AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 10, 1996
REGISTRATION NO. 333-08421
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 3 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
GOSS GRAPHIC SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3555 13-3888069
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
-------------------
700 OAKMONT LANE
WESTMONT, ILLINOIS 60559
TELEPHONE: (630) 850-5600
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
-------------------
JACK E. MERRYMAN, ESQ.
700 OAKMONT LANE
WESTMONT, ILLINOIS 60559
TELEPHONE: (630) 850-5600
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)
-------------------
WITH COPIES TO:
<TABLE>
<S> <C>
ANDREW R. BROWNSTEIN, ESQ. MORTON A. PIERCE, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ DEWEY BALLANTINE
51 WEST 52ND STREET 1301 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10019
(212) 403-1000 (212) 259-8000
</TABLE>
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
-------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box. / /
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 10, 1996
[LOGO]
$225,000,000
Goss Graphic Systems, Inc.
% Senior Subordinated Notes due 2006
Interest payable and
Due , 2006
--------------
The % Senior Subordinated Notes due 2006 (the "Notes") of Goss Graphic
Systems, Inc. (the "Company") are being offered (the "Offering") in connection
with the acquisition by the Company of the Graphic Systems business unit from
Rockwell International Corporation (the "Acquisition"). Interest on the Notes
will be payable semi-annually on and of each year commencing
, 1997. The Notes are redeemable at the option of the Company, on one
or more occasions, at any time on or after , 2001, at the redemption
prices set forth herein, together with accrued and unpaid interest, if any, to
the date of redemption. Prior to , 1999, up to % of the original
principal amount of the Notes will be redeemable at the option of the Company,
on one or more occasions, from the net proceeds of public or private sales of
common stock of, or contributions to the common equity capital of, the Company,
at a redemption price of % of the principal amount of the Notes, together with
accrued and unpaid interest, if any, to the date of redemption; provided that at
least $ million in aggregate principal amount thereof remains outstanding after
each such redemption. Upon a Change of Control (as defined herein), the Company
is obligated to make an offer to purchase the outstanding Notes at a purchase
price in cash equal to 101% of the aggregate principal amount of the Notes,
together with accrued and unpaid interest to the date of repurchase. There can
be no assurance that the Company will have the financial ability or will be
permitted by its other financing instruments to purchase the Notes upon the
occurrence of a Change of Control. See "Description of Notes."
The Notes will be senior subordinated unsecured obligations of the Company, will
be subordinated in right of payment to all Senior Debt (as defined herein) of
the Company, will rank pari passu with all senior subordinated debt of the
Company and will be senior in right of payment to all existing and future
subordinated debt of the Company. The Notes will be effectively subordinated to
all indebtedness and other liabilities of the Company's subsidiaries. As of June
30, 1996, after giving effect to the Transactions (as defined herein), the
aggregate amount of Senior Debt of the Company and indebtedness of the Company's
subsidiaries, to which the Notes will be effectively subordinated, would have
been approximately $75.3 million (excluding approximately $31.4 million of
letters of credit), all of which would have been secured borrowings by the
Company and its subsidiaries under the New Bank Credit Agreement (as defined
herein) and the aggregate amount of other indebtedness and liabilities of the
Company's subsidiaries, to which the Notes will be effectively subordinated,
would have been approximately $172.4 million. See "Use of Proceeds" and
"Capitalization."
The Company is a newly organized corporation formed on behalf of Stonington
Capital Appreciation 1994 Fund, L.P. to consummate the Acquisition. Consummation
of the Offering will occur simultaneously with and is conditioned upon
consummation of the Acquisition and certain other related transactions, which
are subject to certain conditions. See "The Acquisition."
--------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH
AN INVESTMENT IN THE NOTES, SEE "RISK
FACTORS" BEGINNING ON PAGE 13.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(1) Commissions the Company(2)
------------ ------------- --------------
<S> <C> <C> <C>
Per Note..................................... % % %
Total........................................ $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 1996.
(2) Before deducting expenses payable by the Company estimated at $ .
--------------
The Notes are offered by the several Underwriters when, as and if issued by
the Company, delivered to and accepted by the Underwriters and subject to their
right to reject orders in whole or in part. It is expected that delivery of the
Notes will be made on or about , 1996, against payment in immediately
available funds.
CS First Boston BT Securities Corporation
The date of this Prospectus is , 1996.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[PICTURES]
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OPEN MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
DURING THIS OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING
IN THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE NOTES PURSUANT TO EXEMPTIONS FROM RULES 10B-6, 10B-7
AND 10B-8 UNDER THE SECURITIES EXCHANGE ACT OF 1934.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information set forth elsewhere in this
Prospectus. Unless the context requires otherwise, (i) references in this
Prospectus to "Goss" mean, at all times prior to the date of consummation of the
Offering (the "Closing Date"), the Graphic Systems business unit of Rockwell
International Corporation, a Delaware corporation ("Rockwell") and, at all times
on or after the Closing Date, Goss Graphic Systems, Inc. and its subsidiaries,
and (ii) references in this Prospectus to the "Company" mean Goss Graphic
Systems, Inc. and its subsidiaries. In addition, unless the context requires
otherwise, references in this Prospectus to "Management" mean the management of
Goss Graphic Systems, Inc. after the Closing Date. Consummation of the Offering
is conditioned upon consummation of the Transactions (as defined herein).
GOSS
GENERAL
Goss is the leading manufacturer of web offset newspaper press systems
worldwide and of insert web offset press systems in North America. Goss also
manufactures commercial web offset printing presses in North America and
provides aftermarket parts and service to its newspaper and commercial printing
customers. A web offset press utilizes lithography processes to print on long
ribbons of paper (the "web") which are fed through a series of press cylinders.
Photographically or laser produced printing plates mounted on plate cylinders
are coated with ink and water based solutions and the print images are then
transferred (or "offset") to a blanket cylinder which comes into contact with
the paper web to print the image. See "Business--Products and Services--Web
Offset Technology." Founded in 1885, Goss is the only U.S.-based manufacturer of
large-scale web offset printing presses and has pioneered many major industry
innovations, including the conversion from letter press printing to web offset
lithography, the development of computerized electronic control systems and the
introduction of back-to-back color printing. The Company is the only global
producer of newspaper printing presses with manufacturing and sales capabilities
in North America, Europe and Asia. Goss generated approximately 51% of its
fiscal 1995 net revenue of $709 million outside the U.S. (including exports from
the U.S.). The Company operates through three business categories:
. Newspaper. Goss is a widely recognized trade name in the newspaper
printing press industry. Management estimates that approximately 57% of
daily newspapers worldwide (excluding the People's Republic of China
("PRC")) print on Goss presses (approximately 70% in the U.S. and Canada).
Goss provides sophisticated, computer-controlled press systems for a wide
variety of newspaper publications which vary significantly in circulation,
page count and color content and operate in markets around the world. Goss
presses print such publications as The Wall Street Journal, USA Today, The
New York Times and The Los Angeles Times in the U.S., The Financial Times
in the United Kingdom, Zero Hora in Brazil, The Asahi Shimbun in Japan,
The Straits Times in Singapore and The People's Daily in China. Goss's
newspaper press business generated approximately $512 million in net
revenues in fiscal year 1995, or approximately 72% of Goss's net revenues.
. Insert. Goss pioneered the development of specialized web offset presses
for printing advertising inserts and continues to be the leader in the
insert press business with an estimated market share of approximately 70%
in the U.S. and Canada, the principal markets for such equipment. Goss's
insert presses combine newspaper press designs for high speed with
selected commercial press features for enhanced print quality, low
maintenance and high productivity. The Company's customers include leading
insert printers such as Big Flower Press Holdings, Inc. and Sullivan
Graphics, Inc. Goss's insert press business generated approximately $94
million in net revenues in fiscal year 1995, or approximately 13% of
Goss's net revenues.
3
<PAGE>
. Commercial. Goss also manufactures commercial web offset printing presses
in North America used to print a broad variety of commercial products,
including brochures and promotional materials, catalogs, magazines, books,
financial publications and directories. Goss sells its commercial presses
principally in North America, and its customers include large
multinational, regional and local printers, including R.R. Donnelley &
Sons Company, Quebecor, Inc. and Banta Corporation. The commercial press
business generated approximately $103 million in net revenues in fiscal
year 1995, or approximately 15% of Goss's net revenues.
-----------------
The principal executive offices of Goss are located at 700 Oakmont Lane,
Westmont, Illinois 60559 and its telephone number is (630) 850-5600.
BUSINESS STRATEGY
The Company's business strategy is to (i) capitalize on its substantial
installed base of newspaper presses and market share in its traditional markets,
(ii) continue to lead in the development of innovative products that respond to
customers' needs while increasing their productivity and efficiency, (iii)
expand its strong presence in developing regions such as Asia, (iv) draw on the
manufacturing and marketing strengths of its newspaper and insert businesses to
improve the performance of its commercial business, and (v) pursue business
process improvements and cost-saving opportunities. Key elements underlying this
strategy include:
. Leading Installed Base of Newspaper Presses. Goss is the market leader in
newspaper presses with approximately 57% of daily newspapers worldwide
(excluding PRC) utilizing Goss presses. The Company believes that this
installed base and the Company's established customer relationships
provide it with a competitive advantage in obtaining repeat business,
including color capability upgrades, press line extensions and new press
purchases. In addition, the Company's significant installed base provides
a relatively stable source of aftermarket parts and service business.
. Established Global Newspaper Presence. Goss is one of only seven major
global suppliers of newspaper press systems and is the only supplier with
manufacturing, engineering and sales operations in North America, Europe
and Asia. The Company believes this global presence provides it with a
competitive advantage in light of the significant cost of transporting
newspaper press systems and the degree to which such presses require
custom engineering and manufacturing to address each customer's particular
production requirements and press configurations.
. Technology Leader. Management believes that it enjoys a reputation in the
newspaper industry as a leader in technological innovation, having
engineered several major technological advancements, including the
conversion from letterpress to web offset lithography, the development of
computerized electronic control systems and the introduction of
back-to-back process color printing, each of which has improved its
customers' print quality and productivity. Letterpress printing involves
mechanically complex systems that create each line of type out of metal
slugs that are made into plates mounted on a press. The conversion to web
offset presses improved print quality and productivity. Computerized
electronic controls reduced the need for precise adjustments and fine
tuning by technicians, thereby decreasing waste and enhancing reliability
and quality. Back-to-back process color printing utilizes four
vertically-stacked presses (each printing one color) that allow multiple
colors to be printed on both sides of the paper in the same print run.
With the Company's recent introduction of an advanced inking system, and
its ongoing development of an optical color quality adjustment mechanism
and of an automatic image make-ready ("AIM") press system, Management
believes the Company is well-positioned to maintain its technology
leadership. See "Business -- Research and Development."
. Growth in Developing Markets. The Company believes that increasing incomes
and literacy rates are driving the establishment and growth of newspapers
in developing countries, particularly in
4
<PAGE>
South America and Asia (excluding the more mature Japanese market). The
Company believes it is well-positioned to benefit from such growth since
approximately 52% and 61%, respectively, of daily newspapers in South
America and Asia/Pacific (excluding Japan and PRC) print on Goss presses.
In addition, Goss is the only foreign-owned manufacturer of printing
presses in PRC through the Company's joint venture.
. Business Process Improvements. A key element of the Company's business
strategy is to further improve its operating performance. Management has
identified certain specific cost saving opportunities that are reflected
in the pro forma financial statements included herein. See "--Identified
Cost Savings" and "Unaudited Pro Forma Combined Financial Statements."
Management believes that efficiencies not reflected in the pro forma
financial statements included herein can be realized through improvement
of business processes, including enhanced material procurement practices,
more efficient flow of work-in-process through both machining and assembly
operations, increased outsourcing, and restructuring of factory support
functions. In addition, the Company will seek to generate cost savings by
improving efficiency in the process of configuring presses for specific
customer requirements. The Company also has in place integrated product
development teams which include design and manufacturing engineers and
other disciplines which work to identify and implement product cost
reduction initiatives such as component redesign, lower cost component
suppliers, and design modifications to improve manufacturability. However,
there can be no assurance that such efficiencies or cost savings can be
realized.
IDENTIFIED COST SAVINGS
Although no assurance can be given either that any specific level of cost
savings will be achieved or as to the timing thereof, Management currently plans
to achieve substantial savings in the base of operating costs which are
reflected in the pro forma combined financial statements (the "Identified Cost
Savings"). Once these plans are completed, annual savings are expected to amount
to approximately $19 million per year associated with the closing of redundant
facilities and reduction in staffing, revision of employee benefit plans, and
the elimination of certain corporate services previously provided by Rockwell.
It is expected that, upon consummation of the acquisition by the Company of the
Graphic Systems business unit from Rockwell (the "Acquisition"), a reserve of
$16.3 million, net of a $3.9 million provision reflected in the first nine
months of 1996, will be established associated primarily with severance,
outplacement and relocation payments to be incurred in connection with headcount
reductions and costs in connection with planned facility closings. See
"Unaudited Pro Forma Combined Financial Statements."
GGS HOLDINGS, INC. AND GOSS GRAPHIC SYSTEMS, INC.
GGS Holdings, Inc. ("Holdings") and the Company are newly formed Delaware
corporations organized by Stonington Partners, Inc. ("Stonington") on behalf of
Stonington Capital Appreciation 1994 Fund, L.P. (the "Fund") to effect the
acquisition of Goss from Rockwell. The Acquisition will be effected through the
purchase by the Company and certain foreign subsidiaries to be formed by it of
the outstanding capital stock of certain entities which constitute a part of
Goss and certain of the assets and liabilities of other entities that constitute
the remainder of Goss. Neither Holdings nor the Company is expected to have any
assets or liabilities other than those arising in connection with the
Acquisition, or to engage in any business activities other than those incident
to its formation, the Acquisition and the financing of the Acquisition, until
the Acquisition becomes effective. Holdings will, directly or indirectly, own
all of the capital stock of, and assets of, and will assume all of the
liabilities of, Goss. Pursuant to the terms of the Stockholders Agreement (as
defined herein), the Fund will have the right to nominate and to remove all
directors of Holdings, and each of the Stockholders (as defined herein) will
agree to vote in favor of such nomination or removal.
5
<PAGE>
STONINGTON AND THE FUND
Stonington was formed in 1993 and, through the Fund, has raised $1 billion
in funds available for investments of this nature. The senior principals of
Stonington have been organizing investments of this nature since 1981, having
closed an aggregate of 44 transactions with total consideration of approximately
$21 billion.
The Fund is a Delaware limited partnership which was organized by Stonington
to finance investments in industrial and other companies. Its principal
investors include major pension funds, U.S. and foreign banks, insurance
companies and corporations.
THE ACQUISITION
The Company has entered into a Stock and Asset Purchase Agreement dated as
of April 26, 1996, as amended on July 18, 1996 (the "Purchase Agreement") with
Rockwell to effect the acquisition of Goss from Rockwell. The Acquisition will
be effected through the purchase by the Company of all the outstanding stock of
Rockwell Graphic Systems, Inc., a Delaware corporation ("Goss Delaware") and
Rockwell Systemes Graphiques Nantes, a societe anonyme organized under the laws
of the Republic of France ("Goss France"), and through the purchase by the
Company and certain wholly owned foreign subsidiaries of the assets and the
assumption of liabilities which constitute the remainder of Goss. Immediately
after the Acquisition, the Company will merge with Goss Delaware. The purchase
price for the Acquisition will consist of $552.5 million in cash, subject to
certain adjustments (the "Cash Consideration"), and 47,500 shares of Preferred
Stock (as defined herein), $1,000 liquidation preference per share, issued by
Holdings to Rockwell. Simultaneously with the closing of the Acquisition (the
"Acquisition Closing"), Holdings will raise $116.5 million of equity financing,
comprised of $111.5 million in cash from the sale of common stock, par value
$.01 per share, of Holdings (the "Common Stock") to the Fund (the "Stonington
Investment"), $1.0 million in cash from the sale of Common Stock (the "Equity
Private Placement") to an affiliate of a limited partner of the Fund (the
"Institutional Investor"), and $4.0 million in cash from the sale (the
"Management Placement") of the Management Shares (as defined herein) to certain
members of the Company's Management (the "Management Investors"). Holdings will
finance $2.0 million of the Management Placement. Holdings will simultaneously
therewith contribute all such amounts to the Company in exchange for all of the
capital stock of the Company. Upon consummation of the Transactions, the Fund
will own approximately 95.7% of the outstanding Common Stock of Holdings, the
Institutional Investor will own approximately 0.8% of the outstanding Common
Stock of Holdings and the Management Investors will own the remaining
approximately 3.5% (the "Management Shares"). In addition, upon consummation of
the Transactions, Holdings will also grant to certain members of the Board of
Directors of Holdings who are not Management Investors 7,500 shares of nonvoting
common stock, par value $.01 per share, of Holdings (the "Nonvoting Common
Stock"), representing 100% of the Nonvoting Common Stock that will be
outstanding after the Acquisition, pursuant to restricted stock granted under
the Plan (as defined herein). Rockwell will own all of the outstanding Preferred
Stock of Holdings. The balance of the funds needed to consummate the Acquisition
will come from borrowings under a credit agreement, dated , 1996,
among the Company, Bankers Trust Company as agent, the co-agents named therein
and the lenders named therein (the "New Bank Credit Agreement"), the proceeds of
the Offering and the proceeds from the sale of a portfolio of notes receivable
issued in connection with customer financing provided by Goss to purchasers of
Goss's products (collectively, the "Customer Notes"). The foregoing equity and
debt financings, together with the Acquisition, are collectively referred to as
the "Transactions." The Offering is conditioned upon, among other things,
consummation of the Transactions. See "The Acquisition," "Description of New
Bank Credit Agreement," "Description of Sale of Customer Notes" and "Description
of Preferred Stock."
6
<PAGE>
The following table sets forth the sources and uses of funds related to the
Acquisition:
(IN MILLIONS)
-------------
SOURCES OF FUNDS
New Bank Credit Agreement(a).................................... $ 75.3
Senior Subordinated Notes....................................... 225.0
-------------
Total Debt.................................................. 300.3
Sale of Customer Notes.......................................... 163.7
Issuance of Equity(b)........................................... 164.0
-------------
Total..................................................... $ 628.0
-------------
-------------
USES OF FUNDS
Cash Consideration.............................................. $ 552.5
Issuance of Preferred Stock of Holdings......................... 47.5
Transaction Costs............................................... 26.0
Loans to Management Investors................................... 2.0
-------------
Total..................................................... $ 628.0
-------------
-------------
- ------------
<TABLE>
<C> <S>
(a) The Bank Facilities (as defined herein) provide for a Term Loan Facility (as defined
herein) aggregating $75 million and a Revolving Credit Facility (as defined herein) of
$150 million (approximately $0.3 million of which will be drawn down on the Closing
Date in cash in connection with the Acquisition and approximately $31.4 million of
which will be drawn down on the Closing Date in connection with the issuance,
assumption or replacement of letters of credit, comprised of approximately $6.9 million
relating to the sale of Customer Notes and approximately $24.5 million relating to the
assumption or replacement of certain outstanding letters of credit). See "Description
of New Bank Credit Agreement" and "Description of Sale of Customer Notes." The Purchase
Agreement provides for a post-closing purchase price adjustment, pursuant to which the
Company may receive from Rockwell or be required to make to Rockwell additional
payments. The Company intends to pay down the Revolving Credit Facility or draw down
additional amounts under the Revolving Credit Facility, as the case may be, as a result
of such purchase price adjustments. See "The Acquisition--Purchase Price; Adjustments."
(b) Includes the issuance of 1,165,000 shares of common stock, par value $.01 per share, of
Holdings for an aggregate of $116.5 million in cash (including loans to Management
Investors of $2.0 million) that will be contributed to the Company and 47,500 shares of
Preferred Stock that will be issued by Holdings to Rockwell and that will be pushed
down to the Company for accounting purposes in accordance with generally accepted
accounting principles ("GAAP").
</TABLE>
RISK FACTORS
The Notes offered hereby involve a high degree of risk. See "Risk Factors."
7
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
(DOLLARS IN MILLIONS)
The following table sets forth summary historical combined financial data
with respect to Goss for the periods ended and as of the dates indicated. The
summary historical combined financial data for the fiscal years ended September
30, 1993, 1994 and 1995 are derived directly from the audited combined financial
statements of Goss included elsewhere in this Prospectus, except for business
line net sales, business line operating income, Customer Notes operating and bad
debt expenses, interest income (expense), net, Customer Notes interest income
(expense), net, ratio of earnings to fixed charges and backlog. The summary
historical combined financial data for the nine months ended June 30, 1995 and
1996 are derived directly from the unaudited combined financial statements of
Goss included elsewhere in this Prospectus, except for business line net sales,
business line operating income, Customer Notes operating and bad debt expenses,
interest income (expense), net, Customer Notes interest income (expense), net,
ratio of earnings to fixed charges and backlog. Such unaudited combined
financial statements, in the opinion of Management, include all adjustments
necessary for the fair presentation of the financial condition and the results
of operations of Goss for such periods and as of such dates. Operating results
for the nine months ended June 30, 1996 are not necessarily indicative of the
results of operations that may be expected for the year ended September 30,
1996. This information should be read in conjunction with the combined financial
statements of Goss and the notes thereto appearing elsewhere in this Prospectus
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." See "Selected Combined Financial Data." The summary historical
statement of operations for the fiscal years ended September 30, 1991 and 1992
are derived from unaudited combined financial statements of Goss that are not
included in this Prospectus.
The following table also sets forth certain unaudited summary pro forma
combined financial data of the Company for the periods ended and as of the dates
indicated. The unaudited summary pro forma combined statements of operations for
the fiscal year ended September 30, 1995 and for the nine months ended June 30,
1996 give effect to the Transactions as if they had occurred as of October 1,
1994 and October 1, 1995, respectively. The unaudited summary pro forma combined
balance sheet data give effect to the Transactions as if they had occurred as of
June 30, 1996. See "Use of Proceeds" and "The Acquisition." The unaudited
summary pro forma combined financial data do not purport to represent what the
Company's results of operations or financial condition would actually have been
had the Transactions in fact occurred as of such dates or to project the
Company's results of operations or financial condition for any future period or
as of any future date. The unaudited summary pro forma combined financial data
should be read in conjunction with the Unaudited Pro Forma Combined Financial
Statements and the notes thereto. See "Unaudited Pro Forma Combined Financial
Statements" and the separate historical combined financial statements of Goss
and the notes thereto appearing elsewhere in this Prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
8
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SEPTEMBER 30, NINE MONTHS ENDED JUNE 30,
------------------------------------------------- ----------------------------
HISTORICAL HISTORICAL
------------------------------------------------- PRO FORMA --------------- PRO FORMA
1991 1992 1993 1994 1995 1995(A) 1995 1996 1996(A)
-------- -------- --------- ------ ------ --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Business line sales:
Newspaper...................... $ 785.5 $ 527.8 $ 390.8 $435.8 $512.2 $ 512.2 $362.3 $381.7 $ 381.7
Insert......................... 81.8 87.5 143.5 110.7 93.7 93.7 70.3 64.7 64.7
Commercial..................... 93.7 72.7 92.7 101.7 103.4 103.4 76.7 35.5 35.5
-------- -------- --------- ------ ------ --------- ------ ------ ---------
Total net sales.............. 961.0 688.0 627.0 648.2 709.3 709.3 509.3 481.9 481.9
Business line operating income
(loss) (b):
Newspaper...................... 139.9 47.8 27.0 40.6 68.4 71.6 56.2 35.9 37.9
Insert......................... 0.3 (7.4) 11.7 9.4 7.8 7.0 3.3 2.9 2.5
Commercial..................... (35.0) (32.9) (34.8) (17.0) (13.7) (11.4) (7.4) (28.9)(c) (27.1)(c)
-------- -------- --------- ------ ------ --------- ------ ------ ---------
Total business line operating
income.......................... 105.2 7.5 3.9 33.0 62.5 67.2 52.1 9.9 13.3
Rockwell common expense
allocation (d).................. (11.5) (8.1) (7.5) (6.8) (8.3) 0.0 (5.8) (5.8) 0.0
Patent litigation (e)........... 0.0 0.0 0.0 0.0 (3.0) 0.0 0.0 (1.0) 0.0
Restructuring charge (f)........ (49.5) (2.2) (5.4) 0.0 0.0 0.0 0.0 (3.9) 0.0
Customer notes operating and bad
debt
expenses (g)................... (6.9) (3.4) (10.0) (19.6) (5.1) 0.0 (2.9) (3.6) 0.0
-------- -------- --------- ------ ------ --------- ------ ------ ---------
Operating (loss) profit...... 37.3 (6.2) (19.0) 6.6 46.1 67.2 43.4 (4.4) 13.3
Other income (expense), net..... (0.5) 1.2 0.8 (2.1) 1.9 1.9 0.8 (1.4) (1.4)
-------- -------- --------- ------ ------ --------- ------ ------ ---------
Income (loss) before
interest, taxes and
cumulative effect........... 36.8 (5.0) (18.2) 4.5 48.0 69.1 44.2 (5.8) 11.9
Interest income (expense),
net............................. (19.1) (15.3) (8.7) (3.4) 0.0 (35.0) 0.0 (1.6) (26.2)
Customer notes interest income
(expense), net................. 13.5 16.6 19.6 13.6 12.4 0.0 8.4 9.7 0.0
-------- -------- --------- ------ ------ --------- ------ ------ ---------
Income (loss) before taxes
and cumulative effect of
accounting change........... 31.2 (3.7) (7.3) 14.7 60.4 34.1 52.6 2.3 (14.3)
Income tax expense (benefit).... 13.2 (0.8) (1.8) 5.3 24.2 13.7 21.1 1.2 (5.4)
Cumulative effect of change in
accounting principle, net...... 0.0 0.0 (4.6) 0.0 0.0 0.0 0.0 0.0 0.0
-------- -------- --------- ------ ------ --------- ------ ------ ---------
Net income (loss)............ $ 18.0 $ (2.9) $ (10.1) $ 9.4 $ 36.2 $ 20.4 $ 31.5 $ 1.1 $ (8.9)
-------- -------- --------- ------ ------ --------- ------ ------ ---------
-------- -------- --------- ------ ------ --------- ------ ------ ---------
Other Data:
Backlog (at period end) (h)..... $ 525.1 $ 421.3 $ 549.8 $537.7 $480.7 $ 480.7 $496.9 $442.6 $ 442.6
EBITDA (i)...................... 130.4 34.9 26.8 55.5 83.9 102.9 68.6 24.8 38.6
Depreciation and amortization... 36.7 35.5 30.4 29.3 29.7 35.7 22.3 20.7 25.3
Net cash (used for) provided by
operating activities(j)........ (61.2) 71.3 157.5 95.0 12.4
Net cash used for investing
activities(j)................... (10.4) (25.7) (9.4) (5.8) (1.8)
Net cash provided by (used for)
financing activities(j)........ 66.2 (37.2) (155.5) (99.1) (14.1)
Capital expenditures............ 29.6 21.2 12.5 11.6 11.5 11.5 7.9 3.4 3.4
Ratio of EBITDA to non-affiliate
interest expense (k)........... 3.2 343.0 27.6 1.6
Ratio of earnings to fixed
charges (l)..................... 1.9 0.8 0.6 2.4 10.2 1.8 11.7 1.3 0.5
Balance Sheet Data (at period
end):
Total assets.................... $1,093.0 $1,011.7 $ 1,007.7 $950.9 $947.0 $956.3 $888.6 $ 813.2
Total debt...................... 4.6 3.2 12.5 4.1 2.6 11.6 34.3 300.3
Rockwell's net investment (pro
forma-- shareholders'
equity)......................... 639.1 623.8 627.3 628.7 543.1 586.6 507.5 162.0
</TABLE>
9
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- ------------
(a) The pro forma combined financial data for the year ended September 30, 1995
gives pro forma effect to the Transactions and the Identified Cost Savings,
as if they had occurred as of October 1, 1994, with respect to the
statement of operations data and other data, and on September 30, 1995,
with respect to the balance sheet data. The pro forma summary financial
data for the nine months ended June 30, 1996 gives pro forma effect to the
Transactions and Identified Cost Savings, as if they had occurred as of
October 1, 1995 with respect to the statement of operations data and other
data, and on June 30, 1996, with respect to the balance sheet data. The pro
forma financial data are not necessarily indicative of the results that
actually would have been achieved had such transactions been consummated as
of the dates indicated or that may be achieved in the future. See "The
Acquisition" and "Unaudited Pro Forma Combined Financial Statements"
included elsewhere herein.
(b) Business line operating income represents, for each of the Company's three
business lines, net sales less cost of sales and operating expenses.
Business line operating income is before Rockwell common expense
allocation, patent litigation and restructuring charges, which, due to
their nature, are disclosed separately in the financial statements. In
addition, business line operating income excludes operating expenses, bad
debt expenses and interest income (expense), net related to Customer Notes.
(c) For the nine months ended June 30, 1996 (Historical and Pro Forma),
includes a $12.7 million charge for warranty and post-shipment expenses
incurred in fiscal 1996 in respect of certain commercial presses shipped in
fiscal 1993, 1994 and 1995. For other periods presented, charges for
warranty and post-shipment expenses incurred are reflected in the period in
which the sale was recorded.
(d) Rockwell common expense allocation represents expenses charged by Rockwell
on a percentage of sales basis for administrative and management services
such as corporate oversight, cash management, treasury, legal, patent, tax,
insurance, general management and administration, corporate accounting and
communication services.
(e) Patent litigation represents expenses related to the Heidelberger patent
infringement litigation liability which is being retained by Rockwell.
These expenses have been excluded from the pro forma results. See Note (w)
to the Unaudited Pro Forma Combined Financial Statements. See
"Business--Legal Proceedings" included elsewhere herein.
(f) The restructuring charge recorded in the nine months ended June 30, 1996
was associated primarily with severance payments for terminated employees
and the closure of certain redundant facilities. This charge has been
excluded from the pro forma results. The restructuring charges recorded in
the 1991 through 1993 time frame were associated with the closure of a
major manufacturing facility in the United Kingdom and the associated
relocation of product lines and consolidation of manufacturing operations
at several locations. See Note (x) to the Unaudited Pro Forma Combined
Financial Statements.
(g) Customer notes operating expenses and bad debt expenses represent expenses
associated with the Company's portfolio of Customer Notes. These charges
have been excluded from the pro forma results. See Notes (s) and (t) to the
Unaudited Pro Forma Combined Financial Statements.
(h) Backlog represents the aggregate dollar value of unfilled press orders
under contract with the Company at the end of each period.
(i) EBITDA represents business line operating income less Rockwell common
expense allocation plus depreciation and amortization. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to incur and service debt. EBITDA should not be considered by investors as
an alternative to operating income "as determined in accordance with GAAP,"
as an indicator of the Company's operating performance or as an alternative
to net cash provided by (used for) operating activities "as determined in
accordance with GAAP." See The Combined Financial Statements, including the
Combined Statements of Cash Flows, included elsewhere herein.
(j) The Company was not audited for the fiscal years ended prior to September
30, 1993. As such, the Company does not have adequate information to provide
cash flow data for the years ended September 30, 1991 and September 30, 1992
on a basis consistent with that provided in the audited financial
statements.
(k) Ratio of EBITDA to non-affiliate interest expense represents EBITDA divided
by non-affiliate interest expense. Interest expense on a pro forma basis
represents interest (income) expense, net, excluding amortization of
deferred financing costs. Non-affiliate interest expense totaled $32.6
million, $0.2 million, $0.9 million and $24.4 million, respectively, for pro
forma 1995 and for the nine months ended June 30, 1995, June 30, 1996 and
pro forma June 30, 1996.
(l) For purposes of computing the ratio of earnings to fixed charges, "earnings"
consist of income before taxes and cumulative effect of changes in
accounting plus fixed charges less capitalized interest. "Fixed charges"
consist of cash/intercompany interest expense, capitalized interest,
scheduled debt payments, amortization of deferred financing costs, pre-tax
preferred stock dividends and one-third of rental expense (the portion
deemed representative of the interest factor).
10
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
ISSUER......................... Goss Graphic Systems, Inc.
SECURITIES OFFERED............. $225.0 million aggregate principal amount of the Company's
% Senior Subordinated Notes due , 2006.
MATURITY DATE.................. , 2006.
INTEREST PAYMENT DATES......... Interest accrues from the date of issuance at an annual
rate of % and will be payable semi-annually in arrears on
and of each year, commencing , 1997.
Interest will be paid on the basis of a 360-day year,
comprised of twelve 30-day months.
OPTIONAL REDEMPTION............ Except as described below, the Notes are not redeemable at
the Company's option prior to , 2001.
Thereafter the Notes will be subject to redemption at the
option of the Company, in whole or in part, at the
redemption prices set forth herein, together with accrued
and unpaid interest, if any, to the date of redemption.
Notwithstanding the foregoing, prior to ,
1999, the Company may redeem up to % of the original
principal amount of the Notes, on one or more occasions,
from the proceeds of one or more Public Equity Offerings
(as defined herein) or private sales of common stock of,
or contributions to the common equity capital of, the
Company, at a redemption price of % of the principal
amount of the Notes, together with accrued and unpaid
interest, if any, to the date of redemption; provided that
at least $ million in aggregate principal amount of the
Notes remains outstanding after each such redemption.
CHANGE OF CONTROL.............. Upon a Change of Control each holder of Notes may require
the Company to purchase the Notes held by such holder at a
purchase price in cash equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any,
to the date of purchase. See "Risk Factors--Limitation on
a Change of Control."
RANKING........................ The Notes will be senior subordinated unsecured
obligations of the Company, will be subordinated in right
of payment to all Senior Debt (as defined herein) of the
Company, will rank pari passu with all senior subordinated
debt of the Company and will be senior in right of payment
to all existing and future subordinated debt of the
Company. The Notes will be effectively subordinated to all
indebtedness and other liabilities of the Company's
subsidiaries. As of June 30, 1996, on a pro forma basis
after giving effect to the Transactions, the aggregate
amount of Senior Debt of the Company would have been
approximately $25.3 million (consisting of $25 million of
the Term Loan Facility and $0.3 million of the Revolving
Credit Facility and excluding approximately $7.0 million
of letters of credit), all of which would have been
secured borrowings by the Company and its subsidiaries
under the New Bank Credit
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Agreement. The aggregate amount of indebtedness and other
liabilities of the Company's subsidiaries, to which the
Notes will be effectively subordinated, would have been
approximately $222.4 million (including the remaining $50
million of the Term Loan Facility and excluding
approximately $24.4 million of letters of credit). See
"Use of Proceeds," "Capitalization" and "Description of
Notes--Ranking."
CERTAIN COVENANTS.............. The Indenture (as defined herein) will contain certain
covenants that will, among other things, limit the ability
of the Company and its Subsidiaries (as defined herein) to
Incur (as defined herein) additional Debt (as defined
herein), issue Preferred Stock, pay dividends or
distributions or make investments or make certain other
Restricted Payments (as defined herein), enter into
certain transactions with affiliates, dispose of certain
assets, incur liens securing pari passu and subordinated
indebtedness of the Company and engage in mergers and
consolidations. See "Description of Notes--Certain
Covenants."
USE OF PROCEEDS................ The net proceeds of the Notes offered hereby (estimated to
be approximately $ million in the aggregate after
deduction of underwriting discounts and commissions and
expenses of the Offering) will be used to pay a portion of
the consideration for, and the payment of transaction
costs incurred in connection with, the Acquisition. See
"Use of Proceeds."
CONDITIONS..................... The closing of the Offering will be conditioned upon,
among other things, the simultaneous closing of the
Transactions.
</TABLE>
12
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Notes
offered by this Prospectus.
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE INDEBTEDNESS
The Company will incur substantial indebtedness in connection with the
Acquisition and, following the Offering, the Company will be highly leveraged.
As of June 30, 1996, after giving pro forma effect to the Transactions, the
Company would have had total indebtedness of $300.3 million and stockholders'
equity of $162.0 million (net of loans to Management Investors of $2.0 million).
Of the total $628.0 million used to consummate the Acquisition, $300.3 million
(47.8%) will be supplied by debt (excluding $31.4 million of letters of credit),
$163.7 million (26.1%) will be supplied through the sale of Customer Notes,
$162.0 million (25.8%) will be supplied by equity and $2.0 million (0.3%) will
consist of loans to Management Investors. After giving pro forma effect to the
Transactions, the Company's ratio of earnings to fixed charges would have been
1.8x for the fiscal year ended September 30, 1995 and 0.5x for the nine months
ended June 30, 1996. Pro forma interest expense, net for the nine months ended
June 30, 1996 and fiscal year ended September 30, 1995 would have been $26.2
million and $35.0 million, respectively. The Company may incur additional
indebtedness in the future, subject to limitations imposed by the Indenture and
the New Bank Credit Agreement. See "Capitalization" and "Unaudited Pro Forma
Combined Financial Statements."
The Company's ability to make scheduled principal payments of, to pay
interest on or to refinance its indebtedness (including the Notes) depends on
its future performance and financial results, which, to a certain extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors beyond its control. The Company's historical financial results
have been, and its future financial results are anticipated to be, subject to
substantial fluctuations. There can be no assurance that the Company's business
will generate sufficient cash flow from operations or that future working
capital borrowings will be available in an amount sufficient to enable the
Company to service its indebtedness, including the Notes, or make necessary
capital expenditures. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations." The degree to which the Company will be
leveraged following the Offering could have important consequences to holders of
the Notes, including, but not limited to, the following: (i) a substantial
portion of the Company's cash flow from operations will be required to be
dedicated to debt service and will not be available for other purposes; (ii) the
Company's ability to obtain additional financing in the future could be limited;
(iii) certain of the Company's borrowings are at variable rates of interest,
which could result in higher interest expense in the event of increases in
interest rates; (iv) the Company may be more vulnerable to extended economic
downturns and may be restricted from making acquisitions, introducing new
technologies or exploiting business opportunities; and (v) the Indenture and the
New Bank Credit Agreement will contain financial and restrictive covenants that
limit the ability of the Company to, among other things, borrow additional
funds, dispose of assets or pay cash dividends. Failure by the Company to comply
with such covenants could result in an event of default which, if not cured or
waived, could have a material adverse effect on the Company. In addition, the
degree to which the Company is leveraged could prevent it from repurchasing all
Notes tendered to it upon the occurrence of a Change of Control. See
"Description of Notes" and "Description of New Bank Credit Agreement."
SUBORDINATION OF THE NOTES; ASSET ENCUMBRANCES
The Notes will be subordinated in right of payment to all existing and
future Senior Debt. At June 30, 1996, on a pro forma basis after giving effect
to the Transactions, there would have been outstanding approximately $25.3
million of Senior Debt of the Company (including $25 million of the Term Loan
Facility and $0.3 million of the Revolving Credit Facility and excluding
approximately $7.0
13
<PAGE>
million of letters of credit), all of which would have been secured borrowings
by the Company and its subsidiaries under the New Bank Credit Agreement. In
addition, the Notes will be effectively subordinated to approximately $222.4
million of indebtedness and other liabilities and commitments (including trade
payables and lease obligations and the remaining $50 million of the Term Loan
Facility and excluding approximately $24.4 million of letters of credit) of the
Company's subsidiaries. The Company and its subsidiaries will also have the
ability to borrow an additional $109.7 million for general corporate purposes
pursuant to the Revolving Credit Facility, subject to certain conditions. Any
such amounts drawn upon by the Company will be senior in right of payment to the
Notes and any such amounts drawn upon by the subsidiaries will be effectively
senior in right of payment to the Notes. Such amounts will also be secured
borrowings by the Company and its subsidiaries under the New Bank Credit
Agreement. By reason of such subordination, in the event of the insolvency,
liquidation, reorganization, dissolution or other winding-up of the Company or
upon a default in payment with respect to, or the acceleration of, any Senior
Debt, the holders of such Senior Debt and any other creditors who are holders of
Senior Debt and creditors of subsidiaries must be paid in full before the
Holders (as defined herein) of the Notes may be paid. If the Company incurs any
additional pari passu debt, the holders of such debt would be entitled to share
ratably with the Holders of the Notes in any proceeds distributed in connection
with any insolvency, liquidation, reorganization, dissolution or other
winding-up of the Company. This may have the effect of reducing the amount of
proceeds paid to Holders of the Notes. In addition, no payments may be made with
respect to the principal of (and premium, if any) or interest on the Notes if a
payment default exists with respect to Designated Senior Debt and, under certain
circumstances, no payments may be made with respect to the principal of (and
premium, if any) or interest on the Notes for certain periods of time if a
non-payment default exists with respect to Designated Senior Debt. In addition,
certain portions of the borrowings under the New Bank Credit Agreement will be
lent directly to certain of the Company's foreign subsidiaries, and such
borrowings will therefore have a direct, prior claim against such respective
foreign subsidiaries. See "Description of Notes."
The Company's obligations under the New Bank Credit Agreement will be
secured by security interests in all of the capital stock of the Company and
substantially all of the current and future assets of the Company and its
subsidiaries (including a pledge of all of the issued and outstanding shares of
capital stock of the Company's domestic subsidiaries and 66% of the capital
stock of the Company's foreign subsidiaries). In the event of a default on
secured indebtedness (whether as a result of the failure to comply with a
payment or other covenant, a cross-default, or otherwise), the parties granted
such security interests will have a prior secured claim on the capital stock of
the Company and the assets of the Company. If such parties should attempt to
foreclose on their collateral, the Company's financial condition and the value
of the Notes will be materially adversely affected. See "Description of New Bank
Credit Agreement."
ABSENCE OF PARENT GUARANTEES AND SERVICES
Prior to the Acquisition, the business of Goss had been operated as a
division of Rockwell. In the past, Rockwell has been party to, and guarantor of
Goss's obligations under, certain of the agreements providing for the sale of
Goss's products, including agreements for the sale of large newspaper printing
presses to domestic and foreign publishers. In addition, Goss has also posted
letters of credit in connection with certain sales agreements. In connection
with such sales, Goss normally receives a down payment and progress payments
from the customer in advance of delivery and acceptance of the product
purchased. There can be no assurance that, following the Acquisition, customers
will continue to make such down payments and progress payments or that sales
will not be adversely affected without Rockwell acting as a party to and/or
guarantor under the Company's sales contracts. In addition, customers may
request that the Company post letters of credit as security for such down
payments and progress payments. Although the New Bank Credit Agreement will
include a Revolving Credit Facility in an original amount of $150.0 million
under which, among other things, letters of credit may be issued
14
<PAGE>
up to a sublimit (including limits which may be based upon the country in which
the entity posting the letter of credit is incorporated) to be agreed upon (see
"Description of New Bank Credit Agreement"), there can be no assurance that, if
customers request such letters of credit, the Company will be able to provide
them. Approximately $31.4 million of the Revolving Credit Facility will be drawn
down in connection with the issuance, assumption or replacement of letters of
credit on the Closing Date. The total amount of letters of credit issued for the
account of Goss that was outstanding as of June 30, 1996 was approximately $24.5
million. The contracts to which Rockwell is a party or under which Rockwell has
acted as guarantor represented sales of $103.1 million, or 14.5% of total Goss
sales, for the fiscal year ended September 30, 1995.
In addition, Rockwell performs certain engineering and product development
work for Goss at Rockwell's Science Center, the costs of which have been
directly billed to Goss. Goss also has received certain administrative and
management services from Rockwell for which Goss has paid Rockwell at a flat
rate, and certain other services for which Rockwell billed Goss for direct
expense items (and related administration costs). Management believes that the
services provided by Rockwell were billed at rates that are comparable to the
rates that Goss would have received from an independent third party. Rockwell
has agreed to provide certain transitional services to the Company for a limited
period of time following the consummation of the Acquisition. Following the
transitional period, the Company will be required to establish an internal
capability for these functions or obtain such facilities and services from
third-party suppliers on an arm's-length basis, which may be at rates or prices
that differ from those paid by the Company to Rockwell. The Company will also be
required to obtain from third parties on an arm's-length basis certain control
devices and drive systems used with its press systems that are currently
supplied by Allen-Bradley Company, Inc., a wholly-owned subsidiary of Rockwell
("Allen-Bradley"). Such third parties may include Allen-Bradley. Purchases by
Goss from this subsidiary, which have been made on an arm's-length basis,
totaled approximately $31.6 million during the fiscal year ended September 30,
1995.
UNAVAILABILITY OF CUSTOMER FINANCING; GUARANTEE OF CERTAIN CUSTOMER NOTES
Historically, Goss regularly made seller financing available to certain
customers in connection with their purchases of Goss's products. In early 1994,
Goss determined that, in most instances, traditional financing sources were able
to offer financing to its customers on reasonable terms. As a result, Goss has
deemphasized the use of financing in the selling process. After consummation of
the Acquisition, the Company generally does not intend to make financing
available to its customers. Rather, it will continue to assist customers in
securing financing from third-party lending sources. Management believes,
however, that certain competitors of Goss have regularly provided financing to
customers in the past and will continue to make such financing available in the
future. Although the Company believes that limiting the availability of seller
financing has not materially affected the sale of its products, there can be no
assurance that the lack of availability of seller financing in the future will
not have an adverse impact on the Company.
The Acquisition will be financed in part by the sale of Customer Notes. The
Customer Notes are being sold for a purchase price of approximately $163.7
million, subject to certain adjustments, which represents a discount to the face
amount of the Customer Notes, which was approximately $238.2 million as of
February 29, 1996 (the measurement date used to determine the purchase price of
the Customer Note portfolio). In connection with this sale, the Company is
guaranteeing to the purchaser of the Customer Notes the payment of an aggregate
of approximately $20 million in principal and/or interest on Customer Notes from
three customers which had an aggregate principal amount of approximately $84.4
million as of February 29, 1996. Certain of these guarantees will be secured by
letters of credit in an aggregate amount of approximately $6.9 million. In the
event that the obligors on these Customer Notes fail to make regularly scheduled
payments of principal and interest as and when due, the Company may be required
to make such payments to the purchaser of the Customer Notes. See "Description
of Sale of Customer Notes."
15
<PAGE>
FLUCTUATIONS IN SALES AND OPERATING RESULTS
Like most printing press manufacturers, Goss's business is highly cyclical.
The timing of a printing press purchase can be influenced by numerous factors
beyond the Company's control which may temporarily affect the customer's
willingness to commit to a press acquisition. They include the age and
capabilities of the customer's current equipment, general economic conditions,
the customer's ability to finance the press acquisition, total advertising
revenues, the price of newsprint, paper and other raw materials, and competition
with print and non-print media in the marketplace. As a result of these factors,
sales of the Company's products can vary significantly from period to period.
There can be no assurance that such factors will not adversely affect the
Company's results of operations in the future.
The Company also may experience significant changes in its operating profit
margins as a result of variation in sales, changes in product mix, price
competition for orders and costs associated with the introduction of new
presses.
The market for Goss's products depends in part on the demand for printed
material and for print-based advertising. There can be no assurance that
competition from alternative methods of information delivery, including radio,
television, personal computers, on-line information services and other
electronic media, will not erode the demand for print-based advertising.
COMPETITION
The global newspaper printing press, insert printing press and commercial
printing press industries are highly competitive in most product categories and
geographic regions. Competition is based on price, product features, quality,
reliability, customer service and ability to meet the specialized needs of
customers. The gross profit margins on large orders for newspaper presses are in
general lower than the gross profit margins realized for smaller orders for
newspaper presses due to competitive pressures on pricing. Present and potential
competition in the various markets served by Goss comes from companies of
various sizes, many of which are larger and have greater financial and other
resources than the Company. Companies not currently in direct competition with
Goss may introduce competing products in the future.
In addition, the Company has faced and continues to face increased
competition in terms of price from its competitors in the insert printing press
industry. Although Goss has established a presence in the commercial press
industry in North America, this industry is subject to intense competition,
primarily from one commercial press manufacturer, and the Company has a
significantly lower market share in the commercial business compared to the
Company's other businesses. See "Business-- Competition."
COMMERCIAL PRESS SYSTEMS PERFORMANCE PROBLEMS AND RELATED EXPENDITURES
Goss has experienced certain performance problems with its World 16 and, to
a lesser extent, its G25W, commercial press systems which it introduced in 1993
and 1992, respectively. Certain customers have alleged that such press systems
failed to meet performance expectations and contract specifications, including
certain customers which have requested rescission of the initial purchase
contract and/or damages and have threatened litigation to resolve their claims
against the Company relating to their commercial presses. In addition, Goss has
delayed shipment of a World 16 press, has not yet received full payment from
other customers due to performance issues and has had two customers initiate
litigation seeking rescission and damages. See Note 19 to the Combined Financial
Statements included elsewhere in this Prospectus.
A total of six World 16 and four G25W presses have been installed to date,
and since the introduction of these products, Goss has incurred significant
expenses to identify and correct product performance issues and make necessary
modifications to commercial presses at customers' locations.
16
<PAGE>
The Company has established reserves relating to customer satisfaction issues
and continues to review the adequacy of such reserves on an ongoing basis. Also
as a result of performance issues, Goss modified the World 16 press and
reintroduced it to the marketplace in October 1995 under the designation World
16E. Through June 30, 1996 one World 16E press has been shipped and it is
currently being installed. Two World 16 presses were shipped and installed in
the first half of fiscal year 1996. No performance issues were experienced with
these presses, and they received customer acceptance on schedule.
Although the Company believes it has identified and has remedied or is in
the process of remedying all significant performance issues relating to its
commercial presses, there can be no assurance that additional performance issues
will not develop or that significant additional expenditures will not be
required to resolve existing or potential future performance issues. Any such
significant performance issues or expenditures, including with respect to the
resolution of pending or threatened claims, could materially adversely affect
the Company.
LABOR DISPUTES
Certain of the Company's hourly employees located at its Cedar Rapids, Iowa;
Reading, Pennsylvania; and Westmont, Illinois facilities are represented by
national unions and covered by various collective bargaining agreements, which
expire at various times over the next two years. The Company's hourly employees
located at the Preston, United Kingdom and Nantes, France facilities are
represented by local trade groups, those located at the Sayama, Japan facility
are represented by a company union, and all such foreign employees are covered
by collective bargaining agreements, which are renewed annually.
Although the Company considers its relationships with all of its hourly
employees to be satisfactory, a prolonged labor dispute with any union could
significantly impair the Company's business, substantially increase the
Company's costs or otherwise have a material adverse effect on the Company's
business as well as the Company's results of operations and financial condition.
In addition, the Company's ability to readily manufacture and deliver its
products could be impaired by work stoppages by its employees.
DEVELOPMENT OF NEW PRODUCTS; FUNDING FOR RESEARCH AND DEVELOPMENT
Technology in the printing industry continues to evolve. As a result, the
future success of the Company will depend in part upon the ability of the
Company to continue to enhance its existing products and to develop, manufacture
and market new products. Goss has invested over $84 million since 1993 in
engineering, new product development and research. In addition, following a
limited transition period, the Company will no longer conduct research and
development activities at Rockwell's Science Center. The Company has over 400
engineers at four locations around the world and believes that, following the
transition, it will continue to have the necessary engineering, product
development and research capabilities. There can be no assurance, however, that
the Company will be successful in the development, introduction, marketing and
cost-effective manufacture of any new products or enhancements to its existing
products or that there will be sufficient cash flow to fund planned engineering
and research and development expenditures or that financing for such
expenditures will be available on favorable terms. In addition, there can be no
assurance that performance issues will not arise with new press systems and
printing technologies. The Company is currently completing the first
installations of its Newsliner presses. The failure to develop products and
introduce them successfully and in a timely manner could adversely affect the
Company's competitive position and results of operations.
17
<PAGE>
INTERNATIONAL OPERATIONS AND SALES; REPATRIATION OF FOREIGN CASH FLOW
The Company operates manufacturing facilities in various countries.
Furthermore, it relies on source materials and components shipped from, and
markets for finished products located in, various countries. During fiscal 1995,
38% of Goss's net revenues were generated by international sales of its foreign
subsidiaries (based on foreign currencies). International operations and
international shipments are subject to a number of special risks, including, but
not limited to, risks with respect to currency exchange rates, economic and
political destabilization, other disruption of markets, restrictive governmental
actions (such as restrictions on transfer of funds, trade duties and quotas,
customs and tariffs and unexpected changes in regulatory environments),
difficulty in obtaining distribution and support, nationalization, laws and
policies affecting trade, foreign investment and loans, and foreign tax laws.
There can be no assurance that these factors will not have a material adverse
impact on the Company's ability to increase or maintain its foreign sales or on
its results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--International Operations."
The Company's ability to service its indebtedness will be dependent, in
part, on its ability to utilize the cash flow generated by its foreign
operations. In general, U.S. federal and international tax laws provide that
income of international subsidiaries is subject to tax only in the local
jurisdiction and is not subject to U.S. federal income tax unless, and only to
the extent, such income is distributed as a dividend to the U.S. parent company.
The Company has not determined whether to cause its international subsidiaries
to pay dividends to the Company or to cause the net income of such subsidiaries
to be retained abroad. The Company may make loans to its foreign subsidiaries,
and, in that event, payments by the Company's foreign subsidiaries to the
Company on such intercompany loans may result in the repatriation of a
substantial portion of the cash flow of such subsidiaries without the payment of
taxes abroad. In addition, certain of the Company's subsidiaries may make
royalty payments to the Company. There can be no assurance, however, that the
interest payments on such intercompany loans or such royalty payments will not
be recharacterized as dividends, which could have adverse tax consequences to
the Company. In addition, certain portions of the borrowings under the New Bank
Credit Agreement will be lent directly to certain of the Company's foreign
subsidiaries, and such borrowings will therefore have a direct, prior claim
against such respective foreign subsidiaries.
DEPENDENCE ON SUBSIDIARY CASH FLOW; STRUCTURAL SUBORDINATION
The Company will conduct a substantial portion of its business through
subsidiaries. The Company will, in part, be dependent on the cash flow of such
subsidiaries and distributions thereof from such subsidiaries to the Company in
order to meet its debt service obligations. It is not expected that Holdings
will have any assets other than the common stock of the Company.
As a result of the structure of the Company, the Holders of the Notes will
be structurally subordinated to all creditors of the subsidiaries of the
Company. In the event of the insolvency, liquidation, reorganization,
dissolution or other winding-up of the subsidiaries, the Company will not
receive funds available to pay to the Holders of the Notes in respect of the
Notes until after the payment in full of the claims of the creditors of the
subsidiaries. As of June 30, 1996, on a pro forma basis after giving effect to
the Transactions, the aggregate amount of indebtedness and other obligations of
the Company's subsidiaries (including trade payables and lease obligations)
would have been approximately $222.4 million (excluding approximately $24.4
million of letters of credit).
DEPENDENCE ON KEY PERSONNEL
Goss's business is managed by a small number of key executive officers. The
loss of the services of certain of these executives could have an adverse impact
on the Company. There can be no assurance that the services of such personnel
will continue to be made available. The Company has entered into employment
arrangements with certain key executive officers and the Management Investors
will invest
18
<PAGE>
$4,030,000 in exchange for approximately 3.5% of the outstanding capital stock
of Holdings. See "The Acquisition" and "Management."
CONTROL OF THE COMPANY BY THE FUND
The Fund will own approximately 95.7% of the outstanding voting equity of
Holdings and pursuant to the terms of the Stockholders Agreement, the Fund will
control the votes of the shares of Common Stock purchased in the Equity Private
Placement (which represent approximately 0.8% of the outstanding voting equity
of Holdings). The Fund will also have the right, subject to the right of the
holders of Preferred Stock to elect two directors in the event certain
provisions of the Preferred Stock are not complied with, to nominate at any time
and from time to time all directors of Holdings (including the right to expand
the board of directors of Holdings and to fill vacancies created thereby) and
will have the right to remove such directors at any time and from time to time
and each of the Management Investors (who will own the remaining approximately
3.5% of the outstanding voting equity of Holdings) will agree to vote in favor
of such nomination or removal of directors. As a result, the Fund will have the
ability to elect all of the directors of Holdings and the Company, appoint new
management and approve any action requiring the approval of Holdings' or the
Company's stockholders, including adopting amendments to the Company's
certificate of incorporation and approving mergers or sales of substantially all
of the Company's assets, in each case, subject to whatever contractual
restrictions that apply to the Company. There can be no assurance that the
interests of the Fund will not conflict with the interests of the Holders of the
Notes. See "Management," "Ownership of Capital Stock," "Certain Transactions"
and "Description of Preferred Stock."
LIMITATION ON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company is obligated to make
an offer to purchase all outstanding Notes at a price equal to 101% of the
principal amount of the Notes, plus accrued interest thereon. The New Bank
Credit Agreement will prohibit the Company from purchasing any Notes, and will
also provide that the occurrence of certain change of control events with
respect to the Company would constitute a default thereunder. In the event of a
Change of Control, the Company must offer to repay all borrowings under the New
Bank Credit Agreement or obtain the consent of its lenders under the New Bank
Credit Agreement to the purchase of Notes. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain prohibited from
purchasing Notes. In such case, the Company's failure to purchase tendered Notes
would constitute a default under the Indenture, which, in turn, would constitute
a default under the New Bank Credit Agreement. There can be no assurance that
the Company will have the financial ability to purchase the Notes upon the
occurrence of a Change of Control. There can be no assurance that the Company
will be able to comply with all of its obligations under the New Bank Credit
Agreement, the Indenture and the other indebtedness upon the occurrence of a
Change of Control. The maximum amount of borrowings that may be outstanding
under the New Bank Credit Agreement is $225.0 million. See "Description of
Notes--Change of Control."
ABSENCE OF PUBLIC MARKET FOR NOTES; POSSIBLE VOLATILITY OF NOTES
There is currently no established trading market for the Notes, and there
can be no assurance regarding the future development of a market for the Notes,
the ability of the Holders to sell their Notes or the price at which the Holders
may be able to sell their Notes. The Company does not intend to have the Notes
listed for trading on any national securities exchange or quoted on any
automated dealer quotation system.
The Underwriters have advised the Company that the Underwriters currently
intend to make a market in the Notes, but the Underwriters are not obligated to
do so and any such market-making may be discontinued at any time at their sole
discretion. The liquidity of any market for the Notes will
19
<PAGE>
depend upon the number of holders of the Notes, the interest of securities
dealers in making a market in the Notes and other factors. The absence of an
active market for the Notes could adversely affect the liquidity of the Notes.
The liquidity of, and trading markets for, the Notes may also be adversely
affected by general declines in the market for non-investment grade debt. Such
declines may adversely affect the liquidity of, and trading markets for, the
Notes, independent of the financial performance of, or prospects for, the
Company.
Historically, the market for non-investment grade debt has been subject to
disruptions that have caused substantial volatility in the prices of securities
similar to the Notes. There can be no assurance that the market for the Notes
will not be subject to similar disruptions. Any such disruptions may have a
material adverse effect on the value of the Notes.
FRAUDULENT CONVEYANCE
Management believes that the indebtedness represented by the Notes is being
incurred for proper purposes and in good faith, and that, based on present
forecasts, asset valuations and other financial information, after the
consummation of the Transactions, the Company will be solvent, will have
sufficient capital for carrying on its business and will be able to pay its
debts as they mature. See, however, "--Substantial Leverage; Ability to Service
Indebtedness." Notwithstanding Management's belief, however, under federal or
state fraudulent transfer laws, if a court of competent jurisdiction in a suit
by an unpaid creditor or a representative of creditors (such as a trustee in
bankruptcy or a debtor-in-possession) were to find that, at the time of the
incurrence of such indebtedness, the Company was insolvent, was rendered
insolvent by reason of such incurrence, was engaged in a business or transaction
for which its remaining assets constituted unreasonably small capital, intended
to incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, or intended to hinder, delay or defraud its creditors,
and that the indebtedness was incurred for less than reasonably equivalent
value, then such court could, among other things, (a) void all or a portion of
the Company's obligations to the Holders of the Notes, the effect of which would
be that the Holders of the Notes may not be repaid in full and/or (b)
subordinate the Company's obligations to the Holders of the Notes to other
existing and future indebtedness of the Company to a greater extent than would
otherwise be the case, the effect of which would be to entitle such other
creditors to be paid in full before any payment could be made on the Notes.
20
<PAGE>
USE OF PROCEEDS
The net proceeds of the Offering are estimated to be $ million after
deduction of underwriting discounts and commissions and expenses of the
Offering. The net proceeds of the Offering will be used to pay a portion of the
cash consideration payable to Rockwell in the Acquisition and to meet a portion
of certain other cash requirements arising out of or in connection with the
Transactions, including transaction costs.
The following table sets forth the sources and uses of funds related to the
Transactions:
(IN MILLIONS)
-------------
SOURCES OF FUNDS
New Bank Credit Agreement(a).................................... $ 75.3
Senior Subordinated Notes....................................... 225.0
-------------
Total Debt.................................................. 300.3
Sale of Customer Notes.......................................... 163.7
Issuance of Equity(b)........................................... 164.0
-------------
Total..................................................... $ 628.0
-------------
-------------
USES OF FUNDS
Cash Consideration.............................................. $ 552.5
Issuance of Preferred Stock of Holdings......................... 47.5
Transaction Costs............................................... 26.0
Loans to Management Investors................................... 2.0
-------------
Total..................................................... $ 628.0
-------------
-------------
- ------------
<TABLE>
<C> <S>
(a) The Bank Facilities provide for a Term Loan Facility aggregating $75 million and a
Revolving Credit Facility of $150 million (approximately $0.3 million of which will be
drawn down on the Closing Date in cash in connection with the Acquisition and
approximately $31.4 million of which will be drawn down on the Closing Date in
connection with the issuance, assumption or replacement of letters of credit, comprised
of approximately $6.9 million relating to the sale of Customer Notes and approximately
$24.5 million relating to the assumption or replacement of certain outstanding letters
of credit). See "Description of New Bank Credit Agreement" and "Description of Sale of
Customer Notes." The Purchase Agreement provides for a post-closing purchase price
adjustment, pursuant to which the Company may receive from Rockwell or be required to
make to Rockwell additional payments. The Company intends to pay down the Revolving
Credit Facility or draw down additional amounts under the Revolving Credit Facility, as
the case may be, as a result of such purchase price adjustments. See "The
Acquisition--Purchase Price; Adjustments."
(b) Includes the issuance of 1,165,000 shares of common stock, par value $.01 per share, of
Holdings for an aggregate of $116.5 million in cash (including loans to Management
Investors of $2.0 million) that will be contributed to the Company and 47,500 shares of
Preferred Stock that will be issued by Holdings to Rockwell and that will be pushed
down to the Company for accounting purposes in accordance with GAAP.
</TABLE>
21
<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization, as of June 30,
1996, of Goss on a historical basis and of the Company on a pro forma basis to
give effect to the Transactions. See "Unaudited Pro Forma Combined Financial
Statements."
AS OF JUNE 30, 1996
-------------------
ACTUAL PRO FORMA
------ ---------
(IN MILLIONS)
Cash and cash equivalents............................... $ 3.2 $ 0.0
------ ---------
------ ---------
Debt:
Revolving Credit Facility............................. 34.3 0.3
Term Loan Facility.................................... 0.0 75.0
Senior Subordinated Notes............................. 0.0 225.0
------ ---------
Total debt.......................................... 34.3 300.3
Shareholders' equity:
Holdings Preferred Stock.............................. -- 47.5(a)
Common Stock.......................................... -- 114.5(b)
Rockwell's net investment in Rockwell Graphic
Systems................................................. 507.5 --
------ ---------
Rockwell's net investment (pro forma--total
shareholders' equity)................................... 507.5 162.0
------ ---------
Total capitalization.................................... $541.8 $ 462.3
------ ---------
------ ---------
- ------------
<TABLE>
<C> <S>
(a) Includes 47,500 shares of Preferred Stock that will be issued by Holdings to Rockwell
and that will be pushed down to the Company for accounting purposes in accordance with
GAAP.
(b) Net of loans to Management Investors of $2.0 million. See "Management--Management
Investment."
</TABLE>
22
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined balance sheet of the Company as of June 30,
1996 (the "Pro Forma Combined Balance Sheet") and the unaudited pro forma
combined statements of operations of the Company for the year ended September
30, 1995 and the nine months ended June 30, 1996 (the "Pro Forma Combined
Statement of Operations," together with the Pro Forma Combined Balance Sheet,
the "Pro Forma Combined Financial Statements") have been prepared to illustrate
the estimated effect of the Transactions and the Identified Cost Savings
described elsewhere in this Prospectus and in the accompanying Notes to the Pro
Forma Combined Financial Statements. See "The Acquisition." The Pro Forma
Combined Financial Statements do not purport to represent what the Company's
results of operations or financial condition would actually have been had the
Transactions and Identified Cost Savings in fact occurred as of such dates or to
project the Company's results of operations or financial condition for any
future period or as of any date. In addition, there can be no assurance that the
Identified Cost Savings can be achieved.
The Pro Forma Combined Statement of Operations for the fiscal year ended
September 30, 1995 has been derived from the audited combined financial
statements of the Company included elsewhere in this Prospectus, adjusted to
give pro forma effect to (i) the Transactions and (ii) the Identified Cost
Savings, as if they had occurred as of October 1, 1994. The Pro Forma Combined
Balance Sheet and the Pro Forma Combined Statement of Operations for the nine
months ended June 30, 1996 have been derived from the unaudited combined
financial statements of the Company included elsewhere in this Prospectus,
adjusted to give pro forma effect to (i) the Transactions and (ii) the
Identified Cost Savings, as if they had occurred as of June 30, 1996 with
respect to the Pro Forma Combined Balance Sheet and as of October 1, 1995 with
respect to the Pro Forma Combined Statement of Operations.
The Acquisition will be accounted for using the purchase method of
accounting. Under purchase accounting, the total purchase cost and fair value of
liabilities assumed will be allocated to the tangible and intangible assets and
liabilities based on their respective fair values as of the closing. The Pro
Forma Combined Balance Sheet reflects preliminary estimates, which are subject
to final determination, of the allocation of the purchase price and the
elimination of certain liabilities that will not be assumed by the Company in
connection with the Acquisition. The pro forma adjustments represent
Management's preliminary determination of purchase accounting adjustments and
are based upon available information and certain assumptions that the Company
considers reasonable under the circumstances. Consequently, the amounts
reflected in the Pro Forma Combined Balance Sheet are subject to change.
Management does not expect that differences between the preliminary and final
purchase price allocation will have a material impact on the Company's financial
position and/or results of operations.
The Pro Forma Combined Statements of Operations give pro forma effect to (i)
estimated annual cost savings of approximately $14.0 million associated
primarily with the termination of certain employees, (ii) estimated annual cost
savings of $1.2 million associated primarily with the elimination of selected
employee benefit plans and (iii) estimated annual stand-alone cost savings of
$3.8 million from not needing to replicate certain services previously provided
by Rockwell, as if such transactions had occurred on the first day of the
periods presented. The Pro Forma Combined Statements of Operations exclude (i)
an estimated reserve of $20.2 million associated primarily with severance
payments for the termination of certain employees as part of the Identified Cost
Savings which will be reflected as a reserve as part of the purchase price
allocation, (ii) an estimated non-cash charge of $23.0 million associated with
the amortization of the inventory write-up to fair market value, (iii) patent
litigation expense associated with the Heidelberger litigation liability which
is being retained by Rockwell and (iv) interest income, interest expense, bad
debt expense, operating expense and franchise tax expense related to the
Customer Notes. In accordance with the purchase method of accounting, the
Company will establish reserves for the estimated severance costs, and write-up
of inventory to fair value on the Pro Forma Combined Balance Sheet.
The Pro Forma Financial Statements should be read in conjunction with the
historical combined financial statements of the Company and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus.
23
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales............................................ $709.3 $ 709.3
Cost of sales........................................ 543.2 $ (6.0)(p) 543.5
6.3(q)
---------- ----------- ---------
Gross profit......................................... 166.1 (0.3) 165.8
---------- ----------- ---------
Operating expenses:
Engineering........................................ 28.6 (3.0)(p) 25.6
Sales and marketing................................ 35.1 (1.1)(p) 34.0
General and administrative......................... 45.0 (3.9)(p) 39.0
(1.2)(r)
(3.5)(s)
(1.6)(t)
(0.3)(u)
4.5(v)
Rockwell common expense allocation................. 8.3 (8.3)(v) 0.0
Patent litigation.................................. 3.0 (3.0)(w) 0.0
---------- ----------- ---------
Total operating expenses............................. 120.0 (21.4) 98.6
---------- ----------- ---------
Operating profit..................................... 46.1 21.1 67.2
Interest income...................................... 15.4 (15.4)(y) 0.0
Interest expense:
Related party...................................... (2.8) 3.0(y) 0.0
(0.2)(z)
Other.............................................. (0.2) (34.8)(aa) (35.0)
Other income (expense), net.......................... 1.9 1.9
---------- ----------- ---------
Income before income taxes........................... 60.4 (26.3) 34.1
Provision for income taxes........................... 24.2 (10.5)(bb) 13.7
---------- ----------- ---------
Net income........................................... $ 36.2 $ (15.8) $ 20.4
---------- ----------- ---------
---------- ----------- ---------
Other Data:
Business line operating income..................... $ 62.5 $ 71.7(cc)
EBITDA............................................. 83.9 102.9(dd)
Depreciation and amortization...................... 29.7 35.7(ee)
Non-affiliate interest expense..................... 0.2 32.6(ff)
Ratio of earnings to fixed charges................. 9.9 1.8
Ratio of EBITDA to non-affiliate interest
expense.............................................. 419.5 3.2
</TABLE>
See Notes to the Pro Forma Combined Financial Statements.
25
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
ASSETS HISTORICAL ADJUSTMENTS PRO FORMA
- --------------------------------------------------------- --------- ----------- ---------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents.............................. $ 3.2 $ (3.2)(a) $ 0.0
Accounts receivable, net............................... 125.1 125.1
Customer notes receivable, current portion............. 42.1 (26.8)(b) 15.3
Inventories............................................ 201.9 45.0(c) 246.9
Deferred income taxes.................................. 39.5 (33.0)(d) 6.5
Other current assets................................... 5.3 5.3
--------- ----------- ---------
Total current assets............................... 417.1 (18.0) 399.1
Property and equipment................................... 145.9 50.0(e) 195.9
Customer notes receivable................................ 172.5 (172.5)(b) 0.0
Goodwill................................................. 135.5 50.5(f) 186.0
Financing fees........................................... 0.0 18.0(g) 18.0
Deferred income taxes.................................... 3.4 (3.4)(d) 0.0
Other assets............................................. 14.2 14.2
--------- ----------- ---------
Total assets............................................. $ 888.6 $ (75.4) $ 813.2
--------- ----------- ---------
--------- ----------- ---------
<CAPTION>
LIABILITIES AND ROCKWELL'S NET INVESTMENT AND
SHAREHOLDERS' EQUITY
<S> <C> <C> <C>
Current liabilities:
Accounts payable....................................... $ 53.6 $ 53.6
Advance payments from customers........................ 120.0 120.0
Accrued compensation................................... 13.0 13.0
Due to related parties................................. 11.7 11.7
Income taxes payable................................... 8.8 $ (8.8)(h) 0.0
Revolving credit facilities............................ 34.3 (34.3)(i) 0.3
0.3(j)
Other current liabilities.............................. 116.6 16.3(k) 132.9
--------- ----------- ---------
Total current liabilities.......................... 358.0 (26.5) 331.5
Other liabilities........................................ 14.0 (3.5)(l) 19.7
9.2(m)
Deferred income taxes.................................... 9.1 (9.1)(d) 0.0
Senior term loan......................................... 0.0 75.0(j) 75.0
% Senior Subordinated Notes due 2006..................... 0.0 225.0(j) 225.0
--------- ----------- ---------
Total liabilities........................................ 381.1 270.1 651.2
--------- ----------- ---------
Rockwell's net investment in Rockwell Graphic Systems.... 507.5 (507.5)(o) 0.0
--------- ----------- ---------
Holdings Preferred Stock, 6.5% dividend.................. 47.5(n) 47.5
Common Stock............................................. 114.5(o) 114.5
--------- ----------- ---------
Total shareholders' equity............................... 0.0 162.0 162.0
--------- ----------- ---------
Total liabilities, Rockwell's net investment in Rockwell
Graphic Systems and shareholders' equity................. $ 888.6 $ (75.4) $ 813.2
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
See Notes to the Pro Forma Combined Financial Statements.
24
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Net sales................................................ $481.9 $ 481.9
Cost of sales............................................ 391.9 $ (4.5)(p) 392.1
4.7(q)
---------- ----------- ---------
Gross profit........................................... 90.0 (0.2) 89.8
---------- ----------- ---------
Operating expenses:
Engineering............................................ 23.8 (2.3)(p) 21.5
Sales and marketing.................................... 26.2 (0.8)(p) 25.4
General and administrative............................. 33.7 (2.9)(p) 29.6
(0.9)(r)
(2.4)(s)
(1.2)(t)
(0.1)(u)
3.4(v)
Rockwell common expense allocation..................... 5.8 (5.8)(v) 0.0
Patent litigation...................................... 1.0 (1.0)(w) 0.0
Restructuring charge................................... 3.9 (3.9)(x) 0.0
---------- ----------- ---------
Total operating expenses................................. 94.4 (17.9) 76.5
---------- ----------- ---------
Operating (loss) profit.................................. (4.4) 17.7 13.3
Interest income.......................................... 12.8 (12.8)(y) 0.0
Interest expense:
Related party.......................................... (3.8) 3.0(y) 0.0
0.8(z)
Other.................................................. (0.9) (25.3)(aa) (26.2)
Other income (expense), net............................ (1.4) (1.4)
---------- ----------- ---------
Income (loss) before income taxes........................ 2.3 (16.6) (14.3)
Provision (credit) for income taxes...................... 1.2 (6.6)(bb) (5.4)
---------- ----------- ---------
Net income (loss)........................................ $ 1.1 $ (10.0) $ (8.9)
---------- ----------- ---------
---------- ----------- ---------
Other Data:
Business line operating income......................... $ 9.9 $ 16.7(cc)
EBITDA................................................. 24.8 38.6(dd)
Depreciation and amortization.......................... 20.7 25.3(ee)
Non-affiliate interest expense......................... 0.9 24.4(ff)
Ratio of earnings to fixed charges..................... 1.3 0.5
Ratio of EBITDA to cash non-affiliate interest
expense.................................................. 27.6 1.6
</TABLE>
See Notes to the Pro Forma Combined Financial Statements
26
<PAGE>
NOTES TO THE PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN MILLIONS)
The aggregate purchase price, including related fees and expenses, for Goss
is approximately $626.0, net of a $2.0 loan to Management Investors (subject to
adjustment as a result of changes in selected accounts of Goss). See "The
Acquisition--Purchase Price; Adjustments." The purchase price has been allocated
on a preliminary basis to the net assets of the Company based on estimated fair
values at the date of acquisition with the excess of cost over fair value
allocated to goodwill. The purchase price allocation to property and equipment
will be amortized over the estimated useful lives ranging from 3 to 50 years.
Goodwill will be amortized on a straight line basis over 40 years. Financing
costs will be amortized over the life of the debt (5 to 10 years).
The preliminary allocation of the total purchase price to the assets and
liabilities acquired is as follows:
PURCHASE PRICE
Purchase Price of Common Stock and Assets......................... $600.0
Commissions, Fees and Expenses.................................... 26.0
------
Total Purchase Price.............................................. $626.0
------
------
PRELIMINARY ALLOCATION OF PURCHASE PRICE
Total Current Assets, Net of Deferred Taxes....................... $392.6
Property and Equipment............................................ 195.9
Customer Notes.................................................... 163.7
Other Long Term Assets............................................ 14.2
Goodwill.......................................................... 186.0
Financing Fees.................................................... 18.0
Reserve for costs associated with Identified Cost Savings, Net of
Deferred Income Taxes and Restructure Reserve..................... (9.8)
Liabilities Assumed............................................... (334.6)
------
Total Purchase Price.............................................. $626.0
------
------
Pro forma adjustments reflect estimates which will be refined as additional
information is obtained, particularly in the areas of fair value of property and
equipment and related depreciation expense, and the liability for severance
payments and any adjustment to be made to the cash purchase price in accordance
with the Purchase Agreement.
Pro forma adjustments have been made to the Pro Forma Combined Balance Sheet
to reflect the following:
<TABLE>
<S> <C>
(a) Elimination of cash which is not being received by the Company pursuant to the
Purchase Agreement.
(b) Elimination of Customer Notes which will be sold as of the Closing Date. Certain
short-term date-certain notes held by Rockwell Graphic Systems--Japan Corporation
will be retained by the Company.
(c) Record write-up of inventory from LIFO cost to estimated fair value in accordance
with the purchase method of accounting.
</TABLE>
27
<PAGE>
<TABLE>
<S> <C>
(d) Record (i) elimination of current portion of deferred tax assets ($39.5), long term
portion of deferred tax assets ($3.4) and deferred income tax liability ($9.1) in
accordance with the purchase method of accounting and (ii) current deferred tax
asset ($6.5) associated primarily with severance payments for employees to be
terminated and closure of redundant facilities as part of the Indentified Cost
Savings.
(e) Record write-up of property and equipment to estimated fair value in accordance
with the purchase method of accounting.
(f) Elimination of previously recorded goodwill ($135.5) and the recording of goodwill
resulting from the Acquisition ($186.0) in accordance with the purchase method of
accounting.
(g) Record capitalization of financing fees incurred in connection with the
Acquisition. Financing fees include bank commitment fees, Senior Subordinated Note
placement fees, and the portion of the Stonington structuring fee and other
professional fees attributable to the financing of the Acquisition. See "Certain
Transactions."
(h) Elimination of income taxes payable which, pursuant to the Purchase Agreement, will
not be assumed by the Company.
(i) Elimination of debt which, pursuant to the Purchase Agreement, will not be assumed
by the Company.
(j) Record issuance of debt in connection with the Acquisition. The debt consists of
$0.3 initial borrowing under the Revolving Credit Facility, $75 borrowing under the
Term Loan Facility ($25 of which will be held by Goss Graphic Systems, Inc. and $50
of which will be held by Goss's foreign subsidiaries) and $225.0 borrowing under
the Notes to be issued pursuant to the Offering. In addition, approximately $6.9 of
the Revolving Credit Facility will be drawn down on the closing date in connection
with the issuance of letters of credit relating to the sale of Customer Notes and
approximately $24.5 of the Revolving Credit Facility will be drawn down on the
closing date in connection with the assumption or replacement of certain letters of
credit which are currently outstanding.
(k) Record costs associated primarily with severance payments for employees to be
terminated as part of the Identified Cost Savings made by the Company, less related
restructuring reserves previously recorded, as follows:
</TABLE>
JUNE 30,
1996
--------
Reserve for costs associated with Identified Cost Savings......... $ 20.2
Less restructuring reserves previously recorded................... (3.9)
--------
Pro Forma Adjustment.............................................. $ 16.3
--------
--------
<TABLE>
<S> <C>
(l) Elimination of liability for post-employment benefits for those employees on
long-term disability, which pursuant to the Purchase Agreement is being retained by
Rockwell. The expense associated with this benefit was not eliminated, since the
Company will continue to offer this benefit.
(m) Record liability for post-retirement benefit obligations for active employees at
the Reading and Cedar Rapids facilities, which pursuant to the Purchase Agreement
will be retained by the Company. Since these employees participate in the Rockwell
retirement medical plans, accrued post retirement benefit obligations for these
active employees were not included in the Rockwell Graphic Systems' combined
balance sheet. See "Notes to Combined Financial Statements." The combined
statements of operations include charges related to the Company's portion of
service cost for those employees. The Company's portion of interest cost for the
obligation for these employees is included in note (r).
(n) Record issuance of preferred stock with a 6 1/2% dividend by Holdings to Rockwell
which is pushed down to the Company in accordance with GAAP.
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
(o) Elimination of Rockwell's net investment in Goss and a contribution by Holdings of
$114.5 from the proceeds of the Stonington Investment, the Equity Private Placement
and Management Placement in exchange for common stock of the Company, net of a $2.0
loan to Management Investors.
</TABLE>
Pro forma adjustments have been made to the Pro Forma Combined Statements of
Operations to reflect the following:
<TABLE>
<S> <C>
(p) Record estimated cost savings as a result of a reduction of headcount and the
closure of certain facilities pursuant to the Identified Cost Savings, as follows:
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 JUNE 30, 1996
------------------ -----------------
<S> <C> <C>
Cost of sales............................ $ 6.0 $ 4.5
Engineering.............................. 3.0 2.3
Sales and marketing...................... 1.1 0.8
General and administrative............... 3.6 2.7
----- -----
Sub-total headcount reduction............ 13.7 10.3
Rent savings (general and
administrative).......................... 0.3 0.2
----- -----
Total.............................. $ 14.0 $10.5
----- -----
----- -----
</TABLE>
<TABLE>
<S> <C>
The Company anticipates that it will be able to reduce its manufacturing costs by
closing redundant facilities and transferring the production to other under
utilized facilities. In addition, the Company plans on reducing its engineering,
sales and marketing and general and administrative expenses by reducing headcount
and outsourcing certain non-strategic activities. The Company has identified
specific employees and/or functional areas where employees will be terminated. The
Company plans to implement its operating improvement plan over a six-month period
following the Acquisition. See "Business--Identified Cost Savings."
(q) Record incremental depreciation expense on property and equipment.
(r) Estimated net cost savings as a result of the elimination or revision of selected
employee benefit plans pursuant to the Identified Cost Savings, as follows:
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 JUNE 30, 1996
------------------ -----------------
<S> <C> <C>
General and administrative............... $1.2 $ 0.9
--- ---
Total.............................. $1.2 $ 0.9
--- ---
--- ---
</TABLE>
<TABLE>
<S> <C>
Certain U.S. employees are covered by the Rockwell Retirement Plan for eligible
employees. Goss will not assume any of the assets or liabilities of this plan and
will not replicate this employee benefit. In addition, certain U.S. employees of
Goss are covered by the Rockwell Retirement Income Plan for Certain Salaried
Employees in General Industries Operations, a subplan of the Rockwell Retirement
Plan for Eligible Employees. The Company will not acquire any of the assets or
assume any of the liabilities associated with this subplan and will not replicate
this employee benefit.
(s) Elimination of bad debt expense incurred in connection with the Customer Notes
which will be sold as of the Closing Date. See "Description of Sale of Customer
Notes."
(t) Elimination of operating expenses and franchise tax expense associated with
Customer Notes. These Customer Notes will be sold as of the Closing Date. See
"Description of Sale of Customer Notes."
(u) Record reduced amortization of goodwill. The estimated useful life for these assets
is 40 years.
</TABLE>
29
<PAGE>
<TABLE>
<S> <C>
(v) Elimination of Rockwell allocated costs, net of estimated stand-alone costs.
Rockwell currently charges Goss for certain services based on the amount and nature
of services provided. In addition, it allocates common costs based on a percentage
of sales. The common costs allocated by Rockwell cover certain administrative and
management services such as corporate oversight, cash management, treasury, legal,
patent, tax, insurance administration, corporate accounting and communication
services. Rockwell common expense allocation exceeds the estimated stand alone
costs for the Company primarily because the Company will not replicate certain
services, such as corporate oversight and corporate accounting, which are currently
provided by Rockwell. The Rockwell common expense allocation has been eliminated
and the stand-alone costs have been added as follows:
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 JUNE 30, 1996
------------------ -----------------
<S> <C> <C>
Rockwell common expense allocation....... $ (8.3) $(5.8)
----- -----
----- -----
Estimated stand-alone costs.............. $ 4.5 $ 3.4
----- -----
----- -----
</TABLE>
<TABLE>
<S> <C>
(w) Elimination of expense associated with the litigation with Heidelberger
Druckmaschinen AG, which pursuant to the Purchase Agreement will not be assumed by
the Company. This item is reflected in Rockwell's net investment in Goss as of
June 30, 1996.
(x) Elimination of $3.9 of restructuring expense. This expense consisted primarily of
severance costs associated with the reorganization of the commercial sales
organization and reduction of engineering positions at redundant facilities
directly attributable to the Transaction. The cost savings associated with this
restructuring have been included in (p) above.
(y) Elimination of interest income and interest expense related to the Customer Notes.
These Customer Notes will be sold as of the Acquisition Closing.
(z) Elimination of interest income and interest expense related to transactions with
Rockwell.
(aa) Adjustments to interest (income) expense, net as follows:
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1995 JUNE 30, 1996
------------------ -----------------
<S> <C> <C>
Interest expense on Revolving Credit Facility
(assuming an interest rate of 8.25%)............ $ 0.0 $ 0.0
Interest expense on Term Loan Facility (assuming
an interest rate of 8.25%)...................... 6.2 4.6
Interest expense on Senior Subordinated Notes
(assuming an interest rate of 11.75%)........... 26.4 19.8
Amortization of financing costs................. 2.4 1.8
Elimination of interest expense................. (0.2) (0.9)
----- -----
Total pro forma adjustments............... $ 34.8 $25.3
----- -----
----- -----
</TABLE>
<TABLE>
<S> <C>
Following the Acquisition, the Company intends to utilize excess cash to reduce
debt and, therefore, does not expect to have excess cash to invest to generate
interest income. A one- half of one percent change in assumed interest rates would
impact interest expense on the Revolving Credit Facility by less than $0.1,
interest expense on the Term Loan Facility by $0.4 and interest expense on the
Senior Subordinated Notes by $1.1.
(bb) Record income tax effect of the pro forma adjustments at an assumed effective rate
of 40%.
(cc) Business line operating income represents net sales less cost of sales and
operating expenses identifiable to the Company's business lines. Business line
operating income excludes related party administrative, patent litigation and
restructuring charges, which, due to their nature, are disclosed separately in the
financial statements. In addition, business line operating income excludes
operating expenses and bad debt expenses related to Customer Notes. See "Selected
Combined Financial Data" included elsewhere herein.
</TABLE>
30
<PAGE>
<TABLE>
<S> <C>
(dd) EBITDA represents business line operating income less related party administrative
expenses plus depreciation and amortization. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to incur and service
debt. EBITDA should not be considered by investors as an alternative to operating
income as determined in accordance with GAAP, as an indicator of the Company's
operating performance or as an alterative to net cash provided by (used for)
operating activities as determined in accordance with GAAP. See "Selected Combined
Financial Data" included elsewhere herein.
(ee) Record incremental depreciation on property and equipment (see note (q)) plus
incremental amortization of goodwill and other intangible assets (see note (u)).
(ff) Non-affiliate interest expense represents interest expense, excluding the
amortization of financing costs of $2.4 and $1.8 for the year ended September 30,
1995 and the nine months ended June 30, 1996, respectively.
</TABLE>
31
<PAGE>
SELECTED COMBINED FINANCIAL DATA
(DOLLARS IN MILLIONS)
The following table sets forth selected historical combined financial data
with respect to Goss for the periods ended and as of the dates indicated. The
selected historical combined financial data for the fiscal years ended September
30, 1993, 1994 and 1995 are derived directly from the audited combined financial
statements of Goss included elsewhere in this Prospectus, except for business
line net sales, business line operating income, Customer Notes operating and bad
debt expenses, interest income (expense), net, Customer Notes interest income
(expense), net, ratio of earnings to fixed charges and backlog. The selected
historical combined financial data for the nine months ended June 30, 1995 and
1996 are derived directly from the unaudited combined financial statements of
Goss included elsewhere in this Prospectus, except for business line net sales,
business line operating income, Customer Notes operating and bad debt expenses,
interest income (expense), net, Customer Notes interest income (expense), net,
ratio of earnings to fixed charges and backlog. Such unaudited combined
financial statements, in the opinion of Management, include all adjustments
necessary for the fair presentation of the financial condition and the results
of operations of Goss for such periods and as of such dates. Operating results
for the nine months ended June 30, 1996 are not necessarily indicative of the
results of operations that may be expected for the year ended September 30,
1996. This information should be read in conjunction with the combined financial
statements of Goss and the notes thereto appearing elsewhere in this Prospectus
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The selected historical statement of operations for the fiscal
years ended September 30, 1991 and 1992 are derived from unaudited combined
financial statements of Goss that are not included in this Prospectus.
32
<PAGE>
SELECTED COMBINED FINANCIAL DATA
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEARS ENDED SEPTEMBER 30, ENDED JUNE 30,
------------------------------------------------ ---------------
HISTORICAL HISTORICAL
------------------------------------------------ ---------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Business line sales:
Newspaper................................. $ 785.5 $ 527.8 $ 390.8 $435.8 $512.2 $362.3 $381.7
Insert.................................... 81.8 87.5 143.5 110.7 93.7 70.3 64.7
Commercial................................ 93.7 72.7 92.7 101.7 103.4 76.7 35.5
-------- -------- -------- ------ ------ ------ ------
Total net sales......................... 961.0 688.0 627.0 648.2 709.3 509.3 481.9
Business line operating income (loss) (a):
Newspaper................................. 139.9 47.8 27.0 40.6 68.4 56.2 35.9
Insert.................................... 0.3 (7.4) 11.7 9.4 7.8 3.3 2.9
Commercial................................ (35.0) (32.9) (34.8) (17.0) (13.7) (7.4) (28.9)(b)
-------- -------- -------- ------ ------ ------ ------
Total business line operating income.... 105.2 7.5 3.9 33.0 62.5 52.1 9.9
Rockwell common expense allocation (c)..... (11.5) (8.1) (7.5) (6.8) (8.3) (5.8) (5.8)
Patent litigation (d)...................... 0.0 0.0 0.0 0.0 (3.0) 0.0 (1.0)
Restructuring charge (e)................... (49.5) (2.2) (5.4) 0.0 0.0 0.0 (3.9)
Customer notes operating and bad debt
expenses(f)................................ (6.9) (3.4) (10.0) (19.6) (5.1) (2.9) (3.6)
-------- -------- -------- ------ ------ ------ ------
Operating (loss) profit................. 37.3 (6.2) (19.0) 6.6 46.1 43.4 (4.4)
Other income (expense), net................ (0.5) 1.2 0.8 (2.1) 1.9 0.8 (1.4)
-------- -------- -------- ------ ------ ------ ------
Income (loss) before interest, income
taxes and
cumulative effect of accounting
change..................................... 36.8 (5.0) (18.2) 4.5 48.0 44.2 (5.8)
Interest income (expense), net............. (19.1) (15.3) (8.7) (3.4) 0.0 0.0 (1.6)
Customer notes interest income (expense),
net........................................ 13.5 16.6 19.6 13.6 12.4 8.4 9.7
-------- -------- -------- ------ ------ ------ ------
Income (loss) before income taxes and
cumulative effect of accounting
change..................................... 31.2 (3.7) (7.3) 14.7 60.4 52.6 2.3
Income tax expense (benefit)............... 13.2 (0.8) (1.8) 5.3 24.2 21.1 1.2
Cumulative effect of change in accounting
principle, net............................. 0.0 0.0 (4.6) 0.0 0.0 0.0 0.0
-------- -------- -------- ------ ------ ------ ------
Net income.............................. $ 18.0 $ (2.9) $ (10.1) $ 9.4 $ 36.2 $ 31.5 $ 1.1
-------- -------- -------- ------ ------ ------ ------
-------- -------- -------- ------ ------ ------ ------
Other Data:
Backlog (at period end) (g)................ $ 525.1 $ 421.3 $ 549.8 $537.7 $480.7 $496.9 $442.6
EBITDA(h).................................. 130.4 34.9 26.8 55.5 83.9 68.6 24.8
Depreciation and amortization.............. 36.7 35.5 30.4 29.3 29.7 22.3 20.7
Net cash (used for) provided by operating
activities(i).............................. (61.2) 71.3 157.5 95.0 12.4
Net cash used for investing
activities(i).............................. (10.4) (25.7) (9.4) (5.8) (1.8)
Net cash provided by (used for) financing
activities(i).............................. 66.2 (37.2) (155.5) (99.1) (14.1)
Capital expenditures....................... 29.6 21.2 12.5 11.6 11.5 7.9 3.4
Ratio of EBITDA to non-affiliate interest
expense(j)................................. 343.0 27.6
Ratio of earnings to fixed charges(k)...... 1.9 0.8 0.6 2.4 10.2 11.7 1.3
Balance Sheet Data (at period end):
Total assets............................... $1,093.0 $1,011.7 $1,007.7 $950.9 $947.0 $956.3 $888.6
Total debt................................. 4.6 3.2 12.5 4.1 2.6 11.6 34.3
Rockwell's net investment in Rockwell
Graphic Systems............................ 639.1 623.8 627.3 628.7 543.1 586.6 507.5
</TABLE>
33
<PAGE>
- ------------
<TABLE>
<C> <S>
(a) Business line operating income represents, for each of the Company's three business
lines, net sales less cost of sales and operating expenses. Business line operating
income is before Rockwell common expense allocation, patent litigation and
restructuring charges, which, due to their nature, are disclosed separately in the
financial statements. In addition, business line operating income excludes operating
expenses, bad debt expenses and interest income (expense), net related to Customer
Notes.
(b) For the nine months ended June 30, 1996, includes a $12.7 charge for warranty and
post-shipment expenses incurred in fiscal 1996 in respect of certain commercial presses
shipped in fiscal 1993, 1994 and 1995. For other periods presented, charges for
warranty and post-shipment expenses incurred are reflected in the period in which the
sale was recorded.
(c) Rockwell common expense allocation represents expenses charged by Rockwell on a
percentage of sales basis for administrative and management services such as corporate
oversight, cash management, treasury, legal, patent, tax, insurance, general management
and administration, corporate accounting and communication services.
(d) Patent litigation represents expenses related to the Heidelberger patent infringement
litigation liability which is being retained by Rockwell. See "Business--Legal
Proceedings" included elsewhere herein.
(e) The restructuring charge recorded in the second quarter of 1996 represents reserves
associated primarily with severance payments for terminated employees and the closure
of certain redundant facilities. This charge has been excluded from the pro forma
results. The restructuring charges recorded in the 1991 through 1993 timeframe were
associated with the closure of a major manufacturing facility in the United Kingdom and
the associated relocation of product lines and consolidation of manufacturing
operations at several locations. See Note (x) in the Unaudited Pro Forma Combined
Financial Statements.
(f) Customer notes operating expenses and bad debt expenses represent expenses associated
with the Company's portfolio of Customer Notes. These charges have been excluded from
the pro forma results. See Note (s) and (t) to the Unaudited Pro Forma Combined
Financial Statements.
(g) Backlog represents the aggregate dollar value of unfilled press orders under contract
with the Company at end of each period.
(h) EBITDA represents business line operating income less Rockwell common expense
allocation plus depreciation and amortization. EBITDA is presented because it is a
widely accepted financial indicator of a company's ability to incur and service debt.
EBITDA should not be considered by investors as an alternative to operating income "as
determined in accordance with GAAP," as an indicator of the Company's operating
performance or as an alternative to net cash provided by (used for) operating
activities "as determined in accordance with GAAP." See the Combined Financial
Statements, including the Combined Statements of Cash Flows, included elsewhere herein.
(i) The Company was not audited for the fiscal years ended prior to September 30, 1993. As
such, the Company does not have adequate information to provide cash flow data for the
years ended September 30, 1991 and September 30, 1992 on a basis consistent with that
provided in the audited financial statements.
(j) Ratio of EBITDA to non-affiliate interest expense represents EBITDA divided by
non-affiliate interest expense. Non-affiliate interest expense totaled $0.2 and $0.9
for the nine months ended June 30, 1995 and June 30, 1996, respectively.
(k) For purposes of computing the ratio of earnings to fixed charges, "earnings" consist of
income before income taxes and cumulative effect of changes in accounting plus fixed
charges less capitalized interest. "Fixed charges" consist of cash/intercompany
interest expense, capitalized interest, scheduled debt payments, amortization of
deferred financing costs, pre-tax preferred stock dividends and one-third of rental
expense (the portion deemed representative of the interest factor).
</TABLE>
34
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Combined
Financial Statements, the Selected Combined Financial Data, the Unaudited Pro
Forma Combined Financial Statements, and the other financial information and
data appearing elsewhere herein.
The following discussion and analysis of the financial condition and the
results of operations covers periods before completion of the Transactions.
Accordingly, the discussion and analysis of such periods do not reflect the
significant impact that the Transactions will have on the Company. In addition,
the financial information included in the following discussion may not
necessarily reflect the results of operations, financial position and cash flows
of the Company in the future or what the results of operations, financial
position and cash flows would have been had the Company been a separate, stand-
alone entity during the periods presented. This is due to the historical
operation of Goss as part of the larger Rockwell enterprise.
GENERAL
Goss operates through three business categories: (i) newspaper, which
produces both double-width and single-width web offset newspaper press systems
for publishers worldwide, (ii) insert, which manufactures specialized web offset
presses for printing advertising inserts, and (iii) commercial, which produces
web offset presses that print a broad variety of commercial products, including
brochures and promotional materials, catalogs, magazines, books, financial
publications and directories. Goss's newspaper, insert and commercial businesses
accounted for 72%, 13% and 15%, respectively, of fiscal 1995 net sales of $709
million.
Goss serves its global markets from its principal production and assembly
facilities located in the U.S. (Cedar Rapids, IA and Reading, PA), Europe
(Preston, England and Nantes, France) and Japan. Goss generally serves the North
and South American markets from the U.S.; sells into Europe, the Middle East,
Africa and India from Europe; and serves Japan, China and Korea from its
Japanese facility. Other markets in the Asia/Pacific region generally are
serviced from the U.S. or Europe depending upon factors such as customer
equipment preferences and manufacturing capacity.
Goss's operating expenses are comprised of engineering, sales and marketing,
and general and administrative expenses. Engineering expenses for a particular
business category can vary significantly from period to period because such
expenses are charged to the three business categories based upon the product
development projects undertaken in such period by such business. In addition,
certain engineering expenses appear in cost of goods sold to the extent they are
associated with engineering and design for a specific customer contract. General
and administrative expenses are generally allocated to each business category
over the course of the fiscal year based on budgeted sales, although bad debt
provisions are applied to the segment giving rise to such provisions. Sales and
marketing expenses generally are direct expenses incurred by each business.
35
<PAGE>
The results of the combined operations of Goss and of the newspaper, insert
and commercial businesses are set forth below.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED ENDED
SEPTEMBER 30, JUNE 30,
-------------------------- ----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NET SALES FROM:
Newspaper business................................ $390.8 $435.8 $512.2 $362.3 $381.7
Insert business................................... 143.5 110.7 93.7 70.3 64.7
Commercial business............................... 92.7 101.7 103.4 76.7 35.5
------ ------ ------ ------ ------
Total Net Sales............................... 627.0 648.2 709.3 509.3 481.9
COST OF SALES FROM:
Newspaper business................................ 299.2 336.7 379.1 260.0 292.5
Insert business................................... 117.5 87.7 74.6 57.1 52.7
Commercial business............................... 102.6 100.4 89.5 63.6 46.7
------ ------ ------ ------ ------
Total Cost of Sales........................... 519.3 524.8 543.2 380.7 391.9
OPERATING EXPENSES FROM:
Newspaper business................................ 64.6 58.5 64.7 46.1 53.3
Insert business................................... 14.3 13.6 11.3 9.9 9.1
Commercial business............................... 24.9 18.3 27.6 20.5 17.7
------ ------ ------ ------ ------
Total Business Line Operating Expenses........ 103.8 90.4 103.6 76.5 80.1
OPERATING INCOME (LOSS) FROM:
Newspaper business................................ 27.0 40.6 68.4 56.2 35.9
Insert business................................... 11.7 9.4 7.8 3.3 2.9
Commercial business............................... (34.8) (17.0) (13.7) (7.4) (28.9)
------ ------ ------ ------ ------
Total Business Line Operating Income.......... 3.9 33.0 62.5 52.1 9.9
Rockwell common expense allocation................ (7.5) (6.8) (8.3) (5.8) (5.8)
Restructuring Charges............................. (5.4) -- -- -- (3.9)
Patent Litigation................................. -- -- (3.0) -- (1.0)
------ ------ ------ ------ ------
Operating Profit (loss) Before Customer Note
Expenses.......................................... (9.0) 26.2 51.2 46.3 (0.8)
NEWSPAPER BUSINESS (AS A % OF NET SALES)
Net Sales......................................... 100% 100% 100% 100% 100%
Gross Profit...................................... 23% 23% 26% 28% 23%
Business Line Operating Income.................... 7% 9% 13% 16% 9%
INSERT BUSINESS (AS A % OF NET SALES)
Net Sales......................................... 100% 100% 100% 100% 100%
Gross Profit...................................... 18% 21% 20% 19% 19%
Business Line Operating Income.................... 8% 8% 8% 5% 4%
COMMERCIAL BUSINESS (AS A % OF NET SALES)
Net Sales......................................... 100% 100% 100% 100% 100%
Gross Profit (loss)............................... (11%) 1% 13% 17% (32%)
Business Line Operating Income.................... (38%) (17%) (13%) (10%) (81%)
</TABLE>
36
<PAGE>
RESULTS OF OPERATIONS
Nine Months Ended June 30, 1996 Compared to Nine Months Ended June 30, 1995
NET SALES
Net sales decreased $27.4 million or 5.4% to $481.9 million for the nine
months ended June 30, 1996 from $509.3 million for the nine months ended June
30, 1995. This decrease was primarily attributable to a softening of the market
in the commercial and insert businesses, which more than offset increased sales
in the newspaper businesses. The Company believes that, although the precise
duration cannot be predicted with certainty, the softening market conditions in
the commercial business and, to a lesser extent, the insert business may
continue for the next several quarters.
Net sales in the newspaper business increased $19.4 million or 5.4% to
$381.7 million for the nine months ended June 30, 1996 from $362.3 million for
the nine months ended June 30, 1995. Net sales in the large newspaper business
increased $14.7 million or 5.0% to $314.0 million for the nine months ended June
30, 1996 from $299.3 million for the nine months ended June 30, 1995. For the
small newspaper business, sales increased $4.7 million or 7.5% to $67.7 million
from $63.0 million for the comparable periods. The overall increase in newspaper
sales increase was primarily attributable to the shipment of several double
width newspapers press orders to customers in the Asia/Pacific region, partially
offset by lower shipments of small newspapers presses, particularly in Europe.
Two orders for large newspaper press systems together accounted for
approximately 25% of net sales in the newspaper business for the nine months
ended June 30, 1996.
Net sales in the insert business decreased $5.6 million or 8.0% to $64.7
million for the nine months ended June 30, 1996 from $70.3 million for the nine
months ended June 30, 1995.
Net sales in the commercial business decreased $41.2 million or 53.7% to
$35.5 million for the nine months ended June 30, 1996 from $76.7 million for the
nine months ended June 30, 1995. This decrease was primarily attributable to a
soft market in the U.S., and performance issues with the World 16 commercial
press which slowed market acceptance of that press. In addition, significant
press inventory in Europe was sold in the first nine months of 1995 in
connection with Goss's decision to concentrate on the U.S. commercial market.
See "Risk Factors--Commercial Business Performance Issues."
GROSS PROFIT
Gross profit decreased $38.6 million or 30.0% to $90.0 million for the nine
months ended June 30, 1996 from $128.6 million for the nine months ended June
30, 1995. The gross profit margin declined to 18.7% for the nine months ended
June 30, 1996 from 25.3% for the nine months ended June 30, 1995. This decline
in gross profit margin was primarily attributable to the $13.1 million decrease
in gross profit in the newspaper business discussed below and to $12.7 million
in charges recorded in 1996 related to warranty and product performance issues
in the commercial business. A substantial majority (79%) of this charge was
associated with the World 16 and G25W products with the balance relating to
other commercial presses which have experienced performance problems of a more
isolated nature.
Gross profit in the newspaper business decreased $13.1 million or 12.8% to
$89.2 million for the nine months ended June 30, 1996 from $102.3 million for
the nine months ended June 30, 1995. The gross profit margin declined to 23.4%
for the nine months ended June 30, 1996 from 28.2% for the nine months ended
June 30, 1995. This decline in gross profit margin was primarily attributable to
substantially lower margins on a large order for a customer in the Asia/Pacific
region. Excluding this large Asia/Pacific order, the gross margin in the
newspaper business was approximately 26% for the nine months ended June 30,
1996.
Gross profit in the insert business decreased $1.2 million or 9.1% to $12.0
million for the nine months ended June 30, 1996 from $13.2 million for the nine
months ended June 30, 1995. This decrease
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was primarily attributable to decreased sales volume. The gross profit margin
decreased slightly to 18.5% for the nine months ended June 30, 1996 from 18.8%
for the nine months ended June 30, 1995. The decline in gross profit margin was
due to a less favorable mix of contracts in 1996.
Gross profit in the commercial business decreased $24.3 million or 185.5% to
a loss of $11.2 million for the nine months ended June 30, 1996 from $13.1
million profit for the nine months ended June 30, 1995. This decrease was
primarily attributable to charges recorded in 1996 relating to the resolution of
customer and product performance issues on sales of newly introduced commercial
presses in 1993 and 1994. New products which were shipped in 1993 and 1994
continued to experience high warranty and post-shipment expenses and as a result
charges of $12.7 million were recorded in the nine months ended June 30, 1996.
These charges were to complete equipment modifications and to resolve certain
customer issues. In addition to these charges, gross profits were negatively
impacted by the significant reduction in sales volume and the impact of fixed
production costs. See "Risk Factors--Commercial Business Performance Issues."
BUSINESS LINE OPERATING EXPENSES
Operating expenses increased $3.6 million or 4.7% to $80.1 million for the
nine months ended June 30, 1996 from $76.5 million for the nine months ended
June 30, 1995. This increase was primarily attributable to higher engineering
expenses being charged to operating expenses as compared to cost of sales. As a
percent of net sales, operating expenses increased to 16.6% for the nine months
ended June 30, 1996 from 15.0% for the nine months ended June 30, 1995.
Operating expenses in the newspaper business increased $7.2 million or 15.6%
to $53.3 million for the nine months ended June 30, 1996 from $46.1 million for
the nine months ended June 30, 1995. This increase was primarily attributable to
a greater allocation of engineering expenditures being charged to operating
expenses associated with general product development in 1996 as compared to 1995
when a greater portion of engineering was charged to cost of sales for work
relating to the first shipment of the Newsliner product in 1995 as discussed
below. Foreign agent commissions were also higher in 1996. As a percent of net
sales, operating expenses increased to 14.0% from 12.7% in 1995.
Operating expenses in the insert business decreased $0.8 million or 8.1% to
$9.1 million for the nine months ended June 30, 1996 from $9.9 million for the
nine months ended June 30, 1995. This decrease was primarily attributable to a
reduction in general and administrative expenses.
Operating expenses in the commercial business decreased $2.8 million or
13.7% to $17.7 million for the nine months ended June 3 0, 1996 from $20.5
million for the nine months ended June 30, 1995. This decrease was primarily
attributable to lower general and administrative and engineering expenditures.
BUSINESS LINE OPERATING INCOME
Operating income decreased $42.2 million or 81.0% to $9.9 million for the
nine months ended June 30, 1996 from $52.1 million for the nine months ended
June 30, 1995. As a percent of net sales, operating income declined to 2.1% for
the nine months ended June 30, 1996 from 10.2% for the nine months ended June
30, 1995. This decline was primarily attributable to the $13.1 million decline
in gross profit in the newspaper business and the $12.7 million of commercial
warranty and product performance charges recorded in 1996 and significantly
lower commercial sales.
Operating income for the newspaper business decreased $20.3 million or 36.1%
to $35.9 million for the nine months ended June 30, 1996 from $56.2 million for
the nine months ended June 30, 1995. As a percent of sales, operating income
decreased to 9.4% for the nine months ended June 30, 1996 from 15.5% for the
nine months ended June 30, 1995. This decrease was primarily attributable to the
relatively higher engineering expenditures allocated to operating expenses in
respect of general product development work versus allocation to cost of sales
for work related to specific customer contracts and
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the decline in the gross profit margin percentage attributable to the
significant contract in the Asia/Pacific region each as discussed above.
Operating income for the insert business decreased $0.4 million or 12.1% to
$2.9 million for the nine months ended June 30, 1996 from $3.3 million for the
nine months ended June 30, 1995. As a percent of sales, operating income
decreased to 4.5% for the nine months ended June 30, 1996 from 4.7% for the nine
months ended June 30, 1995. Decreased sales partially offset by a reduction in
operating expenses contributed to this degradation in operating income.
Operating income for the commercial business decreased $21.5 million or
290.5% to a loss of $28.9 million for the nine months ended June 30, 1996 from a
loss of $7.4 million for the nine months ended June 30, 1995. This decrease was
primarily attributable to the $12.7 million of commercial warranty and product
performance charges recorded in 1996 and to the $41.2 million decrease in sales.
Year Ended September 30, 1995 Compared to Year Ended September 30, 1994
NET SALES
Net sales increased $61.1 million or 9.4% to $709.3 million in 1995 from
$648.2 million in 1994. This increase was primarily attributable to an increase
in net sales in Goss's newspaper business of $76.4 million or 17.5% partially
offset by a decline in net sales in the insert business of $17.0 million or
15.4%.
Net sales in the newspaper business increased $76.4 million or 17.5% to
$512.2 million in 1995 from $435.8 million in 1994 primarily as a result of a
$58.2 million increase in sales from the U.S. locations as the U.S. and South
American markets continued to improve following a cyclical downturn in 1992 and
1993. In addition, Goss benefitted from (i) increases in press additions as
several newspapers added more color capacity and (ii) its first shipment of the
Newsliner product in 1995, to a large U.S. metropolitan daily newspaper. Goss
also benefitted from an increase in net sales of $24.4 million or 15.1% in
Europe, largely a result of the success of Universal single-width press sales to
the Asia/Pacific region. These increases were partially offset by results in
Japan where the Company experienced a decrease in net sales of $6.2 million or
8.5% due to a weakening of export sales to China attributable to an increase in
the Yen (in which Goss's Japanese costs are denominated) versus the U.S. dollar
(in which export revenues to China are denominated).
Net sales in the insert business decreased $17.0 million or 15.4% to $93.7
million in 1995 from $110.7 million in 1994. This decrease is primarily
attributable to decreased demand for new insert presses due to consolidation
among insert printers and continued decline from a peak purchasing period which
occurred in 1993.
Net sales in the commercial business increased $1.7 million or 1.7% to
$103.4 million in 1995 from $101.7 million in 1994. This increase was primarily
attributable to an increase in European sales of $6.2 million or 44.6%, as Goss
sold off inventory in connection with its decision to concentrate on the U.S.
commercial market. Net sales in the U.S. declined $4.5 million or 5.1% primarily
as a result of soft market conditions relative to 1994 and product performance
issues which impacted market acceptance of the World 16 press. See "Risk
Factors--Commercial Business Performance Issues."
GROSS PROFIT
Gross profit increased $42.7 million or 34.6% to $166.1 million in 1995 from
$123.4 million in 1994. The gross profit margin improved to 23.4% in 1995 from
19.0% in 1994. This improvement was primarily attributable to increased sales
volume in the newspaper business, improved pricing and the impact of cost
reduction initiatives, particularly in the commercial business.
Gross profit in the newspaper business increased $34.0 million or 34.3% to
$133.1 million in 1995 from $99.1 million in 1994. The gross profit margin
improved to 26.0% in fiscal 1995 from 22.7% in
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fiscal 1994 due to improved pricing in both large newspapers and small
newspapers. In large newspapers, Goss benefitted in the U.S. from a better mix
of both higher margin export business and higher margin color press additions,
which was partially offset by lower margins from Japan due to a 8.5% reduction
in sales. In small newspapers, Goss benefitted from increased volume due to
global market acceptance of the Universal single width newspaper press which is
produced in Europe.
Gross profit in the insert business decreased $3.9 million or 17.0% to $19.1
million in 1995 from $23.0 million in 1994. This decrease was primarily
attributable to lower sales volume. The gross profit margin decreased slightly
to 20.4% in 1995 compared to 20.8% in 1994.
Gross profit in the commercial business increased $12.6 million or 969.2% to
$13.9 million in 1995 from $1.3 million in 1994. The gross profit margin
increased to 13.4% in 1995 from 1.3% in 1994. This increase was primarily
attributable to the favorable impact of product cost reduction programs and a
reduction in post-shipment expenses associated with three World 16 and two G25W
presses installed in 1993 and 1994, each of which required incurring additional
expenses in 1994 to address performance issues that arose in the field.
BUSINESS LINE OPERATING EXPENSES
Operating expenses increased $13.2 million or 14.6% to $103.6 million in
1995 from $90.4 million in 1994. This increase was primarily attributable to
higher general and administrative expenses, international sales agent
commissions and engineering expenses. As a percent of net sales, operating
expenses decreased slightly to 14.6% in 1995 from 13.9% in 1994.
Operating expenses in the newspaper business increased $6.2 million or 10.6%
to $64.7 million in 1995 from $58.5 million in 1994. This increase was primarily
attributable to higher agents commissions incurred in connection with the
increase in sales. As a percent of sales, operating expenses declined to 12.6%
in 1995 to 13.4% in 1994. This improvement as a percent of sales is primarily
attributable to operating leverage as overhead costs remained relatively
constant while sales and gross profit increased.
Operating expenses in the insert business decreased $2.3 million or 16.9% to
$11.3 million in 1995 from $13.6 million in 1994. This decrease was primarily
attributable to lower marketing and engineering expenses caused by lower sales
volume.
Operating expenses in the commercial business increased $9.3 million or
50.8% to $27.6 million in 1995 from $18.3 million in 1996. This increase was
primarily attributable to an increase in the allocation of general and
administrative costs to this business line.
BUSINESS LINE OPERATING INCOME
Operating income increased $29.5 million, or 89.4%, to $62.5 million in 1995
from $33.0 million in 1994. As a percent of sales, operating income increased to
8.8% in 1995 from 5.1% in 1994. The increase was primarily attributable to the
higher newspaper sales volume and improved gross profit margins in the
commercial and newspaper businesses, partially offset by increased operating
expenses.
Operating income for the newspaper business increased $27.8 million or 68.5%
to $68.4 million in 1995 from $40.6 million in 1994. As a percent of net sales,
operating income increased to 13.4% in 1995 from 9.3% in 1994. This increase was
primarily attributable to higher sales and improved gross profit margins.
Operating income for the insert business decreased $1.6 million or 17.0% to
$7.8 million in 1995 from $9.4 million in 1994. As a percent of net sales,
operating income was relatively constant at 8.3% and 8.5% in 1995 and 1994,
respectively. A decline in gross profit was partially offset by lower operating
expenses.
Operating income for the commercial business improved $3.3 million or 19.4%
to a loss of $13.7 million in 1995 from a loss of $17.0 million in 1994. This
improvement was primarily attributable to an
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improvement in gross profit margin in 1995, partly related to product cost
reduction initiatives and a reduction in warranty and post shipment expenses.
Year Ended September 30, 1994 Compared to Year Ended September 30, 1993
NET SALES
Net sales increased $21.2 million or 3.4% to $648.2 million in 1994 from
$627.0 million in 1993. This increase was primarily attributable to an increase
in net sales in the newspaper business of $45.0 million or 11.5% and an increase
in the commercial business of $9.0 million or 9.7% partially offset by a decline
in net sales in the insert business of $32.8 million or 22.9%.
Net sales in the newspaper business increased $45.0 million or 11.5% to
$435.8 million in 1994 from $390.8 million in 1993. This increase is primarily
attributable to growth in shipments from Goss's European locations. European net
sales were $161.6 million in 1994, a $43.0 million or 36.3% increase over 1993.
This increase was driven by significant large newspaper product shipments to
Australia and New Zealand from Europe. In addition, sales of small newspaper
presses in Europe increased by 43.6% as the Universal press continued to gain
market acceptance. Sales in the Americas and Japan were relatively constant. Net
sales in Goss's large newspaper business increased $27.4 million or 8.7% to
$343.0 for the year-ended September 30, 1994 from $315.6 million for the year
ended September 30, 1993. During these periods, small newspaper sales increased
$17.6 million or 23.4% to $92.8 million from $75.2 million.
Net sales in the insert business decreased $32.8 million or 22.9% to $110.7
million in 1994 from the peak sales of $143.5 million in 1993. In 1993, sales
were unusually high due to the introduction of three new products. In 1994,
there was a consolidation of insert printers which lead to capacity
rationalization by these customers. This rationalization continued into 1995 but
at a reduced level.
Net sales in the commercial business increased $9.0 million or 9.7% to
$101.7 million in 1994 from $92.7 million in 1993. This increase was primarily
attributable to the introduction of new catalog and directory presses in 1994.
GROSS PROFIT
Gross profit increased $15.7 million or 14.6% to $123.4 million in 1994 from
$107.7 million in 1993. The gross profit margin improved to 19.0% in 1994 from
17.2% in 1993, primarily attributable to increased sales volume and pricing in
Goss's small newspaper business and improved margins in the commercial business.
Gross profit in the newspaper business increased $7.5 million or 8.2% to
$99.1 million in fiscal 1994 from $91.6 million in 1993. The gross profit margin
remained relatively stable at 22.7% in 1994 compared to 23.4% in 1993. The
increase in gross profit was primarily attributable to higher sales volume in
Europe partially offset by less favorable product mix in the U.S. and Japan.
Gross profit in the insert business decreased $3.0 million or 11.5% to $23.0
million in 1994 from $26.0 million in 1993. This decrease was primarily
attributable to lower sales volume. The gross profit margin improved to 20.8% in
1994 from 18.1% in 1993. This improvement was primarily attributable to the
negative impact of production start-up expenses and low introductory pricing for
new products on the gross profit margins in 1993.
Gross profit in the commercial business improved $11.2 million or 113.1% to
$1.3 million in 1994 from a loss $9.9 million in 1993. The gross profit margin
increased to 1.3% in 1994 from negative 10.7% in 1993. This increase was
primarily attributable to a reduction in warranty and post-shipment expenses
which had been experienced in 1993 in conjunction with the introduction of the
World 16 and G25W presses.
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BUSINESS LINE OPERATING EXPENSES
Operating expenses decreased $13.4 million or 12.9% to $90.4 million in 1994
from $103.8 million in 1993. This decrease was primarily attributable to reduced
engineering expenditures, lower sales and marketing expenses and lower general
and administrative costs partially attributable to restructuring actions which
occurred in 1993. As a percent of net sales, operational expenses improved to
13.9% in 1994 from 16.6% in 1993.
Operating expenses from the newspaper business decreased $6.1 million or
9.4% to $58.5 million in 1994 from $64.6 million in 1993. As a percent of net
sales, operating expenses declined to 13.4% in 1994 from 16.5% in 1993. This
decrease was primarily attributable to lower sales and marketing expenses and
lower general and administrative expenses associated with the 1993 restructuring
actions.
Operating expenses for the insert business decreased $0.7 million or 4.9% to
$13.6 million in 1994 from $14.3 million in 1993. This decrease is primarily
attributable to lower engineering expenses. As a percent of net sales, operating
expenses increased to 12.3% in 1994 from 10.0% in 1993. This increase was
primarily attributable to significantly lower sales in 1994.
Operating expenses for the commercial business decreased $6.6 million or
26.5% to $18.3 million in 1994 from $24.9 million in 1993. This decrease was
primarily attributable to lower engineering and general and administrative costs
partially due to a lower allocation of expenses to this business line. As a
percent of net sales, operating expenses decreased to 18.0% in 1994 from 26.9%
in 1993.
BUSINESS LINE OPERATING INCOME
Operating income increased $29.1 million or 746.2% to $33.0 million in 1994
from $3.9 million in 1993. As a percent of net sales, operating income increased
to 5.1% in 1994 from 0.6% in 1993. This increase was primarily attributable to
higher newspaper business sales volume, improved sales volume and gross profit
margins in the commercial business.
Operating income for the newspaper business increased $13.6 million or 50.4%
to $40.6 million in 1994 from $27.0 million in 1993. As a percent of net sales,
operating income increased to 9.3% in 1994 from 6.9% in 1993. This improvement
was primarily attributable to the increase in sales volume, as well as the
decrease in operating expenses attributable to cost reduction efforts.
Operating income for the insert business decreased $2.3 million or 19.7% to
$9.4 million in 1994 from $11.7 million in 1993. As a percent of net sales,
operating income increased to 8.5% in 1994 from 8.2% in 1993. This decrease was
primarily attributable to the reduction in sales volume.
Operating income for the commercial business increased $17.8 million to a
loss of $17.0 million in 1994 from a loss of $34.8 million in 1993. This
improvement was primarily attributable to improved gross profit margins in 1994
following significant production start-up expenses, low introductory pricing on
new products and high warranty and post-shipment expenses in 1993 and also a
reduction in overall operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the Acquisition, Goss's surplus cash in the U.S. and U.K. was
remitted to, and its funding requirements were provided by, Rockwell. The
funding requirements of Goss were provided from Rockwell's own resources through
the use of intercompany accounts. While intercompany purchases from
Allen-Bradley, a Rockwell company, are principally transacted through non-cash,
intercompany accounts, subsequent to the Acquisition, these transactions will
generate normal trade payables of the Company which will require cash. It is
expected that, upon consummation of the Acquisition, a reserve of $16.3 million,
net of a $3.9 million provision reflected in the first nine months of 1996, will
be established associated primarily with severance, outplacement and relocation
payments to be incurred
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in connection with headcount reductions and costs in connection with planned
facility closings. See "Unaudited Pro Forma Combined Financial Statements."
Goss reported net cash provided by operating activities of $12.4 million,
$157.5 million, $71.3 million and negative $61.2 million for the nine months
ended June 30, 1996 and the years ended September 30, 1995, 1994 and 1993,
respectively. In general, changes in reported net cash provided by operating
activities can be primarily attributed to the dollar value of inventories,
receivables and advance payments from customers driven by the timing and level
of new order activity.
The net cash provided by operating activities of $12.4 million for the nine
months ended June 30, 1996 was primarily attributable to a $14.4 million
decrease in customer notes as repayments reduced the outstanding principal
balance while fewer new notes were added, and a $14.2 million reduction in
inventory levels associated with lower new orders, particularly in the newspaper
business. The net cash provided by operating activities was partially offset by
$32.2 million of lower advance payments from customers which corresponded to the
reduction in new orders.
The net cash provided by operating activities of $157.5 million for 1995 was
primarily attributable to a $59.1 million increase in customer advances
primarily associated with several large newspaper press orders. In addition, a
$37.7 million decrease in accounts receivable attributable to the collection of
date-certain letters of credit for 1994 sales contributed to the net cash
provided by operating activities. The net cash provided was partially offset by
a $50.4 million increase in customer notes primarily related to the financing of
a large newspaper press sale.
Net cash provided by operating activities was $71.3 million for 1994. The
balance of advances from customers declined slightly but was offset by lower
inventory levels. A $12.4 million reduction in the balance of customer notes
increased net cash provided by operating activities due to increased reserves
and payments on outstanding customer notes. A $17.6 million increase in other
assets and liabilities caused primarily by the termination of a lease agreement
in Europe, reduced overall net cash provided by operating activities.
Net cash used by operating activities of $61.2 million for 1993 was
primarily attributable to an $84.9 million increase in customer notes to insert
and commercial press customers. In addition, $68.7 million of customer notes
were sold during the year.
As a result of the Transactions, the Company's total indebtedness will
increase substantially. See "Risk Factors--Substantial Leverage; Ability to
Service Indebtedness." Immediately following the consummation of the
Transactions, the Company and its subsidiaries will have approximately $75.3
million of indebtedness outstanding under the Bank Facilities (excluding
approximately $31.4 million in letters of credit) and $225 million of Notes
outstanding. The Company will also be capitalized with equity of $162.0 million
(net of loans to Management Investors of $2.0 million). The Company will also
have the ability to borrow an additional $109.7 million for general corporate
purposes pursuant to the Revolving Credit Facility, subject to certain
conditions. See "Description of New Bank Credit Agreement." The Company's
ability to incur additional indebtedness will be subject to certain limitations,
including limitations imposed by the Indenture and the New Bank Credit
Agreement. The Company's ability to service its indebtedness will be dependent,
in part, on its ability to utilize the cash flow generated by its foreign
operations. See "Risk Factors--International Operations."
After consummation of the Transactions, the Company intends to fund its cash
needs through cash flow from operations, existing cash balances and the
Revolving Credit Facility under the New Bank Credit Agreement. See "Description
of New Bank Credit Agreement." A substantial portion of the Company's available
cash will be required to be applied to service the indebtedness incurred to
finance the Acquisition. The Company may also utilize the Revolving Credit
Facility to issue letters of credit that it may be required to post in
connection with certain sales agreements. See "Risk Factors-- Operations as an
Independent Company; Absence of Parent Guarantees." The amount of advance
payments received by the Company in any period affects the Company's working
capital position and liquidity during that period. The Company's capital
expenditure requirements for fiscal year 1996 are
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expected to be approximately $8 million and for fiscal year 1997 are expected to
be approximately $19 million.
Given the long delivery times and large size of newspaper orders, the
Company typically receives progress payments from newspaper customers in advance
of actual press deliveries. The Company recognizes revenue only after press
delivery and therefore progress payments are recorded as a current liability in
the balance sheet, under customer advances. In addition, certain customers
request that the Company post a letter of credit to guarantee performance under
their respective contracts. As of June 30, 1996 Goss had $120.0 million of
customer advances, and $21.1 million of outstanding letters of credit related
thereto. See "Risk Factor--Operations as an Independent Company; Absence of
Parent Guarantee."
The Indenture and the New Bank Credit Agreement of the Company will contain
financial and operating covenants and significant restrictions on the ability of
the Company to pay dividends, incur indebtedness, make investments and take
certain other corporate actions. See "Description of New Bank Credit Agreement"
and "Description of Notes."
The Company's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness (including the Notes) depends on
its future performance and financial results, which, to a certain extent, is
subject to general economic, financial, competitive, legislative, regulatory and
other factors beyond its control. Based upon the current level of operations and
anticipated growth, Management of the Company believes that available cash flow,
together with available borrowings under the New Bank Credit Agreement and other
sources of liquidity, will be adequate to meet the Company's anticipated future
requirements for working capital, capital expenditures and scheduled payments of
principal of, and interest on, its Senior Debt, and interest on the Notes.
However, a portion of the principal payments at maturity on the Notes may
require refinancing. There can be no assurance that the Company's business will
generate sufficient cash flow from operations or that future borrowings will be
available in an amount sufficient to enable the Company to service its
indebtedness, including the Notes, or to make necessary capital expenditures, or
that any refinancing would be available on commercially reasonable terms or at
all. See "Risk Factors."
VARIABILITY IN THE COMPANY'S BUSINESS
There are a number of factors that contribute to variability in the
Company's business. This variability can produce wide fluctuations in revenues,
earnings, cash flows and working capital balances. The Company expects this
variability to continue.
Factors contributing to this cyclicality include general economic
conditions, which affect demand for press capacity, and the timing of press
replacement, as well as innovations in printing technology, which have caused
significant periodic increases in press demand over the last thirty years. In
addition, Goss's revenue and profitability are influenced by the profitability
of its customers and their ability to finance a press acquisition. Accordingly,
when newspaper publishers and commercial printers experience large decreases in
sales (for example, during periods of recession and the resulting downturn in
advertising revenues) or large increases in costs (for example, significant
increases in raw material costs such as paper and newsprint), their willingness
or ability to commit to press acquisitions or upgrades could be temporarily
affected.
INTERNATIONAL OPERATIONS
For the year ended September 30, 1995, 38% of Goss's revenue was generated
by international sales of its foreign subsidiaries. Historically, Goss had
entered into foreign currency forward exchange contracts to protect it from
adverse currency risk fluctuations on foreign currency commitments. As a result,
the financial performance of the Company's foreign operations on a U.S. dollar
denominated basis has historically not been significantly affected by changes in
currency exchange rates. In addition, certain portions of the Company's
borrowings under the New Bank Credit Agreement will be lent directly to certain
of the Company's foreign subsidiaries in local currency, which may have the
effect of
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hedging against changes in currency exchange rates. However, although the
Company's foreign currency forward exchange arrangements and the foreign-based
borrowings will mitigate the effect of fluctuating currency exchange rates,
unfavorable changes in certain exchange rates could have adverse effects on the
financial performance of the Company's foreign operations in the future.
BACKLOG
As of September 30, 1995, the total contract price of the backlog of orders
for presses was approximately $481 million, and approximately 82% of orders or
services represented thereby have been or are currently expected to be filled
during fiscal year 1996. As of September 30, 1994, such backlog was
approximately $538 million. The decrease from September 30, 1994 to September
30, 1995 is primarily attributable to the shipment in 1995 of a large commercial
order for G25W presses. As of June 30, 1996, the total contract price of the
backlog of orders for presses had decreased to approximately $442.6 million. As
of June 30, 1995, such total was approximately $496.9 million. The decrease from
June 30, 1995 to June 30, 1996 is primarily attributable to lower orders in the
Newspaper and Commercial segments in 1996. Of the total backlog as of June 30,
1996, approximately $132.4 million or 30% is scheduled to be delivered in the
fiscal year ending September 30, 1996 and approximately $256.3 million or 58% is
scheduled for delivery in the fiscal year ending September 30, 1997.
IMPACT OF INFLATION
Goss has historically offset the impact of inflation through price increases
and expense reductions. Periods of high inflation could have an adverse effect
on the Company to the extent that increased borrowing costs for floating rate
debt may not be offset by increases in revenue.
ENVIRONMENTAL MATTERS
The Company's operations are subject to a range of environmental
requirements in the various jurisdictions in which it operates. These
environmental requirements relate to, among others, air emissions, wastewater
discharges, and waste management. Over the past five years, Goss has incurred
less than $1.0 million of expenditures in connection with environmental
remediation matters. Based on the underlying facts giving rise to its
environmental regulatory obligations and technical advice received from the
Company's environmental consultants, the Company can be expected to continue to
incur capital and operating expenses to maintain compliance with applicable
environmental requirements, to upgrade existing equipment at its facilities, to
continue existing remedial activities and to meet new regulatory requirements.
The Company does not anticipate that any such capital and operating expenses
will have a material adverse effect on the Company's results of operations.
Rockwell has agreed to indemnify the Company and its subsidiaries and affiliates
against all environmental costs associated with Goss's facility in Peterborough,
United Kingdom (which Rockwell is retaining) and against all environmental costs
associated with Hall Processing Systems. For a period of four years after the
Closing Date, Rockwell will also indemnify the Company against one-half of
certain environmental costs incurred by the Company in excess of $1.0 million,
provided that such costs result from the disposal, discharge or release of any
hazardous wastes, hazardous substances, pollutants or contaminants on or from
the facilities of Goss (or its predecessors) prior to the Closing, and provided
that such costs result from activities which are (i) required by an enforcement
order or decree entered by a governmental authority as a result of an
environmental proceeding; (ii) necessary to comply with an environmental law in
response to an environmental proceeding, the outcome of which environmental
proceeding is reasonably likely to result in material costs or expenses to the
Company; or (iii) necessary to comply with an environmental law in response to a
written, threatened environmental proceeding, which environmental proceeding is
reasonably likely to result in material costs or expenses to the Company,
provided that, in the case of this clause (iii), all such costs and expenses are
consented to in writing by Rockwell prior to being incurred. There can be no
assurance that unanticipated, future regulatory programs or previously
unidentified environmental conditions will not impose material capital and
operating expenses.
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<PAGE>
BUSINESS
GENERAL
Goss is the leading manufacturer of web offset newspaper press systems
worldwide and of insert web offset press systems in North America. Goss also
manufactures commercial web offset printing presses in North America and
provides aftermarket parts and service to its newspaper and commercial printing
customers. Founded in 1885, Goss is the only U.S.-based manufacturer of
large-scale web offset printing presses and has pioneered many major industry
innovations, including the conversion from letter press printing to web offset
lithography, the development of computerized electronic control systems and the
introduction of back-to-back color printing. Goss is the only global producer of
newspaper printing presses with manufacturing and sales capabilities in North
America, Europe and Asia. Goss generated approximately 51% of its fiscal 1995
net revenue of $709 million overseas (including exports from the U.S.). Goss
operates through three business categories:
. Newspaper. Goss is a widely recognized trade name in the newspaper
printing press industry. Management estimates that approximately 57% of
daily newspapers worldwide (excluding PRC) print on Goss presses
(approximately 70% in the U.S. and Canada). The Company provides
sophisticated, computer-controlled press systems for a wide variety of
newspaper publications which vary significantly in circulation, page count
and color content and operate in markets around the world. Goss presses
print such publications as The Wall Street Journal, USA Today, The New
York Times and The Los Angeles Times in the U.S., The Financial Times in
the United Kingdom, Zero Hora in Brazil, The Asahi Shimbun in Japan, The
Straits Times in Singapore and The People's Daily in China. Goss's
newspaper press business generated approximately $512 million in revenues
in fiscal year 1995, or approximately 72% of Goss's total revenues.
. Insert. Goss pioneered the development of specialized web offset presses
for printing advertising inserts and continues to be the leader in the
insert press business with an estimated market share of approximately 70%
in the U.S. and Canada, the principal markets for such equipment. Goss's
insert presses combine newspaper press designs for high speed with
selected commercial press features for enhanced print quality, low
maintenance and high productivity. The Company's customers include leading
insert printers such as Big Flower Press Holdings, Inc. and Sullivan
Graphics, Inc. Goss's insert press business generated approximately $94
million in revenues in fiscal year 1995, or approximately 13% of Goss's
total revenues.
. Commercial. Goss also manufactures commercial web offset printing presses
in North America used to print a broad variety of commercial products,
including brochures and promotional materials, catalogs, magazines, books,
financial publications and directories. The Company sells its commercial
presses principally in North America, and its customers include large
multinational, regional and local printers, including R.R. Donnelley &
Sons Company, Quebecor, Inc., and Banta Corporation. The commercial press
business generated approximately $103 million in revenues in fiscal year
1995, or approximately 15% of Goss's total revenues.
BUSINESS STRATEGY
The Company's business strategy is to (i) capitalize on its substantial
installed base of newspaper presses and market share in its traditional markets,
(ii) continue to lead in the development of innovative products that respond to
customers' needs while increasing their productivity and efficiency, (iii)
expand its strong presence in developing regions such as Asia, (iv) draw on the
manufacturing and marketing strengths of its newspaper and insert businesses to
improve the performance of its commercial business, and (v) pursue business
process improvements and cost-saving opportunities. Key elements underlying this
strategy include:
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. Leading Installed Base of Newspaper Presses. Goss is the market leader in,
and only domestic manufacturer of, newspaper presses in the U.S. and
Canada (the world's largest market for such presses). Management estimates
that approximately 70% of daily newspapers in this market print on Goss
presses. In addition, management estimates that approximately 52%, 48% and
61%, respectively, of daily newspapers in South America; Europe, Middle
East and Africa; and Asia/Pacific (excluding Japan and PRC) utilize Goss
presses. Management believes that this installed base and the Company's
established customer relationships provide it with a competitive advantage
in obtaining repeat business, including color capability upgrades, press
line extensions and new press purchases. In addition, the Company's
significant installed base provides a relatively stable source of
aftermarket parts and service business.
. Established Global Newspaper Presence. Goss is one of only seven major
global suppliers of newspaper press systems and is the only supplier with
manufacturing, engineering and sales operations in North America, Europe
and Asia. The Company believes this global presence provides it with a
competitive advantage in light of the significant cost of transporting
newspaper press systems and the degree to which such presses require
custom engineering and manufacturing to address each customer's particular
production requirements and press configurations.
. Technology Leader. Management believes that it enjoys a reputation in the
newspaper industry as a leader in technological innovation, having
engineered several major technological advancements, including the
conversion from letterpress to web offset lithography, the development of
computerized electronic control systems and the introduction of
back-to-back process color printing, each of which has improved its
customers' print quality and productivity. Letterpress printing involves
mechanically complex systems that create each line of type out of metal
slugs that are made into plates mounted on a press. The conversion to web
offset presses improved print quality and productivity. Computerized
electronic controls reduced the need for precise adjustments and fine
tuning by technicians, which decreased waste and enhanced reliability and
quality. Back-to-back process color printing utilizes four
vertically-stacked presses (each printing one color) that allow multiple
colors to be printed on both sides of the paper in the same print run.
With the Company's recent introduction of an advanced inking system, and
its ongoing development of an optical color quality adjustment mechanism
and of an automatic image make-ready press system, Management believes the
Company is well-positioned to maintain its technology leadership. See
"--Research and Development."
. Growth in Developing Markets. The Company believes that increasing incomes
and literacy rates are driving the establishment and growth of newspapers
in developing countries, particularly in South America and Asia (excluding
the more mature Japanese market). The Company believes it is
well-positioned to benefit from such growth since approximately 52% and
61%, respectively, of daily newspapers in South America and Asia/Pacific
(excluding Japan and PRC) print on Goss presses. In addition, Goss is the
only foreign-owned manufacturer of printing presses in China through the
Company's joint venture with Shanghai Printing and Packaging Machinery
Corp., a Chinese state-owned enterprise.
. Business Process Improvements. A key element of the Company's business
strategy is to further improve its operating performance. Management has
identified certain specific cost saving opportunities that are reflected
in the pro forma financial statements included herein. See
"Business--Identified Cost Savings" and "Unaudited Pro Forma Combined
Financial Statements." Management believes that efficiencies not reflected
in the pro forma financial statements included herein can be realized
through improvement of business processes, including enhanced material
procurement practices, more efficient flow of work-in-process through both
machining and assembly operations, increased outsourcing, and
restructuring of factory support functions. In addition, the Company will
seek to generate cost savings by improving efficiency in the process of
configuring presses for specific customer requirements. The Company also
has in place
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integrated product development teams which include design and
manufacturing engineers and other disciplines which work to identify and
implement product cost reduction initiatives such as component redesign,
lower cost component suppliers, and design modifications to improve
manufacturability. However, there can be no assurance that such
efficiencies or cost savings can be realized.
. Low-Cost Operations. Goss has reduced its cost structure significantly
since 1991 through headcount reductions and facility rationalization.
Management believes that these efforts, together with the Company's global
manufacturing capabilities, which enable the Company to deliver its
products at lower transportation costs, provide it with one of the lowest
cost operating structures in the industry. In the large newspaper press
system business, the Company believes that it is the lowest cost operator
in the industry. See "--Identified Cost Savings."
IDENTIFIED COST SAVINGS
Although no assurance can be given either that any specific level of cost
savings will be achieved or as to the timing thereof, Management currently plans
to achieve substantial savings in the base of operating costs which are
reflected in the pro forma combined financial statements. Once these plans are
completed, annual savings are expected to amount to approximately $19 million
per year associated with the closing of redundant facilities and reduction in
staffing, revision of employee benefit plans, and the elimination of certain
corporate services previously provided by Rockwell. It is expected that, upon
consummation of the Acquisition, a reserve of $16.3 million, net of a $3.9
million provision reflected in the first nine months of 1996, will be
established associated primarily with severance, outplacement and relocation
payments to be incurred in connection with headcount reductions and costs in
connection with planned facility closings. See "Unaudited Pro Forma Combined
Financial Statements."
The Company anticipates that it will be able to reduce its manufacturing
costs by closing redundant facilities and transferring the production to other
under-utilized facilities. In addition, the Company plans on reducing its
engineering, sales and marketing and general and administrative expenses by
reducing headcount and outsourcing certain non-strategic activities. The Company
has identified specific employees and/or functional areas where employees will
be terminated. The Company plans to implement its operating improvement plan
over a six month period following the Acquisition. Annual savings from these
actions are expected to amount to approximately $14 million per year.
In addition, the Company intends to modify selected employee benefit plans
at an annual savings of $1.2 million. Finally, Goss has received certain
administrative and management services from Rockwell such as corporate
oversight, cash management, treasury, legal, patent, tax, insurance
administration, corporate accounting and communication services. The Company
expects incremental annual savings of $3.8 million as a result of providing
these services on a stand-alone basis. The Company has also identified certain
other cost saving measures which may be implemented in the future.
HISTORY
The Goss Printing Company was established in 1885 in Chicago and soon
thereafter introduced the first of a number of technological advancements in the
industry, a newspaper press that printed on both sides of the paper
simultaneously. Goss established itself as a global company early, recording its
first international sale in 1898 and building its first international plant in
England in 1910.
In the 1960s, Goss introduced web lithographic offset newspaper presses that
led the industry's conversion from letterpress printing. In 1969, Rockwell
acquired Goss, which had grown to become a Fortune 500 company. Goss continued
to be an industry leader over the ensuing decades, enhancing its
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product portfolio by introducing faster presses, new paper roll pasters,
advanced folder designs, automated press controls, expanded flexible color
printing capabilities and advanced inking systems.
In the early 1980s, Goss recognized that certain of its customers were
requesting modifications on its small newspaper presses to accommodate the
printing of advertising inserts, a business which began to develop rapidly. Goss
responded to this demand by adapting its existing newspaper press systems to
include certain commercial press features, ultimately creating a separate line
of specialized insert presses. Goss continues to be a leader in this business
with a market share of approximately 70% in the U.S. and Canada, the principal
markets for such equipment.
Following on Goss's success in the insert niche of the commercial printing
press industry, management embarked on a strategy to expand into the broader
commercial printing business through acquisitions. In 1987, Goss acquired the
Hantscho Company, a supplier of short- and medium-run commercial presses, and in
1989, Goss acquired the long-run publication product line of APV Baker-Perkins.
As a result of these acquisitions, Goss established a presence in the North
American commercial press market. The Company intends to present customers with
a competitive alternative to the commercial press industry leader, Heidelberg
Harris, a subsidiary of Heidelberger Druckmaschinen A.G. of Germany ("Heidelberg
Harris").
INDUSTRY OVERVIEW
Goss's products fall into three broad categories: (i) newspaper press
systems for publishers of national, regional and local newspapers; (ii) insert
press systems for printers of advertising inserts, including Sunday newspaper
inserts and direct mail/point-of-purchase inserts and (iii) commercial press
systems for printers of brochures and promotional materials, catalogs,
magazines, books, financial publications and directories. Management believes
that annual worldwide sales of press equipment for newspapers and commercial
printers between 1992 and 1995 averaged approximately $5.0 billion, of which
approximately $2.5 billion constituted sales of web offset press equipment.
The following is an overview of the global industry for web offset press
equipment for newspapers, insert printers and general commercial printers.
NEWSPAPER PRINTING PRESS INDUSTRY
The global newspaper printing press industry serves a wide variety of
newspaper publications which vary significantly in circulation, page count and
color content based on regional, demographic and economic fundamentals. These
attributes drive newspaper press equipment requirements.
Newspaper printing presses are typically categorized as either
"double-width" or "single-width" presses. A double-width press is capable of
producing twice as many pages per cylinder rotation as a single-width press.
Newspapers with large circulations (i.e., over 50,000 copies) or high page
counts typically require double-width printing presses, while those with smaller
circulations and page counts tend to use single-width presses. A newspaper
generally purchases press capacity sufficient for its highest use requirement,
which is usually the printing of its Sunday edition. Although the number of
single-width printing presses installed worldwide far exceeds the number of
double-width presses, the majority of capital spending for newspaper printing
presses typically is for more complex, double-width press systems. Double-width
newspaper presses can range in price from $6 million to $22 million, while
single-width newspaper presses typically have a price range of between $2
million and $6 million. Goss supplies double-width and single-width web offset
presses to newspaper publishers worldwide.
The purchase of a newspaper press, which typically has a replacement cycle
of approximately twenty-five years, usually represents the most significant
capital expenditure by a newspaper publisher. As such, the purchasing decision
involves extensive capital planning and budgeting. Lead times for
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<PAGE>
deliveries range from nine to eighteen months from the placement of an order for
double-width presses, and two to eight months for single-width presses.
DEMAND CHARACTERISTICS. Given the significant cost of newspaper presses,
both industry and Company sales can vary substantially period-over-period
depending upon the timing of large press purchases. This phenomenon is
exacerbated by the long useful life of newspaper presses and the concomitant
deferability of press replacement. In addition, during periods of economic
growth, higher advertising expenditures and personal incomes lead to an increase
in the profitability of publishers, causing demand for printing presses to
generally increase; similarly during periods of economic recession, demand for
press capacity generally decreases. However, Management believes that, over the
longer term, continued demand for newspaper presses will be driven by a number
of factors, including:
. Economic Growth in Developing Countries. Strong economic growth typically
results in increased advertising expenditures and higher personal incomes.
These factors, together with higher literacy rates, increase newspaper
circulation and page counts which in turn drive demand for additional
press capacity. Management believes these dynamics make developing
countries attractive markets for its newspaper presses.
. Innovation. Press demand has historically increased significantly in
response to press innovations before returning to more normalized levels
of demand. The conversion from letterpress to offset which was started by
Goss in the 1960s, for example, was driven by compelling productivity and
quality improvements offered by offset printing. More recently, Goss's
introduction of "four-high" tower configuration, back-to-back color
presses (which consist of four vertically stacked printing units) in the
late 1980s permitted newspapers to offer color advertising and thus
increase their advertising revenue. This in turn contributed to additional
demand for new presses and add-on units for color printing--demand that
continues as advertisers and consumers insist on increasing amounts of
color in newspapers. A newspaper's ability to enhance quality and increase
productivity while reducing paper waste and staffing are important
considerations as it evaluates whether and when to add a new press or
replace an older press. Accordingly, the aggregate demand for printing
presses as well as the demand for a particular manufacturer's products is
driven in part by the development of new products which achieve market
acceptance.
. Replacement. The useful life of a newspaper press is approximately 25
years, although press life can be extended through refurbishing,
enhancements and proper maintenance. Nevertheless, it has been the
Company's experience that declining productivity and quality, in each case
relative to that offered by a new press, ultimately require that, over
time, older presses be replaced. The timing of press replacement is
influenced by economic factors as well as the productivity and quality
improvements available from new presses. This replacement cycle of older,
first-generation offset presses purchased in the late 1960s to mid-1970s
has begun in the U.S., Canada, Western Europe and Japan, which are mature
markets. In addition, Management believes that there are still over 70
newspapers using letterpresses in the U.S. and Canada alone, and that many
of these presses will be replaced in the forseeable future.
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INSTALLED BASE. Goss is the leading manufacturer of newspaper presses in the
world. Management estimates that approximately 57% of daily newspapers worldwide
(excluding PRC) print on Goss presses. Goss is one of only seven major global
suppliers of web offset newspaper press systems and is the only supplier to have
manufacturing, engineering and sales operations in North America, Europe and
Asia. The table below sets forth the Company's estimate of the approximate
number of newspapers in each of the regional markets Goss serves and the
approximate percentage of daily newspapers in such regions utilizing Goss
presses:
<TABLE>
<CAPTION>
NUMBER OF % WITH GOSS
REGION NEWSPAPERS PRESSES
- --------------------------------------------------------------- --------- -------------------
<S> <C> <C>
U.S. & Canada.................................................. 1,500 70%
Asia/Pacific(1)................................................ 960 61%
South America.................................................. 550 52%
Europe, Middle East & Africa................................... 2,000 48%
Japan(2)....................................................... 68 15%
---------
Total.................................................... 5,078 57%
---------
---------
</TABLE>
- ------------
(1) Excludes People's Republic of China and Japan.
(2) Double-width presses only.
INSERT PRINTING PRESS INDUSTRY
A segment of the commercial press industry unique to North America is the
specialized printing press for advertising inserts, which are typically found in
newspapers or distributed by direct mail or at point-of-purchase locations.
Advertising insert printing presses combine high-speed, multi-web newspaper
press designs with selected commercial press features for enhanced print
quality, low maintenance and high productivity. The two leading printers of
advertising inserts in North America, Big Flower Press Holdings, Inc. and
Sullivan Graphics, Inc., are each customers of Goss. Goss has an estimated
market share of approximately 70% in the U.S. and Canada, the principal markets
for such equipment.
Major factors considered by purchasers of insert press systems include net
productivity (especially speed, reduced paper waste and print quality), service
and support, new technologies (which enhance or lower product cost), product
value and a press system's flexibility to produce multiple formats.
COMMERCIAL PRINTING PRESS INDUSTRY
The commercial press industry serves a broad variety of commercial printers
who print brochures and promotional materials, catalogs, magazines, books,
financial publications, directories and other printed materials. In contrast to
newspaper publishers who print their own publications, commercial printers are
"contract printers" who generally print for publishers and other customers.
Commercial press systems can be configured with a variety of component
choices and auxiliary equipment. Commercial press suppliers act as systems
integrators who are generally expected to provide complete press systems,
including third-party auxiliary equipment such as dryers and chillers associated
with "heatset" printing. Outsourced auxiliary equipment generally comprises 30%
to 40% of the contract value of a commercial press order.
Commercial presses generally operate 24 hours per day, with downtime only
for necessary maintenance and repair. As a result, the average life of a
commercial printing press ranges up to ten years, resulting in much shorter and
generally more predictable replacement and/or rebuilding cycles than for
newspaper presses. Lead times for deliveries of commercial press systems
typically run two to eight months from the placement of an order.
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Major factors considered by purchasers of commercial press systems include
price, net productivity, reliability, efficiency, quality, and service and
support. Commercial printers also continually seek feature and technological
innovations to improve net production output and job turnaround time. In
addition, Goss has assisted in the past, and the Company intends to continue to
assist in the future, smaller commercial printers in obtaining the financing of
press purchases through third-party financing sources.
Goss supplies commercial press systems in the U.S. and Canada, with limited
sales in certain other countries. Management estimates that there are
approximately 2,000 commercial printers in the U.S. and Canada who utilize web
offset presses. The U.S. and Canadian commercial print industry has been
consolidating, as large printers seeking to increase press utilization have
begun to serve customers traditionally addressed by local printers. Many larger
U.S. and Canadian commercial printers are becoming more international in scope
and have formed joint ventures and other alliances in an increasing number of
developed and developing regions.
PRODUCTS AND SERVICES
WEB OFFSET TECHNOLOGY
Goss introduced offset lithography to newspaper printing in the 1960s as a
replacement for the letterpress printing process. The letterpress system relied
on highly-skilled technicians operating complex machines that used a keyboard
connected to a series of circular matrices to create each line of type in the
form of a metal slug. The slugs that came out of the machine would then be
arranged in forms and made into thick, semi-cylindrical metal plates mounted on
a press. The paper was printed in direct contact with these plates. In contrast
to the old letterpress system, offset lithography is far less mechanically
complex, as the process relies on photographic and chemical processes instead of
mechanical ones.
The initial step in the offset process involves transferring the text and
images of a publication onto the printing plates that will be used in the press.
These plates are wrapped around "plate cylinders" in the press unit. As the
plate cylinder rotates, it is first coated with a water-based solution, and then
with an oil-based ink. As the ink is oil-based it adheres only to the areas of
the plate that are not covered with water (i.e., the text or image). The ink on
the plate is then transferred in a mirror image to a "blanket cylinder" which
rotates to come into contact with the paper, where the ink is transferred again,
reversing from a mirror-image back to a normal image.
In most web offset presses both sides of the paper are printed at the same
time, each with its own set of plate and blanket cylinders. The paper is pressed
between the two blanket cylinders as it passes through the unit. After the paper
passes through each of the press units, it travels to a "former," where it is
joined with the other pages, and finally to a folding component where it is
folded and cut to the proper size (or "cutoff").
In process color printing, each color on a page is imaged separately onto
its own plate. Each page of a color publication must pass through four separate
printing units, each loaded with a different color. Process color printing thus
requires four times the number of printing units to print the same number of
pages as does a black and white publication.
Goss primarily produces web offset presses. The term "web" refers to the
fact that the paper is fed through the press from a large paper roll in a long
ribbon that forms a complex web of paper. The other common form of press is a
sheet-fed press, which prints on individual sheets of paper fed through the
press one-by-one. Sheet-fed presses are generally used only for shorter-run,
high quality posters, some high-end magazines, and similar applications because,
historically, the lower speeds necessary to
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achieve the highest print quality were not economical for larger commercial
print runs. Newspapers are almost exclusively printed on web-fed presses.
NEWSPAPER PRESS SYSTEMS
Goss's core business, in which it has been engaged for 111 years, is the
production of newspaper press systems. Goss produces customized double-width
press systems for large national and metropolitan newspapers and single-width
press systems for smaller regional and local newspapers, all sold under the
"Goss" name. The Company typically configures its press units to meet the
specific printing requirements and physical space limitations of its customers.
Goss is a worldwide supplier of web offset newspaper press systems.
Approximately three out of four U.S. daily newspapers and many prestigious
newspapers in over 100 other countries are printed on Goss's presses. Goss has
sold over 4,500 newspaper press systems around the world to publications such as
The Wall Street Journal, The New York Times, The Los Angeles Times, and USA
Today in the U.S., Zero Hora in Brazil, The Financial Times in the U.K., The
Melbourne Age in Australia, The Asahi Shimbun in Japan, The Straits Times in
Singapore and The People's Daily in China.
Sales of new equipment to, as well as additions and modifications to
existing equipment for, large newspaper customers accounted for approximately
58% of Goss's fiscal year 1995 sales. Sales to and additions and modifications
for small newspaper customers accounted for approximately 14% of Goss's fiscal
year 1995 sales.
Goss's current newspaper press product portfolio, which consists of a range
of double-width and single-width press systems, is set forth in the table below:
<TABLE>
<CAPTION>
NEWSPAPER PRESS PRODUCT PORTFOLIO
YEAR
PRODUCT INTRODUCED SIZE SPEED(A)
- ---------------------------------------------------------- ---------- ------------ --------
<S> <C> <C> <C>
Colorliner 80............................................. 1995 Double-Width 80,000
Newsliner................................................. 1994 Double-Width 70,000
MetroColor................................................ 1992 Double-Width 70,000
HT........................................................ 1990 Double-Width 70,000
Colorliner................................................ 1987 Double-Width 75,000
Universal................................................. 1991 Single-Width 50,000
Community................................................. 1963 Single-Width 30,000
Urbanite.................................................. 1962 Single-Width 50,000
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Straight run copies per hour
</TABLE>
In 1995, Goss formalized a standard global product strategy for its new
press offerings. Management believes that the common designs of newspaper
presses will allow Goss to reduce its product costs and provide flexibility to
utilize global manufacturing resources more effectively. Accordingly, Management
has initiated programs to standardize most of the core design components of its
newspaper press systems, while retaining the flexibility to configure and
assemble each press system to specific customer needs.
The Newsliner, introduced in 1994, is Goss's first standard double-width
press system designed for global markets. The Newsliner contains many advanced
features used by newspaper publishers worldwide while providing customers with
flexibility by offering three inking system alternatives: traditional open
fountain, digital injector and Goss's advanced positive-feed keyless, a patented
process which significantly reduces press start-up time, thereby reducing paper
waste. Goss is currently completing the first installations of Newsliner
presses. Goss's premier Colorliner press system which Management
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believes offers the industry's widest range of features and options, has also
been recently redesigned as a standard global product offering.
Goss introduced the Universal press system in 1991 for medium circulation
newspapers and certain commercial printers as Goss's single-width standard
global product offering. The Universal also provides flexibility in that it can
be configured in a variety of arrangements, including both "tower" and satellite
configurations.
The MetroColor is a press upgrade package that is designed to allow
customers with the Metroliner press system to enhance their press systems to add
tower color printing capabilities. The HT is a premier double-width newspaper
press system based on the Colorliner design and targeted exclusively to European
and Asian customers. The HT system incorporates buyer-specific control packages,
folder designs, paging configurations and inking systems geared toward the
requirements of customers located in Europe and Asia.
The Community and the Urbanite press systems represent Goss's first
generation of single-width web offset printing presses, and are still a popular
choice for smaller to medium circulation newspapers due to their simplicity of
operation, quality print reproduction, configuration flexibility and relatively
low price. The Urbanite, which has a single-width press with two plates around
the cylinder and which therefore permits relatively more paging capacity (in
contrast to the single-plate design on the Universal and Community), is marketed
to medium circulation newspapers which require such greater capacity. The
Community is marketed to smaller to medium circulation regional newspapers and
to printers of advertising inserts.
INSERT PRESS SYSTEMS
Goss is a leading supplier of insert presses in the United States and
Canada, which are the source of almost all demand for this specialty product,
with an estimated market share of approximately 70% in the U.S. and Canada.
Management attributes its position as a leading supplier of both new insert
presses and service and parts for existing insert presses to its full range of
product offerings, its strong technical expertise and its ability to respond to
customer needs.
Sales from Goss's insert press business represented approximately 13% of
Goss's sales for the fiscal year ended September 30, 1995.
Goss's current insert printing press product portfolio is set forth in the
table below:
<TABLE>
<CAPTION>
INSERT PRESS PRODUCT PORTFOLIO
YEAR
PRODUCT INTRODUCED SPEED(A)
- -------------------------------------------------------- ---------- --------
<S> <C> <C>
Magnum.................................................. 1993 35,000
C450.................................................... 1992 50,000
C700.................................................... 1985 85,000
Community............................................... 1963 30,000
</TABLE>
- ------------
(a) Copies per hour
Goss's insert presses combine newspaper press designs with selected
commercial press features for enhanced print quality, low maintenance and high
productivity. The Magnum is an adaptation of the proven Community newspaper
press with a modest amount of commercial features, and serves the most
price-sensitive insert printers. The C450 is Goss's mid-range advertising insert
press. The C700 serves national printers, offering the speed of a large
newspaper press with the color capability and turnaround flexibility of a
commercial press.
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COMMERCIAL PRESS SYSTEMS
Goss produces web offset press systems for commercial printers of brochures
and promotional materials, catalogs, magazines, books, financial publications
and directories. Goss sells commercial press systems under the "Goss
Commercial", "Baker-Perkins" and "Hantscho" tradenames. Goss's commercial press
customers include large multinational, regional and local printers, such as R.R.
Donnelley & Sons Company, Quebecor Inc. and Banta Corporation. Goss's commercial
presses have been used to print leading publications such as Time, Newsweek,
Fortune, Business Week, Sports Illustrated and Elle and major catalogs such as
those for Victoria's Secret, Saks Fifth Avenue and Williams-Sonoma.
Sales from Goss's commercial press business represented approximately 14.6%
of its total sales for the fiscal year ended September 30, 1995.
Goss provides complete commercial printing press systems, including
third-party auxiliary equipment. Outsourced auxiliary equipment typically
comprises between 30% and 40% of the contract value of Goss's commercial press
orders. Goss has a broad folder portfolio, which provides customers with
flexibility in the customization of their press configurations.
Goss's commercial press product portfolio is set forth in the table below:
<TABLE>
<CAPTION>
COMMERCIAL/PUBLICATION PRESS PRODUCT PORTFOLIO
YEAR
PRODUCT CUSTOMER TYPE INTRODUCED SPEED(A)
- ------------------------------------------- ----------------------------- ---------- --------
<S> <C> <C> <C>
World 16E.................................. General commercial, book 1995 1,600
G25........................................ Magazine, general commercial 1995 2,750
C700LGD.................................... Speciality printers 1995 2,500
C700D...................................... Directory 1993 2,500
G25W....................................... Catalog, magazine 1992 2,750
</TABLE>
- ------------
(a) Feet per minute
Goss's commercial/publication press product portfolio serves a wide variety
of commercial printers who require reliable and cost-effective printing systems
with the flexibility to provide fast turnaround time and high print quality. To
enhance the profitability of this business, Goss rationalized its
commercial/publication press product portfolio during the 1990's and introduced
new presses to replace existing models and focus on a selected number of core
press systems.
The World 16E is a 16-page commercial press designed for the short to medium
run production of magazines, catalogs, books and general printing. The G25 is a
32-page press which provides enhanced productivity for the long run production
of magazines, catalogs, magazine insert products and general commercial
printing. The G25W is a 48 page press which prints products similar to the G25,
but has a wide format for higher volume printing requirements. The C700D is a
high speed telephone directory press; and, the C700LGD is a high sped, high page
output press used for the production of digest sized publications for national
and regional printers.
The World 16 and, to a lesser extent, the G25W, commercial press systems,
which were introduced in 1993 and 1992, respectively, experienced certain
performance problems during their initial installations. The problems
experienced with the World 16 presses were primarily related to print quality
issues associated with distortion and positioning of the ink dots and color
variation. The G25W problems were primarily related to ink dot distortion which
caused print quality issues and also with difficulties with the folder at higher
speeds. As a result, Goss has incurred significant expenses to identify and
implement the corrective actions necessary to insure the press meets customer
expectations. In addition, the Company modified the press to improve its
performance and introduced the World 16E to the
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marketplace in October 1995. As of June 30, 1996 a total of six World 16 and
four G25W presses were in operation. See "Risk Factors--Commercial Business
Performance Issues" and Note 19 to the Combined Financial Statements contained
elsewhere in this Prospectus.
AFTERMARKET PARTS AND CUSTOMER SERVICE
Goss's large global installed base provides it with a relatively stable
source of aftermarket parts and service business. Goss capitalizes on these
opportunities through its field support network, which provides worldwide
coverage. In fiscal 1995, Goss generated $79 million, or 11%, of net sales from
the sale of aftermarket parts and the provision of maintenance services. The
newspaper segment is the primary contributor to the aftermarket, due to its
large installed base of presses and working relationships with newspaper
customers.
The Company believes that a high level of customer service, technical
support and training are important factors in establishing and maintaining
long-term relationships with customers and in encouraging repeat business.
Service and technical support relates to site preparation and inspection,
equipment installation, preventive and corrective maintenance, press line
extensions and color capability upgrades. The Company employs a staff of 321
field service engineers who are located throughout the world in proximity to the
Company's customers. These engineers not only provide support to customers, but
also provide the Company with feedback from the customers' sites, thus enabling
the Company to monitor and respond to customer needs.
SALES AND MARKETING
Goss maintains an extensive sales and service network consisting of a direct
sales force, service representatives and local agents covering over 100
countries. Goss utilizes "relationship" selling, which stresses value-added
customer services, including field service, spare parts, support and training.
Due to the significance of each press investment, Goss's sales effort also
includes a multi-tier team marketing effort targeted at both the customer's
corporate management and plant managers at individual sites. Goss's technical
personnel play a major role in sales activity. Goss's senior Management also
supports marketing efforts to cultivate prospects and complete sales.
A sale to a prospective newspaper customer generally takes several years
from the initial planning phase to the actual sale. Goss's direct sales
personnel typically assist in customers' design, engineering and capital
budgeting processes and maintain the close and consistent long-term customer
contact required to sell complex, customized printing press systems. Management
believes that this installed base and the Company's established customer
relationships provide it with a competitive advantage in obtaining repeat
business.
The commercial press sales process is generally significantly shorter, as
commercial press purchases involve shorter production times and are typically
driven by shorter replacement cycles or specific print contract commitments.
Goss's direct sales force typically works closely with commercial customers in
designing a complete printing press system solution which includes outsourced
auxiliary equipment.
Goss's worldwide sales network allows responsiveness to local customers'
unique requirements. Compensation for Goss's newspaper direct sales force is
salary-based with a relatively small percentage of compensation derived from
commissions. Compensation for Goss's commercial press direct sales force is
largely commission-based with a base salary component.
Goss enters into detailed contracts with all agents in its sales network.
Most agents are exclusive suppliers of Goss's web offset presses. Typically,
agent compensation is based on specific revenue targets. Most agents in the Goss
sales network have extensive experience in the graphic arts industry as well as
personal industry contacts.
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COMPETITION
The global newspaper printing press, insert printing press and commercial
printing press industries are highly competitive in most product categories and
geographic regions. Competition is based on price, product features,
technological capabilities, quality, reliability and ability to meet the
specialized needs of customers.
Major suppliers of double-width newspaper presses are MAN Roland A.G. ("MAN
Roland") and Koenig & Bauer-Albert A.G. ("KBA") of Germany; Wifag A.G. of
Switzerland ("Wifag"); and Mitsubishi Heavy Industries Ltd. ("Mitsubishi") and
Tokyo Kikai Seisakusho, Ltd. of Japan ("TKS"). Competing major suppliers of
single-width newspaper presses are MAN Roland, KBA and Heidelberg Harris. The
major supplier of commercial presses in the U.S. is Heidelberg Harris. Other
competitors include KBA, MAN Roland and Mitsubishi. The only other major
supplier of insert printing press systems is Heidelberg Harris.
Over the past several years, certain foreign suppliers of large newspaper
printing presses have sought to increase their U.S. sales by offering aggressive
pricing and terms. As a result of pricing actions by Goss's foreign competitors,
on June 30, 1995, Rockwell and Goss filed an antidumping duty petition with the
Commerce Department and the ITC alleging that competitors from Japan and Germany
were selling large newspaper printing presses and components thereof in the U.S.
at less than fair value and were materially injuring a U.S. industry. As a
result of such petition, the Commerce Department and the ITC initiated
antidumping investigations and, in its preliminary injury determination issued
in August 1995, the ITC determined that there is a reasonable indication that
the U.S. large newspaper printing press industry was materially injured by
reason of imports from Japan and Germany.
On July 16, 1996, the U.S. Department of Commerce issued final
determinations that the imports covered by this case, from Japan and Germany,
respectively, have been sold at less than fair value. On August 21, 1996, the
U.S. International Trade Commission determined that imports covered by this case
from Japan and Germany, respectively, have caused material injury or the threat
of material injury, to the domestic industry. Based on these determinations, the
U.S. Customs Service has been directed to require cash deposits of antidumping
duties with respect to such imports at rates that range from 30% to 62% ad
valorem. The assessment of duties could be increased, reduced, or terminated
through subsequent appellate review, or annual administrative reviews, or both.
Moreover, the extent to which antidumping duties would benefit the Company's
competitive position in the U.S. market, if at all, cannot be projected with
assurance.
RESEARCH AND DEVELOPMENT
Management believes that its position as a technological industry leader is
due in large part to its engineering, product development and research
capabilities as well as to its commitment to continual investment in press
innovation. Goss led the newspaper industry's conversion from letterpress
printing to the offset process, which began in the 1960's, and in the late
1980's introduced the "four-high" tower configuration to provide process color
printing advances for newspapers. Other Goss innovations, such as computerized
press controls, have provided for increased net production output through
greater automation, decreased waste and enhanced reliability and quality.
During the past three years, Goss has invested over $84 million in
engineering, product development and research (including $17.4 million, $17.6
million and $15.8 million spent on research and development in fiscal 1993, 1994
and 1995, respectively) and the Company expects to continue to invest at similar
levels throughout fiscal year 1996. Major recent product development projects
have included the launch of two advanced newspaper presses (Newsliner and
Universal), six new commercial press systems or product enhancements (World 16E,
G25W/G25, C450, C700D and C700LGD) and a series of new commercial folders.
Research projects during the past three years included the development of a
positive feed keyless inking system and its evolution to single-fluid
lithography, as well as the completion
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of prototypes for color correction, auto imposition and magnetic cutoff control.
In addition, the technology concepts for a future digital press with
direct-to-press imaging was also developed.
