-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, GQ6T5l5dGGonrMXB+F15f03Dx1Cvpt54OFflj8gZrUNFUs1aOlD6GtxI2QJumAHl FWHAs5+ccPjYHTCaRPn5dg== 0000950144-94-002176.txt : 19950103 0000950144-94-002176.hdr.sgml : 19950103 ACCESSION NUMBER: 0000950144-94-002176 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19941002 FILED AS OF DATE: 19941230 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAVANNAH FOODS & INDUSTRIES INC CENTRAL INDEX KEY: 0000086941 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 581089367 STATE OF INCORPORATION: DE FISCAL YEAR END: 1003 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-11420 FILM NUMBER: 94567272 BUSINESS ADDRESS: STREET 1: P O BOX 339 CITY: SAVANNAH STATE: GA ZIP: 31402 BUSINESS PHONE: 9122341261 10-K 1 SAVANNAH FOODS 10-K 10/2/94 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended October 2, 1994 ----------------------------- or ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from to ----------------- ------------------------------ Commission file number 1-11420 ---------------------------------------------------------- SAVANNAH FOODS & INDUSTRIES, INC. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its Charter) Delaware 58-1089367 - --------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) P. O. Box 339, Savannah, Georgia 31402 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (912) 234-1261 ----------------------------- Securities registered pursuant to Section 12(b) of the Act: Common Stock - Par Value: $.25 per share - -------------------------------------------------------------------------------- (Title of Class) Securities registered pursuant to Section 12(g) of the Act: None - -------------------------------------------------------------------------------- (Title of Class) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ( ) At November 30, 1994, there were 26,238,196 shares of Common Stock outstanding. The aggregate market value of the voting stock held by non-affiliates of the Registrant on November 30, 1994 was $308,298,803. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Registrant's Proxy Statement for the Annual Meeting of Stockholders to be held on February 16, 1995 are incorporated by reference in Part III hereof. The exhibit index is located on page 40 of this filing. Page 1 of 232 pages. 2 PART I Item 1. Business Savannah Foods & Industries, Inc. ("Registrant") was incorporated in Delaware on February 19, 1969, as the successor to Savannah Sugar Refining Corporation, which was originally incorporated in New York in 1916. Registrant and its subsidiaries collectively comprise one business segment and are engaged in the production, marketing, and distribution of food products, primarily refined sugar. Registrant and its wholly-owned subsidiaries, Colonial Sugars, Inc. and Everglades Sugar Refinery, Inc., are engaged in the refining and marketing of a complete line of bulk, packaged and liquid sugars and sugar products, including edible molasses, liquid animal feeds and corn syrup blends. These products are marketed primarily in the southeastern portion of the United States, Louisiana, and Texas, but are also widely distributed into other states generally east of the Mississippi and south of New England. Packaged sugar is marketed under the trade names DIXIE CRYSTALS(R), COLONIAL(R), EVERCANE(R), but is also sold under Registrant's other controlled labels and under customers' private label brands. These products are marketed both by means of direct sales and through brokers and are primarily distributed directly to the customer by common carrier truck or railcar. Michigan Sugar Company, a wholly-owned subsidiary of Registrant, and its wholly-owned subsidiary, Great Lakes Sugar Company, are engaged in the processing of sugar beets into refined sugar and the production of beet pulp and molasses. The refined sugar is marketed primarily in the states of Michigan and Ohio, but is also distributed in the midwestern and eastern parts of the United States. Packaged sugar is marketed under the trade name PIONEER(R), but is also sold under customers' private label brands. These products are marketed both by means of direct sales and through brokers and are primarily distributed directly to the customer by common carrier truck or railcar. Most of the beet pulp is pelletized and sold for export. The balance is sold in the domestic market. The majority of the molasses is sold to Registrant's beet molasses desugarization facility for further processing to recover additional sugar. Dixie Crystals(R) Foodservice, Inc., a wholly-owned subsidiary of Registrant, produces and markets a line of sugar envelopes and portion control items consisting of individual servings of salt, pepper, non-dairy creamer, etc., under the trade names DIXIE CRYSTALS(R) and PIONEER(R), and under various private labels. Foodservice also markets a saccharin-based sweetener under the trade name of SWEET THING(R) and an aspartame-based sweetener under 2 3 the trade name of SWEET THING II(R). These products are marketed to the food service trade through-out the United States both by means of direct sales and through brokers and are primarily shipped directly to customers by common carrier truck. King Packaging Company, Inc. a wholly-owned subsidiary of Dixie Crystals(R) Foodservice, Inc., packs custom made meal kits for the food service industry and provides complimentary products to the portion control products manufactured at Registrant's other foodservice locations. These products are marketed to the food service trade through-out the United States both by means of direct sales and through brokers and are primarily shipped directly to customers by common carrier truck. Raceland Sugars, Inc., a wholly-owned subsidiary of Registrant, operates a raw sugar mill and is engaged in the business of producing raw sugar which is marketed in the Louisiana area. Additionally, the by-products, molasses and bagasse, are currently sold in the domestic market. During 1994, Registrant entered into agreements with a Mexican business group to conduct several joint ventures in the Mexican sweetener industry. The projects related to the joint ventures are in various stages of development, but as of the end of fiscal 1994, none were operational nor had a material amount of Registrant's assets been committed to the joint ventures. Parent and Subsidiaries. The following list presents the relationship of Registrant to its subsidiaries at October 2, 1994: (a) *Michigan Sugar Company, a Michigan corporation, wholly-owned subsidiary. (b) *Great Lakes Sugar Company, an Ohio corporation, wholly-owned subsidiary of Michigan Sugar Company. (c) *Everglades Sugar Refinery, Inc., a Florida corporation, wholly-owned subsidiary. (d) *Food Carrier, Inc., a Georgia corporation, wholly-owned subsidiary. (e) *Dixie Crystals(R) Foodservice, Inc., a Delaware corporation, wholly-owned subsidiary. (f) *Biomass Corporation, a Delaware corporation, wholly-owned subsidiary. (g) *Colonial Sugars, Inc., a Delaware corporation, wholly-owned subsidiary. 3 4 (h) *Savannah Sugar Refining Corporation, a Georgia corporation, wholly-owned subsidiary. (i) *Raceland Sugars, Inc., a Delaware corporation, wholly-owned subsidiary. (j) *Chatham Sugar Company, a Delaware corporation, wholly-owned subsidiary. (k) *South Coast Sugars, Inc., a Delaware corporation, wholly-owned subsidiary. (l) *Phoenix Packaging Corporation, a Delaware corporation, wholly-owned subsidiary. (m) *Pioneer Trading Company, a Virgin Islands corporation, wholly-owned subsidiary of Michigan Sugar Company. (n) *Savannah Investment Company, a Delaware corporation, wholly-owned subsidiary. (o) *King Packaging Company, Inc., a Georgia corporation, wholly-owned subsidiary of Dixie Crystals(R) Foodservice, Inc. (p) *Savannah International Company, a Delaware corporation, wholly-owned subsidiary. (q) *Savannah Packaging Company, a Delaware corporation, a wholly-owned subsidiary of Savannah International Company. (r) *Savannah Total Invert Company, a Delaware corporation, a wholly-owned subsidiary of Savannah International Company. (s) Refined Sugar Trading Institute, Inc., a Delaware corporation, an Export Trading Company, is a non-profit corporation owned jointly with a non-affiliated company. *Indicates subsidiaries included in consolidated financial statements. The operations of Registrant and its wholly-owned subsidiaries, Everglades Sugar Refinery, Inc., Colonial Sugars, Inc., Michigan Sugar Company, Dixie Crystals(R) Foodservice, Inc., and Raceland Sugars, Inc. comprise Registrant's only significant product line which consists of sugar products. Raw Materials. A large portion of the raw sugar for Registrant's Savannah refinery and all the raw 4 5 sugar for Registrant's wholly-owned subsidiary, Everglades Sugar Refinery, Inc., is normally supplied by cane sugar producers in the state of Florida. A large portion of the raw sugar for Registrant's subsidiary, Colonial Sugars, Inc., is normally supplied by cane sugar producers in the state of Louisiana. In the case of the Savannah refinery and Colonial Sugars, Inc., the remaining raw sugar requirements are purchased on the open market, and consist of off-shore cargoes purchased directly and through raw sugar trade houses. Registrant uses the futures market as a hedging mechanism, as circumstances warrant. Michigan Sugar Company and its subsidiary, Great Lakes Sugar Company, process sugar beets under annual contracts from Michigan and Ohio farmers. The land around the processing plants of the company is well suited to growing sugar beets, and the company has not experienced difficulty in obtaining a sufficient quantity of beets to support successful operation of its plants. Under the contracts with the farmers, certain sales expenses and other non-processing expenses are first deducted from the proceeds of refined sugar, pulp, and molasses sales after which the balance is divided between the company and the farmers. Competition. All phases of the refined sugar business and all geographic markets of the business engaged in by Registrant and its subsidiaries are highly competitive. This Competition is not only with other cane sugar refiners and beet sugar processors, but also with corn sweeteners, artificial sweeteners, and with resellers who purchase all of these sweeteners. Competing cane sugar refineries are located in Florida, Louisiana, Maryland, New York, Texas, and California. Competing beet sugar processors are located in California, Colorado, Idaho, Michigan, Minnesota, Montana, Nebraska, North Dakota, Oregon, Texas, and Wyoming. Competition is primarily based upon price, but is also based upon product quality and customer service. At times, the cane sugar refiners are at a competitive disadvantage to the beet sugar producers due to differing methods by which raw materials are purchased. In the beet industry, the beet farmers participate in any increase or decrease in the selling price of refined sugar. However, in the cane industry, refiners purchase raw sugar at prices which are kept artificially high by United States policy to support sugar farmers, and which do not fluctuate in tandem with refined sugar selling prices. Consequently, when competitive pressures reduce refined sugar prices, the margins of beet sugar producers are affected less adversely than those of cane sugar refiners. Number of Employees. At October 2, 1994, Registrant and its subsidiaries had 2,095 full-time employees. In addition, Michigan Sugar Company, Great Lakes Sugar Company, and Raceland Sugars, Inc. 5 6 employ a number of seasonal workers during the beet and cane processing campaigns. Item 2. Properties. Registrant and its wholly-owned subsidiaries own and operate three cane sugar refineries, two sugar melt and transfer facilities, five sugar beet processing plants, a beet molasses desugarization facility, a raw sugar mill, and four foodservice production facilities. The three cane sugar refineries are located in Port Wentworth, Georgia; Gramercy, Louisiana and Clewiston, Florida and are owned by Registrant, Colonial Sugars, Inc. and Everglades Sugar Refinery, Inc., respectively. The Port Wentworth facility borders the Savannah River and the Gramercy facility borders the Mississippi River. Both of these locations include a deep water dock with facilities for shipping and receiving ocean-going vessels. Registrant owns sugar melt and transfer facilities in St. Louis, Missouri and Ludlow, Kentucky. The St. Louis facility borders on the Mississippi River and has a dock for receiving sugar and molasses shipments. Michigan Sugar Company owns and operates four sugar beet processing plants which are located in Caro, Carrollton, Sebewaing, and Croswell, Michigan. Great Lakes Sugar Company owns and operates a sugar beet processing plant in Fremont, Ohio and a storage facility in Findlay, Ohio. The beet molasses desugarization facility, which is owned by Registrant, is located in Fremont, Ohio. Dixie Crystals(R) Foodservice, Inc. owns two production facilities, located in Perrysburg, Ohio and Visalia, California, and leases one facility in Savannah, Georgia. At the end of the lease term, Registrant may purchase the Savannah facility for $10.00. Also, King Packaging Company, Inc. owns and operates a packaging facility in Bremen, Georgia. Raceland Sugars, Inc. owns and operates a raw sugar mill in Raceland, Louisiana. In addition to its milling operations, Raceland produces and harvests sugar cane for use at its mill. These farming operations are done largely on leased land. The facilities listed above provide Registrant with sufficient productive capacity to meet the demands of its current markets. Item 3. Legal Proceedings. Not applicable. 6 7 Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the fourth quarter of fiscal 1994. PART II Item 5. Market for Registrant's Common Stock and Related Stockholder Matters. Registrant's common stock, par value $.25 per share ("Common Stock"), is presently listed and traded on the New York Stock Exchange ("NYSE") under the symbol "SFI". (Until October 14, 1992, it was traded in the over-the-counter market under the symbol "SVAN".) The following table sets forth for the periods indicated the high and low sales prices on the NYSE composite tape for when the Common Stock was traded on the NYSE and the high and low bids for the Common Stock for when it was quoted on the NASDAQ National Market System. The bids set forth below do not include retail mark-ups, mark-downs, or commissions and the prices represent quotations between dealers and may not necessarily represent actual transactions. The information provided has been adjusted to the nearest 1/8 and was compiled from quotations furnished by the National Association of Securities Dealers, Inc. and the New York Stock Exchange. Registrant has paid cash dividends on its common stock every year since 1924. The following information is for the twelve-month period ended January 3, 1993, the nine-month period ended October 3, 1993 and the twelve-month period ended October 2, 1994:
Quarter Dividends Ended High Low Paid -------- -------- ------- --------- 03/29/92 $20.500 $16.250 $.130 06/28/92 19.000 14.750 .130 09/27/92 18.000 14.500 .130 01/03/93 16.875 13.625 .135 ----- $.525 ===== 04/04/93 $16.750 $13.500 $.135 07/04/93 16.625 14.125 .135 10/03/93 17.875 15.125 .135 ----- $.405 ===== 01/02/94 $16.500 $13.000 $.135 04/03/94 15.375 10.500 .135 07/03/94 12.250 10.000 .135 10/02/94 12.750 10.375 .135 ----- $.540 =====
7 8 As of October 2, 1994, the following indicates the number of holders of record of equity securities: Title of Class Number of Record Holders -------------- ------------------------ Common Stock 3,462 Item 6. Selected Financial Data. See following pages. 8 9 SAVANNAH FOODS & INDUSTRIES, INC. SUMMARY OF OPERATIONS (In thousands except for per share amounts and ratios)
Fiscal Period Ended ---------------------------------------------------------------------------- October 2, October 3, January 3, December 29, December 30, 1994 1993 (1) 1993 1991 1990 - -------------------------------------------------------------------------------------------------------------------------------- OPERATIONS FOR THE FISCAL PERIOD Net sales........................................ $1,074,367 $ 818,116 $1,138,114 $1,199,710 $1,213,721 Income from operations (excludes other income and expenses, taxes and change in accounting principle)..................................... 20,297 11,839 49,143 66,884 80,837 Income before change in accounting principle..... 5,743 1,986 27,340 38,260 48,628 Net income (2)................................... 5,743 2,586 9,170 38,260 48,628 Other income statement information: Depreciation and amortization expense.......... 28,972 19,362 23,705 20,510 17,626 Interest expense............................... 13,380 10,226 10,526 9,820 9,672 Provision for income taxes..................... 2,863 1,155 13,628 21,798 26,249 Cash dividends declared.......................... 14,169 10,627 13,890 13,116 10,539 Capital expenditures (3)......................... 23,367 40,111 45,301 55,661 41,558 - ------------------------------------------------------------------------------------------------------------------------------- FINANCIAL POSITION AT THE END OF THE FISCAL PERIOD Current assets................................... $198,880 $269,990 $371,387 $356,769 $309,916 Current liabilities.............................. 85,140 154,760 233,519 223,104 178,531 Working capital.................................. 113,740 115,230 137,868 133,665 131,385 Property, plant and equipment - gross............ 422,695 408,158 355,435 318,391 268,252 Accumulated depreciation......................... 180,810 159,111 129,306 112,092 97,295 Total assets..................................... 486,127 567,852 635,755 581,819 495,585 Long-term debt................................... 140,224 142,078 126,464 94,364 77,411 Stockholders' equity............................. 188,174 194,714 210,620 224,275 201,387 - ------------------------------------------------------------------------------------------------------------------------------- PER SHARE Weighted average shares outstanding.............. 26,238 26,238 26,491 26,782 27,069 Shares outstanding at end of fiscal period 26,238 26,238 26,238 26,723 26,853 Income before change in accounting principle per weighted average share outstanding............. $ .22 $ .08 $ 1.03 $ 1.43 $ 1.80 Net income per weighted average share outstanding (2)................................ .22 .10 .35 1.43 1.80 Dividends declared per share..................... .54 .405 .525 .49 .39 Stockholders' equity per share (4)............... 7.17 7.42 8.03 8.39 7.50 RATIOS Current assets divided by current liabilities.... 2.32 1.74 1.59 1.60 1.74 Long-term debt divided by total long-term debt and stockholders' equity....................... .43 .42 .38 .30 .28 Tax expense divided by pre-tax income............ .33 .37 .33 .36 .35 - -------------------------------------------------------------------------------------------------------------------------------
(1) On July 21, 1993, the Company changed its fiscal year end from the Sunday closest to December 31 to the Sunday closest to September 30. As a result, the fiscal period ended October 3, 1993 represents a nine-month period. For further information, see Note 2 to the accompanying consolidated financial statements. (2) The Company adopted FAS 109, "Accounting for Income Taxes" during the fiscal period ended October 3, 1993 and adopted FAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" during the fiscal period ended January 3, 1993. For more information, see Notes 7 and 10 to the accompanying consolidated financial statements. (3) Capital expenditures include $4,757 for the acquisition of King Packaging Company, Inc. fixed assets in July 1993 and $15,798 for the acquisition of Raceland Sugars, Inc. fixed assets in October 1991. (4) Based on shares outstanding at end of fiscal period. 9 10 Item 7. Management's Discussion and Analysis of the Company's Financial Position and Results of Operations. Change in fiscal year end: On July 21, 1993, the Company changed its fiscal year end from the Sunday closest to December 31 to the Sunday closest to September 30, beginning with the fiscal period ended October 3, 1993. The decision to change the fiscal year end was made to conform the Company's financial reporting year to the natural business year of the sugar industry. This is further discussed in Notes 1 and 2 to the consolidated financial statements. Liquidity In 1994 the Company expanded its Total Quality Program to include a working capital reduction program. The purpose of this program is to minimize operating working capital, defined as non-cash assets and non-interest bearing liabilities including dividends payable, and to therefore improve liquidity. The program has been successful and the Company's liquidity improved by $24,758,000. The improved liquidity is primarily represented by an increase in cash and equivalents of $20,955,000 and a decrease in short-term debt of $26,300,000 net of a decrease in investments included in other current assets in 1993 of $19,733,000. Operating working capital decreased by $26,248,000. This decrease was primarily in inventories ($60,299,000) and accounts receivable ($11,254,000) net of a decrease in accounts payable ($49,457,000). During 1994 about $1,490,000 of the decrease in operating working capital was used to fund expenditures (primarily dividends and capital additions, net of asset sales) in excess of net income adjusted for non-cash transactions. Capital Resources Long-term debt, excluding the current portion, decreased $1,854,000 as a result of debt payments. Changes in debt and equity resulted in an increase from 42% to 43% in the ratio of long-term debt to total capital. At October 2, 1994, the Company had $145,000,000 in revolving credit facilities, of which $20,000,000 was outstanding as long-term debt. The Company had no short-term debt as of October 2, 1994. The remaining available balance of $125,000,000 is intended to meet working capital and other cash needs as they arise. All of the $145,000,000 of available facilities are committed through September 30, 1996. The revolving credit facilities, in general, enable the Company to borrow at the banks' cost of funds plus 1/2%. In addition, Michigan Sugar Company and Raceland Sugars, Inc. can borrow from the Commodity Credit Corporation against their respective sugar inventory balances to meet working capital requirements and to provide a hedge against reduced refined sugar selling prices. At October 2, 1994, stockholders' equity was $188,174,000 compared to equity at October 3, 1993, of $194,714,000. Equity increased as a result of earnings of $5,743,000 for the year ended October 2, 1994, a 10 11 reduction in the minimum pension liability of $1,243,000, and a reduction in the note receivable from the employee stock ownership plan of $643,000. Dividends decreased equity by $14,169,000. Fixed asset additions during the year ended October 2, 1994, were $23,367,000 and proceeds from sale of fixed assets were $3,309,000. The capital expenditures were primarily upgrading and installing sugar packaging and production equipment and concentrated on cost saving or expansion projects which are expected to benefit the Company through increased efficiency, improved quality control and expanded operational capabilities. The Company expects that expenditures for fixed assets, net of cash receipts from disposals, in fiscal 1995 will approximate $17,000,000. Effective December 30, 1991, the first day of the year ended January 3, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 - Employers' Accounting for Postretirement Benefits Other Than Pensions (FAS 106). The cumulative effect of adopting FAS 106 was a one-time noncash charge of $18,170,000, net of tax benefits, or $.68 per share. This new accounting standard does not impact the cash flows of the Company. For further information, see Note 10 to the accompanying consolidated financial statements. Effective January 4, 1993, the first day of the nine-month period ended October 3, 1993, the Company adopted Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (FAS 109). The cumulative effect of adopting FAS 109 was a one-time noncash credit to income of $600,000, or $.02 per share. The credit was recorded as the cumulative effect of a change in an accounting principle. This new accounting standard does not impact the cash flows of the Company. For further information, see Note 7 to the accompanying consolidated financial statements. Results of Operations Year ended October 2, 1994 and nine months ended October 3, 1993 The Company's net income for the fiscal year ended October 2, 1994 (fiscal 1994) was $5,743,000, or $.22 per share, compared to income of $2,586,000, or $.10 per share, for the nine months ended October 3, 1993 (fiscal 1993). Income for fiscal 1993 includes a $3,030,000 charge to net income (a $4,900,000 increase in cost of sales, net of the associated $1,870,000 income tax benefit) related to a LIFO inventory liquidation at Michigan Sugar as further discussed in Note 2 to the consolidated financial statements and a $600,000 cumulative effect credit due to adopting FAS 109. Income for fiscal 1993 before the cumulative effect of adopting FAS 109 was $1,986,000 or $.08 per share. Average weekly sales volume and prices were down in fiscal 1994 compared to fiscal 1993 due to competitive pressure from beet sugar producers marketing a larger beet crop along with additional sugar carried over from the previous year. Productivity increased again in fiscal 1994 at the cane refineries. However, higher raw sugar costs caused by a low raw sugar quota reduced 11 12 average weekly operating income in this division compared to fiscal 1993. Michigan Sugar's average weekly sales volume increased 4% in fiscal 1994 due to a larger crop in Michigan and a carry over from the previous crop. However, average weekly operating income dropped from fiscal 1993 due to lower beet pulp prices and a smaller beet crop in Ohio. Dixie Crystals Foodservice's average weekly operating income decreased from fiscal 1993 due to higher sugar costs and competitive pricing pressures. Cost cutting programs which lowered manufacturing costs helped minimize the impact of these negative factors. Raceland Sugars, Inc. showed a significant increase in average weekly operating income in fiscal 1994 compared to fiscal 1993 as a result of higher raw sugar prices in 1994. Selling, general and administrative expenses decreased 7% on an average weekly basis in fiscal 1994 from fiscal 1993 primarily due to a reduction in storage costs achieved through a production optimization program. Interest expense decreased slightly on an average weekly basis in fiscal 1994 due to lower short-term borrowings. The effective income tax rate for fiscal 1994 was 33% compared to 37% in fiscal 1993. The lower tax rate in fiscal 1994 is primarily due to lower state income tax expense. The outlook is brighter for fiscal 1995. On October 1, 1994, the U.S. Department of Agriculture implemented marketing allotments which should limit the amount of beet sugar which can be sold in the United States. The continued expansion of beet sugar and the resulting negative impact on refined sugar prices has depressed the Company's earnings over the last four years. Marketing allotments are intended to raise refined selling prices to prevent forfeiture of sugar under loan with the Commodity Credit Corporation. Additionally, higher sugar content of beets in Michigan and Ohio, processing more sugar cane at our Raceland raw sugar mill, and an emphasis on reducing costs and promoting value-added products which are not impacted by government legislation should continue to add to the Company's profitability. Nine months ended October 3, 1993 and year ended January 3, 1993 The Company's net income for the nine months ended October 3, 1993, (fiscal 1993) was $2,586,000, or $.10 per share, compared to income of $9,170,000, or $.35 per share, for the year ended January 3, 1993 (fiscal 1992). The Company's net income for fiscal 1992 includes the impact of adopting FAS 106. Income for fiscal 1992 before the cumulative effect of adopting FAS 106 was $27,340,000, or $1.03 per share. Average weekly sales volume and prices were down in fiscal 1993 12 13 compared to fiscal 1992 due to competitive pressure from beet sugar producers and cane refiners fighting for market share. Productivity at the cane refineries during fiscal 1993 was excellent. The Colonial refinery set an average daily production record, and the Savannah refinery just missed doing likewise. Michigan Sugar's average weekly sales volume increased 17% in fiscal 1993 due to a larger beet crop compared to fiscal 1992. However, sugar and byproduct pricing were down and average weekly operating income decreased from fiscal 1992. Dixie Crystals Foodservice showed good improvements in sales and profits on an average weekly basis when compared to fiscal 1992. Lower manufacturing costs were achieved through the move of the Savannah facility to its new location. Raceland Sugars, Inc. showed an increase in average weekly operating income as a result of higher sales volume offset set by lower raw sugar prices. Selling, general and administrative expenses increased in fiscal 1993 on an average weekly basis due to higher selling costs at Michigan Sugar caused by a larger beet crop and higher administrative costs. Interest expense increased primarily due to the increased long-term debt acquired in the latter part of fiscal 1992 and the acquisition of King Packaging in July 1993. The effective tax rate for fiscal 1993 was 37% compared to 33% in fiscal 1992. The higher tax rate in fiscal 1993 is due to a 1% increase in the statutory rate in 1993 and to the receipt of non-taxable life insurance proceeds in 1992. 13 14 Item 8. Financial Statements and Supplementary Data. (a) Financial Statements: Page ---- Report of Independent Accountants 15 Consolidated Balance Sheets at October 2, 1994 and October 3, 1993 16 Consolidated Statements of Operations for the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993 17 Consolidated Statements of Changes in Stockholders' Equity for the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993 18 Consolidated Statements of Cash Flows for the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993 19 Notes to Consolidated Financial Statements 20 (b) Financial Statement Schedules for the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993: V - Property, Plant and Equipment 37 VI - Accumulated Depreciation and Amortization of Property, Plant and Equipment 38 Other schedules are omitted because they are not applicable, or the required information is shown in the financial statements or notes thereto. 14 15 Report of Independent Accountants --------------------------------- November 18, 1994 To the Stockholders and Board of Directors of Savannah Foods & Industries, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Savannah Foods & Industries, Inc. at October 2, 1994, and October 3, 1993, and the results of their operations and their cash flows for the fifty-two weeks ended October 2, 1994, the thirty-nine weeks ended October 3, 1993 and the fifty-three weeks ended January 3, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Notes 7 and 10 to the financial statements, the Company changed its methods of accounting for income taxes and accounting for postretirement benefits other than pensions, during the thirty-nine weeks October 3, 1993 and the fifty-three weeks ended January 3, 1993, respectively. PRICE WATERHOUSE LLP Savannah, Georgia 15 16 SAVANNAH FOODS & INDUSTRIES, INC. Consolidated Balance Sheets (In thousands except for shares and per share amounts)
October 2, October 3, 1994 1993 ---------- ---------- Assets Current assets: Cash and cash equivalents (Note 1) $ 28,436 $ 7,481 Accounts receivable 75,776 87,030 Inventories (net of LIFO reserve of $8,889 in 1994 and $9,011 in 1993) (Notes 1 and 4) 85,340 145,639 Other current assets (Notes 1 and 7) 9,328 29,840 -------- -------- Total current assets 198,880 269,990 Property, plant and equipment (net of accumulated depreciation of $180,810 in 1994 and $159,111 in 1993) (Notes 1 and 5) 241,885 249,047 Other assets (Notes 1, 9 and 10) 45,362 48,815 -------- -------- $486,127 $567,852 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Short-term borrowings (Note 6) $ - $ 26,300 Current portion of long-term debt (Note 6) 1,643 2,421 Trade accounts payable 56,953 106,410 Dividends payable 3,542 - Other liabilities and accrued expenses 23,002 19,629 -------- -------- Total current liabilities 85,140 154,760 -------- -------- Long-term debt (Note 6) 140,224 142,078 -------- -------- Deferred income taxes (Note 7) - 3,951 -------- -------- Deferred employee benefits (Notes 9 and 10) 72,589 72,349 -------- -------- Stockholders' equity (Notes 6 and 8): Common stock $.25 par value; $.55 stated value; 64,000,000 shares authorized; 31,306,800 shares issued 17,365 17,365 Capital in excess of stated value 12,190 12,190 Retained earnings 202,065 210,491 Minimum pension liability adjustment (Note 9) (8,210) (9,453) -------- -------- 223,410 230,593 Less - Treasury stock, at cost (5,068,604 shares) 31,275 31,275 - Note receivable from employee stock ownership plan 3,961 4,604 -------- -------- Total stockholders' equity 188,174 194,714 Commitments and contingencies (Note 11) - - -------- -------- $486,127 $567,852 ======== ========
(The accompanying notes are an integral part of the financial statements.) 16 17 SAVANNAH FOODS & INDUSTRIES, INC. Consolidated Statements of Operations (In thousands except for shares and per share amounts)
Fiscal Period Ended (Notes 1 and 2) -------------------------------------------- October 2, October 3, January 3, 1994 1993 1993 (52 weeks) (39 weeks) (53 weeks) ---------- ---------- ---------- Net sales $1,074,367 $ 818,116 $1,138,114 ---------- ---------- ---------- Operating expenses: Cost of sales and operating expenses 971,706 743,731 1,008,658 Selling, general and administrative expenses 53,392 43,184 56,608 Depreciation and amortization (Note 1) 28,972 19,362 23,705 ---------- ---------- ---------- 1,054,070 806,277 1,088,971 ---------- ---------- ---------- Income from operations 20,297 11,839 49,143 ---------- ---------- ---------- Other income and (expenses): Interest and other investment income 2,170 1,412 1,747 Interest expense (Note 6) (13,380) (10,226) (10,526) Other income (expense) (481) 116 604 ---------- ---------- ---------- (11,691) (8,698) (8,175) ---------- ---------- ---------- Income before income taxes and change in accounting principle 8,606 3,141 40,968 Provision for income taxes (Notes 1 and 7) 2,863 1,155 13,628 ---------- ---------- ---------- Income before change in accounting principle 5,743 1,986 27,340 Cumulative effect of change in accounting principle (Notes 1, 7 and 10) - 600 (18,170) ---------- ---------- ---------- Net income $ 5,743 $ 2,586 $ 9,170 ========== ========== ========== Income per weighted average share outstanding: Income before change in accounting principle $ .22 $ .08 $1.03 Cumulative effect of change in accounting principle - .02 (.68) ---------- ---------- ---------- Net income $ .22 $ .10 $ .35 ---------- ---------- ---------- Weighted average shares outstanding 26,238,196 26,238,196 26,490,701 ========== ========== ==========
(The accompanying notes are an integral part of the financial statements.) 17 18 SAVANNAH FOODS & INDUSTRIES, INC. Consolidated Statements of Changes in Stockholders' Equity (In thousands except for shares and per share amounts)
Note Receivable Minimum from Capital in Pension Employee Stock Common Excess of Retained Liability Treasury Ownership Stock Stated Value Earnings Adjustment Stock Plan Total ------ ------------ -------- ---------- -------- --------------- ----- Balance at December 29, 1991 $17,365 $12,120 $223,252 $ - $(23,516) $(4,946) $224,275 Net income 9,170 9,170 Cash dividends declared ($.525 per share) (13,890) (13,890) Sale of treasury stock - 113,590 shares 70 2,146 2,216 Acquisition of treasury stock - 598,425 shares (9,905) (9,905) Increase in minimum pension liability adjustment (1,437) (1,437) Decrease in note receivable from employee stock ownership plan 191 191 ------- ------- -------- ------- -------- ------- -------- Balance at January 3, 1993 17,365 12,190 218,532 (1,437) (31,275) (4,755) 210,620 Net income 2,586 2,586 Cash dividends declared ($.405 per share) (10,627) (10,627) Increase in minimum pension liability adjustment (8,016) (8,016) Decrease in note receivable from employee stock ownership plan 151 151 ------- ------- -------- ------- -------- ------- -------- Balance at October 3, 1993 17,365 12,190 210,491 (9,453) (31,275) (4,604) 194,714 Net income 5,743 5,743 Cash dividends declared ($.54 per share) (14,169) (14,169) Decrease in minimum pension liability adjustment 1,243 1,243 Decrease in note receivable from employee stock ownership plan 643 643 ------- ------- -------- ------- -------- ------- -------- Balance at October 2, 1994 $17,365 $12,190 $202,065 $(8,210) $(31,275) $(3,961) $188,174 ======= ======= ======== ======= ======== ======= ========
(The accompanying notes are an integral part of the financial statements.) 18 19 SAVANNAH FOODS & INDUSTRIES, INC. Consolidated Statements of Cash Flows (In thousands of dollars)
Fiscal Period Ended (Notes 1 and 2) --------------------------------------------- October 2, October 3, January 3, 1994 1993 1993 (52 weeks) (39 weeks) (53 weeks) ---------- ---------- ---------- Cash flows from operations: Net income $ 5,743 $ 2,586 $ 9,170 Adjustments to reconcile net income to net cash provided by operations - Depreciation and amortization 28,972 19,362 23,705 Cumulative effect of change in accounting principle - (600) 18,170 Provision for deferred income taxes (5,283) 6,986 239 Other 865 204 1,619 Changes in balance sheet accounts - Accounts receivable 11,254 (25,347) 388 Inventories 60,299 133,498 (56,991) Other current assets 2,657 (1,092) 1,008 Trade accounts payable (49,457) (39,441) 30,573 Income taxes accrued - (17,593) (2,636) Accrued expenses related to beet operations - (22,884) (125) Other liabilities and accrued expense 3,373 (1,951) (7,379) Other 2,331 1,547 1,475 ------- -------- ------- Cash provided by operations 60,754 55,275 19,216 ------- -------- ------- Cash flows from investing activities: Additions to property, plant and equipment (23,367) (35,354) (45,301) Proceeds from sale of property, plant and equipment 3,309 2,342 1,550 Acquisition of short-term investments included in "Other current assets" - (4,220) (11,169) Liquidation of short-term investments included in "Other current assets" 19,708 - - Purchase of King Packaging Company, Inc. - (8,925) - Acquisition of long-term investments - (3,237) (1,608) Changes in escrow balances related to industrial revenue bonds 3,669 460 (13,124) Other (3,335) 198 (4,213) ------- -------- ------- Cash used for investing activities (16) (48,736) (73,865) ------- -------- ------- Cash flows from financing activities: Decrease in short-term borrowings (26,300) (3,700) (9,674) Increase in long-term debt - 10,111 83,300 Payments of long-term debt (2,632) (1,337) (51,544) Dividends declared to stockholders (14,169) (10,627) (13,890) Increase in dividends payable 3,542 - - Treasury stock repurchases - - (9,905) Treasury stock issues - - 2,216 Other (224) (1,484) 2,539 ------- -------- ------- Cash (used for) provided by financing activities (39,783) (7,037) 3,042 ------- -------- ------- Cash flows for period 20,955 (498) (51,607) Cash and cash equivalents, beginning of period 7,481 7,979 59,586 ------- -------- ------- Cash and cash equivalents, end of period $28,436 $ 7,481 $ 7,979 ======= ======== =======
(The accompanying notes are an integral part of the financial statements.) 19 20 SAVANNAH FOODS & INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 - Summary of Significant Accounting Policies: Fiscal year - As described in Note 2, the Company changed its fiscal year end from the Sunday closest to December 31 to the Sunday closest to September 30. The fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993 include 52 weeks, 39 weeks and 53 weeks, respectively. Principles of consolidation and business segments - The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. The Company has one primary business segment - Sugar Products. Changes in accounting principles - As discussed in Note 7, Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (FAS 109) was prospectively adopted effective January 4, 1993, the first day of the fiscal period ended October 3, 1993. As discussed in Note 9, Statement of Financial Accounting Standards No. 106 - Employers' Accounting for Postretirement Benefits Other Than Pensions (FAS 106) was adopted effective December 30, 1991, the first day of the fiscal period ended January 3, 1993. Cash equivalents - Cash equivalents include all investments purchased with an original maturity of 90 days or less which have virtually no risk of loss of value of the principal amount of the investment. Inventories - Inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for sugar, packaging materials, and certain other items. Costs for maintenance parts, sugar cane and other non-sugar products are determined using the first-in, first-out (FIFO) and moving average methods. Futures transactions and interest rate swaps - The Company uses futures and other financial instruments as hedges in its inventory purchasing and cash management programs. Gains and losses on such transactions related to inventory are matched to specific inventory purchases and charged or credited to cost of sales as such inventory is sold. Gains and losses on transactions related to loans are included in interest expense during the period in which the related instruments are outstanding. In connection with the Company's futures trading activity, the Company maintains deposits with futures brokers. These deposits are included in "Other current assets". Investments in marketable securities - At October 3, 1993, the Company had invested in marketable securities directly and through certain investment partnerships and mutual funds. The estimated fair market value of these investments approximated the carrying value of $19,733,000 based on quoted market prices and dealer quotes. These 20 21 investments are included in "Other current assets" at October 3, 1993. No investments in marketable securities are held at October 2, 1994. Amortization of intangibles - The Company has intangible assets included in "Other assets" aggregating $8,031,000 and $10,648,000 at October 2, 1994 and October 3, 1993, respectively. These assets are being amortized over five years. Amortization expense for the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993 was $2,617,000, $1,363,000 and $1,328,000, respectively. Property, plant and equipment - Property, plant and equipment is valued at cost less accumulated depreciation and amortization. For financial reporting purposes, depreciation is computed on the straight-line method. Accelerated depreciation methods are used for tax purposes on $266,294,000 of equipment. Accrued expenses related to beet and sugar cane operations - The Company's beet and sugar cane processing plants are generally operated from October through February and then, from March through September, are repaired for the next processing cycle. As sugar is processed from October through February, the Company accrues estimated repair costs and other costs to be incurred in March through September and includes such costs in inventory and, as the sugar is sold, in cost of sales. In contrast, some sugar processors capitalize such costs and include them as prepaid expenses related to the next processing cycle. Fair value of financial instruments - For cash, cash equivalents, accounts receivable, accounts payable, accrued expenses and short-term borrowings, the carrying amounts approximate fair value because of the short maturities of these instruments. See Note 6 for discussion of the fair value of long-term debt. Revenue recognition - The Company recognizes revenue as product is shipped. Reclassifications - Certain prior year amounts have been reclassified to conform to current year presentation. 21 22 Note 2 - Change in Fiscal Year End: In July 1993, the Company changed its fiscal year end from the Sunday closest to December 31 to the Sunday closest to September 30 in order to conform the Company's financial reporting to the natural business year of the sugar industry. Inventory quantities are significantly lower at the end of the new fiscal year than at the end of a calendar year. Therefore, as a consequence of the change in fiscal year end the Company experienced a LIFO inventory liquidation and recorded a charge to operations of $3,030,000, net of tax of $1,870,000, during the fiscal period ended October 3, 1993. To aid comparative analysis, the Company has presented below results of operations (condensed) for the nine-month periods ended October 3, 1993 and September 27, 1992 (in thousands except for shares and per share amounts):
Fiscal Period Ended --------------------------------------- October 3, September 27, 1993 1992 (Unaudited) ------------------- ----------------- Net sales $ 818,116 $ 833,341 Operating expenses 806,277 798,974 ---------- ---------- Income from operations 11,839 34,367 Other income and (expenses) (8,698) (6,740) ---------- ---------- Income before income taxes and change in accounting principle 3,141 27,627 Provision for income taxes 1,155 9,903 ---------- ---------- Income before change in accounting principle 1,986 17,724 Cumulative effect of change in accounting principle 600 (18,170) ---------- ---------- Net income (loss) $ 2,586 $ (446) ========== ========== Income per weighted average share outstanding: Income before change in accounting principle $.08 $ .67 Cumulative effect of change in accounting principle .02 (.69) ---------- ---------- Net income (loss) $.10 $(.02) ========== ========== Weighted average shares outstanding 26,238,196 26,571,834 ========== ==========
22 23 Additionally, to aid comparative analysis of the fiscal periods ended October 2, 1994 and January 3, 1993, the Company has presented below the pro forma condensed consolidated statements of operations through income before change in accounting principle for the fiscal year ended October 2, 1994 and for the fiscal year ended October 3, 1993, as included in the 1993 Annual Report. The amounts are presented without the LIFO charge discussed above (in thousands except for shares and per share amounts):
Fiscal Year Ended --------------------------------------- October 2, October 3, 1994 1993 (pro forma) ------------------- ----------------- Net sales $1,074,367 $1,122,889 Operating expenses 1,054,070 1,091,374 ---------- ---------- Income from operations 20,297 31,515 Other income and (expenses) (11,691) (10,132) ---------- ---------- Income before income taxes and change in accounting principle 8,606 21,383 Provision for income taxes 2,863 6,750 ---------- ---------- Income before change in accounting principle $ 5,743 $ 14,633 ========== ========== Income per weighted average share outstanding before change in accounting principle $.22 $.56 ========== ========== Weighted average shares outstanding 26,238,196 26,245,194 ========== ==========
Note 3 - Acquisition: On July 7, 1993, the Company acquired the outstanding common stock of King Packaging Company, Inc., a supplier of plastic cutlery and customized meal kits to the foodservice and healthcare industries. The acquisition was accounted for as a purchase, and the acquisition costs of the assets acquired and the liabilities assumed are as follows (in thousands of dollars): Current assets $10,330 Inventories 1,770 Property, plant and equipment 4,757 Value of non-compete agreements 8,203 Other assets 290 ------- Assets acquired 25,350 Liabilities assumed (977) ------- $24,373 ======= 23 24 Note 4 - Inventories: A summary of inventories by method of pricing and class is as follows:
October 2, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Last-in, first-out $46,952 $104,005 First-in, first-out 9,350 9,137 Moving average 29,038 32,497 ------- -------- $85,340 $145,639 ------- -------- Raw materials and work-in-process $26,924 $ 76,802 Packaging materials, parts and supplies 27,115 26,002 Finished goods 31,301 42,835 ------- -------- $85,340 $145,639 ======= ========
During the fiscal period ended October 2, 1994, inventory quantities were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of fiscal 1994 purchases, the effect of which decreased cost of goods sold by approximately $1,762,000 and increased net income by approximately $1,097,000 or $.04 per share. The replacement cost of inventories exceeded reported cost by approximately $10,013,000 at October 2, 1994 and $11,616,000 at October 3, 1993. Note 5 - Property, Plant and Equipment: Property, plant and equipment is summarized as follows:
October 2, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Land $ 8,417 $ 8,405 Buildings 91,053 87,162 Machinery and equipment 314,530 289,442 Leasehold improvements 1,159 1,159 Projects-in-process 7,536 21,990 -------- -------- 422,695 408,158 Less - Accumulated depreciation and amortization (180,810) (159,111) -------- -------- $241,885 $249,047 ======== ========
Repairs and maintenance expense was $31,584,000 for the fiscal period ended October 2, 1994, $26,706,000 for the fiscal period ended October 3, 1993 and $33,879,000 for the fiscal period ended January 3, 1993. 24 25 Note 6 - Long-term Debt and Credit Arrangements: Long-term debt is summarized as follows:
October 2, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Senior notes - $50,000 Series A at 8.35% and $20,000 Series B at 7.15% payable through 2002 $ 70,000 $ 70,000 Long-term debt supported by revolving credit facilities with banks 20,000 20,000 Notes payable to banks from 1996 to 1998 related to the ESOP 15,500 15,500 Industrial revenue bonds 28,000 28,000 Present value of non-compete agreements related to the purchase of King Packaging, payable monthly from 1993 to 1998, discounted at 5% 6,314 7,808 Other notes and capital leases payable 2,053 3,191 -------- -------- 141,867 144,499 Less - Current portion (1,643) (2,421) -------- -------- $140,224 $142,078 ======== ========
During the fiscal period ended January 3, 1993, the Company entered into a 10-year loan for $70,000,000 with three insurance companies. Series A for $50,000,000 has a fixed interest rate of 8.35% and Series B for $20,000,000 has a fixed interest rate of 7.15%. These funds were used to finance capital projects at existing production facilities and to repay long-term debt outstanding under the Company's revolving credit lines. At October 2, 1994, the Company had $145,000,000 in revolving credit facilities with banks which are committed through September 1996. The Company has $20,000,000 outstanding under these facilities which it treats as long-term debt. The revolving credit facilities, in general, enable the Company to borrow funds at the banks' cost of funds plus approximately 1/2%. The Company pays an annualized commitment fee of 3/16% on the unused portion of these facilities. At October 2, 1994, the Company had $15,500,000 in notes payable related to the Employee Stock Ownership Plan (ESOP). These notes carry a tax-advantaged rate of interest equal to about 85% of LIBOR. The rates averaged 3.08% and 3.40% during the fiscal periods ended October 2, 1994 and October 3, 1993, respectively. See further discussion of the ESOP at Note 10. The $28,000,000 industrial revenue bonds consist of two issues of bonds for $4,500,000 each due in 2000, an issue for $3,500,000 due in 2003, an issue for $2,500,000 due in 2005, an issue for $6,000,000 due in 2007, and an issue for $7,000,000 due in 2017. The rate on these bonds can vary as frequently as every seven days in order to sell the bonds at par value. During the fiscal period ended October 2, 1994 and the fiscal period ended October 3, 1993, the average interest rate on these bonds was 2.7% and 2.5%, respectively. If the two $4,500,000 bonds cannot be sold, the Company has an agreement with a bank which acts as the marketing agent for the bonds whereby the bank would buy and hold the bonds until their maturity and would receive interest at a rate of 65% of the prime interest rate. If the other issues could not be 25 26 sold by the bank, the Company would have an obligation to sell the bonds themselves or repurchase them. To enhance the marketability of the bonds, the bank/marketing agent has issued letters of credit to guarantee payment of the bonds on the Company's behalf. The Company expects to be able to renew these letters of credit upon their expiration throughout the life of these bonds. Also, the bonds are secured by financing statements on project-related equipment, the cost of which approximates the bond amounts. The Company uses interest rate exchange agreements, more commonly called interest rate swaps, to manage its interest rate exposure. The effect of certain of the swap agreements is to fix the rate on the $20,000,000 long-term debt borrowed under revolving credit agreements, the $15,500,000 ESOP loans and the $28,000,000 industrial revenue bonds over the 2.5 years remaining on the swap contracts. The average fixed interest rate on this $63,500,000 of debt fixed through these swap agreements is 6.89%. These swaps were entered into to fix the interest rate on variable debt at rates which the Company considered attractive at the time the agreements were consummated. The Company did not enter into these agreements in anticipation of rate movements. When the Company entered into these agreements, it compared its anticipated interest costs to other long term borrowing sources such as private placements and other fixed rate borrowing options. Accordingly, the Company has realized its desired objectives in the use of these derivatives. If the Company had canceled these agreements as of October 2, 1994, it would have been required to pay the counter parties to the agreements an aggregate amount of $2,100,000. During the last quarter of the fiscal period ended January 3, 1993, the Company entered into agreements whereby it receives/pays the difference between six month LIBOR and 4.54% on $50,000,000 for a three year period to reduce the interest rate on the Series A senior notes. The Company anticipated that short-term rates would continue to decline. If the Company had canceled these agreements as of October 2, 1994, it would have been required to pay the counter parties to the agreements an aggregate amount of approximately $830,000. Over the life of this transaction the Company expects to break-even. This agreement expires in October 1995. 26 27 Short-term borrowings, including borrowings under the Company's revolving credit facilities which were for temporary working capital needs, are summarized as follows:
Fiscal Period Ended ---------------------------------------- October 2, October 3, January 3, 1994 1993 1993 ---------- ---------- ---------- (In thousands of dollars) Daily average outstanding borrowings $27,953 $49,816 $23,040 Daily weighted average interest rate 3.82% 3.42% 4.33% Maximum borrowings $62,300 $85,500 $39,674 Amount outstanding at year-end $ - $26,300 $30,000
The Company's most restrictive loan covenants require that the Company maintain stockholders' equity of $174,703,000 plus 20% of consolidated net income beginning with fiscal year 1994 and ending with calendar year 1996 and that the Company maintain certain financial ratios. These financial ratio covenants include a requirement that the ratio of income before taxes, interest expense and lease expense to the sum of interest and lease expense be 1.4, or greater, through March 31, 1995 and 2.0, or greater, thereafter. The Company is in compliance with these requirements at October 2, 1994 and expects to be in compliance with such requirements in the future. Interest expense was $13,380,000 for the fiscal period ended October 2, 1994, $10,226,000 for the fiscal period ended October 3, 1993 and $10,526,000 for the fiscal period ended January 3, 1993. Cash payments of interest were $13,364,000 for the fiscal period ended October 2, 1994, $9,377,000 for the fiscal period ended October 3, 1993 and $9,336,000 for the fiscal period ended January 3, 1993. Annual maturities of long-term debt each year for the next five fiscal years are $1,747,000 in 1995, $6,300,000 in 1996, $27,610,000 in 1997, $7,400,000 in 1998, $8,940,000 in 1999, and $89,870,000 in subsequent years through 2017. The carrying value of the Company's long-term debt approximates its market value at October 2, 1994. Virtually all of the Company's debt had a fixed rate at October 2, 1994, either from the note terms or through interest rate swaps. The market value of fixed-rate long-term debt was estimated based on the present value of expected cash flows using current market rates and the Company's incremental borrowing rate for debt with similar terms. Note 7 - Income Taxes: The Company prospectively adopted Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (FAS 109) effective January 4, 1993, the first day of the fiscal period ended October 3, 1993. The adoption of FAS 109 changed the Company's method of accounting for income taxes from the deferred method (Accounting Principles Board Opinion No. 11) to an asset and liability approach. Previously the Company deferred the past tax effects of timing differences between financial reporting and taxable income. The asset and liability approach requires the recognition of deferred tax 27 28 liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of other assets and liabilities. Under FAS 109, assets and liabilities acquired in business combinations accounted for under the purchase method are assigned their fair values, and deferred taxes are provided for lower or higher tax bases. Under APB 11, values assigned were net-of-tax. In adopting FAS 109, the Company adjusted the carrying amounts of the Michigan Sugar Company fixed assets and LIFO inventories acquired in 1984. Pretax income from operations for the fiscal period ended October 3, 1993 was reduced by $5,600,000 representing additional cost of sales and depreciation expense resulting from the higher carrying amounts. The net adjustments to the January 4, 1993 balance sheet to adopt FAS 109 resulted in a $600,000 credit to net income. This amount is reflected in the accompanying consolidated statement of operations for the fiscal period ended October 3, 1993 as a cumulative effect of a change in accounting principle. Pretax income from continuing operations for all periods presented was taxed exclusively in the United States. The provision for income taxes is comprised of the following:
Fiscal Period Ended ---------------------------------------------- October 2, October 3, January 3, 1994 1993 1993 ---------- ---------- ---------- (In thousands of dollars) Current federal $8,071 $(3,692) $13,412 Current state 75 (232) 763 Deferred federal (4,794) 4,977 (666) Deferred state (489) 102 119 ------ ------- ------- Provision charged to continuing operations $2,863 $ 1,155 $13,628 ====== ======= ======= Tax effect of change in minimum pension liability $ 720 $(5,502) $ - ====== ======= =======
Cash payments of income taxes amounted to $7,504,000 for the fiscal period ended October 2, 1994, $11,834,000 for the fiscal period ended October 3, 1993 and $16,774,000 for the fiscal period ended January 3, 1993. 28 29 Deferred income tax liabilities (assets) are comprised of the following:
October 2, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Depreciation $22,406 $24,824 Other post employment benefits (11,951) (11,395) Accrued pension liability (8,296) (8,513) Deferred compensation (5,571) (4,844) Tax benefit purchases 3,335 4,114 Other non-current (368) (235) ------- ------- Total net non-current (asset) liability (445) 3,951 ------- ------- Other accrued expenses (2,865) (1,118) Inventory 410 452 Other current (79) (658) ------- ------- Total net current asset (2,534) (1,324) ------- ------- Net deferred (asset) liability $(2,979) $ 2,627 ======= =======
The components of the Company's deferred income tax provision calculated under APB 11 and the tax effects of each are summarized below:
Fiscal Period Ended ------------------- January 3, 1993 ------------------- (In thousands of dollars) Increase of current federal taxes resulting from tax benefit purchases $ (787) Excess of tax over book depreciation 1,439 Employee related expenses recognized in different periods for book and tax purposes (1,562) Expenses related to sugar beet processing recognized in different periods for book and tax purposes (77) Other 440 ------- $ (547) =======
29 30 A reconciliation between the provision for income taxes and the amount computed by applying the U. S. federal income tax rate to income before income taxes and change in accounting principle is as follows:
Fiscal Period Ended -------------------------------------------- October 2, October 3, January 3, 1994 1993 1993 ---------- ---------- ---------- (In thousands of dollars) Computed "expected" tax expense $3,011 $1,068 $13,929 Increases (reductions) in taxes resulting from: State income taxes, net of federal income tax benefit (269) 95 581 Non-deductible depreciation expense - - 416 Tax-free income earned (104) (107) (519) ESOP dividends (506) (547) - Effect of tax rate increase - 181 - Other 731 465 (779) ------ ------ ------- Provision for income taxes $2,863 $1,155 $13,628 ====== ====== =======
The Company increased its deferred income tax liability in the last quarter of the fiscal period ended October 3, 1993 as a result of legislation enacted during 1993 increasing the corporate tax rate from 34% to 35% commencing in 1993. Note 8 - Stockholders' Equity: The Certificate of Incorporation of the Company, as amended, authorizes a class of preferred stock to consist of up to 1,000,000 shares of $.50 par value stock. The Board of Directors can determine the characteristics of the preferred stock without further stockholder approval. Note 9 - Pension Plans: Substantially all employees and retirees of the Company are covered by noncontributory defined benefit pension plans. The Company also provides supplemental pension benefits to certain retired employees. The supplemental pension benefits are determined annually by the Board of Directors. Benefits under the noncontributory defined benefit pension plans for bargaining employees are primarily based on years of service; benefits for other employees are generally based on years of service and the employee's highest consecutive three-year average earnings. The Company's policy is to contribute at least the minimum amount required by the Employee Retirement Income Security Act. At October 2, 1994, the assets of these plans are invested primarily in cash equivalents, mutual stock and bond funds, and common stocks including 217,587 shares of the Company's common stock with a market value of $2,611,000. The plan received $117,497 in dividends from these shares during the fiscal period ended October 2, 1994. 30 31 The following table sets forth the status of the Company's defined benefit pension plans and the pertinent assumptions used in computing this information as of the end of each respective period:
October 2, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Actuarial present value of benefit obligation based on current compensation: Vested $(65,650) $(67,785) Nonvested (6,370) (7,871) -------- -------- Accumulated benefit obligation (72,020) (75,656) Increase in present value of benefit obligation to reflect projected compensation increases (7,520) (8,217) -------- -------- Projected benefit obligation (79,540) (83,873) Plan assets at fair value 57,120 57,393 -------- -------- Projected benefit obligation (in excess of) plan assets (22,420) (26,480) Unrecognized prior service cost 3,614 4,540 Unrecognized net loss 22,904 26,139 Unrecognized net asset at transition (3,428) (4,503) Adjustment required to recognize minimum liability (15,570) (17,912) -------- -------- Pension liability included in "Deferred employee benefits" $(14,900) $(18,216) ======== ========
The table above is based on a discount rate of 8.5 % for the fiscal period ended October 2, 1994 and 7.5% for the fiscal period ended October 3, 1993, and projected salary increases of 4.5% for the fiscal period ended October 2, 1994 and 4% for the fiscal period ended October 3, 1993. Pension expense for the fiscal period ended October 2, 1994, the fiscal period ended October 3, 1993 and the fiscal period ended January 3, 1993 is summarized as follows:
Fiscal Period Ended ---------------------------------------- October 2, October 3, January 3, 1994 1993 1993 ---------- ---------- ---------- (In thousands of dollars) Costs related to services provided by employees during the year $2,401 $1,573 $2,180 Interest cost on projected benefit obligation 6,274 4,910 6,212 Actual gain on plan assets (1,172) (2,476) (1,620) Net amortization and deferrals (4,564) (2,692) (5,589) ------ ------ ------ Pension expense related to defined benefit plans 2,939 1,315 1,183 Supplemental pension benefits 126 91 124 ------ ------ ------ Total pension expense $3,065 $1,406 $1,307 ====== ====== ======
The expected long-term rate of return on plan assets used in determining "Pension expense related to defined benefit plans" as shown above was 9.5% for the fiscal period ended October 2, 1994, 10.5% for the fiscal period ended October 3, 1993, and 11% for the fiscal period ended January 3, 1993. 31 32 The Company sponsors a Supplemental Executive Retirement Plan (SERP) to supplement its qualified plan for certain management employees. The actuarially determined expense related to this plan was $1,255,000 for the fiscal period ended October 2, 1994, $800,000 for the fiscal period ended October 3, 1993, and $1,010,000 for the fiscal period ended January 3, 1993. Of these expenses, the interest portion amounted to $781,000 for the fiscal period ended October 2, 1994, $569,000 for the fiscal period ended October 3, 1993, and $707,000 for the fiscal period ended January 3, 1993. The remaining balance of the expense in each year is primarily service cost. The table below summarizes the status of the SERP plan at the end of each respective period:
October 2, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Actuarial present value of benefit obligation based on current compensation: Vested $ (9,320) $ (9,063) Nonvested (1,033) (993) -------- -------- Accumulated benefit obligation (10,353) (10,056) Increase in present value of benefit obligation to reflect projected compensation increases (399) (267) -------- -------- Projected benefit obligation (10,752) (10,323) Unrecognized prior service cost 209 130 Unrecognized net loss 1,502 1,937 Unrecognized net obligation at transition 149 229 Adjustment required to recognize minimum liability (1,461) (2,029) -------- -------- Pension liability included in "Deferred employee benefits" $(10,353) $(10,056) ======== ========
The table above is based on a discount rate of 8.5% for the fiscal period ended October 2, 1994 and 7.5% for the fiscal period ended October 3, 1993, and projected salary increases of 4.5% for the fiscal period ended October 2, 1994 and 4% for the fiscal period ended October 3, 1993. In accordance with the provisions of Statement of Financial Accounting Standards No. 87 - Employers' Accounting for Pensions, the Company has recorded an additional minimum liability at October 2, 1994 and at October 3, 1993 representing the excess of the accumulated benefit obligation over the fair value of plan assets and accrued pension liability for its pension and SERP plans. The additional liability has been offset by an intangible asset which is included in "Other assets" to the extent of previously unrecognized prior service cost. Amounts in excess of previously unrecognized prior service cost are recorded net of the related deferred tax benefit as a reduction of stockholders' equity of $8,210,000 at October 2, 1994 and $9,453,000 at October 3, 1993. 32 33 Note 10 - Other Retirement and Benefit Plans: The Company sponsors a deferred compensation plan which permits directors and certain management employees to defer portions of their compensation and earn a guaranteed interest rate on the deferred amounts. The salaries which have been deferred since the plan's inception have been accrued, and the expense, other than salaries, related to this plan is interest on the deferred amounts. Interest expense during the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993 includes $1,915,000, $1,247,000, and $1,196,000, respectively, related to this plan. The Company has included in "Deferred employee benefits" $15,176,000 at October 2, 1994 and $13,191,000 at October 3, 1993 to reflect its liability under this plan. In connection with the deferred compensation plan and the SERP plan referred to in Note 9, the Company purchases whole-life insurance contracts on the related directors and employees. The Company has included in "Other assets" $15,496,000 at October 2, 1994 and $12,303,000 at October 3, 1993 which represent the capitalized value of these policies. If all of the assumptions regarding mortality, interest rates, policy dividends, and other factors are realized, the Company will ultimately realize its full investment plus a factor for the use of its money. The Company sponsors 401(k) plans in which substantially all non-bargaining employees and certain bargaining unit employees are eligible to participate. These plans allow eligible employees to save a portion of their salary on a pre-tax basis. The Company makes annual contributions to these plans which aggregated $408,000, $320,000 and $345,000 for the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993, respectively. The Company also sponsors an Employee Stock Ownership Plan (ESOP) in which substantially all non-bargaining employees participate. Contributions may be made in the form of cash or Company stock. The Company has expensed contributions to the ESOP of $0, $1,235,000 and $1,500,000 for the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993, respectively. The Company maintains a profit-based incentive plan which currently covers approximately 1,100 qualified employees. Compensation under this plan was $0, $0 and $979,000 for the fiscal periods ended October 2, 1994, October 3, 1993 and January 3, 1993, respectively. The Company also sponsors benefit plans that provide postretirement health care and life insurance benefits to certain employees who meet the applicable eligibility requirements. Effective December 30, 1991, the first day of the fiscal period ended January 3, 1993, the Company adopted Statement of Financial Accounting Standards No. 106 - Employers' Accounting for Postretirement Benefits Other Than Pensions (FAS 106). This standard requires accrual of the expected cost of providing postretirement benefits to employees and their beneficiaries and covered dependents during the years that employees provide services. Prior to December 30, 1991, the Company expensed the costs of health care and 33 34 life insurance benefits provided to retirees in the period in which these costs were paid. The cumulative effect of this change in accounting principle was a one-time charge of $28,841,000 before taxes, or $18,170,000 net of tax benefits calculated at an estimated effective tax rate of 37%. The cost of postretirement health care and life insurance benefits is summarized as follows:
Fiscal Period Ended ------------------------------------------------ October 2, October 3, January 3, 1994 1993 1993 ---------- ---------- ---------- (In thousands of dollars) Service cost $ 669 $ 428 $ 547 Interest cost 2,369 1,878 2,451 ------ ------ ------ Total postretirement benefit expense $3,038 $2,306 $2,998 ====== ====== ======
The actuarial and recorded liabilities for these postretirement benefits, none of which has been funded, are as follows:
October 2, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Accumulated postretirement benefit obligation: Retirees $(17,753) $(17,670) Active participants (11,244) (13,920) -------- -------- Accumulated benefit obligation (28,997) (31,590) Unrecognized net (loss) gain (3,163) 704 -------- -------- Accrued postretirement benefit obligation included in "Deferred employee benefits" $(32,160) $(30,886) ======== ========
The assumed discount rate was 8.5% for the fiscal period ended October 2, 1994 and 7.5% for the fiscal period ended October 3, 1993. For the fiscal period ended October 2, 1994, the rate of increase in the per capita costs of covered health care benefits was assumed to be 8% for the first five years, 6% for the next five years and 5% thereafter. For the fiscal period ended October 3, 1993, the rate of increase was assumed to be 9% for the first five years, 7% for the next five years, and 5% thereafter. Increasing the health care cost trend rate assumption by one percentage point would increase the accumulated postretirement benefit obligation as of October 2, 1994 by approximately $3,390,000 and would increase postretirement benefit cost by approximately $355,000 for the fiscal period ended October 2, 1994. Note 11 - Commitments and Contingencies: The Company has contracted for the purchase of a substantial portion of its future raw sugar requirements. Prices to be paid for raw sugar under these contracts are based in some cases on market prices during the anticipated delivery month. In other cases prices are fixed and, in these instances, the Company generally obtains commitments from 34 35 its customers to buy the sugar prior to fixing the price, or enters into futures transactions to hedge the commitment. The Company is exposed to loss in the event of non-performance by the other party to the interest rate swap agreements discussed in Note 6. However, the Company does not anticipate non-performance by the counter-parties to the transactions. In May 1992, the United States Customs Service (Customs) issued a bill to the Company for approximately $7,500,000 seeking reimbursement for certain drawback claims filed by the Company with Customs during the period 1984 through 1988. Customs has alleged that drawback claims prepared by the Company for certain export shipments of sugar during these years are technically and/or substantively deficient and that the Company, therefore, is not entitled to monies previously received under these drawback claims. The Company disputes Customs' findings and intends to vigorously protest the decision of Customs. While it is not certain how long the protest (administrative appeal) process will take, based upon the facts known to the Company at this time, the ultimate resolution of this matter is not expected to have a materially adverse effect on the Company's financial position or results of operations. In July 1991, National Utility Service, Inc. (NUS) filed a complaint against the Company in the United States District Court for the District of New Jersey seeking compensation and damages arising from a contract between the Company and NUS for energy cost saving recommendations. On September 12, 1994, summary judgment was entered against the Company in the amount of $2,973,000 in this case. A motion is presently pending in that action to modify the judgment by the addition of prejudgment interest in an amount between $1,343,000 and $1,472,000. The Company has opposed the motion to modify and has appealed the judgment to the United States Court of Appeals for the Third Circuit. The Company intends to pursue the appeal vigorously and strongly contends that no amounts are due to NUS. 35 36 Note 12 - Quarterly Financial Information (Unaudited): Unaudited quarterly financial information for the fiscal periods ended October 2, 1994 and October 3, 1993 is as follows:
First Second Third Fourth Quarter Quarter Quarter Quarter Ended Ended Ended Ended January 2, April 3, July 3, October 2, 1994 1994 1994 1994 ---------- -------- ------- ---------- (In thousands of dollars except for per share amounts) Fiscal period ended October 2, 1994 Net sales $280,186 $247,005 $272,891 $274,285 Gross profit 30,979 22,308 23,127 26,247 Income from operations 8,317 1,613 3,197 7,170 Net income (loss) 3,541 (271) 233 2,240 Per share .13 (.01) .01 .09
First Second Third Quarter Quarter Quarter Ended Ended Ended April 4, July 4, October 3, 1993 1993 1993 -------- ------- ---------- (In thousands of dollars except for per share amounts) Fiscal period ended October 3, 1993 Net sales $255,015 $270,979 $292,122 Gross profit 25,507 26,042 22,836 Income from operations 6,076 5,317 446 Income (loss) before change in accounting principle 2,653 1,490 (2,157) Per share .10 .06 (.08) Net income (loss) 3,253 1,490 (2,157) Per share .12 .06 (.08)
Quarterly results of operations for the fiscal period ended October 3, 1993 reflect the change in the Company's fiscal year end. The first quarter ended April 4, 1993 reflects the cumulative effect of adoption of FAS 109 of $600,000 effective January 4, 1993. The third quarter reflects a $4,900,000 increase in cost of sales and the associated $1,900,000 income tax benefit representing the liquidation of LIFO basis inventory acquired in 1984 as further explained in Note 2 to the financial statements. 36 37 SAVANNAH FOODS & INDUSTRIES, INC. AND SUBSIDIARIES Schedule V Property, Plant and Equipment (In thousands of dollars)
Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Balance at the Balance at beginning of Transfers the end of Classification the period Additions Retirements add (deduct) the period - -------------- -------------- --------- ----------- ------------ ---------- Fiscal Period Ended October 2, 1994 Land $ 8,405 $ 12 $ - $ - $ 8,417 Buildings 87,162 3,891 - - 91,053 Machinery & equipment 289,442 33,918 (9,490) - 314,530 Leasehold improvements 1,159 - - - 1,159 Projects-in- process 21,990 (14,454) - - 7,536 --------- --------- --------- --------- --------- $ 408,158 $ 23,367 $ (9,490) $ - $ 422,695 ========= ========= ========= ========= ========= Fiscal Period Ended October 3, 1993 Land $ 6,384 $ 2,021 $ - $ - $ 8,405 Buildings 81,233 5,929 - - 87,162 Machinery & equipment 253,132 40,235 (3,925) - 289,442 Leasehold improvements 1,163 - (4) - 1,159 Projects-in- process 13,523 8,467 - - 21,990 --------- --------- --------- --------- --------- $ 355,435 $ 56,652(1) $ (3,929) $ - $ 408,158 ========= ========= ========= ========= ========= Fiscal Period Ended January 3, 1993 Land $ 6,504 $ 45 $ (165) $ - $ 6,384 Buildings 66,755 15,825 (1,347) - 81,233 Machinery & equipment 234,446 24,612 (5,926) - 253,132 Leasehold improvements 1,982 - (819) - 1,163 Projects-in- process 8,704 4,819 - - 13,523 --------- --------- --------- --------- --------- $ 318,391 $ 45,301 $ (8,257) $ - $ 355,435 ========= ========= ========= ========= =========
(1) Additions for the fiscal period ended October 3, 1993 include $10,446 for the write-up of assets at Michigan Sugar Company due to the adoption of FAS 109 (see Note 7 for further discussion) and $10,852 for the assets acquired as a result of the acquisition of King Packaging Company. 37 38 SAVANNAH FOODS & INDUSTRIES, INC. AND SUBSIDIARIES Schedule VI Accumulated Depreciation and Amortization of Property, Plant and Equipment (In thousands of dollars)
Column A Column B Column C Column D Column E Column F -------- -------- -------- -------- -------- -------- Balance at Additions the beginning charged to cost Balance at of the and Transfers the end of Classification period expense Retirements add (deduct) the period - -------------- ------------- --------------- ----------- ------------ ---------- Fiscal Period Ended October 2, 1994 Buildings $ 28,540 $ 4,571 $ - $ - $ 33,111 Machinery & equipment 129,731 21,720 (4,655) - 146,796 Leasehold improvements 840 63 - - 903 --------- --------- --------- --------- --------- $ 159,111 $ 26,354 $ (4,655) $ - $ 180,810 ========= ========= ========= ========= ========= Fiscal Period Ended October 3, 1993 Buildings $ 25,483 $ 3,057 $ - $ - $ 28,540 Machinery & equipment 103,029 28,477 (1,775) - 129,731 Leasehold improvements 794 46 - - 840 --------- --------- --------- --------- --------- $ 129,306 $ 31,580(1) $ (1,775) $ - $ 159,111 ========= ========= ========= ========= ========= Fiscal Period Ended January 3, 1993 Buildings $ 22,485 $ 3,722 $ (724) $ - $ 25,483 Machinery & equipment 88,683 18,595 (4,249) - 103,029 Leasehold improvements 924 56 (186) - 794 --------- --------- --------- --------- --------- $ 112,092 $ 22,373 $ (5,159) $ - $ 129,306 ========= ========= ========= ========= =========
(1) Additions for the fiscal period ended October 3, 1993 include $7,754 for the write-up of assets at Michigan Sugar Company due to the adoption of FAS 109 (see Note 7 for further discussion) and $6,095 for the accumulated depreciation on assets acquired as a result of the acquisition of King Packaging Company. 38 39 Item 9. Change in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of Registrant. The information relating to the Directors of the Company is incorporated by reference from the "ELECTION OF DIRECTORS" section, pages 4 through 7, of the Company's Proxy Statement for its Annual Meeting of Stockholders to be held on February 16, 1995, to be filed pursuant to Section 14 of the Securities Exchange Act of 1934 ("1995 Proxy Statement"). The information relating to the Executive Officers of the Company is incorporated by reference from the "MANAGEMENT OF SAVANNAH FOODS & INDUSTRIES, INC." section, page 8 of the 1995 Proxy Statement. The information relating to disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is incorporated by reference from the "COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934" section, page 12, of the 1995 Proxy Statement. Item 11. Executive Compensation. The information relating to executive compensation is incorporated by reference from the "EXECUTIVE COMPENSATION" section, pages 9 and 10, the "BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD" section, page 14, the "COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION" section, pages 11 and 12, the "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" section, page 12, and the performance graph, page 13, of the 1995 Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management. The information relating to the security ownership of certain beneficial owners and management is incorporated by reference from the "STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" section, pages 2 and 3, of the 1995 Proxy Statement. Item 13. Certain Relationships and Related Transactions. The information relating to certain relationships and related transactions is incorporated by reference from the "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" section, page 14, and the "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" section, page 12, of the 1995 Proxy Statement. 39 40 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a)(1) and (2): See index of Financial Statements, Item 8(a) and 8(b), page 14. (a)(3) Exhibits:
Page Exhibit No. Number Description - --- ------ ----------- 3-1 Articles of Incorporation, as amended, is hereby incorporated by reference to Commission File No. 1-11420 on Form 10-K for the year ended January 3, 1993 as Exhibit 3-1. 3-2 By-Laws, as amended, is hereby incorporated by reference to Commission File No. 1-11420 on Form 10-K for the year ended October 3, 1993 as Exhibit 3-2. 45 4-1 Credit Agreement, dated as of October 1, 1993, by and among Savannah Foods & Industries, Inc., as borrower, the lenders named therein, and Nationsbank of Georgia, National Association, as agent. 162 4-2 Note Agreement, dated as of September 1, 1992, between Savannah Foods & Industries, Inc., as borrower, and the lenders named therein, consisting of $50,000,000 8.35% Series A Senior Notes due November 1, 2002 and $20,000,000 7.15% Series B Senior Notes due November 1, 2002. 4-3 In reliance upon Item 601(b)(4)(iii) of Regulation S-K, various instruments defining the rights of holders of long- term debt of Registrant are not being filed herewith because the total of securities authorized under each such instrument does not exceed 10% of the total assets of Registrant. Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request. 10-1* Profit Sharing and Management Incentive Compensation Plan is hereby incorporated by reference to Commission File No. 1-11420 on Form 10-K for the year ended January 3, 1993 as Exhibit 10-1. 10-2* Supplemental Executive Retirement Plan, as amended and restated, is hereby incorporated by reference to Commission File No. 1-11420 on Form 10-K for the year ended January 3, 1993 as Exhibit 10-2. 10-3* Amendment No. 1 to the Supplemental Executive Retirement Plan is hereby incorporated by reference to Commission File No. 1-11420 on Form 10-K for the year ended January 3, 1993 as Exhibit 10-3. 10-4* Deferred Compensation Plan for Key Employees, as amended and restated, is hereby incorporated by reference to Commission File No. 1-11420 on Form 10-K for the year ended January 3, 1993 as Exhibit 10-4.
40 41
Page Exhibit No. Number Description - --- ------ ----------- 10-5* Amendment No. 1 to the Deferred Compensation Plan for Key Employees is hereby incorporated by reference to Commission File No. 1-11420 on Form 10-K for the year ended January 3, 1993 as Exhibit 10-5. 227 10-6* Amendment No. 2 to the Deferred Compensation Plan for Key Employees. 10-7* Employment Agreement - W. W. Sprague, Jr., as amended, is incorporated by reference to Commission File No. 1-11420 filed on Form 10-K for the year ended December 29, 1991 as Exhibit 10-7. 10-8* Amendment to Employment Agreement - W. W. Sprague, Jr. - is hereby incorporated by reference to Commission File No. 1-11420 on Form 10-K for the year ended January 3, 1993 as Exhibit 10-7. 10-9* Employment Agreements with all other Executive Officers of the Company are incorporated by reference to Commission File No. 1-11420 filed on Form 10-K for the year ended January 1, 1989 as Exhibit 10-10. 10-10* Employment Agreement - W. W. Sprague, III is incorporated by reference to Commission File No. 1-11420 filed on Form 10-K for the year ended December 29, 1991 as Exhibit 10-10. 231 23-1 Consent of Independent Accountants 232 27-1 Financial Data Schedules
* Indicates exhibits which are management contracts or compensatory agreements. (b) Reports on Form 8-K: None. (c) See (a)(3) Exhibits above. (d) Not applicable. 41 42 UNDERTAKINGS For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into Registrant's Registration Statements on Form S-8 Number 2-63448, Monthly Investment Plan for Employees of Savannah Foods & Industries, Inc. (filed June 19, 1984 as amended on April 3, 1992); and Number 2-94678, Employee Retirement Savings Account Plan (filed December 22, 1984 as amended on October 18, 1994). Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") 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 Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a Director, Officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such Director, Officer or controlling persons in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 42 43 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SAVANNAH FOODS & INDUSTRIES, INC. Dated: December 20, 1994. By: /S/William W. Sprague, III ------------------ -------------------------- William W. Sprague, III President 43 44 Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of Registrant in the capacities and on the dates indicated: /S/William W. Sprague, Jr. Chairman and Director December 14, 1994 - -------------------------- William W. Sprague, Jr. (PRINCIPAL EXECUTIVE OFFICER) /S/William W. Sprague, III President and Director December 14, 1994 - -------------------------- William W. Sprague, III (PRINCIPAL OPERATING OFFICER) /S/William R. Steinhauer Senior Vice President - December 14, 1994 - -------------------------- William R. Steinhauer Finance & Administration & Assistant Secretary (PRINCIPAL FINANCIAL AND PRINCIPAL ACCOUNTING OFFICER) /S/F. Sprague Exley Vice President-Distribution December 14, 1994 - -------------------------- F. Sprague Exley and Director /S/W. Waldo Bradley Director December 14, 1994 - -------------------------- W. Waldo Bradley /S/John D. Carswell Director December 14, 1994 - -------------------------- John D. Carswell /S/Hugh M. Tarbutton Director December 14, 1994 - -------------------------- Hugh M. Tarbutton /S/Arthur Gignilliatt, Jr. Director December 14, 1994 - -------------------------- Arthur Gignilliatt, Jr. /S/Robert L. Harrison Director December 14, 1994 - -------------------------- Robert L. Harrison /S/Arnold Tenenbaum Director December 14, 1994 - -------------------------- Arnold Tenenbaum
44 EX-4.1 2 CREDIT AGREEMENT 1 Exhibit 4.1 THIS CREDIT AGREEMENT dated as of October 1, 1993 by and among SAVANNAH FOODS & INDUSTRIES, INC., a Delaware corporation (the "Borrower"), each of the financial institutions initially a signatory hereto together with those assignees pursuant to Section 10.5 and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, as Documentation Agent. WHEREAS, the parties hereto severally desire to make available to the Borrower certain financial accommodations on the terms and conditions contained herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties hereto, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Section 1.1. Definitions. In addition to terms defined elsewhere herein, the following terms shall have the following meanings for the purposes of this Agreement: "Absolute Interest Rate" has the meaning set forth in Section 2.2(c). "Absolute Interest Rate Auction" means a solicitation of Money Market Quotes setting forth Absolute Interest Rates pursuant to Section 2.2. "Absolute Interest Rate Loans" means Money Market Loans, the interest rate on which is determined on the basis of Absolute Interest Rates pursuant to an Absolute Interest Rate Auction. "Acceptance" means a banker's acceptance created by a Lender pursuant to Article 3 for the account of the Borrower. "Acceptance Obligation" has the meaning given that term in Section 3.5(a). "Adjusted Eurodollar Rate" means, with respect to each Interest Period for any Eurodollar Rate Loan or any Eurodollar Rate Market Loan, the rate obtained by dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage equal to 1 minus the stated maximum rate (stated as a decimal) of all reserves, if any, required to be maintained against "Eurocurrency liabilities" as specified in Regulation D of the Board of Governors of the Federal Reserve System (or against any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Loans is determined or any 45 2 2 category of extensions of credit or other assets which includes loans by an office of any Lender outside of the United States of America to residents of the United States of America). "Affiliate" means any Person (other than a Restricted Subsidiary) (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Borrower, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Borrower or (iii) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Borrower or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise. "Agent" means NationsBank of Georgia, National Association, as documentation agent for the Lenders under the terms of this Agreement and the other Loan Documents, and any successor agent. "Agent's Fee Letter" has the meaning set forth in Section 4.7. "Agreement" means this Credit Agreement. "Agreement Date" means the date as of which this Agreement is dated. "Anniversary Date" shall mean any October 1 after the date hereof. "Applicable Law" means all applicable provisions of constitutions, statutes, rules, regulations and orders of all governmental bodies and all orders and decrees of all courts, tribunals and arbitrators. "Applicable Margin" means, with respect to a Base Rate Loan, 0%, and with respect to a Eurodollar Rate Loan, 0.35%. "BA Face Amount" means the face amount of an Acceptance created by a Lender pursuant to Section 3.5. "Bankers Acceptance Facility" means the facility described in Article 3 pursuant to which the Lenders will create Acceptances. "Base Amount" means, for the purposes of any determination under Section 7.7, $173,700,000 plus, or minus, as the case may be, after date hereof, any benefit, or charge, respectively, which is attributable solely to a non-recurring accounting change. 46 3 3 "Base Rate" means, for any day, a rate per annum equal to the greater of (a) the Federal Funds Rate for such day plus one-half of one percent (0.5%) and (b) the Prime Rate for such day. Each change in any interest rate provided for herein based on the Base Rate resulting from a change in the Base Rate shall take effect at the time of such change in the Base Rate. "Base Rate Loan" means a Loan which bears interest at a rate based on the Base Rate. "Basket Indebtedness" means the sum of (i) all Indebtedness of the Borrower or a Restricted Subsidiary secured by Liens other than Liens permitted by Sections 7.10(a) through (f) plus (without duplication) (ii) all Funded Debt of a Restricted Subsidiary incurred subsequent to June 30, 1992. "Bid Acceptance" means any Acceptance created under Section 3.1(a)(ii). "Borrower" has the meaning set forth in the introductory paragraph hereof and shall include the Borrower's successors and assigns. "Borrower's Account" means account number 002 00000 711 of the Borrower maintained at NationsBank of Georgia, National Association ABA Number 061000052, or such other account as the Borrower may notify the Lenders. "Borrowing" means a borrowing by the Borrower of Revolving Loans pursuant to Section 2.3 or a deemed Borrowing pursuant to Section 2.6. "Business Day" means any day other than a Saturday, Sunday or other day on which banks in Atlanta, Georgia are authorized or required to close. "Capitalized Lease" means any lease with respect to which the obligation for Rentals is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. "Capitalized Rentals" of any Person means as of the date of any determination thereof the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which such Person as a lessee would be reflected as a liability on a consolidated balance sheet of such Person. "Cash Collateral Account" means a special non-interest bearing deposit account maintained at the Lending Office of a Lender and under the sole dominion and control of such Lender. 47 4 4 "Class" has the meaning set forth in Section 1.3. "Closing Date" means October 1, 1993. "Code" means the Internal Revenue Code of 1986, as amended. "Commitment" means, as to a Lender, such Lender's obligation to make Loans and create Acceptances hereunder in an amount up to but not exceeding the amount set forth for such Lender on Annex I as such Lender's "Initial Commitment Amount", as the same may be reduced from time to time pursuant to Section 2.11. "Commitment Termination Date" means the date which is the earlier of (i) the Current Termination Date, (ii) the effective date of withdrawal with respect to a Withdrawing Bank and (iii) the date of termination of the Commitments pursuant to this Agreement. "Consolidated Assets" means, as of the date of any determination thereof, the aggregate amount of assets of the Borrower and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP after deducting all Investments in Unrestricted Subsidiaries. "Consolidated Current Assets" and "Consolidated Current Liabilities" means as of the date of any determination thereof such assets and liabilities of the Borrower and its Restricted Subsidiaries on a consolidated basis as shall be determined in accordance with GAAP to constitute current assets and current liabilities, respectively. "Consolidated Funded Debt" means all Funded Debt of the Borrower and its Restricted Subsidiaries, determined on a consolidated basis eliminating intercompany items. "Consolidated Net Income" for any period means the net income of the Borrower and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP applied on a consistent basis, but excluding in any event: (a) extraordinary items; and (b) the effects of non-recurring accounting changes. "Consolidated Tangible Net Worth" means as of the date of any determination thereof the aggregate amount of the capital stock (less treasury stock), surplus and retained earnings of the Borrower and its Restricted Subsidiaries before deducting Minority Interests and after deducting (i) goodwill, 48 5 5 patents, trade names, trademarks, unamortized debt discount and expense, organization expense, deferred and prepaid expenses included in assets which do not constitute current assets, the excess of cost of assets acquired over market value of related assets, any reappraisal, revaluation or write-up of assets and such other assets as are properly classified as "intangible assets" in accordance with GAAP, (ii) Investments in Unrestricted Subsidiaries, and (iii) Minority Interests. "Continue", "Continuation" and "Continued" each refers to the continuation of a Eurodollar Rate Loan from one Interest Period to the next Interest Period. "Convert", "Conversion" and "Converted" each refers to the conversion of Loans of one Type into Loans of another Type pursuant to Section 2.7. "Credit Percentage" means, as to each Lender, the ratio, expressed as a percentage, of (a) the amount of such Lender's Commitment to (b) the aggregate amount of the Commitments of all Lenders; provided, however, that if at the time of determination the Commitments have terminated or been reduced to zero, the "Credit Percentage" of each Lender shall be the Credit Percentage of such Lender in effect immediately prior to such termination or reduction. "Current Debt" of the Borrower or any Restricted Subsidiary means, as of the date of any determination thereof, all Debt of the Borrower or such Restricted Subsidiary having a final maturity of less than one year from the date of origin thereof and which is not renewable or extendible at the option of the obligor for a period or periods of one year or more from the date of origin. "Current Termination Date" means October 1, 1996 and any date to which extensions thereof have been effected under Section 2.15. "Date of Issuance" means, with respect to an Acceptance, the date of the creation of an Acceptance by a Lender under this Agreement. "Debt" of the Borrower or any Restricted Subsidiary means, as of the date of any determination thereof: (a) all Indebtedness of the Borrower or any Restricted Subsidiary for borrowed money or evidenced by notes, bonds, debentures or similar evidences of Indebtedness of the Borrower or any Restricted Subsidiary; (b) obligations secured by any Lien upon property owned by the Borrower or any Restricted Subsidiary or created or arising under any conditional sale or other title retention agreement with 49 6 6 respect to property acquired by the Borrower or any Restricted Subsidiary, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under any such arrangement in the event of default are limited to repossession or sale of property including, without limitation, obligations secured by Liens arising from the sale or transfer of notes or accounts receivable, but, in all events, excluding trade payables and accrued expenses constituting current liabilities; (c) Capitalized Rentals; (d) reimbursement obligations in respect of credit enhancement instruments including letters of credit (excluding, however, letters of credit and surety bonds issued in commercial transactions in the ordinary course of business which are not financial guaranties); and (e) Guaranties of (i) obligations of others of the character referred to herein above in this definition and (ii) obligations of Unrestricted Subsidiaries. "Default" means any of the events specified in Section 8.1, whether or not there has been satisfied any requirement for the giving of notice, the lapse of time, a determination of materiality or the happening of any other condition. "Discount Rate" means, with respect to any Acceptance at any time, the bid rate in effect at the Lender which is to create such Acceptance at such time (as determined by such Lender in its sole discretion) for drafts in a similar amount and term as the draft to be accepted by such Lender. "Dollars" or "$" means the lawful currency of the United States of America. "Draft" has the meaning set forth in Section 3.1(b). "Effective Date" means the later of: (a) the Agreement Date; and (b) the date on which all of the conditions precedent set forth in Article 5 shall have been fulfilled or waived in writing by the Lenders. "Environmental Authority" shall mean any foreign, federal, state, local or regional government that exercises any form of jurisdiction or authority under any Environmental Requirement. "Environmental Judgments and Orders" shall mean all judgments, decrees or orders arising from or in any way associated with any Environmental Requirements, whether or not entered upon consent or written agreements with 50 7 7 an Environmental Authority or other entity arising from or in any way associated with any Environmental Requirement, whether or not incorporated in a judgment, degree or order. "Environmental Law" means any international, foreign, federal, state, regional, county, local, governmental, public or private statute, law, regulation, ordinance, order, consent decree, judgment, permit, license, code, covenant, deed restriction, common law, treaty, convention or other requirement, pertaining to protection of the environment, health or safety of persons, natural resources, conservation, wildlife, waste management, any Hazardous Material Activity and pollution (including, without limitation, regulation of releases and disposals to air, land, water and groundwater), and includes, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986,42 U.S.C. Section Section 9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Solid and Hazardous Waste Amendments of 1984,42 U.S.C. Section Section 6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977,33 U.S.C. Section Section 1251 et seq., Clean Air Act of 1966, as amended, 42 U.S.C. Section Section 7401 et seq., and any similar or implementing state law, and all amendments, rules, regulations, guidance documents and publications promulgated thereunder. "Environmental Liabilities" shall mean any liabilities, whether accrued or contingent, arising from or relating in any way to any Environmental Requirements. "Environmental Notices" shall mean any written communication from any Environmental Authority stating possible or alleged noncompliance with or possible or alleged liability under any Environmental Requirement, including without limitation any complaints, citations, demands or requests from any Environmental Authority for correction of any purported violation of any Environmental Requirements. Environmental Notices also shall mean (i) any written communication from any private Person threatening litigation or administrative proceedings against or involving the Company relating to alleged violation of any Environmental Requirements and (ii) any complaint, petition or similar documents filed by any private Person commencing litigation or administrative proceedings against or involving the Company relating to alleged violation of any Environmental Requirements. "Environmental Proceedings" shall mean any judicial or administrative proceedings arising from or in any way associated with any Environmental Requirement. 51 8 8 "Environmental Releases" shall mean releases (as defined in CERCLA or under any applicable state or local environmental law or regulation) of Hazardous Materials. Environmental Releases does not include releases for which no remediation or reporting is required by applicable Environmental Requirements and which do not present a substantial danger to health, safety or the environment. "Environmental Requirements" shall mean any applicable local, state or federal law, rule, regulation, permit, order, decision, determination or requirement relating in any way to Hazardous Materials or to health, safety or the environment. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. "ERISA Affiliate" means any corporation, trade or business that is, along with the Borrower, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in Section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. "Eurodollar Auction" means a solicitation of Money Market Quotes setting forth LIBO Margins based on the Eurodollar Rate pursuant to Section 2.2. "Eurodollar Business Day" means any day on which banks are scheduled to be open for business and quoting interest rates for Dollar deposits on the London interbank market and which is also a Business Day. "Eurodollar Rate" means, with respect to any Interest Period for a Eurodollar Rate Loan or a Eurodollar Rate Market Loan, the offered rate as determined by the Reference Bank in the London interbank market for deposits in Dollars of amounts equal or comparable to the principal amount of such Loan offered for a term comparable to such Interest Period, as currently shown on the Reuters Screen LIBO page as of 11:00 a.m., GMT, two Eurodollar Business Days prior to the first day of such Interest Period; provided, however, that (a) if more than one offered rate as described above appears on the Reuters Screen LIBO page, the rate used to determine the Eurodollar Rate will be the consensus rate, if any, shown on such LIBO page, and if no consensus rate is available, the rate used to determine the Eurodollar Rate will be the arithmetic average (rounded upward, if necessary, to the next higher 1/10 of 1%) of such offered rates, or (b) if no such offered rates appear, the rate used for such Interest Period will be the arithmetic average (rounded upward, if necessary, to the next higher 1/10 of 1%) of rates quoted by the Reference Bank at approximately 10:00 a.m., 52 9 9 New York time, two Eurodollar Business Days prior to the first day of such Interest Period for deposits in Dollars offered to leading European banks for a period comparable to such Interest Period in an amount comparable to the principal amount of such Eurodollar Rate Loans. If the Reference Bank ceases to use the Reuters Screen LIBO page for determining interest rates based on Eurodollar deposit rates, a comparable internationally recognized interest rate reporting service shall be used to determine such offered rates. "Eurodollar Rate Loan" means a Revolving Loan that bears interest based upon the Eurodollar Rate. "Eurodollar Rate Market Loan" means a Money Market Loan the interest rate on which is determined on the basis of a Eurodollar Rate pursuant to a Eurodollar Auction. "Event of Default" means any of the events specified in Section 8.1, provided that any requirement for notice or lapse of time or any other condition has been satisfied. "Facility Termination Date" has the meaning set forth in Section 4.14. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal, for each day during such period, to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day on such transactions received by the Reference Bank from three Federal Funds brokers of recognized standing selected by it. "Fees" means the fees and commissions provided for or referred to in Sections 4.6 and 4.7 and any other fees payable by the Borrower hereunder or under any other Loan Document. "Fixed Charges" for any period means on a consolidated basis the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the Borrower and its Restricted Subsidiaries, and (ii) all Interest Charges on all Indebtedness (including the interest component of Rentals on Capitalized Leases) of the Borrower and its Restricted Subsidiaries. "Funded Debt" of the Borrower or any Restricted Subsidiary means, as of the date of any determination thereof, (i) all Debt (including Guaranties) of the Borrower or any Restricted Subsidiary having a final maturity of one or more 53 10 10 than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, plus (but without duplication) (ii) Debt described in clause (e)(ii) of the definition of "Debt". "GAAP" shall mean generally accepted accounting principles at the time in the United States. "Governmental Approvals" means all authorizations, consents, approvals, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities. "Governmental Authority" means any national, state or local government (whether domestic or foreign), any political subdivision thereof or any other governmental, quasi-governmental, judicial, public or statutory instrumentality, authority, body, agency, bureau or entity (including, without limitation, the Federal Deposit Insurance Corporation, the Comptroller of the Currency or the Federal Reserve Board, any central bank or any comparable authority) or any arbitrator with authority to bind a party at law. "Guaranties" by any Person means all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, (ii) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (c) to lease property or to purchase Securities or other property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation, or (d) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. 54 11 11 "Hazardous Material" means any hazardous or toxic chemical, waste, byproduct, pollutant, contaminant, compound, product or substance, including, without limitation, asbestos, polychlorinated biphenyls, petroleum (including crude oil or any fraction thereof), and any material the exposure to, or manufacture, possession, presence, use, generation, storage, transportation, treatment, release, disposal, abatement, cleanup, removal, remediation or handling of which, is prohibited, controlled or regulated by any Environmental Law. "Hazardous Material Activity" means any activity, event or occurrence involving a Hazardous Material, including, without limitation, the manufacture, possession, presence, use, generation, storage, transportation, treatment, release, discharge, emission, disposal, abatement, cleanup, removal, remediation or handling of any Hazardous Material. "Indebtedness" of any Person means and includes all obligations of such Person which in accordance with GAAP shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all Debt. "Interest Charges" for any period means all interest paid or accrued (including, without limitation, imputed or express Interest in respect of Capitalized Leases) and all amortization of debt discount and expense on any particular Indebtedness for which such calculations are being made. "Interest Period" means: (a) With respect to any Eurodollar Rate Loan, each period commencing on the date such Eurodollar Rate Loan is made or the last day of the next preceding Interest Period for such Loan and ending on the numerically corresponding day in the first, second, third or sixth calendar month thereafter, as the Borrower may select as provided in Sections 2.3, 2.6 and 2.7, except that each Interest Period that commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month; (b) With respect to any Absolute Interest Rate Loan, the period commencing on the date such Absolute Interest Rate Loan is made and ending on any Business Day up to 180 days thereafter, as the Borrower may select as provided in Section 2.2(b); and (c) With respect to any Eurodollar Rate Market Loan, the period commencing on the date such Eurodollar Rate Market Loan is made and ending on the numerically corresponding day in the first, second, third or sixth calendar 55 12 12 month thereafter, as the Borrower may select as provided in Section 2.2(b), except that each Interest Period that commences on the last Business Day of a calendar month (or any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (i) if any Interest Period would extend beyond the Commitment Termination Date, such Interest Period shall end on the Commitment Termination Date; (ii) each Interest Period that would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day (or, if such next succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day); and (iii) notwithstanding clause (i) above, no Interest Period for any Eurodollar Rate Loan or Eurodollar Rate Market Loan shall have a duration of less than one month or shall extend beyond the Commitment Termination Date and, if the Interest Period for any Eurodollar Rate Loan or Eurodollar Rate Market Loan would otherwise be a shorter period, such Loan shall not be available hereunder for such period. "Investments" means all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or Securities or by loan, advance, capital contribution or otherwise, provided, however, that "Investments" shall not mean or include routine investments in property to be used or consumed in the ordinary course of business. "Lender" means the financial institutions from time to time identified as Lenders on, for each Lender and for each Type of Loan, the then current Annex I attached hereto, together with its respective successors and assigns. "Lending Office" means, for each Lender and for each Type of Loan, the office of each Lender specified for such Lender on Annex I attached hereto. "LIBO Margin" has the meaning set forth in Section 2.2(c). "Lien" means 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 the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, 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, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting property. For the purposes of this Agreement, 56 13 13 the Borrower or a Restricted Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capitalized Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien. "Loan" means any Revolving Loan or Money Market Loan. "Loan Document" means this Agreement, each of the Notes, and each other document or instrument executed and delivered by the Borrower in connection with this Agreement, any of the other foregoing documents or the Loan Facility or the Bankers' Acceptance Facility. "Loan Facility" means the loan facility described in Article 2. "Long-Term Lease" means any lease of real or personal property (other than a Capitalized Lease) having an original term, including any period for which the lease may be renewed or extended at the option of the lessor, of more than three years. "Majority Lenders" means, as of any date, Lenders whose combined Credit Percentages equal or exceed 66-2/3%. "Materially Adverse Change" means, with respect to any Person, a materially adverse change in such Person's business, assets, liabilities, financial condition, results of operations or business prospects and, unless otherwise agreed, as determined by the Majority Lenders. "Materially Adverse Effect" means, with respect to any Person, a materially adverse effect upon such Person's business, assets, liabilities, financial condition, results of operations or business prospects and, unless otherwise agreed, as determined by the Majority Lenders. "Minority Interests" means any shares of stock of any class of a Restricted Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Borrower and/or one or more of its Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. 57 14 14 "Money Market Borrowing" has the meaning set forth in Section 2.2(b). "Money Market Loan" means a loan made to the Borrower under Section 2.2. "Money Market Note" means a promissory note provided for by Section 2.14(b). "Money Market Quote" means an offer in accordance with Section 2.2(c) by a Lender to make a Money Market Loan with one single specified interest rate. "Money Market Quote Request" has the meaning set forth in Section 2.2(b). "Multiemployer Plan" has the same meaning as in ERISA. "NationsBank" means NationsBank of Georgia, National Association. "Net Income Available for Fixed Charges" for any period means the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any federal, state or other income taxes made by the Borrower and its Restricted Subsidiaries during such period and (iii) Fixed Charges of the Borrower and its Restricted Subsidiaries during such period. "Non-Prorata Obligation" means any Money Market Loan, Acceptance created under Section 3.1(a)(ii) or Acceptance Obligation arising in connection with an Acceptance created under Section 3.1(a)(ii). "Note" means a Revolving Note or a Money Market Note. "Notice of Continuation" has the meaning set forth in Section 2.6. "Notice of Conversion" has the meaning set forth in Section 2.7. "Notice of Syndicated Borrowing" means a notice in the form of Exhibit A to be delivered to a Lender pursuant to Section 2.3 evidencing the Borrower's request for a Borrowing of Revolving Loans. "Obligations" means, individually and collectively: (a) the Loans; (b) all Acceptance Obligations and (c) all other indebtedness, liabilities, obligations, covenants and duties of the Borrower owing to the Agent and/or the Lenders of every kind, nature and description, under or in respect of this Agreement or any 58 15 15 of the other Loan Documents including, without limitation, the Fees, whether direct or indirect, absolute or contingent, due or not due, contractual or tortious, liquidated or unliquidated, and whether or not evidenced by any note. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Permitted Investments" means those investments specified in clause (b), (c), (d) or (f) of Section 7.11. "Permitted Liens" has the meaning set forth in Section 7.10. "Person" means an individual, corporation, partnership, association, trust or unincorporated organization, or a government or any agency or political subdivision thereof. "Plan" means a "pension plan," as such term is defined in ERISA, established or maintained by the Borrower or any ERISA Affiliate or as to which the Borrower or any ERISA Affiliate contributed or is a member or otherwise may have any liability. "Post-Default Rate" means a rate equal to two percent (2%) above the Prime Rate as in effect from time to time. "Prorata Acceptance" means any Acceptance created under Section 3.1(a)(i). "Prorata Discount Rate" means the Discount Rate with respect to a Prorata Acceptance plus .35 of 1 percent. "Prime Rate" means the rate of interest publicly announced by the Reference Bank in Atlanta, Georgia from time to time as its "prime rate" (it being understood that the Prime Rate may not be the lowest rate the Reference Bank charges its customers). "Properties" shall mean all real property owned, leased or otherwise used or occupied by the Company or any Restricted Subsidiary, wherever located. "Purchase Money Lien" has the meaning set forth in Section 7.10(g). "Reference Bank" means NationsBank of Georgia, National Association. 59 16 16 "Related Investments" means equity Investments by the Borrower or any Restricted Subsidiary in businesses related to the ongoing business lines of the Borrower as of the Closing Date. "Rentals" means and include as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Borrower or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property whether in connection with a sale and leaseback transaction or otherwise), but shall be exclusive of any amounts required to be paid by the Borrower or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Reportable Event" has the same meaning as in ERISA. "Request for Acceptance" has the meaning set forth in Section 3.1(b). "Restricted Subsidiary" means any Subsidiary which has been designated by the Borrower as a Restricted Subsidiary either in Section 1 of Schedule 6.1(b) or in accordance with Section 7.14. "Revolving Loan" means a loan made to the Borrower pursuant to Section 2.3. "Revolving Note" means a promissory note provided for by Section 2.14(a). "Security" has the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. "Subsidiary" means as to any particular parent corporation any corporation of which more than 50% (by number of votes) of the Voting Stock shall be beneficially owned, directly or indirectly, by such parent corporation. The term "Subsidiary" means a subsidiary of the Borrower. "Surviving Corporation" has the meaning set forth in Section 7.12. "Termination Event" means (a) a Reportable Event; (b) the filing of a notice of intent to terminate a Plan or the treatment of a Plan amendment as a termination under Section 4041 of ERISA or (c) the institution of proceedings to 60 17 17 terminate a Plan by the PBGC under Section 4042 of ERISA, or the appointment of a trustee to administer any Plan. "Total Capitalization" means, as of any date of determination thereof, the sum of Consolidated Tangible Net Worth plus Consolidated Funded Debt plus the amount of any postretirement benefits (other than pensions) of the Borrower accrued in accordance with FAS 106 and generally accepted accounting principles and classified as noncurrent liabilities on the balance sheet of the Borrower. "Type" has the meaning set forth in Section 1.3. "Unrelated Investments" means equity Investments by the Borrower or any Restricted Subsidiary in any Person, which Investments are not Related Investments. "Unrestricted Subsidiary" means any Subsidiary which is not a Restricted Subsidiary. "Voting Stock" means Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). "Wholly-owned" when used in connection with any Subsidiary means a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) and all Debt shall be owned by the Borrower and/or one or more of its Wholly-owned Subsidiaries. "Withdrawing Bank" has the meaning set forth in Section 2.15. Section 1.2. General. Unless otherwise indicated, all accounting terms, ratios and measurements shall be interpreted or determined in accordance with GAAP. References in this Agreement to "Sections", "Articles", "Exhibits" and "Schedules" are to sections, articles, exhibits and schedules herein and hereto unless otherwise indicated. References in this Agreement to any document, instrument or agreement (a) shall include all exhibits, schedules and other attachments thereto, (b) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (c) shall mean such document, instrument or agreement, or replacement or predecessor thereto, as amended, modified or supplemented from time to time and in effect at any given time. Wherever from the context it appears appropriate, each term stated in either the singular or plural shall include the singular and plural, and pronouns stated in the masculine, feminine or neuter gender shall include the masculine, the feminine and the neuter. Unless explicitly set forth to the contrary, a reference to "Subsidiary" shall mean a Subsidiary of the Borrower or a Subsidiary of such 61 18 18 Subsidiary and a reference to an "Affiliate" shall mean a reference to an Affiliate of the Borrower. Unless otherwise indicated, all references to time are references to Atlanta, Georgia time. Section 1.3. Classes and Types of Loans. Loans hereunder are distinguished by "Class" and by "Type". The "Class" of a Loan refers to whether such Loan is a Money Market Loan or a Revolving Loan, each of which constitutes a Class. The "Type" of a Loan refers to whether such Loan is a Base Rate Loan, a Eurodollar Rate Loan, an Absolute Interest Rate Loan or a Eurodollar Rate Market Loan, each of which constitutes a Type. Loans may be identified by both Class and Type. ARTICLE 2 LOAN FACILITY Section 2.1. Loans. Subject to the terms and conditions of this Agreement, each Lender severally agrees to make Loans to the Borrower in Dollars during the period from and including the Effective Date hereof to but not including the Commitment Termination Date in an aggregate principal amount at any one time outstanding up to but not exceeding the amount of the Commitment of such Lender as in effect from time to time; provided, however, that in no event shall the aggregate principal amount of all Revolving Loans, together with the aggregate BA Face Amount of all outstanding Acceptances, the aggregate amount of all Acceptance Obligations and the aggregate principal amount of all Money Market Loans, exceed the aggregate amount of the Commitments as in effect from time to time. Subject to the terms and conditions of this Agreement, during such period the Borrower may borrow, repay and reborrow the amount of the Commitments by means of Base Rate Loans and Money Market Loans and Eurodollar Rate Loans and Acceptances and may Convert Revolving Loans of one Type into Revolving Loans of another Type (all subject to and as provided in Section 2.7) or Continue Loans of one Type as Loans of the same Type (as provided in Section 2.6); provided, however, that there may be no more than ten different Interest Periods for both Revolving Loans and Money Market Loans outstanding at the same time. Section 2.2. Money Market Loans. (a) The Borrower may, on the terms and conditions of this Agreement, request the Lenders to make offers to make Money Market Loans to the Borrower in Dollars. The Lenders may, but shall have no obligation to, make such offers and the Borrower may, but shall have no obligation to, accept any 62 19 19 such offers in the manner set forth in this Section. Money Market Loans may be Eurodollar Rate Market Loans or Absolute Interest Rate Loans, provided that: (i) there may be no more than ten different Interest Periods for both Revolving Loans and Money Market Loans outstanding at the same time; and (ii) the aggregate principal amount of all Money Market Loans, together with the aggregate principal amount of all Revolving Loans, the aggregate BA Face Amount of all outstanding Acceptances and the aggregate amount of all Acceptance Obligations, at any one time outstanding shall not exceed the aggregate amount of the Commitments at such time. (b) When the Borrower wishes to request offers to make Money Market Loans, it shall give each of the Lenders telephonic notice (a "Money Market Quote Request") so as to be received no later than 12:00 noon on (x) the third Eurodollar Business Day prior to the date of borrowing proposed therein, in the case of a Eurodollar Auction or (y) the date of borrowing proposed therein, in the case of an Absolute Interest Rate Auction. The Borrower may request offers to make Money Market Loans for up to four different Interest Periods in a single notice; provided, however, that the request for each separate Interest Period shall be deemed to be a separate Money Market Quote Request for a separate borrowing (a "Money Market Borrowing"). Each Money Market Borrowing shall be at least $1,000,000 (or a larger multiple of $100,000) but shall not cause the limits specified in Section 2.2(a) to be violated. (c) Each Lender may submit one or more Money Market Quotes, each containing an offer to make a Money Market Loan in response to any Money Market Quote Request; provided, however, that, if the Borrower's request under Section 2.2(b) specified more than one Interest Period, such Lender may make a single submission containing one or more Money Market Quotes for each such Interest Period. Each Money Market Quote must be submitted to the Borrower not later than (x) 10:00 a.m. on the second Eurodollar Business Day immediately prior to the proposed date of borrowing, in the case of a Eurodollar Auction or (y) 1:00 p.m. on the proposed date of borrowing, in the case of an Absolute Interest Rate Auction. Subject to Sections 2.8, 2.9 and 5.2 and Article 8, any Money Market Quote so made shall be irrevocable. Each Money Market Quote shall be substantially in the form of Exhibit B hereto and shall specify: (i) the proposed date of borrowing and the Interest Period therefor; (ii) the principal amount of the Money Market Loan for which each such offer is being made, which principal amount shall be at least $1,000,000 (or a larger multiple of $100,000); provided, however, that the aggregate principal amount of all Money Market Loans for which a Lender submits Money Market Quotes (A) may not be 63 20 20 greater than the unused Commitment of such Lender and (B) may not exceed the principal amount of the Money Market Borrowing for a particular Interest Period for which offers were requested; (iii) in the case of a Eurodollar Auction, the margin above or below the applicable Eurodollar Rate (the "LIBO Margin") offered for each such Money Market Loan, expressed as a percentage (rounded upwards, if necessary, to the nearest 1/100th of 1%) to be added to or subtracted from the applicable Eurodollar Rate; (iv) in the case of an Absolute Interest Rate Auction, the rate of interest per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) offered for each such Money Market Loan (the "Absolute Interest Rate"); and (v) the identity of the quoting Lender. No Money Market Quote shall contain qualifying, conditional or similar language or propose terms other than or in addition to those of the Money Market Quote Request and, in particular, no Money Market Quote may be conditioned upon acceptance by the Borrower of all (or some specified minimum) of the principal amount of the Money Market Loan for which such Money Market Quote is being made. (d) Not later than (x) 11:00 a.m. on the second Eurodollar Business Day immediately prior to the date of borrowing proposed therein, in the case of a Eurodollar Auction or (y) 2:00 p.m. on the proposed date of borrowing, in the case of an Absolute Interest Rate Auction, the Borrower shall notify each Lender by telephone of the Borrower's acceptance or nonacceptance of the Money Market Quotes submitted to the Borrower by such Lender. The failure of the Borrower to give such notice by such time shall constitute nonacceptance of any such Money Market Quote. The Borrower may accept any Money Market Quote in whole or in part (provided that any Money Market Quote accepted in part shall be at least $1,000,000 or a larger multiple of $100,000); provided, however, that: (i) the aggregate principal amount of each Money Market Borrowing may not exceed the applicable amount set forth in the related Money Market Quote Request; (ii) the aggregate principal amount of each Money Market Borrowing shall be at least $1,000,000 (or a larger multiple of $100,000) but shall not cause the limits specified in Section 2.2(a) to be violated; and (iii) the Borrower may not accept any offer that fails to comply with Section 2.2(c) or otherwise fails to comply with the requirements of this Agreement (including, without limitation, Section 2.2(a)). (e) Any Lender whose offer to make any Money Market Loan has been accepted shall, not later than 3:00 p.m. on the date specified for the making of such Loan and subject to the other terms and conditions of this Agreement, make the amount of such Loan available to the Borrower at the Borrower's Account in immediately available funds. (f) The amount of any Money Market Loan made by any Lender shall constitute a utilization of such Lender's Commitment. 64 21 21 Section 2.3. Borrowings of Revolving Loans. (a) Subject to the terms and conditions hereof, during the period from the Effective Date to the Commitment Termination Date, each Lender severally agrees to make Revolving Loans to the Borrower in an aggregate principal amount at any time outstanding up to but not exceeding, such Lender's Commitment. Subject to the terms and conditions of this Agreement, during the period from the Effective Date to the Commitment Termination Date, the Borrower may borrow, repay and reborrow Revolving Loans. All Borrowings of Revolving Loans shall be at an aggregate minimum amount of $1,000,000 and integral multiples of $100,000 in excess of that amount. The Borrower shall give the Lenders notice of each Borrowing of Revolving Loans hereunder by means of a Notice of Syndicated Borrowing. Each Notice of Syndicated Borrowing shall specify: (a) the requested date of the Borrowing of Revolving Loans, (b) the requested Type of such Loans, (c) if such Loans are to be Eurodollar Rate Loans, the initial Interest Period for such Loans and (d) the amount of and Lender for any outstanding Loans. Each such Notice of Syndicated Borrowing shall be given by the Borrower to Lenders not later than 12:00 noon on the date of any proposed Borrowing of Base Rate Loans and on the third Eurodollar Business Day prior to the date of any proposed Borrowing of Eurodollar Rate Loans. Subject to the terms and conditions of this Agreement, not later than 3:00 p.m. on the date specified for each Borrowing of Revolving Loans hereunder, each Lender shall make available the amount of the Revolving Loan or Loans to be made by it on such date to the Borrower, at the Borrower's Account, in immediately available funds. (b) If the Borrower requests a Borrowing of Revolving Loans at any time when there are Non-Prorata Obligations outstanding, each Lender shall, to the extent its Commitment exceeds its Credit Percentage of the aggregate outstanding principal balance of all Revolving Loans and the aggregate BA Face Amount of all Prorata Acceptances, fund such excess to the Borrower's Account up to a maximum of its Credit Percentage of such requested Borrowing of Revolving Loans. To the extent such excess is not equal to or greater than such Lender's Credit Percentage of such requested Borrowing of Revolving Loans, the Borrower shall, by written notice to the Lenders and the Reference Bank prior to the date of such requested Borrowing of Revolving Loans, advise the Lenders and the Reference Bank that it has Non-Prorata Obligations outstanding with one or more of the Lenders and that it is electing to take a credit against its request for such Borrowing of Revolving Loans by maintaining all or a portion of the requested Borrowing of Revolving Loans as Non-Prorata Obligations to the extent necessary in order for a Lender holding Non-Prorata Obligations to meet its obligation to fund up to its Credit Percentage of the requested Borrowing of Revolving Loans. (c) At any time when a requested Borrowing of Revolving Loans has been funded in whole or in part by Non-Prorata Obligations as provided in 65 22 22 Section 2.3(b), the Borrower shall provide to the Reference Bank and the Lenders a report detailing its records concerning the dates, maturities, amounts, balances, payment amounts and payment schedules of all Non-Prorata Obligations then outstanding. Such report also shall identify specifically those Non-Prorata Obligations used to fund all or a portion of any Revolving Loans in accordance with Section 2.3(b). Such report shall be delivered with each Notice of Syndicated Borrowing. Delivery of the report required by this Section 2.3(c) shall constitute the Borrower's representation and warranty that the information contained in such report is true, correct and complete in all respects as of the date of such report. (d) Notwithstanding the Borrower's election to take a credit against its Borrowing of Revolving Loans and the corresponding credit against any Lender's obligation to fund all or a portion of any Revolving Loans by maintaining Non-Prorata Obligations, such Non-Prorata Obligations shall for all purposes hereunder be treated as Money Market Loans, Acceptances or Acceptance Obligations, as the case may be. Section 2.4. Several Obligations. No Lender shall be responsible in any way for the failure of any other Lender to make a Loan to be made by such other Lender pursuant to this Agreement; provided, however, that the failure of any Lender to make a Revolving Loan to be made by it in connection with a Notice of Syndicated Borrowing shall not relieve the obligation of each other Lender to make the Revolving Loan to be made by such other Lender in connection with such Notice of Syndicated Borrowing. Section 2.5. Interest. The Borrower hereby promises to pay to each Lender interest on the unpaid principal amount of each Loan made by such Lender for the period from and including the date of such Loan to but excluding the date such Loan shall be paid in full, at the following per annum rates: (a) during such periods as such Loan is a Base Rate Loan, the Base Rate (as in effect from time to time) plus the Applicable Margin (if any); (b) during such periods as such Loan is a Eurodollar Rate Loan, the Adjusted Eurodollar Rate for such Loan for the Interest Period therefor plus the Applicable Margin for Eurodollar Rate Loans; (c) if such Loan is a Eurodollar Rate Market Loan, the Adjusted Eurodollar Rate for such Loan for the Interest Period therefor plus or minus, as appropriate, the LIBO Margin quoted by the Lender making such Loan; and 66 23 23 (d) if such Loan is an Absolute Interest Rate Loan, the Absolute Interest Rate for such Loan for the Interest Period therefor quoted by the Lender making such Loan. Accrued interest on each Loan shall be payable (i) in the case of a Base Rate Loan, on the last Business Day of each March, June, September and December, (ii) in the case of a Eurodollar Rate Loan, on the last day of each Interest Period therefor and, if such Interest Period is longer than three months, at three-month intervals following the first day of such Interest Period, (iii) in the case of a Money Market Loan, on the last day of each Interest Period therefor and, if such Interest Period is longer than three months (in the case of a Eurodollar Rate Market Loan) or 90 days (in the case of a Absolute Interest Rate Loan), at three-month or 90-day (as the case may be) intervals following the first day of such Interest Period and (iv) in the case of any Loan, upon the payment, prepayment or Continuation thereof or the Conversion of such Loan to a Loan of another Type (but only on the principal amount so paid, prepaid or Converted). Notwithstanding the foregoing, interest payable at the Post-Default Rate shall be payable from time to time on demand. Promptly after the determination of any Eurodollar Rate or the Base Rate, or any change in the Base Rate, the Reference Bank shall give notice thereof to the Lenders to which such interest is payable and to the Borrower. Each determination by the Reference Bank of an interest rate hereunder shall be conclusive and binding on the Borrower and the Lenders for all purposes, absent manifest error. Section 2.6. Continuation of Loans So long as no Default or Event of Default has occurred and is continuing, with respect to any Borrowing consisting of Eurodollar Rate Loans, the Borrower may, subject to the provisions of Sections 2.8 and 2.9 and Article 8, elect to maintain such Borrowing or any portion thereof as consisting of Eurodollar Rate Loans by selecting a new Interest Period for such Borrowing, which new Interest Period shall commence on the last day of the immediately preceding Interest Period. Each Continuation shall constitute a Borrowing and shall be made by notice given not later than 12:00 noon on the third Eurodollar Business Day prior to the date of any such Continuation by the Borrower to the Lenders and the Reference Bank. Such notice by the Borrower of a Continuation (a "Notice of Continuation") shall be by telephone or telecopy, confirmed immediately in writing if by telephone, in substantially the form of Exhibit C hereto, specifying (a) the date of such Continuation, (b) the Type of Loans subject to such Continuation, (c) the aggregate amount of Loans subject to such Continuation and (d) the duration of the selected Interest Period, all of which shall be specified in such manner as is necessary to comply with all limitations on Revolving Loans outstanding hereunder. Upon receipt of a Notice of Continuation, the Reference Bank shall determine the Adjusted Eurodollar Rate, and promptly notify the Borrower and the Lenders by telephone (promptly confirmed in writing by telecopier) or in 67 24 24 writing thereof by facsimile transmission. The Borrower may elect to combine more than one Borrowing consisting of Eurodollar Rate Loans into one Borrowing and select a new Interest Period pursuant to this Section; provided, however, that each of the Borrowings to be combined shall consist of Revolving Loans having Interest Periods ending on the same date. If the Borrower shall fail to select a new Interest Period for any Borrowing consisting of Eurodollar Rate Loans in accordance with this Section, such Loans will automatically, on the last day of the then existing Interest Period therefore, convert into Base Rate Loans. Section 2.7. Conversion of Loans. So long as no Default or Event of Default has occurred and is continuing, the Borrower may on any Business Day, upon notice (each such notice, a "Notice of Conversion") given to the Reference Bank and the Lenders, and subject to the provisions of Sections 2.8 and 2.9 and Article 8, Convert the entire amount of or a portion of all Revolving Loans of one Type comprising the same Borrowing into Revolving Loans of another Type; provided, however, that any Conversion of any Eurodollar Rate Loans into Revolving Loans of another Type shall be made on, and only on, the last day of an Interest Period for such Revolving Loans and, upon Conversion of any Base Rate Loans into Revolving Loans of another Type, the Borrower shall pay accrued interest to the date of Conversion on the principal amount Converted. Each such Notice of Conversion shall be given by the Borrower to the Reference Bank and the Lenders not later than 12:00 noon on the date of any proposed conversion into Base Rate Loans and on the third Eurodollar Business Day prior to the date of any proposed Conversion into Eurodollar Rate Loans. Subject to the restrictions specified above, each Notice of Conversion shall be by telephone or telecopy (confirmed immediately in writing if by telephone) in substantially the form of Exhibit D hereto specifying (a) the requested date of such Conversion, (b) the Type of Loans to be converted, (c) the portion of such Type of Loan to be converted, (d) the Type of Loan such Loans are to be converted into and (e) if such Conversion is into Eurodollar Rate Loans, the requested duration of the Interest Period of such Loans. Each Conversion shall be in an aggregate amount for the Loans of all Lenders of not less than $1,000,000 or an integral multiple of $100,000 in excess thereof. Upon receipt of a Notice of Conversion, the Reference Bank shall determine the Adjusted Eurodollar Rate, if applicable, and promptly notify the Borrower and the Lenders by telephone (confirmed in writing by facsimile transmission) or in writing thereof by facsimile transmission. The Borrower may elect to Convert the entire amount of or a portion of all Revolving Loans of one Type comprising more than one Borrowing into Revolving Loans of another Type by combining such Borrowings into one Borrowing consisting of Revolving Loans of another Type; provided, however, that if the Borrowings so combined consist of Eurodollar Rate Loans, such Revolving Loans shall have Interest Periods ending on the same date. 68 25 25 Section 2.8. Limitation on Types of Loans. Notwithstanding anything herein to the contrary, if, on or prior to the determination of any Eurodollar Rate for any Interest Period: (a) the Reference Bank determines, which determination shall be conclusive, and notifies the Borrower that quotations of interest rates for the relevant deposits referred to in the definition of "Eurodollar Rate" in Section 1.1 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining rates of interest for Eurodollar Rate Loans as provided herein; or (b) any Lender that has outstanding a Money Market Quote with respect to a Eurodollar Rate Market Loan determines, which determination shall be conclusive, and notifies the Borrower, that the relevant rates of interest referred to in the definition of "Eurodollar Rate" in Section 1.1 upon the basis of which the rate of interest for such Eurodollar Rate Market Loan is to be determined are not likely adequate to cover the cost to such quoting Lender of making or maintaining such Eurodollar Rate Market Loan; or (c) any Lender determines, which determination shall be conclusive, and notifies the Borrower and the Reference Bank that the relevant rates of interest referred to in the definition of "Eurodollar Rate" in Section 1.1 upon the basis of which the rate of interest for Eurodollar Rate Loans for such Interest Period is to be determined are not likely adequate to cover the cost to such Lender of making or maintaining Eurodollar Rate Loans for such Interest Period; then the Borrower shall give the Reference Bank and each Lender prompt notice thereof and, so long as such condition remains in effect, (i) in the case of clause (a) or (c) above, the Lenders shall be under no obligation to make additional Eurodollar Rate Loans, to Continue Eurodollar Rate Loans or to Convert Base Rate Loans into Eurodollar Rate Loans and the Borrower shall, on the last day(s) of the then current Interest Period(s) for the outstanding Eurodollar Rate Loans, either prepay such Loans or Convert such Loans into Base Rate Loans and (ii) in the case of clause (b) above, no Lender that has outstanding a Money Market Quote with respect to a Eurodollar Rate Market Loan shall be under any obligation to make such Eurodollar Rate Market Loan. Section 2.9. Illegality. Notwithstanding any other provision of this Agreement to the contrary, in the event that it becomes unlawful for any Lender to honor its obligation to make or maintain Eurodollar Rate Loans or Eurodollar Rate Market Loans hereunder, then such Lender shall promptly notify the Borrower thereof and such Lender's obligation to make or Continue, or to Convert Loans of any other Type into, Eurodollar Rate Loans or Eurodollar Rate Market Loans, as the case may be, shall be suspended until such time as such 69 26 26 Lender may again make and maintain such Loans (in which case the provisions of Section 2.10 shall be applicable). Section 2.10. Treatment of Affected Loans. If the obligation of any Lender to make Eurodollar Rate Loans or to Continue, or to Convert Base Rate Loans into, Eurodollar Rate Loans shall be suspended pursuant to Section 2.9, such Lender's Eurodollar Rate Loans shall be automatically Converted into Base Rate Loans on the last day(s) of the then current Interest Period(s) for Eurodollar Rate Loans (or, in the case of a Conversion required by Section 2.9, on such earlier date as such Lender may specify to the Borrower) and, unless and until such Lender gives notice as provided below that the circumstances specified in Section 2.9 that gave rise to such Conversion no longer exist: (a) to the extent that such Lender's Eurodollar Rate Loans have been so Converted, all payments and prepayments of principal that would otherwise be applied to such Lender's Eurodollar Rate Loans shall be applied instead to its Base Rate Loans; and (b) all Loans that would otherwise be made or Continued by such Lender as Eurodollar Rate Loans shall be made or Continued instead as Base Rate Loans, and all Base Rate Loans of such Lender that would otherwise be Converted into Eurodollar Rate Loans shall remain as Base Rate Loans. If such Lender gives notice to the Borrower that the circumstances specified in Section 2.9 that gave rise to the Conversion of such Lender's Eurodollar Rate Loans pursuant to this Section no longer exist (which such Lender agrees to do promptly upon such circumstances ceasing to exist) at a time when Eurodollar Rate Loans made by other Lenders are outstanding, such Lender's Base Rate Loans shall be automatically Converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Eurodollar Rate Loans, to the extent necessary so that, after giving effect thereto, all Loans held by the Lenders holding Eurodollar Rate Loans and by such Lender are held prorata (as to principal amounts, Types and Interest Periods) in accordance with their respective Commitments. Section 2.11. Reductions of the Commitments. The Borrower shall have the right (a) so long as no Loans, Acceptances or Acceptance Obligations are outstanding, to terminate the Commitments, and (b) to reduce the aggregate unused amount of the Commitments, at any time and from time to time without penalty or premium upon not less than three days prior written notice to the Lenders of each such termination or reduction, which notice shall specify the effective date thereof and the amount of any such reduction (which in the case of any partial reduction of the Commitments shall not be less than $10,000,000 and integral multiples of $5,000,000 in excess of that amount) and shall be 70 27 27 irrevocable once given and effective only upon receipt by the Lenders. The Commitments, once terminated or reduced pursuant to this Section, may not be reinstated. Section 2.12. Prepayments; Funding Losses. The Borrower may prepay any Loan at any time; provided, however, that in the event the Borrower prepays any Eurodollar Rate Loan, Eurodollar Rate Market Loan or Absolute Interest Rate Loan made by a Lender prior to the end of the applicable Interest Period therefor, the Borrower shall indemnify such Lender against any loss, cost or expense incurred by such Lender as a result of any such prepayment including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Lender to fund such Loan made by such Lender, such amount to be determined by such Lender and such determination by such Lender shall be binding upon the Borrower absent manifest error. The Borrower may prepay any Base Rate Loan at any time without penalty or premium. Further, the Borrower shall indemnify each Lender against any loss, cost or expense incurred by such Lender as a result of any failure to fulfill, on or before the date for any borrowing, Continuation or Conversion of Loans, the applicable conditions set forth in Section 5.2, or as a result of the failure of the Borrower to borrow any requested Loan, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by such Lender to fund the Loan to be made by such Lender, such amount to be determined by each Lender and such determination by such Lender shall be binding upon the Borrower, absent manifest error. Section 2.13. Repayment of Loans. The Borrower shall repay the entire outstanding principal amount of, and all accrued interest on, all Revolving Loans on the Commitment Termination Date. The Borrower shall repay the entire outstanding principal amount of, and all accrued interest on, each Money Market Loan and Eurodollar Rate Loan on the last day of the Interest Period for such Money Market Loan or Eurodollar Rate Loan, as the case may be, and on the Commitment Termination Date. Section 2.14. Notes. (a) The Revolving Loans made by each Lender shall be evidenced by a single promissory note of the Borrower substantially in the form of Exhibit E-1 hereto, dated the Agreement Date, payable to such Lender in a principal amount equal to the amount of its Commitment as originally in effect and otherwise duly completed. 71 28 28 (b) The Money Market Loans made by any Lender shall be evidenced by a single promissory note of the Borrower substantially in the form of Exhibit E-2 hereto, dated the Agreement Date, payable to such Lender and otherwise duly completed. Section 2.15. Extension of Commitment Termination Date. (a) At least one hundred twenty (120) days before the first Anniversary Date, or any subsequent Anniversary Date, each year the Borrower shall, unless all of the Commitments shall be reduced to zero pursuant to Section 2.11, provide to each Lender a request for extension by each Lender of its Commitment pursuant to this Section 2.15. At least one hundred (100) days before the first Anniversary Date or any subsequent Anniversary Date, each Lender shall provide to the Borrower written notice of whether such Lender intends to extend its Commitment pursuant to this Section 2.15. In the event any Lender fails to provide such notice within the time period specified, such Lender shall be deemed to have rejected such request to extend such Lender's Commitment as contemplated by this Section 2.15. (b) At least ninety (90) days before the first Anniversary Date, or any subsequent Anniversary Date, the Borrower shall notify the other Lenders which of the Lenders have elected to not extend their respective Commitments ("Withdrawing Lenders") and which of the Lenders have elected to extend their Commitments ("Remaining Lenders"). Unless the Commitments of the Withdrawing Lenders are assumed pursuant to Section 2.15(c) or (d) below, the Commitments of the Withdrawing Lenders shall terminate on the date which is the third Anniversary Date immediately following such request and the Notes of the Lenders that have indicated their willingness to extend their respective Commitments shall mature on the third Anniversary Date following the Anniversary Date with respect to which the Borrower made its request pursuant to this Section 2.15. (c) From and after the date the Borrower delivers the notice required by Section 2.15(b) above (the "New Lenders' Assumption Period") until a date not later than sixty (60) days before the Anniversary Date, the Borrower may have one or more new financial institutions ("New Assuming Lenders") assume the Commitments of the Withdrawing Lenders. So long as the Commitments have not been terminated hereunder, the New Assuming Lenders and the Withdrawing Lenders will within the New Assuming Lenders' Assumption Period execute and deliver such assumption documents as a New Assuming Lender or a Withdrawing Lender may require to effect such assumption. (d) From and after the last day of the New Lenders' Assumption Period until a date not later than sixteen (16) days before the Anniversary Date 72 29 29 of such New Lenders' Assumption Period ("Remaining Lenders' Assumption Period"), the Remaining Lenders shall have the right to assume the Commitments of the Withdrawing Lenders (subject to any assumption pursuant to clause (c) above) in proportion to their respective share of the Commitments of such Remaining Lenders. A Remaining Lender may decline in its sole discretion to so assume the Commitments of the Withdrawing Lenders. In such event, the Remaining Lenders interested in such assumption ("Assuming Lenders") shall assume the Commitments of the Withdrawing Lenders in proportion to their respective share of the Commitments of the Assuming Lenders. So long as the Commitments have not been terminated hereunder, the Assuming Lenders and the Withdrawing Lenders will within the Remaining Lenders' Assumption Period execute and deliver such assumption documents as an Assuming Lender or a Withdrawing Lender may require to effect such assumption. (e) Each of the Assuming Lenders or the New Assuming Lenders, as appropriate, shall assume not only the Withdrawing Lenders' obligations hereunder but also under each Loan Document. ARTICLE 3 BANKERS ACCEPTANCE FACILITY Section 3.1. Bankers Acceptance Facility. (a) Bankers Acceptance Facility. (i) Committed Acceptance Facility. Subject to the terms and conditions of this Agreement, each Lender severally agrees to extend credit to the Borrower during the period from the Effective Date to the Commitment Termination Date by providing for bankers acceptance financing resulting from the acceptance of Drafts issued by the Borrower in favor of such Lender in an aggregate BA Face Amount at any one time outstanding up to but not exceeding the amount of the Commitment of such Lender as in effect from time to time; provided, however, that in no event shall the limits specified in Section 3.1(b) be violated. (ii) Bid Acceptance Facility. (A) Bid Request. The Borrower may, on the terms and conditions of this Agreement, request the Lenders to make offers to create Acceptances. The Lenders may, but shall have no obligation to, make such offers and the Borrower may, but 73 30 30 shall have no obligation to, accept any such offers in the manner set forth in this Section. (B) Bid Submission. Each Lender may submit one or more bids for a Bid Acceptance in response to any Request for Acceptance with respect to such Bid Acceptance. Each such bid must be submitted to the Borrower not later than 10:00 a.m. on the date of the requested Bid Acceptance as set forth in the related Request for Acceptance. Subject to Sections 5.2 and Article 8, any such bid so made shall be irrevocable. Each such bid shall specify: (i) the Discount Rate; and (ii) the BA Face Amount of the Bid Acceptance for which each such offer is being made, which BA Face Amount shall be at least $1,000,000 (or a larger multiple of $100,000); provided, however, that the aggregate face amount of all Bid Acceptances for which a Lender submits a bid (x) may not be greater than the unused Commitment of such Lender and (y) may not exceed the BA Face Amount of the Bid Acceptances for which offers were requested. No such bid shall contain qualifying, conditional or similar language or propose terms other than or in addition to those of the Request for Acceptance and, in particular, no bid may be conditioned upon acceptance by the Borrower of all (or some specified minimum) of the BA Face Amount of the Bid Acceptances for which such bid is being made. (C) Bid Acceptance. Not later than 11:30 a.m. on the date of the Request for Acceptance with respect to such Bid Acceptance, the Borrower shall notify each Lender by telephone of the Borrower's acceptance or nonacceptance of such bid submitted to the Borrower by such Lender. The failure of the Borrower to give such notice by such time shall constitute nonacceptance of any such bid. The Borrower may accept any such bid in whole or in part; provided however that: (x) the aggregate BA Face Amount of each Bid Acceptance may not exceed the applicable amount set forth in the related Request for Acceptance; (y) the aggregate BA Face Amount of each Bid Acceptance shall be at least $1,000,000 (or a larger multiple of $100,000) but shall not cause the limits specified in Section 3.1(b) to be violated; and (z) the Borrower may not accept any offer that fails to meet the requirements of this Agreement (including, without limitation, this Section). The BA Face Amount of any Bid Acceptance created by any Lender shall constitute a utilization of such Lender's Commitment. 74 31 31 (b) Each Acceptance shall be created by a Lender hereunder by such Lender accepting a draft in such form as such Lender customarily accepts (a "Draft"), such Draft (i) being drawn by the Borrower on such Lender in accordance with the terms hereof, (ii) being dated the date of acceptance of such Draft by such Lender and (iii) maturing on the Business Day up to 180 days after the date of such Draft but in no event having a maturity date later than the Commitment Termination Date. Further, each Draft shall specify that presentment for payment shall be made by the holder thereof not more than thirty days after the maturity date thereof. In no event shall the aggregate principal amount of all Revolving Loans, together with the aggregate BA Face Amount of all outstanding Acceptances, the aggregate amount of all Acceptance Obligations and the aggregate principal amount of all Money Market Loans, exceed the aggregate amount of the Commitments as in effect from time to time. Each Acceptance created hereunder shall have face amount of at least $1,000,000 and integral multiples of $100,000 in excess thereof. (c) The Borrower shall request (a "Request for Acceptance") that the Lenders accept a Prorata Acceptance or request offers for a Bid Acceptance by giving each Lender written notice or telephonic notice not later than 11:30 a.m. on the date of the requested Acceptance. Not later than 12:00 noon on the date of the requested Prorata Acceptance as set forth in the Request for Acceptance and subject to the other terms and conditions of this Agreement, each such Lender will, in accordance with such Request for Acceptance, (i) fill in the date, amount and maturity of a Draft and (ii) accept such Draft at the location of such Lender specified for such purpose on the signature page hereof. A Lender whose bid to make a Bid Acceptance has been accepted by the Borrower shall, not later than 12:00 noon on the date of the requested Bid Acceptance as set forth in the related Request for Acceptance subject to the other terms and conditions of this Agreement, in accordance with such Request for Acceptance, (i) fill in the date, amount and maturity of a Draft and (ii) accept such Draft at the location of such Lender specified for such purpose on the signature page hereof. Section 3.2. Supply of Drafts/Power of Attorney. To enable each Lender to create Acceptances in the manner specified in Section 3.5, the Borrower shall, at the Borrower's election, either (i) supply such Lender with a sufficient number of blank Drafts duly executed by the Borrower or (ii) provide such Lender with a power of attorney, in substantially the form of Exhibit F ("Power of Attorney"). In case any authorized signatory of the Borrower whose signature shall appear on any Draft or a Power of Attorney shall cease to have such authority before the creation of an Acceptance, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such creation. 