Goss currently is developing the AIM press system. The design concept of AIM
is to allow customers to print directly from a computer file without any
intermediary steps. Today's lithographic printing process requires text and
images to be made-up on paper and then imaged on a printing plate which in turn
is affixed to a rotating cylinder for the printing process. The ability to
transfer text and images in digital form directly to a printing cylinder without
the make-ready process and printing plates would provide customers with greater
productivity and flexibility. In contrast to other direct-to-press technology
currently available for short-run commercial printing, AIM, if developed
successfully, would maintain the speed and print quality of the lithographic
printing process while significantly reducing pre-press time and expense.
Although the Company believes that it can incorporate its AIM technology into
its presses in the future, there can be no assurance that the Company will be
successful in developing and commercializing AIM.
Management believes that Goss possesses the core skills (including
mechanical, electronic and software expertise) developed over many years of
printing press industry experience necessary to engineer, design and enhance
printing press systems and to introduce new technologies. The Company believes
that its research staff has knowledge and expertise to direct, integrate and
manage research programs in a wide range of disciplines, including materials
science, physical and organic chemistry, ink rheology, magnetics, microwave
technology, vision systems and artificial intelligence.
Goss maintains a staff of over 400 engineers at four locations around the
world (Westmont, Illinois; Preston, United Kingdom; Nantes, France and Sayama,
Japan). The Westmont engineering group has engineering, research and development
responsibilities for newspaper and commercial press designs, software
development, development and testing of new print technologies and the
customization of orders for U.S.-sourced newspaper and commercial press systems.
Goss's Westmont, Illinois facility includes a 12,600 square foot press hall, an
ink chemistry lab and software and electronics labs used for research, product
development and testing. Engineering at Goss's other locations is based on the
core skills of its resident engineers and includes such functions as new press
design and the customization of newspaper and commercial press systems.
Goss has also directed and funded certain research and development projects
conducted at the Rockwell Science Center. The financial data contained in this
Prospectus include expenses charged to Goss for the work performed on its behalf
at the Science Center. During fiscal years 1993, 1994 and 1995, such direct
charges were $396,000, $670,000 and $830,000, respectively. Rockwell has agreed
to provide continuing support to the Company following consummation of the
Acquisition at its Science Center for a period to be agreed upon by the Company
and Rockwell for certain ongoing projects at a fee to be determined. Management
believes that following this transition period it will continue to have the
engineering, product development and research capabilities which have made it a
technological industry leader.
As a result of Goss's research and development efforts, it has obtained more
than 100 U.S. patents and more than 100 foreign patents in countries and
territories including Australia, Canada, Japan, Mexico, Great Britain, Germany
and the European Patent Community. Although the Company believes that these
patents are enforceable against its competitors, there can be no assurance that
they are enforceable, or that they can be used to prevent competitors from
making, using or selling products the same as or substantially the same as
Goss's products. Similarly, there is no assurance that Goss's existing product
line, or the Company's future products, are or will be free of infringement of
third-party patents, in the U.S. or any other country.
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EMPLOYEES
As of June 30, 1996, Goss had 2,657 employees, consisting of 1,252 hourly
employees and 1,405 salaried employees. Employees are divided along functional
lines as shown in the table below:
SALARIED
Executive Management................................................ 16
Operations.......................................................... 336
Sales, Marketing and Customer Service............................... 365
Engineering
Design and Production Engineering................................. 323
Research and Development.......................................... 32
Support........................................................... 80
Finance and Information Systems..................................... 213
Human Resources and Other........................................... 40
-----
Total Salaried.................................................. 1,405
HOURLY.............................................................. 1,252
-----
TOTAL............................................................... 2,657
-----
-----
Average industry experience across the salaried workforce is approximately
15 years.
UNIONS AND TRADE GROUPS. Goss's approximately 700 hourly employees located
at its Cedar Rapids, Iowa; Reading, Pennsylvania; and Westmont, Illinois
facilities are represented by national unions and the Company is subject to
three collective bargaining agreements in the U.S. The approximately 500 hourly
employees located at the Preston, England and Nantes, France facilities are
represented by three local trade groups that have entered into a series of
cumulative collective bargaining agreements with the Company. The approximately
120 employees at Goss's Sayama, Japan facility are represented by a Company
union and the Company is subject to one collective bargaining agreement in
Japan. See "Risk Factors--Labor Relations."
PROPERTIES
As of June 30, 1996 Goss owned the facilities set forth below:
<TABLE>
<CAPTION>
MAJOR FACILITIES
FACILITY FUNCTION SQUARE FEET
- ----------------------------------------------- --------------------------------- -----------
<S> <C> <C>
Cedar Rapids, Iowa............................. Machining, assembly, engineering 585,500
Reading, Pennsylvania.......................... Machining, assembly, engineering 458,628
Preston, England............................... Machining, assembly, engineering 300,000
Nantes, France................................. Assembly, engineering 263,300
Sayama, Japan.................................. Assembly, engineering 75,280
Westmont, Illinois............................. Headquarters, sales, engineering 280,674
</TABLE>
MANUFACTURING FACILITIES. Goss owns and operates five manufacturing
facilities in North America, Europe and Asia. The manufacturing plants in Cedar
Rapids, Iowa; Reading, Pennsylvania; and Preston, United Kingdom utilize
flexible machining systems and cell technology to produce high-quality press
components. The Cedar Rapids, Iowa and Preston, United Kingdom facilities
primarily produce large newspaper and commercial presses. The Reading,
Pennsylvania facility is primarily involved in the production of smaller
newspaper and commercial presses.
The facilities in Nantes, France and Sayama, Japan are assembly-only
operations. Goss's joint venture in China, in which Goss had 38% interest as of
December 31, 1995 owns a fully-integrated manufacturing and support facility in
Shanghai, comprised of approximately 500,000 square feet.
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The Company maintains high-quality manufacturing capability for critical,
close-tolerance parts and components and possesses a workforce skilled in both
machining and assembly. Most of Goss's machine tools have numerical control
capabilities and many have internal inspection capabilities. In addition,
statistical process control is used at all Goss machining facilities. The
Company also seeks to maximize the cost effectiveness of its manufacturing
processes and capacity utilization. In that regard, it may from time to time opt
to outsource the manufacture of certain components and subsystems for certain
printing presses.
ENGINEERING FACILITIES. Goss's primary design engineering capabilities are
maintained at its Westmont, Illinois headquarters. Goss has additional
engineering capabilities at all of its facilities.
OTHER FACILITIES. Various sales offices are leased to provide a base for
Goss's sales personnel around the world. Additional warehouse space is leased
primarily for the storage of customer-owned presses awaiting installation.
LEGAL PROCEEDINGS
Goss is currently, and is from time to time, subject to claims and suits
arising in the ordinary course of its business, including those relating to
product liability, safety and health and employment matters. In certain such
actions, plaintiffs request punitive or other damages that may not be covered by
insurance. It is the opinion of Management that the various asserted claims and
litigation in which Goss is currently involved will not have a material adverse
effect on the Company's financial position. However, no assurance can be given
as to the ultimate outcome with respect to such claims and litigation. The
resolution of such claims and litigation could be material to the Company's
operating results for any particular period, depending upon the level of income
for such period.
Goss is a defendant in a lawsuit (Heidelberger Druckmaschinen AG v. Hantscho
Commercial Products, Inc. and Rockwell Graphic Systems, Inc.) involving patent
infringement issues. This lawsuit was filed on June 26, 1987 in the U.S.
District Court for the Southern District of New York. In November 1995, the
Court issued an order in favor of the plaintiff setting damages of 6% of the
sales prices of presses which incorporated the disputed technology plus
interest. The final accounting of the amount of damages owing is being
undertaken and will depend on further proceedings to be held in the district
court. Rockwell has agreed to indemnify the Company for any damages that may be
determined to be payable in such action and to treat such as a retained
liability. Goss no longer incorporates the disputed technology into its presses.
See "The Acquisition-- Representations and Warranties; Indemnity."
Goss has experienced certain performance problems with its World 16 and, to
a lesser extent, its G25W, commercial press systems which it introduced in 1993
and 1992, respectively. Certain customers have alleged that such press systems
failed to meet performance expectations and contract specifications, including
certain customers which have requested rescission of the initial purchase
contract and/or damages and have threatened litigation to resolve their claims
against the Company relating to their commercial presses. In addition, Goss has
had one customer delay shipment of a World 16 press, has not yet received full
payment from other customers due to performance issues and has had two customers
initiate litigation seeking rescission and damages. See Note 19 to the Combined
Financial Statements included elsewhere in this Prospectus.
ENVIRONMENTAL
The Company's operations are subject to federal, state, local, and foreign
environmental laws and regulations that impose limitations on the discharge of,
and establish standards for the handling, generation, emission, release,
discharge, treatment, storage, and disposal and clean up of, certain materials,
substances and wastes. To the best of the Company's knowledge, its operations
are in material compliance with all applicable environmental laws and
regulations as currently interpreted.
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The Company's belief is based upon its understanding of the underlying facts
giving rise to its obligations and the technical advice received from the
Company's environmental consultants. Rockwell has agreed to indemnify the
Company and its subsidiaries and affiliates against all environmental costs
associated with Goss's facility in Peterborough, United Kingdom (which Rockwell
is retaining) and against all environmental costs associated with Hall
Processing Systems ("Hall Processing"). For a period of four years after the
Closing Date, Rockwell will also indemnify the Company against one-half of
certain environmental costs incurred by the Company in excess of $1.0 million,
provided that such costs result from the disposal, discharge or release of any
hazardous wastes, hazardous substances, pollutants or contaminants on or from
the facilities of Goss (or its predecessors) prior to the Closing, and provided
that such costs result from activities which are (i) required by an enforcement
order or decree entered by a governmental authority as a result of an
environmental proceeding; (ii) necessary to comply with an environmental law in
response to an environmental proceeding, the outcome of which environmental
proceeding is reasonably likely to result in material costs or expenses to the
Company; or (iii) necessary to comply with an environmental law in response to a
written, threatened environmental proceeding, which environmental proceeding is
reasonably likely to result in material costs or expenses to the Company,
provided that, in the case of this clause (iii), all such costs and expenses are
consented to in writing by Rockwell prior to being incurred. See "The
Acquisition--Representations and Warranties; Indemnity."
The Company's Reading, Pennsylvania facility has been operating a
groundwater remediation system (at an immaterial cost) under a 1981 Consent
Order with the Commonwealth of Pennsylvania as a result of its, and its
predecessor company's, historical waste disposal practices. Recent data indicate
that certain hazardous constituents in the groundwater have decreased over time,
while the data on other constituents is inconclusive. The Company plans to
submit a proposal to the Pennsylvania Department of Environmental Resources
(PADER) to terminate remediation at the site pursuant to recent statutory
authority to determine cleanup limits consistent with the results of a
site-specific risk assessment. Management has been advised that, given the site
location and aquifer use, the proposal is technically appropriate and may result
in the termination of groundwater remediation at this site. The Company believes
that any liability with respect to either continuing groundwater remediation or
conducting a site-specific risk assessment in order to complete such remediation
will not have a material adverse effect on the Company's business or financial
condition or its financial statements taken as a whole.
Goss has received either notices of potential liability, or third-party
contribution claims, under the federal Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") at six off-site disposal facilities.
Goss has entered into de minimis settlement agreements with the Environmental
Protection Agency (the "EPA") at two of these sites, and a de minimis settlement
proposal is pending review by the EPA at a third site. With respect to the
fourth site, the Interstate Pollution Control site in Rockford, Illinois, at
which Goss has been named a potentially responsible party ("PRP"), Goss's share
of the costs for cleanup of the site has been determined by the EPA to be 1.89%
of the total costs. Goss has been advised by the EPA that the potential
estimated cost for the final remedy at the site may be $10.0 million, with
Goss's share equaling approximately $200,000. At the fifth site, Berks County
Landfill, Spring Township, Berks County, Pennsylvania, Goss has been implicated
as potentially responsible through a third-party lawsuit and by a PRP notice
from the EPA. Management believes that it has been implicated through the
third-party lawsuit and as a PRP at this site based upon allegations that Goss
contributed certain waste to this site. Although Management is unable to
estimate its potential liability at this site because no cost allocations have
been made, Management believes its involvement, if any, is de minimis, based
upon the information available to Management regarding the nature and quantity
of the materials that Goss contributed to this site in comparison to the nature
and quantity of materials contributed to the site by other PRPs. In May 1996,
Goss received a PRP notice from the EPA for the sixth site, the Southeast
Rockford Groundwater site. Management believes it has been implicated as a PRP
at this site because of its involvement at the Interstate Pollution Control site
discussed above, which is located within the boundaries, and is a part,
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of the larger Southeast Rockford Groundwater site and because the EPA has
identified the PRPs at the Interstate Pollution Control site as potential
contributors to the groundwater contamination at the larger site. In addition,
the Company may have been implicated as a PRP at this site because it formerly
operated an industrial facility, which it sold in 1989 in the greater Southeast
Rockford area. Based upon the information available to it, however, Management
believes that there is no independent link to the Southeast Rockford Groundwater
site other than its involvement at the Interstate Pollution Control site.
Because no cost allocations have been made at the Southeast Rockford Groundwater
site, Management has no basis upon which it can estimate Goss's potential
liability at this site. Management understands that the City of Rockford is
attempting to fund a large portion of the past response costs through issuance
of bonds that will be paid by a tax on all industry operating in the area. Based
on this belief and understanding and taking into account Goss's cost allocation
at the Interstate Pollution Control site, Management believes that its
involvement, if any, is de minimis. Based upon Management's understanding of the
underlying facts giving rise to its obligations, the technical advice received
from Goss's environmental consultants, discussions with the involved parties and
its understanding of the planned remedies, Management believes that its
potential liability with respect to all of these sites will not have a material
adverse effect on the Company's results of operations, cash flows, or financial
condition.
Management cannot predict with any certainty whether future events, such as
changes in existing laws and regulations or the discovery of conditions not
currently known to the Company, may give rise to additional environmental costs.
Furthermore, actions by federal, state, local and foreign governments concerning
environmental matters could result in laws or regulations that could increase
the cost of producing the Company's products, or providing its services, or
otherwise adversely affect the demand for its products or services. During
fiscal 1995, Goss incurred less than $100,000 of expenses relating to
environmental matters. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Environmental Matters."
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THE ACQUISITION
The following summary of the material provisions of the Purchase Agreement
is subject to and is modified in its entirety by reference to all the provisions
of the Purchase Agreement, including the definitions therein of certain terms.
The Purchase Agreement provides for the acquisition of Goss through the purchase
by the Company and certain foreign subsidiaries to be formed by it of all the
outstanding stock of Goss Delaware and Goss France, and, as to the remainder of
Goss, through the purchase of assets and the assumption of liabilities from
Rockwell and certain subsidiaries of Rockwell. The Company will effect the
Acquisition by purchasing all of the outstanding capital stock of Goss Delaware
and Goss France. In addition, a Japanese corporation that is wholly owned by the
Company ("Goss Japan") will purchase for cash all of the outstanding stock of
Rockwell Graphic Systems-Japan Corporation, currently a wholly owned subsidiary
of Goss Delaware and the Company, together with a newly-formed, wholly owned
English company ("Goss U.K.") (which will purchase substantially all the assets
of Rockwell Graphic Systems Ltd.), will purchase the assets and assume the
liabilities of the remainder of Goss. After the Acquisition, the Company will
merge with Goss Delaware, and Goss Japan will merge with Rockwell Graphic
Systems-Japan Corporation. The assets that the Company will purchase include a
portfolio of notes receivable issued in connection with customer financing
provided by Rockwell to purchasers of Goss's products. Simultaneously with the
closing of the Acquisition and of the Offering, the Company will sell the
Customer Notes to BT Commercial Corporation for an estimated purchase price of
approximately $163.7 million. The proceeds of this sale of the Customer Notes
will be used in part to finance the Acquisition and the payment of expenses
incurred in connection therewith. See "Use of Proceeds."
PURCHASE PRICE; ADJUSTMENTS
The Company will acquire Goss for a purchase price which will consist of
$552.5 million in cash and 47,500 shares of Preferred Stock issued by Holdings
to Rockwell, plus (i) the aggregate amount of interest on each Customer Note
which is not more than 60 days past due with respect to the interest thereon
accrued (but not yet received) from the date of the last interest payment
thereon through and including the day preceding the date of the closing of the
Acquisition and (ii) an amount equal to 50% of the excess of the amount received
by the Company for the sale of the Customer Notes over $170.0 million (adjusted
for payments with respect to principal (up to an aggregate of $170.0 million)
actually received by Rockwell in respect of the Customer Notes between March 1,
1996 and the day preceding the Closing Date); and minus (i) the amount of all
payments with respect to principal (up to an aggregate of $170.0 million)
actually received by Rockwell in respect of the Customer Notes between March 1,
1996 and the day preceding the Closing Date and (ii) the aggregate amount of
prepaid interest on each Customer Note actually received by Rockwell between
April 26, 1996 and the day preceding the Closing Date to the extent it was not
earned for periods through and including the day preceding the Closing Date.
In addition, the purchase price is subject to certain post-closing
adjustments as follows: (i) the purchase price will be increased
dollar-for-dollar by the amount, if any, by which certain selected assets set
forth below of Goss on the day preceding the Closing Date (the "Selected Closing
Assets") minus the amount of certain selected liabilities set forth below of
Goss on the day preceding the Closing Date (the "Selected Closing Liabilities")
is greater than $200.0 million; and (ii) the purchase price will be decreased
dollar-for-dollar by the amount, if any, by which the Selected Closing Assets
minus the Selected Closing Liabilities is less than $200.0 million. The Selected
Closing Assets will consist of accounts receivable (before any reserves
including unbilled receivables), inventories (before any reserves), cash and
cash equivalents held by Goss France and by Rockwell Graphic Systems-Japan
Corporation, a corporation organized under the laws of Japan, and the
outstanding principal amount of any new Customer Notes entered into between
March 1, 1996 and the day preceding the Closing Date, with the consent of the
Company. The Selected Closing Liabilities will consist of accounts payable
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(including outstanding checks), liabilities for payables to Allen-Bradley during
the 30-day period preceding the Closing Date, customer advances and certain
reserves with respect to warranty and product performance issues in the
commercial business.
REPRESENTATIONS AND WARRANTIES; INDEMNITY
The Purchase Agreement contains customary representations and warranties,
including those concerning corporate organization and authorization, outstanding
capital stock, compliance with laws, taxes, litigation, intellectual property
and employee benefit plans. Each representation and warranty of Rockwell will
survive for a period of one year after the Closing Date, except for the
representations and warranties of Rockwell (which will survive until all
applicable statutes of limitation have expired) relating to (i) the incurrence
of broker's or finder's fees in connection with the Acquisition; (ii) the filing
of tax returns, the payment of taxes and certain other tax-related matters;
(iii) the capitalization and ownership by Rockwell of the authorized capital
stock of certain of the entities that constitute Goss; (iv) due authorization of
the Purchase Agreement and the Acquisition; and (v) ownership of real property.
Rockwell has agreed to indemnify the Company and its subsidiaries and
affiliates against any liabilities incurred in connection with (i) the breach of
any covenant or agreement of Rockwell contained in the Purchase Agreement (with
certain exceptions); (ii) the breach of any of Rockwell's representations and
warranties contained in the Purchase Agreement (subject to de minimis
exceptions); (iii) any settlement of or judgment in respect of certain patent
litigation; (iv) the liquidation of Hall Processing, a partnership in which a
subsidiary of Goss is the general partner; (v) liabilities retained by Rockwell;
and (vi) taxes for any taxable period that ends on or before the Closing Date
and certain other tax-related matters. Rockwell's indemnity obligations with
respect to covenants, agreements and tax-related matters terminate upon the
expiration of all applicable statutes of limitations; with respect to
representations and warranties, terminate upon the expiration of the applicable
representation or warranty; and otherwise do not terminate. Claims based upon
Rockwell's indemnity with respect to breaches of representations and warranties
are not payable until the aggregate amount of damages incurred by the Company
exceeds one percent of the purchase price, in which event Rockwell is only
responsible for damages that are in excess of one-half percent of the purchase
price and that are, in the aggregate, no greater than the purchase price.
In addition, Rockwell has also agreed to indemnify the Company and its
subsidiaries and affiliates against all environmental costs associated with
Goss's facility in Peterborough, United Kingdom (which Rockwell is retaining)
and against all environmental costs associated with Hall Processing. For a
period of four years after the Closing Date, Rockwell will also indemnify the
Company against one-half of certain environmental costs incurred by the Company
in excess of $1.0 million, provided that such costs result from the disposal,
discharge or release of any hazardous wastes, hazardous substances, pollutants
or contaminants on or from the facilities of Goss (or its predecessors) prior to
the Closing, and provided that such costs result from activities which are (i)
required by an enforcement order or decree entered by a governmental authority
as a result of an environmental proceeding; (ii) necessary to comply with an
environmental law in response to an environmental proceeding, the outcome of
which environmental proceeding is reasonably likely to result in material costs
or expenses to the Company; or (iii) necessary to comply with an environmental
law in response to a written, threatened environmental proceeding, which
environmental proceeding is reasonably likely to result in material costs or
expenses to the Company, provided that, in the case of this clause (iii), all
such costs and expenses are consented to in writing by Rockwell prior to being
incurred.
For purposes of the Company's indemnity to Rockwell in connection with the
Acquisition, each representation and warranty of the Company will survive for a
period of one year after the Closing Date, except for the Company's
representation that it has not authorized any broker's or finder's fees in
connection with the Acquisition, which representation will survive until all
applicable statutes of limitation have expired.
64
<PAGE>
The Company has agreed to indemnify Rockwell and its subsidiaries and
affiliates against any liabilities incurred in connection with (i) the breach of
any covenant or agreement of the Company contained in the Purchase Agreement;
(ii) the breach of any of the Company's representations and warranties contained
in the Purchase Agreement; (iii) any obligations or liabilities of Goss Delaware
and its subsidiaries and Goss France, whether incurred before, on or after the
Closing Date, except for those obligations and liabilities for which Rockwell
has indemnified the Company; (iv) liabilities assumed by the Company; (v) any
guarantees or obligations to assure performance or to perform given or made by,
or other liabilities or obligations of, Rockwell or any of its subsidiaries or
affiliates with respect to Goss or certain agreements and contracts relating to
Goss; and (vi) any obligations or liabilities arising out of the operation of
Goss on or after the Closing Date. The Company's indemnity obligations with
respect to covenants and agreements terminate upon the expiration of all
applicable statutes of limitation; with respect to representations and
warranties, terminate upon the expiration of the applicable representation or
warranty; and otherwise do not terminate.
CERTAIN COVENANTS
The Purchase Agreement contains certain customary covenants, including
covenants (i) by Rockwell to conduct the business of Goss in the ordinary
course; to cancel certain intercompany indebtedness; to grant to the Company a
license to use certain intellectual property being retained by Rockwell; and
(ii) by the Company to phase out use of Rockwell's trademarks, tradenames,
logos, etc.; to assume Rockwell's obligations under certain contracts and
agreements relating to the business of Goss; and to grant to Rockwell a license
to use certain intellectual property being acquired by the Company.
In addition, with respect to employee benefits, the Company and Rockwell
have, among other things, agreed that Goss employees will cease participation in
Rockwell retirement plans as of the Closing Date and that Rockwell will retain
all liability under such plans. The Company has agreed to provide welfare
benefits no less favorable in the aggregate than currently provided (with
certain exceptions). The Company may, however, amend or terminate such plans
after the Closing Date. In addition, the Company will assume all stand-alone
retirement plans (including those for employees in the United Kingdom, Germany
and Japan).
CONDITIONS TO CLOSING
The obligation of the Company to consummate the transactions contemplated by
the Purchase Agreement is subject to the satisfaction or waiver by the Company,
on or prior to the Closing Date, of certain conditions, including the following:
(i) no judgment, decree or order may be in effect on the Closing Date which
restrains or prohibits consummation by the Company of the Acquisition and no
litigation shall be pending which would be reasonably likely to enjoin the
Acquisition or which would be reasonably likely to result in material damages to
the Company or Goss as a result of the Acquisition; (ii) the applicable waiting
period under the Hart-Scott-Rodino Act of 1976, as amended, shall have expired
or been terminated; (iii) the Company must have obtained the financing set forth
in certain exhibits to the Purchase Agreement; (iv) there must not have been any
material adverse effect with respect to Goss since September 30, 1995; (v)
Rockwell must have obtained all consents required in connection with
consummation of the Acquisition other than any such consents which if not
obtained would not reasonably be likely to have a material adverse effect; (vi)
the Company must have no reasonable basis to believe that Goss is not in
compliance in all material respects with all environmental laws except where the
failure to so comply would not reasonably be likely to have a material adverse
effect; and (vii) there must be no short-term or long-term borrowings by Goss
outstanding as of the Closing Date, other than overdraft borrowings of Goss
Japan and of Goss France. The obligation of Rockwell to consummate the
transactions contemplated by the Purchase Agreement is subject to the
satisfaction or waiver by Rockwell, on or prior to the Closing Date, of certain
conditions, including each
65
<PAGE>
of the following: (i) no judgment, decree or order may be in effect on the
Closing Date which restrains or prohibits consummation by Rockwell of the
Acquisition and no litigation shall be pending which would be reasonably likely
to enjoin the Acquisition or which would be reasonably likely to result in
material damages to Rockwell or any of its subsidiaries as a result of the
Acquisition; and (ii) the applicable waiting period under the Hart-Scott-Rodino
Act of 1976, as amended, shall have expired or been terminated.
AGREEMENT NOT TO COMPETE
Rockwell has agreed that, for a period of three years after the Closing
Date, neither Rockwell nor any company controlled by Rockwell will, directly or
indirectly, without the written consent of the Company, enter into, or acquire
control of more than a five percent interest in, any business more than ten
percent of whose revenues are derived from operations engaged in the
development, manufacture, sale or provision of web offset printing press
systems; provided that Rockwell may acquire control of any business deriving
less than 50% of its revenues from such operations so long as it shall use
reasonable best efforts to divest such operations as promptly as practicable and
in any event not later than two years following such acquisition. Rockwell or
any company controlled by Rockwell shall not be prohibited or restricted from
entering into any business engaged in, acquiring control of or any interest in
any business engaged in, engaging in or continuing to engage in any activity
which comprises or is an extension or expansion of those business operations
conducted by Rockwell through any of its divisions or subsidiaries other than
Goss as of April 26, 1996. In addition, Rockwell has agreed that its Science
Center will not, for a period of three years after the Closing Date, provide to
competitors of Goss support services which cover substantially similar matters
as the support services which Rockwell's Science Center is performing with
respect to certain projects.
66
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning the individuals who
are expected to be the executive officers and directors of the Company upon
consummation of the Acquisition:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Robert M. Kuhn............................ 54 Chairman and Chief Executive Officer
J. Joe Adorjan............................ 58 Director
Gerald S. Armstrong....................... 53 Director
Alfred C. Daugherty....................... 73 Director
Robert F. End............................. 41 Director
James J. Kerley........................... 73 Director
Alexis P. Michas.......................... 38 Director
Robert J. Mylod, Jr....................... 29 Director
James P. Sheehan.......................... 54 Director
William A. Boston......................... 48 Vice President, Commercial Products
Barbara L. Gora........................... 44 Director of Marketing and Communications
Frank D. Jurenka.......................... 59 Vice President, U.S. Operations
P. Michael Kienzle........................ 61 Vice President, Newspaper Products
Jack E. Merryman.......................... 49 Vice President and General Counsel
M. Eric Schroeder......................... 49 Vice President, Finance and Administration
Alan P. Sheng............................. 52 Vice President, Engineering and Technology
Brian J. Smith............................ 42 Vice President, Human Resources
Richard J. Sutis.......................... 53 Vice President, Asia Pacific
Michael C. Szymaszek...................... 51 Vice President, Quality Assurance & Plant
Manager, Cedar Rapids
Randall Thomas............................ 47 Vice President & General Manager, Europe
</TABLE>
ROBERT M. KUHN joined Goss as President in October 1995 and will serve as
the Company's Chairman and Chief Executive Officer after the Acquisition. Prior
to joining Goss, he had served as Senior Vice President, Business Development of
United Technologies Corporation and President, Hamilton Standard, the aerospace
subsidiary of United Technologies since 1991. Mr. Kuhn has also held senior
management positions at United Technologies, Hamilton Standard, Pratt & Whitney
and Armtek Corporation, where he served as a Corporate Director.
J. JOE ADORJAN is the Chairman of the Board, Chief Executive Officer and
President of Borg Warner Security Corporation, a supplier of guard, alarm,
armored transport, courier and other protective services. Mr. Adorjan has held
these positions since January 1996, October 1995 and April 1995, respectively.
Mr. Adorjan was President of Emerson Electric Co., a manufacturer of electronic,
electrical and other products, from 1992 to 1995 and Chairman and Chief
Executive Officer of ESCO Electronics Corporation from 1990 to 1992. Mr. Adorjan
is also a Director of California Microwave, Inc., The Earthgrains Company and
ESCO Electronics Corporation.
GERALD S. ARMSTRONG is a Partner and a Director of Stonington, a position he
has held since 1993. Mr. Armstrong is also a Partner and a Director of
Stonington Partners, Inc. II, a Delaware corporation ("Stonington II"), a
position he has held since 1994. Mr. Armstrong has also been a Director of
Merrill Lynch Capital Partners, Inc. ("MLCP"), a private investment firm
associated with Merrill Lynch & Co., since 1988, a Partner of MLCP from 1993 to
1994, an Executive Vice President of MLCP from 1988 to 1993, and a Managing
Director of Merrill Lynch & Co. since 1988. From January to November 1988, he
was President and Chief Executive Officer of Printing Finance Company, Inc., a
printing company. From March 1985 to January 1988, Mr. Armstrong was Executive
Vice President and Chief Operating Officer of PACE Industries, Inc., a
manufacturing and printing company. Mr.
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<PAGE>
Armstrong is also a director of Ann Taylor Stores Corporation, Blue Bird
Corporation, First USA, Inc., World Color Press, Inc., Beatrice Foods, Inc., and
several privately-held corporations.
ALFRED C. DAUGHERTY was Chairman of Duracell International Inc., a
manufacturer of premium batteries, and Executive Vice President of Dart
Industries Inc., a maker of consumer products and chemical specialties, as well
as a Director of both, until his retirement on January 1, 1985. Mr. Daugherty is
also a Director of Blue Bird Corporation and several privately held
corporations.
ROBERT F. END is a Partner and a Director of Stonington, a position that he
has held since 1993. He has also been a Director of MLCP since 1993. He was a
Partner of MLCP from 1993 to 1994 and Vice President of MLCP from 1989 to 1993.
Mr. End was also a Managing Director of the Investment Banking Division of
Merrill Lynch & Co. from 1993 to July 1994 and a Director of the Investment
Banking Division of Merrill Lynch & Co. from 1990 to 1993. Mr. End is also a
Director of Beatrice Foods, Inc., United Artists Theatre Circuit, Inc. and
several privately held corporations.
JAMES J. KERLEY served as the Vice Chairman and Chief Financial Officer of
Emerson Electric Co., a manufacturer of electrical products and systems for
consumer, commercial, industrial and defense markets, from 1981 until his
retirement in 1985. Mr. Kerley interrupted his retirement and, at the request of
the Board of Directors of Rohr, Inc., a manufacturer of jet engine components
and other components for aircraft, served as non-executive Chairman of Rohr,
Inc. from 1993 to 1994. Mr. Kerley was the Chief Financial Officer of Monsanto
Company, a manufacturer of chemical and agricultural products, pharmaceuticals,
low-calorie sweeteners, plastics and man-made fibers, from 1970 to 1981. Mr.
Kerley is also a Director of Borg-Warner Automotive, Inc. and DT Industries,
Inc.
ALEXIS P. MICHAS is a Managing Partner and a Director of Stonington, a
position that he has held since 1993. Mr. Michas is also a Managing Partner and
a Director of Stonington II, a position he has held since 1994. Mr. Michas has
also been a Director of MLCP since 1989. He was a Partner of MLCP from 1993 to
1994 and Senior Vice President of MLCP from 1989 to 1993. Mr. Michas was also a
Managing Director of the Investment Banking Division of Merrill Lynch & Co. from
1991 to July 1994 and a Director in the Investment Banking Division of Merrill
Lynch from 1990 to 1991. Mr. Michas is also a Director of Blue Bird Corporation,
Borg-Warner Automotive, Inc., Borg-Warner Security Corporation, Dictaphone
Corporation, Pathmark Stores, Inc., Supermarkets General Holdings Corp. and
several privately-held corporations.
ROBERT J. MYLOD, JR. is a Principal of Stonington, a position he has held
since January 1996. Mr. Mylod was an Associate of Stonington from 1993 to 1995.
Mr. Mylod was also an Associate of MLCP from 1993 to 1994 and an Analyst of MLCP
from 1989 to 1992. Mr. Mylod is also a Director of a privately-held corporation.
JAMES P. SHEEHAN served as the President and Chief Operating Officer of A.H.
Belo Corp., a media company that publishes newspapers and televises programs
through stations owned by it, from 1987 to 1993. Since January 1994, Mr. Sheehan
has been self-employed as a private investor. Mr. Sheehan is not a member of the
Board of Directors of any company with publicly registered debt or equity
securities.
WILLIAM A. BOSTON joined Goss in 1970 and has served as Regional Manager of
Goss's Asia Pacific Operations and Director of International Marketing. Since
1981, Mr. Boston has been responsible for Goss's commercial printing press
business as Vice President, Commercial Products.
BARBARA L. GORA joined Goss in 1978 as Manager of Public Relations, and
subsequently served in a series of business line positions involving contract
administration and sales support. In 1985, she was named Marketing Manager for
the newly formed insert/small newspaper business and later named Marketing
Manager for the Americas commercial business. In 1992, she was promoted to
Americas
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<PAGE>
Marketing Director for both Newspaper and Commercial products. In December 1995,
she was promoted to company-wide Director of Marketing and Communications,
reporting to the President.
FRANK D. JURENKA began his career at Goss in 1977 as Plant Manager of the
Reading, Pennsylvania facility. His 18 years of experience with Goss have
included various senior management positions, including Vice President and
General Manager, Asia Pacific; Vice President, Manufacturing; and Vice
President, Engineering. Mr. Jurenka assumed his current role of Vice President,
U.S. Operations in late 1995 after serving as Vice President and General
Manager, Asia Pacific from 1990-1995.
P. MICHAEL KIENZLE began his career at Goss in 1961 as a Field Erector.
Since that time he has held a number of positions within Goss, including key
management positions such as Director of Customer Service, Director of Sales and
Service, Director of Marketing and Sales, General Manager of Newspaper Products
and Vice President, Goss Newspaper Products. In 1992, he was promoted to his
current position of Vice President, Newspaper Products, with expanded
responsibilities within the Americas newspaper business, after serving as Vice
President, Goss Newspaper Products from 1991 to 1992.
JACK E. MERRYMAN joined Goss in June 1996 as Vice President and General
Counsel. Prior to joining Goss, Mr. Merryman served as General Counsel and
Secretary for Reliance Electric Company, a subsidiary of Rockwell which makes
industrial motors and drive systems, since 1995. Mr. Merryman had served as
Assistant General Counsel & Assistant Secretary of Reliance Electric Company
from 1993 to 1995, and as Senior Counsel from 1987 to 1993. Prior to joining
Reliance Electric Company in 1985, Mr. Merryman served in various legal
capacities for The Sherwin-Williams Company, Roadway Express, Inc., and the City
of Cleveland, Ohio. He is certified to practice before the U.S. Supreme Court
and the U.S. Tax Court.
M. ERIC SCHROEDER joined Goss in June 1995 as Vice President, Finance and
Administration. Prior to joining Goss, Mr. Schroeder served as the Director of
Finance and Controller for Rockwell Switching Systems, a business unit of
Rockwell which designs and manufactures phone call distribution systems, since
April 1988. He has been with Rockwell's organization for 22 years, serving in
financial management positions at both division and corporate staff levels for
Rockwell's government and commercial businesses.
ALAN P. SHENG began his career with Goss in 1985 as Director, Advanced
Technology and Software. After serving in several positions with increasing
engineering, research and development responsibilities, including Executive
Director, Advanced Technology from 1991 to 1992, he was promoted to his present
position of Vice President, Engineering and Technology in 1992. His prior
experience includes six years as a research physicist at Rutgers University and
Caltech and nine years with Bell Laboratories.
BRIAN J. SMITH joined Goss in February 1996 as Vice President, Human
Resources. Prior to joining Goss, Mr. Smith was Director of Global Human
Resources Strategy for the Colgate-Palmolive Company, a consumer products
company, since 1991. Prior to joining Colgate-Palmolive in 1983, Mr. Smith held
a number of human resources management positions at Bankers Trust Company,
Freeport-McMoran, Inc., and American Standard, Inc. Mr. Smith has also served as
Vice Chairman for "Jobs For Youth," a not-for-profit organization based in New
York City, and on the Board of Trustees of Adelphi University.
RICHARD J. SUTIS rejoined Goss in January 1996 as Vice President, Asia
Pacific. From August 1994 to January 1996, Mr. Sutis served as Vice President,
Business Development and Strategy for Stevens International, Inc., a
manufacturer and marketer of complete web fed printing and
69
<PAGE>
packaging systems. Prior to August 1994, and since 1965, Mr. Sutis worked for
Goss (or its predecessors), serving in numerous engineering, marketing and
senior management positions, including Director, Program Management from 1991 to
August 1994.
MICHAEL C. SZYMASZEK joined Goss as Vice President, Quality Assurance in
June 1995, after serving as Director of Quality at Square D Corporation, a maker
of electrical distribution, automation and industrial control products, systems
and services, since 1991. Mr. Szymaszek also assumed the position of Plant
Manager, Cedar Rapids, in May 1996. He worked for Square D Corporation for 27
years, where he served in various management positions in engineering, customer
service and quality.
RANDALL THOMAS joined Goss in 1989 after a decade of serving as Managing
Director of two other divisions of Rockwell in the United Kingdom. In 1989, Mr.
Thomas became Managing Director of Goss's operations at its Preston, England
facility before being promoted in 1992 to his current position of Vice President
& General Manager, Europe.
Messrs. Armstrong, Michas and Mylod will serve as members of the Audit and
Compensation Committees. They are employees of Stonington and serve on the Board
of Directors as representatives of Stonington.
MANAGEMENT INVESTMENT
Simultaneously with the Acquisition Closing, Holdings will issue 40,300
shares of Common Stock to the Management Investors, who are comprised of Messrs.
Kuhn, Boston, Jurenka, Kienzle, Thomas and other key members of management, in
the Management Placement for $4,030,000. The Management Investors will purchase
such shares of Common Stock at the same price per share that the Fund and the
Institutional Investor will pay in the Stonington Investment and the Equity
Private Placement, respectively. Holdings will finance $2,025,000 of this amount
by non-recourse loans (the "Management Notes"); the remaining $2,005,000 will be
paid in cash by the Management Investors. Shares of Common Stock and Management
Notes have been offered to Mr. Kuhn and the executive officers named in the
Summary Compensation Table below (other than Mr. Swift) in the following
amounts: Mr. Kuhn--17,000 shares and $850,000; Mr. Boston--2,000 shares and
$100,000; Mr. Jurenka-- 1,000 shares and $50,000; Mr. Kienzle--1,000 shares and
$50,000; and Mr. Thomas--4,000 shares and $200,000. The Management Notes will
bear interest at a rate equal to 8 1/4%, and will be secured by the pledge of
all the Common Stock held by the Management Investors. As a condition to the
closing of the Management Placement, the Management Investors will be required
to enter into the Stockholders Agreement. See "Certain
Transactions--Stockholders Agreement."
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<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by Goss to its
President and to each of its four most highly compensated executive officers
(other than the President) whose total cash compensation exceeded $100,000, for
the year ended September 30, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
------------------ ----------------------------
AWARDS PAYOUTS
------------ ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS LTIP PAYOUTS
- ------------------------------------- ---- ------- ------- ------------ ------------
($) ($) (#) ($)
<S> <C> <C> <C> <C> <C>
Robert L. Swift (a).................. 1995 244,750 275,000 20,000(b) 199,300(c)
President
William A. Boston.................... 1995 191,400 214,800 -- --
Vice President,
Commercial Products
Frank D. Jurenka..................... 1995 168,625 100,000 -- --
Vice President,
U.S. Operations
P. Michael Kienzle................... 1995 138,200 93,000 -- --
Vice President,
Newspaper Products
Randall Thomas....................... 1995 177,361 159,500 -- --
Vice President & General
Manager, Europe
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Robert M. Kuhn is currently the President of Goss and will serve as Chairman and Chief
Executive Officer of the Company immediately following the Acquisition. Mr. Swift
joined Goss and served as its President from April 1994 until October 1995.
(b) Options to purchase Rockwell stock were granted in fiscal year 1995 to Mr. Swift
pursuant to the Rockwell 1988 Long-Term Incentives Plan. There were no options for
securities of the Company granted during the year ended September 30, 1995. Options to
purchase Rockwell stock will not be converted into options to purchase securities of
Goss.
(c) None of the other officers, besides Mr. Swift, received long-term incentive plan
payouts. Mr. Swift received his long-term incentive plan payout as a participant in the
Allen-Bradley Supplemental Performance Unit Plan. The value for his payout is the
aggregate of the value of the payout of performance units, which is based on
Allen-Bradley's sales growth and return-on-sales performance.
</TABLE>
71
<PAGE>
OPTION GRANTS TO PURCHASE ROCKWELL STOCK IN LAST FISCAL YEAR (A)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------- ANNUAL RATES OF
% OF ROCKWELL
TOTAL STOCK PRICE
NUMBER OF OPTIONS APPRECIATION FOR
SECURITIES GRANTED OPTION TERM
UNDERLYING TO EXERCISE EXPIRATION AS OF
OPTIONS EMPLOYEES OR BASE DATE SEPT. 30, 1995 (C)
GRANTED IN FISCAL PRICE AS OF ---------------------
NAME (#) YEAR ($/SH) SEPT. 30, 1995 (B) 5%($) 10%($)
- --------------------------- ---------- --------- -------- ------------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Swift............ 20,000 1.1% $ 35.625 December 7, 2004 $448,087 $1,135,542
William A. Boston.......... 0 N/A N/A N/A N/A N/A
Frank D. Jurenka........... 0 N/A N/A N/A N/A N/A
P. Michael Kienzle......... 0 N/A N/A N/A N/A N/A
Randall Thomas............. 0 N/A N/A N/A N/A N/A
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Options to purchase Rockwell stock were granted in fiscal year 1995 to Mr. Swift
pursuant to the Rockwell 1988 Long-Term Incentives Plan. There were no options for
securities of Goss granted in fiscal year 1995. Options to purchase stock will not be
converted into options to purchase securities of the Company.
(b) Except for Mr. Swift, all other named executive officers' employment with Rockwell will
terminate as of the Closing Date. As a result, it is expected that all options to
purchase Rockwell stock held by such officers to the extent they are not exercisable
will terminate and be forfeited on the Closing Date and to the extent they are
exercisable, will remain exercisable for a period of three months. Mr. Swift, who
retired from Rockwell effective December 31, 1995, will be entitled to exercise his
options for three years from the date of retirement.
(c) Options to purchase Rockwell stock held by all named executive officers will terminate
or remain exercisable as discussed in footnote (b) above. As a result, the named
executive officers may not benefit from any appreciation of the common stock of
Rockwell as indicated in these two columns.
</TABLE>
AGGREGATED EXERCISES OF OPTIONS TO PURCHASE ROCKWELL STOCK
IN LAST FISCAL YEAR AND 1995 FISCAL YEAR END OPTION VALUES(A)
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED AT 1995 FISCAL YEAR END 1995 FISCAL YEAR END($)
ON --------------------------- ---------------------------
NAME EXERCISE(#) VALUE REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ----------- ----------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Swift............ 0 N/A 10,000 20,000 $ 96,250 $ 232,500
William A. Boston.......... 0 N/A 33,500 0 684,250 0
Frank D. Jurenka........... 0 N/A 22,500 0 519,813 0
P. Michael Kienzle......... 3,100 65,681 16,300 0 367,100 0
Randall Thomas............. 0 N/A 2,400 0 54,600 0
</TABLE>
- ------------
(a) This table reflects options to purchase Rockwell stock granted to the named
executive officers pursuant to the Rockwell 1988 Long-Term Incentives Plan
as described in footnote (b) to the Summary Compensation Table above.
72
<PAGE>
PENSION PLANS
Certain employees of Goss currently participate in either the Rockwell
Retirement Income Plan for Certain Salaried Employees or the Rockwell Retirement
Income Plan for Certain Salaried Employees in General Industries Operations,
each a subplan of the Rockwell Retirement Plan for Eligible Employees
(collectively, the "Rockwell Retirement Plans"). The Rockwell Retirement Plans
have virtually the same "Normal Retirement Benefit" formula which is calculated
as follows: (i) 2 2/3 of final 5-year average compensation multiplied by years
of service (up to 15 years of service) plus 1/2% of final 5-year average
compensation multiplied by years of service in excess of 15 years (up to 20
years of service); minus (ii) an offset percentage equal to .455%, .425% or
.400% (depending on an individual's Social Security Retirement Age (which is
based on year of birth)) applied to the first 15 years of service, plus .250%
applied to years of service between 15 years and 20 years of service, multiplied
by Social Security Covered Compensation.
For accrued benefit determinations prior to age 62, benefit service is
determined as if the employee remained in service until age 62 (or 85 points
(where "points" are equal to the sum of age plus years of service) for certain
grandfathered participants, if earlier under the Rockwell Retirement Income Plan
for Certain Salaried Employees), and the resulting benefit is then multiplied by
the ratio of actual service to service projected to age 62. Compensation is
determined based on total wages, up to the Internal Revenue Service limits. The
Normal Retirement Age is age 65, but the Rockwell Retirement Plans provide for
substantial early retirement subsidies.
Pursuant to the Purchase Agreement, employees of the Company who participate
in the Rockwell Retirement Plans immediately prior to the Closing will cease to
accrue benefits under the Rockwell Retirement Plans and will have a fully
nonforfeitable right to such employee's benefits payable at Normal Retirement
Age under the Rockwell Retirement Plans accrued as of the last business day of
the month in which the Closing occurs. Rockwell will retain full power and
authority with respect to the amendment and termination of the Rockwell
Retirement Plans. Rockwell will remain solely responsible for, and the Company
will have no liability under, relating to or arising out of the Rockwell
Retirement Plans. If the Closing had occurred on July 31, 1996, the estimated
annual benefits at age 62 payable to the named executive officers under the
Rockwell Retirement Plans are as follows: Mr. Boston-- $74,556; Mr.
Jurenka--$93,924; Mr. Kienzle--$68,916; Mr. Thomas--$38,940 (Mr. Thomas
participates in the Rockwell U.K. Executive Plan and his estimated annual
benefits assume an exchange rate of 1.5601 U.S. dollars per pound sterling; and
Mr. Swift--not applicable, since Mr. Swift retired from Rockwell effective
December 31, 1995.
After the consummation of the Acquisition, the Company intends to offer
participation in a defined contribution plan to be established by the Company.
EMPLOYMENT AGREEMENTS
On October 9, 1995, Rockwell entered into a letter employment agreement with
Robert Kuhn providing for Mr. Kuhn's employment as President of Goss. The
agreement provides for an annual base salary of $400,000, and, in the event Mr.
Kuhn is removed as President of Goss during the first 12 months following any
sale by Rockwell of Goss, Mr. Kuhn will receive $400,000 annually for two years,
provided that he is unemployed during such period. The agreement also provides
that Mr. Kuhn will receive a lifetime retirement benefit of $32,000 annually
beginning on his 62nd birthday, provided that Mr. Kuhn does not voluntarily
terminate his employment with Goss (or any successor entity) within five years
of the date of the agreement. In the event that Mr. Kuhn becomes entitled to the
$800,000 payment following his removal as President of Goss during the first
twelve months following a sale of Goss, he will not be entitled to the
retirement benefit. In addition, Mr. Kuhn is entitled to receive incentive
compensation from Rockwell, based on a sale of Goss, determined by reference to
the
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<PAGE>
purchase price paid for Goss. Based on the terms of the Acquisition, Mr. Kuhn is
expected to receive incentive compensation of between $350,000 and $1,000,000.
The Company and Mr. Kuhn intend to enter into an employment agreement that
will supersede and modify the letter employment agreement between Mr. Kuhn and
Rockwell to the extent that the Company has assumed any obligations thereunder.
Mr. Kuhn will serve as Chairman and Chief Executive Officer of the Company with
an initial employment term of two years (which will be automatically extended
for additional two-year terms unless affirmatively terminated by either the
Company or Mr. Kuhn). The agreed-upon annual base salary will be $550,000
subject to annual increases as determined by the Board of Directors. Mr. Kuhn
will also be eligible to receive an annual cash bonus which will be determined
in accordance with the terms of a bonus plan applicable to other senior
executives of the Company to be adopted by the Board of Directors.
Upon a Termination of Employment Without Cause (as defined in the employment
agreement) or a termination of employment by Mr. Kuhn for Good Reason (as
defined in such agreement), Mr. Kuhn will receive an amount in a lump sum equal
to two times his base salary plus an amount equal to the sum of the accrued
annual base salary as of the date of termination and the accrued annual bonus
for the fiscal year prior to the date of termination, if not yet paid, and a pro
rata portion of the annual bonus accrued to the date of such termination. In
addition, until the earlier of two years after the date of termination or Mr.
Kuhn's commencement of employment with another employer, the Company will
continue to provide Mr. Kuhn with the welfare benefits to which he was entitled
while employed by the Company. Mr. Kuhn will not receive severance in connection
with a termination for Cause or termination by Mr. Kuhn other than for Good
Reason or retirement. Upon a termination of employment due to death, disability
or retirement, the Company will pay to Mr. Kuhn or his estate, as the case may
be, an amount equal to the sum of the accrued annual base salary as of the date
of death, disability or retirement and the accrued annual bonus for the fiscal
year prior to the date of death, disability or retirement, if not yet paid, and
a pro-rata portion of the annual bonus accrued to the date of such death,
disability or retirement.
MANAGEMENT STOCK INCENTIVE PLAN
At the Acquisition Closing, Holdings intends to adopt the Management Stock
Incentive Plan (the "Plan") pursuant to which officers and key employees of
Holdings and its subsidiaries (the "Participants") will be granted shares of
Nonvoting Common Stock as restricted stock (the "Restricted Stock") and stock
options exercisable into shares of Common Stock (the "Options"). The Plan is not
related to the Rockwell 1988 Long-Term Incentives Plan discussed above and will
be a separate plan established by Holdings at the Acquisition Closing. The Plan
will be administered by either the Compensation Committee of the Board of
Directors (the "Committee") or the Board of Directors (the "Board"). The
Committee or the Board will have the discretion to select those to whom certain
Options will be granted (from among those eligible) and to determine the
exercise price, the duration and other terms and conditions of such Options (the
"Discretionary Options"). Under the Plan, 12,800 shares of Common Stock will
initially be available for purchase pursuant to Discretionary Options. It is
presently anticipated that certain other Options and the Restricted Stock will
be granted at the Acquisition Closing, as described below. The Board or the
Committee will have the authority to interpret and construe the Plan and any
interpretation or construction of the provisions of the Plan or of any Options
or Restricted Stock granted under the Plan by the Board or the Committee will be
final and conclusive.
It is expected that, at the Acquisition Closing, Options to purchase up to
31,450 shares of Common Stock at an exercise price equal to $100 per share will
be granted (the "Incentive Options"). Twenty percent of the Incentive Options
granted will vest and become exercisable per year on each of the first through
fifth anniversaries of the date of grant, provided that the Participant
continues to be employed by Holdings or a subsidiary of Holdings. It is also
expected that, at the Acquisition Closing, Options to purchase up to 31,450
shares at an exercise price equal to $100 per share will be granted (the
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<PAGE>
"Performance Options"). Up to 20% of the Performance Options will be eligible to
vest and become exercisable each year on each of the first through fifth
anniversaries of the date of grant. Whether such Performance Options vest and,
if so, what fraction of those eligible actually vest will be determined based
upon Holdings' achievement of certain predetermined financial performance goals.
In any case, the Performance Options will vest no later than on the tenth
anniversary of the Acquisition Closing, provided that the applicable Participant
continues to be employed by Holdings or a subsidiary of Holdings. It is also
expected that, at the Acquisition Closing, approximately 7,500 shares of
Nonvoting Common Stock will be issued as Restricted Stock to certain
non-employee members of the Board who are not Management Investors. Twenty
percent of the Restricted Stock will vest at the Acquisition Closing, and 20%
will vest per year on each of the first through fourth anniversaries of the date
of grant, provided that the Participant continues to serve as a member of the
Board of Directors of Holdings or a subsidiary of Holdings. In the event of an
Extraordinary Transaction (as defined in the Option and Restricted Stock
agreements) of Holdings prior to the fifth anniversary of the Acquisition
Closing (or the fourth anniversary in the case of the Restricted Stock), all
outstanding Incentive Options, Performance Options and Restricted Stock will
become fully vested upon consummation of the Extraordinary Transaction.
The terms and conditions of an Option grant will be set forth in a related
Option agreement (the "Option Agreement"). Options granted under the Plan will
terminate upon the earliest to occur of (a) the tenth anniversary of the date of
the Option Agreement; (b) the date on which Holdings acquires any shares of
Common Stock or Options held by the Participant in connection with the exercise
of a Put Right (as defined in the Stockholders Agreement); (c) the
one-hundred-eighty-day anniversary of the date of death, Retirement (as defined
in the Stockholders Agreement) or Disability (as defined in the Stockholders
Agreement) of the Participant; (d) the thirty-day anniversary of the date that
the Participant ceases to be a full-time employee of Holdings or its
subsidiaries for any reason other than as set forth in (c) above or in (e)
below; and (e) immediately upon a Participant's voluntary termination of
employment other than due to death, Retirement or Disability, or termination for
Cause (as defined in the Stockholders Agreement). Payment of the Option exercise
price must be made in cash.
The terms and conditions of a grant of Restricted Stock will be set forth in
a related Restricted Stock agreement. Restricted Stock granted under the Plan,
to the extent that it has not previously vested, will be forfeited immediately
upon the Participant's ceasing to be a member of the Board of Directors of
Holdings or its subsidiaries for any reason. A Participant who has been granted
Restricted Stock will have, with the respect to the shares of Nonvoting Common
Stock underlying the grant, all of the rights of a holder of the Nonvoting
Common Stock. The shares of Nonvoting Common Stock issued as Restricted Stock
will have all the rights of shares of Common Stock, including the right to
receive any cash dividends, except that shares of Nonvoting Common Stock will
not have any voting rights.
It is presently anticipated that grants of Options and Restricted Stock will
be made to the named executive officers, employees and non-employee directors of
Holdings or its subsidiaries at the Acquisition Closing as set forth in the
Management Stock Incentive Plan Table below.
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<PAGE>
MANAGEMENT STOCK INCENTIVE PLAN TABLE
<TABLE>
<CAPTION>
INCENTIVE PERFORMANCE RESTRICTED
OPTIONS OPTIONS STOCK(A)
---------------- ---------------- ---------
DOLLAR DOLLAR NUMBER OF
NAME AND POSITION NUMBER AMOUNT NUMBER AMOUNT SHARES
- ------------------------------------------------- ------ ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Robert M. Kuhn................................... 13,000 0 13,000 0 0
Chairman and Chief Executive Officer
William A. Boston................................ 1,000 0 1,000 0 0
Vice President, Commercial Products
Frank D. Jurenka................................. 750 0 750 0 0
Vice President, U.S. Operations
P. Michael Kienzle............................... 750 0 750 0 0
Vice President, Newspaper Products
Randall Thomas................................... 3,250 0 3,250 0 0
Vice President & General Manager, Europe
All Executive Officers as a Group (including
those listed above)............................ 27,000 0 27,000 0 0
J. Joe Adorjan................................... 0 0 0 0 1,875
Alfred C. Daugherty.............................. 0 0 0 0 1,875
James J. Kerley.................................. 0 0 0 0 1,875
James P. Sheehan................................. 0 0 0 0 1,875
All Other Employees as a Group................... 4,400 0 4,400 0 0
</TABLE>
- ------------
<TABLE>
<C> <S>
(a) Twenty percent of the Nonvoting Common Stock granted to the non-employee directors will
vest immediately upon issuance at the Acquisition Closing and twenty percent will vest
per year upon each of the first through fourth anniversaries of the grant date. The
Nonvoting Common Stock will have all the rights of the Common Stock except the
Nonvoting Common Stock will have no voting rights. In addition the holders of the
Nonvoting Common Stock will enter into the Stockholders Agreement. See "Certain
Transactions--Stockholders Agreement."
</TABLE>
The number of shares of Common Stock that will be available for Options
under the Plan is 74,700 shares and the number of shares of Nonvoting Common
Stock that will be available for Restricted Stock under the Plan is 7,500
shares. If Options granted under the Plan are repurchased by Holdings pursuant
to the "Put Rights" and "Call Rights" contained in the Stockholders Agreement,
the shares covered by such Options will again be available for grant under the
Plan. In the event of the declaration of a stock dividend, or a reorganization,
merger, consolidation, acquisition, disposition, separation, recapitalization,
stock split, split-up, spin-off, combination or exchange of any shares of Common
Stock or Nonvoting Common Stock or like event, the number or character of the
shares subject to the Option or the exercise price of any Option, or the number
or character of the shares granted as Restricted Stock, as applicable, may be
appropriately adjusted as deemed appropriate by the Committee or the Board.
The Plan will terminate upon, and no Options or Restricted Stock will be
granted after, the tenth anniversary of the Acquisition Closing, unless the Plan
has sooner terminated due to (i) grant and full exercise of Options covering all
the shares of Common Stock available for grant under the Plan and (ii) grant and
either vesting or forfeiture of all the shares of Nonvoting Common Stock
available for grant under the Plan. The Board may at any time amend, suspend or
discontinue the Plan; provided, however, that the Board may not alter, amend,
discontinue or revoke or otherwise impair any outstanding Options or Restricted
Stock granted under the Plan and which remain unexercised (in the case of
Options) or which have not been vested or forfeited (in the case of Restricted
Stock) in a manner adverse to the holders thereof, except if the written consent
of such holder is obtained.
OWNERSHIP OF CAPITAL STOCK
The following tables set forth certain information regarding beneficial
ownership of the common stock of Holdings, the nonvoting common stock of
Holdings and the preferred stock of Holdings after the consummation of the
Transactions by (i) each stockholder who is known by the Company to own
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<PAGE>
beneficially more than 5% of the outstanding common stock of Holdings, the
outstanding nonvoting common stock of Holdings or the outstanding preferred
stock of Holdings, and (ii) each director, each executive officer and all
directors and officers as a group. Except as set forth in the footnotes to the
table, each stockholder listed below has informed the Company that such
stockholder has (i) sole voting and investment power with respect to such
stockholder's shares of capital stock of Holdings and (ii) record and beneficial
ownership with respect to such stockholder's shares of capital stock of
Holdings. Holdings will own all of the capital stock of the Company.
HOLDINGS COMMON STOCK
<TABLE>
<CAPTION>
SHARES OF HOLDINGS
NAME OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED
- ------------------------------------------------------------------------- --------------------
<S> <C> <C>
NUMBER PERCENT
--------- -------
Stonington Capital Appreciation
1994 Fund, L.P. (a).................................................... 1,123,700 96.5%
Robert M. Kuhn........................................................... 17,000 1.5%
William A. Boston........................................................ 2,000 *
Frank D. Jurenka......................................................... 1,000 *
P. Michael Kienzle....................................................... 1,000 *
Randall Thomas........................................................... 4,000 *
Directors and executive officers as a group
(including those listed above) (b)..................................... 37,700 3.2%
</TABLE>
- ------------
* Signifies less than 1%.
<TABLE>
<CAPTION>
<S> <C>
(a) After consummation of the Acquisition, the Fund will be the record holder of 1,113,700
shares of Common Stock. The Fund also controls, but disclaims beneficial ownership of,
an additional 10,000 shares purchased by an institutional investor pursuant to the
Stockholders Agreement. The Fund is a Delaware limited partnership whose limited
partners consist of certain institutional investors, formed to invest in corporate
acquisitions organized by Stonington. Stonington Partners, L.P. ("SPLP"), a Delaware
limited partnership, is the general partner of Stonington with a 1% economic interest
in Stonington. Except for such economic interest, SPLP disclaims beneficial ownership
of the shares set forth above. Stonington II is the general partner of SPLP with a 1%
economic interest in SPLP. Except for such economic interests, Stonington II disclaims
beneficial ownership of the shares set forth above. The limited partners of SPLP are
certain employees of Stonington and partnerships controlled by certain employees of
Stonington.
Pursuant to a management agreement with the Fund, Stonington has full discretionary
authority with respect to the investments of the Fund, including the authority to make
and dispose of such investments. Messrs. Armstrong, End and Michas (directors of the
Company) and Messrs. James J. Burke, Jr., Albert J. Fitzgibbons, III and Stephen M.
McLean are the directors of Stonington. Stonington and such directors disclaim
beneficial ownership of the shares set forth above. The address for each of the
entities and individuals listed in this footnote is c/o Stonington Partners, Inc., 767
Fifth Avenue, New York, NY 10153.
(b) Excludes shares held by the Fund of which Mr. Armstrong, Mr. End and Mr. Michas may be
deemed to be beneficial owners as a result of their ownership of stock in, and
membership on the Boards of Directors of, Stonington and Stonington II, but they
disclaim such beneficial ownership.
</TABLE>
77
<PAGE>
HOLDINGS NONVOTING COMMON STOCK
<TABLE>
<CAPTION>
SHARES OF
HOLDINGS
NONVOTING COMMON
STOCK
NAME OF BENEFICIALLY
BENEFICIAL OWNER OWNED
- ---------------------------------------------------------------------------- -----------------
<S> <C> <C>
NUMBER PERCENT
------ -------
J. Joe Adorjan.............................................................. 1,875 25%
Alfred C. Daugherty......................................................... 1,875 25%
James J. Kerley............................................................. 1,875 25%
James P. Sheehan............................................................ 1,875 25%
</TABLE>
HOLDINGS PREFERRED STOCK
<TABLE>
<CAPTION>
SHARES OF
HOLDINGS
PREFERRED
STOCK
NAME AND ADDRESS OF BENEFICIALLY
BENEFICIAL OWNER OWNED
- --------------------------------------------------------------------------- -----------------
<S> <C> <C>
NUMBER PERCENT
------ -------
Rockwell International Corporation......................................... 47,500 100%
2201 Seal Beach Boulevard
Seal Beach, California 90740
</TABLE>
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<PAGE>
CERTAIN TRANSACTIONS
Stonington is receiving a structuring fee of $6.0 million that will be paid
by the Company with respect to its activities in structuring the Acquisition and
related transactions. In addition, Stonington is having reimbursed out-of-pocket
fees and expenses (including filing fees, travel and other fees and expenses)
incurred by Stonington in connection with the Acquisition. Management estimates
that these fees and expenses will total approximately $350,000.
STOCKHOLDERS AGREEMENT
Holdings, the Fund, the Institutional Investor, the Management Investors and
directors of Holdings who are granted Nonvoting Common Stock at the Acquisition
Closing ("Restricted Stockholders") (each, a "Stockholder") will enter into a
stockholders agreement (the "Stockholders Agreement"), which will contain, among
other terms and conditions, provisions relating to corporate governance, certain
restrictions with respect to the transfer of Common Stock or Nonvoting Common
Stock by certain parties thereunder, certain rights related to puts and calls
and certain registration rights granted by Holdings with respect to shares of
Common Stock and Nonvoting Common Stock.
Pursuant to the terms of the Stockholders Agreement the Fund will control
the votes of the Common Stock purchased in the Equity Private Placement. The
Fund will also have the right to nominate at any time and from time to time all
directors of Holdings (including the right to expand the Board of Directors and
to fill vacancies created thereby) and will have the right to remove such
directors at any time and from time to time and each of the Stockholders will
agree to vote in favor of such nomination or removal of directors. Holdings
currently has nine Board members.
Pursuant to the terms of the Stockholders Agreement, in the event that,
prior to an Initial Public Offering (as defined in the Stockholders Agreement),
the Fund proposes to sell securities which, in the aggregate, represent 50% or
more of the common equity on a fully diluted basis to a third party which is
not, and following such sale will not be, an affiliate of the Fund, the
Management Investors and the Restricted Stockholders will have the right to
elect to participate in such sale with respect to a certain number of shares of
Common Stock and Nonvoting Common Stock. In the event that, prior to an Initial
Public Offering, the Fund proposes to sell securities which, in the aggregate,
represent 40% or more of the common equity on a fully diluted basis to a third
party which is not, and following such sale will not be, an affiliate of the
Fund, the Fund has the right to require each Management Investor each Restricted
Stockholder and such other stockholders who have agreed to be bound by the
Stockholders Agreement to participate in such sale with respect to a certain
number of shares of Common Stock and Nonvoting Common Stock.
Management Investors and Restricted Stockholders will not be permitted to
sell or transfer Common Stock or Nonvoting Common Stock, as the case may be,
other than to permitted transferees (i.e., family members and, upon the death of
a Management Investor or a Restricted Stockholder, to his or her estate or
executors), prior to the occurrence of the earlier of the fifth anniversary of
the Acquisition Closing and an Initial Public Offering. Following an Initial
Public Offering, Management Investors and Restricted Stockholders may transfer
shares subject to applicable restrictions under the Securities Act of 1933, as
amended (the "Securities Act"), and other federal and state securities laws. On
or after the fifth anniversary and prior to the tenth anniversary of the
Acquisition Closing, if an Initial Public Offering has not occurred, Management
Investors and Restricted Stockholders will be permitted to sell Common Stock or
Nonvoting Common Stock, as the case may be, to third parties after first giving
Holdings and the other Management Investors and Restricted Stockholders a right
of first refusal for the same number of shares of Common Stock or Nonvoting
Common Stock, as the case may be, at the same price.
Prior to the earlier of an Initial Public Offering or the tenth anniversary
of the Acquisition Closing, Holdings will have the right to require a Management
Investor or a Restricted Stockholder to sell his or
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<PAGE>
her shares of Common Stock or Nonvoting Common Stock, as the case may be, and
Options upon a termination of employment or directorship for any reason. Such
right will be exercisable within a period of one year after the date of
termination of employment or directorship, (or for a period of 190 days, in the
case of termination due to death), subject to certain extensions, at a price per
share, depending on the reason for termination of employment or directorship and
whether such shares are Protected Shares (as defined in the Stockholders
Agreement), equal to the Fair Value Price (as defined in the Stockholders
Agreement) or the original per share purchase price of a share of Common Stock
or Nonvoting Common Stock, as the case may be, (and including, in certain
circumstances, a reduction in the unpaid principal amount of the note issued to
Holdings by such Management Investor in connection with the Management
Placement) and at a price per Option equal to the difference between the Fair
Value Price or the original per share purchase price of the shares of Common
Stock covered by such Option and the exercise price of the shares of Common
Stock covered by such Option, multiplied by the number of shares of Common Stock
covered by the Option. Prior to the earlier of an Initial Public Offering or the
tenth anniversary of the Acquisition Closing, the Management Investor and the
Restricted Stockholder will have the right to require Holdings to purchase his
or her shares of Common Stock or Nonvoting Common Stock, as the case may be, or
Options upon termination of employment or directorship due to death, Disability,
Retirement or Involuntary Termination (as defined in the Stockholders
Agreement). Such a right will be exercisable within a period of 180 days after
the date of termination of employment or directorship due to death, Disability,
Retirement or Involuntary Termination, subject to certain extensions, (a) at a
price per share of Common Stock or Nonvoting Common Stock, as the case may be,
equal to the Fair Value Price thereof; and (b) at a price per Option equal to
the difference between the Fair Value Price of the shares of Common Stock
covered by such Option and the exercise price of the shares of Common Stock
covered by such Option, multiplied by the number of shares of Common Stock
covered by the Option.
The Institutional Investor may not, without the prior written consent of the
Fund, sell or otherwise dispose of its shares of Common Stock prior to the sale
or other disposition by the Fund of a like proportion of its shares of Common
Stock and then only on the same terms and conditions as the Fund's sale or other
disposition.
Stockholders are, subject to certain limitations, entitled to register
shares of Common Stock or Nonvoting Common Stock in connection with a
registration statement prepared by Holdings to register common equity
beneficially owned by the Fund. The Fund will have the right to require Holdings
to take such steps as necessary to register all or part of the Common Stock held
by the Fund under the Securities Act pursuant to the provisions of the
Stockholders Agreement. The Stockholders Agreement contains customary terms and
provisions with respect to, among other things, registration procedures and
certain rights to indemnification granted by parties thereunder in connection
with the registration of Common Stock or Nonvoting Common Stock subject to such
agreement.
DESCRIPTION OF NOTES
GENERAL
The Notes are to be issued under an Indenture, to be dated as of
, 1996 (the "Indenture"), between the Company and The Bank of New
York, as Trustee (the "Trustee").
A copy of the form of the Indenture is filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The following is a
summary of the material provisions of the Indenture. This summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all the provisions of the Indenture, including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act of 1939, as amended. Certain terms used herein are defined below under
"--Certain Definitions."
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<PAGE>
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee, at , New
York, New York ), except that, at the option of the Company, payment of
interest may be made by check mailed to the address of the Holders as such
address appears in the Note register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
shall be made for any registration of transfer or exchange of Notes, but the
company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes will be unsecured senior subordinated obligations of the Company,
limited to $225 million aggregate principal amount, and will mature on ,
2006. The Notes will bear interest at the rate per annum shown on the cover page
hereof from , or from the most recent date to which interest has been paid
or provided for, payable semiannually to Holders of record at the close of
business on the or immediately preceding the interest payment date
on and of each year, commencing , 1997. The Company
will pay interest on overdue principal at such rate, and it will pay interest on
overdue installments of interest at such rate to the extent lawful. Interest on
the Notes will be computed on the basis of a 360-day year of twelve 30-day
months.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to , 2001. Thereafter, the
Notes will be redeemable, at the Company's option, in whole or in part, at any
time or from time to time, upon not less than 30 nor more than 60 days' prior
notice mailed by first-class mail to each Holder's registered address, at the
following redemption prices (expressed in percentages of principal amount), plus
accrued and unpaid interest to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date), if redeemed during the 12-month period
commencing on of the years set forth below:
REDEMPTION
PERIOD PRICE
- ---------------------------------------------------------------- ----------
2001............................................................ %
2002............................................................ %
2003............................................................ %
2004 and thereafter............................................. 100.00%
Notwithstanding the foregoing, at any time and from time to time prior to
, 1999, the Company may redeem in the aggregate up to 35% of the original
principal amount of the Notes with the net proceeds of one or more Public Equity
Offerings following which there is a Public Market or private sales of common
stock of, or contributions to the common equity capital of, the Company or
Holdings, at a redemption price (expressed as a percentage of principal amount)
of % plus accrued and unpaid interest to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however, that at least
$ million aggregate principal amount of the Notes must remain
outstanding after each such redemption.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a pro rata basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
although no Note of $1,000 in original principal amount or less shall be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such
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<PAGE>
Note shall state the portion of the principal amount thereof to be redeemed. A
new Note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original Note.
RANKING
The Debt evidenced by the Notes will be senior subordinated unsecured
obligations of the Company. The payment of the principal of, premium (if any)
and interest on the Notes will be subordinate in right of payment, as set forth
in the Indenture, to the prior payment in full in cash or Cash Equivalents of
all Senior Debt, whether outstanding on the Issue Date or thereafter incurred,
including the Company's obligations under the Credit Agreement.
At June 30, 1996, after giving pro forma effect to the Transactions, the
Company's Senior Debt would have been approximately $25.3 million (including $25
million under the Term Loan Facility and excluding approximately $7.0 million of
letters of credit and excluding guarantees by the Company of subsidiary
borrowings under the Term Loan Facility), all of which would have been secured,
and the aggregate principal amount of subordinated liabilities of the Company
would have been approximately $178.5 million. Although the Indenture contains
limitations on the amount of additional Debt that the Company may incur, under
certain circumstances the amount of such Debt could be substantial and, in any
case, such Debt may be Senior Debt. See "--Certain Covenants--Limitation on
Debt."
A portion of the operations of the Company are conducted through
subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors, secured creditors and creditors holding debt and guarantees issued by
such subsidiaries, and claims of preferred stockholders (if any) of such
subsidiaries generally will have priority with respect to the assets and
earnings of such subsidiaries over the claims of creditors of the company,
including holders of the Notes, even though such obligations will not constitute
Senior Debt. The Notes, therefore, will be effectively subordinated to creditors
(including trade creditors) and preferred stockholders (if any) of subsidiaries
of the Company. At June 30, 1996, after giving pro forma effect to the
Transactions, the aggregate liabilities of the Company's subsidiaries would have
been approximately $222.4 million, including $50 million under the Term Loan
Facility and trade payables and excluding approximately $24.4 million of letters
of credit. Although the Indenture limits the incurrence of Debt and the issuance
of preferred stock of certain of the Company's subsidiaries, such limitation is
subject to a number of significant qualifications. Moreover, the Indenture does
not impose any limitation on the incurrence by such subsidiaries of liabilities
that are not considered Debt under the Indenture. See "--Certain Covenants
- --Limitation on Debt and Preferred Stock of Subsidiaries" and "--Limitation on
Restrictions on Distributions from Subsidiaries."
Only Debt of the Company that is Senior Debt will rank senior to the Notes
in accordance with the provisions of the Indenture. The Notes will in all
respects rank pari passu with all other Senior Subordinated Debt of the Company.
The Company has agreed in the Indenture that it will not Incur, directly or
indirectly, any Debt that is subordinate or junior in ranking in right of
payment to its Senior Debt unless such Debt is Senior Subordinated Debt or is
expressly subordinated in right of payment to Senior Subordinated Debt.
Unsecured Debt is not deemed to be subordinated or junior to Secured Debt merely
because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not repurchase, redeem or otherwise retire any Notes
(collectively, "pay the Notes") if (i) any Designated Senior Debt is not paid
when due or (ii) any other default on Designated Senior Debt occurs and the
maturity of such Designated Senior Debt is accelerated in accordance with its
terms unless, in either case, the default has been cured or waived or has ceased
to exist and any such acceleration has been rescinded or such Designated Senior
Debt has been discharged or paid in full. However, the Company may pay the Notes
without regard to the foregoing if the Company and the Trustee receive written
notice approving such payment from the Representative of the Designated Senior
Debt with respect to which either of the
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events set forth in clause (i) or (ii) of the immediately preceding sentence has
occurred and is continuing. During the continuance of any default (other than a
default described in clause (i) or (ii) of the second preceding sentence) (a
"non-payment default") with respect to any Designated Senior Debt pursuant to
which the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such accelerations) or the
expiration of any applicable grace periods, the Company may not pay the Notes
for a period (a "Payment Blockage Period") commencing upon the receipt by the
Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of
such default from the Representative of the holders of such Designated Senior
Debt specifying an election to effect a Payment Blockage Period and ending 179
days thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because the default giving rise to such Blockage
Notice is no longer continuing or (iii) because Designated Senior Debt has been
discharged or repaid in full). Notwithstanding the provisions described in the
immediately preceding sentence, unless an event described in clause (i) or (ii)
of the first sentence of this paragraph has occurred, the Company may resume
payments on the Notes after the end of such Payment Blockage Period. The Notes
shall not be subject to more than one Payment Blockage Period in any consecutive
360-day period. No non-payment default with respect to Designated Senior Debt
that existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Debt initiating such
Payment Blockage Period will be, or can be, made the basis for the commencement
of a second Payment Blockage Period, unless such default has been cured or
waived for a period of not less than 90 consecutive days.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
(including in bankruptcy, insolvency or receivership proceedings or upon any
assignment for the benefit of creditors or any other marshalling of the
Company's assets and liabilities) relating to the Company or its property, the
holders of Senior Debt will be entitled to receive payment of such Senior Debt
in full in cash or Cash Equivalents before the Noteholders are entitled to
receive any payment or distribution of cash, securities or other property with
respect to the principal of, premium, if any, or interest on the Notes, and
until the Senior Debt is paid in full in cash or Cash Equivalents, any payment
or distribution to which Noteholders would be entitled but for the subordination
provisions of the Indenture will be made to holders of such Senior Debt as their
interests may appear. If a distribution is made to Noteholders that, due to the
subordination provisions, should not have been made to them, such Noteholders
are required to hold it in trust for the holders of Senior Debt and pay it over
to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of Designated Senior
Debt or the Representative of such holders of the acceleration.
By reason of the subordination provisions contained in the Indenture, in the
event of insolvency, creditors of the Company who are holders of Senior Debt may
recover more, ratably, than the Noteholders, and creditors of the Company who
are not holders of Senior Debt may recover less, ratably, than holders of Senior
Debt and may recover more, ratably, than the Noteholders.
The terms of the subordination provisions described above will not apply to
payments from money or the proceeds of U.S. Government Obligations held in trust
by the Trustee for the payment of principal of and interest on the Notes
pursuant to the provisions described under "--Defeasance."
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder shall have the right to require that the Company
repurchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
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of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date):
(i) Prior to the earlier to occur of the first public offering of common
stock of the Company or the first public offering of common stock of
Holdings, the Permitted Holders cease to be the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of a majority in the aggregate of the total voting power of the
Voting Stock of the Company or Holdings, whether as a result of issuance of
securities of the Company or Holdings, any merger, consolidation,
liquidation or dissolution of the Company or Holdings, any direct or
indirect transfer of securities or otherwise (for purposes of this clause
(i) and clause (ii) below, the Permitted Holders shall be deemed to
beneficially own any Voting Stock of a corporation (the "specified
corporation") held by any other corporation (the "parent corporation") so
long as the Permitted Holders beneficially own (as so defined), directly or
indirectly, in the aggregate a majority of the voting power of the Voting
Stock of the parent corporation);
(ii) on or after the earlier to occur of the first public offering of
common stock of the Company or of Holdings referred to in clause (i) above,
(A) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than one or more Permitted Holders, is or becomes the
beneficial owner (as defined in clause (i) above, except that for purposes
of this clause (ii) such person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 40% of the total voting power of
the Voting Stock of the Company or Holdings; provided, however, that the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company or Holdings than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
Directors (for the purposes of this clause (ii), such other person shall be
deemed to beneficially own any voting stock of a specified corporation held
by a parent corporation, if such other person is the beneficial owner (as
defined in this clause (ii)), directly or indirectly, of more than 40% of
the voting power of the Voting Stock of such parent corporation and the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation);
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
or Holdings (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of the
Company or Holdings, as the case may be, was approved by a vote of not less
than 66 2/3% of the directors of the Company or Holdings, as the case may
be, then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office; or
(iv) the merger or consolidation of the Company or Holdings with or into
another Person or the merger of another Person with or into the Company or
Holdings or the sale or transfer in one or a series of transactions of all
or substantially all the assets of the Company or Holdings to another
Person, and, in the case only of any such merger or consolidation, the
securities of the Company or Holdings, as the case may be, that are
outstanding immediately prior to such transaction and which represent 100%
of the aggregate voting power of the Voting Stock of the Company or Holdings
are changed into or exchanged for cash, securities or property unless
pursuant to such transaction such securities are changed into or exchanged
for, in addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at least a
majority, of
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the aggregate voting power of the Voting Stock of the surviving corporation.
The definition of "all or substantially all" assets is generally determined
under New York law based upon the facts and circumstances of a particular
transaction and the condition of the selling entity upon consummation of the
transaction. Consequently, a holder of Notes may be required to establish
that a conveyance, transfer or lease of all or substantially all of the
Company's assets has occurred before being entitled to compel the repurchase
of its Notes in connection with a Change of Control.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating: (1) that a Change of
Control has occurred and that such Holder has the right to require the Company
to purchase such Holder's Notes at a purchase price in cash equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date); (2) the
circumstances and, to the extent available, relevant facts regarding such Change
of Control (including information with respect to pro forma historical income,
cash flow and capitalization after giving effect to such Change of Control); (3)
the repurchase date (which shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed); and (4) the instructions, determined
by the Company consistent with the covenant described hereunder, that a Holder
must follow in order to have its Notes purchased.
The Company shall comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to the covenant described
hereunder. To the extent that the provisions of any securities laws and
regulations conflict with the provisions of the covenant described hereunder,
the Company shall comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations under the covenant
described hereunder by virtue thereof. The Board of Directors of the Company may
not waive compliance by the Company of its obligation to repurchase Notes upon a
Change of Control.
The Change of Control purchase feature is a result of negotiations between
the Company and the Underwriters. Management has no present intention to engage
in a transaction involving a Change of Control, although it is possible that the
Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancing or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of debt outstanding at such time or otherwise affect
the Company's capital structure or credit ratings.
The Credit Agreement generally will prohibit the Company from purchasing any
Notes, and will also provide that the occurrence of certain change of control
events with respect to the Company would constitute a default thereunder. In the
event that at the time of such Change of Control the terms of the Credit
Agreement restrict or prohibit the repurchase of Notes pursuant to this
covenant, then prior to the mailing of the notice to Holders provided for above
but in any event within 30 days following any Change of Control, the Company
shall (i) repay in full all Indebtedness under the Credit Agreement or offer to
repay in full all such Indebtedness and repay the Indebtedness of each Bank that
has accepted such offer or (ii) obtain the requisite consent under the Credit
Agreement to permit the repurchase of the Notes as provided for in this
covenant.
Future debt of the Company may contain prohibitions on the occurrence of
certain events that would constitute a Change of Control or require such debt to
be repurchased upon a Change of Control. Moreover, the exercise by the holders
of their right to require the Company to repurchase the Notes could cause a
default under such debt, even if the Change of Control itself does not, due to
the financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the holders of Notes following the occurrence of a Change
of Control may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when necessary
to make any required repurchases.
The Change of Control purchase feature of the Notes may in certain
circumstances make more difficult or discourage a takeover of the Company, and,
thus, removal of incumbent management.
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CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
Limitation on Debt. (a) The Company shall not Incur, directly or indirectly,
any Debt unless, on the date of such Incurrence, the Consolidated Coverage Ratio
exceeds 2.0 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company may Incur any
or all of the following Debt: (1) Debt Incurred pursuant to the Revolving Credit
Facility; provided, however, that, after giving effect to any such Incurrence,
the aggregate principal amount of such Debt then outstanding does not exceed the
greater of (x) $150 million less the amount of any Debt then outstanding
Incurred by Foreign Subsidiaries under clause (e) of the covenant described
under "--Limitation on Debt and Preferred Stock of Subsidiaries" and (y) the sum
of (A) 65% of the gross book value of the inventory of the Company and its
Subsidiaries (other than any Foreign Subsidiary that has Debt then outstanding
Incurred pursuant to clause (e) of the covenant described under "--Limitation on
Debt and Preferred Stock of Subsidiaries") and (B) 85% of the gross book value
of the accounts receivable of the Company and its Subsidiaries (other than any
Foreign Subsidiary that has Debt then outstanding Incurred pursuant to clause
(e) of the covenant described under "--Limitation on Debt and Preferred Stock of
Subsidiaries;" (2) Debt Incurred pursuant to the Term Loan Facility in an
aggregate outstanding principal amount not to exceed $75 million less the
aggregate amount of all principal repayments of any such Debt actually made
after the Issue Date (other than any such principal repayments made as a result
of the Refinancing of any such Debt) and less the amount of any Debt then
outstanding Incurred by Foreign Subsidiaries under clause (f) of the covenant
described under "--Limitation on Debt and Preferred Stock of Subsidiaries"; (3)
Guarantees by the Company of Debt of a Foreign Subsidiary described in clauses
(e) and (f) of the covenant described under "--Limitation on Debt and Preferred
Stock of Subsidiaries;" (4) Customer Notes Guarantees Incurred following the
Issue Date in an aggregate amount at any one time outstanding not to exceed $30
million less the amount of Customer Notes Guarantees Incurred following the
Issue Date then outstanding pursuant to clause (i) of the covenant described
under "--Limitation on Debt and Preferred Stock of Subsidiaries" and less the
amount of Investments in Customer Notes made following the Issue Date then
outstanding pursuant to clause (C) of the definition of "Permitted Investment";
(5) the BTCC Note Guarantees; (6) Debt owed to and held by a Wholly Owned
Subsidiary; provided, however, that any subsequent issuance or transfer of any
Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a
Wholly Owned Subsidiary or any subsequent transfer of such Debt (other than to
another Wholly Owned Subsidiary) shall be deemed, in each case, to constitute
the Incurrence of such Debt by the Company; (7) the Notes; (8) Debt (including
without limitation Customer Notes Guarantees) outstanding on the Issue Date
(other than Debt described in clause (1), (2), (3), (4), (5), (6) or (7) of this
covenant); (9) Refinancing Debt in respect of Debt Incurred pursuant to
paragraph (a) or pursuant to clause (7) or (8) or this clause (9); (10) Hedging
Obligations with respect to (x) Debt permitted to be Incurred by the Company or
its Subsidiaries pursuant to the Indenture or (y) transactions denominated in
foreign currencies; and (11) Debt (which Debt may, but need not, be Incurred in
whole or in part under the Credit Agreement) in an aggregate principal amount
which, together with all other Debt of the Company outstanding on the date of
such Incurrence (other than Debt permitted by clauses (1) through (10) of this
paragraph (b) or paragraph (a) above), and giving effect to any concurrent
Refinancing of Debt permitted by the Indenture, does not exceed $10 million.
(c) Notwithstanding paragraphs (a) and (b), the Company shall not Incur any
Debt if the proceeds thereof are used, directly or indirectly, to Refinance any
Subordinated Obligations unless such Debt shall be subordinated to the Notes to
at least the same extent as such Subordinated Obligations.
(d) Notwithstanding paragraphs (a) and (b) above, (i) the Company shall not
Incur any Debt if such Debt is subordinated or junior in ranking to any Senior
Debt, unless such Debt is Senior Subordinated Debt or is expressly subordinated
in right of payment to Senior Subordinated Debt and (ii) the Company shall not
issue any Secured Debt which is not Senior Debt unless contemporaneously
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therewith effective provision is made to secure the Notes equally and ratably
with such Secured Debt for so long as such Secured Debt is secured by a Lien.
(e) For purposes of determining compliance with clause (b) of this covenant,
(i) in the event that an item of Debt meets the criteria of more than one of the
types of Debt described in clause (b), the Company, in its sole discretion, will
classify such item of Debt and only be required to include the amount and type
of such Debt in one of the subclauses of clause (b) and (ii) an item of Debt may
be split between more than one of the types of Debt described in clause (b).
Limitation on Debt and Preferred Stock of Subsidiaries. The Company shall
not permit any Subsidiary to Incur, directly or indirectly, any Debt or
Preferred Stock except: (a) Guarantees by the Subsidiaries of Debt of the
Company described in clause (b)(1), (2) and (4) of the covenant described under
"--Limitation on Debt," other Debt of the Company Incurred under the Credit
Agreement which is permitted to be Incurred pursuant to the terms of the
Indenture, and Debt of Foreign Subsidiaries described in clauses (e) and (f) of
this covenant; (b) Debt or Preferred Stock issued to and held by the Company or
a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Debt
or Preferred Stock (other than to the Company or a Wholly Owned Subsidiary)
shall be deemed, in each case, to constitute the issuance of such Debt or
Preferred Stock by the issuer thereof; (c) Debt or Preferred Stock of a
Subsidiary Incurred and outstanding on or prior to the date on which such
Subsidiary was acquired by the Company (other than Debt or Preferred Stock
Incurred in connection with, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company); provided, however, that on the date of such
acquisition and after giving effect thereto, the Company would have been able to
Incur at least $1.00 of additional Debt pursuant to clause (a) of the covenant
described under "--Limitation on Debt"; (d) Debt or Preferred Stock outstanding
on the Issue Date (other than Debt described in clause (a), (b) or (c)); (e)
Debt of a Foreign Subsidiary Incurred pursuant to the Revolving Credit Facility;
provided, however, that, after giving effect to any such Incurrence, the
aggregate principal amount of Debt outstanding of such Foreign Subsidiary
pursuant to this clause (e) does not exceed the greater of (x) $125 million and
(y) the sum of 85% of the gross book value of the accounts receivable of such
Foreign Subsidiary and 65% of the gross book value of the inventories of such
Foreign Subsidiary; (f) Debt of a Foreign Subsidiary Incurred pursuant to the
Term Loan Facility; provided that, after giving effect to any such Incurrence,
the aggregate principal amount of Debt Incurred by all Foreign Subsidiaries
pursuant to this clause (f) may not exceed $50 million less the aggregate amount
of all principal repayments of any such Debt actually made after the Issue Date
(other than any such principal repayments made as a result of the Refinancing of
any such Debt); (g) Refinancing Debt Incurred in respect of Debt or Preferred
Stock referred to in clause (a), (c) or (d) or this clause (g); provided,
however, that to the extent such Refinancing Debt directly or indirectly
Refinances Debt or Preferred Stock of a Subsidiary described in clause (c), such
Refinancing Debt shall be Incurred only by such Subsidiary; (h) Hedging
Obligations by a Subsidiary with respect to (x) Debt permitted to be Incurred by
such Subsidiary pursuant to the Indenture and (y) transactions by such
Subsidiary denominated in foreign currencies; and (i) Customer Notes Guarantees
Incurred following the Issue Date in an aggregate amount at any one time
outstanding not to exceed $30 million less the amount of Customer Notes
Guarantees Incurred following the Issue Date then outstanding pursuant to clause
(4) of paragraph (b) of the covenant described under "-- Limitation on Debt" and
less the amount of Investments in Customer Notes made following the Issue Date
then outstanding pursuant to clause (C) of the definition of "Permitted
Investment."
Limitation on Restricted Payments. (a) The Company shall not, and shall not
permit any Subsidiary, directly or indirectly, to make a Restricted Payment if
at the time the Company or such Subsidiary makes such Restricted Payment: (1) a
Default shall have occurred and be continuing (or would result therefrom); (2)
the Company is not able to Incur an additional $1.00 of Debt pursuant to
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paragraph (a) of the covenant described under "--Limitation on Debt"; or (3) the
aggregate amount of such Restricted Payment and all other Restricted Payments
since the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net
Income accrued during the period (treated as one accounting period) from the
beginning of the fiscal quarter during which the Notes are originally issued to
the end of the most recent fiscal quarter ending at least 45 days prior to the
date of such Restricted Payment (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds
and aggregate Deemed Asset Value received by the Company from the issuance or
sale of its Capital Stock (other than Disqualified Stock) or capital
contributions with respect thereto subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company and except as set forth in
clause (C) other than an issuance or sale to an employee stock ownership plan or
to a trust established by the Company or any of its Subsidiaries for the benefit
of their employees); (C) the aggregate Net Cash Proceeds received by the Company
from the issuance or sale of its Capital Stock (other than Disqualified Stock)
to an employee stock ownership plan or trust established by the Company or any
of its Subsidiaries for the benefit of their employees subsequent to the date on
which the Notes were originally issued, other than any such issuance or sale to
the extent the purchase by such plan or trust is financed by Debt of such plan
or trust and for which the Company is liable as guarantor or otherwise; and (D)
the amount by which Debt of the Company is reduced on the Company's balance
sheet upon the conversion or exchange (other than by a Subsidiary of the
Company) subsequent to the Issue Date, of any Debt of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or the fair value of any other property,
distributed by the Company upon such conversion or exchange, except to the
extent that such distribution results in a reduction in Consolidated Net Income
reflected pursuant to clause (A) above).
(b) The provisions of the foregoing paragraph (a) shall not prohibit: (i)
any purchase or redemption of Capital Stock or Subordinated Obligations of the
Company made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary of the Company or an
employee stock ownership plan or to a trust established by the Company or any of
its Subsidiaries for the benefit of their employees to the extent the purchase
by such plan or trust is financed by Debt of such plan or trust and for which
the Company or any Subsidiary is liable as guarantor or otherwise); provided,
however, that (A) such purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds
from such sale shall be excluded from the calculation of amounts under clauses
(3)(B) and (3)(C) of paragraph (a) above; (ii) any purchase, repurchase,
redemption, defeasance or other acquisition or retirement for value of
Subordinated Obligations together with any premium payable in connection
therewith made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Debt of the Company which is permitted to be Incurred
pursuant to the covenant described under "--Limitation on Debt"; provided,
however, that such purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value shall be excluded in the calculation of the
amount of Restricted Payments; (iii) dividends paid within 60 days after the
date of declaration thereof if at such date of declaration such dividend would
have complied with this covenant; provided, however, that at the time of
declaration of such dividend, no other Default shall have occurred and be
continuing (or would result therefrom); and provided, further, however, that
such dividend shall be included in the calculation of the amount of Restricted
Payments; (iv) the repurchase of shares of, or options to purchase shares of,
common stock of the Company or any of its Subsidiaries from employees, former
employees, directors or former directors of the Company or any of its
Subsidiaries (or permitted transferees of such employees, former employees,
directors or former directors), pursuant to the terms of the agreements
(including employment agreements) or plans (or amendments thereto) approved by
the Board of Directors under which such individuals purchase or sell or are
granted the option to purchase or sell, shares of such common stock; provided,
however, that the aggregate amount of such repurchases in any calendar year
shall not exceed the sum of (x) $2 million and (y) the aggregate Net Cash
Proceeds from any reissuance during such calendar year of Capital Stock to
employees, officers or directors of the Company or its Subsidiaries; provided
further, however,
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that to the extent that the aggregate amount of such repurchases is less than $2
million in any calendar year, the unused portion of such $2 million may be
carried forward to the succeeding calendar year (provided that the aggregate
amount of the repurchases in any calendar year shall, in no event, exceed $4
million plus the amount of aggregate Net Cash Proceeds from any reissuance of
Capital Stock described above) in any calendar year; and provided, further,
however, that such repurchases shall be excluded in the calculation of the
amount of Restricted Payments; (v) Investments in any Person primarily engaged
in a Related Business in an aggregate amount not to exceed $10 million;
provided, however, that the amount of such Investments shall be excluded in the
calculation of the amount of Restricted Payments; (vi) the payment of any cash
dividend on the Common Stock of the Company following a Public Equity Offering
by the Company or, following a Public Equity Offering by Holdings, a payment to
Holdings used solely to pay dividends on the Common Stock of Holdings, in each
case as long as no Default or Event of Default has occurred and is continuing or
would thereby result; provided that the aggregate amount of all such dividends
and payments under this clause (vi) shall not exceed 6% of the Net Cash Proceeds
received by the Company and Holdings in any such Public Equity Offering in any
calendar year; provided further, however, that such dividends and payments shall
be included in the calculation of Restricted Payments; (vii) Investments in
customer notes to the extent such Investments are in existence on the Issue
Date; provided, however, that the amount of such Investments shall be excluded
in the calculation of the amount of Restricted Payments; or (viii) Restricted
Payments in an aggregate amount not to exceed $10 million; provided, however,
that the amount of such Restricted Payments shall be excluded in the calculation
of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Subsidiaries. The Company
shall not, and shall not permit any Subsidiary to, create or otherwise cause or
permit to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary (a) to pay dividends or make any other
distributions on its Capital Stock to the Company or a Subsidiary or pay any
Debt owed to the Company, (b) to make any loans or advances to the Company or
(c) to transfer any of its property or assets to the Company, except: (i) any
encumbrance or restriction pursuant to an agreement in effect or entered into on
the Issue Date or pursuant to the issuance of the Notes; (ii) any encumbrance or
restriction with respect to a Subsidiary pursuant to an agreement relating to
any Debt Incurred by such Subsidiary on or prior to the date on which such
Subsidiary was acquired by the Company (other than Debt Incurred as
consideration in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a Subsidiary or was
acquired by the Company) and outstanding on such date; (iii) any encumbrance or
restriction pursuant to an agreement effecting a Refinancing of Debt Incurred
pursuant to an agreement referred to in clause (i) or (ii) of this covenant or
contained in any amendment to an agreement referred to in clause (i) or (ii) of
this covenant; provided, however, that the encumbrances and restrictions
contained in any such refinancing agreement or amendment are no less favorable
to the Noteholders than encumbrances and restrictions contained in such
agreements; (iv) any encumbrance or restriction (A) that restricts in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset
the subject of such encumbrance or restriction, (B) existing by virtue of any
transfer of, agreement to transfer, option or right with respect to, or Lien on,
any property or assets of the Company or any Subsidiary not otherwise prohibited
by the Indenture or (C) arising or agreed to in the ordinary course of business,
not relating to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of the Company or any
Subsidiary in any manner material to the Company or any Subsidiary; provided
that, in each case, such encumbrance or restriction relates to, and restricts
dealings with, only the property or asset the subject of such encumbrance or
restriction; provided further, that such encumbrance or restriction does not
prohibit, limit or otherwise restrict the making or payment of any dividend or
other distribution to the Company or any Subsidiary; (v) in the case of clause
(c) above, restrictions contained in security agreements or mortgages securing
Debt of a Subsidiary to the extent such restrictions restrict the transfer of
the property subject to such security agreements or mortgages; (vi) any
encumbrance or restriction imposed solely upon a Foreign Subsidiary
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pursuant to an agreement relating to Indebtedness Incurred by such Foreign
Subsidiary which is permitted under the covenant described under "--Limitation
on Debt and Preferred Stock of Subsidiaries"; and (vii) any restriction with
respect to a Subsidiary imposed pursuant to an agreement entered into for the
sale or disposition of all or substantially all the Capital Stock or assets of
such Subsidiary pending the closing of such sale or disposition.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall
not, and shall not permit any Subsidiary to, directly or indirectly, consummate
any Asset Disposition unless (i) the Company or such Subsidiary receives
consideration at the time of such Asset Disposition at least equal to the fair
market value (including as to the value of all non-cash consideration), as
determined in good faith by the Board of Directors, of the shares and assets
subject to such Asset Disposition and at least 75% of the consideration thereof
received by the Company or such Subsidiary is in the form of cash or Cash
Equivalents and (ii) the Company (x) within 180 days (in the case of (A) below)
or 360 days (in the case of (B) below) after receipt of such Net Available Cash,
(A) to the extent the Company so elects (or is so required by the terms of any
Senior Debt), applies an amount equal to 100% of the Net Available Cash to
repay, prepay, redeem or purchase Senior Debt of the Company or Debt (other than
any Disqualified Stock) of a Wholly Owned Subsidiary (in each case other than
Debt owed to the Company or an Affiliate of the Company) or (B) invests or
commits to invest the balance of such Net Available Cash not applied pursuant to
clause (A), in Additional Assets; provided, however, that in the case of any
commitment to invest, such investment must be made within one month thereafter,
and any amount not so invested shall be treated as Excess Proceeds (as defined
below); and (y) applies the balance of such Net Available Cash not applied
pursuant to clause (x), as provided in the following paragraphs of this
covenant. Notwithstanding the foregoing provisions of this paragraph, the
Company and its Subsidiaries shall not be required to apply any Net Available
Cash in accordance with this paragraph except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied in
accordance with this paragraph exceeds $10 million. The amount of Net Available
Cash required to be applied and not applied as so required shall constitute
"Excess Proceeds". Pending application of Net Available Cash pursuant to this
covenant, such Net Available Cash shall be invested in Temporary Cash
Investments or applied to repay Debt Incurred under the Revolving Credit
Facility without commitment reduction thereunder.
For the purposes of this covenant, the following are deemed to be cash
equivalents: (x) the assumption of Debt of the Company or any Subsidiary and the
release of the Company or such Subsidiary from all liability on such Debt in
connection with such Asset Disposition, (y) Temporary Cash Investments, and (z)
securities received by the Company or any Subsidiary from the transferee that
are promptly converted by the Company or such Subsidiary into cash.
(b) If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined
below) totals at least $10 million, the Company must, not later than the
fifteenth Business Day of such month, make an offer (an "Excess Proceeds Offer")
to purchase from the Holders (and to purchase Debt from the holders of any other
Senior Subordinated Debt) on a pro rata basis an aggregate principal amount of
Notes equal to the Excess Proceeds (rounded down to the nearest multiple of
$1,000) on such date, at a purchase price equal to 100% of the principal amount
of such Notes, plus, in each case, accrued interest (if any) to the date of
purchase (or, in respect of such other Senior Subordinated Debt, such lesser
price, if any, as may be provided for by the terms of such Senior Subordinated
Debt) (the "Excess Proceeds Payment").
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this clause by virtue thereof.
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Limitation on Affiliate Transactions. (a) The Company shall not, and shall
not permit any Subsidiary to, enter into or permit to exist any transaction or
series of similar transactions (including the purchase, sale, lease or exchange
of any property, employee compensation arrangements or the rendering of any
service) with any Affiliate of the Company (an "Affiliate Transaction") unless
the terms thereof (1) are no less favorable to the Company or such Subsidiary
than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate, (2) if such
Affiliate Transaction involves an amount in excess of $3 million, (i) are set
forth in writing and (ii) have been approved by a majority of the members of the
Board of Directors having no personal stake in such Affiliate Transaction and
(3) if such Affiliate Transaction involves an amount in excess of $15 million,
have been determined by a nationally recognized investment banking firm to be
fair, from a financial standpoint to the Company and its Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit (i) any
Restricted Payment permitted to be paid pursuant to the covenant described under
"--Limitation on Restricted Payments", (ii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors, (iii) the grant of stock options or similar
rights to employees and directors of the Company pursuant to plans approved by
the Board of Directors, (iv) loans or advances to employees in the ordinary
course of business in accordance with the past practices of the Company or its
Subsidiaries and their predecessors including loans or advances to Management
Investors in connection with the Management Placement, but in any event not to
exceed $4 million in the aggregate outstanding at any one time, (v) the payment
of reasonable and customary fees to directors of the Company and its
Subsidiaries who are not employees of the Company or its Subsidiaries, (vi) any
Affiliate Transaction between the Company and a Wholly Owned Subsidiary or
between Wholly Owned Subsidiaries and (vii) the payment of a one-time fee to
Stonington in connection with the Acquisition in an aggregate amount not to
exceed $6 million plus reasonable expenses.
Merger and Consolidation. The Company shall not consolidate with or merge
with or into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all its assets to, any Person, unless: (i)
the resulting, surviving or transferee Person (the "Successor Company") shall be
a Person organized and existing under the laws of the U.S. of America, any State
thereof or the District of Columbia and the Successor Company (if not the
Company) shall expressly assume, by an indenture supplemental thereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and the Indenture; (ii) immediately
after giving effect to such transaction (and treating any Debt which becomes an
obligation of the Successor Company or any Subsidiary of the Successor Company
as a result of such transaction as having been Incurred by such Successor
Company or such Subsidiary at the time of such transaction), no Default shall
have occurred and be continuing; (iii) immediately after giving effect to such
transaction, the Successor Company would be able to Incur an additional $1.00 of
Debt pursuant to paragraph (a) of the covenant described under "--Limitation on
Debt"; (iv) immediately after giving effect to such transaction, the Successor
Company shall have Consolidated Net Worth in an amount that is not less than the
Consolidated Net Worth of the Company prior to such transaction; and (v) the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with the Indenture.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
SEC Reports. Notwithstanding that the Company may not be required to remain
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act, the Company shall file with the SEC and provide the Trustee and Noteholders
with such annual reports and such information,
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documents and other reports as are specified in Sections 13 and 15(d) of the
Exchange Act and applicable to a U.S. corporation subject to such Sections, such
information, documents and other reports to be so filed and provided at the
times specified for the filing of such information, documents and reports under
such Sections.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in the
payment of interest on the Notes when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
(iii) the failure by the Company to comply with its obligations under "--Certain
Covenants--Merger and Consolidation" above, (iv) the failure by the Company to
comply for 30 days after notice with any of its obligations in the covenants
described above under "--Change of Control" (other than a failure to purchase
Notes) or under "--Certain Covenants" under "--Limitation on Debt", "--
Limitation on Debt and Preferred Stock of Subsidiaries", "--Limitation on
Restricted Payments", "--Limitation on Restrictions on Distributions from
Subsidiaries", "--Limitation on Sales of Assets and Subsidiary Stock" (other
than a failure to purchase Notes) "--Limitation on Affiliate Transactions" or
"--SEC Reports", (v) the failure by the Company to comply for 60 days after
notice with its other agreements contained in the Indenture, (vi) a default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Debt for money borrowed by the
Company or any of its Subsidiaries (or the payment of which is Guaranteed by the
Company or any of its Subsidiaries) whether such Debt or Guarantee now exists,
or is created after the date of the Indenture, which default (A) is caused by
failure to pay principal of or premium, if any, on such Debt, within any
applicable grace period after final maturity ("Final Payment Default") or (B)
results in the acceleration of such Debt prior to its final stated maturity and,
in each case, the principal amount of any such Debt, together with the principal
amount of any other such Debt under which there has been a Final Payment Default
or the maturity of which has been so accelerated, aggregates $10 million or more
and such default or acceleration continues for 30 days after notice, (vii)
certain events of bankruptcy, insolvency or reorganization of the Company or a
Significant Subsidiary (the "bankruptcy provisions"), or (viii) any judgment or
decree for the payment of money in excess of $10 million is rendered against the
Company or a Significant Subsidiary, remains outstanding for a period of 60 days
following such judgment and is not discharged, waived or stayed within 10 days
after notice (the "judgment default provision"), provided that the amount of
such money judgment or decree shall be calculated net of any insurance coverage
that the Company has determined in good faith is available in whole or in part
with respect to such money judgment or decree. However, a default under clauses
(iv), (v), (vi) or (viii) will not constitute an Event of Default until the
Trustee or the holders of 25% in principal amount of the outstanding Notes
notify the Company of the default and the Company does not cure such default
within the time specified after receipt of such notice.
If an Event of Default (other than certain events of bankruptcy, insolvency
or reorganization of the Company or a Significant Subsidiary) occurs and is
continuing, the Trustee or the holders of at least 25% in principal amount of
the outstanding Notes may declare the principal of and accrued but unpaid
interest on all the Notes to be due and payable by notice in writing to the
Company, the administrative agent under the Credit Agreement (if any Debt is
then outstanding under the Credit Agreement) and the Trustee specifying the
respective Event of Default and that it is a "notice of acceleration"; provided,
however, that the failure to so notify the administrative agent under the Credit
Agreement shall not affect the validity of such acceleration. Upon such a
declaration, such principal and interest shall be due and payable immediately,
subject to the subordination provisions of the Indenture. If an Event of Default
relating to certain events of bankruptcy, insolvency or reorganization of the
Company or a Significant Subsidiary occurs and is continuing, the principal of
and interest on all the Notes will ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holders of the Notes. Under certain circumstances, the holders of a majority in
principal amount of the outstanding Notes may rescind any such acceleration with
respect to the Notes and its consequences.
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Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the holders of the Notes unless
such holders have offered to the Trustee reasonable indemnity or security
against any loss, liability or expense. Except to enforce the right to receive
payment of principal, premium (if any) or interest when due, no holder of a Note
may pursue any remedy with respect to the Indenture or the Notes unless (i) such
holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) holders of at least 25% in principal amount of the outstanding
Notes have requested the Trustee to pursue the remedy, (iii) such holders have
offered the Trustee reasonable security or indemnity against any loss, liability
or expense, (iv) the Trustee has not complied with such request within 60 days
after the receipt thereof and the offer of security or indemnity and (v) the
holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other holder of a Note or that would involve the Trustee in personal
liability.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each holder of the Notes notice
of the Default within 90 days (or such shorter period as may be required by
applicable law) after it occurs. Except in the case of a Default in the payment
of principal of, premium (if any) or interest on any Note, the Trustee may
withhold notice if and so long as a committee of its trust officers determines
that withholding notice is not opposed to the interest of the holders of the
Notes. In addition, the Company is required to deliver to the Trustee, within
120 days after the end of each fiscal year, a certificate indicating whether the
signers thereof know of any Default that occurred during the previous year. The
Company also is required to deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any event which would constitute certain
Defaults, their status and what action the Company is taking or proposes to take
in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended or supplemented
with the consent of the holders of a majority in principal amount of the Notes
then outstanding (including consents obtained in connection with a tender offer
or exchange for the Notes) and any past default or compliance with any
provisions may also be waived with the consent of the holders of a majority in
principal amount of the Notes then outstanding. However, without the consent of
each holder of an outstanding Note affected thereby, no amendment may, among
other things, (i) reduce the amount of Notes whose holders must consent to an
amendment, (ii) reduce the rate of or extend the time for payment of interest on
any Note, (iii) reduce the principal of or extend the Stated Maturity of any
Note, (iv) reduce the premium payable upon the redemption of any Note or change
the time at which any Note may be redeemed as described under "--Optional
Redemption", (v) make any Note payable in money other than that stated in the
Note, (vi) impair the right of any holder of the Notes to receive payment of
principal of and interest on such holder's Notes on or after the due dates
therefor or to institute suit for the enforcement of any payment on or with
respect to such holder's Notes or (vii) make any change in the amendment
provisions which requires each holder's consent or in the waiver provisions or
(viii) make any change to the subordination provisions of the Indenture that
would adversely affect the Noteholders.
Without the consent of any holder of the Notes, the Company and the Trustee
may amend or supplement the Indenture to cure any ambiguity, omission, defect or
inconsistency, to provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture, to
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provide for uncertificated Notes in addition to or in place of certificated
Notes (provided that the uncertificated Notes are issued in registered form for
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add
guarantees with respect to the Notes, to secure the Notes, to add to the
covenants of the Company and its Subsidiaries for the benefit of the holders of
the Notes or to surrender any right or power conferred upon the Company, to make
any change that does not adversely affect the rights of any holder of the Notes
or to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the TIA. However, no amendment may be made
to the subordination provisions of the Indenture that adversely affects the
rights of any holder of Senior Debt then outstanding unless the holders of such
Senior Debt (or their Representative) consents to such change.
The consent of the holders of the Notes is not necessary under the Indenture
to approve the particular form of any proposed amendment. It is sufficient if
such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to holders of the Notes a notice briefly describing such
amendment. However, the failure to give such notice to all holders of the Notes,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER
The Notes will be issued in registered form and will be transferable only
upon the surrender of the Notes being transferred for registration of transfer.
The Company may require payment of a sum sufficient to cover any tax, assessment
or other governmental charge payable in connection with certain transfers and
exchanges.
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under "--Change of
Control" and under the covenants described under "--Certain Covenants" (other
than the covenant described under "--Merger and Consolidation"), the operation
of the cross acceleration provision, the bankruptcy provisions with respect to
Significant Subsidiaries and the judgment default provision described under
"--Defaults" above and the limitations contained in clauses (iii) and (iv) under
"--Certain Covenants--Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect only to
Significant Subsidiaries) or (viii) under "--Defaults" above or because of the
failure of the Company to comply with "--Change of Control" above or because of
the failure of the Company to comply with clause (iii) or (iv) under "--Certain
Covenants--Merger and Consolidation" above.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions including, without limitation, (i) such
defeasance not resulting in a breach or violation of, or constituting a default
under, the Indenture, the Credit
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Agreement or any other material agreement or instrument to which the Company is
a party or by which it is bound and (ii) delivery to the Trustee of an Opinion
of Counsel to the effect that holders of the Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such deposit and
defeasance and will be subject to Federal income tax on the same amount and in
the same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred.
CONCERNING THE TRUSTEE
The Bank of New York is to be the Trustee under the Indenture and has been
appointed by the Company as Registrar and Paying Agent with regard to the Notes.
The Holders of a majority in principal amount of the outstanding Notes will
have the right to direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee, subject to certain
exceptions. The Indenture provides that if an Event of Default occurs (and is
not cured), the Trustee will be required, in the exercise of its power, to use
the degree of care of a prudent man in the conduct of his own affairs. Subject
to such provisions, the Trustee will be under no obligation to exercise any of
its rights or powers under the Indenture at the request of any Holder of Notes,
unless such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense and then only to the
extent required by the terms of the Indenture.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other than Debt and
Capital Stock) used or useful in a Related Business; (ii) the Capital Stock of a
Person that becomes a Subsidiary as a result of the acquisition of such Capital
Stock by the Company or another Subsidiary or (iii) Capital Stock constituting a
minority interest in any Person that at such time is a Subsidiary; provided,
however, that any such Subsidiary described in clause (ii) or (iii) above is
primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "--Certain Covenants-- Limitation on
Restricted Payments", "--Certain Covenants--Limitation on Affiliate
Transactions" and "--Certain Covenants--Limitations on Sales of Assets and
Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of
Capital Stock representing 10% or more of the total voting power of the Voting
Stock (on a fully diluted basis) of the Company or of rights or warrants to
purchase such Capital Stock (whether or not currently exercisable) and any
Person who would be an Affiliate of any such beneficial owner pursuant to the
first sentence hereof. Notwithstanding the foregoing, none of Bankers Trust
Company, Credit Suisse or The Bank of Nova Scotia shall be deemed to be an
Affiliate of the Company and its Subsidiaries solely as a result of the security
interests held by any such entity in the Capital Stock of the Company's
Subsidiaries pursuant to the Credit Agreement.
"Asset Disposition" means any sale, transfer or other disposition (or series
of related sales, transfers or dispositions) by the Company or any Subsidiary,
including any disposition by means of a merger, consolidation or similar
transaction (each referred to for the purposes of this definition as a
"disposition"), of (i) any shares of Capital Stock of a Subsidiary (other than
directors' qualifying shares
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or shares required by applicable law to be held by a Person other than the
Company or a Subsidiary), (ii) all or substantially all the assets of any
division or line of business of the Company or any Subsidiary or (iii) any other
assets of the Company or any Subsidiary outside of the ordinary course of
business of the Company or such Subsidiary (other than, in the case of (i), (ii)
and (iii) above, (v) any disposition, or related series of dispositions, of
assets with an aggregate fair market value of $1 million or less for each such
disposition or related series of dispositions, (w) dispositions permitted under
"Certain Covenants--Merger and Consolidation," (x) a disposition by a Subsidiary
to the Company or by the Company or a Subsidiary to a Wholly Owned Subsidiary,
(y) sales of Customer Notes to third parties (including the sale of certain
customer notes to BTCC contemporaneously with the Acquisition) and (z) for
purposes of the covenant described under "Certain Covenants--Limitation on Sales
of Assets and Subsidiary Stock" only, a disposition that constitutes a
Restricted Payment permitted by the covenant described under " Certain Covenants
Limitation on Restricted Payments").
"Average Life" means, as of the date of determination, with respect to any
Debt or Preferred Stock, the quotient obtained by dividing (i) the sum of the
products of numbers of years from the date of determination to the dates of each
successive scheduled principal payment of such Debt or redemption or similar
payment with respect to such Preferred Stock multiplied by the amount of such
payment by (ii) the sum of all such payments.
"Banks" means the "Lenders" as defined in the Credit Agreement.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"BTCC" means BT Commercial Corporation.
"BTCC Note Guarantees" means the Guarantees by the Company of principal
and/or interest under certain customer notes being sold to BTCC
contemporaneously with the Acquisition, which Guarantees are a condition to
BTCC's obligation to purchase such customer notes, and the related repurchase
obligations not in excess of $4 million in the aggregate and indemnity
obligations to BTCC, as set forth in the definitive agreement executed in
connection therewith.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" of any Person means an obligation that is
required to be classified and accounted for as a capital lease on the face of
the balance sheet of such Person prepared in accordance with GAAP, and the
amount of Debt represented by such obligation shall be the capitalized amount of
such obligation determined in accordance with GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible or exchangeable into such equity.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (1) if the Company or any Subsidiary has
Incurred any Debt since the beginning of such period that remains outstanding
(other than Debt Incurred under the Revolving Credit Facility with respect to
which the related commitment remains outstanding) or if the transaction giving
rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence
of Debt, or both, EBITDA and Consolidated Interest Expense for such period shall
be calculated after
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giving effect on a pro forma basis to such Debt as if such Debt had been
Incurred on the first day of such period and the discharge of any other Debt
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Debt as if such discharge had occurred on the first day of such period, (2)
if since the beginning of such period any Debt of the Company or any Subsidiary
has been repaid repurchased, defeased or otherwise discharged or if the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio
will include any such repayment, repurchase, defeasement or discharge not
otherwise covered in clause (1) above, or both (in either case other than Debt
Incurred pursuant to the Revolving Credit Facility or any similar arrangement
unless such revolving credit Debt has been permanently repaid and has not been
replaced), Consolidated Interest Expense for such period shall be calculated,
after giving effect thereto on a pro forma basis, as if such Debt had been
repaid, repurchased, defeased or otherwise discharged on the first day of such
period, (3) if since the beginning of such period the Company or any Subsidiary
shall have made any Asset Disposition, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Disposition for such period, or
increased by an amount equal to the EBITDA (if negative), directly attributable
thereto for such period and Consolidated Interest Expense for such period shall
be reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Debt of the Company or any Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its continuing
Subsidiaries in connection with such Asset Disposition for such period (or, if
the Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense
for such period directly attributable to the Debt of such Subsidiary to the
extent the Company and its continuing Subsidiaries are no longer liable for such
Debt after such sale), (4) if since the beginning of such period the Company or
any Subsidiary (by merger or otherwise) shall have made an Investment in any
Subsidiary (or any person which becomes a Subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in connection with a
transaction requiring a calculation to be made hereunder, which constitutes all
or substantially all of an operating unit of a business, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto (including the Incurrence of any Debt) as if such Investment or
acquisition occurred on the first day of such period and (5) if since the
beginning of such period any Person (that subsequently became a Subsidiary or
was merged with or into the Company or any Subsidiary since the beginning of
such period) shall have made any Asset Disposition, any Investment or
acquisition of assets that would have required an adjustment pursuant to clause
(3) or (4) above if made by the Company or a Subsidiary during such period,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving pro forma effect thereto as if such Asset Disposition, Investment
or acquisition occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Debt Incurred in connection
therewith, the pro forma calculations shall be determined in good faith by a
responsible financial or accounting Officer of the Company. If any Debt bears a
floating rate of interest and is being given pro forma effect, the interest of
such Debt shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period (taking into
account any Interest Rate Agreement applicable to such Debt if such Interest
Rate Agreement has a remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Subsidiaries, plus, to the extent
not included in such total interest expense, and to the extent incurred by the
Company or its Subsidiaries, (i) interest expense attributable to Capital Lease
Obligations, (ii) amortization of debt discount, (iii) capitalized interest,
(iv) non-cash interest expenses, (v) commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Interest Rate Agreements (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock (except dividends payable solely in shares of Capital Stock of
the Company (other than Disqualified Stock of the Company)) held by Persons
other than the Company or a Wholly Owned Subsidiary, (viii) interest
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incurred in connection with Investments in discontinued operations, (ix)
interest accruing on any Debt of any other Person to the extent such Debt is
Guaranteed by the Company or any Subsidiary and (x) the cash contributions to
any employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
Person (other than the Company) in connection with Debt Incurred by such plan or
trust provided, however, that there shall not be included in such Consolidated
Interest Expense any amount of interest expense of any Subsidiary if the net
income of such Subsidiary is excluded in the calculation of Consolidated Net
Income (but only in the same proportion as such net income is excluded) because
the declaration or payment of dividends or similar distributions by such
Subsidiary of such net income is not at the time permitted by the operation of
the terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to such Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, the Company's equity in the net income
of any such Person for such period shall be included in such consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to a
Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income to the extent of any cash
actually contributed by the Company or a Subsidiary to such Person during such
Period; (ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; (iii) any net income of any Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary, directly or
indirectly, to the Company, except that (A) subject to the exclusion contained
in clause (iv) below, the Company's equity in the net income of any such
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Subsidiary during
such period to the Company or another Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to
another Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Subsidiary for such period shall be
included in determining such Consolidated Net Income to the extent of any cash
actually contributed by the Company or a Subsidiary to such Person during such
Period; (iv) any gain or loss net of tax realized upon the sale or other
disposition of any assets of the Company or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain or loss
net of tax realized upon the sale or other disposition of any Capital Stock of
any Person; (v) extraordinary gains or losses net of tax; (vi) the cumulative
effect of a change in accounting principles, net of tax; and (vii) in the case
of the Company, any depreciation or amortization resulting from any write-up in
the book value of any assets due to the Acquisition. Notwithstanding the
foregoing, for the purposes of the covenant described under "Certain
Covenants--Limitation on Restricted Payments" only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from a Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus (ii) paid
in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit and (iv)
any amounts attributable to Disqualified Stock.
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"Credit Agreement" means that certain Credit Agreement, dated as of
, 1996, among the Company, certain Subsidiaries of the Company,
Bankers Trust Company as agent, the co-agents named therein and the lenders
named therein, including (i) any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time, in whole or in part, and (ii) any credit agreements, notes,
guarantees, collateral documents, instruments and agreements executed in respect
of any such amendment, modification, renewal, refunding, replacement or
refinancing.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Customer Notes" means notes receivable, on terms consistent with the past
practices of the Company and its Subsidiaries and with prevailing industry
practices, issued in connection with customer financing provided to purchasers
of the Company's and its Subsidiaries' products and secured by a valid and
enforceable first priority Lien on the products being purchased.
"Customer Notes Guarantees" means Guarantees by the Company and its
Subsidiaries, on terms consistent with the past practices of the Company and its
Subsidiaries and with prevailing industry practices, of all or a portion of
Customer Notes issued by the Company or its Subsidiaries and sold to third
parties, or of all or a portion of customer notes or other financing provided by
third parties to purchasers of the Company's and its Subsidiaries' products;
provided, however, that "Customer Notes Guarantees" shall not include (i) the
provision of letters of credit in respect of financing provided by a third party
to purchasers of the Company's and its Subsidiaries' products to the extent such
letters of credit are Incurred under the Revolving Credit Facility and (ii) the
BTCC Note Guarantees.
"Debt" of any Person means, without duplication, (i) the principal of and
premium (if any) in respect of (A) debt of such Person for money borrowed and
(B) debt evidenced by notes, debentures, bonds or other similar instruments for
the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding (x) trade accounts payable and other current
trade liabilities arising in the ordinary course of business and payable in
accordance with customary practices and (y) deferred purchase price obligations
where payment is due within six months of delivery); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance, or other similar credit transaction (other than obligations
with respect to letters of credit and related Hedging Obligations securing
obligations (other than obligations described in (i) through (iii) above)
entered into in the ordinary course of business of such Person to the extent
such letters of credit are not drawn upon or, if and to the extent drawn upon,
such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit); (v) the amount of all obligations of such Person with respect
to the redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of such Person, any Preferred Stock (but
excluding, in each case, any accrued dividends); (vi) all Hedging Obligations of
such Person (other than Hedging Obligations excluded pursuant to clause (iv)
above); (vii) all obligations of the type referred to in clauses (i) through (v)
of other Persons and all dividends of other Persons for the payment of which, in
either case, such Person is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise, including by means of any Guarantee; and (viii)
all obligations of the type referred to in clauses (i) through (vi) of other
Persons secured by any Lien on any property or asset of such Person (whether or
not such obligation is assumed by such Person), the amount of such obligation
being deemed to be the lesser of the value of such property or assets or the
amount of the obligation so secured. The amount of Debt of any Person at any
date shall be the outstanding balance of all obligations as described above and
the maximum liability, upon the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at
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such date; provided, however, that the amount outstanding at any time of any
Debt Incurred with original issue discount is the face amount of such Debt less
the remaining unamortized portion of the original issue discount of such Debt at
such time as determined in conformity with GAAP.
"Deemed Asset Value" means 75% of the fair market value of assets (other
than cash) received by the Company from the issuance or sale of its Capital
Stock or as a capital contribution, in either case as determined in good faith
by the Board of Directors; provided, however, that such determination shall be
confirmed by a nationally recognized investment banking firm or appraisal firm
in the event that the value determined by the Board of Directors exceeds $10
million.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Debt" means (i) Debt under the Credit Agreement and (ii)
any other Senior Debt of the Company, the principal amount of which is
$25,000,000 or more individually at the date of determination and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Debt and in a written instrument delivered to the Trustee as
"Designated Senior Debt" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or upon the happening of any event (i) matures
or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise,
(ii) is convertible or exchangeable for Debt or Disqualified Stock or (iii) is
redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the first anniversary of the Stated Maturity of the Notes;
provided, however, that any Capital Stock that would not constitute Disqualified
Stock but for provisions thereof giving holders thereof the right to require
such Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the first anniversary of
the Stated Maturity of the Notes shall not constitute Disqualified Stock if the
"asset sale" or "change of control" provisions applicable to such Capital Stock
are not more favorable to the holders of such Capital Stock than the provisions
described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock" and "--Change of Control."
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company, (b) depreciation expense, (c) amortization expense and (d) all other
non-cash items reducing Consolidated Net Income (other than any non-cash item to
the extent it represents an accrual of, or a reserve for, cash disbursements for
any subsequent period prior to the Stated Maturity of the Notes) and less, to
the extent added in calculating Consolidated Net Income, non-cash items (other
than any non-cash item to the extent it represents an accrual for cash receipts
reasonably expected to be received with any 12 months after the date of such
accrual), in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of the Company shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Subsidiary was included in calculating Consolidated Net
Income and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval other than for the board of directors of such Subsidiary (that has not
been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"Foreign Subsidiary" means a subsidiary that is organized under the laws of
any country other than the U.S. and substantially all the assets of which are
located outside of the U.S.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth (i) in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt or other obligation of any Person
and any obligation, direct or indirect, contingent or otherwise, of such Person
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or other obligation of such Person (whether arising by virtue of
partnership arrangements, or by agreements to keep-well, to purchase assets,
goods, securities or services, to take-or-pay or to maintain financial statement
conditions or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the obligee of such Debt or other obligation of the payment hereof
or to protect such obligee against loss in respect thereof (in whole or in
part); provided, however, that the term "Guarantee" shall not include
endorsements for collection or deposit in the ordinary course of business. The
term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
on the Registrar's books.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Debt or Capital Stock of a Person existing at
the time such Person becomes a Subsidiary (whether by merger, consolidation,
acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at
the time it becomes a Subsidiary. The term "Incurrence" when used as a noun
shall have a correlative meaning. The accretion of principal of a non-interest
bearing or other discount security shall be deemed the Incurrence of Debt.
"Interest Rate Agreement" means any interest rate swap agreement, interest
rate cap agreement or other financial agreement or arrangement designed to
protect the Company or any Subsidiary against fluctuations in interest rates.
"Investment" in any Person means any loan or advance (other than advances to
customers in the ordinary course of business on commercially reasonable terms
that are recorded as accounts receivable on the balance sheet of such Person)
to, any acquisition of Capital Stock, equity interest, obligation or other
security of, or capital contribution or other investment in, or any other credit
extension to (including by way of Guarantee of any Debt of), such Person.
"Issue Date" means the date on which the Notes are originally issued.
"Joint Venture Contract" means that certain Joint Venture Contract, dated
October 29, 1993, between Rockwell Graphic Systems, Inc. and Shanghai Printing &
Packaging Machinery Corp., as in effect on the Issue Date.
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"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Net Available Cash" from an Asset Disposition means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note of installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
properties or assets that are the subject of such Asset Disposition or received
in any other noncash form) in each case net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses incurred, and
all Federal, state, provincial, foreign and local taxes required to be accrued
as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all
payments made on any Debt which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be, repaid out of the proceeds from such Asset Disposition, (iii)
all distributions and other patents required to be made to minority interest
holders in Subsidiaries or joint ventures as a result of such Asset Disposition
and (iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed in such Asset Disposition and retained by the
Company or any Subsidiary after such Asset Disposition.
"Net Cash Proceeds," with respect to any issuance or sale of Capital Stock,
means the cash proceeds (including cash equivalents) of such issuance or sale
net of attorneys' fees, accountants' fees, underwriters' or placement agents'
fees, discounts or commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance or sale and net of taxes paid or
payable as a result thereof.
"Permitted Holders" means Stonington, the Fund, the Management Investors and
their respective Affiliates, including Holdings.
"Permitted Investment" means (A) an Investment by the Company or any
Subsidiary in (i) the Company or a Wholly Owned Subsidiary or a Person that
will, upon the making of such Investment, become a Wholly Owned Subsidiary; (ii)
another Person if as a result of, and contemporaneously with, such Investment
such other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or a Wholly Owned
Subsidiary; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or any Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade terms;
(v) payroll, travel and similar advances to cover matters that are expected at
the time of such advances ultimately to be treated as expenses for accounting
purposes, that are made in the ordinary course of business; (vi) loans or
advances to employees, officers or directors made in the ordinary course of
business consistent with past practices of the Company or a Subsidiary or made
in connection with the Management Placement and that do not in the aggregate
exceed $4 million at any time; (vii) stock, obligations or securities received
in settlement of debts created in the ordinary course of business and owing to
the Company or any Subsidiary or in satisfaction of judgments; and (viii) any
Person to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to the
covenant described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock", (B) any Investment by the Company in the Permitted Joint
Venture at the times and in the amounts and manner required by the Joint Venture
Contract and (C) Customer Notes issued following the Issue Date by the Company
and its Subsidiaries; provided that the amount of Investments made pursuant to
Customer Notes following the Issue Date, in the aggregate, at any one time
outstanding may not exceed $30 million less the amount of Customer Notes
Guarantees Incurred following the Issue Date then outstanding pursuant to clause
(4) of paragraph (b) of the covenant described under "--Limitation on Debt" and
clause (i) of the covenant described under "-- Limitation on Debt and Preferred
Stock of Subsidiaries."
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"Permitted Joint Venture" means Shanghai Rockwell Graphic Systems Co., Ltd.,
a joint venture formed by the Company and Shanghai Printing & Packaging
Machinery Corp. pursuant to the Joint Venture Contract.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note which is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means a primary public offering of common stock of
the Company or Holdings pursuant to an effective registration statement under
the Securities Act.
"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of the Company or Holdings, as the case may be, has been distributed by
means of an effective registration statement under the Securities Act or sales
pursuant to Rule 144 under the Securities Act.
"Refinance" means, in respect of any Debt, to refinance, extend, renew,
refund, repay, prepay, redeem, defease or retire, or to issue other Debt in
exchange or replacement for, such debt. "Refinanced" and "Refinancing" shall
have correlative meanings.
"Refinancing Debt" means Debt that Refinances any Debt of the Company or any
Subsidiary existing on the Issue Date or Incurred in compliance with the
Indenture including Debt that Refinances Refinancing Debt; provided, however,
that (i) such Refinancing Debt has a Stated Maturity no earlier than the Stated
Maturity of the Debt being Refinanced, (ii) such Refinancing Debt has an Average
Life at the time such Refinancing Debt is Incurred that is equal to or greater
than the Average Life of the Debt being Refinanced, (iii) such Refinancing Debt
has an aggregate principal amount (or if Incurred with original issue discount
an aggregate issue price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accreted
value) then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Debt being Refinanced and (iv) with
respect to any Refinancing Debt of Debt other than Senior Debt, such Refinancing
Debt shall rank no more senior, and shall be at least as subordinated, in right
of payment to the Notes as the Debt being so extended, renewed, refunded or
refinanced; provided, further, however, that Refinancing Debt shall not include
Debt of a Subsidiary that Refinances Debt of the Company.
"Related Business" means the business of the Company and its Subsidiaries on
the Issue Date and any business related, ancillary or complementary to the
businesses of the Company and its Subsidiaries on the Issue Date.
"Representative" means any trustee, agent or representative (if any) for an
issue of Senior Debt of the Company.
"Restricted Payment" with respect to any Person means (i) the declaration or
payment of any dividends or any other distributions of any sort in respect of
its Capital Stock (including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the direct or
indirect holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) or rights to
acquire its Capital Stock (other than Disqualified Stock)) and dividends or
distributions payable solely to the Company or a Subsidiary, and other than
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pro rata dividends or other distributions made by a Subsidiary that is not a
Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent
interest in the case of a Subsidiary that is an entity other than a
corporation), (ii) the purchase, redemption or other acquisition or retirement
for value of any Capital Stock of the Company held by any Person or of any
Capital Stock of a Subsidiary held by any Affiliate of the Company (other than a
Subsidiary), including the exercise of any option to exchange any Capital Stock
(other than into Capital Stock of the Company that is not Disqualified Stock),
(iii) the purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations purchased
in anticipation of satisfying a sinking fund obligation, principal installment
or final maturity, in each case due within one year of the date of acquisition)
or (iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Revolving Credit Facility" means the provisions of the Credit Agreement
pursuant to which lenders thereunder have committed to make available to the
Company and its Subsidiaries a revolving credit facility.
"SEC" means the Securities and Exchange Commission.
"Secured Debt" means Debt of the Company or a Subsidiary secured by a Lien.
"Senior Debt" means (i) Debt of the Company, whether outstanding on the
Issue Date or thereafter incurred (including, without limitation, Debt (and
other obligations including for fees, expenses, reimbursements, indemnities or
otherwise) Incurred pursuant to the Credit Agreement, any Interest Rate
Agreement or Currency Agreement and any Guarantee by the Company of any Debt or
monetary obligation of any of its Subsidiaries under the Credit Agreement, any
Interest Rate Agreement or Currency Agreement) and (ii) accrued and unpaid
interest thereon (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company or a
Subsidiary at the rate otherwise applicable thereto whether or not post-filing
interest is allowed in such proceeding) unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Notes;
provided, however, that Senior Debt shall not include (1) any obligation of the
Company to any Subsidiary, (2) any liability for Federal, state, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any Debt of
the Company (and any accrued and unpaid interest in respect thereof) which is
subordinate or junior in any respect to any other Debt or other obligation of
the Company, (5) that portion of any Debt which at the time of Incurrence is
Incurred in violation of the Indenture, (6) Debt owed, due, or guaranteed on
behalf of, any director, officer or employee of the Company or any Subsidiary
(including without limitation amounts owed for compensation), and (7) Debt which
when Incurred and without respect to any election under Section 1111(b) of Title
11 U.S. Code, is without recourse to the Company (other than Capital Lease
Obligations or secured purchase money obligations).
"Senior Subordinated Debt" means the Notes and any other Debt of the Company
that specifically provides that such Debt is to rank pari passu with the Notes
in right of payment and is not subordinated by its terms in right of payment to
any Debt or other obligation of the Company which is not Senior Debt.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed date on which the final payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the repurchase of such
security at the option of the holder thereof upon the happening of any
contingency unless such contingency has occurred).
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"Subordinated Obligation" means any Debt of the Company (whether outstanding
on the Issue Date or thereafter Incurred) which by its written terms is
subordinate or junior in right of payment to the Notes.
"Subsidiary" means, in respect of any Person, any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person, (ii) such
Person and one or more Subsidiaries of such Person or (iii) one or more
Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency thereof or
obligations guaranteed by the United States of America or any agency thereof,
(ii) investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 270 days of the date of acquisition thereof
issued by a bank or trust company which is organized under the laws of the U.S.
of America, any state thereof or any foreign country recognized by the U.S., and
which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America, any
jurisdiction thereof or any foreign country recognized by the U.S. of America
with a rating at the time as of which any investment therein is made of "P-1"
(or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher)
according to Standard & Poor's Ratings Group, and (v) investments in securities
with maturities of nine months or less from the date of acquisition issued or
fully guaranteed by any state, commonwealth or territory of the U.S. of America,
or by any political subdivision or taxing authority thereof, and rated at least
"A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc.
"Term Loan Facility" means the provisions of the Credit Agreement pursuant
to which lenders thereunder have committed to make term loans available to the
Company and its Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Sec. 77aaa-77bbbb) as
in effect on the date of this Indenture.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the U.S. of America
(including any agency or instrumentality thereof) for the payment of which the
full faith and credit of the U.S. of America is pledged and which are not
callable at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
(other than directors' qualifying shares and shares held by other Persons to the
extent such shares are required by applicable law to be held by a Person other
than the Company or a Subsidiary) is owned by the Company or one or more Wholly
Owned Subsidiaries.
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DESCRIPTION OF NEW BANK CREDIT AGREEMENT
In arranging for financing for the Acquisition on behalf of the Company,
Stonington has entered into a commitment letter with Bankers Trust Company
("Bankers Trust"), The Bank of Nova Scotia and Credit Suisse (collectively, the
"Lenders") providing for (i) five-year term loan facilities aggregating $75.0
million (the "Term Loan Facility"), and (ii) five-year revolving credit
facilities aggregating $150.0 million inclusive of letters of credit to be
issued thereunder (the "Revolving Credit Facility" and, together with the Term
Loan Facility, the "Bank Facilities"). The Lenders intend to arrange for other
banks, financial institutions and other "accredited investors" (as defined in
regulations promulgated by the Commission) to provide a portion of the Bank
Facilities. Bankers Trust will act as administrative agent for the Lenders, The
Bank of Nova Scotia will act as documentation agent for the Lenders and Credit
Suisse will act as syndication agent for the Lenders. The funds from the Bank
Facilities will be lent directly to the Company and Goss U.K. and Goss Japan,
and, other than the commitment letter, Stonington is not a party to any
agreements or arrangements with respect to the Bank Facilities. The Company and
Goss U.K. and Goss Japan will enter into the New Bank Credit Agreement, which
will supersede the commitment letter, and Stonington will have no continuing
obligations with respect to the Bank Facilities.
The execution of the Bank Facilities, and the delivery of required
documentation thereunder, will occur simultaneously with the closing of this
Offering and the closing of the Acquisition. The Lenders' obligation to provide
the Bank Facilities is conditioned upon, among other things, the preparation,
execution and delivery of mutually acceptable loan documentation, including a
credit agreement incorporating substantially the terms and conditions outlined
in the commitment letter; the Lenders' satisfaction with the final terms,
conditions and structure of the Acquisition; the consummation of the Acquisition
(including the sale of the Customer Notes) pursuant to the terms of the Purchase
Agreement and other definitive documentation, no provision of which shall have
been amended, supplemented, waived or otherwise modified in any material respect
without the prior written consent of the Lenders; and the absence of any
material adverse change in the business, operations, properties, assets,
liabilities, condition (financial or otherwise) or prospects of Goss since
September 30, 1995.
The Term Loan Facility will consist of a term loan in an original principal
amount of $25 million made to the Company, a term loan in an original principal
amount of $25 million made to Goss U.K. and a term loan in an original principal
amount of $25 million made to Goss Japan. The Term Loan Facility will have a
final maturity date of five years after the date of the initial funding under
the Bank Facilities (the "Initial Funding Date"). Quarterly amortization will be
required, commencing December 31, 1997, in annual amounts of $15 million for
each of the second, third and fourth fiscal years following the Closing Date,
and $30 million for the fifth fiscal year following the Closing Date.
In addition, the Company will be required to make prepayments on the Term
Loan Facility and/or reduce the commitments under the Revolving Credit Facility
under certain circumstances, including upon certain asset sales and issuance of
debt or equity securities. The Company will also be required to make such
prepayments and/or reductions in an amount equal to 75% of the Company's and its
subsidiaries' Consolidated Excess Cash Flow (as defined) for each fiscal year,
payable within 90 days after the end of the applicable fiscal year. Mandatory
prepayments or commitment reductions required as a result of equity or debt
issuances by Holdings or the Company or any subsidiary will be apportioned among
the Bank Facilities provided to the Company, Goss U.K. and Goss Japan based upon
the amount of issuance proceeds received by each. Mandatory prepayments arising
as a result of Consolidated Excess Cash Flow will be applied to the Term Loan
Facility in proportion to the amount of debt outstanding under each term loan.
All other mandatory prepayments/reductions will be applied first to prepay the
applicable term loan facility, and, thereafter, to prepay certain remaining term
loans and thereafter to repay the applicable revolving credit facility and
thereafter to any other remaining term loans and revolving credit facilities in
a manner to be determined. All mandatory prepayments of the Term Loan Facility
arising as a result of Consolidated Excess Cash Flow will be applied pro rata to
the
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scheduled installments thereof and all other mandatory prepayments of the Term
Loan Facility will be applied in inverse order of maturity. The Term Loan
Facility will bear interest, at the Company's option, at the customary base rate
plus 1.00% - 1.50% (depending on the Company's leverage ratio at such time) or
at the customary reserve adjusted Euro-Dollar rate plus 2.00% - 2.50% (depending
on the Company's leverage ratio at such time). As shown in Note (aa) to the Pro
Forma Consolidated Statements of Income, interest expense for the year ended
September 30, 1995, on a pro forma basis, on the $75.0 million of Term Loan
Facility would have been $6.2 million.
The Revolving Credit Facility will mature September 30, 2001 and will
consist of a revolving credit facility in an original amount of up to $100
million made available to the Company, a revolving credit facility in an
original amount of up to $100 million made available to Goss U.K., and a
revolving credit facility in an original amount of up to $25 million made
available to Goss Japan, and which may not, in the aggregate, exceed the U.S.
dollar equivalent of $150 million, in each case under which revolving loans may
be made, provided that in no event will the aggregate outstanding amount of such
revolving loans used for working capital requirements and general corporate
purposes exceed the U.S. dollar equivalent of $110 million at any one time, and
under which letters of credit may be issued. It is anticipated that at closing
approximately $5 million of availability under the Revolving Credit Facility
will be excluded until such time as the Company's foreign exchange contracts
expire (the substantial majority of which contracts expire within 12 months
after closing). The Revolving Credit Facility will bear interest, at the
Company's option, at the customary base rate plus 1.00% - 1.50% (depending on
the Company's leverage ratio at such time) or at the customary reserve adjusted
Euro-Dollar rate plus 2.00% - 2.50% (depending on the Company's leverage ratio
at such time).
The proceeds of the Term Loan Facility and approximately $0.3 million under
the Revolving Credit Facility will be used to pay the cash portion of the
purchase price for the Acquisition of Goss under the Purchase Agreement in an
aggregate maximum amount of approximately $552.5 million (subject to certain
adjustments) and to pay fees and expenses in connection with the Acquisition and
the related financings in an aggregate maximum amount of approximately $26.0
million. The Revolving Credit Facility will also be available to provide for the
working capital requirements and general corporate purposes of the Company and
its subsidiaries and to issue commercial letters of credit and standby letters
of credit to support workers' compensation contingencies and for other corporate
purposes to be agreed upon. To the extent that advances under the Revolving
Credit Facility are made available to other subsidiaries of the Company or to
the Company, such intercompany borrowings will be evidenced by promissory notes
subordinated in right of repayment to the Bank Facilities.
The Bank Facilities will be guaranteed by Holdings and by each of the
Company's domestic subsidiaries and, in addition, the Company shall guarantee
the Bank Facilities provided to Goss U.K. and Goss Japan. In the event that U.S.
tax laws are amended to permit foreign subsidiaries to guarantee the Bank
Facilities provided to the Company or to other foreign subsidiaries without the
incurrence of an investment in U.S. property or other deemed dividend for U.S.
tax purposes or otherwise result in U.S. taxable income for the Company and its
subsidiaries, such foreign subsidiaries will agree to then guarantee the Bank
Facilities. All extensions of credit to each borrower subject to certain
exceptions to be agreed upon, will be secured by all existing and after-acquired
real and personal property of such borrower and all guaranties subject to
certain exceptions to be agreed upon, will be secured by all existing and
after-acquired real and personal property of such guarantors, including a pledge
of the stock of all such guarantor's subsidiaries and a pledge of the
Intercompany Notes held by such guarantor; provided that neither the Company nor
any guarantor will be required to pledge more than 66% of the stock of its
foreign subsidiaries unless U.S. tax laws are amended to permit a pledge of more
than 66% of such foreign subsidiaries' stock without giving rise to U.S. tax
liabilities for the Company and its subsidiaries.
The Bank Facilities will contain certain financial covenants, including, but
not limited to, a minimum fixed charge coverage test, a minimum interest
coverage test, a minimum EBITDA test, a minimum net worth test and a maximum
leverage test. In addition, the Bank Facilities will contain other customary
affirmative and negative covenants relating to (among other things) limitations
on
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other indebtedness, liens, investments, guarantees, restricted junior payments,
mergers and acquisitions, sales of assets, capital expenditures, leases,
transactions with affiliates and conduct of business, with customary exceptions
and baskets to be mutually agreed upon. The Bank Facilities will contain
customary events of default, including failure to make payments when due,
defaults under other agreements or instruments of indebtedness, noncompliance
with covenants, breaches of representations and warranties, bankruptcy,
judgments in excess of specified amounts, invalidity of guaranties, impairment
of security interests in collateral and certain changes of control.
Within 90 days of the Initial Funding Date, the Company is required to
obtain interest rate protection, pursuant to interest rate swaps, caps or other
similar arrangements reasonably satisfactory to the Lenders.
DESCRIPTION OF SALE OF CUSTOMER NOTES
In arranging for financing for the Acquisition on behalf of the Company,
Stonington has entered into a commitment letter with BT Commercial Corporation
("BTCC") providing for the purchase by BTCC from the Company of a portfolio of
the Customer Notes and related sales contracts, instruments, agreements,
documents and collateral outstanding on February 29, 1996, arising from the sale
of printing and like equipment (the "Equipment"), for a purchase price of
approximately $163.7 million, subject to certain adjustments for new Customer
Notes entered into between February 29, 1996 and the day preceding the Closing
Date and for Customer Notes that are restructured between March 1, 1996 and the
Closing Date (except for one Customer Note, the restructuring of which has been
disclosed to BTCC), both of which require the prior consent of BTCC. The
purchase price will be reduced by all reductions in the aggregate unpaid
principal balance of the Customer Notes between March 1, 1996 and the Closing
Date, whether resulting from the receipt of regularly scheduled installments of
principal on the Customer Notes, partial installments of principal on the
Customer Notes, or partial or full prepayment (whether the prepayment is the
result of the liquidation of the collateral securing the Customer Notes or
otherwise). The events described above that will reduce the purchase price for
the Customer Notes will also cause equal reductions in the purchase price to be
paid by the Company to Rockwell for the Acquisition of Goss. See "The
Acquisition--Purchase Price; Adjustments." The purchase price represents a
discount to the face amount of the Customer Notes, which was approximately
$238.2 million as of February 29, 1996 (the measurement date used to determine
the Customer Note portfolio purchase price).
The obligations of the Company will be non-recourse, except with respect to
representations and warranties by the Company relating to the bona fide nature,
legal enforceability, accuracy and completeness of the documentation, including
the description and location of the Equipment, respecting the Customer Notes and
certain other matters and except with respect to the guarantees described below.
BTCC's obligation to purchase the Customer Notes is conditioned upon, among
other things (i) the execution of a service and remarketing agreement between
the Company and BTCC acceptable to both parties, providing for warranty,
maintenance and repair services and remarketing assistance with respect to the
Equipment and for certain indemnities of BTCC; (ii) Rockwell making a
representation in favor of BTCC that, other than items withheld because of the
terms of confidentiality agreements by which Rockwell is bound, Rockwell has
made available to BTCC true and correct copies of all Customer Notes; (iii) the
Company making a representation in favor of BTCC that, other than items withheld
by Rockwell because of the terms of confidentiality agreements by which Rockwell
is bound, the Company has made or has caused to be made available to BTCC all
Customer Notes, and that all such documentation is and was complete and correct
in all material respects and does not contain any untrue statement of material
fact or omit to state a material fact.
BTCC's obligations are further conditioned upon (i) the Company guaranteeing
in favor of BTCC (a) approximately $7.0 million of the principal balance and
interest accrued after the Closing Date on the Customer Notes (the "Sunny
Notes") payable by Sunny Industries, Inc. ("Sunny") (secured by a $5.0 million
letter of credit as to the guarantee of principal), (b) one-half of the interest
accrued after
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the Closing Date on a Customer Note (the "Newspaper Customer Note"), secured by
a letter of credit in an amount of approximately $1.9 million and (c) a maximum
amount of $10.5 million of the principal balance on the Customer Notes payable
by Socpresse, S.A., Serpo, Presse Ocean and any of their affiliates (including
Robert Hersant, the estate of Robert Hersant and any other successors, assigns
or heirs of Robert Hersant) (the "Hersant Group") which amount shall be reduced
by all reductions of the aggregate principal balance on such Customer Notes
below $10.5 million; (ii) the execution of an agreement between Rockwell and
BTCC, pursuant to which Rockwell agrees that BTCC may, between June 1, 1997 and
June 30, 1997, sell to Rockwell the Newspaper Customer Note on certain specified
terms, and pursuant to which Rockwell provides certain guarantees to BTCC; and
(iii) Rockwell indemnifying BTCC against certain claims in connection with the
sale of the Newspaper Customer Note. In addition, the Company will agree that
BTCC may, at any time after the Closing Date and upon 10 days written notice to
the Company, sell to the Company for a price of $4.0 million the printing press
equipment securing the Customer Note from Mirandela Artes Grafias S.A. after the
foreclosure upon such equipment by BTCC. The Company may sell or otherwise
remarket such equipment and must pay to BTCC the $4.0 million purchase price on
the earlier of such sale or other remarketing and one year after the sale by
BTCC to the Company of such equipment. The letters of credit to be issued in
connection with the sale of the Sunny Notes and the Newspaper Customer Note will
be obtained pursuant to draw downs under the Revolving Credit Facility. The
Sunny Notes, the Newspaper Customer Note and the Customer Note payable by the
Hersant Group have an aggregate principal amount of approximately $84.4 million.
See "Description of New Bank Credit Agreement."
In addition, BTCC's obligation to purchase the Customer Notes is subject to
the execution and delivery of a purchase agreement reasonably satisfactory to
BTCC, consummation of the Acquisition on terms reasonably satisfactory to BTCC
and the absence of any material adverse change in the performance of the
Customer Notes since March 1, 1996. The funds from the sale of Customer Notes
will be paid directly to the Company, and other than the commitment letter,
Stonington is not a party to any agreements or arrangements with respect to the
sale of Customer Notes. The Company will enter into the purchase agreement with
BTCC, which will supersede the commitment letter, and Stonington will have no
continuing obligations with respect to the sale of Customer Notes.
DESCRIPTION OF PREFERRED STOCK
In connection with the Acquisition, Holdings will issue to Rockwell 47,500
shares of 6 1/2% Redeemable Pay-in-Kind Preferred Stock, par value $.01 per
share (the "Preferred Stock"), having a liquidation preference of $1,000 per
share, or $47.5 million in the aggregate.
The ability of Holdings to pay cash dividends on the Preferred Stock and to
redeem or repurchase the Preferred Stock is subject to limitations imposed by
the Company's debt agreements. The following description of the Preferred Stock
does not purport to be complete and is subject to, and qualified in its entirety
by reference to, all of the provisions of the Certificate of Designation
governing the Preferred Stock, a copy of which is attached as an exhibit to the
Registration Statement. See "Available Information."
RANK
The Preferred Stock, with respect to dividend rights, rights upon
liquidation, winding up or dissolution, and redemption rights, ranks (i) junior
to any other series of preferred stock duly established and hereafter created by
the board of directors of Holdings, the terms of which specifically provide that
such series shall rank senior to the Preferred Stock, (ii) on a parity with any
other series of preferred stock duly established by the board of directors of
Holdings, the terms of which shall specifically provide that such series shall
rank on a parity with the Preferred Stock, whether now existing or hereafter
created, and (iii) prior to any other class or series of capital stock of
Holdings, including, without limitation, all classes of the Common Stock and
Nonvoting Common Stock whether
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now existing or hereafter created (all of such classes or series of capital
stock of Holdings to which the Preferred Stock ranks prior, including without
limitation the Common Stock and the Nonvoting Common Stock, and including,
without limitation, Junior Securities convertible into or exchangeable for other
Junior Securities, are collectively referred to herein as the "Junior
Securities").
DIVIDENDS
The holders of the shares of Preferred Stock are entitled to receive when
and as declared by the Board of Directors of Holdings, out of funds legally
available therefor, cumulative dividends on the shares of the Preferred Stock,
at a rate per annum of 6 1/2% multiplied by the liquidation preference thereof.
Dividends on shares of Preferred Stock are payable on December 31 of each year,
commencing on December 31, 1996, which date shall be the first day of the next
succeeding dividend period (each such period, an "Annual Dividend Period"), or
if any such date is not a business day, on the next succeeding business day
(each of such dates being a "Dividend Payment Date"), in preference to and in
priority over dividends on the Junior Securities. Dividends on the Preferred
Stock are fully cumulative and accrue (whether or not earned or declared and, to
the extent permitted by law, whether or not there are unrestricted funds of
Holdings legally available for the payment of dividends), without interest, from
the first day of the Annual Dividend Period, except that with respect to the
Annual Dividend Period ending on December 30, 1996, such dividend shall accrue
from the Acquisition Closing and except that with respect to the first Annual
Dividend Period relating to any Additional Shares of Preferred Stock (as defined
below), dividends shall accrue from the respective initial date of issuance
thereof.
On each Dividend Payment Date that occurs prior to the payment (a "Junior
Stock Dividend") of dividends on any class or series of Common Stock or Junior
Securities payable in cash or other property (except for dividends payable in
shares of Common Stock or Junior Securities), Holdings may pay dividends on the
Preferred Stock, at its option, in cash or by issuing a number of additional
shares (or partial shares) of the Preferred Stock (the "Additional Shares of
Preferred Stock") for each such share (or partial share) of Preferred Stock then
outstanding equal to the dividend then payable on each such share (or partial
share) of Preferred Stock for the Annual Dividend Period then ended (or such
shorter period for which dividends are so being paid) (expressed as a dollar
amount) divided by the liquidation value of one share of Preferred Stock
(expressed as a dollar amount).
On each Dividend Payment Date which occurs after a Junior Stock Dividend,
Holdings will pay such dividend amount in cash; provided, however, that Holdings
will not be required to pay cash dividends on shares of Preferred Stock to the
extent that the payment of each dividend on shares of Preferred Stock is
prohibited by the then applicable corporation law of the State of Delaware.
RESTRICTED PAYMENTS
For so long as any shares of Preferred Stock are outstanding, no dividend
will be declared or paid or set aside for payment or other distribution declared
or made (in each case, other than dividends or distributions paid in shares of
Junior Securities, or options, warrants or rights to subscribe for or purchase
shares of Junior Securities) upon any Junior Securities, nor will any Junior
Securities (or any options, warrants or rights to subscribe for or purchase
Junior Securities) be redeemed, purchased or otherwise acquired by Holdings or
any of its subsidiaries for any consideration (except for shares of Junior
Securities, or options, warrants or rights to subscribe for or purchase shares
of Junior Securities), unless, in either case, dividends on the shares of
Preferred Stock are paid in full for all prior periods and are paid or set apart
for payment in full for the current period.
Notwithstanding the foregoing, the Certificate of Designation will not
prevent the redemption, purchase or other acquisition by Holdings or any of its
subsidiaries of shares of Junior Securities pursuant to certain management
investment agreements entered into in connection with, or subsequent to, the
Transactions.
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LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of Holdings, the
holders of the Preferred Stock will be entitled to receive their full
liquidation preference per share, together with accrued and unpaid dividends,
before the distribution of any assets of Holdings to the holders of any Junior
Securities.
REDEMPTION
Shares of Preferred Stock may, at the option of Holdings, be redeemed at any
time in whole or in part from time to time, out of funds legally available
therefor, at a redemption price, payable in cash, equal to the per share
liquidation preference thereof, plus, in each case, an amount equal to accrued
and unpaid dividends thereon (whether or not earned or declared), if any, to the
date fixed for redemption.
In addition, prior to the occurrence of (i) any event in which Stonington or
its affiliates cease to own in excess of 50% of the voting securities of
Holdings or the Company (or any company into which the Company is merged) (a
"Control Event"); (ii) the payment of an Extraordinary Dividend (as defined
below); or (iii) a Qualifying Sale (as defined below), Holdings will be required
to offer to purchase (the "Extraordinary Event Offer") on the date of the
Control Event, Extraordinary Dividend or Qualifying Sale, as the case may be,
all shares of Preferred Stock outstanding at such date at a purchase price,
payable in cash, equal to the per share liquidation preference thereof, plus
accrued and unpaid dividends, if any, to the date of the Control Event,
Extraordinary Dividend or Qualifying Sale, as the case may be. Any Extraordinary
Event Offer may be expressly conditioned on the occurrence of a Control Event, a
Qualifying Sale or the payment of the Extraordinary Dividend and if the Control
Event, the Qualifying Sale or the payment of the Extraordinary Dividend does not
occur, Holdings will have no further obligation in respect of such Extraordinary
Event Offer; provided, however, that the termination of an Extraordinary Event
Offer resulting from the failure of such Control Event, such Qualifying Sale or
payment of such Extraordinary Dividend to occur shall not affect the obligation
of Holdings with respect to any subsequent Extraordinary Event Offers.
An Extraordinary Dividend is defined as (i) any dividend or dividends paid
on the Common Stock or any other class of capital stock of Holdings (other than
the Preferred Stock) which other class of capital stock is issued for less than
the then fair market value, (ii) any redemptions or purchases by Holdings (in
one or more transactions) of shares of capital stock of Holdings (other than
certain redemptions or purchases of equity securities including pursuant to
management investment agreements entered into in connection with, or subsequent
to, the Closing), (iii) any dividends (in one or more transactions) by any
subsidiary of Holdings on its capital stock to any person or entity other than
Holdings or one of its subsidiaries or (iv) any redemptions or purchases (in one
or more transactions) by any subsidiary of Holdings of shares of its capital
stock from any person or entity other than Holdings or one of its subsidiaries;
pursuant to which (A) the aggregate value of such dividends set forth in clause
(i) in any twelve month period, plus (B) the aggregate fair market value of such
dividends, purchases or redemptions set forth in clauses (ii) to (iv), is equal
to or greater than the aggregate fair market value of 10% of the then
outstanding shares of Common Stock.
A Qualifying Sale is defined as the transfer by Stonington or its affiliates
(other than transfers to an affiliate) of such number of shares of capital stock
of Holdings in one or more transactions (including transfers of shares of
capital stock of Holdings held on the Closing Date or thereafter acquired, but
excluding such shares acquired from Holdings after the Closing Date (other than
in exchange for other capital stock of Holdings) at the fair market value
thereof) as is equal to or greater than 5% of its shares of Common Stock held on
the Closing Date.
TRANSFER RESTRICTIONS
Prior to a Qualified Primary Public Offering (as defined below), Rockwell
will not be permitted to sell, offer, assign, pledge, hypothecate, encumber or
otherwise transfer ("Transfer") its shares of
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Preferred Stock, other than to affiliates of Rockwell who agree in writing to be
bound by the transfer restrictions described herein, without the prior written
consent of Holdings, except that no such consent (other than with respect to a
transfer to a competitor of Holdings or any of its affiliates) shall be required
upon the failure by Holdings to declare and pay any annual dividend on the
shares of Preferred Stock or to satisfy its obligations specified under the
second paragraph of "--Redemption." After a Qualified Primary Public Offering,
the holders of shares of Preferred Stock will have the right to Transfer such
shares, except for transfers to a competitor of Holdings or any of its
affiliates.
A Qualified Primary Public Offering is defined as the completion of a sale
of shares pursuant to an effective registration statement under the Securities
Act (other than a registration statement relating to Common Stock issuable upon
the exercise of employee stock options or in connection with any employee
benefit plan and other than a registration statement on Form S-4) of Common
Stock representing more than 15% of the then outstanding shares of Common Stock.
VOTING RIGHTS
The holders of record of shares of Preferred Stock will not be entitled to
any voting rights, except upon the occurrence of (i) the failure by Holdings to
declare and pay a dividend on the Preferred Stock on any Dividend Payment Date
or (ii) the failure of Holdings to satisfy the obligations with respect to the
Preferred Stock described under the second paragraph of "--Redemption." Upon the
occurrence of any of the events set forth in the preceding sentence, the size of
the Board of Directors of Holdings will be increased by two directors, and the
holders of a majority of the outstanding shares of Preferred Stock, voting as a
separate class, will be entitled to elect two additional members of the Board of
Directors of Holdings, provided that such right to elect two additional members
of the Board of Directors of Holdings will terminate when the event giving rise
to such right is cured. Such holders are not entitled to any other voting rights
except as specified herein and except as otherwise required by law.
In addition, the affirmative vote of the holders of at least a majority of
the outstanding shares of Preferred Stock, voting separately as a single class
on a one vote per share (pro rated for fractional shares) basis, in person or by
proxy, at a special or annual meeting of stockholders called for the purpose, or
by consent, shall be required to amend, repeal or change any provisions of the
Certificate of Incorporation of Holdings governing the Preferred Stock in any
manner which would adversely affect, alter or change the powers, preferences or
special rights of any share of Preferred Stock.
FINANCIAL STATEMENTS
Holdings will provide to the holders of the shares of Preferred Stock annual
and quarterly financial statements of the Company within times to be agreed
upon.
RELATED AGREEMENT
In connection with the issuance of the Preferred Stock, the Fund will enter
into a letter agreement with Rockwell providing that, in the event that a
Qualifying Sale occurs and Holdings fails to satisfy its obligations set forth
under the second paragraph of "--Redemption," the Fund will promptly purchase
such number of shares of Preferred Stock from Rockwell (or transferees who
obtain shares of Preferred Stock in compliance with the restrictions set forth
in "--Transfer Restrictions") for its full liquidation preference, together with
accrued and unpaid dividends to the date of purchase, as is equal to the net
proceeds from such Qualifying Sale.
112
<PAGE>
DESCRIPTION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the principal U.S. federal income
tax consequences of the acquisition, ownership and disposition of the Notes to
initial beneficial owners of the Notes who are U.S. Holders (as defined below)
and the principal U.S. federal income and estate tax consequences of the
acquisition, ownership and disposition of the Notes to initial beneficial owners
of the Notes who are Non-U.S. Holders (as defined below). This discussion is
based on currently existing provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), existing and proposed Treasury regulations promulgated
thereunder and administrative and judicial interpretations thereof, all as in
effect or proposed on the date hereof and all of which are subject to change,
possibly with retroactive effect, or different interpretations. It does not
include any description of the tax laws of any state, local or foreign
government that may be applicable to the Notes or beneficial owners thereof.
This discussion does not address the tax consequences to subsequent beneficial
owners of the Notes, and is limited to beneficial owners who hold the Notes as
capital assets within the meaning of section 1221 of the Code. This discussion
also does not address the tax consequences to Non-U.S. Holders that are subject
to U.S. federal income tax on a net basis on income realized with respect to a
Note because such income is effectively connected with the conduct of a U.S.
trade or business. Moreover, this discussion does not address all of the U.S.
federal income tax consequences that may be relevant to particular initial
beneficial owners in light of their personal circumstances, or to certain types
of initial beneficial owners (such as certain financial institutions, insurance
companies, tax-exempt entities, dealers in securities or persons who have hedged
the risk of owning a Note).
PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
PARTICULAR TAX CONSEQUENCES TO THEM OF THE ACQUISITION, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE APPLICABILITY OF ANY FEDERAL TAX LAWS OR
ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND ANY CHANGES (OR PROPOSED CHANGES) IN
APPLICABLE TAX LAWS OR INTERPRETATIONS THEREOF.
U.S. FEDERAL INCOME TAXATION OF U.S. HOLDERS
Payments of Interest
In general, interest on a Note will be taxable to a beneficial owner who or
which is (i) a citizen or resident of the U.S. for U.S. federal income tax
purposes, (ii) a corporation created or organized under the laws of the U.S. or
any State thereof, (iii) a person or entity that is otherwise subject to U.S.
federal income tax on a net income basis in respect of income derived from
Notes, or (iv) a partnership to the extent the interest therein is owned by a
person who is described in clause (i), (ii) or (iii) of this paragraph (a "U.S.
Holder") as ordinary income at the time it is (actually or constructively)
received or accrued, depending on the beneficial owner's method of accounting
for U.S. federal income tax purposes.
Sale, Exchange, Disposition and Retirement of Notes
A U.S. Holder's tax basis in a Note will generally be its cost. A U.S.
Holder will generally recognize gain or loss on the sale, exchange, retirement
or other disposition of a Note equal to the difference between the amount
realized on such sale, exchange, retirement or other disposition and the tax
basis of the Note. Gain or loss recognized on such sale, exchange, retirement or
other disposition of a Note (other than gain attributable to accrued but unpaid
interest) will be capital gain or loss and will be long-term capital gain or
loss if the Note was held for more than one year.
113
<PAGE>
U.S. TAXATION OF NON-U.S. HOLDERS
Under present U.S. federal income and estate tax law and subject to the
discussion of backup withholding below:
(i) payments of principal and interest on the Notes by the Company or
any agent of the Company to any beneficial owner of a Note that is not a
U.S. Holder (a "Non -U.S. Holder") will not be subject to U.S. federal
withholding tax, provided that in the case of interest (a)(1) the Non-U.S.
Holder does not actually or constructively own 10 percent or more of the
total combined voting power of all classes of stock of the Company entitled
to vote, (2) the Non-U.S. Holder is not a controlled foreign corporation
that is related to the Company through stock ownership, (3) the Non-U.S.
Holder is not a bank described in Section 881(c)(3)(A) of the Code, and (4)
either (A) the beneficial owner of the Notes certifies to the Company or its
agent on Internal Revenue Service ("IRS") Form W-8 (or a suitable substitute
form), under penalties of perjury, that it is not a "U.S. person" (as
defined in the Code) and provides its name and address, or (B) a securities
clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Notes on behalf of the beneficial
owner certifies to the Company or its agent under penalties of perjury that
such statement has been received from the beneficial owner by it or by a
financial institution between it and the beneficial owner and furnishes the
payor with a copy thereof or (b) the Non-U.S. Holder is entitled to the
benefits of an income tax treaty under which interest on the Notes is exempt
from U.S. withholding tax and provides a properly executed IRS Form 1001
claiming the exemption;
(ii) a Non-U.S. Holder will not be subject to U.S. federal withholding
tax on gain realized on the sale, exchange or redemption of a Note, unless
the Non-U.S. Holder is an individual who is present in the U.S. for a period
or periods aggregating 183 or more days in the taxable year of the
disposition and certain other conditions are met; and
(iii) Notes held at the time of death (or theretofore transferred
subject to certain retained rights or powers) by an individual who at the
time of death is a Non-U.S. Holder will not be included in such holder's
gross estate for U.S. federal estate tax purposes provided that the
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote or hold the Notes in connection with a U.S. trade or business.
INFORMATION REPORTING AND BACKUP WITHHOLDING
For each calendar year in which the Notes are outstanding, the Company is
required to provide the IRS with certain information, including the beneficial
owner's name, address and taxpayer identification number, the aggregate amount
of interest paid to that beneficial owner during the calendar year and the
amount of tax withheld, if any. This requirement, however, does not apply with
respect to payments to certain U.S. Holders, including corporations, tax-exempt
organizations, qualified pension and profit sharing trusts and individual
retirement accounts, provided that they establish entitlement to an exemption.
In the event that a U.S. Holder subject to the reporting requirements
described above fails to supply its correct taxpayer identification number in
the manner required by applicable law or underreports its tax liability, the
Company, its agents or paying agents or a broker may be required to "backup"
withhold a tax equal to 31% of each payment of interest and principal (and
premium, if any) on the Notes. This backup withholding is not an additional tax
and may be credited against the U.S. Holder's U.S. federal income tax liability,
provided that the required information is furnished to the IRS.
Under current Treasury regulations, backup withholding and information
reporting will not apply to payments made by the Company or any agent thereof
(in its capacity as such) to a Non-U.S. Holder
114
<PAGE>
of a Note if such holder has provided the required certification that it is not
a U.S. person as set forth in clause (4) in the first paragraph under "U.S.
Taxation of Non-U.S. Holders," or has otherwise established an exemption
(provided that neither the Company nor its agent has actual knowledge that the
holder is a U.S. person or that the conditions of any exemption are not in fact
satisfied).
Payment of the proceeds from the sale of a Note to or through a foreign
office of a broker will not be subject to information reporting or backup
withholding, except that if the broker is a U.S. person, a controlled foreign
corporation for U.S. federal income tax purposes or a foreign person 50 percent
or more of whose gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment was effectively
connected with a U.S. trade or business, information reporting may apply to such
payments. Payment of the proceeds from a sale of a Note to or through the U.S.
office of a broker is subject to information reporting and backup withholding
unless the holder or beneficial owner certifies as to its taxpayer
identification number or otherwise establishes an exemption from information
reporting and backup withholding.
PROPOSED REGULATIONS
The IRS recently issued proposed regulations relating to withholding, backup
withholding and information reporting that, if adopted in their current form,
would, among other things, unify current certification procedures and forms and
clarify certain reliance standards. The regulations are proposed to be effective
for payments made after December 31, 1997 but provide that certificates issued
on or before the date that is 60 days after the proposed regulations are made
final will continue to be valid until they expire. The proposed regulations,
however, may be subject to change prior to their adoption in final form.
115
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement (the "Underwriting Agreement") dated , 1996, between the Company
and the underwriters set forth below (the "Underwriters"), the Underwriters have
severally but not jointly agreed to purchase from the Company the respective
principal amount of Notes set forth opposite their names below:
PRINCIPAL
AMOUNT
UNDERWRITERS OF NOTES
- ------------------------------------------------------------------ ---------
CS First Boston Corporation....................................... $
BT Securities Corporation
---------
Total......................................................... $
---------
---------
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all the Notes, if any are purchased. The Underwriting
Agreement provides that, in the event of a default by an Underwriter, in certain
circumstances the purchase commitments of the non-defaulting Underwriter may be
increased or the Underwriting Agreement may be terminated.
The Company has been advised that the Underwriters propose to offer the
Notes to the public at the public offering price set forth on the cover page of
this Prospectus and to certain securities dealers at such price less a
concession not in excess of % per $1,000 principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of % per $1,000 principal amount of the Notes to certain other dealers. After
the initial public offering, the public offering price, concession and discount
to dealers may be changed by the Underwriters.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
act as market makers for the Notes. However, neither Underwriter is obligated to
make a market in the Notes, and any such market making may be discontinued at
any time at the sole discretion of such Underwriter. There can be no assurance
that an active public market for the Notes will develop.
The Underwriters have informed the Company that they do not expect
discretionary sales by the Underwriters to exceed 5% of the principal amount of
Notes being offered hereby.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments that the Underwriters may be required to make in respect thereof.
The Company and its subsidiaries have agreed, for a period of 180 days from
the date of this Prospectus, not to sell or otherwise dispose of (or publicly
disclose an intention to dispose of) any United States dollar-denominated debt
securities issued or guaranteed by the Company or its subsidiaries and having a
maturity of more than one year from the date of issue without the prior written
consent of CS First Boston Corporation (which consent will not be unreasonably
withheld).
CS First Boston Corporation and its affiliates, and BT Securities
Corporation and its affiliates, have certain interests in the Acquisition in
addition to being underwriters of the Notes. In connection with the New Bank
Credit Agreement, Bankers Trust Company, an affiliate of BT Securities
Corporation, will act as administrative agent and will receive customary fees
and have expenses reimbursed in connection with such services. BT Commercial
Corporation, an affiliate of BT Securities Corporation, will purchase the
Customer Notes from the company in connection with the Acquisition, and will
have expenses reimbursed in connection therewith. Credit Suisse, the parent of
CS First Boston Corporation,
116
<PAGE>
will act as syndication agent in connection with the New Bank Credit Agreement.
Credit Suisse will receive customary fees and will have expenses reimbursed in
connection with such services.
An affiliate of BT Securities Corporation and an affiliate of CS First
Boston Corporation each own a limited partnership interest in the Fund. In
addition, each of BT Securities Corporation and CS First Boston Corporation has
from time to time provided investment banking and financial advisory services to
Stonington and its affiliates, for which each has received customary fees, and
each of them may continue to do so in the future.
NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the Securities in Canada is being made only on a private
placement basis exempt from the requirement that the Issuers prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of Securities are effected. Accordingly, any resale of the Securities in
Canada must be made in accordance with applicable securities laws which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the Securities.
REPRESENTATIONS OF PURCHASERS
Each purchaser of Securities in Canada who receives a purchase confirmation
will be deemed to represent to the Issuers and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such Securities without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, such purchaser is purchasing as principal and not as agent, and
(iii) purchaser has reviewed the text above under "--Resale Restrictions."
RIGHTS OF ACTION AND ENFORCEMENT
The Securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.
All of the issuers' directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Ontario purchasers to effect service of process within Canada upon the
issuers or such persons. All or a substantial portion of the assets of the
issuers and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuers or such persons in
Canada or to enforce a judgment obtained in Canadian courts against such issuers
or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of Securities to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Securities acquired by such purchaser pursuant to the Offerings. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17,
117
<PAGE>
a copy of which may be obtained from the Issuers. Only one such report must be
filed in respect of Securities acquired on the same date and under the same
prospectus exemption.
LEGAL MATTERS
The validity of the Notes will be passed upon for the Company by Wachtell,
Lipton, Rosen & Katz, New York, New York, counsel to the Company, and for the
Underwriters by Dewey Ballantine, New York, New York.
EXPERTS
The balance sheet of Goss Graphic Systems, Inc. as of July 16, 1996 included
in this Prospectus has been audited by Arthur Andersen LLP, independent
auditors, as stated in their report appearing herein. The balance sheet has been
included in this Prospectus in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The combined financial statements of Rockwell Graphic Systems, a business
unit of Rockwell International Corporation, as of September 30, 1994 and 1995
and for each of the three years in the period ended September 30, 1995 included
in this Prospectus and the related financial statement schedule included
elsewhere in the Registration Statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their reports appearing herein and
elsewhere in the Registration Statement (which reports express an unqualified
opinion and include an explanatory paragraph relating to the preparation of the
financial statements of a business unit of Rockwell International Corporation),
and have been so included in reliance upon the reports of such firm given upon
their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed a registration statement on Form S-1 (together with
all amendments, exhibits, schedules and supplements thereto, the "Registration
Statement") with the Securities and Exchange Commission (the "Commission") under
the Securities Act with respect to the Notes offered hereby. This Prospectus,
which forms a part of the Registration Statement, does not contain all the
information set forth in the Registration Statement, certain parts of which have
been omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Notes offered hereby,
reference is made to the Registration Statement. Statements contained in this
Prospectus as to the contents of any contract, agreement or other document are
not necessarily complete, and, in each instance, reference is made to the copy
of the document filed as an exhibit to the Registration Statement. The
Registration Statement can be inspected and copied at the offices of the
Commission at Room 1024 Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 or at the Commission's regional offices at Seven World Trade Center
(13th Floor), New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained at prescribed rates from the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains an Internet web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Commission. The address of that site is
http://www.sec.gov.
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934 (the "1934 Act). As a result of the
Offering, the Company will become subject to the informational requirements of
the 1934 Act. The Company will fulfill its obligations with respect to such
requirements by filing periodic reports and other information with the
Commission.
118
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
COMBINED FINANCIAL STATEMENTS OF THE ROCKWELL GRAPHIC SYSTEMS, A BUSINESS UNIT OF
ROCKWELL INTERNATIONAL CORPORATION
Independent Auditors' Report....................................................... F-2
Combined Balance Sheets as of September 30, 1994 and 1995 and (Unaudited) June 30,
1996................................................................................. F-3
Combined Statements of Operations for the Years Ended September 30, 1993, 1994 and
1995 and (Unaudited) the Nine Months Ended June 30, 1995 and 1996.................... F-4
Combined Statements of Cash Flows for the Years Ended September 30, 1993, 1994 and
1995 and (Unaudited) the Nine Months Ended June 30, 1995 and 1996.................... F-5
Notes to Combined Financial Statements............................................. F-6
BALANCE SHEET OF GOSS GRAPHIC SYSTEMS, INC.
Report of Independent Public Accountants........................................... F-23
Balance Sheet as of July 16, 1996.................................................. F-24
Notes to Consolidated Balance Sheet................................................ F-25
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Rockwell Graphic Systems:
We have audited the accompanying combined balance sheets of Rockwell Graphic
Systems, a business unit of Rockwell International Corporation (Rockwell Graphic
Systems--see Note 1), as of September 30, 1995 and 1994, and the related
combined statements of operations and cash flows for each of the three years in
the period ended September 30, 1995. These financial statements are the
responsibility of the management of Rockwell Graphic Systems. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of Rockwell Graphic Systems as of
September 30, 1995 and 1994, and the combined results of its operations and its
cash flows for each of the three years in the period ended September 30, 1995 in
conformity with generally accepted accounting principles.
As discussed in Note 1, the accompanying financial statements have been
prepared from the separate records maintained by Rockwell Graphic Systems and
are not necessarily indicative of the conditions that would have existed or the
results of operations if Rockwell Graphic Systems had been operated as an
unaffiliated company. Portions of certain expenses represent allocations of
corporate expenses applicable to Rockwell International Corporation as a whole.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
November 3, 1995 as to the 1995 and 1994 financial statements and
April 26, 1996 as to the 1993 financial statements, except for Note 22
as to which the date is October 9, 1996
F-2
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
COMBINED BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- JUNE 30,
1994 1995 1996
------ ------ -----------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents..................................... $ 14.1 $ 6.7 $ 3.2
Accounts receivable, net...................................... 163.3 125.3 125.1
Customer notes receivable, current portion.................... 44.7 41.5 42.1
Inventories................................................... 207.5 223.4 201.9
Deferred income taxes......................................... 37.4 32.9 39.5
Other current assets.......................................... 6.0 5.7 5.3
------ ------ -----------
Total current assets...................................... 473.0 435.5 417.1
Property and equipment, net..................................... 177.9 163.5 145.9
Customer notes receivable, net.................................. 138.9 190.2 172.5
Goodwill, net................................................... 144.8 141.2 135.5
Deferred income taxes........................................... 7.4 4.6 3.4
Other assets.................................................... 8.9 12.0 14.2
------ ------ -----------
Total assets.................................................... $950.9 $947.0 $ 888.6
------ ------ -----------
------ ------ -----------
LIABILITIES AND ROCKWELL'S NET INVESTMENT
Current liabilities:
Accounts payable.............................................. $ 73.7 $ 79.0 $ 53.6
Advance payments from customers............................... 94.9 154.4 120.0
Accrued compensation.......................................... 14.4 16.1 13.0
Due to related parties........................................ 8.1 10.8 11.7
Income taxes payable.......................................... 3.6 5.1 8.8
Revolving credit facilities................................... -- -- 34.3
Long-term debt, current portion............................... 1.5 1.5 --
Other current liabilities..................................... 105.8 112.1 116.6
------ ------ -----------
Total current liabilities................................. 302.0 379.0 358.0
Other liabilities............................................... 7.5 13.8 14.0
Deferred income taxes........................................... 10.1 10.0 9.1
Long-term debt, less current portion............................ 2.6 1.1 --
Contingencies and commitments--Note 19.......................... -- -- --
Rockwell's net investment in Rockwell Graphic Systems........... 628.7 543.1 507.5
------ ------ -----------
Total liabilities and Rockwell's net investment................. $950.9 $947.0 $ 888.6
------ ------ -----------
------ ------ -----------
</TABLE>
See Notes to Combined Financial Statements.
F-3
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
COMBINED STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
-------------------------- --------------------------
1993 1994 1995 1995 1996
------ ------ ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................................... $627.0 $648.2 $709.3 $ 509.3 $ 481.9
Cost of sales................................ 519.3 524.8 543.2 380.7 391.9
------ ------ ------ ----------- -----------
Gross profit................................. 107.7 123.4 166.1 128.6 90.0
------ ------ ------ ----------- -----------
Operating expenses:
Engineering................................ 29.2 26.2 28.6 20.5 23.8
Sales and marketing........................ 36.3 31.6 35.1 25.0 26.2
General and administrative................. 48.3 52.2 45.0 33.9 33.7
Rockwell common expense allocation......... 7.5 6.8 8.3 5.8 5.8
Patent litigation.......................... -- -- 3.0 -- 1.0
Restructuring charge....................... 5.4 -- -- -- 3.9
------ ------ ------ ----------- -----------
Total operating expenses................... 126.7 116.8 120.0 85.2 94.4
------ ------ ------ ----------- -----------
Operating (loss) profit...................... (19.0) 6.6 46.1 43.4 (4.4)
Interest income.............................. 22.8 16.2 15.4 10.5 12.8
Interest expense:
Related parties............................ (10.2) (4.3) (2.8) (1.9) (3.8)
Other...................................... (1.7) (1.7) (.2) (0.2) (0.9)
Other income (expense), net.................. .8 (2.1) 1.9 0.8 (1.4)
------ ------ ------ ----------- -----------
Income (loss) before income taxes and
cumulative effect of accounting change....... (7.3) 14.7 60.4 52.6 2.3
Provision (credit) for income taxes.......... (1.8) 5.3 24.2 21.1 1.2
------ ------ ------ ----------- -----------
Income (loss) before cumulative effect of
accounting change............................ (5.5) 9.4 36.2 31.5 1.1
Cumulative effect of accounting change for
postemployment benefits, net of income
taxes of $2.5.............................. (4.6) -- -- -- --
------ ------ ------ ----------- -----------
Net (loss) income............................ $(10.1) $ 9.4 $ 36.2 $ 31.5 $ 1.1
------ ------ ------ ----------- -----------
------ ------ ------ ----------- -----------
</TABLE>
See Notes to Combined Financial Statements.
F-4
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
COMBINED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED JUNE 30,
--------------------------- --------------------------
1993 1994 1995 1995 1996
------ ------ ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income............................ $(10.1) $ 9.4 $ 36.2 $ 31.5 $ 1.1
Adjustments to net (loss) income to arrive at
net cash (used for) provided by operating
activities:
Depreciation............................... 26.8 25.7 24.7 18.8 17.1
Gain on sale of customer notes............. (0.6) -- -- -- --
Intercompany purchases from Allen Bradley.. 16.1 14.8 20.3 13.7 15.0
Allocation of common expenses from
Rockwell..................................... 7.5 6.8 8.3 5.8 5.8
Cumulative effect of accounting change..... 7.1 -- -- -- --
Amortization of intangible assets.......... 3.6 3.6 5.0 3.5 3.6
Provision for doubtful accounts
receivable................................... 0.5 1.6 1.9 0.6 0.5
Provision for doubtful customer notes
receivable................................... 7.7 17.7 3.5 1.8 2.4
Deferred income taxes...................... (12.3) (4.8) 6.4 2.1 (5.4)
Changes in assets and liabilities:
Accounts receivable, net................. 3.6 (0.9) 37.7 46.8 (4.0)
Inventories.............................. (31.7) 17.5 (13.7) (30.6) 14.2
Customer notes receivable................ (84.9) 12.4 (50.4) (25.5) 14.4
Accounts payable......................... 4.9 (7.8) 4.4 (3.5) (22.3)
Advance payments from customers.......... (9.5) (11.6) 59.1 27.9 (32.2)
Due to related parties................... (2.8) 1.9 2.7 3.5 0.9
Accrued compensation..................... (2.9) 2.6 1.6 (0.3) (2.7)
Other assets and liabilities............. 15.8 (17.6) 9.8 (1.1) 4.0
------ ------ ------- ----------- -----------
Net cash (used for) provided by operating
activities................................... (61.2) 71.3 157.5 95.0 12.4
------ ------ ------- ----------- -----------
INVESTING ACTIVITIES:
Property and equipment additions............. (12.5) (11.6) (11.5) (7.9) (3.4)
Investment in joint venture.................. -- (.7) -- -- (0.3)
Other........................................ 2.1 (13.4) 2.1 2.1 1.9
------ ------ ------- ----------- -----------
Net cash used for investing activities... (10.4) (25.7) (9.4) (5.8) (1.8)
------ ------ ------- ----------- -----------
FINANCING ACTIVITIES:
Repayment of long-term debt.................. (5.2) (8.6) (1.5) (1.1) (2.8)
Borrowings................................... -- -- -- 7.8 36.6
Sale of customer notes....................... 68.7 7.8 -- -- --
Net cash transferred from (to) Rockwell...... 2.7 (36.4) (154.0) (105.8) (47.9)
------ ------ ------- ----------- -----------
Net cash provided by (used for) financing
activities................................... 66.2 (37.2) (155.5) (99.1) (14.1)
------ ------ ------- ----------- -----------
Net (decrease) increase in cash.............. (5.4) 8.4 (7.4) (9.9) (3.5)
Cash and cash equivalents at beginning of
period....................................... 11.1 5.7 14.1 14.1 6.7
------ ------ ------- ----------- -----------
Cash and cash equivalents at end of period... $ 5.7 $ 14.1 $ 6.7 $ 4.2 $ 3.2
------ ------ ------- ----------- -----------
------ ------ ------- ----------- -----------
</TABLE>
See Notes to Combined Financial Statements.
F-5
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995 AND (UNAUDITED)
THE NINE MONTHS ENDED JUNE 30, 1995 AND 1996
1. BASIS OF PRESENTATION
The accompanying combined financial statements (the Statements) present the
financial position, results of operations and cash flows of Rockwell Graphic
Systems, a business unit of Rockwell International Corporation (Rockwell Graphic
Systems). The Statements have been prepared in accordance with generally
accepted accounting principles utilizing the accounting practices and procedures
of Rockwell Graphic Systems and have been derived from the accounting records of
Rockwell International Corporation and its subsidiaries (Rockwell). The
Statements are not necessarily indicative of the financial position, results of
operations or cash flows had Rockwell Graphic Systems operated as a stand-alone
company.
Rockwell Graphic Systems is a leading manufacturer and supplier of web
offset printing press systems for newspaper, commercial and insert printing.
Rockwell Graphic Systems includes the world headquarters located in Westmont,
Illinois, as well as U.S. manufacturing operations in Cedar Rapids, Iowa and
Reading, Pennsylvania. Substantially all U.S. operations are included within
Rockwell Graphic Systems, Inc., a wholly-owned subsidiary of Rockwell, except
for the Reading facility, which is directly owned by Rockwell. Rockwell Graphic
Systems also includes international operations of indirect wholly-owned
subsidiaries of Rockwell in the United Kingdom, France and Germany and
operations in Japan performed by a wholly-owned subsidiary of Rockwell Graphic
Systems, Inc. Rockwell Graphic Systems also has an investment in a joint venture
in China.
Rockwell's cash resources in the U.S., the United Kingdom and Germany are
managed under a centralized system wherein receipts are deposited to Rockwell
corporate accounts and disbursements are centrally funded. Accordingly, the
Statements do not include cash, marketable securities or borrowings, or related
interest income, expense (except for a 1993 charge to the U.K.), receivables or
payables arising from these cash management activities in the U.S., the United
Kingdom and Germany.
The majority of customer notes receivable relating to Rockwell Graphic
Systems are held and administered by Rockwell International Credit Corporation.
Rockwell subsidiaries in the United Kingdom, France, Australia and Canada also
hold notes receivable from Rockwell Graphic Systems customers. These notes and
related interest income are included in the Statements.
Rockwell Graphic Systems benefits from certain direct services which are
provided by Rockwell, including centralized billing for benefit claim payments
for active U.S. employees, data processing, telecommunications, research and
certain insurance. These direct expenses are included in the Statements. In
addition, Rockwell also provides certain common services, such as cash
management and other treasury services, legal, patent, tax, insurance
administration, corporate accounting, audit, communications, benefit
administration services and general management. These common expenses are
allocated by Rockwell using the proportion of divisional sales to total
corporate sales and such allocations are included in the Statements. Management
believes the manner in which common expenses have been allocated for the
services provided is reasonable. It is not practical for management to estimate
the level of expenses that might have been incurred for the services provided
had Rockwell Graphic Systems operated as a separate stand-along entity, however,
it is possible that services utilized and the costs of such services may differ
from those that would result from transactions among unrelated parties.
Rockwell Graphic Systems' investment in and operating results of Hall
Processing Systems and the assets at the Peterborough, England site have been
excluded from the Statements because they do not
F-6
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
1. BASIS OF PRESENTATION--(CONTINUED)
represent ongoing operations of the business. Hall Processing Systems is a joint
venture which is 50% owned by Rockwell Graphic Systems, and is being liquidated
by Rockwell. The Peterborough, England site is a former Rockwell Graphic Systems
facility which is being held for sale by Rockwell and at which there are no
ongoing operations.
Intercompany accounts have been excluded from the assets and liabilities of
Rockwell Graphic Systems except for the payables by Rockwell Graphic Systems to
Allen-Bradley Company, Inc. (Allen-Bradley), a subsidiary of Rockwell, resulting
from inventory purchases by Rockwell Graphic Systems during the 30 days
preceding the date of the Statements. There are no significant operating
activities with other Rockwell subsidiaries.
INTERIM FINANCIAL INFORMATION
The Statements include information as of June 30, 1996 and for the nine
months ended June 30, 1995 and 1996 which is unaudited. This information
includes all adjustments which management considers necessary for a fair
presentation of the data for such periods, all of which were of a normal and
recurring nature. This information does not include all footnotes which would be
required for complete annual financial statements prepared in accordance with
generally accepted accounting principles. The results of operations for the nine
months ended June 30, 1996 are not necessarily indicative of the results to be
expected for the year ending September 30, 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Rockwell Graphic Systems recognizes revenue on a percentage-of-completion
basis, utilizing the units-of-delivery method. Units are considered delivered
when title passes to the customer in accordance with the contract terms, which
may precede actual delivery to the customer. At September 30, 1993, 1994 and
1995, Rockwell Graphic Systems had recorded cumulative revenues of $110.4
million, $198.1 million and $219.8 million, respectively, on presses awaiting
delivery to customers for which title had transferred. At June 30, 1995 and
1996, Rockwell Graphic Systems had recorded cumulative revenues of $175.8
million and $108.2 million, respectively, on presses awaiting delivery to
customers for which title had transferred. Revenues recognized during the years
ended September 30, 1993, 1994 and 1995 for presses awaiting delivery amounted
to $16.1 million, $132.3 million and $146.4 million, respectively. Revenues
recognized for the nine months ended June 30, 1995 and 1996 for presses awaiting
delivery amounted to $41.1 million and $14.4 million, respectively. Revenues on
installation contracts is recognized using the completed-contract method except
for certain installation contracts, generally in amounts over $1 million, for
which the percentage-of-completion, cost-to-cost method is utilized.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are comprised of cash and short-term investments
having maturities of three months or less at the time of purchase. The carrying
amount of cash and cash equivalents approximates fair value.
F-7
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market. Inventory cost is
generally determined on a last-in, first-out (LIFO) method for U.S. locations
and on a first-in, first-out (FIFO) method for non-U.S. locations.
Reserves are provided for excess inventory on a location-by-location basis
based on an analysis of historical usage and management's estimate of future
inventory requirements. Such reserves are based on the carrying cost (LIFO or
FIFO) of the related inventory.
Inventories are classified as a current asset and include certain amounts
not expected to be realized within one year.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful life of the asset (generally 3 to 13 years for machinery and equipment
and up to 50 years for buildings). Leasehold improvements are amortized over the
shorter of the useful life of the asset or the remaining lease term. Where
applicable, interest has been capitalized and included in property and
equipment. Presses which are maintained as test development units on a long-term
basis are included in property and equipment and depreciated over their
estimated useful life (generally 5 to 12 years). Significant renewals and
betterments are capitalized and replaced units are written off. Maintenance and
repairs, as well as renewals of minor amounts, are charged to expense.
SOFTWARE DEVELOPMENT
Rockwell Graphic Systems expenses all costs associated with the programming
and development of new operating systems for its presses. Costs associated with
specific sales contracts generally are capitalized in inventory and charged to
cost of sales as revenues are recognized.
PRODUCT WARRANTY
Product warranty costs include all costs associated with repairs through the
end of the expressed warranty period. These costs are accrued considering
historical warranty cost experience and a periodic assessment of expected
warranty costs associated with each sale.
Unreimbursed costs to repair equipment after the warranty period are
incurred solely at the discretion of management and are expensed as incurred.
WORKERS' COMPENSATION AND PRODUCT AND GENERAL LIABILITY COSTS
The Statements include Rockwell Graphic Systems' estimated costs, including
costs not reimbursable under insurance contracts, of settling workers'
compensation and product and general liability claims. These estimates are
determined from Rockwell Graphic Systems' historical claims incurred experience,
using actuarial computations of the estimated ultimate settlement cost of such
claims, including claims incurred but not yet reported.
F-8
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
GOODWILL
Goodwill represents the excess of the cost of purchased businesses over the
fair value of their net assets at dates of acquisition. Goodwill is being
amortized generally over 40 years, except for goodwill of $28.6 million arising
from Rockwell's acquisition of Miehle Goss Dexter which occurred prior to 1971,
which is not being amortized. Accumulated amortization of goodwill totaled $18
million and $22 million at September 30, 1994 and 1995, respectively.
Management has reviewed the realizability of goodwill based on an overall
evaluation of remaining useful lives and projected cash flows and profitability
of Rockwell Graphic Systems and has determined that there is no impairment at
September 30, 1995. Management has not evaluated the impact of Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which is
effective for Rockwell Graphic Systems in fiscal 1997.
INCOME TAXES
Income taxes are accounted for using the liability method, whereby deferred
income taxes reflect the net effect of temporary differences between the
carrying amount of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Based on the weight of both negative
and positive evidence, if it is more likely than not that some portion or all of
a deferred tax asset will not be realized, a valuation reserve is established.
INCURRED BUT UNPAID MEDICAL CLAIMS
Rockwell Graphic Systems provides benefits to active U.S. employees for
medical care, dental care and prescription drugs. The liability for benefit
claims which have been incurred but not paid is estimated to be $1.3 million and
$.7 million at September 30, 1994 and 1995, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
3. FINANCIAL INSTRUMENTS AND CREDIT CONCENTRATIONS
The Statements include customer notes receivable, long-term debt and foreign
currency forward exchange contracts.
Rockwell Graphic Systems provides financing for sales to certain customers
in the form of promissory notes. The notes are collateralized by the equipment,
accrue interest at varying rates (6.25% to 13.25%) based on the contractual
terms of each agreement and generally have terms of up to ten years. The accrual
of interest is discontinued when a note becomes 90 days past due or when
Rockwell Graphic Systems is notified by the customer of a significant equipment
problem.
F-9
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
3. FINANCIAL INSTRUMENTS AND CREDIT CONCENTRATIONS--(CONTINUED)
Rockwell Graphic Systems customers are not concentrated by geographic area,
but are concentrated in the publishing and printing businesses. Rockwell Graphic
Systems reviews a customer's credit history before extending credit and
establishes an allowance for uncollectible amounts based on management's
evaluation of the collectibility of outstanding balances considering such
factors as the payment status of the notes and management's estimate of the fair
market value of the collateral. To reduce credit risk, Rockwell Graphic Systems
performs a review of the customer's credit history and retains a security
interest on the equipment financed.
The estimated fair value of customer notes receivable was $177 million and
$223 million, respectively, at September 30, 1994 and 1995 based on prevailing
interest rates for performing notes and on the collateral value of the related
presses for past due notes.
During the years ended September 30, 1992 and 1993, Rockwell Graphic Systems
sold certain of its notes receivable with recourse. At September 30, 1995, the
recourse obligation related to these notes was $10.5 million. Goss Graphic
Systems, Inc. will assume the recourse obligation related to these notes upon
consummation of the acquisition by it of Rockwell Graphic Systems. (See Note 22)
Long-term debt consists of bank loans to Rockwell Graphic Systems Japan
which bear interest at 2.875% per annum and mature in 1996 and 1997.
Rockwell enters into foreign currency forward exchange contracts on behalf
of Rockwell Graphic Systems to protect against adverse currency rate
fluctuations. The notional amounts of these contracts totaled $84 million and
$86 million at September 30, 1994 and 1995, respectively, and the contracts
mature at various dates through March 1997. Rockwell Graphic Systems has
deferred $5.3 million and $2.2 million of losses on these contracts at September
30, 1994 and 1995, respectively.
4. ACCOUNTS RECEIVABLE
Accounts receivable are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- JUNE 30,
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Trade accounts receivables........................................ $141.0 $118.0 $128.6
Unbilled receivables.............................................. 27.4 12.3 1.1
Less allowance for doubtful accounts.............................. (5.1) (5.0) (4.6)
------ ------ --------
Accounts receivable, net.......................................... $163.3 $125.3 $125.1
------ ------ --------
------ ------ --------
</TABLE>
As of September 30, 1994 and 1995 and June 30, 1996, accounts receivable
include $40.0 million, $37.2 million and $34.0 million of retainage held by
customers pending final acceptance of equipment.
Unbilled receivables consists principally of revenues recognized on
contracts under the units-of-delivery method of accounting. Unbilled receivables
are billed in accordance with the terms of contract provisions and do not
include any amounts subject to uncertainty as to their realization.
Substantially all amounts are expected to be billed and collected within one
year.
F-10
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
5. CUSTOMER NOTES RECEIVABLE
Customer notes receivable are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- JUNE 30,
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Customer notes receivable......................................... $212.6 $256.5 $236.1
Less allowance for doubtful notes................................. (29.0) (24.8) (21.5)
------ ------ --------
Notes receivable, net............................................. 183.6 231.7 214.6
Less current portion.............................................. (44.7) (41.5) (42.1)
------ ------ --------
Long-term notes receivable, net................................... $138.9 $190.2 $172.5
------ ------ --------
------ ------ --------
</TABLE>
On October 1, 1995, Rockwell Graphic Systems adopted SFAS No. 114,
"Accounting By Creditors for Impairment of a Loan," as amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan--Income Recognition and
Disclosures," which requires the evaluation of the collectibility of principal
and contractual interest of certain impaired customer notes in assessing the
need for an allowance for customer notes. Customer notes are considered impaired
when, based on current information and events, it is probable that Rockwell
Graphic Systems will be unable to collect all amounts due according to the
contractual terms of the note agreement. Impairment is measured based on the
present value of expected future cash flows discounted at the note's effective
interest rate and/or the fair value of collateral. As of June 30, 1996, $34.4
million of customer notes are considered to be impaired, for which $7.2 million
has been reserved for within the allowance for doubtful notes. The adoption of
SFAS Nos. 114 and 118 did not have a material effect on the results of
operations for the nine months ended June 30, 1996.
6. INVENTORIES
Inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- JUNE 30,
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Materials......................................................... $ 76.8 $ 57.4 $ 66.1
Work in process................................................... 66.3 82.9 68.0
Finished goods.................................................... 35.9 45.3 37.3
Long-term contracts............................................... 28.1 30.4 21.8
Parts............................................................. 24.3 28.0 30.7
Less allowance to reduce certain inventories ($136.7 in 1994 and
$125.9 in 1995) to LIFO........................................... (23.9) (20.6) (22.0)
------ ------ --------
Inventories, net.................................................. $207.5 $223.4 $201.9
------ ------ --------
------ ------ --------
</TABLE>
Inventory valuation reserves were $43.6 million, $45.0 million and $46.2
million at September 30, 1994 and 1995 and June 30, 1996, respectively.
Long-term contracts consist of inventoried costs of assembled parts relating
to unit of delivery contracts. Such inventoried costs include direct costs of
manufacturing and allocable overhead costs which are not expected to be realized
within one year. Inventoried costs under long-term contracts do not include any
amounts subject to uncertainty as to their determination or realization.
F-11
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------ JUNE 30,
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Land and land improvements...................................... $ 35.3 $ 35.4 $ 33.2
Buildings and building improvements............................. 77.8 79.0 78.3
Machinery, equipment and tooling................................ 256.8 255.9 254.2
Construction in progress........................................ 7.6 5.7 2.2
------- ------- --------
Total....................................................... 377.5 376.0 367.9
Less accumulated depreciation................................... (199.6) (212.5) (222.0)
------- ------- --------
Property and equipment, net..................................... $ 177.9 $ 163.5 $ 145.9
------- ------- --------
------- ------- --------
</TABLE>
8. INVESTMENT IN JOINT VENTURE
Shanghai Rockwell Graphic Systems Co. Ltd. (SRGSL), a joint venture with
Shanghai Printing & Packaging Machinery Corporation, is accounted for using the
equity method. SRGSL was formed in Shanghai, People's Republic of China, on
December 8, 1993 and the joint venture agreement has an operating term of 40
years. SRGSL is engaged in the manufacture and sale of printing presses.
Rockwell Graphic Systems has a commitment to contribute a total of $9
million, which includes equipment and technical support, and $1.0 million of
cash, to SRGSL for a 60% interest in the joint venture after all such
contributions have been made. As of September 30, 1995, Rockwell Graphic Systems
has contributed $4.8 million to the joint venture, which includes $.7 million of
cash and $3.0 million of machinery and equipment currently being refurbished or
awaiting shipment to China.
9. OTHER CURRENT LIABILITIES
Other current liabilities are summarized as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------- JUNE 30,
1994 1995 1996
------ ------ --------
<S> <C> <C> <C>
Product warranty costs............................................ $ 45.3 $ 42.7 $ 38.3
Accrued contract costs............................................ 27.8 38.1 33.4
Accrued product liability and workers' compensation costs......... 13.4 15.0 15.3
Other............................................................. 19.3 16.3 29.6
------ ------ --------
Other current liabilities......................................... $105.8 $112.1 $116.6
------ ------ --------
------ ------ --------
</TABLE>
10. PENSION PLANS
Rockwell has a pension plan which covers certain Rockwell Graphic Systems
employees and provides for monthly pension payments to eligible U.S. employees
upon retirement. Pension benefits for U.S. salaried employees are based on years
of credited service and compensation. Pension benefits for certain U.S. hourly
employees are based on years of service and specified benefit amounts. U.S.
pension
F-12
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
10. PENSION PLANS--(CONTINUED)
assets are primarily equity securities, U.S. Government obligations and fixed
income investments whose values are subject to fluctuations of the securities
market.
At September 30, 1994 and 1995, the assets for the entire Rockwell
International Pension Plan for U.S. employees of $7,588 million and $8,398
million, respectively, exceeded the accumulated benefit obligation of the plan
of $6,552 million and $7,266 million, respectively. The accumulated benefit
obligations related to Rockwell Graphic Systems participants in this plan are as
follows (in millions):
1994 1995
------ ------
Accumulated benefit obligation, principally vested:
Active employees........................................ $ 52.6 $ 58.9
Retired and other....................................... 90.0 100.1
------ ------
Total............................................... $142.6 $159.0
------ ------
------ ------
Certain Rockwell Graphic Systems employees in the United Kingdom participate
in a pension plan sponsored by Rockwell. At September 30, 1994 and 1995, assets
of $10.9 million and $10.3 million, respectively, exceeded the accumulated
benefit obligations of this plan of $9.3 million and $10.2 million,
respectively. The accumulated benefit obligation related to Rockwell Graphic
Systems participants in this plan were $7.8 million and $8.4 million at
September 30, 1994 and 1995, respectively.
The combined statements of operations include $2.7 million, $3.1 million and
$2.9 million in 1993, 1994 and 1995, respectively, related to Rockwell Graphic
Systems' portion of the service cost of active participants of these pension
plans in the U.S. and U.K. Amounts related to accrued pension obligations for
participants and related assets of these plans are not included in Rockwell
Graphic Systems' combined balance sheets.
Prior to 1994, Rockwell Graphic Systems had certain stand-alone pension
plans covering certain of its U.S. employees. The combined statement of
operations for 1993 includes net periodic pension cost for these plans of $2.2
million.
F-13
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
10. PENSION PLANS--(CONTINUED)
In addition, Rockwell Graphic Systems has stand-alone pension plans covering
certain of its employees in the United Kingdom, Germany and Japan. Amounts
included in the accompanying combined balance sheets for these stand-alone plans
are as follows (in millions):
<TABLE>
<CAPTION>
1994 1995
-------------------------- --------------------------
ACCUMULATED ASSETS ACCUMULATED ASSETS
BENEFITS EXCEEDING BENEFITS EXCEEDING
EXCEEDING ACCUMULATED EXCEEDING ACCUMULATED
ASSETS BENEFITS ASSETS BENEFITS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Accumulated benefit obligation, principally
vested....................................... $ 4.5 $43.1 $29.5 $21.8
Effect of salary increases................... 1.7 4.5 1.8 5.0
----- ----- ----- -----
Projected benefit obligation................. 6.2 47.6 31.3 26.8
Fair value of plan assets.................... 2.0 49.4 24.2 24.1
----- ----- ----- -----
Plan assets greater than (less than)
projected benefit obligation............... (4.2) 1.8 (7.1) (2.7)
Unamortized amounts:
Transition................................. -- (4.5) (1.3) (2.6)
Net actuarial losses....................... -- 2.9 3.2 6.0
Prior service cost......................... .3 4.2 2.8 2.0
Minimum liability adjustment................. (.2) -- (4.4) --
----- ----- ----- -----
Prepaid (accrued) pension costs.............. $(4.1) $ 4.4 $(6.8) $ 2.7
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
Net pension cost for stand-alone Rockwell Graphic Systems plans for non-U.S.
employees included in the accompanying combined statements of operations
consisted of the following (in millions):
<TABLE><CAPTION>
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Service cost-benefits earned during the year........................... $ 1.3 $ 1.5 $ 1.5
Interest accrued on accumulated benefit obligation..................... 4.0 3.9 4.2
Expected return on plan assets......................................... (3.7) (3.5) (3.9)
Prior service cost amortization........................................ .1 .4 .4
Amortization of net actuarial gains.................................... .4 .5 .3
Transition asset amortization.......................................... (.5) (.5) (.6)
----- ----- -----
Net pension cost....................................................... $ 1.6 $ 2.3 $ 1.9
----- ----- -----
----- ----- -----
</TABLE>
The above pension amounts were determined using a June 30 measurement date
and the following assumptions:
1993 1994 1995
---------- ----------- ----------
Discount rate...................... 5.5%-9.0% 5.5%-8.25% 5.5%-7.5%
Salary increase.................... 4.5-5.0 4.5 4.5
Asset return....................... 5.5-9.0 5.5-9.0 5.5-9.0
Rockwell sponsors defined contribution plans covering all U.S. Rockwell
Graphic Systems salaried employees and certain hourly employees. Employer
contributions to these plans, which were charged to costs and expenses, totaled
$4.6 million, $3.7 million and $3.7 million in 1993, 1994 and 1995,
respectively.
F-14
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
11. RETIREMENT MEDICAL PLANS AND POST EMPLOYMENT BENEFITS
Rockwell has retirement medical plans which cover Rockwell Graphic Systems
U.S. employees and provide for the payment of medical costs of eligible
employees and dependents upon retirement. Since Rockwell Graphic Systems
employees participate in these Rockwell retirement medical plans, accrued
postretirement benefit obligations for participants in these plans are not
included in Rockwell Graphic Systems' combined balance sheets. The retirement
medical obligation related to Rockwell Graphic Systems participants in these
plans is as follows (in millions):
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------
1994 1995
----- -----
<S> <C> <C>
Retirees.................................................... $33.1 $37.5
Active employees:
Eligible to retire........................................ 6.6 8.4
Not eligible.............................................. 10.9 12.8
----- -----
Retirement medical obligation............................... $50.6 $58.7
----- -----
----- -----
</TABLE>
The combined statements of operations include $.7 million, $.8 million and
$.7 million in charges related to Rockwell Graphic Systems' portion of service
cost of active participants of these plans for 1993, 1994 and 1995,
respectively.
The above retirement medical amounts were computed using a June 30
measurement date and the following assumptions:
1994 1995
---- ----
Discount rate.................................................. 8.25% 7.5%
Health care cost trend rate.................................... 8.5 8.5
The health care cost trend rate is assumed to decline to 5.5% after 2015.
Rockwell Graphic Systems provides disability benefits to substantially all
of its U.S. employees and salary continuation benefits to certain employees. The
combined balance sheets include accruals for these benefits of $6.0 million and
$6.6 million at September 30, 1994 and 1995, respectively, which amounts have
been determined using actuarial methods.
12. INCOME TAXES
The operations of Rockwell Graphic Systems in the U.S., U.K., France and
Germany are included in the consolidated income tax returns of Rockwell in each
of these countries. Accordingly, the combined balance sheets do not include
current income taxes receivable, payable or tax contingencies related to these
operations. The income tax provisions included in the combined statements of
operations have been determined as if Rockwell Graphic Systems were a separate
taxpayer.
F-15
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES--(CONTINUED)
The components of the provision (credit) for income taxes are as follows (in
millions):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1993 1994 1995
----- ----- -----
<S> <C> <C> <C>
Current:
U.S............................................ $ 6.4 $ 4.7 $ 8.8
Non-U.S........................................ .4 4.6 7.4
State and local................................ 1.2 .8 1.6
----- ----- -----
Total current.................................... 8.0 10.1 17.8
----- ----- -----
Deferred:
U.S............................................ (5.4) (4.7) 4.9
Non-U.S........................................ (3.3) .7 .6
State and local................................ (1.1) (.8) .9
----- ----- -----
Total deferred................................... (9.8) (4.8) 6.4
----- ----- -----
Provision (credit) for income taxes.............. $(1.8) $ 5.3 $24.2
----- ----- -----
----- ----- -----
</TABLE>
A reconciliation of the statutory U.S. Federal income tax rate to the
effective income tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30,
-----------------------
1993 1994 1995
----- ---- ----
<S> <C> <C> <C>
Federal statutory rate............................. 34.8% 35.0% 35.0%
Effect of:
State and local taxes............................ (.9) -- 2.7
Goodwill amortization............................ (7.9) 5.7 3.1
Foreign sales corporation benefit................ 15.1 (4.1) (1.0)
Foreign tax expense.............................. (22.0) (1.1) --
Rate change effect............................... 6.9 -- --
Other............................................ (1.3) .6 .3
----- ---- ----
24.7% 36.1% 40.1%
----- ---- ----
----- ---- ----
</TABLE>
The domestic and foreign components of income (loss) before income taxes and
cumulative effect of accounting change are as follows (in millions):
YEAR ENDED SEPTEMBER 30,
------------------------
1993 1994 1995
------ ----- -----
Domestic......................................... $ 7.0 $ .6 $41.2
Foreign.......................................... (14.3) 14.1 19.2
------ ----- -----
Total............................................ $ (7.3) $14.7 $60.4
------ ----- -----
------ ----- -----
F-16
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
12. INCOME TAXES--(CONTINUED)
Current and noncurrent deferred income tax assets arise principally from the
following (in millions):
SEPTEMBER 30,
--------------
1994 1995
----- -----
Current:
Inventory reserves...................................... $12.8 $11.0
Product warranty reserves............................... 11.6 9.9
Self-insurance reserves................................. 6.8 5.7
Other................................................... 6.2 6.3
----- -----
Total current asset................................. $37.4 $32.9
----- -----
----- -----
Noncurrent:
Notes receivable........................................ $12.0 $10.1
Property and equipment.................................. (4.9) (7.2)
Retirement benefits..................................... .9 1.7
Other................................................... (0.6) --
----- -----
Total noncurrent asset.............................. $ 7.4 $ 4.6
----- -----
----- -----
The noncurrent deferred tax liability of $10.1 million and $10.0 million at
September 30, 1994 and 1995, respectively, related principally to deferred
income taxes provided on property and equipment in Japan.
Rockwell Graphic Systems has not provided for U.S. income and foreign
withholding taxes on undistributed earnings of its Japanese subsidiary because
management intends to permanently reinvest these earnings. Undistributed
earnings of this subsidiary were $15.7 million and $16.8 million at September
30, 1994 and 1995, respectively and the associated taxes would be $1.6 million
and $1.7 million, respectively. Taxes on undistributed earnings of Rockwell
Graphic Systems operations in the U.K. and France have not been provided, as
distributions to their respective parent companies are non-taxable transactions.
13. REVOLVING CREDIT FACILITIES
Rockwell Graphic Systems Japan has revolving credit agreements with various
banks which permit borrowings aggregating approximately $32.0 million and $36.8
million at September 30, 1995 and June 30, 1996. Borrowings under the credit
facilities bear interest at rates ranging from the Japan prime rate (1.625% at
September 30, 1995) to 3.375%. The credit facilities generally do not contain
expiration dates. Borrowings under two of the credit facilities totaling
approximately $20.0 million are guaranteed by Rockwell. There were no borrowings
outstanding at September 30, 1995. As of June 30, 1996, borrowings under all
credit facilities totaled $8.7 million.
During the nine months ended June 30, 1996, Rockwell Systems Graphiques
Nantes S.A. (Rockwell Graphic Systems' business in France) entered into credit
facilities with two banks which permit borrowings up to $30.5 million bearing
interest with rates ranging from the Paris Interbank Rate plus .25% to 5.625%.
Borrowings under the credit facilities are guaranteed by Rockwell. As of June
30, 1996, borrowings under the credit facilities totaled $25.6 million.
F-17
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
14. NET INVESTMENT IN ROCKWELL GRAPHIC SYSTEMS
A summary of changes in Rockwell's net investment in Rockwell Graphic
Systems is as follows (in millions):
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Balance at beginning of year...................................... $623.8 $627.3 $628.7
Net (loss) income................................................. (10.1) 9.4 36.2
Currency translation and other.................................... (12.5) 5.6 5.2
Additional minimum pension liability.............................. (.2) 1.2 (1.6)
Allocation of common expenses from Rockwell....................... 7.5 6.8 8.3
Non-cash intercompany purchases................................... 16.1 14.8 20.3
Declaration of dividend........................................... -- -- 50.0
Dividend payable--Rockwell........................................ -- -- (50.0)
Net transfers from (to) Rockwell.................................. 2.7 (36.4) (154.0)
------ ------ ------
Balance at end of year............................................ $627.3 $628.7 $543.1
------ ------ ------
------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30,
-----------------
1995 1996
------- ------
<S> <C> <C>
Balance at beginning of period............................................ $ 628.7 $543.1
Net income................................................................ 31.5 1.1
Currency translation and other............................................ 11.5 (8.0)
Additional minimum pension liability...................................... 1.2 (1.6)
Allocation of common expenses from Rockwell............................... 5.8 5.8
Non-cash intercompany purchases........................................... 13.7 15.0
Payment of dividend due Rockwell.......................................... -- (50.0)
Net transfers (to) from Rockwell.......................................... (105.8) 2.1
------- ------
Balance at end of period.................................................. $ 586.6 $507.5
------- ------
------- ------
</TABLE>
15. LEASES
Rockwell Graphic Systems leases certain facilities and equipment under
operating leases, many of which contain renewal options and escalation clauses.
Total rental expense was approximately $6.1 million, $5.5 million and $5.6
million in 1993, 1994 and 1995, respectively. Minimum future rental commitments
under operating leases having noncancelable lease terms in excess of one year
aggregated $3.9 million as of September 30, 1995 and are payable as follows (in
millions): 1996, $1.1; 1997, $0.9; 1998, $0.7; 1999, $0.6; 2000, $0.3; and
thereafter, $0.3.
16. RELATED PARTY TRANSACTIONS
Rockwell Graphic Systems purchases drive systems, press controls and related
products from Allen-Bradley. Such purchases totaled $21.7 million, $24.2 million
and $31.6 million in 1993, 1994 and 1995, respectively.
F-18
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
16. RELATED PARTY TRANSACTIONS--(CONTINUED)
Direct expenses incurred by Rockwell on behalf of Rockwell Graphic Systems
were $11.3 million, $11.7 million and $12.3 million for the years ended
September 30, 1993, 1994 and 1995, respectively. Common expenses allocated by
Rockwell to Rockwell Graphic Systems were $7.5 million, $6.8 million and $8.3
million for the years ended September 30, 1993, 1994 and 1995, respectively.
During the years ended September 30, 1993, 1994 and 1995, Rockwell Graphic
Systems recorded net interest expense of $10.2, $4.3 and $2.8 million related to
intercompany borrowings by Rockwell Graphic Systems from Rockwell International
Limited and borrowings by Rockwell International Credit Corporation from
Rockwell. Such borrowings are included in Rockwell's net investment in Rockwell
Graphic Systems.
At September 30, 1994 and 1995, outstanding checks of $5.4 million and $5.2
million, respectively, under the Rockwell centralized cash management system
have been classified as due to related parties.
17. RESEARCH AND DEVELOPMENT
Research and development expenses were $17.4 million, $17.6 million and
$15.8 million in 1993, 1994 and 1995, respectively, and have been included in
engineering expenses.
18. GEOGRAPHIC AND EXPORT SALES INFORMATION
The following table presents information about Rockwell Graphic Systems by
geographic area (in millions).
<TABLE>
<CAPTION>
ASIA
U.S. EUROPE PACIFIC ELIMINATION TOTAL
------ ------ ------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Net sales to customers..................... 1995 $437.9 $204.8 $66.6 $-- $709.3
1994 400.7 174.7 72.8 -- 648.2
1993 410.6 141.0 75.4 -- 627.0
Transfers between geographic areas......... 1995 11.6 6.5 -- (18.1) --
1994 13.8 7.2 -- (21.0) --
1993 12.8 2.6 -- (15.4) --
Operating profit (loss).................... 1995 36.3 15.0 (5.2) -- 46.1
1994 (2.1) 12.4 (3.7) -- 6.6
1993 (7.4) (13.9) 2.3 -- (19.0)
Identifiable assets........................ 1995 560.8 281.1 105.1 -- 947.0
1994 582.9 274.1 93.9 -- 950.9
</TABLE>
Transfers between geographic areas are recorded at amounts generally in
excess of cost. The resultant income is assigned to the geographic area of
manufacture. In computing operating profit, interest income and expense, other
income and expense and income taxes have not been added or deducted.
Export sales from the U.S. were 20%, 11% and 13% of Rockwell Graphic
Systems' net sales for the years ended December 31, 1993, 1994 and 1995,
respectively. These sales were principally to customers in South America.
F-19
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
19. CONTINGENCIES AND COMMITMENTS
LEGAL CONTINGENCIES
In November 1995, the U.S. District Court for the Southern District of New
York issued a judgment relating to a patent infringement matter that Rockwell
Graphic Systems is liable for damages and interest which management estimates
totals approximately $17 million. Management intends to appeal this judgment. At
November 3, 1995, the date as of which it issued its 1995 Statements, it was
management's estimate that the minimum probable liability was $3 million.
Rockwell Graphic Systems has recorded the minimum probable expense of $3 million
in the 1995 combined statement of operations while the related liability has
been excluded from the Statements as any liability will be paid directly by
Rockwell. Subsequent to November 3, 1995, management revised its estimate of the
minimum probable liability to $4 million and, accordingly, recorded an
additional $1 million of expense during the nine months ended June 30, 1996.
In the normal course of business, various lawsuits and claims are initiated
against Rockwell Graphic Systems related to sales contracts. Among such claims
that have advanced to litigation are a lawsuit filed by a commercial press
customer in February 1996 seeking unspecified damages and an arbitration
proceeding initiated by another commercial press customer in June 1996 seeking
refunds and damages totaling $3.8 million. While it is not presently possible to
determine whether the ultimate resolution of these matters will exceed the $1.7
million accrued, management believes that such resolution will not have a
material adverse effect on Rockwell Graphic Systems' financial position or
liquidity although it is possible that an adverse outcome could materially
affect the results of operations in a given period.
As part of an asset purchase agreement with an acquirer of certain assets of
the Rockwell Graphic Systems business in 1988, the acquirer agreed to defend and
indemnify Rockwell Graphic Systems for certain product liability claims. The
acquirer has initiated informal mediation proceedings against Rockwell Graphic
Systems and Rockwell alleging that certain information was recently received
from Rockwell Graphic Systems that materially increased the acquirer's risk of
defending and indemnifying against the product liability claims. The acquirer is
seeking to prospectively discharge its obligations for such defense and
indemnity. As part of these proceedings, the acquirer also refused to indemnify
Rockwell Graphic Systems in three pending product liability claims which
collectively are estimated to represent an exposure to Rockwell Graphic Systems
of approximately $1 million. While the ultimate resolution of these proceedings
cannot presently be determined, management intends to vigorously defend against
these matters and believes that their ultimate resolution will not have a
material adverse effect on Rockwell Graphic Systems' financial position, results
of operations or liquidity.
Rockwell Graphic Systems has pending against it or may be subject to various
lawsuits, claims and proceedings related primarily to employment, commercial
(including press performance issues) and safety and health matters. Although it
is not presently possible to determine the outcome of these matters, management
believes their ultimate disposition will not have a material adverse effect on
Rockwell Graphic Systems' financial position or liquidity, although it is
possible that the resolution of such lawsuits, claims and proceedings could be
material to the results of operations in a given period.
ENVIRONMENTAL CONTINGENCIES
Rockwell Graphic Systems has received either notices of potential liability
or third-party claims under the federal Comprehensive Environmental Response,
Compensation and Liability Act at six off-
F-20
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
19. CONTINGENCIES AND COMMITMENTS--(CONTINUED)
site disposal facilities (Superfund Sites). Rockwell Graphic Systems has entered
into settlement agreements with the Environmental Protection Agency (EPA) at two
of these sites and a settlement proposal is pending at a third site, none of
which is material to the Statements either individually or collectively. With
respect to the fourth site, at which Rockwell Graphic Systems has been named a
potentially responsible party (PRP), its share of the clean up costs are
estimated to approximate $200,000 of the potential estimated cost for final site
remediation of $10 million. At the fifth and sixth sites, Rockwell Graphic
Systems has been implicated as a PRP. However, Rockwell Graphic Systems believes
its involvement, if any, is not significant. Although current law imposes joint
and several liability on any party determined to be responsible at a Superfund
Site, management believes, based upon all available information, that the
ultimate resolution of these matters will not have a material adverse effect on
Rockwell Graphic Systems' financial position, results of operations or
liquidity.
Rockwell Graphic Systems' Reading, Pennsylvania facility has been operating
a groundwater remediation system under a 1981 Consent Order with the
Commonwealth of Pennsylvania as a result of its, and its predecessor company's,
historical waste disposal practices. Recent data indicate that certain hazardous
constituents in the groundwater have decreased over time, while the data on
other constituents is inconclusive. The Company plans to submit a proposal to
the Pennsylvania Department of Environmental Resources to terminate remediation
at the site pursuant to recent statutory authority to determine cleanup limits
consistent with the results of a site-specific risk assessment. Management has
been advised that, given the site location and aquifer use, the proposal is
technically appropriate and may result in the termination of groundwater
remediation at this site. Management believes that any liability with respect to
either continuing groundwater remediation or conducting a site-specific risk
assessment in order to complete such remediation will not have a material
adverse effect on Rockwell Graphic Systems' financial position, results of
operation or liquidity.
COMMITMENTS
Rockwell provides letters of credit to guarantee the performance of Rockwell
Graphic Systems under certain long-term contracts. Such letters of credit
outstanding were $2.8 million and $24.4 million as of September 30, 1995 and
June 30, 1996. The fair value of these letters of credit is estimated to
approximate their contractual amounts.
20. CHANGE IN METHOD OF ACCOUNTING
Effective October 1, 1992, Rockwell Graphic Systems adopted the provisions
of SFAS No. 112, "Employers' Accounting for Postemployment Benefits." This
standard requires an accrual method of recognizing the cost of postemployment
benefits, such as disability, severance and workers' compensation benefits. The
effect of the accounting change on 1993 net loss, exclusive of such cumulative
effect, was not material.
F-21
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
21. SUPPLEMENTARY CASH FLOW INFORMATION (IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30,
--------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Income tax payments (Japan)........................... $2.9 $2.9 $ .1
Interest payments (non-U.S.):
Related parties..................................... 7.5 1.8 --
Others.............................................. 1.6 1.4 .4
Non-cash investment in joint venture.................. -- 1.3 2.8
</TABLE>
NINE MONTHS
ENDED JUNE 30,
---------------
1995 1996
----- ----
Income tax payments (Japan)................................ $-- $2.4
Interest payments (non-U.S.):
Related parties.......................................... -- --
Others................................................... 0.5 1.1
Non-cash investment in joint venture....................... 1.4 0.8
22. SUBSEQUENT EVENTS
On November 30, 1995, Rockwell Systemes Graphiques Nantes S.A. (Rockwell
Graphic Systems' business in France) paid a dividend of approximately $50
million to Rockwell. The dividend was paid with proceeds from collection of
intercompany accounts of $21 million and bank borrowings incurred by Rockwell
Systemes Graphiques Nantes S.A. of $29 million (see Note 13). The dividend has
been given retroactive effect in the combined financial statements as of
September 30, 1995.
Subsequent to November 3, 1995, the date as of which it issued its 1995
Statements, Rockwell Graphic Systems changed its estimates with respect to
certain product warranty accruals related to sales recorded prior to October 1,
1995. The most significant change in estimates relates to product warranty
accruals provided for the commercial business line. During the first six months
of 1996, Rockwell Graphic Systems recorded additional product warranty accruals
for the commercial business line of $12.7 million related to sales recorded
prior to October 1, 1995.
In March 1996, Rockwell Graphic Systems recorded a $3.9 million
restructuring charge related principally to the closure of certain facilities
and severance payments.
Rockwell International Corporation entered into a Stock and Asset Purchase
Agreement with Goss Graphic Systems, Inc. dated April 26, 1996, as amended on
July 18, 1996, to sell the stock and the assets, subject to certain liabilities,
of Rockwell Graphic Systems for $552.5 million in cash and 47,500 shares of
preferred stock, $1,000 per share liquidation preference.
In connection with a restructuring of certain of its operating facilities,
on October 2, 1996, Rockwell Graphic Systems announced its plan to make
reductions in its work force pursuant to which it intends to record a charge in
October 1996, of approximately $10 million pre-tax.
F-22
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Goss Graphic Systems, Inc.:
We have audited the accompanying balance sheet of GOSS GRAPHIC SYSTEMS, INC.
as of July 16, 1996. This financial statement is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of the Company as of July 16, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
July 16, 1996
F-23
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
BALANCE SHEET
AS OF JULY 16, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash............................................................................... $1,000
------
Total Assets................................................................. $1,000
------
------
LIABILITIES & STOCKHOLDER'S EQUITY
STOCKHOLDER'S EQUITY:
Common Stock ($.01 par value per share, 100 shares
authorized, issued and outstanding).............................................. $ 1
Additional paid-in capital......................................................... 999
------
Total Stockholder's equity................................................... $1,000
------
------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-24
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.
NOTES TO BALANCE SHEET
JULY 16, 1996
1. ORGANIZATION
Goss Graphic Systems, Inc. (the "Company") is a newly formed Delaware
corporation formed on behalf of Stonington Capital Appreciation 1994 Fund, L.P.
("Stonington") to acquire (the "Proposed Acquisition") the operations of the
Graphic Systems business unit ("Goss") of Rockwell International Corporation.
2. THE PROPOSED ACQUISITION
Goss Graphic Systems, Inc. entered into an agreement to acquire the
operations of Goss from Rockwell International Corporation for $600 million
(subject to adjustment) pursuant to the Stock and Asset Purchase Agreement dated
as of April 26, 1996, as amended (the "Acquisition Agreement"). The Proposed
Acquisition will be effected through the purchase by the Company of all the
outstanding stock of Rockwell Graphic Systems, Inc. and Rockwell Systemes
Graphiques Nantes, and through the purchase by the Company and certain wholly
owned foreign subsidiaries of the assets and the assumption of liabilities which
constitute the remainder of Goss. Immediately after the Proposed Acquisition,
the Company will merge with and into Rockwell Graphic Systems, Inc.
3. FINANCING ARRANGEMENTS
Approximately $628 million will be required by the Company to consummate the
Proposed Acquisition as contemplated by the Acquisition Agreement and to pay
related fees and expenses. The Company expects to obtain the financing for the
Proposed Acquisition from the following sources: (i) the receipt of $162 million
in equity from GGS Holdings, Inc. to be obtained by GGS Holdings, Inc. through
the sale of common stock to Stonington, an institutional investor and management
of Goss for approximately $114.5 million in cash (net of loans to certain
Management Investors of $2.0 million) and the issuance of $47.5 million of
pay-in-kind perpetual preferred stock to Rockwell International; (ii) the sale
of senior subordinated notes with an aggregate principal amount of $225 million;
(iii) the borrowing of approximately $77.3 million under a bank credit agreement
which will consist of a term loan and revolving credit facility; and (iv) the
sale of customer notes to BT Securities Corporation for approximately $163.7
million.
To complete the financing arrangements described above, the Company intends
to authorize the issuance of additional common stock.
F-25
<PAGE>
- ---------------------------------------- ---------------------------------------
NO DEALER, SALESPERSON OR OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR
ANY UNDERWRITER. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS [LOGO]
UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE SUCH DATE. Goss Graphic Systems,
Inc.
-------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary..................... 3
Risk Factors........................... 13
Use of Proceeds........................ 21 $225,000,000
Capitalization......................... 22
Unaudited Pro Forma Combined Financial
Statements............................. 23
Selected Combined Financial Data....... 32
Management's Discussion and Analysis of % Senior Subordinated
Financial Condition and Results of Notes due 2006
Operations............................. 35
Business............................... 46
The Acquisition........................ 63
Management............................. 67
Ownership of Capital Stock............. 76
Certain Transactions................... 79
Description of Notes................... 80
Description of New Bank Credit
Agreement.............................. 106
Description of Sale of Customer
Notes.................................. 108
Description of Preferred Stock......... 109
Description of Certain Federal Income
Tax Consequences..................... 113 PROSPECTUS
Underwriting........................... 116
Notice to Canadian Residents........... 117
Legal Matters.......................... 118
Experts................................ 118
Available Information.................. 118
Index to Financial Statements.......... F-1 CS First Boston
-------------------
UNTIL , 1996 (90 DAYS AFTER THE
DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING BT Securities Corporation
TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION,
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ---------------------------------------- ---------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses of the issuance and
distribution of the securities being registered other than underwriting
compensation. All of the amounts shown are estimated except the Securities and
Exchange Commission registration fee.
Securities and Exchange Commission Registration Fee............ $ 77,586
NASD Fee....................................................... 23,000
Blue Sky Fees and Expenses (including attorney's fees and
expenses)...................................................... 15,000
Trustee Fees and Expenses...................................... 13,500
Printing and Engraving Expenses................................ 300,000
Legal Fees and Expenses........................................ 500,000
Accounting Fees and Expenses................................... 400,000
Miscellaneous Expenses......................................... 20,914
----------
Total.................................................... $1,350,000
----------
----------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware ("Section 145")
provides that a Delaware corporation may indemnify any persons who are, or are
threatened to be made, parties to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of the
fact that such person was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such person was an officer,
director, employee or agent of another corporation or enterprise. The indemnity
may include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding, provided such person acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was illegal. A
Delaware corporation may indemnify any persons who are, or are threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reason of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees) actually and reasonably incurred by such person in connection
with the defense or settlement of such action or suit provided such person acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the corporation's best interests except that no indemnification is permitted
without judicial approval if the officer or director is adjudged to be liable to
the corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.
The Company's Certificate of Incorporation provides for the indemnification
of directors and officers of the Company to the fullest extent permitted by
Section 145.
In that regard, the Company' Certificate of Incorporation provides that the
Company shall indemnify and hold harmless each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or
II-1
<PAGE>
investigative, by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the Company
or is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise, including service with respect to employee benefit
plans, whether the basis of such action, suit or proceeding is alleged action in
an official capacity as a director, officer, employee or agent or in any other
capacity while serving as a director, officer, employee or agent, against all
expense, liability and loss (including attorneys' fees, judgments, fines,
amounts paid or to be paid in settlement, and excise taxes or penalties arising
under the Employment Retirement Income Security Act of 1974) reasonably incurred
or suffered by such person in connection with such proceeding, to the fullest
extent authorized by the General Corporation Law of the State of Delaware.
Expenses incurred by any person in defending any such action, suit or proceeding
in advance of its final disposition shall be paid by the Company; provided that
if the General Corporation Law of the State of Delaware requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Company of
an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified by the Company.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the closing of the Offering and of the Acquisition, the
Company will issue approximately 900 shares of common stock (par value $.01) to
Holdings for $114.5 million.
Holdings will issue approximately 47,500 shares of 6 1/2% Redeemable
Pay-in-Kind Preferred Stock (par value $.01) to Rockwell in connection with the
closing of the Acquisition. Holdings will also issue 1,113,700 shares, 10,000
shares and 41,300 shares of common stock (par value $.01) respectively to the
Fund, the Institutional Investor and the Management Investors for a price per
share of $100 and an aggregate price of $116.5 million in connection with the
closing of the Acquisition.
Such sales will be made in reliance upon the exemption from registration
under the Securities Act set forth in Section 4(2) thereof for transactions not
involving a public offering.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
]EXHIBIT
NO. DESCRIPTION
- ----------- ---------------------------------------------------------------------------------
<C> <S>
1.1 --Form of Underwriting Agreement.
2.1** --Stock and Asset Purchase Agreement dated as of April 26, 1996 by and between
Rockwell International Corporation and Goss Graphic Systems, Inc.
2.2** --Amendment to Stock and Asset Purchase Agreement dated as of July 18, 1996 by
and between Rockwell International Corporation and Goss Graphic Systems, Inc.
3.1** --Certificate of Incorporation of the Company.
3.2** --By-Laws of the Company.
4.1 --Form of Indenture between the Company and The Bank of New York, Trustee,
relating to the % Senior Subordinated Notes due 2006 of the Company.
4.2 --Form of Bank Credit Agreement among the Company and the Lenders party thereto.
4.3 --Form of Certificate of Designation of the 6 1/2% Redeemable Pay-in-Kind
Preferred Stock of Holdings.
5.1 --Opinion of Wachtell, Lipton, Rosen & Katz as to the validity of the % Senior
Subordinated Notes due 2006.
10.1 --Form of Subscription Agreement for the Management Placement.
10.2 --Form of Subscription Agreement for Stonington Investment.
10.3 --Form of Subscription Agreement for Equity Private Placement.
10.4 --Form of Stockholders Agreement.
10.5 --Employment Agreement, dated as of September 26, 1996, by and between the
Company and Robert M. Kuhn.
10.6 --Form of Management Stock Incentive Plan.
10.6.1 --Form of Incentive Option Agreement.
10.6.2 --Form of Performance Option Agreement
10.6.3 --Form of Restricted Stock Agreement.
10.7 --Form of Loan Portfolio Purchase Agreement by and among BT Commercial
Corporation and Goss Graphic Systems, Inc.
10.7.1 --Form of Guaranty (Seller Interest Guaranty) by the Company.
10.7.2 --Form of Guaranty (Seller Hersant Guaranty) by the Company.
10.7.3 --Form of Guaranty (Seller Principal Guaranty) by the Company.
12.1** --Statement regarding computation of ratio of earnings to fixed charges of the
Company.
21** --List of subsidiaries of the Company.
23.1 --Consent of Arthur Andersen LLP.
23.2 --Consent of Deloitte & Touche LLP.
23.3 --Consent of Wachtell, Lipton, Rosen & Katz (contained in their opinion filed as
Exhibit 5.1).
24.1** --Powers of Attorney.
24.2** --Powers of Attorney.
25 --Statement of Eligibility on Form T-1 of The Bank of New York, Trustee, under
the Indenture relating to % Senior Subordinated Notes due 2006 of the
Company.
</TABLE>
- ------------
** Previously filed.
II-3
<PAGE>
(b) Financial Statement Schedules.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
Other financial statement schedules are omitted because they are not
applicable or because the required information is presented in the combined
financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities 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 Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, subject to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of New York, State of New
York, on October 9, 1996.
GOSS GRAPHIC SYSTEMS, INC.
By: /s/ M. ERIC SCHROEDER
..................................
M. Eric Schroeder
Vice President--Finance and
Admnistration
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed on October 9, 1996, by the following persons in the
capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<S> <C>
* Chairman and Chief Executive Officer
............................................. (Principal Executive Officer)
Robert M. Kuhn
/s/ M. ERIC SCHROEDER Vice President-Finance and Administration
............................................. (Principal Financial Officer and Principal
M. Eric Schroeder Accounting Officer)
* Director
.............................................
J. Joe Adorjan
* Director
.............................................
Gerald S. Armstrong
* Director
.............................................
Alfred C. Daugherty
* Director
.............................................
Robert F. End
* Director
.............................................
James J. Kerley
* Director
.............................................
Alexis P. Michas
/s/ ROBERT J. MYLOD, JR. Director
.............................................
Robert J. Mylod, Jr.
* Director
.............................................
James P. Sheehan
*By /s/ M. ERIC SCHROEDER
.........................................
M. Eric Schroeder
Attorney-in-fact
</TABLE>
II-5
<PAGE>
INDEPENDENT AUDITORS' REPORT
Rockwell Graphic Systems:
We have audited the Combined Financial Statements of Rockwell Graphic
Systems, a business unit of Rockwell International Corporation (Rockwell Graphic
Systems--see Note 1 to the Combined Financial Statements) as of September 30,
1995 and 1994 and for each of the three years in the period ended September 30,
1995 and have issued our report thereon dated November 3, 1995 as to the
September 30, 1995 and 1994 financial statements and April 26, 1996 as to the
September 30, 1993 financial statements, except for Note 22, as to which the
date is October 9, 1996, included elsewhere in this Registration Statement. Our
report expresses an unqualified opinion and includes an explanatory paragraph
relating to the preparation of the financial statements of a business unit of
Rockwell International Corporation. Our audits also included the financial
statement schedule listed in Item 16(b) of this Registration Statement. This
financial statement schedule is the responsibility of management of Rockwell
Graphic Systems. Our responsibility is to express an opinion based on our
audits. In our opinion, such combined financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
November 3, 1995 as to the 1995 and 1994 financial information and
April 26, 1996 as to the 1993 financial information
S-1
<PAGE>
ROCKWELL GRAPHIC SYSTEMS
A BUSINESS UNIT OF
ROCKWELL INTERNATIONAL CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND DEDUCTIONS END OF
OF PERIOD EXPENSES (A) PERIOD
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Year Ended September 30, 1993:
Allowance for doubtful accounts and notes........ $ 12.1 $8.2 $(3.1) $ 17.2
Inventory valuation reserve...................... 34.4 6.3 (0.5) 40.2
Year Ended September 30, 1994:
Allowance for doubtful accounts and notes........ 17.2 19.3 (2.4) 34.1
Inventory valuation reserve...................... 40.2 7.0 (3.6) 43.6
Year Ended September 30, 1995:
Allowance for doubtful accounts and notes........ 34.1 5.4 (9.7) 29.8
Inventory valuation reserve...................... 43.6 7.3 (5.9) 45.0
</TABLE>
- ------------
(A) Amounts represent write offs and the effects of foreign currency
fluctuations.
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NUMBER IN
SEQUENTIALLY
NUMBERED
REGISTRATION
STATEMENT
---------------
<S> <C> <C>
1.1 Form of Underwriting Agreement.
2.1 Stock and Asset Purchase Agreement dated as of April 26, 1996 by and Previously
between Rockwell International Corporation and Goss Graphic Systems, filed
Inc.
2.2 Amendment to Stock and Asset Purchase Agreement dated as of July 18, Previously
1996 by and between Rockwell International Corporation and Goss filed
Graphic Systems, Inc.
3.1 Certificate of Incorporation of the Company. Previously
filed
3.2 By-Laws of the Company. Previously
filed
4.1 Form of Indenture between the Company and The Bank of New York,
Trustee, relating to the % Senior Subordinated Notes due 2006 of
the Company.
4.2 Form of Bank Credit Agreement among the Company and the Lenders party
thereto.
4.3 Form of Certificate of Designation of the 6 1/2% Redeemable
Pay-in-Kind Preferred Stock of Holdings.
5.1 Opinion of Wachtell, Lipton, Rosen & Katz as to the validity of the
% Senior Subordinated Notes due 2006.
10.1 Form of Subscription Agreement for the Management Placement.
10.2 Form of Subscription Agreement for Stonington Investment.
10.3 Form of Subscription Agreement for Equity Private Placement.
10.4 Form of Stockholders Agreement.
10.5 Employment Agreement, dated as of September 26, 1996, by and between
the Company and Robert M. Kuhn.
10.6 Form of Management Stock Incentive Plan.
10.6.1 Form of Incentive Option Agreement.
10.6.2 Form of Performance Option Agreement
10.6.3 Form of Restricted Stock Agreement.
10.7 Form of Loan Portfolio Purchase Agreement by and among BT Commercial
Corporation and Goss Graphic Systems, Inc.
10.7.1 Form of Guaranty (Seller Interest Guaranty) by the Company.
10.7.2 Form of Guaranty (Seller Hersant Guaranty) by the Company.
10.7.3 Form of Guaranty (Seller Principal Guaranty) by the Company.
12.1 Statement regarding computation of ratio of earnings to fixed charges Previously
of the Company. filed
21 List of subsidiaries of the Company. Previously
filed
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Wachtell, Lipton, Rosen & Katz (contained in their opinion
filed as Exhibit 5.1).
24.1 Powers of Attorney. Previously
filed
24.2 Powers of Attorney. Previously
filed
25 Statement of Eligibility on Form T-1 of The Bank of New York, Trustee,
under the Indenture relating to % Senior Subordinated Notes due
2006 of the Company.
</TABLE>
EXHIBIT 1.1
DB Draft of October 7, 1996
$225,000,000
GOSS GRAPHIC SYSTEMS, INC.
___% Senior Subordinated Notes Due 2006
UNDERWRITING AGREEMENT
__________ __, 1996
CS FIRST BOSTON CORPORATION
BT SECURITIES CORPORATION
c/o CS First Boston Corporation,
Park Avenue Plaza,
New York, N.Y. 10055
Dear Sirs:
1. Introductory. Goss Graphic Systems, Inc., a Delaware corporation
("Goss" or the "Company"), proposes to issue and sell $225,000,000 principal
amount of its ___% Senior Subordinated Notes Due 2006 (the "Notes") to CS First
Boston Corporation ("CS First Boston") and BT Securities Corporation (together
with CS First Boston, the "Underwriters"). The Notes are to be issued under an
indenture, dated as of _____________ __, 1996 (the "Indenture"), between Goss
and The Bank of New York, as trustee (the"Trustee").
The proceeds from the offering of the Notes will provide a portion of the
funding for the acquisition (the "Acquisition") by Goss of the Graphic Systems
business unit from Rockwell International Corporation ("Rockwell") pursuant to a
Stock and Asset Purchase Agreement, dated as of April 26, 1996, and as amended
on July 18, 1996 (the "Purchase Agreement"). The purchase price for the
Acquisition will consist of $552.5 million in cash, subject to certain
adjustments, and 47,500 shares of preferred stock (the "Holdings Preferred
Stock") of GGS Holdings, Inc. ("Holdings"). Simultaneously with the closing of
the Acquisition, Holdings will raise $116.5 million of equity financing,
comprised of $111.5 million in cash from the sale of common stock, par value
$0.01 per share, of Holdings (the "Holdings Common Stock") to the Stonington
Capital Appreciation Fund, L.P. (the "Fund"), $1.0 million in cash from the sale
of Holdings Common Stock (the "Equity Private Placement") to an affiliate of a
limited partner of the Fund, and approximately $4.0 million in cash from the
sale of Holdings Common Stock to members of the Company's management (the
"Management Placement"). Holdings will finance approximately $2.0 million of the
Management Placement. Holdings will simultaneously therewith contribute all such
amounts to Goss in exchange for all of the capital stock of Goss. In addition,
Holdings will also grant to certain members of the Board of Directors of
Holdings 7,500 shares of nonvoting common stock of Holdings. Contemporaneously
with the Acquisition, Goss and certain of its subsidiaries will enter into a
bank credit agreement (the "Credit Agreement") with a syndicate of lenders named
therein to provide term and revolving credit facilities aggregating $225 million
and, pursuant to a Loan Portfolio Purchase Agreement (the "Portfolio Purchase
Agreement") with Bankers Trust Commercial Corporation ("BTCC"), Goss will sell
<PAGE>
a portfolio of notes receivable issued in connection with customer financing
provided by the Graphic Systems business unit of Rockwell to purchasers of its
products. The Company's obligations under the Credit Agreement will be secured
by security interests in all of the capital stock of the Company and certain of
its subsidiaries and substantially all of the future assets of the Company and
its subsidiaries pursuant to a security agreement being entered into in
connecting with the Credit Agreement (the "Security Agreement").
For purposes of this Agreement, the offering of the Notes, the
Acquisition, the Management Placement, the Equity Private Placement and the
transactions contemplated by the Indenture, the Credit Agreement, the Portfolio
Purchase Agreement, the Security Agreement and this Agreement are referred to
collectively as the "Transactions". For purposes of this Agreement, all
references to Goss and its subsidiaries assume the consummation of, and shall
give effect to, the Transactions.
Goss hereby agrees with the Underwriters as follows:
2. Representations and Warranties. Goss represents and warrants to, and
agrees with, the Underwriters that:
(i) A registration statement (No. 333-08421) relating to the Notes,
including a form of prospectus, has been filed with the Securities and
Exchange Commission (the "Commission") and either (i) has been declared
effective under the Securities Act of 1933 (the "Act") and is not proposed
to be amended or (ii) is proposed to be amended by amendment or
post-effective amendment. If such registration statement ("initial
registration statement") has been declared effective, either (i) an
additional registration statement ("additional registration statement")
relating to the Notes may have been filed with the Commission pursuant to
Rule 462(b) ("Rule 462(b)") under the Act and, if so filed, has become
effective upon filing pursuant to such Rule and the Notes all have been
duly registered under the Act pursuant to the initial registration
statement and, if applicable, the additional registration statement or
(ii) such an additional registration statement is proposed to be filed
with the Commission pursuant to Rule 462(b) and will become effective upon
filing pursuant to such Rule and upon such filing the Notes will all have
been duly registered under the Act pursuant to the initial registration
statement and such additional registration statement. If Goss does not
propose to amend the initial registration statement or if an additional
registration statement has been filed and Goss does not propose to amend
it, and if any post-effective amendment to either such registration
statement has been filed with the Commission prior to the execution and
delivery of this Agreement, the most recent amendment (if any) to each
such registration statement has been declared effective by the Commission
or has become effective upon filing pursuant to Rule 462(c) ("Rule
462(c)") under the Act or, in the case of the additional registration
statement, Rule 462(b). For purposes of this Agreement, "Effective Time"
with respect to the initial registration statement or, if filed prior to
the execution and delivery of this Agreement, the additional registration
statement means (i) if Goss has advised the Underwriters that they do not
propose to amend such registration statement, the date and time as of
which such registration statement, or the most recent post-effective
amendment thereto (if any) filed prior to the execution and delivery of
this Agreement, was declared effective by the Commission or has become
effective upon filing pursuant to Rule 462(c), or (ii) if Goss has advised
the Underwriters that they propose to file an amendment or post-effective
amendment to such registration statement, the date and time as of which
such registration statement, as amended by such amendment or
post-effective amendment, as the case may be, is declared effective by the
Commission. If an additional registration statement has not been filed
prior to the execution and delivery of this Agreement but Goss has advised
the Underwriters that they propose to file one, "Effective Time" with
respect to such additional registration statement means the date and time
as of which such registration statement is filed and becomes effective
pursuant to Rule 462(b). "Effective Date" with respect to the initial
registration statement or the additional registration statement (if any)
means the date of the Effective Time thereof. The initial registration
statement, as amended at its Effective Time,
2
<PAGE>
including all information contained in the additional registration
statement (if any) and deemed to be a part of the initial registration
statement as of the Effective Time of the additional registration
statement pursuant to the General Instructions of the Form on which it is
filed and including all information (if any) deemed to be a part of the
initial registration statement as of its Effective Time pursuant to Rule
430A(b) ("Rule 430A(b)") under the Act, is hereinafter referred to as the
"Initial Registration Statement". The additional registration statement,
as amended at its Effective Time, including the contents of the initial
registration statement incorporated by reference therein and including all
information (if any) deemed to be a part of the additional registration
statement as of its Effective Time pursuant to Rule 430A(b), is
hereinafter referred to as the "Additional Registration Statement". The
Initial Registration Statement and the Additional Registration Statement
are herein referred to collectively as the "Registration Statements" and
individually as a "Registration Statement". The form of prospectus
relating to the Notes, as first filed with the Commission pursuant to and
in accordance with Rule 424(b) ("Rule 424(b)") under the Act or (if no
such filing is required) as included in a Registration Statement, is
hereinafter referred to as the "Prospectus". No document has been or will
be prepared or distributed in reliance on Rule 434 under the Act. No stop
order suspending the effectiveness of such Registration Statement or any
part thereof has been issued and no proceeding for that purpose has been
instituted or, to the knowledge of Goss, threatened by the Commission.
(ii) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement: (i) on the
Effective Date of the Initial Registration Statement, the Initial
Registration Statement conformed in all material respects to the
requirements of the Act, the Trust Indenture Act of 1939 ("Trust Indenture
Act") and the rules and regulations of the Commission ("Rules and
Regulations") and did not include any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, (ii) on the
Effective Date of the Additional Registration Statement (if any), each
Registration Statement conformed, or will conform, in all respects to the
requirements of the Act, the Trust Indenture Act and the Rules and
Regulations and did not include, or will not include, any untrue statement
of a material fact and did not omit, or will not omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and (iii) on the date of this Agreement,
the Initial Registration Statement and, if the Effective Time of the
Additional Registration Statement is prior to the execution and delivery
of this Agreement, the Additional Registration Statement each conforms,
and at the time of filing of the Prospectus pursuant to Rule 424(b) or (if
no such filing is required) at the Effective Date of the Additional
Registration Statement in which the Prospectus is included, and on the
Closing Date (as hereinafter defined) each Registration Statement and the
Prospectus, each as amended or supplemented, will conform, in all respects
to the requirements of the Act, the Trust Indenture Act and the Rules and
Regulations, and neither of such documents includes, or will include, any
untrue statement of a material fact or omits, or will omit, to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. If the Effective Time of the Initial
Registration Statement is subsequent to the execution and delivery of this
Agreement: (A) on the Effective Date of the Initial Registration
Statement, the Initial Registration Statement and the Prospectus, each as
amended or supplemented, will conform in all material respects to the
requirements of the Act, the Trust Indenture Act and the Rules and
Regulations, and neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and no Additional Registration Statement has been or will
be filed and (B) on the Closing Date, the Initial Registration Statement
and the Prospectus will conform in all material respects to the
requirements of the Act, the Trust Indenture Act and the Rules and
Regulations, and neither of such documents will include any untrue
statement of a material fact or will omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and no Additional Registration Statement has been or will
be filed. The two preceding sentences do not apply to statements in or
omissions from a Registration Statement or the
3
<PAGE>
Prospectus based upon written information furnished to Goss by any
Underwriter specifically for use therein, it being understood and agreed
that the only such information is that described as such in Section 7(b).
(iii) Goss has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Prospectus. Goss is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified could not reasonably be expected to,
individually or in the aggregate, have a material adverse effect on the
financial condition, business, properties or results of operations of Goss
and its subsidiaries taken as a whole (a "Material Adverse Effect").
(iv) The only direct and indirect subsidiaries of Goss are listed on
Schedule B hereto. Each subsidiary of Goss has been duly incorporated and
is a validly existing corporation in good standing under the laws of the
jurisdiction of its incorporation, with corporate power and authority to
own, lease and operate its properties and conduct its business as
described in the Prospectus; and each subsidiary of Goss is duly qualified
to do business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct
of its business requires such qualification, except where the failure to
be so qualified could not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect; all of the issued and
outstanding capital stock of each subsidiary of Goss has been duly
authorized and validly issued and is fully paid and nonassessable; all of
the capital stock of Goss is owned by Holdings free from liens,
encumbrances and defects; and all of the capital stock of each subsidiary
of Goss is owned by Goss, directly or through subsidiaries, free from
liens, encumbrances and defects, except pursuant to the Security
Agreement.
(v) The Indenture has been duly authorized and, if the Effective
Time of a Registration Statement is prior to the execution and delivery of
this Agreement, has been or otherwise upon such Effective Time will be
duly qualified under the Trust Indenture Act; the Notes have been duly
authorized; when the Notes are delivered and paid for pursuant to this
Agreement on the Closing Date, the Indenture will have been duly executed
and delivered and such Notes will be entitled to the benefits of the
Indenture and will have been duly executed, authenticated, issued and
delivered, and the Indenture and the Notes will constitute valid and
legally binding obligations of Goss enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity
principles. The Indenture and the Notes conform in all material aspects to
the descriptions thereof contained in the Prospectus.
(vi) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between Goss and any person that would give
rise to a valid claim against Goss or any Underwriter for a brokerage
commission, finder's fee or other like payment in connection with the
Transactions.
(vii) Except as disclosed in the Prospectus, there are no contracts,
agreements or understandings between Goss and any person granting such
person the right to require Goss to file a registration statement under
the Act with respect to any securities of Goss owned or to be owned by
such person or to require Goss to include such securities in the
securities registered pursuant to a Registration Statement or in any
securities being registered pursuant to any other registration statement
filed by Goss under the Act.
(viii) Except as disclosed in the Prospectus, no consent, approval,
authorization, or order of, or filing with, or notice to, any third party
or any governmental agency or body or any court
4
<PAGE>
is required for the consummation of the Transactions, except such as have
been obtained and made and such as may be required with respect to the
offering of the Notes under state securities laws and except for such
consents, approvals, authorizations, orders, filings or notices which, if
not obtained or made, could not reasonably be expected to have a Material
Adverse Effect or a material adverse effect on the consummation of the
Transactions.
(ix) The execution, delivery and performance of the Indenture, the
Purchase Agreement, the Credit Agreement, the Portfolio Purchase
Agreement, this Agreement or any other document governing any of the
Transactions, and the consummation of the Transactions, including, without
limitation, the issuance and sale of the Notes and compliance with the
terms and provisions thereof, will not result in a breach or violation of
any of the terms and provisions of, or constitute a default under, any
statute, any rule, regulation or order of any governmental agency or body
or any court, domestic or foreign, having jurisdiction over Goss or any
subsidiary of Goss or any of their properties, assets or operations, or
any agreement or instrument to which Goss or any such subsidiary is a
party or by which Goss or any such subsidiary is bound or to which any of
the properties of Goss or any such subsidiary is subject, or the charter
or by-laws of Goss or any such subsidiary. Goss has full power and
authority to authorize, issue and sell the Notes, as contemplated by this
Agreement and the Indenture.
(x) The Purchase Agreement has been duly authorized, executed and
delivered and constitutes a valid and legally binding obligation of the
parties thereto, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The Purchase Agreement
conforms in all material respects to the description thereof contained in
the Prospectus.
(xi) The Credit Agreement and the Portfolio Purchase Agreement have
each been duly authorized by Goss and its subsidiaries, and upon execution
and delivery thereof will be duly executed and delivered and will each
constitute a valid and legally binding obligation of Goss and its
subsidiaries, enforceable in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The Credit Agreement
and the Portfolio Purchase Agreement conform in all material respects to
the descriptions thereof contained in the Prospectus.
(xii) This Agreement has been duly authorized, executed and
delivered by Goss.
(xiii) Goss and its subsidiaries have good and marketable title to
all real properties and all other properties and assets owned by them, in
each case free from liens, encumbrances and defects and Goss and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions thereto or defaults thereunder, in
each case except as are described in the Prospectus and except as could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(xiv) Goss and its subsidiaries possess adequate certificates,
authorizations, licenses or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by them
and have not received any notice of proceedings (or is aware of any facts
that would be expected to result in such proceeding) relating to the
revocation or modification of any such certificate, authorization, license
or permit that, if determined adversely to Goss or any of its
subsidiaries, could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect. Each of Goss and its
subsidiaries are in compliance with their respective obligations under
such certificates, authorizations, licenses or permits and no event has
occurred that allows, or after notice or lapse of time would allow,
revocation or termination of such
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certificates, authorizations, licenses or permits or violation of such
laws or regulations, except for such non-compliance and events as could
not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.
(xv) No labor dispute with the employees of Goss or any subsidiary
exists or, to the knowledge of Goss, is imminent and Goss is not aware of
any existing or imminent labor disturbance by the employees of their
principal suppliers or customers that could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect.
(xvi) Goss owns or has obtained valid and enforceable licenses for
the U.S. and foreign patents, patent applications, inventions, technology,
processes, trademarks, trademark registrations, service marks, service
mark registrations, trade names, copyrights, computer software, trade
secrets and proprietary or other intellectual property rights
(collectively, the "Intellectual Property") owned, sold or used by or
licensed to it or by it or necessary for the conduct of its business (the
"Goss Intellectual Property"). Except as disclosed in the Prospectus and
except as could not reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect, (i) there are no rights of
third parties to any Goss Intellectual Property; (ii) there is no pending
or, to the knowledge of Goss, threatened action, suit, proceeding or claim
by others challenging the rights of Goss in or to any Goss Intellectual
Property; (iii) there is no pending or, to the knowledge of Goss,
threatened action, suit, proceeding or claim by others challenging the
validity or scope of any such Intellectual Property; (iv) there is no
pending or, to the knowledge of Goss, threatened action, suit, proceeding
or claim by others that Goss or the business are currently or heretofore
conducted infringes or otherwise violates Intellectual Property of others;
and (v) all registrations for and grants relating to Goss Intellectual
Property are valid and in force.
(xvii) Except as described in the Prospectus and except as could not
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect, the properties, assets and operations of each of
Goss and its subsidiaries are in compliance with all applicable federal,
state, local and foreign laws, rules and regulations, orders, decrees,
judgments, permits and licenses relating to public and worker health and
safety, and to the protection and clean-up of the natural environment and
to the protection or preservation of natural resources and of plant and
animal species, and activities or conditions related thereto, including,
without limitation, those relating to the production, extraction,
processing, manufacturing, generation, handling, disposal, transportation
or release of hazardous materials (collectively, "Environmental Laws").
With respect to such properties, assets and operations, including any
previously owned, leased or operated properties, assets or operations,
there are no past, present or, to the best knowledge of Goss, reasonably
anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of Goss or any of its subsidiaries
that may interfere with or prevent compliance or continued compliance with
applicable Environmental Laws in a manner that could reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect. Except as described in the Prospectus and except as could not
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect, none of Goss or any of its subsidiaries is the
subject of any federal, state, local or foreign investigation, and none of
Goss or any of its subsidiaries has received any notice or claim (or is
aware of any facts that would form a reasonable basis for any claim), nor
entered into any negotiations or agreements with any third party, relating
to any liability or potential liability or remedial action or potential
remedial action under Environmental Laws, nor are there any pending,
reasonably anticipated or, to the knowledge of Goss, threatened actions,
suits or proceedings against or affecting Goss, any of its subsidiaries or
its properties, assets or operations, in connection with any such
Environmental Laws. The term "hazardous materials" shall mean those
substances that are regulated by or form the basis for liability under any
applicable Environmental Laws.
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(xviii) Goss and its subsidiaries have filed on a timely basis all
material federal, state, local and foreign tax returns required to be
filed, such returns are complete and correct in all material respects, and
all material taxes shown by such returns or otherwise assessed that are
due and payable have been paid, except such taxes as are being contested
in good faith and as to which adequate reserves have been provided. The
charges, accruals and reserves on the books of Goss and its subsidiaries
in respect of any tax liability for any year not finally determined are
adequate to meet any assessments or reassessments for additional taxes;
and there has been no tax deficiency asserted and, to the knowledge of
Goss, no tax deficiency might be asserted or threatened against Goss or
any subsidiary that could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect.
(xix) Each "employee benefit plan" within the meaning of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in
which employees of Goss or any of its subsidiaries participate or as to
which Goss or any subsidiary has any liability (the "ERISA Plans") is in
compliance in all material respects with the applicable provisions of
ERISA and the Internal Revenue Code of 1986, as amended (the "Code").
Neither Goss nor any of its subsidiaries has any liability with respect to
the ERISA Plans, nor does Goss expect that any such liability will be
incurred, that could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect. The value of the aggregate
vested and nonvested benefit liabilities under each of the ERISA Plans
that is subject to Section 412 of the Code, determined as of the end of
such ERISA Plan's most recent ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the aggregate current
value of the assets of such ERISA Plan allocable to such benefit
liabilities. Neither Goss nor any subsidiary has any material liability,
whether or not contingent, with respect to any ERISA Plan that provides
post-retirement welfare benefits. The descriptions of Goss' stock option,
stock bonus and other stock plans or arrangements, and the options or
other rights granted and exercised thereunder, set forth in the Prospectus
are accurate in all material respects.
(xx) Goss and its subsidiaries maintain a system of internal
accounting controls sufficient for purposes of the prevention or detection
of errors or irregularities in amounts that could be expected to be
material to Goss' combined financial statements and the recording of
transactions so as to permit the preparation of such combined financial
statements in conformity with generally accepted accounting principles.
(xxi) (A) Neither Goss nor any of its subsidiaries is in violation
of its charter or by-laws, (B) neither Goss nor any of its subsidiaries is
in violation of any applicable law, ordinance, administrative or
governmental rule or regulation, or any order, decree or judgment of any
court or governmental agency or body having jurisdiction over Goss or any
of its subsidiaries and (C) no event of default or event that, but for the
giving of notice or the lapse of time or both, would constitute an event
of default exists, or upon the consummation of the Transactions will
exist, under any indenture, mortgage, loan agreement, note, lease, permit,
license or other agreement or instrument to which Goss or any of its
subsidiaries is a party or to which any of the properties, assets or
operations of Goss or any such subsidiary is subject, except, in the case
of clauses (B) and (C), for such violations and defaults that could not
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect. There are no statutes, regulations, contracts or
other documents that are required to be described in the Registration
Statements or the Prospectus or to be filed as an exhibit to the
Registration Statements that are not described or filed as required.
(xxii) Goss and its subsidiaries carry or are entitled to the
benefits of insurance in such amounts and covering such risks as is
generally maintained by companies of established repute engaged in the
same or similar business, and all such insurance is in full force and
effect.
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(xxiii) Except as disclosed in the Prospectus, there are no pending
actions, suits or proceedings against or affecting Goss, any of its
subsidiaries or any of their respective properties, assets or operations
that, if determined adversely to Goss or any of its subsidiaries, could
reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect, or could materially and adversely affect the
ability of Goss to perform its obligations under the Indenture, this
Agreement, or any other document governing any of the Transactions, or
which are otherwise material in the context of the Transactions; and no
such actions, suits or proceedings are threatened or, to the knowledge of
Goss, contemplated.
(xxiv) The financial statements included in each Registration
Statement and the Prospectus comply with the requirements of the Act and
the Rules and Regulations, present fairly the financial position of Goss
and its combined subsidiaries as of the dates shown and the results of
operations and cash flows of Goss and its combined subsidiaries for the
periods shown, and such financial statements have been prepared in
conformity with the generally accepted accounting principles in the United
States applied on a consistent basis; the assumptions used in preparing
the pro forma financial statements included in each Registration Statement
and the Prospectus provide a reasonable basis for presenting the
significant effects directly attributable to the Transactions or events
described therein, the related pro forma adjustments give appropriate
effect to those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding historical
financial statement amounts. The other financial information and
statistical data set forth in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent
with that of the audited combined financial statements included in the
Registration Statements.
(xxv) Since the dates as of which information is given in the
Registration Statements and the Prospectus, (i) neither Goss nor any of
its subsidiaries has incurred any material liability or obligation
(indirect, direct or contingent) or entered into any material verbal or
written agreement or other transaction that is not in the ordinary course
of business and that could reasonably be expected to result in a material
reduction in the future earnings of Goss and its subsidiaries; (ii)
neither Goss nor any of its subsidiaries has sustained any material loss
or interference with its business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by
insurance); (iii) there has been no change, except as contemplated by the
Prospectus, in the indebtedness of Goss and no change in the capital stock
of Goss and no dividend or distribution of any kind declared, paid or made
by Goss on any class of its capital stock; and (iv) there has been no
development or event having or that could reasonably be expected to have a
Material Adverse Effect.
(xxvi) Goss is not and, after giving effect to the consummation of
the Transactions, will not be an "investment company" or an entity
controlled by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended and the rules and regulations
promulgated thereunder.
(xxvii) Neither Goss nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba
within the meaning of Section 517.075, Florida Statutes and Goss agrees to
comply with such Section if prior to the completion of the distribution of
the Notes they or any of their affiliates commence doing such business.
(xxviii) The accountants reporting upon the audited financial
statements and schedules included in the Registration Statements and the
Prospectus are independent public accountants as required by the Act and
the Rules and Regulations.
3. Purchase, Sale and Delivery of Notes. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, (i) Goss agrees to sell
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to the Underwriters, and the Underwriters agree, severally and not jointly, to
purchase from Goss, at a purchase price of _____% of the principal amount
thereof plus accrued interest from ________ ___, 1996 to the Closing Date, the
respective principal amounts of Notes set forth opposite the names of the
Underwriters in Schedule A hereto.
Goss will deliver the Notes to the Underwriters against payment of the
purchase price therefor in Federal (same day) funds by wire transfer to an
account previously designated to CS First Boston by Goss at a bank acceptable to
CS First Boston at the offices of _____________ at _______ A.M., New York time,
on __________ ___, 1996, or at such other time not later than seven full
business days thereafter as CS First Boston and Goss determine, such time being
herein referred to as the "Closing Date". The Notes so to be delivered will be
in definitive fully registered form, in such denominations and registered in
such names as CS First Boston requests and will be made available for checking
and packaging at the above offices of ________________________ at least 24 hours
prior to the Closing Date.
4. Offering by Underwriters. It is understood that the Underwriters
propose to offer the Notes for sale to the public as set forth in the
Prospectus.
5. Certain Agreements of Goss. Goss jointly and severally agrees with the
Underwriters that:
(a) If the Effective Time of the Initial Registration Statement is
prior to the execution and delivery of this Agreement, Goss will file the
Prospectus with the Commission pursuant to and in accordance with
subparagraph (1) (or, if applicable and if consented to by CS First
Boston, subparagraph (4)) of Rule 424(b) not later than the earlier of (A)
the second business day following the execution and delivery of this
Agreement or (B) the fifteenth business day after the Effective Date of
the Initial Registration Statement. Goss will advise CS First Boston
promptly of any such filing pursuant to Rule 424(b). If the Effective Time
of the Initial Registration Statement is prior to the execution and
delivery of this Agreement and an additional registration statement is
necessary to register a portion of the Notes under the Act but the
Effective Time thereof has not occurred as of such execution and delivery,
Goss will file the additional registration statement or, if filed, will
file a post-effective amendment thereto with the Commission pursuant to
and in accordance with Rule 462(b) on or prior to 10:00 P.M., New York
time, on the date of this Agreement or, if earlier, on or prior to the
time the Prospectus is printed and distributed to any Underwriter, or will
make such filing at such later date as shall have been consented to by CS
First Boston.
(b) Goss will advise CS First Boston promptly of any proposal to
amend or supplement the initial or any additional registration statement
as filed or the related prospectus or the Initial Registration Statement,
the Additional Registration Statement (if any) or the Prospectus and will
not effect such amendment or supplementation without CS First Boston's
consent; and Goss will also advise CS First Boston promptly of the
effectiveness of each Registration Statement (if its Effective Time is
subsequent to the execution and delivery of this Agreement) and of any
amendment or supplementation of a Registration Statement or the Prospectus
and of the institution by the Commission of any stop order proceedings in
respect of a Registration Statement and will use its best efforts to
prevent the issuance of any such stop order and to obtain as soon as
possible its lifting, if issued.
(c) If, at any time when a prospectus relating to the Notes is
required to be delivered under the Act in connection with sales by any
Underwriter or dealer, any event occurs as a result of which the
Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, or if it is necessary at any time to
amend the Prospectus to comply with the Act, Goss will promptly notify CS
First Boston of such event and will promptly prepare and file with the
Commission, at its own expense, an
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amendment or supplement which will correct such statement or omission or
an amendment which will effect such compliance. Neither CS First Boston's
consent to, nor the Underwriters' delivery of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth in
Section 6.
(d) As soon as practicable, but not later than the Availability Date
(as defined below), Goss will make generally available to its
securityholders an earnings statement covering a period of at least 12
months beginning after the Effective Date of the Initial Registration
Statement (or, if later, the Effective Date of the Additional Registration
Statement) which will satisfy the provisions of Section 11(a) of the Act.
For the purpose of the preceding sentence, "Availability Date" means the
45th day after the end of the fourth fiscal quarter following the fiscal
quarter that includes such Effective Date, except that, if such fourth
fiscal quarter is the last quarter of Goss' or Holdings' fiscal year, as
the case may be, "Availability Date" means the 90th day after the end of
such fourth fiscal quarter.
(e) Goss will furnish to the Underwriters copies of each
Registration Statement (three of which will be signed and will include all
exhibits), each related preliminary prospectus, and, so long as a
prospectus relating to the Notes is required to be delivered under the Act
in connection with sales by any Underwriter or dealer, the Prospectus and
all amendments and supplements to such documents, in each case in such
quantities as the Underwriters request. The Prospectus shall be so
furnished on or prior to 3:00 P.M., New York time, on the business day
following the later of the execution and delivery of this Agreement or the
Effective Time of the Initial Registration Statement. All other documents
shall be so furnished as soon as available. Goss will pay the expenses of
printing and distributing to the Underwriters all such documents.
(f) Goss will arrange for the qualification of the Notes for sale
and the determination of their eligibility for investment under the laws
of such jurisdictions as CS First Boston designates and will continue such
qualifications in effect so long as required for the distribution.
(g) So long as any of the Notes are outstanding, Goss will furnish
to CS First Boston and, upon request, to the other Underwriter, as soon as
practicable after the end of each fiscal year, a copy of any annual report
to stockholders for such year; and Goss will furnish to CS First Boston
(i) as soon as available, a copy of each report and any definitive proxy
statement of Goss or Holdings, as the case may be, filed with the
Commission under the Securities Exchange Act of 1934 or mailed to
stockholders, and (ii) from time to time, such other information
concerning Goss as CS First Boston may reasonably request.
(h) Goss will pay all expenses incident to the performance of its
obligations under this Agreement and will reimburse the Underwriters (if
and to the extent incurred by them) for any filing fees and other expenses
(including fees and disbursements of counsel) incurred by them in
connection with qualification of the Notes for sale and determination of
their eligibility for investment under the laws of such jurisdictions as
CS First Boston designates and the printing of memoranda relating thereto,
for any fees charged by investment rating agencies for the rating of the
Notes, for the filing fee of the NASD relating to the Notes (including the
fees and disbursements of counsel relating thereto), for any travel
expenses of Goss' officers and employees and any other expenses of Goss in
connection with attending or hosting meetings with prospective purchasers
of the Notes and for expenses incurred in distributing preliminary
prospectuses and the Prospectus (including any amendments and supplements
thereto) to the Underwriters.
(i) For a period of 180 days after the date of the Prospectus,
neither Goss nor any of its subsidiaries will offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, any United
States dollar-denominated debt securities issued or guaranteed by Goss or
any of its subsidiaries and having a maturity of more than one year from
the date of issue or publicly disclose
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the intention to make any such offer, sale, pledge or disposal, without
the prior written consent of CS First Boston (which consent shall not be
unreasonably withheld).
(j) Goss will do and perform all things required to be done and
performed under this Agreement by it that are within its control prior to
or after the Closing Date and to use all reasonable efforts to satisfy all
conditions precedent on its part to the delivery of the Notes.
6. Conditions of the Obligations of the Underwriters. The obligations of
the Underwriters to purchase and pay for any of the Notes on the Closing Date
will be subject to the accuracy of the representations and warranties on the
part of Goss herein, to the accuracy of the statements of officers of Goss made
pursuant to the provisions hereof, to the performance by Goss of its obligations
hereunder and to the following additional conditions precedent:
(a) The Underwriters shall have received a letter, dated the date of
delivery thereof (which, if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, shall
be on or prior to the date of this Agreement or, if the Effective Time of
the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, shall be prior to the filing of the amendment
or post-effective amendment to the registration statement to be filed
shortly prior to such Effective Time), of Arthur Andersen LLP confirming
that they are independent public accountants within the meaning of the Act
and the applicable published Rules and Regulations thereunder and stating
to the effect that:
(i) in their opinion the balance sheet of Goss audited by them
and included in the Registration Statements complies as to form in
all material respects with the applicable accounting requirements of
the Act and the related Rules and Regulations;
(ii) on the basis of procedures specified in such letter,
nothing came to their attention that caused them to believe that, at
the date of the latest available balance sheet of Goss read by such
accountants, and at a subsequent specified date not more than three
days prior to the date of this Agreement, there was any change in
the capital stock, increase in long term debt or decreases in total
assets or stockholders' equity, as compared with amounts shown on
the latest balance sheet of Goss included in the Prospectus.
(iii) (A) they have read the pro forma financial statements
and other pro forma financial information included in the
Registration Statements (collectively, the "Pro Forma Information");
(B) they have made inquiries of certain officials of the
Company who have responsibility for financial and accounting
matters about the basis for the pro forma adjustments;
(C) they have proved the arithmetic accuracy of the
application of the pro forma adjustments to the historical
amounts in the Pro Forma Information; and
(D) on the basis of such procedures, and such other
inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe
that the Pro Forma Information does not comply in all material
respects with the applicable accounting requirements of
Regulation S-X or that the Pro Forma Information included in
the Registration Statements has not been properly compiled and
that the pro forma adjustments have not been properly applied
to the historical amounts in the compilation of those
statements; and
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(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements with the
results obtained from inquiries, a reading of general accounting
records and other procedures specified in such letter and have found
such dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise specified in
such letter.
For purposes of this subsection and subsections (b) and (c) below, (i) if
the Effective Time of the Initial Registration Statement is subsequent to
the execution and delivery of this Agreement, "Registration Statements"
shall mean the initial registration statement as proposed to be amended by
the amendment or post-effective amendment to be filed shortly prior to its
Effective Time, (ii) if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement but the
Effective Time of the Additional Registration Statement is subsequent to
such execution and delivery, "Registration Statements" shall mean the
Initial Registration Statement and the Additional Registration Statement
as proposed to be filed or as proposed to be amended by the post-effective
amendment to be filed shortly prior to its Effective Time, and (iii)
"Prospectus" shall mean the prospectus included in the Registration
Statements.
(b) The Underwriters shall have received a letter, dated the date of
delivery thereof (which, if the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, shall
be on or prior to the date of this Agreement or, if the Effective Time of
the Initial Registration Statement is subsequent to the execution and
delivery of this Agreement, shall be prior to the filing of the amendment
or post-effective amendment to the registration statement to be filed
shortly prior to such Effective Time), of Deloitte & Touche LLP confirming
that they are independent public accountants within the meaning of the Act
and the applicable published Rules and Regulations thereunder and stating
to the effect that:
(i) in their opinion the financial statements and schedules of
Rockwell Graphic Systems, a business unit of Rockwell International
Corporation ("RGS"), audited by them and included in the
Registration Statements comply as to form in all material respects
with the applicable accounting requirements of the Act and the
related published Rules and Regulations;
(ii) they have performed the procedures specified by the
American Institute of Certified Public Accountants for a review of
interim financial information as described in Statement of Auditing
Standards No. 71, Interim Financial Information, on the unaudited
financial statements of RGS included in the Registration Statements;
(iii) on the basis of the review referred to in clause (i)
above, a reading of the latest available interim financial
statements of RGS, inquiries of officials of RGS who have
responsibility for financial and accounting matters and other
specified procedures, nothing came to their attention that caused
them to believe that:
(A) the unaudited financial statements of RGS included
in the Registration Statements do not comply as to form in all
material respects with the applicable accounting requirements
of the Act and the related published Rules and Regulations or
any material modifications should be made to such unaudited
financial statements for them to be in conformity with
generally accepted accounting principles;
(B) at the date of the latest available balance sheet
read by such accountants, and at a subsequent specified date
not more than three days prior to the date of this Agreement,
there was any change in stockholders' equity or any
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increase in short-term indebtedness or long-term debt or any
decrease in consolidated net current assets or total assets of
RGS and its consolidated subsidiaries, as compared with
amounts shown on the latest balance sheet included in the
Prospectus; or
(C) for the period from the closing date of the latest
income statement included in the Prospectus to the closing
date of the latest available income statement read by such
accountants, and at a subsequent specified date not more than
three days prior to the date of this Agreement, there were any
decreases, as compared with the corresponding period of the
previous year and with the period of corresponding length
ended the date of the latest income statement included in the
Prospectus, in consolidated revenues, or net operating income,
or in the total or per share amounts of consolidated income
before extraordinary items or net income,
except in all cases set forth in clauses (B) and (C) above for
changes, increases or decreases which the Prospectus discloses have
occurred or may occur or which are described in such letter; and
(iv) they have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other financial
information contained in the Registration Statements with the
results obtained from inquiries, a reading of general accounting
records and other procedures specified in such letter and have found
such dollar amounts, percentages and other financial information to
be in agreement with such results, except as otherwise specified in
such letter.
(c) If the Effective Time of the Initial Registration Statement is
not prior to the execution and delivery of this Agreement, such Effective
Time shall have occurred not later than 10:00 P.M., New York time, on the
date of this Agreement or such later date as shall have been consented to
by CS First Boston. If the Effective Time of the Additional Registration
Statement (if any) is not prior to the execution and delivery of this
Agreement, such Effective Time shall have occurred not later than 10:00
P.M., New York time, on the date of this Agreement or, if earlier, the
time the Prospectus is printed and distributed to any Underwriter, or
shall have occurred at such later date as shall have been consented to by
CS First Boston. If the Effective Time of the Initial Registration
Statement is prior to the execution and delivery of this Agreement, the
Prospectus shall have been filed with the Commission in accordance with
the Rules and Regulations and Section 5(a) of this Agreement. Prior to the
Closing Date, no stop order suspending the effectiveness of a Registration
Statement shall have been issued and no proceedings for that purpose shall
have been instituted or, to the knowledge of Goss or the Underwriters,
shall be contemplated by the Commission.
(d) Subsequent to the execution and delivery of this Agreement,
there shall not have occurred (i) any change, or any development or event
involving a prospective change, in the financial condition, business,
properties or results of operations of Goss or any of its subsidiaries
which, in the judgment of a majority in interest of the Underwriters
including CS First Boston, is material and adverse and makes it
impractical or inadvisable to proceed with completion of the public
offering or the sale of and payment for any of the Notes; (ii) any
downgrading in the rating of any debt securities or preferred stock of
Goss by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act), or any public
announcement that any such organization has under surveillance or review
its rating of any debt securities or preferred stock of Goss (other than
an announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating); (iii) any
suspension or limitation of trading in securities generally on the New
York Stock Exchange, or any setting of
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minimum prices for trading on such exchange, or any suspension of trading
of any securities of Goss on any exchange or in the over-the-counter
market; (iv) any banking moratorium declared by U.S. Federal or New York
authorities; or (v) any outbreak or escalation of major hostilities in
which the United States is involved, any declaration of war by Congress or
any other substantial national or international calamity or emergency if,
in the judgment of a majority in interest of the Underwriters including CS
First Boston, the effect of any such outbreak, escalation, declaration,
calamity or emergency makes it impractical or inadvisable to proceed with
completion of the public offering or the sale of and payment for any of
the Notes.
(e) The Underwriters shall have received an opinion, dated the
Closing Date, of Wachtell Lipton Rosen & Katz, counsel for Goss, to the
effect that:
(i) Goss has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Prospectus;
(ii) The Indenture has been duly authorized, executed and
delivered and has been duly qualified under the Trust Indenture Act;
the Notes, when duly authenticated by the Trustee in accordance with
the terms of the Indenture and when paid for by the Underwriters in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will have been duly authorized,
executed, authenticated, issued and delivered; and the Indenture and
the Notes will constitute valid and legally binding obligations of
Goss, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles;
(iii) To the knowledge of such counsel, except as disclosed in
the Prospectus and except as provided in connection with the Equity
Private Placement and the Management Placement, there are no
contracts, agreements or understandings between Goss and any person
granting such person the right to require Goss to file a
registration statement under the Act with respect to any securities
of Goss owned or to be owned by such person or to require Goss to
include such securities in the securities registered pursuant to a
Registration Statement or in any securities being registered
pursuant to any other registration statement filed by Goss under the
Act;
(iv) To the knowledge of such counsel, except as disclosed in
the Prospectus, no consent, approval, authorization, or order of, or
filing with, or notice to, any governmental agency or body of the
United States, any state of the United States or any political
subdivision thereof or any court of the United States, any state of
the United States or any political subdivision thereof is required
for the consummation of the offering of the Notes and the
transactions contemplated by the Credit Agreement, except such as
have been obtained and made and such as may be required with respect
to the offering of the Notes under state securities laws;
(v) None of the execution, delivery and performance of the
Indenture, the Purchase Agreement, the Credit Agreement, the
Portfolio Purchase Agreement and this Agreement, and the
consummation of the transactions contemplated thereby, will conflict
with the charter or by-laws of Goss;
(vi) The Purchase Agreement has been duly authorized, executed
and delivered by Goss and constitutes a valid and legally binding
obligation of Goss, enforceable in
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accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles;
(vii) The Credit Agreement and Portfolio Purchase Agreement
have each been duly authorized, and upon consummation of the
Acquisition will have been duly executed and delivered and will each
constitute a valid and legally binding obligation of Goss,
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
(viii) This Agreement has been duly authorized, executed and
delivered by Goss;
(ix) Goss is not and, after giving effect to the consummation
of the Transactions, will not be an "investment company" or an
entity controlled by an investment company as such terms are defined
in the Investment Company Act of 1940, as amended and the rules and
regulations of the Commission thereunder;
(x) The Initial Registration Statement was declared effective
under the Act as of the date and time specified in such opinion, the
Additional Registration Statement (if any) was filed and became
effective under the Act as of the date and time (if determinable)
specified in such opinion, the Prospectus either was filed with the
Commission pursuant to the subparagraph of Rule 424(b) specified in
such opinion on the date specified therein or was included in the
Initial Registration Statement or the Additional Registration
Statement (as the case may be), and, to the knowledge of such
counsel, no stop order suspending the effectiveness of a
Registration Statement or any part thereof has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act, and each Registration Statement and the
Prospectus, as amended or supplemented, comply as to form in all
material respects with the requirements of the Act and the Rules and
Regulations (except for the financial statements and related
schedules and notes or other financial or statistical data contained
therein). No facts have come to such counsel's attention to lead
such counsel to believe that a Registration Statement, as of its
effective date, contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto, as of its issue
date or as of the Closing Date, contained any untrue statement of a
material fact or omitted to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no opinion as to the
financial statements and related schedules and notes or other
financial or statistical data contained in the Registration
Statements or the Prospectus); and
(xi) The Indenture and the Notes conform in all material
respects to the descriptions thereof contained in the Prospectus;
and the description in the Prospectus of United States federal
income tax matters under the heading "Certain Federal Income Tax
Consequences" in all material respects accurately and fairly
presents the information required to be shown;
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States
and the States of Delaware and New York, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (reasonably satisfactory to Underwriters' counsel) of
other counsel reasonably acceptable to the Underwriters' counsel, familiar
with the applicable laws, provided that
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such other opinion or opinions are delivered to the Underwriters and such
reliance is expressly authorized therein; and (B) as to matters of fact,
to the extent such counsel deems proper, on certificates of responsible
officers of the Company and certificates or other written statements of
officials of jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company. With respect to the
matters to be covered in the last sentence of subparagraph (x) above
counsel may state that their opinion and belief is based upon their
participation in the preparation of the Registration Statement and the
Prospectus, as amended or supplemented, and discussions with
representatives of the Company and its auditors in which such counsel and
the Underwriters and their counsel participated but is without independent
check or verification except as specified. Such counsel may further state
that such counsel have not verified, and are not passing upon and do not
assume any responsibility for, the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the Prospectus,
except as provided in subparagraph (xi) above.
(f) The Underwriters shall have received an opinion, dated the
Closing Date, of Jack E. Merryman, Esq., General Counsel of Goss, to the
effect that:
(i) Goss is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business
requires such qualification, except where the failure to be so
qualified could not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect; each subsidiary of
Goss has been duly incorporated and is a validly existing
corporation in good standing under the laws of the jurisdiction of
its incorporation, with corporate power and authority to own, lease
and operate its properties and conduct its business as described in
the Prospectus; and each subsidiary of Goss is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where
the failure to be so qualified could not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
all of the issued and outstanding capital stock of each subsidiary
of Goss has been duly authorized and validly issued and is fully
paid and nonassessable; all of the capital stock of Goss is owned by
Holdings free from liens, encumbrances and defects, except as
described in the Prospectus and except pursuant to the Security
Agreement; and the capital stock of each subsidiary of Goss is owned
by Goss, directly or through subsidiaries, free from liens,
encumbrances and defects, except as described in the Prospectus and
except pursuant to the Security Agreement;
(ii) Goss and its subsidiaries possess adequate certificates,
authorizations or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by
them and have not received any notice of proceedings (or is aware of
any facts that would be expected to result in such proceeding)
relating to the revocation or modification of any such certificate,
authorization or permit that, if determined adversely to Goss or any
of its subsidiaries, could reasonably be expected to, individually
or in the aggregate, have a Material Adverse Effect. Goss and its
subsidiaries are in compliance with their respective obligations
under such certificates, authorizations or permits and no event has
occurred that allows, or after notice or lapse of time would allow,
revocation or termination of such certificates, authorizations or
permits or violation of such laws or regulations, except for such
non-compliance and events as could not reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(iii) Except as disclosed in the Prospectus, there are no
pending actions, suits or proceedings against or affecting Goss any
of its subsidiaries or any of their respective
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properties, assets or operations that, if determined adversely to
Goss or any of its subsidiaries, could, individually or in the
aggregate, have a Material Adverse Effect, or could reasonably be
expected to materially and adversely affect the ability of Goss to
perform its obligations under the Indenture, this Agreement or any
other document governing any of the Transactions, or which are
otherwise material in the context of the Transactions; to the
knowledge of such counsel, no such actions, suits or proceedings are
threatened or contemplated;
(iv) To knowledge of such counsel, the execution, delivery and
performance of the Indenture, the Purchase Agreement, the Credit
Agreement, the Portfolio Purchase Agreement and this Agreement, and
the consummation of the Transactions, including, without limitation,
the issuance and sale of the Notes and compliance with the terms and
provisions thereof, will not result in a breach or violation of any
of the terms and provisions of, or constitute a default under, or
(except such as have been obtained and made and such as may be
required with respect to the offering of the Notes under state
securities laws) require the consent, approval, authorization or
order of, or filing with, or notice to, any person, entity, agency
or body under, any statute, any rule, regulation or order of any
governmental agency or body or any court, domestic or foreign,
having jurisdiction over Goss or any subsidiary of Goss or any of
their properties, assets or operations, or any agreement or
instrument to which Goss or any such subsidiary is a party or by
which Goss or any such subsidiary is bound or to which any of the
properties of Goss or any such subsidiary is subject in each case
except as could not reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect or have a material
adverse effect or the consummation of any of the Transactions, or
the charter or by-laws of Goss or any such subsidiary; and Goss has
full power and authority to authorize, issue and sell the Notes, as
contemplated by this Agreement and the Indenture;
(v) The descriptions in the Registration Statements and
Prospectus of statutes, regulations, legal and governmental
proceedings and contracts and other documents (other than those set
forth under the heading "Description of Notes," "Description of New
Bank Credit Agreement," "Description of Sale of Customer Notes" and
"Description of Certain Federal Income Tax Consequences") are
accurate in all material respects and fairly present the information
required to be shown; and such counsel do not know of any material
statutes, regulations, legal or governmental proceedings required to
be described in a Registration Statement or the Prospectus which are
not described as required or of any material contracts or documents
of a character required to be described in a Registration Statement
or the Prospectus or to be filed as exhibits to a Registration
Statement which are not described and filed as required.
(vi) No facts have come to such counsel's attention to lead
such counsel to believe that a Registration Statement, as of its
effective date or as of the Closing Date, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus or any amendment or
supplement thereto, as of its issue date or as of the Closing Date,
contained any untrue statement of a material fact or omitted to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading (it being understood that such counsel need
express no opinion as to the financial statements and related
schedules and notes or other financial and statistical data
contained in the Registration Statements or the Prospectus).
In rendering his opinion as aforesaid, such counsel may rely upon an
opinion or opinions, each dated the Closing Date, of other counsel as to
the laws of Japan, France and the United Kingdom, provided that (x) each
such local counsel is acceptable to the Underwriters, (y) such reliance is
expressly authorized by each opinion so relied upon and a copy of each
such opinion is delivered
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to the Underwriters and is in form and substance satisfactory to the
Underwriters and (z) counsel shall state in his opinion that he believes
that such counsel and the Underwriters are justified in relying thereon.
(g) The Underwriters shall have received an opinion, dated the
Closing Date, of Chadbourne & Parke LLP, counsel to Rockwell International
Corporation, and such opinions of foreign counsel, dated the Closing Date,
as are delivered pursuant to Section 10(c) of the Purchase Agreement, in
each case substantially to the effect set forth in such Section 10(c) and
addressed to the Underwriters or accompanied by letters stating that the
Underwriters are entitled to rely upon such opinions as if addressed to
the Underwriters.
(h) The Underwriters shall have received from Dewey Ballantine,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with respect to the validity of the Notes, the Registration
Statements, the Prospectus and other related matters as the Underwriters
may require, and Goss shall have furnished to such counsel such documents
as they request for the purpose of enabling them to pass upon such
matters.
(i) The Underwriters shall have received a certificate, dated the
Closing Date, of the President or any Vice-President and a principal
financial or accounting officer of Goss in which such officers, to the
best of their knowledge after reasonable investigation, shall state that:
the representations and warranties of Goss in this Agreement are true and
correct; Goss has complied with all agreements and satisfied all
conditions on their part to be performed or satisfied hereunder at or
prior to the Closing Date; no stop order suspending the effectiveness of
any Registration Statement has been issued and no proceedings for that
purpose have been instituted or are contemplated by the Commission; the
Additional Registration Statement (if any) satisfying the requirements of
subparagraphs (1) and (3) of Rule 462(b) was filed pursuant to Rule
462(b), including payment of the applicable filing fee in accordance with
Rule 111(a) or (b) under the Act, prior to the time the Prospectus was
printed and distributed to any Underwriter; they have carefully examined
the Registration Statements and the Prospectus and neither any
Registration Statement nor the Prospectus, as amended or supplemented, (i)
as of their respective effective or issue times, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading and (ii) as of the Closing Date, contained any untrue
statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and, subsequent to the dates as of which information is given in the
Registration Statements and the Prospectus, there has been no Material
Adverse Effect, nor any development or event involving a prospective
Material Adverse Effect, except as set forth in or contemplated by the
Prospectus or as described in such certificate.
(j) The Underwriters shall have received a letter, dated the Closing
Date, of Arthur Andersen LLP which meets the requirements of subsection
(a) of this Section, except that the specified date referred to in such
subsection will be a date not more than three days prior to the Closing
Date for the purposes of this subsection.
(k) The Underwriters shall have received a letter, dated the Closing
Date, of Deloitte & Touche LLP which meets the requirements of subsection
(b) of this Section, except that the specified date referred to in such
subsection will be a date not more than three days prior to the Closing
Date for the purposes of this subsection.
(l) At the Closing Date, the Credit Agreement shall have been
executed and delivered and be in full force and effect and all conditions
to borrowing thereunder shall have been satisfied, and Goss shall have
provided to the Underwriters copies of all documents with respect thereto
as they may reasonably request.
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(m) At the Closing Date, the Acquisition shall have been completed
as described in the Prospectus, and Goss shall have provided to the
Underwriters copies of all documents with respect thereto as they may
reasonably request.
(n) At the Closing Date, the Portfolio Purchase Agreement shall have
been executed and delivered and be in full force and effect and the
transactions contemplated thereby shall have been completed as described
in the Prospectus, and Goss shall have provided to the Underwriters copies
of all documents with respect thereto as they may reasonably request.
(o) At the Closing Date, the Management Placement and the Equity
Private Placement shall have been completed as described in the
Prospectus, and Goss shall have provided to the Underwriters copies of all
documents with respect thereto as they may reasonably request.
(p) The Underwriters shall have received such other opinions,
certificates, letters and other documents from and on behalf of Goss as CS
First Boston may reasonably request.
Goss will furnish CS First Boston with such conformed copies of such opinions,
certificates, letters and documents as CS First Boston reasonably request. CS
First Boston may in its sole discretion waive on behalf of the Underwriters
compliance with any conditions to the obligations of the Underwriters hereunder.
7. Indemnification and Contribution. (a) Goss will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement,
the Prospectus, or any amendment or supplement thereto, or any related
preliminary prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such loss, claim,
damage, liability or action as such expenses are incurred; provided, however,
that Goss will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with written information furnished
to Goss by any Underwriter specifically for use therein, it being understood and
agreed that the only such information furnished by any Underwriter consists of
the information described as such in subsection (b) below.
(b) Each Underwriter will severally and not jointly indemnify and hold
harmless Goss against any losses, claims, damages or liabilities to which Goss
may become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, the Prospectus, or any amendment or
supplement thereto, or any related preliminary prospectus, or arise out of or
are based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
Goss by such Underwriter specifically for use therein, and will reimburse any
legal or other expenses reasonably incurred by Goss in connection with
investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred, it being understood and agreed that the only such
information furnished by any Underwriter consists of (i) the following
information in the Prospectus furnished on behalf of each Underwriter: the last
paragraph at the bottom of the cover page concerning the terms of the offering
by the Underwriters, the last two legends on page 2, the first sentence of the
first full paragraph on page 20, the information appearing in the third
paragraph under the caption "Underwriting", the information contained
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in the second and third sentences of the fourth paragraph under the caption
"Underwriting" and the information contained in the fifth paragraph under the
caption "Underwriting".
(c) Promptly after receipt by an indemnified party under this Section or
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above or Section 9, notify the indemnifying party of
the commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under subsection (a) or (b) above or Section 9. In case any
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section or Section 9, as the
case may be, for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes an unconditional release of such
indemnified party from all liability on any claims that are the subject matter
of such action.
(d) If the indemnification provided for in this Section or Section 9 is
unavailable or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above (or Section 9, as the case may be), then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in subsection (a) or (b) above (or Section 9, as the case may be)
(i) in such proportion as is appropriate to reflect the relative benefits
received by Goss on the one hand and the Underwriters on the other from the
offering of the Notes or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of Goss on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities as well as any other relevant equitable
considerations. The relative benefits received by Goss on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offerings (before deducting expenses) received by
Goss bear to the total underwriting discounts and commissions received by the
Underwriters. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by Goss or the Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the first
sentence of this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any action or claim which is the subject of this
subsection (d). Notwithstanding the provisions of this subsection (d), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Notes underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of Goss under this Section and Section 9 shall be in
addition to any liability which Goss may otherwise have and shall extend, upon
the same terms and conditions, to each person, if
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any, who controls any Underwriter within the meaning of the Act; and the
obligations of the Underwriters under this Section shall be in addition to any
liability which the respective Underwriters may otherwise have and shall extend,
upon the same terms and conditions, to each director of Goss, to each officer of
Goss who has signed a Registration Statement and to each person, if any, who
controls Goss within the meaning of the Act.
8. Default of Underwriters. If any Underwriter or Underwriters default in
their obligations to purchase Notes hereunder and the aggregate principal amount
of Notes that such defaulting Underwriter or Underwriters agreed but failed to
purchase does not exceed 10% of the total principal amount of the Notes, CS
First Boston may make arrangements satisfactory to Goss for the purchase of such
Notes by other persons, including any of the Underwriters, but if no such
arrangements are made by the Closing Date the non-defaulting Underwriters shall
be obligated severally, in proportion to their respective commitments hereunder,
to purchase the Notes that such defaulting Underwriters agreed but failed to
purchase. If any Underwriter or Underwriters so default and the aggregate
principal amount of Notes or Units with respect to which such default or
defaults occur exceeds 10% of the total principal amount of the Notes, and
arrangements satisfactory to CS First Boston and Goss for the purchase of such
Notes by other persons are not made within 36 hours after such default, this
Agreement will terminate without liability on the part of any non-defaulting
Underwriter or Goss, except as provided in Section 10. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section. Nothing herein will relieve a defaulting
Underwriter from liability for its default.
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of
Goss or its officers and of the Underwriters set forth in or made pursuant to
this Agreement will remain in full force and effect, regardless of any
investigation, or statement as to the results thereof, made by or on behalf of
any Underwriter, Goss or any of its representatives, officers or directors or
any controlling person, and will survive delivery of and payment for the Notes.
If this Agreement is terminated pursuant to Section 8 or if for any reason the
purchase of the Notes by the Underwriters is not consummated, Goss shall remain
responsible for the expenses to be paid or reimbursed by them pursuant to
Section 5 and the respective obligations of Goss and the Underwriters pursuant
to Section 7 and the obligations of Goss pursuant to Section 9 shall remain in
effect. If the purchase of the Notes by the Underwriters is not consummated for
any reason other than solely because of the termination of this Agreement
pursuant to Section 8 or the occurrence of any event specified in clause (iii),
(iv) or (v) of Section 6(d), Goss, will reimburse the Underwriters for all
out-of-pocket expenses (including fees and disbursements of counsel) reasonably
incurred by them in connection with the offering of the Notes.
10. Notices. All communications hereunder will be in writing and, if sent
to the Underwriters, will be mailed, delivered or telegraphed and confirmed to
CS First Boston at Park Avenue Plaza, New York, N.Y. 10055, Attention:
Investment Banking Department--Transactions Advisory Group, or, if sent to Goss,
will be mailed, delivered or telegraphed and confirmed to it at 700 Oakmont
Lane, Westmont, Illinois 60559, Attention: Jack E. Merryman, Esq.; provided,
however, that any notice to an Underwriter pursuant to Section 7 will be mailed,
delivered or telegraphed and confirmed to such Underwriter.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the officers and
directors and controlling persons referred to in Section 7, and no other person
will have any right or obligation hereunder.
12. Representation of Underwriters. CS First Boston will act for the
Underwriters in connection with this financing, and any action under this
Agreement taken by CS First Boston will be binding upon all the Underwriters.
21
<PAGE>
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without regard to principles
of conflicts of laws.
Goss hereby submits to the non-exclusive jurisdiction of the Federal and
state courts in the Borough of Manhattan in The City of New York in any suit or
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
22
<PAGE>
If the foregoing is in accordance with CS First Boston's understanding of
our agreement, kindly sign and return to Goss the counterparts hereof, whereupon
it will become a binding agreement among Goss and the Underwriters in accordance
with its terms.
Very truly yours,
GOSS GRAPHIC SYSTEMS, INC.
By ___________________________
Name:
Title:
The foregoing Underwriting Agreement is
hereby confirmed and accepted as of the
date first above written.
CS FIRST BOSTON CORPORATION
BT SECURITIES CORPORATION
By CS FIRST BOSTON CORPORATION
By _________________________
Name:
Title:
23
<PAGE>
SCHEDULE A
Principal
Amount of
Notes
---------
Underwriter
-----------
CS First Boston Corporation..................... $
BT Securities Corporation.......................
---------
Total $
=========
24
<PAGE>
SCHEDULE B
Subsidiaries of Goss
Rockwell PMC Inc., an Illinois corporation (to be renamed after the Acquisition
Closing)
Goss Graphic Systems Limited, a United Kingdom Corporation
Goss Graphic Systems - Japan Corporation, a Japanese corporation
Rockwell Systemes Graphiques Nantes, a societe anonyme organized under the laws
of the Republic of France (to be renamed after the Acquisition closing)
25
EXHIBIT 4.1
================================================================================
GOSS GRAPHIC SYSTEMS, INC.
$225,000,000
___% SENIOR SUBORDINATED NOTES DUE 2006
-----------------
INDENTURE
Dated as of October __, 1996
-----------------
THE BANK OF NEW YORK
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
Trust Indenture
Act Section Indenture Section
310 (a)(1) .................................................... 8.10
(a)(2) .................................................... 8.10
(a)(3) .................................................... N/A
(a)(4) .................................................... N/A
(a)(5) .................................................... 8.10
(b) ....................................................... 8.10
(c) ....................................................... N/A
311 (a) ....................................................... 8.11
(b) ....................................................... 8.11
(c) ....................................................... N/A
312 (a) ....................................................... 2.05
(b) ....................................................... 12.03
(c) ....................................................... 12.03
313 (a) ....................................................... 11.02
(b)(i) .................................................... 11.02
(b)(2) .................................................... 8.06
(c) ....................................................... 8.06; 11.02
(d) ....................................................... 8.06
314 (a) ....................................................... 8.03; 11.02
(b) ....................................................... 11.03
(c)(1) .................................................... 12.04
(c)(2) .................................................... 12.04
(c)(3) .................................................... N/A
(d) ....................................................... 11.02; 11.03
(e) ....................................................... 12.05
(f) ....................................................... N/A
315 (a) ....................................................... 8.01
(b) ....................................................... 8.05; 12.02
(c) ....................................................... 8.01
(d) ....................................................... 8.01
(e) ....................................................... 7.11
316 (a)(1)(A) ................................................. 7.05
(a)(1)(B) ................................................. 7.04
(a)(2) .................................................... N/A
(b) ....................................................... 7.07
317 (a)(1) .................................................... 7.08
(a)(2) .................................................... 7.09
(b) ....................................................... 2.04
318 (a) ....................................................... 12.01
(b) ....................................................... N/A
(c) ....................................................... 12.01
Note: This Cross-Reference Table shall not, for any purpose, be deemed to
be part of the Indenture.
i
<PAGE>
TABLE OF CONTENTS
Page
PARTIES................................................................ 1
RECITALS OF THE COMPANY................................................ 1
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions........................................... 1
Section 1.02. Other Definitions..................................... 15
Section 1.03. Incorporation by Reference of Trust Indenture Act..... 15
Section 1.04. Rules of Construction................................. 16
ARTICLE II
THE NOTES
Section 2.01. Form and Dating....................................... 16
Section 2.02. Execution and Authentication.......................... 16
Section 2.03. Registrar and Paying Agent............................ 17
Section 2.04. Paying Agent to Hold Money In Trust................... 17
Section 2.05. Lists of Holders...................................... 18
Section 2.06. Transfer and Exchange................................. 18
Section 2.07. Replacement Notes..................................... 18
Section 2.08. Outstanding Notes..................................... 19
Section 2.09. Temporary Notes....................................... 19
Section 2.10. Cancellation.......................................... 19
Section 2.11. Defaulted Interest.................................... 20
Section 2.12. CUSIP Number.......................................... 20
ARTICLE III
REDEMPTION
Section 3.01. Notices to Trustee.................................... 20
Section 3.02. Selection of Notes to be Redeemed..................... 20
Section 3.03. Notice of Redemption.................................. 21
Section 3.04. Effect of Notice of Redemption........................ 21
Section 3.05. Deposit of Redemption Price........................... 22
Section 3.06. Notes Redeemed in Part................................ 22
ARTICLE IV
CHANGE OF CONTROL
- ----------
Note: This Table of Contents shall not, for any reason, be deemed to be
part of the Indenture.
i
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Page
Section 4.01. Change of Control..................................... 22
ARTICLE V
COVENANTS
Section 5.01. Payment of Principal, Premium and Interest............ 24
Section 5.02. Maintenance of Office or Agency....................... 24
Section 5.03. SEC Reports........................................... 24
Section 5.04. Limitation On Debt.................................... 25
Section 5.05. Limitation on Debt and Preferred Stock of
Subsidiaries.......................................... 27
Section 5.06. Limitation On Restricted Payments..................... 28
Section 5.07. Limitation On Restrictions On Distributions from
Subsidiaries.......................................... 30
Section 5.08. Limitation On Sales of Assets and Subsidiary Stock.... 31
Section 5.09. Limitation On Affiliate Transactions.................. 33
Section 5.10. Compliance Certificates............................... 34
Section 5.11. Further Instruments and Acts.......................... 34
ARTICLE VI
SUCCESSORS
Section 6.01. When the Company May Merge or Transfer Assets......... 34
Section 6.02. Successor Company Substituted......................... 35
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01. Events of Default..................................... 35
Section 7.02. Acceleration.......................................... 37
Section 7.03. Other Remedies........................................ 37
Section 7.04. Waiver of Past Defaults............................... 37
Section 7.05. Control by Majority................................... 38
Section 7.06. Limitation On Suits................................... 38
Section 7.07. Unconditional Right of Holders to Receive Payment..... 38
Section 7.08. Collection Suit by Trustee............................ 38
Section 7.09. Trustee May File Proofs of Claim...................... 39
Section 7.10. Priorities............................................ 39
Section 7.11. Undertaking for Costs................................. 39
Section 7.12. Waiver of Stay, Extension and Usury Laws.............. 40
ARTICLE VIII
TRUSTEE
Section 8.01. Duties of Trustee..................................... 40
Section 8.02. Rights of Trustee..................................... 41
Section 8.03. Individual Rights of Trustee.......................... 42
Section 8.04. Trustee's Disclaimer.................................. 42
Section 8.05. Notice of Default..................................... 42
Section 8.06. Reports by Trustee to Holders......................... 42
ii
<PAGE>
Page
Section 8.07. Compensation and Indemnity............................ 42
Section 8.08. Replacement of Trustee................................ 43
Section 8.09. Successor Trustee by Merger, Etc...................... 44
Section 8.10. Eligibility; Disqualification......................... 45
Section 8.11. Preferential Collection of Claims Against the
Company............................................... 45
Section 8.12. May Hold Securities................................... 45
ARTICLE IX
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Liability on Notes; Defeasance........... 45
Section 9.02. Conditions to Defeasance.............................. 46
Section 9.03. Application of Trust Money............................ 47
Section 9.04. Repayment to the Company.............................. 47
Section 9.05. Indemnity for Government Obligations.................. 48
Section 9.06. Reinstatement......................................... 48
ARTICLE X
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. Without Consent of Holders............................ 48
Section 10.02. With Consent of Holders............................... 49
Section 10.03. Compliance with Trust Indenture Act................... 50
Section 10.04. Revocation and Effect of Consents and Waivers......... 50
Section 10.05. Notation On or Exchange of Notes...................... 51
Section 10.06. Trustee to Sign Amendments, Etc....................... 51
Section 10.07. Payment for Consents.................................. 51
ARTICLE XI
SUBORDINATION OF NOTES
Section 11.02. Payment Over of Proceeds Upon Dissolution, Etc........ 52
Section 11.03. No Payment When Senior Debt in Default................ 53
Section 11.04. Acceleration of Payment of Notes...................... 54
Section 11.05. Payment Permitted If No Default....................... 54
Section 11.06. Subrogation to Rights of Holders of Senior Debt....... 54
Section 11.07. Provisions Solely to Define Relative Rights........... 54
Section 11.08. Trustee to Effectuate Subordination................... 55
Section 11.09. No Waiver of Subordination Provisions................. 55
Section 11.10. Notice to Trustee..................................... 55
Section 11.11. Reliance on Judicial Order or Certificate
of Liquidating Agent ................................. 56
Section 11.12. Trustee Not Fiduciary for holders of Senior Debt...... 56
Section 11.13. Rights of Trustee as holder of Senior Debt;
Preservation of Trustee's Rights...................... 57
Section 11.14. Article XI Applicable to Paying Agents................ 57
Section 11.15. Trust Moneys Not Subordinated......................... 57
Section 11.16. Reliance by holders of Senior Debt on
Subordination Provisions..,........................... 57
Section 11.17. Distribution or Notice to Representative.............. 57
iii
<PAGE>
Section 11.18. Article XI Not To Prevent Events of Default or
Limit Right To Accelerate............................. 57
ARTICLE XII
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.......................... 58
Section 12.02. Notices............................................... 58
Section 12.03. Communication by Holders with Other Holders........... 59
Section 12.04. Certificate and Opinion as to Conditions Precedent.... 59
Section 12.05. Statements Required in Certificate or Opinion......... 59
Section 12.06. Rules by Trustee and Agents........................... 60
Section 12.07. No Personal Liability of Directors, Officers,
Employees, Incorporators and Stockholders............. 60
Section 12.08. Governing Law......................................... 60
Section 12.09. No Adverse Interpretation of Other Agreements......... 60
Section 12.10. Successors............................................ 60
Section 12.11. Severability.......................................... 60
Section 12.12. Counterpart Originals................................. 60
Section 12.13. Table of Consents, Headings, Etc...................... 61
EXHIBIT A -- Form of Note; Form of Trustee's Certificate of Authentication
iv
<PAGE>
INDENTURE, dated as of October __, 1996, between Goss Graphic Systems,
Inc. ("the Company"), a corporation duly organized and existing under the laws
of the State of Delaware, and The Bank of New York, a New York banking
corporation, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of up to $225,000,000 aggregate principal
amount of the Company's Senior Subordinated Notes Due 2006 (the "Notes")
issuable as provided in this Indenture. All things necessary to make this
Indenture a valid agreement of the Company, in accordance with its terms, have
been done, and the Company has done all things necessary to make the Notes, when
executed by the Company and authenticated and delivered by the Trustee hereunder
and duly issued by the Company, the valid obligations of the Company as
hereinafter provided.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the Notes
by the Holders thereof, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Notes, as follows:
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"Acquisition" means the acquisition by the Company of the Graphic
Systems business unit from Rockwell International Corporation pursuant to a
Stock and Asset Purchase Agreement dated as of April 26, 1996, as amended on
July 18, 1996.
"Additional Assets" means (i) any property or assets (other than Debt
and Capital Stock) used or useful in a Related Business; (ii) the Capital Stock
of a Person that becomes a Subsidiary as a result of the acquisition of such
Capital Stock by the Company or another Subsidiary or (iii) Capital Stock
constituting a minority interest in any Person that at such time is a
Subsidiary; provided, however, that any such Subsidiary described in clause (ii)
or (iii) above is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described in Sections 5.06, 5.08 and 5.09 only,
"Affiliate" shall also mean any beneficial owner of Capital Stock representing
10% or more of the total voting power of the Voting Stock (on a
<PAGE>
fully diluted basis) of the Company or of rights or warrants to purchase such
Capital Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
Notwithstanding the foregoing, none of Bankers Trust Company, Credit Suisse or
The Bank of Nova Scotia shall be deemed to be an Affiliate of the Company and
its Subsidiaries solely as a result of the security interests held by such
entity in the Capital Stock of the Company's Subsidiaries pursuant to the Credit
Agreement.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Disposition" means any sale, transfer or other disposition (or
series of related sales, transfers or dispositions) by the Company or any
Subsidiary, including any disposition by means of a merger, consolidation or
similar transaction (each referred to for the purposes of this definition as a
"disposition"), of (i) any shares of Capital Stock of a Subsidiary (other than
directors' qualifying shares or shares required by applicable law to be held by
a Person other than the Company or a Subsidiary), (ii) all or substantially all
the assets of any division or line of business of the Company or any Subsidiary
or (iii) any other assets of the Company or any Subsidiary outside of the
ordinary course of business of the Company or such Subsidiary (other than, in
the case of (i), (ii) and (iii) above, (v) any disposition, or related series of
dispositions, of assets with an aggregate fair market value of $1 million or
less for each such disposition or related series of dispositions, (w)
dispositions permitted under Article VI, (x) a disposition by a Subsidiary to
the Company or by the Company or a Subsidiary to a Wholly Owned Subsidiary, (y)
sales of Customer Notes to third parties (including the sale of certain customer
notes to BTCC contemporaneously with the Acquisition) and (z) for purposes of
the covenant described in Section 5.08 only, a disposition that constitutes a
Restricted Payment permitted by the covenant described under Section 5.06.
"Average Life" means, as of the date of determination, with respect to
any Debt or Preferred Stock, the quotient obtained by dividing (i) the sum of
the products of numbers of years from the date of determination to the dates of
each successive scheduled principal payment of such Debt or redemption or
similar payment with respect to such Preferred Stock multiplied by the amount of
such payment by (ii) the sum of all such payments.
"Banks" means the "Lenders" as defined in the Credit Agreement.
"Bankruptcy Law" means the U.S. Bankruptcy Code, 11 U.S.C. ss. 101,
et. seq., or any similar federal or state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"BTCC" means Bankers Trust Commercial Corporation.
"BTCC Note Guarantees" means the Guarantees by the Company of
principal and/ or interest under certain customer notes being sold to BTCC
contemporaneously with the Acquisition, which Guarantees are a condition to
BTCC's obligation to purchase such customer notes, and the related repurchase
obligations not in excess of $4 million in the aggregate and indemnity
obligations to BTCC, as set forth in the definitive agreement executed in
connection therewith.
"Business Day" means each day which is not a Legal Holiday.
2
<PAGE>
"Capital Lease Obligations" of any Person means an obligation that is
required to be classified and accounted for as a capital lease on the face of
the balance sheet of such Person prepared in accordance with GAAP, and the
amount of Debt represented by such obligation shall be the capitalized amount of
such obligation determined in accordance with GAAP; and the Stated Maturity
thereof shall be the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease may be terminated
by the lessee without payment of a penalty.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in such Person (however designated) equity of such Person, including
any Preferred Stock, but excluding any debt securities convertible or
exchangeable into such equity.
"Cash Equivalents" means (i) obligations issued or unconditionally
guaranteed by the United States of America or any agency thereof, or obligations
issued by any agency or instrumentality thereof and backed by the full faith and
credit of the United States of America, (ii) commercial paper rated the highest
grade by Moody's Investors Service, Inc. and Standard & Poor's Ratings Group and
maturing not more than one year from the date of creation thereof, (iii) time
deposits with, and certificates of deposit and banker's acceptances issued by,
any bank having capital surplus and undivided profits aggregating at least $500
million and maturing not more than one year from the date of creation thereof,
(iv) repurchase agreements that are secured by a perfected security interest in
an obligation described in clause (i) and are with any bank described in clause
(iii), (v) shares of any money market mutual fund that (a) has at least 95% of
its assets invested continuously in the types of investments referred to in
clauses (i) and (ii) above, (b) has net assets of not less than $500 million,
and (c) has the highest rating obtainable from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc. and (vi) readily marketable direct
obligations issued by any state of the United States of America or any political
subdivision thereof having one of the two highest rating categories obtainable
from either Moody's Investors Service, Inc. or Standard & Poor's Ratings Group.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending at least 45 days prior to the
date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; provided, however, that (1) if the Company or any Subsidiary
has Incurred any Debt since the beginning of such period that remains
outstanding (other than Debt Incurred under the Revolving Credit Facility with
respect to which the related commitment remains outstanding) or if the
transaction giving rise to the need to calculate the Consolidated Coverage Ratio
is an Incurrence of Debt, or both, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving effect on a pro forma basis to such
Debt as if such Debt had been Incurred on the first day of such period and the
discharge of any other Debt repaid, repurchased, defeased or otherwise
discharged with the proceeds of such new Debt as if such discharge had occurred
on the first day of such period, (2) if since the beginning of such period any
Debt of the Company or any Subsidiary has been repaid, repurchased, defeased or
otherwise discharged or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio will include any such repayment, repurchase,
defeasement or discharge not otherwise covered in clause (1) above, or both (in
either case other than Debt Incurred pursuant to the Revolving Credit Facility
or any similar arrangement unless such revolving credit Debt has been
permanently repaid and has not been replaced), Consolidated
3
<PAGE>
Interest Expense for such period shall be calculated, after giving effect
thereto on a pro forma basis, as if such Debt had been repaid, repurchased,
defeased or otherwise discharged on the first day of such period, (3) if since
the beginning of such period the Company or any Subsidiary shall have made any
Asset Disposition, the EBITDA for such period shall be reduced by an amount
equal to the EBITDA (if positive) directly attributable to the assets which are
the subject of such Asset Disposition for such period, or increased by an amount
equal to the EBITDA (if negative), directly attributable thereto for such period
and Consolidated Interest Expense for such period shall be reduced by an amount
equal to the Consolidated Interest Expense directly attributable to any Debt of
the Company or any Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Subsidiaries in
connection with such Asset Disposition for such period (or, if the Capital Stock
of any Subsidiary is sold, the Consolidated Interest Expense for such period
directly attributable to the Debt of such Subsidiary to the extent the Company
and its continuing Subsidiaries are no longer liable for such Debt after such
sale), (4) if since the beginning of such period the Company or any Subsidiary
(by merger or otherwise) shall have made an Investment in any Subsidiary (or any
person which becomes a Subsidiary) or an acquisition of assets, including any
acquisition of assets occurring in connection with a transaction requiring a
calculation to be made hereunder, which constitutes all or substantially all of
an operating unit of a business, EBITDA and Consolidated Interest Expense for
such period shall be calculated after giving pro forma effect thereto (including
the Incurrence of any Debt) as if such Investment or acquisition occurred on the
first day of such period and (5) if since the beginning of such period any
Person (that subsequently became a Subsidiary or was merged with or into the
Company or any Subsidiary since the beginning of such period) shall have made
any Asset Disposition, any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (3) or (4) above if made by the
Company or a Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Asset Disposition, Investment or acquisition occurred on the
first day of such period. For purposes of this definition, whenever pro forma
effect is to be given to an acquisition of assets, the amount of income or
earnings relating thereto and the amount of Consolidated Interest Expense
associated with any Debt Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible financial or
accounting Officer of the Company. If any Debt bears a floating rate of interest
and is being given pro forma effect, the interest of such Debt shall be
calculated as if the rate in effect on the date of determination had been the
applicable rate for the entire period (taking into account any Interest Rate
Agreement applicable to such Debt if such Interest Rate Agreement has a
remaining term in excess of 12 months).
"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Subsidiaries, plus, to the
extent not included in such total interest expense, and to the extent incurred
by the Company or its Subsidiaries, (i) interest expense attributable to Capital
Lease Obligations, (ii) amortization of debt discount, (iii) capitalized
interest, (iv) non-cash interest expenses, (v) commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing, (vi) net costs associated with Interest Rate Agreements (including
amortization of fees), (vii) Preferred Stock dividends in respect of all
Preferred Stock (except dividends payable solely in shares of Capital Stock of
the Company (other than Disqualified Stock of the Company)) held by Persons
other than the Company or a Wholly Owned Subsidiary, (viii) interest incurred in
connection with Investments in discontinued operations, (ix) interest accruing
on any Debt of any other Person to the extent such Debt is Guaranteed by the
Company or any Subsidiary and (x) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the
4
<PAGE>
Company) in connection with Debt Incurred by such plan or trust provided,
however, that there shall not be included in such Consolidated Interest Expense
any amount of interest expense of any Subsidiary if the net income of such
Subsidiary is excluded in the calculation of Consolidated Net Income (but only
in the same proportion as such net income is excluded) because the declaration
or payment of dividends or similar distributions by such Subsidiary of such net
income is not at the time permitted by the operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to such Subsidiary.
"Consolidated Net Income" means, for any period, the net income of the
Company and its consolidated Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income: (i) any net income of any
Person if such Person is not a Subsidiary, except that (A) subject to the
exclusion contained in clause (iv) below, the Company's equity in the net income
of any such Person for such period shall be included in such Consolidated Net
Income up to the aggregate amount of cash actually distributed by such Person
during such period to the Company or a Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to a
Subsidiary, to the limitations contained in clause (iii) below) and (B) the
Company's equity in a net loss of any such Person for such period shall be
included in determining such Consolidated Net Income to the extent of any cash
actually contributed by the Company or a Subsidiary to such Person during such
Period; (ii) any net income (or loss) of any Person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; (iii) any net income of any Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the payment of
dividends or the making of distributions by such Subsidiary, directly or
indirectly, to the Company, except that (A) subject to the exclusion contained
in clause (iv) below, the Company's equity in the net income of any such
Subsidiary for such period shall be included in such Consolidated Net Income up
to the aggregate amount of cash actually distributed by such Subsidiary during
such period to the Company or another Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution paid to
another Subsidiary, to the limitation contained in this clause) and (B) the
Company's equity in a net loss of any such Subsidiary for such period shall be
included in determining such Consolidated Net Income to the extent of any cash
actually contributed by the Company or a Subsidiary to such Person during such
Period; (iv) any gain or loss net of tax realized upon the sale or other
disposition of any assets of the Company or its consolidated Subsidiaries
(including pursuant to any sale-and-leaseback arrangement) which is not sold or
otherwise disposed of in the ordinary course of business and any gain or loss
net of tax realized upon the sale or other disposition of any Capital Stock of
any Person; (v) extraordinary gains or losses net of tax; (vi) the cumulative
effect of a change in accounting principles, net of tax; and (vii) in the case
of the Company, any depreciation or amortization resulting from any write-up in
the book value of any assets due to the Acquisition. Notwithstanding the
foregoing, for the purposes of Section 5.06 only, there shall be excluded from
Consolidated Net Income any dividends, repayments of loans or advances or other
transfers of assets from a Subsidiary to the extent such dividends, repayments
or transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (a)(3)(D) thereof.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of the end of the most recent
fiscal quarter of the Company ending at least 45 days prior to the taking of any
action for the purpose of which the determination is being made, as (i) the par
or stated value of all outstanding Capital Stock of the Company plus
5
<PAGE>
(ii) paid-in capital or capital surplus relating to such Capital Stock plus
(iii) any retained earnings or earned surplus less (A) any accumulated deficit
and (B) any amounts attributable to Disqualified Stock.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 or such other address as to which the Trustee
may give notice to the Company.
"Credit Agreement" means that certain Credit Agreement, dated as of
October __, 1996, among the Company, certain Subsidiaries of the Company,
Bankers Trust Company as agent, the co-agents named therein and the lenders
named therein, including (i) any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, and in
each case as amended, modified, renewed, refunded, replaced or refinanced from
time to time, in whole or in part, and (ii) any credit agreements, notes,
guarantees, collateral documents, instruments and agreements executed in
connection with any such amendment, modification, renewal, refunding,
replacement or refinancing.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement to which such
Person is a party or a beneficiary.
"Custodian" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"Customer Notes" means notes receivable, on terms consistent with the
past practices of the Company and its Subsidiaries and with prevailing industry
practices, issued in connection with customer financing provided to purchasers
of the Company's and its Subsidiaries' products and secured by a valid and
enforceable first priority Lien on the products being purchased.
"Customer Notes Guarantees" means Guarantees by the Company and its
Subsidiaries, on terms consistent with the past practices of the Company and its
Subsidiaries and with prevailing industry practices, of all or a portion of
Customer Notes issued by the Company or its Subsidiaries and sold to third
parties, or of all or a portion of customer notes or other financing provided by
third parties to purchasers of the Company's and its Subsidiaries' products;
provided, however, that "Customer Notes Guarantees" shall not include (i) the
provision of letters of credit in respect of financing provided by a third party
to purchasers of the Company's and its Subsidiaries' products to the extent such
letters of credit are Incurred under the Revolving Credit Facility and (ii) the
BTCC Note Guarantees.
"Debt" of any Person means, without duplication, (i) the principal of
and premium (if any) in respect of (A) debt of such Person for money borrowed
and (B) debt evidenced by notes, debentures, bonds or other similar instruments
for the payment of which such Person is responsible or liable; (ii) all Capital
Lease Obligations of such Person; (iii) all obligations of such Person issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any title
retention agreement (but excluding (x) trade accounts payable and other current
trade liabilities arising in the ordinary course of business and payable in
accordance with customary practices and (y) deferred purchase price obligations
where payment is due within six months of delivery); (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance, or other
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similar credit transaction (other than obligations with respect to letters of
credit and related Hedging Obligations securing obligations (other than
obligations described in (i) through (iii) above) entered into in the ordinary
course of business of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no
later than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit); (v) the amount of
all obligations of such Person with respect to the redemption, repayment or
other repurchase of any Disqualified Stock or, with respect to any Subsidiary of
such Person, any Preferred Stock (but excluding, in each case, any accrued
dividends); (vi) all Hedging Obligations of such Person (other than Hedging
Obligations excluded pursuant to clause (iv) above); (vii) all obligations of
the type referred to in clauses (i) through (v) of other Persons and all
dividends of other Persons for the payment of which, in either case, such Person
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including by means of any Guarantee; and (viii) all obligations of
the type referred to in clauses (i) through (vi) of other Persons secured by any
Lien on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured. The amount of Debt of any Person at any date shall be the
outstanding balance of all obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date; provided, however, that the amount
outstanding at any time of any Debt Incurred with original issue discount is the
face amount of such Debt less the remaining unamortized portion of the original
issue discount of such Debt at such time as determined in conformity with GAAP.
"Deemed Asset Value" means 75% of the fair market value of assets
(other than cash) received by the Company from the issuance or sale of its
Capital Stock or as a capital contribution, in either case as determined in good
faith by the Board of Directors; provided, however, that such determination
shall be confirmed by a nationally recognized investment banking firm or
appraisal firm in the event that the value determined by the Board of Directors
exceeds $10 million.
"Default" means any event that is, after notice or with the passage of
time or both would be, an Event of Default.
"Designated Senior Debt" means (i) Debt under the Credit Agreement and
(ii) any other Senior Debt of the Company, the principal amount of which is
$__________ or more individually at the date of determination and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Debt and in a written instrument delivered to the Trustee as
"Designated Senior Debt" for purposes of this Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or upon the happening of any event
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Debt or Disqualified Stock
or (iii) is redeemable at the option of the Holder thereof, in whole or in part,
in each case on or prior to the first anniversary of the Stated Maturity of the
Notes; provided, however, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving Holders thereof the right
to require such Person to repurchase or redeem such Capital Stock upon the
occurrence of an "asset sale" or "change of control" occurring prior to the
first anniversary of the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are not more
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favorable to the holders of such Capital Stock than the provisions described
under Section 5.08 and Article IV.
"EBITDA" for any period means the sum of Consolidated Net Income, plus
Consolidated Interest Expense plus the following to the extent deducted in
calculating such Consolidated Net Income: (a) all income tax expense of the
Company, (b) depreciation expense, (c) amortization expense and (d) all other
non-cash items reducing Consolidated Net Income (other than any non-cash item to
the extent it represents an accrual of, or a reserve for, cash disbursements for
any subsequent period prior to the Stated Maturity of the Notes) and less, to
the extent added in calculating Consolidated Net Income, non-cash items (other
than any non-cash item to the extent it represents an accrual for cash receipts
reasonably expected to be received within 12 months after the date of such
accrual), in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the depreciation and
amortization of, a Subsidiary of the Company shall be added to Consolidated Net
Income to compute EBITDA only to the extent (and in the same proportion) that
the net income of such Subsidiary was included in calculating Consolidated Net
Income and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
approval other than for the board of directors of such Subsidiary (that has not
been obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to such Subsidiary or its stockholders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Foreign Subsidiary" means a subsidiary that is organized under the
laws of any country other than the U.S. and substantially all the assets of
which are located outside of the U.S.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the Issue Date, including those set forth
(i) in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) in such other
statements by such other entity as approved by a significant segment of the
accounting profession, and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Debt or other obligation of any
Person and any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt or other obligation of such Person (whether arising by
virtue of partnership arrangements, or by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise); or (ii) entered into for purposes of
assuring in any other manner the obligee of such Debt or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided, however, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb shall have a corresponding
meaning. The term "Guarantor" shall mean any Person guaranteeing any obligation.
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"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Holdings" means GGS Holdings, Inc., a Delaware corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; provided, however, that any Debt or Capital Stock of a Person
existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used
as a noun shall have a correlative meaning. The accretion of principal of a
non-interest bearing or other discount security shall be deemed to be the
Incurrence of Debt.
"Indenture" means this Indenture, as amended, supplemented or
otherwise modified from time to time in accordance with the terms hereof.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement or other financial agreement or arrangement designed
to protect the Company or any Subsidiary against fluctuations in interest rates.
"Investment" in any Person means any loan or advance (other than
advances to customers in the ordinary course of business on commercially
reasonable terms that are recorded as accounts receivable on the balance sheet
of such Person) to, any acquisition of Capital Stock, equity interest,
obligation or other security of, or capital contribution or other investment in,
or any other credit extension to (including by way of Guarantee of any Debt of),
such Person.
"Issue Date" means the date on which the Notes are originally issued.
"Joint Venture Contract" means that certain Joint Venture Contract,
dated October 29, 1993, between Rockwell Graphic Systems, Inc. and Shanghai
Printing & Packaging Machinery Corp., as in effect on the Issue Date.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday, payment may be made at that place on the next succeeding day that
is not a Legal Holiday, and no interest shall accrue for the intervening period.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Management Investors" means certain members of the Company's
management who are participating in the Management Placement.
"Management Placement" means the sale of $4.0 million of common stock
of the Company to the Management Investors.
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"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to such
properties or assets that are the subject of such Asset Disposition or received
in any other noncash form) therefrom, in each case net of (i) all legal, title
and recording expenses, commissions and other fees and expenses incurred, and
all Federal, state, provincial, foreign and local taxes required to be accrued
as a liability under GAAP, as a consequence of such Asset Disposition; (ii) all
payments made on any Debt which is secured by any assets subject to such Asset
Disposition, in accordance with the terms of any Lien upon or other security
agreement of any kind with respect to such assets, or which must by its terms,
or in order to obtain a necessary consent to such Asset Disposition, or by
applicable law be repaid out of the proceeds from such Asset Disposition; (iii)
all distributions and other payments required to be made to minority interest
Holders in Subsidiaries or joint ventures as a result of such Asset Disposition;
and (iv) the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated with the
property or other assets disposed in such Asset Disposition and retained by the
Company or any Subsidiary after such Asset Disposition.
"Net Cash Proceeds" means with respect to any issuance or sale of
Capital Stock, the cash proceeds (including cash equivalent) of such issuance or
sale net of attorneys' fees, accountants' fees, underwriters' or placement
agents' fees, discounts or commissions and brokerage, consultant and other fees
actually incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
"Note Register" means the register of the Notes and the transfer and
exchange of the Notes as provided in Section 2.03 of this Indenture.
"Notes" has the meaning set forth in the first recital.
"Officer" means with respect to any Person the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, Controller, Secretary or any
Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, principal financial officer, treasurer or principal
accounting officer of the Company.
"Opinion of Counsel" means a written opinion from legal counsel, who
may be an employee of or counsel to the Company.
"Permitted Holders" means Stonington, the Fund, the Management
Investors and their respective Affiliates, including Holdings.
"Permitted Investment" means (A) an Investment by the Company or any
Subsidiary in (i) the Company or a Wholly Owned Subsidiary or a Person that
will, upon the making of such Investment, become a Wholly Owned Subsidiary; (ii)
another Person if as a result of, and contemporaneously with, such Investment
such other Person is merged or consolidated with or into, or transfers or
conveys all or substantially all its assets to, the Company or a Wholly Owned
Subsidiary; (iii) Temporary Cash Investments; (iv) receivables owing to the
Company or
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any Subsidiary if created or acquired in the ordinary course of business and
payable or dischargeable in accordance with customary trade terms; (v) payroll,
travel and similar advances to cover matters that are expected at the time of
such advances ultimately to be treated as expenses for accounting purposes, that
are made in the ordinary course of business; (vi) loans or advances to
employees, officers or directors made in the ordinary course of business
consistent with past practices of the Company or a Subsidiary or made in
connection with the Management Placement and that do not in the aggregate exceed
$4 million at any time; (vii) stock, obligations or securities received in
settlement of debts created in the ordinary course of business and owing to the
Company or any Subsidiary or in satisfaction of judgments; and (viii) any Person
to the extent such Investment represents the non-cash portion of the
consideration received for an Asset Disposition as permitted pursuant to the
covenant described under Section 5.08, (B) any Investment by the Company in the
Permitted Joint Venture at the times and in the amounts and manner required by
the Joint Venture Contract and (C) Customer Notes issued following the Issue
Date by the Company and its Subsidiaries; provided that the amount of
Investments made pursuant to Customer Notes following the Issue Date, in the
aggregate, at any one time outstanding may not exceed $30 million less the
amount of Customer Notes Guarantees Incurred following the Issue Date then
outstanding pursuant to Section 5.04(b)(4) and 5.05(i).
"Permitted Joint Venture" means Shanghai Rockwell Graphic Systems Co.,
Ltd., a joint venture formed by the Company and Shanghai Printing & Packaging
Machinery Corp. pursuant to the Joint Venture Contract.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock" means, as applied to the Capital Stock of any
corporation, Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Note means the principal of the Note plus the
premium, if any, payable on the Note which is due or overdue or is to become due
at the relevant time.
"Public Equity Offering" means a primary public offering of common
stock of the Company or Holdings pursuant to an effective registration statement
under the Securities Act.
"Public Market" means any time after (x) a Public Equity Offering has
been consummated, and (y) at least 15% of the total issued and outstanding
common stock of the Company or Holdings, as the case may be, has been
distributed by means of an effective registration statement under the Securities
Act or sales pursuant to Rule 144 under the Securities Act.
"Refinance" means, with respect to any Debt, to refinance, extend,
renew, refund, repay, prepay, redeem, defease or retire, or to issue other Debt
in exchange or replacement for, such indebtedness. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Refinancing Debt" means Debt that Refinances any Debt of the Company
or any Subsidiary existing on the Issue Date or Incurred in compliance with this
Indenture including
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Debt that Refinances Refinancing Debt; provided, however, that (i) such
Refinancing Debt has a Stated Maturity no earlier than the Stated Maturity of
the Debt being Refinanced; (ii) such Refinancing Debt has an Average Life at the
time such Refinancing Debt is Incurred that is equal to or greater than the
Average Life of the Debt being Refinanced; (iii) such Refinancing Debt has an
aggregate principal amount (or if Incurred with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or if Incurred with original issue discount, the aggregate accredited
value) then outstanding or committed (plus fees and expenses, including any
premium and defeasance costs) under the Debt being Refinanced; and (iv) with
respect to any Refinancing Debt of Debt other than Senior Debt, such Refinancing
Debt shall rank no more senior, and shall be at least as subordinated, in right
of payment to the Notes as the Debt being so extended, renewed, refunded or
refinanced; provided, further, however, that Refinancing Debt shall not include
Debt of a Subsidiary that Refinances Debt of the Company.
"Related Business" means the business of the Company and its
Subsidiaries on the Issue Date and any business related, ancillary or
complementary to the businesses of the Company and its Subsidiaries on the Issue
Date.