75 32 32 Section 3.3. Discount. If a Lender shall create a Prorata Acceptance, subject to the terms and conditions of this Agreement, such Lender shall deliver to the Borrower at the Borrower's Account an amount equal to (a) the BA Face Amount of such Acceptance minus (b) the product of (i) the BA Face Amount and (ii) the Prorata Discount Rate. If a Lender shall create a Bid Acceptance, subject to the terms and conditions of this Agreement, such Lender shall deliver to the Borrower at the Borrower's Account an amount equal to (a) the BA Face Amount of such Acceptance minus (b) the product of (i) the BA Face Amount and (ii) the Discount Rate. A Lender may at any time or from time to time sell, rediscount or otherwise dispose of any such Acceptance. Section 3.4. Termination of the Acceptance Commitment. Notwithstanding anything to the contrary herein, if any restriction is imposed on a Lender including, without limitation, any change in acceptance limits imposed on such Lender, which would prevent such Lender from creating Acceptances; then such Lender may, by notice to the Borrower and the other Lenders in writing or by telephone (confirmed in writing), terminate the obligation of such Lender to create Acceptances hereunder in whole or in part, effective on the date on which such Lender gives such notice. Section 3.5. Acceptance Obligation. (a) The Borrower is obligated, and hereby absolutely and unconditionally agrees, to pay to each Lender the BA Face Amount of each Acceptance created by such Lender hereunder on the maturity date of such Acceptance (the obligation of the Borrower under this Section with respect to any Acceptance being the "Acceptance Obligation" with respect to such Acceptance) in the manner set forth in subsection (b) below. (b) The Borrower shall pay each Acceptance Obligation in the following manner: (i) the Borrower shall pay the amount of the Acceptance Obligation to the Lender which created such Acceptance in accordance with Section 4.3; or (ii) Pursuant to Section 4.3, such Lender may debit any deposit account of the Borrower maintained with such Lender and appropriate and apply an amount of funds in such account equal to the Acceptance Obligations outstanding at such time in satisfaction of the Borrower's obligations set forth in subsection (i) above. Section 3.6. Obligations Absolute. The obligations of the Borrower to pay at maturity the amount of any Acceptance created hereunder shall be 76 33 33 unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances including, without limitation, the following circumstances: (i) any lack of validity or enforceability of any Draft; (ii) the existence of any claim, set-off, defense or other right which the Borrower or any Affiliate of the Borrower may have at any time against any holder of any Draft, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein or any unrelated transaction; (iii) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Loan Documents; (iv) any non-application or misapplication by the holder of an Acceptance; or (v) the fact that a Default or Event of Default shall have occurred and be continuing. Section 3.7. Non-Prorata Obligations. (a) If the Borrower requests Prorata Acceptances at any time when there are Non-Prorata Obligations outstanding, each Lender shall, to the extent its Commitment exceeds its Credit Percentage of the aggregate outstanding principal balance of all Revolving Loans and the aggregate BA Face Amount of all Prorata Acceptances, fund such excess to the Borrower's Account up to a maximum of its Credit Percentage of such requested Prorata Acceptances. To the extent such excess is not equal to or greater than such Lender's Credit Percentage of such requested Prorata Acceptances, the Borrower shall, by written notice to the Lenders prior to the date of such requested Prorata Acceptance, advise the Lenders that it has Non-Prorata Obligations outstanding with one or more of the Lenders and that it is electing to take a credit against its request for such Prorata Acceptance by maintaining all or a portion of the requested Prorata Acceptance as Non-Prorata Obligations to the extent necessary in order for a Lender holding Non-Prorata Obligations to meet its obligation to create up to its Credit Percentage of the requested Prorata Acceptances. (b) At any time when the obligation to create Prorata Acceptances has been satisfied in whole or in part by Non-Prorata Obligations as provided above, the Borrower shall provide to the Lenders a report detailing its records 77 34 34 concerning the dates, maturities, amounts, balances, payment amounts and payment schedules of all Non-Prorata Obligations then outstanding. Such report also shall identify specifically those Non-Prorata Obligations used to satisfy all or a portion of any obligation to create Prorata Acceptances in accordance with Section 3.7(a). Such report shall be delivered with the Request for Acceptance with respect to such Prorata Acceptance. Delivery of the report required by this Section 3.7(b) shall constitute the Borrower's representation and warranty that the information contained in such report is true, correct and complete in all respects as of the date of such report. (c) Notwithstanding the Borrower's election to take a credit as provided above and the corresponding credit against any Lender's obligation to create all or a portion of any Prorata Acceptances by maintaining Non-Prorata Obligations, such Non-Prorata Obligations shall for all purposes hereunder be treated as Money Market Loans, Acceptances or Acceptance Obligations, as the case may be. ARTICLE 4 OTHER LOAN AND PAYMENT PROVISIONS. Section 4.1. Interest on Overdue Payments. In the event the Borrower shall fail to pay when due (whether at maturity, by reason of acceleration or otherwise) any principal of, or interest on, any of the Loans or any Acceptance Obligation or any other amount owing hereunder or under any Note or other Loan Document when due, such overdue amounts shall bear (to the extent permitted by Applicable Law) interest at the Post-Default Rate until such unpaid amount has been paid in full (whether before or after judgment). Section 4.2. Computations. Unless otherwise expressly set forth herein, any accrued interest on (a) any Base Rate Loan shall be computed on the basis of a year of 365 or 366 days, as applicable, and the actual number of days elapsed and (b) the Discount Rate (unless otherwise specified) and any other Loan and any Fees due hereunder shall be computed on the basis of a year of 360 days and the actual number of days elapsed. Section 4.3. Payments. Except to the extent otherwise provided herein, all payments of principal, interest and other amounts to be made by the Borrower under this Agreement, the Notes or any other Loan Document shall be made in Dollars, in immediately available funds, to the appropriate Lender at such Lender's Lending Office, not later than 2:00 p.m. on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day) and 78 35 35 shall be made in accordance with the wiring instructions set forth for such Lender on Annex I attached hereto. The parties agree that if the Borrower makes any payment due hereunder after 2:00 p.m. but before 5:00 p.m. on the date such payment is due, such late payment shall not constitute a Default under Section 8.1 but shall nevertheless be deemed to have been paid as of the next succeeding Business Day as provided in the parenthetical phrase of the preceding sentence. Subject to Sections 4.4 and 4.5, any Lender for whose account any such payment is to be made, may (but shall not be obligated to) debit the amount of any such payment which is not made by such time from any special or general deposit account of the Borrower with such Lender (with notice to the Borrower). The Borrower shall, at the time of making each payment under this Agreement or any Note, specify to the applicable Lender the amounts payable by the Borrower hereunder to which such payment is to be applied (and in the event that it fails to so specify, or an Event of Default has occurred and is continuing, such Lender may apply such payment to the Loans, any Acceptance Obligation or any other obligation of the Borrower under the Loan Documents in such manner as such Lender may determine to be appropriate, subject to Section 4.4). If the due date of any payment under this Agreement or any Note would otherwise fall on a day which is not a Business Day such date shall be extended to the next succeeding Business Day and interest shall be payable for the period of such extension. Section 4.4. Pro Rata Treatment. Unless set forth to the contrary herein (a) each Borrowing of Revolving Loans and (b) each payment by the Borrower with respect to any Revolving Loans, shall be made by, or credited to the account of, the Lenders pro rata in accordance with their respective Credit Percentages. Each payment of interest on the Revolving Loans made by the Borrower shall be made for the account of the Lenders pro rata in accordance with the amounts of interest due and payable to the respective Lenders. Section 4.5. Sharing of Payments, Etc. The Borrower agrees that, in addition to (and without limitation of) any right of set-off, bankers' lien or counterclaim a Lender may otherwise have, each Lender shall be entitled, at its option, to offset balances held by it for the account of the Borrower at any of such Lender's offices, in Dollars or in any other currency, against any principal of, or interest on, any of such Lender's Loans hereunder (or other Obligations owing to such Lender hereunder) which is not paid when due (regardless of whether such balances are then due to the Borrower), in which case such Lender shall promptly notify the Borrower and all other Lenders thereof; provided, however, such Lender's failure to give such notice shall not affect the validity of such offset. If a Lender shall obtain payment of any principal of, or interest on, any Loan made by it to the Borrower under this Agreement, or shall obtain payment on any other Obligation owing by the Borrower through the exercise of any right of set-off, banker's lien or counterclaim or similar right or otherwise or through voluntary prepayments directly to a Lender or other payments made 79 36 36 by the Borrower to a Lender not in accordance with the terms of this Agreement and such payment, pursuant to Section 4.4, should be distributed to the Lenders pro rata in accordance with their Credit Percentage, such Lender shall promptly purchase from the other Lenders participations in (or, if and to the extent specified by such Lender, direct interests in) the Revolving Loans made by the other Lenders or other Obligations owed to such other Lenders in such amounts, and make such other adjustments from time to time as shall be equitable, to the end that all the Lenders shall share the benefit of such payment (net of any expenses which may be incurred by such Lender in obtaining or preserving such benefit) pro rata in accordance with their respective Credit Percentages. To such end, all the Lenders shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Borrower agrees that any Lender so purchasing a participation (or direct interest) in the Revolving Loans or other Obligations owed to such other Lenders made by other Lenders may exercise all rights of set-off, bankers' lien, counterclaim or similar rights with respect to such participation as fully as if such Lender were a direct holder of Loans in the amount of such participation. Nothing contained herein shall require any Lender to exercise any such right or shall affect the right of any Lender to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness or obligation of the Borrower. Section 4.6. Unused Facility Fee. During the period from the Effective Date to but excluding the Commitment Termination Date, the Borrower shall pay to each Lender immediately upon receipt of invoice as of the last day of each calendar quarter ending on the last day of each March, June, September and December, a fee in an amount equal to three-sixteenths of one percent (0.1875%) of the amount by which such Lender's Commitment exceeded the average daily (a) aggregate outstanding balance of Revolving Loans and Money Market Loans made by such Lender during such quarter and (b) aggregate BA Face Amounts of the Acceptances created by such Lender during such quarter. Section 4.7. Agent's Fee. The Borrower agrees to pay a documentation fee to the Agent on or prior to the Closing Date in such amount as the Borrower and the Agent shall agree. Section 4.8. Increased Costs. The Borrower agrees that if: (a) any change after the Agreement Date in any law, executive order or regulation or in any request, guideline or directive of any administrative or governmental authority (whether or not having the force of law) or in the interpretation thereof by any court or administrative or governmental authority charged with administration thereof, shall either impose, affect, modify or deem applicable any reserve, special deposit, capital maintenance or similar requirement against any Loan or Acceptance or the Commitment of a Lender or impose on any Lender 80 37 37 any other condition regarding any Loan or Acceptance or such Lender's Commitment or (b) there shall occur any change after the Agreement Date in the basis of taxation of payments to any Lender of any amount owing to such Lender hereunder (except for a change in the rate of taxation on the overall net income of any Lender or the branches or foreign Subsidiaries of any Lender), and the result of any event referred to in clause (a) or (b) above shall be to increase the cost to such Lender of making or maintaining any Loan or issuing or maintaining any Acceptance hereunder or to reduce the rate of return on capital with respect to any Loan or Acceptance, then, upon demand by any such Lender, the Borrower shall immediately pay to such Lender additional amounts which shall be sufficient to compensate such Lender for such increased cost, tax or reduced rate of return. A statement setting forth the basis for requesting such compensation and the method for determining the amount thereof, submitted by such Lender to the Borrower, shall be conclusive; provided, however, that such determinations are made reasonably and in good faith. Section 4.9. U.S. Taxes. (a) The Borrower agrees to pay to each Lender that is not a U.S. Person (as defined below) such additional amounts as are necessary in order that the net payment of any amount due to such non-U.S. Person hereunder after deduction for or withholding in respect of any U.S. Tax imposed with respect to such payment (or in lieu thereof, payment of such U.S. Tax by such non-U.S. Person), will not be less than the amount stated herein to be then due and payable; provided, however, that the foregoing obligation to pay such additional amounts shall not apply: (i) to any payment to a Lender hereunder unless such Lender is, on the date hereof (or on the date it becomes a Lender as provided in Section 10.6) and on the date of any change in the Lending Office of such Lender, either entitled to submit a Form 1001 (relating to such Lender and entitling it to a complete exemption from withholding on all interest to be received by it hereunder in respect of the Loans) or Form 4224 (relating to all interest to be received by such Lender hereunder in respect of the Loans), or (ii) to any U.S. Tax imposed solely by reason of the failure by such non-U.S. Person to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections with the United States of America of such non-U.S. Person if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such U.S. Tax. 81 38 38 For the purposes of this Section, (i) "Form 1001" shall mean Form 1001 (Ownership, Exemption, or Reduced Rate Certificate) of the Department of the Treasury of the United States of America, (ii) "Form 4224" shall mean Form 4224 (Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of the Treasury of the United States of America (or in relation to either such Form such successor and related forms as may from time to time be adopted by the relevant taxing authorities of the United States of America to document a claim to which such Form relates), (iii) "U.S. Person" shall mean a citizen, national or resident of the United States of America, a corporation, partnership or other entity created or organized in or under any laws of the United States of America, or any estate or trust that is subject to Federal income taxation regardless of the source of its income and (iv) "U.S. Taxes" shall mean any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof or therein. (b) Within 30 days after paying any amount to any Lender from which the Borrower is required by law to make any deduction or withholding, and within 30 days after the Borrower is required by law to remit such deduction or withholding to any relevant taxing or other authority, the Borrower shall deliver to such non-U.S. Person evidence satisfactory to such Person of such deduction, withholding or payment (as the case may be). Section 4.10. Agreement Regarding Interest and Charges. THE PARTIES HERETO HEREBY AGREE AND STIPULATE THAT THE ONLY CHARGE IMPOSED UPON THE BORROWER FOR THE USE OF MONEY IN CONNECTION WITH THIS AGREEMENT IS AND SHALL BE THE INTEREST AND FEES DESCRIBED IN SECTIONS 2.5 AND 3.3. THE PARTIES HERETO FURTHER AGREE AND STIPULATE THAT ALL OTHER CHARGES IMPOSED BY THE LENDERS AND THE AGENT ON THE BORROWER IN CONNECTION WITH THIS AGREEMENT, INCLUDING ALL AGENCY FEES, FACILITY FEES, UNDERWRITING FEES, DEFAULT CHARGES, LATE CHARGES, ATTORNEYS' FEES AND REIMBURSEMENT FOR COSTS AND EXPENSES PAID BY THE AGENT OR ANY LENDER TO THIRD PARTIES OR FOR DAMAGES INCURRED BY THE AGENT OR ANY LENDER, ARE CHARGES MADE TO COMPENSATE THE AGENT OR ANY SUCH LENDER FOR UNDERWRITING OR ADMINISTRATIVE SERVICES AND COSTS OR LOSSES PERFORMED OR INCURRED, AND TO BE PERFORMED OR INCURRED, BY THE AGENT AND THE LENDERS IN CONNECTION WITH THIS AGREEMENT AND SHALL UNDER NO CIRCUMSTANCES BE DEEMED TO BE CHARGES FOR THE USE OF MONEY PURSUANT TO OFFICIAL CODE OF GEORGIA ANNOTATED SECTION 7-4-2 AND 7-4-18. ALL CHARGES OTHER THAN CHARGES FOR THE USE OF MONEY 82 39 39 SHALL BE FULLY EARNED AND NONREFUNDABLE WHEN DUE. IN NO EVENT SHALL THE AMOUNT OF INTEREST DUE OR PAYABLE ON THE LOANS EXCEED THE MAXIMUM RATE OF INTEREST ALLOWED BY APPLICABLE LAW AND, IN THE EVENT ANY SUCH PAYMENT IS PAID BY THE BORROWER OR RECEIVED BY ANY LENDER, THEN SUCH EXCESS SUM SHALL BE CREDITED AS A PAYMENT OF PRINCIPAL, UNLESS THE BORROWER SHALL NOTIFY THE RESPECTIVE LENDER IN WRITING THAT THE BORROWER ELECTS TO HAVE SUCH EXCESS SUM RETURNED TO IT FORTHWITH. IT IS THE EXPRESS INTENT OF THE PARTIES HERETO THAT THE BORROWER NOT PAY AND THE LENDERS NOT RECEIVE, DIRECTLY OR INDIRECTLY, IN ANY MANNER WHATSOEVER, INTEREST IN EXCESS OF THAT WHICH MAY BE LAWFULLY PAID BY THE BORROWER UNDER APPLICABLE LAW. Section 4.11. Statements of Account. Upon request, each Lender will account to the Borrower monthly with a statement of Loans, Acceptances, charges and payments made to such Lender pursuant to this Agreement and the other Loan Documents, as well as the amount of such Lender's Commitment, and such account rendered by a Lender shall be deemed final, binding and conclusive upon Borrower unless such Lender is notified by the Borrower in writing within fifteen days after the date each account is delivered to Borrower that the Borrower objects to the information, calculations or items therein contained. Such notice shall only be deemed an objection to those items specifically objected to therein. The failure of any Lender to deliver such a statement of accounts shall not relieve or discharge the Borrower from its obligations hereunder. Section 4.12. Defaulting Lender's Status. Notwithstanding anything contained herein to the contrary, but in addition to provisions regarding the failure of a Lender to perform its obligations hereunder set forth elsewhere in this Agreement, so long as any Lender shall be in default in its obligation to fund any Revolving Loan or shall have rejected its Commitment, then such Lender shall not be entitled to receive any payments of principal of, or interest on, its Commitment or the Revolving Loans, or Acceptance Obligations or its share of any commitment or other fees payable hereunder, and for purposes of voting or consenting to matters with respect to the Loan Documents, such Lender shall be deemed not to be a "Lender" hereunder and such Lender's Commitment shall be deemed to be zero, unless and until (x) the Obligations have been paid in full, (y) such failure to fulfill its obligation to fund is cured and such Lender shall have paid, as and to the extent provided in this Agreement, to the applicable party, such amount then owing together with interest on the amount of funds that such Lender failed to timely fund or (z) the Obligations under this Agreement shall have been declared or shall have become immediately due and payable. No Commitment of any Lender shall be increased or otherwise affected by any such 83 40 40 failure or rejection by any Lender. Any payments of principal or interest which would, but for this subsection, be paid to any Lender, shall be paid to the Lenders who shall not be in default under their respective Commitments and who shall not have rejected any Commitment, for application to the Loans or to provide cash collateral in such manner and order as shall be determined by the other Lenders. Section 4.13. Reliance. Neither the Agent nor any Lender shall incur any liability to the Borrower for acting upon any telephonic notice referred to in this Agreement which the Agent or any Lender believes in good faith to have been given by a person authorized to deliver a Notice of Syndicated Borrowing, a Money Market Quote Request, a Request for Acceptance, a Notice of Continuation or a Notice of Conversion on behalf of the Borrower or for otherwise acting in good faith under Sections 2.2, 2.3, 2.6, 2.7 and 3.1(c). Section 4.14. Maturity Date of Acceptances Past Commitment Termination Date. If, on the date (the "Facility Termination Date") this Agreement and the Bankers Acceptance Facility are terminated, any Acceptances created by a Lender remain outstanding, the Borrower shall, on the Facility Termination Date, deposit with such Lender an amount of money equal to the BA Face Amount of such Acceptances in the Cash Collateral Account of such Lender. If a timely presentment for payment with respect to any such Acceptance occurs after the Facility Termination Date, the Borrower authorizes such Lender to use the monies deposited in such Lender's Cash Collateral Account to make payment to the payee with respect to such presentment. Section 4.15. Cash Collateral Accounts. The Cash Collateral Account maintained by a Lender shall be in the name of such Lender as a cash collateral account and such Lender shall have sole dominion and control over, and sole access to, such Cash Collateral Account. Neither the Borrower nor any Person claiming on behalf of or through the Borrower shall have any right to withdraw any of the funds held in any Cash Collateral Account. The Borrower agrees that it will not (i) sell or otherwise dispose of any interest in any Cash Collateral Account or any funds held therein, or (ii) create or permit to exist any Lien upon or with respect to any Cash Collateral Account or any funds held therein, except as provided in or contemplated by this Agreement. Each Lender shall exercise reasonable care in the custody and preservation of any funds held in its Cash Collateral Account and shall be deemed to have exercised such care if such funds are accorded treatment substantially equivalent to that which such Lender accords other funds deposited with such Lender, it being understood that no Lender shall have any responsibility for taking any necessary steps to preserve rights against any parties with respect to any funds held in its Cash Collateral Account. Subject to the right of a Lender to withdraw funds from its Cash Collateral Account as provided herein, such Lender may in its sole discretion invest funds on deposit 84 41 41 in its Cash Collateral Account, reinvest proceeds of any such investments which may mature or be sold, and invest interest or other income received from any such investments, in each case, in Permitted Investments, as such Lender may select. Such proceeds, interest and income which are not so invested or reinvested in Permitted Investments shall be deposited and held by such Lender in its Cash Collateral Account. ARTICLE 5 CONDITIONS PRECEDENT Section 5.1. Conditions Precedent to Initial Loans and Acceptances. This Agreement, the obligation of the Lenders to make any Loans in accordance with the terms hereof and the obligation of the Lenders to create Acceptances in accordance with the terms hereof, are subject to the condition precedent that the Borrower deliver to the Agent and to each Lender each of the following, each of which shall be satisfactory in form and substance to the Agent and the Lenders: (a) A Revolving Note executed and delivered by the Borrower, payable to one of each of the Lenders; (b) A Money Market Note executed and delivered by the Borrower, payable to one of each of the Lenders; (c) A copy of the certificate of incorporation (certified as of a recent date by the Secretary of State of the State of Delaware) and by-laws (certified by the Secretary or Assistant Secretary of the Borrower) of the Borrower as in effect on the Effective Date; (d) A copy (certified by the Secretary of the Borrower) of all corporate action taken by the Borrower to authorize the execution, delivery and performance the Loan Documents to which the Borrower is a party; (e) Certificates of incumbency and specimen signatures with respect to each of the officers of the Borrower who are authorized to execute and deliver the Loan Documents to which the Borrower is a party; (f) Certificates of good standing, qualification to do business or other similar certificates issued as of a recent date by the Secretary of State of each State in which the Borrower is currently doing business; and 85 42 42 (g) An opinion of Miller, Simpson & Tatum, counsel to the Borrower, addressed to the Lenders and the Agent in substantially the form of Exhibit G; (h) The financial statements described in Section 6.1(j); (i) Copies of any policy of insurance (or a certificate of insurance issued by the applicable insurance company or agent) required to be maintained by the Borrower under any of the Loan Documents; (j) Evidence of payment of all fees and expenses then due and owing by the Borrower; and (k) Such other documents and instruments as the Agent or a Lender may reasonably request. Section 5.2. Conditions Precedent to All Loans and Acceptances. The obligation of the Lenders to make Loans or Continue or Convert Loans and of the Lenders to create Acceptances is subject to the further conditions precedent that (a) as of the date of each such Loan or Date of Issuance of each such Acceptance and after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing; (ii) the representations and warranties made or deemed made by the Borrower in this Agreement and the other Loan Documents to which it is a party, shall be true and correct on and as of the date of the making of such Loan or Date of Issuance of such Acceptance with the same force and effect as if made on and as of such date except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) and except for changes in factual circumstances specifically permitted hereunder; (iii) no Materially Adverse Change since the Effective Date shall have occurred and (iv) the proposed Loan or Acceptance, as the case may be, requested hereby satisfies all limitations set forth in the Credit Agreement and (b) the Lenders shall have received the applicable Money Market Quote Requests, Notices of Syndicated Borrowing or Requests for Acceptances, within the time periods provided therefor. Each Notice of Syndicated Borrowing, Money Market Quote Request, Request for Acceptance, Notice of Continuation and Notice of Conversion delivered by the Borrower hereunder shall constitute a certification by the Borrower to the effect set forth in the preceding sentence (both as of the date of such instrument and, unless the Borrower otherwise notifies the Lenders prior to the date of such Borrowing or issuance, as of the date of such Borrowing or issuance). 86 43 43 ARTICLE 6 REPRESENTATIONS AND WARRANTIES Section 6.1. Representations and Warranties. The Borrower represents and warrants to the Agent and each Lender as follows: (a) Organization; Power; Qualification. The Borrower, and each Restricted Subsidiary, is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the power and authority to own or lease its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and is in good standing as a foreign corporation, and authorized to do business, in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization. (b) Subsidiaries. Schedule 6.1(b) states the name of each of the Borrower's Subsidiaries, its jurisdiction of incorporation and the percentage of its Voting Stock owned by the Borrower and/or its Subsidiaries. Those Subsidiaries listed in Section 1 of said Schedule constitute Restricted Subsidiaries. The Borrower and each Subsidiary has good and marketable title to all of the shares it purports to own of the stock to each Subsidiary, free and clear in each case of any Lien. All such shares have been duly issued and are fully paid and non-assessable. (c) Authorization of Agreement, Notes, Loan Documents and Borrowings. The Borrower has the right and power, and has taken all necessary action to authorize it, to borrow hereunder and to execute, deliver and perform this Agreement, the Notes and the other Loan Documents to which it is a party in accordance with their respective terms and to consummate the transactions contemplated hereby. This Agreement, the Notes and each of the other Loan Documents to which the Borrower is a party have been duly executed and delivered by the duly authorized officers of the Borrower and each is a legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with its respective terms. (d) Compliance of Agreement, Notes, Loan Documents and Borrowing with Laws, etc. The execution, delivery and performance of this Agreement, the Notes and the other Loan Documents to which the Borrower is a party in accordance with their respective terms and the borrowings hereunder do not and will not, by the passage of time, the giving of notice, a determination of materiality, the satisfaction of any condition, any combination of the foregoing, or otherwise: (i) require any Governmental Approval or violate any Applicable Law relating to the Borrower; (ii) conflict with, result in a breach of or constitute 87 44 44 a default under the certificate of incorporation or bylaws of the Borrower, or any indenture, agreement or other instrument to which the Borrower is a party or by which it or any of its properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower or any Restricted Subsidiary other than Permitted Liens. (e) Compliance with Law; Governmental Approvals. The Borrower, and each Restricted Subsidiary, is in compliance with each Governmental Approval applicable to it and in compliance with all other Applicable Law relating to it, except for noncompliances which, and Governmental Approvals the failure to possess which, would not, singly or in the aggregate, cause a Default or Event of Default or have a Materially Adverse Effect on the Borrower and its Restricted Subsidiaries taken as a whole. (f) Titles to Properties. The Borrower and each Restricted Subsidiary has good, marketable and legal title to, or a valid leasehold interest in, its properties and assets including, but not limited to, those reflected on the consolidated balance sheet of the Borrower as at December 31, 1992, except those which have been disposed of subsequent to such date in the ordinary course of business and subject to no Liens except for Permitted Liens. (g) Indebtedness. Schedule 6.1(g) is a complete and correct listing of all Current Debt, Funded Debt, Capitalized Leases and Long-Term Leases of the Borrower and its Restricted Subsidiaries. The Borrower and its Restricted Subsidiaries have performed and are in compliance with all of the terms of such Indebtedness and all instruments and agreements relating thereto, and no default or event of default, or event or condition which with the giving of notice, the lapse of time, a determination of materiality, the satisfaction of any other condition or any combination of the foregoing, would constitute such a default or event of default, exists with respect to any such Indebtedness. (h) Litigation. Except as set forth in Schedule 6.1(h), there are no actions, suits or proceedings pending (nor, to the knowledge of the Borrower, are there any actions, suits or proceedings threatened, nor is there any basis therefor) against or in any other way relating adversely to or affecting the Borrower or any of the Restricted Subsidiaries or any of their respective property in any court or before any arbitrator of any kind or before or by any governmental body, which, if adversely determined, would have a Materially Adverse Effect on the Borrower and its Restricted Subsidiaries taken as a whole. (i) Tax Returns and Payments. All federal, state and other tax returns of the Borrower and its Restricted Subsidiaries required by Applicable Law to be filed have been duly filed, and all federal, state and other taxes, 88 45 45 assessments and other governmental charges or levies upon the Borrower and each of its Restricted Subsidiaries and their respective properties, income, profits and assets which are due and payable have been paid, except any such nonpayment which is at the time permitted under Section 7.3. (j) Financial Statements. The Borrower has furnished to each Lender copies of the consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at December 31, 1992, and the related statements of income and cash flow and consolidated statement of changes in stockholders' equity for the periods covered thereby, each certified by the of the Treasurer of the Borrower to be, in her opinion, in compliance with the next succeeding sentence. Such balance sheet and statements (including in each case related schedules and notes) are complete and correct and present fairly, in accordance with GAAP consistently applied throughout the periods involved, the financial position of the Borrower and its consolidated Subsidiaries as at their respective dates and the results of operations and the cash flow for such periods. Except as disclosed in such balance sheet or statements, the Borrower and its consolidated Subsidiaries had no material liabilities, contingent or otherwise, and nor were there any material unrealized or anticipated losses of the Borrower and its consolidated Subsidiaries. (k) ERISA. Each Plan complies in all material respects with all Applicable Law and (i) no Reportable Event has occurred and is continuing with respect to any Plan, (ii) neither the Borrower nor any ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or instituted steps to do so, and (iii) no steps have been instituted to terminate any Plan. No condition exists or event or transaction has occurred in connection with any Plan which could result in the incurrence by the Borrower or any ERISA Affiliate of any material liability, fine or penalty. No Plan maintained by the Borrower or any ERISA Affiliate, nor any trust created thereunder, has incurred any "accumulated funding deficiency" as defined in Section 302 of ERISA nor does the present value of all benefits vested under all Plans exceed, as of the last annual valuation date, the value of the assets of the Plans allocable to such vested benefits. Neither the Borrower nor any ERISA Affiliate has any contingent liability with respect to any post-retirement "welfare benefit plan" (as such term is defined in ERISA) except as has been disclosed to the Lenders. (l) Absence of Defaults. The Borrower is not in default under its certificate of incorporation or its bylaws, and no event has occurred, which has not been remedied, cured or waived: (i) which constitutes a Default or an Event of Default; or (ii) which constitutes, or which with the passage of time, the giving of notice, a determination of materiality, the satisfaction of any condition, or any combination of the foregoing, would constitute, a default or event of default by the Borrower any material agreement (other than this Agreement) or judgment, 89 46 46 decree or order to which the Borrower is a party or by which the Borrower or any of its properties may be bound. (m) Accuracy and Completeness of Information. All written information, reports and other papers and data furnished to the Agent or any Lender by, on behalf of, or at the direction of, the Borrower were, at the time the same were so furnished, complete and correct in all material respects, to the extent necessary to give the recipient a true and accurate knowledge of the subject matter, or, in the case of financial statements, present fairly, in accordance with GAAP consistently applied throughout the periods involved, the financial position of the Persons involved as at the date thereof and the results of operations for such periods. No fact is known to the Borrower which has had, or may in the future have (so far as the Borrower can reasonably foresee), a Materially Adverse Effect upon the Borrower and its Restricted Subsidiaries taken as a whole which has not been set forth in the financial statements referred to in Section 6.1(j) or in such information, reports or other papers or data or otherwise disclosed in writing to the Agent and the Lenders prior to the Agreement Date. No document furnished or written statement made to the Agent or any Lender in connection with the negotiation, preparation of execution of this Agreement or any of the other Loan Documents contains or will contain any untrue statement of a fact material to the creditworthiness of the Borrower or omits or will omit to state a material fact necessary in order to make the statements contained therein not misleading. (n) Environmental Laws. The Borrower has obtained all Governmental Authorizations which are required under Environmental Laws and is in compliance in all respects with all terms and conditions of such Governmental Authorizations, and it is also in compliance in all respects with all other limitations, restrictions, conditions, standards, prohibitions, requirements, obligations, schedules, and timetables contained in the Environmental Laws where the failure to so comply could have a Material Adverse Effect on the Borrower and its Restricted Subsidiaries, taken as a whole. The Borrower is not aware of, and has not received notice of, any past, present, or future events, conditions, circumstances, activities, practices, incidents, actions, or plans which, with respect to the Borrower or any Restricted Subsidiary, may interfere with or prevent compliance or continued compliance with Environmental Laws, or may give rise to any common-law or legal liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study, or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, chemical, or industrial, toxic, or other Hazardous Material; and there is no civil, criminal, or administrative action, suit, demand, claim, hearing, notice, or demand letter, notice or violation, investigation, or proceeding pending or, to the Borrower's 90 47 47 knowledge, threatened, against the Borrower or any Restricted Subsidiary relating in any way to Environmental Laws. (o) Investment Company Act. Neither the Borrower nor any Subsidiary is an "investment company" or an "affiliated person" of any "investment company" or a company "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. (p) Use of Proceeds. The proceeds of all Loans and Acceptances will be used for interim acquisition financing and other general corporate purposes. None of the transactions contemplated by this Agreement (including, without limitation thereof, the use of proceeds of Loans and Acceptances) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Neither the Borrower nor any Subsidiary owns or intends to carry or purchase any "margin stock" within the meaning of said Regulation G. None of the proceeds of the Loans or Acceptances will be used to purchase, or refinance any borrowing the proceeds of which were used to purchase, any "security" within the meaning of the Securities Exchange Act of 1934, as amended. Section 6.2. Survival of Representations and Warranties, Etc. All statements contained in any certificate, financial statement or other instrument delivered by or on behalf of the Borrower to the Agent or any Lender pursuant to or in connection with this Agreement or any of the other Loan Documents (including, but not limited to, any such statement made in or in connection with any amendment thereto or any statement contained in any certificate, financial statement or other instrument delivered by or on behalf of the Borrower prior to the date hereof and delivered to the Agent or any Lender in connection with closing the transactions contemplated hereby) shall constitute representations and warranties made by the Borrower under this Agreement. All representations and warranties made under this Agreement shall be deemed to be made at and as of the Agreement Date, the Effective Date and at and as of the date of making each Loan, each Continuation or Conversion of a Loan and the Date of Issuance of each Acceptance, except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) and except for changes in factual circumstances specifically permitted hereunder. 91 48 48 ARTICLE 7 COVENANTS For so long as any of the Obligations remains unpaid or unperformed, or this Agreement is in effect, unless the Majority Lenders (or, if required pursuant to Section 10.7, all of the Lenders) shall otherwise consent in the manner provided for in Section 10.7: Section 7.1. Corporate Existence, Etc. The Borrower will preserve and keep in full force and effect, and will cause each Restricted Subsidiary to preserve and keep in full force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business; provided, however, that the foregoing shall not prevent any transaction permitted by Section 7.12. Section 7.2. Insurance. The Borrower will maintain, and will cause each Restricted Subsidiary to maintain, insurance coverage by financially sound and reputable insurers in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties. Notwithstanding the foregoing, each policy of insurance maintained by the Borrower or any Restricted Subsidiary shall contain a 30 day non-cancellation clause. Section 7.3. Taxes, Claims for Labor and Materials, Compliance with Laws; Environmental Compliance. (a) The Borrower will promptly pay and discharge, and will cause each Restricted Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Borrower or such Restricted Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Borrower or such Restricted Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Borrower or such Restricted Subsidiary; provided, however, that the Borrower or such Restricted Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Borrower or such Restricted Subsidiary or any material interference with the use thereof by the Borrower or such Restricted Subsidiary, and (ii) the Borrower or such Restricted Subsidiary shall set aside on its books, reserves deemed by it to be adequate with respect thereto. The Borrower will promptly comply and will cause each Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject including, without limitation, the Occupational Safety and Health Act of 1970, as amended and ERISA, the violation of which could materially and 92 49 49 adversely affect the properties, business, prospects, profits or condition of the Borrower and its Restricted Subsidiaries or would result in any Lien not permitted under Section 7.10. (b) The Borrower shall comply with all applicable Environmental Laws, now existing or later enacted, except where the failure to so comply could not have a material adverse effect on the business, profits, prospects, properties or condition (financial or otherwise) of the Borrower or any Restricted Subsidiary. The Borrower at its sole expense shall take or cause to be taken all appropriate action necessary to cure any violation by the Borrower of any applicable Environmental Laws, which violation could have a Materially Adverse Effect on the Borrower or any Restricted Subsidiary. The Borrower shall not manufacture, possess, use, generate, store, transport, treat, release, discharge, emit or dispose any Hazardous Material except in de minimus amounts and in compliance in all material respects with all applicable Environmental Law. The Borrower shall promptly take, or cause to be taken, in compliance with all applicable Environmental Law, all response action required or directed by any governmental authority to abate, clean up, remove and remediate any Hazardous Material released at, disposed at, contaminating, polluting or impairing, any real or personal property owned, occupied or operated by the Borrower. Section 7.4. Maintenance, Etc. The Borrower will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order and from time to time will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. Section 7.5. Nature of Business. Neither the Borrower nor any Restricted Subsidiary will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Borrower and its Restricted Subsidiaries would be substantially changed from the general nature of the business engaged in by the Borrower and its Restricted Subsidiaries as described in Schedule 7.5 hereto. Section 7.6. Current Ratio. The Borrower will at all times keep and maintain the ratio of Consolidated Current Assets to Consolidated Current Liabilities at not less than 1.25 to 1.00. Section 7.7. Consolidated Tangible Net Worth. The Borrower will at all times during each fiscal quarter keep and maintain Consolidated Tangible Net Worth at an amount not less than the sum of (a) the Base Amount and (b) 20% of Consolidated Net Income for each fiscal year of the Borrower, beginning with the fiscal year starting January 4, 1993 (it being agreed that for the purposes of 93 50 50 making any calculation under this clause (b), Consolidated Net Income which is a deficit figure for any such fiscal year shall be deemed to be zero). Section 7.8. Indebtedness Ratios. (a) The Borrower will not at any time permit the ratio of Consolidated Funded Debt to Total Capitalization to exceed 45%. (b) The Borrower will not at any time permit the ratio of Basket Indebtedness to Consolidated Tangible Net Worth to exceed 20%. (c) Any corporation which becomes a Restricted Subsidiary after the date hereof shall for all purposes of this Section be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Funded Debt of such corporation existing immediately after it becomes a Restricted Subsidiary. Section 7.9. Fixed Charges Coverage Ratio. The Borrower will keep and maintain the ratio of Net Income Available for Fixed Charges to Fixed Charges (determined as of the end of each fiscal quarter for the period of four consecutive fiscal quarters ending on such quarter end date, taken as a single accounting period) at not less than 2.00 to 1.00. Section 7.10. Limitation on Liens. The Borrower will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except the following (collectively, "Permitted Liens"): (a) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided payment thereof is not at the time required by Section 7.3; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Borrower or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; 94 51 51 (c) Liens incidental to the conduct of business or the ownership of properties and assets (including Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (d) Minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Borrower and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Borrower and its Restricted Subsidiaries; (e) Liens securing Indebtedness of a Wholly-owned Restricted Subsidiary to Borrower or to another Wholly-owned Restricted Subsidiary and any extension, renewal or replacement of any such Lien provided, that (i) the Lien so extended, renewed or replaced shall not encumber any property of the Borrower or any Restricted Subsidiary which was not subject to the Lien so extended, renewed or replaced, and (ii) there shall be no increase in the principal amount of Indebtedness secured by such Lien; (f) Liens on inventories of the Borrower consisting of sugar processed from sugar beets and sugarcane securing Current Debt of the Borrower or any Restricted Subsidiary to the United States Commodity Credit Corporation, provided that the sole recourse of the United States Commodity Credit Corporation for any Current Debt so secured shall be to the related seasonal sugar inventories of the Borrower and shall not extend to any other sugar inventories whether existing at the time such Current Debt is incurred or arising thereafter or to the general credit of the Borrower; (g) Liens incurred after the Agreement Date given to secure the payment of the purchase price incurred in connection with the acquisition of fixed assets useful and intended to be used in carrying on the business of the Borrower or a Restricted Subsidiary, including Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Borrower or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach so long as they were not 95 52 52 incurred, extended or renewed in contemplation of such acquisition, provided that (i) the Lien shall attach solely to the fixed assets acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets whether or not assumed by the Borrower or a Restricted Subsidiary shall not exceed an amount equal to 100% of the lesser of the total purchase price or fair market value at the time of acquisition of such fixed assets (as determined in good faith by the Board of Directors of the Borrower), and (iii) all Indebtedness secured by such Liens is otherwise permitted by the provisions of this Agreement, including, without limitation thereof, by the provisions of Sections 7.8 and 7.9 (all such Liens incurred pursuant to and in accordance with this subsection being hereinafter referred to as "Purchase Money Liens"); (h) in addition to those Liens permitted by the immediately preceding subsections (a) through (g), any Lien (other than any Lien securing Debt of the Borrower or any Restricted Subsidiary which is not a Purchase Money Lien) created after the Agreement Date, provided that the Indebtedness secured by any such Lien is otherwise permitted by the provisions of this Agreement, including, without limitation thereof, by the provisions of Sections 7.8 and 7.9; and (i) Liens in existence on the date hereof and specified on Schedule 7.10 including any renewals, extensions or refundings (but not increases) of the indebtedness incurred in connection therewith to the extent of the principal amount thereof outstanding on the Closing Date. Section 7.11. Investments. The Borrower will not, and will not permit any Restricted Subsidiary to, make any Investments, other than: (a) Investments by the Borrower and its Restricted Subsidiaries in and to Restricted Subsidiaries, including any Investment in a corporation which, after giving effect to such Investment, will become a Restricted Subsidiary; (b) Investments in commercial paper of any Person maturing in 360 days or less from the date of issuance thereof which, at the time of acquisition by the Borrower or any Restricted Subsidiary, are accorded a rating of A-1 or better by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.; (c) Investments in (i) direct obligations of the United States of America or any agency or instrumentality of the United States of America, the payment or guarantee of which constitutes a full faith and credit obligation of the United States of America, in either case, maturing in twelve months or less from the date of acquisition thereof, and (ii) obligations (including, without limitation, notes and bonds) of any Person which at the time of acquisition by the Borrower or any Restricted Subsidiary, are accorded a long term rating of AA or better by 96 53 53 Standard & Poor's Corporation or a long term rating of Aa3 or better by Moody's Investors Service, Inc., or their respective successors, and which mature in twelve months or less from the date of acquisition thereof, it being agreed that the maturity of any obligation shall include puts, announced calls, auctions or other similar features which allow redemption by the holder of any such obligation; (d) Investments in deposits, certificates of deposit or bankers' acceptances, in each case maturing within one year from the date of issuance thereof, issued by a bank or trust company approved by the Board of Directors of the Borrower, organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $100,000,000 and whose long-term certificates of deposit at the time of acquisition thereof by the Borrower or a Restricted Subsidiary, are accorded a rating of A or better by Standard & Poor's Corporation or A2 or better by Moody's Investors Service, Inc., or their respective successors; (e) Investments in so-called "money market preferred stock", (the dividends with respect to which are reset at least four times annually) issued by a corporation organized under the laws of the United States or any state thereof and whose common stock is listed on the American or New York Stock Exchange, which preferred stock at the time of acquisition thereof by the Borrower or any Restricted Subsidiary, is accorded a rating of "A" or better by Standard and Poor's Corporation or "A2" or better by Moody's Investor Service, Inc., or an equivalent rating by any other nationally recognized credit rating agency of similar standing; (f) Investments in repurchase agreements maturing in 30 days or less with a bank or trust company which is a primary government securities dealer (as chosen by the United States Federal Reserve Bank) or which meets the requirements of subsection (d) of this Section and which repurchase agreements are fully secured by obligations of the type described in clause (i) of subsection (c) of this Section; (g) Investments in shares of mutual funds operated by Merrill Lynch & Co., Smith Barney, Harris Upham & Co. and John Nuveen & Co., and other United States corporations of similar national standing approved by the Board of Directors of the Borrower, in any case whose investments are limited to those permitted by subsections (b), (c), (d) and (e) of this Section; (h) Loans or advances in the usual and ordinary course of business to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of the Borrower or any Restricted Subsidiary; 97 54 54 (i) Receivables arising from the sale of goods and services in the ordinary course of business of the Borrower and its Restricted Subsidiaries, whether evidenced by a note or otherwise; (j) Related Investments in an amount not exceeding (i) 30% of Total Capitalization minus (ii) the amount of Unrelated Investments at the time outstanding; and (k) Unrelated Investments in an amount not exceeding the lesser of (i) $20,000,000 or (ii) (A) 30% of Total Capitalization minus (B) the amount of Related Investments at the time outstanding. In valuing any Investments for the purpose of applying the limitations set forth in this Section, such Investments shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For purposes of this Section, at any time when a corporation becomes a Restricted Subsidiary, all Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Restricted Subsidiary, at such time. Section 7.12. Mergers, Consolidations and Sales of Assets. (a) The Borrower will not, and will not permit any Restricted Subsidiary to, (i) consolidate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of (including, without limitation, any disposition in connection with a sale and leaseback transaction) all or any substantial part (as defined in subsection (e) of this Section) of the assets of the Borrower and its Restricted Subsidiaries; provided, however, that: (1) any Restricted Subsidiary may merge or consolidate with or into the Borrower or any Wholly-owned Restricted Subsidiary so long as in any merger or consolidation involving the Borrower, the Borrower shall be the surviving or continuing corporation; (2) the Borrower may consolidate or merge with any other corporation if (i) either (A) the Borrower shall be the surviving or continuing corporation, or (B) if the Borrower is not the surviving or continuing corporation, the corporation (hereinafter called the "Surviving Corporation") formed by such consolidation or the corporation into which the Borrower shall have been merged (y) shall be a corporation organized under the 98 55 55 laws of the United States, or any state, territory or possession of the United States or the District of Columbia, and (z) shall have expressly and unconditionally assumed by a written instrument satisfactory in form to the Lenders all of the Obligations and the due and punctual performance of all the covenants and conditions of this Agreement and the other Loan Documents to which the Borrower is a party and shall have furnished the Lenders an opinion of counsel satisfactory to the Lenders and the Agent to the effect that such instrument has been duly authorized, executed and delivered and constitutes the legal, valid and binding contract and agreement of the Surviving Corporation enforceable in accordance with its terms, and (ii) at the time of such consolidation or merger and after giving effect thereto no Default or Event of Default shall have occurred and be continuing, and (iii) the financial condition, business or operations of the Borrower (whether or not it is the surviving corporation) shall not be materially and adversely affected thereby; and (3) any Restricted Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Borrower or any Wholly-owned Restricted Subsidiary. (b) The Borrower will not permit any Restricted Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this Section, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) of such Restricted Subsidiary to any Person other than the Borrower or a Wholly-owned Restricted Subsidiary, except for the purpose of qualifying directors, or except in satisfaction of the validly pre-existing preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Borrower and/or a Restricted Subsidiary whereby the Borrower and/or such Restricted Subsidiary maintain their same proportionate interest in such Restricted Subsidiary. (c) The Borrower will not sell, transfer or otherwise dispose of any shares of stock of any Restricted Subsidiary (except to qualified directors) or any Indebtedness of any Restricted Subsidiary, and will not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the Borrower or a Wholly-owned Restricted Subsidiary) any shares of stock or any Indebtedness of any other Restricted Subsidiary, unless: 99 56 56 (i) the Board of Directors of the Borrower shall have determined, as evidenced by a resolution thereof (a copy of which, certified as true and correct by the chief financial officer of the Borrower, shall be promptly furnished to the Agent and the Lenders), that the proposed sale, transfer or disposition of said shares of stock and Indebtedness is in the best interests of the Borrower; and (ii) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Borrower and its Restricted Subsidiaries. (d) In addition to the foregoing restrictions with respect to the sale of assets contained in this Section, the Borrower will not, and will not permit any Restricted Subsidiary to, discount or sell any of its notes receivable or accounts receivable other than at face value and without recourse. (e) As used in this Section, a sale, lease or other disposition of assets shall be deemed to be a "substantial part" of the assets of the Borrower and its Restricted Subsidiaries if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Borrower and its Restricted Subsidiaries (other than in the ordinary course of business) during the 12-month period ending with the date of such sale, lease or other disposition, exceeds 20% of Consolidated Assets, determined as of the end of the immediately preceding fiscal year. Any sale of assets shall not be included in any computation under this subsection (e) to the extent that the proceeds of such sale are applied, within one year after such sale, (i) to the purchase of other fixed assets useful and to be used in the business of the Borrower and its Restricted Subsidiaries and, pending such application, are maintained by the Borrower or any Restricted Subsidiary in a segregated account or (ii) to prepay the Obligations pursuant to the terms of Section 2.12. Section 7.13. Guaranties. The Borrower will not, and will not permit any Restricted Subsidiary to, become or be liable in respect of any Guaranty except (a) Guaranties of the Borrower or any Restricted Subsidiary guaranteeing obligations of any Restricted Subsidiary incurred in the ordinary course of business, which obligations do not constitute Debt and are not otherwise prohibited hereunder, or (b) Guaranties of the Borrower or any Restricted Subsidiary which constitute Debt, are limited in amount to a stated maximum dollar exposure or contribution and are permitted by the provisions of this Agreement including, without limitation, Sections 7.8 and 7.9. 