"Representative" means any trustee, agent or representative (if any)
for an issue of Senior Debt of the Company.
"Responsible Officer" means, when used with respect to the Trustee,
any officer within the Corporate Trust Office of the Trustee (or any successor
group of the Trustee) or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers.
"Restricted Payment" with respect to any Person means (i) the
declaration or payment of any dividends or any other distributions of any sort
in respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving such Person) or similar payment to the direct
or indirect Holders of its Capital Stock (other than dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) or rights to
acquire its Capital Stock (other than Disqualified Stock)) and dividends or
distributions payable solely to the Company or a Subsidiary, and other than pro
rata dividends or other distributions made by a Subsidiary that is not a Wholly
Owned Subsidiary to minority stockholders (or owners of an equivalent interest
in the case of a Subsidiary that is an entity other than a corporation), (ii)
the purchase, redemption or other acquisition or retirement for value of any
Capital Stock of the Company held by any Person or of any Capital Stock of a
Subsidiary held by any Affiliate of the Company (other than a Subsidiary),
including the exercise of any option to exchange any Capital Stock (other than
into Capital Stock of the Company that is not Disqualified Stock), (iii) the
purchase, repurchase, redemption, defeasance or other acquisition or retirement
for value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment of any Subordinated Obligations (other than the purchase,
repurchase or other acquisition of Subordinated Obligations purchased in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of acquisition) or
(iv) the making of any Investment in any Person (other than a Permitted
Investment).
"Revolving Credit Facility" means the provisions of the Credit
Agreement pursuant to which lenders thereunder have committed to make available
to the Company and its Subsidiaries a revolving credit facility.
"SEC" means the Securities and Exchange Commission.
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"Secured Debt" means any Debt of the Company or a Subsidiary secured
by a Lien.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means (i) Debt of the Company, whether outstanding on
the Issue Date or thereafter incurred (including, without limitation, Debt (and
other obligations including for fees, expenses, reimbursements, indemnities or
otherwise) Incurred pursuant to the Credit Agreement, any Interest Rate
Agreement or Currency Agreement and any Guarantee by the Company of any Debt or
monetary obligation of any of its Subsidiaries under the Credit Agreement, any
Interest Rate Agreement or Currency Agreement) and (ii) accrued and unpaid
interest thereon (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company or a
Subsidiary at the rate otherwise applicable thereto whether or not post-filing
interest is allowed in such proceeding) unless, in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the Notes;
provided, however, that Senior Debt shall not include (1) any obligation of the
Company to any Subsidiary, (2) any liability for Federal, state, local or other
taxes owed or owing by the Company, (3) any accounts payable or other liability
to trade creditors arising in the ordinary course of business (including
guarantees thereof or instruments evidencing such liabilities), (4) any Debt of
the Company (and any accrued and unpaid interest in respect thereof) which is
subordinate or junior in any respect to any other Debt or other obligation of
the Company, (5) that portion of any Debt which at the time of Incurrence is
Incurred in violation of the Indenture, (6) Debt owed, due, or guaranteed on
behalf of, any director, officer or employee of the Company or any Subsidiary
(including, without limitation, amounts owed for compensation), and (7) Debt
which when Incurred and without respect to any election under Section 1111 (b)
of Title 11 U.S. Code, is without recourse to the Company (other than Capital
Lease Obligations or secured purchase money obligations).
"Senior Subordinated Debt" means the Notes and any other Debt of the
Company that specifically provides that such Debt is to rank pari passu with the
Notes in right of payment and is not subordinated by its terms in right of
payment to any Debt or other obligation of the Company which is not Senior Debt.
"Significant Subsidiary" means any Subsidiary that would be a
"Significant Subsidiary" of the Company as such term is defined in Rule 1-02 of
Regulation S-X, promulgated by the SEC.
"Stated Maturity" means with respect to any security the date
specified in such security as the fixed date on which the final payment of
principal of such security is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of such security at the option of the Holder thereof upon the
happening of any contingency unless such contingency has occurred).
"Stonington" means Stonington Partners, Inc.
"Subordinated Obligation" means any Debt of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which by its written terms
is subordinate or junior in right of payment to the Notes.
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"Subsidiary" means, in respect of any Person, any corporation,
association, partnership or other business entity of which more than 50% of the
total voting power of shares of Capital Stock or other interests (including
partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person;
(ii) such Person and one or more Subsidiaries of such Person; or (iii) one or
more Subsidiaries of such Person.
"Tangible Property" means all land, buildings, machinery and equipment
and leasehold interests and improvements which would be reflected on a balance
sheet of the Company prepared in accordance with generally accepted accounting
principles, excluding (i) all rights, contracts and other intangible assets of
any nature whatsoever; and (ii) all inventories and other current assets.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America or any agency
thereof, (ii) investments in time deposit accounts, certificates of deposit and
money market deposits maturing within 270 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the U.S. of America, any state thereof or any foreign country recognized by the
U.S., and which bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50,000,000 (or the foreign currency equivalent
thereof) and has outstanding debt which is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
investments in commercial paper, maturing not more than 180 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America, any
jurisdiction thereof or any foreign country recognized by the United States of
America with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Group, and (v) investments in
securities with maturities of nine months or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States of America, or by any political subdivision or taxing authority thereof,
and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's
Investors Service, Inc.
"Term Loan Facility" means the provisions of the Credit Agreement
pursuant to which lenders thereunder have committed to make term loans available
to the Company and its Subsidiaries.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture, and
thereafter such term shall mean such successor serving hereunder.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including
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any agency or instrumentality thereof) for the payment of which the full faith
and credit of the United States of America is pledged and which are not callable
at the issuer's option.
"Voting Stock" of a Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares and shares held by other Persons
to the extent such shares are required by applicable law to be held by a Person
other than the Company or a Subsidiary) is owned by the Company or one or more
Wholly Owned Subsidiaries.
Section 1.02. Other Definitions.
Defined in
Term Article/Section
---- ---------------
"Affiliate Transaction"..... Section 5.09
"Blockage Notice"........... Section 11.03
"Change of Control"......... Article IV
"covenant defeasance"....... Section 9.01
"Default Amount"............ Section 7.02
"Excess Proceeds Offer"..... Section 5.08
"Excess Proceeds Payment" .. Section 5.08
"Event of Default".......... Section 7.01
"Final Payment Default"..... Section 7.01
"legal defeasance".......... Section 9.01
"Non-payment Default"....... Section 7.01
"Notes Payment"............. Section 11.02
"Paying Agent".............. Section 2.03
"parent corporation"........ Article IV
"Payment Blockage Period" .. Section 11.03
"Proceeding"................ Section 11.02
"Registrar"................. Section 2.03
"specified corporation"..... Article IV
"Successor Company"......... Section 6.01
Section 1.03 Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
(i) "indenture securities" means the Notes;
(ii) "indenture security holder" means a Holder or Noteholder;
(iii) "indenture to be qualified" means this Indenture;
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(iv) "indenture trustee" or "institutional trustee" means the
Trustee;
(v) "obligor" upon the Notes means each of the Company and any
successor obligor upon the Notes.
All other terms used in this Indenture that are (i) defined by the
TIA; (ii) defined by TIA reference to another statute; or (iii) defined by SEC
rule under the TIA have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(iii) the word "or" shall not be deemed to be exclusive;
(iv) words in the singular include the plural, and words in the
plural include the singular; and
(v) provisions apply to successive events and transactions.
ARTICLE II
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, the terms of which are
incorporated in and made a part of this Indenture. The Notes may have such
notations, legends or endorsements approved as to form by the Company and
required, as applicable, by law, stock exchange rule, agreements to which the
Company is subject and/or usage. Each Note shall be dated the date of its
authentication. The Notes shall be issuable only in denominations of $1,000 and
integral multiples thereof.
Section 2.02. Execution and Authentication.
Two Officers of the Company shall sign the Notes for the Company by
manual or facsimile signature. The Company's seal shall be reproduced on the
Notes.
If an Officer whose signature is on a Note no longer holds that office
at the time such Note is authenticated, such Note shall be valid nevertheless.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature of the Trustee shall be conclusive evidence that a
Note has been authenticated in accordance with the terms of this Indenture.
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The Trustee, upon a written order of the Company signed by two
Officers of the Company, shall authenticate the Notes for original issue up to
an aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time shall not exceed the amount
set forth therein except as provided in Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate the Notes. Unless limited by the terms of such
appointment, any such authenticating agent may authenticate the Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such authenticating agent of the Trustee. An
authenticating agent has the same rights as an Agent to deal with the Company or
an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain (i) an office or agency where the Notes may
be presented for registration of transfer or for exchange (including any
co-registrar, the "Registrar"); and (ii) an office or agency where the Notes may
be presented for payment ("Paying Agent"). The Registrar shall keep a register
of the Holders and of the transfer and exchange of the Notes (the "Note
Register"). The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Paying Agent" shall include any such
additional paying agent. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Holder. The Company shall notify the
Trustee and the Trustee shall notify the Holders of the name and address of any
Agent not a party to this Indenture. The Company or any of its domestically
incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or
co-registrar. The Company shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. Any such agency agreement shall implement the provisions of this
Indenture that relate to such Agent. If the Company fails to maintain a
Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee
shall act as such, as appropriate, and shall be entitled to appropriate
compensation in accordance with Section 8.07.
The Company initially appoints the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes.
Section 2.04. Paying Agent to Hold Money In Trust.
On or prior to each due date of the principal of, premium, if any, and
interest on any Note, the Company shall deposit with the Paying Agent a sum
sufficient to pay such principal, premium, if any, and interest when so becoming
due. The Company shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, and interest on the Notes, and shall notify the
Trustee of any Default by the Company in making any such payment. While any such
Default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Company at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Company or its domestically incorporated Wholly
Owned Subsidiaries) shall have no further liability for the money delivered to
the Trustee. If the Company or its domestically incorporated Wholly Owned
Subsidiaries acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
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Section 2.05. Lists of Holders.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders. If the Trustee is not the Registrar, the Company shall furnish to
the Trustee at least five Business Days before each interest payment date and at
such other times as the Trustee may request in writing a list in such form and
as of such date as the Trustee may reasonably require of the names and addresses
of the Holders.
Section 2.06. Transfer and Exchange.
Notes shall be issued in registered form and shall be transferable
only upon the surrender of a Note for registration of transfer. When Notes are
presented to the Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Notes of other denominations, the
Registrar shall register the transfer or make the exchange; provided, however,
that any Note presented or surrendered for registration of transfer or exchange
shall be duly endorsed or accompanied by a written instruction of transfer in
form satisfactory to the Registrar and the Trustee duly executed by the Holder
thereof or by his attorney duly authorized in writing. To permit registrations
of transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request.
Neither the Company nor the Registrar shall be required to (i) issue,
register the transfer of or exchange Notes during a period beginning at the
opening of business on a Business Day 15 days before the day of any selection of
Notes for redemption under Section 3.02; (ii) register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (iii) register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before an interest payment date and ending at the close of
business on the interest payment date.
No service charge shall be made to any Holder of a Note for any
registration of transfer or exchange (except as otherwise expressly permitted
herein), but the Company may require payment of a sum sufficient to cover any
transfer tax or similar governmental charge payable in connection therewith.
Prior to due presentment to the Trustee for registration of the
transfer of any Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Note is registered in the Note Register as the
absolute owner of such Note for the purpose of receiving payment of principal
of, premium, if any, and interest on such Note and for all other purposes
whatsoever, whether or not such Note is overdue, and none of the Trustee, any
Agent nor the Company shall be affected by any notice to the contrary.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee shall authenticate
a replacement Note if the Company's and the Trustee's reasonable requirements
for the replacements of Notes are met. If required by the Trustee or the
Company, an indemnity bond shall be supplied by the Holder that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any Agent
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or any authenticating agent from any loss which any of them may suffer if a Note
is replaced. The Company and the Trustee may charge the Holder for their
expenses in replacing a Note.
Every replacement Note shall be an obligation of the Company.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee, except for those cancelled by it, those delivered to it for
cancellation and those described in this Section 2.08 as not outstanding. A Note
does not cease to be outstanding because the Company, a Subsidiary of the
Company or an Affiliate of the Company holds such Note.
If a Note is replaced pursuant to Section 2.07, it shall cease to be
outstanding unless the Trustee receives proof satisfactory to it that such
replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be
outstanding upon surrender of such Note and replacement thereof pursuant to
Section 2.07.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Notes (or
portions thereof) to be redeemed or maturing, as the case may be, and the Paying
Agent is not prohibited from paying such money to the Holders on that date
pursuant to the terms of this Indenture, then on and after that date such Notes
(or portions thereof) shall cease to be outstanding and interest thereon shall
cease to accrue.
Section 2.09. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may prepare
and the Trustee shall authenticate temporary Notes. Temporary Notes shall be
substantially in the form of definitive Notes but may have such variations as
the Company and the Trustee consider appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
definitive Notes in exchange for temporary Notes. Until such exchange, temporary
Notes shall be entitled to the same rights, benefits and privileges as
definitive Notes.
Section 2.10. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee and no one else shall cancel all Notes surrendered for registration
of transfer, exchange, payment, replacement or cancellation, and may, but shall
not be required to, destroy such cancelled Notes (subject to the record
retention requirement of the Exchange Act), and make available for delivery a
certificate of such destruction to the Company, unless the Company directs
cancelled Notes to be returned to them. The Company may not issue new Notes to
replace Notes it has redeemed, paid or delivered to the Trustee for
cancellation.
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Section 2.11. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes, the
Company shall pay such defaulted interest in any lawful manner and shall pay
interest on defaulted installments of interest at the rate borne by the Notes to
the extent lawful. The Company may pay such defaulted interest to the Persons
who are Holders of the Notes on a subsequent special record date, which date
shall be at the earliest practicable date but in all events at least five
Business Days prior to the payment date, in each case at the rate provided in
the Notes. The Company shall fix or cause to be fixed any such special record
date and payment date, and, at least 15 days prior to the special record date,
the Company shall mail or cause to be mailed to each Holder of a Note a notice
that states such special record date, such related payment date and the amount
of any such defaulted interest to be paid to Holders of the Notes.
Section 2.12. CUSIP Number.
The Company in issuing the Notes may use a "CUSIP" number, and, if the
Company shall do so, the Trustee shall use such CUSIP number in notices of
redemption or exchange as a convenience to Holders; provided, however, that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in such notice or on the Notes and that
reliance may be placed only on the other identification numbers printed on the
Notes. The Company will notify the Trustee of any change in a CUSIP number.
ARTICLE III
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to paragraph 5 of the
Notes, the Company shall notify the Trustee in writing of the redemption date,
the principal amount of Notes to be redeemed, the CUSIP number of such Notes and
the paragraph of the Notes pursuant to which the redemption will occur.
The Company shall give each notice to the Trustee provided for in this
Section 3.01 at least 60 but not more than 90 days before the redemption date
unless the Trustee consents to a shorter period. Such notice shall be
accompanied by an Officers' Certificate and an Opinion of Counsel from the
Company to the effect that such redemption will comply with the conditions
herein. If fewer than all of the Notes are to be redeemed, the record date
relating to such redemption shall be selected by the Company and given to the
Trustee, which record date shall not be less than 15 days after the date of
notice to the Trustee.
Section 3.02. Selection of Notes to be Redeemed.
If fewer than all the Notes are to be redeemed, the Trustee shall
select the Notes to be redeemed by lot or by such other methods as the Trustee
in its sole discretion shall deem to be fair and appropriate and that comply
with the applicable legal and securities exchange requirements, if any. The
Trustee shall make the selection from outstanding Notes not previously called
for redemption. The Trustee may select for redemption portions of the principal
of Notes that have denominations larger than $1,000. Notes and portions of Notes
the Trustee selects shall
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be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption. The Trustee shall notify the Company promptly of
the Notes or portions of Notes to be redeemed.
Section 3.03. Notice of Redemption.
The Company shall, at least 30 days but not more than 60 days before a
redemption date, mail or cause to be mailed, by first class-mail, a notice of
redemption to each Holder the Notes of which are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the redemption date;
(ii) the redemption price;
(iii) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
redemption date upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Note;
(iv) the name and address of the Paying Agent;
(v) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(vi) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment
pursuant to the terms of this Indenture, interest on Notes called for
redemption ceases to accrue on and after the redemption date;
(vii) the paragraph of the Notes and/or the Section of this
Indenture pursuant to which the Notes called for redemption are being
redeemed; and
(viii) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes.
At the Company's request, at least five Business Days prior to the
date upon which such notice is to be mailed unless the Trustee consents to a
shorter period, the Trustee shall give the notice of redemption in the Company's
name and at the Company's expense. In such event, the Company shall provide the
Trustee with the information required by this Section 3.03.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption shall become due and payable on the redemption date
and at the redemption price stated in such notice of redemption. Upon surrender
to the Paying Agent, such Notes shall be paid at the redemption price stated in
such notice of redemption, plus accrued interest to the redemption date. Failure
to give notice to a Holder or any defect in any notice shall not affect the
validity of any notice to any other Holder.
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Section 3.05. Deposit of Redemption Price.
On or prior to any redemption date, the Company shall deposit with the
Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall
segregate and hold in trust) money sufficient to pay the redemption price of and
accrued interest on all Notes to be redeemed on that date. The Trustee or the
Paying Agent shall promptly return to the Company any money deposited with the
Trustee or the Paying Agent by the Company in excess of the amounts necessary to
pay the redemption price of, and accrued interest on, all Notes to be redeemed
on that date other than Notes or portions of Notes called for redemption which
have been delivered by the Company to the Trustee for cancellation.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder (at the expense of the
Company) a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
ARTICLE IV
CHANGE OF CONTROL
Section 4.01. Change of Control. (a) Upon the occurrence of any of the
following events (each a "Change of Control"), each Holder shall have the right
to require that the Company repurchase such Holder's Notes at a purchase price
in cash equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the relevant
interest payment date):
(i) prior to the earlier to occur of the first public offering of
common stock of the Company or the first public offering of common
stock of Holdings, the Permitted Holders cease to be the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act),
directly or indirectly, of a majority in the aggregate of the total
voting power of the Voting Stock of the Company or Holdings, whether
as a result of issuance of securities of the Company or Holdings, any
merger, consolidation, liquidation or dissolution of the Company or
Holdings, any direct or indirect transfer of securities or otherwise
(for purposes of this clause (i) and clause (ii) below, the Permitted
Holders shall be deemed to beneficially own any Voting Stock of a
corporation (the "specified corporation") held by any other
corporation (the "parent corporation") so long as the Permitted
Holders beneficially own (as so defined), directly or indirectly, in
the aggregate a majority of the voting power of the Voting Stock of
the parent corporation);
(ii) on or after the earlier to occur of the first public
offering of common stock of the Company or of Holdings referred to in
clause (i) above, (A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than one or more Permitted
Holders, is or becomes the beneficial owner (as defined in clause (i)
above, except that for purposes of this clause (ii) such person shall
be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is
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exercisable immediately or only after the passage of time), directly
or indirectly, of more than 40% of the total voting power of the
Voting Stock of the Company or Holdings; provided, however, that the
Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the
total voting power of the voting stock of the Company or Holdings than
such other person and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a
majority of the Board of Directors (for the purposes of this clause
(ii), such other person shall be deemed to beneficially own any voting
stock of a specified corporation held by a parent corporation, if such
other person is the beneficial owner (as defined in this clause (ii)),
directly or indirectly, of more than 40% of the voting power of the
Voting Stock of such parent corporation and the Permitted Holders
beneficially own (as defined in clause (i) above), directly or
indirectly, in the aggregate a lesser percentage of the voting power
of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such
parent corporation);
(iii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors of
the Company or Holdings (together with any new directors whose
election by such Board of Directors or whose nomination for election
by the shareholders of the Company or Holdings, as the case may be,
was approved by a vote of not less than 66-2/3% of the directors of
the Company or Holdings, as the case may be, then still in office who
were either directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Board of Directors then
in office; or
(iv) the merger or consolidation of the Company or Holdings with
or into another Person or the merger of another Person with or into
the Company or Holdings or the sale or transfer in one or a series of
transactions of all or substantially all the assets of the Company or
Holdings to another Person, and, in the case only of any such merger
or consolidation, the securities of the Company or Holdings, as the
case may be, that are outstanding immediately prior to such
transaction and which represent 100% of the aggregate voting power of
the Voting Stock of the Company or Holdings are changed into or
exchanged for cash, securities or property unless pursuant to such
transaction such securities are changed into or exchanged for, in
addition to any other consideration, securities of the surviving
corporation that represent immediately after such transaction, at
least a majority, of the aggregate voting power of the Voting Stock of
the surviving corporation.
(b) Notwithstanding the foregoing, if at the time of the occurrence of
a Change of Control the terms of the Credit Agreement restrict or prohibit the
repurchase of Notes pursuant to Section 4.01(a), then, prior to the mailing of
the notice to Holders provided for in Section 4.01(c) but in any event within 30
days following any such Change of Control, the Company shall (i) repay in full
all Debt under the Credit Agreement or offer to repay in full all such Debt and
repay the Debt of each Bank that has accepted such offer or (ii) obtain any
required consent or waiver under the Credit Agreement to permit the repurchase
of the Notes as provided for in Section 4.01(a).
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(c) Within 30 days following any Change of Control, the Company shall
mail a notice to each Holder with a copy to the Trustee stating: (1) that a
Change of Control has occurred and that such Holder has the right to require the
Company to purchase such Holder's Notes at a purchase price in cash equal to
101% of the principal amount thereof plus accrued and unpaid interest, if any,
to the date of purchase (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date); (2) the circumstances and, to the extent available, relevant facts
regarding such Change of Control (including information with respect to pro
forma historical income, cash flow and capitalization after giving effect to
such Change of Control); (3) the repurchase date (which shall be no earlier than
30 days nor later than 60 days from the date such notice is mailed); and (4) the
instructions, determined by the Company consistent with the covenant described
hereunder, that a Holder must follow in order to have its Notes purchased.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to the
provisions of this Article IV. To the extent that the provisions of any
securities laws and regulations conflict with the provisions of this Section
4.01, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Article IV by virtue thereof.
ARTICLE V
COVENANTS
Section 5.01. Payment of Principal, Premium and Interest.
The Company shall duly and punctually pay the principal of (and
premium, if any) and interest on the Notes in accordance with the terms of this
Indenture and the Notes.
Section 5.02. Maintenance of Office or Agency.
The Company shall maintain an office or agency (which may be an office
of the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Notes may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in such location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee.
The Company also from time to time may designate one or more
additional offices or agencies where the Notes may be presented or surrendered
for any or all such purposes and from time to time may rescind any such
designation; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
for such purposes. The Company shall give prompt written notice to the Trustee
of any such designation or rescission and of any change in the location of any
such other office or agency.
Section 5.03. SEC Reports.
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So long as any of the Notes remain outstanding, the Company shall
cause copies of all quarterly and annual financial reports and of the
information, documents, and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, to be filed with the Trustee and mailed to the Holders at their
addresses appearing in the Note Register maintained by the Registrar, in each
case, within 5 Business Days of filing with the SEC. If the Company is not
subject to the requirements of such Section 13 or 15(d) of the Exchange Act, the
Company shall nevertheless continue to file with the SEC, in conformity with
Section 13 or Section 15(d) of the Exchange Act, and provide the Trustee and
Holders with such annual and quarterly reports (without exhibits in the case of
documents provided to the Trustee and Holders) and such information, documents
and other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which are specified in Section 13 or
Section 15(d) of the Exchange Act. The Company shall also comply with the
provisions of TIA ss. 314(a).
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its convenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
Section 5.04. Limitation On Debt.
(a) The Company shall not Incur, directly or indirectly, any Debt
unless, on the date of such Incurrence, the Consolidated Coverage Ratio exceeds
2.0 to 1.0.
(b) Notwithstanding the foregoing paragraph (a), the Company may Incur
any or all of the following Debt:
(i) Debt Incurred pursuant to the Revolving Credit Facility;
provided, however, that, after giving effect to any such Incurrence,
the aggregate principal amount of such Debt then outstanding does not
exceed the greater of (x) $150 million less the amount of any Debt
then outstanding Incurred by Foreign Subsidiaries pursuant to Section
5.05(e) and (y) the sum of (A) 65% of the gross book value of the
inventory of the Company and its Subsidiaries (other than any Foreign
Subsidiary that has Debt then outstanding Incurred pursuant to Section
5.05(e) and (B) 85% of the gross book value of the accounts receivable
of the Company and its Subsidiaries (other than any Foreign Subsidiary
that has Debt then outstanding Incurred pursuant to Section 5.05(e));
(ii) Debt Incurred pursuant to the Term Loan Facility in an
aggregate outstanding principal amount not to exceed $75 million less
the aggregate amount of all principal repayments of any such Debt
actually made after the Issue Date (other than any such principal
repayments made as a result of the Refinancing of any such Debt) and
less the amount of any Debt then outstanding Incurred by Foreign
Subsidiaries under Section 5.05(f);
(iii) Guarantees by the Company of Debt of a Foreign Subsidiary
described in Section 5.05(e) and Section 5.05(f);
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(iv) Customer Notes Guarantees Incurred following the Issue Date
in an aggregate amount at any one time outstanding not to exceed $30
million less the amount of Customer Notes Guarantees Incurred
following the Issue Date then outstanding pursuant to Section 5.05(i)
and less the amount of Investments in Customer Notes made following
the Issue Date then outstanding pursuant to clause (C) of the
definition of "Permitted Investment";
(v) the BTCC Note Guarantees;
(vi) Debt owed to and held by a Wholly Owned Subsidiary;
provided, however, that any subsequent issuance or transfer of any
Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of
such Debt (other than to another Wholly Owned Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such Debt by the
Company;
(vii) the Notes;
(viii) Debt (including without limitation Customer Notes
Guarantees) outstanding on the Issue Date (other than Debt described
in clauses (i), (ii), (iii), (iv), (v), (vi) or (vii) of this Section
5.04);
(ix) Refinancing Debt in respect of Debt Incurred pursuant to
paragraph (a) above or pursuant to clause (vii) or (viii) above or
this clause (ix);
(x) Hedging Obligations with respect to (1) Debt permitted to be
Incurred by the Company or its Subsidiaries pursuant to this Indenture
or (2) transactions denominated in foreign currencies; and
(xi) Debt (which Debt may, but need not, be Incurred in whole or
in part under the Credit Agreement) in an aggregate principal amount
which, together with all other Debt of the Company outstanding on the
date of such Incurrence (other than Debt permitted by clauses (i)
through (x) of this paragraph (b) or paragraph (a) above), and giving
effect to any concurrent Refinancing of Debt permitted by the
Indenture, does not exceed $10 million.
For purposes of determining compliance with this paragraph (b), (i) in the event
that an item of Debt meets the criteria of more than one of the types of Debt
described in paragraph (b), the Company, in its sole discretion, will classify
such item of Debt and only be required to include the amount and type of such
Debt in one of the clauses of paragraph (b); and (ii) an item of Debt may be
divided and classified in more than one of the types of Debt in paragraph (b).
(c) Notwithstanding paragraph (a) and paragraph (b) above, the Company
shall not Incur any Debt if the proceeds thereof are used, directly or
indirectly, to Refinance any Subordinated Obligations unless such Debt shall be
subordinated to the Notes to at least the same extent as such Subordinated
Obligations.
(d) Notwithstanding paragraph (a) and paragraph (b) above, (i) the
Company shall not Incur any Debt if such Debt is subordinated or junior in
ranking to any Senior Debt, unless such Debt is Senior Subordinated Debt or is
expressly subordinated in right of payment
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to Senior Subordinated Debt; and (ii) the Company shall not issue any Secured
Debt which is not Senior Debt unless contemporaneously therewith effective
provision is made to secure the Notes equally and ratably with such Secured Debt
for so long as such Secured Debt is secured by a Lien.
Section 5.05. Limitation on Debt and Preferred Stock of Subsidiaries.
The Company shall not permit any Subsidiary to Incur, directly or
indirectly, any Debt or Preferred Stock except:
(a) Guarantees by the Subsidiaries of Debt of the Company described in
clause (b)(i), (ii) and (iv) of Section 5.04, other Debt of the Company Incurred
under the Credit Agreement which is permitted to be Incurred pursuant to the
terms of this Indenture, and Debt of Foreign Subsidiaries described in clauses
(e) and (f) below;
(b) Debt or Preferred Stock issued to and held by the Company or a
Wholly Owned Subsidiary; provided, however, that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned Subsidiary
ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Debt
or Preferred Stock (other than to the Company or a Wholly Owned Subsidiary)
shall be deemed, in each case, to constitute the issuance of such Debt or
Preferred Stock by the issuer thereof;
(c) Debt or Preferred Stock of a Subsidiary Incurred and outstanding
on or prior to the date on which such Subsidiary was acquired by the Company
(other than Debt or Preferred Stock Incurred in connection with, or to provide
all or any portion of the funds or credit support utilized to consummate, the
transaction or series of related transactions pursuant to which such Subsidiary
became a Subsidiary or was acquired by the Company); provided, however, that on
the date of such acquisition and after giving effect thereto, the Company would
have been able to Incur at least $1.00 of additional Debt pursuant to Section
5.04(a);
(d) Debt or Preferred Stock outstanding on the Issue Date (other than
Debt described in clause (a), (b) or (c));
(e) Debt of a Foreign Subsidiary Incurred pursuant to the Revolving
Credit Facility; provided, however, that, after giving effect to any such
Incurrence, the aggregate principal amount of Debt outstanding of such Foreign
Subsidiary pursuant to this clause (e) does not exceed the greater of (x) $125
million and (y) the sum of 85% of the gross book value of the accounts
receivable of such Foreign Subsidiary and 65% of the gross book value of the
inventories of such Foreign Subsidiary;
(f) Debt of a Foreign Subsidiary Incurred pursuant to the Term Loan
Facility; provided that, after giving effect to any such Incurrence, the
aggregate principal amount of Debt Incurred by all Foreign Subsidiaries pursuant
to this clause (f) may not exceed $50 million less the aggregate amount of all
principal repayments of any such Debt actually made after the Issue Date (other
than any such principal repayments made as a result of the Refinancing of any
such Debt);
(g) Refinancing Debt Incurred in respect of Debt or Preferred Stock
referred to in clause (a), (c) or (d) or this clause (g); provided, however,
that to the extent such Refi-
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nancing Debt directly or indirectly Refinances Debt or Preferred Stock of a
Subsidiary described in clause (c), such Refinancing Debt shall be Incurred only
by such Subsidiary;
(h) Hedging Obligations by a Subsidiary with respect to (x) Debt
permitted to be Incurred by such Subsidiary pursuant to the Indenture and (y)
transactions by such Subsidiary denominated in foreign currencies; and
(i) Customer Notes Guarantees Incurred following the Issue Date in an
aggregate amount at any one time outstanding not to exceed $30 million less the
amount of Customer Notes Guarantees Incurred following the Issue Date then
outstanding pursuant to Section 5.04(b)(iv) and less the amount of Investments
in Customer Notes made following the Issue Date then outstanding pursuant to
clause (C) of the definition of "Permitted Investment."
Section 5.06. Limitation On Restricted Payments.
(a) The Company shall not, and shall not permit any Subsidiary,
directly or indirectly, to make a Restricted Payment if at the time the Company
or such Subsidiary makes such Restricted Payment:
(i) a Default shall have occurred and be continuing (or would
result therefrom);
(ii) the Company, after giving pro forma effect to such
Restricted Payment, would not be permitted to Incur an additional
$1.00 of Debt pursuant to Section 5.04(a); or
(iii) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Issue Date would exceed the sum
of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
during which the Notes were originally issued to the end of the most recent
fiscal quarter ending at least 45 days prior to the date of such Restricted
Payment (or, in case such Consolidated Net Income shall be a deficit, minus
100% of such deficit); (B) the aggregate Net Cash Proceeds and aggregate
Deemed Asset Value received by the Company from the issue or sale of its
Capital Stock (other than Disqualified Stock) or capital contributions with
respect thereto subsequent to the Issue Date (other than an issuance or
sale to a Subsidiary of the Company and except as set forth in clause (C)
other than an issuance or sale to an employee stock ownership plan or to a
trust established by the Company or any of its Subsidiaries for the benefit
of their employees); (C) the aggregate Net Cash Proceeds received by the
Company from the issuance or sale of its Capital Stock (other than
Disqualified Stock) to an employee stock ownership plan or trust
established by the Company or any of its Subsidiaries for the benefit of
their employees subsequent to the date on which the Notes were originally
issued, other than any such issuance or sale to the extent the purchase by
such plan or trust is financed by Debt of such plan or trust and for which
the Company is liable as guarantor or otherwise; and (D) the amount by
which Debt of the Company is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary of the Company)
subsequent to the Issue Date, of any Debt of the Company convertible or
exchangeable for Capital Stock (other than Disqualified Stock) of the
Company (less the amount of any cash, or the fair value of any
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other property, distributed by the Company upon such conversion or
exchange, except to the extent that such distribution results in a
reduction in Consolidated Net Income reflected pursuant to clause (A)
above).
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any purchase or redemption of Capital Stock or Subordinated
Obligations of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, Capital Stock of the
Company (other than Disqualified Stock and other than Capital Stock
issued or sold to a Subsidiary of the Company or an employee stock
ownership plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees to the extent the
purchase by such plan or trust is financed by Debt of such plan or
trust and for which the Company or any Subsidiary is liable as
guarantor or otherwise), provided, however, that (A) such purchase or
redemption shall be excluded in the calculation of the amount of
Restricted Payments and (B) the Net Cash Proceeds from such sale shall
be excluded from the calculation of amounts under clauses (iii)(B) and
(iii)(C) of paragraph (a) above;
(ii) any purchase, repurchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Obligations
together with any premium payable in connection therewith made by
exchange for, or out of the proceeds of the substantially concurrent
sale of, Debt of the Company which is permitted to be Incurred
pursuant to Section 5.04; provided, however, that such purchase,
repurchase, redemption, defeasance or other acquisition or retirement
for value shall be excluded in the calculation of the amount of
Restricted Payments;
(iii) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have
complied with this covenant; provided, however, that at the time of
declaration of such dividend, no other Default shall have occurred and
be continuing (or would result therefrom); and provided, further,
however, that such dividend shall be included in the calculation of
the amount of Restricted Payments;
(iv) the repurchase of shares of, or options to purchase shares
of, common stock of the Company or any of its Subsidiaries from
employees, former employees, directors or former directors of the
Company or any of its Subsidiaries (or permitted transferees of such
employees, former employees, directors or former directors), pursuant
to the terms of the agreements (including employment agreements) or
plans (or amendments thereto) approved by the Board of Directors under
which such individuals purchase or sell or are granted the option to
purchase or sell, shares of such common stock; provided, however, that
the aggregate amount of such repurchases in any calendar year shall
not exceed the sum of (x) $2 million and (y) the aggregate Net Cash
Proceeds from any reissuance during such calendar year of Capital
Stock to employees, officers or directors of the Company or its
Subsidiaries; provided further, however, that to the extent that the
aggregate amount of such repurchases is less than $2 million in any
calendar year, the unused portion of such $2 million may be carried
forward to the succeeding calendar year (provided that the aggregate
amount of the repurchases in any calendar year shall, in no event,
exceed $4 million plus the amount of
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aggregate Net Cash Proceeds from any reissuance of Capital Stock
described above) in any calendar year; and provided, further, however,
that such repurchases shall be excluded in the calculation of the
amount of Restricted Payments;
(v) Investments in any Person primarily engaged in a Related
Business in an aggregate amount not to exceed $10 million; provided,
however, that the amount of such Investments shall be excluded in the
calculation of the amount of Restricted Payments;
(vi) the payment of any cash dividend on the Common Stock of the
Company following a Public Equity Offering by the Company or,
following a Public Equity Offering by Holdings, a payment to Holdings
used solely to pay dividends on the Common Stock of Holdings, in each
case as long as no Default or Event of Default has occurred and is
continuing or would thereby result; provided that the aggregate amount
of all such dividends and payments under this clause (vi) shall not
exceed 6% of the Net Cash Proceeds received by the Company and
Holdings in any such Public Equity Offering in any calendar year;
provided further, however, that such dividends and payments shall be
included in the calculation of Restricted Payments;
(vii) Investments in customer notes to the extent such
Investments are in existence on the Issue Date; provided, however,
that the amount of such Investments shall be excluded in the
calculation of the amount of Restricted Payments; or
(viii) Restricted Payments in an aggregate amount not to exceed
$10 million; provided, however, that the amount of such Restricted
Payments shall be excluded in the calculation of the amount of
Restricted Payments.
Section 5.07. Limitation On Restrictions On Distributions from Subsidiaries.
(a) The Company shall not, and shall not permit any Subsidiary to,
create or otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction on the ability of any Subsidiary to:
(i) pay dividends or make any other distributions on its Capital
Stock to the Company or a Subsidiary or pay any Debt owed to the
Company,
(ii) make any loans or advances to the Company or
(iii) transfer any of its property or assets to the Company,
except:
(1) any encumbrance or restriction pursuant to an agreement in
effect or entered into on the Issue Date or pursuant to the issuance
of the Notes;
(2) any encumbrance or restriction with respect to a Subsidiary
pursuant to an agreement relating to any Debt Incurred by such
Subsidiary on or prior to the date on which such Subsidiary was
acquired by the Company (other than Debt Incurred as consideration in,
or to provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions
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pursuant to which such Subsidiary became a Subsidiary or was acquired
by the Company) and outstanding on such date;
(3) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Debt Incurred pursuant to an agreement
referred to in clause (1) or (2) or contained in any amendment to an
agreement referred to in clause (1) or clause (2); provided, however,
that the encumbrances and restrictions contained in any of such
refinancing agreement or amendment are no less favorable to the
Noteholders than encumbrances and restrictions with respect to such
Subsidiary contained in such agreements;
(4) any such encumbrance or restriction (A) that restricts in a
customary manner the subletting, assignment or transfer of any
property or asset that is a lease, license, conveyance or contract or
similar property or asset the subject of such encumbrance or
restriction, (B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or
assets of the Company or any Subsidiary not otherwise prohibited by
the Indenture or (C) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property
or assets of the Company or any Subsidiary in any manner material to
the Company or any Subsidiary; provided that, in each case, such
encumbrance or restriction relates to, and restricts dealings with,
only the property or asset the subject of such encumbrance or
restriction; provided further, that such encumbrance or restriction
does not prohibit, limit or otherwise restrict the making or payment
of any dividend or other distribution to the Company or any
Subsidiary;
(5) in the case of this clause (iii), restrictions contained in
security agreements or mortgages securing Debt of a Subsidiary to the
extent such restrictions restrict the transfer of the property subject
to such security agreements or mortgages;
(6) any encumbrance or restriction imposed solely upon a Foreign
Subsidiary pursuant to an agreement relating to Indebtedness Incurred
by such Foreign Subsidiary which is permitted under the covenant
described in Section 5.05; and
(7) any restriction with respect to a Subsidiary imposed pursuant
to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Subsidiary
pending the closing of such sale or disposition.
Section 5.08. Limitation On Sales of Assets and Subsidiary Stock.
(a) The Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, consummate any Asset Disposition unless
(i) the Company or such Subsidiary receives consideration at the
time of such Asset Disposition at least equal to the fair market
value, as determined in good faith by the Board of Directors
(including as to the value of all non-cash
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consideration), of the shares and assets subject to such Asset
Disposition and at least 75% of the consideration thereof received by
the Company or such Subsidiary is in the form of cash or Cash
Equivalents, and
(ii) the Company (x) within 180 days (in the case of (A) below)
or 360 days (in the case of (B) below) after receipt of such Net
Available Cash, (A) to the extent the Company so elects (or is so
required by the terms of any Senior Debt), applies an amount equal to
100% of the Net Available Cash to repay, prepay, redeem or purchase
Senior Debt of the Company or Debt (other than any Disqualified Stock)
of a Wholly Owned Subsidiary (in each case other than Debt owed to the
Company or an Affiliate of the Company) or (B) invests or commits to
invest the balance of such Net Available Cash not applied pursuant to
clause (A), in Additional Assets; provided, however, that in the case
of any commitment to invest such investment must be made within one
month thereafter, and any amount not so invested shall be treated as
Excess Proceeds (as defined below); and (y) applies the balance of
such Net Available Cash not applied pursuant to clause (x), as
provided in the following paragraphs of this covenant. Notwithstanding
the foregoing provisions of this paragraph, the Company and its
Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this paragraph except to the extent that the aggregate
Net Available Cash from all Asset Dispositions which are not applied
in accordance with this paragraph exceeds $10 million. The amount of
Net Available Cash required to be applied and not applied as so
required shall constitute "Excess Proceeds". Pending application of
Net Available Cash pursuant to this covenant, such Net Available Cash
shall be invested in Temporary Cash Investments or applied to repay
Debt Incurred under the Revolving Credit Facility without commitment
reduction thereunder.
For the purposes of this covenant, the following are deemed to be cash
equivalents: (x) the assumption of Debt of the Company or any Subsidiary and the
release of the Company or such Subsidiary from all liability on such Debt in
connection with such Asset Disposition, (y) Temporary Cash Investments, and (z)
securities received by the Company or any Subsidiary from the transferee that
are promptly converted by the Company or such Subsidiary into cash.
(b) If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer
(as defined below) totals at least $10 million, the Company must, not later than
the fifteenth Business Day of such month, make an offer (an "Excess Proceeds
Offer") to purchase from the Holders (and to purchase Debt from the holders of
any other Senior Subordinated Debt) on a pro rata basis an aggregate principal
amount of Notes equal to the Excess Proceeds (rounded down to the nearest
multiple of $1,000) on such date, at a purchase price equal to 100% of the
principal amount of such Notes, plus, in each case, accrued interest (if any) to
the date of purchase (or, in respect of such other Senior Subordinated Debt,
such lesser price, if any, as may be provided for by the terms of such Senior
Subordinated Debt) (the "Excess Proceeds Payment").
(c) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
Section 5.08. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 5.08, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this clause by virtue thereof.
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Section 5.09. Limitation On Affiliate Transactions.
(a) The Company shall not, and shall not permit any Subsidiary to,
enter into or permit to exist any transaction or series of similar transactions
(including the purchase, sale, lease or exchange of any property, employee
compensation arrangements or the rendering of the terms thereof any service)
with any Affiliate of the Company (an "Affiliate Transaction") unless the terms
thereof:
(i) are no less favorable to the Company or such Subsidiary as
terms than those that could be obtained at the time of such
transaction in arm's length dealings with a Person who is not such an
Affiliate,
(ii) if such Affiliate Transaction involves an amount in excess
of $3 million, (1) are set forth in writing and (2) have been approved
by a majority of the members of the Board of Directors having no
personal stake in such Affiliate Transaction, and
(iii) if such Affiliate Transaction involves an amount in excess
of $15 million, have been determined by a nationally recognized
investment banking firm to be fair, from a financial standpoint to the
Company and its Subsidiaries.
(b) The provisions of the foregoing paragraph (a) shall not prohibit:
(i) any Restricted Payment permitted to be paid pursuant to
Section 5.06;
(ii) any issuance of securities, or other payments, awards or
grants in cash, securities or otherwise pursuant to, or the funding
of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors;
(iii) the grant of stock options or similar rights to employees
and directors of the Company pursuant to plans approved by the Board
of Directors;
(iv) loans or advances to employees in the ordinary course of
business in accordance with the past practices of the Company or its
Subsidiaries and their predecessors including loans or advances to
Management Investors in connection with the Management Placement, but
in any event not to exceed $4 million in the aggregate outstanding at
any one time;
(v) the payment of reasonable and customary fees to directors of
the Company and its Subsidiaries who are not employees of the Company
or its Subsidiaries;
(vi) any Affiliate Transaction between the Company and a Wholly
Owned Subsidiary or between Wholly Owned Subsidiaries; and
(vii) the payment of a one-time fee to Stonington in connection
with the Acquisition in an aggregate amount not to exceed $6 million
plus reasonable expenses.
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Section 5.10. Compliance Certificates.
The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year, an Officers' Certificate stating that a review of the
activities of the Company and its Subsidiaries during the preceding fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such Officers' Certificate, that to the best of his or her knowledge the
Company has kept, observed, performed and fulfilled each covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action each is taking or
proposes to take with respect thereto). The Company shall also comply with TIA
ss. 314(a)(4).
Section 5.11. Further Instruments and Acts.
Upon request of the Trustee, the Company will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
ARTICLE VI
SUCCESSORS
Section 6.01. When the Company May Merge or Transfer Assets.
The Company shall not consolidate with or merge with or into, or
convey, transfer or lease, in one transaction or a series of transactions, all
or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor
Company") shall be a Person organized and existing under the laws of
the United States of America, any State thereof or the District of
Columbia and the Successor Company (if not the Company) shall
expressly assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and this Indenture;
(ii) immediately after giving effect to such transaction (and
treating any Debt which becomes an obligation of the Successor Company
or any Subsidiary of the Successor Company as a result of such
transaction as having been Incurred by such Successor Company or such
Subsidiary at the time of such transaction), no Default shall have
occurred and be continuing;
(iii) immediately after giving effect to such transaction, the
Successor Company would be able to Incur an additional $1.00 of Debt
pursuant to Section 5.04(a);
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(iv) immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which
is not less than the Consolidated Net Worth of the Company prior to
such transaction; and
(v) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if
any) comply with the terms of this Indenture.
Section 6.02. Successor Company Substituted.
The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of and interest on the Notes.
ARTICLE VII
DEFAULTS AND REMEDIES
Section 7.01. Events of Default.
Each of the following shall constitute an "Event of Default":
(i) the Company defaults in any payment of interest on any Note
when the same becomes due and payable, whether or not such payment
shall be prohibited by Article XI, and such default continues for a
period of 30 days;
(ii) the Company defaults in the payment of the principal of any
Note when the same becomes due and payable at its Stated Maturity,
upon optional redemption, upon declaration, upon required repurchase
or otherwise, whether or not such payment shall be prohibited by
Article XI;
(iii) the Company fails to comply with Article VI;
(iv) the Company fails to comply for 30 days after the notice
specified in this Section 7.01 with any of its obligations contained
in Article IV (other than a failure to purchase Notes), Section 5.03,
Section 5.04, Section 5.05, Section 5.06, Section 5.07, Section 5.08
(other than a failure to purchase Notes), or Section 5.09;
(v) the Company fails to comply with any of its agreements in
this Indenture (other than those referred to in clause (i), clause
(ii), clause (iii) or clause (iv) of this Section 7.01) and such
failure continues for 60 days after the notice specified in this
Section 7.01;
(vi) a default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or
evidenced any Debt for money borrowed by the Company or any of its
Subsidiaries (or the payment of
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which is Guaranteed by the Company or any of its Subsidiaries) whether
such Debt or Guarantee now exists, or is created after the date of
this Indenture, which default (1) is caused by failure to pay
principal of or premium, if any, or interest on such Debt within any
applicable grace period after final maturity ("Final Payment
Default"), or (2) results in the acceleration of such Debt prior to
its final stated maturity and, in each case, the principal amount of
any such Debt, together with the principal amount of any other such
Debt under which there has been a Final Payment Default or the
maturity of which has been so accelerated, aggregates $10 million or
more and such default or acceleration continues for 30 days after the
notice specified in this Section 7.01;
(vii) the Company or any Significant Subsidiary of the Company
pursuant to or within the meaning of Bankruptcy Law: (1) commences a
voluntary case, (2) consents to the entry of an order for relief
against it in an involuntary case, (3) consents to the appointment of
a Custodian of it or for all or substantially all of its property; or
(4) makes a general assignment for the benefit of its creditors;
(viii) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that: (1) is for relief against the
Company or any Significant Subsidiary of the Company in an involuntary
case, (2) appoints a Custodian of the Company or any Significant
Subsidiary of the Company or for all or substantially all of the
property of the Company or any Significant Subsidiary of the Company,
or (3) orders the liquidation of the Company or any Significant
Subsidiary of the Company, and any such order or decree remains
unstayed and in effect for 60 consecutive days; and
(ix) any final non-appealable judgment or decree for the payment
of money in excess of $10 million is rendered against the Company or a
Significant Subsidiary, remains outstanding for a period of 60 days
following such judgment and is not discharged, waived or stayed within
10 days after notice; provided that, the amount of such money judgment
or decree shall be calculated net of any insurance coverage that the
Company has determined in good faith is available in whole or in part
with respect to such money, judgment or decree.
A Default under clauses (iv), (v), (vi) or (ix) will not constitute an
Event of Default until the Trustee or the Holders of at least 25% in principal
amount of the outstanding Notes notify the Company of the Default and the
Company does not cure such Default within the time specified after receipt of
such notice.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, an Officers' Certificate of any Event of Default pursuant to
clause (iii), clause (vii) or clause (viii) and any event which with the giving
of notice or the lapse of time would become an Event of Default pursuant to
clauses (iv), (v), (vi) or (ix), its status and what action the Company is
taking or proposes to take in respect thereof.
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Section 7.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
clause (vii) or clause (viii) of Section 7.01) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the then
outstanding Notes, may declare the principal of and accrued but unpaid interest
on all the Notes to be due and payable (collectively, the "Default Amount") by
notice in writing to the Company, the administrative agent under the Credit
Agreement (if any Debt is then outstanding under the Credit Agreement) and the
Trustee specifying the respective Event of Default and that it is a "notice of
acceleration"; provided, however, that the failure to so notify the
administrative agent under the Credit Agreement shall not affect the validity of
such acceleration. Upon such a declaration, the Default Amount shall be due and
payable immediately, subject to Article IX of this Indenture. Notwithstanding
the foregoing, in case of an Event of Default specified in clause (vii) or
clause (viii) of Section 7.01, all outstanding Notes shall ipso facto become and
be immediately due and payable without any declaration or other act on the part
of the Trustee or any Holders of the Notes. Under certain circumstances, the
Holders of a majority in aggregate principal amount of the then outstanding
Notes by written notice to the Trustee may on behalf of all of the Holders
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Events of Default
(except nonpayment of principal, interest or premium that has become due solely
because of the acceleration) have been cured or waived.
Section 7.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes and this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any such Notes in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon any Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in such Event of Default. No remedy
shall be exclusive of any other remedy. All remedies shall be cumulative to the
extent permitted by law.
Section 7.04. Waiver of Past Defaults.
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive an existing Default and its consequences, except (i) a Default in
the payment of the principal of, premium, if any, or interest on, the Notes; or
(ii) a Default in respect of a provision that under Section 10.02 cannot be
amended without the consent of each Holder affected thereby. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
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Section 7.05. Control by Majority.
Subject to certain restrictions, Holders of a majority in principal
amount of the Notes then outstanding may direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee. However, the Trustee may
refuse to follow any direction that conflicts with law or the terms of this
Indenture or if, subject to Section 8.01, the Trustee reasonably determines that
such action, if taken, would be unduly prejudicial to the rights of other
Holders or may involve the Trustee in personal liability.
Section 7.06. Limitation On Suits.
Except to enforce the right to receive payment of principal, premium,
if any, or interest when due, no Holder of a Note may pursue any remedy with
respect to this Indenture or the Notes, unless:
(i) such Holder has previously given the Trustee written notice
that an Event of Default is continuing;
(ii) Holders of at least 25% in principal amount of the Notes
then outstanding have made a written request to the Trustee to pursue
the remedy;
(iii) such Holders have offered the Trustee reasonable security
or indemnity against any loss, liability or expense;
(iv) the Trustee has not complied with such request within 60
days after the receipt thereof and the offer of security or indemnity;
and
(v) Holders of a majority in principal amount of the Notes then
outstanding have not given the Trustee a direction inconsistent with
such request within such 60-day period.
A Holder of a Note shall not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 7.07. Unconditional Right of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium, if any, and
interest on such Note, on or after the respective due dates expressed in such
Note, or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of any
such Holder of a Note.
Section 7.08. Collection Suit by Trustee.
If an Event of Default specified in Section 7.01(i) or Section
7.01(ii) occurs and is continuing, the Trustee may recover judgment in its own
name and as trustee of an express trust against the Company for the entire
amount then due and owing, plus the amounts provided for in Section 8.07.
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Section 7.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee and the Holders of the Notes allowed in any judicial proceedings
relative to the Company, the Company's creditors or the Company's property, and,
unless prohibited by law or applicable regulations, may vote on behalf of the
Holders in any election of a trustee in bankruptcy or other Person performing
similar functions, and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make payments to the Trustee, and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due to Trustee under Section 8.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
Section 7.10. Priorities.
If the Trustee collects any money pursuant to this Article VII, it
shall pay out the money in the following order:
(i) FIRST: to the Trustee for amounts due to it under Section
8.07;
(ii) SECOND: to holders of Senior Debt to the extent required by
Article XI;
(iii) THIRD: to Holders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any, and interest,
respectively; and
(iv) FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 7.10.
Section 7.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 7.11 shall not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 7.07, or a suit by Holders of more than 10% in principal
amount of the Notes then outstanding.
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Section 7.12. Waiver of Stay, Extension and Usury Laws.
The Company (to the extent that it may lawfully do so) shall not at
any time insist upon, plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay, extension or usury law wherever enacted, now
or at any time hereafter in force, that may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE VIII
TRUSTEE
Section 8.01. Duties of Trustee.
(a) If an Event of Default of which a Responsible Officer of the
Trustee is aware has occurred and is continuing, the Trustee shall exercise such
of the rights and powers vested in it by this Indenture, and use the same degree
of care and skill in their exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default of which a
Responsible Officer of the Trustee is aware:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture.
(c) The Trustee shall not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct or bad faith, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section 8.01;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith, unless it is proved that the Trustee was negligent
in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with a
direction received by it pursuant to Section 7.05.
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(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraph
(a), paragraph (b) and paragraph (c) of this Section 8.01.
(e) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if the Trustee shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(f) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company.
(g) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section 8.01 and to the provisions of the TIA.
Section 8.02. Rights of Trustee.
(a) The Trustee may rely upon any document reasonably believed by it
to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in any such document.
(b) Before the Trustee acts or refrains from taking any action, the
Trustee may require an Officers' Certificate or an Opinion of Counsel or both.
The Trustee shall not be liable for any action taken or omitted to be taken by
it in good faith in reliance on such Officers' Certificate or such Opinion of
Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent; provided, however, that any such
agent is appointed by the Trustee with due care.
(d) The Trustee shall not be liable for any action taken or omitted to
be taken by it in good faith which it reasonably believes to be authorized or
within its rights or powers conferred upon it by this Indenture; provided,
however, that the Trustee's conduct does not constitute negligence, willful
misconduct or bad faith.
(e) The Trustee may consult with counsel of its selection, and the
written advice or opinion of counsel with respect to legal matters shall be full
and complete authorization and protection from liability in respect to any
action taken, omitted or suffered by the Trustee hereunder in good faith and in
accordance with the advice or opinion of such counsel.
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Section 8.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights as it would have if the Trustee
were not the Trustee hereunder. However, in the event the Trustee acquires any
conflicting interest in accordance with the TIA it must eliminate such
conflicting interest within 90 days, apply to the SEC for permission to continue
as Trustee or resign. Any Paying Agent, Registrar or co-registrar may do the
same with like rights and duties. The Trustee shall at all times remain subject
to Section 8.10 and Section 8.11.
Section 8.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validly or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds of the Notes and it shall not
be responsible for any statement contained herein or any statement contained in
the Notes or any other document in connection with the sale of the Notes or
pursuant to this Indenture other than the Trustee's certificates of
authentication.
Section 8.05. Notice of Default.
If a Default occurs and is continuing and if such Default is known to
the Responsible Officer of the Trustee, the Trustee must mail to each Holder a
notice of such Default within 90 days (or such shorter period as may be required
by applicable law) after such Default occurs. Except in the case of a Default in
payment of principal of, premium, if any, or interest on any Note, the Trustee
may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of the Holders.
Section 8.06. Reports by Trustee to Holders.
Within 60 days after each _______, beginning with _______ following
the date of this Indenture, the Trustee shall mail to Holders of the Notes a
brief report dated as of such reporting date that complies with TIA ss. 313(a)
to the extent such a report is required by TIA ss. 313(a). The Trustee also
shall comply with TIA ss. 313(b).
A copy of each report at the time of its mailing to the Holders shall
be mailed to the Company and filed with the SEC and each stock exchange, if any,
on which the Notes may be listed. The Company shall promptly notify the Trustee
upon the Notes being listed on any stock exchange and any delisting thereof.
Section 8.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time compensation as
such parties shall agree in writing for the Trustee's acceptance of this
Indenture and its services hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of the Trustee of an express
trust. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee for all reasonable out-of-pocket expenses incurred or made by it in the
course of its services hereunder. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts.
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The Company shall indemnify the Trustee and any predecessor Trustee
and their agents against any and all loss, liability or reasonable expense
including taxes (other than taxes based upon, measured by or determined by the
income of the Trustee) incurred by this in connection with the administration of
this trust including attorneys fees and expenses and the performance of its
duties under this Indenture, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its power or duties hereunder, except any such loss,
liability or expense attributable to the negligence, willful misconduct or bad
faith of the Trustee.
The Trustee shall notify the Company promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder except to the extent that the
Company may be materially prejudiced by such failure. The Company shall defend
the claim and the Trustee shall cooperate in the defense of such claim. The
Trustee may have separate counsel of its selection and the Company shall pay the
reasonable fees and expenses of such counsel. The Company need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own negligence, willful misconduct or bad faith.
The Company need not pay for any settlement made without its consent, which
consent shall not be unreasonably withheld.
The Company's payment obligations under this Section 8.07 shall
survive the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations under this Section 8.07,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except such money or property that is held by it in
trust for the benefit of Holders to pay principal and interest on particular
Notes.
If the Trustee shall incur expenses after the occurrence of a Default
specified in Section 7.01(vii) or Section 7.01(viii), such expenses (including
the reasonable fees and expenses of its agents and counsel) are intended to
constitute expenses of administration under Bankruptcy Law.
Section 8.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 8.08.
The Trustee may resign at any time and be discharged from the trust
hereby created by so notifying the Company in writing. The Holders of not less
than a majority in principal amount of the Notes then outstanding may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company
shall remove the Trustee if:
(i) the Trustee fails to comply with Section 8.10;
(ii) the Trustee is adjudged bankrupt or insolvent;
(iii) a Custodian or other public officer takes charge of the
Trustee or its property; or
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(iv) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee gives notice of its resignation or is removed, the retiring
Trustee, the Company or the Holders of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee after written request by any Holder who has been a
Holder for at least six months fails to comply with Section 8.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Any successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all of the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the Lien provided for
in Section 8.07. Notwithstanding replacement of the Trustee pursuant to this
Section 8.08, the Company's obligations under Section 8.07 shall continue for
the benefit of the retiring Trustee.
Section 8.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business or assets to,
another corporation or banking association, the resulting, surviving or
transferee entity without any further act shall constitute the successor
Trustee; provided, however, that such entity shall be otherwise qualified and
eligible under this Article VIII.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated, and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
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Section 8.10. Eligibility; Disqualification.
This Indenture at all times shall have a Trustee which satisfies the
requirements of TIA ss. 310(a). Trustee shall be a corporation organized and
doing business under the laws of the United States of America or of any State
thereof authorized under such laws to exercise corporate trustee power, shall be
subject to supervision or examination by federal or state authority and shall
have a combined capital and surplus of at least $50 million as set forth in its
most recently published annual report of condition. The Trustee shall be subject
to TIA ss. 310(b).
Section 8.11. Preferential Collection of Claims Against the Company.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee which has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
Section 8.12. May Hold Securities.
The Trustee, any authenticating agent, any paying agent, any registrar
or any other agent of the Company, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to Sections __ and __,
may otherwise deal with the Company with the same rights it would have if it
were not Trustee, authenticating agent, paying agent, security registrar or such
other agent.
ARTICLE IX
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Liability on Notes; Defeasance.
(a) When (i) the Company delivers to the Trustee all outstanding Notes
(other than Notes replaced pursuant to Section 2.07) for cancellation or (ii)
all outstanding Notes have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article III of this
Indenture and the Company irrevocably deposits with the Trustee funds sufficient
to pay at maturity or upon redemption all outstanding Notes including interest
thereon to maturity or such redemption date (other than Notes replaced pursuant
to Section 2.07), and if in either case the Company pays all other sums payable
hereunder by the Company, then this Indenture shall, subject to Section 9.01(c),
cease to be of further effect. The Trustee shall acknowledge satisfaction and
discharge of this Indenture on demand of the Company accompanied by an Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company.
(b) Subject to Section 9.01(c) and Section 9.02, the Company at any
time may terminate (i) all of the Company obligations under the Notes and this
Indenture ("legal defeasance"), except for certain obligations, including those
respecting the defeasance trust and obligations to register the transfer or
exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and
to maintain a registrar and paying agent in respect of the Notes; or (ii) its
obligations under Article IV, Section 5.03, Section 5.04, Section 5.05, Section
5.06, Section 5.07, Section 5.08, Section 5.09, Section 5.10, Section 6.01(iii),
Section 6.01(iv) and the operation of Section 7.01(iv), Section 7.01(vi),
Section 7.01(vii) (with respect only to Significant
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Subsidiaries), Section 7.01(viii) (with respect only to Significant
Subsidiaries) and Section 7.01(ix) ("covenant defeasance"). The Company may
exercise its legal defeasance option notwithstanding its prior exercise of its
covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Notes may not be accelerated because of an Event of Default with respect
thereto. If the Company exercises its covenant defeasance option, payment of the
Notes may not be accelerated because of an Event of Default specified in Section
7.01 (iv), Section 7.01(vi), Section 7.01(vii) (with respect only to Significant
Subsidiaries), Section 7.01(viii) (with respect only to Significant
Subsidiaries) or Section 7.01(ix), or because of the failure of the Company to
comply with Article IV or Section 6.01(iii) or Section 6.01(iv).
Upon satisfaction of the conditions set forth herein and at the
request of the Company, the Trustee shall acknowledge in writing the discharge
of those obligations of the Company terminated thereby.
(c) Notwithstanding clause (a) and clause (b) above, the Company's
obligations contained in Section 2.03, Section 2.04, Section 2.05, Section 2.06,
Section 2.07, Section 8.07, Section 8.08 and this Article IX shall survive until
the Notes have been paid in full. Thereafter, the Company's obligations
contained in Section 8.07, Section 9.04 and Section 9.05 shall survive.
Section 9.02. Conditions to Defeasance.
The Company may exercise its legal defeasance option or its covenant
defeasance option only if:
(i) the Company irrevocably deposits in trust (the "defeasance
trust") with the Trustee money or U.S. Government Obligations for the
payment of principal, premium (if any) and interest on the Notes to
maturity or redemption, as the case may be;
(ii) such defeasance does not result in a breach or violation of,
or constitute a default under, this Indenture, the Credit Agreement or
any other material agreement or instrument to which the Company is a
party or by which it is bound;
(iii) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and
interest when due on all the Notes to maturity or redemption, as the
case may be;
(iv) 123 days pass after the deposit is made and during the
123-day period no Default specified in Section 7.01(vii) or Section
7.01(viii) in either case with respect to the Company occurs which is
continuing at the end of the period;
(v) the deposit does not result in a breach or violation of, or
constitute a default under, this Indenture (including, without
limitation, Article XI hereof),
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the Credit Agreement or any other material agreement or instrument to
which the Company is a party or by which the Company is bound;
(vi) the Company delivers to the Trustee an Opinion of Counsel to
the effect that the trust resulting from the deposit does not
constitute, or is qualified as, a regulated investment company under
the U.S. Investment Company Act of 1940, as amended;
(vii) in the case of the legal defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States stating that (1) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling, or (2)
since the date of this Indenture there has been a change in the
applicable U.S. Federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel shall confirm that,
the Holders will not recognize income, gain or loss for U.S. Federal
income tax purposes as a result of such defeasance and will be subject
to U.S. Federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such deposit and
defeasance had not occurred;
(viii) in the case of the covenant defeasance option, the Company
shall have delivered to the Trustee an Opinion of Counsel in the
United States to the effect that the Holders will not recognize
income, gain or loss for U.S. Federal income tax purposes as a result
of such covenant defeasance and will be subject to U.S. Federal income
tax on the same amounts, in the same manner and at the same times as
would have been the case if such covenant defeasance had not occurred;
and
(ix) the Company delivers to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
to the defeasance and discharge of the Notes as contemplated by this
Article IX have been complied with.
Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of the Notes at a future date in
accordance with Article III.
Section 9.03. Application of Trust Money.
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to this Article IX. The Trustee shall apply the
deposited money and the money from U.S. Government Obligations through the
Paying Agent and in accordance with this Indenture to the payment of principal
of, premium, if any, and interest on the Notes.
Section 9.04. Repayment to the Company.
The Trustee and the Paying Agent shall promptly turn over to the
Company upon request any excess money or securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of
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principal or interest that remains unclaimed for two years, and, thereafter,
Holders entitled to the money shall look to the Company for payment as general
creditors.
Section 9.05. Indemnity for Government Obligations.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against deposited U.S. Government
Obligations or the principal and interest received on such U.S. Government
Obligations.
Section 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with this Article IX by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to this Article IX until
such time as the Trustee or Paying Agent is permitted to apply all such money or
U.S. Government Obligations in accordance with this Article IX; provided,
however, that, if the Company has made any payment of interest on or principal
of any of the Notes because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money or U.S. Government Obligations held by the Trustee or
Paying Agent.
ARTICLE X
AMENDMENT, SUPPLEMENT AND WAIVER
Section 10.01. Without Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture or
the Notes without the consent of any Holder:
(i) to cure any ambiguity, omission, defect or inconsistency;
(ii) to provide for the assumption of the Company's obligations
to the Holders in the case of a merger or consolidation pursuant to
Article VI;
(iii) to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes
are issued in registered form for purposes of Section 163(f) of the
Code, or in a manner such that the uncertificated Notes are described
in Section 163(f)(2)(B) of the Code);
(iv) to add guarantees with respect to the Notes;
(v) to secure the Notes;
(vi) to add to the covenants of the Company and its Subsidiaries
hereunder for the benefit of the Holders or to surrender any right or
power conferred upon the Company;
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(vii) to make any change that would provide any additional rights
or benefits to the Holders or that does not adversely affect the
rights hereunder of any Holder; or
(viii) to comply with requirements of the SEC in order to effect
or maintain the qualification of this Indenture under the TIA.
No amendment may be made to any provision of Article XI that would
adversely affect the rights of any holder of Senior Debt then outstanding unless
the holders of such Senior Debt (or their Representative) consent to such
change.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such amended
or supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 10.06, the Trustee shall join with the Company in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations which may be contained therein, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture which affects its
own rights, duties or immunities under this Indenture or otherwise.
After an amendment, supplement or waiver under this Section 10.01
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing any such amendment, supplement or waiver. Any failure
of the Company to mail such notice, or any defect therein, shall not in any way
impair or affect the validity of any such amended or supplement Indenture or
waiver. Subject to Section 7.04 and Section 7.07, the Holders of a majority in
aggregate principal amount of the Notes then outstanding may waive compliance by
the Company in any particular instance with any provision of this Indenture or
the Notes.
Section 10.02. With Consent of Holders.
The Company and the Trustee may amend or supplement this Indenture,
the Notes or any amended or supplemental Indenture with the written consent of
the Holders of at least a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a Lender offer or exchange for the Notes) and any existing Event of Default and
its consequences or compliance with any provision of this Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the Notes then outstanding. However, without the consent of each Holder of an
outstanding Note affected thereby, any amendment, supplement or waiver may not,
among other things:
(i) reduce the amount of Notes the Holders of which must consent
to an amendment;
(ii) reduce the rate of or extend the time for payment of
interest on any Note;
(iii) reduce the principal of or extend the Stated Maturity of
any Note;
(iv) reduce the premium payable upon the redemption of any Note
or change the time at which any Note may be redeemed in accordance
with Article III;
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(v) make any Note payable in money other than that stated in the
Note;
(vi) impair the right of any Holder of the Notes to receive
payment of principal of and interest on such Holder's Notes on or
after the due dates therefor or to institute suit for the enforcement
of any payment on or with respect to such Holder's Notes;
(vii) make any change in Section 7.04 or Section 7.07 or the
second sentence of this Section 10.02; or
(viii) make any change in any provision of Article XI that
adversely affects the interests of any Holder.
Upon the request of the Company accompanied by a resolution of the
Board of Directors of the Company authorizing the execution of any such amended
or supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory with the Trustee of the consent of the Holders as aforesaid and
upon receipt by the Trustee of the documents described in Section 10.06, the
Trustee shall join with the Company in the execution of such amended or
supplemental Indenture unless such amended or supplemental Indenture affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise, in
which case the Trustee may in its discretion, but shall not be obligated to,
enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders under this
Section 10.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section 10.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing any such amendment, supplement or waiver. Any failure
of the Company to mail such notice, or any defect therein, shall not in any way
impair or affect the validity of any such amended or supplemental Indenture or
waiver. Subject to Section 7.04 and Section 7.07, the Holders of a majority in
aggregate principal amount of the Notes then outstanding may waive compliance by
the Company in any particular instance with any provision of this Indenture or
the Notes.
Section 10.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental Indenture that complies with the TIA as
then in effect.
Section 10.04. Revocation and Effect of Consents and Waivers.
Until an amendment, supplement or waiver becomes effective, a consent
to such amendment, supplement or waiver by a Holder is a continuing and binding
consent by the Holder and every subsequent Holder of the Notes or portion of a
Note that evidences the same Debt as the consenting Holder's Note, even if a
notation of the consent or waiver is not made on any Note. However, any such
Holder or subsequent Holder may revoke the consent as to its Note if the Trustee
receives written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver shall become
effective in accordance with its terms and thereafter shall bind every Holder.
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The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to give their consent or take
any other action described above or required or permitted to be taken pursuant
to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, such Persons which were Holders at such record
date (or their duly designated proxies), and only such Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
Section 10.05. Notation On or Exchange of Notes.
If an amendment or supplement changes the terms of a Note, the Trustee
may require the Holder to deliver such Note to the Trustee. The Trustee may
place an appropriate notation on the Note regarding the changed terms and return
it to the Holder. Alternatively, if the Company or the Trustee so determines,
the Company in exchange for such Note shall issue and the Trustee shall
authenticate a new Note that reflects such changed terms. Failure to make the
appropriate notation or to issue a new Note shall not affect the validity of
such amendment or supplement.
Section 10.06. Trustee to Sign Amendments, Etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article X if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment or
supplement the Trustee shall be entitled to receive, and (subject to Section
8.01) shall be fully protected in relying upon, an Officer's Certificate and an
Opinion of Counsel stating that such amendment or supplement is authorized or
permitted pursuant to this Indenture. The Company shall not sign any amendment
or supplemental Indenture until the Board of Directors approves any such
amendment or supplemental Indenture.
Section 10.07. Payment for Consents.
The Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any Holder for or as an inducement to
any consent, amendment, supplement or waiver with respect to any term or
provision of this Indenture or the Notes, unless such consideration is offered
to be paid or agreed to be paid to all Holders that consent, waive or agree to
amend or supplement in the time frame set forth in the solicitation documents
relating to any such consent, waiver or agreement to amend or supplement.
ARTICLE XI
SUBORDINATION OF NOTES
Section 11.01. Agreement to Subordinate.
The Company agrees, and each Holder by accepting the Notes agrees,
that the Indebtedness evidenced by the Notes is subordinated in right of
payment, to the extent and in the manner provided in this Article XI, to the
prior payment in full in cash or Cash Equivalents of
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all Senior Debt and that the subordination is for the benefit of and enforceable
by the holders of Senior Debt. The Notes shall in all respects rank pari passu
with all other Senior Subordinated Debt of the Company and only Indebtedness of
the Company which is Senior Debt shall rank senior to the Notes in accordance
with the provisions set forth herein. All provisions of this Article XI shall be
subject to Section 11.15 hereof.
Section 11.02. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (i) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets; or (ii) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy; or (iii) any assignment for the benefit of creditors
or any other marshalling of assets or liabilities of the Company, then and in
any such event specified in clause (i), clause (ii) or clause (iii) above (each
such event, if any, herein sometimes referred to as a "Proceeding"):
(1) the holders of Senior Debt will be entitled to receive
payment of such Senior Debt in full in cash or Cash Equivalents before
the Noteholders are entitled to receive any payment or distribution of
cash, securities or other property with respect to the principal of,
premium, (if any), or interest on or other obligations in respect of
the Notes, or on account of any purchase or other acquisition of Notes
by the Company (all such payments, distributions, purchases and
acquisitions herein referred to, individually and collectively, as a
"Notes Payment"), and to that end the holders of Senior Debt of the
Company shall be entitled to receive, for application to the payment
thereof, any Notes Payment which may be payable or deliverable in
respect of the Notes in any such Proceeding; and
(2) until the Senior Debt is paid in full in cash or Cash
Equivalents, any Notes Payment to which Noteholders would be entitled
but for this Article XI will be made to holders of such Senior Debt as
their interests may appear. If a Notes Payment is made to Noteholders
that, due to this Article XI should not have been made to them such
Noteholders are required to hold it in trust for the holders of Senior
Debt and pay it over to them as their interests may appear.
In the event that, notwithstanding the foregoing provisions of this
Section 11.02, the Trustee receives payment or distribution of assets of the
Company of any kind or character, before all the Senior Debt of the Company is
paid in full in cash or Cash Equivalents, then and in such event, such Notes
Payment shall be paid over or delivered forthwith to the trustee in bankruptcy,
receiver, liquidating trustee, custodian, assignee, agent or other person making
payment or distribution of assets of the Company for application to the payment
of all Senior Debt of the Company remaining unpaid, to the extent necessary to
pay the Senior Debt of the Company in full in cash or Cash Equivalents, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt of the Company.
The consolidation of the Company with, or the merger of the Company
into, another person or the liquidation or dissolution of the Company following
the conveyance or transfer of all or substantially all of its properties and
assets as an entirety to another person upon the terms and conditions set forth
in Article VI shall not be deemed a Proceeding for the purposes of this Section
11.02 if the person formed by such consolidation or into which the Company is
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merged or the person which acquires by conveyance or transfer such properties
and assets as an entirety, as the case may be, shall, as part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article VI.
Section 11.03. No Payment When Senior Debt in Default.
The Company may not make any Notes Payment or make any deposit
pursuant to the provisions described under "Defeasance" Article IX if (i) any
Designated Senior Debt is not paid when due or (ii) any other default on
Designated Senior Debt occurs and the maturity of such Designated Senior Debt is
accelerated in accordance with its terms unless, in either case, the default has
been cured or waived or has ceased to exist and any such acceleration has been
rescinded or such Designated Senior Debt has been discharged or paid in full;
provided, however, that the Company may make Notes Payments or make any deposit
pursuant to the provisions described under "Defeasance" Article IX without
regard to the foregoing if the Company and the Trustee receive written notice
approving such payment from the Representative of the Designated Senior Debt
with respect to which either of the events set forth in clause (i) or (ii) of
the immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the second preceding sentence) (a "non-payment default") with respect to any
Designated Senior Debt pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such accelerations) or the expiration of any applicable grace periods,
the Company may not make Notes Payments for a period (a "Payment Blockage
Period") commencing upon the receipt by the Trustee (with a copy to the Company)
of written notice (a "Blockage Notice") of such default from the Representative
of the holders of such Designated Senior Debt specifying an election to effect a
Payment Blockage Period and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the Trustee and
the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because Designated Senior Debt has been discharged or repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence,
unless an event described in clause (i) or (ii) of the first sentence of this
paragraph has occurred, the Company may resume payments on the Notes after the
end of such Payment Blockage Period. The Notes shall not be subject to more than
one Payment Blockage Period in any consecutive 360-day period. For all purposes
of this paragraph, no non-payment default with respect to Designated Senior Debt
that existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Debt initiating such
Payment Blockage Period will be, or can be, made the basis for the commencement
of a second Payment Blockage Period, unless such default has been cured or
waived for a period of not less than 90 consecutive days.
In the event that, notwithstanding the foregoing, the Company shall
make any Notes Payment to the Trustee or any Holder prohibited by the foregoing
provisions of this Section 11.03, then and in such event, such Notes Payment
shall be paid over and delivered forthwith to the holders of the Senior Debt of
the Company remaining unpaid, to the extent necessary to pay in full in cash or
Cash Equivalents all the Senior Debt of the Company.
If payment of the Notes is accelerated because of an Event of Default,
the Company or the Trustee shall promptly notify the holders of Designated
Senior Debt or the Representative of such holders of the acceleration.
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The provisions of this Section 11.03 shall not apply to any Notes
Payment with respect to which Section 11.02 would be applicable.
Section 11.04. Acceleration of Payment of Notes.
If payment of the Notes is accelerated because of an Event of Default,
the Company or the Trustee shall promptly notify the holders of all Designated
Senior Debt (or the Representative of such holders) of the acceleration. If any
Designated Senior Debt is outstanding none of the Company or any Guarantor may
pay the Notes until five Business Days after the Representative of all
Designated Senior Debt receives notice of such acceleration and, thereafter, may
pay the Notes only if such payments are otherwise permitted pursuant to this
Article 11 at such time.
Section 11.05. Payment Permitted If No Default.
Nothing contained in this Article XI or elsewhere in this Indenture or
in any of the Notes shall prevent the Company, at any time except during the
pendency of any Proceeding referred to in Section 11.02 or under the conditions
described in Section 11.03, from making Notes Payments.
Section 11.06. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all amounts due or to become due on
or in respect of Senior Debt of the Company, or the provision for such payment,
in cash or Cash Equivalents or otherwise in a manner satisfactory to the holders
of Senior Debt of the Company, the Holders shall be subrogated (equally and
ratably with the holders of all Debt of the Company, if any, which by its
express terms is subordinated to Senior Debt of the Company to substantially the
same extent as the Notes are subordinated to the Senior Debt of the Company and
is entitled to like rights of subrogation by reason of any payments or
distributions made to holders of such Senior Debt) in right of payment to the
rights of the holders of such Senior Debt of the Company to receive payments and
distributions of cash, property and securities applicable to the Senior Debt of
the Company until the principal of (and premium, if any) and interest on the
Notes shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of the Company of any cash,
property or securities to which the Holders or the Trustee would be entitled
except for the provisions of this Article XI, and no payments over pursuant to
the provisions of this Article XI to the holders of Senior Debt of the Company
by Holders or the Trustee, shall, as among the Company, its creditors other than
holders of Senior Debt and the Holders, be deemed to be a payment or
distribution by the Company to or on account of the Senior Debt of the Company.
Section 11.07. Provisions Solely to Define Relative Rights.
The provisions of this Article XI are and are intended solely for the
purpose of defining the relative rights of the Holders on the one hand and the
holders of Senior Debt of the Company on the other hand. Nothing contained in
this Article XI or elsewhere in this Indenture or in the Notes is intended to or
shall (i) impair, as among the Company, its creditors other than holders of
Senior Debt and the Holders, the obligation of the Company, which is absolute
and unconditional, to pay to the Holders the principal of (and premium, if any)
and interest on the Notes as and when the same shall become due and payable in
accordance with their terms; or (ii) affect the relative rights against the
Company of the Holders and creditors of the Company
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other than the holders of Senior Debt; or (iii) prevent the Trustee or the
Holder from exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under this Article
XI of the holders of Senior Debt of the Company to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
Section 11.08. Trustee to Effectuate Subordination.
Each Holder of a Note by such Holder's acceptance thereof authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination provided in this
Article XI and appoints the Trustee his attorney-in-fact for any and all such
purposes. If the Trustee does not file a proper claim or proof of debt in the
form required in any bankruptcy, insolvency or receivership proceeding prior to
30 days before the expiration of the time to file such claim or claims, then the
holders of the Senior Debt or their Representative are hereby authorized to file
an appropriate claim for and on behalf of the Holders. Nothing herein contained
shall be deemed to authorize the Trustee or the holders of Senior Debt or their
Representative to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arraignment, adjudication or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee for the holder of Senior Debt or their Representative to vote in respect
of the claim of any Holder in any such proceeding.
Section 11.09. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt of the
Company to enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of the
Company or by any noncompliance by the Company with the terms, provisions and
covenants of this Indenture.
Without in any way limiting the generality of the foregoing paragraph,
the holders of the Senior Debt may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders, without incurring
responsibility to the Holders and without impairing or releasing the
Subordination provided in this Article or the obligations hereunder of the
Holders to the holders of Senior Debt, do any one or more of the following: (a)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Debt or any instrument evidencing the same or any
agreement under which Senior Debt is outstanding; provided, however, that any
such alteration shall not increase the amount of Senior Debt outstanding in a
manner prohibited by this Indenture; (b) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior Debt; (c)
release any Person liable in any manner for the collection of Senior Debt; and
(d) exercise of refrain from exercising any rights against the Company or any
other Person; provided, however, that in no event shall any such actions limit
the right of the Holder to take any action to accelerate the maturity of the
Notes in accordance with the provisions set forth in Article V or to pursue any
rights or remedies under the Indenture or under applicable laws if the taking of
such action does not otherwise violate the terms of this Article.
Section 11.10. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Notes. Notwithstanding the provisions of this
Article XI or any other provision of this
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Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which could prohibit the making of any payment to or by the Trustee in
respect of the Notes, unless and until the Trustee shall have received written
notice thereof specifically referencing this Article XI from the Company or a
holder of Senior Debt of the Company or from any Representative or trustee
therefor; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 8.01, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the Trustee shall
not have received the notice provided for in this Section 11.10 at least two
Business Days prior to the date upon which by the terms hereof any money may
became payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Note), then, anything
herein contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the purpose
for which such money was received and shall not be affected by any notice to the
contrary which may be received by it within two Business Days prior to such
date.
Subject to the provisions of Section 8.01, the Trustee and the Holders
shall be entitled to rely on the Representative for the holders of Senior Debt
for the purpose of ascertaining the Persons entitled to participate in any
payment or distribution pursuant to this Article XI. In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any person as a holder of Senior Debt of the Company to
participate in any payment or distribution pursuant to this Article XI, the
Trustee may request each person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Debt of the Company held
by such person, the extent to which such person is entitled to participate in
such payment or distribution and any other facts pertinent to the rights of such
person under this Article XI, and if such evidence is not furnished, the Trustee
may defer any payment to such person pending judicial determination as to the
right of such person to receive such payment.
Section 11.11. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article XI, the Trustee, subject to the provisions of Section 8.01, and
the Holders shall be entitled to rely upon any order or decree entered by any
court of competent jurisdiction in which such Proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the Holders, for
the purpose of ascertaining the persons entitled to participate in such payment
or distribution, the holders of the Senior Debt of the Company and other Debt of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
XI.
Section 11.12. Trustee Not Fiduciary for holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt of the Company and shall not be liable to any such
holders if it shall mistakenly in the absence of gross negligence or willful
misconduct pay over or distribute to Holders or to the Company or to any other
person cash, property or securities to which any holders of Senior Debt of the
Company shall be entitled by virtue of this Article XI or otherwise. With
respect to the holders of Senior Debt of the Company, the Trustee undertakes to
perform or to observe only such of its covenants or obligations as are
specifically set forth in this Article XI and no implied covenants or
obligations with respect to holders of Senior Debt of the Company shall be read
into this Indenture against the Trustee.
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Section 11.13. Rights of Trustee as holder of Senior Debt; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XI with respect to any Senior Debt of the
Company which may at any time be held by it, to the same extent as any other
holder of Senior Debt of the Company, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article XI shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 8.07.
Section 11.14. Article XI Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article XI shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article XI in addition to or in place of the Trustee; provided,
however, that Section 11.13 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
Section 11.15. Trust Moneys Not Subordinated.
Notwithstanding anything contained herein to the contrary, payments
from money or the proceeds of U.S. Government Obligations held in trust under
Article IX by the Trustee for the payment of principal of, premium, if any, and
interest on the Notes shall not be subordinated to the prior payment of any
Senior Debt or subject to the restrictions on this Article XI, and none of the
Trustee or the Holders shall be obligated to pay over any such amount to the
Company or any holder of Senior Debt of the Company or any other creditor of the
Company.
Section 11.16. Reliance by holders of Senior Debt on Subordination Provisions.
Each Holder by accepting a Note acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Debt, whether such Senior Debt
was created or acquired before or after the issuance of the Notes, to acquire
and continue to hold, or to continue to hold, such Senior Debt and such holder
of Senior Debt shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Debt.
Section 11.17. Distribution or Notice to Representative.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative (if any).
Section 11.18. Article XI Not To Prevent Events of Default or Limit Right To
Accelerate.
The failure to make a payment pursuant to the Notes by reason of any
provision in this Article XI shall not be construed as preventing the occurrence
of a Default. Nothing in
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this Article XI shall have any effect on the right of the Holders or the Trustee
to accelerate the maturity of the Notes.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA ss. 318(c), such imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Company or the Trustee to the other
is duly given if in writing and delivered in person or mailed by first class
mail (registered or certified, return receipt requested), telex, telecopier or
overnight air courier guaranteeing next day delivery, to the other's address:
If to the Company:
Goss Graphic Systems, Inc.
700 Oakmont Lane
Westmont, Illinois 60559
Telecopier No.: (708) 850-5807
Attention: M. Eric Schroeder
If to the Trustee:
The Bank of New York
101 Barclay Street - 21W
New York, NY 10286
Telecopier No: (212) 815-5915
Attention: Corporate Trust Trustee Administration
The Company or the Trustee, by notice each to the other may designate
additional or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the Note
Register. Any notice or communication shall also be so mailed to any Person
described in TIA ss. 313(c), to the extent required by the TIA. Failure
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to mail a notice or communication to a Holder or any defect in such notice shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner set forth above
within the time prescribed, such notice or communication shall be deemed to be
duly given whether or not the addressee receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders with Other Holders.
Holders pursuant to TIA ss. 312(b) may communicate with other Holders
with respect to their rights under this Indenture or the Notes. The Company, the
Trustee, the Registrar, the Paying Agent and any other Person shall have the
protection of TIA ss. 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions and covenants, if any, provided for in this
Indenture relating to the proposed action have been satisfied; and
(ii) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all conditions and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant contained in this Indenture shall include:
(i) a statement that the Person making such certificate or
opinion has read such condition or covenant;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of such Person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether such condition
or covenant has been satisfied; and
(iv) a statement as to whether, in the opinion of such Person.
such condition or covenant has been satisfied.
59
<PAGE>
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar and Paying Agent may make reasonable rules and set
reasonable requirements for their functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders.
No past, present or future director, officer, employee, incorporator
or stockholder of the Company, as such, shall have any liability for any
obligations of the Company under the Notes or this Indenture or for any claim
based on, in respect of, or by reason of, such obligations. Each Holder by
accepting a Note waives and releases all such liability. Such waiver and release
form a part of the consideration for issuance of the Notes.
Section 12.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICT OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAW OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not he used to interpret another indenture, loan or
debt agreement of the Company or its Subsidiaries. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
Section 12.10. Successors.
All agreements of the Company contained in this Indenture and the
Notes shall bind the Company and its successors. All agreements of the Trustee
in this Indenture shall bind the Trustee and its successors.
Section 12.11. Severability.
In case any provision of this Indenture or the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each such
signed copy shall be deemed to be an original, and all of such signed copies
together shall represent one and the same agreement.
60
<PAGE>
Section 12.13. Table of Consents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience only,
and shall not, for any reason, be deemed to be part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
61
<PAGE>
SIGNATURES
Dated as of ___________, 1996 GOSS GRAPHIC SYSTEMS, INC.
By:_________________________________________
Name:
Title:
Dated as of __________, 1996 THE BANK OF NEW YORK,
as Trustee
By:_________________________________________
Name:
Title:
62
<PAGE>
EXHIBIT A
FORM OF FACE OF NOTE
GOSS GRAPHIC SYSTEMS, INC.
No.________ Principal Amount $
CUSIP No.
% Senior Subordinated Notes Due 2006
GOSS GRAPHIC SYSTEMS, INC., a Delaware corporation, promises to pay to
___________________________________, or registered assigns, the principal sum of
_________ Dollars on _______,2006.
Interest Payment Dates: [ and .]
Record Dates: [ and .]
Additional provisions of this Note are set forth on the reverse side
of this Note.
Dated:____________
[Seal] GOSS GRAPHIC SYSTEMS, INC.
By______________________________________
Title:
By______________________________________
Title:
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
THE BANK OF NEW YORK,
as Trustee, certifies
that this is one of the
Notes referred to in the
Indenture.
Dated: October __, 1996
By___________________________
Authorized Signatory
A-1
<PAGE>
FORM OF REVERSE SIDE OF NOTE
% Senior Subordinated Notes Due 2006
1. Interest
GOSS GRAPHIC SYSTEMS, INC., a Delaware corporation (such corporation,
and its successors and assigns under the Indenture hereinafter referred to,
being herein called "the Company"), promises to pay interest on the principal
amount of this Note at the rate per annum shown above. The Company will pay
interest semi-annually on ______ and ______ of each year, commencing ______,
1997. Interest on the Notes will accrue from the most recent date to which
interest has been paid, or, if no interest has been paid, from ______, 1997.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne by
the Notes and shall pay interest on overdue installments of interest at such
rate to the extent lawful.
2. Method of Payment
The Company will pay interest on the Notes (except defaulted interest)
to the Persons who are registered holders of Notes at the close of business on
the ______ or ______ next preceding the interest payment date even if Notes are
cancelled after the record date and on or before the interest payment date.
Holders must surrender Notes to a Paying Agent to collect principal payments.
The Company will pay principal and interest in money of the United States that
at the time of payment is legal tender for payment of public and private debts.
However, the Company may pay principal and interest by check payable in such
money. It may mail an interest check to a Holder's registered address.
3. Paying Agent and Registrar
Initially, The Bank of New York, a New York banking corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may appoint and
change any Paying Agent, Registrar or co-registrar without notice. The Company
or any of its domestically incorporated Wholly Owned Subsidiaries may act as
Paying Agent, Registrar or co-registrar.
4. Indenture
The Company issued the Notes under an Indenture dated as of October
__, 1996 (the "Indenture"), between the Company and the Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture (the "TIA"). Terms
defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Notes are subject to all such terms, and Holders
are referred to the Indenture and the TIA for a statement of those terms.
A-2
<PAGE>
The Notes are unsecured senior subordinated obligations of the Company
limited to $225,000,000 aggregate principal amount. The Indenture imposes
certain limitations on the incurrence of additional indebtedness by the Company
and certain of its subsidiaries, the payment of dividends on, and the redemption
of, capital stock of the Company and certain of its Subsidiaries, the making of
Investments, restrictions on distributions from certain Subsidiaries, the use of
proceeds from the sale of assets and Subsidiary stock and transactions with
affiliates. The Indenture also restricts the ability of the Company to
consolidate or merge with or into, or to transfer all or substantially all its
assets to, another person.
5. Optional Redemption
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to ______, 2001. Thereafter, the
Notes will be redeemable, at the Company's option, in whole or in part, at any
time and from time to time on or after ______, 2001, upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each Holder's
registered address, at the following redemption prices (expressed in percentages
of principal amount), plus accrued interest to the redemption date (subject to
the right of Holders of record on the relevant record date to receive interest
due on the relevant interest payment date), if redeemed during the 12-month
period commencing on or after __________ of the years set forth below:
Redemption
Year Price
---- ----------
2001 . . . . . . . . %
2002 . . . . . . . . %
2003 . . . . . . . . %
2004 . . . . . . . . 100.000%
In addition, at any time and from time to time prior to , 1999, the
Company may redeem in the aggregate up to 35% of the original principal amount
of the Notes with the net proceeds of one or more Public Equity Offerings
following which there is a Public Market, or private sales of common stock or
contributions to the common equity capital of the Company or Holdings at a
redemption price (expressed as a percentage of principal amount) of ___%, plus
accrued and unpaid interest, if any, to the redemption date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date); provided, however, that at least
$__________ aggregate principal amount of the Notes must remain outstanding
after each such redemption.
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate and in compliance with the applicable legal and securities exchange
requirements, if any, and, although no Note of $1,000 in original principal
amount or less shall be redeemed in part. If any Note is to be redeemed in part
only, the notice of redemption relating to such Note shall state the portion of
the principal amount thereof to be redeemed. A new Note in principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancellation of the original Note.
A-3
<PAGE>
6. Notice of Redemption
Notice of redemption shall be mailed at least 30 days but not more
than 60 days before the redemption date to each Holder of Notes to be redeemed
at its registered address. Notes in denominations larger than $1,000 may be
redeemed in part but only in whole multiples of $1,000. If money sufficient to
pay the redemption price of and accrued interest on all Notes (or portions
thereof) to be redeemed on the redemption date is deposited with the Paying
Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Notes (or
such portions thereof) called for redemption.
7. Put Provisions
Upon a Change of Control, any Holder will have the right to cause the
Company to repurchase all or any part of the Notes of such Holder at a purchase
price equal to 101% of the principal amount of the Notes to be repurchased plus
accrued interest to the date of repurchase (subject to the right of Holders of
record on the relevant record date to receive interest due on the interest
payment date) as provided in, and subject to the terms of, the Indenture.
8. Subordination
The Notes are subordinated to Senior Debt, as such term is defined in
the Indenture. To the extent provided in the Indenture, Senior Debt must be paid
in full in cash or Cash Equivalents before the Notes may be paid. The Company
agrees, and each Holder by accepting a Note agrees, to the subordination
provisions contained in the Indenture and authorizes the Trustee to give effect
to such subordination provisions and appoints the Trustee as attorney-in-fact
for such purpose.
9. Denominations; Transfer; Exchange
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples of $1,000. Holders may transfer or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements or transfer documents and to
pay any taxes and fees required by law or permitted by the Indenture. The
Registrar need not register the transfer of or exchange any Note selected for
redemption (except, in the case of a Note to be redeemed in part, the portion of
the Note not to be redeemed) or any Notes for a period of 15 days before a
selection of Notes to be redeemed or 15 days before an interest payment date.
10. Persons Deemed Owners
The registered Holder of this Note may be treated as the sole owner of
such Note for all purposes.
11. Unclaimed Money
Subject to applicable abandoned property law, if money for the payment
of principal or interest remains unclaimed for two years, the Trustee or Paying
Agent shall
A-4
<PAGE>
pay the money back to the Company at its request. After any such payment,
Holders entitled to the money must look only to the Company and not to the
Trustee or Paying Agent for payment as general creditors.
12. Discharge and Defeasance
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Notes and the Indenture if the Company
deposits with the Trustee money or U.S. Government Obligations for the payment
of principal and interest on the Notes to redemption or maturity, as the case
may be.
13. Amendment; Waiver
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Notes may be amended with the written consent of the Holders of
at least a majority in principal amount outstanding of the Notes; and (ii) any
default or compliance with any provision may be waived with the written consent
of the Holders of a majority in principal amount of the Notes then outstanding.
Subject to certain exceptions set forth in the Indenture, without the consent of
any Holder, the Company and the Trustee may amend the Indenture or the Notes to
cure any ambiguity, omission, defect or inconsistency, or to comply with Article
VI of the Indenture, or to provide for uncertificated Notes, in addition to or
in place of certificated Notes, or to add guarantees with respect to the Notes
or add additional covenants or surrender rights and powers conferred on the
Company, or to make any change that would provide additional rights or benefits
to the Holders or that does not adversely affect the rights of any Holder or to
comply with requirements of the SEC in connection with the qualification of the
Indenture under the TIA.
14. Defaults and Remedies
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest; (ii) default in payment of principal on the Notes at
maturity, upon redemption, upon declaration, upon required repurchase or
otherwise; (iii) failure by the Company to comply with other covenants in the
Indenture or the Notes, in certain cases subject to notice and lapse of time;
(iv) certain accelerations (including failure to pay within any grace period
after final maturity) of other Debt of the Company or any of its Subsidiaries if
the amount accelerated (or so unpaid) aggregates $10 million or more; (v)
certain events of bankruptcy or insolvency with respect to the Company and its
Significant Subsidiaries; and (vi) certain judgments or decrees for the payment
of money in excess of $10 million. If an Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable immediately. Certain
events of bankruptcy or insolvency are Events of Default which will result in
the Notes being due and payable immediately upon the occurrence of such Events
of Default.
Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee may refuse to enforce the Indenture or the Notes
unless it receives reasonable indemnity or security. Subject to certain
limitations, Holders of a majority in principal amount of the Notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders notice of any continuing Default
A-5
<PAGE>
(except a Default in payment of principal or interest) if it determines that
withholding such notice is in the interest of the Holders.
15. Trustee Dealings with the Company
Subject to certain limitations imposed by the TIA, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee.
16. No Recourse Against Others
A past, present or future director, officer, employee or stockholder,
as such, of the Company or the Trustee shall not have any liability for any
obligations of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of such obligations. By accepting a Note,
each Holder waives and releases all such liability. The waiver and release are
part of the consideration for the issue of the Notes.
17. Authentication
This Note shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the face of this Note.
18. Abbreviations
Customary abbreviations may be used in the name of a Holder or an
assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. Governing Law
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICT OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAW OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
A-6
<PAGE>
20. CUSIP Numbers
Pursuant to the recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Notes and has directed the Trustee to use such CUSIP numbers in
notices of redemption as a convenience to Holders. No representation is made as
to the accuracy of such numbers either as printed on the Notes or as contained
in any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
--------------------------
The Company will furnish to any Holder upon written request and
without charge to such Holder a copy of the Indenture which contains the text of
this Note in larger type. Requests may be made to:
Goss Graphic Systems, Inc.
700 Oakmont Lane,
Westmont, Illinois 60559
Attention: M. Eric Schroeder
A-7
<PAGE>
================================================================================
ASSIGNMENT FORM
To assign this Note, complete the form below:
I or we assign and transfer this Note to:
[Print or type assignee's name, address and zip code]
[Insert assignee's soc. sec. or tax I.D. No. ]
and irrevocably appoint ___________________ agent to transfer this
Note on the books of the Company. The agent may substitute another to
act for him.
================================================================================
Date: _______________________ Your Signature: __________________________________
================================================================================
Sign exactly as your name appears on the face of this Note.
A-8
<PAGE>
OPTION OF HOLDER OF NOTE TO ELECT PURCHASE
If you elect to have this Note purchased by the Company pursuant to
Article IV, check the box:
|_|
If you elect to have only part of this Note purchased by the Company
pursuant to Article IV, state the amount:
$________________________
Date: ___________________________ Your Signature: ______________________________
(Sign exactly as your name
appears on the face of the
Note)
Guaranteed:_____________________________________________________________________
A-9
================================================================================
$225,000,000
CREDIT AGREEMENT
DATED AS OF OCTOBER 15, 1996
AMONG
GOSS GRAPHIC SYSTEMS, INC.,
GOSS GRAPHIC SYSTEMS LIMITED,
GOSS GRAPHIC SYSTEMS JAPAN K. K.
and
ROCKWELL GRAPHIC SYSTEMS-JAPAN CORPORATION,
as Borrowers,
THE LENDERS LISTED HEREIN,
as Lenders,
BANKERS TRUST COMPANY,
as Administrative Agent,
CREDIT SUISSE,
as Syndication Agent,
THE BANK OF NOVA SCOTIA,
as Documentation Agent,
and
BANKERS TRUST COMPANY, TOKYO BRANCH,
as Japanese Agent
================================================================================
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.,
GOSS GRAPHIC SYSTEMS LIMITED,
GOSS GRAPHIC SYSTEMS JAPAN K. K.
and
ROCKWELL GRAPHIC SYSTEMS-JAPAN CORPORATION
CREDIT AGREEMENT
TABLE OF CONTENTS
Page
Section 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . 3
---------------------
1.2 Accounting Terms; Utilization of GAAP for Purposes of
-----------------------------------------------------
Calculations Under Agreement . . . . . . . . . . . . . . . . . . 51
----------------------------
1.3 Other Definitional Provisions . . . . . . . . . . . . . . . . . . 51
-----------------------------
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS . . . . . . . . . 52
2.1 Commitments; Making of Loans; the Register; Notes . . . . . . . . 52
-------------------------------------------------
2.2 Interest on the Loans . . . . . . . . . . . . . . . . . . . . . . 63
---------------------
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
----
2.4 Repayments, Prepayments and Reductions in Revolving Loan
--------------------------------------------------------
Commitments; General Provisions Regarding Payments . . . . . . . 68
--------------------------------------------------
2.5 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 82
---------------
2.6 Special Provisions Governing Eurodollar Rate Loans . . . . . . . 83
--------------------------------------------------
2.7 Increased Costs; Taxes; Capital Adequacy . . . . . . . . . . . . 85
----------------------------------------
2.8 Obligation of Lenders and Issuing Lenders to Mitigate . . . . . . 92
-----------------------------------------------------
2.9 Collection, Deposit and Transfer of Payments in Respect of
----------------------------------------------------------
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
--------
2.10 Indemnifying Lenders. . . . . . . . . . . . . . . . . . . . . . . 95
--------------------
Section 3. LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . 99
3.1 Issuance of Letters of Credit and Lenders' Purchase of
------------------------------------------------------
Participations Therein . . . . . . . . . . . . . . . . . . . . . 99
----------------------
3.2 Letter of Credit Fees . . . . . . . . . . . . . . . . . . . . . . 102
---------------------
3.3 Drawings and Reimbursement of Amounts Drawn Under Letters of
------------------------------------------------------------
Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
------
3.4 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . 106
--------------------
3.5 Indemnification; Nature of Issuing Lenders' Duties . . . . . . . 107
--------------------------------------------------
3.6 Increased Costs and Taxes Relating to Letters of Credit . . . . . 109
-------------------------------------------------------
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT . . . . . . . . . 110
4.1 Conditions to Term Loans and Initial Revolving Loans . . . . . . 110
----------------------------------------------------
4.2 Conditions to All Loans . . . . . . . . . . . . . . . . . . . . . 125
-----------------------
4.3 Conditions to Letters of Credit . . . . . . . . . . . . . . . . . 126
-------------------------------
(i)
<PAGE>
PAGE
Section 5. BORROWERS' REPRESENTATIONS AND WARRANTIES . . . . . . . . . 127
5.1 Organization, Powers, Qualification, Good Standing, Business and
----------------------------------------------------------------
Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . 127
------------
5.2 Authorization of Borrowing, etc. . . . . . . . . . . . . . . . . 128
--------------------------------
5.3 Financial Condition . . . . . . . . . . . . . . . . . . . . . . . 130
-------------------
5.4 No Material Adverse Change; No Restricted Junior Payments . . . . 130
---------------------------------------------------------
5.5 Title to Properties; Liens . . . . . . . . . . . . . . . . . . . 130
--------------------------
5.6 Litigation; Adverse Facts . . . . . . . . . . . . . . . . . . . . 131
-------------------------
5.7 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . 131
----------------
5.8 Performance of Agreements; No Materially Adverse Agreements . . . 131
-----------------------------------------------------------
5.9 Governmental Regulation . . . . . . . . . . . . . . . . . . . . . 132
-----------------------
5.10 Securities Activities . . . . . . . . . .. . . . . . . . . . . . 132
---------------------
5.11 Employee Benefit Plans . . . . . . . . . .. . . . . . . . . . . . 132
----------------------
5.12 Certain Fees . . . . . . . . . . . . . . .. . . . . . . . . . . . 133
------------
5.13 Environmental Protection . . . . . . . . .. . . . . . . . . . . . 133
------------------------
5.14 Employee Matters . . . . . . . . . . . . .. . . . . . . . . . . . 135
----------------
5.15 Solvency . . . . . . . . . . . . . . . . .. . . . . . . . . . . . 135
--------
5.16 Disclosure . . . . . . . . . . . . . . . . . .. . . . . . . . . . 135
----------
5.17 Related Agreements . . . . . . . . . . . . . .. . . . . . . . . . 135
------------------
Section 6. BORROWERS' AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . 136
6.1 Financial Statements and Other Reports . . . . . . . . . . . . . 136
--------------------------------------
6.2 Corporate Existence, etc. . . . . . . . . . . . . . . . . . . . . 143
-------------------------
6.3 Payment of Taxes and Claims; Tax Consolidation . . . . . . . . . 143
----------------------------------------------
6.4 Maintenance of Properties; Insurance; Application of Net
--------------------------------------------------------
Insurance/Condemnation Proceeds . . . . . . . . . . . . . . . . . 144
-------------------------------
6.5 Inspection; Audits of Inventory and Accounts Receivable; Lender
---------------------------------------------------------------
Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
-------
6.6 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . . 146
--------------------------
6.7 Environmental Disclosure and Inspection . . . . . . . . . . . . . 146
---------------------------------------
6.8 Execution of Future Guaranties and Collateral Documents . . . . . 149
-------------------------------------------------------
6.9 Additional Real Property Collateral . . . . . . . . . . . . . . . 151
-----------------------------------
6.10 Assignability and Recording of Lease Agreements . . . . . . . .. 153
-----------------------------------------------
6.11 Interest Rate Protection . . . . . . . . . . . . . . . . . . . .. 154
------------------------
6.12 Change of Corporate Names; Further Actions . . . . . . . . . . .. 154
------------------------------------------
6.13 Transfer of Stock of RGS Japan; Goss Japan Merger . . . . . . .. 154
-------------------------------------------------
Section 7. BORROWERS' NEGATIVE COVENANTS . . . . . . . . . . . . . . . 155
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . 155
------------
7.2 Liens and Related Matters . . . . . . . . . . . . . . . . . . . . 156
-------------------------
7.3 Investments; Joint Ventures . . . . . . . . . . . . . . . . . . . 157
---------------------------
7.4 Contingent Obligations . . . . . . . . . . . . . . . . . . . . . 158
----------------------
7.5 Restricted Junior Payments . . . . . . . . . . . . . . . . . . . 159
--------------------------
(ii)
<PAGE>
PAGE
7.6 Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . 161
-------------------
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions 164
----------------------------------------------------------------
7.8 Sales and Lease-Backs . . . . . . . . . . . . . . . . . . . . . . 165
---------------------
7.9 Transactions with Shareholders and Affiliates . . . . . . . . . . 166
---------------------------------------------
7.10 Disposal of Subsidiary Stock . . . . . . . . . . . . . . . . . . 166
----------------------------
7.11 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . 167
-------------------
7.12 Amendments of Certain Documents; Designation of Designated
----------------------------------------------------------
Senior Indebtedness . . . . . . . . . . . . . . . . . . . . . . 167
-------------------
7.13 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . 168
-----------
7.14 Deposit Accounts . . . . . . . . . . . . . . . . . . . . . . . . 168
----------------
7.15 Foreign Unfunded Pension Plans . . . . . . . . . . . . . . . . . 168
------------------------------
Section 8. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . 168
8.1 Failure to Make Payments When Due . . . . . . . . . . . . . . . . 168
---------------------------------
8.2 Default in Other Agreements . . . . . . . . . . . . . . . . . . . 168
---------------------------
8.3 Breach of Certain Covenants . . . . . . . . . . . . . . . . . . . 169
---------------------------
8.4 Breach of Warranty . . . . . . . . . . . . . . . . . . . . . . . 169
------------------
8.5 Other Defaults Under Loan Documents . . . . . . . . . . . . . . . 169
-----------------------------------
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc. . . . . . . 169
-----------------------------------------------------
8.7 Voluntary Bankruptcy; Appointment of Receiver, etc. . . . . . . . 170
---------------------------------------------------
8.8 Judgments and Attachments . . . . . . . . . . . . . . . . . . . . 170
-------------------------
8.9 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
-----------
8.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . 171
----------------------
8.11 Change in Control . . . . . . . . . . . . . . . . . . . . . . . 171
-----------------
8.12 Invalidity of Loan Documents. . . . . . . . . . . . . . . . . . . 172
----------------------------
8.13 Failure of Security . . . . . . . . . . . . . . . . . . . . . . . 172
-------------------
8.14 Action Relating to Certain Subordinated Indebtedness. . . . . . . 172
----------------------------------------------------
8.15 Failure to Consummate Acquisition, Company Merger or Goss
---------------------------------------------------------
Japan Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . 172
------------
8.16 Failure by RGS Japan to Execute Loan Documents or Assume
--------------------------------------------------------
Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . 173
-----------
8.17 Amendment of Certain Documents of Holdings. . . . . . . . . . . . 173
------------------------------------------
8.18 Conduct of Business Relating to Holdings . . . . . . . . . . . . 173
----------------------------------------
Section 9. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
9.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
-----------
9.2 Powers and Duties; General Immunity . . . . . . . . . . . . . . . 175
-----------------------------------
9.3 Representations and Warranties; No Responsibility For Appraisal
---------------------------------------------------------------
of Creditworthiness . . . . . . . . . . . . . . . . . . . . . . . 177
-------------------
9.4 Right to Indemnity . . . . . . . . . . . . . . . . . . . . . . . 177
------------------
9.5 Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . 178
---------------
9.6 Collateral Documents and Guaranties . . . . . . . . . . . . . . . 178
-----------------------------------
(iii)
<PAGE>
Page
Section 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 179
10.1 Assignments and Participations in Loans and Letters of
------------------------------------------------------
Credit . . . . . . . . . . . . . . . . . . . . . . . . . . 179
------
10.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 182
--------
10.3 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 183
---------
10.4 Set-Off; Security Interest in Deposit Accounts . . . . . . . 184
----------------------------------------------
10.5 Ratable Sharing . . . . . . . . . . . . . . . . . . . . . . 185
---------------
10.6 Amendments and Waivers . . . . . . . . . . . . . . . . . . . 186
----------------------
10.7 Independence of Covenants . . . . . . . . . . . . . . . . . 187
-------------------------
10.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 187
-------
10.9 Survival of Representations, Warranties and Agreements . . . 187
------------------------------------------------------
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative . . . 188
-----------------------------------------------------
10.11 Marshalling; Payments Set Aside . . . . . . . . . . . . . . 188
-------------------------------
10.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . 188
------------
10.13 Obligations Several; Independent Nature of Lenders' Rights . 188
----------------------------------------------------------
10.14 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 189
--------
10.15 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . 189
--------------
10.16 Successors and Assigns . . . . . . . . . . . . . . . . . . . 189
----------------------
10.17 Consent to Jurisdiction and Service of Process . . . . . . . 189
----------------------------------------------
10.18 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . 190
--------------------
10.19 Confidentiality . . . . . . . . . . . . . . . . . . . . . . 190
---------------
10.20 Judgment Currency. . . . . . . . . . . . . . . . . . . . . . 191
-----------------
10.21 Counterparts; Effectiveness . . . . . . . . . . . . . . . . 191
---------------------------
10.22 No Immunity . . . . . . . . . . . . . . . . . . . . . . . . 192
-----------
Signature pages . . . . . . . . . . . . . . . . . . . . . . . . . . S-1
(iv)
<PAGE>
EXHIBITS
I FORM OF NOTICE OF BORROWING
II FORM OF NOTICE OF CONVERSION/CONTINUATION
III FORM OF NOTICE OF ISSUANCE OF LETTER OF CREDIT
IV FORM OF TERM NOTE
V FORM OF REVOLVING NOTE
VI FORM OF COMPLIANCE CERTIFICATE
VII FORM OF FINANCIAL CONDITION CERTIFICATE
VIII FORM OF BORROWING BASE CERTIFICATE
IX-A FORM OF OPINION OF WACHTELL, LIPTON, ROSEN & KATZ
IX-B FORM OF OPINION OF JACK E. MERRYMAN
X-A FORM OF OPINION OF NISHIMURA & PARTNERS
X-B FORM OF OPINION OF LINKLATERS & PAINES
X-C FORM OF OPINION OF BREDIN PRAT & ASSOCIES
XI FORM OF OPINION OF O'MELVENY & MYERS LLP
XII FORM OF ASSIGNMENT AGREEMENT
XIII FORM OF AUDITOR'S LETTER
XIV FORM OF COLLATERAL ACCOUNT AGREEMENT
XV FORM OF BLOCKED ACCOUNT AGREEMENT
XVI FORM OF LOCK BOX AGREEMENT
XVII FORM OF COLLATERAL ACCESS AGREEMENT
XVIII FORM OF GUARANTY
XIX FORM OF PLEDGE AGREEMENT
XX FORM OF SECURITY AGREEMENT
XXI FORM OF TRADEMARK SECURITY AGREEMENT
XXII FORM OF PATENT SECURITY AGREEMENT
XXIII FORM OF SUBSIDIARY GUARANTY
XXIV FORM OF SUBSIDIARY SECURITY AGREEMENT
XXV FORM OF SUBSIDIARY PLEDGE AGREEMENT
XXVI FORM OF SUBSIDIARY TRADEMARK SECURITY AGREEMENT
XXVII FORM OF SUBSIDIARY PATENT SECURITY AGREEMENT
XXVIII FORM OF NOTICE OF ALLOCATION
XXIX FORM OF ASSUMPTION AGREEMENT
(v)
<PAGE>
SCHEDULES
2.1 LENDERS' COMMITMENTS AND PRO RATA SHARES
5.1 SUBSIDIARIES OF COMPANY
5.5 REAL PROPERTY ASSETS
5.6 LITIGATION
5.12 CERTAIN FEES
5.13 ENVIRONMENTAL MATTERS
7.1 CERTAIN EXISTING INDEBTEDNESS
7.2 CERTAIN EXISTING LIENS
7.3 CERTAIN EXISTING INVESTMENTS
7.4 CERTAIN EXISTING CONTINGENT OBLIGATIONS
(vi)
<PAGE>
GOSS GRAPHIC SYSTEMS, INC.,
GOSS GRAPHIC SYSTEMS LIMITED,
GOSS GRAPHIC SYSTEMS JAPAN K. K.
and
ROCKWELL GRAPHIC SYSTEMS-JAPAN CORPORATION
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of October 15, 1996 and entered into
by and among GOSS GRAPHIC SYSTEMS, INC., a corporation organized under the laws
of the State of Delaware, GOSS GRAPHIC SYSTEMS LIMITED, a corporation organized
under the laws of the United Kingdom, GOSS GRAPHIC SYSTEMS JAPAN K. K. and
ROCKWELL GRAPHIC SYSTEMS-JAPAN CORPORATION, each a corporation organized under
the laws of Japan, THE FINANCIAL INSTITUTIONS ACTING AS LENDERS AND LISTED ON
THE SIGNATURE PAGES HEREOF, THE FINANCIAL INSTITUTIONS ACTING AS INDEMNIFYING
LENDERS AND LISTED ON THE SIGNATURE PAGES HEREOF, BANKERS TRUST COMPANY
("BTCo"), as administrative agent for Lenders (in such capacity, "Administrative
Agent"), CREDIT SUISSE, as syndication agent for Lenders (in such capacity,
"Syndication Agent"), THE BANK OF NOVA SCOTIA, as documentation agent for
Lenders (in such capacity, "Documentation Agent"), and BANKERS TRUST COMPANY,
TOKYO BRANCH ("BT Tokyo"), as agent for Japanese Lenders (in such capacity,
"Japanese Agent").
R E C I T A L S
- - - - - - - -
WHEREAS, Holdings (this and other capitalized terms used in these
recitals without definition being used as defined in subsection 1.1) and Company
have been formed by Stonington for the purpose of acquiring (i) the capital
stock of Rockwell Graphic Systems, Inc., a corporation organized under the laws
of the State of Delaware ("RGS US"), Rockwell Systemes Graphiques Nantes S.A., a
societe anonyme organized under the laws of the Republic of France ("RGS
France"), and RGS Japan (collectively, the "Acquired Stock"), and (ii)
substantially all of the assets (the "Acquired Assets") and assuming
substantially all of the liabilities (the "Assumed Liabilities") relating to the
Rockwell Graphic Systems business unit ("RGS") of Rockwell International
Corporation, a corporation organized under the laws of the State of Delaware
("Rockwell"), and of Rockwell Graphic Systems Ltd., a corporation organized
under the laws of the United Kingdom ("RGS UK"), Rockwell International of
Canada, Ltd., Rockwell International GmbH, and Rockwell Australia Ltd.;
1
<PAGE>
WHEREAS, on or before the Closing Date, (i) Stonington and its
Affiliates and Management Investors shall have purchased all of the outstanding
Holdings Common Stock for a cash consideration of not less than $112,500,000,
and (ii) Holdings shall have issued to Rockwell Holdings Preferred Stock with an
aggregate liquidation preference equal to not less than $47,500,000;
WHEREAS, on or before the Closing Date, (a) Holdings shall have
contributed to Company, as common equity, all of the cash consideration received
by Holdings from the sale of Holdings Common Stock, which in no event shall be
less than $112,500,000, in exchange for all of the capital stock of Company, and
(b) Company shall have issued and sold not less than $225,000,000 in aggregate
principal amount of Senior Subordinated Notes;
WHEREAS, on or before the Closing Date, Company will raise
approximately $163,700,000 in cash proceeds from the non-recourse (except for
the Assumed Guaranties which in no event will exceed $20,000,000) sale of
certain Customer Notes to BTCC, as such amount may be adjusted in accordance
with the terms of the Loan Portfolio Purchase Agreement;
WHEREAS, on the Closing Date, (i) Company will purchase the Acquired
Stock (other than the capital stock of RGS Japan) and the Acquired Assets (other
than the assets of RGS UK) pursuant to the Purchase Agreement, and immediately
upon the consummation of the Acquisition, Company will merge with and into RGS
US (the "Company Merger"), with RGS US being the surviving corporation in such
merger, which corporation will be renamed "Goss Graphic Systems, Inc.", (ii) New
Goss Japan will purchase all of the outstanding capital stock of RGS Japan, and
(iii) Goss UK will acquire substantially all of the assets of RGS UK pursuant to
the Purchase Agreement;
WHEREAS, the US/UK Lenders have agreed to extend certain credit
facilities to Company, the Japanese Lenders have agreed to extend certain credit
facilities to Goss Japan and the US/UK Lenders have agreed to extend certain
credit facilities to Goss UK, the proceeds of which will be used, (i) together
with the proceeds from the issuance of Senior Subordinated Notes, the proceeds
from the non-recourse sale of the Customer Notes, the proceeds from the sale of
Holdings Common Stock and the issuance of the Holdings Preferred Stock described
above, to pay the Purchase Price for the Acquisition, and (ii) to provide
financing for working capital and other general corporate purposes of Company,
Goss Japan and Goss UK, as the case may be;
WHEREAS, each of Company, Goss Japan and Goss UK desire to secure all
of their respective Obligations hereunder and under the other Loan Documents by
granting to the respective Agents, on behalf of Lenders, a First Priority Lien
on substantially all of their respective real, personal and mixed property;
2
<PAGE>
WHEREAS, Holdings and Domestic Subsidiaries have agreed to guarantee
the Obligations of Borrowers hereunder and under the other Loan Documents,
Company has agreed to guarantee the Obligations of Goss Japan and Goss UK
hereunder and under the other Loan Documents, and all such Loan Parties have
agreed to secure their respective guaranties by granting to Agents, on behalf of
Lenders, a First Priority Lien on substantially all of their respective real,
personal and mixed property; and
NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, Borrowers, Lenders and Agents agree
as follows:
Section 1. DEFINITIONS
1.1 Certain Defined Terms.
---------------------
The following terms used in this Agreement shall have the following
meanings:
"Account" means, with respect to any Person, all present and future
rights of such Person to payment for goods sold or leased or for services
rendered (except those evidenced by instruments or chattel paper), whether now
existing or hereafter arising and wherever arising, and whether or not they have
been earned by performance.
"Acquisition" means the transactions contemplated by the Purchase
Agreement, including, but not limited to, the purchase of the Acquired Stock and
the Acquired Assets and the assumption of the Assumed Liabilities.
"Adjusted Eurodollar Rate" means, for any Interest Rate Determination
Date with respect to an Interest Period for a Eurodollar Rate Loan, the rate per
annum obtained by dividing (i) the offered quotation (rounded upward to the
--------
nearest 1/16 of one percent) to first class banks in the interbank Eurodollar
market by Administrative Agent for Dollar deposits of amounts in same day funds
comparable to the principal amount of the Eurodollar Rate Loan of the
Administrative Agent for which the Adjusted Eurodollar Rate is then being
determined with maturities comparable to such Interest Period as of
approximately 10:00 a.m. (New York time) on such Interest Rate Determination
Date by (ii) a percentage equal to 100% minus the stated maximum rate of all
-- -----
reserve requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable on such Interest Rate
Determination Date to any member bank of the Federal Reserve System in respect
of "Eurocurrency liabilities" as defined in Regulation D (or any successor
category of liabilities under Regulation D).
"Adjusted Pro Rata Share" means, (i) with respect to any US/UK Lender,
the percentage obtained by dividing (a) the US/UK Revolving Loan Exposure of
--------
that US/UK Lender by (b) the aggregate US/UK Revolving Loan Exposure of all
--
US/UK
3
<PAGE>
Lenders other than Daily Funding Lender, and (ii) with respect to any Japanese
Lender, the percentage obtained by dividing (a) the Japanese Revolving Loan
--------
Exposure of that Japanese Lender by (b) the aggregate Japanese Revolving Loan
--
Exposure of all Japanese Lenders other than Japanese Funding Lender.
"Administrative Agent" has the meaning assigned to that term in the
introduction to this Agreement, and includes any such successor Administrative
Agent appointed pursuant to subsection 9.5.
"Affected Lender" has the meaning assigned to that term in subsection
2.6C.
"Affiliate", as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities or
by contract or otherwise; provided that no Agent shall be considered to be an
--------
"Affiliate" of Holdings or any of its Subsidiaries.
"Agent" means (i) with respect to Domestic Loans and UK Loans,
Administrative Agent, and (ii) with respect to Japanese Loans, Japanese Agent,
and in each case also means and includes any such successor Agent appointed
pursuant to subsection 9.5.
"Agent Account" means an account maintained by the applicable Agent
into which the applicable Concentration Banks are instructed to transfer funds
on deposit in the Concentration Accounts.
"Agreement" means this Credit Agreement dated as of October 15, 1996,
as it may be amended, supplemented or otherwise modified from time to time.
"Applicable Base Rate Margin" means, as of any date of determination,
(i) 1.00% per annum in the event that the Leverage Ratio for the two most recent
consecutive Fiscal Quarters then ended is equal to or less than 2.75:1.00; (ii)
1.25% per annum in the event that the Leverage Ratio for the two most recent
consecutive Fiscal Quarter then ended is equal to or less than 3.00:1:00 but the
Borrower is not entitled to the rate provided for in the preceding clause (i);
and (iii) 1.50% per annum in the event the Leverage Ratio is greater than
3:00:1.00 or for any period of time in which neither of the preceding clauses
(i) or (ii) applies and for the period of time from the Closing Date until a
Margin Determination Certificate is first delivered pursuant to subsection
6.1(xvii).
"Applicable Eurodollar Margin" means, as of any date of determination,
(i) 2.00% per annum in the event that the Leverage Ratio for two most recent
consecutive
4
<PAGE>
Fiscal Quarters then ended is equal to or less than 2.75:1.00; (ii) 2.25% per
annum in the event that the Leverage Ratio for the two most recent consecutive
Fiscal Quarters then ended is equal to or less than 3.00:1:00 but the Borrower
is not entitled to the rate provided for in the preceding clause (i); and (iii)
2.50% per annum in the event that the Leverage Ratio is greater than 3.00:1.00
or for any period of time in which neither of the preceding clauses (i) or (ii)
applies and for the period of time from the Closing Date until a Margin
Determination Certificate is first delivered pursuant to subsection 6.1(xvii).
"Asset Sale" means the sale, assignment or other transfer for value by
Company or any of its Subsidiaries to any Person other than Company or any of
its wholly-owned Subsidiaries of (i) any of the stock of any of Company's
Subsidiaries, (ii) substantially all of the assets of any division or line of
business of Company or any of its Subsidiaries, or (iii) any other assets
(whether tangible or intangible) of Company or any of its Subsidiaries (other
than (a) inventory sold in the ordinary course of business and (b) any such
other assets to the extent that the aggregate value of such assets sold in any
single transaction or related series of transactions is equal to $250,000 or
less, or $1,000,000 or less in the aggregate for all such excluded assets under
this clause (b)); provided that the term "Asset Sale" shall not include the sale
--------
of the Customer Notes pursuant to the Loan Portfolio Purchase Agreement and
shall not include the sale from time to time of Secured Customer Financing
Notes.
"Assignment Agreement" means an Assignment Agreement in substantially
the form of Exhibit XII annexed hereto.
-----------
"Assumed Guaranties" means those guaranties of Customer Notes to be
assumed or provided by Company for the benefit of BTCC, as purchaser of the
Customer Notes, which guaranties shall be substantially in accordance with the
terms and conditions set forth in the Loan Portfolio Purchase Agreement for such
Assumed Guaranties and which Assumed Guaranties shall consist of: (i) a guaranty
of approximately $5,000,000 of the principal balance of and up to $2,000,000 in
interest accrued after the Closing Date on a Customer Note payable by Sunny
Industries, Inc. (secured by a $5,000,000 letter of credit as to the guarantee
of principal), which guaranty will expire on the earlier to occur of the date on
which Sunny Industries, Inc. makes a scheduled payment of interest or the first
anniversary of the Closing Date; (ii) a guaranty of one-half year's interest
(approximately $1,900,000) accrued after the Closing Date on a Customer Note
payable by a newspaper customer (secured by a letter of credit in an amount of
approximately $1,900,000), which guaranty will expire no later than June 30,
1997; and (iii) a guaranty of $10,500,000 of the principal on a Customer Note
payable by the Hersant Group, which guaranty will expire in approximately four
years, in each case as in effect on the Closing Date and as amended from time to
time to the extent permitted under subsection 7.12.
"Assumption Agreement" means the assignment and assumption agreement,
substantially in the form of Exhibit XXIX annexed hereto, pursuant to
------------
5
<PAGE>
which New Goss Japan shall assign its obligations under this Agreement to RGS
Japan and RGS Japan shall assume all such obligations.
"Auditors" means Arthur Andersen LLP.
"Auditor's Letter" means a letter, substantially in the form of
Exhibit XIII annexed hereto, acknowledged by Auditors, and delivered to
- ------------
Administrative Agent pursuant to subsection 4.1W or 6.1(iii).
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as now and hereafter in effect, or any successor statute, and any
similar or comparable law of any applicable Governmental Authority.
"Base Rate" means, at any time, the higher of (x) the Prime Rate or
(y) the rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate.
"Base Rate Loans" means Loans bearing interest at rates determined by
reference to the Base Rate as provided in subsection 2.2A.
"Blocked Account" means a Deposit Account under the exclusive dominion
and control of an Agent that is maintained by the applicable Loan Party with a
Blocked Account Bank pursuant to a Blocked Account Agreement.
"Blocked Account Agreement" means a blocked account agreement executed
and delivered by a Blocked Account Bank or a Concentration Bank, as the case may
be, the applicable Agent and the applicable Loan Party, substantially in the
form of Exhibit XV annexed hereto, or any other blocked account agreement,
----------
document or instrument with a similar or comparable effect executed by any
Foreign Subsidiary of Company, in form and substance satisfactory to
Administrative Agent, as such Blocked Account Agreement may be amended,
supplemented or otherwise modified from time to time, and "Blocked Account
Agreements" means all such Blocked Account Agreements, collectively.
"Blocked Account Bank" means any commercial bank satisfactory to
Administrative Agent at which any Loan Party maintains a Blocked Account.
"Borrower" means (i) with respect to Domestic Loans, Company, (ii)
with respect to Japanese Loans, Goss Japan, and (iii) with respect to UK Loans,
Goss UK.
"Borrowing Base" means (i) with respect to Domestic Loans, the Company
Borrowing Base, (ii) with respect to Japanese Loans, the Goss Japan Borrowing
Base, and (iii) with respect to UK Loans, the Goss UK Borrowing Base.
6
<PAGE>
"Borrowing Base Certificate" means a certificate substantially in the
form of Exhibit VIII annexed hereto delivered by a Borrower pursuant to
------------
subsection 4.1S or subsection 6.1(xviii). Goss Japan and Goss UK shall complete
such Borrowing Base Certificate based on the respective Yen, Sterling, Franc,
Mark or ECU amounts reflected for Accounts, Raw Materials, Finished Goods and
Spare Parts on such Borrower's or Goss France's, as applicable, financial books
and records and shall, in addition, provide the Dollar Equivalent of such Yen,
Sterling, Franc, Mark or ECU amounts as of the date of such Borrowing Base
Certificate. For purposes of determining compliance with the provisions of this
Agreement, Administrative Agent shall utilize the Dollar Equivalent of such Yen,
Sterling, Franc, Mark or ECU amounts.
"BTCC" means BT Commercial Corporation, an Affiliate of BTCo.
"BTCo" has the meaning assigned to that term in the introduction to
this Agreement.
"BT Tokyo" has the meaning assigned to that term in the introduction
to this Agreement, and is an Affiliate of BTCo.
"Business Day" means (i) for all purposes other than as covered by
clause (ii) below, any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of New York or Illinois or is a day on
which banking institutions located in either such state are authorized or
required by law or other governmental action to close, and (ii) with respect to
all notices, determinations, fundings and payments in connection with any
Japanese Loans, any day that is a Business Day described in clause (i) above but
excluding any day which is a legal holiday under the laws of Japan or which is a
day on which banking institutions located in Tokyo, Japan, are authorized or
required by law or other governmental action to close.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Cash" means money, currency or a credit balance in a Deposit Account.
"Cash Equivalents" means, as at any date of determination,
(i) (a) marketable securities (1) issued or directly and unconditionally
guaranteed as to interest and principal by the United States Government or (2)
issued by any agency of the United States the obligations of which are backed by
the full faith and credit of the United States, in each case maturing within one
year after such date; (b) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof, in each case maturing within one year after
such date and having, at the time of the acquisition thereof, the highest rating
obtainable from either Standard & Poor's Ratings Group ("S&P") or Moody's
Investors
7
<PAGE>
Service, Inc. ("Moody's"); (c) commercial paper maturing no more than one year
from the date of creation thereof and having, at the time of the acquisition
thereof, a rating of at least A-1 from S&P or at least P-1 from Moody's;
(d) certificates of deposit or bankers' acceptances maturing within one year
after such date and issued or accepted by any Lender or by any commercial bank
organized under the laws of the United States of America or any state thereof or
the District of Columbia that (1) is at least "adequately capitalized" (as
defined in the regulations of its primary Federal banking regulator) and (2) has
Tier 1 capital (as defined in such regulations) of not less than $100,000,000;
and (e) shares of any money market mutual fund that (1) has at least 95% of its
assets invested continuously in the types of investments referred to in clauses
(a) and (b) above, (2) has net assets of not less than $500,000,000, and (3) has
the highest rating obtainable from either S&P or Moody's, and (ii) with respect
to Goss Japan or Goss UK, respectively, Japanese or UK investments which are
comparable in term and credit quality to those described in the foregoing clause
(i)(a)-(e).
"Cash Proceeds" means, with respect to any Asset Sale, Cash payments
(including any Cash received by way of deferred payment pursuant to, or
monetization of, a note receivable or otherwise, but only as and when so
received) received from such Asset Sale.
"Certificate re Non-Bank Status" means a certificate in form and
substance satisfactory to Administrative Agent delivered by a Lender to
Administrative Agent pursuant to subsection 2.7B(iii) pursuant to which such
Lender certifies, under penalty of perjury, that it is not (i) a "bank" as such
term is defined in subsection 881(c)(3) of the Internal Revenue Code; (ii) a 10
percent shareholder of Company within the meaning of Section 871(h)(3)(B) or
Section 881(c)(3)(B) of the Internal Revenue Code; or (iii) a "controlled"
foreign corporation related to Company within the meaning of Section 864(d)(4)
of the Internal Revenue Code.
"Closing Date" means the date on or before October 15, 1996, on which
the initial Loans are made.
"Collateral" means, collectively, all of the real, personal and mixed
property (including capital stock) in which Liens are purported to be granted by
the Collateral Documents.
"Collateral Access Agreement" means any landlord waiver, mortgagee
waiver, bailee letter or any similar acknowledgement agreement of any landlord
or mortgagee in respect of any Real Property Asset where any Inventory is
located or any warehouseman or processor in possession of Inventory,
substantially in the form of Exhibit XVII annexed hereto, with such changes
------------
thereto as may be agreed to by Administrative Agent in the reasonable exercise
of its discretion.
8
<PAGE>
"Collateral Account" has the meaning assigned to that term in the
Collateral Account Agreement.
"Collateral Account Agreement" means the Collateral Account Agreements
executed and delivered by each of the Borrowers and the applicable Agent on the
Closing Date, substantially in the form of Exhibit XIV annexed hereto, pursuant
-----------
to which such Borrowers may pledge cash to such Agent to secure the obligations
of such Borrower to reimburse an Issuing Lender for payments made under one or
more Letters of Credit as provided in Section 3, as such Collateral Account
Agreements may hereafter be amended, supplemented or otherwise modified from
time to time.
"Collateral Documents" means the Collateral Account Agreements, the
Security Agreements, the Pledge Agreements, the Trademark Security Agreements,
the Patent Security Agreements, the Subsidiary Security Agreements, the
Subsidiary Pledge Agreements, the Subsidiary Trademark Security Agreements, the
Subsidiary Patent Security Agreements, the Blocked Account Agreements, the Lock
Box Agreements and the Mortgages.
"Commercial Letter of Credit" means any letter of credit or similar
instrument issued for the purpose of providing the primary payment mechanism in
connection with the purchase of any materials, goods or services by a Borrower
or any of its Subsidiaries in the ordinary course of business of such Borrower
or such Subsidiary.
"Commitments" means the Domestic Term Loan Commitments, the US/UK
Revolving Loan Commitments, the UK Term Loan Commitments, the Japanese Term Loan
Commitments or the Japanese Revolving Loan Commitments, or any combination
thereof.
"Company" means (i) prior to the consummation of the Company Merger,
Goss Graphic Systems, Inc., a corporation organized under the laws of the State
of Delaware, as the Borrower with respect to the Domestic Term Loan Commitments,
and (ii) immediately upon consummation of the Company Merger, RGS US as the
surviving corporation, which corporation will be renamed "Goss Graphic Systems,
Inc." and be a wholly-owned Subsidiary of Holdings.
"Company Borrowing Base" means, as at any date of determination, an
aggregate amount equal to:
(i) eighty-five percent (85%) of Eligible Accounts Receivable of
Company, plus
----
(ii) sixty-five percent (65%) of Eligible Raw Materials of
Company, plus
----
9
<PAGE>
(iii) sixty-five percent (65%) of Eligible Finished Goods of
Company, plus
----
(iv) sixty-five percent (65%) of Eligible Spare Parts of
Company, minus
-----
(v) the aggregate amount of reserves, if any, required to be
established by Administrative Agent in its sole discretion with
respect to any Currency Agreement or Interest Rate Agreement between a
Lender or any of its Affiliates as a counterparty and Company, minus
-----
(vi) the aggregate amount of reserves, if any, established
by Administrative Agent in the exercise of its Permitted Discretion
against Eligible Accounts Receivable, Eligible Raw Materials, Eligible
Finished Goods and Eligible Spare Parts of Company;
provided that Administrative Agent, in the exercise of its Permitted Discretion,
- --------
may (a) increase or decrease reserves against Eligible Accounts Receivable,
Eligible Raw Materials, Eligible Finished Goods and Eligible Spare Parts of
Company and (b) reduce the advance rates provided in this definition, or restore
such advance rates to any level equal to or below the advance rates in effect as
of the Closing Date.
"Company Common Stock" means the common stock of Company, par value
$0.01 per share.
"Compliance Certificate" means a certificate substantially in the form
of Exhibit VI annexed hereto delivered to Administrative Agent and Lenders by
----------
Company pursuant to subsection 6.1(iv).
"Concentration Account" means an account, including without limitation
any Investment Account, under the exclusive dominion and control of an Agent
that is maintained by the applicable Loan Party with a Concentration Bank into
which the applicable Lock Box Banks and Blocked Account Banks are instructed to
transfer funds on deposit in the applicable Lock Box Accounts or Blocked
Accounts, as the case may be, pursuant to the terms of the applicable Lock Box
Agreements or Blocked Account Agreements, as the case may be.
"Concentration Bank" means an Agent or any Affiliate of such Agent, or
any commercial bank satisfactory to Administrative Agent at which any Loan Party
maintains a Concentration Account.
"Consolidated Adjusted EBITDA" means, for any period, (a) the sum,
without duplication, of the amounts for such period of (i) Consolidated Net
Income, (ii) Consolidated Interest Expense, (iii) provisions for taxes based on
income, (iv) total
10
<PAGE>
depreciation expense, (v) total amortization expense, (vi) expenses related to
the Customer Notes, and (vii) other non-cash items reducing Consolidated Net
Income less (b) the sum, without duplication, of the amounts for such period of
----
(i) income related to the Customer Notes and (ii) other non-cash items
increasing Consolidated Net Income, all of the foregoing as determined on a
consolidated basis for Company and its Subsidiaries in conformity with GAAP;
provided that for any covenant calculation, the Consolidated Adjusted EBITDA for
- --------
the quarter ended March 31, 1996 will be $35,100,000.
"Consolidated Capital Expenditures" means, for any period, the sum of
the aggregate of all expenditures (whether paid in cash or other consideration
or accrued as a liability and including that portion of Capital Leases which is
capitalized on the consolidated balance sheet of Company and its Subsidiaries)
by Company and its Subsidiaries during that period that, in conformity with
GAAP, are included in "additions to property, plant or equipment" or comparable
items reflected in the consolidated statement of cash flows of Company and its
Subsidiaries.
"Consolidated Cash Interest Expense" means, for any period,
Consolidated Interest Expense for such period excluding, however, any interest
--------- -------
expense not payable in Cash (including amortization of discount and amortization
of debt issuance costs).
"Consolidated Current Assets" means, as at any date of determination,
the total assets of Company and its Subsidiaries on a consolidated basis which
may properly be classified as current assets in conformity with GAAP, excluding
---------
Cash and Cash Equivalents.
"Consolidated Current Liabilities" means, as at any date of
determination, the total liabilities of Company and its Subsidiaries on a
consolidated basis which may properly be classified as current liabilities in
conformity with GAAP, excluding the current portion of any Indebtedness.
---------
"Consolidated Excess Cash Flow" means, for any period, an amount equal
to (i) the sum, without duplication, of the amounts for such period of (a)
Consolidated Adjusted EBITDA and (b) the Consolidated Working Capital Adjustment
(excluding for the Fiscal Year ending September 30, 1997, any amounts
constituting Purchase Price adjustments) minus (ii) the sum, without
-----
duplication, of the amounts for such period of (a) voluntary and scheduled
repayments of Consolidated Total Debt (excluding repayments of Revolving Loans
except to the extent the Revolving Loan Commitments are permanently reduced in
connection with such repayments), (b) Consolidated Capital Expenditures (net of
any proceeds of any related financings with respect to such expenditures),
(c) Consolidated Cash Interest Expense, and (d) the provision for current taxes
based on income of Company and its Subsidiaries and payable in cash with respect
to such period to the extent not included as a current liability.
"Consolidated Fixed Charges" means, for any period, the sum (without
duplication) of the amounts for such period of (i) Consolidated Cash Interest
Expense
11
<PAGE>
accrued after the Closing Date, (ii) scheduled principal payments made on
Consolidated Total Debt, (iii) consolidated cash taxes accrued after the Closing
Date, and (iv) Consolidated Capital Expenditures, all of the foregoing as
determined on a consolidated basis for Company and its Subsidiaries in
conformity with GAAP.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP and capitalized interest) of Company and its Subsidiaries on a
consolidated basis with respect to Consolidated Total Debt, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, but excluding,
---------
however, any amounts referred to in subsection 2.3 payable to Administrative
- -------
Agent and Lenders on or before the Closing Date and net costs under Interest
Rate Agreements obtained in compliance with subsection 6.11.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Company and its Subsidiaries on a consolidated basis for such period
taken as a single accounting period determined in conformity with GAAP; provided
--------
that there shall be excluded (i) the income (or loss) of any Person (other than
a Subsidiary of Company) in which any other Person (other than Company or any of
its Subsidiaries) has a joint interest, except to the extent of the amount of
dividends or other distributions actually paid to Company or any of its
Subsidiaries by such Person during such period, (ii) the income (or loss) of any
Person accrued prior to the date it becomes a Subsidiary of Company or is merged
into or consolidated with Company or any of its Subsidiaries or that Person's
assets are acquired by Company or any of its Subsidiaries, (iii) the income of
any Subsidiary of Company to the extent that the declaration or payment of
dividends or similar distributions by that Subsidiary of that income is not at
the time permitted by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Subsidiary, (iv) any after-tax gains or losses attributable
to Asset Sales or returned surplus assets of any Pension Plan, and (v) (to the
extent not included in clauses (i) through (iv) above) any net extraordinary
gains or net non-cash extraordinary losses.
"Consolidated Net Worth" means, as at any date of determination, the
sum of the capital stock and paid-in capital, plus retained earnings (or minus
accumulated deficits) of Company and its Subsidiaries on a consolidated basis in
conformity with GAAP.
"Consolidated Total Debt" means, as at any date of determination, the
aggregate stated balance sheet amount of all Indebtedness of Company and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
"Consolidated Working Capital" means, as at any date of determination,
the excess of Consolidated Current Assets over Consolidated Current Liabilities.
12
<PAGE>
"Consolidated Working Capital Adjustment" means, for any period on a
consolidated basis, the amount (which may be a negative number) equal to the
Consolidated Working Capital of Company and its Subsidiaries as of the beginning
of such period minus the Consolidated Working Capital of Company and its
-----
Subsidiaries as of the end of such period.
"Contingent Obligation", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any Indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof,
(ii) with respect to any letter of credit issued for the account of that Person
or as to which that Person is otherwise liable for reimbursement of drawings, or
(iii) under Interest Rate Agreements and Currency Agreements. Contingent
Obligations shall include, without limitation, (a) the direct or indirect
guaranty, endorsement (other than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (b) the obligation to make take-or-
pay or similar payments if required regardless of non-performance by any other
party or parties to an agreement, and (c) any liability of such Person for the
obligation of another through any agreement (contingent or otherwise) (X) to
purchase, repurchase or otherwise acquire such obligation or any security
therefor, or to provide funds for the payment or discharge of such obligation
(whether in the form of loans, advances, stock purchases, capital contributions
or otherwise) or (Y) to maintain the solvency or any balance sheet item, level
of income or financial condition of another if, in the case of any agreement
described under subclauses (X) or (Y) of this sentence, the primary purpose or
intent thereof is as described in the preceding sentence. The amount of any
Contingent Obligation shall be equal to the amount of the obligation so
guaranteed or otherwise supported or, if less, the amount to which such
Contingent Obligation is specifically limited.
"Contractual Obligation", as applied to any Person, means any
provision of any Security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement, futures contract, option contract, synthetic cap or other
similar agreement or arrangement.
"Customer Financing Note Guaranty" means a guaranty of, or a recourse
arrangement relating to, in each case on terms consistent with the past
practices of Company and its Subsidiaries and with prevailing industry
practices, all or a portion of Secured Customer Financing Notes provided by
Company or any of its Subsidiaries for the benefit
13
<PAGE>
of an unaffiliated purchaser of any Secured Customer Financing Note, or all or a
portion of promissory notes or other financing provided by third parties to
customers of Company or any of its Subsidiaries to provide for the payment by
such customer of all or any part of the purchase price of Finished Goods sold by
Company or any of its Subsidiaries to such customer.
"Customer Notes" means those loans and associated instruments,
agreements, documents and collateral created as a result of customer financing
provided by RGS in connection with the sale of printing and like equipment in
the conduct of RGS' business and which are (i) referenced under the heading
"Customer Notes and Related Agreements" on Schedule 5(l) to the Purchase
Agreement, (ii) similar loans entered into between April 29, 1996 and the day
preceding the Closing Date, and which are consented to and purchased by BTCC and
(iii) Customer Notes that are restructured between March 1, 1996 and the Closing
Date, and which are consented to and purchased by BTCC.
"Daily Funding Lender" means Administrative Agent, in its individual
capacity as a US/UK Lender hereunder.
"Deposit Account" means a demand, time, savings, passbook or like
account with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a negotiable certificate of
deposit.
"Documentation Agent" has the meaning assigned to that term in the
introduction to this Agreement, and includes any such successor Documentation
Agent appointed pursuant to subsection 9.5.
"Dollar Equivalents" means Dollars or, on any date when an amount
expressed in a currency other than Dollars is to be determined in Dollars, an
equivalent amount of Dollars determined at the nominal rate of exchange quoted
by Administrative Agent in New York City, not later than 9:00 A.M. (New York
time) on the date of determination, to prime banks in New York City for the spot
purchase in the New York foreign exchange market of Dollars with such other
currency.
"Dollars" and the sign "$" mean the lawful money of the United States
of America.
"Domestic Loans" means the Domestic Revolving Loans or the Domestic
Term Loans made to Company, or any combination thereof.
"Domestic Revolving Loans" means the Loans made by Lenders to Company
pursuant to subsection 2.1A(ii)(a).
14
<PAGE>
"Domestic Revolving Notes" means (i) the promissory notes of Company
issued pursuant to subsection 2.1F(i) on the Closing Date and (ii) any
promissory notes issued by Company pursuant to the last sentence of subsection
10.1B(i) in connection with assignments of the US/UK Revolving Loan Commitments
and US/UK Revolving Loans of any Lenders, in each case substantially in the form
of Exhibit V annexed hereto, as they may be amended, supplemented or otherwise
---------
modified from time to time.
"Domestic Subsidiary" means a direct or indirect Subsidiary of Company
that is incorporated or organized under the laws of a state of the United States
of America.
"Domestic Term Loan Commitment" means the commitment of a Lender to
make Term Loans to Company pursuant to subsection 2.1A(i)(a), and "Domestic Term
Loan Commitments" means such commitments of all such Lenders in the aggregate.
"Domestic Term Loan Exposure" means, with respect to any US/UK Lender
as of any date of determination (i) prior to the funding of the Domestic Term
Loans, that Lender's Domestic Term Loan Commitment and (ii) after the funding of
the Domestic Term Loans, the outstanding principal amount of the Domestic Term
Loans of that Lender.
"Domestic Term Loans" means the Term Loans made by Lenders to Company
pursuant to subsection 2.1A(i)(a).
"Domestic Term Notes" means (i) the promissory notes of Company issued
pursuant to subsection 2.1F(i) on the Closing Date and (ii) any promissory notes
issued by Company pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the Domestic Term Loan Commitments or Domestic
Term Loans of any Lenders, in each case substantially in the form of Exhibit IV
----------
annexed hereto, as they may be amended, supplemented or otherwise modified from
time to time.
"ECU" means the European Currency Unit, a unit of account that is at
present used in the European Monetary System of the EU.
"Eligible Accounts Receivable" means, with respect to a Borrower,
Accounts of such Borrower deemed by Administrative Agent in the exercise of its
Permitted Discretion to be eligible for inclusion in the calculation of the
Borrowing Base for such Borrower; provided that for purposes of this definition,
--------
until the first anniversary of the Closing Date, references to Goss UK as
Borrower shall be deemed to mean and include Goss France. In determining the
amount to be so included, the face amount of such Accounts shall be reduced by
the amount of all returns, discounts, deductions, claims, credits, charges, or
other allowances. Unless otherwise approved in writing by Administrative Agent,
an Account shall not be an Eligible Account Receivable if:
(a) it arises out of a sale made by such Borrower to an Affiliate; or
15
<PAGE>
(b) the goods giving rise to such Account have been shipped,
delivered and invoiced, and title has passed, to the account debtor and
either (i) the payment terms for such Account are longer than 30 days from
the date of such invoice or (ii) such Account is classified by Borrower in
accordance with its past practices and procedures as an "account receivable
not yet due" (collectively, the "Extended Payment Accounts"), but only to
the extent (1) the aggregate amount of all such Extended Payment Accounts
of all Borrowers exceed 20% of all Accounts of all Borrowers or (2) final
payment on such an Extended Payment Account shall not be received by such
Borrower within 270 days after shipment and delivery of the goods giving
rise to such Extended Payment Account; or
(c) it is unpaid more than 90 days after the original payment due
date; or
(d) it is from the same account debtor or its Affiliate and fifty
percent (50%) or more of all Accounts from that account debtor (and its
Affiliates) are ineligible under (c) above; or
(e) when aggregated with all other Accounts of an account debtor,
such Account exceeds 25% in face value of all Accounts of such Borrower
then outstanding, but only to the extent of such excess, unless such excess
is supported by an irrevocable letter of credit satisfactory to
Administrative Agent (as to form, substance and issuer) and assigned to
Agent; or
(f) the account debtor for such Account is a creditor of such
Borrower, has or has asserted a right of setoff against such Borrower, or
has disputed its liability or otherwise has made any claim with respect to
such Account or any other Account which has not been resolved, in each case
to the extent of the amount owed by such Borrower to such account debtor,
the amount of such actual or asserted right of setoff, or the amount of
such dispute or claim, as the case may be; or
(g) the account debtor is (or its assets are) the subject of any of
the events described in subsection 8.6 or 8.7; or
(h) (i) with respect to Company, (1) such Account is not payable in
Dollars or (2) the account debtor for such Account is located outside the
United States, (ii) with respect to Goss Japan, (1) such Account is not
payable in Dollars or Yen or (2) the account debtor for such Account is
located outside of Japan, and (iii) with respect to Goss UK and Goss
France, (1) such Account is not payable in Dollars, Sterling, Francs, Marks
or ECU, or (2) the account debtor for such Account is located outside of
the EU, except in each case to the extent (x) the aggregate amount of such
Accounts of all Borrowers which do not comply with sub-clause (2) of clause
(i), (ii) or (iii) above does not exceed 20% of the aggregate amount of all
Accounts of all Borrowers, or (y) such Account is supported by an
irrevocable letter
16
<PAGE>
of credit, a guaranty or any other financing arrangement, in each case
satisfactory to Administrative Agent (as to form, substance and issuer) and
assigned to Agent; or
(i) the sale to the account debtor is on a bill-and-hold, guarantied
sale, sale-and-return, sale on approval or consignment basis or made
pursuant to any other written agreement providing for repurchase or return;
or
(j) Administrative Agent determines by its own credit analysis that
collection of such Account is uncertain or that such Account may not be
paid; or
(k) the account debtor is any federal, state, local, provincial, or
other comparable or similar governmental authority, agency or
instrumentality; provided that if the account debtor is the United States
--------
of America or any department, agency or instrumentality thereof, such
Account shall not be ineligible solely as a result of this clause (k) if
the applicable Loan Party duly assigns its rights to payment of such
Account to Administrative Agent pursuant to the Assignment of Claims Act of
1940, as amended (31 U.S.C. Sec.Sec. 3727 et seq.); or
(l) the goods giving rise to such Account have not been shipped,
delivered and invoiced to the account debtor, the services giving rise to
such Account have not been performed and invoiced to the account debtor, or
such Account otherwise does not represent a final sale; or
(m) such Account does not comply with all Requirements of Law,
including without limitation the Federal Consumer Credit Protection Act,
the Federal Truth in Lending Act and Regulation Z of the Board of Governors
of the Federal Reserve System; or
(n) such Account arises as a result of any progress billing or such
Account is subject to any adverse security deposit, progress payment or
other similar advance made by or for the benefit of the applicable account
debtor; or
(o) the goods giving rise to such Account are subject to any Secured
Customer Financing Arrangement or Customer Financing Note Guaranty; or
(p) it is not subject to a valid and perfected First Priority Lien in
favor of Agent or does not otherwise conform to the representations and
warranties contained in the Loan Documents; provided that no Account which
--------
is otherwise an Eligible Account Receivable shall be excluded under this
clause (p) solely as a result of (i) in the case of Goss UK, the account
debtor for such Account is located in a jurisdiction other than that of the
UK so long as such account debtor is in the EU; (ii) in the case of Goss
France, such Account is not subject to a valid and perfected Lien in favor
of Agent; and (iii) in the case of Goss Japan, such Account is not subject
to a perfected Lien in favor of Agent solely because (x) no notification of
Agent's security interest
17
<PAGE>
in such Account has been provided to the account debtor or (y) Agent has
not taken possession of any drafts or checks related to such Account;
provided that Goss Japan has caused such drafts or checks to be deposited
--------
in a Blocked Account in accordance with the procedures set forth in
subsection 2.9B;
provided that Administrative Agent, in the exercise of its Permitted Discretion,
- --------
may impose additional restrictions (or eliminate the same) to the standards of
eligibility set forth in this definition.
"Eligible Assignee" means (A) (i) a commercial bank organized under
the laws of the United States or any state thereof; (ii) a savings and loan
association or savings bank organized under the laws of the United States or any
state thereof; (iii) a commercial bank organized under the laws of any other
country or a political subdivision thereof; provided that (x) such bank is
--------
acting through a branch or agency located in the United States or (y) such bank
is organized under the laws of a country that is a member of the Organization
for Economic Cooperation and Development or a political subdivision of such
country; and (iv) any other entity which is an "accredited investor" (as defined
in Regulation D under the Securities Act) which extends credit or buys loans as
one of its businesses including, but not limited to, insurance companies, mutual
funds and lease financing companies, in each case (under clauses (i) through
(iv) above) that is reasonably acceptable to Administrative Agent; and (B) any
Lender and any Affiliate of any Lender; provided that no Affiliate of Company
--------
shall be an Eligible Assignee.
"Eligible Finished Goods" means Finished Goods which constitute
Eligible Inventory.
"Eligible Inventory" means, with respect to a Borrower, the aggregate
amount of Raw Materials, Finished Goods and Spare Parts of such Borrower deemed
by Administrative Agent in the exercise of its Permitted Discretion to be
eligible for inclusion in the calculation of the Borrowing Base; provided that
--------
for purposes of this definition, until the first anniversary of the Closing
Date, references to Goss UK as Borrower shall be deemed to mean and include Goss
France. In determining the amount to be so included, such Raw Materials,
Finished Goods and Spare Parts shall be valued at the lower of cost or market,
on a basis consistent with such Borrower's current and historical accounting
practice, net of any progress payments and/or advance payments made by customers
and received by such Borrower with respect to Finished Goods otherwise
includible in such Borrower's Borrowing Base as Eligible Inventory. Unless
otherwise approved in writing by Administrative Agent, an item of Raw Materials,
Finished Goods and Spare Parts shall not be included in Eligible Inventory if:
(a) it is not owned solely by such Borrower or such Borrower does not
have good, valid and marketable title thereto; or
18
<PAGE>
(b) (i) with respect to Company, it is not located in the United
States; (ii) with respect to Goss Japan, it is not located in Japan; or
(iii) with respect to Goss UK, it is not located in the UK, or with respect
to Goss France, it is not located in the UK or France; or
(c) other than Finished Goods subject to a Secured Customer Financing
Arrangement which are in the process of being installed by such Borrower
for a period which does not exceed six months ("Specified Finished Goods"),
it is not located on property owned or leased by such Borrower or in a
contract warehouse, in each case unless subject to a Collateral Access
Agreement executed by any applicable mortgagee, lessor or contract
warehouseman, as the case may be, and segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises; or
(d) it is not subject to a valid and perfected First Priority Lien in
favor of the Agent except, with respect to Raw Materials, Finished Goods
and Spare Parts stored at sites described in clause (c) above, for Liens
for unpaid rent or normal and customary warehousing charges; provided that
--------
no Raw Materials, Finished Goods and Spare Parts which are otherwise
Eligible Inventory shall be excluded under this clause (d) solely as a
result of: (i) in the case of Goss UK, Specified Finished Goods are being
installed in a jurisdiction other than that of the UK so long as they are
being installed in the EU; and (ii) in the case of Goss France, such Raw
Materials, Finished Goods and Spare Parts are not subject to a valid and
perfected Lien in favor of Agent; or
(e) it consists of goods returned or rejected by such Borrower's
customers; or other than Finished Goods subject to a Secured Customer
Financing Arrangement which are in the process of being installed by such
Borrower for a period which does not exceed six months, goods in transit to
third parties (other than to warehouse sites covered by a Collateral Access
Agreement); or
(f) it consists of Raw Materials which are sub-assemblies; or
(g) it is not first-quality goods, is obsolete or slow moving, or
does not otherwise conform to the representations and warranties contained
in the Loan Documents;
provided that Administrative Agent, in the exercise of its Permitted Discretion,
- --------
may impose additional restrictions (or eliminate the same) to the standards of
eligibility set forth in this definition.
"Eligible Raw Materials" means Raw Materials which constitute Eligible
Inventory.
19
<PAGE>
"Eligible Spare Parts" means Spare Parts which constitute Eligible
Inventory.
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by Company or any of its ERISA Affiliates. Any such plan of a former ERISA
Affiliate of the Company shall continue to be considered an Employee Benefit
Plan within the meaning of this definition solely with respect to the period
during which such former ERISA Affiliate was an ERISA Affiliate of the Company
and with respect to liabilities existing after such period for which the Company
could be liable under the Internal Revenue Code or ERISA.
"Environmental Claim" means any accusation, allegation, notice of
violation, claim, demand, abatement order or other order or direction
(conditional or otherwise) by any Governmental Authority or any Person for any
damage, including, without limitation, personal injury (including sickness,
disease or death), tangible or intangible property damage, contribution,
indemnity, indirect or consequential damages, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the environment,
or for fines, penalties or restrictions, in each case relating to, resulting
from or in connection with Hazardous Materials and relating to Company, any of
its Subsidiaries, any of their respective Affiliates or any Facility.
"Environmental Laws" means all statutes, ordinances, orders, rules,
regulations, plans, policies or decrees and requirements having the force of law
of any Governmental Authority relating to (i) environmental matters, including,
without limitation, those relating to fines, injunctions, penalties, damages,
contribution, cost recovery compensation, losses or injuries resulting from the
Release or threatened Release, (ii) the generation, use, storage, transportation
or disposal of Hazardous Materials, or (iii) occupational safety and health,
industrial hygiene, land use or the protection of human, plant or animal health
or welfare from environmental hazards, in any manner applicable to Company or
any of its Subsidiaries or any of their respective properties, including,
without limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Sec. 9601 et seq.) ("CERCLA"), the Hazardous Materials
-- ---
Transportation Act (49 U.S.C. Sec. 1801 et seq.), the Resource Conservation and
-- ---
Recovery Act (42 U.S.C. Sec. 6901 et seq.), the Federal Water Pollution Control
-- ---
Act ( 33 U.S.C. Sec. 1251 et seq.), the Clean Air Act (42 U.S.C. Sec. 7401 et
-- --- --
seq.), the Toxic Substances Control Act (15 U.S.C. Sec. 2601 et seq.), the
- --- -- ---
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. Sec.136 et seq.),
-- ---
the Occupational Safety and Health Act (29 U.S.C. Sec. 651 et seq.) and the
-- ---
Emergency Planning and Community Right-to-Know Act (42 U.S.C. Sec. 11001 et
--
seq.), each as amended or supplemented, and any analogous future or present
- ---
local, state and federal laws, statutes and regulations promulgated pursuant
thereto, each as in effect as of the date of determination.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute, and any similar or
comparable laws in a jurisdiction outside of the U.S. applicable to Company or
any of its Subsidiaries.
20
<PAGE>
"ERISA Affiliate", as applied to any Person, means (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trades or businesses under common control within the meaning of
Section 414(c) of the Internal Revenue Code of which that Person is a member;
and (iii) except for purposes of Title IV of ERISA, any member of an affiliated
service group within the meaning of Section 414(m) or (o) of the Internal
Revenue Code of which that Person, any corporation described in clause (i) above
or any trade or business described in clause (ii) above is a member. Any former
ERISA Affiliate of a Person shall continue to be considered an ERISA Affiliate
within the meaning of this definition solely with respect to the period during
which such entity was an ERISA Affiliate of the Person and with respect to
liabilities arising after such period for which the Person could be liable under
the Internal Revenue Code or ERISA.
"ERISA Event" means (i) a "reportable event" within the meaning of
Section 4043 of ERISA and the regulations issued thereunder with respect to any
Pension Plan (excluding those for which the provision for 30-day notice to the
PBGC has been waived by regulation); (ii) the failure to meet the minimum
funding standard of Section 412 of the Internal Revenue Code with respect to any
Pension Plan (whether or not waived in accordance with Section 412(d) of the
Internal Revenue Code) or the failure to make by its due date a required
installment under Section 412(m) of the Internal Revenue Code with respect to
any Pension Plan or the failure to make any required contribution to a
Multiemployer Plan; (iii) the provision by the administrator of any Pension Plan
pursuant to Section 4041(a)(2) of ERISA of a notice of intent to terminate such
plan in a distress termination described in Section 4041(c) of ERISA; (iv) the
withdrawal by Company or any of its ERISA Affiliates from any Pension Plan with
two or more contributing sponsors or the termination of any such Pension Plan
resulting in liability pursuant to Sections 4063 or 4064 of ERISA; (v) the
institution by the PBGC of proceedings to terminate any Pension Plan, or the
occurrence of any event or condition which could reasonably be expected to
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan; (vi) the imposition of liability on
Company or any of its ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA; (vii) the
withdrawal by Company or any of its ERISA Affiliates in a complete or partial
withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) from any
Multiemployer Plan if there is any potential liability therefor, or the receipt
by Company or any of its ERISA Affiliates of notice from any Multiemployer Plan
that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA, or that it intends to terminate or has terminated under Section 4041A or
4042 of ERISA; (viii) the occurrence of an act or omission which could
reasonably be expected to give rise to the imposition on Company or any of its
ERISA Affiliates of material fines, penalties, taxes or related charges under
Chapter 43 of the Internal Revenue Code or under Section 409 or 502(c), (i) or
(l) or 4071 of ERISA in respect of any Employee Benefit Plan; (ix) the assertion
of a material claim (other than routine claims for benefits) against any
Employee Benefit Plan other than a Multiemployer Plan or the assets thereof, or
against Company or
21
<PAGE>
any of its ERISA Affiliates in connection with any such Employee Benefit Plan;
(x) receipt from the Internal Revenue Service of notice of the failure of any
Pension Plan (or any other Employee Benefit Plan intended to be qualified under
Section 401(a) of the Internal Revenue Code) to qualify under Section 401(a) of
the Internal Revenue Code, or the failure of any trust forming part of any
Pension Plan to qualify for exemption from taxation under Section 501(a) of the
Internal Revenue Code; or (xi) the imposition of a Lien pursuant to Section
401(a)(29) or 412(n) of the Internal Revenue Code or pursuant to ERISA with
respect to any Pension Plan; provided that any event described in the foregoing
--------
clauses shall not be an ERISA Event if Company and/or its Subsidiaries are (or
would be) liable for any potential liability resulting from such event solely
because of their affiliation with an ERISA Affiliate (excluding Company and all
Subsidiaries) and (i) such events could not reasonably be expected to result
(individually or in the aggregate) in liability (including joint and several
liability) of Company and its Subsidiaries of more than $1,000,000, or (ii)
neither Company and its Subsidiary could reasonably be expected to be liable
(either individually or on a joint and several basis) for any potential
liability resulting from such event; provided further that any event described
-------- -------
in the foregoing proviso shall be an ERISA Event if the PBGC or any other
governmental authority notifies Company or one of its Subsidiaries that Company
or one of its Subsidiaries is liable for any potential liability resulting from
such event.
"Eurodollar Rate Loans" means Loans bearing interest at rates
determined by reference to the Adjusted Eurodollar Rate as provided in
subsection 2.2A.
"EU" means the European Union.
"Event of Default" means each of the events set forth in Section 8.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute, and any comparable or similar laws
in a jurisdiction outside of the United States applicable to Company or any of
its Subsidiaries.
"Exchange Rate" means, on any date when an amount expressed in a
currency other than Dollars is to be determined with respect to any Letter of
Credit, the nominal rate of exchange of the applicable Issuing Lender in the New
York foreign exchange market for the purchase by such Issuing Lender (by cable
transfer) of such currency in exchange for Dollars at 12:00 noon (New York time)
one Business Day prior to such date, expressed as a number of units of such
currency per one Dollar.
"Facilities" means the manufacturing plants, offices, warehouses and
all other real property (including, without limitation, all buildings, fixtures
or other improvements located thereon) and related facilities now, hereafter or
heretofore owned, leased, operated or used by Company or any of its Subsidiaries
or any of their respective predecessors or Affiliates.
22
<PAGE>
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate 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 which is a Business Day, the average of the quotations for such day on such
transactions received by Administrative Agent from three Federal funds brokers
of recognized standing selected by Administrative Agent.
"Fee Property" means a Real Property Asset consisting of a fee
interest in real property.
"Financial Plan" has the meaning assigned to that term in subsection
6.1(xiii).
"Finished Goods" means all completed web offset newspaper press
systems, insert web offset press systems and commercial web offset printing
presses, or accessories thereto, and other related goods and merchandise, in
each case constituting finished goods which are held for sale or lease by a
Borrower, including those held for display or demonstration, but not including
any Raw Materials, components, work in process, Spare Parts or materials used or
consumed or to be used or consumed in the business of such Borrower.
"First Priority" means, with respect to any Lien purported to be
created in any Collateral pursuant to any Collateral Document, that (i) such
Lien has priority over any other Lien (other than Permitted Encumbrances which
as a matter of statutory law have priority over any other Lien irrespective of
the prior perfection or filing of such other Lien) on such Collateral and (ii)
such Lien is the only Lien (other than Permitted Encumbrances) to which such
Collateral is subject.
"Fiscal Quarter" means a fiscal quarter of any Fiscal Year.
"Fiscal Year" means the fiscal year of Company and its Subsidiaries
ending on September 30 of each calendar year.
"Flood Hazard Property" means a Mortgaged Property located in an area
in the United States designated by the Federal Emergency Management Agency as
having special flood or mud slide hazards.
"Foreign Subsidiary" means a direct or indirect Subsidiary of Company
that is incorporated or organized under the laws of a jurisdiction other than
that of the United States of America.
23
<PAGE>
"Foreign Unfunded Pension Plan" means a Pension Plan described in
Section 4(b)(4) of ERISA that is not required to be funded pursuant to
applicable foreign law.
"Francs" and the sign "FF" mean the lawful money of the Republic of
France.
"Fund" means Stonington Capital Appreciation 1994 Fund, L.P., a
limited partnership organized under the laws of the State of Delaware, organized
by Stonington.
"Funding Date" means the date of the funding of a Loan.
"Funding Lender" means (i) with respect to Domestic and UK Loans,
Daily Funding Lender and (ii) with respect to Japanese Loans, Japanese Funding
Lender.
"Funding and Payment Office" means (i) with respect to Domestic Loans
and UK Loans, the US/UK Funding and Payment Office, and (ii) with respect to
Japanese Loans, the Japanese Funding and Payment Office.
"GAAP" means, subject to the limitations on the application thereof
set forth in subsection 1.2, generally accepted accounting principles set forth
in opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, in each case as the same are applicable to the
circumstances as of the date of determination.
"Goss France" means, on and after the Closing Date, RGS France, which
corporation will be renamed "Goss Systemes Graphiques Nantes S.A." as soon as
practicable after the Closing Date, and is a wholly-owned Subsidiary of Company.
"Goss Japan" means (i) prior to the purchase by New Goss Japan of all
of the outstanding capital stock of RGS Japan, New Goss Japan, as the Borrower
with respect to the Japanese Term Loan Commitments, (ii) immediately upon the
purchase by New Goss Japan of all of the outstanding capital stock of RGS Japan,
RGS Japan, as the Borrower with respect to the Japanese Revolving Loan
Commitment and the obligor under the Assumption Agreement with respect to the
Japanese Term Loans and (iii) upon consummation of the Goss Japan Merger, the
surviving corporation or such merger, which corporation will be named "Goss
Graphic Systems Japan K. K."
"Goss Japan Borrowing Base" means, as at any date of determination, an
aggregate amount equal to the sum of:
24
<PAGE>
(i) eighty-five percent (85%) of Eligible Accounts Receivable of
Goss Japan, plus
----
(ii) sixty-five percent (65%) of Eligible Raw Materials of
Goss Japan, plus
----
(iii) sixty-five percent (65%) of Eligible Finished Goods of
Goss Japan, plus
----
(iv) sixty-five percent (65%) of Eligible Spare Parts of
Goss Japan, minus
-----
(v) the aggregate amount of reserves, if any, required to be
established by Administrative Agent in its sole discretion with
respect to any Currency Agreement or Interest Rate Agreement between a
Lender or any of its Affiliates as a counterparty and Goss Japan,
minus
-----
(vi) the aggregate amount of reserves, if any, established
by Administrative Agent in the exercise of its Permitted Discretion
against Eligible Accounts Receivable, Eligible Raw Materials, Eligible
Finished Goods and Eligible Spare Parts of Goss Japan;
provided that Administrative Agent, in the exercise of its Permitted Discretion,
- --------
may (a) increase or decrease reserves against Eligible Accounts Receivable,
Eligible Raw Materials, Eligible Finished Goods and Eligible Spare Parts of Goss
Japan and (b) reduce the advance rates provided for in this definition, or
restore such advance rates to any level equal to or below the advance rates in
effect as of the Closing Date.
"Goss Japan Merger" means the merger of New Shellco with RGS Japan,
with the surviving corporation being named "Goss Graphic Systems Japan K. K."
and a wholly-owned Subsidiary of Company.
"Goss UK" has the meaning assigned to that term in the introduction to
this Agreement, and is a wholly-owned Subsidiary of Company.
"Goss UK Borrowing Base" means, as at any date of determination, an
aggregate amount equal to the sum of:
(i) eighty-five percent (85%) of Eligible Accounts Receivable of
Goss UK, plus up until the first anniversary of the Closing Date,
----
eighty-five percent (85%) of Eligible Accounts Receivable of Goss
France, plus
----
25
<PAGE>
(ii) sixty-five percent (65%) of Eligible Raw Materials of
Goss UK plus up until the first anniversary of the Closing Date,
----
sixty-five percent (65%) of Eligible Raw Materials of Goss France,
plus
----
(iii) sixty-five percent (65%) of Eligible Finished Goods of
Goss UK plus up until the first anniversary of the Closing Date,
----
sixty-five percent (65%) of Eligible Finished Goods of Goss France,
plus
----
(iv) sixty-five percent (65%) of Eligible Spare Parts of
Goss UK plus up until the first anniversary of the Closing Date,
----
sixty-five percent (65%) of Eligible Spare Parts of Goss France, minus
-----
(v) the aggregate amount of reserves, if any, required to be
established by Administrative Agent in its sole discretion with
respect to any Currency Agreement or Interest Rate Agreement between a
Lender or any of its Affiliates as a counterparty and Goss UK or Goss
France, minus
-----
(vi) the aggregate amount of reserves, if any, established
by Administrative Agent in the exercise of its Permitted Discretion
against Eligible Accounts Receivable, Eligible Raw Materials, Eligible
Finished Goods and Eligible Spare Parts of Goss UK or, up until the
first anniversary of the Closing Date, Goss France;
provided that Administrative Agent, in the exercise of its Permitted Discretion,
- --------
may (a) increase or decrease reserves against Eligible Accounts Receivable,
Eligible Raw Materials, Eligible Finished Goods and Eligible Spare Parts of Goss
UK or Goss France and (b) reduce the advance rates provided for in this
definition, or restore such advance rates to any level equal to or below the
advance rates in effect as of the Closing Date.
"Governmental Authority" means any federal, state or local
governmental authority, agency or court in the United States, or other
comparable or similar governmental authority, agency or court in a jurisdiction
outside of the United States applicable to Company or any of its Subsidiaries.
"Governmental Authorization" means any permit, license, authorization,
plan, directive, consent order or consent decree of or from any Governmental
Authority.
"Guarantor" means, at any time, Holdings, Company or any of their
respective Subsidiaries that is then a party to any of the Guaranties or
Subsidiary Guaranties.
"Guaranty" means the Guaranty executed and delivered by Company or
Holdings on the Closing Date, substantially in the form of Exhibit XVIII annexed
-------------
hereto, and any other guaranty, document or instrument with a similar or
comparable effect
26
<PAGE>
executed by any Foreign Subsidiary that is a Borrower, in form and substance
satisfactory to Administrative Agent, as such Guaranty may be amended,
supplemented or otherwise modified from time to time, and "Guaranties" means all
such Guaranties, collectively.
"Hazardous Materials" means (i) any chemical, material or substance
which, at the time of determination, is defined as or included in the definition
of "hazardous substances", "hazardous wastes", "hazardous materials", "extremely
hazardous waste", "restricted hazardous waste", "infectious waste", "toxic
substances" or any other formulations intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, "TCLP
toxicity" or "EP toxicity" or words of similar meaning and regulatory effect
under any applicable Environmental Laws; (ii) any oil, petroleum, petroleum
fraction or petroleum derived substance; (iii) any drilling fluids, produced
waters and other wastes associated with the exploration, development or
production of crude oil, natural gas or geothermal resources; (iv) any flammable
substances or explosives; (v) any radioactive materials; (vi) asbestos in any
form; (vii) urea formaldehyde foam insulation; (viii) electrical equipment which
contains any oil or dielectric fluid containing levels of polychlorinated
biphenyls in excess of fifty parts per million; (ix) pesticides; and (x) any
other chemical, material or substance, exposure to which is prohibited, limited,
regulated or determined by any Governmental Authority or which may or could pose
a hazard to the health and safety of the owners, occupants or any Persons in the
vicinity of the Facilities.
"Hersant Group" means Socpresse, S.A., Serpo, Presse Ocean and any of
their Affiliates (including Robert Hersant, the estate of Robert Hersant and any
other successors, assigns or heirs of Robert Hersant).
"Holdings" means GGS Holdings, Inc., a corporation organized under the
laws of the State of Delaware, formed by Stonington on behalf of the Fund to
effect the Acquisition.
"Holdings' Certificate of Designation" means Holdings' Certificate of
Designation of 6-1/2% Redeemable Pay-in-Kind Preferred Stock, in the form
delivered to Administrative Agent and Lenders on the Closing Date and as such
provisions may be amended from time to time to the extent permitted under
subsection 7.12.
"Holdings Common Stock" means the voting and nonvoting common stock of
Holdings, par value $0.01 per share.
"Holdings Preferred Stock" means the 6-1/2% Redeemable Pay-in-Kind
Preferred Stock of Holdings, par value $0.01 per share, having a liquidation
preference of $1,000 per share (or $47,500,000 in the aggregate), and issued to
Rockwell in connection with the Acquisition.
27
<PAGE>
"Indebtedness", as applied to any Person, means (i) all indebtedness
for borrowed money, (ii) that portion of obligations with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services (excluding any such obligations incurred under ERISA),
which purchase price is (a) due more than six months from the date of incurrence
of the obligation in respect thereof or (b) evidenced by a note or similar
written instrument, and (v) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is nonrecourse to the
credit of that Person. Obligations under Interest Rate Agreements and Currency
Agreements constitute Contingent Obligations and not Indebtedness.
"Indemnifying Lender" means each financial institution that is
designated as an Indemnifying Lender on the signature pages hereof, and each
financial institution which is designated, with the approval of Japanese Funding
Lender, as an Indemnifying Lender in an Assignment Agreement, and "Indemnifying
Lenders" means, collectively, all such financial institutions designated as a
Indemnifying Lender on the signature pages hereof.
"Indemnitee" has the meaning assigned to that term in subsection 10.3.
"Indemnity Amount" means for each Indemnifying Lender which is a
signatory hereto the amount and the percentage that is so designated and set
forth opposite such Indemnifying Lender's name on Schedule 2.1 annexed hereto,
------------
and for each financial institution which becomes an Indemnifying Lender pursuant
to an Assignment Agreement the amount and the percentage that is so designated
in such Assignment Agreement; provided that such percentage interest of an
--------
Indemnifying Lender may increase or decrease from time to time depending on
Japanese Funding Lender's interests in the Japanese Term Loans or Japanese
Revolving Loan Commitment.
"Indemnity Participation" shall have the meaning set forth therefor in
subsection 2.10.
"Intellectual Property" means all patents, trademarks, tradenames,
copyrights, registered names, service marks, technology, know-how and processes
used in or necessary for the conduct of the business of Company and its
Subsidiaries as currently conducted that are material to the condition
(financial or otherwise), business or operations of Company and its
Subsidiaries, taken as a whole.
"Interest Payment Date" means (i) with respect to any Base Rate Loan,
the first Business Day of each calendar month, commencing on the first such date
to occur after the Closing Date, and (ii) with respect to any Eurodollar Rate
Loan, the last day of each Interest Period applicable to such Loan; provided
--------
that in the case of each Interest Period of
28
<PAGE>
six months "Interest Payment Date" shall also include the date that is three
months after the commencement of such Interest Period.
"Interest Period" has the meaning assigned to that term in subsection
2.2B.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement.
"Interest Rate Determination Date" means, with respect to any Interest
Period, the second Business Day prior to the first day of such Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter, and any similar or
comparable laws in a jurisdiction outside of the United States applicable to
Company or any of its Subsidiaries.
"Inventory" means, with respect to any Person, all goods, merchandise
and other personal property which are held by such Person for sale or lease,
including those held for display or demonstration, including without limitation,
Raw Materials, Finished Goods and Spare Parts.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Company or any of its Subsidiaries of, or of a beneficial
interest in, any Securities of any other Person (other than a Person that prior
to such purchase or acquisition was a wholly-owned Domestic Subsidiary of
Company), (ii) any direct or indirect redemption, retirement, purchase or other
acquisition for value, by any Subsidiary of Company from any Person other than
Company or any of its Subsidiaries, of any equity Securities of such Subsidiary,
or (iii) any direct or indirect loan, advance (other than advances to employees
for moving, entertainment and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution by
Company or any of its Subsidiaries to any other Person other than a wholly-owned
Domestic Subsidiary of Company, including all indebtedness and accounts
receivable from that other Person that are not current assets or did not arise
from sales to that other Person in the ordinary course of business. The amount
of any Investment shall be the original cost of such Investment plus the cost of
all additions thereto, without any adjustments for increases or decreases in
value, or write-ups, write-downs or write-offs with respect to such Investment.
"Investment Account" means an interest-bearing account at a
Concentration Bank in the name of, and under the exclusive dominion and control
of, an Agent and maintained by the applicable Loan Party with such Concentration
Bank.
"IP Collateral" means, collectively, the Collateral under the IP
Collateral Documents.
29
<PAGE>
"IP Collateral Documents" means, collectively, the Trademark Security
Agreements, the Patent Security Agreements, the Subsidiary Trademark Security
Agreements, and the Subsidiary Patent Security Agreements.
"Issuing Lender" means, with respect to any Letter of Credit, Agent.
"Japanese Agent" means initially BT Tokyo and any successor Japanese
Agent appointed pursuant to subsection 9.5.
"Japanese Commitments" means the Japanese Revolving Loan Commitment or
Japanese Term Loan Commitment, or any combination thereof.
"Japanese Funding Lender" means Japanese Agent, in its individual
capacity as a Japanese Lender hereunder.
"Japanese Funding and Payment Office" means (i) the office of Japanese
Agent and Japanese Funding Lender located at Tokyo Ginza Kyokai Bldg., 1-3-1,
Marunouchi, Chiyoda-Ku, Tokyo, Japan, or (ii) such other office of Japanese
Agent and Japanese Funding Lender as may from time to time hereafter be
designated as such in a written notice delivered by Japanese Agent and Japanese
Funding Lender to Goss Japan and Japanese Lenders.
"Japanese Lender" and "Japanese Lenders" means the Lenders that have
Japanese Commitments or that have Japanese Loans outstanding.
"Japanese Loans" means the Japanese Revolving Loans or the Japanese
Term Loans made to Goss Japan, or any combination thereof.
"Japanese Revolving Loan Commitment" means the commitment of a
Japanese Lender to make Japanese Revolving Loans to Goss Japan pursuant to
subsection 2.1A(ii)(b), and "Japanese Revolving Loan Commitments" means such
commitments of all such Lenders in the aggregate.
"Japanese Revolving Loan Exposure" means, with respect to any Japanese
Lender as of any date of determination (i) prior to the termination of the
Japanese Revolving Loan Commitments, that Lender's Japanese Revolving Loan
Commitment and (ii) after the termination of the Japanese Revolving Loan
Commitments, the sum of (a) the aggregate outstanding principal amount of the
Japanese Revolving Loans of that Lender plus (b) in the event that Lender is an
----
Issuing Lender, the aggregate Letter of Credit Usage in respect of all Letters
of Credit issued by that Lender for the benefit of Goss Japan (in each case net
of any participations purchased by other Lenders in such Letters of Credit or
any unreimbursed drawings thereunder) plus (c) the aggregate amount of all
----
participations purchased by that Lender in any outstanding Letters of Credit for
the benefit of Goss Japan or any unreimbursed drawings under any such Letters of
Credit.
30
<PAGE>
"Japanese Revolving Loans" means the Loans made by Lenders to Goss
Japan pursuant to subsection 2.1A(ii)(b).
"Japanese Revolving Notes" means (i) the promissory notes of Goss
Japan issued pursuant to subsection 2.1F(ii) on the Closing Date and (ii) any
promissory notes issued by Goss Japan pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of Japanese Revolving Loan
Commitments and Japanese Revolving Loans of any Lender, in each case
substantially in the form of Exhibit V annexed hereto, as they may be amended,
---------
supplemented or otherwise modified from time to time.
"Japanese Term Loan Commitment" means the commitment of a Lender to
make Term Loans to Goss Japan pursuant to subsection 2.1A(i)(b), and "Japanese
Term Loan Commitments" means such commitments of all such Lenders in the
aggregate.
"Japanese Term Loan Exposure" means, with respect to any Japanese
Lender as of any date of determination (i) prior to the funding of the Japanese
Term Loans, that Lender's Japanese Term Loan Commitment and (ii) after the
funding of the Japanese Term Loans, the outstanding principal amount of the
Japanese Term Loans of that Lender.
"Japanese Term Loans" means the Term Loans made by Lenders to Goss
Japan pursuant to subsection 2.1A(i)(b).
"Japanese Term Notes" means (i) the promissory notes of Goss Japan
issued pursuant to subsection 2.1F(ii) on the Closing Date and (ii) any
promissory notes issued by Goss Japan pursuant to the last sentence of
subsection 10.1B(i) in connection with assignments of the Japanese Term Loan
Commitments or Japanese Term Loans of any Lenders, in each case substantially in
the form of Exhibit IV annexed hereto, as they may be amended, supplemented or
----------
otherwise modified from time to time.
"Joint Venture" means a joint venture, partnership, limited liability
company or other similar arrangement, whether in corporate, partnership,
limited liability company or other legal form; provided that in no event shall
--------
any corporate Subsidiary of any Person be considered to be a Joint Venture to
which such Person is a party.
"Lender" and "Lenders" means (i) the US/UK Lenders and (ii) the
Japanese Lenders, or any combination thereof, in each case together with their
successors and permitted assigns pursuant to subsection 10.1; provided that the
--------
term "Lenders," when used in the context of a particular Commitment, shall mean
Lenders having that Commitment.
"Letter of Credit" or "Letters of Credit" means Commercial Letters of
Credit and Standby Letters of Credit issued or to be issued by Issuing Lenders
for the account of a Borrower pursuant to subsection 3.1.
31
<PAGE>
"Letter of Credit Usage" means, as at any date of determination, the
sum of (i) the maximum aggregate amount which is or at any time thereafter may
become available for drawing under all Letters of Credit then outstanding issued
for the account of a Borrower, plus (ii) the aggregate amount of all drawings
----
under such Letters of Credit honored by Issuing Lenders and not theretofore
reimbursed.
"Leverage Ratio" means, as at any date of determination, the ratio of
(i) Consolidated Total Debt as of the last day of the Fiscal Quarter for which
such determination is being made to (ii) Consolidated Adjusted EBITDA for the
four-Fiscal Quarter period ending as of the last day of the Fiscal Quarter for
which such determination is being made.
"Lien" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"Loan" or "Loans" means one or more of the Term Loans or Revolving
Loans or any combination thereof.
"Loan Documents" means this Agreement, the Notes, the Letters of
Credit (and any applications for, or reimbursement agreements or other documents
or certificates executed by a Borrower in favor of an Issuing Lender relating
to, the Letters of Credit), the Guaranties, the Assumption Agreement and the
Collateral Documents and, solely for purposes of the use of the term "Loan
Documents" in the definition of the term "Obligations," the Currency Agreements
to which any Lender or any of its Affiliates is a party and Interest Rate
Agreements to which any Lender or any of its Affiliates is a party.
"Loan Parties" means each of the Borrowers, the Guarantors or any of
Company's Subsidiaries executing any other Loan Document.
"Loan Portfolio Purchase Agreement" means that certain Loan Portfolio
Purchase Agreement dated as of October 15, 1996 entered into between Company and
BTCC whereby Company shall sell and BTCC shall purchase the Customer Notes, as
in effect on the Closing Date, as amended from time to time to the extent
permitted under subsection 7.12.
"Local Time" means (i) with respect to Domestic Loans and UK Loans,
New York time, and (ii) with respect to Japanese Loans, Tokyo time.
"Lock Box" means a lock box maintained by any Loan Party pursuant to
lock box service arrangements satisfactory to Administrative Agent.
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<PAGE>
"Lock Box Account" means a Deposit Account under the exclusive
dominion and control of an Agent that is maintained by the applicable Loan Party
with a Lock Box Bank pursuant to a Lock Box Agreement.
"Lock Box Agreement" means a lock box agreement executed and delivered
by a Lock Box Bank, an Agent and the applicable Loan Party, substantially in the
form of Exhibit XVI annexed hereto, as such Lock Box Agreement may be amended,
-----------
supplemented or otherwise modified from time to time, and "Lock Box Agreements"
means all such Lock Box Agreements, collectively.
"Lock Box Bank" means any commercial bank satisfactory to
Administrative Agent at which any Loan Party maintains a Lock Box Account.
"Management Investment Incentive Plan" means the plan to be adopted by
Holdings as of the Closing Date pursuant to which officers and key employees of
Holdings and its Subsidiaries will be granted shares of Holdings Common Stock as
restricted stock and stock options exercisable into shares of Holdings Common
Stock, as such plan may be amended, supplemented or otherwise modified from time
to time to the extent permitted under subsection 7.12.
"Management Investment" has the meaning assigned to that term in the
Recitals.
"Management Investors" means those Persons in the management of
Company holding any capital stock of Holdings.
"Management Notes" means those certain secured promissory notes
executed and delivered by certain Management Investors to Holdings in connection
with the purchase of Holdings Common Stock by such Management Investors.
"Margin Determination Certificate" means an Officers' Certificate of
Company delivered with the financial statements required pursuant to subsections
6.1(ii) or 6.1(iii) setting forth in reasonable detail the Leverage Ratio.
"Margin Stock" has the meaning assigned to that term in Regulation U
of the Board of Governors of the Federal Reserve System as in effect from time
to time.
"Marks" and the sign "DM" mean the lawful money of the Federal
Republic of Germany.
"Material Adverse Effect" means (i) a material adverse effect upon the
business, operations, properties, assets, condition (financial or otherwise) or
prospects of (w) Company and its Domestic Subsidiaries, taken as a whole, (x)
Goss Japan and its Subsidiaries, taken as a whole, (y) Goss UK and its
Subsidiaries, taken as a whole, or (z)
33
<PAGE>
Company and its Subsidiaries, taken as a whole; provided that in the event of
--------
the occurrence of a material adverse effect as described in the foregoing
clauses (w), (x) or (y), such Borrower shall have five days after receipt of
notice from Administrative Agent to cure such material adverse effect (without
causing a material adverse effect for any other Borrower) before it shall become
a "Material Adverse Effect" as defined in this clause (i); (ii) the impairment
in any material respect of the ability of any Loan Party to perform, or of any
Agent or any Lender to enforce, the Obligations; or (iii) a material adverse
effect on the value of the Collateral or the amount which any Agent or any
Lender would be likely to receive (after giving consideration to delays in
payment and costs of enforcement) in the liquidation of the Collateral.
"Material Contract" means any contract or other arrangement to which
any Borrower or any of its Subsidiaries is a party (other than the Loan
Documents) for which breach, nonperformance, cancellation or failure to renew
could have a Material Adverse Effect.
"Material Leasehold" means a Real Property Asset consisting of a
leasehold interest in an Operating Lease or a Capital Lease which is reasonably
determined by Administrative Agent to be of material value as collateral for the
Obligations.
"Material Subsidiary" means any Subsidiary of Holdings that (i) owns
5% or more of the assets of Holdings and its Subsidiaries, measured on a
consolidated basis, or (ii) accounts for 5% or more of Consolidated Net Income.
"Maximum Permitted Revolving Loan Commitments" means, as of any date
of determination, $150,000,000 minus the aggregate amount of all reductions made
-----
to the Revolving Loan Commitments pursuant to subsection 2.4B(ii) or 2.4B(iii)
since the Closing Date.
"Mortgage" means an instrument (whether designated as a deed of trust,
a trust deed or a mortgage or by any similar title) executed and delivered by
any Borrower or any of its Subsidiaries encumbering a Fee Property or a Material
Leasehold, as such instrument may be amended, supplemented or otherwise modified
from time to time, and "Mortgages" means all such instruments, including the
Closing Date Mortgages (as defined in subsection 4.1I) and any Additional
Mortgages (as defined in subsection 6.9), collectively.
"Mortgaged Property" means a Closing Date Mortgaged Property (as
defined in subsection 4.1I) or an Additional Mortgaged Property (as defined in
subsection 6.9).
"Multiemployer Plan" means a "multiemployer plan", as defined in
Section 3(37) of ERISA, to which Company or any of its ERISA Affiliates is
contributing,
34
<PAGE>
or ever has contributed, or to which Company or any of its ERISA Affiliates has,
or ever has had, an obligation to contribute.
"Net Cash Proceeds" means, with respect to any Asset Sale, Cash
Proceeds of such Asset Sale net of bona fide direct costs incurred in connection
with such Asset Sale, including without limitation (i) income taxes reasonably
estimated to be actually payable as a result of such Asset Sale within two years
of the date of such Asset Sale and (ii) payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than the Loans) that is secured by a Lien on the stock or assets in question and
that is required to be repaid under the terms thereof as a result of such Asset
Sale.
"Net Insurance/Condemnation Proceeds" means any Cash payments or
proceeds received by Agent or by any Borrower or any of such Borrower's
Subsidiaries (i) under any business interruption or casualty insurance policy in
respect of a covered loss thereunder or (ii) as a result of the taking of any
assets of any Borrower or any of its respective Subsidiaries by any Person
pursuant to the power of eminent domain, condemnation or otherwise, or pursuant
to a sale of any such assets to a purchaser with such power under threat of such
a taking, in each case net of any actual and reasonable documented costs
incurred by such Borrower or any of its respective Subsidiaries in connection
with the adjustment or settlement of any claims of such Borrower or such
Subsidiary in respect thereof.
"New Goss Japan" means prior to the transfer to New Shellco of all of
the outstanding capital stock of RGS Japan in accordance with the provisions of
subsection 6.13, Goss Graphic Systems Japan K. K., a corporation organized under
the laws of Japan, and is a wholly-owned Subsidiary of Company.
"New Shellco" means a corporation organized under the laws of Japan,
which corporation will be named "Goss Graphic Systems Japan K. K." immediately
upon the transfer by New Goss Japan to New Shellco of all of the outstanding
capital stock of RGS Japan in accordance with the provisions of subsection 6.13,
and is to be merged with RGS Japan pursuant to the Goss Japan Merger, which
surviving corporation will retain the name "Goss Graphic Systems Japan K. K."
"Notes" means one or more of the Term Notes or Revolving Notes, or any
combination thereof.
"Notice of Allocation" means a notice substantially in the form of
Exhibit XXVIII annexed hereto delivered by Borrowers to Administrative Agent
- --------------
(with a copy to the applicable Agent) pursuant to subsection 2.1A(ii)(c) for the
purpose of allocating the Revolving Loan Commitments between the Japanese
Revolving Loan Commitment and the US/UK Revolving Loan Commitment.
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<PAGE>
"Notice of Borrowing" means a notice substantially in the form of
Exhibit I annexed hereto delivered by a Borrower to Administrative Agent (with a
- ---------
copy to the applicable Agent) pursuant to subsection 2.1B with respect to a
proposed borrowing.
"Notice of Conversion/Continuation" means a notice substantially in
the form of Exhibit II annexed hereto delivered by a Borrower to Administrative
----------
Agent (with a copy to the applicable Agent) pursuant to subsection 2.2D with
respect to a proposed conversion or continuation of the applicable basis for
determining the interest rate with respect to the Loans specified therein.
"Notice of Issuance of Letter of Credit" means a notice substantially
in the form of Exhibit III annexed hereto delivered by a Borrower to
-----------
Administrative Agent (with a copy to the applicable Agent) pursuant to
subsection 3.1B(i) with respect to the proposed issuance of a Letter of Credit.
"Obligations" means all obligations of every nature of each Loan Party
from time to time owed to any Agent or any Lender under the Loan Documents,
whether for principal, interest (including interest accruing on or after the
occurrence of any of the events described in subsection 8.6 or 8.7 whether or
not allowed), reimbursement of amounts drawn under Letters of Credit, fees,
expenses, indemnification or otherwise.
"Officers' Certificate" means, as applied to any corporation, a
certificate executed on behalf of such corporation by its chairman of the board
(if an officer) or its president or one of its vice presidents (or comparable
officer in the case of New Goss Japan, RGS Japan, Goss UK or Goss France) and by
its chief financial officer or its treasurer; provided that any Officers'
--------
Certificate required to be delivered by any Loan Party on the Closing Date may
be executed on behalf of such Loan Party by any one of the foregoing officers;
provided further that every Officers' Certificate with respect to the compliance
- -------- -------
with a condition precedent to the making of any Loans hereunder shall include
(i) a statement that the officer or officers making or giving such Officers'
Certificate have read such condition and any definitions or other provisions
contained in this Agreement relating thereto, (ii) a statement that, in the
opinion of the signers, they have made or have caused to be made such
examination or investigation as is necessary to enable them to express an
informed opinion as to whether or not such condition has been complied with, and
(iii) a statement as to whether, in the opinion of the signers, such condition
has been complied with.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases that may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) that is not a
Capital Lease other than any such lease under which that Person is the lessor.
"Patent Security Agreement" means the Patent Collateral Assignment and
Security Agreement executed and delivered by Company, or, if applicable,
Holdings on the
36
<PAGE>
Closing Date, substantially in the form of Exhibit XXII annexed hereto, or any
------------
other security agreement, document or instrument with a similar or comparable
effect executed by any Foreign Subsidiary that is a Borrower, in form and
substance satisfactory to Administrative Agent, as such Patent Security
Agreement may be amended, supplemented or otherwise modified from time to time,
and "Patent Security Agreements" means all such Patent Security Agreements,
collectively.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor thereto), or any similar or comparable governmental agency or
authority in a jurisdiction outside of the United States applicable to Company
or any of its Subsidiaries.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"Permitted Discretion" means Administrative Agent's good faith
judgment based upon any factor which it believes in good faith: (i) will or
could adversely affect the value of any Collateral, the enforceability or
priority of Administrative Agent's or any other Agent's Liens thereon or the
amount which Agents and Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral; (ii) suggests that any collateral report or financial
information delivered to Administrative Agent or any other Agent by any Person
on behalf of any Loan Party is incomplete, inaccurate or misleading in any
material respect; (iii) materially increases the likelihood of a bankruptcy,
reorganization or other insolvency proceeding involving any Borrower or any of
its Subsidiaries or any of the Collateral; or (iv) creates or reasonably could
be expected to create a Potential Event of Default or Event of Default. In
exercising such judgment, Administrative Agent may consider such factors already
included in or tested by the definition of Eligible Accounts Receivable,
Eligible Finished Goods, Eligible Raw Materials or Eligible Spare Parts, as well
as any of the following: (i) the financial and business climate of any
Borrower's industry and general macroeconomic conditions, (ii) changes in
collection history and dilution with respect to any such Borrower's Accounts,
(iii) changes in demand for, and pricing of, any such Borrower's Raw Materials,
Finished Goods or Spare Parts, (iv) changes in any concentration of risk with
respect to such Accounts or Raw Materials, Finished Goods or Spare Parts, and
(v) any other factors that change the credit risk of lending to any Borrower on
the security of such Accounts or Raw Materials, Finished Goods or Spare Parts,
including without limitation any foreign exchange risks or uncertainties. The
burden of establishing lack of good faith shall be on the Borrower.
"Permitted Encumbrances" means the following types of Liens (other
than any such Lien imposed pursuant to Section 401(a)(29) or 412(n) of the
Internal Revenue Code or by ERISA):
37
<PAGE>
(i) Liens for taxes, assessments or governmental charges or claims
the payment of which is not, at the time, required by subsection 6.3 (other
than any Lien relating to or imposed in connection with any Environmental
Claim);
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics and materialmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made
therefor;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, leases,
government contracts, trade contracts, performance and return-of-money
bonds and other similar obligations (exclusive of obligations for the
payment of borrowed money); provided, however, that "Permitted
-------- -------
Encumbrances" shall not include Liens for the benefit of any customer of
Company or any of its Subsidiaries or for any advances, deposits, progress
payments or other similar payments made to Company or any of its
Subsidiaries by a customer;
(iv) any attachment or judgment Lien not constituting an Event of
Default under subsection 8.8 (other than any Lien relating to or imposed in
connection with any Environmental Claim);
(v) leases or subleases granted to others not interfering in any
material respect with the ordinary conduct of the business of Company or
any of its Subsidiaries;
(vi) easements, rights-of-way, restrictions, covenants,
declarations, encroachments, minor defects or irregularities in title, and
other similar charges or encumbrances not interfering in any material
respect with the ordinary conduct of the business of Company or any of its
Subsidiaries;
(vii) any (a) restriction or encumbrance that the interest or
title of a lessor or sublessor may be subject to, or (b) subordination of
the interest of the lessee or sublessee under a lease to any restriction or
encumbrance referred to in the preceding clause (a);
(viii) Liens arising from filing UCC financing statements relating
solely to leases permitted by this Agreement;
(ix) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with the
importation of goods;
38
<PAGE>
(x) licenses of patents, trademarks and other intellectual property
rights granted by Company or any of its Subsidiaries in the ordinary course
of business and not interfering in any material respect with the ordinary
conduct of the business of Company or such Subsidiary; and
(xi) the title exceptions approved by Administrative Agent and
shown on Schedule B of the Closing Date Mortgage Policies (as defined in
subsection 4.1I(d)).
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, Joint Ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
"Pledge Agreement" means the Pledge Agreement executed and delivered
by Company or Holdings on the Closing Date, substantially in the form of Exhibit
-------
XIX annexed hereto, or any other pledge agreement, document or instrument with a
- ---
similar or comparable effect executed by a Foreign Subsidiary that is a
Borrower, in form and substance satisfactory to Administrative Agent, as such
Pledge Agreement may be amended, supplemented or otherwise modified from time to
time, and "Pledge Agreements" means all such Pledge Agreements, collectively.
"Potential Event of Default" means a condition or event that, after
notice or passage of time or both, would constitute an Event of Default.
"Prime Rate" means the rate that Administrative Agent announces from
time to time as its prime lending rate as in effect from time to time. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate actually charged to any customer. Any Agent or any other Lender may
make commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
"Pro Rata Share" means, on any date of determination, (i) with respect
to all payments, computations and other matters relating to a Type of Term Loan
Commitment or a Type of Term Loan of any Lender, the percentage obtained by
dividing (x) the Term Loan Exposure of such Type of that Lender by (y) the
- -------- --
aggregate Term Loan Exposure of such Type of all Lenders; (ii) with respect to
all payments, computations and other matters relating to a Type of Revolving
Loan Commitment or a Type of Revolving Loans of any Lender or any Letters of
Credit of such Type or participations in such Revolving Loans or Letters of
Credit purchased by any Lender, the percentage obtained by dividing (x) the
--------
Revolving Loan Exposure of such Type of that Lender by (y) the aggregate
--
Revolving Loan Exposure of such Type of all Lenders; and (iii) for all other
purposes with respect to each Lender, the percentage obtained by dividing
--------
(x) the Term Loan Exposure of all Types of that Lender plus the Revolving Loan
----
Exposure of all Types of that Lender by (y) the sum of the aggregate Term Loan
--
Exposure of all Types of all Lenders plus the aggregate
----
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<PAGE>
Revolving Loan Exposure of all Types of all Lenders, in any such case as the
applicable percentage may be adjusted by assignments permitted pursuant to
subsection 10.1. The initial Pro Rata Share of each Lender is set forth
opposite the name of that Lender in Schedule 2.1 annexed hereto.
------------
"Public Offering" means any bona fide primary underwritten public
offering of Holdings Common Stock or Company Common Stock pursuant to an
effective registration statement under the Securities Act (other than pursuant
to a registration statement on Form S-8 or otherwise relating to equity
securities issuable exclusively under any employee benefit plan of Holdings).
"Purchase Agreement" means that certain Stock and Asset Purchase
Agreement by and between Company and Rockwell dated as of April 26, 1996, in the
form delivered to Administrative Agent and Lenders prior to their execution of
this Agreement, as amended by that certain amendment dated as of July 18, 1996,
and as such agreement may be amended further from time to time thereafter to the
extent permitted under subsection 7.12.
"Purchase Price" has the meaning given to such term in the Purchase
Agreement as in effect on the date hereof.
"Raw Materials" means all raw materials to be used or consumed in the
production or manufacture of Finished Goods by a Borrower prior to such use or
consumption.
"Real Property Assets" means all real property from time to time owned
in fee by any Loan Party and all rights, title and interest in and to any and
all leases of real property as to which any Loan Party has a leasehold or
license interest, including without limitation any such fee or leasehold or
license interests acquired by any Loan Party after the date hereof.
"Register" has the meaning assigned to that term in subsection 2.1E.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time, and any similar or
comparable laws in the UK or Japan.
"Reimbursement Date" has the meaning assigned to that term in
subsection 3.3B.
"Related Agreements" means, collectively, the Purchase Agreement, the
Stockholders Agreement, the Management Investment Incentive Plan, the Transition
Agreement, the Loan Portfolio Purchase Agreement, the Assumed Guaranties, the
Holdings' Certificate of Designation, the Senior Subordinated Note Indenture,
the Senior Subordinated
40
<PAGE>
Notes, the Share Transfer Agreement and the Management Notes, and all other
agreements or instruments delivered pursuant to or in connection with any of the
foregoing including any purchase agreement or registration rights agreement.
"Release" means any release, spill, emission, leaking, pumping,
pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping,
leaching or migration of Hazardous Materials into the environment (including,
without limitation, the abandonment or disposal of any barrels, containers or
other closed receptacles containing any Hazardous Materials), or into or out of
any Facility, including the movement of any Hazardous Material through the air,
soil, surface water or groundwater.
"Requirement of Law" means (a) the certificates or articles of
incorporation, by-laws, partnership agreement, limited liability company
operating agreement and other organizational or governing documents of a Person,
(b) any law, treaty, rule, regulation or determination of an arbitrator, court
or any other Governmental Authority (in each case, other than Environmental
Laws), or (c) any franchise, license, lease, permit, certificate, authorization,
qualification, easement, right of way, right or approval binding on a Person or
any of its property.
"Requisite Lenders" means Lenders having or holding a majority of the
sum of the aggregate Term Loan Exposure of all Types of all Lenders plus the
----
aggregate Revolving Loan Exposure of all Types of all Lenders.
"Restricted Junior Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
of Company now or hereafter outstanding, except a dividend payable solely in
shares of that class of stock to the holders of that class, (ii) any redemption,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock of Company now or
hereafter outstanding, (iii) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire
shares of any class of stock of Company now or hereafter outstanding, and
(iv) any payment or prepayment of principal of, premium, if any, or interest on,
or redemption, purchase, retirement, defeasance (including in-substance or legal
defeasance), sinking fund or similar payment with respect to, any Subordinated
Indebtedness.
"Revolving Loan Commitment Termination Date" means September 30, 2001.
"Revolving Loan Commitments" means the US/UK Revolving Loan
Commitments or the Japanese Revolving Loan Commitments, or any combination
thereof.
"Revolving Loan Exposures" means the US/UK Revolving Loan Exposure or
the Japanese Revolving Loan Exposure, or any combination thereof.
41
<PAGE>
"Revolving Loans" means Domestic Revolving Loans, the UK Revolving
Loans or the Japanese Revolving Loans, or any combination thereof.
"Revolving Notes" means the Domestic Revolving Notes, the UK Revolving
Notes or the Japanese Revolving Notes, or any combination thereof.
"RGS France" has the meaning assigned to that term in the recitals to
this Agreement.
"RGS Japan" means Rockwell Graphic Systems-Japan Corporation, a
corporation organized under the laws of Japan, which corporation will be renamed
during the period 90 days after the Closing Date and prior to the consummation
of the Goss Japan Merger, and, (i) prior to the transfer by New Goss Japan to
New Shellco of all of the outstanding capital stock of RGS Japan, is a wholly-
owned Subsidiary of New Goss Japan, (ii) immediately upon transfer of by New
Goss Japan to New Shellco of all of the outstanding capital stock of RGS Japan,
is a wholly-owned Subsidiary of New Shellco, and (iii) is to be merged with New
Shellco pursuant to the Goss Japan Merger, which surviving corporation will be
named "Goss Graphic Systems Japan K. K."
"Secured Customer Financing Arrangement" means an arrangement whereby
a customer of Company or any of its Subsidiaries executes and delivers a Secured
Customer Financing Note for all or any part of the purchase price of Finished
Goods sold by Company or any of its Subsidiaries to such customer, the repayment
of which Secured Customer Financing Note is secured by a duly perfected security
interest in such Finished Goods in favor of Company or any such Subsidiary.
"Secured Customer Financing Note" means a promissory note (other than
Customer Notes), on terms consistent with the past practices of Company and its
Subsidiaries and with prevailing industry practices, executed and delivered by a
customer of Company or any of its Subsidiaries in connection with a Secured
Customer Financing Arrangement.
"Securities" means any stock, shares, partnership interests, voting
trust certificates, certificates of interest or participation in any profit-
sharing agreement or arrangement, options, warrants, bonds, debentures, notes,
or other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities" or any certificates of interest, shares or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire, any of the foregoing.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any successor statute, and any comparable or similar laws in a
jurisdiction outside of the United States applicable to Company or any of its
Subsidiaries.
42
<PAGE>
"Security Agreement" means the Security Agreement executed and
delivered by Company or, if applicable, Holdings on the Closing Date,
substantially in the form of Exhibit XX annexed hereto, or any other security
----------
agreement, document or instrument with a similar or comparable effect executed
by any Foreign Subsidiary that is a Borrower, in form and substance satisfactory
to Administrative Agent, as such Security Agreement may be amended or
supplemented or otherwise modified from time to time, and "Security Agreements"
means all such Security Agreements, collectively.
"Senior Subordinated Note Indenture" means the senior subordinated
indenture dated as of October __, 1996 by and between Company and The Bank of
New York, as Trustee, pursuant to which the Senior Subordinated Notes are
issued, as such indenture may be amended from time to time to the extent
permitted under subsection 7.12.
"Senior Subordinated Notes" means the senior subordinated unsecured
notes issued by Company pursuant to the Senior Subordinated Note Indenture in
the aggregate principal amount of $225,000,000, in the form of Exhibit A to the
Senior Subordinated Note Indenture, as such notes may be amended from time to
time to the extent permitted under subsection 7.12.
"Share Transfer Agreement" means that certain share transfer agreement
and indemnity, dated as of October ___, 1996, by and between Company and Tomita,
whereby Company purchased all of the outstanding capital stock of Tomita
Engineering K. K., a corporation organized under the laws of Japan and, prior to
the purchase of such stock by Company, a wholly-owned subsidiary of Tomita, and
which corporation was renamed "Goss Graphic Systems Japan K. K." and became a
wholly-owned Subsidiary of Company.
"Solvent" means, with respect to any Person, that as of the date of
determination both (A) (i) the then fair saleable value of the property of such
Person is (y) greater than the total amount of liabilities (including contingent
liabilities) of such Person and (z) not less than the amount that will be
required to pay the probable liabilities on such Person's then existing debts as
they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to such Person; (ii) such Person's
capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"Spare Parts" means all components, goods, merchandise or spare parts,
in each case related to press equipment, which are held for sale or lease by a
Borrower in
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connection with the servicing, maintenance or repair of Finished Goods sold or
leased by such Borrower but not including any Raw Materials or work in process.
"Standby Letter of Credit" means any standby letter of credit or
similar instrument issued for the purpose of supporting (i) Indebtedness of
Company or any of its Subsidiaries in respect of industrial revenue or
development bonds or financings; (ii) workers' compensation liabilities of
Company or any of its Subsidiaries; (iii) the obligations of third party
insurers of Company or any of its Subsidiaries arising by virtue of the laws of
any jurisdiction requiring third party insurers; (iv) obligations with respect
to Capital Leases or Operating Leases of Company or any of its Subsidiaries;
(v) performance, payment, deposit or surety obligations of Company or any of its
Subsidiaries, in any case if required by law or governmental rule or regulation
or in accordance with custom and practice in the industry; (vi) payment
obligations of Company in respect of the Assumed Guaranties as described in the
definition thereof; (vii) payment obligations of Company or its Subsidiaries in
respect of Customer Financing Note Guaranties; provided that the aggregate
--------
amount of all such Customer Financing Note Guaranties supported by a Letter of
Credit does not exceed $10,000,000 at any time outstanding; and (viii) Currency
Agreements designed to hedge against fluctuations in currency values with
respect to customer contracts for the sale of Finished Goods entered into in the
ordinary course of business and consistent with past practices; provided that
--------
Standby Letters of Credit may not be issued for the purpose of supporting
(a) trade payables or (b) any Indebtedness constituting "antecedent debt" (as
that term is used in the Bankruptcy Code).
"Sterling" and the sign "B.P." mean the lawful money of the UK.
"Stockholders Agreement" means that certain Stockholders Agreement
dated as of the Closing Date entered into by and among Holdings, the Fund and
the Management Investors, as such agreement may be amended, supplemented or
otherwise modified from time to time to the extent permitted under subsection
7.12.
"Stonington" means Stonington Partners, Inc., a corporation organized
under the laws of Delaware.
"Subordinated Indebtedness" means (i) the Indebtedness of Company
evidenced by the Senior Subordinated Notes and (ii) any other Indebtedness of
Company (other than Indebtedness to any of its Subsidiaries) that is
subordinated in right of payment to the Obligations pursuant to documentation
containing maturities, amortization schedules, covenants, defaults, remedies,
subordination provisions and other material terms in form and substance
satisfactory to Administrative Agent and Requisite Lenders.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association, joint venture or other
business entity of which more than 50% of the total voting power of shares of
stock or other ownership interests entitled (without regard to the occurrence of
any contingency) to vote in the election of the Person
44
<PAGE>
or Persons (whether directors, managers, trustees or other Persons performing
similar functions) having the power to direct or cause the direction of the
management and policies thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof.
"Subsidiary Guaranty" means the Subsidiary Guaranty executed and
delivered by Domestic Subsidiaries on the Closing Date and to be executed and
delivered by Domestic Subsidiaries from time to time thereafter in accordance
with subsection 6.8A, substantially in the form of Exhibit XXIII annexed hereto,
-------------
or any other guaranty, document or instrument with a similar or comparable
effect executed by any Foreign Subsidiary other than a Borrower, in form and
substance satisfactory to Administrative Agent, as such Subsidiary Guaranty may
be amended, supplemented or otherwise modified from time to time.
"Subsidiary Patent Security Agreement" means each Subsidiary Patent
Collateral Security Agreement and Conditional Assignment executed and delivered
by Domestic Subsidiaries on the Closing Date or to be executed and delivered by
Domestic Subsidiaries from time to time thereafter in accordance with subsection
6.8A, in each case substantially in the form of Exhibit XXVII annexed hereto, or
-------------
any other security agreement, document or instrument with a similar or
comparable effect executed by any Foreign Subsidiary other than a Borrower, in
form and substance satisfactory to Administrative Agent, as such Subsidiary
Patent Security Agreement may be amended, supplemented or otherwise modified
from time to time, and "Subsidiary Patent Security Agreements" means all such
Subsidiary Patent Security Agreements collectively.
"Subsidiary Pledge Agreement" means each Subsidiary Pledge Agreement
executed and delivered by Domestic Subsidiaries on the Closing Date or to be
executed and delivered by Domestic Subsidiaries from time to time thereafter in
accordance with subsection 6.8A, in each case substantially in the form of
Exhibit XXV annexed hereto, or any other pledge agreement, document or
- -----------
instrument with a similar or comparable effect executed by a Foreign Subsidiary
other than a Borrower, in form and substance satisfactory to Administrative
Agent, as such Subsidiary Pledge Agreement may be amended, supplemented or
otherwise modified from time to time, and "Subsidiary Pledge Agreements" means
all such Subsidiary Pledge Agreements, collectively.
"Subsidiary Security Agreement" means each Subsidiary Security
Agreement executed and delivered by Domestic Subsidiaries on the Closing Date or
to be executed and delivered by Domestic Subsidiaries from time to time
thereafter in accordance with subsection 6.8A, in each case substantially in the
form of Exhibit XXIV annexed hereto, or any other security agreement, document
------------
or instrument with a similar or comparable effect executed by any Foreign
Subsidiary other than a Borrower, in form and substance satisfactory to
Administrative Agent, as such Subsidiary Security Agreement may be amended,
supplemented or otherwise modified from time to time, and "Subsidiary Security
Agreements" means all such Subsidiary Security Agreements, collectively.
45
<PAGE>
"Subsidiary Trademark Security Agreement" means each Subsidiary
Trademark Collateral Security Agreement and Conditional Assignment executed and
delivered by Domestic Subsidiaries on the Closing Date or to be executed and
delivered by Domestic Subsidiaries from time to time thereafter in accordance
with subsection 6.8A, in each case substantially in the form of Exhibit XXVI
------------
annexed hereto, or any other security agreement, document or instrument with a
similar or comparable effect executed by any Foreign Subsidiary other than a
Borrower, in form and substance satisfactory to Administrative Agent, as such
Subsidiary Trademark Security Agreement may be amended, supplemented or
otherwise modified from time to time, and "Subsidiary Trademark Security
Agreements" means all such Subsidiary Trademark Security Agreements,
collectively.
"Syndication Agent" has the meaning assigned to that term in the
introduction to this Agreement, and includes any such successor Syndication
Agent appointed pursuant to subsection 9.5.
"Tax" or "Taxes" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called, by
whomsoever, on whomsoever and wherever imposed, levied, collected, withheld or
assessed; provided that "Tax on the overall net income" of a Person shall be
--------
construed as a reference to a tax imposed by the jurisdiction in which that
Person's principal office (and/or, in the case of a Lender, its lending office)
is located or in which that Person is deemed to be doing business on all or part
of the net income, profits or gains of that Person (whether worldwide, or only
insofar as such income, profits or gains are considered to arise in or to relate
to a particular jurisdiction, or otherwise).
"Term Loan Commitments" means the Domestic Term Loan Commitments, the
UK Term Loan Commitments or the Japanese Term Loan Commitments, or any
combination thereof.
"Term Loan Exposures" means the Domestic Term Loan Exposure, the UK
Term Loan Exposure or the Japanese Term Loan Exposure, or any combination
thereof.
"Term Loans" means Domestic Term Loans, the UK Term Loans or the
Japanese Term Loans, or any combination thereof.
"Term Notes" means Domestic Term Notes, the UK Term Notes and the
Japanese Term Notes, or any combination thereof.
"Title Company" means First American Title Insurance Company.
"Tomita" means Tomita K. K., a corporation organized under the laws of
Japan.
46
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"Total Utilization of Revolving Loan Commitments" means for any
Borrower, as at any date of determination, the sum of (i) the aggregate
principal amount of all outstanding Revolving Loans made to such Borrower, plus
----
(ii) the Letter of Credit Usage with respect to all Letters of Credit issued for
the account of such Borrower.
"Trademark Security Agreement" means the Trademark Collateral Security
Agreement and Conditional Assignment executed and delivered by Company or, if
applicable, Holdings on the Closing Date, substantially in the form of Exhibit
-------
XXI annexed hereto, or any other security agreement, document or instrument with
- ---
a similar or comparable effect executed by any Foreign Subsidiary that is a
Borrower, in form and substance satisfactory to Administrative Agent, as such
Trademark Security Agreement may be amended, supplemented or otherwise modified
from time to time, and "Trademark Security Agreements" means all such Trademark
Security Agreements, collectively.
"Transaction Costs" means the fees, costs and expenses payable by any
Loan Party on or before the Closing Date in connection with the transactions
contemplated hereby or by the Purchase Agreement.
"Transition Agreement" means that certain Transition Agreement dated
as of the Closing Date between Rockwell and Company with respect to certain
transitional arrangements in conformity with the Outline of Terms set forth as
Exhibit C to the Purchase Agreement.
"Triggering Event" means (i) the occurrence and continuation of any
Event of Default under subsection 8.1, 8.6 or 8.7 or (ii) the acceleration of
the maturity of the Obligations as a result of any Event of Default, which
acceleration has not been rescinded in accordance with the provisions of Section
8.
"Type" means (i) with respect to a Commitment, a Domestic Term Loan
Commitment, a Japanese Term Loan Commitment, a UK Term Loan Commitment or a
US/UK Revolving Loan Commitment or a Japanese Revolving Loan Commitment, and
(ii) with respect to a Term Loan, means a Domestic Term Loan, a Japanese Term
Loan or a UK Term Loan, and (iii) with respect to a Revolving Loan, means a
Domestic Revolving Loan, a Japanese Revolving Loan or a UK Revolving Loan.
"UK" means the United Kingdom of Great Britain and Northern Ireland.
"UK Loans" means the UK Revolving Loans or UK Term Loans made to Goss
UK, or any combination thereof.
"UK Revolving Loans" means the Loans made by the Lenders to Goss UK
pursuant to subsection 2.1A(ii)(a).
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"UK Revolving Notes" means (i) the promissory notes of Goss UK issued
pursuant to subsection 2.1F(iii) on the Closing Date and (ii) any promissory
notes issued by Goss UK pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of US/UK Revolving Loan Commitments and US/UK
Revolving Loans of any Lender, in each case substantially in the form of
Exhibit V annexed hereto, as they may be amended, supplemented or otherwise
- ---------
modified from time to time.
"UK Term Loan Commitment" means the commitment of a Lender to make
Term Loans to Goss UK pursuant to subsection 2.1A(i)(c), and "UK Term Loan
Commitments" means such commitments of all such Lenders in the aggregate.
"UK Term Loan Exposure" means, with respect to any UK Lender as of any
date of determination (i) prior to the funding of the UK Term Loans, that
Lender's UK Term Loan Commitment and (ii) after the funding of the UK Term
Loans, the outstanding principal amount of the UK Term Loans of that Lender.
"UK Term Loans" means the Term Loans made by Lenders to Goss UK
pursuant to subsection 2.1A(i)(c).
"UK Term Notes" means (i) the promissory notes of Goss UK issued
pursuant to subsection 2.1F(iii) on the Closing Date and (ii) any promissory
notes issued by Goss UK pursuant to the last sentence of subsection 10.1B(i) in
connection with assignments of the UK Term Loan Commitments or UK Term Loans of
any Lenders, in each case substantially in the form of Exhibit IV annexed
----------
hereto, as they may be amended, supplemented or otherwise modified from time to
time.
"US/UK Funding and Payment Office" means (i) the office of
Administrative Agent and Daily Funding Lender located at 14 Wall Street, 3rd
Floor, New York, New York 10005 or (ii) such other office of Administrative
Agent and Daily Funding Lender as may from time to time hereafter be designated
as such in a written notice delivered by Administrative Agent and Daily Funding
Lender to Borrowers and Lenders.
"US/UK Lender" and "US/UK Lenders" means the Lenders that have
Domestic Term Loan Commitments, UK Term Loan Commitments or US/UK Revolving Loan
Commitments or that have Domestic or UK Loans outstanding.
"US/UK Revolving Loan Commitment" means the commitment of a Lender to
make Revolving Loans to Company or Goss UK pursuant to subsection 2.1A(ii)(a),
and "US/UK Revolving Loan Commitments" means such commitments of all such
Lenders in the aggregate.
"US/UK Revolving Loan Exposure" means, with respect to any US/UK
Lender as of any date of determination (i) prior to the termination of the US/UK
Revolving Loan Commitments, that Lender's US/UK Revolving Loan Commitment and
(ii) after the
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<PAGE>
termination of the US/UK Revolving Loan Commitments, the sum of (a) the
aggregate outstanding principal amount of the US/UK Revolving Loans of that
Lender plus (b) in the event that Lender is an Issuing Lender, the aggregate
----
Letter of Credit Usage in respect of all Letters of Credit issued by that Lender
for the benefit of Company or the benefit of Goss UK (in each case net of any
participations purchased by other Lenders in such Letters of Credit or any
unreimbursed drawings thereunder) plus (c) the aggregate amount of all
----
participations purchased by that Lender in any outstanding Letters of Credit for
the benefit of Company or the benefit of Goss UK or any unreimbursed drawings
under any such Letters of Credit.
"US/UK Revolving Loans" means the Domestic Revolving Loans and the UK
Revolving Loans.
"Yen" and the sign "Yen" mean the lawful money of Japan.
1.2 Accounting Terms; Utilization of GAAP for Purposes of Calculations Under
------------------------------------------------------------------------
Agreement.
---------
Except as otherwise expressly provided in this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to them in conformity with GAAP. Financial statements and other information
required to be delivered by Company to Lenders pursuant to clauses (i), (ii),
(iii) and (xiii) of subsection 6.1 shall be prepared in accordance with GAAP (to
the extent GAAP is applicable thereto) as in effect at the time of such
preparation (and delivered together with the reconciliation statements provided
for in subsection 6.1(v)). Calculations in connection with the definitions,
covenants and other provisions of this Agreement shall utilize accounting
principles and policies in conformity with those used to prepare the financial
statements referred to in subsection 5.3.
1.3 Other Definitional Provisions.
-----------------------------
References to "Sections" and "subsections" shall be to Sections and
subsections, respectively, of this Agreement unless otherwise specifically
provided. Any of the terms defined in subsection 1.1 may, unless the context
otherwise requires, be used in the singular or the plural, depending on the
reference. An Event of Default shall "continue" or be "continuing" until such
Event of Default has been waived in accordance with subsection 10.6 hereof.
49
<PAGE>
Section 2. AMOUNTS AND TERMS OF COMMITMENTS AND LOANS
2.1 Commitments; Making of Loans; the Register; Notes.
-------------------------------------------------
A. Commitments.
(i) Term Loans. Subject to the terms and conditions of this
----------
Agreement and in reliance upon the representations and warranties of Borrowers
herein set forth, Lenders hereby severally agree to make the Term Loans
described in subsections 2.1A(i)(a), 2.1A(i)(b) and 2.1A(i)(c).
(a) Domestic Term Loans. Each US/UK Lender severally agrees to
-------------------
lend to Company on the Closing Date an amount in Dollars not exceeding its
Pro Rata Share of the aggregate amount of the Domestic Term Loan
Commitments to be used for the purposes identified in subsection 2.5A. The
amount of each US/UK Lender's Domestic Term Loan Commitment is set forth
opposite its name on Schedule 2.1 annexed hereto and the aggregate amount
------------
of the Domestic Term Loan Commitments is $25,000,000; provided that the
--------
Domestic Term Loan Commitments of Lenders shall be adjusted to give effect
to any assignments of the Domestic Term Loan Commitments pursuant to
subsection 10.1B. Each Lender's Domestic Term Loan Commitment shall expire
immediately and without further action on October 15, 1996 if the Domestic
Term Loans are not made on or before that date. Company may make only one
borrowing under the Domestic Term Loan Commitments. Amounts borrowed under
this subsection 2.1A(i)(a) and subsequently repaid or prepaid may not be
reborrowed.
(b) Japanese Term Loans. Each US/UK Lender which has an office,
-------------------
branch or Affiliate listed as a Japanese Lender on Schedule 2.1 annexed
------------
hereto severally agrees to lend to New Goss Japan on the Closing Date an
amount in Dollars not exceeding its Pro Rata Share of the aggregate amount
of the Japanese Term Loan Commitments to be used for the purposes
identified in subsection 2.5A; provided that promptly upon consummation of
--------
the Closing, each such US/UK Lender shall transfer or assign its Japanese
Term Loans and its Japanese Revolving Loan Commitment to such office,
branch or Affiliate, as the case may be, in Japan, which office, branch or
Affiliate in Japan shall thereupon become a Japanese Lender for all
purposes hereunder in accordance with subsection 10.1B. The amount of each
such Lender's Japanese Term Loan Commitment is set forth opposite its name
on Schedule 2.1 annexed hereto and the aggregate amount of the Japanese
------------
Term Loan Commitments is $25,000,000; provided that the Japanese Term Loan
--------
Commitments of Lenders shall be adjusted to give effect to any assignments
of the Japanese Term Loan Commitments pursuant to subsection 10.1B. Each
such Lender's Japanese Term Loan Commitment shall expire immediately and
without further action on October 15, 1996 if the Japanese Term Loans are
not made on or before that date. New Goss Japan may make only one
borrowing under the Japanese Term Loan
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<PAGE>
Commitments. Amounts borrowed under this subsection 2.1A(i)(b) and
subsequently repaid or prepaid may not be reborrowed.
(c) UK Term Loans. Each US/UK Lender severally agrees to lend
-------------
to Goss UK on the Closing Date an amount in Dollars not exceeding its Pro
Rata Share of the aggregate amount of the UK Term Loan Commitments to be
used for the purposes identified in subsection 2.5A. The amount of each
US/UK Lender's UK Term Loan Commitment is set forth opposite its name on
Schedule 2.1 annexed hereto and the aggregate amount of the UK Term Loan
------------
Commitments is $25,000,000; provided that the UK Term Loan Commitments of
--------
Lenders shall be adjusted to give effect to any assignments of the UK Term
Loan Commitments pursuant to subsection 10.1B. Each Lender's UK Term Loan
Commitment shall expire immediately and without further action on
October 15, 1996 if the UK Term Loans are not made on or before that date.
Goss UK may make only one borrowing under the UK Term Loan Commitments.
Amounts borrowed under this subsection 2.1A(i)(c) and subsequently repaid
or prepaid may not be reborrowed.
(ii) Revolving Loans. Subject to the terms and conditions of
---------------
this Agreement and in reliance upon the representations and warranties of
Borrowers herein set forth, Lenders hereby severally agree to make the Revolving
Loans described in subsections 2.1A(ii)(a) and 2.1A(ii)(b).
(a) US/UK Revolving Loans. Each US/UK Lender severally agrees,
---------------------
subject to the limitations set forth in subsections 2.1A(ii)(c) and
2.1A(iii), to lend to Company or to Goss UK, as the case may be, from time
to time during the period from the Closing Date to but excluding the
Revolving Loan Commitment Termination Date an aggregate amount in Dollars
not exceeding its Pro Rata Share of the aggregate amount of the US/UK
Revolving Loan Commitments as in effect from time to time to be used for
the purposes identified in subsection 2.5B. The original amount of each
US/UK Lender's US/UK Revolving Loan Commitment is set forth opposite its
name on Schedule 2.1 annexed hereto and the maximum aggregate amount of the
------------
US/UK Revolving Loan Commitments is $150,000,000; provided that the US/UK
--------
Revolving Loan Commitments shall be adjusted to give effect to any Notices
of Allocation pursuant to subsection 2.1A(ii)(c) and any assignments of the
US/UK Revolving Loan Commitments pursuant to subsection 10.1B;and provided,
--------
further that the amount of the US/UK Revolving Loan Commitments shall be
-------
reduced from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4B(ii) and 2.4B(iii). Each Lender's US/UK
Revolving Loan Commitment shall expire on the Revolving Loan Commitment
Termination Date and all US/UK Revolving Loans and all other amounts owed
hereunder with respect to the US/UK Revolving Loans and the US/UK Revolving
Loan Commitments shall be paid in full no later than that date; provided
--------
that each Lender's US/UK Revolving Loan Commitment shall expire immediately
and without further action on October 15, 1996 if the Domestic Term Loans
and the initial US/UK Revolving
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<PAGE>
Loans are not made on or before that date. Amounts borrowed under this
subsection 2.1A(ii)(a) may be repaid and reborrowed to but excluding the
Revolving Loan Commitment Termination Date.
(b) Japanese Revolving Loans. Each Japanese Lender severally
------------------------
agrees, subject to the limitations set forth in subsections 2.1A(ii)(c) and
2.1A(iii), upon consummation of the purchase by New Goss Japan of all of
the outstanding capital stock of RGS Japan, to lend to Goss Japan from time
to time during the period from the Closing Date to but excluding the
Revolving Loan Commitment Termination Date an aggregate amount in Dollars
not exceeding its Pro Rata Share of the aggregate amount of the Japanese
Revolving Loan Commitments as in effect from time to time to be used for
the purposes identified in subsection 2.5B. The original amount of each
Japanese Lender's Japanese Revolving Loan Commitment is set forth opposite
its name on Schedule 2.1 annexed hereto and the maximum aggregate amount of
------------
the Japanese Revolving Loan Commitments is $25,000,000; provided that such
--------
amounts shall be adjusted to give effect to any Notices of Allocation
pursuant to subsection 2.1A(ii)(c) and any assignments of the Japanese
Revolving Loan Commitments pursuant to subsection 10.1B; and provided,
--------
further that the amount of the Japanese Revolving Loan Commitments shall be
-------
reduced from time to time by the amount of any reductions thereto made
pursuant to subsections 2.4B(ii) and 2.4B(iii). Each Lender's Japanese
Revolving Loan Commitment shall expire on the Revolving Loan Commitment
Termination Date and all Japanese Revolving Loans and all other amounts
owed hereunder with respect to the Japanese Revolving Loans and the
Japanese Revolving Loan Commitments shall be paid in full no later than
that date; provided that each Lender's Japanese Revolving Loan Commitment
--------
shall expire immediately and without further action on October 15, 1996 if
the Japanese Term Loans are not made on or before that date. Amounts
borrowed under this subsection 2.1A(ii)(b) may be repaid and reborrowed to
but excluding the Revolving Loan Commitment Termination Date.
(c) Allocation of Revolving Loan Commitments; Notices of Allocation.
---------------------------------------------------------------
The initial amounts allocated to the US/UK Revolving Loan Commitment and to
the Japanese Revolving Loan Commitment are set forth in Schedule 2.1
------------
annexed hereto. Borrowers may change the amount of the Revolving Loan
Commitments allocated to the US/UK Revolving Loan Commitments and the
Japanese Revolving Loan Commitments at any time by delivering a Notice of
Allocation to Administrative Agent (with a copy to the applicable Agent)
designating a new amount for the US/UK Revolving Loan Commitments and the
Japanese Revolving Loan Commitments at least five Business Days prior to
the date upon which such allocation is to be effective; provided that (1)
--------
the sum of the US/UK Revolving Loan Commitments and the Japanese Revolving
Loan Commitments shall always equal the Maximum Permitted Revolving Loan
Commitments then in effect; (2) the Japanese Revolving Loan Commitments
shall not in any event (a) exceed an amount equal to $25,000,000 minus the
-----
aggregate amount of all reductions made to the Japanese Revolving Loan
Commitments pursuant to subsection 2.4B(ii) or 2.4B(iii) since the Closing
Date, or (b) be reduced to an amount that is less than the Total
Utilization of Revolving Loan Commitments for Goss Japan; and (3) the US/UK
Revolving Loan Commitments shall not in any event (a) exceed an amount
equal to the Maximum Permitted Revolving Loan Commitments then in effect
minus the Japanese
-----
52
<PAGE>
Revolving Loan Commitments then in effect, or (b) be reduced to an amount
that is less than the Total Utilization of Revolving Loan Commitments for
Company and Goss UK. Administrative Agent shall promptly notify each
Lender of any requested change in the allocation of the Revolving Loan
Commitments and the amount of such Lender's Pro Rata Share of the new
Japanese Revolving Loan Commitments or US/UK Revolving Loan Commitments, as
the case may be.
(iii) Limitations on Revolving Loans. Anything contained in
------------------------------
this Agreement to the contrary notwithstanding, the Revolving Loans and the
Revolving Loan Commitments shall be subject to the following limitations in
the amounts indicated:
(a) in no event shall: (1) the Total Utilization of Revolving
Loan Commitments for all Borrowers at any time exceed the Maximum
Permitted Revolving Loan Commitments; (2) the Total Utilization of
Revolving Loan Commitments for Company at any time exceed
$100,000,000; (3) the Total Utilization of Revolving Loan Commitments
for Goss Japan at any time exceed the Japanese Revolving Loan
Commitments then in effect; (4) the Total Utilization of Revolving
Loan Commitments for Goss UK at any time exceed $100,000,000; and (5)
the Total Utilization of Revolving Loan Commitments for Company and
Goss UK at any time exceed the US/UK Revolving Loan Commitments then
in effect;
(b) in no event shall: (1) the Total Utilization of Revolving
Loan Commitments for Company at any time exceed the Company Borrowing
Base then in effect; (2) the Total Utilization of Revolving Loan
Commitments for Goss Japan at any time exceed the Goss Japan Borrowing
Base then in effect; and (3) the Total Utilization of Revolving Loan
Commitments for Goss UK at any time exceed the Goss UK Borrowing Base
then in effect;
(c) in no event shall the sum of the aggregate outstanding
principal amount of all Revolving Loans borrowed pursuant to
subsections 2.1A(ii)(a) and 2.1A(ii)(b) at any time exceed
$110,000,000; and
(d) in no event shall the aggregate amount of Eligible Accounts
Receivable for all Borrowers at any time be less than 50% of the Total
Utilization of Revolving Loan Commitments of all Borrowers.
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<PAGE>
B. Borrowing Mechanics.
(i) Minimum Amounts. Loans made on any Funding Date as Base Rate
---------------
Loans shall not be subject to any minimum amounts. Loans made on any
Funding Date as Eurodollar Rate Loans with a particular Interest Period
shall be in an aggregate minimum amount of $2,000,000 and integral
multiples of $250,000 in excess of that amount.
(ii) Notice to Agent. Whenever a Borrower desires that Lenders
---------------
make Term Loans or Revolving Loans it shall deliver to Administrative Agent
(with a copy to Agent) a Notice of Borrowing (1) no later than 12:00 Noon
(Local Time) at least three Business Days in advance of the proposed
Funding Date in the case of a Eurodollar Rate Loan or (2) no later than
12:00 Noon (New York time) on the proposed Funding Date in the case of a
Loan made to Company as a Base Rate Loan or (3) no later than 12:00 Noon
(Local Time) at least one Business Day in advance of the proposed Funding
Date in the case of a Loan made to Goss Japan or Goss UK as a Base Rate
Loan.
(iii) Notice of Borrowing. The Notice of Borrowing shall specify
-------------------
(i) the Borrower, (ii) the proposed Funding Date (which shall be a Business
Day), (iii) the amount and Type of Loans requested, (iv) in the case of any
Loans made on the Closing Date, that such Loans shall be Base Rate Loans,
(v) in the case of Revolving Loans not made on the Closing Date, whether
such Loans shall be Base Rate Loans or Eurodollar Rate Loans, (vi) in the
case of any Loans requested to be made as Eurodollar Rate Loans, the
initial Interest Period requested therefor, and (vii) in the case of
Revolving Loans, that, after giving effect to the requested Loans, Borrower
will be in compliance with the limitations on Revolving Loans and Revolving
Loan Commitments set forth in subsections 2.1A(ii) and 2.1A(iii).
(iv) Continuation/Conversion. Term Loans and Revolving Loans may
-----------------------
be continued as or converted into Base Rate Loans and Eurodollar Rate Loans
in the manner provided in subsection 2.2D.
(v) Telephonic Notice. In lieu of delivering the above-described
-----------------
Notice of Borrowing, Borrower may give Administrative Agent (and Agent)
telephonic notice by the required time of any proposed borrowing under this
subsection 2.1B; provided that such notice shall be promptly confirmed in
--------
writing by delivery of a Notice of Borrowing to Administrative Agent (with
a copy to Agent) on or before the applicable Funding Date.
Neither any Agent nor any Lender shall incur any liability to any
Borrower in acting upon any telephonic notice referred to above that such
Agent believes in good faith to have been given by a duly authorized
officer or other person authorized to borrow on behalf of such Borrower or
for otherwise acting in
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good faith under this subsection 2.1B, and upon funding of Loans by any
Funding Lender, Agent and/or Lenders in accordance with this Agreement
pursuant to any such telephonic notice such Borrower shall have effected
Loans hereunder.
(vi) Certification of Certain Items. The Borrower shall notify
------------------------------
the Administrative Agent (with a copy to Agent) prior to the funding of any
Loans in the event that any of the matters to which such Borrower is
required to certify in the Notice of Borrowing is no longer true and
correct as of the applicable Funding Date, and the acceptance by such
Borrower of the proceeds of any Loans shall constitute a re-certification
by such Borrower, as of the applicable Funding Date, as to the matters to
which such Borrower is required to certify in the Notice of Borrowing.
(vii) Eurodollar Rate Loans. Except as otherwise provided in
---------------------
subsections 2.6B, 2.6C and 2.6G, a Notice of Borrowing for any Eurodollar
Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable on
and after the related Interest Rate Determination Date, and the Borrower
shall be bound to make a borrowing in accordance therewith.
C. Disbursement of Funds.
(i) Subject to this subsection 2.1C and subsection 2.1D, (a) all
Domestic Loans under this Agreement shall be made by US/UK Lenders
simultaneously and proportionately to their respective Pro Rata Shares of
the Commitments for the Domestic Loans requested, (b) all Japanese Loans
under this Agreement shall be made by Japanese Lenders simultaneously and
proportionately to their respective Pro Rata Shares of the Commitments for
the Japanese Loans requested, and (c) all UK Loans under this Agreement
shall be made by US/UK Lenders simultaneously and proportionately to their
respective Pro Rata Shares of the Commitments for the UK Loans requested,
it being understood that no Lender shall be responsible for any default by
any other Lender in that other Lender's obligation to make a Loan requested
hereunder nor shall the Commitment of any Lender to make the particular
Type of Loan requested be increased or decreased as a result of a default
by any other Lender in that other Lender's obligation to make a Loan
requested hereunder.
(ii) Upon receipt by Agent of a Notice of Borrowing pursuant to
subsection 2.1B (or telephonic notice in lieu thereof) for Revolving Loans
that consist of Base Rate Loans and upon satisfaction or waiver of the
conditions precedent specified in subsection 4.1 (in the case of Loans made
on the Closing Date) and, subject to the provisions set forth in the
immediately succeeding paragraph, subsection 4.2 (in the case of all
Loans), the Funding Lender, without prior notice to the other Lenders,
shall make such Revolving Loans on the applicable Funding Date (subject to
settlement with the other applicable Lenders in accordance with subsection
2.1D) by making the proceeds of such Revolving Loans available to the
Borrower on such Funding Date by causing an amount of same day funds equal
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to the proceeds of such Revolving Loans to be credited to the account of
such Borrower at the Funding and Payment Office. Such Revolving Loans
shall constitute Revolving Loans by the Funding Lender for all purposes
under the Loan Documents, subject to settlement with the other applicable
Lenders pursuant to subsection 2.1D. The Funding Lender shall make
Revolving Loans pursuant to this subsection 2.1C(ii) notwithstanding the
fact that the principal amount of such Revolving Loans, when added to the
aggregate principal amount of such Funding Lender's Revolving Loans then
outstanding and Pro Rata Share of the Letter of Credit Usage then in
effect, may exceed such Funding Lender's Revolving Loan Commitment then in
effect; provided that such Revolving Loans shall at all times be
--------
Obligations owed to such Funding Lender under this Agreement; and provided,
--------
further that in no event shall any Borrower fail to comply with the
-------
limitations on Revolving Loans and Revolving Loan Commitments set forth in
subsections 2.1A(ii) and 2.1A(iii).
Notwithstanding anything in this Agreement to the contrary, if
the conditions precedent specified in subsection 4.2 cannot be fulfilled
with respect to any proposed Revolving Loans that consist of Base Rate
Loans, the Borrower which requested such Revolving Loans shall, in its
Notice of Borrowing or otherwise, give immediate written notice thereof
(specifying the circumstances which prevent the conditions precedent from
being fulfilled) to Agent (with a copy to each Lender) and the Funding
Lender may (and each Lender hereby authorizes the Funding Lender to), but
is not obligated to, continue to make Revolving Loans that are Base Rate
Loans to such Borrower for 20 Business Days from the date Agent first
receives such notice, or until sooner instructed by Requisite Lenders to
cease making such Revolving Loans (the "Funding Lender Discretionary
Period") to such Borrower. Once notice is given by a Borrower that
circumstances exist which prevent the conditions precedent to borrowing
from being fulfilled, no additional notice with respect to the same
circumstances will be effective to commence a new Funding Lender
Discretionary Period for such Borrower.
(iii) Promptly after receipt by Agent of a Notice of Borrowing
pursuant to subsection 2.1B (or telephonic notice in lieu thereof) for any
Loans (other than Revolving Loans that consist of Base Rate Loans), Agent
shall notify each Lender having that Type of Commitment of the proposed
borrowing. Each such Lender shall make the amount of its Loan available to
Agent in same day funds in Dollars, at the Funding and Payment Office, not
later than 12:00 Noon (Local Time) on the applicable Funding Date; provided
--------
that Japanese Term Loans made on the Closing Date shall be made available
to the US/UK Funding and Payment Office. Except as provided in subsection
3.3B with respect to Revolving Loans used to reimburse any Issuing Lender
for the amount of a drawing under a Letter of Credit issued by it, upon
satisfaction or waiver of the conditions precedent specified in subsections
4.1 (in the case of Loans made on the Closing Date) and, subject to the
provisions set forth in the immediately preceding paragraph, 4.2 (in the
case of all Loans), Agent shall make the proceeds of the Loans available to
the applicable Borrower on the
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Funding Date by causing an amount of same day funds in Dollars equal to the
proceeds of all such Loans received by Agent from Lenders to be credited to
the account of the applicable Borrower at the applicable Funding and
Payment Office.
Unless Agent shall have been notified by any Lender prior to the
Funding Date for any Loans pursuant to this subsection 2.1C(iii) that such
Lender does not intend to make available to Agent the amount of such
Lender's Loan requested on such Funding Date, Agent may assume that such
Lender has made such amount available to Agent on such Funding Date and
Agent may, in its sole discretion, but shall not be obligated to, make
available to the applicable Borrower a corresponding amount on such Funding
Date. If such corresponding amount is not in fact made available to Agent
by such Lender, Agent shall be entitled to recover such corresponding
amount on demand from such Lender together with interest thereon, for each
day from such Funding Date until the date such amount is paid to Agent at
the customary rate set by Agent for the correction of errors among banks
for three Business Days and thereafter at the Base Rate. If such Lender
does not pay such corresponding amount forthwith upon Agent's demand
therefor, Agent shall promptly notify the Borrower and the Borrower shall
immediately pay such corresponding amount in Dollars to Agent together with
interest thereon, for each day from such Funding Date until the date such
amount is paid to Agent at the rate payable under this Agreement for Base
Rate Loans of the applicable Type of Loans. Nothing in this subsection
2.1C shall be deemed to relieve any Lender from its obligation to fulfill
its Commitments hereunder or to prejudice any rights that the Borrower may
have against any Lender as a result of any default by such Lender
hereunder.
D. Settlement Procedures.
(i) Each Funding Lender will from time to time notify the other
applicable Lenders, not later than 12:00 Noon (Local Time) (a) on at least
one Business Day during each seven calendar-day period, (b) on each date on
which payment of interest on any Revolving Loans is required to be made
pursuant to subsection 2.2C, (c) on the Revolving Loan Commitment
Termination Date, and (d) at such other times as such Funding Lender in its
discretion may determine (each such notice by such Funding Lender being a
"Settlement Notice" and the date of each Settlement Notice being a
"Settlement Date") of the aggregate principal amount of outstanding
Revolving Loans made by such Funding Lender and each other applicable
Lender as of the close of business on the Business Day immediately
preceding the applicable Settlement Date.
(ii) If a Settlement Notice indicates that the aggregate
principal amount of outstanding Revolving Loans made by such Funding Lender
(including Revolving Loans made by such Funding Lender pursuant to
subsection 2.1C(ii)) is in excess of such Funding Lender's Pro Rata Share
of the aggregate principal amount of outstanding Revolving Loans made by
all applicable Lenders (the amount of such
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excess being the "Excess Funded Amount"), each other applicable Lender
will, not later than 4:00 P.M. (Local Time) on the Settlement Date, pay to
such Funding Lender, by depositing same day funds in the account specified
by such Funding Lender at the Funding and Payment Office, an amount equal
to such Lender's Adjusted Pro Rata Share of the Excess Funded Amount, upon
which payment such Funding Lender shall be deemed to have sold, and such
Lender shall be deemed to have purchased, as of the Settlement Date, a
portion of the outstanding Revolving Loans made by such Funding Lender for
its own account pursuant to subsection 2.1C(ii) on or after the immediately
preceding Settlement Date equal to such Lender's Adjusted Pro Rata Share of
the Excess Funded Amount. The obligation of each applicable Lender to
purchase a portion of any Revolving Loan made by any Funding Lender as
provided in this subsection 2.1D(ii) is subject to the condition that at
the time such Revolving Loan was made by such Funding Lender (a) the duly
authorized officer of such Funding Lender responsible for the
administration of such Funding Lender's credit relationship with the
Borrower believed in good faith that either (X) no Event of Default had
occurred and was continuing or (Y) any Event of Default that had occurred
and was continuing had been waived by Requisite Lenders at the time such
Revolving Loan was made or (b) a Funding Lender Discretionary Period with
respect to such Borrower was in effect.
(iii) If a Settlement Notice indicates that the aggregate
principal amount of outstanding Revolving Loans made by a Funding Lender is
less than such Funding Lender's Pro Rata Share of the aggregate principal
amount of outstanding Revolving Loans made by all applicable Lenders (the
amount of such difference being the "Excess Paydown Amount"), such Funding
Lender will, no later than 4:00 P.M. (Local Time) on the Settlement Date,
unconditionally pay to each other applicable Lender, by depositing same day
funds in the account specified by such Lender to such Funding Lender, an
amount equal to such Lender's Adjusted Pro Rata Share of the Excess Paydown
Amount, upon which payment such Lender shall be deemed to have sold, and
Funding Lender shall be deemed to have purchased, as of the Settlement
Date, a portion of the outstanding Revolving Loans of such Lender equal to
such Lender's Adjusted Pro Rata Share of the Excess Paydown Amount.
(iv) Except as provided in subsection 2.1D(ii), the obligations
of any Funding Lender and each other applicable Lender pursuant to
subsections 2.1D(ii) and 2.1D(iii) shall be absolute and unconditional and
shall not be affected by any circumstance, including, without limitation,
(a) any set-off, counterclaim, recoupment, defense or other right which an
Agent or any Lender may have against an Agent, any other Lender, any Loan
Party or any other Person for any reason whatsoever; (b) the occurrence or
continuance of an Event of Default or a Potential Event of Default; (c) any
adverse change in the condition (financial or otherwise) of any Loan Party;
(d) any breach of this Agreement by any Borrower, an Agent or any Lender;
or (e) any other circumstance, happening, or event whatsoever, whether or
not similar to any of the foregoing. In the event that any Person (the
"Payor")
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obligated to make a payment to any other Person (the "Payee") pursuant to
this subsection 2.1D fails to make available to the Payee the amount of
such payment required to be made by the Payor, the Payee shall be entitled
to recover such amount on demand from the Payor together with interest at
the customary rate set by Administrative Agent for the correction of errors
among Lenders for three Business Days and thereafter at the sum of the Base
Rate plus 1.50% per annum.
(v) In the event that all or any portion of any repayment of
principal of the Revolving Loans is thereafter recovered by or on behalf of
any Borrower from any Funding Lender (including any such recovery in a
proceeding under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect) in an amount that is proportionately greater
(based on the respective Pro Rata Shares of applicable Lenders) than any
such recovery from the other Lenders, the loss of the amount so recovered
shall be ratably shared among all Lenders in the manner contemplated by
subsection 10.5.
E. The Register.
(i) Administrative Agent shall maintain, at its address referred to
in subsection 10.8, a register for the recordation of the names and
addresses of Lenders and the Commitments and Loans of each Lender from time
to time (the "Register"). The Register shall be available for inspection
by any Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
(ii) Administrative Agent shall record in the Register the Term
Loan Commitments and the Revolving Loan Commitments and the Term Loans and
Revolving Loans from time to time of each Lender, and each repayment or
prepayment in respect of the principal amount of the Term Loans or
Revolving Loans of each Lender. Any such recordation shall be conclusive
and binding on each Borrower and each Lender, absent manifest error;
provided that failure to make any such recordation, or any error in such
--------
recordation, shall not affect any Borrower's Obligations in respect of the
applicable Loans.
(iii) Each Lender shall record on its internal records (including,
without limitation, the Notes held by such Lender) the amount of each Loan
made by it and each payment in respect thereof. Any such recordation shall
be conclusive and binding on each Borrower, absent manifest error; provided
--------
that failure to make any such recordation, or any error in such
recordation, shall not affect such Borrower's Obligations in respect of the
applicable Loans; and provided, further that in the event of any
-------- -------
inconsistency between the Register and any Lender's records, the
recordations in the Register shall govern.
(iv) Borrowers, Agents and Lenders shall deem and treat the
Persons listed as Lenders in the Register as the holders and owners of the
corresponding
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Commitments and Loans listed therein for all purposes hereof, and no
assignment or transfer of any such Commitment or Loan shall be effective,
in each case unless and until an Assignment Agreement effecting the
assignment or transfer thereof shall have been accepted by Administrative
Agent and recorded in the Register as provided in subsection 10.1B(ii).
Prior to such recordation, all amounts owed with respect to the applicable
Commitment or Loan shall be owed to the Lender listed in the Register as
the owner thereof, and any request, authority or consent of any Person who,
at the time of making such request or giving such authority or consent, is
listed in the Register as a Lender shall be conclusive and binding on any
subsequent holder, assignee or transferee of the corresponding Commitments
or Loans.
(v) Each Borrower hereby designates BTCo to serve as such Borrower's
agent solely for purposes of maintaining the Register as provided in this
subsection 2.1E, and each Borrower hereby agrees that, to the extent BTCo
serves in such capacity, BTCo and its officers, directors, employees,
agents and affiliates shall constitute Indemnitees for all purposes under
subsection 10.3.
F. Notes.
(i) Company shall execute and deliver on the Closing Date (a) to each
US/UK Lender (or to Administrative Agent for that Lender) a Domestic Term
Note substantially in the form of Exhibit IV annexed hereto to evidence
----------
that Lender's Domestic Term Loan, in the principal amount of that Lender's
Domestic Term Loan and with other appropriate insertions, and (b) to each
US/UK Lender (or to Administrative Agent for that Lender) a Domestic
Revolving Note substantially in the form of Exhibit V annexed hereto to
---------
evidence that Lender's Domestic Revolving Loans, in the principal amount of
that Lender's US/UK Revolving Loan Commitment and with other appropriate
insertions;
(ii) New Goss Japan shall execute and deliver on the Closing Date
to each Japanese Lender (or to Administrative Agent for that Lender) a
Japanese Term Note substantially in the form of Exhibit IV annexed hereto
----------
to evidence that Lender's Japanese Term Loan, in the principal amount of
that Lender's Japanese Term Loan and with other appropriate insertions, and
on the Closing Date, immediately upon consummation of the Acquisition, RGS
Japan shall execute and deliver to each Japanese Lender (or to
Administrative Agent for that Lender) a Japanese Revolving Note
substantially in the form of Exhibit V annexed hereto to evidence that
---------
Lender's Japanese Revolving Loans, in the principal amount of that Lender's
Japanese Revolving Loan Commitment and an assumption of the Japanese Term
Note; and
(iii) Goss UK shall execute and deliver on the Closing Date (a) to
each Lender (or to Administrative Agent for that Lender) a UK Term Note
substantially in the form of Exhibit IV annexed hereto to evidence that
----------
Lender's UK Term Loan, in the principal amount of that Lender's UK Term
Loan and with other appropriate
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insertions, and (b) to each US/UK Lender (or to Administrative Agent for
that Lender) a UK Revolving Note substantially in the form of Exhibit V
---------
annexed hereto to evidence that Lender's UK Revolving Loans, in the
principal amount of that Lender's US/UK Revolving Loan Commitment and with
other appropriate insertions.
2.2 Interest on the Loans.
---------------------
A. Rate of Interest. Subject to the provisions of subsections 2.6 and
2.7, each Term Loan and each Revolving Loan shall bear interest on the unpaid
principal amount thereof from the date made through maturity (whether by
acceleration or otherwise) at a rate determined by reference to the Base Rate or
to the Adjusted Eurodollar Rate. The applicable basis for determining the rate
of interest with respect to any Term Loan or any Revolving Loan shall be
selected by the Borrower initially at the time a Notice of Borrowing is given
with respect to such Loan pursuant to subsection 2.1B, and the basis for
determining the interest rate with respect to any Term Loan or any Revolving
Loan may be changed from time to time pursuant to subsection 2.2D. If on any day
a Term Loan or Revolving Loan is outstanding with respect to which notice has
not been delivered to the Agent in accordance with the terms of this Agreement
specifying the applicable basis for determining the rate of interest, then for
that day that Loan shall bear interest determined by reference to the Base Rate.
Subject to the provisions of subsections 2.2E and 2.7, the Term Loans
and the Revolving Loans shall bear interest through maturity as follows:
(a) if a Base Rate Loan, then at the sum of the Base Rate plus
----
the Applicable Base Rate Margin; or
(b) if a Eurodollar Rate Loan, then at the sum of the Adjusted
Eurodollar Rate plus the Applicable Eurodollar Margin.
----
Upon delivery of the Margin Determination Certificate by Company to
Administrative Agent pursuant to subsection 6.1(xvii), the Applicable Base Rate
Margin and the Applicable Eurodollar Rate Margin shall automatically be adjusted
in accordance with such Margin Determination Certificate, such adjustment to
become effective on the first day of the Fiscal Quarter immediately succeeding
the Fiscal Quarter in which Administrative Agent receives such Margin
Determination Certificate; provided that if a Margin Determination Certificate
--------
is not delivered at the time required pursuant to subsection 6.1(xvii), clause
(iii) of the definitions "Applicable Base Rate Margin" and "Applicable
Eurodollar Rate Margin", as the case may be, shall be applicable from such time
until delivery of the succeeding Margin Determination Certificate; provided
--------
further that if a Margin Determination Certificate erroneously indicates an
- -------
applicable margin more favorable to Borrowers than should be afforded by the
actual calculation of the Leverage Ratio, each Borrower shall promptly pay
additional interest, letter of credit fees and all other applicable fees to
correct for such error.
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B. Interest Periods. In connection with each Eurodollar Rate Loan, a
Borrower may, pursuant to the applicable Notice of Borrowing or Notice of
Conversion/Continuation, as the case may be, select an interest period (each an
"Interest Period") to be applicable to such Loan, which Interest Period shall
be, at Borrower's option, either a one, two, three or six month period; provided
--------
that:
(i) the initial Interest Period for any such Loan shall commence on
the Funding Date in respect of such Loan, in the case of a Loan initially
made as a Eurodollar Rate Loan or on the date specified in the applicable
Notice of Conversion/Continuation, in the case of a Loan converted to a
Eurodollar Rate Loan;
(ii) in the case of immediately successive Interest Periods
applicable to a Eurodollar Rate Loan continued as such pursuant to a Notice
of Conversion/Continuation, each successive Interest Period shall commence
on the day on which the next preceding Interest Period expires;
(iii) if an Interest Period would otherwise expire on a day that
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day; provided that, if any Interest Period would
--------
otherwise expire on a day that is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to clause (v) of this subsection 2.2B, end on the last
Business Day of a calendar month;
(v) no Interest Period with respect to any portion of the Term Loans
shall extend beyond September 30, 2001 and no Interest Period with respect
to any portion of the Revolving Loans shall extend beyond the Revolving
Loan Commitment Termination Date;
(vi) no Interest Period with respect to any portion of the Term
Loans of any Borrower shall extend beyond a date on which such Borrower is
required to make a scheduled payment of principal of the Term Loans of such
Borrower unless the sum of (a) the aggregate principal amount of Term Loans
of such Borrower that are Base Rate Loans plus (b) the aggregate principal
----
amount of Term Loans of such Borrower that are Eurodollar Rate Loans with
Interest Periods expiring on or before such date equals or exceeds the
principal amount required to be paid on the Term Loans of such Borrower on
such date;
(vii) there shall be no more than 4 Interest Periods for any
Borrower outstanding at any time; and
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(viii) in the event a Borrower fails to specify an Interest Period
for any Eurodollar Rate Loan in the applicable Notice of Borrowing or
Notice of Conversion/Continuation, such Borrower shall be deemed to have
selected an Interest Period of one month.
C. Interest Payments. Subject to the provisions of subsection 2.2E,
interest on each Loan shall be payable in arrears on and to each Interest
Payment Date applicable to that Loan, upon any prepayment of that Loan (to the
extent accrued on the amount being prepaid) and at maturity (including final
maturity); provided that in the event any Revolving Loans that are Base Rate
--------
Loans are prepaid pursuant to subsection 2.4B(i) or subsection 2.4B(iii)(g),
interest accrued on such Revolving Loans through the date of such prepayment
shall be payable on the next succeeding Interest Payment Date applicable to Base
Rate Loans (or, if earlier, at final maturity).
D. Conversion or Continuation. Subject to the provisions of subsection
2.6, a Borrower shall have the option to convert at any time all or any part of
its outstanding Term Loans or Revolving Loans equal to $2,000,000 and integral
multiples of $250,000 in excess of that amount from Loans bearing interest at a
rate determined by reference to one basis to Loans bearing interest at a rate
determined by reference to an alternative basis, or upon the expiration of any
Interest Period applicable to any Eurodollar Rate Loan to continue all or any
portion of such Loan equal to $2,000,000 and integral multiples of $250,000 in
excess of that amount as a Eurodollar Rate Loan; provided, however, that any
-------- -------
Eurodollar Rate Loan may only be converted into a Base Rate Loan on the
expiration date of an Interest Period applicable thereto.
A Borrower shall deliver a Notice of Conversion/Continuation to
Administrative Agent (with a copy to Agent) no later than 12:00 Noon (Local
Time) at least one Business Day in advance of the proposed conversion date and
at least three Business Days in advance of the proposed conversion/continuation
date (in the case of a conversion to, or a continuation of, a Eurodollar Rate
Loan). A Notice of Conversion/Continuation shall specify (i) the proposed
conversion/continuation date (which shall be a Business Day), (ii) the amount
and Type of the Loan to be converted/continued, (iii) the nature of the proposed
conversion/continuation, (iv) in the case of a conversion to, or a continuation
of, a Eurodollar Rate Loan, the requested Interest Period, and (v) in the case
of a conversion to, or a continuation of, a Eurodollar Rate Loan, that no
Potential Event of Default or Event of Default has occurred and is continuing.
In lieu of delivering the above-described Notice of Conversion/Continuation, a
Borrower may give Administrative Agent and the Agent telephonic notice by the
required time of any proposed conversion/continuation under this subsection
2.2D; provided that such notice shall be promptly confirmed in writing by
--------
delivery of a Notice of Conversion/Continuation to Administrative Agent (with a
copy to Agent) on or before the proposed conversion/continuation date.
No Agent and no Lender shall incur any liability to any Borrower in
acting upon any telephonic notice referred to above that Agent believes in good
faith to have been
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given by a duly authorized officer or other person authorized to act on behalf
of such Borrower or for otherwise acting in good faith under this subsection
2.2D, and upon conversion or continuation of the applicable basis for
determining the interest rate with respect to any Loans in accordance with this
Agreement pursuant to any such telephonic notice any Borrower shall have
effected a conversion or continuation, as the case may be, hereunder.
Except as otherwise provided in subsections 2.6B, 2.6C and 2.6G, a
Notice of Conversion/Continuation for conversion to, or continuation of, a
Eurodollar Rate Loan (or telephonic notice in lieu thereof) shall be irrevocable
on and after the related Interest Rate Determination Date, and the Borrower
shall be bound to effect a conversion or continuation in accordance therewith.
E. Default Rate. Upon the occurrence and during the continuation of any
Event of Default, the outstanding principal amount of all Loans and, to the
extent permitted by applicable law, any interest payments thereon not paid when
due and any fees and other amounts then due and payable hereunder, shall
thereafter bear interest (including post-petition interest in any proceeding
under the Bankruptcy Code) payable upon demand at a rate that is 2.00% per annum
in excess of the interest rate otherwise payable under this Agreement with
respect to Base Rate Loans. Payment or acceptance of the increased rates of
interest provided for in this subsection 2.2E is not a permitted alternative to
timely payment and shall not constitute a waiver of any Event of Default or
otherwise prejudice or limit any rights or remedies of any Agent or any Lender.
F. Computation of Interest. Interest on the Loans shall be computed on
the basis of a 360-day year, in each case for the actual number of days elapsed
in the period during which it accrues. In computing interest on any Loan,
(i) the date of the making of such Loan or the first day of an Interest Period
applicable to such Loan or, with respect to a Base Rate Loan being converted
from a Eurodollar Rate Loan, the date of conversion of such Eurodollar Rate Loan
to such Base Rate Loan shall be included, and (ii) the date of payment of such
Loan or the expiration date of an Interest Period applicable to such Loan or,
with respect to a Base Rate Loan being converted to a Eurodollar Rate Loan, the
date of conversion of such Base Rate Loan to such Eurodollar Rate Loan shall be
excluded; provided that if a Loan is repaid on the same day on which it is made,
--------
no interest shall be paid on that Loan.
2.3 Fees.
----
A. Commitment Fees.
(1) Company. Company agrees to pay to Administrative Agent, for
-------
distribution to each US/UK Lender in proportion to that Lender's Pro Rata
Share of the US/UK Revolving Loan Commitment, commitment fees for the
period from and including the Closing Date to and excluding the Revolving
Loan Commitment
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Termination Date in an amount equal to fifty percent (50%) of (x) the
average of the daily excess of (a) the Maximum Permitted Revolving Loan
Commitments over (b) the Total Utilization of Revolving Loan Commitments
for all Borrowers multiplied by (y) 0.50% per annum.
---------- --
(2) Goss Japan. Goss Japan agrees to pay to Japanese Agent, for
----------
distribution to each Japanese Lender in proportion to that Lender's Pro
Rata Share of the Japanese Revolving Loan Commitment, commitment fees for
the period from and including the Closing Date to and excluding the
Revolving Loan Commitment Termination Date in an amount equal to fifteen
percent (15%) of (x) the average of the daily excess of (a) the Maximum
Permitted Revolving Loan Commitments over (b) the Total Utilization of
Revolving Loan Commitments for all Borrowers multiplied by (y) 0.50% per
---------- --
annum.
(3) Goss UK. Goss UK agrees to pay to Administrative Agent, for
-------
distribution to each US/UK Lender in proportion to that Lender's Pro Rata
Share of the US/UK Revolving Loan Commitment, commitment fees for the
period from and including the Closing Date to and excluding the Revolving
Loan Commitment Termination Date in an amount equal to thirty-five percent
(35%) of (x) the average of the daily excess of (a) the Maximum Permitted
Revolving Loan Commitments over (b) the Total Utilization of Revolving Loan
Commitments for all Borrowers multiplied by (y) 0.50% per annum.
---------- --
(4) Calculation. Such commitment fees shall be calculated on
-----------
the basis of a 360-day year and the actual number of days elapsed and be
payable monthly in arrears on the first Business Day of each calendar
month, commencing on the first such date to occur after the Closing Date,
and on the applicable Revolving Loan Commitment Termination Date.
B. Other Fees. Each Borrower agrees to pay to each Agent, Syndication
Agent and Documentation Agent such other fees in the amounts and at the times
separately agreed upon between Stonington or such Borrower and such Agent,
Syndication Agent or Documentation Agent.
2.4 Repayments, Prepayments and Reductions in Revolving Loan Commitments;
---------------------------------------------------------------------
General Provisions Regarding Payments.
-------------------------------------
A. Scheduled Payments of Term Loans.
(i) Scheduled Payments of Domestic Term Loans. Company shall make
-----------------------------------------
principal payments on the Domestic Term Loans in installments on the dates
and in the amounts set forth below:
65
<PAGE>
Scheduled Repayment
Date of Domestic Term Loans
--------- ----------------------------
December 31, 1997 $1,250,000.00
March 31, 1998 $1,250,000.00
June 30, 1998 $1,250,000.00
September 30, 1998 $1,250,000.00
December 31, 1998 $1,250,000.00
March 31, 1999 $1,250,000.00
June 30, 1999 $1,250,000.00
September 30, 1999 $1,250,000.00
December 31, 1999 $1,250,000.00
March 31, 2000 $1,250,000.00
June 30, 2000 $1,250,000.00
September 30, 2000 $1,250,000.00
December 31, 2000 $2,500,000.00
March 31, 2001 $2,500,000.00
June 30, 2001 $2,500,000.00
September 30, 2001 $2,500,000.00
------------
TOTAL $25,000,000.00
==============
; provided that the scheduled installments of principal of the Domestic
--------
Term Loans set forth above shall be reduced in connection with any
voluntary or mandatory prepayments of the Term Loans in accordance with
subsection 2.4B(iv); and provided, further that the Domestic Term Loans and
-------- -------
all other amounts owed hereunder with respect to the Domestic Term Loans
shall be paid in full no later than September 30, 2001, and the final
installment payable by Company in respect of the Domestic Term Loans on
such date shall be in an amount, if such amount is different from that
specified above, sufficient to repay all amounts owing by Company under
this Agreement with respect to the Domestic Term Loans.
66
<PAGE>
(ii) Scheduled Payments of Japanese Term Loans. Goss Japan shall
-----------------------------------------
make principal payments on the Japanese Term Loans in installments on the
dates and in the amounts set forth below:
Scheduled Repayment
Date of Japanese Term Loans
------ ----------------------
December 31, 1997 $1,250,000.00
March 31, 1998 $1,250,000.00
June 30, 1998 $1,250,000.00
September 30, 1998 $1,250,000.00
December 31, 1998 $1,250,000.00
March 31, 1999 $1,250,000.00
June 30, 1999 $1,250,000.00
September 30, 1999 $1,250,000.00
December 31, 1999 $1,250,000.00
March 31, 2000 $1,250,000.00
June 30, 2000 $1,250,000.00
September 30, 2000 $1,250,000.00
December 31, 2000 $2,500,000.00
March 31, 2001 $2,500,000.00
June 30, 2001 $2,500,000.00
September 30, 2001 $2,500,000.00
-------------
TOTAL $25,000,000.00
==============
; provided that the scheduled installments of principal of the Japanese Term
--------
Loans set forth above shall be reduced in connection with any voluntary or
mandatory prepayments of the Term Loans in accordance with subsection 2.4B(iv);
and provided, further that the Japanese Term Loans and all other amounts owed
-------- -------
hereunder with respect to the Japanese Term Loans shall be paid in full no later
than September 30, 2001 and the final installment payable by Goss Japan in
respect of the Japanese Term Loans on such date shall be in an amount, if such
amount is different from that specified above, sufficient to repay all amounts
owing by Goss Japan under this Agreement with respect to the Japanese Term
Loans.
(iii) Scheduled Payments of UK Term Loans. Goss UK shall make
-----------------------------------
principal payments on the UK Term Loans in installments on the dates and in
the amounts set forth below:
67
<PAGE>
Scheduled Repayment
Date of UK Term Loans
------ -------------------
December 31, 1997 $1,250,000.00
March 31, 1998 $1,250,000.00
June 30, 1998 $1,250,000.00
September 30, 1998 $1,250,000.00
December 31, 1998 $1,250,000.00
March 31, 1999 $1,250,000.00
June 30, 1999 $1,250,000.00
September 30, 1999 $1,250,000.00
December 31, 1999 $1,250,000.00
March 31, 2000 $1,250,000.00
June 30, 2000 $1,250,000.00
September 30, 2000 $1,250,000.00
December 31, 2000 $2,500,000.00
March 31, 2001 $2,500,000.00
June 30, 2001 $2,500,000.00
September 30, 2001 $2,500,000.00
-------------
TOTAL $25,000,000.00
==============
; provided that the scheduled installments of principal of the UK Term Loans set
--------
forth above shall be reduced in connection with any voluntary or mandatory
prepayments of the Term Loans in accordance with subsection 2.4B(iv); and
provided, further that the UK Term Loans and all other amounts owed hereunder
- -------- -------
with respect to the UK Term Loans shall be paid in full no later than
September 30, 2001 and the final installment payable by Goss UK in respect of
the UK Term Loans on such date shall be in an amount, if such amount is
different from that specified above, sufficient to repay all amounts owing by
Goss UK under this Agreement with respect to the UK Term Loans.
B. Prepayments and Reductions in Revolving Loan Commitments.
(i) Voluntary Prepayments. Each Borrower may, upon not less than one
---------------------
Business Day's prior written or telephonic notice, in the case of Base Rate
Loans, and three Business Days' prior written or telephonic notice, in the
case of Eurodollar Rate Loans, in each case given to Administrative Agent
(with a copy to Agent) by 12:00 Noon (Local Time) on the date required and,
if given by telephone, promptly confirmed in writing to Administrative
Agent (with a copy to Agent) (which original written or telephonic notice
such Agent will promptly transmit by telefacsimile or
68
<PAGE>
telephone to each Lender), at any time and from time to time prepay any
Term Loans or Revolving Loans on any Business Day in whole or in part in an
aggregate minimum amount of $500,000 and integral multiples of $250,000 in
excess of that amount; provided, however, that a Eurodollar Rate Loan may
-------- -------
not be prepaid prior to the expiration of the Interest Period applicable
thereto unless such Borrower pays to each Lender all such amounts as are
payable pursuant to subsection 2.6D. Notice of prepayment having been
given as aforesaid, the principal amount of the Loans specified in such
notice shall become due and payable on the prepayment date specified
therein. Any such voluntary prepayment shall be applied as specified in
subsection 2.4B(iv).
(ii) Voluntary Reductions of Revolving Loan Commitments. Each
--------------------------------------------------
Borrower may, upon not less than three Business Days' prior written or
telephonic notice confirmed in writing to Administrative Agent (with a copy
to Agent) (which original written or telephonic notice such Agent will
promptly transmit by telefacsimile or telephone to each Lender), at any
time and from time to time terminate in whole or permanently reduce in
part, without premium or penalty, any Revolving Loan Commitments with
respect to such Borrower in an amount up to the amount by which such
Revolving Loan Commitments exceed the Total Utilization of Revolving Loan
Commitments with respect to such Borrower; provided that any such partial
--------
reduction of such Revolving Loan Commitments shall be in an aggregate
minimum amount of $1,000,000 and integral multiples of $500,000 in excess
of that amount; and provided further that any reduction of the US/UK
-------- -------
Revolving Loan Commitment shall be made jointly by Company and Goss UK.
Any Borrower's notice to an Agent shall designate the date (which shall be
a Business Day) of such termination or reduction and the amount of any
partial reduction, and such termination or reduction of any such Revolving
Loan Commitments shall be effective on the date specified in such
Borrower's notice and shall reduce such Revolving Loan Commitment of each
Lender proportionately to its Pro Rata Share.
(iii) Mandatory Prepayments and Mandatory Reductions of Revolving
-----------------------------------------------------------
Loan Commitments.
----------------
(a) Prepayments and Reductions from Asset Sales. No later than
-------------------------------------------
the first Business Day following the date of receipt (x) by Goss Japan
or any of its Subsidiaries, (y) by Goss UK or any of its Subsidiaries,
or (z) by Company or any of its Subsidiaries (other than the
Subsidiaries included in the foregoing clauses (x) and (y)) of Cash
Proceeds of any Asset Sale, (1) such Borrower shall prepay its Term
Loans in an aggregate amount equal to the Net Cash Proceeds of such
Asset Sale; (2) to the extent the Net Cash Proceeds of such Asset Sale
exceed the aggregate outstanding amount of such Borrower's Term Loans,
(i) in the case of Goss Japan or Goss UK, such Borrower shall prepay
the Term Loans of Goss UK or Goss Japan, respectively, in an aggregate
amount equal to such excess or (ii) in the case of
69
<PAGE>
Company, Company shall prepay the Japanese Term Loans and the UK Term
Loans on a pro rata basis (in accordance with the respective
outstanding principal amount thereof) in an aggregate amount equal to
such excess; (3) to the extent the Net Cash Proceeds of such Asset
Sale exceed the Term Loan prepayments required to be made by such
Borrower pursuant to the foregoing clauses (1) - (2), such Borrower
shall prepay its Revolving Loans without any corresponding reduction
in the related Revolving Loan Commitments, in an aggregate amount
equal to such excess; and (4) to the extent that Net Cash Proceeds of
such Asset Sale remain after the applications required pursuant to the
foregoing clauses (1) - (3), such Borrower shall cause the excess of
such Net Cash Proceeds to be applied first to prepay the remaining
outstanding Term Loans of any Borrower, including the Company, on a
pro rata basis (in accordance with the respective outstanding
principal amount thereof) and after payment of all remaining
outstanding Term Loans, to prepay the remaining outstanding Revolving
Loans of any Borrower, including the Company, on a pro rata basis (in
accordance with the respective outstanding amount of Revolving Loan
Commitments) without any corresponding reduction in the related
Revolving Loan Commitments. Concurrently with any prepayment of the
Loans pursuant to this subsection 2.4B(iii)(a), the Borrower shall
deliver to the Administrative Agent (with a copy to Agent) an
Officers' Certificate demonstrating the derivation of the Net Cash
Proceeds of the correlative Asset Sale from the gross sales price
thereof. In the event that any Borrower shall, at any time after
receipt of Cash Proceeds of any Asset Sale requiring a prepayment of
the Loans pursuant to this subsection 2.4B(iii)(a), determine that the
prepayments previously made in respect of such Asset Sale were in an
aggregate amount less than that required by the terms of this
subsection 2.4B(iii)(a), such Borrower shall promptly make an
additional prepayment of Term Loans or Revolving Loans, as the case
may be, in the manner described above in an aggregate amount equal to
the amount of any such deficit, and such Borrower shall concurrently
therewith deliver to the Administrative Agent (with a copy to Agent)
an Officers' Certificate demonstrating the derivation of the
additional Net Cash Proceeds. Any mandatory prepayments pursuant to
this subsection 2.4B(iii)(a) shall be applied as specified in
subsection 2.4B(iv).
(b) Prepayments and Reductions from Net Insurance/ Condemnation
-----------------------------------------------------------
Proceeds. No later than the first Business Day following the date of
--------
receipt by Agent or (x) by Goss Japan or any of its Subsidiaries,
(y) by Goss UK or any of its Subsidiaries, or (z) by Company or any of
its Subsidiaries (other than the Subsidiaries included in the
foregoing clauses (x) and (y)) of any Net Insurance/Condemnation
Proceeds that are required to be applied to prepay the Loans and/or
reduce the Revolving Loan Commitments pursuant to the provisions of
subsection 6.4C, (1) such Borrower shall prepay its Term Loans in an
aggregate amount equal to such Net Insurance/Condemnation Proceeds;
70
<PAGE>
(2) to the extent the Net Insurance/Condemnation Proceeds exceed the
aggregate outstanding amount of such Borrower's Term Loans, (i) in the
case of Goss Japan or Goss UK, such Borrower shall prepay the Term
Loans of Goss UK or Goss Japan, respectively, in an aggregate amount
equal to such excess or (ii) in the case of Company, Company shall
prepay the Japanese Term Loans and the UK Term Loans on a pro rata
basis (in accordance with the respective outstanding principal amount
thereof) in an aggregate amount equal to such excess; (3) to the
extent the Net Insurance/Condemnation Proceeds exceed the Term Loan
prepayments required to be made by such Borrower pursuant to the
foregoing clauses (1) - (2), such Borrower shall prepay its Revolving
Loans without any corresponding reduction in the related Revolving
Loan Commitments, in an aggregate amount equal to such excess; and
(4) to the extent that Net Insurance/Condemnation Proceeds remain
after the applications required pursuant to the foregoing clauses
(1) - (3), such Borrower shall cause the excess of such Net
Insurance/Condemnation Proceeds to be applied first to prepay the
remaining outstanding Term Loans of any Borrower, including the
Company, on a pro rata basis (in accordance with the respective
outstanding principal amount thereof) and after payment of all
remaining outstanding Term Loans, to prepay the remaining outstanding
Revolving Loans of any Borrower, including the Company, on a pro rata
basis (in accordance with the respective outstanding amount of
Revolving Loan Commitments) without any corresponding reduction in the
related Revolving Loan Commitments. Any mandatory prepayments
pursuant to this subsection 2.4B(iii)(a) shall be applied as specified
in subsection 2.4B(iv).
(c) Prepayments and Reductions Due to Reversion of Surplus
------------------------------------------------------
Assets of Pension Plans. On the date of return (x) to Goss Japan or
-----------------------
any of its Subsidiaries, (y) to Goss UK or any of its Subsidiaries, or
(z) to Company or any of its Subsidiaries (other than the Subsidiaries
included in the foregoing clauses (x) and (y)) of any surplus assets
of any pension plan of such Borrower or any of its Subsidiaries,
(1) such Borrower shall prepay its Term Loans in an aggregate amount
(the "Net Reversion Amount") equal to 100% of such returned surplus
assets, net of transaction costs and expenses incurred in obtaining
such return, including incremental taxes payable as a result thereof;
(2) to the extent the Net Reversion Amount exceeds the aggregate
outstanding amount of such Borrower's Term Loans, (i) in the case of
Goss Japan or Goss UK, such Borrower shall prepay the Term Loans of
Goss UK or Goss Japan, respectively, in an aggregate amount equal to
such excess or (ii) in the case of Company, Company shall prepay the
Japanese Term Loans and the UK Term Loans on a pro rata basis (in
accordance with the respective outstanding principal amount thereof)
in an aggregate amount equal to such excess; (3) to the extent the Net
Reversion Amount exceeds the Term Loan prepayments required to be made
by such Borrower pursuant to the foregoing clauses (1) - (2), such
Borrower shall prepay its Revolving Loans without any
71
<PAGE>
corresponding reduction in the related Revolving Loan Commitments, in
an aggregate amount equal to such excess; and (4) to the extent that
the Net Reversion Amount remains after the applications required
pursuant to the foregoing clauses (1) - (3), such Borrower shall cause
the excess of such Net Reversion Amount to be applied first to prepay
the remaining outstanding Term Loans of any Borrower, including the
Company, on a pro rata basis (in accordance with the respective
outstanding principal amount thereof) and after payment of all
remaining outstanding Term Loans, to prepay the remaining outstanding
Revolving Loans of any Borrower, including the Company, on a pro rata
basis (in accordance with the respective outstanding amount of
Revolving Loan Commitments) without any corresponding reduction in the
related Revolving Loan Commitments. Any such mandatory prepayments
shall be applied as specified in subsection 2.4B(iv).
(d) Prepayments and Reductions Due to Issuance of Equity
----------------------------------------------------
Securities. No later than the first Business Day following the date
----------
of receipt by Holdings or Company of the cash proceeds (net of
underwriting discounts and commissions and other reasonable costs
associated therewith) from the issuance of any equity Securities of
Holdings or Company (other than proceeds from Holdings Common Stock
issued to officers and employees of Company and its Subsidiaries
pursuant to option plans or other similar plans or agreements adopted
by Holdings' Board of Directors), (1) Company shall prepay the
Domestic Term Loans, the Japanese Term Loans and the UK Term Loans on
a pro rata basis (in accordance with the respective outstanding
principal amount thereof) in an aggregate amount equal to such cash
proceeds, (2) to the extent that such cash proceeds exceed the
aggregate outstanding principal amount of such Term Loans, Company
shall prepay its Revolving Loans without any corresponding reduction
in the related Revolving Loan Commitments, in an aggregate amount
equal to such excess, and (3) to the extent of any remaining cash
proceeds after the applications required pursuant to the foregoing
clauses (1) - (2), Company shall cause such remaining cash proceeds to
be applied to prepay the remaining outstanding Revolving Loans on a
pro rata basis (in accordance with the respective outstanding amount
of Revolving Loan Commitments) without any corresponding reduction in
the related Revolving Loan Commitments. In the case of the receipt by
Holdings of such cash proceeds from the issuance of any equity
Securities of Holdings, Company shall cause Holdings to immediately
contribute such cash proceeds to Company and Company shall apply such
cash proceeds pursuant to this subsection 2.4B(iii)(d) as though
initially received by Company from the issuance of its own equity
Securities. Any such mandatory prepayments shall be applied as
specified in subsection 2.4B(iv).
(e) Prepayments and Reductions Due to Issuance of Debt
--------------------------------------------------
Securities. No later than the first Business Day following the date
----------
of receipt (x) by Goss
72
<PAGE>
Japan or any of its Subsidiaries, (y) by Goss UK or any of its
Subsidiaries, or (z) by Company or any of its Subsidiaries (other than
the Subsidiaries included in the foregoing clauses (x) and (y)) of the
cash proceeds (net of underwriting discounts and commissions and other
reasonable costs and expenses associated therewith) from the issuance
of any debt Securities of Holdings, such Borrower or any such
Subsidiary, (1) such Borrower shall prepay its Term Loans in an
aggregate amount equal to such net cash proceeds; (2) to the extent
such net cash proceeds exceed the aggregate outstanding amount of such
Borrower's Term Loans, (i) in the case of Goss Japan or Goss UK, such
Borrower shall prepay the Term Loans of Goss UK or Goss Japan,
respectively, in an aggregate amount equal to such excess or (ii) in
the case of Company, Company shall prepay the Japanese Term Loans and
the UK Term Loans on a pro rata basis (in accordance with the
respective outstanding principal amount thereof) in an aggregate
amount equal to such excess; (3) to the extent such net cash proceeds
exceed the Term Loan prepayments required to be made by such Borrower
pursuant to the foregoing clauses (1) - (2), such Borrower shall
prepay its Revolving Loans without any corresponding reduction in the
related Revolving Loan Commitments, in an aggregate amount equal to
such excess; and (4) to the extent that such net cash proceeds remain
after the applications required pursuant to the foregoing clauses
(1) - (3), such Borrower shall cause the excess of such net cash
proceeds to be applied first to prepay the remaining outstanding Term
Loans of any Borrower, including the Company, on a pro rata basis (in
accordance with the respective outstanding principal amount thereof)
and after payment of all remaining outstanding Term Loans, to prepay
the remaining outstanding Revolving Loans of any Borrower, including
the Company, on a pro rata basis (in accordance with the respective
outstanding amount of Revolving Loan Commitments) without any
corresponding reduction in the related Revolving Loan Commitments. In
the case of the receipt by Holdings of such cash proceeds from the
issuance of any debt Securities of Holdings, Holdings shall
immediately contribute such cash proceeds to Company and Company shall
apply such cash proceeds pursuant to this subsection 2.4B(iii)(e) as
though initially received by Company from the issuance of its own debt
Securities. Any such mandatory prepayments shall be applied as
specified in subsection 2.4B(iv).
(f) Prepayments and Reductions from Consolidated Excess Cash
--------------------------------------------------------
Flow. In the event that there shall be Consolidated Excess Cash Flow
----
for any Fiscal Year, commencing with the Fiscal Year ending September
30, 1997, within 90 days after the last day of such Fiscal Year
(1) Company shall, and shall cause Goss Japan and Goss UK to, prepay
their respective Term Loans on a pro rata basis (in accordance with
the respective outstanding principal amount thereof) in an aggregate
amount equal to 75% of such Consolidated Excess Cash Flow and (2) to
the extent such amount exceeds the aggregate
73
<PAGE>
outstanding principal amount of the Term Loans, Company shall, and
shall cause Goss Japan and Goss UK to, prepay their respective
Revolving Loans on a pro rata basis (in accordance with the respective
outstanding Revolving Loan Commitments), without any corresponding
reductions in the related Revolving Loan Commitments, in an aggregate
amount equal to such excess. Any such mandatory prepayments shall be
applied as specified in subsection 2.4B(iv).
(g) Prepayments Due to Reductions or Restrictions of Revolving
----------------------------------------------------------
Loan Commitments or Due to Insufficient Borrowing Base. (i) Company
------------------------------------------------------
shall immediately prepay the Domestic Revolving Loans to the extent
necessary so that (1) the Total Utilization of Revolving Loan
Commitments for Company and Goss UK at any time does not exceed the
US/UK Revolving Loan Commitments then in effect; (2) the Total
Utilization of Revolving Loan Commitments for Company at any time does
not exceed $100,000,000; (3) the Total Utilization of Revolving Loan
Commitments for Company at any time does not exceed the Company
Borrowing Base then in effect; (4) the aggregate outstanding principal
amount of all Revolving Loans borrowed pursuant to subsections
2.1A(ii)(a) and 2.1A(ii)(b) at any time does not exceed $110,000,000;
(5) the aggregate amount of Eligible Accounts Receivable for all
Borrowers at any time shall not be less than 50% of the Total
Utilization of Revolving Loan Commitments of all Borrowers; and (6)
the sum of the Total Utilization of Revolving Loan Commitments for all
Borrowers at any time does not exceed the Maximum Permitted Revolving
Loan Commitments; (ii) Goss Japan shall immediately prepay the
Japanese Revolving Loans to the extent necessary so that (1) the Total
Utilization of Revolving Loan Commitments for Goss Japan at any time
does not exceed the Japanese Revolving Loan Commitments then in
effect; (2) the Total Utilization of Revolving Loan Commitments for
Goss Japan at any time does not exceed the Goss Japan Borrowing Base
then in effect; (3) the aggregate outstanding principal amount of all
Revolving Loans borrowed pursuant to subsections 2.1A(ii)(a) and
2.1A(ii)(b) at any time does not exceed $110,000,000; (4) the
aggregate amount of Eligible Accounts Receivable for all Borrowers at
any time shall not be less than 50% of the Total Utilization of
Revolving Loan Commitments of all Borrowers; and (5) the sum of the
Total Utilization of Revolving Loan Commitments for all Borrowers at
any time does not exceed the Maximum Permitted Revolving Loan
Commitments; and (iii) Goss UK shall immediately prepay the UK
Revolving Loans to the extent necessary so that (1) the Total
Utilization of Revolving Loan Commitments for Company and Goss UK at
any time does not exceed the US/UK Revolving Loan Commitments then in
effect; (2) the Total Utilization of Revolving Loan Commitments for
Goss UK at any time does not exceed $100,000,000; (3) the Total
Utilization of Revolving Loan Commitments for Goss UK at any time does
not exceed the Goss UK Borrowing Base then in
74
<PAGE>
effect; (4) the aggregate outstanding principal amount of all
Revolving Loans borrowed pursuant to subsections 2.1A(ii)(a) and
2.1A(ii)(b) at any time does not exceed $110,000,000; (5) the
aggregate amount of Eligible Accounts Receivable for all Borrowers at
any time shall not be less than 50% of the Total Utilization of
Revolving Loan Commitments of all Borrowers; and (6) the sum of the
Total Utilization of Revolving Loan Commitments for all Borrowers at
any time does not exceed the Maximum Permitted Revolving Loan
Commitments.
(h) Prepayments of Revolving Loans from Amounts Transferred to
----------------------------------------------------------
an Agent Account. With respect to any and all amounts transferred to
----------------
a Concentration Account on any Business Day pursuant to the terms of
any Blocked Account Agreement or Lock Box Agreement, as the case may
be, then on such Business Day, if such amounts are transferred to an
Agent Account prior to 12:00 Noon (Local Time) on such Business Day,
or on the next succeeding Business Day, if such amounts are
transferred to an Agent Account on or after 12:00 Noon (Local Time) on
such Business Day, (1) Borrower shall prepay such Borrower's Revolving
Loans in an amount equal to the amount transferred to such Agent
Account on such Business Day (to the extent such amount relates to
payments received in respect of Accounts of Borrower) until all of
such Borrower's Revolving Loans that are Base Rate Loans shall have
been paid in full and (2) to the extent any such amount transferred to
such Agent Account with respect to any Borrower exceeds the amount
required to be prepaid by such Borrower pursuant to clause (1), so
long as no Potential Event of Default or Event of Default exists, such
excess amount shall be deposited at the end of a Business Day in an
Investment Account, with any interest earned for the benefit of such
Borrower (with funds in such Investment Account being applied to
Revolving Loans that are Base Rate Loans on the next Business Day or
disbursed in accordance with subsection 2.9D). With respect to Goss
UK only, such Investment Accounts may be denominated in Dollars,
Sterling, Marks or Francs. With respect to Goss Japan only, such
Investment Accounts may be denominated in Dollars or Yen. Each
Borrower hereby irrevocably authorizes Agent to apply funds
transferred to an Agent Account to effect prepayments required under
this subsection 2.4B(iii)(h).
(i) Reductions of Revolving Loan Commitments Not Limited to
-------------------------------------------------------
Amount of Revolving Loans Outstanding. The amount of any required
-------------------------------------
reduction of the Revolving Loan Commitments pursuant to any provision
of this subsection 2.4B(iii) shall not be affected by the fact that
the outstanding principal amount of Revolving Loans at the time of
such reduction is less than the amount of such reduction.
75
<PAGE>
(iv) Application of Prepayments.
--------------------------
(a) Application of Voluntary Prepayments by Type of Loans and
---------------------------------------------------------
Order of Maturity. Any voluntary prepayments pursuant to subsection
-----------------
2.4B(i) shall be applied as specified by the Borrower in the
applicable notice of prepayment; provided that in the event such
--------
Borrower fails to specify the Loans to which any such prepayment shall
be applied, such prepayment shall be applied first to repay such
-----
Borrower's outstanding Revolving Loans to the full extent thereof, and
second to repay such Borrower's outstanding Term Loans to the full
------
extent thereof. Any voluntary prepayments of the Term Loans pursuant
to subsection 2.4B(i) shall be applied on a pro rata basis (in
accordance with the respective outstanding principal amount thereof)
to each scheduled installment of principal of the Term Loans of such
Borrower set forth in subsection 2.4A that is unpaid at the time of
such prepayment.
(b) Application of Mandatory Prepayments by Type of Loans. Any
-----------------------------------------------------
amount (the "Applied Amount") required to be applied as a mandatory
prepayment of the Loans pursuant to subsections 2.4B(iii)(a)-(f) shall
be applied first to prepay the Term Loans to the extent required
-----
pursuant to and in accordance with subsection 2.4B(iii), and second,
------
to the extent of any remaining portion of the Applied Amount, to
prepay the Revolving Loans to the full extent thereof.
(c) Application of Mandatory Prepayments of Term Loans by Order
-----------------------------------------------------------
of Maturity. Any mandatory prepayments of the Term Loans pursuant to
-----------
subsections 2.4B(iii)(a)-(e) shall be applied to reduce the scheduled
installments of principal of the applicable Term Loans set forth in
subsections 2.4A(i), 2.4A(ii) and 2.4A(iii) in inverse order of
maturity. Any mandatory prepayments of the Term Loans pursuant to
subsection 2.4B(iii)(f) shall be applied to reduce the scheduled
installments of principal of the applicable Term Loans set forth in
subsections 2.4A(i), 2.4A(ii) and 2.4A(iii) on a pro rata basis (in
accordance with the respective outstanding principal amount thereof).
(d) Application of Prepayments to Base Rate Loans and Eurodollar
------------------------------------------------------------
Rate Loans. Considering Term Loans and Revolving Loans being prepaid
----------
separately, any prepayment thereof shall be applied first to Base Rate
Loans to the full extent thereof before application to Eurodollar Rate
Loans, in each case in a manner which minimizes the amount of any
payments required to be made by Borrowers pursuant to subsection 2.6D.
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C. General Provisions Regarding Payments.
(i) Manner and Time of Payment. All payments by any Borrower of
--------------------------
principal, interest, fees and other Obligations hereunder and under the
Notes shall be made in Dollars in same day funds, without defense, setoff
or counterclaim, free of any restriction or condition, and delivered to
Agent, not later than 12:00 Noon (Local Time) on the date due at the
Funding and Payment Office for the account of such Lenders. Funds received
by Agent after that time on such due date shall be deemed to have been paid
by the Borrower on the next succeeding Business Day. In order to effect
timely payment of any interest, fees, commissions or other amounts due
hereunder, each Borrower hereby authorizes Agent to request the Funding
Lender to make Revolving Loans for its own account (subject to settlement
pursuant to subsection 2.1D) in a principal amount equal to such interest,
fees, commissions or other amounts; provided that Agent shall not have the
--------
right to request such Revolving Loans if, after giving effect to such
Revolving Loans: (a) the Total Utilization of Revolving Loan Commitments
for all Borrowers at any time exceeds the Maximum Permitted Revolving Loan
Commitments; (b) the Total Utilization of Revolving Loan Commitments for
Company and Goss UK at any time exceeds the US/UK Revolving Loan
Commitments then in effect; (c) the Total Utilization of Revolving Loan
Commitments for Goss Japan at any time exceeds the Japanese Revolving Loan
Commitments then in effect; (d) the Total Utilization of Revolving Loan
Commitments for Company exceeds $100,000,000; and (5) the Total Utilization
of Revolving Loan Commitments for Goss UK exceeds $100,000,000. Such
Funding Lender shall make the amount of such Revolving Loans (which shall
be made as Base Rate Loans) available to Agent in same day funds, at the
Funding and Payment Office not later than 1:00 P.M. (Local Time) on the
date requested by Agent and Borrowers and Lenders hereby authorize Agent,
whether or not the conditions specified in subsection 4.2 have been
satisfied or waived, to apply the proceeds of such Revolving Loans directly
to the payment of suchunpaid interest, fees, commissions or other amounts.
Each Borrower hereby agrees that, upon the funding of any such Revolving
Loans by the applicable Funding Lender in accordance with the provisions of
this subsection 2.4C(i), such Borrower shall have effected Revolving Loans
hereunder, which Revolving Loans shall for all purposes of this Agreement
be deemed to have been made by the Funding Lender pursuant to and in
accordance with the provisions of subsection 2.1C(ii). Agent shall deliver
prompt notice to the Borrower of the amount of Revolving Loans made
pursuant to this subsection 2.4C together with copies of all invoices or
other statements evidencing the fees, commissions or other amounts due
hereunder (other than interest) paid with the proceeds of such Revolving
Loans; provided that Agent shall give notice to the Borrower five days in
--------
advance of the making of any such Revolving Loans for the payment of any
amounts owed under subsection 10.2 together with copies of all invoices or
other statements evidencing such amounts. In addition, each Borrower
hereby authorizes Agent to charge its accounts with Agent in order to cause
timely payment to be made to Agent of all principal, interest, fees and
expenses due
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hereunder (subject to sufficient funds being available in its accounts for
that purpose). Each Agent shall promptly notify Administrative Agent of
all such payments received by such Agent.
(ii) Application of Payments to Principal and Interest. Except
-------------------------------------------------
as provided in subsection 2.2C, all payments in respect of the principal
amount of any Loan shall include payment of accrued interest on the
principal amount being repaid or prepaid, and all such payments (and, in
any event, any payments in respect of any Loan on a date when interest is
due and payable with respect to such Loan) shall be applied to the payment
of interest before application to principal.
(iii) Apportionment of Payments. Aggregate principal and interest
-------------------------
payments in respect of Term Loans and Revolving Loans shall be apportioned
among all outstanding Loans to which such payments relate, in each case
proportionately to such Lenders' respective Pro Rata Shares of such Loans;
provided that (i) payments of principal in respect of the Revolving Loans
--------
pursuant to subsection 2.4B(iii)(h) shall be applied to reduce the
outstanding Revolving Loans of the applicable Funding Lender (subject to
settlement pursuant to subsection 2.1D) prior to application to the
outstanding Revolving Loans of any other Lender, and (ii) payments of
interest in respect of Revolving Loans which are Base Rate Loans shall be
apportioned ratably among applicable Lenders in proportion to the Base Rate
Loans of each applicable Lender outstanding during the period in which such
interest shall have accrued. Each Agent shall promptly distribute to the
applicable Lender, at its primary address set forth below its name on the
appropriate signature page hereof or at such other address as such Lender
may request, its Pro Rata Share of all such payments received by Agent and
the commitment fees of such Lender when received by Agent pursuant to
subsection 2.3. Notwithstanding the foregoing provisions of this
subsection 2.4C(iii), if, pursuant to the provisions of subsection 2.6C,
any Notice of Conversion/Continuation is withdrawn as to any Affected
Lender or if any Affected Lender makes Base Rate Loans in lieu of its Pro
Rata Share of any Eurodollar Rate Loans, Agent shall give effect thereto in
apportioning payments received thereafter.
(iv) Payments on Business Days. Whenever any payment to be made
-------------------------
hereunder shall be stated to be due on a day that is not a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder or of the commitment fees hereunder, as the case may be.
(v) Notation of Payment. Each Lender agrees that before disposing of
-------------------
any Note held by it, or any part thereof (other than by granting
participations therein), that Lender will make a notation thereon of all
Loans evidenced by that Note and all principal payments previously made
thereon and of the date to which interest thereon has been paid; provided
--------
that the failure to make (or any error in the making of) a notation of any
Loan made under such Note shall not limit or otherwise affect the
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obligations of any Borrower hereunder or under such Note with respect to
any Loan or any payments of principal or interest on such Note.
2.5 Use of Proceeds.
---------------
A. Term Loans. The proceeds of the Term Loans, together with up to
$5,000,000 in proceeds of the initial Revolving Loans and other funds available
to Borrowers, shall be applied by Borrowers to purchase the Acquired Stock and
Acquired Assets and to pay any fees or other amounts relating thereto.
B. Revolving Loans. The proceeds of the initial Revolving Loans in an
amount not to exceed $5,000,000, together with the proceeds of the Term Loans
and other funds available to Borrowers, shall be applied by Borrowers to
purchase the Acquired Stock and Acquired Assets and to pay any fees or other
amounts relating thereto. Any excess proceeds of the initial Revolving Loans
and the proceeds of any subsequent Revolving Loans shall be applied by each
Borrower for working capital and general corporate purposes, which may include
the making of intercompany loans to any of Company's wholly-owned Subsidiaries,
in accordance with subsection 7.1(iii), for their own working capital and
general corporate purposes.
C. Margin Regulations. No portion of the proceeds of any borrowing under
this Agreement shall be used by any Borrower or any of its Subsidiaries in any
manner that might cause the borrowing or the application of such proceeds to
violate Regulation G, Regulation U, Regulation T or Regulation X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board or
to violate the Exchange Act, or to violate any other similar or comparable laws
of Japan or the UK, in each case as in effect on the date or dates of such
borrowing and such use of proceeds.
2.6 Special Provisions Governing Eurodollar Rate Loans.
--------------------------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
A. Determination of Applicable Interest Rate. As soon as practicable
after 10:00 A.M. (Local Time) on each Interest Rate Determination Date,
Administrative Agent shall determine (which determination shall, absent manifest
error, be final, conclusive and binding upon all parties) the interest rate that
shall apply to the Eurodollar Rate Loans for which an interest rate is then
being determined for the applicable Interest Period and shall promptly give
notice thereof (in writing or by telephone confirmed in writing) to the Borrower
and each applicable Lender.
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B. Inability to Determine Applicable Interest Rate. In the event that
Administrative Agent shall have determined (which determination shall be final
and conclusive and binding upon all parties hereto), on any Interest Rate
Determination Date with respect to any Eurodollar Rate Loans that by reason of
circumstances affecting the interbank Eurodollar market adequate and fair means
do not exist for ascertaining the interest rate applicable to such Loans on the
basis provided for in the definition of Adjusted Eurodollar Rate, such Agent
shall on such date give notice (by telefacsimile or by telephone confirmed in
writing) to the Borrower and each applicable Lender, of such determination,
whereupon (i) no Loans may be made as, or converted to, Eurodollar Rate Loans
until such time as such Agent notifies such Borrower and such Lenders that the
circumstances giving rise to such notice no longer exist and (ii) any Notice of
Borrowing or Notice of Conversion/Continuation given by a Borrower with respect
to the Loans in respect of which such determination was made shall be deemed to
be rescinded by such Borrower.
C. Illegality or Impracticability of Eurodollar Rate Loans. In the event
that on any date any Lender shall have determined (which determination shall be
final and conclusive and binding upon all parties hereto but shall be made only
after consultation with the Borrower and Administrative Agent) that the making,
maintaining or continuation of its Eurodollar Rate Loans (i) has become unlawful
as a result of compliance by such Lender in good faith with any law, treaty,
governmental rule, regulation, guideline or order (or would conflict with any
such treaty, governmental rule, regulation, guideline or order not having the
force of law even though the failure to comply therewith would not be unlawful)
or (ii) has become impracticable, or would cause such Lender material hardship,
as a result of contingencies occurring after the date of this Agreement which
materially and adversely affect the interbank Eurodollar market or the position
of such Lender in that market, then, and in any such event, such Lender shall be
an "Affected Lender" and it shall on that day give notice (by telefacsimile or
by telephone confirmed in writing) to the Borrower and Administrative Agent of
such determination (which notice Administrative Agent shall promptly transmit to
each other applicable Lender). Thereafter (a) the obligation of the Affected
Lender to make Loans as, or to convert Loans to, Eurodollar Rate Loans shall be
suspended until such notice shall be withdrawn by the Affected Lender, (b) to
the extent such determination by the Affected Lender relates to an Eurodollar
Rate Loan then being requested by a Borrower pursuant to a Notice of Borrowing
or a Notice of Conversion/Continuation, the Affected Lender shall make such Loan
as (or convert such Loan to, as the case may be) a Base Rate Loan, (c) the
Affected Lender's obligation to maintain its outstanding Eurodollar Rate Loans
(the "Affected Loans"), shall be terminated at the earlier to occur of the
expiration of the Interest Period then in effect with respect to the Affected
Loans or when required by law, and (d) the Affected Loans shall automatically
convert into applicable Base Rate Loans on the date of such termination.
Notwithstanding the foregoing, to the extent a determination by an Affected
Lender as described above relates to a Eurodollar Rate Loan then being requested
by a Borrower pursuant to a Notice of Borrowing or a Notice of Conversion/
Continuation, such Borrower shall have the option, subject to the provisions of
subsection 2.6D, to rescind such Notice of Borrowing or Notice of Conversion/
Continuation as to all Lenders by giving notice (by telefacsimile or by
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telephone confirmed in writing) to Administrative Agent of such rescission on
the date on which the Affected Lender gives notice of its determination as
described above (which notice of rescission Administrative Agent shall promptly
transmit to each other applicable Lender). Except as provided in the
immediately preceding sentence, nothing in this subsection 2.6C shall affect the
obligation of any Lender other than an Affected Lender to make or maintain Loans
as, or to convert Loans to, Eurodollar Rate Loans in accordance with the terms
of this Agreement.
D. Compensation For Breakage or Non-Commencement of Interest Periods. A
Borrower shall compensate each Lender, upon written request by that Lender
(which request shall set forth in reasonable detail the basis for requesting
such amounts), for all reasonable losses, expenses and liabilities (including,
without limitation, any interest paid by that Lender to lenders of funds
borrowed by it to make or carry its Eurodollar Rate Loans, and any loss, expense
or liability sustained by that Lender in connection with the liquidation or re-
employment of such funds) which that Lender may sustain: (i) if for any reason
(other than a default by that Lender) a borrowing of any Eurodollar Rate Loan
does not occur on a date specified therefor in a Notice of Borrowing or a
telephonic request for borrowing, or a conversion to or continuation of any
Eurodollar Rate Loan does not occur on a date specified therefor in a Notice of
Conversion/Continuation or a telephonic request for conversion or continuation,
(ii) if any prepayment or other principal payment or any conversion of any of
its Eurodollar Rate Loans occurs on a date prior to the last day of an Interest
Period applicable to that Loan, (iii) if any prepayment of any of its Eurodollar
Rate Loans is not made on any date specified in a notice of prepayment given by
the Borrower, or (iv) as a consequence of any other default by the Borrower in
the repayment of its Eurodollar Rate Loans when required by the terms of this
Agreement.
E. Booking of Eurodollar Rate Loans. Any Lender may make, carry or
transfer Eurodollar Rate Loans at, to, or for the account of any of its branch
offices or the office of an Affiliate of that Lender.
F. Assumptions Concerning Funding of Eurodollar Rate Loans. Calculation
of all amounts payable to a Lender under this subsection 2.6 and under
subsection 2.7A shall be made as though that Lender had actually funded each of
its relevant Eurodollar Rate Loans through the purchase of a Eurodollar deposit
bearing interest at the rate obtained pursuant to clause (i) of the definition
of Adjusted Eurodollar Rate in an amount equal to the amount of such Eurodollar
Rate Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such Eurodollar deposit from an offshore office of that
Lender to a domestic office of that Lender; provided, however, that each Lender
-------- -------
may fund each of its Eurodollar Rate Loans in any manner it sees fit and the
foregoing assumptions shall be utilized only for the purposes of calculating
amounts payable under this subsection 2.6 and under subsection 2.7A.
G. Eurodollar Rate Loans After Default. After the occurrence of and
during the continuation of a Potential Event of Default or an Event of Default,
(i) Borrowers may
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not elect to have a Loan be made or maintained as, or converted to, a Eurodollar
Rate Loan after the expiration of any Interest Period then in effect for that
Loan and (ii) subject to the provisions of subsection 2.6D, any Notice of
Borrowing or Notice of Conversion/Continuation given by any Borrower with
respect to a requested borrowing or conversion/continuation that has not yet
occurred shall be deemed to be rescinded by such Borrower.
2.7 Increased Costs; Taxes; Capital Adequacy.
----------------------------------------
A. Compensation for Increased Costs and Taxes. Subject to the provisions
of subsection 2.7B, in the event that any Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by such Lender with any guideline, request or directive
issued or made after the date hereof by any central bank or other governmental
or quasi-governmental authority (whether or not having the force of law):
(i) subjects such Lender (or its applicable lending office) to any
additional Tax (other than any Tax on the overall net income of such
Lender) with respect to this Agreement or any of its obligations hereunder
or any payments to such Lender (or its applicable lending office) of
principal of, or interest, commitment fees or any other amount payable
hereunder;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement against assets held by, or deposits or other liabilities in or
for the account of, or advances or loans by, or other credit extended by,
or any other acquisition of funds by, any office of such Lender (other than
any such reserve or other requirements with respect to Eurodollar Rate
Loans that are reflected in the definition of Adjusted Eurodollar Rate); or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Lender (or its applicable lending office)
or its obligations hereunder or the interbank Eurodollar market;
and the result of any of the foregoing is to increase the cost to such Lender of
agreeing to make, making or maintaining Loans hereunder or to reduce any amount
received or receivable by such Lender (or its applicable lending office) with
respect thereto in an amount deemed by such Lender (in its sole discretion) to
be material; then, in any such case, the applicable Borrower shall promptly pay
to such Lender, upon receipt of the statement referred to in the next sentence,
such additional amount or amounts (in the form
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of an increased rate of, or a different method of calculating, interest or
otherwise as such Lender in its sole discretion shall determine) as may be
necessary to compensate such Lender for any such increased cost or reduction in
amounts received or receivable hereunder. Such Lender shall deliver to the
applicable Borrower (with a copy to Administrative Agent) a written statement,
setting forth in reasonable detail the basis for calculating the additional
amounts owed to such Lender under this subsection 2.7A, which statement shall be
conclusive and binding upon all parties hereto absent manifest error.
B. Withholding of Taxes.
(i) Payments to Be Free and Clear. All sums payable by Borrowers
-----------------------------
under this Agreement and the other Loan Documents shall be paid free and
clear of, and, except to the extent required by law, without any deduction
or withholding on account of, any Tax (other than a Tax on the overall net
income of any Lender) imposed, levied, collected, withheld or assessed by
or within the United States of America, Japan or the UK or any political
subdivision in or of the United States of America, Japan or the UK or any
other jurisdiction from or to which a payment is made by or on behalf of
any Borrower or by any federation or organization of which the United
States of America, Japan or the UK or any such jurisdiction is a member at
the time of payment.
(ii) Grossing-up of Payments. If any Borrower or any other
-----------------------
Person (including Japanese Funding Lender with respect to any payments made
to an Indemnifying Lender under subsection 2.10) is required by law to make
any deduction or withholding on account of any such Tax from any sum paid
or payable by any Borrower to any Agent or any Lender under any of the Loan
Documents or by Japanese Funding Lender with respect to any payments made
to an Indemnifying Lender under subsection 2.10:
(a) such Borrower shall notify Administrative Agent (with a copy
to Agent) of any such requirement or any change in any such
requirement as soon as such Borrower becomes aware of it;
(b) such Borrower shall pay any such Tax before the date on
which penalties attach thereto, such payment to be made (if the
liability to pay is imposed on such Borrower) for its own account or
(if that liability is imposed on such Agent or any such Lender, as the
case may be) on behalf of and in the name of such Agent or any such
Lender;
(c) the sum payable by such Borrower or by Japanese Funding
Lender in respect of which the relevant deduction, withholding or
payment is required shall be increased to the extent necessary to
ensure that, after the making of that deduction, withholding or
payment, such Agent, such Lender or Indemnifying Lender, as the case
may be, receives on the due date a net
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sum equal to what it would have received had no such deduction,
withholding or payment been required or made; and
(d) within 30 days after paying any sum from which it is
required by law to make any deduction or withholding, and within 30
days after the due date of payment of any Tax which it is required by
clause (b) above to pay, such Borrower shall deliver to such Agent
evidence reasonably satisfactory to the other affected parties of such
deduction, withholding or payment and of its making payment thereof to
the relevant taxing or other authority;
provided that no such additional amount of United States or UK Tax shall be
--------
required to be paid to any Lender under clause (c) above except to the
extent that any change after the date hereof (in the case of each Lender
listed on the signature pages hereof) or after the date of the Assignment
Agreement pursuant to which such Lender became a Lender (in the case of
each other Lender) in any such requirement for a deduction, withholding or
payment as is mentioned therein shall result in an increase in the rate of
such deduction, withholding or payment from that in effect at the date of
this Agreement or at the date of such Assignment Agreement, as the case may
be, in respect of payments to such Lender; provided further that any such
-------- -------
additional amount of Japanese Tax shall be required to be paid by Borrower
to Japanese Agent, Japanese Funding Lender, any Indemnifying Lender or to
any other Lender under clause (c) above whether or not any such payment
shall be required as a result of any change in applicable laws and
regulations after the date hereof (i.e., Borrower shall be required to pay
such additional amount of Japanese Tax even if the obligation to make such
payment shall have arisen under applicable laws and regulations as in
effect on the date hereof); and provided further that notwithstanding
-------- -------
anything to the contrary contained in this Agreement or in any other Loan
Document, to the extent that Japanese Funding Lender is required by any
applicable law or regulation, whether or not in effect on the date hereof,
to make any deduction or withholding on account of any such Tax from any
sum paid or payable by Japanese Funding Lender to any Indemnifying Lender
pursuant to subsection 2.10, (a) Borrower shall pay any such Tax before the
date on which penalties attach thereto, such payment to be made (if the
liability to pay is imposed on such Borrower) for its own account or (if
that liability is imposed on Japanese Funding Lender or such Indemnifying
Lender, as the case may be) on behalf of and in the name of Japanese
Funding Lender or such Indemnifying Lender; and (b) the sum payable by such
Borrower or by Japanese Funding Lender in respect of which the relevant
deduction, withholding or payment is required shall be increased to the
extent necessary to ensure that, after the making of that deduction,
withholding or payment, Japanese Funding Lender or Indemnifying Lender, as
the case may be, receives on the due date a net sum equal to what it would
have received had no such deduction, withholding or payment been required
or made. Borrower shall indemnify Japanese Funding Lender and each
Indemnifying Lender for any Tax (other than a Tax on the
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overall net income of any Lender) imposed, levied, collected, withheld or
assessed by or under any applicable Governmental Authority with respect to
the payments to be made pursuant to subsection 2.10.
(iii) Evidence of Exemption from Withholding Taxes.
--------------------------------------------
(a) (1) Each Lender that is organized under the laws of any
jurisdiction other than the United States or any state or other
political subdivision thereof (for purposes of this subsection
2.7B(iii), a "Non-US Lender") shall deliver to Administrative Agent
for transmission to Company, on or prior to the Closing Date (in the
case of each Lender listed on the signature pages hereof) or on or
prior to the date of the Assignment Agreement pursuant to which it
becomes a Lender (in the case of each other Lender), and at such other
times as may be necessary in the determination of Company or
Administrative Agent (each in the reasonable exercise of its
discretion), (X) two original copies of Internal Revenue Service Form
1001 or 4224 (or any successor forms), properly completed and duly
executed by such Non-US Lender, together with any other certificate or
statement of exemption required under the Internal Revenue Code or the
regulations issued thereunder to establish that such Non-US Lender is
not subject to deduction or withholding of United States federal
income tax with respect to any payments to such Non-US Lender of
principal, interest, fees or other amounts payable under any of the
Loan Documents or (Y) if such Non-US Lender is not a "bank" or other
Person described in Section 881(c)(3) of the Internal Revenue Code and
cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (X) above, a Certificate re Non-Bank Status
together with two original copies of Internal Revenue Service Form W-8
(or any successor form), properly completed and duly executed by such
Non-US Lender, together with any other certificate or statement of
exemption required under the Internal Revenue Code or the regulations
issued thereunder to establish that such Non-US Lender is not subject
to deduction or withholding of United States federal income tax with
respect to any payments to such Non-US Lender of interest payable
under any of the Loan Documents.
(2) Each Japanese Lender that is organized under the laws of
any jurisdiction other than Japan or any political subdivision thereof
(for purposes of this subsection 2.7B(iii), a "Non-Japanese Lender")
agrees to deliver to Goss Japan and Japanese Agent upon request such
certificates, documents or other evidence as may be required from time
to time, properly completed and duly executed by such Non-Japanese
Lender, to establish the basis for any applicable exemption from or
reduction of Taxes with respect to any payments to such Non-Japanese
Lender of principal, interest, fees, commissions or any other amount
payable under this Agreement or the Japanese Loans.
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(3) Each US/UK Lender that is organized under the laws of
any jurisdiction other than the UK or any political subdivision
thereof (for purposes of this subsection 2.7B(iii), a "Non-UK Lender",
agrees to deliver to Goss UK and Administrative Agent upon request
such certificates, documents or other evidence as may be required from
time to time, properly completed and duly executed by such Non-UK
Lender, to establish the basis for any applicable exemption from or
reduction of Taxes with respect to any payments to such Non-UK Lender
of principal, interest, fees, commissions or any other amount payable
under this Agreement or the UK Loans.
(b) Each Lender required to deliver any forms, certificates or
other evidence with respect to United States federal income tax
withholding matters, Japanese income tax withholding matters or UK
income tax withholding matters pursuant to subsection 2.7B(iii)(a)
hereby agrees, from time to time after the initial delivery by such
Lender of such forms, certificates or other evidence, whenever a lapse
in time or change in circumstances renders such forms, certificates or
other evidence obsolete or inaccurate in any material respect, that
such Lender shall (1) promptly deliver to Agent for transmission to
Borrower (X) in the case of any Non-US Lender, two new original copies
of Internal Revenue Service Form 1001 or 4224, or a Certificate re
Non-Bank Status and two original copies of Internal Revenue Service
Form W-8, as the case may be, (Y) in the case of any Non-Japanese
Lender, such certificates, documents or other evidence as may be
required from time to time under the second paragraph of subsection
2.7B(iii)(a), or (Z) in the case of any Non-UK Lender, such
certificates, documents or other evidence as may be required from time
to time under the third paragraph of subsection 2.7B(iii)(a), in each
case properly completed and duly executed by such Lender, together
with any other certificate or statement of exemption required in order
to confirm or establish that such Lender is not subject to deduction
or withholding of United States, Japanese or UK (as applicable) Tax
with respect to payments to such Lender under the Loan Documents or
(2) notify Agent and the Borrower of its inability to deliver any such
forms, certificates or other evidence.
(c) The Borrower shall not be required to pay any additional
amount to any Non-US Lender, Non-Japanese Lender or Non-UK Lender, as
the case may be, under clause (c) of subsection 2.7B(ii) if such
Lender shall have failed to satisfy the requirements of clause (a) or
(b) of this subsection 2.7B(iii); provided that if such Lender shall
--------
have satisfied the requirements of subsection 2.7B(iii)(a) on the
Closing Date (in the case of each Lender listed on the signature pages
hereof) or on the date of the Assignment Agreement pursuant to which
it became a Lender (in the case of each other Lender) (hereinafter,
the "Relevant Date"), nothing in this subsection 2.7B(iii)(c) shall
relieve the Borrower of its obligation to pay any additional amounts
pursuant to clause (c) of subsection 2.7B(ii) in the event that, as a
result of any change
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in any applicable law, treaty or governmental rule, regulation or
order, or any change in the interpretation, administration or
application thereof, such Lender is no longer properly entitled to
deliver forms, certificates or other evidence at a subsequent date
establishing the fact that such Lender is exempt from withholding tax
or is subject to withholding tax at a rate higher than on the Relevant
Date, as described in subsection 2.7B(iii)(a).
(d) The Borrower shall not be required to pay any additional
amount to any Indemnifying Lender under clause (c) of subsection
2.7B(ii) if such Indemnifying Lender shall have failed to satisfy the
requirements of clause (a) or (b) of this subsection 2.7B(iii);
provided that nothing in this subsection 2.7B(iii)(d) shall relieve
--------
the Borrower of its obligation to pay any additional amounts pursuant
to clause (c) of subsection 2.7B(ii) in the event that such
Indemnifying Lender is not as of the Closing Date (in the case of each
other Indemnifying Lender) or as of the Relevant Date (in the case of
each other Indemnifying Lender), or is no longer thereafter, properly
entitled to deliver forms, certificates or other evidence establishing
the fact that such Indemnifying Lender is exempt from withholding tax
or is subject to withholding tax at a rate higher than on the Relevant
Date, as described in subsection 2.7B(iii)(a), whether or not as a
result of any change in applicable law, treaty or governmental rule,
regulation or order, or any change in the interpretation,
administration or application thereof.
C. Capital Adequacy Adjustment. If any Lender shall have determined that
the adoption, effectiveness, phase-in or applicability after the date hereof of
any law, rule or regulation (or any provision thereof) regarding capital
adequacy, or any change therein or in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
(or its applicable lending office) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law) of any such
governmental authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on the capital of such Lender or any
corporation controlling such Lender as a consequence of, or with reference to,
such Lender's Loans, Commitments or Letters of Credit or any participations
therein or any other obligations hereunder with respect to the Loans or the
Letters of Credit, in the case of any Lender, to a level below that which such
Lender or such controlling corporation could have achieved but for such
adoption, effectiveness, phase-in, applicability, change or compliance (taking
into consideration the policies of such Lender or such controlling corporation
with regard to capital adequacy and in an amount deemed by such Lender (in its
sole discretion) to be material), then from time to time, within five Business
Days after receipt by the Borrower from such Lender of the statement referred to
in the next sentence, Borrowers shall pay to such Lender such additional amount
or amounts as will compensate such Lender or such controlling corporation on an
after-tax basis for such reduction. Such Lender shall deliver to the Borrower
(with a copy to Administrative Agent and Agent) a written statement,
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setting forth in reasonable detail the basis of the calculation of such
additional amounts, which statement shall be conclusive and binding upon all
parties hereto absent manifest error. Notwithstanding any provision of this
subsection 2.7 to the contrary, Borrowers shall pay, on terms and conditions
consistent with this subsection 2.7, any additional amount or amounts as will
compensate any Lender or any corporation controlling such Lender on an after-tax
basis for any reduction in the rate of return on the capital of such Lender or
such controlling entity because of any overlap of the Revolving Loan
Commitments, whether or not as a result of any change in applicable law, treaty
or governmental rule, regulation or order, or any change in the interpretation,
administration or application thereof.
2.8 Obligation of Lenders and Issuing Lenders to Mitigate.
-----------------------------------------------------
Each Lender and Issuing Lender agrees that, as promptly as practicable
after the officer of such Lender or Issuing Lender responsible for administering
the Loans or Letters of Credit of such Lender or Issuing Lender, as the case may
be, becomes aware of the occurrence of an event or the existence of a condition
that would cause such Lender to become an Affected Lender or that would entitle
such Lender or Issuing Lender to receive payments under subsection 2.7 or
subsection 3.6, it will, to the extent not inconsistent with the internal
policies of such Lender or Issuing Lender and any applicable legal or regulatory
restrictions, use reasonable efforts (i) to make, issue, fund or maintain the
Commitments of such Lender or the affected Loans or Letters of Credit of such
Lender or Issuing Lender through another lending or letter of credit office of
such Lender or Issuing Lender, or (ii) take such other measures as such Lender
or Issuing Lender may deem reasonable, if as a result thereof the circumstances
which would cause such Lender to be an Affected Lender would cease to exist or
the additional amounts which would otherwise be required to be paid to such
Lender or Issuing Lender pursuant to subsection 2.7 or subsection 3.6 would be
materially reduced and if, as determined by such Lender or Issuing Lender in its
sole discretion, the making, issuing, funding or maintaining of such Commitments
or Loans or Letters of Credit through such other lending or letter of credit
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Commitments or Loans or Letters of
Credit or the interests of such Lender or Issuing Lender; provided that such
--------
Lender or Issuing Lender will not be obligated to utilize such other lending or
letter of credit office pursuant to this subsection 2.8 unless the applicable
Borrower agrees to pay all incremental expenses incurred by such Lender or
Issuing Lender as a result of utilizing such other lending or letter of credit
office as described in clause (i) above or if the use of such other office is
inconsistent with the internal policies of such Lender or any applicable legal
or regulatory restrictions. A certificate as to the amount of any such expenses
payable by a Borrower pursuant to this subsection 2.8 (setting forth in
reasonable detail the basis for requesting such amount) submitted by such Lender
or Issuing Lender to such Borrower (with a copy to Administrative Agent) shall
be conclusive absent manifest error.
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2.9 Collection, Deposit and Transfer of Payments in Respect of Accounts.
-------------------------------------------------------------------
Each Borrower shall, and shall cause each of its Subsidiaries to,
maintain in effect at all times a system of accounts and procedures reasonably
satisfactory to Administrative Agent for the collection and deposit of payments
in respect of such Person's Accounts and the transfer of amounts so deposited to
the applicable Concentration Account and Agent Account. Without limiting the
generality of the foregoing:
A. Maintenance of Lock Boxes, Lock Box Accounts, Blocked Accounts
and Concentration Accounts.
(i) Except as permitted under subsection 2.9A(ii), each Borrower
shall, and shall cause each of its Subsidiaries to maintain at all times
any Lock Boxes, Lock Box Accounts, Blocked Accounts and Concentration
Accounts established pursuant to the terms of this Agreement, the Lock Box
Agreements and the Blocked Account Agreements, if any.
(ii) Each Borrower shall not, and shall not permit any of its
Subsidiaries to, close any Lock Box, Lock Box Account, Blocked Account or
Concentration Account or open a new Lock Box, Lock Box Account, Blocked
Account or Concentration Account unless it shall have (a) notified
Administrative Agent (with a copy to Agent) in writing at least 30 days (or
such lesser number of days as may be agreed to by Administrative Agent)
prior to the proposed closing or opening, (b) in the case of a new Lock Box
Account, entered into a Lock Box Agreement with the applicable Lock Box
Bank, (c) in the case of a new Blocked Account, entered into a Blocked
Account Agreement with the applicable Blocked Account Bank, and (d) in the
case of a new Concentration Account, entered into a Blocked Account
Agreement, or in the case of a Concentration Account that is an Investment
Account, such other agreement in form and substance satisfactory to
Administrative Agent, with the applicable Concentration Bank.
B. Collection and Deposit of Payments in Respect of Accounts.
(i) Each Borrower shall, and shall cause each of its Subsidiaries to,
deliver such notices to account debtors and take all such other actions as
may reasonably be necessary to cause all payments in respect of such
Person's Accounts to be made directly to a Lock Box or to a Blocked
Account, as applicable, except for any such payments made by wire transfer
or transmitted by the automated clearing house system, with respect to
which the account debtors shall be instructed to send payments to the
applicable Concentration Accounts.
(ii) Each Borrower shall, and shall cause each of its
Subsidiaries to, direct its authorized representative, at least once on
each Business Day, to retrieve all checks and other instruments delivered
to a Lock Box and, as promptly as possible
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on the same Business Day so retrieved, to endorse for payment and deposit
each such check or other instrument in the Lock Box Account related to such
Lock Box. Notwithstanding the foregoing, upon the occurrence and during
the continuation of a Potential Event of Default or an Event of Default and
from and after such time as Administrative Agent shall have notified any
Borrower of Administrative Agent's election to exercise the rights provided
for in this subsection 2.9B(ii), such Borrower shall not, and shall not
permit its Subsidiaries to, retrieve any items from any Lock Box unless
accompanied by a representative of an Agent, and each Borrower hereby
appoints each Agent or any of its designees as such Borrower's attorneys-
in-fact with powers, upon notification by Administrative Agent as
aforesaid, to (a) access all Lock Boxes and (b) endorse for payment any
checks or other instruments representing payment in respect of any Accounts
of such Persons that are delivered to any Lock Box. All acts of said
attorneys or designees are hereby ratified and approved, and said attorneys
or designees shall not be liable for any acts of omission or commission
(other than acts or omissions constituting gross negligence or wilful
misconduct as determined in a final order by a court of competent
jurisdiction), nor for any error of judgment or mistake of fact or law.
The power of attorney set forth in this subsection 2.9B(ii) is irrevocable
until all Obligations shall have been paid in full and the Commitments
shall have terminated.
(iii) In the event that any Borrower or any of its Subsidiaries
receives any check, cash, note or other instrument representing payment of
an Account, such Borrower shall, or shall cause such Subsidiary to, hold
such item in trust for Agent and shall, as soon as practicable (and in any
event within one Business Day) after receipt thereof, cause such item to be
deposited into an applicable Lock Box Account or Blocked Account, as the
case may be, with any necessary endorsements.
(iv) Each Borrower hereby agrees on behalf of itself and on
behalf of any of its Subsidiaries, from and after such time, if any, as
Administrative Agent shall have notified such Borrower or such Subsidiary
in writing that the provisions of this subsection 2.9B(iv) are to become
effective until such later time, if any, as Administrative Agent shall have
notified such Borrower or such Subsidiary in writing that such provisions
are no longer to be effective, not to deposit any monies into the Lock Box
Accounts, the Blocked Accounts or the Concentration Accounts or to
otherwise permit any monies to be deposited into any of such accounts,
except payments received in respect of such Borrower's or Subsidiary's
Accounts.
C. Transfer of Amounts Deposited in the Lock Box Accounts and
Blocked Accounts to the Concentration Accounts. Each Borrower shall, and shall
cause each of its Subsidiaries to, cause all collected amounts deposited in each
Lock Box Account and each Blocked Account to be transferred on each Business Day
to the applicable Concentration Account in accordance with the terms of the
applicable Lock Box Agreement or Blocked Account Agreement, as the case may be;
provided, however, that each Borrower shall, and shall cause each of its
- -------- -------
Subsidiaries to, always maintain collected amounts equal to
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the Franc equivalent of $5,000 in any Blocked Account in France or a similar
equivalent amount in the local currency in any other jurisdiction where a
minimum balance is required to be maintained.
D. Transfer of Amounts Deposited in the Concentration Accounts to
the Agent Account. Each Borrower shall, and shall cause each of its
Subsidiaries to, cause all collected amounts deposited in each Concentration
Account to be transferred on each Business Day to the applicable Agent Account;
provided, however, that any collected amounts in a Concentration Account that is
- -------- -------
an Investment Account need not be transferred to an Agent Account. Any amounts
so transferred to such Agent Account first shall be applied as provided in
-----
subsection 2.4B(iii)(h) to the extent therein provided and thereafter, so long
----------
as no Event of Default or Potential Event of Default shall have occurred and be
continuing, shall be available for disbursement to the applicable Loan Parties
for working capital and other general corporate purposes.
E. Treatment of Accounts. Each Borrower shall not, and shall not
allow any of its Subsidiaries to, without Administrative Agent's prior written
consent, grant any extension of the time of payment of any Account, compromise
or settle any Account for less than the full amount thereof, release, in whole
or in part, any person or property liable for the payment thereof, or allow any
credit or discount whatsoever thereon, except, prior to the occurrence of an
Event of Default, in accordance with their usual and customary business
practices.
F. Borrowers to Provide Information. Each Borrower shall, and shall
cause each of its Subsidiaries to, at such intervals as Administrative Agent may
reasonably request, furnish such statements, schedules and/or information as
Administrative Agent may request relating to such Borrowers' or such
Subsidiaries' Accounts and the collection, deposit and transfer of payments in
respect thereof, including, without limitation, all invoices evidencing such
Accounts.
2.10 Indemnifying Lenders.
--------------------
A. Purchase of Participations by Indemnifying Lenders. Upon the
execution of this Agreement or an Assignment Agreement, as the case may be, each
Indemnifying Lender shall be deemed to, and hereby agrees to, have irrevocably
purchased a participation (the "Indemnity Participation") from the Japanese
Funding Lender in (x) the Japanese Term Loans of the Japanese Funding Lender and
(y) the Japanese Revolving Loan Commitment of the Japanese Funding Lender,
including without limitation the Japanese Revolving Loans and the participations
purchased by the Japanese Funding Lender pursuant to subsection 3.1C in the
Letters of Credit issued by the Japanese Agent and any drawings thereunder, in a
proportionate amount based on such Indemnifying Lender's Indemnity Amount. Upon
the occurrence of a Triggering Event, each Indemnifying Lender, upon one
Business Day's notice from Japanese Funding Lender, shall deliver to Japanese
Funding Lender by wire transfer in immediately available funds its proportionate
share based on its
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Indemnity Amount of the aggregate unpaid principal amount of Japanese Funding
Lender's Japanese Loans and any accrued and unpaid interest thereon and the
aggregate unreimbursed amount of any payments made by Japanese Funding Lender
pursuant to subsection 3.3C to Japanese Agent with respect to any unreimbursed
drawings on Letters of Credit issued by such Japanese Agent. Each Indemnifying
Lender's obligations under this subsection 2.10 shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (a) any set-off, counterclaim, recoupment, defense or other right
which any Agent, Funding Lender or Lender may have against any Agent, Funding
Lender, Loan Party or other Person for any reason whatsoever; (b) the occurrence
or continuance of an Event of Default or a Potential Event of Default; (c) any
adverse change in the condition (financial or otherwise) of any Loan Party; (d)
any breach of this Agreement by any Loan Party, Agent, Funding Lender or Lender;
or (e) any other circumstance, happening, or event whatsoever, whether or not
similar to any of the foregoing; provided that the obligations of each
--------
Indemnifying Lender are subject to the condition that at the time such Japanese
Loan was made or such Letter of Credit was issued (a) the duly authorized
officer of such Japanese Funding Lender or the Japanese Agent, as the case may
be, responsible for the administration of the credit relationship with Goss
Japan believed in good faith that either (x) no Event of Default had occurred
and was continuing or (y) any Event of Default that had occurred and was
continuing had been waived by Requisite Lenders at the time such Japanese Loan
was made or such Letter of Credit was issued or (b) with respect to the making
of Japanese Revolving Loans, a Funding Lender Discretionary Period with respect
to Goss Japan was in effect.
B. Payment of Indemnity Fees. Japanese Funding Lender shall
promptly pay by wire transfer of immediately available funds to each
Indemnifying Lender, as an indemnity fee for the Indemnity Participation
provided to Japanese Funding Lender by Indemnifying Lender in this subsection
2.10, the following amounts, in each case in proportion to such Indemnifying
Lender's Indemnity Amount: (i) with respect to the Japanese Loans, an amount
equal to the excess of the interest received by Japanese Funding Lender pursuant
to subsection 2.2C from Goss Japan in excess of the Base Rate or the Adjusted
Eurodollar Rate, as the case may be, on such Japanese Loans; (ii) with respect
to Letters of Credit, letter of credit fees received by Japanese Funding Lender
pursuant to subsections 3.2(i)(b) and 3.2(ii)(b) from Administrative Agent; and
(iii) commitment fees received by Japanese Funding Lender pursuant to subsection
2.3A from Administrative Agent; provided that if any such indemnity fee is less
--------
than $10,000, Japanese Funding Lender shall not be required to so promptly pay
such indemnity fee to the Indemnifying Lender until the aggregate unpaid amount
of indemnity fees accumulates to an amount exceeding $10,000. The excess, if
any, of the interest payable to Japanese Funding Lender on the Japanese Loans
over the interest distributable to Indemnifying Lender under this subsection
2.10B in respect thereof, and the excess, if any, of the letter of credit and
commitment fees payable to Japanese Funding Lender over and in addition to the
letter of credit and commitment fees distributable to Indemnifying Lender under
this subsection 2.10B, shall be retained by Japanese Funding Lender.