100 57 57 Section 7.14. Designation of Restricted Subsidiaries. The Borrower may at any time designate any Subsidiary to be a Restricted Subsidiary by resolution of the Board of Directors of the Borrower (a copy of which shall be promptly furnished to the Lenders); provided, however, that no Subsidiary shall be designated as a Restricted Subsidiary if, at the time thereof or after giving effect to such designation, any Default or Event of Default shall occur and then be continuing. The Borrower may designate any Restricted Subsidiary to be an Unrestricted Subsidiary by resolution of the Board of Directors of the Borrower (a copy of which shall be promptly furnished to the Lenders); provided, however, that (i) no Restricted Subsidiary shall be designated an Unrestricted Subsidiary if, at the time thereof or after giving effect to such designation, any Default or Event of Default shall exist and (ii) any such designation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be irrevocable. Section 7.15. Transactions with Affiliates. The Borrower will not, and will not permit any Restricted Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. Section 7.16. Termination of Pension Plans. The Borrower will not and will not permit any Subsidiary to withdraw from any Multiemployer Plan or permit any employee benefit plan maintained by it to be terminated if such withdrawal or termination could result in withdrawal liability (as described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on any property of the Borrower or any Subsidiary pursuant to Section 4068 of ERISA. Section 7.17. Reports and Rights of Inspection. The Borrower will keep, and will cause each Restricted Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of, or in relation to, the business and affairs of the Borrower or such Restricted Subsidiary, in accordance with GAAP consistently applied (except for changes disclosed in the financial statements furnished to each Lender pursuant to this Section and concurred in by the independent public accountants referred to in subsection (b) of this Section), and will furnish to each Lender (in duplicate if so specified below or otherwise requested): (a) Quarterly Statements. As soon as available and in any event within 60 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: 101 58 58 (i) consolidated balance sheets of the Borrower and its Restricted Subsidiaries as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated figures for the fiscal year then most recently ended, (ii) consolidated statements of income of the Borrower and its Restricted Subsidiaries for such quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated figures for the corresponding periods of the preceding fiscal year, and (iii) consolidated statements of cash flows of the Borrower and its Restricted Subsidiaries for the portion of the fiscal year ending with such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct by an authorized financial officer of the Borrower; (b) Annual Statements. As soon as available and in any event within 120 days after the close of each fiscal year of the Borrower, copies of: (i) consolidated and consolidating balance sheets of the Borrower and its Restricted Subsidiaries as of the close of such fiscal year, and (ii) consolidated and consolidating statements of income and retained earnings and cash flows of the Borrower and its Restricted Subsidiaries for such fiscal year, and in each case setting forth in comparative form the consolidated figures for the preceding fiscal years all in reasonable detail and accompanied by a report thereon of a firm of independent public accountants of recognized national standing selected by the Borrower to the effect that the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Borrower and its Restricted Subsidiaries as of the end of the fiscal year being reported on and the consolidated results of the operations and cash flows for said year in conformity with GAAP and that the examination of such accountants in connection with such financial statements has been conducted in accordance with generally accepted auditing standards and included such tests of the accounting records and such other auditing procedures as said accountants deemed necessary in the circumstances; 102 59 59 (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Borrower or any Restricted Subsidiary, the subject matter of which could have a material adverse effect on the assets, business, operations or financial condition of the Borrower or such Restricted Subsidiary, as the case may be, and any management letter received from such accountants; (d) SEC and Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Borrower to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Borrower or any Subsidiary with any securities exchange or the Securities and Exchange Commission or any successor agency, and copies of any material orders in any material proceedings to which the Borrower or any of its Subsidiaries is a party, issued by any governmental agency, Federal or state, having jurisdiction over the Borrower or any of its Subsidiaries; (e) ERISA Reports. Promptly upon the occurrence thereof, written notice of (i) a Reportable Event with respect to any Plan as to which the PBGC by regulation has not waived the 30 day notification requirement; provided, however, that the loss of plan qualification and the failure to meet the minimum funding standards shall be Reportable Events requiring notice hereunder regardless of the issuance of any waivers of notice to the PBGC; (ii) the institution of any steps by the Borrower, any ERISA Affiliate, the PBGC or any other person to terminate any Plan by means of a distress termination under Section 4041(c) of ERISA or an involuntary termination under Section 4042 of ERISA; (iii) the institution of any steps by the Borrower or any ERISA Affiliate to withdraw from any Plan which would result in withdrawal liability in excess of $1,000,000; (iv) a non-exempt "prohibited transaction" within the meaning of Section 406 of ERISA in connection with any Plan; (v) any material increase in the contingent liability of the Borrower or any Restricted Subsidiary with respect to any post-retirement welfare liability; or (vi) the taking of any action by, or the threatening of the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing; (f) Officer's Certificates. Within the periods provided in the immediately preceding subsections (a) and (b), a certificate of an authorized financial officer of the Borrower stating that such officer has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in sufficient detail) required in order to establish whether the Borrower was in compliance with the requirements of Section 7.6 through Section 7.16 at the end of the period covered by the financial statements then being furnished, and (ii) whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists on 103 60 60 the date of the certificate or existed at any time during the period covered by such financial statements (including, specifically, at the time of any designation of a Subsidiary as a Restricted Subsidiary or as an Unrestricted Subsidiary) any Default or Event of Default and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Borrower is taking and proposes to take with respect thereto; (g) Accountant's Certificates. Within the period provided in the immediately preceding subsection (b), a certificate of the accountants who render an opinion with respect to such financial statements, stating that they have reviewed this Agreement and stating further whether, in making their audit, such accountants have become aware of any Default or Event of Default under any of the terms or provisions of this Agreement insofar as any such terms or provisions pertain to or involve accounting matters or determinations, and if any such condition or event then exists, specifying the nature and period of existence thereof; (h) Unrestricted Subsidiaries. Within the periods provided in the immediately preceding subsection (b), financial statements of the character and for the dates and periods as in each subsection (b) provided covering each Unrestricted Subsidiary (or groups of Unrestricted Subsidiaries on a consolidated basis); (i) Additional Information. Within 5 Business Days after any senior officer of the Borrower obtains knowledge of: (i) the institution of legal proceedings against the Borrower and/or any Restricted Subsidiary, which has a reasonable possibility of having a Materially Adverse Effect on the Borrower and its Restricted Subsidiaries, taken as a whole, or which in any manner draws into question the validity of or has a reasonable possibility of impairing the ability of the Borrower to perform its obligations hereunder or under any other Loan Documents; or (ii) any (A) Environmental Liabilities which could result in penalties, fines, claims or other liabilities in amounts, individually or in the aggregate, in excess of $1,000,000, (B) pending, threatened or anticipated Environmental Proceedings which has a reasonable possibility of having a Materially Adverse Effect on the Borrower and its Restricted Subsidiaries, taken as a whole, (C) Environmental Notices, (D) Environmental Judgments and Orders, or (E) Environmental Releases at, on, in, under or in any way materially affecting the Properties; the 104 61 61 Borrower will deliver to each Lender an Officer's Certificate specifying the nature and period of existence thereof and what action the Borrower has taken, is taking or proposes to take with respect thereto. (j) Requested Information. With reasonable promptness, such other data and information as the Agent or any Lender may reasonably request. Without limiting the foregoing, the Borrower will permit the Agent and each Lender (or such Persons as the Agent or any Lender may designate), to visit and inspect, under the Borrower's guidance, any of the properties of the Borrower or any Restricted Subsidiary, to examine all of their books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, employees, and independent public accountants (and by this provision the Borrower authorizes said accountants to discuss with the Agent and each Lender the finances and affairs of the Borrower and its Restricted Subsidiaries) all at such reasonable times and as often as may be reasonably requested. The Borrower shall not be required to pay or reimburse the Agent or any Lender for expenses which the Agent or any Lender may incur in connection with any such visitation or inspection; provided, however, that if such visitation or inspection is made during any period when a Default or an Event of Default shall have occurred and be continuing, the Borrower agrees to reimburse the Agent and each Lender for all such expenses promptly on demand. ARTICLE 8 DEFAULT Section 8.1. Events of Default. Each of the following shall constitute an Event of Default, whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment or order of any court or any order, rule or regulation of any governmental or nongovernmental body: (a) Default in Payment. The Borrower shall fail to pay when due (whether upon demand, at maturity, by reason of acceleration or otherwise) the principal of, or interest on, any of the Loans or Notes, or any amount payable hereunder when and as required to be made pursuant to any Acceptance Obligation, or shall fail to pay when due any of the other obligations owing by the Borrower under this Agreement or any other Loan Document. 105 62 62 (b) Misrepresentations. Any statement, representation or warranty made or deemed made by or on behalf of the Borrower in writing under this Agreement or under any other Loan Document, or any amendment hereto or thereto, or in any other writing or statement at any time furnished or made or deemed made by or on behalf of the Borrower to the Agent or any Lender, shall at any time prove to have been incorrect or misleading in any material respect when furnished or made. (c) Default in Performance. (i) The Borrower shall fail to perform or observe any term, covenant, condition or agreement contained in Sections 7.6 through 7.13 or (ii) the Borrower shall fail to perform or observe any term, covenant, condition or agreement contained in this Agreement or any other Loan Document to which it is a party and not otherwise mentioned in this Section and the continuance of such failure for a period of 30 days after the earlier of (A) the day on which the Borrower first obtains knowledge of such failure or (B) the day on which written notice of such failure is given to the Borrower by the Agent. (d) Indebtedness Cross-Default. (i) The Borrower shall fail to pay when due and payable the principal of, or interest on, any Debt (other than the Loans) in an aggregate amount in excess of $1,000,000; or (ii) the maturity of any such Debt shall have (A) been accelerated in accordance with the provisions of any indenture, contract or instrument providing for the creation of or concerning such Debt or (B) been required to be prepaid prior to the stated maturity thereof; or (iii) any other event shall have occurred and be continuing which, with or without the passage of time, the giving of notice, a determination of materiality, the satisfaction of any condition or any combination of the foregoing, would permit any holder or holders of such Debt, any trustee or agent acting on behalf of such holder or holders or any other Person, to accelerate such maturity and such Person shall not have waived its right to so accelerate with respect to such event. (e) Other Cross-Defaults. The Borrower shall default in the payment when due, or in the performance or observance, of any material obligation or condition of any contract or lease (other than one of the Loan Documents or one relating to Debt) to which it is a party if such default would have a Materially Adverse Effect on the Borrower and its Restricted Subsidiaries taken as a whole, unless, but only as long as, the existence of any such default is being contested by the Borrower in good faith by appropriate proceedings, adequate reserves in 106 63 63 respect thereof have been established on the books of the Borrower and the contest thereof by the Borrower will not have a Materially Adverse Effect on the Borrower and its Restricted Subsidiaries taken as a whole as determined by the Majority Lenders in their sole discretion. (f) Voluntary Bankruptcy Proceeding. The Borrower or any Subsidiary of the Borrower shall: (i) commence a voluntary case under the federal bankruptcy laws (as now or hereafter in effect); (ii) file a petition seeking to take advantage of any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or composition for adjustment of debts; (iii) consent to or fail to contest in a timely and appropriate manner any petition filed against it in an involuntary case under such bankruptcy laws or other laws; (iv) apply for or consent to, or fail to contest in a timely and appropriate manner, the appointment of, or the taking of possession by, a receiver, custodian, trustee, or liquidator of itself or of a substantial part of its property, domestic or foreign; (v) admit in writing its inability to pay its debts as they become due; (vi) make a general assignment for the benefit of creditors; (vii) make a conveyance fraudulent as to creditors under any state or federal law; or (viii) take any corporate or partnership action for the purpose of effecting any of the foregoing. (g) Involuntary Bankruptcy Proceeding. A case or other proceeding shall be commenced against the Borrower or any Subsidiary of the Borrower, in any court of competent jurisdiction seeking: (i) relief under the federal bankruptcy laws (as now or hereafter in effect) or under any other laws, domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts; or (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of such Person, or of all or any substantial part of the assets, domestic or foreign, of such Person. (h) Litigation. The Borrower shall challenge or contest in any action, suit or proceeding in any court or before any arbitrator or governmental body the validity or enforceability of this Agreement, any Note or any other Loan Document. (i) Judgment. A judgment or order for the payment of money shall be entered against the Borrower or any Restricted Subsidiary by any court which exceeds, individually or together with all other such judgments or orders, $5,000,000 in amount and such judgment or order shall continue undischarged or unstayed for a period of 30 days. (j) Attachment. A warrant or writ of attachment or execution or similar process shall be issued against any property of the Borrower or any Restricted Subsidiary which exceeds, individually or together with all other such 107 64 64 processes, $5,000,000 in amount and such process shall continue undischarged for a period of 30 days. (k) ERISA. (i) Any Termination Event with respect to a Plan shall occur; (ii) any Plan shall incur an "accumulated funding deficiency" (as defined in Section 412 of the Code or Section 302 of ERISA) for which a waiver has not been obtained in accordance with the applicable provisions of the Code and ERISA; or (iii) the Borrower is in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan resulting from the Borrower's complete or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such Multiemployer Plan. (l) Loan Documents. An Event of Default (as defined therein) shall occur under any of the other Loan Documents. (m) Cessation of Operations. The present business operations of the Borrower or any Restricted Subsidiary shall be suspended for a period of twenty-one consecutive days or more. (n) Ownership; Board of Directors. Any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended (or any successor regulation)) of more than 20% of the voting stock of the Borrower; or during any period of 25 consecutive calendar months, a majority of the Board of Directors of the Borrower shall no longer be composed of individuals (i) who were members of said Board on the first day of such period, (ii) whose election or nomination to said Board was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of said Board or (iii) whose election or nomination to said Board was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of said Board. Section 8.2. Remedies. Upon the occurrence of an Event of Default the following provisions shall apply: (a) Acceleration; Termination of Facilities. (i) Automatic. Upon the occurrence of an Event of Default specified in Sections 8.1(f) or (g), (A)(i) the principal of, and the interest on, the Loans and the Notes at the time outstanding, (ii) an amount equal to the BA Face Amount of all Acceptances outstanding as of the date of the occurrence of the Event of Default and (iii) all of the other obligations of the Borrower hereunder, including, but not limited 108 65 65 to, the other amounts owed to the Lenders and the Agent under this Agreement, the Notes or any of the other Loan Documents, and all other Obligations, shall become automatically due and payable by the Borrower without presentment, demand, protest, or other notice of any kind, all of which are expressly waived by the Borrower and (B) the Loan Facility and the Bankers Acceptance Facility, the obligation of the Lenders to make Loans under the Loan Facility, the obligation of the Lenders to create Acceptances under the Bankers Acceptance Facility and each Lender's Commitment shall immediately and automatically terminate. (ii) Optional. If any other Event of Default shall have occurred and be continuing, the Agent, at the direction of the Majority Lenders, shall, or each Lender, with the consent of the Majority Lenders, may: (A) declare (i) the principal of, and interest on, the Loans and the Notes at the time outstanding, (ii) an amount equal to the BA Face Amount of all Acceptances outstanding as of the date of the occurrence of the Event of Default and (iii) all of the other obligations of the Borrower hereunder, including, but not limited to, the other amounts owed to the Lenders and the Agent under this Agreement, the Notes or any of the other Loan Documents, and all other Obligations, to be forthwith due and payable, whereupon the same shall immediately become due and payable without presentment, demand, protest or other notice of any kind, all of which are expressly waived by the Borrower and (B) terminate the Loan Facility and the Bankers Acceptance Facility, the obligation of the Lenders to make Loans under the Loan Facility and the obligation of the Lenders to create Acceptances under the and Bankers Acceptance Facility and each Lender's Commitment. (b) Loan Documents. The Agent, upon the direction of the Majority Lenders, shall, and each Lender, with the consent of the Majority Lenders, may, exercise any and all of its rights under any and all of the other Loan Documents. (c) Cash Collateral. Each Lender, with the consent of the Majority Lenders, may require the Borrower (rather than prepaying the Acceptances as required by Section 11.02(a) above) to deposit into such Lender's Cash Collateral Account the amounts specified in Sections 8.2(a)(i)(A)(ii) or 8.2(a)(ii)(A)(ii) owing to such Lender, as applicable. The monies so deposited therein shall be used in the manner specified in Section 4.15 as if the Facility Termination Date were the date the applicable Event of Default had occurred. Section 8.3. Rights Cumulative. The rights and remedies of the Agent and the Lenders under this Agreement, the Notes and each of the other Loan Documents shall be cumulative and not exclusive of any rights or remedies which 109 66 66 it would otherwise have under Applicable Law. In exercising its rights and remedies the Agent and the Lenders may be selective and no failure or delay by the Agent or any of the Lenders in exercising any right shall operate as a waiver of it, nor shall any single or partial exercise of any power or right preclude its other or further exercise or the exercise of any other power or right. ARTICLE 9 THE AGENT Section 9.1. Authorization and Action. Each Lender hereby appoints and authorizes the Agent to take such action as agent on such Lender's behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Agent by the terms and thereof, together with such powers as are reasonably incidental thereto. The power of attorney set forth hereinabove shall be irrevocable and coupled with an interest. The relationship between the Agent and the Lenders shall be that of principal and agent only and nothing herein shall be construed to deem the Agent a trustee for any Lender nor to impose on the Agent duties or obligations other than those expressly provided for herein. The Agent will also furnish to any Lender, upon the request of such Lender, a copy of any certificate or notice furnished to the Agent by the Borrower pursuant to this Agreement or any other Loan Document not already delivered to such Lender pursuant to the terms of this Agreement or any such other Loan Document. As to any matters not expressly provided for by the Loan Documents (including, without limitation, enforcement or collection of the Notes), the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Majority Lenders, and such instructions shall be binding upon all Lenders and all holders of Notes; provided, however, that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or any other Loan Document or Applicable Law. Not in limitation of the foregoing, the Agent shall not exercise any right or remedy it or the Lenders may have under any Loan Document upon the occurrence of a Default or an Event of Default unless the Majority Lenders have so directed the Agent in writing to exercise such right or remedy. Section 9.2. Agent's Reliance, Etc. Neither the Agent nor any of its directors, officers, agents, employees or counsel shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limiting the generality of the foregoing, the Agent: (a) may consult with legal counsel (including counsel for the Borrower), independent public 110 67 67 accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (b) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement or any other Loan Document; (c) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of any of this Agreement or any other Loan Document or the satisfaction of any conditions precedent under this Agreement or any Loan Document on the part of the Borrower or other Persons or inspect the property, books or records of the Borrower or any other Person; (d) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other Loan Document, any other instrument or document furnished pursuant thereto or any collateral covered thereby; and (e) shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon any notice, consent, certificate or other instrument or writing (which may be by telephone or telecopy) believed by it to be genuine and signed, sent or given by the proper party or parties. Section 9.3. NationsBank as Lender. NationsBank as a Lender, shall have the same rights and powers under this Agreement and any other Loan Document as any other Lender and may exercise the same as though it were not the Agent; and the term "Lender" or "Lenders" shall, unless otherwise expressly indicated, include NationsBank in each case in its individual capacity. NationsBank and its Affiliates may each accept deposits from, maintain deposits or credit balances for, invest in, lend money to, act as trustee under indentures of, and generally engage in any kind of business with the Borrower and any other Affiliate thereof as if it were any other bank and without any duty to account therefor to the other Lenders. Section 9.4. Lender Credit Decision, Etc. Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or other Affiliates has made any representations or warranties to such Lender and that no act by the Agent hereinafter taken, including any review of the affairs of the Borrower, shall be deemed to constitute any representation or warranty by the Agent to any Lender. Each Lender acknowledges that it has, independently and without reliance upon the Agent, any other Lender or counsel to the Agent, and based on the financial statements of the Borrower and its Affiliates, its review of the Loan Documents, the legal opinions required to be delivered to it hereunder, the advice of its own counsel and such other documents and information as it has deemed appropriate, made its own credit and legal analysis and decision to enter into this Agreement and the transaction contemplated hereby. Each Lender also acknowledges that it will, independently and without reliance upon the Agent, any other Lender or counsel 111 68 68 to the Agent, and based on such review, advice, documents and information as it shall deem appropriate at the time, continue to make its own decisions in taking or not taking action under the Loan Documents. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall have no duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, financial and other condition or creditworthiness of the Borrower or any other Affiliate thereof which may come into possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or other Affiliates. Section 9.5. Indemnification. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so) pro rata in accordance with the Lenders' respective Credit Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of the Loan Documents or any action taken or omitted by the Agent under the Loan Documents; provided, however, that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Agent's gross negligence or willful misconduct or if the Agent fails to follow the written direction of the Majority Lenders unless such failure is pursuant to the advice of counsel of which the Lenders have received notice. Without limiting the generality of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its ratable share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preparation, execution, administration, or enforcement of, or legal advice with respect to the rights or responsibilities of the parties under, the Loan Documents, to the extent that the Agent is not reimbursed for such expenses by the Borrower. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder or under the other Loan Documents and the termination of this Agreement. Section 9.6. Actions by Majority Lenders. Each Lender hereby agrees that, except as otherwise set forth herein, any action taken by the Majority Lenders in accordance with the provisions of this Agreement or the Loan Documents, and the exercise by the Majority Lenders of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders. Section 9.7. Successor Agent. The Agent may resign at any time as Agent under the Loan Documents by giving written notice thereof to the Lenders and the Borrower. In the event of a material breach of its duties hereunder, the 112 69 69 Agent may be removed as Agent under the Loan Documents at any time by the Majority Lenders and the Borrower. Upon any such resignation or removal, the Majority Lenders shall have the right to appoint a successor Agent with, so long as no Default has occurred and is continuing, the consent of the Borrower. If no successor Agent shall have been so appointed by the Majority Lenders, and shall have accepted such appointment, within 30 days after the resigning Agent's giving of notice of resignation or the Majority Lenders' removal of the resigning Agent, then the resigning Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a Lender, if any Lender shall be willing to serve, and otherwise shall be a commercial bank having combined capital and surplus of at least $500,000,000 and reasonably acceptable to the Majority Lenders. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the resigning Agent, and the retiring Agent shall be discharged from its duties and obligations under the Loan Documents. After any resigning Agent's resignation or removal hereunder as Agent, the provisions of this Article 9 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under the Loan Documents. ARTICLE 10 MISCELLANEOUS Section 10.1. Notices. Unless otherwise provided herein, communications provided for hereunder shall be in writing and shall be mailed, telecopied or delivered as follows: If to the Borrower: Savannah Foods & Industries, Inc. Two East Bryan Savannah, Georgia 31402 Attention: Treasurer Telecopy number: (912) 233-9783 Telephone number: (912) 651-5046 If to the Agent or any Lender: To such Person's address or telecopy number, as applicable, set forth on the then current Annex I attached hereto. or, as to each party at such other address as shall be designated by such party in a written notice to the other parties. All such notices and other communications 113 70 70 shall be effective (i) if mailed, when received; (ii) if telecopied, when transmitted; or (iii) if hand delivered, when delivered. Notwithstanding the immediately preceding sentence, all notices or communications to the Agent or any Lender under Articles 2, 3 and 4 shall be effective only when actually received. Section 10.2. Expenses. The Borrower will pay all present and future expenses of the Agent and each of the Lenders in connection with: (a) the negotiation, preparation, execution, delivery and administration of this Agreement, the Notes and each of the other Loan Documents, whenever the same shall be executed and delivered, including appraisers' fees, search fees, recording fees and the reasonable fees and disbursements of: (i) counsel for the Agent and (ii) each local counsel retained by the Agent; provided, however, that the Borrower shall be responsible for the fees and expenses of one law firm as counsel for the Agent for the negotiation, preparation, execution and delivery of the Loan Documents; (b) the negotiation, preparation, execution and delivery of any waiver, amendment or consent by the Agent or any Lender relating to this Agreement, the Notes or any of the other Loan Documents or in connection with the assignment of any Lender's Commitment hereunder or sales of participations therein, including the fees and disbursements of counsel to the Agent or such Lender or in connection with any of the foregoing; (c) any restructuring, refinancing or "workout" of the transactions contemplated by this Agreement, the Notes and the other Loan Documents, or any material amendment to the terms of this Agreement or any other Loan Document, including the fees and disbursements of counsel to the Agent or to any Lender; (d) the collection or enforcement of the obligations of the Borrower under this Agreement, the Notes or any other Loan Document including the reasonable fees and disbursements of counsel (actually incurred by such counsel) to the Agent or to any Lender if such collection or enforcement is done by, through or with the assistance of an attorney; (e) prosecuting or defending any claim in any way arising out of, related to, or connected with this Agreement, the Notes or any of the other Loan Documents, which expenses shall include the fees and disbursements of counsel to the Agent or any Lender and of experts and other consultants retained by the Agent or any Lender; (f) the exercise by the Agent or any Lender of any right or remedy granted to it under this Agreement, the Notes or any of the other Loan 114 71 71 Documents including the reasonable fees and disbursements of counsel to the Agent or any Lender; and (g) to the extent not already covered by any of the preceding subsections, any bankruptcy or other proceeding of the type described in Sections 8.1(f) or (g), and the fees and disbursements of counsel to the Agent and any Lender incurred in connection with the representation of the Agent or such Lender in any matter relating to or arising out of any such proceeding, including without limitation (i) any motion for relief from any stay or similar order, (ii) the negotiation, preparation, execution and delivery of any document relating to the Agent or such Lender and (iii) the negotiation and preparation of any plan of reorganization of the Borrower, whether proposed by the Borrower, the Lenders or any other Person, and whether such fees and expenses are incurred prior to, during or after the commencement of such proceeding or the confirmation or conclusion of any such proceeding. Section 10.3. Stamp, Intangible and Recording Taxes. The Borrower will pay any and all stamp, intangible, registration, recordation and similar taxes, fees or charges and shall indemnify the Agent and each Lender against any and all liabilities with respect to or resulting from any delay in the payment or omission to pay any such taxes, fees or charges, which may be payable or determined to be payable in connection with the execution, delivery, performance or enforcement of this Agreement, the Notes and any of the other Loan Documents or the perfection of any rights or Liens thereunder. Section 10.4. Setoff. Subject to Section 4.5 and in addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, each Lender is hereby authorized by the Borrower, at any time or from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to set-off and to appropriate and to apply any and all deposits (general or special, including, but not limited to, indebtedness evidenced by certificates of deposit, whether matured or unmatured) and any other indebtedness at any time held or owing by such Lender or any Affiliate of such Lender, to or for the credit or the account of the Borrower against and on account of any of the Obligations, irrespective of whether or not the Majority Lenders shall have declared any or all of the Loans and all other Obligations to be due and payable as permitted by Section 8.2, and although such obligations shall be contingent or unmatured. Section 10.5. Assignability. Each Lender may sell, assign, transfer, negotiate, and grant participations in, or otherwise dispose of (for purposes of this Section 10.5, a "Transfer"), all or any portion of its rights and benefits under this Agreement or under the Notes that such Lender is issued to any Person and in the event of any Transfer by such Lender, all references herein to such Lender shall 115 72 72 be deemed a reference to such Lender's transferee or participant to the extent of its participation; provided, however, unless a Transfer shall be to an affiliate of a Lender or pursuant to a Transfer under Section 4.5 hereof or in connection with a participation under which the participant does not have any voting rights other than with respect to amendments or waivers of material provisions of the Credit Agreement, no Transfer shall occur without the prior written consent of the Borrower (such consent not to be unreasonably withheld). The Borrower hereby agrees that any transferee or participant purchasing a participation in the Loans under this Agreement may exercise all rights of offset, banker's lien and counterclaim with respect to such participation as fully as if such transferee or participant were a holder of a "Loan" in the amount of such participation. In the case of any Transfer (other than a participation unless otherwise agreed by such Lender with its participant), such transferee shall have all rights and duties under this Agreement as if such transferee were the Lender. The Borrower may not assign any of its rights or obligations hereunder without the prior written consent of the Lenders. Section 10.6. Amendments. Except as otherwise expressly provided in this Agreement, any consent or approval required or permitted by this Agreement or in any Loan Document to be given by the Lenders may be given, and any term of this Agreement or of any other Loan Document may be amended, and the performance or observance by the Borrower or any Affiliate of the Borrower of any terms of this Agreement or such other Loan Document or the continuance of any Default or Event of Default may be waived (either generally or in a particular instance and either retroactively or prospectively) with, but only with, the written consent of the Borrower and the written consent of the Majority Lenders. Notwithstanding the foregoing, the rates of interest on the Loans and the Notes, the dates on which any interest payable by the Borrower under any Loan Document is due, the Commitment Termination Date, the repayment obligations with respect to any Acceptance Obligations, the amount and payment date of any Fees and this Section may not be amended, or the Borrower's compliance thereunder may not be waived, without the written consent of all the Lenders and the Borrower. Further, the definition of Majority Lenders (or any minimum requirement necessary for the Lenders or Majority Lenders to take action hereunder) may not be amended without the written consent of all of the Lenders and the Borrower. Further, no amendment, waiver or consent unless in writing and signed by the Agent, in addition to the Lenders required hereinabove to take such action, shall affect the rights or duties of the Agent under this Agreement or any of the other Loan Documents. No waiver shall extend to or affect any obligation not expressly waived or impair any right consequent thereon. No course of dealing or delay or omission on the part of any Lender or the Agent in exercising any right shall operate as a waiver thereof or otherwise be prejudicial thereto. Except as otherwise explicitly provided for herein or in any other Loan Document, no notice to or demand upon the Borrower shall entitle the Borrower 116 73 73 to other or further notice or demand in similar or other circumstances. Notwithstanding any of the foregoing to the contrary, the consent of the Borrower shall not be required for any amendment, modification or waiver of the provisions of Article 9 (other than the provisions of Section 9.7). In addition, the Borrower and the Lenders hereby authorize the Agent to modify this Agreement by unilaterally amending or supplementing Annex I from time to time in the manner requested by the Borrower, the Agent or any Lender in order to reflect any assignments or transfers of the Commitments as provided for hereunder; provided, however, that the Agent shall promptly deliver a copy of any such modification to the Borrower and each Lender. Section 10.7. Nonliability of Agent and Lenders. The relationship between the Borrower and the Lenders and the Agent shall be solely that of borrower and lender. Neither the Agent nor any Lender shall have any fiduciary responsibilities to the Borrower, nor shall the Agent have any fiduciary duty to any Lender. Neither the Agent nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower's business or operations. Section 10.8. Information. Except as otherwise provided by law, the Agent and each Lender shall utilize all non-public information obtained pursuant to the requirements of this Agreement which has been identified as confidential or proprietary by the Borrower in accordance with its customary procedure for handling confidential information of this nature and in accordance with safe and sound banking practices but in any event may make disclosure: (i) to any of their respective Affiliates (provided they shall agree to keep such information confidential in accordance with the terms of this Section); (ii) as reasonably required by any bona fide transferee or participant in connection with the contemplated transfer of any Commitment or participations therein as permitted hereunder; (iii) as required by any Governmental Authority or representative thereof or pursuant to legal process; (iv) to such Lender's independent auditors and other professional advisors (provided they shall be notified of the confidential nature of the information); (v) after the happening and during the continuance of an Event of Default, to any other Person, in connection with the exercise of the Agent's or any Lender's rights hereunder or under any of the other Loan Documents; or (vi) to any other Person to which such delivery or disclosure may be necessary or appropriate (x) in compliance with any law, rule, regulation or order applicable to such Lender, (y) in response to any subpoena or other legal process or informal investigative demand or (z) in connection with any litigation to which such Lender is a party. Section 10.9. Indemnification. The Borrower shall and hereby agrees to indemnify, defend and hold harmless the Agent and each of the Lenders and their respective directors, officers, agents, employees and counsel from and 117 74 74 against (a) any and all losses, claims, damages, liabilities, deficiencies, judgments or expenses incurred by any of them (except to the extent that it is finally judicially determined to have resulted from their own gross negligence or willful misconduct) arising out of or by reason of any litigation, investigations, claims or proceedings which arise out of or are in any way related to: (i) this Agreement or the transactions contemplated thereby; (ii) the making of Loans or the creation of Acceptances; (iii) any actual or proposed use by the Borrower of the proceeds of the Loans or Acceptances; or (iv) the Agent's or any Lender's entering into this Agreement, the other Loan Documents or any other agreements and documents relating hereto, including, without limitation, amounts paid in settlement, court costs and the fees and disbursements of counsel incurred in connection with any such litigation, investigation, claim or proceeding or any advice rendered in connection with any of the foregoing and (b) any such losses, claims, damages, liabilities, deficiencies, judgments or expenses incurred in connection with any remedial or other action taken by the Borrower, the Agent or any of the Lenders in connection with compliance by the Borrower or any of its Affiliates, or any of their respective properties, with any federal, state or local Environmental Laws or other environmental rules, regulations, orders, directions, ordinances, criteria or guidelines. If and to the extent that the obligations of the Borrower hereunder are unenforceable for any reason, the Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under Applicable Law. The Borrower's obligations hereunder shall survive any termination of this Agreement and the other Loan Documents and the payment in full of the Obligations, and are in addition to, and not in substitution of, any other obligations set forth in this Agreement. Section 10.10. Survival. Notwithstanding any termination of this Agreement, or of the other Loan Documents, the indemnities to which the Agent and the Lenders are entitled under the provisions of Sections 10.2 and 10.10 and any other provision of this Agreement and the other Loan Documents shall continue in full force and effect and shall protect the Agent and the Lenders against events arising after such termination as well as before. Section 10.11. Titles and Captions. Titles and captions of Articles, Sections, Schedules, Exhibits, subsections and clauses in this Agreement are for convenience only, and neither limit nor amplify the provisions of this Agreement. Section 10.12. Severability of Provisions. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating the remainder of such provision or the remaining provisions or affecting the validity or enforceability of such provision in any other jurisdiction. 118 75 75 Section 10.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF GEORGIA. Section 10.14. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns. [Signatures on Following Pages] 119 76 76 IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be executed by their authorized officers all as of the day and year first above written. THE BORROWER: SAVANNAH FOODS & INDUSTRIES, INC. By: ---------------------------------- Name: Title: 120 77 77 THE DOCUMENTATION AGENT: NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, as Agent By: --------------------------------- Name: ------------------------------- Title: ------------------------------- Address for Notices: 600 Peachtree Street Atlanta, Georgia 30308 Attention: Ms. Jan Serafen Telephone: (404) 607-5549 Telecopy: (404) 607-6467 [Signatures Continued On Next Page.] 121 78 78 THE LENDERS: NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Address for Notices and Acceptances: 600 Peachtree Street Atlanta, Georgia 30308 Attention: Ms. Jan Serafen Telephone: (404) 607-5549 Telecopy: (404) 607-6467 [Signatures Continued On Next Page.] 122 79 79 WACHOVIA BANK OF GEORGIA By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Address for Notices and Acceptances: 191 Peachtree Street, NE Atlanta, Georgia 30303-1757 Attention: Mr. Stephen F. Blake Telephone: (404) 332-4078 Telecopy: (404) 332-6920 [Signatures Continued On Next Page.] 123 80 80 TRUST COMPANY BANK By: --------------------------------- Name: ------------------------------- Title: ------------------------------ Address for Notices and Acceptances: 25 Park Place, NE Center Code 120 Atlanta, Georgia 30303 Attention: Mr. John K. Shoffner Telephone: (404) 827-6819 Telecopy: (404) 588-8833 [Signatures Continued On Next Page.] 124 81 81 THE FUJI BANK, LIMITED By: ------------------------------ Name: ---------------------------- Title: --------------------------- Address for Notices: 245 Peachtree Center Avenue, NE Atlanta, Georgia 30303-1208 Attention: Mr. Scott L. Keller Telephone: (404) 653-2113 Telecopy: (404) 653-2119 [Signatures Continued On Next Page.] 125 82 82 SECOND NATIONAL BANK By: -------------------------- Name: ------------------------ Title: ----------------------- Address for Notices: 101 N. Washington Avenue Saginaw, Michigan 48607 Attention: Ms. Joyce M. Van Ochten Telephone: (517) 776-7433 Telecopy: (517) 776-7420 NBD BANK, NA By: -------------------------- Name: ------------------------ Title: ----------------------- Address for Notices: 611 Woodward Avenue Detroit, Michigan 48226 Attention: Mr. John C. Otteson Telephone: (313) 225-3677 Telecopy: (313) 225-2649 126 83 83 CANADIAN IMPERIAL BANK OF COMMERCE By: ------------------------------- Name: ----------------------------- Title: ---------------------------- Address for Notices: 2727 Paces Ferry Road, Suite 1200 Atlanta, Georgia 30339 Attention: Ms. Kelly Cannon Telephone: (404) 319-4905 Telecopy: (404) 319-4954 For Money Market Loans: Carol L. Kizzia (212) 856-3693 Address for Acceptances: 425 Lexington Avenue New York, New York 10017 Attention: Ms. Rose Black Vice President Cash Service Dept. 2nd Floor Telephone: (212) 856-6708 Telecopy: (212) 856-3873 [Signatures Continued On Next Page.] 127 84 ANNEX I TO CREDIT AGREEMENT LIST OF LENDERS, COMMITMENTS AND LENDING OFFICES NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION Initial Commitment Amount: $40,000,000 Initial Credit Percentage: 27.59% Lending Office (All Types): 21st Floor 600 Peachtree Street, N.E. Atlanta, Georgia 30308 Telecopy Number: (404) 607-6176 Wiring Instructions: ABA #061000052 Attn: Corporate Loan Services - Acct. #0136621-0101997 WACHOVIA BANK OF GEORGIA Initial Commitment Amount: $25,000,000 Initial Credit Percentage: 17.24% Lending Office (All Types): 191 Peachtree Street, N.E. Mail Code GA-212 Atlanta, Georgia 30303-1251 Telecopy Number: (404) 352-6920 Wiring Instructions: ABA #0610 000 10 Loan Clearing Account 18-800-621 Attn: Barbara Smith 128 85 2 TRUST COMPANY BANK Initial Commitment Amount: $25,000,000 Initial Credit Percentage: 17.24% Lending Office (All Types): P.O. Box 4418 Mail Code 126 Atlanta, Georgia 30302 Telecopy Number: (404) 588-8833 Wiring Instructions: ABA #061000104 Wire Clearing General Account # 8892170730 Instructions: Please notify Susan Deisenroth at extension 8038 CANADIAN IMPERIAL BANK OF COMMERCE Initial Commitment Amount: $25,000,000 Initial Credit Percentage: 17.24% Lending Office (All Types): 425 Lexington Avenue New York, New York 10017 Telecopy Number: (212) 856-3973 Wiring Instructions: Morgan Guaranty Bank New York, New York F/A CIBC - New York #63000480 ABA #021-000-238 Attn: Credit Operations, Atlanta 129 86 3 THE FUJI BANK LIMITED Initial Commitment Amount: $10,000,000 Initial Credit Percentage: 6.9% Lending Office (All Types): Suite 2100 245 Peachtree Center Avenue, N.E. Atlanta, Georgia 30303-1208 Telecopy Number: (404) 653-2119 Wiring Instructions: Fuji Bank Limited, New York ABA #026 009700 Attn: For Further Credit to Fuji Bank, Atlanta Acct #725000 130 87 4 SECOND NATIONAL BANK Initial Commitment Amount: $10,000,000 Initial Credit Percentage: 6.9% Lending Office (All Types): 101 N. Washington Avenue Saginaw, MI 48607 Telecopy Number: (517) 776-7420 Wiring Instructions: ABA #072400227 Attn: K. Egarer NBD BANK, N.A. Initial Commitment Amount: $10,000,000 Initial Credit Percentage: 6.9% Lending Office (All Types): NBD Bank, N.A. 611 Woodward Ave. Detroit, Michigan 48226 Telecopy Number: (313) 225-2649 Wiring Instructions: NBD Bank, N.A. ABA #072000326 Attn: Commerical Loans Dept. Account #2423804 (Principal & Interest Only) Any Questions, Contact Debra Leapheart (x3443) 131 88 EXECUTION COPY CREDIT AGREEMENT Dated as of October 1, 1993 by and among SAVANNAH FOODS & INDUSTRIES, INC., as Borrower and Each of the Financial Institutions Initially a Signatory hereto, together with Those Assignees Pursuant to Section 10.5, as Lenders and NATIONSBANK OF GEORGIA, NATIONAL ASSOCIATION, as Documentation Agent 132 89 i TABLE OF CONTENTS ARTICLE 1. DEFINITIONS 1 Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 1.3. Classes and Types of Loans . . . . . . . . . . . . . . . . . . . 18 ARTICLE 2. LOAN FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.1. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.2. Money Market Loans . . . . . . . . . . . . . . . . . . . . . . . 18 Section 2.3. Borrowings of Revolving Loans . . . . . . . . . . . . . . . . . . 21 Section 2.4. Several Obligations . . . . . . . . . . . . . . . . . . . . . . . 22 Section 2.5. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 2.6. Continuation of Loans . . . . . . . . . . . . . . . . . . . . . . 23 Section 2.7. Conversion of Loans . . . . . . . . . . . . . . . . . . . . . . . 24 Section 2.8. Limitation on Types of Loans . . . . . . . . . . . . . . . . . . 25 Section 2.9. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 2.10. Treatment of Affected Loans . . . . . . . . . . . . . . . . . . . 26 Section 2.11. Reductions of the Commitments . . . . . . . . . . . . . . . . . . 26 Section 2.12. Prepayments; Funding Losses . . . . . . . . . . . . . . . . . . . 27 Section 2.13. Repayment of Loans . . . . . . . . . . . . . . . . . . . . . . . 27 Section 2.14. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 2.15. Extension of Commitment Termination Date . . . . . . . . . . . . 28 ARTICLE 3. ACCEPTANCE FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 3.1. Acceptance Facility . . . . . . . . . . . . . . . . . . . . . . . 29 Section 3.2. Supply of Drafts/Power of Attorney . . . . . . . . . . . . . . . 31 Section 3.3. Discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 3.4. Termination of the Acceptance Commitment . . . . . . . . . . . . . . . . . . . . . . . 32 Section 3.5. Acceptance Obligation . . . . . . . . . . . . . . . . . . . . . . 32 Section 3.6. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . 32 Section 3.7. Non-Prorata Obligations . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE 4. OTHER LOAN AND PAYMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.1. Interest on Overdue Payments . . . . . . . . . . . . . . . . . . 34 Section 4.2. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Section 4.3. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