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C. Other Payments. Provided Indemnifying Lender shall have made any
payments to Japanese Funding Lender required by this subsection 2.10, including
the payments required to be made upon the occurrence of a Triggering Event
pursuant to subsection 2.10A, Japanese Funding Lender shall promptly pay by wire
transfer of immediately available funds to each such Indemnifying Lender any
principal or other payments thereafter recovered by Japanese Funding Lender from
Goss Japan to the extent allocable to the Indemnity Participation. If Japanese
Funding Lender shall pay any amount to the Indemnifying Lender pursuant to this
subsection 2.10 in the belief or expectation that a related payment has been or
will be received or collected and such related payment is not received or
collected by Japanese Funding Lender, then the Indemnifying Lender will promptly
on demand by Japanese Funding Lender return such amount to Japanese Funding
Lender, together with interest thereon at such rate as Japanese Funding Lender
shall determine to be customary between banks for correction of errors. If
Japanese Funding Lender determines at any time that any amount received or
collected by Japanese Funding Lender pursuant to this Agreement is to be
returned to Goss Japan under this Agreement or paid to any other Person or
entity pursuant to any insolvency law, any sharing clause in this Agreement, or
otherwise, then, notwithstanding any other provision of this Agreement, Japanese
Funding Lender shall not be required to distribute any portion thereof to
Indemnifying Lender, and Indemnifying Lender will promptly on demand by Japanese
Funding Lender repay any portion that Japanese Funding Lender shall have
distributed to Indemnifying Lender, together with interest thereon at such rate,
if any, as Japanese Funding Lender shall pay to Goss Japan or such other Person
or entity with respect thereto. If any amounts returned by Japanese Funding
Lender to Goss Japan pursuant to this subsection 2.10 are later recouped by
Japanese Funding Lender, Japanese Funding Lender shall promptly pay to
Indemnifying Lender a proportionate amount based on such Indemnifying Lender's
Indemnity Amount.
D. Indemnity for Costs and Expenses. If Japanese Funding Lender
incurs any costs or expenses (including, without limitation, in indemnifying
Japanese Agent pursuant to subsection 9.4) in connection with any effort to
enforce or protect Japanese Funding Lender's or Indemnifying Lender's rights or
interests with respect to this Agreement or the other Loan Documents, then,
other than in the case of Japanese Funding Lender's gross negligence or willful
misconduct, Indemnifying Lender will reimburse Japanese Funding Lender on demand
for Indemnifying Lender's proportionate share based on the Indemnity Amount of
any portion of such costs or expenses which is not reimbursed by or on behalf of
Goss Japan. If Japanese Funding Lender recovers any amounts for which Japanese
Funding Lender has previously been reimbursed by Indemnifying Lender hereunder,
Japanese Funding Lender shall promptly distribute to Indemnifying Lender
Indemnifying Lender's proportionate share thereof based on the Indemnity Amount.
E. Certain Tax Matters. Indemnifying Lender agrees to deliver to
Japanese Funding Lender from time to time upon request such certificates,
statements, documents, forms or other evidence, properly completed and executed
by Indemnifying Lender, as may be required at any time in order to comply with
any applicable tax laws or
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regulations or to confirm or maintain in effect Indemnifying Lender's
entitlement to exemption from or reduction of any applicable withholding tax on
any payments hereunder. Indemnifying Lender hereby agrees to indemnify and hold
Japanese Funding Lender harmless from any applicable taxes, penalties, interest
and other expenses, costs and losses incurred or payable by Japanese Funding
Lender as a result of either (i) Indemnifying Lender's failure to submit any
statement, document, form or certificate or other evidence that Indemnifying
Lender is required to provide pursuant to this subsection or (ii) Japanese
Funding Lender's reliance on any such statement, document, form or certificate
or other evidence which Indemnifying Lender has provided to Japanese Funding
Lender pursuant to this subsection.
F. Indemnifying Lender Consent. Notwithstanding any provision to
the contrary contained in this Agreement or the other Loan Documents, so long as
the Indemnifying Lender has not failed to make any payments required to be made
by Indemnifying Lender under this subsection 2.10 or is not otherwise in default
under its obligations under this subsection 2.10, Japanese Funding Lender hereby
agrees that, to the extent of but only to the extent of, such Indemnifying
Lender's proportionate share based on its Indemnity Amount Japanese Funding
Lender will not agree to any amendment, modification, termination or waiver of
any provision of this Agreement or the other Loan Documents, or to any departure
by Goss Japan therefrom, in each case related to the Indemnity Participation
without the prior written consent of the Indemnifying Lender. Nothing herein
contained shall prevent the Japanese Funding Lender from consenting to any
amendment, modification, termination or waiver of any provision of this
Agreement or the other Loan Documents, or to any departure by Goss Japan
therefrom, to the extent unrelated to the Indemnity Participation or to the
extent that Japanese Funding Lender's interests or Pro Rata Share is not related
to the Indemnity Participation or the Indemnity Amount.
G. Failure to Make Required Payments. In the event that any Person
obligated to make a payment to any other Person pursuant to this subsection 2.10
fails to make available to the Person entitled to receive such payment the
amount of such payment, the Person entitled to receive such payment shall be
entitled to recover such amount on demand from such other Person, together with
interest at the customary rate set by Administrative Agent for the correction of
errors among Lenders for three Business Days and thereafter at the sum of the
Base Rate plus 1.50% per annum.
H. Assignment Matters. Japanese Funding Lender may from time to
time sell or transfer to other Persons assignments or participations or other
interests in Japanese Funding Lender's Japanese Loans and Japanese Revolving
Loan Commitments but not in the portion thereof allocated to the Indemnity
Participation hereunder. Indemnifying Lender's Indemnity Participation may not
be sold, pledged, assigned, or otherwise transferred (i) without Japanese
Funding Lender's prior written consent; provided that this restriction shall not
--------
apply to any such transfer to any of Indemnifying Lender's Affiliates; or (ii)
without a pro rata assignment in accordance with subsection 10.1B of each Type
of Commitment and Loan held by such Indemnifying Lender.
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I. Miscellaneous. In no event shall the Indemnity Participation be
construed as a loan or other extension of credit by the Indemnifying Lender to
the Japanese Funding Lender. In no event shall this Agreement be construed to
require Indemnifying Lender to make any Loans or to otherwise extend any credit
to Goss Japan or to the Japanese Funding Lender under this Agreement or under
the other Loan Documents. In no event shall this Agreement be construed to
require Indemnifying Lender to fund or pay to the Japanese Funding Lender the
Indemnity Amount except upon the occurrence of a Triggering Event pursuant to
subsection 2.10A. Indemnifying Lender agrees that Japanese Funding Lender or
Japanese Agent may take legal action to enforce or protect Indemnifying Lender's
or Japanese Funding Lender's interests in respect of this Agreement and the
other Loan Documents.
Section 3. LETTERS OF CREDIT
3.1 Issuance of Letters of Credit and Lenders' Purchase of Participations
---------------------------------------------------------------------
Therein.
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A. Letters of Credit. In addition to Borrowers requesting that Lenders
make Revolving Loans pursuant to subsection 2.1A(ii)(a) and 2.1A(ii)(b), as the
case may be, Borrowers may request, in accordance with the provisions of this
subsection 3.1, from time to time during the period from the Closing Date to but
excluding the Revolving Loan Commitment Termination Date, that an Agent issue
Letters of Credit for the account of such Borrower for the purposes specified in
the definitions of Commercial Letters of Credit and Standby Letters of Credit.
Subject to the terms and conditions of this Agreement and in reliance upon the
representations and warranties of Borrowers herein set forth, such Agents shall
issue such Letters of Credit in accordance with the provisions of this
subsection 3.1; provided that Borrowers shall not request that any Agent issue
--------
(and no Agent shall issue):
(i) any Letter of Credit if, after giving effect to such issuance,
(1) the Total Utilization of Revolving Loan Commitments for all Borrowers
would exceed the Maximum Permitted Revolving Loan Commitments; (2) the
Total Utilization of Revolving Loan Commitments for Company at any time
would exceed $100,000,000; (3) the Total Utilization of Revolving Loan
Commitments for Goss Japan at any time would exceed the Japanese Revolving
Loan Commitments then in effect; (4) the Total Utilization of Revolving
Loan Commitments for Goss UK at any time would exceed the $100,000,000; and
(5) the Total Utilization of Revolving Loan Commitments for Company and
Goss UK at any time would exceed the US/UK Revolving Loan Commitments then
in effect;
(ii) any Letter of Credit if, after giving effect to such
issuance, (1) the Total Utilization of Revolving Loan Commitments for
Company at any time would exceed the Company Borrowing Base then in effect;
(2) the Total Utilization of Revolving Loan Commitments for Goss Japan at
any time would exceed the Goss Japan Borrowing Base then in effect; and (3)
the Total Utilization of Revolving Loan
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Commitments for Goss UK at any time would exceed the Goss UK Borrowing Base
then in effect;
(iii) any Letter of Credit if, after giving effect to such
issuance, (1) the aggregate stated amount of all Letters of Credit
supporting Customer Financing Note Guaranties would exceed $10,000,000 at
any time; and (2) the aggregate amount of Eligible Accounts Receivable for
all Borrowers would at any time be less than 50% of the Total Utilization
of Revolving Loan Commitments of all Borrowers;
(iv) any Standby Letter of Credit having an expiration date later
than the earlier of (a) the date which is five Business Days prior to the
Revolving Loan Commitment Termination Date and (b) the date which is one
year from the date of issuance of such Standby Letter of Credit; provided
--------
that the immediately preceding clause (b) shall not prevent any Issuing
Lender from agreeing that a Standby Letter of Credit will automatically be
extended for one or more successive periods not to exceed one year each
unless such Issuing Lender elects not to extend for any such additional
period; and provided, further that such Issuing Lender shall elect not to
-------- -------
extend such Standby Letter of Credit if it has knowledge that an Event of
Default has occurred and is continuing (and has not been waived in
accordance with subsection 10.6) at the time such Issuing Lender must elect
whether or not to allow such extension; or
(v) any Commercial Letter of Credit having an expiration date (a)
later than the earlier of (X) the date which is five Business Days prior to
the Revolving Commitment Termination Date and (Y) the date which is 180
days from the date of issuance of such Commercial Letter of Credit or (b)
that is otherwise unacceptable to the applicable Issuing Lender in its
reasonable discretion.
Any Letter of Credit may be denominated in a currency other than Dollars.
For the purposes of making any determinations hereunder with respect to a Letter
of Credit denominated in a currency other than Dollars, the stated amount of
such Letter of Credit shall be valued based on the applicable Exchange Rate for
such currency as of the applicable date of determination.
B. Mechanics of Issuance.
(i) Notice of Issuance. Whenever any Borrower desires the issuance
------------------
of a Letter of Credit, it shall deliver to Administrative Agent (with a
copy to Agent) a Notice of Issuance of Letter of Credit substantially in
the form of Exhibit III annexed hereto no later than 12:00 Noon (Local
-----------
Time) at least three Business Days, or such shorter period as may be agreed
to by the Issuing Lender in any particular instance, in advance of the
proposed date of issuance. The Notice of Issuance of Letter of Credit
shall specify (a) the proposed date of issuance (which shall be a Business
Day), (b) the face amount of the Letter of Credit, (c) the applicable
currency the
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Letter of Credit is requested to be denominated in, (d) the expiration date
of the Letter of Credit, (e) the name and address of the beneficiary, and
(f) either the verbatim text of the proposed Letter of Credit or the
proposed terms and conditions thereof, including a precise description of
any documents to be presented by the beneficiary which, if presented by the
beneficiary prior to the expiration date of the Letter of Credit, would
require the Issuing Lender to make payment under the Letter of Credit;
provided that the Issuing Lender, in its reasonable discretion, may require
--------
changes in the text of the proposed Letter of Credit or any such documents;
and provided, further that no Letter of Credit shall require payment
-------- -------
against a conforming draft to be made thereunder on the same business day
(under the laws of the jurisdiction in which the office of the Issuing
Lender to which such draft is required to be presented is located) that
such draft is presented if such presentation is made after 10:00 A.M. (in
the time zone of such office of the Issuing Lender) on such business day.
The Borrower shall notify the Administrative Agent (with a copy
to Issuing Lender) prior to the issuance of any Letter of Credit in the
event that any of the matters to which it is required to certify in the
applicable Notice of Issuance of Letter of Credit is no longer true and
correct as of the proposed date of issuance of such Letter of Credit, and
upon the issuance of any Letter of Credit Borrower shall be deemed to have
re-certified, as of the date of such issuance, as to the matters to which
it is required to certify in the applicable Notice of Issuance of Letter of
Credit.
(ii) Determination of Issuing Lender. Upon receipt by Agent of a
-------------------------------
Notice of Issuance of Letter of Credit (or a copy thereof) pursuant to
subsection 3.1B(i) requesting the issuance of a Letter of Credit, Agent
shall be the Issuing Lender with respect thereto.
(iii) Issuance of Letter of Credit. Upon satisfaction or waiver
----------------------------
(in accordance with subsection 10.6) of the conditions set forth in
subsection 4.3, the Issuing Lender shall issue the requested Letter of
Credit in accordance with the Issuing Lender's standard operating
procedures.
(iv) Notification to Lenders. Upon the issuance of any Letter of
-----------------------
Credit the applicable Issuing Lender shall promptly notify Administrative
Agent of such issuance which notice shall be accompanied by a copy of such
Letter of Credit. Promptly after receipt of such notice (or, if Agent is
the Issuing Lender, together with such notice), Agent shall notify each
Lender, of the amount of such Lender's respective participation in such
Letter of Credit, determined in accordance with subsection 3.1C.
(v) Reports to Lenders. Within 15 days after the end of each
------------------
calendar quarter ending after the Closing Date, so long as any Letter of
Credit shall have been outstanding during such calendar quarter, each
Issuing Lender shall deliver to
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Administrative Agent, for distribution to each other Lender, a report
setting forth for such calendar quarter the daily maximum amount available
to be drawn under the Letters of Credit issued by such Issuing Lender that
were outstanding during such calendar quarter.
C. Revolving Lenders' Purchase of Participations in Letters of Credit.
Immediately upon the issuance of each Letter of Credit for the benefit of
Company, Goss Japan or Goss UK, each applicable Lender shall be deemed to, and
hereby agrees to, have irrevocably purchased from the Issuing Lender a
participation in such Letter of Credit and drawings thereunder in an amount
equal to such Lender's Pro Rata Share of the Revolving Loan Commitment of such
Type of the maximum amount which is or at any time may become available to be
drawn thereunder.
3.2 Letter of Credit Fees.
---------------------
Each Borrower agrees to pay the following amounts with respect to
Letters of Credit issued hereunder for such Borrower's account:
(i) with respect to each Standby Letter of Credit, (a) a fronting
fee, payable directly to the applicable Issuing Lender, equal to 0.25% per
annum of the daily maximum amount available to be drawn under such Standby
Letter of Credit, but in any event not less than $500 per year per Standby
Letter of Credit, and (b) a letter of credit fee, payable to Administrative
Agent equal to (x) the Applicable Eurodollar Margin multiplied by (y) the
-------------
daily maximum amount available to be drawn under such Standby Letter of
Credit, in each case payable in arrears on and to (but excluding) each
March 31, June 30, September 30 and December 31 of each year and computed
on the basis of a 360-day year for the actual number of days elapsed;
(ii) with respect to each Commercial Letter of Credit, (a) a
fronting fee, payable directly to the applicable Issuing Lender, equal to
0.25% per annum of the daily maximum amount available to be drawn under
such Commercial Letter of Credit, but in any event not less than $500 per
year per Commercial Letter of Credit, and (b) a letter of credit fee
payable to Administrative Agent equal to (x) the Applicable Eurodollar
Margin multiplied by (y) the daily maximum amount available to be drawn
-------------
under such Commercial Letter of Credit in each case payable in arrears on
and to (but excluding) each March 31, June 30, September 30 and December 31
of each year and computed on the basis of a 360-day year for the actual
number of days elapsed; and
(iii) with respect to the issuance, amendment or transfer of each
Letter of Credit and each payment of a drawing made thereunder (without
duplication of the fees payable under clauses (i) and (ii) above),
documentary and processing charges payable directly to the applicable
Issuing Lender for its own account in accordance
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with such Issuing Lender's standard schedule for such charges in effect at
the time of such issuance, amendment, transfer or payment, as the case may
be.
For purposes of calculating any fees payable under clauses (i) or (ii) of this
subsection 3.2, (1) the daily amount available to be drawn under any Letter of
Credit shall be determined as of the close of business on any date of
determination, (2) any adjustments in the Applicable Eurodollar Margin shall be
made in accordance with subsection 2.2A and (3) any amount which is denominated
in a currency other than Dollars shall be valued based on the applicable
Exchange Rate for such currency as of the applicable date of determination.
Promptly upon receipt by Administrative Agent or such Issuing Lender of any
amount described in clause (i)(b) and (ii)(b) of this subsection 3.2, such
Administrative Agent or Issuing Lender shall distribute to each other applicable
Lender its Pro Rata Share of such amount.
3.3 Drawings and Reimbursement of Amounts Drawn Under Letters of Credit.
-------------------------------------------------------------------
A. Responsibility of Issuing Lender With Respect to Drawings. In
determining whether to honor any drawing under any Letter of Credit by the
beneficiary thereof, the Issuing Lender shall be responsible only to exercise
reasonable care to determine that the documents required to be delivered under
such Letter of Credit have been delivered and that they comply on their face
with the requirements of such Letter of Credit.
B. Reimbursement by Borrowers of Amounts Drawn Under Letters of Credit.
In the event an Issuing Lender has determined to honor a drawing under a Letter
of Credit issued by it, (i) such Issuing Lender shall immediately notify the
Borrower and Administrative Agent (with a copy to Agent) and (ii) the Borrower
shall reimburse such Issuing Lender on or before the Business Day immediately
following the date on which such drawing is honored (the "Reimbursement Date")
in an amount in same day funds in Dollars (which amount, in the case of a
drawing under a Letter of Credit which is denominated in a currency other than
Dollars, shall be calculated by reference to the applicable Exchange Rate) equal
to the amount of such drawing; provided that, anything contained in this
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Agreement to the contrary notwithstanding, (i) unless the Borrower shall have
notified Administrative Agent and such Issuing Lender (with a copy to Agent)
prior to 12:00 Noon (Local Time) on the date such drawing is honored that such
Borrower intends to reimburse such Issuing Lender for the amount of such drawing
with funds other than the proceeds of Revolving Loans, such Borrower shall be
deemed to have given a timely Notice of Borrowing to Administrative Agent
requesting Lenders to make Revolving Loans that are Base Rate Loans on the
Reimbursement Date in an amount in Dollars (which amount, in the case of a
drawing under a Letter of Credit which is denominated in a currency other than
Dollars, shall be calculated by reference to the applicable Exchange Rate) equal
to the amount of such drawing and (ii) subject to satisfaction or waiver of the
conditions specified in subsection 4.2B, Lenders shall, on the Reimbursement
Date, make Revolving Loans that are Base Rate Loans in the amount of such
drawing, the proceeds of which shall be applied directly by Agent to reimburse
such Issuing Lender for the amount of such drawing; and
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provided, further that if for any reason proceeds of Revolving Loans are not
- -------- -------
received by such Issuing Lender on the Reimbursement Date in an amount equal to
the amount of such drawing, such Borrower shall reimburse such Issuing Lender,
on demand, in an amount in same day funds equal to the excess of the amount of
such drawing over the aggregate amount of such Revolving Loans, if any, which
are so received. Nothing in this subsection 3.3B shall be deemed to relieve any
Lender from its obligation to make Revolving Loans on the terms and conditions
set forth in this Agreement, and such Borrower shall retain any and all rights
it may have against any Lender resulting from the failure of such Lender to make
such Revolving Loans under this subsection 3.3B.
C. Payment by Lenders of Unreimbursed Drawings Under Letters of Credit.
(i) Payment by Lenders. In the event that the Borrower shall fail
------------------
for any reason to reimburse any Issuing Lender as provided in subsection
3.3B in an amount (calculated in the case of a drawing under a Letter of
Credit denominated in a currency other than Dollars, by reference to the
applicable Exchange Rate) equal to the amount of any drawing honored by
such Issuing Lender under a Letter of Credit issued by it, such Issuing
Lender shall promptly notify each other Lender having a Revolving Loan
Commitment of such Type, of the unreimbursed amount of such drawing and
having a Revolving Loan Commitment of such Type, of such other Lender's
respective participation therein based on such Lender's Pro Rata Share.
Each such Lender shall make available to such Issuing Lender an amount
equal to its respective participation in same day funds in Dollars, at the
office of such Issuing Lender specified in such notice, not later than
12:00 Noon (Local Time) on the first business day (under the laws of the
jurisdiction in which such office of such Issuing Lender is located) after
the date notified by such Issuing Lender. In the event that any such
Lender fails to make available to such Issuing Lender on such business day
the amount of such Lender's participation in such Letter of Credit or the
amount of the unreimbursed drawing regarding such Letter of Credit as
provided in this subsection 3.3C, such Issuing Lender shall be entitled to
recover such amount on demand from such Lender together with interest
thereon at the rate customarily used by such Issuing Lender for the
correction of errors among banks for three Business Days and thereafter at
the Base Rate. Nothing in this subsection 3.3C shall be deemed to
prejudice the right of any such Lender to recover from any Issuing Lender
any amounts made available by such Lender to such Issuing Lender pursuant
to this subsection 3.3C in the event that it is determined by the final
judgment of a court of competent jurisdiction that the payment with respect
to a Letter of Credit by such Issuing Lender in respect of which payment
was made by such Lender constituted gross negligence or willful misconduct
on the part of such Issuing Lender.
(ii) Distribution to Lenders of Reimbursements Received From
-------------------------------------------------------
Borrowers. In the event any Issuing Lender shall have been reimbursed by
---------
other Lenders pursuant to subsection 3.3C(i) for all or any portion of any
drawing honored by such Issuing Lender under a Letter of Credit issued by
it, such Issuing Lender shall
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distribute to each other Lender which has paid all amounts payable by it
under subsection 3.3C(i) with respect to such drawing such other Lender's
Pro Rata Share of all payments subsequently received by such Issuing Lender
from a Borrower in reimbursement of such drawing when such payments are
received. Any such distribution shall be made to a Lender at its primary
address set forth below its name on the appropriate signature page hereof
or at such other address as such Lender may request.
D. Interest on Amounts Drawn Under Letters of Credit.
(i) Payment of Interest by Borrowers. Each Borrower agrees to pay to
--------------------------------
Issuing Lender, with respect to drawings made under any Letters of Credit
issued by such Issuing Lender at such Borrower's request, interest on the
amount paid by such Issuing Lender in respect of each such drawing from the
date of such drawing to but excluding the date such amount is reimbursed by
the Borrower (including any such reimbursement out of the proceeds of
Revolving Loans pursuant to subsection 3.3B) at a rate equal to (a) for the
period from the date of such drawing to but excluding the Reimbursement
Date, the rate then in effect under this Agreement with respect to
Revolving Loans that are Base Rate Loans and (b) thereafter, a rate which
is 2% per annum in excess of the rate of interest otherwise payable under
this Agreement with respect to Revolving Loans that are Base Rate Loans.
Interest payable pursuant to this subsection 3.3D(i) shall be computed on
the basis of a 360-day year for the actual number of days elapsed in the
period during which it accrues and shall be payable on demand or, if no
demand is made, on the date on which the related drawing under a Letter of
Credit is reimbursed in full.
(ii) Distribution of Interest Payments by Issuing Lender.
---------------------------------------------------
Promptly upon receipt by any Issuing Lender of any payment of interest
pursuant to subsection 3.3D(i) with respect to a drawing under a Letter of
Credit issued by it, (a) such Issuing Lender shall distribute to each other
applicable Lender, out of the interest received by such Issuing Lender in
respect of the period from the date of such drawing to but excluding the
date on which such Issuing Lender is reimbursed for the amount of such
drawing (including any such reimbursement out of the proceeds of Revolving
Loans pursuant to subsection 3.3B), the amount that such other Lender would
have been entitled to receive in respect of the letter of credit fee that
would have been payable in respect of such Letter of Credit for such period
pursuant to subsection 3.2 if no drawing had been made under such Letter of
Credit, and (b) in the event such Issuing Lender shall have been reimbursed
by other Lenders pursuant to subsection 3.3C(i) for all or any portion of
such drawing, such Issuing Lender shall distribute to each other Lender
which has paid all amounts payable by it under subsection 3.3C(i) with
respect to such drawing such other Lender's Pro Rata Share of any interest
received by such Issuing Lender in respect of that portion of such drawing
so reimbursed by such other Lender for the period from the date on which
such Issuing Lender was so reimbursed by such other Lender to but excluding
the
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date on which such portion of such drawing is reimbursed by the Borrower.
Any such distribution shall be made to a Lender at its primary address set
forth below its name on the appropriate signature page hereof or at such
other address as such Lender may request.
3.4 Obligations Absolute.
--------------------
The obligation of a Borrower to reimburse an Issuing Lender for
drawings made under the Letters of Credit issued by it and to repay any
Revolving Loans made by Lenders pursuant to subsection 3.3B and the obligations
of Lenders under subsection 3.3C(i) shall be unconditional and irrevocable, and
any such payments shall be made 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 Letter of Credit;
(ii) the existence of any claim, set-off, defense or other right
which any Borrower or any Lender may have at any time against a beneficiary
or any transferee of any Letter of Credit (or any Persons for whom any such
transferee may be acting), any Issuing Lender or other Lender or any other
Person or, in the case of a Lender, against any Borrower, whether in
connection with this Agreement, the transactions contemplated herein or any
unrelated transaction (including any underlying transaction between
Borrower or one of its Subsidiaries and the beneficiary for which any
Letter of Credit was procured);
(iii) any draft or document presented under any Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(iv) payment by the applicable Issuing Lender under any Letter of
Credit against presentation of a draft or document which does not comply
with the terms of such Letter of Credit;
(v) any adverse change in the business, operations, properties,
assets, condition (financial or otherwise) or prospects of Borrower or any
of its Subsidiaries;
(vi) any breach of this Agreement or any other Loan Document by
any party thereto;
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing; or
(viii) the fact that an Event of Default or a Potential Event of
Default shall have occurred and be continuing;
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provided, in each case, that payment by the applicable Issuing Lender under the
- --------
applicable Letter of Credit shall not have constituted gross negligence or
willful misconduct of such Issuing Lender under the circumstances in question
(as determined by a final judgment of a court of competent jurisdiction).
3.5 Indemnification; Nature of Issuing Lenders' Duties.
--------------------------------------------------
A. Indemnification. In addition to amounts payable as provided in
subsection 3.6, each Borrower hereby agrees to protect, indemnify, pay and save
harmless each Issuing Lender from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including reasonable
fees, expenses and disbursements of counsel and reasonable allocated costs of
internal counsel) which such Issuing Lender may incur or be subject to as a
consequence, direct or indirect, of (i) the issuance of any Letter of Credit by
such Issuing Lender, other than as a result of (a) the gross negligence or
willful misconduct of such Issuing Lender as determined by a final judgment of a
court of competent jurisdiction or (b) subject to the following clause (ii), the
wrongful dishonor by such Issuing Lender of a proper demand for payment made
under any Letter of Credit issued by it or (ii) the failure of such Issuing
Lender to honor a drawing under any such Letter of Credit as a result of any act
or omission, whether rightful or wrongful, of any Governmental Authority (all
such acts or omissions herein called "Governmental Acts").
B. Nature of Issuing Lenders' Duties. As between any Borrower on the one
hand and any Issuing Lender on the other hand, Borrower assumes all risks of the
acts and omissions of, or misuse of the Letters of Credit issued by such Issuing
Lender by, the respective beneficiaries of such Letters of Credit. In
furtherance and not in limitation of the foregoing, such Issuing Lender shall
not be responsible (absent a determination of a court of competent jurisdiction
of gross negligence or willful misconduct by Issuing Lender) for: (i) the form,
validity, sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and issuance of
any such Letter of Credit, even if it should in fact prove to be in any or all
respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) the
validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any such Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, which may prove to
be invalid or ineffective for any reason; (iii) failure of the beneficiary of
any such Letter of Credit to comply fully with any conditions required in order
to draw upon such Letter of Credit; (iv) errors, omissions, interruptions or
delays in transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher; (v) errors in
interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any such
Letter of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any such Letter of Credit of the proceeds of any drawing under
such Letter of Credit; or (viii) any consequences arising from causes beyond the
control of such Issuing Lender, including without limitation any Governmental
Acts, and none of the above shall affect or impair, or prevent the vesting of,
any of such Issuing Lender's rights or powers hereunder.
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In furtherance and extension and not in limitation of the specific
provisions set forth in the first paragraph of this subsection 3.5B, any action
taken or omitted by any Issuing Lender under or in connection with the Letters
of Credit issued by it or any documents and certificates delivered thereunder,
if taken or omitted in good faith, shall not put such Issuing Lender under any
resulting liability to any Borrower.
Notwithstanding anything to the contrary contained in this subsection
3.5, each Borrower shall retain any and all rights it may have against any
Issuing Lender for any liability arising solely out of the gross negligence or
willful misconduct of such Issuing Lender, as determined by a final judgment of
a court of competent jurisdiction or out of a wrongful dishonor by Issuing
Lender of a proper demand for payment made under any Letter of Credit.
3.6 Increased Costs and Taxes Relating to Letters of Credit.
-------------------------------------------------------
In the event that any Issuing Lender or Lender shall determine (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto) that any law, treaty or governmental rule, regulation
or order, or any change therein or in the interpretation, administration or
application thereof (including the introduction of any new law, treaty or
governmental rule, regulation or order), or any determination of a court or
governmental authority, in each case that becomes effective after the date
hereof, or compliance by any Issuing Lender or Lender with any guideline,
request or directive issued or made after the date hereof by any central bank or
other governmental or quasi-governmental authority (whether or not having the
force of law):
(i) subjects such Issuing Lender or Lender (or its applicable lending
or letter of credit office) to any additional Tax (other than any Tax on
the overall net income of such Issuing Lender or Lender) with respect to
the issuing or maintaining of any Letters of Credit or the purchasing or
maintaining of any participations therein or any other obligations under
this Section 3, whether directly or by such being imposed on or suffered by
any particular Issuing Lender;
(ii) imposes, modifies or holds applicable any reserve (including
without limitation any marginal, emergency, supplemental, special or other
reserve), special deposit, compulsory loan, FDIC insurance or similar
requirement in respect of any Letters of Credit issued by any Issuing
Lender or participations therein purchased by any Lender; or
(iii) imposes any other condition (other than with respect to a
Tax matter) on or affecting such Issuing Lender or Lender (or its
applicable lending or letter of credit office) regarding this Section 3 or
any Letter of Credit or any participation therein;
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and the result of any of the foregoing is to increase the cost to such Issuing
Lender or Lender of agreeing to issue, issuing or maintaining any Letter of
Credit or agreeing to purchase, purchasing or maintaining any participation
therein or to reduce any amount received or receivable by such Issuing Lender or
Lender (or its applicable lending or letter of credit office) with respect
thereto in an amount deemed by such Issuing Lender or Lender (in its sole
discretion) to be material; then, in any case, such Borrower shall promptly pay
to such Issuing Lender or Lender, upon receipt of the statement referred to in
the next sentence, such additional amount or amounts as may be necessary to
compensate such Issuing Lender or Lender for any such increased cost or
reduction in amounts received or receivable hereunder. Such Issuing Lender or
Lender shall deliver to the Borrower a written statement, setting forth in
reasonable detail the basis for calculating the additional amounts owed to such
Issuing Lender or Lender under this subsection 3.6, which statement shall be
conclusive and binding upon all parties hereto absent manifest error.
Section 4. CONDITIONS TO LOANS AND LETTERS OF CREDIT
The obligations of Lenders to make Loans and the issuance of Letters
of Credit hereunder are subject to the satisfaction of the following conditions.
4.1 Conditions to Term Loans and Initial Revolving Loans.
----------------------------------------------------
The obligations of Lenders to make the Term Loans and any Revolving
Loans to be made on the Closing Date are, in addition to the conditions
precedent specified in subsection 4.2, subject to prior or concurrent
satisfaction of the following conditions:
A. Borrower Documents. On or before the Closing Date, each Borrower and,
in the case of Goss Japan, both New Goss Japan and RGS Japan (provided that in
--------
the case of RGS Japan, it is understood that such actions shall be taken
immediately upon consummation of the purchase by New Goss Japan of all of the
outstanding capital stock of RGS Japan) shall deliver or cause to be delivered
to Lenders (or to Administrative Agent for Lenders with sufficient originally
executed copies, where appropriate, for each Lender and its counsel) the
following, each, unless otherwise noted, dated the Closing Date:
(i) Certified copies of its Certificate or Articles of Incorporation,
together with a good standing certificate from the Secretary of State of
its jurisdiction of incorporation and each other state in which it is
qualified as a foreign corporation to do business and, to the extent
generally available, a certificate or other evidence of good standing as to
payment of any applicable franchise or similar taxes from the appropriate
taxing authority of each of such jurisdictions, and in the case of New Goss
Japan, RGS Japan and Goss UK, the comparable or equivalent documentation
under the laws of the applicable Governmental Authority, each dated a
recent date prior to the Closing Date.
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(ii) Copies of its Bylaws, certified as of the Closing Date by
its corporate secretary or an assistant secretary, and in the case of New
Goss Japan, RGS Japan and Goss UK, the comparable or equivalent
documentation.
(iii) Resolutions of its Board of Directors approving and
authorizing the execution, delivery and performance of this Agreement and
the other Loan Documents and Related Agreements to which it is a party,
certified as of the Closing Date by its corporate secretary or an assistant
secretary as being in full force and effect without modification or
amendment;
(iv) Signature and incumbency certificates of its officers
executing this Agreement and the other Loan Documents to which it is a
party;
(v) Executed and acknowledged (where applicable) originals of this
Agreement, the Notes (duly executed in accordance with subsection 2.1F,
drawn to the order of each applicable Lender and with appropriate
insertions) and the other Loan Documents to which it is a party, which Loan
Documents shall include:
a. in the case of Company: a Collateral Account Agreement, Blocked
Account Agreements, any applicable Collateral Access Agreements, Lock
Box Agreements, Guaranties of the Obligations of Goss Japan and Goss
UK, Pledge Agreements pledging 100% of the stock of its Domestic
Subsidiaries and 66% of the stock of its Foreign Subsidiaries, a
Security Agreement, a Trademark Security Agreement, a Patent Security
Agreement, Mortgages and the Share Transfer Agreement (as executed by
Company and Tomita);
b. in the case of RGS Japan with respect to its Obligations: a
Collateral Account Agreement, Blocked Account Agreements, Security
Agreements, a Trademark Security Agreement, a Patent Security
Agreement, any applicable Collateral Access Agreements, Mortgages and
the Assumption Agreement;
c. in the case of New Goss Japan: a Guaranty of the Obligations of
RGS Japan, a Pledge Agreement pledging 100% of the stock of RGS Japan
and the Assumption Agreement;
d. in the case of Goss UK with respect to its Obligations: a
Collateral Account Agreement, Blocked Account Agreements, any
applicable Collateral Access Agreements, a Security Agreement, a
Trademark Security Agreement, a Patent Security Agreement and
Mortgages;
(vi) An Officers' Certificate from each Borrower (and in the case
of Goss Japan, both New Goss Japan and RGS Japan) as to authorized
signatories of that Borrower for Notices of Borrowing, Notices of
Conversion/Continuation, Notices of Issuance of Letters of Credit and
Notices of Allocation; and
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(vii) Such other documents as Administrative Agent may reasonably
request.
B. Holdings and Subsidiary Documents. On or before the Closing Date,
Company shall cause Holdings, and each Borrower shall cause each of its
Subsidiaries (including after giving effect to the consummation of the
Acquisition) to deliver to Lenders (or to Administrative Agent for Lenders with
sufficient originally executed copies, where appropriate, for each Lender and
its counsel) the following, each, unless otherwise noted, dated the Closing
Date:
(i) Certified copies of the Certificate or Articles of Incorporation
of such Person, together with a good standing certificate from the
Secretary of State of the State of its jurisdiction of incorporation and
each other state in which such Person is qualified as a foreign corporation
to do business and, to the extent generally available, a certificate or
other evidence of good standing as to payment of any applicable franchise
or similar taxes from the appropriate taxing authority of each of such
jurisdictions, and in the case of any Foreign Subsidiary, the comparable or
equivalent documentation under the laws of the applicable Governmental
Authority, each dated a recent date prior to the Closing Date;
(ii) Copies of the Bylaws of such Person, certified as of the
Closing Date by such Person's corporate secretary or an assistant
secretary, and in the case of any Foreign Subsidiary, the comparable or
equivalent documentation;
(iii) Resolutions of the Board of Directors of such Person
approving and authorizing the execution, delivery and performance of the
Loan Documents and Related Agreements to which it is a party, certified as
of the Closing Date by the corporate secretary or an assistant secretary of
such Person as being in full force and effect without modification or
amendment;
(iv) Signature and incumbency certificates of the officers of
such Person executing the Loan Documents to which it is a party;
(v) Executed originals of the Loan Documents to which such Person is
a party, which Loan Documents shall include:
a. in the case of Goss France: Blocked Account Agreements, a
Subsidiary Guaranty of the Obligations of Goss UK, and, with respect
to such Subsidiary Guaranty, a Mortgage, a Subsidiary Trademark
Security Agreement and a Subsidiary Patent Security Agreement;
b. in the case of each Domestic Subsidiary: Blocked Account
Agreements, any applicable Collateral Access Agreements, Lock Box
Agreements, Subsidiary Guaranties of the Obligations of each Borrower,
and with respect to such Subsidiary Guaranties, a Subsidiary Pledge
Agreement, a
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Subsidiary Security Agreement, a Subsidiary Trademark Security
Agreement, a Subsidiary Patent Security Agreement and Mortgages;
c. in the case of each other Foreign Subsidiary: Blocked
Account Agreements, any applicable Collateral Access Agreements, Lock
Box Agreements, and, to the extent available without causing adverse
tax consequences for Company and its Subsidiaries, Subsidiary
Guaranties of the Obligations of the Borrowers, and with respect to
such Subsidiary Guaranties, a Subsidiary Pledge Agreement, a
Subsidiary Security Agreement, a Subsidiary Trademark Security
Agreement, a Subsidiary Patent Security Agreement and Mortgages; and
d. in the case of Holdings: Guaranties of the Obligations of
each Borrower, and, with respect to such Guaranties, a Pledge
Agreement pledging 100% of Company's Stock and a Security Agreement;
and
(vi) Such other documents as Administrative Agent may reasonably
request.
C. Corporate and Capital Stock Structure, Ownership, Management, Etc.
The capital stock, organizational and share ownership structure of Company and
its Subsidiaries, both before and after giving effect to the Acquisition and the
Company Merger, shall be as set forth on Schedule 5.1 annexed hereto (and
------------
Administrative Agent shall have received an Officers' Certificate of Company to
such effect), and Administrative Agent shall have received copies of, and shall
be satisfied with the form and substance of any and all employment contracts
with senior management of Company and its Subsidiaries.
D. Proceeds of Debt and Equity Capitalization of Holdings and Company.
(i) Equity Capitalization of Holdings. On or before the Closing
---------------------------------
Date, (a) Stonington and its Affiliates and Management Investors shall have
purchased all of the outstanding Holdings Common Stock for a cash
consideration of not less than $112,500,000, and (b) Holdings shall have
issued to Rockwell all of the outstanding Holdings Preferred Stock with an
aggregate liquidation preference equal to $47,500,000. The terms and
conditions of the Holdings Preferred Stock, including the type and amount
of dividend payments and any redemption provisions, shall be satisfactory
to Administrative Agent and Requisite Lenders, provided that no payments of
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cash dividends shall be required thereon. Holdings shall have delivered to
Administrative Agent an Officers' Certificate in form and substance
reasonably satisfactory to Administrative Agent setting forth the
shareholders of, and such shareholders' share ownership interests in, the
Holdings Common Stock.
(ii) Debt and Equity Capitalization of Company. On or before the
-----------------------------------------
Closing Date, (a) Holdings shall have contributed to Company, as common
equity, all of the cash consideration received by Holdings from the sale of
Holdings Common Stock,
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which in no event shall be less than $112,500,000, (b) Company shall have
issued and sold not less than $225,000,000 in aggregate principal amount of
Senior Subordinated Notes, and (c) Company shall have sold to BTCC the
Customer Notes on a non-recourse (except for Assumed Guaranties which in no
event shall exceed $20,000,000) basis for approximately $163,700,000 in
accordance with the terms of the Loan Portfolio Purchase Agreement, as such
amount may be adjusted in accordance with the terms of the Loan Portfolio
Purchase Agreement.
(iii) Use of Proceeds by Company. Company shall have provided
--------------------------
evidence satisfactory to Administrative Agent that the cash proceeds from
the debt and equity capitalization of Company described in the immediately
preceding clause (ii) shall have been irrevocably committed, prior to the
application of the proceeds of the Term Loans and the Revolving Loans made
on the Closing Date, to the payment of the Purchase Price and Transaction
Costs.
E. Related Agreements.
(i) The Senior Subordinated Notes. The terms and conditions of the
-----------------------------
Senior Subordinated Notes shall be satisfactory to Administrative Agent and
Requisite Lenders. Company shall have delivered to Administrative Agent a
fully executed or conformed copy of the Senior Subordinated Note Indenture.
(ii) Approval of Certain Related Agreements. The Stockholders
--------------------------------------
Agreement, the Loan Portfolio Purchase Agreement, the Assumed Guaranties,
the Holdings' Certificate of Designation, and the Transition Agreement,
shall each be satisfactory in form and substance to Administrative Agent
and Requisite Lenders.
(iii) Related Agreements in Full Force and Effect. Administrative
-------------------------------------------
Agent shall have received (a) a fully executed or conformed copy of each
Related Agreement and any documents executed in connection therewith, and
each Related Agreement shall be in full force and effect and no provision
thereof shall have been modified or waived in any respect determined by
Administrative Agent to be material, in each case without the consent of
Administrative Agent and Requisite Lenders, and (b) an Officers'
Certificate from Company, in form and substance satisfactory to
Administrative Agent, certifying to the effect that each such document
(which shall be attached thereto) is correct and complete and is in full
force and effect and certifying as to such matters with respect to each of
the Related Documents. The guaranties to be delivered by Rockwell with
respect to the Customer Notes pursuant to the terms and conditions of the
Loan Portfolio Purchase Agreement shall have been so delivered, shall be in
full force and effect and shall be satisfactory in form and substance to
Administrative Agent.
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F. Termination of Existing Credit Agreements; Existing Letters of Credit.
(i) On the Closing Date, Company and its Subsidiaries shall have (a)
repaid in full all amounts outstanding under any existing credit or other
loan agreements, (b) shall have terminated any commitments to lend or make
other extensions of credit thereunder, (c) delivered to Administrative
Agent all documents or instruments necessary to release all Liens securing
Indebtedness or other obligations of Company and its Subsidiaries
thereunder, including without limitation all termination statements,
terminations of lockbox agreements, blocked account agreements and
collateral account agreements, assignment documents, satisfactions,
reconveyances, releases and similar documents as to any financing
statements, mortgages, deeds of trust, assignment and other agreement or
instruments creating or perfecting liens or security interests which shall
release all liens securing any and all indebtedness under such existing
credit or other loan agreements, and (d) made arrangements satisfactory to
Administrative Agent with respect to the cancellation of any letters of
credit outstanding thereunder or the issuance of Letters of Credit to
support the obligations of Company and its Subsidiaries with respect
thereto.
(ii) Administrative Agent shall have received an Officers'
Certificate of Company stating that after giving effect to the actions
described in this subsection 4.1F, the Indebtedness of the Loan Parties
(other than Indebtedness under the Loan Documents and the Senior
Subordinated Notes) shall consist only of the Indebtedness described on
Schedule 7.1 annexed hereto. The terms and conditions of all such
------------
remaining Indebtedness shall be in form and substance satisfactory to
Administrative Agent.
G. Necessary Consents. Company and its Subsidiaries shall have obtained
all Governmental Authorizations and all consents of other Persons, in each case
that are necessary or advisable in connection with the Acquisition and the
Company Merger, the transactions contemplated by the Loan Documents and the
Related Agreements and the continued operation of the business to be conducted
by Company and its Subsidiaries in substantially the same manner as conducted
prior to the consummation of the Acquisition and the Company Merger, and each of
the foregoing shall be in full force and effect, in each case other than those
the failure to obtain, which either individually or in the aggregate, would not
be reasonably likely to have a Material Adverse Effect. All applicable waiting
periods shall have expired without any action being taken or threatened by any
competent authority which would restrain, prevent or otherwise impose adverse
conditions on the Acquisition or the Company Merger or the financing thereof,
and no action, request for stay, petition for review or rehearing,
reconsideration or appeal shall be pending and any time for agency action to set
aside its consent on its own motion has expired. Administrative Agent shall
have received an Officer's Certificate of Company to the effect set forth in
this subsection 4.1G.
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H. Acquisition and Company Merger.
(i) the Purchase Agreement shall be in full force and effect and
shall not have been amended, supplemented, waived or otherwise modified
without the consent of Administrative Agent and Requisite Lenders,
including without limitation any Closing Date supplements to such Purchase
Agreement, and executed or conformed copies thereof (including all exhibits
and schedules thereto) and any amendments thereto and all documents
executed in connection therewith shall have been delivered to
Administrative Agent;
(ii) the Purchase Agreement and any and all documents executed in
connection therewith shall specifically include provisions, in each case
satisfactory in form and substance to Administrative Agent, providing for
(a) Rockwell's indemnification of Company and its Subsidiaries for all
settlements and judgments arising out of Heidelberger Druckmaschinen AG v.
---------------------------------
Hantscho Commercial Products, Inc. and Rockwell Graphics Systems, Inc.; (b)
----------------------------------------------------------------------
the Transition Agreement; and (c) the transfer to, and ownership by,
Company and its Subsidiaries of all intellectual property rights, including
without limitation all patents, patent applications, copyrights and trade
secrets, which are used primarily in, or related primarily to, the business
to be conducted by Company and its Subsidiaries;
(iii) all conditions to the Acquisition set forth in the Purchase
Agreement shall have been satisfied or the fulfillment of any such
conditions shall have been waived with the consent of Administrative Agent
and Requisite Lenders;
(iv) the Acquisition shall have become effective in accordance
with the terms of the Purchase Agreement;
(v) the Company Merger shall have become effective in accordance with
the terms of the applicable merger agreement and the laws of the State of
Delaware and Company shall have delivered a fully executed copy of such
merger agreement to Administrative Agent and such merger agreement shall be
satisfactory in form and substance to Administrative Agent;
(vi) the aggregate cash purchase price for the Acquired Stock and
Acquired Assets shall not exceed $552,500,000 (subject to certain
adjustments as provided in the Purchase Agreement) plus the issuance of the
----
Holdings Preferred Stock to Rockwell;
(vii) Transaction Costs plus the payment of any financial
advisory, structuring or other similar fees with respect to the Acquisition
and related transactions shall not exceed $30,000,000;
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(viii) Administrative Agent shall have received an Officers'
Certificate of Company to the effect set forth in clauses (i) - (vii).
I. Closing Date Mortgages; Closing Date Mortgage Policies; Etc.
Administrative Agent shall have received from Borrowers and each applicable
Subsidiary:
(a) Closing Date Mortgages. Fully executed and acknowledged
----------------------
Mortgages (each a "Closing Date Mortgage" and, collectively, the "Closing
Date Mortgages"), in proper form for recording in all appropriate places in
all applicable jurisdictions, encumbering each Real Property Asset listed
in Schedule 5.5 annexed hereto and identified on such Schedule as being so
------------
encumbered (each a "Closing Date Mortgaged Property" and, collectively, the
"Closing Date Mortgaged Properties");
(b) Opinions of Local Counsel. An opinion of counsel (which counsel
-------------------------
shall be reasonably satisfactory to Administrative Agent) in each
jurisdiction in which a Closing Date Mortgaged Property is located with
respect to the enforceability of the Closing Date Mortgages to be recorded
in such jurisdiction and such other matters as Administrative Agent may
reasonably request, in each case in form and substance reasonably
satisfactory to Administrative Agent;
(c) Landlord Consents and Estoppels; Recorded Leasehold Interests.
-------------------------------------------------------------
In the case of each Closing Date Mortgaged Property consisting of a
Material Leasehold, (a) a landlord consent and estoppel with respect
thereto and (b) evidence that such Material Leasehold is a recorded or
registered (in the case of Material Leaseholds in the UK) leasehold
property;
(d) Title Insurance. (a) ALTA mortgagee title insurance policies or
---------------
unconditional commitments therefor (or such comparable or equivalent
insurance to the extent available with respect to properties located
outside of the United States) (the "Closing Date Mortgage Policies") issued
by a title company with respect to the Closing Date Mortgaged Properties as
listed in Schedule 5.5 annexed hereto and identified on such Schedule as
------------
being so encumbered, in amounts not less than the respective amounts
designated therein with respect to any particular Closing Date Mortgaged
Properties, insuring fee simple title to, or a valid leasehold interest in,
each such Closing Date Mortgaged Property vested in such Loan Party and
insuring Administrative Agent that the applicable Closing Date Mortgages
create valid and enforceable First Priority mortgage Liens on the
respective Closing Date Mortgaged Properties encumbered thereby, subject
only to the Permitted Encumbrances, which Closing Date Mortgage Policies
(1) shall include an endorsement for mechanics' liens, for future advances
under this Agreement and for any other matters requested by Administrative
Agent and (2) shall provide for affirmative insurance and such reinsurance
as Administrative Agent may request, all of the foregoing in form and
substance reasonably satisfactory to Administrative Agent; and (b) evidence
reasonably satisfactory to Administrative Agent that such Loan Party has
(i) delivered
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to such title company all certificates and affidavits required by the title
company in connection with the issuance of the Closing Date Mortgage
Policies and (ii) paid to the title company or to the appropriate
governmental authorities all expenses and premiums of the title company in
connection with the issuance of the Closing Date Mortgage Policies and all
recording and stamp taxes (including mortgage recording and intangible
taxes) payable in connection with recording the Closing Date Mortgages in
the appropriate real estate records;
(e) Surveys. A current survey with respect to each Closing Date
-------
Mortgaged Property located in the United States prepared in accordance with
the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys
jointly established and adopted by ALTA and ACSM in 1992 and meeting the
requirements of a Class A Survey, as defined therein ("Survey"), showing
gross area of such Closing Date Mortgaged Property, lot lines and
monuments, building lines, easements both burdening and benefiting such
Closing Date Mortgaged Property, utilities, including water and sewer lines
to the point of connection with the public system, the improvements
(including loading docks and the location and number of parking spaces),
encroachments, if any, on such Closing Date Mortgaged Property or over
adjoining properties, and other matters located on or affecting such
Closing Date Mortgaged Property requested by the Administrative Agent.
Each such Survey will contain a certificate addressed to the Administrative
Agent and Title Company in form and substance satisfactory to
Administrative Agent;
(f) Copies of Documents Relating to Title Exceptions. Copies of all
------------------------------------------------
recorded documents listed as exceptions to title or otherwise referred to
in the Closing Date Mortgage Policies;
(g) Matters Relating to Flood Hazard Properties. (a) Evidence, which
-------------------------------------------
may be in the form of a letter from an insurance broker or a municipal
engineer, as to whether (1) any Closing Date Mortgaged Property is a Flood
Hazard Property and (2) the community in which any such Flood Hazard
Property is located is participating in the National Flood Insurance
Program, (b) if there are any such Flood Hazard Properties, such Loan
Party's written acknowledgement of receipt of written notification from
Administrative Agent (1) as to the existence of each such Flood Hazard
Property and (2) as to whether the community in which each such Flood
Hazard Property is located is participating in the National Flood Insurance
Program, and (c) in the event any such Flood Hazard Property is located in
a community that participates in the National Flood Insurance Program,
evidence that Company has obtained flood insurance in respect of such Flood
Hazard Property to the extent required under the applicable regulations of
the Board of Governors of the Federal Reserve System; and
(h) Environmental Indemnity. An environmental indemnity agreement,
-----------------------
satisfactory in form and substance to Administrative Agent and its counsel,
with
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respect to the indemnification of Administrative Agent and Lenders for any
liabilities that may be imposed on or incurred by any of them as a result
of the treatment, storage, disposal, use, presence or Release of any
Hazardous Materials.
J. Security Interests in Personal and Mixed Property. To the extent not
already satisfied pursuant to subsection 4.1I, Administrative Agent shall have
received evidence satisfactory to it that Holdings, Company and their respective
Subsidiaries shall have taken or caused to be taken such actions, executed and
delivered or caused to be executed and delivered all such agreements, documents
and instruments, and made or caused to be made all such filings and recordings
(other than the filing or recording of items described in clauses (iii), (iv)
and (v) below) that may be necessary or, in the opinion of Administrative Agent,
desirable in order to create in favor of Administrative Agent, for the benefit
of Lenders, a valid and (upon such filing and recording) perfected First
Priority security interest as of such date in the entire personal and mixed
property Collateral. Such actions shall include, without limitation, the
following:
(i) Schedules to Collateral Documents. Delivery to Administrative
---------------------------------
Agent of accurate and complete schedules to all of the applicable
Collateral Documents.
(ii) Stock Certificates and Instruments. Delivery to
----------------------------------
Administrative Agent of (a) certificates (which certificates shall be
registered in the name of Administrative Agent or properly endorsed in
blank for transfer or accompanied by irrevocable undated stock powers duly
endorsed in blank, all in form and substance satisfactory to Administrative
Agent) representing the capital stock pledged pursuant to the Pledge
Agreements and the Subsidiary Pledge Agreements and (b) all promissory
notes or other instruments (duly endorsed, where appropriate, in a manner
satisfactory to Administrative Agent) evidencing any Collateral.
(iii) Lien Searches, UCC Termination Statements, Etc. Delivery to
-----------------------------------------------
Administrative Agent of the results of a recent search, by a Person
satisfactory to Administrative Agent, of (a) all effective Uniform
Commercial Code ("UCC") financing statements and fixture filings and all
judgment and tax lien filings which may have been made in the United States
with respect to any personal or mixed property of any Loan Party, together
with copies of all such filings disclosed by such search, (b) all
comparable filings which may have been made with respect to any personal or
mixed property of any Loan Party outside of the United States, together
with copies of all such filings disclosed by such search, and (c) UCC
termination statements or other comparable filings for non-U.S.
jurisdictions duly executed by all applicable Persons for filing in all
applicable jurisdictions as may be necessary to terminate any effective UCC
financing statements or fixture filings or other comparable filings in non-
U.S. jurisdictions disclosed in such searches (other than any such
financing statements or fixture filings in respect of Liens permitted to
remain outstanding pursuant to the terms of this Agreement).
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(iv) UCC Financing Statements, Fixture Filings and Other Filings.
-----------------------------------------------------------
Delivery to Administrative Agent of UCC financing statements, and where
appropriate, fixture filings, and any other comparable filings to be made
outside of the United States, duly executed by each applicable Loan Party with
respect to all personal and mixed property Collateral of such Loan Party, for
filing in all jurisdictions as may be necessary or, in the opinion of
Administrative Agent, desirable to perfect the security interests created
in such Collateral pursuant to the Collateral Documents.
(v) IP Collateral Documents, Etc. Delivery to Administrative Agent
-----------------------------
of the IP Collateral Documents, together with accurate and complete
schedules thereto and any cover sheets or other documents or instruments
required for filing with the United States Patent and Trademark Office (the
"PTO") or any comparable Governmental Authority outside of the United
States.
(vi) Deposit Accounts. Delivery to Administrative Agent of a
----------------
Lock Box Agreement or a Blocked Account Agreement executed by each Person
that is a party thereto with respect to each Deposit Account listed on
Schedule I annexed to the Security Agreements and the Subsidiary Security
----------
Agreements (other than any Concentration Account) as requested by
Administrative Agent.
(vii) Opinions of Local Counsel. Delivery to Administrative Agent
-------------------------
of an opinion of counsel (which counsel shall be reasonably satisfactory to
Administrative Agent) under the laws of each jurisdiction in which any Loan
Party or any personal or mixed property Collateral is located with respect
to the creation and perfection of the security interests in favor of
Administrative Agent in such Collateral and such other matters governed by
the laws of such jurisdiction regarding such security interests, in each
case as Administrative Agent may reasonably request and in form and
substance reasonably satisfactory to Administrative Agent.
(viii) Other Documents. Delivery to Administrative Agent of such
---------------
other documents and instruments that Administrative Agent reasonably deems
necessary or advisable to establish, preserve and perfect the First
Priority Liens granted to Administrative Agent on behalf of Lenders under
the Collateral Documents.
(ix) Evidence of Other Filings. Evidence reasonably satisfactory
-------------------------
to Administrative Agent that all other filings (including, without
limitation, UCC termination statements and comparable instruments under the
laws and regulations of Governmental Authorities outside of the United
States), recordings and other actions Administrative Agent deems necessary
or advisable to establish, preserve and perfect the First Priority Liens
granted to Administrative Agent in personal and mixed property shall have
been made.
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K. Audit of Inventory and Accounts Receivable. On or before the Closing
Date, Administrative Agent (or an independent auditor satisfactory to
Administrative Agent) shall have completed audits of the Inventory and Accounts
of each Borrower and its Subsidiaries, and Administrative Agent shall be
satisfied with the results thereof.
L. Real Estate Appraisals. Administrative Agent shall have received
appraisals from one or more independent real estate appraisers satisfactory to
Administrative Agent, in form, scope and substance reasonably satisfactory to
Administrative Agent and satisfying the requirements of any applicable laws and
regulations, concerning any Closing Date Mortgaged Properties (as defined in
subsection 4.1I) located in the United States, in each case to the extent
required under such laws and regulations as determined by Administrative Agent
in its discretion.
M. Environmental Reports. Administrative Agent shall have received
reports and other information, in form, scope and substance satisfactory to
Administrative Agent, regarding environmental matters relating to the
Facilities.
N. Financial Statements; Pro Forma Balance Sheet. On or before the
Closing Date, Lenders shall have received from Company:
(i) audited financial statements of RGS, consisting of combined
balance sheets for Fiscal Years ended September 30, 1995 and 1994, and the
combined statements of operations and cash flows for Fiscal Years ended
September 30, 1995, 1994 and 1993;
(ii) unaudited financial statements of RGS as at June 30, 1996,
consisting of a combined balance sheet and the related combined statement
of operations and cash flows for the nine-month period ending on such date,
all in reasonable detail and certified by the chief financial officer of
Company that they fairly present the financial condition of RGS as at the
dates indicated and the results of its operations and its cash flows for
the periods indicated, subject to changes resulting from audit and normal
year-end adjustments;
(iii) pro forma combined balance sheet of Company and its
Subsidiaries as at June 30, 1996, prepared in accordance with GAAP and
reflecting the consummation of the Acquisition and the Company Merger and
the financings and other transactions contemplated hereby, which pro forma
financial statements shall be in form and substance satisfactory to
Lenders; and
(iv) projected financial statements of Company and its
Subsidiaries consisting of a combined balance sheet and the related
combined statements of operations and cash flows for the seven-year period
after the Closing Date, which financial projections shall be in form and
substance satisfactory to Lenders.
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O. No Material Adverse Effect. Since September 30, 1995, no Material
Adverse Effect (in the sole opinion of Administrative Agent) shall have
occurred.
P. Solvency Assurances. On the Closing Date, as to each Borrower and
such Borrower's respective Subsidiaries, Administrative Agent and Lenders shall
have received (i) a letter or letters from Murray, Devine & Company dated the
Closing Date and addressed to Administrative Agent and Lenders, in form and
substance satisfactory to Administrative Agent and with appropriate attachments,
and (ii) Financial Condition Certificates dated the Closing Date, substantially
in the form annexed hereto as Exhibit VII and with appropriate attachments, in
-----------
each case demonstrating that, after giving effect to the consummation of the
Acquisition and the Company Merger and the financing transactions contemplated
hereby, each such Borrower and its respective Subsidiaries will be Solvent under
the laws of such Borrower's applicable jurisdiction. In addition,
Administrative Agent shall have received copies of all such other resolutions,
certifications, determinations, appraisals, opinions and other documents and
instruments as may be necessary to comply with the solvency, financial
assistance or other comparable or equivalent laws of such jurisdictions, all of
the foregoing to be in form and substance satisfactory to Administrative Agent.
Q. Insurance Review; Evidence of Insurance. Administrative Agent shall
have received (i) a report from a consultant satisfactory to Administrative
Agent, in form, scope and substance satisfactory to Administrative Agent,
concerning the adequacy of the Borrowers' existing and proposed insurance
program or programs, and (ii) a certificate from Company's insurance broker and
each of Company's Subsidiary's insurance brokers or other evidence satisfactory
to it that all insurance required to be maintained pursuant to subsection 6.4 is
in full force and effect and that Administrative Agent on behalf of Lenders has
been named as additional insured and/or loss payee thereunder to the extent
required under subsection 6.4.
R. No Disruption of Financial and Capital Markets. There shall have been
no material adverse change after July 12, 1996 to the syndication markets for
credit facilities similar in nature to the credit facilities provided herein and
there shall not have occurred and be continuing a material disruption of or
material adverse change in financial, banking or capital markets that would have
an adverse effect on such syndication market, in each case as determined by
Administrative Agent in its sole discretion.
S. Borrowing Base Certificates. On or before the Closing Date, each
Borrower shall have delivered to Administrative Agent and Lenders a Borrowing
Base Certificate substantially in the form of Exhibit VIII annexed hereto
------------
prepared as of a recent date prior to the Closing Date.
T. Opinions of Borrowers' Counsel. Lenders shall have received
(i) originally executed copies of one or more favorable written opinions of
Wachtell, Lipton, Rosen & Katz, counsel for Borrowers, and of Jack E. Merryman,
General Counsel of the Borrowers,
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in form and substance reasonably satisfactory to Administrative Agent and its
counsel, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in Exhibit IX-A annexed hereto, Exhibit IX-B
------------ ------------
annexed hereto and as to such other matters as Administrative Agent acting on
behalf of Lenders may reasonably request, and (ii) originally executed copies of
one or more favorable written opinions of (i) Nishimura & Partners, local
counsel for Goss Japan, (ii) Linklaters & Paines, local counsel for Goss UK, and
(iii) Bredin Prat & Associes, local counsel for Goss France, each in form and
substance reasonably satisfactory to Administrative Agent and its counsel, dated
as of the Closing Date and setting forth substantially the matters in the
opinions designated in Exhibit X-A annexed hereto, Exhibit X-B annexed hereto
----------- -----------
and Exhibit X-C annexed hereto and as to such other matters as Administrative
-----------
Agent acting on behalf of Lenders may reasonably request.
U. Opinions of O'Melveny & Myers LLP. Lenders shall have received
originally executed copies of one or more favorable written opinions of
O'Melveny & Myers LLP, dated as of the Closing Date, substantially in the form
of Exhibit XI annexed hereto and as to such other matters as Administrative
----------
Agent acting on behalf of Lenders may reasonably request.
V. Opinions of Counsel Delivered Under Related Agreements.
Administrative Agent and its counsel shall have received copies of each of the
opinions of counsel delivered to the parties under the Related Agreements,
together with a letter from each such counsel authorizing Lenders to rely upon
such opinion to the same extent as though it were addressed to Lenders.
W. Auditor's Letters and Stand-Alone Report. Administrative Agent shall
have received (i) copies of the Auditor's Letter acknowledged by Auditors and
(ii) a report from Auditors, in form, scope and substance satisfactory to
Administrative Agent, concerning certain stand-alone costs of RGS.
X. Expenses and Fees. Company shall have paid to Administrative Agent,
for distribution (as appropriate) to Administrative Agent, Syndication Agent,
Documentation Agent and Lenders, the fees payable on the Closing Date referred
to in subsection 2.3. Company shall have paid to Administrative Agent all of
the Administrative Agent's costs and expenses incurred in connection with the
consummation of the transactions contemplated hereby and shall have paid all of
the fees, costs and expenses of all of Administrative Agent's experts,
consultants, auditors, appraisers, counsel and other advisors, including without
limitation the fees and expenses of O'Melveny & Myers LLP and of local and
foreign counsel to Administrative Agent.
Y. Representations and Warranties; Performance of Agreements. Each
Borrower shall have delivered to Administrative Agent an Officers' Certificate,
in form and substance satisfactory to Administrative Agent, to the effect that
the representations and warranties in Section 5 hereof are true, correct and
complete in all material respects on and as of the Closing Date to the same
extent as though made on and as of that date (or, to the
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extent such representations and warranties specifically relate to an earlier
date, that such representations and warranties were true, correct and complete
in all material respects on and as of such earlier date) and that such Borrower
shall have performed in all material respects all agreements and satisfied all
conditions which this Agreement provides shall be performed or satisfied by it
on or before the Closing Date except as otherwise disclosed to and agreed to in
writing by Administrative Agent and Requisite Lenders.
Z. Due Diligence. The results of Agents' continuing financial, legal,
tax and accounting due diligence investigations with respect to the Acquisition
and the other transactions contemplated hereunder, including without limitation
the due diligence investigation with respect to the future need for customer
notes and customer advances, shall be satisfactory in all respects to Agents,
and any supplemental business or financial due diligence that Agents reasonably
determine has become necessary shall not have disclosed information not
previously disclosed to Agents which causes the results of such diligences not
to be satisfactory in all respects to Agents and the other Lenders. Lenders
shall have also received any information reasonably necessary to conduct their
continuing due diligence.
AA. Completion of Proceedings. All corporate and other proceedings taken
or to be taken in connection with the transactions contemplated hereby and all
documents incidental thereto not previously found acceptable by Administrative
Agent, acting on behalf of Lenders, and its counsel shall be satisfactory in
form and substance to Administrative Agent and such counsel, and Administrative
Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Administrative Agent may reasonably
request.
Each Lender hereby agrees that by its execution and delivery of its
signature pages thereto and by the funding of its loans to be made on the
Closing Date, such Lender approves of and consents to each of the matters set
forth in this subsection 4.1 which must be approved by, or which must be
satisfactory to, all or Requisite Lenders; provided that in the case of any
--------
agreement or document which must be approved by, or which must be satisfactory
to, all or Requisite Lenders, Administrative Agent or Company shall have
delivered a copy of such agreement or document in substantially the form in
which executed or delivered to such Lender on or prior to the Closing Date.
4.2 Conditions to All Loans.
-----------------------
The obligations of Lenders to make Loans on each Funding Date are
subject to the following further conditions precedent:
A. Administrative Agent (with a copy to Agent) shall have received before
that Funding Date, in accordance with the provisions of subsection 2.1B, an
originally executed Notice of Borrowing, in each case signed by the chief
executive officer, the chief financial
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officer or the treasurer of the Borrower or by any other authorized signatory of
such Borrower.
B. As of that Funding Date:
(i) The representations and warranties contained herein and in the
other Loan Documents shall be true, correct and complete in all material
respects on and as of that Funding Date to the same extent as though made
on and as of that date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case such
representations and warranties shall have been true, correct and complete
in all material respects on and as of such earlier date;
(ii) No event shall have occurred and be continuing or would
result from the consummation of the borrowing contemplated by such Notice
of Borrowing that would constitute an Event of Default or a Potential Event
of Default;
(iii) Borrower shall have performed in all material respects all
agreements and satisfied all conditions which this Agreement provides shall
be performed or satisfied by it on or before that Funding Date;
(iv) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans to be made by it on that Funding Date;
(v) The making of the Loans requested on such Funding Date shall not
violate any law including, without limitation, Regulation G, Regulation T,
Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System or any other comparable or similar law of any Governmental
Authority; and
(vi) There shall not be pending or, to the knowledge of Borrower,
threatened, any action, suit, proceeding, governmental investigation or
arbitration against or affecting Company or any of its Subsidiaries or any
property of Company or any of its Subsidiaries that has not been disclosed
by any Borrower in writing pursuant to subsection 5.6 or 6.1(x) prior to
the making of the last preceding Loans (or, in the case of the initial
Loans, prior to the execution of this Agreement), and there shall have
occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, that,
in either event, in the opinion of Administrative Agent or of Requisite
Lenders, would be expected to have a Material Adverse Effect; and no
injunction or other restraining order shall have been issued and no hearing
to cause an injunction or other restraining order to be issued shall be
pending or noticed with respect to any action, suit or proceeding seeking
to enjoin or otherwise prevent the consummation of, or to recover any
damages or obtain relief as a result of, the transactions contemplated by
this Agreement or the making of Loans hereunder.
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4.3 Conditions to Letters of Credit.
-------------------------------
The issuance of any Letter of Credit hereunder (whether or not the
Issuing Lender is obligated to issue such Letter of Credit) is subject to the
following conditions precedent:
A. On or before the date of issuance of the initial Letter of Credit
pursuant to this Agreement, the initial Loans shall have been made.
B. On or before the date of issuance of such Letter of Credit,
Administrative Agent (with a copy to Agent) shall have received, in accordance
with the provisions of subsection 3.1B(i), an originally executed Notice of
Issuance of Letter of Credit, in each case signed by the chief executive
officer, the chief financial officer or the treasurer of Borrower, or by any
other authorized signatory of Borrower, together with all other information
specified in subsection 3.1B(i) and such other documents or information as the
Issuing Lender may reasonably require in connection with the issuance of such
Letter of Credit.
C. On the date of issuance of such Letter of Credit, all conditions
precedent described in subsection 4.2B shall be satisfied to the same extent as
if the issuance of such Letter of Credit were the making of a Loan and the date
of issuance of such Letter of Credit were a Funding Date.
Section 5. BORROWERS' REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make
the Loans, to induce Issuing Lenders to issue Letters of Credit and to induce
other Lenders to purchase participations therein, each Borrower represents and
warrants to each Lender, on the date of this Agreement, on each Funding Date and
on the date of issuance of each Letter of Credit, that the following statements
are true, correct and complete:
5.1 Organization, Powers, Qualification, Good Standing, Business and
----------------------------------------------------------------
Subsidiaries.
- ------------
A. Organization and Powers. Each Loan Party is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each Loan Party has all requisite corporate
power and authority to own and operate its properties, to carry on its business
as now conducted and as proposed to be conducted, to enter into the Loan
Documents and the Related Agreements to which it is a party and to carry out the
transactions contemplated thereby.
B. Qualification and Good Standing. Each Loan Party is qualified to do
business and in good standing in every jurisdiction where its assets are located
and wherever necessary to carry out its business and operations, except in
jurisdictions, individually or in
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the aggregate for all such jurisdictions, where the failure to be so qualified
or in good standing has not had and will not have a Material Adverse Effect.
C. Conduct of Business. Company and its Subsidiaries are engaged only in
the businesses permitted to be engaged in pursuant to subsection 7.11.
D. Subsidiaries. All of the Subsidiaries of Holdings are identified in
Schedule 5.1 annexed hereto. The capital stock of each of the Subsidiaries of
- ------------
Holdings identified in Schedule 5.1 annexed hereto is duly authorized, validly
------------
issued, fully paid and nonassessable and none of such capital stock constitutes
Margin Stock. Each of the Subsidiaries of Holdings identified in Schedule 5.1
------------
annexed hereto is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation set
forth therein, has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted, and is qualified to do business and in good standing
in every jurisdiction where its assets are located and wherever necessary to
carry out its business and operations, in each case except where failure to be
so qualified or in good standing or a lack of such corporate power and
authority, individually or in the aggregate, has not had and will not have a
Material Adverse Effect. Schedule 5.1 annexed hereto correctly sets forth, the
------------
ownership interest of Holdings and each of its Subsidiaries in each of the
Subsidiaries of Holdings identified therein.
5.2 Authorization of Borrowing, etc.
--------------------------------
A. Authorization of Borrowing. The execution, delivery and performance
of the Loan Documents and the Related Agreements have been duly authorized by
all necessary corporate action on the part of each Loan Party that is a party
thereto.
B. No Conflict. The execution, delivery and performance by any Loan
Party of the Loan Documents and the Related Agreements to which it is a party
and the consummation of the transactions contemplated by the Loan Documents and
such Related Agreements do not and will not (i) violate any provision of any law
or any governmental rule or regulation applicable to any Loan Party, the
Certificate or Articles of Incorporation or Bylaws, or other organizational or
governing documents, of any Loan Party or any order, judgment or decree of any
court or other Governmental Authority binding on any Loan Party, (ii) conflict
with, result in a breach of or constitute (with due notice or lapse of time or
both) a default under any Contractual Obligation of any Loan Party, except for
such breaches, conflicts and defaults which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, (iii) result
in or require the creation or imposition of any Lien upon any of the properties
or assets of any Loan Party (other than any Liens created under any of the Loan
Documents in favor of Administrative Agent on behalf of Lenders), or
(iv) require any approval of stockholders or any approval or consent of any
Person under any Contractual Obligation of any Loan Party, except for such
approvals or consents (a) which will be obtained on or before the Closing Date
or (b) which
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the failure to obtain could not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect.
C. Governmental Consents. The execution, delivery and performance by any
Loan Party of the Loan Documents and the Related Agreements to which it is a
party and the consummation of the transactions contemplated by the Loan
Documents and such Related Agreements do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body, except for those set forth on Schedules 5(d) and 6(d) to the Purchase
Agreement, filings required by federal or state securities laws, filing under
the Hart-Scott-Rodino Antitrust Improvement Act, filings required in respect of
the Goss Japan Merger under the Japanese Antimonopoly Law (which filing will be
made after the Closing Date), filings required in connection with the perfection
of security interests granted pursuant to the Loan Documents, and such other
registrations, consents, approvals, notices or other actions which have been or
will be made, obtained, given or taken on or before the Closing Date or which
the failure to obtain or take could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
D. Binding Obligation. Each of the Loan Documents and the Related
Agreements has been duly executed and delivered by each Loan Party that is a
party thereto and is the legally valid and binding obligation of such Loan
Party, enforceable against such Loan Party in accordance with its respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability.
E. Valid Issuance of Company Common Stock, Holdings Common Stock and
Holdings Preferred Stock.
(i) Company Common Stock. The Company Common Stock to be sold on or
--------------------
before the Closing Date, when issued and delivered, will be duly and
validly issued, fully paid and nonassessable. No stockholder of Company
has or will have any preemptive rights to subscribe for any additional
equity Securities of Company. The issuance and sale of such Company Common
Stock, upon such issuance and sale, will either (a) have been registered or
qualified under applicable federal and state securities laws or (b) be
exempt therefrom.
(ii) Holdings Common Stock. All issued and outstanding shares of
---------------------
Holdings Common Stock have been duly and validly issued, fully paid and
nonassessable. Except as provided in the Stockholders Agreement, no
stockholder of Holdings has or will have any preemptive rights to subscribe
for any additional equity Securities of Holdings. Any issuance and sale of
Holdings Common Stock, upon such issuance and sale, will either (a) have
been registered or qualified under applicable federal and state securities
laws or (b) be exempt therefrom.
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(iii) Holdings Preferred Stock. All issued and outstanding shares
------------------------
of Holdings Preferred Stock have been duly and validly issued, fully paid
and nonassessable. No stockholder of Holdings has or will have any
preemptive rights to subscribe for anyadditional Holdings Preferred Stock.
Any issuance and sale of Holdings Preferred Stock, upon such issuance and
sale, will either (a) have been registered and qualified under applicable
federal and state securities laws or (b) be exempt therefrom.
5.3 Financial Condition.
-------------------
Company has heretofore delivered to Lenders, at Lenders' request, the
financial statements and information described in subsection 4.1N. All such
statements (other than the projected financial statements of Company and its
Subsidiaries) were prepared in conformity with GAAP and fairly present the
financial position (on a consolidated and, where applicable, consolidating
basis) of the entities described in such financial statements as at the
respective dates thereof and the results of operations and cash flows (on a
consolidated and, where applicable, consolidating basis) of the entities
described therein for each of the periods then ended, subject, in the case of
any such unaudited financial statements, to changes resulting from audit and
normal year-end adjustments. None of the Loan Parties has (and none of the Loan
Parties will have following the funding of the initial Loans) any Contingent
Obligation, contingent liability or liability for taxes, long-term lease or
unusual forward or long-term commitment that is not reflected in the foregoing
financial statements or the notes thereto and which in any such case is material
in relation to the business, operations, properties, assets, condition
(financial or otherwise) or prospects of Company and its Subsidiaries, taken as
a whole.
5.4 No Material Adverse Change; No Restricted Junior Payments.
---------------------------------------------------------
Since September 30, 1995, no event or change has occurred that has
caused or evidences, either in any case or in the aggregate, a Material Adverse
Effect. Since April 26, 1996, neither Company nor any of its Subsidiaries has
directly or indirectly declared, ordered, paid or made, or set apart any sum or
property for, any Restricted Junior Payment or agreed to do so except as
permitted by the Purchase Agreement or by subsection 7.5.
5.5 Title to Properties; Liens.
--------------------------
Except as set forth in Schedules 5(j)(i) and 5(j)(ii) to the Purchase
Agreement, Holdings, Company and their respective Subsidiaries have (i) good,
sufficient and legal title to (in the case of fee interests in real property),
(ii) valid leasehold interests in (in the case of leasehold interests in real or
personal property), or (iii) good title to (in the case of all other personal
property), all of their respective properties and assets reflected in the
financial statements referred to in subsection 5.3 or in the most recent
financial statements delivered pursuant to subsection 6.1, in each case except
for assets disposed of since the date of such financial statements in the
ordinary course of business or as otherwise
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permitted under subsection 7.2. Except for Permitted Encumbrances, all such
properties and assets are free and clear of Liens. Schedule 5.5 annexed hereto
------------
sets forth all of the Real Property Assets of Company and its Subsidiaries as of
the Closing Date.
5.6 Litigation; Adverse Facts.
-------------------------
Except as set forth in Schedule 5.6 annexed hereto or, with respect to
------------
Environmental Claims, as set forth on Schedule 5.13 annexed hereto, there are no
-------------
actions, suits, proceedings, arbitrations or governmental investigations
(whether or not purportedly on behalf of Holdings, Company or any of their
respective Subsidiaries) at law or in equity or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, pending or, to the knowledge of any
Borrower, threatened against or affecting Holdings, Company or any of their
respective Subsidiaries or any property of Holdings, Company or any of their
respective Subsidiaries that, individually or in the aggregate, could reasonably
be expected to result in a Material Adverse Effect. Neither Holdings nor
Company nor any of their respective Subsidiaries is (i) in violation of any
applicable laws (excluding Environmental Laws which are covered in subsection
5.13) that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect or (ii) subject to or in default with
respect to any final judgments, writs, injunctions, decrees, rules or
regulations of any court or any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect.
5.7 Payment of Taxes.
----------------
Except to the extent permitted by subsection 6.3, all material tax returns
and reports of Holdings, Company and their respective Subsidiaries required to
be filed by any of them have been timely filed, and all material taxes,
assessments, fees and other governmental charges upon Holdings, Company and
their respective Subsidiaries and upon their respective properties, assets,
income, businesses and franchises which are due and payable have been paid when
due and payable. None of the Borrowers knows of any material proposed tax
assessment against Holdings, Company or any of their respective Subsidiaries
which is not being actively contested by Holdings, Company or such Subsidiary in
good faith and by appropriate proceedings; provided that such reserves or other
--------
appropriate provisions, if any, as shall be required in conformity with GAAP
shall have been made or provided therefor.
5.8 Performance of Agreements; No Materially Adverse Agreements.
-----------------------------------------------------------
A. Neither Holdings nor Company nor any of their respective Subsidiaries
is in default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any of its Contractual
Obligations, and no condition exists that, with the giving of notice or the
lapse of time or both, would constitute such a default, except
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where the consequences, direct or indirect, of such default or defaults, if any,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
B. Neither Holdings nor Company nor any of their respective Subsidiaries
is a party to or is otherwise subject to any agreements or instruments or any
charter or other internal restrictions which, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect.
C. The Material Contracts of each of Holdings and Company and their
respective Subsidiaries are in full force and effect and no material defaults
currently exist thereunder.
5.9 Governmental Regulation.
-----------------------
Neither Holdings nor Company nor any of their respective Subsidiaries
is subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Interstate Commerce Act or the Investment Company Act
of 1940 or under any other federal or state statute or regulation or under any
other comparable or similar laws of any Governmental Authority which may limit
its ability to incur Indebtedness or which may otherwise render all or any
portion of the Obligations unenforceable.
5.10 Securities Activities.
---------------------
Neither Holdings nor Company nor any of their respective Subsidiaries
is engaged principally, or as one of its important activities, in the business
of extending credit for the purpose of purchasing or carrying any Margin Stock.
5.11 Employee Benefit Plans.
----------------------
A. Holdings and Company and each of their respective Subsidiaries are in
compliance in all material respects with all applicable provisions and
requirements of ERISA and the regulations and published interpretations
thereunder and the terms of each Employee Benefit Plan, and have performed all
their material obligations under each Employee Benefit Plan.
B. No ERISA Event has occurred or is reasonably expected to occur that
could reasonably be expected to result in an aggregate liability to the Company
or any of its Subsidiaries of more than $1,000,000.
C. In accordance with the most recent actuarial valuation for any Pension
Plan, the excess of the aggregated accumulated benefit obligations, as defined
in Statement of Financial Accounting Standards No. 87, over the aggregate total
fair market value for all such Pension Plans (excluding for purposes of such
computation (1) any Pension Plans with respect to which the fair market value of
the assets exceeds such accumulated benefit obligations and (2) any Foreign
Unfunded Pension Plan), does not exceed $5,000,000.
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5.12 Certain Fees.
------------
Except as set forth in Schedule 5.12 annexed hereto, no broker's or
-------------
finder's fee or commission will be payable with respect to this Agreement or any
of the transactions contemplated hereby, and each Borrower hereby indemnifies
Lenders against, and agrees that it will hold Lenders harmless from, any claim,
demand or liability for any such broker's or finder's fees alleged to have been
incurred in connection herewith or therewith and any expenses (including
reasonable fees, expenses and disbursements of counsel) arising in connection
with any such claim, demand or liability.
5.13 Environmental Protection.
------------------------
Except as set forth in Schedule 5.13 annexed hereto:
-------------
(i) the operations of Company and each of its Subsidiaries
(including, without limitation, all operations and conditions at or in the
Facilities) comply in all material respects with all Environmental Laws;
(ii) Company and each of its Subsidiaries have obtained all
Governmental Authorizations under Environmental Laws necessary to their
respective operations, and all such Governmental Authorizations are being
maintained in good standing, and Company and each of its Subsidiaries are
in compliance in all material respects with such Governmental
Authorizations;
(iii) neither Company nor any of its Subsidiaries has received
(a) any notice or claim to the effect that it is or may be liable to any
Person as a result of or in connection with any Hazardous Materials or
(b) any letter or request for information under Section 104 of the
Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Sec. 9604) or comparable state laws, and, to the best of the
Borrowers' knowledge, none of the operations of Company or any of its
Subsidiaries is the subject of any federal or state investigation relating
to or in connection with any Hazardous Materials at any Facility or at any
other location except for such of the foregoing which would not reasonably
be expected to have a Material Adverse Effect;
(iv) none of the operations of Company or any of its Subsidiaries
is subject to any judicial or administrative proceeding alleging the
violation of or liability under any Environmental Laws which if adversely
determined could reasonably be expected to have a Material Adverse Effect;
(v) neither Company nor any of its Subsidiaries nor any of their
respective Facilities or operations are subject to any outstanding written
order or agreement with any governmental authority or private party
relating to (a) any actual or potential violation of or liability under
Environmental Laws or (b) any Environmental Claims
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except for such of the foregoing which would not reasonably be expected to
have a Material Adverse Effect;
(vi) neither Company nor any of its Subsidiaries has any
contingent liability in connection with any Release by Company or any of
its Subsidiaries except for such of the foregoing which would not
reasonably be expected to have a Material Adverse Effect;
(vii) neither Company nor any of its Subsidiaries nor, to the best
knowledge of the Borrowers, any predecessor of Company or any of its
Subsidiaries has filed any notice under any Environmental Law indicating
past or present treatment, storage or disposal of hazardous waste at any
Facility, as defined under 40 C.F.R. Parts 260-270 or any state equivalent;
(viii) no Hazardous Materials exist on, under or about any Facility
in a manner that would reasonably be expected to give rise to an
Environmental Claim having a Material Adverse Effect, and neither Company
nor any of its Subsidiaries has filed any notice or report of a Release
that would reasonably be expected to give rise to an Environmental Claim
having a Material Adverse Effect;
(ix) neither Company nor any of its Subsidiaries nor, to the best
knowledge of Company, any of their respective predecessors has disposed of
any Hazardous Materials in a manner that would reasonably be expected to
give rise to an Environmental Claim having a Material Adverse Effect;
(x) to the best knowledge of Company, no underground storage tanks or
surface impoundments are on or at any Facility; and
(xi) no Lien in favor of any Person relating to or in connection
with any Environmental Claim has been filed or has been attached to any
Facility except for any such Lien which would not reasonably be expected to
have a Material Adverse Effect.
Notwithstanding anything in this subsection 5.13 to the contrary, no
event or condition has occurred with respect to the Loan Parties relating to any
Environmental Laws or any Release of any Hazardous Materials at any Facility or
any other location, including without limitation any matter disclosed in
Schedule 5.13 annexed hereto which, individually or in the aggregate, has had or
- -------------
could reasonably be expected to have, a Material Adverse Effect.
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5.14 Employee Matters.
----------------
There is no strike or work stoppage in existence or threatened
involving Company or any of its Subsidiaries that could reasonably be expected
to have a Material Adverse Effect.
5.15 Solvency.
--------
Company and each of its Subsidiaries is and, upon the incurrence of
any Obligations by any Borrower on any date on which this representation is
made, will be, Solvent.
5.16 Disclosure.
----------
No representation or warranty of Company or any of its Subsidiaries
contained in any Loan Document or Related Agreement or in any other document,
certificate or written statement furnished to Lenders by or on behalf of Company
or any of its Subsidiaries for use in connection with the transactions
contemplated by this Agreement contains any untrue statement of a material fact
or omits to state a material fact (known to any Borrower, in the case of any
document not furnished by it) necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances in
which the same were made. Any projections and pro forma financial information
contained in such materials are based upon good faith estimates and assumptions
believed by the Borrowers to be reasonable at the time made, it being recognized
by Lenders that such projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any such
projections may differ from the projected results. There are no facts known (or
which should upon the reasonable exercise of diligence be known) to the
Borrowers (other than matters of a general economic nature) that, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect and that have not been disclosed herein or in such other
documents, certificates and statements furnished to Lenders for use in
connection with the transactions contemplated hereby.
5.17 Related Agreements.
------------------
A. Company has delivered to Lenders complete and correct copies of the
Related Agreements and of all exhibits and schedules thereto.
B. Except to the extent otherwise set forth herein or in the schedules
hereto, each of the representations and warranties given by Rockwell to Company
in the Purchase Agreement is true and correct in all material respects as of the
Closing Date, subject to the qualifications set forth in the schedules to the
Purchase Agreement.
C. Each of the representations and warranties given by Company to
Rockwell in the Purchase Agreement is true and correct in all material respects
as of the Closing Date.
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<PAGE>
D. Notwithstanding anything in the Purchase Agreement to the contrary,
the representations and warranties of Borrowers set forth in subsections 5.17B
and 5.17C shall, solely for purposes of this Agreement, survive the Closing Date
for the benefit of Lenders.
Section 6. BORROWERS' AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that, so long as any of the
Commitments hereunder shall remain in effect and until payment in full of all of
the Loans and other Obligations and the cancellation or expiration of all
Letters of Credit, unless Requisite Lenders shall otherwise give prior written
consent, such Borrower shall perform, and shall cause each of its Subsidiaries
to perform, all covenants in this Section 6.
6.1 Financial Statements and Other Reports.
--------------------------------------
Each Borrower will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP. Company will deliver to Administrative Agent and Lenders:
(i) Monthly Financials: as soon as available and in any event (1)
------------------
within 45 days after the end of each month ending after the Closing Date
through the first anniversary of the Closing Date and (2) within 30 days
after the end of each month ending after the first anniversary of the
Closing Date, (a) the consolidated and consolidating (by geographic region,
which regions shall consist of the United States, Europe and Asia (each, a
"Region")) balance sheets of each Borrower and its Subsidiaries as at the
end of such month and the related consolidated and consolidating (by
Region) statements of income, stockholders' equity and cash flows of such
Borrower and its Subsidiaries for such month and for the period from the
beginning of the then current Fiscal Year to the end of such month and, in
the case of such monthly financials delivered after the first anniversary
of the Closing Date, setting forth in comparative form the corresponding
figures for the corresponding periods of the previous Fiscal Year and the
corresponding figures from the Financial Plan for the current Fiscal Year,
all in reasonable detail and certified by the chief financial officer of
Company that they fairly present, in all material respects, the financial
condition of such Borrower and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments, and (b) a report describing the operations of such Borrower
and its Subsidiaries in the form prepared for presentation to senior
management for such month and for the period from the beginning of the then
current Fiscal Year to the end of such month;
(ii) Quarterly Financials: as soon as available and in any event
--------------------
within 45 days after the end of each Fiscal Quarter, (a) the consolidated
and consolidating (by
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Region) balance sheets of each Borrower and its Subsidiaries as at the end
of such Fiscal Quarter and the related consolidated and consolidating (by
Region) statements of income, stockholders' equity and cash flows of such
Borrower and its Subsidiaries for such Fiscal Quarter and for the period
from the beginning of the then current Fiscal Year to the end of such
Fiscal Quarter, setting forth in each case in comparative form the
corresponding figures for the corresponding periods of the previous Fiscal
Year and the corresponding figures from the Financial Plan for the current
Fiscal Year, all in reasonable detail and certified by the chief financial
officer of Company that they fairly present, in all material respects, the
financial condition of such Borrower and its Subsidiaries as at the dates
indicated and the results of their operations and their cash flows for the
periods indicated, subject to changes resulting from audit and normal year-
end adjustments, and (b) a narrative report describing the operations of
such Borrower and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Quarter and for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter;
(iii) Year-End Financials: as soon as available and in any event
-------------------
within 90 days after the end of each Fiscal Year, (a) the consolidated and
consolidating (by Region) balance sheets of such Borrower and its
Subsidiaries as at the end of such Fiscal Year and the related consolidated
and consolidating (by Region) statements of income, stockholders' equity
and cash flows of such Borrower and its Subsidiaries for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures
for the previous Fiscal Year and the corresponding figures from the
Financial Plan for the Fiscal Year covered by such financial statements,
all in reasonable detail and certified by the chief financial officer of
Company that they fairly present, in all material respects, the financial
condition of such Borrower and its Subsidiaries as at the dates indicated
and the results of their operations and their cash flows for the periods
indicated, (b) a narrative report describing the operations of such
Borrower and its Subsidiaries in the form prepared for presentation to
senior management for such Fiscal Year, and (c) in the case of such
consolidated financial statements with respect to Company and its
Subsidiaries, (1) a report thereon of Arthur Andersen LLP or other
independent certified public accountants of recognized national standing
selected by Company and satisfactory to Administrative Agent, which report
shall be unqualified as to scope of audit, shall express no doubts about
the ability of Company and its Subsidiaries to continue as a going concern,
and shall state that such consolidated financial statements fairly present,
in all material respects, the consolidated financial position of Company
and its Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years (except as
otherwise disclosed in such financial statements) and that the examination
by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards and (2) a letter acknowledged by such accounting firm,
substantially in the form of Exhibit XIII annexed hereto with such changes
------------
as are approved by Administrative Agent,
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acknowledging that Lenders will receive such consolidated financial
statements in such report and will use such financial statements and report
in their credit analyses of each Borrower and its Subsidiaries;
(iv) Officers' and Compliance Certificates: (a) together with
-------------------------------------
each delivery of financial statements of each Borrower and its Subsidiaries
pursuant to subdivisions (i), (ii) and (iii) above, an Officers'
Certificate of Company stating that the signers have reviewed the terms of
this Agreement and have made, or caused to be made under their supervision,
a review in reasonable detail of the transactions and condition of each
Borrower and its Subsidiaries during the accounting period covered by such
financial statements and that such review has not disclosed the existence
during or at the end of such accounting period, and that the signers do not
have knowledge of the existence as at the date of such Officers'
Certificate, of any condition or event that constitutes an Event of Default
or Potential Event of Default, or, if any such condition or event existed
or exists, specifying the nature and period of existence thereof and what
action Borrowers have taken, are taking and propose to take with respect
thereto; (b) together with each delivery of financial statements pursuant
to subdivision (ii) and (iii) above, a Compliance Certificate demonstrating
in reasonable detail compliance during and at the end of the applicable
accounting periods with the restrictions contained in Section 7; and (c)
within 90 days after the beginning of each Fiscal Year and in any event on
or prior to the date of any mandatory prepayments made pursuant to
subsection 2.4B(iii)(f) during such Fiscal Year, an Officers' Certificate
of Company setting forth the Consolidated Excess Cash Flow for the Fiscal
Year covered by such financial statements and demonstrating in reasonable
detail the derivation of such Consolidated Excess Cash Flow;
(v) Reconciliation Statements: if, as a result of any change in
-------------------------
accounting principles and policies from those used in the preparation of
the audited financial statements referred to in subsection 5.3, the
consolidated financial statements of Company and its Subsidiaries delivered
pursuant to subdivisions (i), (ii), (iii) or (xiii) of this subsection 6.1
will differ in any material respect from the consolidated financial
statements that would have been delivered pursuant to such subdivisions had
no such change in accounting principles and policies been made, then
(a) together with the first delivery of financial statements pursuant to
subdivision (i), (ii), (iii) or (xiii) of this subsection 6.1 following
such change, consolidated financial statements of Company and its
Subsidiaries for (y) the current Fiscal Year to the effective date of such
change and (z) the full Fiscal Year immediately preceding the Fiscal Year
in which such change is made, in each case prepared on a pro forma basis as
if such change had been in effect during such periods, and (b) together
with each delivery of financial statements pursuant to subdivision (i),
(ii), (iii) or (xiii) of this subsection 6.1 following such change, a
written statement of the chief accounting officer or chief financial
officer of Company setting forth the differences (including without
limitation any differences that would affect any calculations relating to
the financial
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covenants set forth in subsection 7.6) which would have resulted if such
financial statements had been prepared without giving effect to such
change;
(vi) Accountants' Certification: together with each delivery of
--------------------------
consolidated financial statements of Company and its Subsidiaries pursuant
to subdivision (iii) above, a written statement by the independent
certified public accountants giving the report thereon (a) stating that
their audit examination has included a review of the terms of this
Agreement and the other Loan Documents as they relate to accounting
matters, (b) stating whether, in connection with their audit examination,
any condition or event that constitutes an Event of Default or Potential
Event of Default has come to their attention and, if such a condition or
event has come to their attention, specifying the nature and period of
existence thereof; provided that such accountants shall not be liable by
--------
reason of any failure to obtain knowledge of any such Event of Default or
Potential Event of Default that would not be disclosed in the course of
their audit examination, and (c) stating that based on their audit
examination nothing has come to their attention that causes them to believe
either or both that the information contained in the certificates delivered
therewith pursuant to subdivision (iv) above is not correct or that the
matters set forth in the Compliance Certificates delivered therewith
pursuant to subdivision (iv) above for the applicable Fiscal Year are not
stated in accordance with the terms of this Agreement;
(vii) Accountants' Reports: promptly upon receipt thereof (unless
--------------------
restricted by applicable professional standards), copies of all reports
submitted to any Borrower by independent certified public accountants in
connection with each annual, interim or special audit of the financial
statements of any Borrower and its Subsidiaries made by such accountants,
including, without limitation, any comment letter submitted by such
accountants to management in connection with their annual audit;
(viii) SEC Filings and Press Releases: promptly upon their
------------------------------
becoming available, copies of (a) all financial statements, reports,
notices and proxy statements sent or made available generally by any
Borrower to its security holders or by any Subsidiary of any Borrower to
its security holders other than any Borrower or another Subsidiary of a
Borrower, (b) all regular and periodic reports and all registration
statements (other than on Form S-8 or a similar form) and prospectuses, if
any, filed by a Borrower or any of its Subsidiaries with any securities
exchange or with the Securities and Exchange Commission or any governmental
or private regulatory authority, and (c) all press releases and other
statements made available generally by a Borrower or any of its
Subsidiaries to the public concerning material developments in the business
of such Borrower or any of its Subsidiaries;
(ix) Events of Default, etc.: promptly upon any officer of any
-----------------------
Loan Party obtaining knowledge (a) of any condition or event that
constitutes an Event of Default or Potential Event of Default, or becoming
aware that any Lender has given any notice (other than to Administrative
Agent) or taken any other action with
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respect to a claimed Event of Default or Potential Event of Default,
(b) that any Person has given any notice to a Borrower or any of its
Subsidiaries or taken any other action with respect to a claimed default or
event or condition of the type referred to in subsection 8.2, (c) of any
condition or event that would be required to be disclosed in a current
report filed by a Borrower with the Securities and Exchange Commission on
Form 8-K (Items 1, 2, 4, 5 and 6 of such Form as in effect on the date
hereof) if such Borrower were required to file such reports under the
Exchange Act, or (d) of the occurrence of any event or change that has
caused or evidences, either in any case or in the aggregate, a Material
Adverse Effect, an Officers' Certificate specifying the nature and period
of existence of such condition, event or change, or specifying the notice
given or action taken by any such Person and the nature of such claimed
Event of Default, Potential Event of Default, default, event or condition,
and what action Borrowers have taken, are taking and propose to take with
respect thereto;
(x) Litigation or Other Proceedings: (a) promptly upon any officer
-------------------------------
of any Loan Party obtaining knowledge of (X) the institution of, or non-
frivolous threat of, any action, suit, proceeding (whether administrative,
judicial or otherwise), governmental investigation or arbitration against
or affecting such Borrower or any of its Subsidiaries or any property of
such Borrower or any of its Subsidiaries (collectively, "Proceedings") not
previously disclosed in writing by Company or any of its Subsidiaries to
Lenders or (Y) any material development in any Proceeding that, in any
case:
(1) could reasonably be expected to result in a Material Adverse
Effect; or
(2) seeks to enjoin or otherwise prevent the consummation of, or
to recover any damages or obtain relief as a result of, the
transactions contemplated hereby;
written notice thereof together with such other information as may be
reasonably available to such Borrower to enable Lenders and their counsel
to evaluate such matters; and (b) within twenty days after the end of each
Fiscal Quarter, a schedule of all Proceedings involving an alleged
liability of, or claims against or affecting, any Borrower or any of its
Subsidiaries equal to or greater than $500,000, and promptly after request
by Administrative Agent such other information as may be reasonably
requested by Administrative Agent to enable Administrative Agent and its
counsel to evaluate any of such Proceedings;
(xi) ERISA Events: promptly upon becoming aware of the
------------
occurrence of or forthcoming occurrence of any ERISA Event, a written
notice specifying the nature thereof, what action Company or any of its
ERISA Affiliates has taken, is taking or proposes to take with respect
thereto and, when known, any action taken or
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threatened by the Internal Revenue Service, the Department of Labor or the
PBGC with respect thereto;
(xii) ERISA Notices: with reasonable promptness, copies of
-------------
(a) each Schedule B (Actuarial Information) to the annual report (Form 5500
Series) filed by Company or any of its ERISA Affiliates with the Internal
Revenue Service with respect to each Pension Plan; (b) all notices received
by Company or any of its ERISA Affiliates from a Multiemployer Plan sponsor
concerning an ERISA Event; and (c) such other documents or governmental
reports or filings relating to any Employee Benefit Plan as Administrative
Agent shall reasonably request;
(xiii) Financial Plans: as soon as practicable and in any event no
---------------
later than 30 days after the beginning of each Fiscal Year, a consolidated
and consolidating (by Region) plan and financial forecast for such Fiscal
Year (the "Financial Plan" for such Fiscal Year), including without
limitation (a) a forecasted consolidated and consolidating (by Region)
balance sheet and forecasted consolidated and consolidating (by Region)
statements of income and cash flows of each Borrower and its Subsidiaries
for such Fiscal Year, together with a pro forma Compliance Certificate for
--- -----
such Fiscal Year and an explanation of the assumptions on which such
forecasts are based, and (b) forecasted consolidated and consolidating (by
Region) statements of income and cash flows of each Borrower and its
Subsidiaries for each month of such Fiscal Year, together with an
explanation of the assumptions on which such forecasts are based;
(xiv) Insurance: as soon as practicable and in any event by the
---------
last day of each Fiscal Year, a report in form and substance satisfactory
to Administrative Agent outlining all material insurance coverage
maintained as of the date of such report by Company and its Subsidiaries
and all material insurance coverage planned to be maintained by Company and
its Subsidiaries in the immediately succeeding Fiscal Year and confirming
the status of Administrative Agent as loss payee under all such insurance
to the extent required by subsection 6.4;
(xv) Board of Directors: with reasonable promptness, written
------------------
notice of any change in the Board of Directors of any Borrower;
(xvi) New Subsidiaries: promptly upon any Person becoming a
----------------
Subsidiary of Company, a written notice setting forth with respect to such
Person (a) the date on which such Person became a Subsidiary of Company and
(b) all of the data required to be set forth in Schedule 5.1 annexed hereto
------------
with respect to all Subsidiaries of Company (it being understood that such
written notice shall be deemed to supplement Schedule 5.1 annexed hereto
------------
for all purposes of this Agreement);
(xvii) Margin Determination Certificate: concurrently with the
--------------------------------
delivery of the financial statements required under subsections 6.1(ii) and
6.1(iii), Company shall
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deliver a Margin Determination Certificate with respect to the Fiscal
Quarter then ended;
(xviii) Borrowing Base Certificate: (a) as soon as available and in
--------------------------
any event (1) within 30 days after the last Business Day of each month
ending after the Closing Date through the first anniversary of the Closing
Date and (2) within 15 days after the last Business Day of each month
ending after the first anniversary of the Closing Date (or, at any time
that the sum of Company Borrowing Base, the Goss Japan Borrowing Base and
the Goss UK Borrowing Base exceeds the Total Utilization of Revolving Loan
Commitments by less than $25,000,000, as soon as available and in any event
within three Business Days after the last Business Day of each week) or (b)
as soon as available and in any event within three Business Days after a
written request from Administrative Agent, a Borrowing Base Certificate
dated as of the last Business Day of such month (or such week) or such date
of request, as applicable, together with any additional schedules and other
information as Administrative Agent may reasonably request (it being
understood that (1) each Borrower, in addition to any such Borrowing Base
Certificate, may from time to time deliver to Administrative Agent and
Lenders on any Business Day after the Closing Date a Borrowing Base
Certificate dated as of such Business Day, together with an aging
receivables schedule identifying each account debtor by name and address
and any additional schedules and other information as Administrative Agent
may reasonably request, and (2) the most recent Borrowing Base Certificate
described in this clause (xviii) that is delivered to Administrative Agent
shall be used in calculating the Company Borrowing Base, the Goss Japan
Borrowing Base and the Goss UK Borrowing Base, as applicable, as of any
date of determination);
(xix) UCC Search Report: as promptly as practicable after the
-----------------
date of delivery to Administrative Agent of any UCC financing statement
executed by any Loan Party pursuant to subsection 4.1J(iv) or 6.8A, copies
of completed UCC searches evidencing the proper filing, recording and
indexing of all such UCC financing statements and listing all other
effective financing statements in that jurisdiction that name such Loan
Party as debtor, together with copies of all such financing statements not
previously delivered to Administrative Agent by or on behalf of any
Borrower or such Loan Party; and
(xx) Other Information: with reasonable promptness, such other
-----------------
information and data with respect to any Borrower or any of its
Subsidiaries as from time to time may be reasonably requested by
Administrative Agent on its own behalf or on behalf of any Lender.
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6.2 Corporate Existence, etc.
-------------------------
Except as permitted under subsection 7.7, each Borrower will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full force
and effect its corporate existence and all rights and franchises material to its
business.
6.3 Payment of Taxes and Claims; Tax Consolidation.
----------------------------------------------
A. Each Borrower will, and will cause each of its Subsidiaries to, pay
all taxes, assessments and other governmental charges imposed upon it or any of
its properties or assets or in respect of any of its income, businesses or
franchises before any material penalty accrues thereon, and all claims
(including, without limitation, claims for labor, services, materials and
supplies) for sums that have become due and payable and that by law have or may
become a material Lien upon any of its properties or assets, prior to the time
when any material penalty or fine shall be incurred with respect thereto;
provided that no such charge or claim need be paid if being contested in good
- --------
faith by appropriate proceedings promptly instituted and diligently conducted
and if such reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made therefor.
B. None of the Borrowers will nor will any such Borrower permit any of
its Subsidiaries to, file or consent to the filing of any consolidated income
tax return with any Person (other than Company or any of its Subsidiaries).
6.4 Maintenance of Properties; Insurance; Application of Net
--------------------------------------------------------
Insurance/Condemnation Proceeds.
-------------------------------
A. Maintenance of Properties. Each Borrower will, and will cause each of
its Subsidiaries to, maintain or cause to be maintained in good repair, working
order and condition, ordinary wear and tear excepted, all of their respective
material properties used or useful in the business of such Borrower and its
Subsidiaries (including, without limitation, Intellectual Property) and from
time to time will make or cause to be made all appropriate repairs, renewals and
replacements thereof such that the properties will remain in substantially the
same condition and working order, ordinary wear and tear excepted, that exists
as of the Closing Date.
B. Insurance. Each Borrower will maintain or cause to be maintained,
with financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and businesses of its Subsidiaries
against loss or damage of the kinds customarily carried or maintained under
similar circumstances by corporations of established reputation engaged in
similar businesses. Without limiting the generality of the foregoing, each
Borrower will maintain or cause to be maintained (i) flood insurance with
respect to each Initial Flood Hazard Property (as defined in subsection 6.10B)
and each Additional Flood Hazard Property (as defined in subsection 6.12A), in
each case to the extent such Initial Flood Hazard Property or Additional Flood
Hazard Property is located in a community that participates in the National
Flood Insurance Program and (ii) public liability
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insurance, third party property damage insurance and replacement value insurance
on the Collateral under such policies of insurance, with such insurance
companies, in such amounts and covering such risks as are at all times
satisfactory to Administrative Agent in its commercially reasonable judgment.
Each such policy of insurance that insures against loss or damage with respect
to any Collateral or against losses due to business interruption shall name the
applicable Agent for the benefit of Lenders as the loss payee thereunder for any
covered loss in excess of $500,000 and shall provide for at least 30 days (15
days in the event of non-payment of premium) prior written notice to such Agent
of any modification or cancellation of such policy.
C. Application of Net Insurance/Condemnation Proceeds.
Upon receipt by Administrative Agent of any Net Insurance/Condemnation
Proceeds as loss payee (i) in respect of any such business interruption
insurance constituting Net Insurance/Condemnation Proceeds, (a) Administrative
Agent shall, so long as no Event of Default or Potential Event of Default shall
have occurred and be continuing, deliver such Net Insurance/Condemnation
Proceeds to the applicable Borrower, and (b) if an Event of Default or Potential
Event of Default shall have occurred and be continuing, Administrative Agent
shall, and Borrowers hereby authorize Administrative Agent to, apply such Net
Insurance/Condemnation Proceeds to prepay the Loans as provided in subsection
2.4B(iii)(b), and (ii) in respect of any such insurance against loss or damage
with respect to any Collateral, (a) to the extent that any Borrower or any of
its Subsidiaries intends to use any such insurance proceeds to repair, restore
or replace the assets of such Borrower or Subsidiary in respect of which such
Net Insurance/Condemnation Proceeds were received, Administrative Agent shall,
so long as no Event of Default or Potential Event of Default shall have occurred
and be continuing, (A) in the event the aggregate amount of such Net
Insurance/Condemnation Proceeds in respect of any covered loss does not exceed
$1,000,000, deliver such Net Insurance/Condemnation Proceeds to such Borrower,
and such Borrower shall, or shall cause such Subsidiary to, use such Net
Insurance/Condemnation Proceeds to effect such repair, restoration or
replacement, and (B) in the event the aggregate amount of such Net
Insurance/Condemnation Proceeds exceeds $1,000,000, hold such proceeds in a cash
collateral account and so long as any Borrower or any of its Subsidiaries
proceeds to repair, restore or replace the assets of such Borrower or such
Subsidiary in respect of which such Net Insurance/Condemnation Proceeds were
received, Administrative Agent shall from time to time disburse to such Borrower
or such Subsidiary amounts necessary to pay the cost of such repair, restoration
or replacement after the receipt by Administrative Agent of invoices or other
documentation reasonably satisfactory to Administrative Agent describing the
amount of costs so incurred; provided however that if in the reasonable good
-------- -------
faith belief of Administrative Agent, such Borrower or such Subsidiary is not
proceeding diligently with the repair, restoration or replacement,
Administrative Agent shall, and Borrowers hereby authorize Administrative Agent
to, apply such insurance proceeds to prepay the Loans as provided in subsection
2.4B(iii)(b), and (b) if an Event of Default or Potential Event of Default shall
have occurred and be continuing or to the extent that neither the applicable
Borrower nor any of its Subsidiaries intends to
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<PAGE>
use any such Net Insurance/Condemnation Proceeds to repair, restore or replace
assets of such Borrower or any of its Subsidiaries as described above,
Administrative Agent shall, and Borrowers hereby authorize Administrative Agent
to, apply such Net Insurance/Condemnation Proceeds to prepay the Loans as
provided in subsection 2.4B(iii)(b).
6.5 Inspection; Audits of Inventory and Accounts Receivable; Lender Meeting.
-----------------------------------------------------------------------
A. Inspection Rights. Each Borrower shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by
Administrative Agent to visit and inspect any of the properties of such Borrower
or any of its Subsidiaries, including its and their financial and accounting
records, and to make copies and take extracts therefrom, and to discuss its and
their affairs, finances and accounts with its and their officers and independent
public accountants (provided that such Borrower may, if it so chooses, be
present at or participate in any such discussion).
B. Audits of Inventory and Accounts Receivable. Upon the request of
Administrative Agent, each Borrower shall, and shall cause each of its
Subsidiaries to, permit any authorized representatives designated by
Administrative Agent to conduct two audits of all Inventory and Accounts of Loan
Parties during each twelve-month period after the Closing Date (exclusive of the
audit of Inventory and Accounts referred to in subsection 4.1K (the "Base
Audit")) or upon the occurrence and during the continuation of an Event of
Default, such additional audits of Inventory and Accounts as Administrative
Agent may require, each such audit to be substantially similar in scope and
substance to the Base Audit, all upon reasonable notice and at such reasonable
times during normal business hours and as often as may be reasonably requested.
C. Lender Meeting. Without in any way limiting the foregoing, each
Borrower will participate in a meeting of Agent and Lenders at least once during
each Fiscal Year to be held at such Borrower's corporate offices (or such other
location as may be agreed to by such Borrower and Agent) at such time as may be
agreed to by such Borrower and Agent.
6.6 Compliance with Laws, etc.
--------------------------
Each Borrower shall, and shall cause each of its Subsidiaries to,
comply with the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including without limitation all
Environmental Laws), noncompliance with which could reasonably be expected to
cause, individually or in the aggregate at any time, a Material Adverse Effect.
6.7 Environmental Disclosure and Inspection.
---------------------------------------
A. Compliance with Environmental Laws. Each Borrower shall, and shall
cause each of its Subsidiaries to, exercise all due diligence in order to comply
in all material
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respects and cause (i) all tenants under any leases or occupancy agreements
affecting any portion of the Facilities and (ii) all other Persons on or
occupying such property, to comply in all material respects with all
Environmental Laws.
B. Environmental Review and Inspection. Each Borrower agrees that
Administrative Agent may, from time to time and in its reasonable discretion,
retain, at Borrower's expense, an independent professional consultant to review
any report relating to Hazardous Materials prepared by or for Borrower and, upon
a reasonable belief that any Borrower has breached any covenant or
representation with respect to environmental matters or that there has been a
material violation of Environmental Laws at any Facility or by any Borrower, to
conduct its own reasonable investigation of such matter at any Facility
currently owned, leased, operated or used by Borrower or any of its
Subsidiaries, and Borrower agrees to use its best efforts to obtain permission
for Administrative Agent's professional consultant to conduct its own
investigation of any such matter at any Facility previously owned, leased,
operated or used by Borrower or any of its Subsidiaries. Each Borrower hereby
grants to each Agent and its agents, employees, consultants and contractors the
right to enter into or onto the Facilities currently owned, leased, operated or
used by Borrower or any of its Subsidiaries upon reasonable notice to Borrower
to perform such assessments on such property as are reasonably necessary to
conduct such a review and/or investigation. Any such investigation of any
Facility shall be conducted, unless otherwise agreed to by Borrower and Agent,
during normal business hours and, to the extent reasonably practicable, shall be
conducted so as not to interfere with the ongoing operations at any such
Facility or to cause any damage or loss to any property at such Facility.
Borrowers and Agents hereby acknowledge and agree that any report of any
investigation conducted at the request of Agent pursuant to this subsection 6.7B
will be obtained and shall be used by Agent and Lenders for the purposes of
Lenders' internal credit decisions, to monitor and police the Loans and to
protect Lenders' security interests, if any, created by the Loan Documents.
Each Agent agrees to deliver a copy of any such report to Borrower with the
understanding that each Borrower acknowledges and agrees that (i) it will
indemnify and hold harmless such Agent and each Lender from any costs, losses or
liabilities relating to such Borrower's use of or reliance on such report,
(ii) neither Agent nor any Lender makes any representation or warranty with
respect to such report, and (iii) by delivering such report to Borrower, neither
Agent nor any Lender is requiring or recommending the implementation of any
suggestions or recommendations contained in such report.
C. Environmental Disclosure. Each Borrower and its Subsidiaries will
deliver to Administrative Agent and Lenders:
(i) Environmental Audits and Reports. As soon as practicable
--------------------------------
following receipt thereof, copies of all environmental audits,
investigations, analyses and reports of any kind or character, whether
prepared by personnel of Borrower or any of its Subsidiaries or by
independent consultants, governmental authorities or any other Persons,
with respect to significant environmental matters at any Facility
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<PAGE>
which, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect or with respect to any Environmental
Claims which, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect;
(ii) Notice of Certain Releases, Remedial Actions, Etc. Each
--------------------------------------------------
Borrower shall promptly advise Administrative Agent and Lenders in writing
and in reasonable detail of (i) any Release required to be reported to any
Governmental Authority under any applicable Environmental Laws, (ii) any
and all written communications with respect to any Environmental Claims
that could reasonably be expected to give rise to a Material Adverse Effect
or with respect to any Release required to be reported to any Governmental
Authority, (iii) any remedial action taken by such Borrower or any other
Person in response to (x) any Hazardous Materials on, under or about any
Facility, the existence of which could reasonably be expected to give rise
to an Environmental Claim having a Material Adverse Effect, or (y) any
Environmental Claim that could have a Material Adverse Effect, (iv) such
Borrower's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of any Facility that could cause such Facility
or any part thereof to be subject to any restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws, and
(v) any request for information from any Governmental Authority that
suggests such agency is investigating whether such Borrower or any of its
Subsidiaries may be potentially responsible for a Release.
(iii) Notice of Certain Proposed Actions Having Environmental
-------------------------------------------------------
Impact. Each Borrower shall promptly notify Administrative Agent and
------
Lenders of (i) any proposed acquisition of stock, assets, or property by
Borrower or any of its Subsidiaries that could reasonably be expected to
expose Borrower or any of its Subsidiaries to, or result in, Environmental
Claims that could reasonably be expected to have a Material Adverse Effect
or that could reasonably be expected to have a material adverse effect on
any Governmental Authorization then held by Borrower or any of its
Subsidiaries and (ii) any proposed action to be taken by Borrower or any of
its Subsidiaries to commence manufacturing, industrial or other operations
(beyond those presently undertaken) that could reasonably be expected to
subject Borrower or any of its Subsidiaries to material additional
obligations or requirements under Environmental Laws.
(iv) Other Information. Each Borrower shall, at its own expense,
-----------------
provide copies of such documents or information as Administrative Agent may
reasonably request in relation to any matters disclosed pursuant to this
subsection 6.7.
D. Borrower's Remedial Action Regarding Hazardous Materials.
(i) Remedial Actions Relating to Hazardous Materials Activities.
-----------------------------------------------------------
Each Borrower shall promptly take, and shall cause each of its Subsidiaries
promptly to
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take, any and all remedial action in connection with the presence, storage,
use, disposal, transportation or Release on, under or about any Facility in
order to comply in all material respects with all applicable Environmental
Laws and Governmental Authorizations. In the event any Borrower or any of
its Subsidiaries undertakes any remedial action with respect to any
Hazardous Materials on, under or about any Facility, Borrower or such
Subsidiary shall conduct and complete such remedial action in compliance in
all material respects with all applicable Environmental Laws, and in
accordance with the policies, orders and directives of all Governmental
Authorities except when, and only to the extent that, Borrower's or such
Subsidiary's liability for such presence, storage, use, disposal,
transportation or discharge of any Hazardous Materials is being contested
in good faith by Borrower or such Subsidiary.
(ii) Actions with Respect to Environmental Claims and Violations
-----------------------------------------------------------
of Environmental Laws. Each Borrower shall promptly take, and shall cause
---------------------
each of its Subsidiaries promptly to take, any and all actions necessary to
(i) cure any violation of applicable Environmental Laws by Borrower or its
Subsidiaries that could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect (provided Borrower may reasonably
contest alleged violations so long as the delay in the cure by reason of
such contest could not reasonably be expected to have a Material Adverse
Effect) and (ii) make an appropriate response to any Environmental Claim
against Borrower or any of its Subsidiaries and discharge any obligations
it may have to any Person thereunder where failure to do so could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
6.8 Execution of Future Guaranties and Collateral Documents.
-------------------------------------------------------
A. Execution of Future Subsidiary Guaranty and Collateral Documents. In
the event that any Person becomes a Domestic Subsidiary of Company after the
date hereof, Company will promptly notify Administrative Agent of that fact and
cause such Subsidiary to execute and deliver to Administrative Agent a
counterpart of the Subsidiary Guaranty and, as applicable, a Subsidiary Pledge
Agreement, a Subsidiary Security Agreement, a Subsidiary Trademark Security
Agreement, a Subsidiary Patent Security Agreement and Additional Mortgages and
to take all such further action and execute all such further documents and
instruments as may be reasonably required to grant and perfect in favor of
Administrative Agent, for the benefit of Lenders, a First Priority security
interest in all of the Real Property Assets and all of the personal property
assets of such Subsidiary described in the applicable Collateral Documents.
B. Execution of Future Foreign Subsidiary Guaranty and Collateral
Documents. In the event that any Person becomes a direct Foreign Subsidiary of
Company after the date hereof, Company will promptly notify Administrative Agent
of that fact and will execute a pledge amendment to the Pledge Agreement
executed and delivered by Company pledging not less than 66% of the stock of
such Foreign Subsidiary. In the event
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that U.S. tax laws are amended to permit a Foreign Subsidiary to guarantee the
Domestic Loans without the incurrence of an investment in U.S. property or other
deemed dividends for U.S. tax purposes or without otherwise resulting in U.S.
taxable income, Company will promptly notify Administrative Agent of that fact
and will execute pledge amendments to the Pledge Agreement executed and
delivered by Company pledging not less than 100% of the stock of its Foreign
Subsidiaries and Company will cause its Foreign Subsidiaries to execute and
deliver to Administrative Agent, a counterpart of a Subsidiary Guaranty, a
Subsidiary Pledge Agreement, a Subsidiary Security Agreement, a Subsidiary
Trademark Security Agreement, a Subsidiary Patent Security Agreement and
Additional Mortgages, as applicable, and to take all such further action and
execute all such further documents and instruments as may be reasonably required
to grant and perfect in favor of the applicable Agent, for the benefit of
Lenders, a First Priority security interest in all of the Real Property Assets
and all of the personal property assets of such Subsidiary described in the
applicable Collateral Documents.
C. Subsidiary Charter Documents, Legal Opinions, Etc. With respect any
such new Subsidiary, Company shall deliver to Administrative Agent, together
with the applicable Guaranty and such Collateral Documents:
(i) certified copies of such Subsidiary's Articles or Certificate of
Incorporation, together with a good standing certificate from the Secretary
of State (or comparable official) of the jurisdiction of its incorporation,
each to be dated a recent date prior to their delivery to Administrative
Agent
(ii) a copy of such Subsidiary's Bylaws (or comparable or
equivalent documentation), certified by its corporate secretary or an
assistant corporate secretary or other appropriate officer as of a recent
date prior to their delivery to Administrative Agent;
(iii) a certificate executed by the secretary or an assistant
secretary or other appropriate officer of such Subsidiary as to (a) the
incumbency and signatures of the officers of such Subsidiary executing such
Guaranty and the Collateral Documents to which such Subsidiary is a party
and (b) the fact that the attached resolutions of the Board of Directors of
such Subsidiary authorizing the execution, delivery and performance of such
Guaranty and such Collateral Documents are in full force and effect and
have not been modified or rescinded; and
(iv) a favorable opinion of counsel to such Subsidiary, in form
and substance satisfactory to Administrative Agent and its counsel, as to
(a) the due organization and good standing of such Subsidiary, (b) the due
authorization, execution and delivery by such Subsidiary of such Guaranty
and such Collateral Documents, (c) the enforceability of such Guaranty and
such Collateral Documents against such Subsidiary, and (d) such other
matters as Administrative Agent may
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reasonably request, all of the foregoing to be satisfactory in form and
substance to Administrative Agent and its counsel.
6.9 Additional Real Property Collateral.
-----------------------------------
A. Additional Mortgages, Etc. From and after the Closing Date, in the
event that (i) any Borrower or any of its Subsidiaries acquires any Fee Property
or any Material Leasehold (other than any Fee Property or Material Leasehold
which Administrative Agent in its sole discretion affirmatively waives the
requirements set forth in this subsection 6.9 with respect to such Fee Property
or Material Leasehold) (each a "Covered Real Property Asset") or (ii) at the
time any Person becomes a Subsidiary of any Borrower, such Person owns or holds
any Covered Real Property Asset, such Borrower or such Subsidiary shall, as soon
as practicable after the acquisition of such or such Covered Real Property Asset
or such Person's becoming a Subsidiary of any Borrower, as the case may be,
deliver to Administrative Agent the following:
(a) Additional Mortgage. Fully executed and acknowledged
-------------------
counterparts of Mortgages (each an "Additional Mortgage" and collectively,
the "Additional Mortgages") in recordable form encumbering such Covered
Real Property Asset, which Mortgages shall create a valid and enforceable
First Priority Lien (or such other priority lien as may be specified in the
applicable Additional Mortgage), subject to Permitted Encumbrances, on such
Covered Real Property Asset in favor of Agent (or such other trustee as may
be required or desired under local law) for the benefit of Lenders;
(b) Opinion of Counsel. If required by Administrative Agent, an
------------------
opinion of local counsel (which counsel shall be reasonably satisfactory to
Administrative Agent) in the jurisdiction in which such Covered Real
Property Asset is located with respect to the enforceability of Additional
Mortgage recorded in such jurisdiction and such other matters as
Administrative Agent may reasonably request, in form and substance
reasonably satisfactory to Administrative Agent;
(c) Landlord Consent and Estoppel; Recorded Leasehold Interest. In
----------------------------------------------------------
the case of a Covered Real Property Asset consisting of a Material
Leasehold, such estoppel letters from the landlord on such Material
Leasehold as may be reasonably requested by Administrative Agent, in form
and substance reasonably satisfactory to Administrative Agent;
(d) Title Insurance. (1) If required by Administrative Agent, in the
---------------
case of each such Covered Real Property Asset consisting of a Fee Property,
an ALTA mortgagee title insurance policy issued by a title insurer
reasonably satisfactory to Administrative Agent (an "Additional Mortgage
Policy"), in an amount reasonably satisfactory to Administrative Agent,
ensuring Administrative Agent that the applicable Additional Mortgage
creates a valid and enforceable First Priority
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mortgage Lien (or such other priority lien as may be specified in the
applicable Additional Mortgage) on such Covered Real Property Asset, free
and clear of all defects and encumbrances except Permitted Encumbrances,
which Additional Mortgage Policy (x) shall be in form and substance
satisfactory to Administrative Agent and (y) shall include an endorsement
for mechanics' liens, for future advances under this Agreement, the Notes
and the other Loan Documents, and for any other matters that Administrative
Agent may request, and (z) shall provide for affirmative insurance and such
reinsurance as Administrative Agent may request, all of the foregoing in
form and substance reasonably satisfactory to Administrative Agent; and (2)
a current Survey (as defined in subsection 4.1I(d)) with respect to such
Covered Real Property Asset showing gross area of such Covered Real
Property Asset, lot lines and monuments, building lines, easements both
burdening and benefiting such Covered Real Property Asset, utilities,
including water and sewer lines to the point of connection with the public
system, the improvements (including loading docks and the location and
number of parking spaces), encroachments, if any, on such Covered Real
Property Asset or over adjoining properties, and other matters located on
or affecting such Covered Real Property Asset requested by the
Administrative Agent. Each such Survey will contain a certificate
addressed to the Administrative Agent and Title Company in form and
substance satisfactory to Administrative Agent;
(e) Title Report. If no Additional Mortgage Policy is required with
------------
respect to such Covered Real Property Asset, a title report obtained by
Borrower in respect of any such Covered Real Property Asset, dated not more
than 30 days prior to the date such Additional Mortgage is to be recorded
and satisfactory in form and substance to Administrative Agent;
(f) Matters Relating to Flood Hazard Properties. (i) Evidence, which
-------------------------------------------
may be in the form of a letter from an insurance broker or a municipal
engineer, as to whether (1) such Covered Real Property Asset (an
"Additional Flood Hazard Property") is Flood Hazard Property and (2) the
community in which such Covered Real Property Asset (if it is an Additional
Flood Hazard Property) is located is participating in the National Flood
Insurance Program; (ii) if such Covered Real Property Asset is an
Additional Flood Hazard Property, Borrower's written acknowledgement of
receipt of written notification from Administrative Agent (1) as to the
existence of such Additional Flood Hazard Property and (2) as to whether
the community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program; and (iii) in the
event such Covered Real Property Asset is an Additional Flood Hazard
Property that is located in a community that participates in the National
Flood Insurance Program, evidence that Borrower has obtained flood
insurance in respect of such Flood Hazard Property to the extent required
under the applicable regulations of the Board of Governors of the Federal
Reserve System; and
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(g) Environmental Audit. If required by Administrative Agent, in the
-------------------
case of each such Covered Real Property Asset consisting of a Fee Property,
environmental audits, reports and other information prepared by
professional consultants mutually acceptable to Borrower and Administrative
Agent, in form, scope and substance satisfactory to Administrative Agent in
its reasonable discretion, concerning any environmental hazards or
liabilities to which Borrower or any of its Subsidiaries may be subject
with respect to such Additional Mortgaged Property.
B. Real Estate Appraisals. Each Borrower shall, and shall cause each of
its Subsidiaries to, permit any authorized representatives designated by any
Agent, upon reasonable notice, to visit and inspect any Additional Mortgaged
Property for the purpose of obtaining an appraisal of value, conducted by
consultants retained by such Agent in compliance with all applicable banking
regulations, with respect to such Covered Real Property Asset.
6.10 Assignability and Recording of Lease Agreements.
-----------------------------------------------
From and after the Closing Date, in the event that any Borrower or any
of its Subsidiaries enters into any lease that is a Material Leasehold (other
than any Material Leasehold as to which Administrative Agent in its sole
discretion affirmatively waives the requirements set forth in this subsection
6.10), such Borrower shall, or shall cause such Subsidiary to, (i) obtain lease
terms permitting (or not expressly prohibiting) the encumbrancing of such
Material Leasehold pursuant to an Additional Mortgage and the assignment of such
Material Leasehold interest to the successful bidder at a foreclosure or similar
sale (and to a subsequent third party assignee by Agent or any Lender to the
extent Agent or such Lender is the successful bidder at such sale) in the event
of a foreclosure or similar action pursuant to such Additional Mortgage and
(ii) cause such lease, or a memorandum of lease with respect thereto, or other
evidence of such lease in form and substance reasonably satisfactory to Agent,
to be recorded in all places to the extent necessary or desirable, in the
reasonable judgment of Agent, so as to enable an Additional Mortgage encumbering
such Material Leasehold to effectively create a valid and enforceable First
Priority Lien (subject to Permitted Encumbrances) on such Material Leasehold in
favor of Agent (or such other Person as may be required or desired under local
law) for the benefit of Lenders.
6.11 Interest Rate Protection.
------------------------
Within ninety (90) days after the Closing Date, Borrowers shall
obtain, and shall thereafter maintain in effect for a period of not less than
two years one or more Interest Rate Agreements with respect to the Loans, in an
aggregate notional principal amount of not less than $37,500,000, each such
Interest Rate Agreement to be in form and substance satisfactory to
Administrative Agent.
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6.12 Change of Corporate Names; Further Actions.
------------------------------------------
No later than fifteen days prior to a change of name of any Loan
Party, Company shall provide written notice to Administrative Agent (with a copy
to Agent) of such name change. Such notice shall include the new corporate name
of such Loan Party and the date on which such new corporate name shall become
effective. Company shall, and shall cause such Loan Party to, take any and all
necessary actions to maintain Agent's priority and perfected security interest
in the Collateral, including without limitation obtaining all necessary
Governmental Authorizations, execution or reexecution of all applicable
agreements, documents, filings or any other instrument and filing of any and all
appropriate instruments with any applicable Governmental Authority. As soon as
practicable after such corporate name change, Company and such Loan Party shall
provide to Administrative Agent evidence in form and substance satisfactory to
Administrative Agent that such new corporate name has been appropriately
obtained, filed and/or registered with the applicable Governmental Authority.
6.13 Transfer of Stock of RGS Japan; Goss Japan Merger.
-------------------------------------------------
As soon as practicable after the Closing Date, Company shall, or shall
cause New Goss Japan to, take all such actions as may be required to form a
wholly-owned Subsidiary, New Shellco, to which will be transferred all of the
outstanding capital stock of RGS Japan and all of the other assets, if any, of
New Goss Japan acquired upon or after the Closing Date. In addition, New
Shellco shall assume all of the Obligations and liabilities of New Goss Japan
under the Loan Documents and such other obligations and liabilities as may have
arisen in the ordinary course of its business on or after the Closing Date or as
may be approved by Administrative Agent; provided, however, that no liabilities
-------- -------
of New Goss Japan arising prior to the Closing Date shall be so assumed.
Promptly after the transfer to New Shellco of all of the outstanding capital
stock of RGS Japan, New Goss Japan shall be dissolved or otherwise liquidated.
As soon as practicable after the Closing Date, but in any event prior to the
first anniversary of the Closing Date, Company shall cause New Shellco and RGS
Japan to consummate the Goss Japan Merger. In no event shall Company permit New
Goss Japan and RGS Japan to merge. All of the foregoing actions and all of the
documentation to effect such actions shall be (i) in form and substance
satisfactory to Administrative Agent and its counsel, (ii) in compliance with
any and all Japanese laws and regulations, and (iii) completed prior to the
first anniversary of the Closing Date.
Section 7. BORROWERS' NEGATIVE COVENANTS
Each Borrower covenants and agrees that, so long as any of the Commitments
hereunder shall remain in effect and until payment in full of all of the Loans
and other Obligations and the cancellation or expiration of all Letters of
Credit, unless Requisite Lenders shall otherwise give prior written consent,
such Borrower shall perform, and shall cause each of its Subsidiaries to
perform, all covenants in this Section 7.
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7.1 Indebtedness.
------------
Each Borrower shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or guaranty, or otherwise
become or remain directly or indirectly liable with respect to, any
Indebtedness, except:
(i) Borrowers may become and remain liable with respect to the
Obligations;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations permitted by subsection 7.4 and,
upon any matured obligations actually arising pursuant thereto, the
Indebtedness corresponding to the Contingent Obligations so extinguished;
(iii) Company may become and remain liable with respect to
Indebtedness to any of its wholly-owned Subsidiaries, and any wholly-owned
Subsidiary of Company may become and remain liable with respect to
Indebtedness to Company or any other wholly-owned Subsidiary of Company;
provided that (a) all such intercompany Indebtedness shall be evidenced by
--------
promissory notes that are pledged to the applicable Agent pursuant to the
terms of the applicable Collateral Documents, (b) all such intercompany
Indebtedness owed by any Borrower to any of its Subsidiaries shall be
subordinated in right of payment to the payment in full of the applicable
Obligations pursuant to the terms of the such promissory notes or an
intercompany subordination agreement, and (c) any payment by any Subsidiary
of any Borrower under any guaranty of the applicable Obligations shall
result in a pro tanto reduction of the amount of any intercompany
--- -----
Indebtedness owed by such Subsidiary to such Borrower or to any of its
Subsidiaries for whose benefit such payment is made; provided, further,
-------- -------
that the aggregate amount of all such intercompany Indebtedness owing at
any time from any Foreign Subsidiary to Company or any Domestic Subsidiary
shall not exceed $100,000,000 in the aggregate at any time;
(iv) Company and its Subsidiaries, as applicable, may remain
liable with respect to Indebtedness described in Schedule 7.1 annexed
------------
hereto;
(v) Company may become and remain liable with respect to repurchase
obligations not in excess of $4,000,000 and indemnity obligations to BTCC
as set forth in the Loan Portfolio Purchase Agreement and the Assumed
Guaranties;
(vi) Company may become and remain liable with respect to
Indebtedness evidenced by the Senior Subordinated Notes in an aggregate
principal amount not to exceed $225,000,000; and
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(vii) Company may become and remain liable with respect to Capital
Leases and other Indebtedness in an aggregate principal amount with respect
to such Capital Leases and other Indebtedness which does not exceed
$7,500,000 at any time outstanding.
7.2 Liens and Related Matters.
-------------------------
A. Prohibition on Liens. No Borrower shall, nor shall any Borrower
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or permit to exist any Lien on or with respect to any property or asset of any
kind (including any document or instrument in respect of goods or accounts
receivable) of such Borrower or any of its Subsidiaries, whether now owned or
hereafter acquired, or any income or profits therefrom, or file or permit the
filing of, or permit to remain in effect, any financing statement or other
similar notice of any Lien with respect to any such property, asset, income or
profits under the Uniform Commercial Code of any State or under any similar
recording or notice statute, except:
(i) Permitted Encumbrances;
(ii) Liens granted pursuant to the applicable Collateral
Documents;
(iii) Liens described in Schedule 7.2 annexed hereto;
------------
(iv) Liens solely on the equipment and the proceeds of such
equipment securing the Capital Leases permitted under subsection 7.1(vii);
and
(v) Other Liens securing other Indebtedness permitted under
subsection 7.1(vii).
B. Equitable Lien in Favor of Lenders. If any Borrower or any of its
Subsidiaries shall create or assume any Lien upon any of its properties or
assets, whether now owned or hereafter acquired, other than Liens excepted by
the provisions of subsection 7.2A, it shall make or cause to be made effective
provision whereby the Obligations will be secured by such Lien equally and
ratably with any and all other Indebtedness secured thereby as long as any such
Indebtedness shall be so secured; provided that, notwithstanding the foregoing,
--------
this covenant shall not be construed as a consent by Requisite Lenders to the
creation or assumption of any such Lien not permitted by the provisions of
subsection 7.2A.
C. No Further Negative Pledges. Except with respect to specific property
encumbered to secure payment of particular Indebtedness or to be sold pursuant
to an executed agreement with respect to an Asset Sale, none of the Borrowers or
any of their respective Subsidiaries shall enter into any agreement (other than
the Senior Subordinated Note Indenture) prohibiting the creation or assumption
of any Lien upon any of its properties or assets, whether now owned or hereafter
acquired.
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<PAGE>
D. No Restrictions on Subsidiary Distributions to Borrowers or Other
Subsidiaries. Except as provided herein, no Borrower will, nor will any
Borrower permit any of its Subsidiaries to, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction of any
kind on the ability of any such Subsidiary to (i) pay dividends or make any
other distributions on any of such Subsidiary's capital stock owned by such
Borrower or any other Subsidiary of such Borrower, (ii) repay or prepay any
Indebtedness owed by such Subsidiary to such Borrower or any other Subsidiary of
such Borrower, (iii) make loans or advances to such Borrower or any other
Subsidiary of such Borrower, or (iv) transfer any of its property or assets to
such Borrower or any other Subsidiary of such Borrower.
7.3 Investments; Joint Ventures.
---------------------------
No Borrower shall, nor shall any Borrower permit any of its
Subsidiaries to, directly or indirectly, make or own any Investment in any
Person, including any Joint Venture, except:
(i) Company and its Subsidiaries may make and own Investments in Cash
Equivalents;
(ii) Company and its Subsidiaries may continue to own the
Investments owned by them as of the Closing Date in any Subsidiaries of
Company and may make additional Investments after the Closing Date in such
wholly-owned Subsidiaries of up to $5,000,000 in the aggregate for all such
additional Investments;
(iii) in addition to the amounts permitted pursuant to subsection
7.3(ii) above, Company and its Subsidiaries may make intercompany loans to
the extent permitted under subsection 7.1(iii);
(iv) Company and its Subsidiaries may continue to own the
Investments owned by them and described in Schedule 7.3 annexed hereto;
------------
(v) Company may continue to own its Joint Venture interests in
Shanghai Rockwell Graphic Systems Co., Ltd. pursuant to the terms of its
joint venture contract with Shanghai Printing & Packaging Machinery Co., as
in effect on the Closing Date and may make additional Investments after the
Closing Date in such Joint Venture of up to $7,500,000;
(vi) Company and its Subsidiaries may make and maintain
Investments in non-cash proceeds of Asset Sales in accordance with the
provisions of subsection 7.7(iv);
(vii) Company and its Subsidiaries may make and maintain
investments received in connection with the bankruptcy or reorganization of
suppliers and
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customers and in settlement of delinquent obligations of, and other
disputes with, customers and suppliers, in each case arising in the
ordinary course of business;
(viii) Company and its Subsidiaries may make and maintain
Investments with respect to Secured Customer Financing Arrangements;
provided that the aggregate outstanding amount of such Secured Customer
--------
Financing Arrangements made after the Closing Date plus the aggregate
----
outstanding amount of Contingent Obligations with respect to Customer
Financing Note Guaranties provided after the Closing Date under subsection
7.4(viii)(b) does not exceed $30,000,000 at any time; and
(ix) Company and its Subsidiaries may make and own other
Investments in an aggregate amount not to exceed at any time $1,000,000.
7.4 Contingent Obligations.
----------------------
No Borrower shall nor shall any Borrower permit any of its
Subsidiaries to, directly or indirectly, create or become or remain liable with
respect to any Contingent Obligation, except:
(i) Company and its Subsidiaries may become and remain liable with
respect to Contingent Obligations arising under their respective
Guaranties, including Contingent Obligations thereunder with respect to
Interest Rate Agreements and Currency Agreements entered into with any
Lender or any of its Affiliates;
(ii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of Letters of Credit;
(iii) Company and its Subsidiaries may become and remain liable
with respect to Contingent Obligations in respect of customary
indemnification and purchase price adjustment obligations incurred in
connection with Asset Sales or other sales of assets;
(iv) Company may become and remain liable with respect to the
Assumed Guaranties relating to the Customer Notes;
(v) Company may become and remain liable with respect to Contingent
Obligations in respect of any Indebtedness of any of Company's Subsidiaries
permitted by subsection 7.1;
(vi) Company and its Subsidiaries, as applicable, may remain
liable with respect to Contingent Obligations described in Schedule 7.4
------------
annexed hereto;
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(vii) Company may become and remain liable with respect to
Contingent Obligations under Interest Rate Agreements required under
subsection 6.11 and under Currency Agreements designed to hedge against
fluctuations in currency values entered into in the ordinary course of
business;
(viii) Company and its Subsidiaries (a) may become and remain liable
with respect to Customer Financing Note Guaranties existing as of the
Closing Date in an aggregate amount not to exceed $7,000,000; (b) may
become and remain liable with respect to Customer Financing Note Guaranties
provided after the Closing Date which Customer Financing Note Guaranties
are not supported by Letters of Credit; provided that the aggregate
--------
outstanding amount of such Customer Financing Note Guaranties under this
clause (b) plus the aggregate outstanding amount of Investments with
----
respect to Secured Customer Financing Arrangements made after the Closing
Date in accordance with subsection 7.3(viii) does not exceed $30,000,000 at
any time; and (c) may become and remain liable with respect to Customer
Financing Note Guaranties supported by Letters of Credit; provided that the
--------
aggregate amount of all Customer Financing Note Guaranties supported by
Letters of Credit under clause (c) shall not exceed $10,000,000 outstanding
at any time; and
(ix) Company and its Subsidiaries may become and remain liable
with respect to other Contingent Obligations; provided that the maximum
--------
aggregate liability, contingent or otherwise, of Company and its
Subsidiaries in respect of all such other Contingent Obligations shall at
no time exceed $1,000,000.
7.5 Restricted Junior Payments.
--------------------------
No Borrower shall nor shall any Borrower permit any of its
Subsidiaries to, directly or indirectly, declare, order, pay, make or set apart
any sum for any Restricted Junior Payment; provided that (i) Company may make
--------
payments of regularly scheduled interest in respect of the Senior Subordinated
Notes, in accordance with the terms of and to the extent required by, and
subject to the subordination provisions contained in, the Senior Subordinated
Note Indenture, and (ii) so long as no Event of Default or Potential Event of
Default shall have occurred and be continuing or shall be caused thereby,
Company may make Restricted Junior Payments to Holdings (X) in an aggregate
amount not to exceed $500,000 in any Fiscal Year in order to permit Holdings to
pay general administrative costs and expenses, (Y) in an aggregate amount not to
exceed in the aggregate $1,000,000 in any Fiscal Year (provided that the unused
--------
portion of such $1,000,000 may be carried forward to the succeeding Fiscal Year,
but only up to an aggregate amount not to exceed $2,000,000 of such Restricted
Junior Payments for any given Fiscal Year) or $5,000,000 during the term of this
Agreement plus the net cash proceeds of any issuance of Holdings Common Stock to
----
Management Investors and other officers and employees of Company and its
Subsidiaries in accordance with the terms of the Stockholders Agreement and the
Management Stock Incentive Plan, which net cash proceeds have been contributed
to Company, and (Z) in an amount necessary to permit Holdings to discharge the
consolidated tax liabilities of
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Holdings, Company and Company's Subsidiaries, in each case so long as Holdings
applies the amount of any such Restricted Junior Payment for such purpose.
7.6 Financial Covenants.
-------------------
A. Minimum Fixed Charge Ratio. Company shall not permit the ratio of
(i) Consolidated Adjusted EBITDA to (ii) Consolidated Fixed Charges for any
four-Fiscal Quarter period ending during any of the periods set forth below to
be less than the correlative ratio indicated:
Period Minimum Fixed Charge Ratio
---------------------------- ----------------------------
1st Fiscal Quarter, 1997 1.00:1.00
2nd Fiscal Quarter, 1997 1.00:1.00
3rd Fiscal Quarter, 1997 1.00:1.00
4th Fiscal Quarter, 1997 1.00:1.00
1st Fiscal Quarter, 1998 1.10:1.00
2nd Fiscal Quarter, 1998 1.10:1.00
3rd Fiscal Quarter, 1998 1.10:1.00
4th Fiscal Quarter, 1998 1.10:1.00
1st Fiscal Quarter, 1999 1.15:1.00
2nd Fiscal Quarter, 1999 1.15:1.00
3rd Fiscal Quarter, 1999 1.15:1.00
4th Fiscal Quarter, 1999 1.15:1.00
1st Fiscal Quarter, 2000
and each Fiscal Quarter thereafter 1.20:1.00
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B. Maximum Leverage Ratio. Company shall not permit the ratio of
(i) Consolidated Total Debt as of the last day of any Fiscal Quarter occurring
during any of the periods set forth below to (ii) Consolidated Adjusted EBITDA
for the four-Fiscal Quarter period ending on such last day to exceed the
correlative ratio indicated:
Period Maximum Leverage Ratio
---------------------------- ---------------------------
1st Fiscal Quarter, 1997 6.25:1.00
2nd Fiscal Quarter, 1997 7.50:1.00
3rd Fiscal Quarter, 1997 5.75:1.00
4th Fiscal Quarter, 1997 5.00:1.00
1st Fiscal Quarter, 1998 4.50:1.00
2nd Fiscal Quarter, 1998 4.50:1.00
3rd Fiscal Quarter, 1998 4.25:1.00
4th Fiscal Quarter, 1998 4.00:1.00
1st Fiscal Quarter, 1999 4.00:1.00
2nd Fiscal Quarter, 1999 4.00:1.00
3rd Fiscal Quarter, 1999 4.00:1.00
4th Fiscal Quarter, 1999 3.50:1.00
1st Fiscal Quarter, 2000 3.50:1.00
2nd Fiscal Quarter, 2000 3.50:1.00
3rd Fiscal Quarter, 2000 3.50:1.00
4th Fiscal Quarter, 2000 3.50:1.00
1st Fiscal Quarter, 2001 3.25:1.00
2nd Fiscal Quarter, 2001 3.25:1.00
3rd Fiscal Quarter, 2001 3.25:1.00
4th Fiscal Quarter, 2001 3.25:1.00
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<PAGE>
C. Minimum Consolidated Adjusted EBITDA. Company shall not permit
Consolidated Adjusted EBITDA for any four-Fiscal Quarter period ending as of the
last day of any Fiscal Quarter occurring during any of the periods set forth
below to be less than the correlative amount indicated:
Minimum Consolidated
Period Adjusted EBITDA
- ------------------------------ ----------------------
1st Fiscal Quarter, 1997 $50,000,000
2nd Fiscal Quarter, 1997 $37,500,000
3rd Fiscal Quarter, 1997 $52,500,000
4th Fiscal Quarter, 1997 $62,500,000
1st Fiscal Quarter, 1998 $67,500,000
2nd Fiscal Quarter, 1998 $72,500,000
3rd Fiscal Quarter, 1998 $75,000,000
4th Fiscal Quarter, 1998 $75,000,000
1st Fiscal Quarter, 1999 $75,000,000
2nd Fiscal Quarter, 1999 $75,000,000
3rd Fiscal Quarter, 1999 $75,000,000
4th Fiscal Quarter, 1999 $75,000,000
1st Fiscal Quarter, 2000
and each Fiscal Quarter thereafter $80,000,000
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<PAGE>
D. Minimum Consolidated Net Worth. Company shall not permit Consolidated
Net Worth at any time during any of the periods set forth below to be less than
the correlative amount indicated:
Minimum Consolidated
Period Net Worth
- ------------------------------ --------------------
1st Fiscal Quarter, 1997 $100,000,000
2nd Fiscal Quarter, 1997 $100,000,000
3rd Fiscal Quarter, 1997 $100,000,000
4th Fiscal Quarter, 1997 $100,000,000
1st Fiscal Quarter, 1998 $105,000,000
2nd Fiscal Quarter, 1998 $110,000,000
3rd Fiscal Quarter, 1998 $115,000,000
4th Fiscal Quarter, 1998 $120,000,000
1st Fiscal Quarter, 1999 $125,000,000
2nd Fiscal Quarter, 1999 $130,000,000
3rd Fiscal Quarter, 1999 $135,000,000
4th Fiscal Quarter, 1999 $140,000,000
1st Fiscal Quarter, 2000 $145,000,000
2nd Fiscal Quarter, 2000 $150,000,000
3rd Fiscal Quarter, 2000 $155,000,000
4th Fiscal Quarter, 2000 $160,000,000
1st Fiscal Quarter, 2001 $165,000,000
2nd Fiscal Quarter, 2001 $170,000,000
3rd Fiscal Quarter, 2001 $175,000,000
4th Fiscal Quarter, 2001 $180,000,000
7.7 Restriction on Fundamental Changes; Asset Sales and Acquisitions.
----------------------------------------------------------------
No Borrower shall nor shall any Borrower permit any of its
Subsidiaries to, alter the corporate, capital or legal structure of such
Borrower or any of its Subsidiaries, or enter into any transaction of merger or
consolidation, or liquidate, wind-up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease or sub-lease (as lessor or
sub-lessor), transfer or otherwise dispose of, in one transaction or a series of
transactions, all or any part of its business, property or fixed assets, whether
now owned or hereafter
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acquired, or acquire by purchase or otherwise all or substantially all the
business, property or fixed assets of, or stock or other evidence of beneficial
ownership of, any Person or any division or line of business of any Person,
except:
(i) any Subsidiary of Company may be merged with or into Company or
any wholly-owned Subsidiary of Company, or may be liquidated, wound up or
dissolved, or all or any part of its business, property or assets may be
conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to Company or any wholly-owned
Subsidiary of Company; provided that, in the case of such a merger, Company
--------
or such wholly-owned Subsidiary shall be the continuing or surviving
corporation and if any such transaction involves a Subsidiary Guarantor,
the surviving corporation shall be the Company or such Subsidiary
Guarantor;
(ii) Company and its Subsidiaries may make Consolidated Capital
Expenditures;
(iii) Company and its Subsidiaries may sell or otherwise dispose
of assets in transactions that do not constitute Asset Sales; provided that
--------
the consideration received for such assets shall be in an amount at least
equal to the fair market value thereof; and
(iv) subject to subsection 7.10, Company and its Subsidiaries may
make Asset Sales (a) of the property, plant and equipment of Goss France;
(b) constituting sale/leaseback transactions of its real property located
in Sayama, Japan, and Westmont, Illinois; (c) of the vacated warehouse
located in Cedar Rapids, Iowa; and (d) of other assets having a fair market
value not in excess of $2,000,000 for any given Fiscal Year; provided that
--------
(x) the consideration received for such assets shall be in an amount at
least equal to the fair market value thereof; (y) the consideration
received therefor shall be at least 85% in cash and the balance of any
consideration not received as cash shall be represented by promissory notes
which shall be pledged to Agent pursuant to the applicable Collateral
Documents; and (z) the proceeds of such Asset Sales shall be applied as
required by subsection 2.4B(iii)(a).
7.8 Sales and Lease-Backs.
---------------------
Except as permitted by subsection 7.7(iv)(b), no Borrower shall nor
shall any Borrower permit any of its Subsidiaries to, directly or indirectly,
become or remain liable as lessee or as a guarantor or other surety with respect
to any lease, whether an Operating Lease or a Capital Lease, of any property
(whether real, personal or mixed), whether now owned or hereafter acquired,
(i) which such Borrower or any of its Subsidiaries has sold or transferred or is
to sell or transfer to any other Person (other than such Borrower or any of its
Subsidiaries) or (ii) which such Borrower or any of its Subsidiaries intends to
use for substantially the same purpose as any other property which has been or
is to be sold or
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transferred by such Borrower or any of its Subsidiaries to any Person (other
than such Borrower or any of its Subsidiaries) in connection with such lease.
7.9 Transactions with Shareholders and Affiliates.
---------------------------------------------
No Borrower shall nor shall any Borrower permit any of its
Subsidiaries to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any holder of 5%
or more of any class of equity Securities of Holdings or Company or with any
Affiliate of Holdings or Company or of any such holder, on terms that are less
favorable to Holdings or Company or that Subsidiary, as the case may be, than
those that might be obtained at the time from Persons who are not such a holder
or Affiliate; provided that the foregoing restriction shall not apply to (i) any
--------
transaction between Company and any of its wholly-owned Subsidiaries or between
any of its wholly-owned Subsidiaries, (ii) reasonable and customary fees paid to
members of the Boards of Directors of Company and its Subsidiaries,
(iii) payment of Transaction Costs and payments permitted under subsection 7.5,
(iv) reasonable financial advisory or structuring fees paid to Stonington for
services rendered by Stonington, including without limitation financial advisory
fees to Stonington for services related to the Acquisition, and reimbursement of
out-of-pocket expenses, and (v) arms-length transactions in the ordinary course
of business with other companies managed by Stonington.
7.10 Disposal of Subsidiary Stock.
----------------------------
Except pursuant to the Collateral Documents and except for any sale of
100% of the capital stock or other equity Securities of any of its Subsidiaries
in compliance with the provisions of subsection 7.7(i) or (iv), no Borrower
shall:
(i) directly or indirectly sell, assign, pledge or otherwise encumber
or dispose of any shares of capital stock or other equity Securities of any
of its Subsidiaries, except to qualify directors if required by applicable
law; or
(ii) permit any of its Subsidiaries directly or indirectly to
sell, assign, pledge or otherwise encumber or dispose of any shares of
capital stock or other equity Securities of any of its Subsidiaries
(including such Subsidiary), except to Company, another Subsidiary of
Company, or to qualify directors if required by applicable law.
7.11 Conduct of Business.
-------------------
From and after the Closing Date, no Borrower shall nor shall any
Borrower permit any of its Subsidiaries to, engage in any business other than
(i) the businesses engaged in by such Borrower and its Subsidiaries on the
Closing Date and similar or related
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businesses and (ii) such other lines of business as may be consented to by
Requisite Lenders.
7.12 Amendments of Certain Documents; Designation of Designated Senior
-----------------------------------------------------------------
Indebtedness.
------------
A. Amendments or Waivers of Certain Related Agreements. No Borrower
will, nor will any Borrower permit any of its Subsidiaries to, agree to any
material amendment to, or waive any of its material rights under, or make any
payment consistent with such an amendment of, or change to, any Related
Agreement (other than any Related Agreement evidencing or governing any
Subordinated Indebtedness, the Assumed Guaranties and the Customer Notes related
to the Assumed Guaranties) after the Closing Date without in each case obtaining
the prior written consent of Requisite Lenders to such amendment or waiver.
B. Amendments of Documents Relating to Subordinated Indebtedness, the
Assumed Guaranties and the Customer Notes Related to the Assumed Guaranties. No
Borrower shall nor shall any Borrower permit any of its Subsidiaries to, amend
or otherwise change the terms of any Subordinated Indebtedness, the Assumed
Guaranties and the Customer Notes related to the Assumed Guaranties or any
agreement related thereto or any guaranty entered into by any Loan Party in
connection therewith, or make any payment consistent with an amendment thereof
or change thereto, if the effect of such amendment or change is to increase the
interest rate on such Subordinated Indebtedness, such Assumed Guaranties or such
Customer Notes, change any dates upon which payments of principal or interest
are due thereon, change any of the covenants with respect thereto in a manner
which is more restrictive to such Borrower or any of its Subsidiaries, change
any event of default or condition to an event of default with respect thereto in
a manner which is more restrictive to such Borrower, change the redemption,
prepayment or defeasance provisions thereof, change the subordination provisions
thereof (or of any guaranty thereof), or change any collateral therefor (other
than to release such collateral), or if the effect of such amendment or change,
together with all other amendments or changes made, is to increase the
obligations of the obligor thereunder or to confer any additional rights on the
holders of such Subordinated Indebtedness, such Assumed Guaranties or such
Customer Notes (or a trustee or other representative on their behalf) which
would be adverse to any Loan Party or Lenders.
C. Designation of "Designated Senior Indebtedness". No Borrower shall
nor shall any Borrower permit any of its Subsidiaries to, designate any
Indebtedness as "Designated Senior Indebtedness" (as defined in the Senior
Subordinated Note Indenture) for purposes of the Senior Subordinated Note
Indenture without the prior written consent of Requisite Lenders.
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7.13 Fiscal Year.
-----------
No Borrower shall change its Fiscal Year-end from September 30.
7.14 Deposit Accounts.
----------------
No Borrower shall nor shall any Borrower permit any of its
Subsidiaries to, maintain any Deposit Account which is not a Lock Box Account, a
Blocked Account or a Concentration Account under the exclusive dominion and
control of the applicable Agent.
7.15 Foreign Unfunded Pension Plans.
------------------------------
No Borrower shall nor shall any Borrower permit any of its Subsidiaries to
adopt or amend any Foreign Unfunded Pension Plan if such adoption or amendment
could reasonably be expected to result any Material Adverse Effect.
Section 8. EVENTS OF DEFAULT
If any of the following conditions or events ("Events of Default")
shall occur:
8.1 Failure to Make Payments When Due.
---------------------------------
Failure by any Borrower to pay any installment of principal of any
Loan when due, whether at stated maturity, by acceleration, by notice of
voluntary prepayment, by mandatory prepayment or otherwise; failure by any
Borrower to pay when due any amount payable to an Issuing Lender in
reimbursement of any drawing under a Letter of Credit; or failure by any
Borrower to pay interest on any Loan or any fee or any other amount due under
this Agreement within five days after the date due; or
8.2 Default in Other Agreements.
---------------------------
(i) Failure of any Borrower or any of its Subsidiaries to pay when
due any principal of or interest on one or more items of Indebtedness
(other than Indebtedness referred to in subsection 8.1) or Contingent
Obligations in an aggregate principal amount of $5,000,000 or more, in each
case beyond the end of any grace period provided therefor; or (ii) breach
or default by any Borrower or any of its Subsidiaries with respect to any
other material term of (a) one or more items of Indebtedness or Contingent
Obligations in the aggregate principal amounts referred to in clause (i)
above or (b) any loan agreement, mortgage, indenture or other agreement
relating to such item(s) of Indebtedness or Contingent Obligation(s), if
the effect of such breach or default is to cause, or to permit the holder
or holders of that Indebtedness or Contingent Obligation(s) (or a trustee
on behalf of such holder or holders) to cause, that Indebtedness or
Contingent Obligation(s) to become or be
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declared due and payable prior to its stated maturity or the stated
maturity of any underlying obligation, as the case may be (upon the giving
or receiving of notice, lapse of time, both, or otherwise); or
8.3 Breach of Certain Covenants.
---------------------------
Failure of any Borrower to perform or comply with any term or
condition contained in subsection 2.5 or 6.2 or Section 7 of this Agreement; or
8.4 Breach of Warranty.
------------------
Any representation, warranty, certification or other statement made by
any Borrower or any of its Subsidiaries in any Loan Document or in any statement
or certificate at any time given by any Borrower or any of its Subsidiaries in
writing pursuant hereto or thereto or in connection herewith or therewith shall
be false in any material respect on the date as of which made; or
8.5 Other Defaults Under Loan Documents.
-----------------------------------
Any Borrower or any of its Subsidiaries shall default in the
performance of or compliance with any term contained in this Agreement or any of
the other Loan Documents, other than any such term referred to in any other
subsection of this Section 8, and such default shall not have been remedied or
waived within 30 days after receipt by any Borrower of notice from the
applicable Agent or any Lender of such default; or
8.6 Involuntary Bankruptcy; Appointment of Receiver, etc.
-----------------------------------------------------
(i) A court having jurisdiction in the premises shall enter a decree
or order for relief in respect of Holdings, any Borrower or any of its
Material Subsidiaries in an involuntary case under the Bankruptcy Code
which decree or order is not stayed; or (ii) an involuntary case shall be
commenced against Holdings, any Borrower or any of its Material
Subsidiaries under the Bankruptcy Code; or a decree or order of a court
having jurisdiction in the premises for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Holdings, any Borrower or any of its Material
Subsidiaries, or over all or a substantial part of its property, shall have
been entered; or there shall have occurred the involuntary appointment of
an interim receiver, trustee or other custodian of Holdings, any Borrower
or any of its Material Subsidiaries for all or a substantial part of its
property; or a warrant of attachment, execution or similar process shall
have been issued against any substantial part of the property of Holdings,
any Borrower or any of its Material Subsidiaries, and any such event
described in this clause (ii) shall continue for 60 days unless dismissed,
bonded or discharged; or
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8.7 Voluntary Bankruptcy; Appointment of Receiver, etc.
---------------------------------------------------
(i) Holdings, any Borrower or any of its Material Subsidiaries shall
have an order for relief entered with respect to it or commence a voluntary
case under the Bankruptcy Code, or shall consent to the entry of an order
for relief in an involuntary case, or to the conversion of an involuntary
case to a voluntary case, under any such law, or shall consent to the
appointment of or taking possession by a receiver, trustee or other
custodian for all or a substantial part of its property; or Holdings, any
Borrower or any of its Material Subsidiaries shall make any assignment for
the benefit of creditors; or (ii) Holdings, any Borrower or any of its
Material Subsidiaries shall be unable, or shall fail generally, or shall
admit in writing its inability, to pay its debts as such debts become due;
or the Board of Directors of Holdings, any Borrower or any of its Material
Subsidiaries (or any committee thereof) shall adopt any resolution or
otherwise authorize any action to approve any of the actions referred to in
clause (i) above or this clause (ii); or
8.8 Judgments and Attachments.
-------------------------
Any money judgment, writ or warrant of attachment or similar process
involving (i) in any individual case an amount in excess of $2,500,000 or
(ii) in the aggregate at any time an amount in excess of $5,000,000 (in either
case to the extent not adequately covered by insurance as to which a solvent and
unaffiliated insurance company has acknowledged coverage) shall be entered or
filed against Holdings, any Borrower or any of its Subsidiaries or any of their
respective assets and shall remain undischarged, unvacated, unbonded or unstayed
for a period of 60 days (or in any event later than five days prior to the date
of any proposed sale thereunder); or
8.9 Dissolution.
-----------
Any order, judgment or decree shall be entered against Holdings, any
Borrower or any of its Subsidiaries decreeing the dissolution or split up of
Holdings, any Borrower or that Subsidiary and such order shall remain
undischarged or unstayed for a period in excess of 60 days; or
8.10 Employee Benefit Plans.
----------------------
There shall occur one or more ERISA Events which individually or in
the aggregate results in or might reasonably be expected to result in liability
of any Borrower or any of its Subsidiaries in excess of $2,500,000 during the
term of this Agreement; or there shall exist an excess of aggregated accumulated
benefit obligations, as defined in Statement of Financial Accounting Standards
No. 87, over the aggregate total fair market value for all Pension Plans
(excluding for purposes of such computation (1) each Pension Plan with respect
to which the fair market value of the assets exceeds such accumulated benefit
obligations and (2) each Foreign Unfunded Pension Plan), which exceeds
$[5,000,000]; or
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8.11 Change in Control.
-----------------
(i) A change shall occur in the Board of Directors of Holdings so
that a majority of the Board of Directors of Holdings ceases to consist of
the individuals who constituted the Board of Directors of Holdings on the
Closing Date (or individuals whose election or nomination for election was
approved by a vote of at least 75% of the directors then in office who
either were directors of Holdings on the Closing Date or whose election or
nomination for election previously was so approved); or
(ii) any Person or Group (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission), other than Stonington and its
Affiliates, shall become or be the owner, directly or indirectly,
beneficially or of record, of shares representing more than 30% of the
aggregate ordinary voting power represented by the issued and outstanding
capital stock of Holdings on a fully diluted basis, unless Stonington and
its Affiliates shall own and continue to so own capital stock representing
not less than a majority of such aggregate ordinary voting power; or
(iii) at any time prior to a Public Offering, Stonington shall
cease to own, directly or indirectly, beneficially or of record, at least
51% of each of the Holdings Common Stock or any other class of voting
capital stock of Holdings; or
(iv) Holdings shall cease to beneficially own and control,
directly or indirectly, 100% of the issued and outstanding shares of
capital stock of Company or shall cease to have the ability to elect all of
the Board of Directors of Company;
(v) Company shall cease to beneficially own and control, directly or
indirectly, 100% of the issued and outstanding shares of capital stock of
each of the other Borrowers (other than directors' qualifying shares) or
Company shall cease to have the ability to elect all of the Board of
Directors of each of the other Borrowers; or
(vi) any "Change of Control" (as defined in the Senior
Subordinated Note Indenture) shall occur; or
8.12 Invalidity of Loan Documents.
----------------------------
Any Guaranty for any reason, other than the satisfaction in full of
all Obligations, ceases to be in full force and effect (other than in accordance
with its terms) or is declared to be null and void; or any Loan Party denies
that it has any further liability, including without limitation with respect to
future advances by Lenders, under any Loan Document to which it is a party, or
gives notice to such effect; or the validity of any Loan Document shall be
contested by any Governmental Authority (whether by a general suspension of
payments or a moratorium on the payment of any class of indebtedness or
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otherwise); or any treaty, law, regulation, communique, decree, ordinance or
policy of any Governmental Authority shall purport to render any provision of
any Loan Document invalid or unenforceable or shall purport to prevent or
materially delay the performance or observance by any Loan Party of its
obligations under any Loan Documents.
8.13 Failure of Security.
-------------------
Any Collateral Document shall, at any time, cease to be in full force
and effect (other than by reason of a release of Collateral in accordance with
the terms thereof) or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any Loan Party, or any applicable
Agent shall not have or shall cease to have a valid and perfected First Priority
security interest in the Collateral; or
8.14 Action Relating to Certain Subordinated Indebtedness.
----------------------------------------------------
Any event shall occur which, under the terms of the Senior
Subordinated Note Indenture shall require Holdings or any of its Subsidiaries to
purchase, redeem or otherwise acquire or offer to purchase, redeem or otherwise
acquire all or any portion of any such Subordinated Indebtedness; or Holdings or
any of its Subsidiaries shall for any other reason purchase, redeem or otherwise
acquire or offer to purchase, redeem or otherwise acquire, or make any other
payments in respect of, all or any portion of any such Subordinated
Indebtedness, except to the extent expressly permitted by subsection 7.5; or
8.15 Failure to Consummate Acquisition, Company Merger or Goss Japan
---------------------------------------------------------------
Merger.
------
(i) The Acquisition or the Company Merger shall not be consummated in
accordance with this Agreement concurrently with the making of the initial
Loans, or the Acquisition or the Company Merger shall be unwound, reversed
or otherwise rescinded in whole or in part for any reason; or
(ii) The Goss Japan Merger shall not be consummated in accordance
with this Agreement and with the terms of the applicable merger agreement
and the laws and regulations of Japan as soon as practicable after the
Closing Date and in any event no later the first anniversary of the Closing
Date; or
8.16 Failure by RGS Japan to Execute Loan Documents or Assume Obligations.
--------------------------------------------------------------------
(i) RGS Japan fails to execute this Agreement and the other Loan
Documents to which it is required to be a party at the Closing, or fails to
assume the obligations hereunder and thereunder immediately upon the
consummation of the purchase by New Goss Japan of all of the outstanding capital
stock of RGS Japan; or
(ii) Tomita fails to make any indemnity payment of $2,500,000 or
more pursuant to the Share Transfer Agreement; or
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8.17 Amendment of Certain Documents of Holdings.
------------------------------------------
Holdings shall agree to any material amendment to, or waive any of its
material rights under, or otherwise change any material terms of, any of the
Purchase Agreement, the Holdings' Certificate of Designation, or the
Stockholders Agreement, in each case as in effect on the Closing Date, in a
manner adverse to Holdings or any of its Subsidiaries or to Lenders without the
prior written consent of Administrative Agent and Requisite Lenders; or Holdings
or any other Guarantor shall designate any Indebtedness as "Designated Senior
Debt" (as defined in the Senior Subordinated Note Indenture) for purposes of the
Senior Subordinated Note Indenture or any guaranty relating thereto without the
prior written consent of Requisite Lenders; or
8.18 Conduct of Business Relating to Holdings.
----------------------------------------
Holdings shall engage in any business other than owning 100% of the
capital stock of Company and entering into and performing its obligations under
and in accordance with the Loan Documents and the Related Agreements to which it
is a party, or shall own any assets other than (a) the capital stock of Company
and (b) Cash and Cash Equivalents in an amount not to exceed $1,000,000 at any
one time for the purpose of paying general operating expenses of Holdings or
shall incur or permit to exist any Indebtedness or any other liabilities other
than liabilities related to the permitted business of Holdings and which are not
material in amount, either individually or in the aggregate:
THEN (i) upon the occurrence of any Event of Default described in
subsection 8.6 or 8.7, each of (a) the unpaid principal amount of and accrued
interest on the Loans, (b) an amount equal to the maximum amount that may at any
time be drawn under all Letters of Credit then outstanding (whether or not any
beneficiary under any such Letter of Credit shall have presented, or shall be
entitled at such time to present, the drafts or other documents or certificates
required to draw under such Letter of Credit), and (c) all other Obligations
shall automatically become immediately due and payable, without presentment,
demand, protest or other requirements of any kind, all of which are hereby
expressly waived by each Borrower, and the obligation of each Lender to make any
Loan, the obligation of Agent to issue any Letter of Credit and the right of any
Lender to issue any Letter of Credit hereunder shall thereupon terminate, and
(ii) upon the occurrence and during the continuation of any other Event of
Default, the applicable Agent shall, upon the written request or with the
written consent of Requisite Lenders, by written notice to each Borrower,
declare all or any portion of the amounts described in clauses (a) through (c)
above to be, and the same shall forthwith become, immediately due and payable,
and the obligation of each Lender to make any Loan, the obligation of Agent to
issue any Letter of Credit and the right of any Lender to issue any Letter of
Credit hereunder shall thereupon terminate; provided that the foregoing shall
--------
not affect in any way the obligations of Lenders under subsection 3.3C(i).
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Any amounts described in clause (b) above, when received by Agent,
shall be held by Agent pursuant to the terms of the Collateral Account Agreement
and shall be applied as therein provided.
Notwithstanding anything contained in the second preceding paragraph,
if at any time within 60 days after an acceleration of the Loans pursuant to
each paragraph each Borrower shall pay all arrears of interest and all payments
on account of principal which shall have become due otherwise than as a result
of such acceleration (with interest on principal and, to the extent permitted by
law, on overdue interest, at the rates specified in this Agreement) and all
Events of Default and Potential Events of Default (other than non-payment of the
principal of and accrued interest on the Loans, in each case which is due and
payable solely by virtue of acceleration) shall be remedied or waived pursuant
to subsection 10.6, then Requisite Lenders, by written notice to each Borrower,
may at their option rescind and annul such acceleration and its consequences;
but such action shall not affect any subsequent Event of Default or Potential
Event of Default or impair any right consequent thereon. The provisions of this
paragraph are intended merely to bind Lenders to a decision which may be made at
the election of Requisite Lenders and are not intended to benefit any Borrower
and do not grant any Borrower the right to require Lenders to rescind or annul
any acceleration hereunder, even if the conditions set forth herein are met.
Section 9. AGENT
9.1 Appointment.
-----------
BTCo and BT Tokyo, respectively, are hereby appointed (i)
Administrative Agent by each Lender and (ii) Japanese Agent by each Japanese
Lender, each so appointed hereunder and under the other Loan Documents, and each
such Lender hereby authorizes such Agent to act as its agent in accordance with
the terms of this Agreement and the other Loan Documents. Credit Suisse and The
Bank of Nova Scotia, respectively, are hereby appointed by each Lender as the
(i) Syndication Agent and (ii) Documentation Agent, each so appointed hereunder.
Agent agrees to act upon the express conditions contained in this Agreement and
the other Loan Documents, as applicable. The provisions of this Section 9 are
solely for the benefit of Agent, Syndication Agent and Documentation Agent and
Lenders and Borrowers shall have no rights as a third party beneficiary of any
of the provisions thereof. In performing its functions and duties under this
Agreement, Agent shall act solely as an agent of Lenders and does not assume and
shall not be deemed to have assumed any obligation towards or relationship of
agency or trust with or for any Borrower or any of its Subsidiaries.
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9.2 Powers and Duties; General Immunity.
-----------------------------------
A. Powers; Duties Specified. Each Lender irrevocably authorizes Agent to
take such action on such Lender's behalf and to exercise such powers, rights and
remedies hereunder and under the other Loan Documents as are specifically
delegated or granted to Agent by the terms hereof and thereof, together with
such powers, rights and remedies as are reasonably incidental thereto. Agent
shall have only those duties and responsibilities that are expressly specified
in this Agreement and the other Loan Documents. Agent may exercise such powers,
rights and remedies and perform such duties by or through its agents or
employees. None of Agent, Syndication Agent or Documentation Agent shall have,
by reason of this Agreement or any of the other Loan Documents, a fiduciary
relationship in respect of any Lender; and nothing in this Agreement or any of
the other Loan Documents, expressed or implied, is intended to or shall be so
construed as to impose upon Agent, Syndication Agent or Documentation Agent any
obligations in respect of this Agreement or any of the other Loan Documents
except as expressly set forth herein or therein.
B. No Responsibility for Certain Matters. None of Agent, Syndication
Agent or Documentation Agent shall be responsible to any Lender for the
execution, effectiveness, genuineness, validity, enforceability, collectibility
or sufficiency of this Agreement or any other Loan Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statements or in any financial or other statements,
instruments, reports or certificates or any other documents furnished or made by
Agent, Syndication Agent or Documentation Agent to Lenders or by or on behalf of
any Borrower to Agent, Syndication Agent or Documentation Agent or any Lender in
connection with the Loan Documents and the transactions contemplated thereby or
for the financial condition or business affairs of any Borrower or any other
Person liable for the payment of any Obligations, nor shall Agent, Syndication
Agent or Documentation Agent be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions, covenants
or agreements contained in any of the Loan Documents or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or as to the existence
or possible existence of any Event of Default or Potential Event of Default.
Anything contained in this Agreement to the contrary notwithstanding, none of
Agent, Syndication Agent or Documentation Agent shall have any liability arising
from confirmations of the amount of outstanding Loans or the Letter of Credit
Usage or the component amounts thereof.
C. Exculpatory Provisions. None of Agent, Syndication Agent or
Documentation Agent shall nor any of its officers, directors, employees or
agents shall be liable to Lenders for any action taken or omitted by Agent,
Syndication Agent or Documentation Agent under or in connection with any of the
Loan Documents except to the extent caused by Agent's, Syndication Agent's or
Documentation Agent's gross negligence or willful misconduct. If Agent,
Syndication Agent or Documentation Agent shall request instructions from Lenders
with respect to any act or action (including the failure to take an action) in
connection with this Agreement or any of the other Loan Documents, Agent,
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Syndication Agent or Documentation Agent shall be entitled to refrain from such
act or taking such action unless and until Administrative Agent shall have
received instructions from Requisite Lenders. Without prejudice to the
generality of the foregoing, (i) Agent, Syndication Agent or Documentation Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
communication, instrument or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and shall be
entitled to rely and shall be protected in relying on opinions and judgments of
attorneys (who may be attorneys for Borrowers and their Subsidiaries),
accountants, experts and other professional advisors selected by it; and (ii) no
Lender shall have any right of action whatsoever against Agent, Syndication
Agent or Documentation Agent as a result of Agent, Syndication Agent or
Documentation Agent acting or (where so instructed) refraining from acting under
this Agreement or any of the other Loan Documents in accordance with the
instructions of Requisite Lenders. Agent, Syndication Agent and Documentation
Agent shall be entitled to refrain from exercising any power, discretion or
authority vested in it under this Agreement or any of the other Loan Documents
unless and until it has obtained the instructions of Requisite Lenders.
D. Agent Entitled to Act as Lender. The agency hereby created shall in
no way impair or affect any of the rights and powers of, or impose any duties or
obligations upon, Agent, Syndication Agent or Documentation Agent in its
individual capacity as a Lender hereunder. With respect to its participation in
the Loans and the Letters of Credit, Agent, Syndication Agent and Documentation
Agent shall have the same rights and powers hereunder as any other Lender and
may exercise the same as though it were not performing the duties and functions
delegated to it hereunder, and the term "Lender" or "Lenders" or any similar
term shall, unless the context clearly otherwise indicates, include Agent in its
individual capacity. Agent, Syndication Agent and Documentation Agent and each
of their respective Affiliates may accept deposits from, lend money to and
generally engage in any kind of banking, trust, financial advisory or other
business with any Borrower or any of its Affiliates as if it were not performing
the duties specified herein, and may accept fees and other consideration from
any Borrower for services in connection with this Agreement and otherwise
without having to account for the same to Lenders.
9.3 Representations and Warranties; No Responsibility For Appraisal of
------------------------------------------------------------------
Creditworthiness.
----------------
Each Lender represents and warrants that it has made its own
independent investigation of the financial condition and affairs of each
Borrower and its Subsidiaries in connection with the making of the Loans and the
issuance of Letters of Credit hereunder and that it has made and shall continue
to make its own appraisal of the creditworthiness of each Borrower and its
Subsidiaries. None of Agent, Syndication Agent or Documentation Agent shall
have any duty or responsibility, either initially or on a continuing basis, to
make any such investigation or any such appraisal on behalf of Lenders or to
provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the making of the Loans or at any time
or times thereafter, and none of Agent,
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Syndication Agent or Documentation Agent shall have any responsibility with
respect to the accuracy of or the completeness of any information provided to
Lenders.
9.4 Right to Indemnity.
------------------
Each Lender, in proportion to its Pro Rata Share, severally agrees to
indemnify Agent, Syndication Agent or Documentation Agent to the extent that
Agent, Syndication Agent or Documentation Agent shall not have been reimbursed
by Borrowers, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits and reasonable costs and expenses
(including, without limitation, reasonable counsel fees and disbursements) or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against Agent, Syndication Agent or Documentation Agent in
exercising its powers, rights and remedies or performing its duties hereunder or
under the other Loan Documents or otherwise in its capacity as Agent,
Syndication Agent or Documentation Agent in any way relating to or arising out
of this Agreement or the other Loan Documents; provided that no Lender shall be
--------
liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from Agent's, Syndication Agent's or Documentation Agent's gross negligence or
willful misconduct. If any indemnity furnished to Agent, Syndication Agent or
Documentation Agent for any purpose shall, in the opinion of Agent, Syndication
Agent or Documentation Agent be insufficient or become impaired, Agent,
Syndication Agent or Documentation Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished.
9.5 Successor Agent.
---------------
Agent, Syndication Agent or Documentation Agent may resign at any time
by giving 30 days' prior written notice thereof to Lenders and each Borrower,
and Agent, Syndication Agent or Documentation Agent may be removed at any time
with or without cause by an instrument or concurrent instruments in writing
delivered to each Borrower and Agent, Syndication Agent or Documentation Agent,
as the case may be, and signed by Requisite Lenders. Upon any such notice of
resignation or any such removal, Requisite Lenders shall have the right, upon
five Business Days' notice to each Borrower, to appoint a successor Agent,
Syndication Agent or Documentation Agent. Upon the acceptance of any
appointment as Agent, Syndication Agent or Documentation Agent hereunder by a
successor Agent, Syndication Agent or Documentation Agent that successor Agent,
Syndication Agent or Documentation Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Agent and the retiring or removed Agent, Syndication Agent or
Documentation Agent shall be discharged from its duties and obligations under
this Agreement. After any retiring or removed Agent's, Syndication Agent's or
Documentation Agent's resignation or removal hereunder as Agent, Syndication
Agent or Documentation Agent, the provisions of this Section 9 shall inure to
its benefit as
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to any actions taken or omitted to be taken by it while it was Agent,
Syndication Agent or Documentation Agent under this Agreement.
9.6 Collateral Documents and Guaranties.
-----------------------------------
Each Lender hereby further authorizes Agent to enter into each
Collateral Document as secured party on behalf of and for the benefit of Lenders
and agrees to be bound by the terms of each Collateral Document; provided that,
--------
subject to any provision of subsection 10.6 requiring the consent of any
additional Lenders, Agent shall not enter into or consent to any amendment,
modification, termination or waiver of any provision contained in any Collateral
Document or any Guaranty without the prior consent of Requisite Lenders, but
Agent may (i) release any Lien covering any items of Collateral that are the
subject of a sale or other disposition of assets permitted by this Agreement or
to which Requisite Lenders have consented and (ii) release any Guarantor (other
than any Borrower or Holdings) from its Guaranty if all of the capital stock of
such Guarantor is sold to a Person that is not any Affiliate of Company pursuant
to a sale or other disposition permitted hereunder or to which Requisite Lenders
have consented. Anything contained in any of the Loan Documents to the contrary
notwithstanding, each Lender agrees that no Lender shall have any right
individually to realize upon any of the Collateral under any Collateral Document
or to enforce any of the Guaranties, it being understood and agreed that all
rights and remedies under the Collateral Documents and the Guaranties may be
exercised solely by Agent for the benefit of Lenders in accordance with the
terms thereof.
Section 10. MISCELLANEOUS
10.1 Assignments and Participations in Loans and Letters of Credit.
-------------------------------------------------------------
A. General. Subject to subsection 10.1B, each Lender shall have the
right at any time to (i) sell, assign or transfer to any Eligible Assignee, or
(ii) sell participations to any Person in, all or any part of its Commitments or
any Loan or Loans made by it or its Letters of Credit or participations therein
or any other interest herein or in any other Obligations owed to it; provided
--------
that no such sale, assignment, transfer or participation shall, without the
consent of Company, require Company to file a registration statement with the
Securities and Exchange Commission or apply to qualify such sale, assignment,
transfer or participation under the securities laws of any state; provided,
--------
further that no such sale, assignment or transfer described in clause (i) above
- -------
shall be effective unless and until an Assignment Agreement effecting such sale,
assignment or transfer shall have been accepted by Administrative Agent and
recorded in the Register as provided in subsection 10.1B(ii); and provided,
--------
further that no such sale, assignment, transfer or participation of any Letter
- -------
of Credit or any participation therein may be made separately from a sale,
assignment, transfer or participation of a corresponding interest in the
Revolving Loan Commitment and the Revolving Loans of the Lender effecting such
sale, assignment, transfer or participation. Except as otherwise provided in
this subsection 10.1, no Lender shall, as between Borrowers
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and such Lender, be relieved of any of its obligations hereunder as a result of
any sale, assignment or transfer of, or any granting of participations in, all
or any part of its Commitments or the Loans, the Letters of Credit or
participations therein, or the other Obligations owed to such Lender.
B. Assignments.
(i) Amounts and Terms of Assignments. Each Commitment, Loan, Letter
--------------------------------
of Credit or participation therein, or other Obligation may (a) be assigned
in any amount to another Lender, or to an Affiliate of the assigning Lender
or another Lender, with the giving of notice to Company and Administrative
Agent or (b) be assigned in an aggregate amount of not less than $5,000,000
(or such lesser amount as shall constitute the aggregate amount of the
Commitments, Loans, Letters of Credit and participations therein, and other
Obligations of the assigning Lender) to any other Eligible Assignee with
the consent of Company and Administrative Agent and, in the case of an
assignment of an Indemnity Amount or an Indemnity Participation, the
consent of the Japanese Funding Lender (which consent of Company,
Administrative Agent and Japanese Funding Lender shall not be unreasonably
withheld); provided that any such assignment by a Lender (other than the
--------
assignment of Japanese Term Loans and Japanese Revolving Loan Commitments
required pursuant to subsection 2.1A(ii)) in accordance with either clause
(a) or (b) above shall effect a pro rata assignment of each Type of
Commitment and each Type of Loan of the assigning Lender, and in the event
that any such assigning Lender is an Indemnifying Lender, shall also effect
a pro rata assignment of any Indemnity Participation and Indemnity Amount;
provided further that notwithstanding the foregoing, in the event that an
-------- -------
Indemnifying Lender is making an assignment to any other Lender or Eligible
Assignee, which Lender or Eligible Assignee desires to become a Japanese
Lender hereunder, Japanese Funding Lender shall be entitled to assign to
such other Lender or Eligible Assignee, without making a pro rata
assignment of any other Type of Commitment or Type of Loan of such Japanese
Funding Lender, that portion of its Japanese Term Loans and Japanese
Revolving Loan Commitment which represents the portion of the Indemnity
Participation and Indemnity Amount being assigned to such other Lender or
Eligible Assignee by such Indemnifying Lender, and upon such assignment by
Japanese Funding Lender, such other Lender or Eligible Assignee shall
become a Japanese Lender hereunder. To the extent of any such assignment
in accordance with either clause (a) or (b) above, the assigning Lender
shall be relieved of its obligations with respect to its Commitments,
Loans, Letters of Credit or participations therein, or other Obligations or
the portion thereof so assigned. The parties to each such assignment shall
execute and deliver to Administrative Agent, for its acceptance and
recording in the Register, an Assignment Agreement, together with (other
than the assignment of Japanese Term Loans and Japanese Revolving Loan
Commitments required pursuant to subsection 2.1A(ii)) a processing and
recordation fee of $3,500, and with such forms, certificates or other
evidence, if any, with respect to any withholding tax matters as
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the assignee under such Assignment Agreement may be required to deliver to
Administrative Agent pursuant to subsection 2.7B(iii)(a). Upon such
execution, delivery, acceptance and recordation, from and after the
effective date specified in such Assignment Agreement, (y) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment
Agreement, shall have the rights and obligations of a Lender hereunder and
(z) the assigning Lender thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such Assignment
Agreement, relinquish its rights and be released from its obligations under
this Agreement (and, in the case of an Assignment Agreement covering all or
the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto; provided
--------
that, anything contained in any of the Loan Documents to the contrary
notwithstanding, if such Lender is the Issuing Lender with respect to any
outstanding Letters of Credit such Lender shall continue to have all rights
and obligations of an Issuing Lender with respect to such Letters of Credit
until the cancellation or expiration of such Letters of Credit and the
reimbursement of any amounts drawn thereunder). The Commitments hereunder
shall be modified to reflect the Commitment of such assignee and any
remaining Commitment of such assigning Lender and, if any such assignment
occurs after the issuance of the Notes hereunder, the assigning Lender
shall, upon the effectiveness of such assignment or as promptly thereafter
as practicable, surrender its applicable Notes to Administrative Agent for
cancellation, and thereupon new Notes shall be issued to the assignee
and/or to the assigning Lender, substantially in the form of Exhibit IV or
----------
Exhibit V annexed hereto, as the case may be, with appropriate insertions,
---------
to reflect the new Commitments and/or outstanding Term Loans, as the case
may be, of the assignee and/or the assigning Lender.
(ii) Acceptance by Administrative Agent; Recordation in Register.
-----------------------------------------------------------
Upon its receipt of an Assignment Agreement executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with
the processing and recordation fee referred to in subsection 10.1B(i) and
any forms, certificates or other evidence with respect to any withholding
tax matters that such assignee may be required to deliver to Administrative
Agent pursuant to subsection 2.7B(iii), Administrative Agent shall, if
Administrative Agent and Company have consented to the assignment evidenced
thereby (in each case to the extent such consent is required pursuant to
subsection 10.1B(i)), (a) accept such Assignment Agreement by executing a
counterpart thereof as provided therein (which acceptance shall evidence
any required consent of Administrative Agent to such assignment),
(b) record the information contained therein in the Register, and (c) give
prompt notice thereof to Company. Administrative Agent shall maintain a
copy of each Assignment Agreement delivered to and accepted by it as
provided in this subsection 10.1B(ii).
C. Participations. The holder of any participation (other than an
Indemnity Participation), other than an Affiliate of the Lender granting such
participation, shall not be
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entitled to require such Lender to take or omit to take any action hereunder
except action directly affecting (i) the extension of the scheduled final
maturity date of any Loan allocated to such participation or (ii) a reduction of
the principal amount of or the rate of interest payable on any Loan allocated to
such participation, and all amounts payable by Borrowers hereunder (including
without limitation amounts payable to such Lender pursuant to subsections 2.6D,
2.7 and 3.6) shall be determined as if such Lender had not sold such
participation. Each Borrower and each Lender hereby acknowledges and agrees
that, solely for purposes of subsections 10.4 and 10.5, (a) any participation
will give rise to a direct obligation of such Borrower to the participant and
(b) the participant shall be considered to be a "Lender".
D. Assignments to Federal Reserve Banks. In addition to the assignments
and participations permitted under the foregoing provisions of this subsection
10.1, any Lender may assign and pledge all or any portion of its Loans, the
other Obligations owed to such Lender, and its Notes to any Federal Reserve Bank
as collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any operating circular issued by such Federal Reserve
Bank; provided that (i) no Lender shall, as between any Borrower and such
--------
Lender, be relieved of any of its obligations hereunder as a result of any such
assignment and pledge and (ii) in no event shall such Federal Reserve Bank be
considered to be a "Lender" or be entitled to require the assigning Lender to
take or omit to take any action hereunder.
E. Information. Each Lender may furnish any information concerning
Company and its Subsidiaries in the possession of that Lender from time to time
to assignees and participants (including prospective assignees and
participants), subject to subsection 10.19.
10.2 Expenses.
--------
Whether or not the transactions contemplated hereby shall be
consummated, each Borrower agrees to pay promptly (i) all the actual and
reasonable costs and expenses of preparation of the Loan Documents and any
consents, amendments, waivers or other modifications thereto; (ii) all the
actual and reasonable costs of furnishing all opinions by counsel for any
Borrower (including without limitation any opinions requested by Lenders as to
any legal matters arising hereunder) and of any Borrower's performance of and
compliance with all agreements and conditions on its part to be performed or
complied with under this Agreement and the other Loan Documents including,
without limitation, with respect to confirming compliance with environmental and
insurance requirements; (iii) the actual and reasonable fees, expenses and
disbursements of counsel to Agent (including actual and reasonable allocated
costs of internal counsel) in connection with the negotiation, preparation,
execution and administration of the Loan Documents and any consents, amendments,
waivers or other modifications thereto and any other documents or matters
requested by any Borrower; (iv) all the actual and reasonable costs and expenses
of creating and perfecting Liens in favor of Agent on behalf of Lenders pursuant
to the Loan Documents, including without limitation costs of conducting record
searches, examining
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Collateral, opening bank accounts and lockboxes, depositing checks, receiving
and transferring funds (including charges for checks for which there are
insufficient funds), costs of title insurance premiums, real estate survey
costs, and fees and taxes in connection with the filing of financing statements,
costs of preparing and recording Loan Documents, fees and expenses of counsel
for providing such opinions as Agent or Requisite Lenders may reasonably
request, and fees and expenses of legal counsel to Agent; (v) all the actual
costs and reasonable expenses of obtaining and reviewing any appraisals provided
for under this Agreement and any environmental audits or reports provided for
under this Agreement; (vi) all other actual and reasonable costs and expenses
incurred by Agent, Syndication Agent and Documentation Agent in connection with
the syndication of the Commitments and the negotiation, preparation and
execution of the Loan Documents and any consents, amendments, waivers or other
modifications thereto and the transactions contemplated thereby; and (vii) after
the occurrence of an Event of Default, all costs and expenses, including
reasonable attorneys' fees (including actual and reasonable allocated costs of
internal counsel) and costs of settlement, incurred by Agent and Lenders in
enforcing any Obligations of or in collecting any payments due from any Loan
Party hereunder or under the other Loan Documents by reason of such Event of
Default or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a "work-out" or
pursuant to any insolvency or bankruptcy proceedings.
10.3 Indemnity.
---------
In addition to the payment of expenses pursuant to subsection 10.2,
whether or not the transactions contemplated hereby shall be consummated, each
Borrower agrees to defend, indemnify, pay and hold harmless Administrative Agent
and Lenders, and the officers, directors, employees, agents and affiliates of
Administrative Agent and Lenders (collectively called the "Indemnitees") from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including without limitation the reasonable
fees and disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto), whether direct, indirect or consequential and
whether based on any federal, state or foreign laws, statutes, rules or
regulations (including without limitation securities and commercial laws,
statutes, rules or regulations and Environmental Laws), on common law or
equitable cause or on contract or otherwise, that may be imposed on, incurred
by, or asserted against any such Indemnitee, in any manner relating to or
arising out of this Agreement or the other Loan Documents or the Related
Agreements or the transactions contemplated hereby or thereby (including without
limitation Lenders' agreement to make the Loans hereunder or the use or intended
use of the proceeds of any of the Loans or the issuance of Letters of Credit
hereunder or the use or intended use of any of the Letters of Credit) or the
statements contained in the commitment letter delivered by any Lender to any
Borrower with respect thereto (collectively called the "Indemnified
Liabilities"); provided that Borrowers shall not have any obligation to any
--------
Indemnitee hereunder with respect to
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any Indemnified Liabilities to the extent such Indemnified Liabilities arise
solely from the gross negligence or willful misconduct of that Indemnitee as
determined by a final judgment of a court of competent jurisdiction. To the
extent that the undertaking to defend, indemnify, pay and hold harmless set
forth in the preceding sentence may be unenforceable because it is violative of
any law or public policy, each Borrower shall contribute the maximum portion
that it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
Without limiting the generality of the foregoing, each Borrower
further agrees to fully and promptly pay, perform, discharge, defend (subject to
Indemnitee's selection of counsel), indemnify and hold harmless each Indemnitee
from and against any Indemnified Environmental Liabilities; provided that
--------
Borrowers shall not have any obligation to any Indemnitee hereunder with respect
to any Indemnified Environmental Liabilities to the extent such Indemnified
Environmental Liabilities arise solely from the gross negligence or willful
misconduct of that Indemnitee as determined by a final judgment of a court of
competent jurisdiction. To the extent that the undertaking to defend,
indemnify, pay and hold harmless set forth in the preceding sentence may be
unenforceable because it is violative of any law or public policy, each Borrower
shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Environmental Liabilities incurred by the Indemnitees or any of them. As used
herein, "Indemnified Environmental Liabilities" means any liabilities,
obligations, losses, damages (including, without limitation, natural resource
damages), penalties, actions, judgments, suits, claims (including Environmental
Claims), costs (including, without limitation, the costs of any investigation,
study, sampling, testing, abatement, cleanup, removal, remediation, or other
response action necessary to remove, remediate, clean up, or abate any Hazardous
Materials or any activity relating to Hazardous Materials that is in violation
of any Environmental Laws or that presents a material risk of giving rise to an
Environmental Claim), expenses and disbursements of any kind or nature
whatsoever, whether direct, indirect or consequential and whether based on any
federal, state or foreign laws, statutes, rules or regulations (including
without limitation securities and commercial laws, statutes, rules or
regulations and Environmental Laws), on common law or equitable cause or on
contract or otherwise, that may be imposed on, incurred by, or asserted against
any such Indemnitee, in any manner relating to or arising out of: (i) any
Release, threatened Release or disposal of any Hazardous Materials at any of the
Facilities; (ii) the Release, threatened Release, or disposal at any location of
any Hazardous Materials generated at or originating from any of the Facilities
by or at the direction of Company or any of its Subsidiaries; (iii) any
Environmental Claim in connection with any of the Facilities; or (iv) the
operation of or violation of any Environmental Law at any of the Facilities.
10.4 Set-Off; Security Interest in Deposit Accounts.
----------------------------------------------
In addition to any rights now or hereafter granted under applicable
law and not by way of limitation of any such rights, upon the occurrence of any
Event of Default
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and consultation with Administrative Agent each Lender is hereby authorized by
each Borrower at any time or from time to time, without notice to any 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, but not including trust accounts) and any
other Indebtedness at any time held or owing by that Lender to or for the credit
or the account of such Borrower against and on account of the obligations and
liabilities of such Borrower under this Agreement, the Letters of Credit and
participations therein and the other Loan Documents, including, but not limited
to, all claims of any nature or description arising out of or connected with
this Agreement, the Letters of Credit and participations therein or any other
Loan Document, irrespective of whether or not (i) that Lender shall have made
any demand hereunder or (ii) the principal of or the interest on the Loans or
any amounts in respect of the Letters of Credit or any other amounts due
hereunder shall have become due and payable pursuant to Section 8 and although
said obligations and liabilities, or any of them, may be contingent or
unmatured. Each Borrower hereby further grants to Administrative Agent and each
Lender for the benefit of all Lenders a security interest in all deposits and
accounts maintained with Administrative Agent or such Lender as security for the
Obligations.
10.5 Ratable Sharing
---------------
Lenders hereby agree among themselves that if any of them shall,
whether by voluntary payment, by realization upon security, through the exercise
of any right of set-off or banker's lien, by counterclaim or cross action or by
the enforcement of any right under the Loan Documents or otherwise, or as
adequate protection of a deposit treated as cash collateral under the Bankruptcy
Code, receive payment or reduction of a proportion of the aggregate amount of
principal, interest, amounts payable in respect of Letters of Credit, fees and
other amounts then due and owing to that Lender from a Borrower hereunder or
under the other Loan Documents (collectively, the "Aggregate Amounts Due" to
such Lender) which is greater than the proportion received by any other Lender
in respect of the Aggregate Amounts Due to such other Lender, then the Lender
receiving such proportionately greater payment shall (i) notify Agent and each
other Lender of the receipt of such payment and (ii) apply a portion of such
payment to purchase participations (which it shall be deemed to have purchased
from each seller of a participation simultaneously upon the receipt by such
seller of its portion of such payment) in the Aggregate Amounts Due to the other
Lenders so that all such recoveries of Aggregate Amounts Due shall be shared by
all Lenders in proportion to the Aggregate Amounts Due to them; provided that if
--------
all or part of such proportionately greater payment received by such purchasing
Lender is thereafter recovered from such Lender upon the bankruptcy or
reorganization of such Borrower or otherwise, those purchases shall be rescinded
and the purchase prices paid for such participations shall be returned to such
purchasing Lender ratably to the extent of such recovery, but without interest.
Each Borrower expressly consents to the foregoing arrangement and agrees that
any holder of a participation so purchased may exercise any and all rights of
banker's lien, set-off or counterclaim with respect to any and all monies
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owing by such Borrower to that holder with respect thereto as fully as if that
holder were owed the amount of the participation held by that holder.
10.6 Amendments and Waivers.
----------------------
No amendment, modification, termination or waiver of any provision of
this Agreement or of the Notes, and no consent to any departure by any Borrower
therefrom, shall in any event be effective without the written concurrence of
such Borrower and Requisite Lenders; provided that any such amendment,
--------
modification, termination, waiver or consent which: increases the amount of any
of the Commitments or reduces the principal amount of any of the Loans; changes
in any manner the definition of "Pro Rata Share" or the definition of "Requisite
Lenders"; changes in any manner the provisions contained in the second paragraph
of subsection 2.1C(ii); changes in any manner any provision of this Agreement
which, by its terms, expressly requires the approval or concurrence of all
Lenders; postpones the date of any scheduled installment of principal of any of
the Loans; postpones the date on which any interest or any fees are payable;
decreases the interest rate borne by any of the Loans (other than any waiver of
any increase in the interest rate applicable to any of the Loans pursuant to
subsection 2.2E) or the amount of any fees payable hereunder; increases the
maximum duration of Interest Periods permitted hereunder; releases all or any
significant portion of the Collateral other than in accordance with the terms of
the Loan Documents; reduces the amount or postpones the due date of any amount
payable in respect of, or extends the required expiration date of, any Letter of
Credit; changes in any manner the obligations of Lenders relating to the
purchase of participations in Letters of Credit; increases the advance rates
provided for in the definition of "Company Borrowing Base" or in the definition
of "Goss Japan Borrowing Base" or in the definition of "Goss UK Borrowing Base"
to any level above the advance rates in effect as of the Closing Date; or
changes in any manner the provisions contained in subsection 8.1 or this
subsection 10.6 shall be effective only if evidenced by a writing signed by or
on behalf of all Lenders. In addition, (i) no amendment, modification,
termination or waiver of any provision of any Note shall be effective without
the written concurrence of the Lender which is the holder of that Note, (ii) no
amendment, modification, termination or waiver of any provision of
subsection 2.10 or of related definitions shall be effective without the written
concurrence of the Indemnifying Lenders holding a majority of the Japanese Term
Loan Exposure and the Japanese Revolving Loan Exposure and of Japanese Funding
Lender, and (iii) no amendment, modification, termination or waiver of any
provision of Section 9 or of any other provision of this Agreement which, by its
terms, expressly requires the approval or concurrence of Agent shall be
effective without the written concurrence of Agent. Administrative Agent may,
but shall have no obligation to, with the concurrence of any Lender, execute
amendments, modifications, waivers or consents on behalf of that Lender. Any
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which it was given. No notice to or demand on any Borrower
in any case shall entitle such Borrower to any other or further notice or demand
in similar or other circumstances. Any amendment, modification, termination,
waiver or consent effected in
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accordance with this subsection 10.6 shall be binding upon each Lender at the
time outstanding, each future Lender and, if signed by any Borrower, on such
Borrower.
10.7 Independence of Covenants.
-------------------------
All covenants hereunder shall be given independent effect so that if a
particular action or condition is not permitted by any of such covenants, the
fact that it would be permitted by an exception to, or would otherwise be within
the limitations of, another covenant shall not avoid the occurrence of an Event
of Default or Potential Event of Default if such action is taken or condition
exists.
10.8 Notices.
-------
Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served, telexed or sent by telefacsimile or mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telefacsimile or telex, or three Business Days
after depositing it in the mail with postage prepaid and properly addressed;
provided that notices to Administrative Agent shall not be effective until
- --------
received. For the purposes hereof, the address of each party hereto shall be as
set forth under such party's name on the signature pages hereof or (i) as to
Borrowers and Agent, such other address as shall be designated by such Person in
a written notice delivered to the other parties hereto and (ii) as to each other
party, such other address as shall be designated by such party in a written
notice delivered to Agent.
10.9 Survival of Representations, Warranties and Agreements.
------------------------------------------------------
A. All representations, warranties and agreements made herein shall
survive the execution and delivery of this Agreement and the making of the Loans
and the issuance of the Letters of Credit hereunder.
B. Notwithstanding anything in this Agreement or implied by law to the
contrary, the agreements of Borrowers set forth in subsections 2.6D, 2.7, 3.5A,
3.6, 10.2, 10.3 and 10.4 and the agreements of Lenders set forth in subsections
9.2C, 9.4 and 10.5 shall survive the payment of the Loans, the cancellation or
expiration of the Letters of Credit and the reimbursement of any amounts drawn
thereunder, and the termination of this Agreement.
10.10 Failure or Indulgence Not Waiver; Remedies Cumulative.
-----------------------------------------------------
No failure or delay on the part of Agent or any Lender in the exercise
of any power, right or privilege hereunder or under any other Loan Document
shall impair such power, right or privilege or be construed to be a waiver of
any default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege
178
<PAGE>
preclude other or further exercise thereof or of any other power, right or
privilege. All rights and remedies existing under this Agreement and the other
Loan Documents are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
10.11 Marshalling; Payments Set Aside.
-------------------------------
No Agent nor any Lender shall be under any obligation to marshal any
assets in favor of any Borrower or any other party or against or in payment of
any or all of the Obligations. To the extent that any Borrower makes a payment
or payments to Agent or Lenders (or to Agent for the benefit of Lenders), or
Agent or Lenders enforce any security interests or exercise their rights of
setoff, and such payment or payments or the proceeds of such enforcement or
setoff or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, any other state or federal
law, common law or any equitable cause, then, to the extent of such recovery,
the obligation or part thereof originally intended to be satisfied, and all
Liens, rights and remedies therefor or related thereto, shall be revived and
continued in full force and effect as if such payment or payments had not been
made or such enforcement or setoff had not occurred.
10.12 Severability.
------------
In case any provision in or obligation under this Agreement or the
Notes shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
10.13 Obligations Several; Independent Nature of Lenders' Rights.
----------------------------------------------------------
The obligations of Lenders hereunder are several and no Lender shall
be responsible for the obligations or Commitments of any other Lender hereunder.
Nothing contained herein or in any other Loan Document, and no action taken by
Lenders pursuant hereto or thereto, shall be deemed to constitute Lenders as a
partnership, an association, a joint venture or any other kind of entity. The
amounts payable at any time hereunder to each Lender shall be a separate and
independent debt, and each Lender shall be entitled to protect and enforce its
rights arising out of this Agreement and it shall not be necessary for any other
Lender to be joined as an additional party in any proceeding for such purpose.
10.14 Headings.
--------
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
179
<PAGE>
10.15 Applicable Law.
--------------
THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
10.16 Successors and Assigns.
----------------------
This Agreement shall be binding upon the parties hereto and their
respective successors and assigns and shall inure to the benefit of the parties
hereto and the successors and assigns of Lenders (it being understood that
Lenders' rights of assignment are subject to subsection 10.1). None of
Borrowers' rights or obligations hereunder nor any interest therein may be
assigned or delegated by any Borrower without the prior written consent of all
Lenders.
10.17 Consent to Jurisdiction and Service of Process.
----------------------------------------------
ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY BORROWER ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OBLIGATION MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE
OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT EACH BORROWER
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS AND IRREVOCABLY AGREES TO BE BOUND BY
ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, SUCH OTHER LOAN
DOCUMENT OR SUCH OBLIGATION. Each Borrower hereby agrees that service of all
process in any such proceeding in any such court may be made by registered or
certified mail, return receipt requested, to such Borrower at its address
provided in subsection 10.8, such service being hereby acknowledged by such
Borrower to be sufficient for personal jurisdiction in any action against such
Borrower in any such court and to be otherwise effective and binding service in
every respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Lender to bring
proceedings against any Borrower in the courts of any other jurisdiction.
10.18 Waiver of Jury Trial.
--------------------
EACH OF THE PARTIES TO THIS AGREEMENT HEREBY AGREES TO WAIVE ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
180
<PAGE>
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF
THIS LOAN TRANSACTION OR THE LENDER/BORROWER RELATIONSHIP THAT IS BEING
ESTABLISHED. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including without limitation contract claims, tort
claims, breach of duty claims and all other common law and statutory claims.
Each party hereto acknowledges that this waiver is a material inducement to
enter into a business relationship, that each has already relied on this waiver
in entering into this Agreement, and that each will continue to rely on this
waiver in their related future dealings. Each party hereto further warrants and
represents that it has reviewed this waiver with its legal counsel and that it
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER
SPECIFICALLY REFERRING TO THIS SUBSECTION 10.18 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS
MADE HEREUNDER. In the event of litigation, this Agreement may be filed as a
written consent to a trial by the court.
10.19 Confidentiality.
---------------
Each Lender shall hold all non-public information obtained pursuant to
the requirements of this Agreement which has been identified in writing as
confidential by any Borrower in accordance with such Lender's customary
procedures for handling confidential information of this nature and in
accordance with safe and sound banking practices, it being understood and agreed
by each Borrower that in any event a Lender may make disclosures to Affiliates
of such Lender, to the legal counsel and accountants of such Lender or of such
Affiliates, or disclosures reasonably required by any bona fide assignee,
transferee or participant (who shall have agreed to the confidentiality of the
same) in connection with the contemplated assignment or transfer by such Lender
of any Loans or any participations therein or disclosures required or requested
by any governmental agency or representative thereof or pursuant to legal
process; provided that, unless specifically prohibited by applicable law or
--------
court order, each Lender shall notify Company of any request by any governmental
agency or representative thereof (other than any such request in connection with
any examination of the financial condition of such Lender by such governmental
agency) for disclosure of any such non-public information prior to disclosure of
such information; and provided, further that in no event shall any Lender be
-------- -------
obligated or required to return any materials furnished by Company or any of its
Subsidiaries.
181
<PAGE>
10.20 Judgment Currency.
-----------------
(a) If, for the purposes of obtaining judgment in any court, it is
necessary to convert a sum due hereunder in Dollars into another currency, the
parties hereto agree, to the fullest extent permitted by law, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures an Agent or a Lender could purchase the Dollars with such other
currency in New York, New York on the Business Day immediately preceding the day
on which any such judgment, or any relevant part thereof, is given.
(b) The obligations of each Borrower in respect of any sum due from
it to any Agent or any Lender hereunder shall, notwithstanding any judgment in a
currency other than Dollars, be discharged only to the extent that on the
Business Day following receipt by such Agent or Lender of any sum adjudged to be
so due in such other currency such Agent or Lender may in accordance with normal
banking procedures purchase Dollars with such other currency; if the Dollars so
purchased are less than the sum originally due such Agent or Lender in Dollars,
such Borrower agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify such Agent or Lender against such loss, and if the
Dollars so purchased exceed the sum originally due to such Agent or Lender in
Dollars, Lender shall remit such excess to such Borrower.
10.21 Counterparts; Effectiveness.
---------------------------
This Agreement and any amendments, waivers, consents or supplements
hereto or in connection herewith may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto and receipt by each Borrower
and Administrative Agent of written or telephonic notification of such execution
and authorization of delivery thereof.
10.22 No Immunity.
-----------
To the extent that any Borrower has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, such
Borrower hereby irrevocably waives such immunity in respect of its obligations
under this Agreement and, without limiting the generality of the foregoing,
agrees that the waivers set forth in this Section 10.22 shall have the fullest
scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United
States and are intended to be irrevocable for purposes of such Act.
182
<PAGE>
[Remainder of page intentionally left blank]
183
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
BORROWERS:
GOSS GRAPHIC SYSTEMS, INC.
By:
------------------------------------------
Title:
---------------------------------------
Notice Address:
Goss Graphics Systems, Inc.
700 Oakmont Lane
Westmont, Illinois 60559
Attention: M. Eric Schroeder
Telecopy No.: 630-850-5807
with copies to:
Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Robert Mylod
Telecopy No.: 212-339-8585/8586
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Feintuch, Esq.
Telecopy No.: 212-403-1000
S-1
<PAGE>
GOSS GRAPHIC SYSTEMS LIMITED
By:
-----------------------------------------
Title:
--------------------------------------
Notice Address:
Goss Graphic Systems Limited
Greenbank Street
Preston
Lancashire PR1 7LA
England, The United Kingdom
Attention: ______________
Telecopy No.: 44-1772-885698
with copies to:
Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Robert Mylod
Telecopy No.: 212-339-8585/8586
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Feintuch, Esq.
Telecopy No.: 212-403-1000
S-2
<PAGE>
GOSS GRAPHIC SYSTEMS JAPAN K. K.
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Goss Graphic Systems Japan K. K.
Mitsuya Toranomon Building
22-14 Toranomon 1-Chome
Minato-Ku, Tokyo 105
Attention: ________________
Telecopy No.: 81-3-3508-8046
with copies to:
Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Robert Mylod
Telecopy No.: 212-339-8585/8586
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Feintuch, Esq.
Telecopy No.: 212-403-1000
S-3
<PAGE>
ROCKWELL GRAPHIC SYSTEMS-JAPAN CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Rockwell Graphic Systems-Japan Corporation
c/o Goss Graphic Systems Japan K. K.
Mitsuya Toranomon Building
22-14 Toranomon 1-Chome
Minato-Ku, Tokyo 105
Attention: ________________
Telecopy No.: 81-3-3508-8046
with copies to:
Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Robert Mylod
Telecopy No.: 212-339-8585/8586
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Richard D. Feintuch, Esq.
Telecopy No.: 212-403-1000
S-4
<PAGE>
LENDERS:
BANKERS TRUST COMPANY,
as a Lender and as Administrative Agent
By:
------------------------------------------
Title:
---------------------------------------
Notice Address:
Notice:
Bankers Trust Company
c/o BT Commercial Corporation
300 South Grand Avenue
41st Floor
Los Angeles, California 90071
Attention: Thomas L. Ventling
Telecopy No.: 213-620-8394
Domestic Lending Office:
Bankers Trust Company
Commercial Finance Division
14 Wall Street, 3rd Floor
New York, New York 10005
Attention: Bharathi Baliga
Telecopy No.: 212-618-2428
Eurodollar Lending Office:
Bankers Trust Company
Commercial Finance Division
14 Wall Street, 3rd Floor
New York, New York 10005
Attention: Bharathi Baliga
Telecopy No.: 212-618-2428
S-5
<PAGE>
CREDIT SUISSE,
as a Lender and as Syndication Agent
By:
----------------------------------------
Title:
-------------------------------------
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Credit Suisse
c/o CS First Boston
55 East 52nd Street
New York, New York 10055
Attention: Colleen Burke
Telecopy No.: 212-980-3997
S-6
<PAGE>
THE BANK OF NOVA SCOTIA,
as a Lender and as Documentation Agent
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
The Bank of Nova Scotia
Corporate Finance & Syndications
One Liberty Plaza, 26th Floor
New York, New York 10006
Attention: Nick Karsiotis
Telecopy No.: 212-225-5090
S-7
<PAGE>
BANKERS TRUST COMPANY, TOKYO BRANCH,
as a Lender and as Japanese Agent
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Bankers Trust Company, Tokyo Office
Tokyo Ginza Kyokai Building
1-3-1, Marunouchi, Chiyoda-Ku
Tokyo, Japan
Attention: Hisao Fujiwara
Telecopy No.: 81-3-3216-6526
with a copy to:
Bankers Trust Company
c/o BT Commercial Corporation
300 South Grand Avenue
41st Floor
Los Angeles, California 90071
Attention: Thomas L. Ventling
Telecopy No.: 213-620-8394
S-8
<PAGE>
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION,
as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-9
<PAGE>
THE BANK OF NEW YORK, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-10
<PAGE>
THE BANK OF NOVA SCOTIA, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-11
<PAGE>
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-12
<PAGE>
CAISSE NATIONALE de CREDIT AGRICOLE, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-13
<PAGE>
THE DAI-ICHI KANGYO BANK, LTD.,
Chicago Branch, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-14
<PAGE>
DEUTSCHE FINANCIAL SERVICES HOLDING CORPORATION, as a
Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-15
<PAGE>
THE FIRST NATIONAL BANK OF CHICAGO, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-16
<PAGE>
THE FUJI BANK, LIMITED, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-17
<PAGE>
HARRIS TRUST AND SAVINGS BANK, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-18
<PAGE>
HELLER FINANCIAL, INC., as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-19
<PAGE>
THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY, as a
Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-20
<PAGE>
LaSALLE NATIONAL BANK, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-21
<PAGE>
THE MITSUBISHI TRUST AND BANKING CORPORATION, as a
Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-22
<PAGE>
NATIONAL BANK OF CANADA, A Canadian Chartered Bank,
as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-23
<PAGE>
THE SANWA BANK, LIMITED, Chicago Branch, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-24
<PAGE>
THE SAKURA BANK, LIMITED, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-25
<PAGE>
TRANSAMERICA BUSINESS CREDIT CORPORATION, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
Notice Address:
Attention:
Telecopy No.: (____) ____-_____
S-26
Exhibit 4.3
FORM OF
CERTIFICATE
OF
DESIGNATION
OF
6-1/2% REDEEMABLE PAY-IN-KIND PREFERRED STOCK
OF
GGS HOLDINGS, INC.
---------------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
---------------------------
GGS HOLDINGS, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Corporation"), HEREBY CERTIFIES that the
following resolutions were duly adopted by the Board of Directors of the
Corporation pursuant to authority conferred upon the Board of Directors by the
provisions of the Amended and Restated Certificate of Incorporation of the
Corporation which authorize the issuance of up to 1,000,000 shares of a class of
capital stock designated as preferred stock, par value $0.01 per share (the
"Preferred Stock"), by the unanimous written consent of the Board of Directors
of the Corporation on __________, 1996 pursuant to Section 141(f) of the
Delaware General Corporation Law.
RESOLVED, that there is hereby designated a series of Preferred
Stock, par value $0.01 per share, consisting of 100,000 shares of the
Corporation, which will be issued in a series entitled "6-1/2% Redeemable
Pay-in-Kind Preferred Stock".
RESOLVED, that the issuance of 47,500 shares of 6-1/2% Redeemable
Pay-in-Kind Preferred Stock, par value $0.01 per share to Rockwell International
Corporation, is hereby authorized and the preferences and privileges, relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions of all shares of such series, in addition to those
set forth in the Amended and Restated Certificate of Incorporation of the
Corporation are hereby fixed as follows:
<PAGE>
6-1/2% REDEEMABLE PAY-IN-KIND PREFERRED STOCK
1. NUMBER OF SHARES. (a) The designation of the series of Preferred
Stock, par value $0.01 per share, provided for herein shall be "6-1/2%
Redeemable Pay-in-Kind Preferred Stock" (hereinafter referred to as the "6-1/2%
Preferred Stock"), and the number of authorized shares constituting 6-1/2%
Preferred Stock is 100,000. Unless specifically provided to the contrary, the
term 6-1/2% Preferred Stock shall include Additional Shares of 6-1/2% Preferred
Stock (as hereinafter defined). The shares of 6-1/2% Preferred Stock shall only
be issued in connection with the consummation of the transactions contemplated
by the Purchase Agreement (as hereinafter defined), and pursuant to Section 2
hereof.
(b) All shares of 6-1/2% Preferred Stock redeemed, purchased or
otherwise acquired by the Corporation shall be retired and cancelled and shall
be restored to the status of authorized but unissued shares of Preferred Stock,
without designation as to series, and may thereafter be issued, but not as
shares of 6-1/2% Preferred Stock.
(c) The 6-1/2% Preferred Stock shall, with respect to dividend
rights, rights upon liquidation, winding up or dissolution, and redemption
rights, rank (i) junior to any other series of Preferred Stock duly established
and hereafter created by the Board of Directors of the Corporation, the terms of
which shall specifically provide that such series shall rank prior to the 6-1/2%
Preferred Stock (the "Senior Preferred Stock"), (ii) on a parity with any other
series of Preferred Stock duly established by the Board of Directors of the
Corporation, the terms of which shall specifically provide that such series
shall rank on a parity with the 6-1/2% Preferred Stock, whether now existing or
hereafter created (the "Parity Preferred Stock"), and (iii) prior to any other
class or series of capital stock of the Corporation, including, without
limitation, all classes of common stock and nonvoting common stock of the
Corporation (collectively, the "Common Stock"), whether now existing or
hereafter created (all of such classes or series of capital stock of the
Corporation to which the 6-1/2% Preferred Stock ranks prior, including, without
limitation, the Common Stock and junior securities convertible into or
exchangeable for other junior securities, are collectively referred to herein as
the "Junior Securities").
2. DIVIDENDS. (a) Subject to any prior preferences of any
Senior Preferred Stock, the holders of the shares of 6-1/2% Preferred
Stock shall be entitled to receive
-2-
<PAGE>
when and as declared by the Board of Directors of the Corporation, out of funds
legally available therefor, cumulative dividends on the shares of the 6-1/2%
Preferred Stock, at a rate per annum of 6-1/2% multiplied by the liquidation
preference thereof. Dividends on shares of the 6-1/2% Preferred Stock shall be
payable on December 31 of each year, commencing on December 31, 1996, which date
shall be the first day of the next succeeding dividend period (each annual
period commencing on December 31, 1996, an "Annual Dividend Period"), or if any
such date is not a Business Day (as hereinafter defined), on the next succeeding
Business Day (each of such dates being a "6-1/2% Preferred Dividend Payment
Date"), in preference to and in priority over dividends on the Junior
Securities. Such dividends shall be paid to the holders of record of the 6-1/2%
Preferred Stock at the close of business on the date specified by the Board of
Directors of the Corporation (the "Record Date") at the time such dividend is
declared; provided, however, that such Record Date shall not be more than 60
days nor less than 10 days prior to the respective 6-1/2% Preferred Dividend
Payment Date. Dividends on the 6-1/2% Preferred Stock shall be fully cumulative
and shall accrue (whether or not earned or declared and, to the extent permitted
by law, whether or not there are unrestricted funds of the Corporation legally
available for the payment of dividends), without interest, from the initial date
of issuance of the 6-1/2% Preferred Stock (the "6-1/2% Preferred Initial
Issuance Date") and except that with respect to the first Annual Dividend Period
relating to any Additional Shares of 6-1/2% Preferred Stock, dividends shall
accrue from the respective initial date of issuance thereof. Dividends with
respect to 6-1/2% Preferred Stock, whether or not in arrears, may be declared
and paid at any time without reference to any regular 6-1/2% Preferred Dividend
Payment Date to holders of record of shares of 6-1/2% Preferred Stock as of the
close of business on a date, not more than 60 days nor less than 10 days
preceding the payment date thereof, as specified by the Board of Directors of
the Corporation at the time the payment of such dividends is declared. The
amount of dividends accrued for any shares of 6-1/2% Preferred Stock for any
period less than a full Annual Dividend Period shall be calculated on the basis
of a 6-1/2% per annum rate for the actual number of days elapsed from the later
of the date of issuance of such share of 6-1/2% Preferred Stock or the last
6-1/2% Preferred Dividend Payment Date on which accrued and unpaid dividends
were declared and paid with respect to such 6-1/2% Preferred Stock, to and
including the date as of which such calculation is made, based on a 365 or 366
day year, as the case may be, and the actual number of days elapsed.
-3-
<PAGE>
On each 6-1/2% Preferred Dividend Payment Date and on any other date
on which dividends on the 6-1/2% Preferred Stock are paid pursuant to the
provisions of this Section 2 that, in each case, occurs prior to the payment of
any dividend on any class or series of Common Stock or Junior Securities (a
"Junior Stock Dividend") payable in cash or other property (except for dividends
payable solely in shares of Common Stock or Junior Securities), the Corporation
may pay dividends on the 6-1/2% Preferred Stock, at its option, in cash or by
issuing a number of additional shares (or partial shares) of the 6-1/2%
Preferred Stock (the "Additional Shares of 6-1/2% Preferred Stock") for each
such share (or partial share) of 6-1/2% Preferred Stock then outstanding equal
to the dividend then payable on each such share (or partial share) of 6-1/2% of
Preferred Stock for the Annual Dividend Period then ended (or such other period
for which dividends are so being paid) (expressed as a dollar amount) divided by
the liquidation value of one share of 6-1/2% Preferred Stock (expressed as a
dollar amount).
On each 6-1/2% Preferred Dividend Payment Date and on any other date
on which dividends on the 6-1/2% Preferred Stock are paid pursuant to the
provisions of this Section 2 that, in each case, occurs on or after the payment
of any Junior Stock Dividend, the Corporation shall pay all dividends on the
6-1/2% Preferred Stock in cash.
(b) (i) No dividends (other than as set forth in the succeeding
sentence) shall be declared or paid or set apart for payment on any Parity
Preferred Stock for any period unless all accrued and unpaid dividends on shares
of 6-1/2% Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof irrevocably set apart
for such payment and for no other purpose. When dividends are not paid in full
upon the shares of 6-1/2% Preferred Stock and any other series of Parity
Preferred Stock, all dividends declared on 6-1/2% Preferred Stock and any other
series of Parity Preferred Stock shall be declared and paid pro rata so that the
amount of dividends so declared per share on 6-1/2% Preferred Stock and per such
number of shares of such other series of Preferred Stock having a liquidation
value equal to the per share liquidation value of the 6-1/2% Preferred Stock
shall in all cases bear to each other the same ratio that accrued dividends per
share on the shares of 6-1/2% Preferred Stock and per such number of shares of
such other series of Parity Preferred Stock bear to each other.
(ii) For so long as any shares of 6-1/2% Preferred Stock are
outstanding, no shares of Parity Preferred Stock
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shall be redeemed or repurchased by the Corporation or any of its Subsidiaries
for any consideration (except for shares of Parity Preferred Stock) unless all
accrued and unpaid dividends on shares of 6-1/2% Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof irrevocably set apart for such payment and for no other
purpose.
(iii) For so long as any shares of 6-1/2% Preferred Stock are
outstanding, no dividend shall be declared or paid or set aside for payment or
other distribution declared or made (in each case, other than dividends or
distributions paid solely in shares of Junior Securities, or options, warrants
or rights to subscribe for or purchase shares of Junior Securities) upon any
Junior Securities, nor will any Junior Securities (or any options, warrants or
rights to subscribe for or purchase Junior Securities) be redeemed, purchased or
otherwise acquired by the Corporation or any of its Subsidiaries for any
consideration (except for shares of Junior Securities, or options, warrants or
rights to subscribe for or purchase shares of Junior Securities), unless, in
either case, the full amount of cumulative dividends on all shares of 6-1/2%
Preferred Stock are paid in full for all prior periods and are paid or set apart
for payment in full for the current period. Nothing contained in this
Certificate of Designation shall prevent the redemption or repurchase by the
Corporation or any of its Subsidiaries for any consideration of shares of Junior
Securities pursuant to management investment agreements entered into in
connection with, or subsequent to, the transactions contemplated by the Purchase
Agreement ("Management Investment Agreements").
(c) Any dividend payment made on shares of 6-1/2% Preferred Stock
shall first be credited against the dividends accrued with respect to the
earliest periods for which dividends have not been paid. Holders of shares of
6-1/2% Preferred Stock shall not be entitled to (i) any dividends, whether
payable in cash, property or stock, in excess of full cumulative dividends, as
herein provided, on the 6-1/2% Preferred Stock, or (ii) any interest, or sum of
money in lieu of interest, in respect of any dividend payment or payments on the
6-1/2% Preferred Stock which may be in arrears.
(d) Certificates for Additional Shares of 6-1/2% Preferred Stock
shall bear a legend identifying such shares as Additional Shares of 6-1/2%
Preferred Stock. Shares of Additional Shares of 6-1/2% Preferred Stock shall be
identical in all respects to shares of 6-1/2% Preferred Stock (except that such
Additional Shares of 6-1/2% Preferred Stock
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shall be dated as of the date of issuance and shall accrue dividends from such
date) and shall be treated alike.
(e) All dividends paid with respect to shares of 6-1/2% Preferred
Stock pursuant to this Section 2 shall be paid pro rata to the holders entitled
thereto.
3. REDEMPTION. Shares of 6-1/2% Preferred Stock shall be redeemable
by the Corporation as provided below (with all references in this Section 3 to a
redemption price per share to be adjusted proportionally in respect of partial
shares):
(a) OPTIONAL REDEMPTION. At the option of the Corporation, shares of
6-1/2% Preferred Stock may be redeemed at any time as a whole or in part from
time to time, at a redemption price, payable in cash, equal to the per share
liquidation preference thereof, plus, in each case, an amount equal to accrued
and unpaid dividends thereon (whether or not earned or declared), if any, to the
date fixed for redemption.
(b) MANDATORY REDEMPTION. Prior to the occurrence of (i) a Change of
Control (as defined below), (ii) the payment of an Extraordinary Dividend (as
defined below), or (iii) a Qualifying Sale (as defined below), the Corporation
shall offer to purchase and redeem (the "Extraordinary Event Offer") on the
Change of Control Date (as defined below), Extraordinary Dividend Payment Date
(as defined below) or Qualifying Sale Date (as defined below), as the case may
be, all shares of 6-1/2% Preferred Stock (including all Additional Shares of
6-1/2% Preferred Stock) outstanding at such date at a purchase price, payable in
cash, equal to the per share liquidation preference thereof, plus accrued and
unpaid dividends (whether or not earned or declared), if any, to the Change of
Control Date, Extraordinary Dividend Payment Date or Qualifying Sale Date, as
the case may be. Any Extraordinary Event Offer may be expressly conditioned on
the occurrence of a Change of Control, a Qualifying Sale or the payment of the
Extraordinary Dividend, as the case may be, and if the Change of Control, the
Qualifying Sale or the payment of the Extraordinary Dividend, as the case may
be, does not occur, the Corporation will have no further obligation in respect
of such Extraordinary Event Offer; provided, however, that the termination of an
Extraordinary Event Offer resulting from the failure of such Change of Control,
such Qualifying Sale or payment of such Extraordinary Dividend, as the case may
be, to occur shall not affect the obligation of the Corporation with respect to
any subsequent Extraordinary Event Offers.
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Also subject to compliance with any then applicable requirements
of any federal or state securities laws, notice of an Extraordinary Event Offer
shall be mailed by the Corporation not less than 20 Business Days before the
Change of Control Date, Extraordinary Dividend Payment Date or Qualifying Sale
Date, as the case may be, to each holder of the 6-1/2% Preferred Stock. Such
notice shall be mailed, by registered or certified mail (return receipt
requested), postage prepaid, or delivered by hand to each holder of the shares
of 6-1/2% Preferred Stock at such holder's address as the same appears on the
stock transfer books of the Corporation. Also subject to compliance with any
then applicable requirements of any federal or state securities laws, the
Extraordinary Event Offer shall remain open from the time of mailing or
delivery until the Change of Control Date, Extraordinary Dividend Payment Date
or Qualifying Sale Date, as the case may be. The notice, which shall govern the
terms of the Extraordinary Event Offer, shall state:
a. that the Extraordinary Event Offer is being made pursuant to this
Section 3(b) and that all shares of 6-1/2% Preferred Stock will be
accepted for payment of cash in the amount of the liquidation preference
thereof, plus accrued and unpaid dividends thereon (whether or not earned
or declared) to the Change of Control Date, Extraordinary Dividend Payment
Date or Qualifying Sale Date, as the case may be;
b. the purchase price and the Change of Control Date, Extraordinary
Dividend Payment Date or Qualifying Sale Date, as the case may be;
c. that any shares of 6-1/2% Preferred Stock not tendered will
continue to accrue dividends;
d. that any shares of 6-1/2% Preferred Stock accepted for payment
pursuant to the Extraordinary Event Offer shall cease to accrue dividends
after the Change of Control Date, Extraordinary Dividend Payment Date or
Qualifying Sale Date, as the case may be;
e. that holders of 6-1/2% Preferred Stock electing to have shares of
6-1/2% Preferred Stock purchased pursuant to a Extraordinary Event Offer
will be required to surrender the shares of 6-1/2% Preferred Stock, to the
Corporation at the address specified in the notice prior to the close of
business on the Change of Control Date, Extraordinary Dividend Payment
Date or Qualifying Sale Date, as the case may be;
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f. that holders of 6-1/2% Preferred Stock will be entitled to
withdraw their election if the Corporation receives, not later than the
close of business on the Change of Control Date, Extraordinary Dividend
Payment Date or Qualifying Sale Date, as the case may be, a telegram,
telex, facsimile transmission or letter setting forth the name of such
holder, the number of shares of 6-1/2% Preferred Stock the holder of
6-1/2% Preferred Stock delivered for purchase and a statement that such
holder is withdrawing his election to have such shares of 6-1/2% Preferred
Stock purchased;
g. that holders whose shares of 6-1/2% Preferred Stock are purchased
only in part will be issued new shares of 6-1/2% Preferred Stock equal in
number to the unpurchased number of the shares of 6-1/2% Preferred Stock
surrendered; and
h. that the Extraordinary Event Offer is conditioned on the
occurrence of the Change of Control or Qualifying Sale or the payment of
the Extraordinary Dividend described therein.
On the Change of Control Date, Extraordinary Dividend Payment Date
or Qualifying Sale Date, as the case may be, the Corporation shall accept for
payment all shares of 6-1/2% Preferred Stock tendered pursuant to the
Extraordinary Event Offer, promptly mail to the holders of shares of 6-1/2%
Preferred Stock so accepted payment in an amount equal to the purchase price for
all shares so accepted, and promptly mail to such holders a new certificate
representing a number of shares equal to any untendered portion of the shares of
6-1/2% Preferred Stock surrendered.
(c) NOTICE OF REDEMPTION; OTHER REDEMPTION PROCEDURES. (i) Whenever
shares of 6-1/2% Preferred Stock (including Additional Shares of 6-1/2%
Preferred Stock) are to be redeemed pursuant to Section 3(a), a notice of such
redemption shall be mailed, by registered or certified mail (return receipt
requested), postage prepaid, or delivered by hand to each holder of shares of
the 6-1/2% Preferred Stock at such holder's address as the same appears on the
stock transfer books of the Corporation. Such notice shall be mailed or
delivered not less than 10 days and not more than 60 days prior to the date
fixed for redemption. Each such notice shall state: (i) the date fixed for
redemption (the "Redemption Date"); (ii) the number of shares of 6-1/2%
Preferred Stock to be redeemed; (iii) the redemption price (including the
amount of accrued and unpaid dividends to the Redemption Date);
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(iv) the place or places where such shares of 6-1/2% Preferred Stock are to be
surrendered for payment of the redemption price (including the amount of accrued
and unpaid dividends to the Change of Control Date, Extraordinary Dividend
Payment Date or Qualifying Sale Date, as the case may be); (v) that dividends on
the shares to be redeemed will cease to accrue on such date fixed for
redemption; and (vi) the extent, if any, to which Additional Shares of 6-1/2%
Preferred Stock are being redeemed. If fewer than all shares of 6-1/2% Preferred
Stock held by a holder are to be redeemed, the notice mailed to such holder
shall specify the number of shares to be redeemed from such holder. Except as
required by applicable law, no defect in the notice of redemption or in the
mailing thereof shall affect the validity of the redemption proceedings.
(ii) Notice having been mailed as described in Section 3(c)(i), and
if, on or before the redemption date specified in such notice, an amount in cash
sufficient to redeem in full on the redemption date and at the applicable
redemption price, together with accrued and unpaid dividends to such redemption
date, all shares of 6-1/2% Preferred Stock called for redemption shall have been
irrevocably set apart so as to be available for such purpose and only for such
purpose, or shall have been paid to the holders thereof, then effective as of
the close of business on such redemption date, dividends on the shares of 6-1/2%
Preferred Stock so called for redemption shall cease to accrue, and said shares
shall no longer be deemed to be outstanding and shall have the status of
authorized but unissued shares of Preferred Stock, undesignated as to series,
and all rights of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the redemption price and any accrued
and unpaid dividends to the redemption date) shall cease. Upon surrender in
accordance with said notice of the certificates for any shares so redeemed
(properly endorsed or assigned for transfer, if the Board of Directors of the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the redemption price aforesaid. In case fewer
than all the shares represented by any such certificate are redeemed, a new
certificate of like terms and having the same date of original issuance shall be
issued representing the unredeemed shares without cost to the holder thereof.
(iii) In the event that fewer than all shares of 6-1/2% Preferred
Stock are redeemed pursuant to Section 3(a), except as expressly provided
herein, the Corporation may elect whether to redeem shares of 6-1/2% Preferred
Stock generally, only Additional Shares of 6-1/2% Preferred Stock or
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any combination thereof. Any such redemption of Additional Shares of 6-1/2%
Preferred Stock or other 6-1/2% Preferred Stock shall be made pro rata among
Additional Shares of 6-1/2% Preferred Stock or other 6-1/2% Preferred Stock, as
the case may be.
(iv) Nothing contained in this Certificate of Designation shall
limit any legal right of the Corporation or any Subsidiaries or Affiliates (as
defined below) to purchase or otherwise acquire any shares of 6-1/2% Preferred
Stock at any price, whether higher or lower than the redemption price, so long
as the holder thereof shall agree thereto.
4. LIQUIDATION. (a) Upon a liquidation, winding up or dissolution of
the affairs of the Corporation, whether voluntary or involuntary, the holders of
shares of 6-1/2% Preferred Stock then outstanding shall be entitled, before any
assets of the Corporation shall be distributed among or paid over to the holders
of Junior Securities but after legally required distribution of such assets
among, or legally required payment thereof over to, creditors of the Corporation
and to holders of any Senior Preferred Stock, to receive from the assets of the
Corporation available for distribution to stockholders, an amount in cash
equal to $1,000 (subject to adjustment as provided below) per share (pro rated
for fractional shares), plus, in each such case, an amount equal to all accrued
and unpaid dividends thereon (whether or not earned or declared) to and
including the date of final distribution to the holders of 6-1/2% Preferred
Stock. After any such payment in full, the holders of shares of the 6-1/2%
Preferred Stock shall not be entitled to any further participation in any
distribution of assets of the Corporation. As used in this Certificate of
Designation, the terms "liquidation preference" and "liquidation value" (and
other terms of similar import) shall mean $1,000 per share.
(b) Neither the merger or consolidation of the Corporation into or
with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, nor the sale of all or substantially
all of the assets of the Corporation, shall be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary, for the purposes of this
Section 4.
(c) If, upon any such liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the assets of the Corporation
shall be insufficient to make the full payments required by subsection (a) of
this
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Section 4, the amount available for distribution shall be shared pro-rata by the
holders of shares of 6-1/2% Preferred Stock and the holders of any other class
or series of Preferred Stock ranking on a parity with the shares of 6-1/2%
Preferred Stock and no distribution shall be made on account of any class or
series of Junior Securities.
(d) Subject to the rights of the holders of shares of any class or
series of Preferred Stock ranking on a parity with or prior to the shares of
6-1/2% Preferred Stock upon liquidation, dissolution or winding up, upon any
liquidation, dissolution or winding up of the Corporation, after payment shall
have been made in full to the holders of the shares of 6-1/2% Preferred Stock as
provided in Section 4(a), but not prior thereto, any Junior Securities shall,
subject to the respective terms and provisions (if any) applying thereto, be
entitled to receive any and all assets remaining to be paid or distributed, and
the holders of the shares of 6-1/2% Preferred Stock shall not be entitled to
share therein.
5. VOTING. (a) The holders of record of shares of 6-1/2% Preferred
Stock shall have no voting rights, except as described in the third sentence of
this Section 5 and upon the occurrence of (i) the failure by the Corporation to
declare and pay all accrued dividends on the 6-1/2% Preferred Stock on any
6-1/2% Preferred Dividend Payment Date or (ii) the failure of the Corporation to
satisfy its obligations specified in Section 3(b). Upon the occurrence of any of
the events set forth in clauses (i) or (ii) of the preceding sentence, the
number of members of the Corporation's Board of Directors shall be increased by
two directors, and the holders of a majority of the outstanding shares of 6-1/2%
Preferred Stock, voting as a separate class, shall be entitled to elect two
additional members of the Corporation's Board of Directors; provided, however,
that such right to elect two additional members of the Corporation's Board of
Directors will terminate and such additional directors shall be removed from the
Board of Directors when the event giving rise to such right is cured (it being
understood that such termination will not affect the rights of the holders of
the 6-1/2% Preferred Stock upon a subsequent event giving rise to their right to
elect two members of the Corporation's Board of Directors). In addition, the
affirmative vote of the holders of at least a majority of the outstanding shares
of 6-1/2% Preferred Stock (including the Additional Shares of 6-1/2% Preferred
Stock), voting separately as a single class on a one vote per share (pro rated
for fractional shares) basis, in person or by proxy, at a special or annual
meeting of stockholders called for the purpose, or by consent, shall be required
for the Corporation to amend, repeal or change any
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provisions of the Certificate of Incorporation of the Corporation governing the
6-1/2% Preferred Stock or this Certificate of Designation in any manner which
would adversely affect, alter or change any powers, preferences or rights of any
share of 6-1/2% Preferred Stock. Such holders shall not be entitled to any other
voting rights except as specified in this Section 5 and except as otherwise
required by law.
(b) At any time when the right of the holders of 6-1/2% Preferred
Stock to elect two members of the Corporation's Board of Directors shall have
vested in the holders of 6-1/2% Preferred Stock, the Corporation shall, at the
earliest practicable date, call a special meeting of the holders of 6-1/2%
Preferred Stock for the purpose of exercising such right. Such meeting shall be
held at the earliest practicable date upon the notice required for special
meetings of stockholders at the place for holding of annual meetings of
stockholders of the Corporation or, if none, at a place designated by the
Secretary of the Corporation. If such meeting shall not be called by the
Corporation within 60 days after such right shall have vested in the holders of
6-1/2% Preferred Stock, then the holders of record of 25% in number of shares of
6-1/2% Preferred Stock then outstanding may designate in writing one of their
number to call such meeting at the expense of the Corporation, and such meeting
may be called by such person so designated upon the notice required for special
meetings of stockholders and shall be held at a place designated by the
holder(s) of 6-1/2% Preferred Stock calling such meeting. In the event of a
vacancy in the office of a director whom the holders of 6-1/2% Preferred Stock
are entitled to elect occurring by reason of death, resignation, disability or
removal, the remaining director whom the holders of 6-1/2% Preferred Stock are
entitled to elect shall appoint a new director to fill the unexpired term. If
the vacancy is not filled by such appointment or if there is then in office no
director who has been elected by the holders of shares of 6-1/2% Preferred
Stock, then the vacancy shall be filled by vote of the holders of 6-1/2%
Preferred Stock.
6. RESTRICTIONS ON TRANSFER. (a) Prior to a Qualified Primary Public
Offering (as defined below), no sale, offer, assignment, transfer, pledge,
hypothecation, encumbrance or other disposition ("Transfer") of any shares of
6-1/2% Preferred Stock shall be permitted without the prior written consent of
the Corporation, other than to Affiliates of Rockwell International Corporation,
a Delaware corporation ("Rockwell") who are not individuals and who agree in
writing to be bound by the transfer restrictions described herein, except that
no such consent (other than with respect to a proposed Transfer to a Competitor
(as defined below) or an
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Affiliate of a Competitor) shall be required upon the failure by the Corporation
to declare and pay any annual dividend on the shares of 6-1/2% Preferred Stock
or to satisfy its obligations specified under Section 3(b) of this Certificate
of Designation. No such consent shall be required with respect to any Transfer
of any shares of 6-1/2% Preferred Stock after a Qualified Primary Public
Offering, other than with respect to a proposed Transfer of shares of 6-1/2%
Preferred Stock to a Competitor or any Affiliate of a Competitor.
(b) The 6-1/2% Preferred Stock has not been registered under the
Securities Act or any applicable state securities or blue sky law and may not be
Transferred without such registration unless the Transfer can be effected
without such registration and in compliance with the Securities Act and such
laws. The holders of shares of 6-1/2% Preferred Stock shall not Transfer any
shares of 6-1/2% Preferred Stock, other than pursuant to an effective
registration statement under the Securities Act, without first notifying the
Corporation prior to such Transfer and, if requested by the Corporation,
delivering to the Corporation a written opinion of legal counsel experienced in
Securities Act matters, in form and substance reasonably satisfactory to the
Corporation, that an exemption from registration is available under the
Securities Act and any applicable state securities or blue sky law.
(c) Each certificate representing shares of 6-1/2% Preferred Stock
shall bear the following legend, in addition to any legends required under any
applicable state securities or "blue sky" laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (AND ANY INTEREST
THEREIN) MAY NOT BE TRANSFERRED, OFFERED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSFER, SALE, OFFER, ASSIGNMENT, PLEDGE, HYPOTHECATION,
ENCUMBRANCE OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
CERTIFICATE OF DESIGNATION CREATING THE SECURITIES REPRESENTED BY
THIS CERTIFICATE (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
GGS HOLDINGS, INC. AND WILL BE MAILED TO A SECURITYHOLDER WITHOUT
CHARGE WITHIN FIVE DAYS AFTER RECEIPT BY GGS HOLDINGS, INC. OF A
WRITTEN REQUEST THEREFOR FROM SUCH SECURITYHOLDER). NO TRANSFER,
OFFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE (OR
INTEREST THEREIN) MAY BE MADE EXCEPT AS OTHERWISE PROVIDED IN SUCH
CERTIFICATE OF DESIGNATION AND (A)
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PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") AND ANY APPLICABLE STATE SECURITIES AND
"BLUE SKY" LAWS, OR (B) IF GGS HOLDINGS, INC. HAS BEEN FURNISHED
WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL
SHALL BE REASONABLY SATISFACTORY TO GGS HOLDINGS, INC., TO THE
EFFECT THAT SUCH TRANSFER, SALE, OFFER, ASSIGNMENT, PLEDGE,
HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION IS EXEMPT FROM THE
REGISTRATION PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND
REGULATIONS IN EFFECT THEREUNDER AND ANY SIMILAR REGISTRATION
REQUIREMENT UNDER SUCH STATE SECURITIES, OR "BLUE SKY", LAWS.
7. NO REGISTRATION RIGHTS. No person shall at any time be entitled
to registration or similar rights with respect to any shares of 6-1/2% Preferred
Stock, other than those that the Corporation may otherwise grant.
8. ADDITIONAL DEFINITIONS. As used in this Certificate of
Designation, the following terms have the meanings specified below:
"Affiliate" shall mean, with respect to any Person, any individual,
corporation, partnership or other entity that directly, or through one or more
intermediaries, controls or is controlled by or is under common control with
such Person.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City.
"Change of Control" shall mean any event in which Stonington Capital
Appreciation 1994 Fund, L.P. ("Stonington") or its Affiliates cease to own in
excess of 50% of the voting securities of the Corporation or Goss Graphic
Systems, Inc. ("Goss") (or any company into which Goss is merged).
"Change of Control Date" shall mean the date of consummation of a
Change of Control.
"Closing" shall mean the date of consummation of the transactions
contemplated by the Purchase Agreement.
"Competitor" shall mean any person engaged in the business of
designing, developing, engineering, manufacturing, selling, installing or
servicing printing press systems for newspaper, insert or commercial printing or
other graphic arts.
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"Extraordinary Dividend" shall mean (i) any dividend or dividends on
the Common Stock or any other class of capital stock of the Corporation (other
than the 6-1/2% Preferred Stock), which other class of capital stock is issued
for less than the then fair market value of such capital stock, (ii) any
redemptions or purchases by the Corporation (in one or more transactions) of
shares of capital stock of the Corporation (other than the redemption or
purchase of equity securities pursuant to Management Investment Agreements and
other than the redemption or purchase of Senior Preferred Stock
which was issued for at least the then fair market value of such Senior
Preferred Stock), (iii) any dividends (in one or more transactions) by any
Subsidiary of the Corporation on its capital stock to any Person other than the
Corporation or one of its Subsidiaries or (iv) any redemptions or purchases
(in one or more transactions) by any Subsidiary of the Corporation of shares of
its capital stock from any Person other than the Corporation or one of its
Subsidiaries; pursuant to which (A) the aggregate value of such dividends set
forth in clause (i) in any twelve month period, plus (B) the aggregate fair
market value of such dividends, purchases or redemptions set forth in clauses
(ii) to (iv), is equal to or greater than the aggregate fair market value of
10% of the then outstanding shares of Common Stock.
"Extraordinary Dividend Payment Date" shall mean the payment date
resulting in an Extraordinary Dividend.
"Person" shall mean an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization and any governmental or
regulatory body or other agency or authority.
"Purchase Agreement" shall mean the Stock and Asset Purchase
Agreement, dated as of April 26, 1996, as amended, by and between Goss and
Rockwell.
"Qualified Primary Public Offering" shall mean the completion of a
sale of shares pursuant to an effective registration statement under the
Securities Act (other than a registration statement relating to Common Stock
issuable upon exercise of employee stock options or in connection with any
employee benefit plan and other than a registration statement on Form S-4)
relating to the public offering of Common Stock representing more than 15% of
the then outstanding shares of Common Stock.
"Qualifying Sale" shall mean the transfer or other disposition by
Stonington and/or its Affiliates (other than
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transfers to Affiliates of Stonington) of such number of shares of capital stock
of the Corporation in one or more transactions (including transfers of shares of
capital stock of the Corporation held as of the Closing or thereafter acquired,
but excluding such shares acquired from the Corporation after the Closing (other
than in exchange for other capital stock of the Corporation) at the fair market
value thereof) as is equal to or greater than 5% of the shares of Common Stock
held by Stonington as of the Closing.
"Qualifying Sale Date" shall mean the date of consummation of a
transaction resulting in a Qualifying Sale.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subsidiaries" of any Person shall mean any Person of which at least
a majority of the outstanding capital stock or other equity interests having
voting power under ordinary circumstances to elect directors or members of other
management bodies shall at the time be held, directly or indirectly, by such
Person, by such Person and one or more Subsidiaries or by one or more
Subsidiaries.
9. REPORTS. The Corporation will promptly furnish to the holders of
the 6-1/2% Preferred Stock all quarterly and annual financial reports that it,
or any of its Subsidiaries, are required to file with the Securities and
Exchange Commission (the "Commission") under the Securities and Exchange Act of
1934, as amended (or similar reports in the event that it and its Subsidiaries
are not at the time required to file such reports with the Commission).
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by its President and attested by its Secretary this
_____ day of _____, 1996.
---------------------------
President
ATTEST:
-----------------------
Secretary
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Exhibit 5.1
[LETTERHEAD OF WACHTELL, LIPTON, ROSEN & KATZ]
October 9, 1996
Goss Graphic Systems, Inc.
700 Oakmont Lane
Westmont, Illinois 60559
Ladies and Gentlemen:
We have acted as special counsel for Goss Graphic Systems, Inc., a
Delaware corporation (the "Company"), in connection with the registration by the
Company of $225,000,000 aggregate principal amount of the Company's Senior
Subordinated Notes due 2006 (the "Notes"), pursuant to a Registration Statement
on Form S-1 (File No. 333-08421) filed with the Securities and Exchange
Commission under the Securities Act of 1933, as subsequently amended or
supplemented (the Registration Statement, as amended or supplemented is
hereinafter referred to as the "Registration Statement"). The Notes are to be
issued pursuant to an Indenture (the "Indenture") between the Company and the
Bank of New York, as Trustee (the "Trustee"). The form of the Indenture is filed
as an exhibit to the Registration Statement.
In connection with this opinion we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records of the Company and such agreements, certificates of
public officials, certificates of officers or other representatives of the
Company and others, and such other statements, documents, papers, certificates
and corporate or other records as we have deemed necessary or appropriate as a
basis for the opinion set forth herein.
In giving the opinion contained herein, we have relied upon
representations of officers of the Company and certificates of public officials
with respect to certain factual matters. We also have assumed the genuineness of
all signatures or instruments submitted to us, the authenticity of all
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Goss Graphic Systems, Inc.
October 9, 1996
Page 2
documents submitted to us as originals and the conformity of copies submitted to
us with the original documents to which such copies relate.
We are admitted to practice law only in the State of New York. We
limit our opinion set forth herein in all cases to matters arising under the
laws of the State of New York, the General Corporation Law of the State of
Delaware or the federal laws of the United States.
Based upon such examination and subject to the limitations,
assumptions, qualifications and exceptions as set forth herein, we are of the
opinion that the Notes, when duly authenticated by the Trustee in accordance
with the terms of the Indenture and when paid for by the underwriters in
accordance with the terms of the Underwriting Agreement, a form of which is
filed as an exhibit to the Registration Statement, will be entitled to the
benefits of the Indenture, and the Indenture and the Notes will constitute valid
and legally binding obligations of the Company, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights and to general
equity principles.
This opinion is rendered to you in connection with the filing of the
Registration Statement. This opinion may not be relied upon by you for any other
purpose, or furnished to, quoted to, or relied upon by any other person, firm or
corporation for any purpose without our prior written consent.
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus that is a part of the Registration Statement. In
giving such consent, we do not hereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933.
Very truly yours,
WACHTELL, LIPTON, ROSEN & KATZ
EXHIBIT 10.1
FORM OF
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of
______ __, 1996, by and among GGS Holdings, Inc., a Delaware corporation
("Holdings"), and the persons listed in Schedule I hereto, as such Schedule I
may be amended from time to time (collectively, the "Management Investors" and
each, individually, a "Management Investor").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock and Asset Purchase Agreement, dated as of
April 26, 1996, as amended (the "Stock and Asset Purchase Agreement"), by and
among Rockwell International Corporation, a Delaware corporation ("Rockwell")
and Goss Graphic Systems, Inc., a Delaware corporation and a wholly owned
subsidiary of Holdings (the "Company") the Company has, simultaneously with the
execution and delivery of this Agreement, directly or indirectly, acquired the
Graphic Systems business unit of Rockwell ("Goss") through the purchase of all
of the capital stock of certain subsidiaries of Rockwell that constitute a part
of Goss and certain assets and liabilities of certain subsidiaries of Rockwell
that constitute the remainder of Goss (the "Acquisition"); and
WHEREAS, pursuant to the terms and subject to the conditions set forth in
this Agreement and in connection with providing equity financing for the
transactions contemplated by the Stock and Asset Purchase Agreement, each
Management Investor desires to subscribe for and purchase from Holdings, and
Holdings desires to issue and sell to such Management Investor, the number of
Management Shares (as hereinafter defined) set forth opposite such Management
Investor's name in Column A of Schedule I hereto. The aggregate purchase price
to be paid for the Management Shares to be acquired by each Management Investor
is set forth opposite such Management Investor's name in Column B of Schedule I
hereto (such Management Investor's "Purchase Price");
NOW, THEREFORE, in order to implement the foregoing and in consideration of
the mutual representations, warranties, covenants and agreements contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the following terms
shall have the meanings ascribed to them below:
Acquisition: shall have the meaning set forth in the first WHEREAS clause
to this Agreement.
Agreement: shall have the meaning set forth in the preamble to this
Agreement.
Closing: shall have the meaning specified in Section 2.3 hereof.
Closing Date: shall have the meaning specified in Section 2.3 hereof.
Company: shall have the meaning specified in the first WHEREAS clause to
this Agreement.
Discretionary Options: shall have the meaning specified in Section 2.5(b)
hereof.
Exchange Act: shall mean the Securities Exchange Act of 1934, as amended,
or any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of such similar federal statute.
Holdings: shall have the meaning specified in the preamble to this
Agreement.
Incentive Option Agreements: shall have the meaning specified in Section
2.5(b) hereof.
Incentive Options: shall have the meaning specified in Section 2.5(b)
hereof.
Management Investor(s): shall have the meaning set forth in the preamble to
this Agreement.
Management Note: shall have the meaning specified in Section 2.2 hereof.
Management Shares: shall mean Shares purchased by a Management Investor
from Holdings pursuant to this Agreement
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and/or (ii) pursuant to the exercise of an option granted under the Management
Stock Incentive Plan.
Management Stock Incentive Plan: shall have the meaning specified in
Section 2.5(b) hereof.
Performance Option Agreements: shall have the meaning specified in Section
2.5(b) hereof.
Performance Options: shall have the meaning specified in Section 2.5(b)
hereof.
Purchase Price: shall have the meaning set forth in the third WHEREAS
clause to this Agreement.
Rockwell: shall have the meaning specified in the first WHEREAS clause to
this Agreement.
Rule 144: shall have the meaning specified in Section 3.3 hereof.
SEC: shall mean the Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act or the Exchange Act.
Securities Act: shall mean the Securities Act of 1933, as amended, or any
similar federal statute then in effect, and a reference to a particular section
thereof shall be deemed to include a reference to the comparable section, if
any, of any such similar federal statute.
Shares: shall mean any shares of common stock, par value $.01 per share, of
Holdings, including, without limitation, all such shares issued in connection
with any employee benefit plan of Holdings or its subsidiaries, including the
Management Stock Incentive Plan.
Stockholders' Agreement: shall have the meaning specified in Section 2.3(c)
hereof.
Stock Pledge Agreement: shall have the meaning specified in Section 2.2
hereof.
Stock and Asset Purchase Agreement. The term "Stock and Asset Purchase
Agreement" shall have the meaning specified in the first WHEREAS clause to this
Agreement.
Stonington: shall have the meaning set forth in the Stockholders'
Agreement.
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ARTICLE II
SUBSCRIPTION FOR AND ISSUANCE OF SHARES
Section 2.1 Subscription for and Issuance of Shares. Pursuant to the terms
and subject to the conditions set forth in this Agreement, each Management
Investor hereby subscribes for and agrees to purchase, and Holdings hereby
agrees to issue and sell to each Management Investor on the Closing Date the
number of Management Shares set forth opposite such Management Investor's name
in Column A of Schedule I hereto at a purchase price of $100 per Management
Share. Each Management Investor shall pay the Purchase Price set forth opposite
such Management Investor's name in Column B of Schedule I hereto.
Section 2.2 Management Notes; Pledge of Management Shares. In consideration
for the Management Investor's subscription hereunder, Holdings will, subject to
the issuance of the note referred to in the next sentence, lend each Management
Investor funds to facilitate payment of the portion of the Purchase Price set
forth opposite such Management Investor's name in Column C of Schedule I hereto.
Each loan will be evidenced by a nonrecourse secured promissory note of the
Management Investor substantially in the form of the note attached hereto as
Exhibit A (as to each Management Investor, a "Management Note"). As collateral
security for the obligations of such Management Investor to pay the principal of
and interest on such Management Investor's Management Note, such Management
Investor hereby agrees to pledge to Holdings the number of Management Shares
being acquired hereunder by such Management Investor pursuant to the terms of a
Stock Pledge Agreement substantially in the form of the Stock Pledge Agreement
attached hereto as Exhibit B (the "Stock Pledge Agreement"), along with the
other collateral contemplated by the Stock Pledge Agreement. A duly executed and
delivered Management Note and Stock Pledge Agreement securing payment of such
Management Investor's Management Note shall be delivered to Holdings at the
Closing by each Management Investor borrowing a portion of the Purchase Price
from Holdings.
Section 2.3 The Closing. The closing (the "Closing") of the transactions
contemplated by this Article II shall take place at the offices of Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York 10019 immediately
prior to the consummation of the Acquisition pursuant to the Stock and Asset
Purchase Agreement. The date of such Closing is hereinafter referred to as the
"Closing Date."
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(a) At the Closing, Holdings shall deliver:
(i) to each Management Investor, against delivery of the Purchase
Price set forth opposite such Management Investor's name in Column B of
Schedule I hereto, duly issued stock certificates representing the total
number of Management Shares set forth opposite such Management Investor's
name in Column A of Schedule I hereto; and
(ii) to each Management Investor, against delivery of such Management
Investor's Management Note and Stock Pledge Agreement, cash equal to the
principal amount of such Management Investor's Management Note.
(b) At the Closing, each Management Investor shall deliver to
Holdings, against delivery to the Management Investor of stock certificates
representing the Management Shares to be purchased by such Management Investor,
(i) cash in the amount set forth opposite such Management Investor's name in
Column B of Schedule I hereto, (ii) a duly executed Management Note in the
amount set forth opposite such Management Investor's name in Column C of
Schedule I hereto, and (iii) a duly executed Stock Pledge Agreement.
(c) At the Closing, Holdings, Merrill Lynch KECALP L.P. 1994, the
Management Investors and Stonington will enter into a Stockholders' Agreement,
substantially in the form of the Stockholders' Agreement attached hereto as
Exhibit C (the "Stockholders' Agreement").
Section 2.4 Representations, Warranties and Covenants of the Management
Investors. Each of the Management Investors severally, but not jointly,
represents and warrants to Holdings and covenants with Holdings as follows:
(i) any Management Note to be issued by such Management Investor at
the Closing will, when issued and delivered in accordance with the terms
hereof, be duly and validly issued and be a valid and binding obligation of
such Management Investor, enforceable against such Management Investor in
accordance with its terms;
(ii) such Management Investor has full right, power and authority to
execute and deliver this Agreement, and, to the extent to be executed and
delivered by such Management Investor, the Stock Pledge Agreement, and to
perform such Management Investor's obligations hereunder and thereunder,
and this Agreement has been duly authorized, executed and delivered by such
Management Investor and is
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valid, binding and enforceable against such Management Investor in
accordance with its terms, and the Stock Pledge Agreement, if any, has been
duly authorized and, when executed and delivered, will be valid, binding
and enforceable against such Management Investor in accordance with its
terms; and
(iii) such Management Investor hereby represents and warrants that
except as disclosed to Holdings in writing prior to the date hereof, such
Management Investor is not on the date hereof, and will not be, at any time
between the date hereof and the Closing Date, entitled to any payments or
compensation of any kind from Rockwell or any of its subsidiaries
(including the subsidiaries to be acquired by Goss Graphic Systems, Inc.
pursuant to the Acquisition) under any employment contract, severance
agreement or other compensation or bonus agreement or arrangement currently
in effect, which payments or compensation arise out of or are based upon
the execution, delivery or performance of the Stock and Asset Purchase
Agreement, this Agreement, the Stock Pledge Agreement or the Stockholders'
Agreement (in each case, including the transactions contemplated thereby).
Section 2.5 Representations, Warranties and Covenants of Holdings. (a)
Holdings represents and warrants to each of the Management Investors as follows:
(i) Holdings is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware;
(ii) Holdings has full corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder and this
Agreement has been duly authorized, executed and delivered by Holdings and
is valid, binding and enforceable against Holdings in accordance with its
terms;
(iii) Holdings has full corporate power and authority to execute and
deliver the Stockholders' Agreement and the Stock Pledge Agreements and to
perform its obligations thereunder and such agreements have been duly
authorized by Holdings and will, when executed and delivered by Holdings,
be valid, binding and enforceable against Holdings in accordance with their
terms;
(iv) the Management Shares to be issued to such Management Investor
pursuant to this Agreement, when issued and delivered in accordance with
the terms hereof, will be
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duly and validly issued and, upon receipt of cash or other consideration in
an amount equal to the par value of such Management Shares, will be fully
paid and nonassessable; and
(v) none of the execution, delivery and performance of this Agreement,
the Stockholders' Agreement, and the Stock Pledge Agreements by Holdings
will conflict with Holdings' Certificate of Incorporation or By-Laws or
result in any material breach of any terms or provisions of, or constitute
a default under, any material contract, agreement or instrument to which
Holdings is a party or by which Holdings is bound.
(vi) after giving effect to the transactions contemplated by this
Agreement, the authorized capital of the Company will consist of 10,000,000
authorized Shares, of which 1,165,000 Shares will be issued and outstanding
immediately after the Closing, 7,500 authorized shares of nonvoting common
stock, par value $.01 per share, of Holdings, of which 7,500 shares will be
issued and outstanding immediately after the Closing, and 1,000,000
authorized shares of preferred stock, par value $.01 per share, of
Holdings, of which 100,000 shares will be designated as 6 1/2% Redeemable
Pay-in-Kind Preferred Stock and 47,500 shares of 6 1/2% Redeemable
Pay-in-Kind Preferred Stock will be issued and outstanding immediately
after the Closing. In addition, up to ______ Shares will have been reserved
for issuance under the Management Stock Incentive Plan. All of the
outstanding Shares will be duly authorized, and upon the issuance thereof
will be validly issued, fully paid and nonassessable.
(b) Holdings will establish a Management Stock Incentive Plan
substantially in the form attached hereto as Exhibit D (the "Management Stock
Incentive Plan"). Incentive options (the "Incentive Options") for a total of
______ Shares, performance options (the "Performance Options") for a total of
______ additional Shares and ______ discretionary stock options (the
"Discretionary Options") will initially be available for grant by Holdings. At
the closing of the Acquisition, the Management Investors will be granted
Incentive Options to purchase ______ Shares and Performance Options to purchase
______ Shares. The Incentive Option Agreements for Incentive Options granted at
the closing of the Acquisition will be substantially in the form of Exhibit A to
the Management Stock Incentive Plan (the "Incentive Option Agreements") and the
Performance Option Agreements for Performance Options granted at the closing of
the Acquisitions will be substantially in the form of Exhibit B to the
Management Stock Incentive Plan (the "Performance Option
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Agreements"). All Incentive Options and Performance Options granted at the
closing of the Acquisitions will have an exercise price of $100 per Share.
ARTICLE III
INVESTMENT REPRESENTATIONS OF THE MANAGEMENT INVESTORS
Section 3.1 Investment Intention; No Resales. Each Management Investor
represents and warrants that such Management Investor is acquiring his or her
Management Shares for investment purposes only, solely for his or her own
account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof or with any present intention of
distributing or reselling any Management Shares thereof, except for such
distributions and dispositions as are both explicitly permitted hereunder and
under the Stockholders' Agreement and effected in compliance with the Securities
Act and the rules and regulations thereunder and all applicable state
securities, or "blue sky," laws. Each Management Investor agrees and
acknowledges that such Management Investor will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of any
Management Shares, or solicit any offers to purchase or otherwise acquire or
take a pledge of any Management Shares, other than transfers, sales,
assignments, pledges, hypothecations or other dispositions explicitly permitted
by Articles II and III of the Stockholders' Agreement and provided that any such
transfer, sale, assignment, pledge, hypothecation or other disposition is in
accordance with the terms and provisions of such Articles and (i) the transfer,
sale, assignment, pledge, hypothecation or other disposition is pursuant to an
effective registration statement under the Securities Act and has been
registered under all applicable state securities, or "blue sky," laws, or (ii)
such Management Investor shall have furnished Holdings with an opinion of
counsel (which counsel and the form and substance of which opinion shall be
reasonably satisfactory to Holdings), to the effect that no such registration is
required because of the availability of an exemption from registration under the
Securities Act and the rules and regulations in effect thereunder and under all
applicable state securities, or "blue sky," laws.
Section 3.2 Legends. Each certificate representing Management Shares shall
bear the legend set forth in Section 2.6 of the Stockholders' Agreement.
Section 3.3 Stock Unregistered. Each Management Investor acknowledges and
represents that such Management Investor has been advised that (a) the
Management Shares have not
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been registered under the Securities Act; (b) the Management Shares must be held
for an indefinite period and such Management Investor must continue to bear the
economic risk of the investment in the Management Shares unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available; (c) it is not anticipated that there will be any
public market for the Management Shares; (d) Rule 144 promulgated under the
Securities Act ("Rule 144") is not currently available with respect to the sales
of any securities of Holdings, and Holdings has made no covenant to make such
Rule 144 available; (e) if and when the Management Shares may be disposed of
without registration in reliance on Rule 144, such disposition can be made only
in limited amounts in accordance with the terms and conditions of such Rule 144;
(f) if the Rule 144 exemption is not available, public offer or sale without
registration will require the availability of an exemption under the Securities
Act; (g) a restrictive legend or legends in the forms set forth herein and in
the Stockholders' Agreement shall be placed on the certificates representing the
Management Shares; and (h) a notation shall be made in the appropriate records
of Holdings indicating that the Management Shares are subject to restrictions on
transfer and, if Holdings should at some time in the future engage the services
of a securities transfer agent, appropriate stop-transfer instructions may be
issued to such transfer agent with respect to the Management Shares.
Section 3.4 Rule 144. If Holdings shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, Holdings will file
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder to the extent
required from time to time to enable each Management Investor to sell Management
Shares without registration under the Securities Act within the limitations of
the exemptions provided by (i) Rule 144, as such Rule 144 may be amended from
time to time, or (ii) any similar or successor rule or regulation hereafter
adopted by the SEC. If any Management Shares are disposed of in accordance with
Rule 144 or any similar or successor rule or regulation, each Management
Investor disposing of Management Shares shall deliver to Holdings at or prior to
the time of such disposition an executed copy of Form 144 (if required by Rule
144) or such other form or forms required by any such similar or successor rule
or regulation and such other documentation as Holdings may require in connection
with such disposition. Notwithstanding anything to the contrary contained in
this Section 3.4, Holdings may deregister any of its securities under Section 12
of the Exchange Act if it is then permitted to do so pursuant to
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the Exchange Act and the rules and regulations in effect thereunder.
Section 3.5 Additional Investment Representations. Each Management Investor
represents and warrants that (a) such Management Investor's financial situation
is such that such Management Investor can afford to bear the economic risk of
holding the Management Shares for an indefinite period of time and suffer
complete loss of such Management Investor's investment in the Management Shares;
(b) such Management Investor's knowledge and experience in financial and
business matters are such that such Management Investor is capable of evaluating
the merits and risks of such Management Investor's investment in the Management
Shares, or such Management Investor has been advised by a purchaser
representative (as such term is defined in Rule 501(n) of the General Rules and
Regulations promulgated under the Securities Act) possessing such knowledge and
experience; (c) such Management Investor understands that the Management Shares
are a speculative investment which involve a high degree of risk of loss of such
Management Investor's investment therein, that there are substantial
restrictions on the transferability of the Management Shares and that on the
Closing Date and for an indefinite period following the Closing there will be no
public market for the Management Shares and, accordingly, it may not be possible
to liquidate such Management Investor's investment in Holdings at all, including
in case of emergency; (d) such Management Investor and such Management
Investor's representatives, including such Management Investor's professional,
tax and other advisors, have carefully reviewed the financial and other
information with respect to Goss, the Company and Holdings (including with
respect to the Acquisitions) supplied to them and such Management Investor
understands and has taken cognizance of (or has been advised by such Management
Investor's representatives as to) all the risks related to an investment in the
Management Shares; (e) in making such Management Investor's decision to invest
in the Management Shares hereunder, such Management Investor has relied upon
independent investigations made by such Management Investor and, to the extent
believed by such Management Investor to be appropriate, such Management
Investor's representatives, including such Management Investor's own
professional, tax and other advisors; (f) such Management Investor and such
Management Investor's representatives have been given the opportunity to examine
all documents and to ask questions of, and to receive answers from, Holdings and
its representatives concerning the terms and conditions of the investment in the
Management Shares and to obtain any additional information necessary to verify
the accuracy of the information supplied to them, and no representations have
been made to such Management Investor or such representatives concerning the
Management Shares, Goss,
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the Company, Holdings, their respective subsidiaries, their businesses or
prospects or other matters, except as set forth herein; and (g) such Management
Investor is an officer or key employee of Holdings or one of its subsidiaries or
is otherwise currently engaged as a senior executive or consultant or has
significant business experience in the printing press manufacturing or similar
business and, in any such case, expects, after the Acquisition, to be an officer
or key employee of, director of, or consultant to, Holdings or one or more of
its subsidiaries.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Binding Effect. The provisions of this Agreement shall be
binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns.
Section 4.2 No Right of Employment. Neither this Agreement nor any purchase
or sale of Management Shares pursuant hereto shall create, or be construed or
deemed to create, any right of employment in favor of any Management Investor or
any other person by Holdings or any of its subsidiaries.
Section 4.3 Recapitalizations, Exchanges, Etc. Affecting Shares. The
provisions of this Agreement regarding Management Shares shall apply to any and
all shares of capital stock of Holdings or any successor or assign of Holdings
(whether by merger, consolidation, sale of assets, reorganization or otherwise)
which may be issued in respect of, in exchange for, or in substitution of the
Management Shares by reason of any stock dividend, stock split, stock issuance,
reverse stock split, combination, recapitalization, reclassification, merger,
consolidation or otherwise. Upon the occurrence of any of such events, amounts
hereunder shall be appropriately adjusted. Subject only to the provisions of the
preceding sentence, nothing contained in this Agreement shall prohibit or
restrict Holdings from taking any corporate action, including, without
limitation, declaring any dividend (whether in cash or stock) or engaging in any
corporate transaction of any kind, including, without limitation, any merger,
consolidation, liquidation or sale of assets.
Section 4.4 Waiver and Amendment. Any party hereto may waive its rights
under this Agreement at any time, and Holdings may waive its rights under this
Agreement with respect to any Management Investor at any time, and no such
waiver shall operate to waive Holdings' rights under this Agreement
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with respect to any other Management Investor. Any agreement on the part of any
such party to any such waiver shall be valid only if set forth in an instrument
in writing signed by such party. This Agreement may be amended only by a written
instrument signed by Holdings, and by Management Investors owning a majority of
the then outstanding Management Shares.
Section 4.5 Notices. All notices and other communications provided for
herein shall be dated and in writing and shall be deemed to have been duly given
when delivered, if delivered personally, or when deposited in the mail if sent
by registered or certified mail, return receipt requested, postage prepaid, and
when received if delivered otherwise, to the party to whom it is directed:
(a) If to Holdings, to it at the following address:
GGS Holdings, Inc.
c/o Stonington Partners, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Alexis P. Michas
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein, Esq.
(b) If to any of the Management Investors, to such Management Investor
at the address set forth below under such Management Investor's
signature
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties.
Section 4.6 Applicable Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the principles of conflicts of law.
Section 4.7 Integration. This Agreement and the documents referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to its subject matter. There are no
restrictions, agreements, promises, representations, warranties, covenants or
undertakings with respect to the subject matter hereof other than those
expressly set forth herein and in the
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Stock and Asset Purchase Agreement, the Stock Pledge Agreements, the Management
Notes, the Stockholders' Agreement, the Management Stock Incentive Plan, the
Incentive Option Agreements and the Performance Option Agreements and the other
agreements referred to in such agreements. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter other than such agreements and understandings set forth in the Stock and
Asset Purchase Agreement (except as modified pursuant hereto), the Stock Pledge
Agreements, the Management Notes, the Stockholders' Agreement, the Management
Stock Incentive Plan, the Incentive Option Agreements and the Performance Option
Agreements and the other agreements referred to in such agreements.
Section 4.8 Descriptive Headings, Etc. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires, (i) words of any gender shall be deemed to include each
other gender; (ii) words using the singular or plural number shall also include
the plural or singular number, respectively; and (iii) references to "hereof,"
"herein," "hereby" and similar terms shall refer to this entire Agreement unless
the context otherwise requires.
Section 4.9 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 4.10 Expenses. Holdings shall pay the legal fees and the expenses
of the Management Investors reasonably incurred in connection with the
preparation and negotiation of this Agreement, the Stock Pledge Agreements, the
Management Notes and the Stockholders' Agreement; provided that Holdings shall
not be obligated pursuant to this Agreement to pay the fees and expenses of more
than one counsel for all of the Management Investors.
Section 4.11 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to
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effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 4.12 Further Assurances. The parties hereto shall from time to time
execute and deliver all such further documents and do all acts and things as the
other party may reasonably require to effectively carry out or better evidence
or perfect the full intent and meaning of this Agreement.
Section 4.13 Waiver of Jury Trial. Each of Holdings and each of the
Management Investors hereby irrevocably waives all right to a trial by jury in
any action, proceeding or counterclaim arising out of or relating to this
Agreement or the transactions contemplated hereby.
Section 4.14 Survival of Covenants. Holdings and the Management Investors
hereby agree that the applicable provisions of this Agreement, including without
limitation, Sections 2.4 and 2.5, shall survive and remain in full force and
effect following the Closing.
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EXHIBIT 10.2
FORM OF
STONINGTON STOCK SUBSCRIPTION AGREEMENT
STONINGTON STOCK SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of
__________, 1996, by and between GGS Holdings, Inc., a Delaware corporation
("Holdings") and Stonington Capital Appreciation 1994 Fund, L.P., a Delaware
limited partnership ("Stonington").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock and Asset Purchase Agreement, dated as of
April 26, 1996, as amended (the "Stock and Asset Purchase Agreement"), by and
among Rockwell International Corporation, a Delaware corporation ("Rockwell")
and Goss Graphic Systems, Inc., a Delaware corporation and a wholly owned
subsidiary of Holdings (the "Company"), the Company has, simultaneously with the
execution and delivery of this Agreement, directly or indirectly, acquired the
Graphic Systems business unit of Rockwell ("Goss") through the purchase of all
of the capital stock of certain subsidiaries of Rockwell that constitute a part
of Goss and certain assets and liabilities of certain subsidiaries of Rockwell
that constitute the remainder of Goss (the "Acquisition");
WHEREAS, on the date hereof, Stonington, Merrill Lynch KECALP L.P. 1994 and
the Management Investors (as defined below) are entering into a Stockholders'
Agreement with Holdings (the "Stockholders' Agreement"), which will be effective
simultaneously with the purchase of shares of common stock, par value $.01 per
share, of Holdings ("Shares") by Stonington;
WHEREAS, simultaneously herewith, certain of the investors listed in
Schedule I to the Stockholders' Agreement (the "Management Investors") are
entering into a Management Stock Subscription Agreement with Holdings (the
"Management Stock Subscription Agreement") providing for the purchase of Shares
by such Management Investors thereunder in exchange for cash and the issuance of
notes by the Management Investors (the "Management Notes") and the execution of
a stock pledge agreement (the "Stock Pledge Agreements"); and
WHEREAS, pursuant to the terms and subject to the conditions set forth in
this Agreement and in connection with providing equity financing for the
transactions contemplated by the Acquisition Agreements, Stonington desires to
subscribe for and purchase from Holdings, and Holdings desires to issue and sell
to Stonington, ______ Shares (the "Stonington Shares") for $_____ (the "Purchase
Price").
<PAGE>
WHEREAS, in connection with the Acquisition, the Company is obtaining (i)
senior debt financing from a group of lenders with Bankers Trust Company, The
Bank of Nova Scotia and Credit Suisse as the Arrangers pursuant to a credit
agreement dated _________, 1996 (the "Credit Agreement"), (ii) subordinated debt
financing pursuant to the sale of $225,000,000 aggregate principal amount of
[__%] Senior Subordinated Notes due 2006 (the "Notes") under an Indenture dated
____________, 1996 (the "Indenture"), and (iii) proceeds from the sale of a
portfolio of customer notes of Goss (the "Customer Notes") pursuant to a Note
Purchase Agreement between the Company and BT Commercial Corporation (the "Note
Purchase Agreement");
NOW THEREFORE, in consideration of the premises and the representations,
warranties and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
Stock Subscription
Section 1.1. Purchase and Sale of Stock. Upon the terms and conditions
hereinafter set forth, Holdings hereby agrees to issue and sell, and Stonington
hereby agrees to subscribe for and purchase the Stonington Shares.
Section 1.2. Consideration for Shares. In consideration of, and
concurrently with, the issuance of the Stonington Shares, Stonington shall
deliver in exchange therefor the Purchase Price in cash, certified check or by
wire transfer to an account or accounts designated by Holdings.
Section 1.3. Closing. At the Closing (as defined below), Holdings will
deliver to Stonington duly issued certificates representing the Stonington
Shares. The delivery and transfer of the Stonington Shares in exchange for the
payment of the Purchase Price by Stonington (the "Closing") will take place
simultaneously with the purchase of Shares by the Management Investors
purchasing pursuant to the Management Stock Subscription Agreement, and
immediately prior to the consummation of the Acquisition, at a location and time
to be designated by Holdings.
ARTICLE II
Representations and Warranties of Holdings
Holdings represents and warrants to Stonington that:
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<PAGE>
Section 2.1. Organization and Authority. Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to enter into and
perform (or cause a subsidiary thereof to enter into and perform, as the case
may be) its obligations under this Agreement, the Management Stock Subscription
Agreement, the Credit Agreement, the Stock and Asset Purchase Agreement, the
Notes, the Indenture, the Note Purchase Agreement, the Stock Pledge Agreement,
the Management Notes, the Management Stock Incentive Plan (as such term is
defined and the Management Stock Subscription Agreement) and the Stockholders'
Agreement (all such agreements and plans other than this Agreement being
hereinafter sometimes collectively referred as the "Collateral Agreements"), and
to consummate the transactions contemplated hereby and thereby. Holdings has all
requisite corporate power and authority to issue and sell the Stonington Shares
and otherwise to carry out the transactions contemplated hereby. Holdings has
taken all necessary corporate action to authorize the execution, delivery and
performance by it of this Agreement and (by it or a subsidiary thereof, as the
case may be, of) each of the Collateral Agreements and the consummation of the
transactions contemplated hereby and thereby. Holdings has not engaged in any
business or incurred any liabilities since the date of its incorporation except
for activities, expenses and liabilities incident to its organization and to the
carrying out of the transactions contemplated by this Agreement and the
Collateral Agreements.
Section 2.2. Capitalization. (a) After giving effect to the transactions
contemplated by this Agreement, the authorized capital of Holdings will consist
of 10,000,000 authorized Shares of which 1,165,000 Shares will be issued and
outstanding immediately after the Closing, 7,500 authorized shares of nonvoting
common stock, par value $.01 per share, of Holdings, of which 7,500 shares will
be issued and outstanding immediately after the Closing, and 1,000,000
authorized shares of preferred stock, par value $.01 per share, of Holdings, of
which 100,000 shares will be designated as 6 1/2% Redeemable Pay-in-Kind
Preferred Stock and 47,500 shares of such 6 1/2% Redeemable Pay-in-Kind
Preferred Stock will be issued and outstanding immediately after the Closing. In
addition, up to ______ Shares will have been reserved for issuance under the
Management Stock Incentive Plan. All of the outstanding shares will be duly
authorized, validly issued, fully paid and nonassessable.
Section 2.3. Compliance with Other Instruments, etc. Holdings is not in
violation of any term of its Certificate of Incorporation or of its By-Laws or
any agreement or instrument
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<PAGE>
to which it is a party or by which it or any of its properties or assets is
bound, and Holdings is not in violation of any term of any applicable law,
ordinance, rule or regulation or any applicable order, judgment or decree of any
court or governmental authority, the consequences of which violation may
reasonably be expected to have a material adverse effect on the business,
financial condition, properties or operations of Holdings. Neither the execution
and delivery of this Agreement or the Collateral Agreements, nor the issuance of
the Shares nor the performance by Holdings of its obligations hereunder or
thereunder nor the consummation of the transactions contemplated hereby or
thereby will result in any violation of or be in conflict with or constitute a
default (with due notice or lapse of time or both) under any term of the
Certificate of Incorporation or the By-Laws of Holdings or any agreement or
instrument to which Holdings is a party or by which any of its properties or
assets is bound or any applicable law, ordinance, rule or regulation or any
applicable order of any court or governmental authority or, except as expressly
provided herein or in the Collateral Agreements, will result in the creation of
any mortgage, pledge, lien, security interest, charge or encumbrance upon any of
the properties or assets of Holdings, which violation, conflict, default, or
creation, either in any case or in the aggregate, materially adversely affects,
or may reasonably be expected to have a material adverse effect on, the
business, financial condition, properties or operations of Holdings.
Section 2.4. Authorization and Delivery of Collateral Agreements. Each of
the Collateral Agreements to be executed by Holdings (or a subsidiary thereof,
as the case may be) has been duly authorized and has been or, prior to the
Closing, will be, executed and delivered by such entity and in full force and
effect. Holdings has delivered or will deliver to Stonington and counsel
complete and correct copies of each of the Collateral Agreements and of all
exhibits and schedules thereto.
Section 2.5. Valid and Binding Agreements. Each of this Agreement and the
Collateral Agreements, when duly executed and delivered by Holdings and the
other parties thereto, will be the valid and binding obligations of Holdings (or
a subsidiary thereof, as the case may be) enforceable in accordance with their
respective terms, except (i) as may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally, and (ii) that the remedies of
specific performance, injunction and other forms of equitable relief may not be
available because they are subject to certain
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<PAGE>
tests of equity jurisdiction, equitable defenses and the discretion of the court
before which any proceeding therefor may be brought.
Section 2.6. No Consents. No order, license, consent, authorization or
approval of, or exemption by, or notice to or filing or registration with, or
other actions to, with or by any federal, state or other governmental body was
or is necessary to effect the transactions contemplated by this Agreement and
the Collateral Agreements or to authorize the execution, delivery and
performance by Holdings (or a subsidiary thereof, as the case may be) of this
Agreement or the Collateral Agreements or the issuance of the Shares, except (i)
such as have heretofore been made or obtained, (ii) such as may be required
under the Securities Act of 1933, as amended (the "Securities Act") or state
securities, or "blue sky," laws, (iii) filings required under the Credit
Agreement to perfect the security interests granted to the lenders thereunder,
(iv) other filings, authorizations, consents and approvals referred to in the
Collateral Agreements, and (v) such as would not, if not obtained, made or
performed, have a material adverse effect on the business, financial condition,
properties or operations of Holdings.
ARTICLE III
Representations and Warranties of Stonington
Stonington hereby represents and warrants as follows:
Section 3.1. Investment Intention. Stonington represents that it is
acquiring the Stonington Shares for its own account for investment purposes only
and not with a view to, or for resale in connection with, the distribution or
other disposition thereof or with any present intention of distributing or
reselling any Stonington Shares thereof. Stonington represents that it has been
advised that the Stonington Shares issuable hereunder have not been registered
under the Securities Act. Stonington agrees and acknowledges that it will not
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate or
otherwise dispose of any of the Stonington Shares (or solicit any offers to
purchase or otherwise acquire or take a pledge of any of the Stonington Shares)
unless such transfer, sale, assignment, pledge, hypothecation or other
disposition is made (i) pursuant to an effective registration statement under
the Securities Act and all applicable state securities, or "blue sky," laws or
(ii) pursuant to an available exemption from registration under, or otherwise in
compliance with, the
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<PAGE>
Securities Act and all applicable state securities, or "blue sky," laws.
Section 3.2. Legend. The certificate or certificates representing
Stonington Shares shall bear the legend set forth in Section 2.6 of the
Stockholders' Agreement.
Section 3.3. Rule 144. Stonington acknowledges and represents that it has
been advised that (i) Rule 144 promulgated under the Securities Act ("Rule 144")
is not currently available with respect to the sales of any securities of
Holdings, and Holdings has made no covenant to make such Rule 144 available,
(ii) if and when the Stonington Shares may be disposed of without registration
in reliance on Rule 144, such disposition can be made only in limited amounts in
accordance with the terms and conditions of such Rule 144, and (iii) if the Rule
144 exemption is not available, public offer or sale without registration will
require the availability of an exemption under the Securities Act. If any of the
Stonington Shares are disposed of in accordance with Rule 144, Stonington shall
deliver to Holdings at or prior to the time of such disposition an executed copy
of Form 144 (if required by Rule 144) and such other documentation as Holdings
may reasonably require in connection with such disposition.
Section 3.4. Ability to Bear Risk; Evaluation of Risks. Stonington
represents that (i) the financial situation of Stonington is such that it can
afford to bear the economic risk of holding the unregistered Stonington Shares
for an indefinite period, (ii) it can afford to suffer the complete loss of its
investment in the Stonington Shares, (iii) it understands and has taken
cognizance of all the risk factors related to the purchase of the Stonington
Shares, and (iv) its knowledge and experience in financial and business matters
is such that it is capable of evaluating the risks of the investment in the
Stonington Shares.
Section 3.5. Authorization, etc. Stonington represents to Holdings that
this Agreement has been duly authorized, executed and delivered.
Section 3.6. Termination of Restrictions. The restrictions referred to in
Section 3.2 shall cease and terminate as to any particular Stonington Shares
when, in the opinion of counsel for Holdings, the provisions of the
Stockholders' Agreement are no longer applicable to such Stonington Shares or
the Stockholders' Agreement shall have terminated in accordance with its terms.
Whenever such restrictions shall cease and terminate as to any Stonington
Shares, the holder thereof shall be entitled to receive from Holdings, without
expense (other
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<PAGE>
than applicable transfer taxes, if any, if such unlegended shares are being
delivered and transferred to any person other than the registered holder
thereof), new certificates for such shares of like tenor not bearing the legend
referred to in Section 3.2.
ARTICLE IV
Conditions to Closing
Section 4.1. Conditions to Stonington's Obligation. Stonington's obligation
to purchase and deliver the consideration for the Stonington Shares to be sold
by Holdings to Stonington at the Closing is subject to the fulfillment at or
prior to the Closing of the following conditions, any or all of which may be
waived by Stonington, in whole or in part, to the extent permitted by applicable
law:
Section 4.1.1. Representations and Warranties. The representations and
warranties of Holdings contained in this Agreement shall be true and correct in
all material respects when made and at and as of the time of the Closing.
Section 4.1.2. Performance. Holdings shall have performed and complied in
all material respects with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing.
Section 4.1.3. No Impediments. As of the Closing there shall be no
impediments to (a) the drawdown of funds pursuant to the Credit Agreement, (b)
consummation of the Sale of Customer Notes, (c) consummation of the Notes
Offering, and (d) consummation of the Acquisition.
Section 4.1.4. No Orders. As of the Closing, there shall not be outstanding
any order of any court, administrative agency or governmental body which in any
way restrains or prevents the carrying out of the transactions contemplated by
this Agreement or any of the Collateral Agreements.
Section 4.1.5. Compliance with Securities Laws. The offering and sale of
the Stonington Shares to be issued at the Closing under this Agreement shall
have complied with all requirements of federal and any applicable state
securities, or "blue sky," laws.
Section 4.1.6. Funding. The drawdown of funds pursuant to the Credit
Agreement and consummation of the Sale of
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<PAGE>
Customer Notes and the Notes Offering shall be reasonably certain to occur
immediately after the purchase of Shares by Stonington and the Management
Investors.
Section 4.2. Conditions to Holdings' Obligation. Holdings' obligations to
accept payment for and to deliver Stonington Shares at the Closing are subject
to the fulfillment at or prior to the Closing of the following conditions, any
or all of which may be waived by Holdings, in whole or in part, to the extent
permitted by applicable law:
Section 4.2.1. Representations and Warranties. The representations and
warranties of Stonington contained in this Agreement shall be true and correct
in all material respects when made and at and as of the time of the Closing.
Section 4.2.2. Performance. Stonington shall have performed and complied in
all material respects with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to or at the
Closing.
Section 4.2.3. No Impediments. As of the Closing there shall be no
impediments to (a) the drawdown of funds pursuant to the Credit Agreement, (b)
consummation of the Sale of Customer Notes, (c) consummation of the Notes
Offering, and (d) consummation of the Acquisition.
Section 4.2.4. No Orders. As of the Closing, there shall not be outstanding
any order of any court, administrative agency or governmental body which in any
way restrains or prevents the carrying out of the transactions contemplated by
this Agreement or any of the Collateral Agreements.
Section 4.2.5. Compliance with Securities Laws. The offering and sale of
the Stonington Shares to be issued at the Closing under this Agreement shall
have complied with all requirements of federal and any applicable state
securities, or "blue sky," laws.
Section 4.2.6. Funding. The drawdown of funds pursuant to the Credit
Agreement and consummation of the Sale of Customer Notes and the Notes Offering
shall be reasonably certain to occur immediately after the purchase of Shares by
Stonington and the Management Investors.
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<PAGE>
ARTICLE V
Miscellaneous Provisions
Section 5.1. Survival of Representations and Warranties. All covenants,
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement and delivery of the Stonington Shares
and payment therefor and shall continue in full force and effect. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the successors of such party; and all covenants, promises and
agreements in this Agreement by or on behalf of Holdings, or by or on behalf of
Stonington, shall bind and inure to the benefit of the successors of such
parties hereto.
Section 5.2. Notices. All notices, statements, instructions or other
documents required to be given hereunder shall be in writing and shall be given
either personally or by mailing the same in a sealed envelope, first-class mail,
postage prepaid and either certified or registered, return receipt requested, or
by telecopy, addressed to Holdings at its principal offices and to the other
parties at their addresses reflected in the stock records of Holdings.
Stonington, by written notice given to Holdings in accordance with this Section
5.2 may change the address to which notices, statements, instructions or other
documents are to be sent. All notices, statements, instructions and other
documents hereunder that are mailed or telecopied shall be deemed to have been
given on the date of mailing or telecopying.
Section 5.3. Further Assurances. The parties hereto shall from time to time
execute and deliver all such further documents and do all acts and things as the
other party may reasonably require to effectively carry out or better evidence
or perfect the full intent and meaning of this Agreement.
Section 5.4. Complete Agreement; Counterparts. This Agreement and the
Collateral Agreements (and the agreements referred to herein and therein)
constitute the entire agreement and supersede all other agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof. This Agreement may be executed by any one
or more of the parties hereto in any number of counterparts, each of which shall
be deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
Section 5.5. Amendments; No Waiver; Remedies. No amendment or waiver of any
provision of this Agreement, nor any
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<PAGE>
consent to any departure by Holdings therefrom, shall in any event be effective
unless the same shall be in writing and signed by Holdings and Stonington and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No failure on the part of Stonington
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. Holdings may waive its rights under this Agreement with respect to
Stonington at any time, and no such waiver shall operate to waive Holdings'
rights under this Agreement with respect to Stonington. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 5.6. Indemnity. Holdings agrees to indemnify and hold harmless
Stonington, their affiliates, their limited and general partners, and the
directors, officers, employees, agents, representatives, and controlling persons
of the foregoing (each being an "Indemnified Party") from and against any and
all claims, damages, liabilities and expenses (including, without limitation,
fees and disbursements of counsel) which may be incurred by or asserted against
any Indemnified Party in connection with or arising out of any investigation,
litigation, or proceeding related to or arising out of or pertaining to the
purchase of the Stonington Shares or any of the transactions contemplated by
this Agreement and the Collateral Agreements, whether or not the Indemnified
Party is a party thereto, other than any of the foregoing that result solely by
reason of the negligence, willful misconduct or bad faith of Stonington.
Section 5.7. Binding Effect; Governing Law. This Agreement shall be binding
upon and inure to the benefit of Holdings and Stonington and their respective
successors and assigns, except that Holdings shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent of
Stonington. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to the principles of
conflicts of laws.
Section 5.8. Waiver of Jury Trial. Each of Holdings and Stonington hereby
irrevocably waives all right to a trial by jury in any action, proceeding or
counterclaim arising out of or relating to this Agreement or the transactions
contemplated hereby.
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<PAGE>
Section 5.9. Costs, Expenses and Taxes. Holdings agrees to pay within 30
days after demand all reasonable out-of-pocket costs and expenses of Stonington
and its affiliates in connection with the preparation, execution, delivery and
administration of this Agreement, and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for Stonington with respect thereto and with respect to
advising Stonington and its affiliates as to their rights and responsibilities
under this Agreement, and all costs and expenses, if any (including reasonable
counsel fees and expenses), in connection with the purchase of the Stonington
Shares. In addition, Holdings shall pay any and all stamp and other taxes
payable or determined to be payable in connection with the execution and
delivery of this Agreement, and the other documents to be delivered hereunder,
and agrees to save Stonington and its affiliates harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
Section 5.10. Descriptive Headings, Etc. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires, (i) words of any gender shall be deemed to include each
other gender; (ii) words using the singular or plural number shall also include
the plural or singular number, respectively; and (iii) references to "hereof,"
"herein," "hereby" and similar terms shall refer to this entire Agreement unless
the context otherwise requires.
Section 5.11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed on the date first written above.
GGS HOLDINGS INC.
By:___________________________________
Name:
Title:
STONINGTON CAPITAL APPRECIATION
1994 FUND, L.P.
By:___________________________________
Name:
Title:
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EXHIBIT 10.3
FORM OF
STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT (the "Agreement"), dated as of __________ __,
1996 by and between GGS Holdings, Inc., a Delaware corporation (the "Company"),
and Merrill Lynch KECALP L.P. 1994 (the "Investor").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock and Asset Purchase Agreement dated as of April
26, 1996, as amended (the "Stock and Asset Purchase Agreement"), by and among
the Company, Goss Graphic Systems, Inc., a Delaware corporation and a wholly
owned subsidiary of the Company ("Goss") and Rockwell International Corporation,
a Delaware corporation ("Rockwell"), the Company will, directly or indirectly,
acquire the Graphic Systems business unit of Rockwell ("Graphics") through the
purchase of all of the capital stock of certain subsidiaries of Rockwell that
constitute a part of Graphics and certain assets and liabilities of certain
subsidiaries that constitute the remainder of Graphics (the "Acquisition");
WHEREAS, the Company was formed on behalf of Stonington Capital
Appreciation 1994 Fund, L.P. ("Stonington"); and
WHEREAS, pursuant to the terms and subject to the conditions set forth in
this Agreement and in connection with providing equity financing for the
transactions contemplated by the Stock and Asset Purchase Agreement, the
Investor desires to subscribe for and purchase, and the Company desires to issue
and sell to the Investor ______ Shares for an aggregate purchase price of
$_______ (the "Purchase Price");
NOW, THEREFORE, in order to implement the foregoing and in consideration of
the mutual representations, warranties, covenants and agreements contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
<PAGE>
Bank Credit Agreement. The term "Bank Credit Agreement" shall mean the
credit agreement dated _______ __, 1996 among Goss, the Lenders listed therein,
and Bankers Trust Company, as Agent, as amended, modified, renewed, refunded,
replaced, supplemented or refinanced from time to time.
Closing. The term "Closing" shall have the meaning specified in Section 2.2
hereof.
Closing Date. The term "Closing Date" shall have the meaning specified in
Section 2.2 hereof.
Collateral Agreements. "Collateral Agreements" means the Stockholders
Agreement, the Stock and Asset Purchase Agreement, the Management Stock
Incentive Plan, the Employment Agreement, the Management Notes, the Pledge
Agreement, the Restricted Stock Agreements and the Stock Option Agreements.
Employment Agreement. The term "Employment Agreement" shall mean the
Employment Agreement between Goss and Robert M. Kuhn.
Exchange Act. The term "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, or any similar federal statute then in effect, and a
reference to a particular section thereof shall be deemed to include a reference
to the comparable section, if any, of such similar federal statute.
Indenture. The term "Indenture" shall mean the indenture dated _________
__, 1996 pursuant to which the Notes are to be issued.
Management Investors. The term "Management Investors" shall mean the
individuals set forth on Schedule 1 of the Stockholders Agreement.
Management Notes. The term "Management Notes" shall mean the Management
Notes dated the date of the Management Stock Subscription Agreement, between
each of the Management Investors and the Company.
Management Shares. The term "Management Shares" shall mean Shares purchased
by a Management Investor from the Company in exchange for cash, or pursuant to
the exercise of an option granted under the Management Stock Incentive Plan.
Management Stock Incentive Plan. The "Management Stock Incentive Plan"
shall mean the stock option plan of the Company, dated the date hereof.
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<PAGE>
Management Stock Subscription Agreement. The term "Management Stock
Subscription Agreement" shall mean the agreement pursuant to which the
Management Investors subscribe for Shares.
Nonvoting Shares. The term "Nonvoting Shares" shall mean any shares of
nonvoting common stock, par value $.01 per share, of the Company, including,
without limitation, all Nonvoting Shares issued in connection with any employee
benefit plan of the Company or its subsidiaries, including the Management Stock
Incentive Plan.
Notes. The term "Notes" shall mean the $225,000,000 aggregate principal
amount of ______% Senior Subordinated Notes due 2006 of Goss.
Pay-In-Kind Preferred Stock. The term "Pay-In-Kind Preferred Stock" shall
mean the 100,000 shares of 6 1/2% Redeemable Pay-In-Kind Preferred Stock, par
value $.01 per share, of the Company.
Pledge Agreements. The term "Pledge Agreements" shall mean the Pledge
Agreements, dated the date of the Management Stock Subscription Agreement,
between each of the Management Investors and the Company.
Preferred Stock. The term "Preferred Stock" shall mean the preferred stock,
par value $.01 per share, of the Company.
Prospectus. The term "Prospectus" shall mean the prospectus dated _________
__, 1996, regarding the offering by Goss of the Notes.
Restricted Stock Agreements. The term "Restricted Stock Agreements" shall
mean the agreements under which restricted stock is granted pursuant to the
Management Stock Incentive Plan.
Rule 144. The term "Rule 144" shall mean Rule 144 promulgated under the
Securities Act.
SEC. The term "SEC" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act or the
Exchange Act.
Securities Act. The term "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar federal statute then in effect, and a reference
to a particular section
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thereof shall be deemed to include a reference to the comparable section, if
any, of any such similar federal statute.
Shares. The term "Shares" shall mean any shares of common stock, par value
$.01 per share, of the Company, including, without limitation, all Shares issued
in connection with any employee benefit plan of the Company or its subsidiaries,
including the Management Stock Incentive Plan.
Stock Option Agreements. The term "Stock Option Agreements" shall mean the
agreements pursuant to which options are granted pursuant to the Management
Stock Incentive Plan.
Stockholders Agreement. The term "Stockholders Agreement" shall have the
meaning specified in Section 2.2(c) hereof.
ARTICLE II
SUBSCRIPTION FOR AND ISSUANCE OF SHARES
Section 2.1 Subscription for and Issuance of Shares. Pursuant to the terms
and subject to the conditions set forth in this Agreement, the Investor hereby
subscribes for and agrees to purchase, and the Company hereby agrees to issue
and sell to the Investor on the Closing Date _______ Shares in exchange for the
Purchase Price.
Section 2.2. The Closing. The closing (the "Closing") of the transactions
contemplated by this Article II shall take place at the offices of Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, simultaneously
with the consummation of the Stock and Asset Purchase Agreement, or at such
other place or such other time as the parties hereto may mutually agree. The
date of such closing is hereinafter referred to as the "Closing Date."
(a) At the Closing, the Company shall deliver to the Investor, against
delivery of the Purchase Price, duly issued stock certificates representing the
Shares to be purchased by the Investor.
(b) At the Closing, the Investor shall deliver to the Company an
amount equal to the Purchase Price by wire transfer in immediately available
funds to an account specified by the Company against delivery to the Investor of
stock certificates representing the Shares to be purchased by the Investor.
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(c) At the Closing, the Company, Stonington, the Investor, and the
Management Investors will enter into a Stockholders Agreement (the "Stockholders
Agreement").
(d) If the Closing has occurred but the Acquisition is not consummated
prior to the close of business on the Closing Date, then the Company shall
immediately deliver to the Investor, against delivery by the Investor of the
stock certificates representing the Shares purchased by the Investor, the cash
delivered to the Company by the Investor pursuant to Section 2.2(b) hereof and
this Agreement shall thereupon be terminated.
Section 2.3 Representations, Warranties and Covenants of the Investor. The
Investor represents and warrants to the Company and covenants with the Company
as follows:
(i) the Investor has full right, power and authority to execute and
deliver this Agreement, and to perform the Investor's obligations
hereunder, and this Agreement has been duly authorized, executed and
delivered by the Investor and is valid, binding and enforceable against the
Investor in accordance with its terms;
(ii) the Investor has full right, power and authority to execute and
deliver the Stockholders Agreement and to perform the obligations
thereunder and the Stockholders Agreement has been duly authorized by the
Investor and will, when executed and delivered by the Investor, be valid,
binding and enforceable against the Investor in accordance with its terms;
and
(iii) none of the execution, delivery and performance of this
Agreement and the Stockholders Agreement by the Investor will conflict with
or result in any material breach of any terms or provisions of, or
constitute a default under, any material contract, agreement or instrument
to which the Investor is a party or by which the Investor is bound.
Section 2.4 Representations, Warranties and Covenants of the Company. The
Company represents and warrants to the Investor as follows:
(i) the Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware;
(ii) the Company has full corporate power and authority to execute and
deliver this Agreement and to perform
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its obligations hereunder and this Agreement has been duly authorized,
executed and delivered by the Company and is valid, binding and enforceable
against the Company in accordance with its terms;
(iii) the Company has full corporate power and authority to execute
and deliver the Stockholders Agreement and to perform its obligations
thereunder and the Stockholders Agreement has been duly authorized by the
Company and will, when executed and delivered by the Company, be valid,
binding and enforceable against the Company in accordance with its terms;
(iv) the Shares to be issued to the Investor pursuant to this
Agreement, when issued and delivered in accordance with the terms hereof,
will be duly and validly issued and, upon receipt of cash or other
consideration in an amount at least equal to the par value of such Shares,
will be fully paid and nonassessable;
(v) none of the execution, delivery and performance of this Agreement
and the Stockholders Agreement by the Company will conflict with the
Company's Certificate of Incorporation or By-Laws or result in any material
breach of any terms or provisions of, or constitute a default under, any
material contract, agreement or instrument to which the Company is a party
or by which the Company is bound;
(vi) after giving effect to the transactions contemplated by this
Agreement, the authorized capital of the Company will consist of 10,000,000
authorized Shares, 7,500 authorized Nonvoting Shares, and 1,000,000 shares
of Preferred Stock (of which 100,000 shares will be designated as
Pay-in-Kind Preferred Stock), of which 1,165,000 Shares, 7,500 Nonvoting
Shares, and 47,500 shares of Pay-in-Kind Preferred Stock will be issued and
outstanding immediately after the Closing. In addition, up to ______ Shares
will have been reserved for issuance under the Management Stock Incentive
Plan. All of the outstanding Shares will be duly authorized, and upon the
issuance thereof will be validly issued, fully paid and nonassessable; and
(vii) except for the Pay-In-Kind Preferred Stock, options under the
Management Stock Incentive Plan for the purchase of up to an aggregate of
______ Shares and as otherwise set forth in the Management Stock Incentive
Plan, the Employment Agreement, the Stockholders Agreement and the
Prospectus, the Company (x) has no outstanding
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stock or securities convertible into or exchangeable for any shares of
capital stock, or any rights or any options for the purchase of, or any
agreements providing for the issue (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, any capital
stock or any stock or securities convertible into or exchangeable for any
capital stock and (y) is not subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of
capital stock or any convertible securities, rights or options of the type
described in the foregoing clause (x). The Company is not a party to, nor,
after due inquiry, has knowledge of, any agreement (except as set forth in
this Agreement, the Prospectus, the Stockholders Agreement, the Indenture,
the Bank Credit Agreement, the Management Stock Incentive Plan, the Stock
Option Agreements, the Restricted Stock Agreements, the Employment
Agreement, the Management Notes, the Notes and the Pledge Agreements)
restricting the transfer of any shares of capital stock of the Company.
ARTICLE III
INVESTMENT REPRESENTATIONS OF THE INVESTOR
Section 3.1 Investment Intention; No Resales. The Investor represents and
warrants that the Investor is acquiring its Shares for investment, solely for
its account and not with a view to, or for resale in connection with, the
distribution or other disposition thereof or with any present intention of
distributing or reselling any Shares thereof, except for such distributions and
dispositions permitted under the Stockholders Agreement and effected in
compliance with the Securities Act and the rules and regulations thereunder and
all applicable state securities, or "blue sky", laws. The Investor agrees and
acknowledges that it will not, directly or indirectly, offer, transfer, sell,
assign, pledge, hypothecate or otherwise dispose of any Shares, or solicit any
offers to purchase or otherwise acquire or take a pledge of any Shares, other
than transfers, sales, assignments, pledges, hypothecations or other
dispositions explicitly permitted by the Stockholders Agreement.
Section 3.2 Legend. Each certificate representing Shares shall bear the
legend set forth in Section 2.6 of the Stockholders Agreement.
Section 3.3 Stock Unregistered. The Investor acknowledges and represents
that the Investor has been advised
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that (a) the Shares have not been registered under the Securities Act; (b) the
Shares must be held indefinitely and the Investor must continue to bear the
economic risk of the investment in the Shares unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available; (c) it is not anticipated that there will be any public market for
the Shares; (d) Rule 144 is not currently available with respect to the sales of
any securities of the Company, and the Company has made no covenant to make such
Rule available; (e) if and when the Shares may be disposed of without
registration in reliance on Rule 144, such disposition can be made only in
limited amounts in accordance with the terms and conditions of such Rule; (f) if
the Rule 144 exemption is not available, public offer or sale without
registration will require the availability of an exemption under the Securities
Act; (g) a restrictive legend in the form set forth in the Stockholders
Agreement shall be placed on the certificates representing the Shares; and (h) a
notation shall be made in the appropriate records of the Company indicating that
the Shares are subject to restrictions on transfer and, if the Company should at
some time in the future engage the services of a securities transfer agent,
appropriate stop-transfer instructions will be issued to such transfer agent
with respect to the Shares.
Section 3.4 Rule 144. If any Shares are disposed of in accordance with Rule
144 or any similar or successor rule or regulation, the Investor shall deliver
to the Company at or prior to the time of such disposition an executed copy of
Form 144 (if required by Rule 144) or of such other form or forms required by
any such similar or successor rule or regulation and such other documentation as
the Company may require in connection with such disposition. Notwithstanding
anything to the contrary contained in this Section 3.4, the Company may
deregister any of its securities under Section 12 of the Exchange Act if it is
then permitted to do so pursuant to the Exchange Act and the rules and
regulations in effect thereunder.
Section 3.5 Additional Investment Representations. The Investor represents
and warrants that (a) the Investor is an "Accredited Investor", as such term is
defined in Regulation D of the Securities Act; (b) the Investor's financial
situation is such that it can afford to bear the economic risk of holding the
Shares for an indefinite period of time and suffer complete loss of its
investment in the Shares; (c) the Investor's knowledge and experience in
financial and business matters are such that it is capable of evaluating the
merits and risks of its investment in the Shares; (d) the Investor understands
that the Shares are a speculative investment which involve a high degree
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of risk of loss of its investment therein, that there are substantial
restrictions on the transferability of the Shares and that on the Closing Date
and for an indefinite period following the Closing there will be no public
market for the Shares and, accordingly, it may not be possible to liquidate its
investment in the Company in case of emergency, if at all; (e) in making the
decision to invest in the Shares hereunder, the Investor has relied upon
independent investigations made by the Investor and, to the extent believed by
the Investor to be appropriate, its representatives, including its own
professional, tax and other advisors; and (f) the Investor and the Investor's
representatives have been given the opportunity to examine all documents and to
ask questions of, and to receive answers from, the Company and its
representatives concerning the terms and conditions of the investment in the
Shares, and no representations have been made to the Investor or the Investor's
representatives concerning the Shares, the Company, its subsidiaries, their
business or prospects or other matters.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Binding Effect. The provisions of this Agreement shall be
binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns.
Section 4.2 Recapitalizations, Exchanges, Etc. Affecting Shares. The
provisions of this Agreement regarding Shares shall apply to any and all shares
of capital stock of the Company or any successor or assign of the Company
(whether by merger, consolidation, sale of assets, reorganization or otherwise)
which may be issued in respect of, in exchange for, or in substitution of the
Shares by reason of any stock dividend, stock split, stock issuance, reverse
stock split, combination, recapitalization, reclassification, merger,
consolidation or otherwise. Subject only to the provisions of the preceding
sentence, nothing contained in this Agreement shall prohibit or restrict the
Company from taking any corporate action, including, without limitation,
declaring any dividend (whether in cash or stock) or engaging in any corporate
transaction of any kind, including, without limitation, any merger,
consolidation, liquidation or sale of assets.
Section 4.3 Waiver and Amendment. Any party hereto may waive its rights
under this Agreement at any time. Any agreement on the part of any such party to
any such waiver shall be valid only if set forth in an instrument in writing
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signed by such party. This Agreement may be amended only by a written instrument
signed by the Company and the Investor.
Section 4.4 Notices. All notices and other communications provided for
herein shall be dated and in writing and shall be deemed to have been duly
given, when delivered, if delivered personally, or when deposited in the mail if
sent by registered or certified mail, return receipt requested, postage prepaid
and when received if delivered otherwise, to the party to whom it is directed:
(a) If to the Company, to it at the following address:
GGS Holdings, Inc.
c/o Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, New York 10153
Attention: Alexis P. Michas
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10153
Attention: Andrew R. Brownstein, Esq.
(b) If to the Investor, to it at the following address:
Merrill Lynch KECALP L.P. 1994
World Financial Center South Tower
23rd Floor
New York, New York 10080-6123
Attention: _______________
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties.
Section 4.5 Applicable Law. The laws of the State of Delaware without
reference to the choice of law principles thereof shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law.
Section 4.6 Integration. This Agreement and the documents referred to
herein or delivered pursuant hereto which
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form a part hereof contain the entire understanding of the parties with respect
to its subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof other than those expressly set forth herein and in the
Collateral Agreements. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter other than
such agreements and understandings set forth in the Collateral Agreements.
Section 4.7 Descriptive Headings, Etc. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Agreement
otherwise requires, (i) words of any gender shall be deemed to include each
other gender; (ii) words using the singular or plural number shall also include
the plural or singular number, respectively; and (iii) references to "hereof,"
"herein," "hereby" and similar terms shall refer to this entire Agreement.
Section 4.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
Section 4.9 Expenses. The Company shall pay the legal fees and the
expenses of the Investor reasonably incurred in connection with the preparation
and negotiation of this Agreement.
Section 4.10 Severability. In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
Section 4.11 Further Assurances. The parties hereto shall from time to time
execute and deliver all such further documents and do all acts and things as the
other party may reasonably require to effectively carry out or better evidence
or perfect the full intent and meaning of this Agreement.
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Section 4.12 Waiver of Jury Trial. Each of the Company and the Investor
hereby irrevocably waives all right to a trial by jury in any action, proceeding
or counterclaim, arising out of or relating to this Agreement or the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
GGS HOLDINGS, INC.
By:_____________________________________
Name:
Title:
MERRILL LYNCH KECALP L.P. 1994
By: KECALP Inc., its general partner
By:_________________________________
Name:
Title:
EXHIBIT 10.4
FORM OF
STOCKHOLDERS' AGREEMENT
By and among
GGS HOLDINGS, INC.,
THE MANAGEMENT INVESTORS LISTED IN SCHEDULE 1,
MERRILL LYNCH KECALP L.P. 1994,
And
STONINGTON CAPITAL APPRECIATION 1994 FUND, L.P.
Dated as of ________ __, 1996
<PAGE>
STOCKHOLDERS' AGREEMENT
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS................................................................
ARTICLE II
TRANSFER RESTRICTIONS......................................................
Section 2.1. General Restrictions on Transfer............................
Section 2.2. Certain Permitted Transfers.................................
Section 2.3. Rights of First Refusal.....................................
Section 2.4. Termination of Rights of First Refusal
and Restrictions on Transfer..............................
Section 2.5. Sale of Shares to a Third Party.............................
Section 2.6. Legend on Certificates......................................
Section 2.7. Limitation on Institutional Investor........................
ARTICLE III
PUT AND CALL RIGHTS .......................................................
Section 3.1. Put Rights..................................................
Section 3.2. Call Rights.................................................
Section 3.3. Reallocation Right..........................................
Section 3.4. Termination of Put and Call Rights..........................
ARTICLE IV
CORPORATE GOVERNANCE ......................................................
Section 4.1. Directors ..................................................
Section 4.2. Voting .....................................................
ARTICLE V
REGISTRATION RIGHTS .......................................................
Section 5.1. Incidental Registration.....................................
Section 5.2. Registration Procedures.....................................
Section 5.3. Indemnification.............................................
Section 5.4. Holdback Agreement..........................................
(i)
<PAGE>
ARTICLE VI
MISCELLANEOUS..............................................................
Section 6.1. Binding Effect..............................................
Section 6.2. No Right of Employment; Expiration
of Consulting Arrangements................................
Section 6.3. Recapitalizations, Exchanges, Etc.
Affecting Shares..........................................
Section 6.4. Waiver and Amendment........................................
Section 6.5. Tax Withholding.............................................
Section 6.6. Notices.....................................................
Section 6.7. Applicable Law and Time of Essence..........................
Section 6.8. Integration.................................................
Section 6.9. Descriptive Headings, Etc...................................
Section 6.10. Counterparts................................................
Section 6.11. Successors, Assigns and Transferees.........................
Section 6.12. Severability................................................
Section 6.13. Termination.................................................
Section 6.14. Community Property States...................................
Schedule 1. List of Management Investors
<PAGE>
FORM OF
STOCKHOLDERS' AGREEMENT
THIS STOCKHOLDERS' AGREEMENT (the "Agreement"), dated as of ________
__, 1996, by and among GGS Holdings, Inc., a Delaware corporation ("GGS"), the
stockholders and the holders of options or restricted stock under the Management
Stock Incentive Plan (the "Management Stock Incentive Plan") listed in Schedule
1 hereto, as such Schedule 1 may be amended from time to time (collectively, the
"Management Investors," and each individually, a "Management Investor"), Merrill
Lynch KECALP L.P. 1994 (the "Institutional Investor"), and Stonington Capital
Appreciation 1994 Fund, L.P., a Delaware limited partnership ("Stonington").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock and Asset Purchase Agreement, dated as
of April 26, 1996, as amended (the "Stock and Asset Purchase Agreement"), by and
among Rockwell International Corporation, a Delaware corporation ("Rockwell")
and Goss Graphic Systems, Inc., a Delaware corporation and a wholly owned
subsidiary of GGS (the "Company") the Company has, simultaneously with the
execution and delivery of this Agreement, directly or indirectly, acquired the
Graphic Systems business unit of Rockwell ("Goss") through the purchase of all
of the capital stock of certain subsidiaries of Rockwell that constitute a part
of Goss and certain assets and liabilities of certain subsidiaries of Rockwell
that constitute the remainder of Goss (the "Acquisition");
WHEREAS, the Management Investors, the Institutional Investor and
Stonington are acquiring Shares or Nonvoting Shares (each as defined below) and
certain of the Management Investors will be granted Performance Options and
Incentive Options (each as defined below) to purchase additional Shares pursuant
to the terms of the Management Stock Incentive Plan; and
WHEREAS, GGS and the Stockholders (as defined below) wish to enter
into this Agreement to provide certain rights and obligations among them.
NOW, THEREFORE, in consideration of the premises and mutual
agreements, covenants and provisions contained herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
meanings ascribed to them below:
"Acquisition" shall have the meaning specified in the first WHEREAS
clause hereto.
"Agreement" shall have the meaning specified in the preamble hereto.
"Assignment Notice" shall have the meaning specified in Section
3.2(c) hereof.
"Assignment Request" shall have the meaning specified in Section
3.2(c) hereof.
"Board of Directors" shall mean the board of directors of GGS.
"Call Assignment" shall have the meaning specified in Section 3.2(c)
hereof.
"Call Event" shall have the meaning specified in Section 3.2(a)
hereof.
"Call Notice" shall have the meaning specified in Section 3.2(a)
hereof.
"Call Notice Period" shall have the meaning specified in Section
3.2(a) hereof.
"Call Options" shall have the meaning specified in Section 3.2(a)
hereof.
"Call Right" shall have the meaning specified in Section 3.2(a)
hereof.
"Call Shares" shall have the meaning specified in Section 3.2(a)
hereof.
"Cause" used in connection with a termination of employment (or, in
the case of a director or consultant, the termination of such person's retention
or appointment as a director or consultant) of a Management Investor by GGS and
its subsidiaries shall mean (unless otherwise defined in an employment (or
consulting or similar) agreement between such Management Investor and GGS or any
of its subsidiaries, in which case the
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term "Cause" as used herein with respect to such Management Investor shall have
the meaning ascribed to it therein), (i) the Management Investor's willful
failure to perform the duties of his or her employment (or director or
consulting relationship, as the case may be) in any material respect, (ii)
malfeasance or negligence in the performance of a Management Investor's duties
of employment (or director or consulting relationship, as the case may be),
(iii) the Management Investor's commission of a felony under the laws of the
United States or any state thereof (whether or not in connection with his or her
employment (or director or consulting relationship, as the case may be)), (iv)
the Management Investor's disclosure of confidential information respecting
GGS's or any of its subsidiaries' business to any individual or entity which is
not in the performance of the duties of his or her employment (or director or
consulting relationship, as the case may be), (v) the Management Investor's
commission of an act or acts of sexual harassment that would normally constitute
grounds for termination or (vi) any other act or omission by the Management
Investor (other than an act or omission resulting from the exercise by the
Management Investor of good faith business judgment) which is materially
injurious to the financial condition or the business reputation of the Company
or any of its affiliates.
"Closing" shall have the meaning specified in Section 4(a) of the
Stock and Asset Purchase Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning specified in the first WHEREAS
clause to this Agreement.
"Compensation Committee" shall have the meaning specified in Section
5 of the Management Stock Incentive Plan.
"Credit Agreement" shall mean the Credit Agreement, dated as of the
date hereof, among the Company, the lenders who are parties thereto and Bankers
Trust Company, as Agent.
"Disability" with respect to a Management Investor shall mean
(unless otherwise defined in an employment (or consulting or similar) agreement
between such Management Investor and GGS or any of its subsidiaries, in which
case the term "Disability" as used herein with respect to such Management
Investor shall have the meaning ascribed to it therein), the inability of such
Management Investor to perform substantially such Management Investor's duties
and responsibilities to GGS
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or any of its subsidiaries as an employee, consultant or director, as the case
may be, by reason of a physical or mental disability or infirmity (i) for a
continuous period of six months or (ii) at such earlier time as such Management
Investor submits medical evidence of such disability satisfactory to the
Compensation Committee acting reasonably that such Management Investor has a
physical or mental disability or infirmity that will likely prevent such
Management Investor from substantially performing such Management Investor's
duties and responsibilities for six months or longer. The date of such
Disability shall be on the last day of such six-month period or the day on which
the Compensation Committee determines that the Management Investor has a
physical or mental disability or infirmity as provided in clause (ii) herein.
"Drag-Along Right" shall have the meaning specified in Section
2.5(a) hereof.
"Duly Endorsed" shall mean duly endorsed in blank by the person or
persons in whose name a Share or a Nonvoting Share is registered or accompanied
by a duly executed stock or security assignment or stock transfer power separate
from the Share or Nonvoting Share with the signature(s) thereon guaranteed by a
commercial bank or trust company or a member of a national securities exchange
or the National Association of Securities Dealers, Inc. or such other executed
stock or security assignment as the Compensation Committee may in its sole
discretion deem acceptable.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute then in effect, and a reference to a
particular section thereof shall be deemed to include a reference to the
comparable section, if any, of such similar federal statute.
"Fair Value Price" shall mean, with respect to each Share, option to
purchase Shares then exercisable in accordance with its terms and Nonvoting
Share, as the case may be, as of any date of determination an amount equal to
the average of the last reported sale price for the 20 consecutive trading days
ended immediately preceding the date of date of determination for a Share or
Nonvoting Share, as applicable, on the principal national securities exchange
registered under the Exchange Act on which Shares or Nonvoting Shares, as the
case may be, are listed or admitted to trading, or, if not listed on any such
exchange, the average of the closing sale prices per Share or Nonvoting Share,
as applicable, during the 20 consecutive trading days ended immediately
preceding the date of determination on NASDAQ or, if not quoted on NASDAQ, the
average of the highest reported bid and lowest reported asked quotation on
NASDAQ
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during the 20 consecutive trading days immediately preceding the date of
determination; provided that if such sales prices or quotations are not
available, the Fair Value Price as of any date of determination shall be an
amount equal to the quotient obtained by dividing (1) the difference between (a)
the product of (i) GGS's consolidated earnings from continuing operations before
interest, taxes and depreciation or amortization, if any, resulting from any
write-up in the book value of GGS's assets due to the Acquisition, excluding
extraordinary items, for the four full fiscal quarters ending immediately
preceding the date of determination and (ii) 7.5, and (b) GGS's average
outstanding consolidated indebtedness and preferred stock (valued, with respect
to each series thereof, at the greater of its liquidation preference and its
call or redemption price then in effect, if any) based upon such amounts
outstanding at the end of each of the four fiscal quarters ending immediately
preceding the date of determination (net of any cash and cash equivalents in
excess of $2.0 million) by (2) the number of Shares and Nonvoting Shares then
outstanding determined on a fully diluted basis, except that, if any date of
determination occurs during the first full fiscal quarter immediately following
the Closing, the Fair Value Price, in lieu of the result of the formula set
forth in this proviso, shall be the Original Purchase Price (as defined below),
and if any date of determination occurs during the second, third or fourth full
fiscal quarters immediately following the Closing, the Fair Value Price shall be
calculated in accordance with the formula set forth in this proviso based on
actual results of GGS during the period since the Closing extrapolated on an
annualized basis; provided, further, that if there has been a disposition of
assets, an acquisition, recapitalization or reclassification of securities or
any other extraordinary transaction in the preceding four quarters, then the
Fair Value Price as determined by the formula set forth in the immediately
preceding proviso may (but shall not be required to) be adjusted as determined
by the Board of Directors acting reasonably.
"GGS" shall have the meaning specified in the preamble hereto.
"GGS Note" shall have the meaning specified in Section 3.1(b)
"Goss" shall have the meaning specified in the first WHEREAS clause
to this Agreement.
"Hart-Scott Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
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"Incentive Option Agreements" shall mean each Incentive Option
Agreement dated as of the date hereof between GGS and the employee, director or
consultant named therein.
"Incentive Options" shall mean Incentive Options granted pursuant to
the Management Stock Incentive Plan.
"Initial Public Offering" shall have the meaning specified in
Section 2.1 hereof.
"Institutional Investor" shall have the meaning specified in the
preamble hereto.
"Institutional Shares" shall mean the Shares and Nonvoting Shares
(from time to time) beneficially owned by the Institutional-Investor.
"Institutional Stock Subscription Agreement" shall mean the Stock
Subscription Agreement, dated as of the date hereof, by and between GGS and the
Institutional Investor.
"Involuntary Termination" shall mean, with respect to a Management
Investor, (a) the termination of his or her employment (or director or
consulting relationship, as the case may be) with GGS or its subsidiaries by GGS
or its subsidiaries, or successors or assigns which termination is not for Cause
or the result of the Management Investor's Retirement, death or Disability, or
(b) the sale or transfer (other than to GGS or another of its subsidiaries) by
GGS or any of its subsidiaries of substantially all of the capital stock of GGS
or of the subsidiary of GGS which employs such Management Investor or a sale
(other than to GGS or another of its subsidiaries) of all or substantially all
of the assets of the business unit of GGS which employs such Management
Investor, provided that as a result thereof the Management Investor is no longer
an employee (or director or consultant, as the case may be) of GGS or one of its
subsidiaries (including the subsidiary or business unit which has been sold or
transferred) and further provided that, in the case of a Management Investor
employed by a subsidiary or business unit which has been sold or transferred,
proper provision shall not have been made for the conversion of such Management
Investor's Shares and/or Options into shares and/or options of the acquiring
company on terms intended to preserve substantially the economic value thereof
as of the date of such transaction.
"Management Default Offerees" shall have the meaning specified in
Section 2.3(e) hereof.
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"Management Investors" shall have the meaning specified in the
preamble hereto. Unless the context otherwise requires, when used in this
Agreement the term "Management Investors" shall include any employee, director
or consultant of GGS or any of its subsidiaries who has been granted an option
or Restricted Stock pursuant to the Management Stock Incentive Plan.
"Management Investor's Estate" shall have the meaning specified in
Section 2.2(c) hereof.
"Management Note" shall have the meaning specified in Section 2.2 of
the Management Stock Subscription Agreement.
"Management Offerees" shall have the meaning specified in Section
2.3(b) hereof.
"Management Proposal" shall have the meaning specified in Section
2.3(a) hereof.
"Management Purchaser" shall have the meaning specified in Section
2.3(a) hereof.
"Management Shares" shall mean the Shares and Nonvoting Shares (from
time to time) beneficially owned by the Management Investors or their Permitted
Transferees, including Shares issued upon the exercise of an option granted
under the Management Stock Incentive Plan or any other benefit plan and
including Nonvoting Shares issued pursuant to a grant of Restricted Stock under
the Management Stock Incentive Plan or any other benefit plan.
"Management Stock Incentive Plan" shall mean the Management Stock
Incentive Plan adopted by the Board of Directors as of the Closing.
"Management Stock Subscription Agreement" shall mean the Management
Stock Subscription Agreement, dated as of the date hereof, by and among GGS and
the Management Investors (other than any other Management Investors who become
such after the date hereof).
"Management Transfer Default Shares" shall have the meaning
specified in Section 2.3(e) hereof.
"Management Transfer Notice" shall have the meaning specified in
Section 2.3(a) hereof.
"Management Transfer Offerees" shall have the meaning specified in
Section 2.3(b) hereof.
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"Management Transfer Shares" shall have the meaning specified in
Section 2.3(a) hereof.
"New Management" shall have the meaning specified in Section 3.3
hereof.
"Nonvoting Shares" shall mean the shares of nonvoting common stock,
par value $.01 per share, of GGS.
"Option Call Price" shall have the meaning specified in Section
3.2(a) hereof.
"Option Put Price" shall have the meaning specified in Section
3.1(a) hereof.
"Original Purchase Price" shall mean, with respect to Shares, the
actual purchase price per Share (including the exercise price for Shares
purchased pursuant to options or similar securities), and, with respect to
Nonvoting Shares, shall mean the amount set forth in the election permitted by
Section 83(b) of the Code with respect to such Nonvoting Shares, made in
accordance with the Restricted Stock Agreement covering such Nonvoting Shares.
"Performance Option Agreements" shall mean each Performance Option
Agreement, dated as of the date hereof, between GGS and the employee, director
or consultant named therein.
"Performance Options" shall mean Performance Options granted
pursuant to the Management Stock Incentive Plan.
"Permitted Transferee" shall have the meaning specified in Section
2.2(d) hereof.
"Permitted Transfers" shall have the meaning specified in Section
2.2 hereof.
"Person" shall mean an individual, partnership, joint venture,
corporation, trust, unincorporated organization or government or any department
or agency thereof.
"Protected Shares" shall have the meaning specified in Section
3.2(a) hereof.
"Purchasing Management Investors" shall have the meaning specified
in Section 3.2(c).
"Put Notice" shall have the meaning specified in Section 3.1(a)
hereof.
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"Put Notice Period" shall have the meaning specified in Section
3.1(a) hereof.
"Put Options" shall have the meaning specified in Section 3.1(a)
hereof.
"Put Right" shall have the meaning specified in Section 3.1(a)
hereof.
"Put Shares" shall have the meaning specified in Section 3.1(a)
hereof.
"Registrable Securities" shall mean the Management Shares (excluding
any Nonvoting Shares represented by Restricted Stock which has not vested), the
Institutional Shares and the Stonington Shares, collectively; provided, however,
as to any particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (i) a registration statement with
respect to the sale of such securities shall have become effective under the
Securities Act and such securities shall have been disposed of in accordance
with such registration statement, (ii) such securities shall have been sold
pursuant to Rule 144 (or any successor provision) under the Securities Act,
(iii) such securities shall have been otherwise transferred and new certificates
for such securities not bearing a legend restricting further transfer shall have
been delivered by GGS, (iv) such securities shall have ceased to be outstanding
(in the case of Shares underlying options granted under the Management Stock
Incentive Plan, such Shares cease to be outstanding after such options have been
exercised), or (v) in the case of Shares or Nonvoting Shares held by a
Management Investor, such securities shall have been transferred to any Person
other than a Management Investor or a Permitted Transferee.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with Article V of this Agreement, including without
limitation, (i) all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees, (ii) all fees and expenses of
complying with securities or "blue sky" laws (including reasonable fees and
disbursements of counsel for the underwriters in connection with "blue sky"
qualifications of the Registrable Securities), (iii) all printing, messenger and
delivery expenses, (iv) the fees and disbursements of counsel for GGS and of
GGS's independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such performance
and compliance, (v) the reasonable fees and disbursements of one counsel
retained by each of Stonington and the Management Investors as a group
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in connection with each such registration, (vi) any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities and the
reasonable fees and expenses of any special experts retained in connection with
the requested registration, including any fee payable to a qualified independent
underwriter within the meaning of the rules of the National Association of
Securities Dealers, Inc., but excluding underwriting discounts and commissions
and transfer taxes, if any, (vii) internal expenses of GGS or any of its
subsidiaries (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties) and (viii)
securities acts liability insurance (if GGS elects to obtain such insurance).
"Remaining Management Transfer Shares" shall have the meaning
specified in Section 2.3(b) hereof.
"Repurchase Period" shall have the meaning specified in Section 3.3
hereof.
"Repurchased Equity" shall have the meaning specified in Section 3.3
hereof.
"Resale Notice" shall have the meaning specified in Section 3.3.
"Restricted Stock" shall mean Restricted Stock granted pursuant to
the Management Stock Incentive Plan.
"Restricted Stock Agreements" shall mean each Restricted Stock
Agreement dated as of the date hereof between GGS and the employee, director or
consultant named therein.
"Retirement" shall mean with respect to any Management Investor his
termination of employment after attainment of age 65 or such other retirement
policy as may be in force from time to time or as may otherwise be approved by
the Compensation Committee upon a recommendation of the Chief Executive Officer
of GGS or any of its subsidiaries.
"Retirement Put Event" shall have the meaning specified in Section
3.1(a) hereof.
"Rockwell" shall have the meaning specified in the first WHEREAS
clause to this Agreement.
"SEC" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange Act.
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"Section 5.1 Notice" shall have the meaning specified in Subsection
5.1(a) hereof.
"Section 5.1 Sale Number" shall have the meaning specified in
Subsection 5.1(c) hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute then in effect, and a reference to a particular
section thereof shall be deemed to include a reference to the comparable
section, if any, of any such similar federal statute.
"Share Call Price" shall have the meaning specified in Section
3.2(a) hereof.
"Share Put Price" shall have the meaning specified in Section 3.1(a)
hereof.
"Shares" shall mean the shares of common stock, par value $.01 per
share, of GGS.
"Stock and Asset Purchase Agreement" shall have the meaning
specified in the first WHEREAS clause hereto.
"Stockholders" shall mean the beneficial owners of the Management
Shares (including holders of options or Restricted Stock granted to employees,
directors and consultants of GGS or any of its subsidiaries under the Management
Stock Incentive Plan), the Institutional Shares and the Stonington Shares
collectively, and each such individual holder shall be referred to as a
"Stockholder."
"Stock Pledge Agreements" shall mean each Stock Pledge Agreement,
dated as of the date hereof, between GGS and the individual pledgor named
therein.
"Stonington" shall have the meaning specified in the preamble
hereto.
"Stonington Shares" shall mean the Shares from time to time
beneficially owned by Stonington.
"Stonington Stock Subscription Agreement" shall mean the Stonington
Stock Subscription Agreement, dated as of the date hereof, by and between GGS
and Stonington.
"Tag-Along Right" shall have the meaning specified in Section 2.5
hereof.
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"Termination Put Event" shall have the meaning specified in Section
3.1(a) hereof.
"Third Party" shall have the meaning specified in Section 2.5
hereof.
"Transferring Management Investor" shall have the meaning specified
in Section 2.3(a) hereof.
"Voluntary Resignation" shall mean (unless otherwise defined in an
employment (or consulting or similar) agreement between a Management Investor
and GGS or any of its subsidiaries, in which case the term "Voluntary
Resignation" as used herein with respect to such Management Investor shall have
the meaning ascribed to it therein) the termination of a Management Investor's
employment (or director or consultant relationship) with GGS or any of its
subsidiaries by such Management Investor, other than for Retirement, death or
Disability.
"Withdrawal Election" shall have the meaning specified in Subsection
5.1(c) hereof.
ARTICLE II
TRANSFER RESTRICTIONS
Section 2.1 General Restrictions on Transfer. Prior to the earlier
of (a) the fifth anniversary of the Closing and (b) the completion of a sale of
Shares pursuant to an effective registration statement under the Securities Act
(other than a registration statement relating to Shares issuable upon exercise
of employee stock options or in connection with any employee benefit plan of GGS
or any of its subsidiaries and other than a registration statement relating to
the public offering of Shares representing (when taken together with all Shares
sold under previous registration statements which were not in connection with
employee stock options or employee benefit plans) less than 15% of the then
outstanding Shares) (an "Initial Public Offering"), the Management Investors
shall not, without the prior written consent of GGS, directly or indirectly
sell, offer, transfer, assign, pledge, hypothecate or otherwise dispose of any
Management Shares, except for transfers made in accordance with the provisions
of Sections 2.2 and 2.5 and Articles III and V hereof and which are made in
compliance with the federal securities laws and all applicable state securities,
or "blue sky," laws. No transfer of Management Shares in violation of this
Agreement or any Management Investor's Stock Pledge Agreement shall be made or
recorded on
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the books of GGS and any such transfer shall be void and of no effect.