133 90 ii Section 4.4. Pro Rata Treatment . . . . . . . . . . . . . . . . . . . . . . . 35 Section 4.5. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . 35 Section 4.6. Unused Facility Fee . . . . . . . . . . . . . . . . . . . . . . . 36 Section 4.7. Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 4.8. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 4.9. U.S. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Section 4.10. Agreement Regarding Interest and Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Section 4.11. Statements of Account . . . . . . . . . . . . . . . . . . . . . . 39 Section 4.12. Defaulting Lender's Status . . . . . . . . . . . . . . . . . . . 39 Section 4.13. Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Section 4.14. Maturity Date of Acceptances Past Commitment Termination Date . . . . . . . . . . . . . . . . 40 Section 4.15. Cash Collateral Accounts . . . . . . . . . . . . . . . . . . . . 40 ARTICLE 5. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Section 5.1. Conditions Precedent to Initial Loans and Acceptances . . . . . . 41 Section 5.2. Conditions Precedent to All Loans and Acceptances . . . . . . . . 42 ARTICLE 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . 43 Section 6.1. Representations and Warranties . . . . . . . . . . . . . . . . . 43 Section 6.2. Survival of Representations and Warranties, Etc. . . . . . . . . 47 ARTICLE 7. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 7.1. Corporate Existence, Etc. . . . . . . . . . . . . . . . . . . . . 48 Section 7.2. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 Section 7.3. Taxes, Claims for Labor and Materials, Compliance with Laws; Environmental Compliance . . . . . . . . . . . . . . . . 48 Section 7.4. Maintenance, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.5. Nature of Business . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.6. Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Section 7.7. Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . 49 Section 7.8. Indebtedness Ratios . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.9. Fixed Charges Coverage Ratio . . . . . . . . . . . . . . . . . . 50 Section 7.10. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . 50 Section 7.11. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 Section 7.12. Mergers, Consolidations and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . 54 Section 7.13. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
134 91 iii Section 7.14. Designation of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 57 Section 7.15. Transactions with Affiliates . . . . . . . . . . . . . . . . . . 57 Section 7.16. Termination of Pension Plans . . . . . . . . . . . . . . . . . . 57 Section 7.17. Reports and Rights of Inspection . . . . . . . . . . . . . . . . 57 ARTICLE 8. DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Section 8.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 61 Section 8.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Section 8.3. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 65 ARTICLE 9. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Section 9.1. Authorization and Action . . . . . . . . . . . . . . . . . . . . 66 Section 9.2. Agent's Reliance, Etc. . . . . . . . . . . . . . . . . . . . . . 66 Section 9.3. NationsBank as Lender . . . . . . . . . . . . . . . . . . . . . . 67 Section 9.4. Lender Credit Decision, Etc. . . . . . . . . . . . . . . . . . . 67 Section 9.5. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 68 Section 9.6. Actions by Majority Lenders . . . . . . . . . . . . . . . . . . . 68 Section 9.7. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . 68 ARTICLE 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Section 10.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Section 10.2. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 Section 10.3. Stamp, Intangible and Recording Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 10.4. Setoff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 10.5. Assignability . . . . . . . . . . . . . . . . . . . . . . . . . 71 Section 10.6. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 Section 10.7. Nonliability of Agent and Lenders . . . . . . . . . . . . . . . 73 Section 10.8. Information . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 10.9. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 73 Section 10.10. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 Section 10.11. Titles and Captions . . . . . . . . . . . . . . . . . . . . . . 74 Section 10.12. Severability of Provisions . . . . . . . . . . . . . . . . . . . 74 Section 10.13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 75 Section 10.14. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 75
135 92 iv ANNEX I List of Lenders, Commitments and Lending Offices SCHEDULE 6.1(b) Subsidiaries SCHEDULE 6.1(g) Indebtedness SCHEDULE 6.1(h) Litigation SCHEDULE 7.5 Description of Business SCHEDULE 7.17 Liens EXHIBIT A Form of Notice of Syndicated Borrowing EXHIBIT B Form of Money Market Quote EXHIBIT C Form of Notice of Continuation EXHIBIT D Form of Notice of Conversion EXHIBIT E-1 Form of Revolving Note EXHIBIT E-2 Form of Money Market Note EXHIBIT F Form of Power of Attorney EXHIBIT G Form of Opinion of Borrower's Counsel
136 93 SCHEDULE 6.1(b) Subsidiaries Section 1. Restricted Subsidiaries:
Percentage of Voting Stock Owned by Borrower and Jurisdiction of Each Other Name of Subsidiary Incorporation Subsidiary ------------------ ------------- ---------- Colonial Sugars, Inc. Delaware 100 Everglades Sugar Refining, Inc. Florida 100 Michigan Sugar Co. Michigan 100 Phoenix Packaging, Inc. Delaware 100 Raceland Sugars, Inc. Delaware 100 Savannah Foodservice, Inc. Delaware 100 Food Carrier, Inc. Georgia 100 Savannah Investment Co. Delaware 100 Savannah Sugar Ref. Co. Georgia 100 King Packaging Company Georgia 100
Section 2. Unrestricted Subsidiaries:
Percentage of Voting Stock Owned by Borrower and Jurisdiction of Each Other Name of Subsidiary Incorporation Subsidiary ------------------ ------------- ---------- Biomass Corporation Delaware 100 Chatham Sugar Corp. Delaware 100 South Coast Sugars, Inc. Delaware 100 Sunaid of Florida, Inc. Delaware 100
137 94 SCHEDULE 6.1(g) Indebtedness (To be completed by Borrower) 138 95 EXHIBIT E-1 [FORM OF SYNDICATED NOTE] PROMISSORY NOTE FOR SYNDICATED LOANS $_________________ __________ __, 1993 Atlanta, Georgia FOR VALUE RECEIVED, SAVANNAH FOODS & INDUSTRIES, INC., a Delaware corporation (the " Company"), hereby promises to pay to _________________ (the "Bank"), for account of its Lending Office provided for by the Credit Agreement to below, the principal sum of ______________ Dollars (or such lesser amount as shall equal the aggregate unpaid principal amount of the Revolving Loans made by the Bank to the Company under the Credit Agreement), 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, and to pay interest on the unpaid principal amount of each such Revolving Loan, at such office, in like money and funds, for the period commencing on the date of such Revolving Loan until such Revolving Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement. The date and amount of each Revolving Loan made by the Bank to the Company, and each payment made on account of the principal thereof, shall be recorded by the Bank on its books and, prior to any transfer of this Note, endorsed by the Bank on the schedule attached hereto or any continuation thereof, provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Company to make a payment when due of any amount owing under the Credit Agreement or hereunder in respect of the Revolving Loans made by the Bank. This Note is one of the Revolving Notes referred to in the Credit Agreement dated as of October 1, 1993 (as modified and supplemented and in effect from time to time, the "Credit Agreement") between Savannah Foods & Industries, Inc., each of the financial institutions a party thereto, and NationsBank of Georgia, National Association, as Documentation Agent, and evidences Revolving Loans made by the Bank thereunder. Capitalized terms used but not defined in this Note have the respective meanings assigned to them in the Credit Agreement. E-1-1 139 96 The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of Loans upon the terms and conditions specified therein. Except as permitted by Section 10.5 of the Credit Agreement, this Note may not be assigned by the Bank to any other Person. This Note shall be governed by, and construed in accordance with, the law of the State of Georgia. IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal by its duly authorized officer as of the day and year first written above. SAVANNAH FOODS & INDUSTRIES, INC. By: ------------------------------------------ Title: ------------------------------------- Attest: -------------------------------------- Title: ------------------------------------- [CORPORATE SEAL] E-1-2 140 97 EXHIBIT A [FORM OF NOTICE OF SYNDICATED BORROWING] [Date] NationsBank of Georgia, National Association 600 Peachtree Street Atlanta, Georgia 30308 Attention: Ms. Jan Serafen Wachovia Bank of Georgia Trust Company Bank 191 Peachtree Street, NE One Park Place, NE Atlanta, Georgia 30303-1757 Atlanta, Georgia 30303 Attention: Mr. Stephen F. Blake Attention: Mr. John K. Shoffner Canadian Imperial Bank of The Fuji Bank, Limited Commerce 245 Peachtree Center Avenue, NE 2727 Paces Ferry Road Atlanta, Georgia 30303-1208 Suite 1200 Attention: Mr. Scott L. Keller Atlanta, Georgia 30339 Attention: Ms. Kelly Cannon Second National Bank NBD Bank, N.A. 101 N. Washington Avenue 611 Woodward Avenue Saginaw, Michigan 48607 Detroit, Michigan 48226 Attention: Ms. Joyce M. Attention: Mr. John C. Otteson Van Ochten Re: Notice of Syndicated Borrowing Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of October 1, 1993 (the "Credit Agreement"; capitalized terms used but not defined herein have the meanings assigned to them in the Credit Agreement) between Savannah Foods & Industries, Inc. (the A-1 141 98 "Borrower"), each of the financial institutions a party thereto, and NationsBank of Georgia, National Association, as Documentation Agent. Pursuant to Section 2.3 of the Credit Agreement, the Borrower hereby requests a Revolving Loan as follows: Interest Borrowing Date Amount(1) Type(2) Period(3) - -------------- ------ ---- ------ The following Loans are currently outstanding under the Credit Agreement: Amount Lender ------ ------ The Borrower hereby represents and warrants that as of the date of the Loan requested hereby and after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing; (ii) the representations and warranties made or deemed made by the Borrower in the Credit Agreement and the other Loan Documents to which it is a party, shall be true and correct on and as of the date of the making of such Loan with the same force and effect as if made on and as of such date except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) and except for changes in factual circumstances specifically permitted hereunder; ____________________ 1 Each amount must be $1,000,000 or a larger multiple of $100,000. 2 Insert either "Base Rate Loan" or "Eurodollar Rate Loan". 3 One, two, three or six months, if a Eurodollar Rate Loan; N/A, if a Base Rate Loan. A-2 142 99 (iii) no change that is material and adverse has occurred in the operations or condition, financial or otherwise, of the Borrower and its Restricted Subsidiaries taken as a whole since the Effective Date; and (iv) the proposed Borrowing requested hereby satisfies all limitations set forth in the Credit Agreement. SAVANNAH FOODS & INDUSTRIES, INC. By: ----------------------------- Title: A-3 143 100 EXHIBIT B [FORM OF MONEY MARKET QUOTE] [Date] Savannah Foods & Industries, Inc. Two East Bryan Savannah, Georgia 31402 Attention: Treasurer Re: Money Market Quote to Savannah Foods & Industries, Inc. Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of October 1, 1993 (the "Credit Agreement"; capitalized terms used but not defined herein have the meanings assigned to them in the Credit Agreement) between Savannah Foods & Industries, Inc. (the "Borrower"), each of the financial institutions a party thereto, and NationsBank of Georgia, National Association, as Documentation Agent. This Money Market Quote is given in accordance with Section 2.2(c) of the Credit Agreement. In response to the Borrower' s request dated __________ __, 199_, the undersigned hereby makes the following Money Market Quote(s) on the following terms: 1. Quoting Bank: 2. Person to contact at Quoting Bank: B-1 144 101 3. The undersigned hereby offers to make [a] Money Market Loan[s] in the following Interest Period[s] and at the following rate[s]: Borrowing Date Amount(1) Type(2) Interest Period(3) Rate(4) -------------- ------ ----- --------------- ---- ____________________ 1 The principal amount bid for each Interest Period may not exceed the principal amount requested. Bids must be made for at least $1,000,000 or a larger multiple of $100,000. 2 Indicate "Eurodollar Rate Market Loan" or Absolute Interest Rate Loan". 3 One, two, three or six months, in the case of a Eurodollar Rate Market Loan, or, in the case of an Absolute Interest Rate Loan, a period of up to 180 days after the making of such Absolute Interest Rate Loan and ending on a Business Day, as specified in the related Money Market Quote Request. 4 For a Eurodollar Rate Market Loan, specify margin over or below the applicable Eurodollar Rate determined for the applicable interest Period. Specify percentage (rounded to the nearest 1/10 of 1%) and specify whether "PLUS" or "MINUS". For an Absolute Interest Rate Loan, specify rate of interest per annum (rounded to the nearest 1/10 of 1%). B-2 145 102 The undersigned understands and agrees that the offer[s] set forth above, subject to the satisfaction of the applicable conditions set forth in the Credit Agreement, irrevocably obligate[s] it to make the Money Market Loan[s] for which any offer[s] [is/are] accepted, in whole or in part (subject to the fourth sentence of Section 2.2(d) of the Credit Agreement). Very truly yours, [NAME OF BANK] By: -------------------------------- Authorized Officer Dated: B-3 146 103 EXHIBIT C [FORM OF NOTICE OF CONTINUATION] [Date] NationsBank of Georgia, National Association, as Reference Bank 600 Peachtree Street Atlanta, Georgia 30308 Attention: Ms. Jan Serafen Wachovia Bank of Georgia Trust Company Bank 191 Peachtree Street, NE One Park Place, NE Atlanta, Georgia 30303-1757 Atlanta, Georgia 30303 Attention: Mr. Stephen F. Blake Attention: Mr. John K. Shoffner Canadian Imperial Bank of The Fuji Bank, Limited Commerce 245 Peachtree Center Avenue, NE 2727 Paces Ferry Road Atlanta, Georgia 30303-1208 Suite 1200 Attention: Mr. Scott L. Keller Atlanta, Georgia 30339 Attention: Ms. Kelly Cannon Second National Bank NBD Bank, N.A. 101 N. Washington Avenue 611 Woodward Avenue Saginaw, Michigan 48607 Detroit, Michigan 48226 Attention: Ms. Joyce M. Attention: Mr. John C. Otteson Van Ochten Re: Notice of Continuation Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of October 1, 1993 (the "Credit Agreement"; capitalized terms used but not defined herein have the meanings assigned to them in the Credit Agreement) between Savannah Foods & Industries, Inc. (the "Borrower"), each of the financial institutions a party thereto, and NationsBank of Georgia, National Association, as Documentation Agent. C-1 147 104 Pursuant to Section 2.6 of the Credit Agreement, the Borrower hereby requests the Continuation of Eurodollar Rate Loans as Type Continuation Continued Interest Date(1) Amount(2) From(3) Period(4) ---- ------ ---- ------ The Borrower hereby represents and warrants that as of the date of the Continuation requested hereby and after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing; (ii) the representations and warranties made or deemed made by the Borrower in the Credit Agreement and the other Loan Documents to which it is a party, shall be true and correct on and as of the date of such Continuation with the same force and effect as if made on and as of such date except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) and except for changes in factual circumstances specifically permitted hereunder; (iii) no change that is material and adverse has occurred in the operations or condition, financial or otherwise, of the Borrower and its Restricted Subsidiaries taken as a whole since the Effective Date; and ____________________ 1 Must be the last day of the Interest Period for the Loan to be Continued. 2 Each amount must be $1,000,000 or a larger multiple of $100,000. Partial Continuations may not result in aggregate Eurodollar Loans for any Interest Period of other than $1,000,000 or a larger multiple of $100,000. 3 Identify Type of Loan being Continued. 4 One, two, three or six months. C-2 148 105 (iv) the proposed Continuation requested hereby satisfies all limitations set forth in the Credit Agreement. SAVANNAH FOODS & INDUSTRIES, INC. By: ------------------------------ Title: C-3 149 106 EXHIBIT D [FORM OF NOTICE OF CONVERSION] [Date] NationsBank of Georgia, National Association, as Reference Bank 600 Peachtree Street Atlanta, Georgia 30308 Attention: Ms. Jan Serafen Wachovia Bank of Georgia Trust Company Bank 191 Peachtree Street, NE One Park Place, NE Atlanta, Georgia 30303-1757 Atlanta, Georgia 30303 Attention: Mr. Stephen F. Blake Attention: Mr. John K. Shoffner Canadian Imperial Bank of The Fuji Bank, Limited Commerce 245 Peachtree Center Avenue, NE 2727 Paces Ferry Road Atlanta, Georgia 30303-1208 Suite 1200 Attention: Mr. Scott L. Keller Atlanta, Georgia 30339 Attention: Ms. Kelly Cannon Second National Bank NBD Bank, N.A. 101 N. Washington Avenue 611 Woodward Avenue Saginaw, Michigan 48607 Detroit, Michigan 48226 Attention: Ms. Joyce M. Attention: Mr. John C. Otteson Van Ochten Re: Notice of Conversion Ladies and Gentlemen: Reference is made to that certain Credit Agreement dated as of October 1, 1993 (the "Credit Agreement"; capitalized terms used but not defined herein have the meanings assigned to them in the Credit Agreement) between Savannah Foods & Industries, Inc. (the "Borrower"), each of the financial institutions a party thereto, and NationsBank of Georgia, D-1 150 107 National Association, as Documentation Agent. Pursuant to Section 2.7 of the Credit Agreement, the Borrower hereby requests the Conversion of Loans as follows: Conversion Date(1) Amount(2) Type Converted From(3) Type Converted To(4) Interest Period(5) - ------------------ --------- ---------------------- -------------------- ------------------
The Borrower hereby represents and warrants that a as of the date of the Conversion requested hereby and after giving effect thereto: (i) no Default or Event of Default shall have occurred and be continuing; (ii) the representations and warranties made or deemed made by the Borrower in the Credit Agreement and the other Loan Documents to which it is a party, shall be true and correct on and as of the date of such Conversion with the same force and effect as if made on and as of such date except to the extent that such representations and warranties expressly relate solely to an earlier date (in which case such representations and warranties shall have been true and accurate on and as of such earlier date) and except for changes in factual circumstances specifically permitted hereunder; __________________________________ 1 If a Conversion from a Eurodollar Rate Loan to a Base Rate Loan, must be the last day of the Interest period for such Eurodollar Rate Loan. 2 Each amount must be $1,000,000 or a larger multiple of $100,000. Partial Conversions from Eurodollar Rate Loans to Base Rate Loans may not result in aggregate Eurodollar Rate Loans for any Interest Period of other than $1,000,000 or a multiple of $1,000,000. 3 Identify Type of Loan being Converted. 4 Insert either "Base Rate Loan" or "Eurodollar Rate Loan". 5 One, two, three or six months, if a Eurodollar Rate Loan; N/A, if a Base Rate Loan. D-2 151 108 (iii) no change that is material and adverse has occurred in the operations or condition, financial or otherwise, of the Borrower and its Restricted Subsidiaries taken as a whole since the Effective Date; and (iv) the proposed Continuation requested hereby satisfies all limitations set forth in the Credit Agreement. SAVANNAH FOODS & INDUSTRIES, INC. By: --------------------------------------- Title: --------------------------------- D-3 152 109 EXHIBIT E-1 PROMISSORY NOTE FOR MONEY MARKET LOANS $_______________ ____________________ Atlanta, Georgia FOR VALUE RECEIVED, SAVANNAH FOODS & INDUSTRIES, INC., a Delaware corporation (the " Company"), hereby promises to pay to Wachovia Bank of Georgia, 191 Peachtree Street, NE, Atlanta, Georgia 30303-1757, Attention: Mr. Stephen F. Blake (the "Bank"), for account of its Lending Office provided for by the Credit Agreement referred to below, the principal sum of ________________ Dollars (or such lesser amount as shall equal the aggregate unpaid principal amount of the Revolving Loans made by the Bank to the Company under the Credit Agreement), 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, and to pay interest on the unpaid principal amount of each such Revolving Loan, at such office, in like money and funds, for the period commencing on the date of such Revolving Loan until such Revolving Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement. The date and amount of each Revolving Loan made by the Bank to the Company, and each payment made on account of the principal thereof, shall be recorded by the Bank on its books and, prior to any transfer of this Note, endorsed by the Bank on the schedule attached hereto or any continuation thereof, provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Company to make a payment when due of any amount owing under the Credit Agreement or hereunder in respect of the Revolving Loans made by the Bank. This Note is one of the Revolving Notes referred to in the Credit Agreement dated as of September __, 1993 (as modified and supplemented and in effect from time to time, the "Credit Agreement") between Savannah Foods & Industries, Inc., each of the financial institutions a party thereto, and NationsBank of Georgia, National Association, as Documentation Agent, and evidences Revolving Loans made by the Bank thereunder. Capitalized terms used but not defined in this Note have the respective meanings assigned to them in the Credit Agreement. E-1-1 153 110 The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of Loans upon the terms and conditions specified therein. Except as permitted by Section 10.5 of the Credit Agreement, this Note may not be assigned by the Bank to any other Person. This Note shall be governed by, and construed in accordance with, the law of the State of Georgia. IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal by its duly authorized officer as of the day and year first written above. SAVANNAH FOODS & INDUSTRIES, INC. By: ------------------------------ Title: E-1-2 154 111 SCHEDULE OF SYNDICATED LOANS This Note evidences Revolving Loans made under the within described Credit Agreement to Savannah Foods & Industries, Inc., on the dates and in the principal amounts set forth below, subject to the payments and prepayments of principal set forth below:
Principal Amount Unpaid ------ ------ Date of Loan Amount of Loan Paid or Prepaid Principal Amount Notation Made By ------------ -------------- --------------- ---------------- ----------------
E-1-3 155 112 EXHIBIT E-2 [FORM OF MONEY MARKET NOTE] PROMISSORY NOTE FOR MONEY MARKET LOANS $_________________ __________ __, 1993 Atlanta, Georgia FOR VALUE RECEIVED, SAVANNAH FOODS & INDUSTRIES, INC., a Delaware corporation (the " Company"), hereby promises to pay to _______________ (the "Bank"), for account of its Lending Office provided for by the Credit Agreement referred to below, the aggregate unpaid principal amount of the Money Market Loans made by the Bank to the Company under the Credit Agreement, 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, and to pay interest on the unpaid principal amount of each such Money Market Loan, at such office, in like money and funds, for the period commencing on the date of such Money Market Loan until such Money Market Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement. The date, amount, Type, interest rate and maturity date of each Money Market Loan made by the Bank to the Company, and each payment made on account of the principal thereof, shall be recorded by the Bank on its books and, prior to any transfer of this Note, endorsed by the Bank on the schedule attached hereto or any continuation thereof, provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Company to make a payment when due of any amount owing under the Credit Agreement or hereunder in respect of the Money Market Loans made by the Bank. This Note is one of the Money Market Notes referred to in the Credit Agreement dated as of October 1, 1993 (as modified and supplemented and in effect from time to time, the "Credit Agreement") between Savannah Foods & Industries, Inc., each of the financial institutions a party thereto, and NationsBank of Georgia, National Association, as Documentation Agent, and evidences Money Market Loans made by the Bank thereunder. Capitalized terms used but not defined in this Note have the respective meanings assigned to them in the Credit Agreement. E-2-1 156 113 The Credit Agreement provides for the acceleration of the maturity of this Note upon the occurrence of certain events and for prepayments of Money Market Loans upon the terms and conditions specified therein. Except as permitted by Section 10.5 of the Credit Agreement, this Note may not be assigned by the Bank to any other Person. This Note shall be governed by, and construed in accordance with, the law of the State of Georgia. IN WITNESS WHEREOF, the undersigned has caused this Note to be executed under seal by its duly authorized officer as of the day and year first written above. SAVANNAH FOODS & INDUSTRIES, INC. By: ------------------------------------------ Title: ------------------------------------- Attest: -------------------------------------- Title: ------------------------------------- [CORPORATE SEAL] E-2-2 157 114 EXHIBIT F [FORM OF LIMITED POWER OF ATTORNEY] This Limited Power of Attorney executed this 1st day of October, 1993 by SAVANNAH FOODS & INDUSTRIES, INC. (Obligor") in favor of _______________ ("Lender") in connection with that certain Credit Agreement dated as of October 1, 1993 (the "Credit Agreement") by and between Obligor and Lender, NationsBank of Georgia, National Association, as Documentation Agent, and certain other financial institutions a party thereto. 1. In accordance with the Credit Agreement, Obligor hereby makes, constitutes and appoints Lender, acting through any of its officers or agents, as its true and lawful aget and attorney-in-fact, with full authority in place of Obligor and in the name of Obligor from time to time to execute and sign drafts for and on behalf of Obligor and to request extensions and acceptance of the drafts by telephone from Obligo as weell as to execute any other instruments which Lender may deem necessary or advisable to accomplish the purposes of this Limited Power of Attorney and the Credit Agreement. 2. Obligor agrees that this Power of Attorney may only be revoked in writing ande any such revocation shall not be effective with respect to Lender or any other person, institution or organization until Lender or such person, institution or organization has received written notice of such revocation. IN WITNESS WHEREOF, the undersigned has hereunto set its hand and seal. Signed sealed and delivered SAVANNAH FOODS & in the presence of: INDUSTRIES, INC. By: - ------------------------------- ------------------------------ Unofficial Witness Title: --------------------------- - ------------------------------- Unofficial Witness F-1 158 115 EXHIBIT G [FORM OF OPINION OF BORROWER'S COUNSEL] [Letterhead of Miller, Simpson & Tatum] [Closing Date] NationsBank of Georgia, National Association, as Documentation Agent 600 Peachtree Street Atlanta, Georgia 30308 Each Lender a party to the Credit Agreement described below Ladies and Gentlemen: We have acted as counsel to Savannah Foods & Industries, Inc., a Delaware corporation (the "Borrower") and the Subsidiaries in connection with that certain Credit Agreement dated as of October 1, 1993 (the "Credit Agreement"; terms used herein and not defined herein have their respective defined meanings as set forth in the Credit Agreement) by and among the Borrower, the financial institutions from time to time parties thereto (the "Lenders") and NationsBank of Georgia, National Association, as Documentation Agent (the "Agent"), and the other Loan Documents to which the Borrower is a party. This opinion is being furnished to you at the direction of the Loan Parties pursuant to Section 5.1 of the Credit Agreement. G-1 159 116 For the purpose of giving this opinion, we have examined executed copies of the Credit Agreement, the other Loan Documents, the certificate of incorporation and bylaws of the Borrower, and such other documents and records, and have made such inquiries, as we have considered necessary or appropriate to provide a basis for the opinions expressed herein. We have assumed the genuineness of all signatures (other than those of the Borrower) and the authenticity of all documents submitted to us as originals, and the conformity to the authentic originals of all documents submitted to us as certified or photostatic copies. Based upon the foregoing, we are of the opinion that: 1. The Borrower is a corporation, duly formed, validly existing and in good standing under the laws of the State of Delaware. The Borrower has the power and authority to own its respective properties and to carry on its respective business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business and in good standing in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization. 2. Each Subsidiary is a corporation, duly formed, validly existing and in good standing under the laws of the state of its incorporation. Each Subsidiary has the power and authority to own its respective properties and to carry on its respective business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business and in good standing in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization. 3. The Borrower has the right and power, and has taken all necessary action to authorize it, to execute, deliver and perform the Loan Documents to which it is a party in accordance with their respective terms. The officers of the Borrower executing the Loan Documents on behalf of the Borrower are duly and fully authorized to execute the same. 4. Each Loan Document has been duly authorized, executed and delivered by the Borrower and each constitutes a legal, valid and binding obligation of the Borrower, enforceable against the Borrower in accordance with its terms, except as the same may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors' rights and by general principles of equity (regardless of whether considered in a proceeding in equity or in law). 5. The execution, delivery and performance of each Loan Document by the Borrower in accordance with their respective terms, and the borrowings under the Credit Agreement by G-2 160 117 the Borrower, do not and will not, by the passage of time, the giving of notice or otherwise: (a) require any Governmental Approval or violate any Applicable Law relating to the Borrower; (b) conflict with, result in a breach of, or constitute a default under, the certificate of incorporation or the bylaws of the Borrower, or to the best of our knowledge after due inquiry, any contract, indenture, agreement or other instrument to which the Borrower is a party or by which the Borrower or any of its respective properties may be bound; or (c) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by the Borrower other than in favor of the Agent. 6. The Borrower is not in default under its certificate of incorporation or its bylaws, and no event has occurred, which has not been remedied, cured or waived: (a) which constitutes a Default or an Event of Default or (b) which constitutes, or which with the passage of time, the giving of notice, a determination of materiality, the satisfaction of any condition, or any combination of the foregoing, would constitute, a default or event of default by the Borrower any material agreement (other than the Credit Agreement) or judgment, decree or order to which the Borrower is a party or by which the Borrower or any of its properties may be bound. 7. Except as specified on Schedule 6.1(h) to the Credit Agreement, there are no actions, suits or proceedings pending against or in any other way relating adversely to or affecting the Borrower or any of its respective properties in any court or before any arbitrator of any kind or before or by any governmental body. Very truly yours, MILLER, SIMPSON & TATUM By: -------------------------------- A Partner G-3 161 EX-4.2 3 NOTE AGREEMENT 1 EXHIBIT 4.2 ================================================================================ COMPOSITE CONFORMED COPY OF THE NOTE AGREEMENTS Re: $50,000,000 8.35% SERIES A SENIOR NOTES DUE NOVEMBER 1, 2002 AND $20,000,000 7.15% SERIES B SENIOR NOTES DUE NOVEMBER 1, 2002 OF SAVANNAH FOODS & INDUSTRIES, INC. ================================================================================ 162 2 COMPOSITE CONFORMED COPY OF THE NOTE AGREEMENTS RELATING TO: $50,000,000 8.35% Series A senior Notes Due November 1, 2002 and $20,000,000 7.15% Series B senior Notes Due November 1, 2002 of SAVANNAH FOODS & INDUSTRIES, INC. -------------------------- Separate Note Agreements each dated as of September 1, 1992, in the form attached hereto into on October 5, 1992 between Savannah Foods & Industries, Inc. (the "Company"), and respectively, The Great-West Life Assurance Company, The Variable Annuity Life Insurance Company, The Minnesota Mutual Life Insurance Company, Mutual Trust Life Insurance Company, National Travelers Life Company and The Reliable Life Insurance Company (the "Note Purchasers"). Each of said Agreements was executed on behalf of the Company by William R. Steinhauer, its Vice President - Finance and W.W. Sprague, its President. Each of said Agreements was addressed to, and accepted by, the respective Purchasers as set forth below: Acceptance by Purchasers ------------------------ THE GREAT-WEST LIFE ASSURANCE COMPANY By /s/ Wanye T. Hoffman ------------------------------------ Its Vice President Private Placement Investments By /s/ G. Douglas Hurley ------------------------------------ Its Vice President Private Placement Investments THE VARIABLE ANNUITY LIFE INSURANCE COMPANY By /s/ Julia S. Tucker ------------------------------------ Its Investment Officer 163 3 THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY By: MIMLIC ASSET MANAGEMENT COMPANY By /s/ Guy M. De Lambert ------------------------ Its Vice President MUTUAL TRUST LIFE INSURANCE COMPANY By: MIMLIC ASSET MANAGEMENT COMPANY By /s/ Lynne M. Mills --------------------- Its Vice President NATIONAL TRAVELERS LIFE COMPANY By: MIMLIC ASSET MANAGEMENT COMPANY By /s/ Lynne M. Mills --------------------- Its Vice President THE RELIABLE LIFE INSURANCE COMPANY BY: MIMLIC ASSET MANAGEMENT COMPANY By /s/ Lynne M. Mills -------------------- Its Vice President -2- 164 4 [COMPOSITE CONFORMED COPY] ================================================================================ SAVANNAH FOODS & INDUSTRIES, INC. NOTE AGREEMENT Dated as of September 1, 1992 Re: $50,000,000 8.35% Series A Senior Notes Due November 1, 2002 and $20,000,000 7.15% Series B Senior Notes Due November 1, 2002 ================================================================================ 165 5 TABLE OF CONTENTS (Not a part of the Agreement)
SECTION HEADING PAGE Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.1. Description of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2. Commitment, Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 1.3. Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 2. PREPAYMENT OF NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2.1. Required Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2.2. Optional Prepayment with Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 2.3. Notice of Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 2.4. Application of Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 2.5. Direct Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3. REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3.1. Representations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 3.2. Representations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 4. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 4.1. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 4.2. Waiver of Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 5. COMPANY COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 5.1. Corporate Existence, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 5.2. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws; Environmental Compliance . . . . 7 Section 5.4. Maintenance, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 5.5. Nature of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 5.6. Current Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 5.7. Consolidated Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 5.8. Indebtedness Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.9. Fixed Charges Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.10. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 5.11. Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Section 5.12. Mergers, Consolidations and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 5.13. Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
-i- 166 6 Section 5.14. Designation of Restricted Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 5.15. Repurchase of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 5.16. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 5.17. Termination of Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 5.18. Reports and Rights of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 6.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 6.2. Notice to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6.3. Acceleration of Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6.4. Rescission of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.1. Consent Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.2. Solicitation of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 7.3. Effect of Amendment or Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 8.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 8.2. Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 8.3. Directly or Indirectly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 9. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 9.1. Registered Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 9.2. Exchange of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 9.3. Loss, Theft, Etc. of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 9.4. Expenses, Stamp Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 9.5. Powers and Rights Not Waived; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . 30 Section 9.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 9.7. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 9.8. Survival of Covenants and Representations . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 9.9. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 9.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 9.11. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
-ii- 167 7 ATTACHMENTS TO NOTE AGREEMENT: Schedule I -- Names and Addresses of Note Purchasers and Amounts of Commitments Exhibit A-1 -- Form of 8.35% Series A Senior Note due November 1, 2002 Exhibit A-2 -- Form of 7.15% Series B Senior Note due November 1, 2002 Exhibit B -- Representations and Warranties of the Company Exhibit C -- Description of Special Counsel's Closing Opinion Exhibit D -- Description of Closing Opinion of Counsel to the Company Exhibit E -- Form of Letter of Transfer
-iii- 168 8 SAVANNAH FOODS & INDUSTRIES, INC. TWO EAST BRYAN SAVANNAH, GEORGIA 31402 NOTE AGREEMENT Re: $50,000,000 8.35% Series A Senior Notes Due November 1, 2002 and $20,000,000 7.15% Series B Senior Notes Due November 1, 2002 Dated as of September 1, 1992 To the Purchaser named in Schedule I hereto which is a signatory of this Agreement Gentlemen: The undersigned, SAVANNAH FOODS & INDUSTRIES, INC., a Delaware corporation (the "Company"), agrees with you as follows: SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT. Section 1.1. Description of Notes. The Company will authorize the issue and sale of the following series of senior promissory notes: (a) $50,000,000 aggregate principal amount of its 8.35% Series A Senior Notes (the "Series A Notes") to be dated the date of issue, to bear interest from such date at the rate of 8.35% per annum, payable semiannually on the first day of each November and May in each year (commencing on the first of such dates after the Closing Date (hereinafter defined) and at maturity and to bear interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the rate of 10.35% per annum after the date due, whether by acceleration or otherwise, until paid, to be expressed to mature on November 1, 2002, and to be substantially in the form attached hereto as Exhibit A-1; and 169 9 Savannah Foods & Industries, Inc. Note Agreement (b) $20,000,000 aggregate principal amount of its 7.15% Series B Senior Notes (the "Series B Notes" and, collectively with the Series A Notes, the "Notes") to be dated the date of issue, to bear interest from such date at the rate of 7.15% per annum, payable semiannually on the first day of each November and May in each year (commencing on the first of such dates after the Closing Date (hereinafter defined)) and at maturity and to bear interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest at the rate of 9.15% per annum after the date due, whether by acceleration or otherwise, until paid, to be expressed to mature on November 1, 2002, and to be substantially in the form attached hereto as Exhibit A-2. Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months. The Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in Section 2 of this Agreement. The term "Notes" as used herein shall include each Note delivered pursuant to this Agreement and the separate agreements with the other purchasers named in Schedule I. You and the other purchasers named in Schedule I are hereinafter sometimes referred to as the "Purchasers." Section 1.2. Commitment, Closing Date. Subject to the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, the Company agrees to issue and sell to you, and you agree to purchase from the Company, Notes of the series and in the principal amount set forth opposite your name on Schedule I hereto at a price of 100% of the principal amount thereof on the Closing Date hereafter mentioned. Delivery of the Notes will be made at the offices of Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against payment therefor in Federal Reserve or other funds current and immediately available at the principal office of NationsBank, N.A., ABA No. 06 10 00052, Account No. 002 00000 711 in the amount of the purchase price at 11:00 A.M., Chicago time, on: (a) in the case of the Series A Notes, November 6, 1992 or such earlier date as the Company shall specify by not less than five business days' prior written notice to you (the "First Closing Date"); and (b) in the case of the Series B Notes, December 15, 1992 or such earlier date as the Company shall specify by not less than five business days' prior written notice to you (the "Second Closing Date"). The First Closing Date and the Second Closing Date are hereinafter collectively referred to as the "Closing Dates" and, individually, as a "Closing Date." The Notes of each series delivered to you on the respective Closing Dates will be delivered to you in the form of a single registered Note of such series in the form attached hereto as Exhibit A-1 or Exhibit A-2, as the case may be, for the full amount of your purchase (unless different denominations are -2- 170 10 Savannah Foods & Industries, Inc. Note Agreement specified by you) on such Closing Date, registered in your name or in the name of your nominee, all as you may specify at any time prior to the date fixed for delivery. Section 1.3. Other Agreements. Simultaneously with the execution and delivery of this Agreement, the Company is entering into similar agreements with the other Purchasers under which such other Purchasers agree to purchase from the Company the principal amount of Notes of each series set opposite such Purchasers' names in Schedule I, and your obligation and the obligations of the Company hereunder are subject to the execution and delivery of the similar agreements by the other Purchasers. This Agreement and said similar agreements with the other Purchasers are herein collectively referred to as the "Agreements." The obligations of each Purchaser shall be several and not joint and no Purchaser shall be liable or responsible for the acts of any other Purchaser. SECTION 2. PREPAYMENT OF NOTES. Section 2.1. Required Prepayments (a) Series A Notes. The Company agrees that on November 1 in each year, commencing November 1, 1998 and ending November 1, 2001, both inclusive, it will prepay and apply and there shall become due and payable on the principal indebtedness evidenced by the Series A Notes an amount equal to the lesser of (i) the respective amount set opposite each such date below or (ii) the principal amount of the Series A Notes then outstanding.
REQUIRED PREPAYMENT DATE: PRINCIPAL AMOUNT: ------------------------- ----------------- November 1, 1998 $ 6,250,000 November 1, 1999 $12,500,000 November 1, 2000 $12,500,000 November 1, 2001 $12,500,000
The entire remaining principal amount of the Series A Notes shall become due and payable on November 1, 2002. (b) Series B Notes. The Company agrees that on November 1 in each year, commencing November 1, 1998 and ending November 1, 2001, both inclusive, it will prepay and apply and there shall become due and payable on the principal indebtedness evidenced by the Series B Notes an amount equal to the lesser of (i) the respective amount set opposite each such date below or (ii) the principal amount of the Series B Notes then outstanding.
REQUIRED PREPAYMENT DATE: PRINCIPAL AMOUNT: ------------------------- ----------------- November 1, 1998 $ 2,500,000 November 1, 1999 $ 5,000,000 November 1, 2000 $ 5,000,000 November 1, 2001 $ 5,000,000
-3- 171 11 Savannah Foods & Industries, Inc. Note Agreement The entire remaining principal amount of the Series B Notes shall become due and payable on November 1, 2002. (c) No premium shall be payable in connection with any required prepayment made pursuant to this Section 2.1. (d) For purposes of this Section 2.1, any prepayment of less than all of the outstanding Notes pursuant to Section 2.2 shall be deemed to be applied first, to the amount of principal scheduled to remain unpaid on all Notes on November 1, 2002, and then to the remaining scheduled principal payments in inverse chronological order. Section 2.2. Optional Prepayment with Premium. In addition to the payments required by Section 2.1, upon compliance with Section 2.3 the Company shall have the privilege, at any time and from time to time, of prepaying the outstanding Notes, either in whole or in part (but if in part then in a minimum principal amount of $1,000,000) by payment of the principal amount of the Notes, or portion thereof to be prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal to the Make-Whole Amount, determined as of two business days prior to the date of such prepayment pursuant to this Section 2.2. Section 2.3. Notice of Optional Prepayments. The Company will give notice of any prepayment of the Notes pursuant to Section 2.2 to each holder thereof not less than 30 days nor more than 60 days before the date fixed for such optional prepayment specifying (i) such date, (ii) the principal amount of the holder's Notes to be prepaid on such date, (iii) that a premium may be payable, (iv) the date when such premium will be calculated, (v) the estimated premium that may be payable, including a reasonably detailed computation thereof, and (vi) the accrued interest applicable to the prepayment. Such notice of prepayment shall also certify all facts, if any, which are conditions precedent to any such prepayment. Notice of prepayment having been so given, the aggregate principal amount of the Notes specified in such notice, together with accrued interest thereon and the premium, if any, payable with respect thereto shall become due and payable on the prepayment date specified in said notice. Not later than two business days prior to the prepayment date specified in such notice, the Company shall provide each holder of a Note written notice of the premium, if any, payable in connection with such prepayment and, whether or not any premium is payable, a reasonably detailed computation of the Make-Whole Amount. Section 2.4. Application of Prepayments. All partial payments pursuant to Section 2.1 in respect of any series of Notes shall be applied on all outstanding Notes of such series ratably in accordance with the unpaid principal amounts thereof. All partial prepayments pursuant to Section 2.2 shall be applied on all outstanding Notes (without distinction as to series) ratably in accordance with the unpaid principal amounts thereof. Section 2.5. Direct Payment. Notwithstanding anything to the contrary contained in this Agreement or the Notes, in the case of any Note owned by you or your nominee or owned by any subsequent Institutional Holder which has given written notice to the Company requesting that the provisions of this Section 2.5 shall apply, the Company will punctually pay when due the principal thereof, interest thereon and premium, if any, due with respect to said -4- 172 12 Savannah Foods & Industries, Inc. Note Agreement principal, without any presentment thereof, directly to you, to your nominee or to such subsequent Institutional Holder at your address or your nominee's address set forth in Schedule I hereto or such other address as you, your nominee or such subsequent Institutional Holder may from time to time designate in writing to the Company or, if a bank account with a United States bank is designated for you or your nominee on Schedule I hereto or in any written notice to the Company from you, from your nominee or from any such subsequent Institutional Holder, the Company will make such payments in immediately available funds to such bank account, marked for attention as indicated, or in such other manner or to such other account in any United States bank as you, your nominee or any such subsequent Institutional Holder may from time to time direct in writing. SECTION 3. REPRESENTATIONS. Section 3.1. Representations of the Company. The Company represents and warrants that all representations and warranties set forth in Exhibit B are true and correct as of the date hereof and are incorporated herein by reference with the same force and effect as though herein set forth in full. Section 3.2. Representations of the Purchaser. You represent, and in entering into this Agreement the Company understands, that you are acquiring the Notes for the purpose of investment and not with a view to the distribution thereof, and that you have no present intention of selling, negotiating or otherwise disposing of the Notes; it being understood, however, that the disposition of your property shall at all times be and remain within your control. You further represent that you are acquiring the Notes for your own account and with your general corporate assets and not with the assets of any separate account in which any employee benefit plan has any interest. As used in this Section, the terms "separate account" and "employee benefit plan" shall have the respective meanings assigned to them in ERISA. SECTION 4. CLOSING CONDITIONS. Section 4.1. Conditions. Your obligation to purchase the Notes on the related Closing Date shall be subject to the performance by the Company of its agreements hereunder which by the terms hereof are to be performed at or prior to the time of delivery of the Notes and to the following further conditions precedent: (a) Closing Certificate. You shall have received a certificate dated the related Closing Date, signed by the President or a Vice President of the Company, the truth and accuracy of which shall be a condition to your obligation to purchase the Notes proposed to be sold to you (i) to the effect that (A) the representations and warranties of the Company set forth in Exhibit B hereto are true and correct on and with respect to the related Closing Date, (B) the Company has performed all of its obligations hereunder which are to be performed on or prior to the related Closing Date, and (C) no Default or Event of Default has occurred and is continuing, and (ii) updating Annex B to Exhibit B hereto so as to describe all Current Debt, Funded Debt, Capitalized Leases and Long- -5- 173 13 Savannah Foods & Industries, Inc. Note Agreement Term Leases of the Company outstanding on the related Closing Date, after giving effect to the application of the proceeds of the Notes. (b) Legal Opinions. You shall have received from Chapman and Cutler, who are acting as your special counsel in this transaction, and from Miller, Simpson & Tatum, counsel for the Company, their respective opinions dated the related Closing Date, in form and substance satisfactory to you, and covering the matters set forth in Exhibits C and D, respectively, hereto. (c) Related Transactions. The Company shall have consummated the sale of the entire principal amount of the Notes scheduled to be sold on the related Closing Date pursuant to this Agreement and the other Agreements referred to in Section 1.3. The consummation of the transactions contemplated to occur on the First Closing Date shall have so occurred in accordance with the terms and provisions hereof on or prior to the Second Closing Date. (d) Private Placement Number. A Private Placement Number for the Notes shall have been obtained from Standard & Poor's Corporation. (e) Satisfactory Proceedings. All proceedings taken in connection with the transactions contemplated by this Agreement, and all documents necessary to the consummation thereof, shall be satisfactory in form and substance to you and your special counsel, and you shall have received a copy (executed or certified as may be appropriate) of all legal documents or proceedings taken in connection with the consummation of said transactions. Section 4.2. Waiver of Conditions. If on any Closing Date the Company fails to tender to you the Notes to be issued to you on such date or if the conditions specified in Section 4.1 have not been fulfilled, you may thereupon elect to be relieved of all further obligations under this Agreement. Without limiting the foregoing, if the conditions specified in Section 4.1 have not been fulfilled, you may waive compliance by the Company with any such condition to such extent as you may in your sole discretion determine. Nothing in this Section 4.2 shall operate to relieve the Company of any of its obligations hereunder or to waive any of your rights against the Company. SECTION 5. COMPANY COVENANTS. From and after the First Closing Date and continuing so long as any amount remains unpaid on any Note: Section 5.1. Corporate Existence, Etc. The Company will preserve and keep in full force and effect, and will cause each Restricted Subsidiary to preserve and keep in full force and effect, its corporate existence and all licenses and permits necessary to the proper conduct of its business; provided, however, that the foregoing shall not prevent any transaction permitted by Section 5.12. -6- 174 14 Savannah Foods & Industries, Inc. Note Agreement Section 5.2. Insurance. The Company will maintain, and will cause each Restricted Subsidiary to maintain, insurance coverage by financially sound and reputable insurers in such forms and amounts and against such risks as are customary for corporations of established reputation engaged in the same or a similar business and owning and operating similar properties. Notwithstanding the foregoing, each policy of insurance maintained by the Company or any Restricted Subsidiary shall contain a 30 day non-cancellation clause. Section 5.3. Taxes, Claims for Labor and Materials, Compliance with Laws; Environmental Compliance. (a) The Company will promptly pay and discharge, and will cause each Restricted Subsidiary promptly to pay and discharge, all lawful taxes, assessments and governmental charges or levies imposed upon the Company or such Restricted Subsidiary, respectively, or upon or in respect of all or any part of the property or business of the Company or such Restricted Subsidiary, all trade accounts payable in accordance with usual and customary business terms, and all claims for work, labor or materials, which if unpaid might become a Lien upon any property of the Company or such Restricted Subsidiary; provided, however, that the Company or such Restricted Subsidiary shall not be required to pay any such tax, assessment, charge, levy, account payable or claim if (i) the validity, applicability or amount thereof is being contested in good faith by appropriate actions or proceedings which will prevent the forfeiture or sale of any property of the Company or such Restricted Subsidiary or any material interference with the use thereof by the Company or such Restricted Subsidiary, and (ii) the Company or such Restricted Subsidiary shall set aside on its books, reserves deemed by it to be adequate with respect thereto. The Company will promptly comply and will cause each Subsidiary to comply with all laws, ordinances or governmental rules and regulations to which it is subject including, without limitation, the Occupational Safety and Health Act of 1970, as amended and ERISA, the violation of which could materially and adversely affect the properties, business, prospects, profits or condition of the Company and its Restricted Subsidiaries or would result in any Lien not permitted under Section 5.10. (b) The Company shall comply with all applicable Environmental Laws, now existing or later enacted, except where the failure to so comply could not have a material adverse effect on the business, profits, prospects, properties or condition (financial or otherwise) of the Company or any Restricted Subsidiary. The Company at its sole expense shall take or cause to be taken all appropriate action necessary to cure any violation by the Company of any applicable Environmental Laws, which violation could have a material adverse effect on the business, profits, prospects, properties or condition (financial or otherwise) of the Company or any Restricted Subsidiary. The Company shall not manufacture, possess, use, generate, store, transport, treat, release, discharge, emit or dispose any Hazardous Material except in de minimus amounts and in compliance in all material respects with all applicable Environmental Law. The Company shall promptly take, or cause to be taken, in compliance with all applicable Environmental Law, all response action required or directed by any governmental authority to abate, clean up, remove and remediate any Hazardous Material released at, disposed at, contaminating, polluting or impairing, any real or personal property owned, occupied or operated by the Company. -7- 175 15 Savannah Foods & Industries, Inc. Note Agreement Section 5.4. Maintenance, Etc. The Company will maintain, preserve and keep, and will cause each Restricted Subsidiary to maintain, preserve and keep, its properties which are used or useful in the conduct of its business (whether owned in fee or a leasehold interest) in good repair and working order and from time to time will make all necessary repairs, replacements, renewals and additions so that at all times the efficiency thereof shall be maintained. Section 5.5. Nature of Business. Neither the Company nor any Restricted Subsidiary will engage in any business if, as a result, the general nature of the business, taken on a consolidated basis, which would then be engaged in by the Company and its Restricted Subsidiaries would be substantially changed from the general nature of the business engaged in by the Company and its Restricted Subsidiaries as described in the Private Placement Offering Memorandum dated April, 1992, prepared by Canadian Imperial Bank of Commerce. Section 5.6. Current Ratio. The Company will at all times keep and maintain the ratio of Consolidated Current Assets to Consolidated Current Liabilities at not less than 1.25 to 1.00. Section 5.7. Consolidated Tangible Net Worth. The Company will at all times during each fiscal quarter keep and maintain Consolidated Tangible Net Worth at an amount not less than the sum of: (i) the Base Amount; plus (ii) 20% of Consolidated Net Income for each fiscal year of the Company, beginning with the fiscal year starting December 30, 1991 and ending with the fiscal year starting January 2, 1996 (it being agreed that for the purposes of making any calculation under this clause (ii), Consolidated Net Income which is a deficit figure for any such fiscal year ending on or before December 30, 1996, shall be deemed to be zero). Section 5.8. Indebtedness Ratios. (a) The Company will not at any time permit the ratio of Consolidated Funded Debt to Total Capitalization to exceed 45%. (b) The Company will not at any time permit the ratio of Basket Indebtedness to Consolidated Tangible Net Worth to exceed 20%. (c) Any corporation which becomes a Restricted Subsidiary after the date hereof shall for all purposes of this Section 5.8 be deemed to have created, assumed or incurred at the time it becomes a Restricted Subsidiary all Funded Debt of such corporation existing immediately after it becomes a Restricted Subsidiary. Section 5.9. Fixed Charges Coverage Ratio. The Company will keep and maintain the ratio of Net Income Available for Fixed Charges to Fixed Charges (determined as of the -8- 176 16 Savannah Foods & Industries, Inc. Note Agreement end of each fiscal quarter for the period of four consecutive fiscal quarters ending on such quarter end date, taken as a single accounting period) at not less than 2.00 to 1.00. Section 5.10. Limitation on Liens. The Company will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except: (a) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen, provided payment thereof is not at the time required by Section 5.3; (b) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Company or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured; (c) Liens incidental to the conduct of business or the ownership of properties and assets (including Liens in connection with worker's compensation, unemployment insurance and other like laws, warehousemen's and attorneys' liens and statutory landlords' liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money; provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings; (d) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Company and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Company and its Restricted Subsidiaries; (e) Liens securing Indebtedness of a Wholly-owned Restricted Subsidiary to the Company or to another Wholly-owned Restricted Subsidiary and any extension, renewal or replacement of any such Lien provided, that (i) the Lien so extended, renewed or replaced shall not encumber any property of the Company or any Restricted Subsidiary which was not subject to the Lien so extended, renewed or replaced, and (ii) there shall be no increase in the principal amount of Indebtedness secured by such Lien; -9- 177 17 Savannah Foods & Industries, Inc. Note Agreement (f) Liens on inventories of the Company consisting of sugar processed from sugar beets and sugarcane securing Current Debt of the Company or any Restricted Subsidiary to the United States Commodity Credit Corporation, provided that the sole recourse of the United States Commodity Credit Corporation for any Current Debt so secured shall be to the related seasonal sugar inventories of the Company and shall not extend to any other sugar inventories whether existing at the time such Current Debt is incurred or arising thereafter or to the general credit of the Company; (g) Liens incurred after the Closing Date given to secure the payment of the purchase price incurred in connection with the acquisition of fixed assets useful and intended to be used in carrying on the business of the Company or a Restricted Subsidiary, including Liens existing on such fixed assets at the time of acquisition thereof or at the time of acquisition by the Company or a Restricted Subsidiary of any business entity then owning such fixed assets, whether or not such existing Liens were given to secure the payment of the purchase price of the fixed assets to which they attach so long as they were not incurred, extended or renewed in contemplation of such acquisition, provided that (i) the Lien shall attach solely to the fixed assets acquired or purchased, (ii) at the time of acquisition of such fixed assets, the aggregate amount remaining unpaid on all Indebtedness secured by Liens on such fixed assets whether or not assumed by the Company or a Restricted Subsidiary shall not exceed an amount equal to 100% of the lesser of the total purchase price or fair market value at the time of acquisition of such fixed assets (as determined in good faith by the Board of Directors of the Company), and (iii) all Indebtedness secured by such Liens is otherwise permitted by the provisions of this Agreement, including, without limitation thereof, by the provisions of Section Section 5.8 and 5.9 (all such Liens incurred pursuant to and in accordance with this Section 5.10(G) being hereinafter referred to as "Purchase Money Liens"); and (h) in addition to those Liens permitted by the foregoing paragraphs (a) through (g), any Lien (other than any Lien securing Debt of the Company or any Restricted Subsidiary which is not a Purchase Money Lien) created after the Closing Date, provided that the Indebtedness secured by any such Lien is otherwise permitted by the provisions of this Agreement, including, without limitation thereof, by the provisions of Section Section 5.8 and 5.9. Section 5.11. Investments. The Company will not, and will not permit any Restricted Subsidiary to, make any Investments, other than: (a) Investments by the Company and its Restricted Subsidiaries in and to Restricted Subsidiaries, including any Investment in a corporation which, after giving effect to such Investment, will become a Restricted Subsidiary; (b) Investments in commercial paper of any Person maturing in 360 days or less from the date of issuance thereof which, at the time of acquisition by the Company or any Restricted Subsidiary, are accorded a rating of A-1 or better by Standard & Poor's Corporation or P-1 by Moody's Investors Service, Inc.; -10- 178 18 Savannah Foods & Industries, Inc. Note Agreement (c) Investments in (i) direct obligations of the United States of America or any agency or instrumentality of the United States of America, the payment or guarantee of which constitutes a full faith and credit obligation of the United States of America, in either case, maturing in twelve months or less from the date of acquisition thereof, and (ii) obligations (including, without limitation, notes and bonds) of any Person which at the time of acquisition by the Company or any Restricted Subsidiary, are accorded a rating of AA or better by Standard & Poor's Corporation or Aa2 or better by Moody's Investors Service, Inc., or their respective successors, and which mature in twelve months or less from the date of acquisition thereof, it being agreed that the maturity of any obligation shall include puts, announced calls, auctions or other similar features which allow redemption by the holder of any such obligation; (d) Investments in deposits, certificates of deposit or bankers' acceptances, in each case maturing within one year from the date of issuance thereof, issued by a bank or trust company approved by the Board of Directors of the Company, organized under the laws of the United States or any state thereof, having capital, surplus and undivided profits aggregating at least $100,000,000 and whose long-term certificates of deposit at the time of acquisition thereof by the Company or a Restricted Subsidiary, are accorded a rating of A or better by Standard & Poor's Corporation or A2 or better by Moody's Investors Service, Inc., or their respective successors; (e) Investments in so-called "money market preferred stock", (the dividends with respect to which are re-set at least four times annually) issued by a corporation organized under the laws of the United States or any state thereof and whose common stock is listed on the American or New York Stock Exchange, which preferred stock at the time of acquisition thereof by the Company or any Restricted Subsidiary, is accorded a rating of "A" or better by Standard and Poor's Corporation or "a2" or better by Moody's Investor Service, Inc., or an equivalent rating by any other nationally recognized credit rating agency of similar standing; (f) Investments in repurchase agreements maturing in 30 days or less with a bank or trust company which is a primary government securities dealer (as chosen by the United States Federal Reserve Bank) or which meets the requirements of paragraph (d) of this Section 5.11 and which repurchase agreements are fully secured by obligations of the type described in clause (i) of paragraph (c) of this Section 5.11; (g) Investments in shares of mutual funds operated by Merrill Lynch & Co., Smith Barney, Harris Upham & Co. and John Nuveen & Co., and other United States corporations of similar national standing approved by the Board of Directors of the Company, in any case whose investments are limited to those permitted by paragraphs (b), (c), (d) and (e) of this Section 5.11; (h) loans or advances in the usual and ordinary course of business to officers, directors and employees for expenses (including moving expenses related to a transfer) incidental to carrying on the business of the Company or any Restricted Subsidiary; -11- 179 19 Savannah Foods & Industries, Inc. Note Agreement (i) receivables arising from the sale of goods and services in the ordinary course of business of the Company and its Restricted Subsidiaries, whether evidenced by a note or otherwise; (j) Related Investments in an amount not exceeding (i) 30% of Total Capitalization minus (ii) the amount of Unrelated Investments at the time outstanding; (k) Unrelated Investments in an amount not exceeding the lesser of (i) $20,000,000 or (ii) (A) 30% of Total Capitalization minus (B) the amount of Related Investments at the time outstanding. In valuing any Investments for the purpose of applying the limitations set forth in this Section 5.11, such Investments shall be taken at the original cost thereof, without allowance for any subsequent write-offs or appreciation or depreciation therein, but less any amount repaid or recovered on account of capital or principal. For purposes of this Section 5.11, at any time when a corporation becomes a Restricted Subsidiary, all Investments of such corporation at such time shall be deemed to have been made by such corporation, as a Restricted Subsidiary, at such time. Section 5.12. Mergers, Consolidations and Sales of Assets. (a) The Company will not, and will not permit any Restricted Subsidiary to, (i) consolidate with or be a party to a merger with any other corporation or (ii) sell, lease or otherwise dispose of (including, without limitation, any disposition in connection with a sale and leaseback transaction) all or any substantial part (as defined in paragraph (e) of this Section 5.12) of the assets of the Company and its Restricted Subsidiaries; provided, however, that: (1) any Restricted Subsidiary may merge or consolidate with or into the Company or any Wholly-owned Restricted Subsidiary so long as in any merger or consolidation involving the Company, the Company shall be the surviving or continuing corporation; (2) the Company may consolidate or merge with any other corporation if (i) either (A) the Company shall be the surviving or continuing corporation, or (B) if the Company is not the surviving or continuing corporation, the corporation (hereinafter called the "Surviving Company") formed by such consolidation or the corporation into which the Company shall have been merged (y) shall be a corporation organized under the laws of the United States, or any state, territory or possession of the United States or the District of Columbia, (z) shall have expressly and unconditionally assumed by a written instrument satisfactory in form to the holders of the Notes the due and punctual payment of the principal of and interest and premium, if any, on the Notes and the due and punctual performance of all the covenants and conditions of this Agreement and shall have furnished the holders of the Notes an opinion of counsel satisfactory to such holders to the effect that such instrument has been duly authorized, executed and delivered and constitutes the legal, valid and binding contract and agreement of the Surviving Corporation enforceable in accordance with its terms, (ii) at the time of such -12- 180 20 Savannah Foods & Industries, Inc. Note Agreement consolidation or merger and after giving effect thereto no Default or Event of Default shall have occurred and be continuing; and (3) any Restricted Subsidiary may sell, lease or otherwise dispose of all or any substantial part of its assets to the Company or any Wholly-owned Restricted Subsidiary. (b) The Company will not permit any Restricted Subsidiary to issue or sell any shares of stock of any class (including as "stock" for the purposes of this Section 5.12, any warrants, rights or options to purchase or otherwise acquire stock or other Securities exchangeable for or convertible into stock) of such Restricted Subsidiary to any Person other than the Company or a Wholly-owned Restricted Subsidiary, except for the purpose of qualifying directors, or except in satisfaction of the validly pre-existing preemptive rights of minority shareholders in connection with the simultaneous issuance of stock to the Company and/or a Restricted Subsidiary whereby the Company and/or such Restricted Subsidiary maintain their same proportionate interest in such Restricted Subsidiary. (c) The Company will not sell, transfer or otherwise dispose of any shares of stock of any Restricted Subsidiary (except to qualify directors) or any Indebtedness of any Restricted Subsidiary, and will not permit any Restricted Subsidiary to sell, transfer or otherwise dispose of (except to the Company or a Wholly-owned Restricted Subsidiary) any shares of stock or any Indebtedness of any other Restricted Subsidiary, unless: (1) the Board of Directors of the Company shall have determined, as evidenced by a resolution thereof (a copy of which, certified as true and correct by the chief financial officer of the Company, shall be promptly furnished to the holders of the Notes), that the proposed sale, transfer or disposition of said shares of stock and Indebtedness is in the best interests of the Company; and (2) such sale or other disposition does not involve a substantial part (as hereinafter defined) of the assets of the Company and its Restricted Subsidiaries. (d) In addition to the foregoing restrictions with respect to the sale of assets contained in this Section 5.12, the Company will not, and will not permit any Restricted Subsidiary to, discount or sell any of its notes receivable or accounts receivable other than at face value and without recourse. (e) As used in this Section 5.12, a sale, lease or other disposition of assets shall be deemed to be a "substantial part" of the assets of the Company and its Restricted Subsidiaries if the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Company and its Restricted Subsidiaries (other than in the ordinary course of business) during the 12-month period ending with the date of such sale, lease or other disposition, exceeds 20% of Consolidated Assets, determined as of the end of the immediately preceding fiscal year. Any sale of assets shall not be included in any computation under this paragraph (e) to the extent that the proceeds of such sale are applied, within one year after such sale, (i) to the purchase of other fixed assets useful and to be used in -13- 181 21 Savannah Foods & Industries, Inc. Note Agreement the business of the Company and its Restricted Subsidiaries and, pending such application, are maintained by the Company or any Restricted Subsidiary in a segregated account or (ii) to prepay the Notes pursuant to the terms of Section 2.2. Section 5.13. Guaranties. The Company will not, and will not permit any Restricted Subsidiary to, become or be liable in respect of any Guaranty except (i) Guaranties of the Company or any Restricted Subsidiary guaranteeing obligations of any Restricted Subsidiary incurred in the ordinary course of business, which obligations do not constitute Debt and are not otherwise prohibited hereunder, or (ii) Guaranties of the Company or any Restricted Subsidiary which constitute Debt, are limited in amount to a stated maximum dollar exposure or contribution and are permitted by the provisions of this Agreement including, without limitation, Section Section 5.8 and 5.9. Section 5.14. Designation of Restricted Subsidiaries. The Company may at any time designate any Subsidiary to be a Restricted Subsidiary by resolution of the Board of Directors of the Company (a copy of which shall be promptly furnished to the holders of the Notes); provided, however, that no Subsidiary shall be designated as a Restricted Subsidiary if, at the time thereof or after giving effect to such designation, any Default or Event of Default shall occur and then be continuing. The Company may designate any Restricted Subsidiary to be an Unrestricted Subsidiary by resolution of the Board of Directors of the Company (a copy of which shall be promptly furnished to the holders of the Notes); provided, however, that (i) no Restricted Subsidiary shall be designated an Unrestricted Subsidiary if, at the time thereof or after giving effect to such designation, any Default or Event of Default shall exist and (ii) any such designation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be irrevocable. Section 5.15. Repurchase of Notes. Neither the Company nor any Restricted Subsidiary or Affiliate, directly or indirectly, may repurchase or make any offer to repurchase any Notes unless an offer has been made to repurchase Notes, pro rata, from all holders of the Notes at the same time and upon the same terms. In case the Company repurchases or otherwise acquires any Notes, such Notes shall immediately thereafter be cancelled and no Notes shall be issued in substitution therefor. Without limiting the foregoing, upon the repurchase or other acquisition of any Notes by any Restricted Subsidiary or any Affiliate, such Notes shall no longer be outstanding for purposes of any section of this Agreement relating to the taking by the holders of the Notes of any actions with respect hereto, including, without limitation, Section 6.3, Section 6.4 and Section 7.1. Section 5.16. Transactions with Affiliates. The Company will not, and will not permit any Restricted Subsidiary to, enter into or be a party to any transaction or arrangement with any Affiliate (including, without limitation, the purchase from, sale to or exchange of property with, or the rendering of any service by or for, any Affiliate), except in the ordinary course of and pursuant to the reasonable requirements of the Company's or such Restricted Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Restricted Subsidiary than would obtain in a comparable arm's-length transaction with a Person other than an Affiliate. -14- 182 22 Savannah Foods & Industries, Inc. Note Agreement Section 5.17. Termination of Pension Plans. The Company will not and will not permit any Subsidiary to withdraw from any Multiemployer Plan or permit any employee benefit plan maintained by it to be terminated if such withdrawal or termination could result in withdrawal liability (as described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on any property of the Company or any Subsidiary pursuant to Section 4068 of ERISA. Section 5.18. Reports and Rights of Inspection. The Company will keep, and will cause each Restricted Subsidiary to keep, proper books of record and account in which full and correct entries will be made of all dealings or transactions of, or in relation to, the business and affairs of the Company or such Restricted Subsidiary, in accordance with GAAP consistently applied (except for changes disclosed in the financial statements furnished to you pursuant to this Section 5.18 and concurred in by the independent public accountants referred to in Section 5.18(B) hereof), and will furnish to you so long as you are the holder of any Note and to each other Institutional Holder of the then outstanding Notes (in duplicate if so specified below or otherwise requested): (a) Quarterly Statements. As soon as available and in any event within 60 days after the end of each quarterly fiscal period (except the last) of each fiscal year, copies of: (1) consolidated balance sheets of the Company and its Restricted Subsidiaries as of the close of such quarterly fiscal period, setting forth in comparative form the consolidated figures for the fiscal year then most recently ended, (2) consolidated statements of income of the Company and its Restricted Subsidiaries for such quarterly fiscal period and for the portion of the fiscal year ending with such quarterly fiscal period, in each case setting forth in comparative form the consolidated figures for the corresponding periods of the preceding fiscal year, and (3) consolidated statements of cash flows of the Company and its Restricted Subsidiaries for the portion of the fiscal year ending with such quarterly fiscal period, setting forth in comparative form the consolidated figures for the corresponding period of the preceding fiscal year, all in reasonable detail and certified as complete and correct by an authorized financial officer of the Company; (b) Annual Statements. As soon as available and in any event within 120 days after the close of each fiscal year of the Company, copies of: (1) consolidated and consolidating balance sheets of the Company and its Restricted Subsidiaries as of the close of such fiscal year, and -15- 183 23 Savannah Foods & Industries, Inc. Note Agreement (2) consolidated and consolidating statements of income and retained earnings and cash flows of the Company and its Restricted Subsidiaries for such fiscal year, in each case setting forth in comparative form the consolidated figures for the preceding fiscal year, all in reasonable detail and accompanied by a report thereon of a firm of independent public accountants of recognized national standing selected by the Company to the effect that the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company and its Restricted Subsidiaries as of the end of the fiscal year being reported on and the consolidated results of the operations and cash flows for said year in conformity with GAAP and that the examination of such accountants in connection with such financial statements has been conducted in accordance with generally accepted auditing standards and included such tests of the accounting records and such other auditing procedures as said accountants deemed necessary in the circumstances; (c) Audit Reports. Promptly upon receipt thereof, one copy of each interim or special audit made by independent accountants of the books of the Company or any Restricted Subsidiary, the subject matter of which could have a material adverse effect on the assets, business, operations or financial condition of the Company or such Restricted Subsidiary, as the case may be, and any management letter received from such accountants; (d) SEC and Other Reports. Promptly upon their becoming available, one copy of each financial statement, report, notice or proxy statement sent by the Company to stockholders generally and of each regular or periodic report, and any registration statement or prospectus filed by the Company or any Subsidiary with any securities exchange or the Securities and Exchange Commission or any successor agency, and copies of any material orders in any material proceedings to which the Company or any of its Subsidiaries is a party, issued by any governmental agency, Federal or state, having jurisdiction over the Company or any of its Subsidiaries; (e) ERISA Reports. Promptly upon the occurrence thereof, written notice of (i) a Reportable Event with respect to any Plan as to which the PBGC by regulation has not waived the 30 day notification requirement; provided, however, that the loss of plan qualification and the failure to meet the minimum funding standards shall be Reportable Events requiring notice hereunder regardless of the issuance of any waivers of notice to the PBGC; (ii) the institution of any steps by the Company, any ERISA Affiliate, the PBGC or any other person to terminate any Plan by means of a distress termination under Section 4041(c) of ERISA or an involuntary termination under Section 4042 of ERISA; (iii) the institution of any steps by the Company or any ERISA Affiliate to withdraw from any Plan which would result in withdrawal liability in excess of $1,000,000; (iv) a non-exempt "prohibited transaction" within the meaning of Section 406 of ERISA in connection with any Plan; (v) any material increase in the contingent liability of the Company or any Restricted Subsidiary with respect to any post-retirement welfare liability; or (vi) the taking of any action by, or the threatening of -16- 184 24 Savannah Foods & Industries, Inc. Note Agreement the taking of any action by, the Internal Revenue Service, the Department of Labor or the PBGC with respect to any of the foregoing; (f) Officer's Certificates. Within the periods provided in paragraphs (a) and (b) above, a certificate of an authorized financial officer of the Company stating that such officer has reviewed the provisions of this Agreement and setting forth: (i) the information and computations (in sufficient detail) required in order to establish whether the Company was in compliance with the requirements of Section 5.6 through Section 5.17 at the end of the period covered by the financial statements then being furnished, and (ii) whether there existed as of the date of such financial statements and whether, to the best of such officer's knowledge, there exists on the date of the certificate or existed at any time during the period covered by such financial statements (including, specifically, at the time of any designation of a Subsidiary as a Restricted Subsidiary or as an Unrestricted Subsidiary) any Default or Event of Default and, if any such condition or event exists on the date of the certificate, specifying the nature and period of existence thereof and the action the Company is taking and proposes to take with respect thereto; (g) Accountant's Certificates. Within the period provided in paragraph (b) above, a certificate of the accountants who render an opinion with respect to such financial statements, stating that they have reviewed this Agreement and stating further whether, in making their audit, such accountants have become aware of any Default or Event of Default under any of the terms or provisions of this Agreement insofar as any such terms or provisions pertain to or involve accounting matters or determinations, and if any such condition or event then exists, specifying the nature and period of existence thereof; (h) Unrestricted Subsidiaries. Within the periods provided in paragraph (b) above, financial statements of the character and for the dates and periods as in said paragraph (b) provided covering each Unrestricted Subsidiary (or groups of Unrestricted Subsidiaries on a consolidated basis); and (i) Requested Information. With reasonable promptness, such other data and information as you or any such Institutional Holder may reasonably request. Without limiting the foregoing, the Company will permit you, so long as you are the holder of any Note, and each Institutional Holder of the then outstanding Notes (or such Persons as either you or such Institutional Holder may designate), to visit and inspect, under the Company's guidance, any of the properties of the Company or any Restricted Subsidiary, to examine all of their books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss their respective affairs, finances and accounts with their respective officers, employees, and independent public accountants (and by this provision the Company authorizes said accountants to discuss with you the finances and affairs of the Company and its Restricted Subsidiaries) all at such reasonable times and as often as may be reasonably requested. The Company shall not be required to pay or reimburse you or any such holder for expenses which you or any such holder may incur in connection with any such visitation or inspection; provided, however, that if such visitation or inspection is made during -17- 185 25 Savannah Foods & Industries, Inc. Note Agreement any period when a Default or an Event of Default shall have occurred and be continuing, the Company agrees to reimburse you or such holder for all such expenses promptly on demand. SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR. Section 6.1. Events of Default. Any one or more of the following shall constitute an "Event of Default" as such term is used herein: (a) Default shall occur in the payment of interest on any Note when the same shall have become due and such default shall continue for more than five days; or (b) Default shall occur in the making of any required prepayment on any of the Notes as provided in Section 2.1; or (c) Default shall occur in the making of any other payment of the principal of any Note or premium, if any, thereon at the expressed or any accelerated maturity date or at any date fixed for prepayment; or (d) Default shall be made in the payment when due (whether by lapse of time, by declaration, by call for redemption or otherwise) of the principal of or interest on any Material Debt (other than the Notes) and such default shall continue beyond the period of grace, if any, allowed with respect thereto; or (e) The acceleration of any Material Debt (other than the Notes); or (f) Default shall occur in the observance or performance of any covenant or agreement contained in Section 5.6 through Section 5.13; or (g) Default shall occur in the observance or performance of any other provision of this Agreement which is not remedied within 30 days after the earlier of (i) the day on which the Company first obtains knowledge of such default, or (ii) the day on which written notice thereof is given to the Company by the holder of any Note; or (h) Any representation or warranty made by the Company herein, or made by the Company in any statement or certificate furnished by the Company in connection with the consummation of the issuance and delivery of the Notes or furnished by the Company pursuant hereto, is untrue in any material respect as of the date of the issuance or making thereof; or (i) Final judgment or final judgments for the payment of money aggregating in excess of $10,000,000 is or are outstanding against the Company or any Restricted Subsidiary or against any property or assets of either and any one of such judgments has remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a period of 45 days from the date of its entry; or -18- 186 26 Savannah Foods & Industries, Inc. Note Agreement (j) The Company fails to issue the Series B Notes in the amount set forth in Section 1.1(B) on the Second Closing Date; or (k) A custodian, liquidator, trustee or receiver is appointed for the Company or any Restricted Subsidiary or for the major part of the property of either and is not discharged within 60 days after such appointment; or (l) The Company or any Restricted Subsidiary becomes insolvent or bankrupt, is generally not paying its debts as they become due or makes an assignment for the benefit of creditors, or the Company or any Restricted Subsidiary applies for or consents to the appointment of a custodian, liquidator, trustee or receiver for the Company or such Restricted Subsidiary or for the major part of the property of either; or (m) Bankruptcy, reorganization, arrangement or insolvency proceedings, or other proceedings for relief under any bankruptcy or similar law or laws for the relief of debtors, are instituted by or against the Company or any Restricted Subsidiary and, if instituted against the Company or any Restricted Subsidiary, are consented to or are not dismissed within 60 days after such institution. Section 6.2. Notice to Holders. When any Event of Default described in the foregoing Section 6.1 has occurred, or if the holder of any Note or of any other evidence of Funded Debt or Current Debt of the Company gives any notice or takes any other action with respect to a claimed default, the Company agrees to give notice within three business days of such event to all holders of the Notes then outstanding. Section 6.3. Acceleration of Maturities. When any Event of Default described in paragraph (a), (b) or (c) of Section 6.1 has happened and is continuing, any holder of any Note may, and when any Event of Default described in paragraphs (d) through (j), inclusive, of said Section 6.1 has happened and is continuing, the holder or holders of 25% or more of the principal amount of Notes at the time outstanding may, by notice to the Company, declare the entire principal and all interest accrued on all Notes to be, and all Notes shall thereupon become, forthwith due and payable, without any presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived. When any Event of Default described in paragraph (k), (l) or (m) of Section 6.1 has occurred, then all outstanding Notes shall immediately become due and payable without presentment, demand or notice of any kind. Upon the Notes becoming due and payable as a result of any Event of Default as aforesaid, the Company will forthwith pay to the holders of the Notes the entire principal outstanding, together with interest accrued on the Notes and, to the extent not prohibited by applicable law, an amount as liquidated damages for the loss of the bargain evidenced hereby (and not as a penalty) equal to the Make-Whole Amount, determined as of the date on which the Notes shall so become due and payable. No course of dealing on the part of the holder or holders of any Notes nor any delay or failure on the part of any holder of Notes to exercise any right shall operate as a waiver of such right or otherwise prejudice such holder's rights, powers and remedies. The Company further agrees, to the extent permitted by law, to pay to the holder or holders of the Notes all costs and expenses incurred by them in the collection of any Notes upon any default hereunder or -19- 187 27 Savannah Foods & Industries, Inc. Note Agreement thereon, including reasonable compensation to such holder's or holders' attorneys for all services rendered in connection therewith. Section 6.4. Rescission of Acceleration. The provisions of Section 6.3 are subject to the condition that if the principal of and accrued interest on all or any outstanding Notes have been declared immediately due and payable by reason of the occurrence of any Event of Default described in paragraphs (a) through (j), inclusive, of Section 6.1, the holders of 66-2/3% in aggregate principal amount of the Notes then outstanding may, by written instrument filed with the Company, rescind and annul such declaration and the consequences thereof, provided that at the time such declaration is annulled and rescinded: (a) no judgment or decree has been entered for the payment of any monies due pursuant to the Notes or this Agreement; (b) all arrears of interest upon all the Notes and all other sums payable under the Notes and under this Agreement (except any principal, interest or premium on the Notes which has become due and payable solely by reason of such declaration under Section 6.3) shall have been duly paid; and (c) each and every other Default and Event of Default shall have been made good, cured or waived pursuant to Section 7.1; and provided further, that no such rescission and annulment shall extend to or affect any subsequent Default or Event of Default or impair any right consequent thereto. SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS. Section 7.1. Consent Required. Any term, covenant, agreement or condition of this Agreement may, with the consent of the Company, be amended or compliance therewith may be waived (either generally or in a particular instance and either retroactively or prospectively), if the Company shall have obtained the consent in writing of the holders of at least 66-2/3% in aggregate principal amount of outstanding Notes; provided that without the written consent of the holders of all of the Notes then outstanding, no such amendment or waiver shall be effective (i) which will change the time of payment (including any prepayment required by Section 2.1) of the principal of or the interest on any Note or change the principal amount thereof or change the rate of interest thereon, or (ii) which will change any of the provisions with respect to optional prepayments, or (iii) which will change the percentage of holders of the Notes required to consent to any such amendment or waiver of any of the provisions of this Section 7 or Section 6, or (iv) which will amend or modify any other term or provision hereof prior to the Second Closing Date. Section 7.2. Solicitation of Holders. So long as there are any Notes outstanding, the Company will not solicit, request or negotiate for or with respect to any proposed waiver or amendment of any of the provisions of this Agreement or the Notes unless each holder of Notes (irrespective of the amount of Notes then owned by it) shall be informed thereof by the Company and shall be afforded the opportunity of considering the same and shall be supplied -20- 188 28 Savannah Foods & Industries, Inc. Note Agreement by the Company with sufficient information to enable it to make an informed decision with respect thereto. The Company will not, directly or indirectly, pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, to any holder of Notes as consideration for or as an inducement to entering into by any holder of Notes of any waiver or amendment of any of the terms and provisions of this Agreement or the Notes unless such remuneration is concurrently offered, on the same terms, ratably to the holders of all Notes then outstanding. Section 7.3. Effect of Amendment or Waiver. Any such amendment or waiver shall apply equally to all of the holders of the Notes and shall be binding upon them, upon each future holder of any Note and upon the Company, whether or not such Note shall have been marked to indicate such amendment or waiver. No such amendment or waiver shall extend to or affect any obligation not expressly amended or waived or impair any right consequent thereon. SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS. Section 8.1. Definitions. Unless the context otherwise requires, the terms hereinafter set forth when used herein shall have the following meanings and the following definitions shall be equally applicable to both the singular and plural forms of any of the terms herein defined: "Affiliate" shall mean any Person (other than a Restricted Subsidiary) (i) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company, (ii) which beneficially owns or holds 5% or more of any class of the Voting Stock of the Company or (iii) 5% or more of the Voting Stock (or in the case of a Person which is not a corporation, 5% or more of the equity interest) of which is beneficially owned or held by the Company or a Subsidiary. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of Voting Stock, by contract or otherwise. "Base Amount" shall mean, for the purposes of any determination under Section 5.7, $190,000,000 plus, or minus, as the case may be, any benefit, or charge, respectively, which is attributable solely to a non-recurring accounting change. "Basket Indebtedness" means the sum of (i) all Indebtedness of the Company or a Restricted Subsidiary secured by Liens other than Liens permitted by Section Section 5.10(A) through (F) plus (without duplication) (ii) all Funded Debt of a Restricted Subsidiary incurred subsequent to June 30, 1992. "Capitalized Lease" shall mean any lease the obligation for Rentals with respect to which is required to be capitalized on a consolidated balance sheet of the lessee and its subsidiaries in accordance with GAAP. -21- 189 29 Savannah Foods & Industries, Inc. Note Agreement "Capitalized Rentals" of any Person shall mean as of the date of any determination thereof the amount at which the aggregate Rentals due and to become due under all Capitalized Leases under which such Person is a lessee would be reflected as a liability on a consolidated balance sheet of such Person. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company" shall mean Savannah Foods & Industries, Inc., a Delaware corporation, and any Person who succeeds to all, or substantially all, of the assets and business of Savannah Foods & Industries, Inc. "Consolidated Assets" shall mean, as of the date of any determination thereof, the aggregate amount of assets of the Company and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP after deducting all Investments in Unrestricted Subsidiaries. "Consolidated Current Assets" and "Consolidated Current Liabilities" shall mean as of the date of any determination thereof such assets and liabilities of the Company and its Restricted Subsidiaries on a consolidated basis as shall be determined in accordance with GAAP to constitute current assets and current liabilities, respectively. "Consolidated Funded Debt" shall mean all Funded Debt of the Company and its Restricted Subsidiaries, determined on a consolidated basis eliminating intercompany items. "Consolidated Net Income" for any period shall mean the net income of the Company and its Restricted Subsidiaries determined on a consolidated basis in accordance with GAAP applied on a consistent basis, but excluding in any event: (a) extraordinary items; and (b) the effects of non-recurring accounting changes. "Consolidated Tangible Net Worth" shall mean as of the date of any determination thereof the aggregate amount of the capital stock (less treasury stock), surplus and retained earnings of the Company and its Restricted Subsidiaries after deducting (i) goodwill, patents, trade names, trademarks, unamortized debt discount and expense, organization expense, deferred and prepaid expenses included in assets which do not constitute current assets, the excess of cost of shares acquired over book value of related assets, any reappraisal, revaluation or write-up of assets and such other assets as are properly classified as "intangible assets" in accordance with GAAP, (ii) Investments in Unrestricted Subsidiaries, and (iii) Minority Interests. "Current Debt" of the Company or any Restricted Subsidiary shall mean, as of the date of any determination thereof, all Debt of the Company or such Restricted Subsidiary having a final maturity of less than one year from the date of origin thereof and which is not renewable -22- 190 30 Savannah Foods & Industries, Inc. Note Agreement or extendable at the option of the obligor for a period or periods of one year or more from the date of origin. "Debt" of the Company or any Restricted Subsidiary shall mean, as of the date of any determination thereof: (i) all Indebtedness of the Company or any Restricted Subsidiary for borrowed money or evidenced by notes, bonds, debentures or similar evidences of Indebtedness of the Company or any Restricted Subsidiary; (ii) obligations secured by any Lien upon property owned by the Company or any Restricted Subsidiary or created or arising under any conditional sale or other title retention agreement with respect to property acquired by the Company or any Restricted Subsidiary, notwithstanding the fact that the rights and remedies of the seller, lender or lessor under any such arrangement in the event of default are limited to repossession or sale of property including, without limitation, obligations secured by Liens arising from the sale or transfer of notes or accounts receivable, but, in all events, excluding trade payables and accrued expenses constituting current liabilities; (iii) Capitalized Rentals; (iv) reimbursement obligations in respect of credit enhancement instruments including letters of credit (excluding, however, letters of credit and surety bonds issued in commercial transactions in the ordinary course of business which are not financial guaranties); and (v) Guaranties of (a) obligations of others of the character referred to hereinabove in this definition and (b) obligations of Unrestricted Subsidiaries. "Default" shall mean any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, constitute an Event of Default. "Environmental Law" shall mean any international, foreign, federal, state, regional, county, local, governmental, public or private statute, law, regulation, ordinance, order, consent decree, judgment, permit, license, code, covenant, deed restriction, common law, treaty, convention or other requirement, pertaining to protection of the environment, health or safety of persons, natural resources, conservation, wildlife, waste management, any Hazardous Material Activity and pollution (including, without limitation, regulation of releases and disposals to air, land, water and groundwater), and includes, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section Section 9601 et seq., Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. Section Section 6901 et seq., Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Section Section 1251 et seq., Clean Air Act of 1966, as amended, 42 U.S.C. Section Section 7401 et seq., and any similar -23- 191 31 Savannah Foods & Industries, Inc. Note Agreement or implementing state law, and all amendments, rules, regulations, guidance documents and publications promulgated thereunder. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. "ERISA Affiliate" shall mean any corporation, trade or business that is, along with the Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in section 414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. "Event of Default" shall have the meaning set forth in Section 6.1. "Fixed Charges" for any period shall mean on a consolidated basis the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable during such period by the Company and its Restricted Subsidiaries, and (ii) all Interest Charges on all Indebtedness (including the interest component of Rentals on Capitalized Leases) of the Company and its Restricted Subsidiaries. "Funded Debt" of the Company or any Restricted Subsidiary shall mean, as of the date of any determination thereof, (i) all Debt (including Guaranties) of the Company or any Restricted Subsidiary having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, plus (but without duplication) (ii) Current Debt (other than Current Debt secured by Liens permitted by Section 5.10(F)) unless there has been a period of at least 30 consecutive days during the twelve-month period immediately preceding the date of any determination hereunder during which the Company has been free of Current Debt plus (but without duplication) (iii) Debt described in clause (v)(b) of the definition of "Debt". "GAAP" shall mean generally accepted accounting principles at the time in the United States. "Guaranties" by any Person shall mean all obligations (other than endorsements in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or other obligation of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, all obligations incurred through an agreement, contingent or otherwise, by such Person: (i) to purchase such Indebtedness or obligation or any property or assets constituting security therefor, (ii) to advance or supply funds (x) for the purchase or payment of such Indebtedness or obligation, (y) to maintain working capital or other balance sheet condition or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation, (iii) to lease property or to purchase Securities or other -24- 192 32 Savannah Foods & Industries, Inc. Note Agreement property or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of the primary obligor to make payment of the Indebtedness or obligation, or (iv) otherwise to assure the owner of the Indebtedness or obligation of the primary obligor against loss in respect thereof. For the purposes of all computations made under this Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be Indebtedness equal to the principal amount of such Indebtedness for borrowed money which has been guaranteed, and a Guaranty in respect of any other obligation or liability or any dividend shall be deemed to be Indebtedness equal to the maximum aggregate amount of such obligation, liability or dividend. "Hazardous Material" shall mean any hazardous or toxic chemical, waste, byproduct, pollutant, contaminant, compound, product or substance, including, without limitation, asbestos, polychlorinated biphenyls, petroleum (including crude oil or any fraction thereof), and any material the exposure to, or manufacture, possession, presence, use, generation, storage, transportation, treatment, release, disposal, abatement, cleanup, removal, remediation or handling of which, is prohibited, controlled or regulated by any Environmental Law. "Hazardous Material Activity" shall mean any activity, event or occurrence involving a Hazardous Material, including, without limitation, the manufacture, possession, presence, use, generation, storage, transportation, treatment, release, discharge, emission, disposal, abatement, cleanup, removal, remediation or handling of any Hazardous Material. "Indebtedness" of any Person shall mean and include all obligations of such Person which in accordance with GAAP shall be classified upon a balance sheet of such Person as liabilities of such Person, and in any event shall include all Debt. "Institutional Holder" shall mean any insurance company, bank, savings and loan association, trust company, investment company, charitable foundation, employee benefit plan (as defined in ERISA) or other institutional investor or financial institution. "Interest Charges" for any period shall mean all interest (including, without limitation, imputed or express interest in respect of Capitalized Leases) and all amortization of debt discount and expense on any particular Indebtedness for which such calculations are being made. "Investments" shall mean all investments, in cash or by delivery of property made, directly or indirectly in any Person, whether by acquisition of shares of capital stock, indebtedness or other obligations or Securities or by loan, advance, capital contribution or otherwise; provided, however, that "Investments" shall not mean or include routine investments in property to be used or consumed in the ordinary course of business. "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 the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term "Lien" shall include reservations, -25- 193 33 Savannah Foods & Industries, Inc. Note Agreement exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting property. For the purposes of this Agreement, the Company or a Restricted Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capitalized Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien. "Long-Term Lease" shall mean any lease of real or personal property (other than a Capitalized Lease) having an original term, including any period for which the lease may be renewed or extended at the option of the lessor, of more than three years. "Make-Whole Amount" shall mean in connection with any prepayment or acceleration of the Notes the excess, if any, of (i) the aggregate present value as of the date of such prepayment of each dollar of principal being prepaid (taking into account the application of such prepayment required by Section 2.1) and the amount of interest (exclusive of interest accrued to the date of prepayment) that would have been payable in respect of such dollar if such prepayment had not been made, determined by discounting such amounts at the Reinvestment Rate from the respective dates on which they would have been payable, over (ii) 100% of the principal amount of the outstanding Notes being prepaid. If the Reinvestment Rate is equal to or higher than the interest rate then borne by a particular series of Notes, the Make-Whole Amount with respect to the Notes of such series shall be zero. For purposes of any determination of the Make-Whole Amount: "Reinvestment Rate" shall mean (a) the sum of .50%, plus the yield reported at 10:00 A.M. (New York time) by the Telerate Access Service (page 8033) provided by the Telerate Information System for "On the Run" United States Treasury securities, or, if such service is not available, the yield reported by any other nationally recognized trading screen reporting on-line intraday trading in United States government securities at 10:00 A.M. (New York time), in either case for United States government securities having a maturity (rounded to the nearest month) corresponding to the remaining Weighted Average Life to Maturity of the principal being prepaid, or (b) in the event that no such nationally recognized trading screen reporting on-line trading in United States government securities is available, "Reinvestment Rate" shall mean the sum of .50%, plus the arithmetic mean of the yields under the respective headings "This Week" and "Last Week" published in the Statistical Release under the caption "Treasury Constant Maturities" for the maturity (rounded to the nearest month) corresponding to the Weighted Average Life to Maturity of the principal being prepaid (taking into account the application of such prepayment required by Section 2.1). If no maturity exactly corresponds to such Weighted Average Life to Maturity, yields for the published maturity next longer than the Weighted Average Life to Maturity and for the published maturity next shorter than the Weighted Average Life to Maturity shall be calculated pursuant to the immediately preceding sentence and the Reinvestment Rate shall be interpolated from such yields on a straight-line basis, rounding in each of such relevant periods to the nearest month. For the purposes of calculating the Reinvestment Rate, -26- 194 34 Savannah Foods & Industries, Inc. Note Agreement the most recent Statistical Release published prior to the date of determination of the Make-Whole Amount shall be used "Statistical Release" shall mean the then most recently published statistical release designated "H.15(519)" or any successor publication which is published weekly by the Federal Reserve System and which establishes yields on actively traded U.S. Government Securities adjusted to constant maturities or, if such statistical release is not published at the time of any determination hereunder, then such other reasonably comparable index which shall be designated by the holders of 66-2/3% in aggregate principal amount of the outstanding Notes. "Weighted Average Life to Maturity" of the principal amount of the Notes being prepaid shall mean, as of the time of any determination thereof, the number of years obtained by dividing the then Remaining Dollar-Years of such principal by the aggregate amount of such principal. The term "Remaining Dollar-Years" of such principal shall mean the amount obtained by (i) multiplying (x) the remainder of (1) the amount of principal that would have become due on each scheduled payment date if such prepayment had not been made, less (2) the amount of principal on the Notes scheduled to become due on such date after giving effect to such prepayment and the application thereof in accordance with the provisions of Section 2.1, by (y) the number of years (calculated to the nearest one-twelfth) which will elapse between the date of determination and such scheduled payment date, and (ii) totalling the products obtained in (i). "Material Debt" shall mean, as of the date of any determination thereof, one or more obligations of the Company or any Restricted Subsidiary constituting Debt which, individually or in the aggregate, exceed $3,000,000. "Minority Interests" shall mean any shares of stock of any class of a Restricted Subsidiary (other than directors' qualifying shares as required by law) that are not owned by the Company and/or one or more of its Restricted Subsidiaries. Minority Interests shall be valued by valuing Minority Interests constituting preferred stock at the voluntary or involuntary liquidating value of such preferred stock, whichever is greater, and by valuing Minority Interests constituting common stock at the book value of capital and surplus applicable thereto adjusted, if necessary, to reflect any changes from the book value of such common stock required by the foregoing method of valuing Minority Interests in preferred stock. "Multiemployer Plan" shall have the same meaning as in ERISA. "Net Income Available for Fixed Charges" for any period shall mean the sum of (i) Consolidated Net Income during such period plus (to the extent deducted in determining Consolidated Net Income), (ii) all provisions for any Federal, state or other income taxes made by the Company and its Restricted Subsidiaries during such period and (iii) Fixed Charges of the Company and its Restricted Subsidiaries during such period. -27- 195 35 Savannah Foods & Industries, Inc. Note Agreement "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Person" shall mean an individual, partnership, corporation, trust or unincorporated organization, and a government or agency or political subdivision thereof. "Plan" means a "pension plan," as such term is defined in ERISA, established or maintained by the Company or any ERISA Affiliate or as to which the Company or any ERISA Affiliate contributed or is a member or otherwise may have any liability. "Purchasers" shall have the meaning set forth in Section 1.1. "Related Investments" shall mean equity Investments by the Company or any Restricted Subsidiary in businesses related to the ongoing business lines of the Company as of the Closing Date. "Rentals" shall mean and include as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Company or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property (whether in connection with a sale and leaseback transaction or otherwise), but shall be exclusive of any amounts required to be paid by the Company or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called "percentage leases" shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues. "Reportable Event" shall have the same meaning as in ERISA. "Restricted Subsidiary" shall mean any Subsidiary which has been designated by the Company as a Restricted Subsidiary either in Annex A to Exhibit B attached hereto or in accordance with Section 5.14. "Security" shall have the same meaning as in Section 2(1) of the Securities Act of 1933, as amended. The term "subsidiary" shall mean as to any particular parent corporation any corporation of which more than 50% (by number of votes) of the Voting Stock shall be beneficially owned, directly or indirectly, by such parent corporation. The term "Subsidiary" shall mean a subsidiary of the Company. "Total Capitalization" shall mean, as of any date of determination thereof, the sum of Consolidated Tangible Net Worth plus Consolidated Funded Debt. "Unrelated Investments" shall mean equity Investments by the Company or any Restricted Subsidiary in any Person, which Investments are not Related Investments. -28- 196 36 Savannah Foods & Industries, Inc. Note Agreement "Unrestricted Subsidiary" shall mean any Subsidiary which is not a Restricted Subsidiary. "Voting Stock" shall mean Securities of any class or classes, the holders of which are ordinarily, in the absence of contingencies, entitled to elect a majority of the corporate directors (or Persons performing similar functions). "Wholly-owned" when used in connection with any Subsidiary shall mean a Subsidiary of which all of the issued and outstanding shares of stock (except shares required as directors' qualifying shares) and all Debt shall be owned by the Company and/or one or more of its Wholly- owned Subsidiaries. Section 8.2. Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, the same shall be done in accordance with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement. Section 8.3. Directly or Indirectly. Where any provision in this Agreement refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether the action in question is taken directly or indirectly by such Person. SECTION 9.1. MISCELLANEOUS. Section 9.1. Registered Notes. The Company shall cause to be kept at its principal office a register for the registration and transfer of the Notes (hereinafter called the "Note Register") and the Company will register or transfer or cause to be registered or transferred as hereinafter provided any Note issued pursuant to this Agreement. At any time and from time to time the registered holder of any Note which has been duly registered as hereinabove provided may transfer such Note upon (i) surrender thereof at the principal office of the Company accompanied by a Letter of Transfer in substantially the form of Exhibit E hereto, with all required information completed. Upon receipt of the Note and Letter of Transfer, Company shall transfer or cause to be transferred such Note in accordance with the Letter of Transfer, without requiring any further action or delivery of any additional items on the part of such registered holder or the transferee. The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement. Payment of or on account of the principal, premium, if any, and interest on any registered Note shall be made to or upon the written order of such registered holder. Section 9.2. Exchange of Notes. At any time and from time to time, upon not less than ten days' notice to that effect given by the holder of any Note initially delivered or of any Note substituted therefor pursuant to Section 9.1, this Section 9.2 or Section 9.3, and, upon surrender of such Note -29- 197 37 Savannah Foods & Industries, Inc. Note Agreement at its office, the Company will deliver in exchange therefor, without expense to such holder, except as set forth below, a Note for the same aggregate principal amount as the then unpaid principal amount of the Note so surrendered, or Notes in the denomination of $100,000 or any amount in excess thereof as such holder shall specify, dated as of the date to which interest has been paid on the Note so surrendered or, if such surrender is prior to the payment of any interest thereon, then dated as of the date of issue, registered in the name of such Person or Persons as may be designated by such holder, and otherwise of the same form and tenor as the Notes so surrendered for exchange. The Company may require the payment of a sum sufficient to cover any stamp tax or governmental charge imposed upon such exchange or transfer. Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence satisfactory to the Company of the loss, theft, mutilation or destruction of any Note, and in the case of any such loss, theft or destruction upon delivery of a bond of indemnity in such form and amount as shall be reasonably satisfactory to the Company, or in the event of such mutilation upon surrender and cancellation of the Note, the Company will make and deliver without expense to the holder thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note. If the Purchaser or any subsequent Institutional Holder is the owner of any such lost, stolen or destroyed Note, then the affidavit of an authorized officer of such owner, setting forth the fact of loss, theft or destruction and of its ownership of such Note at the time of such loss, theft or destruction shall be accepted as satisfactory evidence thereof and no further indemnity shall be required as a condition to the execution and delivery of a new Note other than the written agreement of such owner to indemnify the Company. Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the transactions herein contemplated shall be consummated, the Company agrees to pay directly all of your out-of-pocket expenses in connection with the preparation, execution and delivery of this Agreement and the transactions contemplated hereby, including but not limited to the reasonable charges and disbursements of Chapman and Cutler, your special counsel, duplicating and printing costs and charges for shipping the Notes, adequately insured to you at your home office or at such other place as you may designate, and all such expenses relating to any amendment, waivers or consents pursuant to the provisions hereof, including, without limitation, any amendments, waivers, or consents resulting from any work-out, renegotiation or restructuring relating to the performance by the Company of its obligations under this Agreement and the Notes. The Company also agrees that it will pay and save you harmless against any and all liability with respect to stamp and other taxes, if any, which may be payable or which may be determined to be payable in connection with the execution and delivery of this Agreement or the Notes, whether or not any Notes are then outstanding. The Company agrees to protect and indemnify you against any liability for any and all brokerage fees and commissions payable or claimed to be payable to any Person in connection with the transactions contemplated by this Agreement. Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No delay or failure on the part of the holder of any Note in the exercise of any power or right shall operate as a waiver thereof; nor shall any single or partial exercise of the same preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and -30- 198 38 Savannah Foods & Industries, Inc. Note Agreement remedies of the holder of any Note are cumulative to, and are not exclusive of, any rights or remedies any such holder would otherwise have. Section 9.6. Notices. All communications provided for hereunder shall be in writing and, if to you, delivered or mailed prepaid by registered or certified mail or overnight air courier, or by facsimile communication, in each case addressed to you at your address appearing on Schedule I to this Agreement or such other address as you or the subsequent holder of any Note initially issued to you may designate to the Company in writing, and if to the Company, delivered or mailed by registered or certified mail or overnight air courier, or by facsimile communication, to the Company at Two East Bryan, Savannah, Georgia 31402, Attention: Chief Financial Officer or to such other address as the Company may in writing designate to you or to a subsequent holder of the Note initially issued to you; provided, however, that a notice to you by overnight air courier shall only be effective if delivered to you at a street address designated for such purpose in Schedule I, and a notice to you by facsimile communication shall only be effective if made by confirmed transmission to you at a telephone number designated for such purpose in Schedule I and thereafter confirmed by registered or certified mail or by overnight air courier as aforesaid, or, in any case, as you or a subsequent holder of any Note initially issued to you may designate to the Company in writing. Section 9.7. Successors and Assigns. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to your benefit and to the benefit of your successors and assigns, including each successive holder or holders of any Notes. Section 9.8. Survival of Covenants and Representations. All covenants, representations and warranties made by the Company herein and in any certificates delivered pursuant hereto, whether or not in connection with the Closing Date, shall survive the closing and the delivery of this Agreement and the Notes. Section 9.9. Severability. Should any part of this Agreement for any reason be declared invalid or unenforceable, such decision shall not affect the validity or enforceability of any remaining portion, which remaining portion shall remain in force and effect as if this Agreement had been executed with the invalid or unenforceable portion thereof eliminated and it is hereby declared the intention of the parties hereto that they would have executed the remaining portion of this Agreement without including therein any such part, parts or portion which may, for any reason, be hereafter declared invalid or unenforceable. Section 9.10. Governing Law. This Agreement and the Notes issued and sold hereunder shall be governed by and construed in accordance with Illinois law. Section 9.11. Captions. The descriptive headings of the various Sections or parts of this Agreement are for convenience only and shall not affect the meaning or construction of any of the provisions hereof. -31- 199 39 Savannah Foods & Industries, Inc. Note Agreement The execution hereof by you shall constitute a contract between us for the uses and purposes hereinabove set forth, and this Agreement may be executed in any number of counterparts, each executed counterpart constituting an original but all together only one agreement. SAVANNAH FOODS & INDUSTRIES, INC. By ------------------------------- Its By ------------------------------- Its Accepted as of September 1, 1992. [VARIATION] By ------------------------------- Its [By ------------------------------- Its ] -32- 200 40 PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED Series A Series B THE GREAT-WEST LIFE ASSURANCE COMPANY $25,000,000 $7,000,000 8515 East Orchard Road 3rd Floor, Tower 2 Englewood, Colorado 80111 Attention: U.S. Private Placement Investments Telefacsimile No.: (303) 689-6193 Confirmation No.: (303) 889-3000 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Savannah Foods & Industries, Inc., 8.35% Series A Senior Notes due 2002 or 7.15% Series B Senior Notes due 2002, principal or interest" and further identifying the allocation of each payment between principal and interest and confirming the principal balance) to: Norwest Bank Minnesota, N.A. Norwest Center Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479-0065 ABA No. 091000019 for credit to the Trust Clearing Account 08-40-245 Re: The Great-West Life for Account No. 7-06277-00-1 Notices All notices of payments, on or in respect of the Notes and written confirmation of each such payment to: SCHEDULE I (to Note Agreement) 201 41 Norwest Bank Minnesota, N.A. Norwest Center Sixth Street and Marquette Avenue Minneapolis, Minnesota 55479-0065 Telefacsimile No.: (612) 667-4187 Attention: Craig Johnson, Financial Institution's Services; Telephone No.: (612) 667-7566 All notices and communications other than those in respect to payments to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. No. 98-0000673 I-2 202 42 PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED Series A Series B THE VARIABLE ANNUITY LIFE $10,000,000 $13,000,000 INSURANCE COMPANY c/o American General Corporation 2929 Allen Parkway Houston, Texas 77019 Attention: Private Placements, A37-01 Telefacsimile No.: (713) 831-1366 Confirmation No.: (713) 831-1140 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Savannah Foods & Industries, Inc., 8.35% Series A Senior Notes due 2002 or 7.15% Series B Senior Notes due 2002, principal or interest") to: State Street Bank and Trust Company Boston, Massachusetts 02101 ABA No. 011000028 Re The Variable Annuity Life Insurance Company Account No. 0125-821-9 Fund Number: PA 54 Notices All notices of payment, on or in respect of the Notes and written confirmation of each such payment to: The Variable Annuity Life Insurance Company and PA 54 c/o State Street Bank and Trust Company 1776 Heritage Drive A4E North Quincy, Massachusetts 02110 I-3 203 43 All notices and communications, including a duplicate copy of all notices in respect to payments to be addressed as first provided above Name of Nominee in which Notes are to be issued: None Taxpayer I.D. No. 74-1625348 I-4 204 44 PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED Series A Series B THE MINNESOTA MUTUAL LIFE INSURANCE $12,000,000 $ 0 COMPANY 400 North Robert Street St. Paul, Minnesota 55101 Attention: MIMLIC Asset Management Company Telefacsimile No.: (612) 223-5959 Confirmation No.: (612) 298-3826 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Savannah Foods & Industries, Inc., 8.35% Series A Senior Notes due 2002, principal or interest") to: The Federal Reserve Bank of Minneapolis for the account of The First Bank National Association Minneapolis, Minnesota ABA #091000022, BNF The Minnesota Mutual Life Insurance Company Account No. 801-10-00600 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. No. 41-0417830 I-5 205 45 PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED Series A Series B MUTUAL TRUST LIFE INSURANCE COMPANY $1,000,000 $ 0 c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, Minnesota 55101 Attention: Client Administrator Telefacsimile No.: (612) 223-5959 Confirmation No.: (612) 298-3826 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Savannah Foods & Industries, Inc., 8.35% Series A Senior Notes due 2002, principal or interest") to: The Northern Trust Company 50 South LaSalle Street Chicago, IL 60675 ABA No. 07-1000-152 for credit wire account No. 5186041000, for further credit to Mutual Trust Life Insurance Company, Account No. 26-00621 Attention: M.B.S. Department for credit to Mutual Trust Life Insurance Company Account No. 26- 00621 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: ELL & Co. Taxpayer I.D. No. 36-1516780 I-6 206 46 PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED Series A Series B NATIONAL TRAVELERS LIFE COMPANY $1,000,000 $ 0 c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, Minnesota 55101 Attention: Client Administrator Telefacsimile No.: (612) 223-5959 Confirmation No.: (612) 298-3826 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Savannah Foods & Industries, Inc., 8.35% Series A Senior Notes due 2002, principal or interest") to: Norwest Bank Minneapolis Minneapolis, Minnesota Attention:Bridgette Melberg, Income Collections Department ABA #091-0000-19 for credit to the account of Trust Clearing Account No. 840245 for further credit to National Travelers Life Company's Account No. 6C0318004 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: EMSEG & Co. Taxpayer I.D. No. 42-0432940 I-7 207 47 PRINCIPAL AMOUNT NAME AND ADDRESS OF NOTES TO BE OF PURCHASERS PURCHASED Series A Series B THE RELIABLE LIFE INSURANCE COMPANY $1,000,000 $ 0 c/o MIMLIC Asset Management Company 400 North Robert Street St. Paul, Minnesota 55101 Attention: Client Administrator Telefacsimile No.: (612) 223-5959 Confirmation No.: (612) 298-3826 Payments All payments on or in respect of the Notes to be by bank wire transfer of Federal or other immediately available funds (identifying each payment as "Savannah Foods & Industries, Inc., 8.35% Series A Senior Notes due 2002, principal or interest") to: Federal Reserve Bank of Cleveland, Pittsburgh Branch, MELLON/PITT/TRUST ABA No. 043000261 for credit to The Reliable Life Insurance Company Account No. 198-6676-50027010 Notices All notices and communications, including notices with respect to payments and written confirmation of each such payment, to be addressed as first provided above. Name of Nominee in which Notes are to be issued: None Taxpayer I.D. No. 43-0476110 I-8 208 48 SAVANNAH FOODS & INDUSTRIES, INC. 8.35% Series A Senior Note Due November 1, 2002 PPN: ______________ No. ____________, 19__ $_______________ SAVANNAH FOODS & INDUSTRIES, INC., a Delaware corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on the first day of November, 2002 the principal amount of DOLLARS ($____________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 8.35% per annum from the date hereof until maturity, payable semiannually on the first day of each November and May in each year (commencing on the first of such dates after the date hereof) and at maturity. The Company agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 10.35% per annum after the due date, whether by acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable at the principal office of the Company in Savannah, Georgia in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. This Series A Note is one of the 8.35% Series A Senior Notes due November 1, 2002 (the "Series A Notes") of the Company in the aggregate principal amount of $50,000,000 issued or to be issued, together with the 7.15% Series B Senior Notes due November 1, 2002 (collectively with the Series A Notes, the "Notes") of the Company in the aggregate principal amount of $20,000,000, under and pursuant to the terms and provisions of the separate Note Agreements, each dated as of September 1, 1992 (the "Note Agreements"), entered into by the Company with the original Purchasers therein referred to and this Series A Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits provided for thereby or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. EXHIBIT A-1 (to Note Agreement) 209 49 This Series A Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates and certain prepayments are required to be made thereon, all in the events, on the terms and in the manner and amounts as provided in the Note Agreements. The Series A Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreements. This Series A Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company accompanied by a completed Letter of Transfer in substantially the form attached to the Note Agreements. Payment of or on account of principal, premium, if any, and interest on this Series A Note shall be made only to or upon the order in writing of the registered holder. SAVANNAH FOODS & INDUSTRIES, INC. By ------------------------------- Its A-1-2 210 50 SAVANNAH FOODS & INDUSTRIES, INC. 7.15% Series B Senior Note Due November 1, 2002 PPN: ______________ No. ____________, 19__ $_______________ SAVANNAH FOODS & INDUSTRIES, INC., a Delaware corporation (the "Company"), for value received, hereby promises to pay to or registered assigns on the first day of November, 2002 the principal amount of DOLLARS ($____________) and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the principal amount from time to time remaining unpaid hereon at the rate of 7.15% per annum from the date hereof until maturity, payable semiannually on the first day of each November and May in each year (commencing on the first of such dates after the date hereof) and at maturity. The Company agrees to pay interest on overdue principal (including any overdue required or optional prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any overdue installment of interest, at the rate of 9.15% per annum after the due date, whether by acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable at the principal office of the Company in Savannah, Georgia in coin or currency of the United States of America which at the time of payment shall be legal tender for the payment of public and private debts. This Series B Note is one of the 7.15% Series B Senior Notes due November 1, 2002 (the "Series B Notes") of the Company in the aggregate principal amount of $20,000,000 issued or to be issued, together with the 8.35% Series A Senior Notes due November 1, 2002 (collectively with the Series B Notes, the "Notes") of the Company in the aggregate principal amount of $50,000,000, under and pursuant to the terms and provisions of the separate Note Agreements, each dated as of September 1, 1992 (the "Note Agreements"), entered into by the Company with the original Purchasers therein referred to and this Series B Note and the holder hereof are entitled equally and ratably with the holders of all other Notes outstanding under the Note Agreements to all the benefits provided for thereby or referred to therein. Reference is hereby made to the Note Agreements for a statement of such rights and benefits. EXHIBIT A-1 (to Note Agreement) 211 51 This Series B Note and the other Notes outstanding under the Note Agreements may be declared due prior to their expressed maturity dates and certain prepayments are required to be made thereon, all in the events, on the terms and in the manner and amounts as provided in the Note Agreements. The Series B Notes are not subject to prepayment or redemption at the option of the Company prior to their expressed maturity dates except on the terms and conditions and in the amounts and with the premium, if any, set forth in the Note Agreements. This Series B Note is registered on the books of the Company and is transferable only by surrender thereof at the principal office of the Company accompanied by a completed Letter of Transfer in substantially the form attached to the Note Agreements. Payment of or on account of principal, premium, if any, and interest on this Series B Note shall be made only to or upon the order in writing of the registered holder. SAVANNAH FOODS & INDUSTRIES, INC. By ------------------------------ Its A-2-2 212 52 REPRESENTATIONS AND WARRANTIES The Company represents and warrants to you as follows: 1. Subsidiaries. Annex A attached hereto states the name of each of the Company's Subsidiaries, its jurisdiction of incorporation and the percentage of its Voting Stock owned by the Company and/or its Subsidiaries. Those Subsidiaries listed in Section 1 of said Annex 1 constitute Restricted Subsidiaries. The Company and each Subsidiary has good and marketable title to all of the shares it purports to own of the stock of each Subsidiary, free and clear in each case of any Lien. All such shares have been duly issued and are fully paid and non-assessable. 2. Corporate Organization and Authority. The Company, and each Restricted Subsidiary, (a) is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation; (b) has all requisite power and authority and all necessary licenses and permits to own and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted; and (c) is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction wherein the nature of the business transacted by it or the nature of the property owned or leased by it makes such licensing or qualification necessary. 3. Business and Property. You have heretofore been furnished with a copy of the Private Placement Offering Memorandum dated April, 1992 (the "Memorandum") prepared by Canadian Imperial Bank of Commerce which generally sets forth the business conducted and proposed to be conducted by the Company and its Subsidiaries and the principal properties of the Company and its Subsidiaries. 4. Financial Statements. (a) The consolidated balance sheets of the Company and its consolidated Subsidiaries as of December 28, 1986, January 3, 1988, January 1, 1989, December 31, 1989, December 30, 1990 and December 29, 1991, inclusive, and the statements of income and retained earnings and changes in financial position or cash flows for the fiscal years ended on said dates, each accompanied by a report thereon containing an opinion unqualified as to scope limitations imposed by the Company and otherwise without qualification except as therein noted, by , have been prepared in accordance with GAAP consistently applied except as therein noted, are correct and complete and present fairly the financial position of the Company and its Subsidiaries as of such dates and the results of their operations and changes in their financial position or cash flows for such periods. The unaudited consolidated balance sheets of the Company and its consolidated Subsidiaries as of March 31, 1992, and the unaudited statements of income and retained earnings and cash flows EXHIBIT B (to Note Agreement) 213 53 for the three-month period ended on said date prepared by the Company have been prepared in accordance with GAAP consistently applied, are correct and complete and present fairly the financial position operations and changes in their financial position or cash flows for such period. (b) Since December 29, 1991, there has been no change in the condition, financial or otherwise, of the Company and its consolidated Subsidiaries as shown on the consolidated balance sheet as of such date except changes in the ordinary course of business, none of which individually or in the aggregate has been materially adverse. Without limiting the foregoing, since December 29, 1991, neither the business, operation, properties and assets of the Company and its consolidated Subsidiaries nor any of the existing sugar beet or sugarcane crops to be purchased by the Company have been materially and adversely affected in any way as the result of any fire, explosion, earthquake, storm, sabotage, disaster, accident, labor disturbance, requisition or taking of property by governmental authority, flood, drought, embargo, riot, activity of armed forces, or act of God or the public enemy, or other casualty. 5. Indebtedness. Annex B attached hereto correctly describes all Current Debt, Funded Debt, Capitalized Leases and Long-Term Leases of the Company and its Restricted Subsidiaries outstanding on June 30, 1992. On the Closing Date and after giving effect to the application of the proceeds of the Notes, the total amount of Funded Debt outstanding under the revolving credit agreements described in part 2 of Annex B and all other revolving credit agreements of the Company will be $10,000,000, all of which will be unsecured. 6. Full Disclosure. Neither the financial statements referred to in paragraph 4 hereof nor the Agreements, the Memorandum or any other written statement furnished by the Company to you in connection with the negotiation of the sale of the Notes, contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or herein not misleading. There is no fact peculiar to the Company or its Subsidiaries which the Company has not disclosed to you in writing which materially affects adversely nor, so far as the Company can now foresee, will materially affect adversely the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Restricted Subsidiaries, taken as a whole. 7. Pending Litigation. There are no proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Restricted Subsidiary in any court or before any governmental authority or arbitration board or tribunal which are expected to materially and adversely affect the properties, business, prospects, profits or condition (financial or otherwise) of the Company and its Restricted Subsidiaries. 8. Title to Properties. The Company and each Restricted Subsidiary has good and marketable title in fee simple (or its equivalent under applicable law) to all material parcels of real property and has good title to all the other material items of property it purports to own, including that reflected in the most recent balance sheet referred to in paragraph 4 hereof, except as sold or otherwise disposed of in the ordinary course of business and except for Liens permitted by the Agreements. B-2 214 54 9. Patents and Trademarks. The Company and each Restricted Subsidiary owns or possesses all the patents, trademarks, trade names, service marks, copyright, licenses and rights with respect to the foregoing necessary for the present and planned future conduct of its business, without any known conflict with the rights of others. 10. Sale is Legal and Authorized. The sale of the Notes and compliance by the Company with all of the provisions of the Agreements and the Notes -- (a) are within the corporate powers of the Company; (b) will not violate any provisions of any law or any order of any court or governmental authority or agency and will not conflict with or result in any breach of any of the terms, conditions or provisions of, or constitute a default under the Articles of Incorporation or By-laws of the Company or any indenture or other agreement or instrument to which the Company is a party or by which it may be bound or result in the imposition of any Liens or encumbrances on any property of the Company; and (c) have been duly authorized by proper corporate action on the part of the Company (no action by the stockholders of the Company being required by law, by the Articles of Incorporation or By-laws of the Company or otherwise), executed and delivered by the Company and the Agreements and the Notes constitute the legal, valid and binding obligations, contracts and agreements of the Company enforceable in accordance with their respective terms. 11. No Defaults. No Default or Event of Default has occurred and is continuing. The Company is not in default in the payment of principal or interest on any Funded Debt or Current Debt and is not in default under any instrument or instruments or agreements under and subject to which any Funded Debt or Current Debt has been issued and no event has occurred and is continuing under the provisions of any such instrument or agreement which with the lapse of time or the giving of notice, or both, would constitute an event of default thereunder. 12. Governmental Consent. No approval, consent or withholding of objection on the part of any regulatory body, state, Federal or local, is necessary in connection with the execution and delivery by the Company of the Agreements or the Notes or compliance by the Company with any of the provisions of the Agreements or the Notes. 13. Taxes. All tax returns required to be filed by the Company or any Restricted Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees and other governmental charges upon the Company or any Restricted Subsidiary or upon any of their respective properties, income or franchises, which are shown to be due and payable in such returns have been paid. For all taxable years ending on or before December 28, 1986, the Federal income tax liability of the Company and its Restricted Subsidiaries has been satisfied and either the period of limitations on assessment of additional Federal income tax has expired or the Company and its Restricted Subsidiaries have entered into an agreement with the Internal Revenue Service closing conclusively the total tax liability for the taxable year. The B-3 215 55 Company does not know of any proposed additional tax assessment against it for which adequate provision has not been made on its accounts, and no material controversy in respect of additional Federal or state income taxes due since said date is pending or to the knowledge of the Company threatened. The provisions for taxes on the books of the Company and each Restricted Subsidiary are adequate for all open years, and for its current fiscal period. 14. Use of Proceeds. The net proceeds from the sale of the Notes will be used to repay bank debt and for general corporate purposes. None of the transactions contemplated in the Agreements (including, without limitation thereof, the use of proceeds from the issuance of the Notes) will violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulation issued pursuant thereto, including, without limitation, Regulations G, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. Neither the Company nor any Subsidiary owns or intends to carry or purchase any "margin stock" within the meaning of said Regulation G. None of the proceeds from the sale of the Notes will be used to purchase, or refinance any borrowing the proceeds of which were used to purchase, any "security" within the meaning of the Securities Exchange Act of 1934, as amended. 15. Private Offering. Neither the Company, directly or indirectly, nor any agent on its behalf has offered or will offer the Notes or any similar Security or has solicited or will solicit an offer to acquire the Notes or any similar Security from or has otherwise approached or negotiated or will approach or negotiate in respect of the Notes or any similar Security with any Person other than the Purchasers and not more than ten other institutional investors, each of whom was offered a portion of the Notes at private sale for investment. Neither the Company, directly or indirectly, nor any agent on its behalf has offered or will offer the Notes or any similar Security or has solicited or will solicit an offer to acquire the Notes or any similar Security from any Person so as to bring the issuance and sale of the Notes within the provisions of Section 5 of the Securities Act of 1933, as amended. 16. ERISA. The consummation of the transactions provided for in the Agreements and compliance by the Company with the provisions thereof and the Notes issued thereunder will not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Code. Each Plan complies in all material respects with all applicable statutes and governmental rules and regulations, and (a) no Reportable Event has occurred and is continuing with respect to any Plan, (b) neither the Company nor any ERISA Affiliate has withdrawn from any Plan or Multiemployer Plan or instituted steps to do so, and (c) no steps have been instituted to terminate any Plan. No condition exists or event or transaction has occurred in connection with any Plan which could result in the incurrence by the Company or any ERISA Affiliate of any material liability, fine or penalty. No Plan maintained by the Company or any ERISA Affiliate, nor any trust created thereunder, has incurred any "accumulated funding deficiency" as defined in Section 302 of ERISA nor does the present value of all benefits vested under all Plans exceed, as of the last annual valuation date, the value of the assets of the Plans allocable to such vested benefits. Neither the Company nor any ERISA Affiliate has any contingent liability with respect to any post-retirement "welfare benefit plan" (as such term is defined in ERISA) except as has been disclosed to the Purchasers. B-4 216 56 17. Compliance with Law. Neither the Company nor any Restricted Subsidiary (a) is in violation of any law, ordinance, franchise, governmental rule or regulation to which it is subject; or (b) has failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of its property or to the conduct of its business, which violation or failure to obtain would materially adversely affect the business, prospects, profits, properties or condition (financial or otherwise) of the Company and its Restricted Subsidiaries, taken as a whole, or impair the ability of the Company to perform its obligations contained in the Agreements or the Notes. Neither the Company nor any Restricted Subsidiary is in default with respect to any order of any court or governmental authority or arbitration board or tribunal. 18. Compliance with Environmental Laws. The Company is not in violation of any applicable Federal, state, or local laws, statutes, rules, regulations or ordinances relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or ground water, to the withdrawal or use of ground water, to the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, crude oil or any fraction thereof, or other hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or other controlled, prohibited or regulated substances which violation could have a material adverse effect on the business, prospects, profits, properties or condition (financial or otherwise) of the Company and its Restricted Subsidiaries, taken as a whole. The Company does not know of any liability or class of liability of the Company or any Restricted Subsidiary under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), or the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.). 19. Investment Company Act. Neither the Company nor any Subsidiary is an "investment company" or an "affiliated person" of any "investment company" or a company "controlled" by an "investment company", as such terms are defined in the Investment Company Act of 1940, as amended. 20. Foreign Trade. Neither the Sale of the Notes nor the use of the proceeds thereof will violate any regulation of the United States Treasury Department contained in 31 CFR Subtitle 3, Chapter V, as amended. B-5 217 57 SUBSIDIARIES OF THE COMPANY 1. RESTRICTED SUBSIDIARIES:
PERCENTAGE OF VOTING STOCK NAME OF JURISDICTION OF OWNED BY COMPANY AND SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY Colonial Sugars, Inc. Delaware 100 Everglades Sugar Refining, Inc. Florida 100 Michigan Sugar Co. Michigan 100 Phoenix Packaging Delaware 100 Raceland Sugars, Inc. Delaware 100 Savannah Foodservice, Inc. Delaware 100 Food Carrier, Inc. Georgia 100 Savannah Investment Co. Delaware 100 Savannah Sugar Ref. Co. Georgia 100
2. Unrestricted Subsidiaries:
PERCENTAGE OF VOTING STOCK NAME OF JURISDICTION OF OWNED BY COMPANY AND SUBSIDIARY INCORPORATION EACH OTHER SUBSIDIARY Biomass Corporation Delaware 100 Chatham Sugar Corp. Delaware 100 South Coast Sugars, Inc. Delaware 100 Sunaid of Florida, Inc. Delaware 100
ANNEX A (to Closing Certificate) 218 58 DESCRIPTION OF DEBT AND LEASES 1. Current Debt of the Company and its Restricted Subsidiaries outstanding on June 30, 1992 is as follows: NONE 2. Funded Debt (other than Capitalized Rentals) of the Company and its Restricted Subsidiaries outstanding on June 30, 1992 is as follows:
OUTSTANDING DESCRIPTION PRINCIPAL Savannah Foods & Industries, Inc. $5,000,000 aggregate principal amount 8-3/4% Senior Notes due 12/1/92 $ 500,000 $2,350,000 Savannah Port Authority Pollution Control Revenue Bonds 1,380,000 (Savannah Foods & Industries, Inc. Project), Series 1983 (final maturity 11/1/2001) $1,000,000 Savannah Port Authority Revenue Bonds (Savannah Foods & 765,000 Industries, Inc. Project), Series 1974 (final maturity 8/1/98) Revolving Credit Facility with Chase Manhattan Bank, N.A., providing for 15,000,000 up to $15,000,000 principal amount of loans at variable rates of interest, terminating 12/21/95 Revolving Credit Facility with Wachovia Bank of Georgia, providing for 15,000,000 up to $20,000,000 principal amount of loans at variable rates of interest, terminating 5/1/98 Revolving Credit Facility with Second National Bank of Saginaw, 10,000,000 providing for up to $10,000,000 principal amount of loans at variable rates of interest, terminating 10/31/97
ANNEX B (to Closing Certificate) 219 59 Revolving Credit Facility with Trust Company Bank of Georgia, providing 10,000,000 for up to $20,000,000 principal amount of loans at variable rates of interest, terminating 6/1/97 Revolving Credit Facility with National Bank of Detroit, providing for 10,000,000 up to $10,000,000 principal amount of loans at variable rates of interest, terminating 6/30/98 ESOP Loan with NationsBank, providing for up to $10,000,000 principal 5,500,000 amount of ESOP loans at variable rates of interest, maturing 10/24/99 ESOP Loan with National Bank of Detroit, variable rate of interest, 10,000,000 maturing 10/9/97 Industrial Revenue Bonds (International Automated Machines Project), 535,000 maturing 1995 Industrial Development Authority of the City of Visalia Georgia 2,500,000 $2,500,000 Industrial Development Revenue Bonds (Savannah Foods & Industries Project), Series 1990, variable interest rate, maturing 2005 Non-Compete Agreement providing for total payments of $2,560,000, 1,666,953 maturing 1994 $7,000,000 Hendry County Industrial Development Authority Industrial 7,000,000 Development Revenue Bonds (Savannah Foods & Industries Project), variable interest rate, maturing 2017 Michigan Sugar Company (Industrial Development Revenue Bonds Guaranteed by Company) Michigan Job Development Authority Industrial Development Revenue Bonds (Michigan Sugar Company (Sebewaing Project), Series 1985, 4,500,000 variable interest rate, maturing 2000
Annex B-2 220 60 Michigan Industrial Development Revenue Bonds (Michigan Sugar Company 4,500,000 (Croswell Project), variable interest rate, maturing 2000 Michigan Industrial Development Revenue Bonds (Michigan Sugar Company 3,500,000 (Caro Project), variable interest rate, maturing 2003 Michigan Strategic Fund Industrial Development Revenue Bonds (Michigan 6,000,000 Sugar Company (Carrollton Project), Series 1992, variable interest rate, maturing 2007 Land Mortgage, maturing 1995 22,500 TOTAL: $108,369,453
3. Long-Term Leases of the Company and its Restricted Subsidiaries outstanding on June 30, 1992 are as follows: Savannah Foods & Industries, Inc., lessee Savannah Airport Commission - hangar lease on 1.04 acres Expiration: 11-21-2010 Savannah Airport Commission - Lease by builders transport and assumption by SFI on airport hangar Expiration: 7-31-99 Raceland Sugars, Inc., lessee Agricultural Lease - Clovelly Farms Expiration: 12-31-95 Property Lease in Terrebonne Parish Expiration: 12-31-96 Sugar Cane Lease at Ashton Plantation Expiration: 12-31-97
4. Capitalized Leases of the Company and its Restricted Subsidiaries outstanding on June 30, 1992 are as follows: NONE Annex B-3 221 61 DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION The closing opinion of Chapman and Cutler, special counsel to the Purchasers, called for by Section Section 4.1 of the Note Agreements, shall be dated the related Closing Date and addressed to the Purchasers, shall be satisfactory in form and substance to the Purchasers and shall be to the effect that: 1. The Company is a corporation, validly existing and in good standing under the laws of the State of Delaware and has the corporate power and the corporate authority to execute and deliver the Note Agreements and to issue the Notes. 2. The Note Agreements have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 3. The Notes have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreements do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Chapman and Cutler shall also state that the opinion of Miller, Simpson & Tatum is satisfactory in scope and form to Chapman and Cutler and that, in their opinion, the Purchasers are justified in relying thereon. In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler may rely solely upon an examination of the Certificate of Incorporation certified by, and a certificate of good standing of the Company from, the Secretary of State of the State of Delaware and the By-laws of the Company. With respect to matters of fact upon which such opinion is based, Chapman and Cutler may rely on appropriate certificates of public officials and officers of the Company. EXHIBIT C (to Note Agreement) 222 62 DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY The closing opinion of Miller Simpson & Tatum, counsel for the Company, which is called for by Section 4.1 of the Note Agreements, shall be dated the related Closing Date and addressed to the Purchasers, shall be satisfactory in scope and form to the Purchasers and shall be to the effect that: 1. The Company is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of Delaware, has the corporate power and the corporate authority to execute and perform the Note Agreements and to issue the Notes and has the full corporate power and the corporate authority to conduct the activities in which it is now engaged and is duly licensed or qualified and is in good standing as a foreign corporation in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification necessary. 2. Each Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and is duly licensed or qualified and is in good standing in each jurisdiction in which the character of the properties owned or leased by it or the nature of the business transacted by it makes such licensing or qualification necessary and all of the issued and outstanding shares of capital stock of each such Subsidiary have been duly issued, are fully paid and non-assessable and are owned by the Company, by one or more Subsidiaries, or by the Company and one or more Subsidiaries. 3. Each Note Agreement has been duly authorized by all necessary corporate action on the part of the Company, has been duly executed and delivered by the Company and constitutes the legal, valid and binding contract of the Company enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 4. The Notes have been duly authorized by all necessary corporate action on the part of the Company, have been duly executed and delivered by the Company and constitute the legal, valid and binding obligations of the Company enforceable in accordance with their terms, subject to bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally, and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law). 5. No approval, consent or withholding of objection on the part of, or filing, registration or qualification with, any governmental body, Federal or state, is necessary in connection with the execution and delivery of the Note Agreements or the Notes. EXHIBIT D (to Note Agreement) 223 63 6. The issuance and sale of the Notes and the execution, delivery and performance by the Company of the Note Agreements do not conflict with or result in any breach of any of the provisions of or constitute a default under or result in the creation or imposition of any Lien upon any of the property of the Company pursuant to the pro visions of the Articles of Incorporation or By-laws of the Company or any agreement or other instrument known to such counsel to which the Company is a party or by which the Company may be bound. 7. The issuance, sale and delivery of the Notes under the circumstances contemplated by the Note Agreements do not, under existing law, require the registration of the Notes under the Securities Act of 1933, as amended, or the qualification of an indenture under the Trust Indenture Act of 1939, as amended. The opinion of Miller Simpson & Tatum shall cover such other matters relating to the sale of the Notes as the Purchasers may reasonably request. With respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely on appropriate certificates of public officials and officers of the Company. D-2 224 64 FORM OF LETTER OF TRANSFER [Date] Savannah Foods & Industries, Inc. Two East Bryan Savannah, Georgia 31402 Re: Transfer of $_______ Principal Amount of [8.35% Series A Senior Note][7.15% Series B Senior Note] Due November 1, 2002 (the "Note") From [Seller] to [Secondary Purchaser] Dear Sirs: Pursuant to Section Section 9.1 of the Note Agreement dated as of September 1, 1992 (the "Note Agreement") between Savannah Foods & Industries, Inc. (the "Company") and [Name of Seller] (the "Seller"), this letter is to advise you that the Seller has transferred the Note or a portion thereof in the above-referenced principal amount to [Secondary Purchaser] (the "Secondary Purchaser"). In connection with such transfer the Secondary Purchaser and the Seller hereby request that the Company deliver to the Secondary Purchaser a new [8.35% Series A Senior Note][7.15% Series B Senior Note] Due November 1, 2002 in the above-referenced principal amount in the form of Exhibit A to the Note Agreement and otherwise in the form contemplated by Section Section 9.1 of the Note Agreement (the "New Note"). 1. For the purposes of making any payment to the Secondary Purchaser of principal of and interest or premiums, if any, on the New Note, or any other amount payable thereunder, such payment shall be made to the following account: [Bank] [Address] [ABA No: ] [Account No: ] [Reference: ] 2. For the purpose of giving any notice or providing information to the Secondary Purchaser required under the New Note or the Note Agreement, any such notice or information shall be delivered to the Secondary Purchaser at the following address: [Address] [Attention: ] [Telephone: ] [Telecopy: ] EXHIBIT E (to Note Agreement) 225 65 3. Please deliver the registered New Note to the Purchaser via overnight courier at the following address: 4. [TO BE COMPLETED IF LESS THAN 100% OF THE NOTES OF THE SELLER ARE BEING SOLD.] Please deliver to the Seller a Note in the remaining principal amount of $______________ substantially in the form of Exhibit A to the Note Agreement via overnight courier at the following address: [SELLER] By ------------------------------- Name: Title: [SECONDARY PURCHASER] By ------------------------------- Name: Title: E-2 226 EX-10.6 4 AMD 2 TO DEFERRED COMPENSATION PLAN FOR EMP. 1 Exhibit 10-6 Page 1 AMENDMENT NO. 2 TO THE DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES OF SAVANNAH FOODS & INDUSTRIES, INC. AND SUBSIDIARIES THIS AMENDMENT NO. 2 is made this 13th day of December, 1993 by Savannah Foods & Industries, Inc. (the "Company"). W I T N E S E T H: WHEREAS the Board of Directors of the Company adopted the Amendment and Restatement of the Deferred Compensation Plan for Key Employees of Savannah Foods & Industries, Inc. and Subsidiaries, effective August 1, 1990 and as subsequently amended in that Amendment No. 1 dated October 16, 1992 (the "Plan"); and WHEREAS the Board deems it to be in the best interests of the Company to change the timing and method of Severance Benefits attributable to future Deferral Elections and to allow the Committee to annually limit the amount to be deferred by Participants under the Plan. NOW, THEREFORE, effective the day and year first above written, the Plan is amended as set forth below. ITEM ONE Section 5.2 is rewritten to read as follows: 5.2 TIMING AND METHOD. (a) Pre-1994 Deferral Elections. For Deferral Elections which are executed and delivered to the Committee prior to January 1, 1994 and to the extent such Deferral Elections are effective for a calendar year or years beginning prior to January 1, 1994 (Pre-1994 Deferral Elections"): 227 2 Exhibit 10-6 Page 2 (i) If at the time of Severance, the Participant has neither attained age 55 nor accrued 15 Years of Service, then payment of the Severance Benefit attributable to such Pre-1994 Deferral Elections shall equal the amount of the Participant's total Deferrals and Deemed Deferrals under the Plan attributable to Pre-1994 Deferral Elections plus interest credited with respect to such Deferrals and Deemed Deferrals at the rate of 7% per annum, compounded annually. Payment shall be made in lump sum in the month next following the month of Severance. (ii) If at the time of Severance the Participant has either attained age 55 or accrued 15 Years of Service, then payment of the Severance Benefit attributable to such Pre-1994 Deferral Elections shall begin the first January following the Participant's attainment of Normal Retirement Age and shall continue in each month thereafter until 180 payments are made. Each monthly payment shall equal the sum of the monthly payments payable pursuant to all of the Participant's Pre-1994 Deferral Elections. The monthly amount payable pursuant to such pre-1994 Deferral Elections shall equal the monthly Normal Retirement Benefit amount stated in the Schedule attached to each such Deferral Election. (b) Post-1993 Deferral Elections. For those Deferral Elections not otherwise described in Section 5.2(a) above ("Post-1993 Deferral Elections"): 228 3 Exhibit 10-6 Page 3 (i) If at the time of Severance, the Participant has not attained age 60, then payment of the Severance Benefit attributable at such Post-1993 Deferral Elections shall equal the amount of the Participant's total Deferrals and Deemed Deferrals under the Plan attributable to Post-1993 Deferral Elections plus interest credited with respect to such Deferrals and Deemed Deferrals at the rate of 7% per annum, compounded annually. Payment shall be made in lump sum in the month next following the month of Severance. (ii) If at the time of Severance the Participant has attained age 60, then payment attributable to Post-1993 Deferral Elections shall be made under the provisions of Section 3.2 hereof as if the Participant had elected Early Retirement. ITEM TWO Section 1.10 is rewritten to read as follows: 1.10 DEFERRAL ELECTION: The Participant's irrevocable written election, made in accordance with Article 2 and substantially in the form attached hereto as Exhibit A and as approved by the Committee, to forgo the receipt of a stipulated amount of salary. Amounts so foregone are called "Deferrals". ITEM THREE Section 2.4(c) is inserted as follows: 2.4 DEFERRAL ELECTIONS. (c) No Deferral Election is effective for deferring any dollar amount of salary except to 229 4 Exhibit 10-6 Page 4 the extent such election is accepted and approved by the Committee in the exercise of its sole discretion. Thus, the Committee, may, as to each employee submitting a Deferral Election, limit the dollar amount of salary which may be deferred or completely disallow any salary deferral as to such Deferral Election. IN WITNESS WHEREOF, the Company has caused this Amendment to be executed as of the day and year first above written. SAVANNAH FOODS & INDUSTRIES, INC. [SEAL] Attest: /S/W. R. Steinhauer By: /S/William W. Sprague, III - ---------------------- ------------------------------ Assistant Secretary President - ---------------------- ------------------ 230 EX-23.1 5 CONSENT OF PRICE WATERHOUSE 1 Exhibit 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectuses constituting part of (i) the Registration Statement on Form S-8 (No. 2-63448), as amended April 3, 1992 pertaining to the Monthly Investment Plan for Employees of Savannah Foods & Industries, Inc., and (ii) the Registration Statement of Form S-8 (No. 2-94678), as amended October 18, 1994, pertaining to the Employee Retirement Savings Account Plan of Savannah Foods & Industries, Inc., of our report dated November 18, 1994, appearing on page 15 of this Form 10-K. PRICE WATERHOUSE LLP Savannah, Georgia December 29, 1994 231 EX-27.1 6 FINANCIAL DATA SCHEDULES
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF SAVANNAH FOODS INDUSTRIES INC. FOR THE YEAR ENDED OCTOBER 2, 1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR OCT-02-1994 OCT-02-1994 28,436 0 75,776 0 85,340 198,880 241,885 180,810 486,127 85,140 140,224 17,365 0 0 170,809 486,127 1,074,367 1,074,367 971,706 971,706 0 0 13,380 8,606 2,863 5,743 0 0 0 5,743 .22 0
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