Section 2.2 Certain Permitted Transfers. Each of the Stockholders
and GGS acknowledges and agrees that any of the following transfers of Shares or
Nonvoting Shares (collectively, the "Permitted Transfers") are deemed to be
permitted transfers of such securities:
(a) a transfer made to GGS pursuant to the provisions of Sections
2.3, 2.5, and Article III hereof and a pledge of Management Shares to GGS
pursuant to the terms of a Management Investor's Stock Pledge Agreement;
(b) a transfer made with the prior written consent of GGS;
(c) a transfer of Management Shares upon the death of a Management
Investor to his executors, administrators and testamentary trustees (the
"Management Investor's Estate"); and
(d) a transfer of Management Shares made in compliance with the
federal and all applicable state securities laws to the Management Investor's
spouse, parents, children or grandchildren or to a trust or similar entity, the
beneficiaries of which, or to a corporation or partnership, the stockholders or
limited and general partners of which, include only the Management Investor and
such Management Investor's spouse, parents, children or grandchildren;
provided that no transfers pursuant to Section 2.2(c) or (d) shall be permitted
(and any such transfer shall be void and of no effect) unless and until the
applicable transferee shall agree in writing, in form and substance reasonably
satisfactory to GGS, to become bound, and becomes bound, by all the terms of
this Agreement and the Management Investor's Stock Pledge Agreement, if any, to
the same extent as a Management Investor is so bound. Each Person to whom
Management Shares may be transferred or pledged pursuant to Sections 2.2(c) and
(d) is hereinafter sometimes referred to as a "Permitted Transferee." Any
Permitted Transferee may further transfer any Management Shares hereafter
acquired by such Permitted Transferee to any other Permitted Transferee of the
Management Investor (including the Management Investor); provided that no such
transfer shall be made to a Permitted Transferee (or the Management Investor)
hereunder (whether by a Management Investor or another Permitted Transferee)
unless and until such Permitted Transferee (or, in the event of transfers to the
Management Investor, the Management Investor) shall agree in writing, in form
and substance reasonably satisfactory to GGS, to become bound,
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and becomes bound, by all the terms of this Agreement and the Management
Investor's Stock Pledge Agreement, if any, to the same extent as a Management
Investor is so bound. No transfer pursuant to this Agreement shall release any
Management Investor from liability with respect to the payment and performance
of the obligations contained in such Management Investor's Management Note.
Notwithstanding anything to the contrary contained herein, no transfer to or
from the Management Investor or any Permitted Transferee shall be made if, as a
result thereof, GGS would be required to register any Shares or Nonvoting Shares
under the Securities Act, the Exchange Act and any applicable state securities,
or "blue sky," laws; and
(e) transfers made in connection with an Initial Public Offering or
pursuant to Article V hereof.
Section 2.3 Rights of First Refusal. (a) On or after the fifth
anniversary of the Closing and prior to the tenth anniversary of the Closing,
provided that an Initial Public Offering has not occurred, the Management
Investors and their Permitted Transferees may not, directly or indirectly sell,
offer, transfer, assign, pledge, hypothecate or otherwise dispose of (except for
transfers made in accordance with the provisions of Sections 2.2 and 2.5 and
Articles III and V hereof and which are made in compliance with the federal
securities laws and all applicable state securities, or "blue sky," laws) any or
all of the Management Shares then owned by such Management Investor or such
Management Investor's Permitted Transferees unless (i) such Management Investor
or his or her Permitted Transferee (either of the foregoing a "Transferring
Management Investor") shall have received a written offer (the "Management
Proposal") from a bona fide proposed purchaser of the Management Shares (the
"Management Purchaser"), which Management Proposal shall remain open and
available for acceptance for a period of at least 60 calendar days and provide
for the sale of a designated number of Management Shares (the "Management
Transfer Shares") to the Management Purchaser (subject only to the rights of GGS
and the other Management Investors under this Section 2.3) at a sales price
consisting solely of cash in United States currency at closing and containing
the written agreement of the Management Purchaser to be bound by the terms and
conditions of this Agreement and the Transferring Management Investor's Stock
Pledge Agreement, if any, each as amended from time to time, and (ii) such
Transferring Management Investor shall have first given a written notice (the
"Management Transfer Notice") to GGS containing an irrevocable offer (open to
acceptance for a period of 30 calendar days after the date such Management
Transfer Notice is given) to sell such Management Transfer Shares to the
Management Transfer Offerees (as defined below)
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at the price and on terms no less favorable than those specified in the
Management Proposal. The provisions of this Section 2.3 shall in no event apply
to any Management Shares which consist of Nonvoting Shares that have not vested
pursuant to the Restricted Stock Agreement under which such Nonvoting Shares
were issued.
(b) The Management Transfer Notice shall give GGS the right to
purchase all the Management Transfer Shares. If GGS elects to purchase less than
all of the Management Transfer Shares, GGS shall communicate, at least 10
calendar days prior to expiration of the 30-day period under the Management
Transfer Notice, to all the Management Investors (other than the selling
Management Investor) listed in Schedule 1 hereto who then hold of record any
Shares or Nonvoting Shares ("Management Offerees" and, together with GGS, the
"Management Transfer Offerees") the Management Transfer Notice and the number of
Management Transfer Shares GGS intends to elect not to purchase ("Remaining
Management Transfer Shares"). A Management Offeree who wishes to purchase
Remaining Management Transfer Shares shall provide GGS with written notice
specifying the number of Remaining Management Transfer Shares as to which such
Management Offeree desires to accept the offer within 7 calendar days of the
giving of such notice by GGS. If the aggregate number of Remaining Management
Transfer Shares as to which notice of acceptance is provided by all Management
Offerees exceeds the number of Remaining Management Transfer Shares, then the
right to purchase Remaining Management Transfer Shares shall be allocated among
the Management Offerees on a pro rata basis (with rounding to avoid fractional
Shares or Nonvoting Shares) based on the percentage of Remaining Management
Transfer Shares corresponding to the relationship of the aggregate number of
Remaining Management Transfer Shares sought by each accepting Management Offeree
to the aggregate number of Remaining Management Transfer Shares sought by all
accepting Management Offerees. If the aggregate number of Remaining Management
Transfer Shares as to which notice of acceptance is provided by all Management
Offerees is less than the number of Remaining Management Transfer Shares, GGS
shall have the right, but not the obligation, to purchase the remainder of such
Remaining Management Transfer Shares.
(c) GGS, on behalf of itself, if it elects to purchase Management
Transfer Shares, or its designee, and/or on behalf of all purchasing Management
Offerees, if any, may accept such offer as to all, but not less than all, of the
Management Transfer Shares by providing the Transferring Management Investor
with written notice (specifying the number of Management Transfer Shares as to
which each Management Transfer
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Offeree is accepting the offer) within 30 calendar days after the date the
Management Transfer Notice is given to GGS.
(d) The closing of the purchase by the Management Transfer Offerees
of the Management Transfer Shares shall take place at the principal office of
GGS on the later of (x) the 10th business day after the expiration of the 30-day
period after the giving of the Management Transfer Notice and (y) the second
business day after the receipt of any required governmental approval or the
expiration or termination of any waiting period, including any waiting period
pursuant to the Hart-Scott Act. At such closing, such Management Transfer
Offerees shall deliver a certified check or checks in the appropriate amount to
the Transferring Management Investor against delivery of Duly Endorsed
certificates representing the Management Transfer Shares so purchased; provided
that GGS may pay all or any part of the purchase price for the Management
Transfer Shares it purchases from the Transferring Management Investor by the
cancellation of such portion of the indebtedness outstanding under the
Management Note as would be required to be paid to GGS in accordance with the
terms of the Management Note if the Transferring Management Investor had
received cash proceeds from GGS for the Management Transfer Shares so sold; and
provided further that GGS may direct any Management Offeree purchasing
Management Transfer Shares from the Transferring Management Investor to pay, and
such Management Offeree shall pay, to GGS in lieu of to the Transferring
Management Investor, all or any part of the purchase price for the Management
Transfer Shares purchased by such Management Offeree from the Transferring
Management Investor that would be required to be paid to GGS under the terms of
the Management Note of the Transferring Management Investor if such amount had
been paid directly to the Transferring Management Investor and, in such event,
GGS will cancel an equivalent portion of the indebtedness then outstanding under
the Transferring Management Investor's Management Note.
(e) If any Management Transfer Shares allocated to a Management
Offeree are not purchased by such Management Offeree (the "Management Transfer
Default Shares"), such Management Transfer Default Shares may be purchased by
the other Management Offerees purchasing Management Transfer Shares (the
"Management Default Offerees"), allocated among such Management Default Offerees
(with rounding to avoid fractional Shares or Nonvoting Shares) in proportion to
the number of Management Transfer Shares otherwise being purchased by those of
such Management Default Offerees who agree to purchase Management Transfer
Default Shares, allocated among those electing to purchase in a manner
consistent with the allocation provisions of Section 2.3(b). If the Management
Default Offerees do not purchase all of the Management Transfer Default Shares,
GGS may
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purchase the remaining Management Transfer Default Shares. Nothing contained
herein shall prejudice GGS's right to maintain any cause of action or pursue any
other remedies available to it as a result of such default.
(f) If at the end of the 30-day period after the giving of the
Management Transfer Notice, GGS has not accepted, on behalf of itself (if it
elects to purchase Management Transfer Shares) or its designee and/or any
purchasing Management Offerees, the offer contained in such Management Transfer
Notice as to all of the Management Transfer Shares covered thereby, then the
Transferring Management Investor shall have 30 calendar days in which to
complete the sale of the Management Transfer Shares to the Management Purchaser
in accordance with the Management Proposal, except where failure to consummate
such sale is not caused, in whole or in part, by the Transferring Management
Investor (provided that any extension beyond such 30-calendar day period may not
extend beyond the period referred to in the last sentence of this Subsection
2(f)). GGS may direct any Management Purchaser to which any Management Transfer
Shares are sold by the Transferring Management Investor pursuant to this Section
2.3 to pay, and the Transferring Management Investor shall cause such Management
Purchaser to pay (and, if such Transferring Management Investor shall receive
any of such purchase price directly, such Transferring Management Investor shall
pay), to GGS in lieu of such Transferring Management Investor, all or any part
of the purchase price for the Management Transfer Shares purchased by such
Management Purchaser from the Transferring Management Investor that would be
required to be paid to GGS under the terms of the Management Note of the
Transferring Management Investor if such amount had been paid directly to the
Transferring Management Investor and, in such event, GGS will cancel an
equivalent portion of the indebtedness then outstanding under the Transferring
Management Investor's Management Note. Promptly after any sale to a Management
Purchaser pursuant to this Section 2.3, the Transferring Management Investor
shall notify GGS of the consummation thereof and shall furnish such evidence of
the completion and time of completion of such sale and of the terms thereof as
GGS may request. If the sale of the Management Transfer Shares to a Management
Purchaser is not completed within 60 calendar days after the first to occur of
(i) the expiration of the 30-day period referred to in Subsection 2.3(d) above
or (ii) receipt from the Management Transfer Offerees of written notice
declining the offer contained in the Management Transfer Notice, the
Transferring Management Investor shall no longer be permitted to sell such
Management Transfer Shares pursuant to this Section 2.3 without again complying
with this Section 2.3 and all of the transfer restrictions contained in this
Agreement shall again be in effect with respect to all of
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such Transferring Management Investor's Management Shares, including the
Management Transfer Shares.
(g) Notwithstanding anything to the contrary in this Agreement, any
transfer or disposition of Management Shares by any person (other than GGS) who
or which has acquired Management Shares, directly or indirectly, from any
Management Investor (whether pursuant to Article II or Article III hereof) shall
be void and of no effect unless and until the persons acquiring such Management
Shares shall have executed and delivered to GGS a pledge in writing, in form and
substance satisfactory to GGS, pledging, as collateral security for the payment
of the outstanding indebtedness of the Management Investor from whom such person
directly or indirectly acquired such Management Shares, under such Management
Investor's Management Note, that portion, if any, of such Management Shares
required to be so pledged under such Management Investor's Stock Pledge
Agreement. GGS may, in its sole discretion, waive the requirements of this
Section 2.3(g).
Section 2.4 Termination of Rights of First Refusal and Restrictions
on Transfer. Upon the termination of the restrictions on transfer set forth in
Sections 2.1 and 2.3, transfers of the Management Shares beneficially owned by
the Management Investors or their Permitted Transferees shall be permitted
subject to all applicable federal and state securities, or "blue sky," laws.
Section 2.5 Sale of Shares to a Third Party. (a) If at any time
prior to an Initial Public Offering Stonington proposes to sell, for their own
account, in one or more transactions, shares which, in the aggregate, represent
50% or more of the capital stock of GGS on a fully diluted basis to a third
party in one or more private transactions which is not, and following such sale
will not be, affiliated with Stonington (a "Third Party"), the Management
Investors who are at such time employees, directors or consultants of GGS or any
of its subsidiaries, the Management Investors who were but are no longer
employees, directors or consultants as a result of death (in which case the
estate of such Management Investors), Disability or Retirement and/or each of
their Permitted Transferees, shall have the right to participate (a "Tag-Along
Right") in such sale with respect to any Shares (including Shares obtainable
upon exercise of options granted pursuant to the Management Stock Incentive
Plan) or Nonvoting Shares (including Nonvoting Shares represented by Restricted
Stock granted pursuant to the Management Stock Incentive Plan, but only to the
extent that such Restricted Stock has vested) held by them on a pro rata basis
(based on the percentage of Management Shares corresponding to the relationship
of the aggregate number of Shares to be
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sold by Stonington to the aggregate number of Stonington Shares) for the same
consideration per Share and otherwise on the same terms as Stonington sells its
Shares. If circumstances occur which give rise to the Tag-Along Right, then
Stonington shall give written notice to the Management Investors providing a
summary of the terms of the proposed sale to the Third Party and advising such
Management Investors of their Tag-Along Rights. Each Management Investor may
exercise his or her Tag-Along Right by written notice to GGS stating the number
of Shares or Nonvoting Shares that he or she wishes to sell, up to the maximum
number permitted (being his or her pro rata amount referred to above and as
disclosed in the notice to be given to him or her). If a Management Investor
gives written notice indicating that he or she wishes to sell, he or she shall
be obligated to sell that number of Shares or Nonvoting Shares specified in his
or her written acceptance notice upon the same terms and conditions as
Stonington is selling to the Third Party conditional upon and contemporaneous
with completion of the transaction of purchase and sale with the Third Party. If
at any time prior to an Initial Public Offering Stonington proposes to sell for
their own account, in one or more transactions, Shares which, in the aggregate,
represent more than 40% of the capital stock of GGS on a fully diluted basis to
a Third Party in one or more private transactions, Stonington shall, upon
written request, have the right to require the Management Investors (regardless
of whether such Management Investor is then an employee, director or consultant
of GGS or any of its subsidiaries and regardless of any termination of
employment, consultancy or directorship) and/or each of their Permitted
Transferees, to participate (a "Drag-Along Right") in such sale with respect to
any Shares (including Shares obtainable upon exercise of options granted
pursuant to the Management Stock Incentive Plan) or Nonvoting Shares (including
Nonvoting Shares represented by Restricted Stock granted pursuant to the
Management Stock Incentive Plan, but only to the extent that such Restricted
Stock has vested) held by them on a pro rata basis (based on the percentage of
Management Shares corresponding to the relationship of the aggregate number of
Shares to be sold by Stonington to the aggregate number of Stonington Shares)
for the same consideration per Share and otherwise on the same terms as
Stonington sells its Shares. For purposes of this Section 2.5(a), to the extent
that Shares issuable upon exercise of an option granted under the Management
Stock Incentive Plan are to be sold pursuant to the exercise of a Tag-Along
Right or Drag-Along Right, the holders of such options shall not be required to
exercise their options until all conditions to the commitment by the Third Party
to purchase the Shares into which such options are exercisable pursuant to the
exercise of a Tag-Along Right or Drag-Along Right have been satisfied or waived.
Notwithstanding anything
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to the contrary contained in this Section 2.5(a), a Management Investor shall
not be entitled to exercise its Tag-Along Rights on and after the date of such
Management Investor's termination of employment (or director or consulting
relationship) for Cause or Voluntary Resignation with GGS or any of its
subsidiaries.
(b) Tag-Along Rights and Drag-Along Rights pursuant to this Section
2.5 shall be exercisable upon 15 calendar days' prior written notice.
Section 2.6 Legend on Certificates. Without limiting the provisions
of Section 2.1 or 2.2 hereof, no Stockholder shall make any transfer of any
shares of capital stock of GGS (or interest therein) if such action would
constitute a violation of any federal or state securities or blue sky laws, or
if (other than in the case of a transfer by Stonington) such transfer would
subject GGS to any reporting obligations under the Exchange Act. No transfer of
any shares of capital stock of GGS shall be effective (other than in connection
with transfers pursuant to Article V hereof) unless GGS, upon its request, has
been furnished with an opinion of counsel for the Stockholder, which opinion and
counsel shall be reasonably satisfactory to GGS, to the effect that such
transfer is exempt from the registration provisions of Section 5 of the
Securities Act and the rules and regulations in effect thereunder and such
transfer can be effected without similar registration under applicable state
securities or "blue sky" laws. Any such opinion may be delivered by counsel to
GGS, and, in the case of any transfer pursuant to a Drag-Along Right, shall be
delivered by counsel to GGS. Any attempt to transfer any Shares or Nonvoting
Shares (or interest therein) not in accordance with this Agreement shall be null
and void and neither the Company nor any transfer agent of such securities shall
transfer upon the books of GGS any shares of capital stock of GGS to any Person
unless such transfer or attempted transfer is permitted by this Agreement. Each
certificate representing Shares or Nonvoting Shares shall bear the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED, ENCUMBERED OR
OTHERWISE DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE
PROVISIONS OF A STOCKHOLDERS' AGREEMENT DATED AS OF ________ __,
1996 (A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF GGS HOLDINGS,
INC. AND WILL BE MAILED TO A STOCKHOLDER WITHOUT CHARGE WITHIN FIVE
DAYS AFTER RECEIPT BY GGS HOLDINGS, INC. OF A WRITTEN
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REQUEST THEREFOR FROM SUCH STOCKHOLDER). NO TRANSFER, SALE,
ASSIGNMENT, PLEDGE, HYPOTHECATION, ENCUMBRANCE OR OTHER DISPOSITION
OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT
AS OTHERWISE PROVIDED IN SUCH STOCKHOLDERS' AGREEMENT AND (A)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 (THE "ACT") AND ANY APPLICABLE STATE SECURITIES, OR
"BLUE SKY," LAWS, OR (B) IF GGS HOLDINGS, INC. HAS BEEN FURNISHED
WITH AN OPINION OF COUNSEL FOR THE HOLDER, WHICH OPINION AND COUNSEL
SHALL BE REASONABLY SATISFACTORY TO GGS HOLDINGS, INC., TO THE
EFFECT THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF
THE ACT AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER AND SUCH
STATE SECURITIES, OR "BLUE SKY," LAWS.
In addition, each such certificate shall bear such other legends as GGS may deem
necessary or appropriate.
Section 2.7 Limitation on Institutional Investor. Notwithstanding
anything contained herein to the contrary, the Institutional Investor may not,
without the prior written consent of Stonington, sell or otherwise dispose of
its Institutional Shares prior to the sale or other disposition by Stonington of
a like proportion of its Stonington Shares and then only on the same terms and
conditions as Stonington's sale or other disposition.
ARTICLE III
PUT AND CALL RIGHTS
Section 3.1 Put Rights. (a) Upon termination of a Management
Investor's employment, consultancy or directorship with GGS or any of its
subsidiaries due to death, Disability, Retirement or Involuntary Termination of
the Management Investor (any of the foregoing, a "Put Event") in each case prior
to the earlier of an Initial Public Offering and the tenth anniversary of the
Closing, such Management Investor and his Permitted Transferees shall have the
right (the "Put Right"), exercisable by delivery of a written notice (the "Put
Notice") to GGS within a period of 180 calendar days after the date of
occurrence of the Put Event (subject to extension for up to three months in the
event that GGS is legally prohibited or contractually prohibited, by virtue of
its, or any of its subsidiaries', debt or other contractual obligations, from
honoring a
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Put Right) (the "Put Notice Period"), to require GGS to purchase all, but not
less than all, of the Management Shares (excluding any Nonvoting Shares
represented by Restricted Stock which has not vested) owned by such Management
Investor or his or her Permitted Transferees (the "Put Shares") and all vested
options to purchase Shares held by such Management Investor or Management
Investor's Permitted Transferees (the "Put Options") on the date of the
occurrence of the Put Event at a price per Put Share or Put Option equal to the
Share Put Price (as defined below) or Option Put Price (as defined below),
respectively, and upon receipt of such notice GGS shall purchase such Put Shares
and Put Options, subject to the terms hereof. For purposes of this Section 3.1,
the term "Share Put Price" shall mean the Fair Value Price of the Put Shares on
the date of occurrence of such Put Event, all calculations described in this
sentence to be made on a per Share basis or on a per Nonvoting Share basis, as
applicable. For purposes of this Section 3.1, the term "Option Put Price" of any
Put Options sold pursuant to the exercise of the Put Right shall mean the
product of the number of Shares issuable upon exercise of a Management
Investor's then-vested Put Options times the difference, if positive (if
negative such price shall be equal to zero), between (i) the Share Put Price and
(ii) the exercise price of each Put Option.
(b) The Put Notice shall specify the number of Put Shares and/or Put
Options to be sold and shall contain an irrevocable offer to sell such Put
Shares and/or Put Options to GGS in the manner set forth below at the applicable
Share Put Price or Option Put Price, respectively. The closing of the purchase
by GGS of Put Shares and/or Put Options shall take place at the principal office
of GGS on the tenth business day after the date of the Put Notice. At such
closing, GGS shall deliver to the Management Investor or his or her Permitted
Transferees against delivery of Duly Endorsed certificates representing such Put
Shares or Put Options, a certified check or checks in the amount of the
applicable Share Put Price and/or Option Put Price; provided that GGS may pay
all or any part of the applicable Share Put Price and/or Option Put Price
payable in the event of the exercise of a Put Right by the cancellation of such
portion of the indebtedness then outstanding under any Management Note as would
be required to be paid to GGS in accordance with the terms of such Management
Note if such Management Investor had received cash proceeds from GGS for the
whole amount due. Notwithstanding anything to the contrary contained in this
Section 3.1(b), to the extent that the payment for Put Shares and/or Put Options
with cash would, at the time of payment or issuance thereof, constitute or cause
a breach or default (immediately or with notice or the lapse of time or both)
under any agreement or instrument to which GGS,
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or any of its subsidiaries, is a party or by which GGS, or any of its
subsidiaries, or any of their assets are bound or violate any law, statute,
order, writ, injunction, decree, judgment, rule, regulation, policy or guideline
promulgated, or judgment entered, by any federal, state, local or foreign court
or governmental authority applicable to GGS or any of its subsidiaries, GGS
shall be permitted to pay for the Put Shares and/or Put Options with a
subordinated note of GGS payable in three equal annual installments commencing
on the first anniversary of the issuance thereof, bearing interest payable
annually at 8 1/4% and containing subordination terms which are reasonably
satisfactory to the relevant senior lenders to GGS, or any of its subsidiaries,
(a "GGS Note") with an original principal amount equal to the balance of the
applicable Share Put Price and/or Option Put Price (provided, that such notes
may have maturities of longer than three years and may provide for interest to
accrue or be payable in kind rather than cash if necessary to avoid a potential
breach or default of any such agreement or instrument, provided that such
maturities and interest shall be adjusted only to the minimum extent reasonably
necessary to avoid such potential breach or default) and as would not cause such
a breach or default or violate any law, statute, order, writ, injunction,
decree, judgment, rule, regulation, policy or guideline promulgated, or judgment
entered, by any federal, state, local or foreign court or governmental authority
applicable to GGS or any of its subsidiaries.
(c) Notwithstanding anything to the contrary contained in this
Section 3.1, GGS shall not be obligated to acquire any Put Shares or Put Options
pursuant to Section 3.1(a) hereof to the extent that the acquisition thereof
would (i) violate any law, statute, order, writ, injunction, decree, judgment,
rule, regulation, policy or guideline promulgated, or judgment entered, by any
federal, state, local or foreign court or governmental authority applicable to
GGS or any of its subsidiaries, or (ii) constitute or cause a breach or default
(immediately or with notice or lapse of time or both) of any agreement or
instrument to which GGS, or any of its subsidiaries, is a party or by which GGS,
or any of its subsidiaries, or any of their assets are bound.
(d) To the extent that the provisions of Section 3.1(c) limit but do
not preclude GGS from acquiring any Put Shares or Put Options, GGS shall acquire
such Put Shares and/or Put Options on the date specified in Section 3.1(b) to
the extent permitted pro rata from each Management Investor or Permitted
Transferee who or which has exercised such Management Investor's or Management
Investor's Estate's right pursuant to Section 3.1(a) in accordance with the
number of such Put Shares
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and/or Put Options GGS is required to purchase from each such Management
Investor or Permitted Transferee.
(e) To the extent that Put Shares and/or Put Options as to which Put
Rights have been exercised are not purchased by GGS in accordance with Sections
3.1(c) and (d) hereof, GGS shall acquire such Put Shares and/or Put Options on
the tenth business day after such date as GGS learns that it is no longer
restricted under Section 3.1(c) hereof from acquiring all such Put Shares and/or
Put Options. The price to be paid to acquire such Put Shares and/or Put Options
shall be the amount that would have been paid pursuant to Section 3.1(a) hereof
if such acquisition had not been delayed plus interest calculated from such date
at 8 1/4%.
(f) Notwithstanding anything to the contrary contained in this
Section 3.1 but subject to the terms of this Agreement, GGS may, at any time
prior to the consummation of the purchase of the Put Shares and/or Put Options
pursuant to this Section 3.1, cause its designee or designees (which may include
Stonington or any of its affiliates) to consummate such purchase pursuant to the
terms and conditions of this Section 3.1.
Section 3.2 Call Rights. (a) Upon termination of a Management
Investor's employment, consultancy or directorship with GGS or any of its
subsidiaries for any reason (a "Call Event") in each case prior to the earlier
of an Initial Public Offering and the tenth anniversary of the Closing, GGS
shall have the right (the "Call Right"), exercisable by delivery of a written
notice (the "Call Notice") to such Management Investor or Permitted Transferee
within a period of one year after the date of occurrence of a Call Event arising
other than as a result of the death of the Management Investor and within a
period of 190 days after the death of the Management Investor in the event of a
Call Event arising as a result of the death of the Management Investor (subject
in either case to extension for up to three months in the event GGS is legally
prohibited or contractually prohibited, by virtue of its or any of its
subsidiary's debt or other obligations, from exercising its Call Rights) (the
"Call Notice Period"), to require such Management Investor or such Management
Investor's Permitted Transferees to sell all, or any portion, of the Management
Shares owned by such Management Investor or his or her Permitted Transferees
(the "Call Shares") and any then vested options to purchase Shares held by such
Management Investor or such Management Investor's Permitted Transferee (the
"Call Options") on the date of occurrence of the Call Event at a price per Call
Share or Call Option equal to the Share Call Price (as defined below) or Option
Call Price (as defined below), respectively,
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and upon receipt of such notice the Management Investor who receives such notice
shall sell such Call Shares and Call Options, subject to the terms hereof. For
purposes of this Section 3.2, the term "Share Call Price" shall mean, as
determined on the date of the applicable Call Notice, (i) in the event of a
termination of employment, consultancy or directorship for Cause, the lower of
the Original Purchase Price and the Fair Value Price of the Call Shares; (ii) in
the event of Voluntary Resignation, (a) with respect to Protected Shares (as
defined below) on the date of the occurrence of the event giving rise to the
Call Right, the Fair Value Price of such Protected Shares and (b) with respect
to Call Shares that are not Protected Shares on such date, the lower of the Fair
Value Price and the Original Purchase Price of the Call Shares; and (iii) in the
event of Involuntary Termination, death, Disability or Retirement, the greater
of the Original Purchase Price and the Fair Value Price of the Call Shares
(provided that the unpaid principal amount of such Management Investor's
Management Note, if any, shall be reduced by an amount equal to the amount, if
any, by which the Original Purchase Price exceeds the Fair Value Price of the
Call Shares), such calculations to be made on a per Share basis. On each of the
first five annual anniversaries of the Closing, 20% of a Management Investors'
Shares acquired at the time of Closing (including shares which are subject to
and may be purchased pursuant to Incentive Options and Performance Options
granted at the time of Closing) will become "Protected Shares." For purposes of
this Section 3.2, the term "Option Call Price" of any Call Options to be
purchased pursuant to the exercise of the Call Right shall mean the product of
the number of Shares issuable upon exercise of the Management Investor's
then-vested Call Options times the difference, if positive (if negative such
price shall be equal to zero), between (i) the Share Call Price and (ii) the
exercise price of each Call Option.
(b) The Call Notice shall specify the number of Call Shares and/or
Call Options to be purchased and shall contain an offer to purchase the Call
Shares and/or Call Options at the applicable Share Call Price or Option Call
Price, respectively. The closing of the acquisition by GGS of Call Shares and/or
Call Options shall take place at the principal office of GGS as soon as
practicable after the date of the Call Notice. At such closing, GGS shall
deliver to the Management Investor or such Management Investor's Permitted
Transferees, against delivery of Duly Endorsed certificates representing such
Call Shares or Call Options, either (i) a certified check or checks in the
amount of the applicable Share Call Price and/or Option Call Price, or (ii) a
certified check or checks for one-half of the applicable Share Call Price and/or
Option Call Price, plus a GGS Note with an original principal amount equal to
one-half of
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the applicable Share Call Price and/or Option Call Price; provided, that GGS may
pay (reducing the cash and note portions equally) all or any part of the
applicable Share Call Price and/or Option Call Price payable in the event of the
exercise of a Call Right by the cancellation of such portion of the indebtedness
then outstanding under any Management Note as would be required to be paid to
GGS in accordance with the terms of such Management Note if such Management
Investor had received cash proceeds from GGS for the whole amount due.
Notwithstanding anything to the contrary contained in this Section 3.2(b), to
the extent that the payment for the Call Shares and/or Call Options either with
cash or through the incurrence of indebtedness pursuant to the issuance of a GGS
Note in the proportions specified above would, at the time of payment or
issuance thereof, constitute or cause a material breach or default (immediately
or with notice or the lapse of time or both) under any agreement or instrument
to which GGS or any of its subsidiaries is a party or by which GGS or any of its
subsidiaries or any of their assets are bound or violate any law, statute,
order, writ, injunction, decree, judgment, rule, regulation, policy or guideline
promulgated, or judgment entered, by any federal, state, local or foreign court
or governmental authority applicable to GGS or any of its subsidiaries, GGS
shall be permitted to pay for the Call Shares and/or Call Options in such other
proportion of cash and notes (which may have maturities longer than three years
and which may provide for interest to accrue or be payable in kind rather than
cash if necessary to avoid a potential breach or default of any such agreement
or instrument, provided that such maturities and interest shall be adjusted only
to the minimum extent reasonably necessary to avoid such potential breach or
default) as would not cause such a breach or violate any law, statute, order,
writ, injunction, decree, judgment, rule, regulation, policy or guideline
promulgated, or judgment entered, by any federal, state, local or foreign court
or governmental authority applicable to GGS or any of its subsidiaries;
provided, further, that in the case of termination of employment, consultancy,
or directorship of a Management Investor for Cause, GGS may acquire Call Shares
and/or Call Options in any proportion of cash and notes such that the sum of the
amount of cash plus the aggregate principal amount of the notes is equal to the
product of (x) the applicable Share Call Price and/or Option Call Price and (y)
the number of Call Shares and/or Call Options to be purchased, as the case may
be.
(c) In the event GGS is not permitted to or elects not to exercise
its Call Rights (in whole or in part) for any reason, then GGS may, but is not
obligated to, assign (a "Call Assignment") its Call Rights to the other
Management Investors, provided that any purchase by such assignee pursuant to a
Call
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Assignment shall be for cash or certified check only. In the event GGS elects to
assign its Call Rights, it shall provide written notice (an "Assignment Notice")
to such Management Investors specifying that such Management Investor may elect
to request assignment of all or any portion of the Call Rights from GGS (an
"Assignment Request"). Management Investors shall submit an Assignment Request
within 30 days of the Assignment Notice specifying the kind and amount of Call
Rights that such Management Investor requests be assigned to it. In accepting a
Call Assignment, the Management Investor accepts an unconditional obligation to
purchase the shares or options subject to the Call Assignment at the applicable
Share Call Price or Option Call Price at the closing described below
simultaneously upon receiving the Call Assignment. In the event that the
Assignment Requests exceed the maximum number of shares or options subject to
the Call Assignment, then any Management Investor that submitted an Assignment
Request in excess of his proportionate ownership of the outstanding stock and
options of GGS held by all Management Investors who submitted Assignment
Requests shall have his request reduced up to the extent such request exceeds
his pro rata ownership on a pro rata basis based on his respective ownership of
the outstanding stock and options of GGS. Such Call Rights shall only be
exercisable if the Shares and Nonvoting Shares called pursuant to all such
exercises of such Call Rights pursuant to this Section 3.2 (including by GGS and
its designees) are for all the related Call Shares. The closing of the
acquisition by the Management Investors of Call Shares and/or Call Options (the
"Purchasing Management Investors") shall take place at the principal office of
GGS on the date GGS or its designee purchases Call Shares pursuant to such Call
Rights or, if no such Call Shares are being purchased by GGS or its designee, on
the 40th calendar day (provided that such day is a business day; if the 40th day
falls on a weekend or holiday, then the closing shall take place on the first
business day immediately following such weekend or holiday) after the date of
the Assignment Notice. At such closing, the Purchasing Management Investors
shall deliver to the selling Management Investor, the selling Management
Investor's Estate, or his or her Permitted Transferees, against delivery of Duly
Endorsed certificates representing such Call Shares and/or Call Options, a
certified check or checks in the amount of the applicable Share Call Price
and/or Option Call Price.
Section 3.3 Reallocation Right. In the event GGS purchases Call
Shares, Call Options, Put Shares or Put Options (collectively, the "Repurchased
Equity"), then GGS shall have the right, exercisable at the discretion of GGS by
delivery of a written notice (the "Resale Notice") within a period of 180
calendar days after the date of the purchase of the Repurchased
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Equity (the "Repurchase Period") to offer to sell any or all of the Repurchased
Equity at a price per share or per option to be determined by the Compensation
Committee for such Repurchased Equity to any employee, director or consultant of
GGS or one of its subsidiaries (the "New Management"). GGS shall be able to
offer to sell the Repurchased Equity to any or all members of the New Management
in the absolute discretion of GGS in consultation with the Compensation
Committee.
Section 3.4 Termination of Put and Call Rights. Notwithstanding
anything to the contrary contained herein, no Put Right or Call Right shall be
exercisable after an Initial Public Offering.
ARTICLE IV
CORPORATE GOVERNANCE
Section 4.1 Directors. (a) The Stockholders agree and acknowledge
that Stonington has the right to nominate all directors of GGS and that, prior
to the date hereof, Stonington has appointed to the board of directors of GGS
all the individuals who are directors of GGS as of the date hereof. The
Stockholders further agree that Stonington shall be entitled to reduce or expand
the size of the board of directors and to nominate successors to all directors
of GGS. All the Stockholders agree to vote their Shares in favor of the
directors nominated pursuant to this Section 4.1. The failure of Stonington to
fully exercise its nomination rights shall not constitute a waiver or diminution
of such rights, nor shall it prevent Stonington from fully exercising such
rights prospectively. Should any of the individuals elected as directors
pursuant to this Section 4.1 or who are currently serving as directors be
unwilling or unable to serve, or otherwise cease to serve (including by means of
removal in accordance with the following sentence), then subject to applicable
law Stonington shall be entitled to fill the resulting vacancies on the Board of
Directors by nominating or designating any replacement for any director
originally nominated by them pursuant to this Section 4.1. Subject to applicable
law, if Stonington proposes to remove any director, the Stockholders agree to
cooperate in such removal (including voting as Stockholders, if necessary) and
any resulting vacancy shall be filled in accordance with the preceding sentence.
(b) The Board of Directors will have an audit committee and a
compensation committee and such other committees as the Board of Directors
designates.
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Section 4.2 Voting. The Institutional Investor hereby agrees to vote
its Institutional Shares as directed by Stonington.
ARTICLE V
REGISTRATION RIGHTS
Section 5.1 Registration.
(a) Right to Include Registrable Securities. If GGS at any time
proposes to register under the Securities Act any of its equity securities
beneficially owned by Stonington (other than a registration on Form S-4 or Form
S-8, or any successor or similar forms), in a manner that would permit
registration of Registrable Securities for sale to the public under the
Securities Act and in an underwritten offering, it will each such time promptly
give written notice to all Stockholders who beneficially own any Registrable
Securities of its intention to do so, of the registration form of the SEC that
has been selected by GGS and of such holders' rights under this Section 5.1 (the
"Section 5.1 Notice"); provided that, if, at the time of such proposed
registration, any Management Investors (or their Permitted Transferees) are able
to sell Registrable Securities owned by them pursuant to Rule 144 under the
Securities Act, GGS shall not be required to give a Section 5.1 Notice to such
Management Investors (or their Permitted Transferees), and such Management
Investors (or their Permitted Transferees) shall not be entitled to any rights
under this Section 5.1. GGS will use its reasonable best efforts to include in
the proposed registration all Registrable Securities that GGS is requested in
writing, within 15 calendar days after the Section 5.1 Notice is given, to
register by the Stockholders thereof; provided, however, that (i) if, at any
time after giving written notice of its intention to register any equity
securities and prior to the effective date of the registration statement filed
in connection with such registration, GGS shall determine for any reason not to
register such equity securities, GGS may, at its election, give written notice
of such determination to all Stockholders who beneficially own any Registrable
Securities and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such abandoned registration, and (ii)
in case of a determination by GGS to delay registration of its equity
securities, GGS shall be permitted to delay the registration of such Registrable
Securities for the same period as the delay in registering such other equity
securities.
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(b) Registration Rights Upon Request. If GGS at any time proposes to
register under the Securities Act any of its equity securities, it will each
such time promptly give written notice to Stonington. In addition, GGS, upon the
request of Stonington (which must hold at least 10% of the outstanding equity
securities of GGS at the time of such request), shall, from time to time,
register any reasonable portion of such securities held by Stonington (including
in an underwritten offering) and bear all expenses in connection with such
offering in a manner consistent with paragraph (c) below and shall enter into
such other agreements in furtherance thereof (including with underwriters
reasonably acceptable to GGS), and GGS shall provide customary indemnifications
in such instances (in a manner consistent with the indemnification provisions of
this Article V) to Stonington and any such underwriters.
(c) Expenses. GGS shall pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 5.1; provided, however, that each Stockholder shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Stockholder's Registrable Securities pursuant to a
registration statement effected pursuant to this Section 5.1.
(d) Priority in Incidental Registrations. If the managing
underwriter for a registration pursuant to this Section 5.1 shall advise GGS in
writing that, in its opinion, the number of securities requested to be included
in such registration exceeds the number (the "Section 5.1 Sale Number") that can
be sold in an orderly manner in such offering within a price range acceptable to
Stonington, GGS shall include in such offering (i) first, all the securities
that GGS proposes to register for its own sale, and (ii) second, to the extent
that the securities GGS proposes to register are less than the Section 5.1 Sale
Number, all Registrable Securities requested to be included by all Stockholders,
provided, however, that if the number of such Registrable Securities exceeds the
Section 5.1 Sale Number less the number of securities included pursuant to
clause (i) hereof, then the number of such Registrable Securities included in
such registration shall be allocated pro rata among all requesting Stockholders,
on the basis of the relative number of shares of such Registrable Securities
each such Stockholder has requested to be included in such registration. If, as
a result of the proration provisions of this Subsection (d), any Stockholder
shall not be entitled to include all Registrable Securities in a registration
pursuant to this Section 5.1 that such Stockholder has requested be included,
such Stockholder may elect to withdraw his request to
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include Registrable Securities in such registration (a "Withdrawal Election");
provided, however, that such Withdrawal Election shall be irrevocable and, after
making a Withdrawal Election, a Stockholder shall no longer have any right to
include Registrable Securities in the registration as to which such Withdrawal
Election was made.
Section 5.2 Registration Procedures. If and whenever GGS is required
to use its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Article V, GGS will, as
soon as practicable:
(a) prepare and file with the SEC the requisite registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become and remain
effective; provided, however, that GGS may discontinue or delay any
registration of securities that is being effected pursuant to Section 5.1
at any time prior to the effective date of the registration statement
relating thereto;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement
effective for such period as GGS shall deem appropriate and to comply with
the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such registration statement
during such period;
(c) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment and
supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such registration statement
(including each preliminary prospectus and summary prospectus), in
conformity with the requirements of the Securities Act, and such other
documents as such seller may reasonably request;
(d) use its best efforts to register or qualify such Registrable
Securities covered by such registration statement under such other
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities representing more than 15% of the total number of
securities covered by such registration statement or any managing
underwriter shall reasonably request, and do any
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and all other acts and things that may be necessary or advisable to enable
such seller and each managing underwriter, if any, to consummate the
disposition in such jurisdictions of such Registrable Securities owned by
such seller; provided, however, that neither GGS nor any of its
subsidiaries shall for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this clause (d) be obligated to be
so qualified, to subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such jurisdiction;
(e) notify each seller of any such Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of GGS's
becoming aware that the prospectus, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading,
and at the request of any such seller promptly prepare and furnish to such
seller a reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to the purchasers of such
Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading;
(f) use its best efforts to cause all such Registrable Securities
covered by such registration statement to be listed on the principal
securities exchange on which similar equity securities issued by GGS are
then listed or eligible for listing, if the listing of such securities is
then permitted under the rules of such exchange;
(g) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first day of its first calendar quarter after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder;
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(h) enter into an underwriting agreement with the underwriter of
such offering in the form customary for such underwriter for similar
offerings, including such representations and warranties by GGS,
provisions regarding the delivery of opinions of counsel for GGS and
accountants' letters, provisions regarding indemnification and
contribution, and such other terms and conditions as are at the time
customarily contained in such underwriter's underwriting agreements for
similar offerings (the sellers of Registrable Securities which are to be
distributed by such underwriter(s) may, at their option, require that any
or all of the representations and warranties by, and the other agreements
on the part of, GGS to and for the benefit of such underwriter(s) shall
also be made to and for the benefit of such sellers of Registrable
Securities);
(i) provide a transfer agent and registrar for all such Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(j) upon receipt of such confidentiality agreements as GGS may
reasonably request, make available for inspection by any seller of such
Registrable Securities covered by such registration statement and by any
attorney, accountant or other agent retained by any such seller, all
pertinent financial and other records, pertinent corporate documents and
properties of GGS and its subsidiaries, and cause all of GGS's and its
subsidiaries' officers, directors and employees to supply all information
reasonably requested by any such seller, attorney, accountant or agent in
connection with such registration statement; and
(k) permit any beneficial owner of Registrable Securities who, in
the sole judgment, exercised in good faith, of such holder, might be
deemed to be a controlling person of GGS, to participate in the
preparation of such registration or comparable statement and to require
the insertion therein of material, furnished to GGS in writing, that in
the judgment of such holder, as aforesaid, should be included.
GGS may require each seller of Registrable Securities as to which
any registration is being effected to furnish GGS such information regarding
such seller and the distribution of such securities as GGS may from time to time
reasonably request in writing. GGS shall not be required to register or qualify
any Registrable Securities covered by such registration statement under any
state securities, or "blue sky," laws of such
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jurisdictions other than as it deems necessary in connection with its chosen
method of distribution or to take any other actions or do any other things other
than those it deems necessary or advisable to consummate such distribution, and
GGS shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not
otherwise be obligated to be so qualified, to subject itself to taxation in any
such jurisdiction or to consent to general service of process in any such
jurisdiction.
Each beneficial owner of Registrable Securities agrees that upon
receipt of any notice from GGS of the happening of any event of the kind
described in clause (d) of this Section 5.2, such beneficial owner will
forthwith discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such
beneficial owner's receipt of the copies of the supplemented or amended
prospectus contemplated by clause (d) of this Section 5.2, and, if so directed
by GGS, such beneficial owner will deliver to GGS (at GGS's expense) all copies,
other than permanent file copies then in such beneficial owner's possession, of
the prospectus covering such Registrable Securities that was in effect prior to
such amendment or supplement.
Section 5.3 Indemnification.
(a) Indemnification by GGS. In the event of any registration of any
securities of GGS under the Securities Act pursuant to Section 5.1, GGS will,
and hereby does, indemnify and hold harmless, to the extent permitted by law,
the seller of any Registrable Securities covered by such registration statement,
its directors and officers or general and limited partners (and the directors
and officers thereof), and each other Person, if any, who controls such seller
within the meaning of the Securities Act, against any and all losses, claims,
damages or liabilities, joint or several, and expenses (including any amounts
paid in any settlement effected with GGS's consent, which consent shall not be
unreasonably withheld) to which such seller, any such director or officer or
general or limited partner or any such controlling Person may become subject
under the Securities Act, common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (a) any untrue statement or alleged untrue
statement of a material fact contained in any registration statement under which
such securities were registered under the Securities Act or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading or (b) any violation
by GGS of any federal, state or common law rule or regulation applicable to
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GGS and relating to action required of or inaction by GGS in connection with any
such registration, and GGS will reimburse such seller and each such director,
officer, general or limited partner, and controlling Person for any legal or any
other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, liability, action or
proceeding; provided, that GGS shall not be liable to any such seller or any
such director, officer, general or limited partner, or controlling Person in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement or amendment thereof or supplement thereto
or in any such preliminary, final or summary prospectus in reliance upon and in
conformity with written information furnished to GGS by or on behalf of any such
seller or any such director, officer, general or limited partner, or controlling
Person, specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any director, officer, general or limited
partner or controlling Person and shall survive the transfer of such securities
by such seller.
(b) Indemnification by the Sellers. GGS may require, as a
condition to including any Registrable Securities in any registration statement
filed in accordance with Section 5.1, that GGS shall have received an
undertaking reasonably satisfactory to it from the prospective seller of such
Registrable Securities to indemnify and hold harmless (in the same manner and to
the same extent as set forth in Subsection (a)) GGS and its directors and
officers and each Person controlling GGS within the meaning of the Securities
Act and all other prospective sellers and their directors, officers, general and
limited partners and respective controlling Persons with respect to any
statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement, if such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity with
written information furnished to GGS or its representatives by or on behalf of
such seller specifically stating that it is for use in the preparation of such
registration statement, preliminary, final or summary prospectus or amendment or
supplement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of GGS or any of the prospective sellers
or any of their respective directors, officers, general or limited partners or
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controlling Persons and shall survive the transfer of such securities by such
seller. GGS shall use its best efforts to provide that the indemnification
obligation of any Stockholder does not exceed the net proceeds to the
Stockholder in such underwritten offering.
(c) Notices of Claims, Etc. As soon as possible after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Section 5.3, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding paragraphs of this
Section 5.3, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein, and,
to the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party; provided that the indemnifying party
shall not be entitled to so participate or so assume the defense if, in the
indemnified party's reasonable judgment, a conflict of interest between the
indemnified party and the indemnifying party exists in respect of such claim.
After notice from the indemnifying party to such indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 5.3 for any
legal or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; and provided further that the sellers and
their respective officers, directors, general and limited partners and
controlling Persons or GGS and its officers, directors and controlling Persons,
as the case may be, shall have the right to employ one counsel to represent such
indemnified parties if, in such indemnified parties' reasonable judgment, a
conflict of interest between the indemnified parties and the indemnifying
parties exists in respect of such claim, and in that event the fees and expenses
of such separate counsel (not to exceed one such firm and local counsel, if
necessary) shall be paid by the indemnifying party. No indemnifying party will
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in respect of such
claim or litigation.
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(d) Contribution. If the indemnification provided for in this
Section 5.3 is unavailable or insufficient to hold harmless an indemnified party
under Subsection (a) or (b), then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in Subsection (a) or (b) in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and the indemnified party on the other hand in connection
with statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
indemnifying party or the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue or alleged untrue statements or omission. The parties hereto agree that
it would not be just and equitable if contributions pursuant to this Subsection
(d) were to be determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable considerations referred
to in the first sentence of this Subsection (d). The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this Subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any action or claim (which
shall be limited as provided in Subsection (c) if the indemnifying party has
assumed the defense of any such action in accordance with the provisions
thereof) which is the subject of this Subsection (d). No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Promptly after receipt by an
indemnified party under this Subsection (d) of notice of the commencement of any
action against such party in respect of which a claim for contribution may be
made against an indemnifying party under this Subsection (d), such indemnified
party shall notify the indemnifying party in writing of the commencement thereof
if the notice specified in Subsection (c) has not been given with respect to
such action; provided that the omission so to notify the indemnifying party
shall not relieve the indemnifying party from any liability which it may have to
any indemnified party otherwise under this Subsection (d), except to the extent
that the indemnifying party is actually prejudiced by such failure to give
notice. Notwithstanding anything in this Subsection (d) to the contrary, no
indemnifying party (other than GGS) shall be required
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pursuant to this Subsection (d) to contribute any amount in excess of the
proceeds received by such indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages or liabilities
of the indemnified parties relate.
Section 5.4 Holdback Agreement. If requested in writing by GGS or
the underwriter, if any, of any offering affording Stockholders registration
rights pursuant to Section 5.1, each Stockholder beneficially owning securities
of GGS representing or convertible into or exchangeable or exercisable for, in
the aggregate, more than 1% of the common equity of GGS then outstanding agrees
not to effect any public sale or distribution, including any sale pursuant to
Rule 144, of any Registrable Securities or any other equity security of GGS or
of any security convertible into or exchangeable or exercisable for any equity
security of GGS (in each case, other than as part of such underwritten public
offering) within 14 days before or 120 days after the effective date of a
registration statement affording Stockholders registration rights pursuant to
Section 5.1, and GGS hereby also so agrees and agrees to cause other holders of
any equity security, or of any security convertible into or exchangeable or
exercisable for any equity security, of GGS purchased from GGS (at any time
other than in a public offering) to so agree.
ARTICLE VI
MISCELLANEOUS
Section 6.1 Binding Effect. The provisions of this Agreement shall
be binding upon the parties hereto and their respective heirs, legal
representatives, successors and assigns.
Section 6.2 No Right of Employment; Expiration of Consulting
Arrangements. Neither this Agreement nor any purchase or sale of Management
Shares pursuant hereto shall create, or be construed or deemed to create, any
right of employment in favor of any person by GGS or any of its subsidiaries.
Expiration of a consulting arrangement without the prior termination thereof
shall not be deemed a termination of such arrangement for purposes of this
Agreement.
Section 6.3 Recapitalizations, Exchanges, Etc. Affecting Shares. The
provisions of this Agreement regarding Shares and Nonvoting Shares shall apply
to any and all shares of capital stock of GGS or any successor or assign of GGS
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(whether by merger, consolidation, sale of assets, reorganization or otherwise)
which may be issued in respect of, in exchange for, or in substitution of the
Shares or Nonvoting Shares by reason of any stock dividend, stock split, stock
issuance, reverse stock split, combination, recapitalization, reclassification,
merger, consolidation, or otherwise. The provisions of this Agreement regarding
Shares and Nonvoting Shares shall also apply to any and all shares of any
subsidiary of GGS which are distributed to the stockholders of GGS pursuant to a
plan to spin-off such subsidiary. Upon the occurrence of any of such events,
amounts hereunder shall be appropriately adjusted. Subject only to the
provisions of the preceding sentence, nothing contained in this Agreement shall
prohibit or restrict GGS from taking any corporate action, including, without
limitation, declaring any dividend (whether in cash or stock) or engaging in any
corporate transaction of any kind, including, without limitation, any merger,
consolidation, liquidation or sale of assets.
Section 6.4 Waiver and Amendment. Any party hereto may waive its
rights under this Agreement at any time, and GGS may waive its rights under this
Agreement with respect to any Stockholder or group of Stockholders at any time,
and no such waiver shall operate to waive GGS's rights under this Agreement with
respect to any other Stockholder or group of Stockholders. Any agreement on the
part of any such party to any such waiver shall be valid only if set forth in an
instrument in writing signed by such party. This Agreement may be amended only
by a written instrument signed by (i) GGS, (ii) Stonington and (iii) Management
Investors beneficially owning a majority of the then outstanding Management
Shares; provided that any amendment that adversely affects the rights of the
Institutional Investor shall be of no force or effect unless the Institutional
Investor shall have consented in writing thereto; provided further that Schedule
1 may be amended by GGS (without any additional consent or agreement of any
other party hereto) to add parties who become holders of stock, options or other
securities of GGS (including Management Purchasers purchasing Shares or
Nonvoting Shares in accordance with Section 2.3) and such persons or entities
may thereby become signatories hereto. Stockholders shall be bound from and
after the date of the receipt of a written notice from GGS setting forth such
amendment or waiver by any consent authorized by this Section 6.4, whether or
not Shares shall have been marked to indicate such consent.
Section 6.5 Tax Withholding. No later than the date as of which an
amount first becomes includible in the gross income of a Management Investor for
federal income tax purposes with respect to any Management Shares (or any
options to acquire Management Shares), such Management Investor shall pay to
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GGS, or make arrangements satisfactory to GGS regarding the payment of, any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. The obligations of GGS hereunder shall be
conditional on such payment or arrangements, and GGS shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment
otherwise due to the Management Investor.
Section 6.6 Notices. All notices and other communications provided
for herein shall be dated and in writing and shall be deemed to have been duly
given when delivered, if delivered personally, or when deposited in the mail if
sent by registered or certified mail, return receipt requested, postage prepaid
and when received if delivered otherwise, to the party to whom it is directed:
(a) If to GGS, to:
GGS Holdings, Inc.
c/o Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, New York 10153
Attn: Alexis P. Michas
Telecopy No.: (212) 339-8585
with copies to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Andrew R. Brownstein, Esq.
Telecopy No.: (212) 403-2000
(b) If to any of the Management Investors, to the address of
such Management Investor as shown in the stock record
book of GGS
(c) If to Stonington, to the address of Stonington as shown
in the stock record book of GGS
(d) If to the Institutional Investor, to the address of the
Institutional Investor as shown in the stock record book of
GGS or as from time to time designated by the Institutional
Investor in writing to GGS
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with copies to:
Stonington Partners, Inc.
767 Fifth Avenue
48th Floor
New York, New York 10153
Attn: Alexis P. Michas
Telecopy No.: (212) 339-8585
or at such other address as the parties hereto shall have specified by notice in
writing to the other parties.
Section 6.7 Applicable Law and Time of Essence. The laws of the
State of Delaware shall govern the interpretation, validity and performance of
the terms of this Agreement, without regard to the application of principles of
conflicts of law. Time shall be of the essence of this Agreement and of every
part thereof.
Section 6.8 Integration. This Agreement and the documents referred
to herein or delivered pursuant hereto which form a part hereof contain the
entire understanding of the parties with respect to its subject matter. There
are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings with respect to the subject matter hereof other than
those expressly set forth herein and in the Management Stock Subscription
Agreement, the Institutional Stock Subscription Agreement, the Stonington Stock
Subscription Agreement, the Stock Pledge Agreements, the Management Notes, the
Management Stock Incentive Plan, the Incentive Option Agreements, the
Performance Option Agreements and the Restricted Stock Agreements. It is
understood that each employee of GGS who is granted an option or Restricted
Stock pursuant to the Management Stock Incentive Plan shall be deemed a
Management Investor hereunder. This Agreement supersedes all prior agreements
and understandings between the parties with respect to its subject matter other
than such agreements and understandings set forth in the Management Stock
Subscription Agreement, the Institutional Stock Subscription Agreement, the
Stonington Stock Subscription Agreement, the Stock Pledge Agreements, the
Management Notes, the Management Stock Incentive Plan, the Incentive Option
Agreements, the Performance Option Agreements and the Restricted Stock
Agreements.
Section 6.9 Descriptive Headings, Etc. The headings in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect the meaning of terms contained herein. Unless the context of this
Agreement otherwise requires, (i) words of any gender shall be deemed to include
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each other gender; (ii) words using the singular or plural number shall also
include the plural or singular number, respectively; and (iii) references to
"hereof," "herein," "hereby" and similar terms shall refer to this entire
Agreement.
Section 6.10 Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
Section 6.11 Successors, Assigns and Transferees. This Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors, assigns and transferees except to the extent that
the terms of this Agreement limit or otherwise restrict the transferability of
any rights or obligations hereunder.
Section 6.12 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
Section 6.13 Termination. This Agreement shall terminate, and
thereby become null and void, on the tenth anniversary of the date hereof;
provided, however, that the provisions of Section 5.3 hereof shall survive the
termination of this Agreement.
Section 6.14 Community Property States. Each Management Investor who
is a natural person and whose Management Shares or options or rights under this
Agreement would be subject to the community property laws of any state hereby
represents that such Management Investor's spouse has duly executed the Consent
of Spouse attached hereto and such Consent was delivered to GGS along with such
Management Investor's signature page hereto.
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of the 26th day of September, 1996, is made by and
between Goss Graphic Systems, Inc., a Delaware corporation having its principal
place of business in the State of Illinois (the "Company"), and Robert M. Kuhn
(the "Executive").
WHEREAS, the Company desires to obtain the services of the Executive, and
the Executive is willing to render such services, in accordance with the terms
hereinafter set forth; and
WHEREAS, the Executive wishes to be employed by the Company; and
WHEREAS, the Board of Directors of the Company (the "Board") by appropriate
resolutions has authorized the employment of the Executive as provided for in
this Agreement; and
WHEREAS, the parties hereto desire to amend, modify and restate, to the
extent that the Company has assumed any obligations under, the letter agreement
between the Executive and Rockwell International Corporation, dated as of
October 9, 1995;
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the adequacy of which is hereby acknowledged, the Company and the Executive
agree as follows:
ARTICLE I
Definitions
"Accrued Annual Base Salary" means that portion of the Executive's Annual
Base Salary which is accrued but unpaid as of the Date of Termination.
"Accrued Annual Bonus" means the sum of (i) the amount of any Annual Bonus
earned with respect to the Fiscal Year ending prior to the Date of Termination
but which is unpaid as of the Date of Termination plus (ii) with respect to the
Fiscal Year during which the Date of Termination occurs, a pro rata portion
(based on a fraction the numerator of which is the number of days which have
elapsed in such Fiscal Year through the Date of Termination, and the denominator
of which is 365) of the Annual Bonus which the Executive would have earned had
the Date of Termination been the last day of such Fiscal Year.
"Annual Base Salary" has the meaning specified in Section 4.1 of this
Agreement.
"Annual Bonus" has the meaning specified in Section 4.2 of this Agreement.
"Board" has the meaning specified in the recitals to this Agreement.
<PAGE>
"Cause" means (i) the Executive's willful failure to perform the duties of
his employment in any material respect, (ii) malfeasance or negligence in the
performance of the Executive's duties of employment in any material respect,
(iii) the Executive's commission of a felony under the laws of the United States
or any state thereof (whether or not in connection with his employment), (iv)
the Executive's material disclosure of Protected Information (as defined in
Section 8.11(a)) respecting the Company's or any of its Subsidiaries' business
to any individual or entity which is not in the performance of the duties of his
employment, (v) the Executive's commission of an act or acts of sexual
harassment that would normally constitute grounds for termination under a formal
policy adopted by the Company, or (vi) any other act or omission by the
Executive (other than an act or omission resulting from the exercise by the
Executive of good faith business judgment) which is materially injurious to the
financial condition or the business reputation of the Company or any of its
affiliates.
Notwithstanding the foregoing, no act or omission by the Executive shall
constitute Cause hereunder unless the Company gives written notice thereof to
the Executive, and the Executive fails to remedy such act or omission within
thirty (30) days after receiving such notice.
"Change of Control" has the meaning described in the following paragraphs
(a) through (c):
(a) Prior to an initial public offering of the stock of GGS Holdings,
Inc. ("GGS"), the holding company for the Company, a "Change of Control" shall
be deemed to have occurred:
(i) Whenever Stonington Capital Appreciation 1994 Fund, L.P. (the
"Fund") (together with all affiliates) owns less than fifty-one percent (51%) of
either (A) the then outstanding shares of common stock of GGS (the "Outstanding
GGS Common Stock") or (B) the combined voting power of the then outstanding
voting securities of GGS entitled to vote generally in the election of directors
(the "Outstanding GGS Voting Securities"); or
(ii) Whenever GGS owns less than fifty-one percent (51%) of
either (A) the then outstanding shares of common stock of the Company or (B) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors.
(b) After an initial public offering of the stock of GGS, a "Change of
Control" shall mean:
(i) The acquisition by any Person or group of related Persons of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of twenty
percent (20%) or more of either the Outstanding GGS Common Stock or the
Outstanding GGS Voting Securities; provided, however, that for purposes of this
subparagraph (i), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from GGS, (B) any acquisition by GGS, or
(C)
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any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by GGS or any corporation controlled by GGS; and provided further
that no acquisition shall constitute a Change of Control unless, as a result
thereof, a Person or group of related Persons has beneficial ownership of a
larger percentage of the Outstanding GGS Common Stock or the Outstanding GGS
Voting Securities than is then beneficially owned by the Fund and its
affiliates; or
(ii) Individuals who, as of the date of the Closing, constitute
the board of directors of GGS (the "Incumbent Board") cease for any reason to
constitute at least a majority of the board of directors of GGS; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the shareholders of GGS, was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Incumbent Board; or
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, all or substantially all of the individuals and entities
who were the beneficial owners, respectively, of the Outstanding GGS Common
Stock and Outstanding GGS Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, at least sixty percent
(60%) of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation resulting from such
Business Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their respective ownership, immediately
prior to such Business Combination, of the Outstanding GGS Common Stock and
Outstanding GGS Voting Securities; provided, however, that the provisions of
this paragraph (b) shall be applied, in connection with and after any such
Business Combination, as if all references to GGS (except in the definition of,
and references to, the Incumbent Board) were replaced by references to the
corporation resulting from such Business Combination and shall be applied, with
respect to any subsequent Business Combination, as if the reference in this
subparagraph (iii) to "at least sixty percent (60%)" were replaced by a
reference to "at least ninety-five percent (95%)"; or
(iv) Approval by the shareholders of the Company or of GGS of a
complete liquidation or dissolution of the Company or of GGS, respectively;
provided, however, that a Change of Control shall not result from approval by
the shareholders of GGS of a dissolution of GGS for the purpose of making a pro
rata distribution of shares of the Company to the shareholders of GGS; and
provided further that, after such distribution, the provisions of paragraph (a),
above, this paragraph (b), and paragraph (c), below, shall be applied as if all
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references to GGS (except in the definition of, and references to, the Incumbent
Board) were replaced by references to the Company; or
(v) Any event as a result of which GGS owns less than fifty-one
percent (51%) of either (A) the then outstanding shares of common stock of the
Company or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors.
(c) If the Fund makes a pro rata distribution of shares of common
stock or other securities of GGS to individuals or other entities who are
partners in the Fund, then the continued holding of such shares or other
securities of GGS by those distributees shall be deemed, for purposes of
paragraphs (a) and (b), above, to be continued holding of those shares or other
securities by the Fund and its affiliates.
"Closing" means the closing of the acquisition of Rockwell Graphic Systems
(a business unit of Rockwell International Corporation) by the Company from
Rockwell International Corporation.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company" has the meaning specified in the recitals to this Agreement.
"Contract Term" has the meaning specified in Section 3.1 of this Agreement.
"Date of Termination" means the date as of which the Executive's employment
with the Company is terminated by the Company or by the Executive for any reason
including, but not limited to, death or Disability.
"Disability" means any medically determinable physical or mental
impairment, which shall have rendered the Executive unable to perform the duties
required under this Agreement for a continuous period of six (6) months. The
date of the determination of Disability is the date on which the Executive is
certified, following such six (6)-month period, by a physician reasonably
acceptable to the Company and the Executive, as having incurred a Disability.
"Executive" has the meaning specified in the recitals to this Agreement.
"Fiscal Year" means each period of twelve (12) months beginning on October
1 and ending on the following September 30.
"Good Reason" means the occurrence of any one of the following events:
(a) Assignment to the Executive of any duties materially and adversely
inconsistent with the Executive's position as specified in Article 11 hereof, or
any other action by the
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Company which results in a material and adverse change in the Executive's
position, authority, duties or responsibilities; or
(b) A change in the Executive's title or the line of authority through
which the Executive is required to report, it being understood that the
Executive shall report directly to the Board; or
(c) Failure to elect the Executive as a director of the Company and
Chairman of the Board; or
(d) Failure by the Company to adopt, not later than three (3) months after
the Closing, the annual bonus plan referred to in Section 4.2 of this Agreement;
or
(e) Failure by the Company to obtain, in accordance with Section 8.1,
below, the written agreement of any successor in interest to the business of the
Company or assignee of the Company to assume and perform the obligations of the
Company under this Agreement; or
(f) The failure by the Company to comply with any provision of Article IV
or Article V of this Agreement.
Notwithstanding the foregoing, no act or omission by the Company shall
constitute Good Reason hereunder unless (i) the Executive gives the Company
written notice thereof within two (2) months after he first knew or should have
known of such act or omission, and the Company fails to remedy such act or
omission within thirty (30) days after receiving such notice, or (ii) such act
or omission is part of a series of two (2) or more acts or omissions, each of
which constitutes Good Reason without regard to this proviso, and which occur
within a period of twelve (12) months or less.
Anything in this Agreement to the contrary notwithstanding, termination by
the Executive for any reason during the period of three (3) months which begins
one (1) month after a Change of Control which occurs within three (3) years
after the Closing shall be deemed to be a termination for Good Reason for all
purposes of this Agreement.
"Initial Grant" has the meaning specified in Section 4.3 of this Agreement.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Prohibited Business" has the meaning specified in Section 8.12 of this
Agreement.
"Protected Information" has the meaning specified in Section 8.11 of this
Agreement.
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"Retirement" means the termination of the Executive's employment after
attainment of retirement age as set forth in the retirement policy of the
Company as may be in force from time to time and applicable to other senior
executives of the Company.
"Stock Options" has the meaning specified in Section 4.3 of this Agreement.
"Stockholders Agreement" means the Stockholders Agreement, dated as of the
Closing, among the Management Investors named therein, the Company, the Fund,
and Merrill Lynch KECALP L.P. 1994.
"Subsidiary" means, with respect to any Person, (a) any corporation of
which an aggregate of more than fifty percent (50%) of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, and (b) any partnership in which such Person and/or
one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than
fifty percent (50%).
"Termination of Employment Without Cause" means a termination of the
Executive's employment by the Company for any reason other than Cause.
ARTICLE II
Duties
2.1 Employment. This Agreement amends, modifies and restates, to the extent
that the Company has assumed any obligations under, the letter agreement between
the Executive and Rockwell International Corporation, dated as of October 9,
1995, and such letter agreement, to the extent that the Company has assumed any
obligations thereunder, shall be superseded by, and shall be deemed modified in
full in accordance with, the provisions hereof.
2.2 Duties. The Company hereby employs the Executive to serve as Chairman
of the Board, Chief Executive Officer and President of the Company during the
Contract Term with overall charge and responsibility for the business and
affairs of the Company and to perform such duties consistent with such position
as the Executive shall reasonably be directed to perform by the Board of
Directors of the Company or as may be specified in the Company's bylaws (if
applicable), and the Executive hereby accepts such employment. During the
Contract Term, and excluding any periods of vacation, sick leave or disability
to which the Executive is entitled, the Executive agrees to devote the
Executive's full business time and attention to the business affairs of the
Company. It is anticipated that such services will be performed primarily in
Westmont, Illinois.
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2.3 Other Activities. During the Contract Term, it shall not be a violation
of this Agreement for the Executive to (a) serve on corporate, civic or
charitable boards or committees, (b) deliver lectures or fulfill speaking
engagements, or (c) manage personal investments, so long as such activities are
consistent with the policies of the Company and do not interfere with the
performance of the Executive's duties in accordance with this Agreement.
ARTICLE III
Term of Agreement
3.1 Term. The initial term of this Agreement shall commence on the Closing
and terminate on the second anniversary of the Closing. This initial term,
however, shall be automatically extended without further action of either party
for successive additional two (2)-year periods, unless written notice of either
party's intention not to extend has been given to the other party hereto at
least three (3) months prior to the expiration of the then effective term (the
initial term or such longer period for which the term of the Executive's
employment shall have been so extended is hereinafter referred to as the
"Contract Term"). Except as provided in Article VI, the Executive's employment
shall not be terminated prior to the end of the Contract Term.
ARTICLE IV
Compensation
4.1 Base Salary. Commencing as of the Closing and while the Executive is
employed by the Company during the Contract Term, the Company shall pay or cause
to be paid to the Executive in cash, in installments not less frequently than
monthly, an annual base salary ("Annual Base Salary") at the rate of $550,000;
provided, however, that no payments shall be made or accrued pursuant to this
Agreement prior to the Closing. The Company shall review the Executive's Annual
Base Salary no less frequently than annually and may from time to time make
increases or decreases in the Executive's Annual Base Salary, provided that it
shall not be reduced to an annual rate of less than $550,000. The term Annual
Base Salary as used in this Agreement shall refer to the Annual Base Salary as
so increased or decreased.
4.2 Annual Bonus. While the Executive is employed by the Company during the
Contact Term, the Company shall pay or cause to be paid to the Executive an
annual cash bonus ("Annual Bonus") in accordance with the terms of a bonus plan
for senior executives of the Company, which plan shall be adopted by the Board
not later than three (3) months after the Closing and the terms of which shall
reflect the recommendations of, and be acceptable to, the Executive; provided,
however, that such plan shall specify that the annual target bonus for the
Executive shall be equal to the Executive's Annual Base Salary.
4.3 Stock Options.
(a) Grant of Stock Options. Effective as of the Closing, the Company shall
grant (the "Initial Grant") to the Executive options ("Stock Options") to
purchase 26,000 shares of common stock of the Company pursuant to the Company's
Management Stock Incentive Plan, of which
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13,000 shall be Incentive Options and 13,000 shall be Performance Options (as
such terms are defined in the Management Stock Incentive Plan).
(b) Exercise Price. The exercise price of the Stock Options shall be
$100.00 per share, payable on the terms and subject to the adjustments set forth
in the Management Stock Incentive Plan.
ARTICLE V
Other Benefits
5.1 Incentive, Savings and Retirement Plans. The Executive shall be
entitled to participate while the Executive is employed by the Company during
the Contract Term in all incentives (including long-term incentives), savings
and retirement plans, practices, policies and programs applicable to other
senior executives of the Company. In addition, the Executive shall be entitled
to receive from the Company a supplemental lifetime retirement benefit in the
amount of $32,000 per year, commencing upon the termination of his employment
for any reason at any time after the Executive reaches the age of 62; provided,
however, that that supplemental retirement benefit will not be payable if the
Executive voluntarily terminates his employment with the Company, other than for
Good Reason, prior to October 9, 2000.
5.2 Welfare Benefits. While the Executive is employed by the Company during
the Contract Term, the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
all welfare benefit plans, practices, policies and programs provided by the
Company and applicable to other senior executives of the Company; provided,
however, that in any event the Company shall during the Contract Term provide
the Executive with long-term disability insurance coverage and shall also pay,
in an amount up to a maximum of forty thousand dollars ($40,000) annually, the
premiums on life insurance policy number CUL 002771Z issued by Connecticut
General Life Insurance Co.
5.3 Fringe Benefits. While the Executive is employed by the Company during
the Contract Term, the Executive shall be entitled to all fringe benefits
applicable to other senior executives of the Company, and the Executive shall in
any event be entitled to a car allowance of $1,000 per month to be used for
lease payments on a car selected by the Executive.
5.4 Reimbursement of Business Expenses. The Executive shall be entitled to
receive prompt reimbursement for all reasonable business expenses incurred while
the Executive is employed by the Company, upon the Company's receipt of
accountings therefor.
5.5 Reimbursement of Other Travel Expenses. The Executive shall be entitled
to receive prompt reimbursement, upon the Company's receipt of accounting
therefor, (a) for all reasonable expenses incurred by the Executive in
connection with having his spouse accompany him for a good business reason when
the Executive is traveling on Company business and (b) for all reasonable
expenses incurred by the Executive for travel by the Executive and his spouse
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between the Executive's residence in Oak Brook, Illinois and his residence in
Newport, Rhode Island.
5.6 Relocation Expenses. As reimbursement to the Executive for reasonable
moving and relocation expenses incurred by the Executive in connection with the
relocation of his principal residence to Illinois, the Company shall pay to the
Executive upon the execution of this Agreement a lump sum of $46,000.
5.7 Vacation. While the Executive is employed by the Company during the
Contract Term, the Executive shall be entitled to paid vacation time in
accordance with the plans, practices, policies, and programs applicable to other
senior executives of the Company.
5.8 Legal and Financial Planning Fees and Expenses. Subject to an annual
limit of $10,000, the Company shall pay all reasonable attorneys' fees, other
professional fees and disbursements incurred by the Executive for estate
planning and for personal financial planning while the Executive is employed by
the Company during the Contract Term. In addition, the Company shall pay all
reasonable attorneys' fees and disbursements incurred by the Executive in
connection with the negotiation and preparation of this Agreement, the
Stockholders Agreement, the Management Stock Incentive Plan, and other
agreements and plans relating to the Executive's employment by the Company.
ARTICLE VI
Termination of Employment
6.1 Termination of Employment for Cause or Other Than for Good Reason or
Retirement. If, before the end of the Contract Term, the Company terminates the
Executive's employment for Cause or the Executive terminates employment other
than for Good Reason or Retirement, then the Company shall pay immediately after
the Date of Termination to the Executive an amount equal to the Executive's
Accrued Annual Base Salary. The Executive shall have no further right to receive
any Accrued Annual Bonus, unaccrued Annual Bonus or other compensation after
such termination or resignation of employment with respect to the year in which
such termination or resignation occurs or later years or to accrue from and
after the Date of Termination any further benefits under any other plan or
arrangement. If the Company terminates the Executive's employment for Cause, it
shall provide the Executive with not less than ten (10) days' advance written
notice of termination, including a statement of the Date of Termination and the
specific detailed basis for such termination. In this connection, as provided
for in the definition of "Cause" contained in Article I hereof, the Company
shall not have the right to terminate the Executive's employment for Cause
unless the notice and cure provisions in said definition have first been
complied with.
6.2 Termination of Employment for Death, Disability or Retirement. If,
before the end of the Contract Term, the Executive's employment terminates due
to death or Disability or Retirement, the Company shall pay to the Executive,
the beneficiaries designated in writing by the Executive, or the Executive's
estate, as the case may be, immediately after the Date of
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Termination an amount which is equal to the sum of (a) the Executive's Accrued
Annual Base Salary as of the Date of Termination and (b) the Executive's Accrued
Annual Bonus which is unpaid as of the Date of Termination (except that the
portion of such Accrued Annual Bonus which is applicable to the Fiscal Year in
which the termination occurs shall be paid promptly following delivery of the
audited financial statements for the Company for such year).
6.3 Termination of Employment by the Company Without Cause or by the
Executive for Good Reason. If, before the end of the Contract Term, there is a
Termination of Employment Without Cause or a termination of employment by the
Executive for Good Reason, the Executive shall receive promptly after the Date
of Termination in a lump sum in immediately available funds an amount equal to
the sum of (a) the Executive's Accrued Annual Base Salary and the Annual Base
Salary which would have been payable to the Executive if his employment had
continued for the period from the Date of Termination until the second
anniversary of the Date of Termination, and (b) any Accrued Annual Bonus (except
that the portion of such Accrued Annual Bonus which is applicable to the Fiscal
Year in which the termination occurs shall be paid promptly following the
delivery of the audited financial statements for the Company for such year). In
addition, for a period of two (2) years after the Date of Termination, the
Company shall also continue to provide benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, practices, policies and programs referred to
in Section 5.2 of this Agreement; provided, however, that such benefits may be
discontinued earlier in the event that, and to the extent that, the Executive
becomes entitled to comparable benefits from a subsequent employer. Finally,
until the Executive reaches age 62, the Company will continue to pay, up to a
maximum annual amount of $40,000, the premiums on the life insurance policy
described in Section 5.2, above; provided, however, that such payments may be
discontinued earlier in the event that, and to extent that, the Executive
becomes entitled to have those premiums paid by a subsequent employer. The
Executive agrees to promptly advise the Company when and if he commences
employment with a subsequent employer.
6.4 Other Termination Benefits. In addition to any amounts or benefits
payable upon termination of employment hereunder and except as otherwise
provided herein, the Executive shall be entitled to any payments or benefits
explicitly provided under the terms of any plan, policy or program of the
Company or as otherwise required by applicable law.
ARTICLE VII
Representations and Warranties of the Executive
To induce the Company to enter into this Agreement, the Executive makes the
following representations and warranties to the Company, each and all of which
shall be true as of the date of execution and delivery of this Agreement and
shall survive the execution and delivery of this Agreement:
7.1 Power, Legal Competence, Enforceable Obligations. The Executive is a
bona fide resident of the State of Illinois, over 21 years of age, and has the
power and is legally competent
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to execute, deliver and perform this Agreement and all documents and instruments
to be delivered by the Executive hereunder. This Agreement constitutes a legal,
valid and binding obligation of the Executive, enforceable against him in
accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally or by
general principles of equity.
7.2 Investment Knowledge and Experience. The Executive has sufficient
knowledge and experience in financial, business and tax matters to be capable of
evaluating the risks and merits inherent in an investment in the Company and of
making an informed investment decision with respect thereto.
7.3 Adequate Means. The Executive, at the present time, has adequate means
of providing for his current needs and personal contingencies, including the
payment of income tax liabilities attributable to the taxable income from the
common stock of the Company and Stock Options that he will receive under this
Agreement and the Executive has no need, at the present time, for liquidity in
the common stock of the Company and Stock Options that he will receive under
this Agreement.
7.4 Investment Purposes. The Executive is presently obtaining the common
stock of the Company and Stock Options hereunder for his own account, for
investment and not with a view, during the period of his employment with the
Company, to the resale, transfer or distribution of all or any such shares of
common stock or Stock Options.
7.5 Resale of Shares. The Executive will not resell or distribute the
shares of common stock of the Company or Stock Options that he will receive
under this Agreement unless such shares are registered under the Securities Act
of 1933, as amended, or an exemption from such registration is available.
ARTICLE VIII
Miscellaneous
8.1 Assignment, Successors. The Company may freely assign its respective
rights and obligations under this Agreement to a successor to the Company's
business, without the prior written consent of the Executive, provided that such
successor assumes in writing all of the Company's obligations hereunder. This
Agreement shall be binding upon and inure to the benefit of the Executive and
the Executive's estate and the Company and any assignee of or successor to the
Company.
8.2 Nonalienation of Benefits. Benefits payable under this Agreement shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, prior to actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
hereunder shall be void.
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8.3 Severability. If all or any part of this Agreement is declared by any
court or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any paragraph or part of a paragraph so
declared to be unlawful or invalid shall, if possible, be construed in a manner
which will give effect to the terms of such paragraph or part of a paragraph to
the fullest extent possible while remaining lawful and valid.
8.4 Amendment and Waiver. This Agreement shall not be altered, amended or
modified except by written instrument executed by the Company and Executive. A
waiver of any term, covenant, agreement or condition contained in this Agreement
shall not be deemed a waiver of any other term, covenant, agreement or
condition, and any waiver of any default as to any such term, covenant,
agreement or condition shall not be deemed a waiver of any later default as to
such term or as to any other term, covenant, agreement or condition.
8.5 Notices. All notices and other communications hereunder shall be in
writing and delivered by hand, by facsimile transmission, by first class
registered or certified mail, return receipt requested, postage prepaid, or by
reputable commercial delivery service, addressed as follows:
If to the Company: Goss Graphic Systems, Inc.
c/o Stonington Partners, Inc.
767 Fifth Avenue, 48th Floor
New York, New York 10153
Attention: Alexis P. Michas
Fax: (212) 339-8585
With a copy to: Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Andrew R. Brownstein
Fax: (212) 403-2000
If to the Executive: Robert M. Kuhn
1903 Midwest Club Parkway
Oak Brook, Illinois 60521
With a copy to: Robert J. Stucker, Esq.
Vedder, Price, Kaufman & Kammholz
222 North LaSalle Street
Chicago, Illinois 60601-1003
Fax: (312) 609-5005
Either party may from time to time designate a new address by notice given in
accordance with this section. Notice and communications shall be effective when
delivered by hand or
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commercial delivery service, when received by facsimile transmission, or three
(3) business days after being mailed as set forth above.
8.6 Counterpart Originals. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
8.7 Entire Agreement. This Agreement, together with the Stockholders
Agreement, the Pledge Agreement dated as of the date hereof between the Company
and the Executive, the Management Stock Subscription Agreement dated as of the
Closing among the Company and the Management Investors named therein, the
Management Stock Incentive Plan and the agreement or agreements pursuant to
which options are granted to the Executive under the Management Stock Incentive
Plan, form the entire agreement between the parties hereto with respect to any
severance payments and with respect to the subject matter of this Agreement.
8.8 Effect on Other Agreements. This Agreement shall supersede all prior
agreements, promises and representations, whether in writing or otherwise,
regarding the Executive's employment with the Company, including severance or
other payments contingent upon termination of such employment.
8.9 Applicable Law. The provisions of this Agreement shall be interpreted
and construed in accordance with the laws of the State of Delaware, without
regard to its choice of law principles.
8.10 Survival of Certain Rights and Obligations. The Executive's rights
under Article VI hereof, and his obligations under Sections 8.11, 8.12 and 8.13
hereof, shall survive the termination of the Executive's employment and/or the
termination of this Agreement.
8.11 Trade Secrets, Confidential and Proprietary Business Information. (a)
The Company has advised the Executive and the Executive acknowledges that it is
the policy of the Company to maintain as secret and confidential all Protected
Information (as defined below), and that Protected Information has been and will
be developed at substantial cost and effort to the Company. "Protected
Information" means trade secrets and confidential and proprietary business
information of the Company, including, but not limited to, such information
regarding customers (including potential customers), sources of supply,
processes, methods, plans, apparatus, specifications, materials, pricing
information, intellectual property (including applications and rights in
discoveries, inventions or patents), internal memoranda, marketing plans,
contracts, finances, personnel, research and internal policies, other than any
information which has entered the public domain (unless such information entered
the public domain through the efforts of or on account of the Executive).
(b) The Executive acknowledges that the Executive will acquire Protected
Information with respect to the Company and its successors in interest, which
information is a valuable,
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special and unique asset of the Company's business and operations, and that
disclosure of such Protected Information would cause irreparable damage to the
Company.
(c) The Executive shall not, directly or indirectly, divulge, furnish or
willfully make accessible to any person, firm, corporation, association or other
entity (otherwise than as may be required in the regular course of the
Executive's employment or by law) nor use in any manner, either during (other
than as may be required in the regular course of the Executive's employment or
by law) or after termination of employment by the Company, any Protected
Information, or cause any such information of the Company to enter the public
domain.
8.12 Non-Competition. (a) The Executive agrees that the Executive shall not
during the Executive's employment with the Company, and, if the Executive
terminates employment during the Contract Term without Good Reason or if the
Company terminates the Executive's employment during the Contract Term for
Cause, thereafter for one (1) year, directly or indirectly, in any capacity,
engage or participate in, or become employed by or render advisory or consulting
or other services in connection with, any Prohibited Business as defined in
Section 8.12(c).
(b) The Executive agrees that the Executive shall not, during the
Executive's employment with the Company, and, if the Executive terminates
employment during the Contract Term without Good Reason or if the Company
terminates the Executive's employment during the Contract Term for Cause,
thereafter for one (1) year, make any financial investment, whether in the form
of equity or debt, or own any interest, directly or indirectly, in any
Prohibited Business. Nothing in this Section 8.12 shall, however, restrict the
Executive from making any investment in any company whose stock is listed on an
American securities exchange or traded in the over-the-counter market and has
sales in excess of $100 million; provided that (i) such investment does not give
the Executive the right or ability to control or influence the policy decisions
of any Prohibited Business, and (ii) such investment does not create a conflict
of interest between the Executive's duties hereunder and the Executive's
interest in such investment.
(c) A "Prohibited Business" shall mean any business involving designing,
developing, engineering, manufacturing, selling, installing or servicing
printing press systems for newspaper, insert or commercial printing or other
graphic arts.
8.13 Undertaking Regarding Employees. From the date of the Closing until
two (2) years after the Date of Termination, the Executive shall not, directly
or indirectly, except with the permission in writing of the Company, (a) induce
or encourage any employee of the Company or of any successor in interest to
leave employment with the Company or any successor in interest; or (b) employ,
hire, solicit or cause to be employed, hired or solicited for employment (other
than by the Company or any successor in interest), or establish a business with
or encourage others to hire, any person who within one (1) year prior thereto
was, to the knowledge of the Executive, employed by the Company or any successor
in interest; provided, however, that the Executive will not be prohibited from
hiring or employing (or causing to be hired or
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employed) any person whose termination of employment with the Company or any
successor in interest was not directly or indirectly induced, encouraged or
solicited by the Executive.
IN WITNESS WHEREOF, the parties have executed this Agreement on this 26th
day of September, 1996.
GOSS GRAPHIC SYSTEMS, INC.
By: /s/ Alexis P. Michas
---------------------------------
Name: Alexis P. Michas
Title: Vice President
/s/ Robert M. Kuhn
--------------------------------
Robert M. Kuhn
15
EXHIBIT 10.6
GGS HOLDINGS, INC.
FORM OF
MANAGEMENT STOCK INCENTIVE PLAN
(Effective ________ __, 1996)
1. Purpose. The purpose of this Plan is to further the best interests of
GGS Holdings, Inc. (including any successor thereto, the "Corporation") and its
subsidiaries by encouraging its key employees, as is more fully set forth in
Sections 5 and 6 of this Plan, to continue association with the Corporation and
by providing additional incentive for unusual industry and efficiency through
offering an opportunity to acquire a proprietary stake in the Corporation and
its future growth. The Corporation believes that this goal may best be achieved
by granting stock options and/or Restricted Stock (as defined in Section 12
hereof) to Participants (as defined in Section 6 hereof).
2. Tax Status of Options. The stock options to be granted pursuant to this
Plan (hereinafter called "Options") will not be Incentive Stock Options as
provided for in Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
3. Option Shares and Restricted Stock; Classes of Options. The maximum
number of shares of the Corporation's common stock, par value $.01 per share
(the "Shares") that may be issued pursuant to options granted under this Plan
shall be
<PAGE>
______, and the maximum number of shares of the Corporation's nonvoting common
stock, par value $.01 per share (the "Nonvoting Shares") that may be issued
pursuant to Restricted Stock granted under this Plan shall be 7,500, in each
case subject to adjustment as provided in Section 16 hereof. Three (3) classes
of Options may be granted under this Plan: Incentive Options, Performance
Options and Discretionary Options.
4. Effective Date of Plan. This Plan has been adopted by the Board of
Directors as of the date written on the first page hereof (the "Effective
Date"), which is the date of the Closing (as that term is defined in the Stock
and Asset Purchase Agreement (the "Purchase Agreement") dated as of April 26,
1996, as amended, by and between Rockwell International Corporation and Goss
Graphic Systems, Inc.).
5. Administration of Plan. The Plan shall be administered by the Board of
Directors of the Corporation (the "Board of Directors") or by a committee
designated by the Board of Directors to administer the Plan (herein called the
"Compensation Committee"). The Board of Directors may authorize the Compensation
Committee to exercise any and all of the powers and functions of the Board of
Directors pursuant to the Plan. The interpretation and construction by the
Compensation Committee or the Board of Directors of any provisions of the Plan
or of any Options or Restricted Stock granted under it shall be
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final and conclusive. No member of the Compensation Committee or of the Board of
Directors shall be liable for any action or determination made with respect to
the Plan or any Options or Restricted Stock granted under it. No shareholder of
the Corporation nor any Participant, former Participant, or any beneficiary,
shall have any claim or cause of action against the Corporation or any member of
the Board of Directors or the Compensation Committee on account of, or by reason
of, or arising out of the exercise of such discretionary power.
6. Eligibility. The persons eligible to participate in the Plan as
recipients of Options or Restricted Stock shall be all eligible key employees,
consultants and directors of the Corporation and its subsidiaries
("Participants").
7. Grant of Options. (a) Incentive Options: Options to purchase an
aggregate of ______ Shares (the "Incentive Options"), subject to adjustment as
provided for in Section 16 hereof, shall be granted immediately upon the
Effective Date to the Participants and in the amounts set forth on Schedule III
hereto, pursuant to Incentive Option Agreements substantially in the form
attached hereto as Exhibit A. The Incentive Options shall vest upon the terms
set forth in such Incentive Option Agreements.
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(b) Performance Options: Options to purchase an aggregate of ______
Shares (the "Performance Options"), subject to adjustment as provided for in
Section 16 hereof, shall be granted immediately upon the Effective Date to the
Participants and in the amounts set forth on Schedule III hereto, pursuant to
Performance Option Agreements substantially in the form attached hereto as
Exhibit B. Subject to the Maximum Yearly Vesting Schedule set forth in Schedule
I attached hereto (the "MYVS"), the Performance Options shall vest in specified
increments as of the end of each fiscal year of the Corporation commencing with
fiscal year 1997 and continuing through and including fiscal year 2001, and
shall vest only if and to the extent the Corporation attains certain operating
performance objectives, all in accordance with the provisions set forth in
Schedule I attached hereto. The MYVS sets forth the maximum amount of
Performance Options which may vest as of the end of each fiscal year of the
Corporation commencing with fiscal year 1997 and continuing through and
including fiscal year 2001. Notwithstanding anything to the contrary contained
herein, in the MYVS or in any Performance Option Agreement, any Performance
Options that have not previously vested shall vest on the tenth anniversary of
the Effective Date.
(c) Discretionary Options: Additional Options (the "Discretionary
Options") may be granted from time to time in the discretion of the Board of
Directors of the Corporation
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(the "Board of Directors") or the Compensation Committee (as defined below)
thereof on terms and conditions set forth in agreements entered into in
connection with such grants (the "Discretionary Option Agreements"). Such terms
and conditions may (but shall not be required to) be identical to the terms and
conditions of Incentive Option and/or Performance Options.
(d) Each grant of an Option pursuant to this Plan shall be made in
writing and upon such terms and conditions as may be determined by the Board of
Directors or by the Compensation Committee at the time of grant, subject to the
provisions and limitations set forth in this Plan, including without limitation
the requirement that as a condition of a grant of an Option, the proposed
recipient execute a counterpart of the Stockholders' Agreement (the
"Stockholders' Agreement") dated as of the Effective Date, as it may be amended
from time to time, by and among the Corporation, certain other stockholders of
the Corporation and the "Management Investors" (as such term is defined in the
Stockholders' Agreement and which term includes each Participant participating
in this Plan in such Participant's capacity as an optionholder), and agree to be
bound thereby as a "Management Investor." The Incentive Option Agreement,
Performance Option Agreement or Discretionary Option Agreement (collectively,
the "Option Agreements") for each Option shall be executed by the Chief
Executive Officer, except that, in the event that the Chief Executive Officer is
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the recipient of any Option(s), the Option Agreement for such Option(s) shall be
executed by the Secretary of the Corporation.
8. Option Price. The purchase price for each Share covered by any Incentive
Option or Performance Option shall be $100, subject to adjustment as provided in
Section 16 hereof. The purchase price for each Share covered by a Discretionary
Option shall be as set forth in the related Discretionary Option Agreement,
subject to adjustment as provided in Section 16 hereof. The purchase price of an
Option, as set forth in this Paragraph 8, shall be called the "Option Price."
9. Duration of Options. (a) Each Option shall remain in effect from the
date of the grant of the Option until it is terminated according to its terms or
as hereinafter provided, but in no event beyond the tenth anniversary of the
date of grant of the Option (the period when an Option is in effect is
hereinafter referred to as the "Option Period").
(b) Except as otherwise set forth in the Option Agreement, subject to
the Put Rights and Call Rights contained in the Stockholders' Agreement, and
subject to Section 9(c) hereof, the Option Period of an Option shall terminate
upon the date upon which the Participant holding such Option ceases to be an
employee, consultant or director of the Corporation or its subsidiaries for any
reason including, but not limited to,
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Retirement (as defined in the Stockholders' Agreement), death, Disability (as
defined in the Stockholders' Agreement), Involuntary Termination (as defined in
the Stockholders' Agreement) or termination for Cause (as defined in the
Stockholders' Agreement).
(c) The expiration of a consulting arrangement without the prior
termination thereof shall not be deemed a termination of such arrangement (or
cessation of being a consultant) for purposes of this Plan. The employment,
consultancy or directorship of a Participant who has been granted Options shall
not be deemed to have terminated if the Participant is absent from such
employment, consultancy or directorship by reason of an approved leave of
absence (in accordance with the applicable policy of the Corporation or the
applicable subsidiary) or is transferred to and becomes an employee, consultant
or director of a subsidiary of the Corporation or the Corporation. If a
subsidiary of the Corporation ceases to be such a subsidiary, the employment,
consultancy or directorship, as applicable, of each employee, consultant and
director of such subsidiary who is not an employee, consultant or director of
the Corporation or of another (remaining) subsidiary of the Corporation
immediately thereafter shall be deemed to have ceased on the date such
subsidiary ceases to be a subsidiary of
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<PAGE>
the Corporation unless proper provision is made for the conversion of such
Participant's Options into options of the surviving or acquiring company on
terms intended to preserve substantially the economic value thereof as of the
date such subsidiary ceases to be a subsidiary of the Corporation.
(d) The termination of the Option Period of an Option shall not affect
the Put Rights and Call Rights set forth in the Stockholders' Agreement with
respect to such Option or any Shares purchased pursuant to such Options.
10. Exercisability of Options. Each Option shall be exercisable during the
period of time from the date it vests until the end of the Option Period and
shall be exercised in accordance with the terms of this Plan and the applicable
Option Agreement and the Stockholders' Agreement. In the event of a conflict,
the terms of the Stockholders' Agreement shall govern.
11. Procedure for Exercise and Payment for Shares. (a) A Participant shall
exercise an Option by giving notice to the Corporation in the form attached
hereto as Schedule II. Such notice shall be deemed sufficient for this purpose
only if delivered to the Corporation at its principal office and only if it
states (i) the number of Shares with respect to which the Option is being
exercised, and (ii) the date, not more than ninety (90) days after the date of
such notice, upon which the
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Shares shall be purchased and payment therefor shall be made (the "Exercise
Date"). The exercise of an Option shall be effective only if, on or before the
Exercise Date, the Participant pays the aggregate Option Price for the Shares
being purchased in cash or by certified or bank cashier's check, delivered to
the principal office of the Corporation. The Corporation shall, as soon as
practicable after the Exercise Date, deliver or cause to be delivered to the
Participant a certificate or certificates for the number of Shares with respect
to which the Option is so exercised and payment is so made, registered in the
name of the exercising Participant. Until such certificates have been issued,
the exercising Participant shall not have any of the rights of a shareholder of
the Corporation including, without limitation, the right to vote with respect to
the underlying Shares.
(b) Notwithstanding the foregoing, if as of the Exercise Date for an
Option (i) the Corporation may not issue Shares with respect to such Option by
reason of any law or contract or (ii) any law or any regulation of any
commission or agency having jurisdiction shall require the Corporation or the
exercising Participant to take any action with respect to the Shares acquired by
the exercise of an Option, then the date upon which the Corporation shall issue
or cause to be issued the certificate or certificates for the Shares shall be
postponed until such issuance is permitted or full compliance has
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been made with all such requirements of law or regulation, as applicable;
provided, that the Corporation shall use its reasonable efforts to take all
necessary action to comply with such requirements of law or regulation. Further,
if requested by the Corporation, at or before the time of the issuance of the
Shares with respect to which exercise of an Option has been made, the exercising
Participant shall deliver to the Corporation his or her written statements
satisfactory in form and content to the Corporation, that he or she intends to
hold the Shares so acquired by him or her on exercise of his or her Option, for
investment purposes only and not with a view to resale or other distribution
thereof to the public in violation of the Securities Act of 1933, as amended
(the "Securities Act"). Moreover, in the event that the Corporation shall
determine that, in compliance with the Securities Act or other applicable
statutes or regulations, it is necessary to register any of the Shares with
respect to which an exercise of an Option has been made, or to qualify any such
Shares for exemption from any of the requirements of the Securities Act or any
other applicable statute or regulation, no Options may be exercised and no
Shares shall be issued to the exercising Participant until the required action
has been completed; provided, that the Corporation shall use its reasonable
efforts to take all necessary action to comply with such requirements of law or
regulation. Notwithstanding anything to the contrary contained
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<PAGE>
herein, neither the Board of Directors nor the members of the Compensation
Committee owes a fiduciary duty to any Participant in his or her capacity as
such.
12. Grant of Restricted Stock. (a) An aggregate of 7,500 Nonvoting Shares
("Restricted Stock"), subject to adjustment as provided for in Section 16
hereof, shall be granted immediately upon the Effective Date to the Participants
and in the amounts set forth on Schedule III hereto, pursuant to Restricted
Stock Agreements substantially in the form attached hereto as Exhibit C. The
Restricted Stock shall vest upon the terms set forth in such Restricted Stock
Agreements.
(b) Shares of Restricted Stock shall be evidenced in such manner as
the Compensation Committee may deem appropriate, including book-entry
registration or issuance of one or more stock certificates. Any certificate
issued in respect of shares of Restricted Stock shall be registered in the name
of the Participant to whom such shares are granted and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
shares of Restricted Stock, substantially in the following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the GGS Holdings, Inc. Management Stock Incentive Plan
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and a Restricted Stock Agreement. Copies of such Plan and Agreement
are on file at the offices of GGS Holdings, Inc., c/o Goss Graphic
Systems, Inc., 700 Oakmont Lane, Westmont, Illinois 60559-5546."
The Compensation Committee may require that the certificates evidencing such
shares be held in custody by the Corporation until such shares of Restricted
Stock have vested and that, as a condition of any grant of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the Shares covered by such grant of Restricted Stock.
(c) Each grant of Restricted Stock pursuant to this Plan shall be made
in writing and upon such terms and conditions as may be determined by the Board
of Directors or by the Compensation Committee at the time of grant, subject to
the provisions and limitations set forth in this Plan, including without
limitation the requirement that as a condition of a grant of Restricted Stock,
the proposed recipient execute a counterpart of the Stockholders' Agreement and
agree to be bound thereby as a "Management Investor." The Restricted Stock
Agreement for each grant of Restricted Stock shall be executed by the Chief
Executive Officer, except that, in the event that the Chief Executive Officer is
the recipient of any Restricted Stock, the Restricted Stock Agreement for such
Restricted Stock shall be executed by the Secretary of the Corporation. Shares
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<PAGE>
of Restricted Stock shall also be subject to the following terms and conditions:
(i) Except as provided in this paragraph (i), the Restricted Stock
Agreement and the Stockholders' Agreement, the Participant shall have, with
respect to the shares of Restricted Stock, all of the rights of a
stockholder of the Corporation holding the Nonvoting Shares that are the
subject of the Restricted Stock, including, if applicable, the right to
receive any cash dividends. If so determined by the Compensation Committee
in the applicable Restricted Stock Agreement and subject to the
availability of sufficient Nonvoting Shares under Section 3 hereof, (A)
cash dividends on the Nonvoting Shares that are the subject of the
Restricted Stock shall be automatically deferred and reinvested in
additional Restricted Stock, held subject to the vesting of the underlying
Restricted Stock, and (B) dividends payable in Nonvoting Shares shall be
paid in the form of Restricted Stock, held subject to the vesting of the
underlying Restricted Stock.
(ii) Except as otherwise set forth in the Restricted Stock Agreement
and subject to Section 12(c)(iii) hereof, shares of Restricted Stock which
have not vested shall be forfeited by the Participant upon the date upon
which the Participant holding such Restricted Stock ceases to be an
employee, consultant or director of the Corporation or its
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subsidiaries for any reason including, but not limited to, Retirement,
Disability, Involuntary Termination or termination for Cause; provided
that, if the Participant holding such Restricted Stock ceases to be an
employee, consultant or director of the Corporation or its subsidiaries due
to such Participant's death, shares of Restricted Stock which have not
vested shall immediately vest upon such Participant's death and shall not
be forfeited.
(iii) The expiration of a consulting arrangement without the prior
termination thereof shall not be deemed a termination of such arrangement
(or cessation of being a consultant) for purposes of this Plan. The
employment, consultancy or directorship of a Participant who has been
granted Restricted Stock shall not be deemed to have terminated if the
Participant is absent from such employment, consultancy or directorship by
reason of an approved leave of absence (in accordance with the applicable
policy of the Corporation or the applicable subsidiary) or is transferred
to and becomes an employee, consultant or director of a subsidiary of the
Corporation or the Corporation. If a subsidiary of the Corporation ceases
to be such a subsidiary, the employment, consultancy or directorship, as
applicable, of each employee, consultant and director of
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such subsidiary who is not an employee, consultant or director of the
Corporation or of another (remaining) subsidiary of the Corporation
immediately thereafter shall be deemed to have ceased on the date such
subsidiary ceases to be a subsidiary of the Corporation.
(iv) If and when shares of Restricted Stock vest without a prior
forfeiture of such Restricted Stock, unlegended certificates for such
shares shall be delivered to the Participant upon surrender of the legended
certificates.
13. Cash-Out of Certain Options. Without limiting any rights of the
Corporation under the Stockholders' Agreement, the Compensation Committee or the
Board of Directors may cancel any outstanding Options in exchange for a cash
payment, or in the discretion of the Compensation Committee or the Board of
Directors payment of other property, to the Participant equal to the excess of
(x) the fair market value (as determined in good faith by the Board of Directors
of the Corporation) of the consideration received per Stonington Share (as such
term is defined in the Stockholders' Agreement) by Stonington (as such term is
defined in the Stockholders' Agreement) in any sale (by merger, stock purchase
or otherwise) to a person which is not an affiliate of the Corporation or
Stonington of all the then issued and outstanding Stonington Shares (a "Transfer
Event"), over (y) the Option Price for such Options, multiplied
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by the number of Shares subject to such cancelled Options, in each case
effective upon the consummation of the Transfer Event.
14. Transferability. (a) Incentive Options may not be transferred by the
Participant except that certain contract rights under the Stockholders'
Agreement (as provided therein) with respect to such Options may be transferred
to the estate of a deceased Participant. An Incentive Option may be exercised
during the lifetime of the Participant only by such Participant.
(b) Performance Options may not be transferred by the Participant
except that (i) certain contract rights under the Stockholders' Agreement (as
provided therein) with respect to such Options may be transferred to the estate
of a deceased Participant and (ii) the Participant may transfer Performance
Options to Permitted Transferees (as defined in the Stockholders' Agreement) in
accordance with the provisions of the Stockholders' Agreement. A Performance
Option may be exercised during the lifetime of the Participant only by such
Participant or Permitted Transferee.
(c) Except in accordance with the terms of the Stockholders'
Agreement, Restricted Stock may not be transferred by the Participant.
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15. Termination of the Plan. This Plan shall terminate upon the close of
business on ________ ___, 2006 (other than with respect to Options that have not
by their terms terminated at such time or with respect to Restricted Stock which
has not yet vested or been forfeited in accordance with its terms at such time,
with respect to which this Plan shall continue, in the case of Options, through
the end of the Option Period thereof, or in the case of Restricted Stock, until
the Restricted Stock vests or is forfeited) unless it shall have sooner
terminated by there having been granted and fully exercised Options covering the
entire 75,700 Shares (subject to adjustment as provided for in Section 16
hereof) subject to this Plan, and by there having been granted and either vested
or forfeited Restricted Stock covering the entire 7,500 Nonvoting Shares
(subject to adjustment as provided for in Section 16 hereof) subject to this
Plan.
16. Adjustments. In the event of the declaration of any stock dividend on
the Shares or Nonvoting Shares of the Corporation or in the event of any
reorganization, merger, consolidation, acquisition, separation,
recapitalization, spin-off, split-up, extraordinary dividend, combination or
exchange of the Shares or Nonvoting Shares or like adjustment, the number and
type of securities or other property available pursuant to this Plan and the
number and type of securities or other property subject to any Option or
Restricted Stock, as the case
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may be, granted or to be granted pursuant to this Plan, and the Option Prices,
shall be adjusted by appropriate changes in this Plan and in any outstanding
Options or Restricted Stock (including the substitution of cash or other
property for Shares or Nonvoting Shares, as applicable). Any such adjustment to
the Plan or to Restricted Stock, Options or Option Prices shall be made by
action of the Board of Directors or the Compensation Committee, whose
determination shall be conclusive.
17. Amendment or Discontinuance of the Plan. The Board of Directors or the
Compensation Committee may amend or terminate this Plan and may amend any Option
or Restricted Stock granted pursuant to this Plan at any time; provided that no
amendment or termination may adversely affect a Participant's rights to or
interest in any Option or Restricted Stock previously granted under this Plan
unless such Participant shall have agreed thereto in writing.
18. Initial Public Offerings. Notwithstanding anything contained herein to
the contrary, if the Corporation proposes to effect an Initial Public Offering
and if the appropriate securities regulatory authority or stock exchange
determines that in order for the Initial Public Offering to proceed, it would be
necessary to reduce the number of issued options or the term of such issued
options, then the Board of Directors or
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the Compensation Committee may: (i) require the holders of Options to either
exercise Options or agree to the cancellation of such Options so that after such
exercise or cancellation the number of issued Options is no more than the
maximum number permitted by such appropriate regulatory authorities or stock
exchange; or (ii) shorten the Option Period of any Option to the extent
necessary to comply with applicable law or stock exchange requirements, as the
case may be. For the purposes of effecting such amendment, the Options to be
affected and the order that they shall be affected shall be as follows: first,
Discretionary Options granted to Participants who have been granted Incentive
Options or Performance Options; second, Incentive Options; third, Performance
Options; and fourth, Discretionary Options not covered in first above. To the
extent that any such Options shall be required to be exercised or cancelled, the
determination as to whether to exercise or cancel such Options shall be made by
the holder thereof in his or her sole discretion. In addition, the allocation of
Options that are required to be exercised or cancelled among the holders of each
category of Options shall be pro rata among such holders, except to the extent a
holder agrees in writing to the exercise or cancellation of a disproportionately
large number of his or her Options in that category.
19. Repurchased Options and Repurchased Shares Attributable Thereto.
Options, and the Shares attributable to
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such Options, which have been repurchased by the Corporation pursuant to the Put
Rights and Call Rights contained in the Stockholders' Agreement on account of
the termination of employment, consultancy or directorship of Participants shall
again be available for issuance under this Plan and subject to the terms of the
Stockholders' Agreement as Discretionary Options (thereby increasing the
aggregate number of Discretionary Options available for grant pursuant to
Section 3 hereof).
20. Withholding. No later than the date as of which an amount first becomes
includible in the gross income of the Participant for federal income tax
purposes with respect to any Option or Restricted Stock hereunder, such
Participant shall pay to the Corporation, or make arrangements satisfactory to
the Corporation regarding the payment of, any federal, state, local or foreign
taxes of any kind required by law to be withheld with respect to such amount.
The obligations of the Corporation hereunder shall be conditional on such
payment or arrangements, and the Corporation shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment otherwise due the
Participant.
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SCHEDULE I
MAXIMUM YEARLY VESTING SCHEDULE
Performance Options Under the
GGS Holdings, Inc. Management Stock Option Plan (the "Plan")
Total Available Options: Performance Options exercisable for an aggregate of
______ Shares. Performance Options will vest over five
years based on the Corporation achieving certain
levels of earnings performance (as hereinafter
described).
Vesting of
Performance Options: Performance Options, which will be granted effective
as of the Closing (as that term is defined in the
Stock and Asset Purchase Agreement (the "Purchase
Agreement") dated as of April 26, 1996, as amended, by
and between Rockwell International Corporation and
Goss Graphic Systems, Inc.) of the transactions (the
"Acquisition") contemplated by the Purchase Agreement,
shall vest according to the financial performance of
the Corporation for each of the five full fiscal years
following the Closing, as follows: As more fully set
forth in the Plan, a Participant's Performance Options
shall not vest unless the Participant is employed by,
a director of or a consultant to the Corporation or
one of its subsidiaries on the date such Option would
vest. Performance Options shall vest for each fiscal
year as follows:
(i) If the calculated Enterprise Value (as defined
below) for any fiscal year meets or exceeds a
"Target" level for such year (but does not meet or
exceed the next higher "Target" level for such
year), the percentage of the Performance Options
eligible for vesting in that year (including
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those carried forward from prior years, as
provided below) that is set forth in the chart
below for such highest achieved "Target" level
will vest.
(ii) If the calculated Enterprise Value for any year is
less than the lowest "Target" level for such year,
the Performance Options eligible for vesting in
such year shall not vest in such year.
The Performance Options that are eligible for vesting
but do not actually vest in a given year shall again
be eligible for vesting in subsequent years based upon
the criteria in clause (i) above.
"Enterprise Value" shall be the difference between (i)
7.5 times the Corporation's consolidated earnings from
continuing operations before interest, taxes and
depreciation or amortization, if any, resulting from
any write-up in the book value of the Corporation's
assets due to the Acquisition, excluding extraordinary
items, for the relevant year and (ii) the
Corporation's average outstanding consolidated
indebtedness and preferred stock (valued, with respect
to each series thereof, at the greater of its
liquidation preference and its call or redemption
price then in effect, if any) based upon such amounts
outstanding of the end of each of the four quarters of
such year (net of any cash and cash equivalents in
excess of $2.0 million); provided, however, if there
has been a disposition of assets, an acquisition,
recapitalization or reclassification of securities or
any other extraordinary transaction in such fiscal
year, then the Enterprise Value as determined by the
foregoing formula may (but shall not be required to)
be adjusted as determined by the
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Board of Directors or the Compensation Committee. The
extent of vesting for any year shall be determined by
the Board of Directors or the Compensation Committee
based upon the audited financial statements of the
Corporation (except for adjustments referred to above)
and, once determined, shall be deemed effective as of
the last day of each such fiscal year. The "Target"
levels and eligible vesting percentages are as
follows:
Percent of Total Targeted Enterprise Values for Years
Eligible Performance Ended September 30,
Options Vesting ------------------------------------------------------
in Each Year 1997 1998 1999 2000 2001
- -------------------- -------- -------- -------- -------- --------
(in thousands)
20% $142,237 $191,948 $232,787 $283,740 $338,911
40% 145,329 196,121 237,847 289,908 346,279
60% 148,421 200,293 242,908 296,076 353,647
80% 151,513 204,466 247,968 302,245 361,014
100% 154,605 208,639 253,029 308,413 368,382
I-3
EXHIBIT 10.6.1
FORM OF
INCENTIVE OPTION AGREEMENT
INCENTIVE OPTION AGREEMENT (the "Agreement") dated this ___ day of _______,
1996 providing for the granting of certain options by GGS Holdings, Inc., a
Delaware corporation (the "Corporation"), to _____________, an [employee of]
[consultant to] [non-employee director of] the Corporation or of a subsidiary of
the Corporation (the "Employee").
As of ________ ___, 1996, the Corporation has duly adopted the GGS
Holdings, Inc. Management Stock Incentive Plan (the "Plan"), which is
incorporated herein by reference. Unless otherwise expressly stated, all defined
terms herein shall have the same meanings ascribed to them in the Plan. In
accordance with Section 7 of the Plan, the Employee is to be granted options
under the Plan to buy shares of common stock, par value $.01 per share (the
"Shares"), of the Corporation.
1. Number of Shares; Incentive Option Price. The Corporation hereby
irrevocably grants to the Employee ______ options (the "Incentive Options") to
purchase, in the aggregate, _______ Shares (the "Incentive Option Shares") at an
exercise price of $100 per Share (the "Option Price") on the terms and subject
to the conditions set forth herein and in the Plan.
<PAGE>
2. Period of Incentive Options and Conditions of Exercise. (a) The Option
Period of the Incentive Options (or any portion thereof) shall commence on the
date hereof (the "Date of Grant") and terminate upon the earlier of the date
that is ten (10) years from the Date of Grant (the "Expiration Date") and the
time at which such Incentive Options (or any portion thereof) are terminated
pursuant to Section 3 hereof. Upon the termination of Incentive Options in
accordance with the provisions hereof, all rights of the Employee with respect
to such Incentive Options hereunder and in connection with such Incentive
Options under the Plan shall cease. This Agreement shall terminate upon the
complete termination of all Incentive Options granted pursuant hereto.
(b) Subject to prior termination thereof, one-fifth of the Incentive
Options granted pursuant hereto shall vest on each of the first through fifth
annual anniversaries of the Date of Grant.
(c) Upon the consummation of an Extraordinary Transaction (as defined
below), such portion, if any, of the Incentive Options that have not vested
shall become fully vested.
(d) The Employee may exercise the Incentive Options with respect to all or
any portion of the Incentive Option Shares at any time and from time to time
after (and to the extent) the Incentive Options have vested and before the end
of
-2-
<PAGE>
the Option Period with respect to the Incentive Options or such portion thereof.
The Corporation need not issue fractional Shares upon the exercise of the
Incentive Options but in lieu thereof shall pay to the holder exercising the
Incentive Options the "Fair Value Price" (as defined in and determined in
accordance with the Stockholders' Agreement) of such fractional Shares.
(e) For purposes of this Agreement, an "Extraordinary Transaction" means an
event as a result of which Stonington Partners, Inc. and its subsidiaries and
affiliates ("Permitted Holders") cease to be the beneficial owners of at least
50% of the common equity of GGS on a fully diluted basis, or any other event as
a result of which: (i) the Tag-Along Rights (as defined and set forth in the
Stockholders' Agreement) are triggered; (ii) the Corporation consolidates,
enters into a plan of reorganization with, or merges with or into another
corporation or conveys, transfers or leases all or substantially all of its
assets to any person, or any corporation consolidates with or merges with or
into the Corporation, in any such event pursuant to a transaction in which the
outstanding voting common stock of the Corporation is changed into or exchanged
for cash, securities or other property, other than any such transaction where
(A) the outstanding voting common stock of the Corporation is changed into or
exchanged for, in whole or in part, voting stock of the surviving corporation
which is
-3-
<PAGE>
not redeemable capital stock and (B) the holders of the voting common stock of
the Corporation immediately prior to such transaction own, directly or
indirectly, not less than 50% of the voting stock of the surviving corporation
immediately after such transaction; (iii) at any time, a majority of the members
of the Board of Directors of the Corporation then in office does not consist of
(A) individuals who two years prior to such date were members of the Board of
Directors of the Corporation, (B) new directors whose election to such Board of
Directors or whose nomination for election by the shareholders of the
Corporation was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such two-year period or
whose election or nomination for election was previously approved by directors
elected or nominated in accordance with this clause (B) and (C) such other
directors as have been nominated or approved by the Permitted Holders; or (iv)
the Corporation is liquidated, dissolved, wound-up or adopts a plan of
liquidation.
3. Termination Upon Termination of Employment. Except in circumstances and
to the extent specified in the following sentence, the Plan or the Stockholders'
Agreement, the Incentive Options shall terminate immediately upon the Employee's
ceasing to be a full-time employee of, a director of or a consultant to the
Corporation or any of its subsidiaries.
-4-
<PAGE>
The time at which a vested Incentive Option shall terminate shall be the
earliest to occur of (x) the Expiration Date, (y) the close of business on the
date on which the Employee exercises a "Put Right" pursuant to the Stockholders'
Agreement with respect to any Shares or Options owned by him or her and (z) the
following dates:
(i) the thirtieth day after the date upon which the Employee ceases to
be a full-time employee of, a director of or a consultant to the
Corporation or any of its subsidiaries unless he or she ceases to be an
employee, director or a consultant in a manner described in subsection (ii)
or (iii) below;
(ii) the one hundred and eightieth day after the date of the death,
Retirement or Disability (as such terms are defined in the Stockholders'
Agreement) of the Employee if the Employee dies, Retires or becomes
Disabled before the time at which such Incentive Option otherwise
terminates; or
(iii) immediately upon the Employee's voluntary termination of
employment, directorship or consultancy (other than (i) due to the
-5-
<PAGE>
death of such Employee or (ii) upon the occasion of his or her Retirement
or Disability (as such terms are defined in the Stockholders' Agreement))
or termination of employment, directorship or consultancy by the
Corporation or any of its subsidiaries for Cause.
4. Non-Transferability of Incentive Options; Death of Employee. The
Incentive Options and this Agreement (i) may not be assigned, transferred
(except that certain contract rights under the Stockholders' Agreement with
respect to Incentive Options may be transferred to the estate of a deceased
Employee), pledged or hypothecated in any way, (ii) shall not be assignable by
operation of law (except by will or by the laws of descent and distribution) and
(iii) shall not be subject to execution, attachment or similar process. During
the lifetime of the Employee, the Incentive Options may be exercised only by him
or her. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Incentive Options contrary to the provisions hereof shall be
null and void and without effect.
5. Exercise of Incentive Options. The Incentive Options shall be exercised
as specified in the Plan.
-6-
<PAGE>
6. Specific Restrictions Upon Incentive Option Shares. The Employee hereby
agrees with the Corporation as follows:
(a) the Employee shall acquire the Incentive Option Shares for investment
purposes only and not with a view to resale or other distribution thereof to the
public in violation of the Securities Act of 1933, as amended (the "Securities
Act"), and shall not dispose of any Incentive Option Shares in any transaction
which, in the opinion of counsel to the Corporation, may violate the Securities
Act, or the rules and regulations thereunder, or any applicable state
securities, or "blue sky," laws;
(b) if any Incentive Option Shares shall be registered under the Securities
Act, no public offering (otherwise than on a national securities exchange, as
defined in the Exchange Act) of any Incentive Option Shares shall be made by the
Employee (or any other person) under such circumstances that he or she (or such
other person) may be deemed an underwriter, as defined in the Securities Act;
and
(c) the Corporation shall have the authority to endorse upon the
certificate or certificates representing the Incentive Option Shares such
legends referring to the foregoing restrictions or any other applicable
restrictions, as the Corporation may deem appropriate, including those resulting
from
-7-
<PAGE>
the fact that the Employee is a party to the Stockholders' Agreement.
7. Cash-Out of Certain Options. Without limiting any rights of the
Corporation under the Stockholders' Agreement, the Compensation Committee or the
Board of Directors may cancel any outstanding Incentive Options in exchange for
a cash payment, or in the discretion of the Compensation Committee or the Board
of Directors payment of other property, to the Participant equal to the excess
of (x) the fair market value (as determined in good faith by the Board of
Directors of the Corporation) of the consideration received per Stonington Share
(as such term is defined in the Stockholders' Agreement) by Stonington (as such
term is defined in the Stockholders' Agreement) in any sale (by mergers, stock
purchase or otherwise) to a person who is not an affiliate of the Corporation or
Stonington of all the then outstanding Stonington Shares (a "Transfer Event")
over (y) the Option Price for such Incentive Option Shares, multiplied by the
number of Incentive Option Shares subject to such cancelled Incentive Options,
in each case effective upon the consummation of the Transfer Event.
8. Termination of Employment. The employment, consultancy or directorship
of the Employee shall not be deemed to have terminated if the Employee is absent
from such employment, consultancy or directorship by reason of an approved leave
of
-8-
<PAGE>
absence (in accordance with the applicable policy of the Corporation or the
applicable subsidiary) or is transferred to and becomes an employee, consultant
or director of a subsidiary of the Corporation or the Corporation, and, in the
case of a consultant, the expiration of a consulting arrangement without the
prior termination thereof shall not be deemed a termination of such arrangement
(or cessation of being a consultant) for purposes of this Agreement. If a
subsidiary of the Corporation ceases to be such a subsidiary, the employment,
consultancy or directorship, as applicable, of each employee, consultant and
director of such subsidiary who is not an employee, consultant or director of
the Corporation or of another (remaining) subsidiary of the Corporation
immediately thereafter shall be deemed to have ceased on the date such
subsidiary ceases to be a subsidiary of the Corporation unless proper provision
is made for the conversion of such Participant's Options into options of the
surviving or acquiring company on terms which are intended to preserve
substantially the economic value thereof as of the date such subsidiary ceases
to be a subsidiary of the Corporation.
9. Payment. Nothing herein contained or done pursuant hereto shall obligate
the recipient of an Incentive Option to purchase and/or pay for any Incentive
Option Shares except those Incentive Option Shares in respect of which the
-9-
<PAGE>
holder of the Incentive Option shall have exercised such option to purchase
hereunder in the manner hereinabove provided.
10. Time. Time is of the essence for this Agreement.
11. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their heirs, successors and permitted assigns.
12. THE EMPLOYEE HEREBY REPRESENTS, WARRANTS AND ACKNOWLEDGES TO THE
CORPORATION THAT THE EMPLOYEE IS AN EMPLOYEE OF THE CORPORATION OR A SUBSIDIARY
OF THE CORPORATION AND THAT THE EMPLOYEE WAS NOT AND IS NOT BEING INDUCED TO
ENTER INTO THIS AGREEMENT BY AN EXPECTATION OF EMPLOYMENT OR CONTINUED
EMPLOYMENT.
13. Notices. Any notice required or permitted under this Agreement shall be
deemed given when delivered personally, or when deposited in a United States
Post Office as registered mail, postage prepaid, addressed, as appropriate, to
the Employee at his or her address set forth below or such other address as he
or she may designate in writing to the Corporation, or to the Corporation, c/o
Stonington Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York
10153, Attention: Alexis P. Michas or such other address(es) as the Corporation
may designate in writing to the Employee.
-10-
<PAGE>
14. Failure to Enforce Not a Waiver. The failure of the Corporation to
enforce at any time any provision of this Agreement shall in no way be construed
to be a waiver of such provision or of any other provision hereof.
15. Governing Law. This Agreement shall be governed by and construed
according to the laws of the State of Delaware, without regard to principles of
conflict of laws.
16. Provisions of Plan. The Incentive Options provided for herein are
granted pursuant to the Plan, and said Incentive Options and this Agreement are
in all respects governed by the Plan and subject to all of the terms and
provisions thereof, whether such terms and provisions are incorporated in this
Agreement solely by reference or are expressly cited herein. In the event of any
inconsistency between this Agreement and the Plan, the terms of the Plan shall
govern to the extent of such inconsistency. For greater certainty, without
limiting the generality of the foregoing, the Employee agrees to be bound by any
amendments to the Plan or this Agreement made by the Compensation Committee of
the Board of Directors of the Corporation or the Board of Directors of the
Corporation in accordance with the provisions of the Plan to conform the Plan or
this Agreement to the rules and regulations of any appropriate regulatory
authority or any national securities exchange on which the Corporation proposes
to list or lists any of its
-11-
<PAGE>
shares. From and after the date, if any, on which any shares of the Corporation
are listed on any national securities exchange and/or subject to the rules and
regulations of any applicable regulatory authority, the terms and conditions of
this Agreement and the implementation thereof shall be subject to the rules and
regulations of such exchange and/or regulatory authority, as the case may be,
and, in the event of any inconsistency between the terms and conditions of this
Agreement and the rules and regulations of any such exchange and/or regulatory
authority, as the case may be, the rules and regulations of such exchange and/or
regulatory authority, as the case may be, shall prevail.
-12-
<PAGE>
IN WITNESS WHEREOF, the Corporation has executed this Agreement in
duplicate on the day and year first above written.
GGS HOLDINGS, INC.
By:_____________________________________
Name:
Title:
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Agreement.
________________________________________
[name]
________________________________________
________________________________________
ADDRESS
-13-
EXHIBIT 10.6.2
FORM OF
PERFORMANCE OPTION AGREEMENT
PERFORMANCE OPTION AGREEMENT (the "Agreement") dated this day of ________,
1996 providing for the granting of certain options by GGS Holdings, Inc., a
Delaware corporation (the "Corporation"), to ____________, an [employee of]
[consultant to] [non-employee director of] the Corporation or of a subsidiary of
the Corporation (the "Employee").
As of ________ ___, 1996, the Corporation has duly adopted the GGS
Holdings, Inc. Management Stock Incentive Plan (the "Plan"), which is
incorporated herein by reference. Unless otherwise expressly stated, all defined
terms herein shall have the same meanings ascribed to them in the Plan. In
accordance with Section 7 of the Plan, the Employee is to be granted options
under the Plan to buy shares of common stock, par value $.01 per share (the
"Shares"), of the Corporation.
1. Number of Shares; Performance Option Price. The Corporation hereby
irrevocably grants to the Employee ______ options (the "Performance Options") to
purchase, in the aggregate, ______ Shares (the "Performance Option Shares") at
an exercise price of $100 per Share (the "Option Price") on the terms and
subject to the conditions set forth herein and in the Plan.
<PAGE>
2. Period of Performance Options and Conditions of Exercise. (a) The Option
Period of the Performance Options (or any portion thereof) shall commence on the
date hereof (the "Date of Grant") and terminate upon the earlier of the date
that is ten (10) years from the Date of Grant (the "Expiration Date") and the
time at which such Performance Options (or any portion thereof) are terminated
pursuant to Section 3 hereof. Upon the termination of Performance Options in
accordance with the provisions hereof, all rights of the Employee with respect
to such Performance Options hereunder and in connection with such Performance
Options under the Plan shall cease. This Agreement shall terminate upon the
complete termination of all Performance Options granted pursuant hereto.
(b) The Performance Options granted pursuant hereto, subject to the
following provisions of this Section 2, shall vest on the basis set forth in the
Plan.
(c) Upon the consummation of an Extraordinary Transaction (as defined
below), such portion of the Performance Options, if any, that have not vested
shall become fully vested.
(d) The Employee may exercise the Performance Options with respect to all
or any portion of the Performance Option Shares at any time and from time to
time after (and to the extent) the Performance Options have vested and before
the end of the Option Period with respect to the Performance Options or
-2-
<PAGE>
such portion thereof. The Corporation need not issue fractional Shares upon the
exercise of the Performance Options but in lieu thereof shall pay to the holder
exercising the Performance Options the "Fair Value Price" (as defined in and
determined in accordance with the Stockholders' Agreement) of such fractional
Shares.
(e) For purposes of this Agreement, an "Extraordinary Transaction" means an
event as a result of which Stonington Partners, Inc. and its subsidiaries and
affiliates ("Permitted Holders") cease to be the beneficial owners of at least
50% of the common equity of GGS on a fully diluted basis, or any other event as
a result of which: (i) the Tag-Along Rights (as defined and set forth in the
Stockholders' Agreement) are triggered; (ii) the Corporation consolidates,
enters into a plan of reorganization with, or merges with or into another
corporation or conveys, transfers or leases all or substantially all of its
assets to any person, or any corporation consolidates with or merges with or
into the Corporation, in any such event pursuant to a transaction in which the
outstanding voting common stock of the Corporation is changed into or exchanged
for cash, securities or other property, other than any such transaction where
(A) the outstanding voting common stock of the Corporation is changed into or
exchanged for, in whole or in part, voting stock of the surviving corporation
which is not redeemable capital stock and (B) the holders of the voting
-3-
<PAGE>
common stock of the Corporation immediately prior to such transaction own,
directly or indirectly, not less than 50% of the voting stock of the surviving
corporation immediately after such transaction; (iii) at any time, a majority of
the members of the Board of Directors of the Corporation then in office does not
consist of (A) individuals who two years prior to such date were members of the
Board of Directors of the Corporation, (B) new directors whose election to such
Board of Directors or whose nomination for election by the shareholders of the
Corporation was approved by a vote of 66-2/3% of the directors then still in
office who were either directors at the beginning of such two-year period or
whose election or nomination for election was previously approved by directors
elected or nominated in accordance with this clause (B) and (C) such other
directors as have been nominated or approved by the Permitted Holders; or (iv)
the Corporation is liquidated, dissolved, wound-up or adopts a plan of
liquidation.
3. Termination Upon Termination of Employment. Except in circumstances and
to the extent specified in the following sentence, the Plan or the Stockholders'
Agreement, the Performance Options shall terminate immediately upon the
Employee's ceasing to be a full-time employee of, a director of or a consultant
to the Corporation or any of its subsidiaries. The time at which a vested
Performance Option shall terminate shall be the earliest to occur of (x) the
Expiration Date, (y)
-4-
<PAGE>
the close of business on the date on which the Employee exercises a "Put Right"
pursuant to the Stockholders' Agreement with respect to any Shares or Options
owned by him or her and (z) the following dates:
(i) the thirtieth day after the date upon which the Employee ceases to
be a full-time employee of, a director of or a consultant to the
Corporation or any of its subsidiaries unless he or she ceases to be an
employee, a director or a consultant in a manner described in subsection
(ii) or (iii) below;
(ii) the one hundred and eightieth day after the date of the death,
Retirement or Disability (as such terms are defined in the Stockholders'
Agreement) of the Employee if the Employee dies, Retires or becomes
Disabled before the time at which such Performance Option otherwise
terminates; or
(iii) immediately upon the Employee's voluntary termination of
employment, directorship or consultancy (other than (i) due to the death of
such Employee or (ii) upon the occasion of his or her Retirement or
Disability (as such
-5-
<PAGE>
terms are defined in the Stockholders' Agreement)) or termination of
employment, directorship or consultancy by the Corporation or any of its
subsidiaries for Cause.
4. Non-Transferability of Performance Options; Death of Employee. The
Performance Options and this Agreement (i) may not be assigned, transferred
(except to Permitted Transferees (as defined in the Stockholders' Agreement) in
accordance with the Stockholders' Agreement and except that certain contract
rights under the Stockholders' Agreement with respect to Performance Options may
be transferred to the estate of a deceased Employee), pledged or hypothecated in
any way, (ii) shall not be assignable by operation of law (except by will or by
the laws of descent and distribution) and (iii) shall not be subject to
execution, attachment or similar process. During the lifetime of the Employee,
the Performance Options may be exercised only by him or her or a Permitted
Transferee. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Performance Options contrary to the provisions hereof shall
be null and void and without effect.
5. Exercise of Performance Options. The Performance Options shall be
exercised as specified in the Plan.
-6-
<PAGE>
6. Specific Restrictions Upon Performance Option Shares. The Employee
hereby agrees with the Corporation as follows:
(a) the Employee shall acquire the Performance Option Shares for investment
purposes only and not with a view to resale or other distribution thereof to the
public in violation of the Securities Act of 1933, as amended (the "Securities
Act"), and shall not dispose of any Performance Option Shares in any transaction
which, in the opinion of counsel to the Corporation, may violate the Securities
Act, or the rules and regulations thereunder, or any applicable state
securities, or "blue sky," laws;
(b) if any Performance Option Shares shall be registered under the
Securities Act, no public offering (otherwise than on a national securities
exchange, as defined in the Exchange Act) of any Performance Option Shares shall
be made by the Employee (or any other person) under such circumstances that he
or she (or such other person) may be deemed an underwriter, as defined in the
Securities Act; and
(c) the Corporation shall have the authority to endorse upon the
certificate or certificates representing the Performance Option Shares such
legends referring to the foregoing restrictions or any other applicable
restrictions as the Corporation may deem appropriate, including those resulting
-7-
<PAGE>
from the fact that the Employee is a party to the Stockholders' Agreement.
7. Cash-Out of Certain Options. Without limiting any rights of the
Corporation under the Stockholders' Agreement, the Compensation Committee or the
Board of Directors may cancel any outstanding Performance Options in exchange
for a cash payment, or in the discretion of the Compensation Committee or the
Board of Directors payment of other property, to the Participant equal to the
excess of (x) the fair market value (as determined in good faith by the Board of
Directors of the Corporation) of the consideration received per Stonington Share
(as such term is defined in the Stockholders' Agreement) by Stonington (as such
term is defined in the Stockholders' Agreement) in any sale (by merger, stock
purchase or otherwise) to a person who is not an affiliate of the Corporation or
Stonington of all the then outstanding Stonington Shares (a "Transfer Event")
over (y) the Option Price for such Performance Option Shares, multiplied by the
number of Performance Option Shares subject to such cancelled Performance
Options, in each case effective upon the consummation of the Transfer Event.
8. Termination of Employment. The employment, consultancy or directorship
of the Employee shall not be deemed to have terminated if the Employee is absent
from such employment, consultancy or directorship by reason of an approved leave
of
-8-
<PAGE>
absence (in accordance with the applicable policy of the Corporation or the
applicable subsidiary) or is transferred to and becomes an employee, consultant
or director of a subsidiary of the Corporation or the Corporation, and, in the
case of a consultant, the expiration of a consulting arrangement without the
prior termination thereof shall not be deemed a termination of such arrangement
(or cessation of being a consultant) for purposes of this Agreement. If a
subsidiary of the Corporation ceases to be such a subsidiary, the employment,
consultancy or directorship, as applicable, of each employee, consultant and
director of such subsidiary who is not an employee, consultant or director of
the Corporation or of another (remaining) subsidiary of the Corporation
immediately thereafter shall be deemed to have ceased on the date such
subsidiary ceases to be a subsidiary of the Corporation unless proper provision
is made for the conversion of such Participant's Options into options of the
surviving or acquiring company on terms which are intended to preserve
substantially the economic value thereof as of the date such subsidiary ceases
to be a subsidiary of the Corporation.
9. Payment. Nothing herein contained or done pursuant hereto shall obligate
the recipient of a Performance Option to purchase and/or pay for any Performance
Option Shares except those Performance Option Shares in respect of which the
-9-
<PAGE>
holder of the Performance Option shall have exercised such option to purchase
hereunder in the manner hereinabove provided.
10. Time. Time is of the essence for this Agreement.
11. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their heirs, successors and permitted assigns.
12. THE EMPLOYEE HEREBY REPRESENTS, WARRANTS AND ACKNOWLEDGES TO THE
CORPORATION THAT THE EMPLOYEE IS AN EMPLOYEE OF THE CORPORATION OR SUBSIDIARY OF
THE CORPORATION AND THAT THE EMPLOYEE WAS NOT AND IS NOT BEING INDUCED TO ENTER
INTO THIS AGREEMENT BY AN EXPECTATION OF EMPLOYMENT OR CONTINUED EMPLOYMENT.
13. Notices. Any notice required or permitted under this Agreement shall be
deemed given when delivered personally, or when deposited in a United States
Post Office as registered mail, postage prepaid, addressed, as appropriate, to
the Employee at his or her address set forth below or such other address as he
or she may designate in writing to the Corporation, or to the Corporation, c/o
Stonington Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York
10153, Attention: Alexis P. Michas or such other address(es) as the Corporation
may designate in writing to the Employee.
-10-
<PAGE>
14. Failure to Enforce Not a Waiver. The failure of the Corporation to
enforce at any time any provision of this Agreement shall in no way be construed
to be a waiver of such provision or of any other provision hereof.
15. Governing Law. This Agreement shall be governed by and construed
according to the laws of the State of Delaware, without regard to principles of
conflict of laws.
16. Provisions of Plan. The Performance Options provided for herein are
granted pursuant to the Plan, and said Performance Options and this Agreement
are in all respects governed by the Plan and subject to all of the terms and
provisions thereof, whether such terms and provisions are incorporated in this
Agreement solely by reference or are expressly cited herein. In the event of any
inconsistency between this Agreement and the Plan, the terms of the Plan shall
govern to the extent of such inconsistency. For greater certainty, without
limiting the generality of the foregoing, the Employee agrees to be bound by any
amendments to the Plan or this Agreement made by the Compensation Committee of
the Board of Directors of the Corporation or the Board of Directors of the
Corporation in accordance with the provisions of the Plan to conform the Plan or
this Agreement to the rules and regulations of any appropriate regulatory
authority or any national securities exchange on which the Corporation proposes
to list or lists any
-11-
<PAGE>
of its shares. From and after the date, if any, on which any shares of the
Corporation are listed on any national securities exchange and/or subject to the
rules and regulations of any applicable regulatory authority, the terms and
conditions of this Agreement and the implementation thereof shall be subject to
the rules and regulations of such exchange and/or regulatory authority, as the
case may be, and, in the event of any inconsistency between the terms and
conditions of this Agreement and the rules and regulations of any such exchange
and/or regulatory authority, as the case may be, the rules and regulations of
such exchange and/or regulatory authority, as the case may be, shall prevail.
-12-
<PAGE>
IN WITNESS WHEREOF, the Corporation has executed this Agreement in
duplicate on the day and year first above written.
GGS HOLDINGS, INC.
By:__________________________________
Name:
Title:
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Agreement.
_____________________________________
[name]
_____________________________________
_____________________________________
ADDRESS
-13-
EXHIBIT 10.6.3
FORM OF
RESTRICTED STOCK AGREEMENT
RESTRICTED STOCK AGREEMENT (the "Agreement") dated this ______ day of
________, 1996 providing for the granting of certain shares of restricted stock
by GGS Holdings, Inc., a Delaware corporation (the "Corporation"), to
_____________, a non-employee director of the Corporation or of a subsidiary of
the Corporation (the "Grantee").
As of ________ ___, 1996, the Corporation has duly adopted the GGS
Holdings, Inc. Management Stock Incentive Plan (the "Plan"), which is
incorporated herein by reference. Unless otherwise expressly stated, all defined
terms herein shall have the same meanings ascribed to them in the Plan. In
accordance with Section 12 of the Plan, the Grantee is to be granted restricted
stock under the Plan representing shares of nonvoting common stock, par value
$.01 per share (the "Nonvoting Shares"), of the Corporation.
1. Number of Shares. The Corporation hereby irrevocably grants to the
Grantee ______ Nonvoting Shares (the "Restricted Stock") on the terms and
subject to the conditions set forth herein and in the Plan.
2. Vesting; Forfeiture. (a) This Agreement shall terminate upon the
earliest of (i) the date that is ten (10) years from the date hereof (the "Date
of Grant"), (ii) the date
<PAGE>
upon which all Restricted Stock granted pursuant hereto becomes completely
vested and (iii) the date upon which the Restricted Stock (or any portion
thereof) is forfeited pursuant to Section 3 hereof. Upon the termination of this
Agreement, any Restricted Stock which has not yet vested shall be forfeited,
and all rights of the Grantee with respect to such Restricted Stock hereunder
and in connection with such Restricted Stock under the Plan shall cease.
(b) Subject to prior termination thereof, one-fifth of the Restricted Stock
granted pursuant hereto shall vest on the Date of Grant and one-fifth of the
Restricted Stock granted pursuant hereto shall vest on each of the first through
fourth annual anniversaries of the Date of Grant.
(c) Upon the consummation of an Extraordinary Transaction (as defined
below) and upon the death of the Grantee, such portion, if any, of the
Restricted Stock that has not vested shall become fully vested.
(d) For purposes of this Agreement, an "Extraordinary Transaction" means an
event as a result of which Stonington Partners, Inc. and its subsidiaries and
affiliates ("Permitted Holders") cease to be the beneficial owners of at least
50% of the common equity of the Corporation on a fully diluted basis, or any
other event as a result of which: (i) the Tag-Along Rights (as defined and set
forth in the Stockholders'
-2-
<PAGE>
Agreement) are triggered; (ii) the Corporation consolidates, enters into a plan
of reorganization with, or merges with or into another corporation or conveys,
transfers or leases all or substantially all of its assets to any person, or
any corporation consolidates with or merges with or into the Corporation, in any
such event pursuant to a transaction in which the outstanding voting common
stock of the Corporation is changed into or exchanged for cash, securities or
other property, other than any such transaction where (A) the outstanding voting
common stock of the Corporation is changed into or exchanged for, in whole or in
part, voting stock of the surviving corporation which is not redeemable capital
stock and (B) the holders of the voting common stock of the Corporation
immediately prior to such transaction own, directly or indirectly, not less
than 50% of the voting stock of the surviving corporation immediately after such
transaction; (iii) at any time, a majority of the members of the Board of
Directors of the Corporation then in office does not consist of (A) individuals
who two years prior to such date were members of the Board of Directors of the
Corporation, (B) new directors whose election to such Board of Directors or
whose nomination for election by the shareholders of the Corporation was
approved by a vote of 66-2/3% of the directors then still in office who were
either directors at the beginning of such two-year period or whose election or
nomination for election was previously ap proved by directors elected or
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<PAGE>
nominated in accordance with this clause (B) and (C) such other directors as
have been nominated or approved by the Permitted Holders; or (iv) the
Corporation is liquidated, dissolved, wound-up or adopts a plan of liquidation.
3. Forfeiture Upon Termination of Service. Except in circumstances and to
the extent specified the Plan or the Stockholders' Agreement, Restricted Stock
which has not yet vested shall be forfeited immediately upon the Grantee's
ceasing to be a full-time employee of, a director of or a consultant to the
Corporation or any of its subsidiaries for any reason; provided that, if the
Grantee ceases to be a full-time employee of, a director of or a consultant to
the Corporation or any of its subsidiaries due to the Grantee's death,
Restricted Stock which has not yet vested shall immediately vest upon the
Grantee's death and shall not be forfeited.
4. Non-Transferability of Restricted Stock. Except in accordance with the
terms of the Stockholders Agreement, the Restricted Stock and this Agreement (i)
may not be assigned, transferred, pledged or hypothecated in any way, (ii) shall
not be assignable by operation of law and (iii) shall not be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of the Restricted Stock contrary to
the provisions hereof shall be null and void and without effect.
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<PAGE>
5. Section 83(b) Election. As a condition to receiving the Restricted
Stock, the Grantee shall, within 30 days after the date hereof, make the
election permitted by Section 83(b) of the Code with respect to the Restricted
Stock, and any comparable election under state or local tax law, and the
Corporation shall assist the Grantee in the completion and timely filing of such
elections.
6. Specific Restrictions Upon Nonvoting Shares. The Grantee hereby agrees
with the Corporation as follows:
(a) the Grantee shall acquire the Nonvoting Shares represented by the
Restricted Stock for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933, as amended (the "Securities Act"), and shall not dispose of any Nonvoting
Shares in any transaction which, in the opinion of counsel to the Corporation,
may violate the Securities Act, or the rules and regulations thereunder, or any
applicable state securities, or "blue sky," laws;
(b) if any Nonvoting Shares shall be registered under the Securities Act,
no public offering (otherwise than on a national securities exchange, as defined
in the Exchange Act) of any Nonvoting Shares shall be made by the Grantee (or
any other person) under such circumstances that he or she (or such
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<PAGE>
other person) may be deemed an underwriter, as defined in the Securities Act;
and
(c) the Corporation shall have the authority to endorse upon the
certificate or certificates representing the Nonvoting Shares such legends
referring to the foregoing restrictions or any other applicable restrictions, as
the Corporation may deem appropriate, including those resulting from the fact
that the Grantee is a party to the Stockholders' Agreement.
7. Termination of Service. The employment, consultancy or directorship of
the Grantee shall not be deemed to have terminated if the Grantee is absent from
such employment, consultancy or directorship by reason of an approved leave of
absence (in accordance with the applicable policy of the Corporation or the
applicable subsidiary) or is transferred to and becomes an employee, consultant
or director of a subsidiary of the Corporation or the Corporation, and, in the
case of a consultant, the expiration of a consulting arrangement without the
prior termination thereof shall not be deemed a termination of such arrangement
(or cessation of being a consultant) for purposes of this Agreement. If a
subsidiary of the Corporation ceases to be such a subsidiary, the employment,
consultancy or directorship, as applicable, of each employee, consultant and
director of such subsidiary who is not an employee, consultant
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<PAGE>
or director of the Corporation or of another (remaining) subsidiary of the
Corporation immediately thereafter shall be deemed to have ceased on the date
such subsidiary ceases to be a subsidiary of the Corporation unless proper
provision is made for the conversion of such Grantee's Nonvoting Shares into
shares of capital stock of the surviving or acquiring company on terms which are
intended to preserve substantially the economic value thereof.
8. Time. Time is of the essence for this Agreement.
9. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their heirs, successors and permitted assigns.
10. THE GRANTEE HEREBY REPRESENTS, WARRANTS AND ACKNOWLEDGES TO THE
CORPORATION THAT THE GRANTEE IS A DIRECTOR OF THE CORPORATION OR A SUBSIDIARY OF
THE CORPORATION AND THAT THE GRANTEE WAS NOT AND IS NOT BEING INDUCED TO ENTER
INTO THIS AGREEMENT BY AN EXPECTATION OF DIRECTORSHIP OR CONTINUED DIRECTORSHIP.
11. Notices. Any notice required or permitted under this Agreement shall be
deemed given when delivered personally, or when deposited in a United States
Post Office as registered mail, postage prepaid, addressed, as appropriate, to
the
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<PAGE>
Grantee at his or her address set forth below or such other address as he or she
may designate in writing to the Corporation, or to the Corporation, c/o
Stonington Partners, Inc., 767 Fifth Avenue, 48th Floor, New York, New York
10153, Attention: Alexis P. Michas or such other address(es) as the Corporation
may designate in writing to the Grantee.
12. Failure to Enforce Not a Waiver. The failure of the Corporation to
enforce at any time any provision of this Agreement shall in no way be construed
to be a waiver of such provision or of any other provision hereof.
13. Governing Law. This Agreement shall be governed by and construed
according to the laws of the State of Delaware, without regard to principles of
conflict of laws.
14. Provisions of Plan. The Restricted Stock provided for herein is granted
pursuant to the Plan, and said Restricted Stock and this Agreement are in all
respects governed by the Plan and subject to all of the terms and provisions
thereof, whether such terms and provisions are incorporated in this Agreement
solely by reference or are expressly cited herein. In the event of any
inconsistency between this Agreement and the Plan, the terms of the Plan shall
govern to the extent of such inconsistency. For greater certainty, without
limiting the generality of the foregoing, the Grantee agrees to be bound by any
amendments to the Plan or this Agreement made
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<PAGE>
by the Compensation Committee of the Board of Directors of the Corporation or
the Board of Directors of the Corporation in accordance with the provisions of
the Plan to conform the Plan or this Agreement to the rules and regulations of
any appropriate regulatory authority or any national securities exchange on
which the Corporation proposes to list or lists any of its shares. From and
after the date, if any, on which any shares of the Corporation are listed on any
national securities exchange and/or subject to the rules and regulations of any
applicable regulatory authority, the terms and conditions of this Agreement and
the implementation thereof shall be subject to the rules and regulations of such
exchange and/or regulatory authority, as the case may be, and, in the event of
any inconsistency between the terms and conditions of this Agreement and the
rules and regulations of any such exchange and/or regulatory authority, as the
case may be, the rules and regulations of such exchange and/or regulatory
authority, as the case may be, shall prevail.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has executed this Agreement in
duplicate on the day and year first above written.
GGS HOLDINGS, INC.
By:_____________________________________
Name:
Title:
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Agreement.
________________________________________
[name]
________________________________________
________________________________________
ADDRESS
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EXHIBIT 10.7
FORM OF
LOAN PORTFOLIO PURCHASE AGREEMENT
by and between
BT COMMERCIAL CORPORATION
and
GOSS GRAPHIC SYSTEMS, INC.
Dated as of October __, 1996
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS....................................................... 1
1.1 Defined Terms............................................... 1
1.2 Accounting Terms and Determinations......................... 4
1.3 Other Terms................................................. 4
2. PURCHASE AND SALE OF ASSETS....................................... 4
2.1 Agreement to Sell and Purchase.............................. 4
2.2 Purchase Price............................................. 5
2.3 No Assumption of Liabilities................................ 6
3. REPRESENTATIONS AND WARRANTIES BY SELLER......................... 6
3.1 Organization, Standing and Qualification................... 6
3.2 Power and Authority to Conduct Business.................... 7
3.3 Execution, Delivery and Performance of Agreement........... 7
3.4 Authority; Right to Sell Purchased Loans................... 7
3.5 Valid and Binding Obligation............................... 7
3.6 Litigation................................................. 7
3.7 Title to Properties........................................ 7
3.8 Lien Priority.............................................. 8
3.9 No Setoffs or Defenses..................................... 8
3.10 Insurance.................................................. 8
3.11 Records.................................................... 8
3.12 Accounting for Purchased Loans............................. 8
3.13 Purchased Loans - Compliance with Applicable Law........... 8
3.14 Purchased Loans - Performance by Rockwell and RGS.......... 9
3.15 Purchased Loans - Absence of Defaults...................... 9
3.16 Purchased Loans - Absence of Disputes...................... 9
3.18 Bulk Sales................................................. 9
3.19 Disclosure................................................. 9
4. REPRESENTATIONS AND WARRANTIES BY PURCHASER...................... 9
4.1 Organization, Standing and Qualification................... 10
4.2 Execution, Delivery and Performance of Agreement........... 10
4.3 Authority.................................................. 10
4.4 Valid and Binding Obligation............................... 10
5. COVENANTS OF SELLER.............................................. 10
5.1 General.................................................... 10
5.2 Conduct in Ordinary Course................................. 10
5.3 Notice of Change........................................... 11
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Page
5.4 Access to Information and Documents........................ 11
5.5 Corporate Resolutions...................................... 11
5.6 Put Right.................................................. 11
5.7 Costs and Expenses......................................... 11
5.8 NYDN Purchase Agreement.................................... 12
6. COVENANTS OF PURCHASER........................................... 12
6.1 General.................................................... 12
6.2 Notice of Change........................................... 12
6.3 Corporate Resolutions...................................... 12
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER............. 12
7.1 Representations and Warranties............................. 12
7.2 Covenants.................................................. 13
7.3 Closing Date............................................... 13
7.4 No Material Adverse Change................................. 13
7.5 Absence of Changes or Events............................... 13
7.6 No Market Impairment....................................... 13
7.7 Terms of Transactions...................................... 13
7.8 Delivery of Documents...................................... 13
7.9 Opinion of Counsel......................................... 13
7.10 Consents................................................... 14
7.11 Litigation................................................. 14
7.12 Due Diligence Investigation................................ 14
7.13 Service and Remarketing Agreement.......................... 14
7.14 Seller Hersant Guaranty.................................... 14
7.15 Seller Principal Guaranty.................................. 14
7.16 Seller Principal Letter of Credit.......................... 14
7.17 Seller Interest Guaranty................................... 14
7.18 Seller Interest Letter of Credit........................... 15
7.19 Rockwell Guaranty.......................................... 15
7.20 Payment of Fees and Expenses............................... 15
7.21 Consummation of Acquisition of RGS......................... 15
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER................ 15
8.1 Representations and Warranties............................. 15
8.2 Covenants.................................................. 15
8.3 Litigation................................................. 15
8.4 Consents................................................... 16
8.5 Consummation of Acquisition of RGS......................... 16
9. CLOSING.......................................................... 16
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Page
9.1 Closing; Closing Date...................................... 16
9.2 Deliveries by Seller at Closing............................ 16
9.3 Purchaser's Deliveries at Closing.......................... 17
10. ADDITIONAL COMMITMENTS............................................ 17
10.1 General..................................................... 17
10.2 Notices to Debtors.......................................... 17
10.3 Payments Received by Seller................................. 17
10.4 Communications Received by Seller........................... 17
11. INDEMNIFICATION................................................... 18
11.1 Survival of Representations and Warranties.................. 18
11.2 Indemnification of Purchaser by Seller...................... 18
11.3 Matters Involving Third Parties............................. 18
11.4 Indemnification Sole Remedy................................. 19
11.5 Certain Limitations......................................... 20
12. GENERAL PROVISIONS................................................ 20
12.1 Notices..................................................... 20
12.2 Integration: Amendment...................................... 21
12.3 Waiver...................................................... 21
12.4 Binding Effect of Agreement................................. 21
12.5 Headings.................................................... 22
12.6 Counterparts................................................ 22
12.7 Public Announcements........................................ 22
12.8 Governing Law............................................... 22
12.9 SUBMISSION TO JURISDICTION.................................. 22
12.10 JURY TRIAL.................................................. 22
12.11 Delays...................................................... 22
12.12 Severability................................................ 22
SIGNATURE PAGE ......................................................... 22
EXHIBITS
EXHIBIT 7.9 Form of Opinion of Counsel
EXHIBIT 7.14 Form of Seller Hersant Guaranty
EXHIBIT 7.15 Form of Seller Principal Guaranty
EXHIBIT 7.17 Form of Seller Interest Guaranty
EXHIBIT 7.19 Form of Rockwell Guaranty
EXHIBIT 9.2(a) Form of Bill of Sale
EXHIBIT 10.2 Form of Notice of Assignment
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SCHEDULES
SCHEDULE 2.1(a) Purchased Loans
SCHEDULE 2.1(b) Purchased Equipment
SCHEDULE 3.6 Litigation Involving Purchased Assets
SCHEDULE 3.8 Liens
SCHEDULE 3.9 Setoffs and Defenses
SCHEDULE 3.14 Purchased Loans Performance Exceptions
SCHEDULE 3.15 Purchased Loan Defaults
SCHEDULE 3.16 Purchased Loan Disputes
iv
<PAGE>
LOAN PORTFOLIO PURCHASE AGREEMENT
This Loan Portfolio Purchase Agreement ("Agreement") is made and
entered into as of October __ , 1996, by and between BT Commercial Corporation,
a Delaware corporation ("Purchaser"), and Goss Graphic Systems, Inc., a Delaware
corporation ("Seller").
Recitals
WHEREAS, in connection with the sale of the stock and/or assets of the
Rockwell Graphic Systems business unit ("RGS") of Rockwell International
Corporation, a Delaware corporation ("Rockwell"), to Seller, Seller wishes to
effect a sale of a portfolio of loans of RGS, and associated instruments,
agreements, documents and collateral, all as more particularly described below,
arising from the sale of printing and like equipment in the conduct of RGS'
business.
WHEREAS, Seller desires to sell and Purchaser desires to purchase such
loans and certain other related assets of Seller.
WHEREAS, Purchaser, Seller and Rockwell desire to effect such purchase
and such sale on the terms and subject to the conditions contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
the adequacy of which are hereby acknowledged, Purchaser and Seller hereby agree
as follows:
1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms
shall have the following meanings:
"Agreement" has the meaning assigned in the introductory
paragraph hereto.
"Closing" shall mean the consummation and effectiveness of the
purchase and sale of the Purchased Assets upon satisfaction of the conditions
set forth in Section 9 of this Agreement.
"Commitment Letter" has the meaning assigned in Section 5.7 of
this Agreement.
<PAGE>
"Damages" has the meaning assigned in Section 11.2 of this
Agreement.
"GAAP" means generally accepted accounting principles in the
United States as in effect from time to time.
"Hersant Affiliates" means Robert Hersant, the estate of Robert
Hersant and any other successors, assigns or heirs of Robert Hersant, Socpresse,
S.A., Serpo, Presse Ocean, and any affiliates of any of the foregoing.
"Hersant Loans" has the meaning assigned in Section 7.14 of this
Agreement.
"Indemnified Party" has the meaning assigned in Section 11.2 of
this Agreement.
"Indemnifying Party" has the meaning assigned in Section 11.3(a)
of this Agreement.
"Liability" has the meaning assigned in Section 2.3 of this
Agreement.
"Maintenance Services" has the meaning assigned in the Service
and Remarketing Agreement.
"Non-Performing Purchased Loans" means those Purchased Loans
reflected as such on the Records as maintained by RGS; i.e. those Purchased
Loans as to which any payment of principal, interest or other amounts payable
with respect thereto by the obligors is 90 days or more past due.
"NYDN Agreement" means the Sales and Purchase Agreement pursuant
to which the NYDN Loans were created.
"NYDN Interest" has the meaning assigned in Section 7.17 of this
Agreement.
"NYDN Loan" means the Purchased Loan the obligor with respect to
which is Daily News, L.P.
"NYDN Termination Date" means the earlier of (I) the occurrence
of Completion (as defined in the NYDN Agreement) on or before April 15, 1997 (as
the same may be extended due to Force Majeure (as defined in the NYDN
Agreement)), or (II) June 30, 1997.
2
<PAGE>
"Portugal Equipment" has the meaning assigned in Section 5.6 of
this Agreement.
"Portugal Put Price" has the meaning assigned in Section 5.6 of
this Agreement.
"Portugal Put Right" has the meaning assigned in Section 5.6 of
this Agreement.
"Portugal Loans" has the meaning assigned in Section 5.6 of this
Agreement.
"Purchase Price" has the meaning assigned in Section 2.2 of this
Agreement.
"Purchased Assets" has the meaning assigned in Section 2.1 of
this Agreement.
"Purchased Loans" has the meaning assigned in Section 2.1(a) of
this Agreement.
"Purchased Equipment" has the meaning assigned in Section 2.1(b)
of this Agreement.
"Purchaser" has the meaning assigned in the introductory
paragraph hereto.
"Records" has the meaning assigned in Section 2.1(d) of this
Agreement.
"Remarketing Services" has the meaning assigned in the Service
and Remarketing Agreement.
"RGS" has the meaning assigned in the recitals to this Agreement.
"Rockwell" has the meaning assigned in the introductory paragraph
hereto.
"Rockwell Agreement" means that certain Agreement Regarding Loan
Portfolio, dated as of even date herewith, entered into between Purchaser and
Rockwell.
"Rockwell Guaranty" has the meaning assigned in Section 7.19 of
this Agreement.
3
<PAGE>
"Seller" has the meaning assigned in the introductory paragraph
hereto.
"Seller Hersant Guaranty" has the meaning assigned in Section
7.14 of this Agreement.
"Seller Interest Guaranty" has the meaning assigned in Section
7.17 of this Agreement.
"Seller Interest Letter of Credit" has the meaning assigned in
Section 7.18 of this Agreement.
"Seller Principal Guaranty" has the meaning assigned in Section
7.15 of this Agreement.
"Seller Principal Letter of Credit" has the meaning assigned in
Section 7.16 of this Agreement.
"Service and Remarketing Agreement" has the meaning assigned in
Section 7.13 of this Agreement.
"Sunny" has the meaning assigned in Section 7.15 of this
Agreement.
"Sunny Interest" has the meaning assigned in Section 7.17 of this
Agreement.
"Sunny Loans" has the meaning assigned in Section 7.15 of this
Agreement.
"Third Party Claim" has the meaning assigned in Section 11.3(a)
of this Agreement.
1.2 Accounting Terms and Determinations. Unless otherwise defined or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP, applied on a consistent basis in all material respects.
1.3 Other Terms. Each of the words "hereof," "herein," and
"hereunder" refer to this Agreement as a whole. References to Sections,
Schedules and Exhibits are internal references to this Agreement and to its
attachments, unless otherwise specified.
2. PURCHASE AND SALE OF ASSETS
4
<PAGE>
2.1 Agreement to Sell and Purchase. On the terms and subject to the
conditions contained herein, Seller shall sell, transfer, convey, assign and
deliver to Purchaser, and Purchaser shall purchase, at the Closing, the
following assets of Seller (collectively, the "Purchased Assets"), it being the
intention of Seller and Purchaser that Purchaser acquire the Purchased Assets
and all incidents of ownership, subject to the terms of this Agreement:
(a) Purchased Loans. All of the loans, purchase contracts, sales
contracts, and associated guaranties, instruments, agreements and
documents (but excluding any currency hedge agreements, interest rate
swap agreements or like contracts or agreements, including, without
limitation, the currency hedge agreements entered into by RGS or
Rockwell in connection with the loan transactions the obligors with
respect to which are any of the Hersant Affiliates) arising from the
sale of printing and like equipment and outstanding as of February 29,
1996, together with such additional loans entered into by RGS with the
prior consent of Purchaser from March 1, 1996 through and including
the close of business on the day preceding the Closing, and together
with all rights to accrued interest (irrespective of when accrued),
all as listed, or respecting the transactions referenced, on Schedule
2.1(a) (collectively, the "Purchased Loans");
(b) Equipment. All right, title and interest of Seller in and to
the equipment the sale of which was financed by Purchased Loans and/or
is collateral security for Purchased Loans, together with all other
collateral security for the Purchased Loans, and together with all
equipment and other collateral security acquired or repossessed by or
on behalf of Rockwell or RGS between March 1, 1996 and the Closing and
owned or held by Seller at the Closing, and together with the computer
hardware employed by RGS in the administration of the Purchased Loans
prior to the Closing, all as described on Schedule 2.1(b)
(collectively, the "Purchased Equipment");
(c) Other Intangible Personal Property. All other intangible
personal property of Seller respecting or associated with the
Purchased Loans or the Purchased Equipment, including, without
limitation, choses in action, claims, judgments, and other rights
against all obligors, including guarantors and other third parties,
obligated under or with respect to any of the Purchased Loans, and
RGS' and Seller's rights as licensees with respect to the computer
software employed by RGS prior to the Closing in the administration of
the Purchased Loans; and
(d) Records. All books, correspondence, files, lists, records,
reports, studies and other printed, written, electronic or other
materials and information of Seller solely relating to or constituting
material information respecting the Purchased Assets ("Records").
5
<PAGE>
2.2 Purchase Price. In consideration of the sale, transfer,
conveyance, assignment and delivery of the Purchased Assets by Seller to
Purchaser, Purchaser shall pay Seller the amount (the "Purchase Price")
calculated as:
(a) $163,682,460 (or such other amount as may be mutually agreed
upon by Rockwell, Seller and Purchaser to take into account any
increases or decreases in the principal amount of any Purchased Loan
effected through a restructuring of such Purchased Loan by RGS between
March 1, 1996 and the Closing (other than the restructuring of the
Purchased Loans the obligor with respect to which is Gowe, Inc.), and
any of such restructuring shall be effected only with the prior
consent of Purchaser; plus
(b) the principal amount of all additional loans entered into
with the prior consent of Purchaser from March 1, 1996 through and
including the close of business on the day preceding the Closing; plus
(c) the amount of all accrued and unpaid interest exclusive of
accrued interest on any of the Non-Performing Purchased Loans; minus
(d) all reductions in the aggregate unpaid principal balance of
the Purchased Loans from March 1, 1996 through and including the
Closing, whether resulting from the receipt of regularly scheduled
installments of principal on the Purchased Loans, partial installments
of principal on the Purchased Loans or partial or full prepayment
(whether the prepayment is the result of the liquidation of the
collateral securing the Purchased Loans or otherwise).
The Purchase Price shall be calculated as of the close of business on the
business day immediately preceding the Closing.
2.3 No Assumption of Liabilities. Purchaser is not assuming any
Liability (as hereinafter defined) of Seller other than the obligation of Seller
under the loan documents relating to the Purchased Loans to respect the right of
the obligors thereunder to quiet enjoyment of the printing equipment the
acquisition of which was financed by the Purchased Loans.
As used herein, the term "Liability" means any liability (whether
known or unknown, whether or nor asserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated and whether due
or to become due).
3. REPRESENTATIONS AND WARRANTIES BY SELLER. Seller represents and
warrants to Purchaser as follows:
6
<PAGE>
3.1 Organization, Standing and Qualification. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Seller is not required to be qualified as a foreign
corporation in any state where the failure to be so qualified would individually
or in the aggregate have a material adverse effect on the financial condition,
results of operations or business of Seller.
3.2 Power and Authority to Conduct Business. Seller has all requisite
corporate power and authority, and is entitled, to conduct its business and to
own and to lease its assets.
3.3 Execution, Delivery and Performance of Agreement. None of the
execution, the delivery and the performance of this Agreement by Seller will,
with or without the giving of notice or the passage of time, or both, conflict
with, result in a default, right to accelerate or loss of rights under, or
result in the creation of any claim, lien or encumbrance pursuant to, (a) the
certificate of incorporation or the bylaws of Seller, (b) any agreement to which
the Seller is a party or by which the Seller or, to Seller's knowledge, any of
the Purchased Assets are bound, (c) any law or any regulation by which the
Seller or, to Seller's knowledge, any of the Purchased Assets are bound, (d) any
decree, injunction, judgment or order by which the Seller or, to Seller's
knowledge, any of the Purchased Assets are bound, or (e) any other governmental
restriction by which Seller or, to Seller's knowledge, the Purchased Assets are
bound, except for such violations, conflicts, breaches, defaults, claims, liens,
or encumbrances which individually or in the aggregate would not reasonably be
likely to materially and adversely affect the Purchased Assets or the
Purchaser's rights and benefits with respect thereto. Seller is not required to
provide any notice to, or make any filing with, or to obtain the approval or the
consent of any government or any governmental agency with respect to the
Seller's execution, delivery and performance of this Agreement and the other
agreements, instruments and transactions contemplated hereby.
3.4 Authority; Right to Sell Purchased Loans. Seller has the full
right, power and authority to execute and to deliver this Agreement and to
perform its obligations hereunder and all corporate proceedings required to be
taken to duly authorize the execution, delivery and performance of this
Agreement by Seller have been or will be properly taken.
3.5 Valid and Binding Obligation. Each of this Agreement and the
other documents to be executed and delivered by Seller in connection herewith
constitutes the valid and binding obligation of Seller, enforceable against
Seller in accordance with its respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, now or hereafter in effect, relating to or affecting the
enforcement of creditors' rights generally, and except that the remedy of
specific performance and other equitable remedies are subject to judicial
discretion.
3.6 Litigation. To Seller's knowledge, except as set forth on
Schedule 3.6, there is no action or proceeding relating to the Purchased Assets
or the transactions
7
<PAGE>
contemplated by this Agreement which would individually or in the aggregate be
reasonably likely to materially and adversely affect the Purchased Assets or the
Purchaser's rights and benefits with respect thereto.
3.7 Title to Properties. Seller has good and marketable title to all
of the Purchased Assets, except for such defects which, individually or in the
aggregate, would not reasonably be likely to materially and adversely affect the
Purchased Assets or the Purchaser's rights and benefits with respect thereto.
The instruments and the documents relating to the Purchased Loans were purchased
by Seller from Rockwell and RGS. To Seller's knowledge, each of the Purchased
Loans is valid, genuine, and enforceable in accordance with its terms against
the obligor thereunder, bears the authentic signature of the obligor thereunder,
and is in the possession of Seller or Seller's bailee. Upon consummation of the
transactions contemplated hereby, none of the Purchased Assets will be subject
to any claim, lien or encumbrance and Purchaser will acquire all of the right,
title and interest of Seller in and to the Purchased Loans, except for such
claims, liens or encumbrances which, individually or in the aggregate, would not
reasonably be likely to materially and adversely affect the Purchased Assets or
the Purchaser's rights and benefits with respect thereto.
3.8 Lien Priority. To Seller's knowledge, except as set forth on
Schedule 3.8, the security interest and lien securing each Purchased Loan is a
valid and subsisting first lien on the collateral described in the associated
loan documents and such collateral security is free and clear of all
encumbrances and liens having priority over the first lien and security interest
securing such Purchased Loan.
3.9 No Setoffs or Defenses. To Seller's knowledge, except as set
forth on Schedule 3.9, none of the Purchased Loans is subject to any right of
rescission, setoff, counterclaim or defense, and no such right of rescission,
setoff, counterclaim or defense has been asserted with respect thereto.
3.10 Insurance. To Seller's knowledge, the collateral security for
each Purchased Loan is insured against loss and damage by fire and such other
hazards as is customary and prudent based upon industry standard practices. To
Seller's knowledge, RGS and its successors and assigns are named as loss-payees
under a lender's form loss-payable endorsement under each such policy of
insurance.
3.11 Records. To Seller's knowledge, the Records accurately and
completely reflect in all material respects the documents relating to each
Purchased Loan, including the complete and accurate locations and descriptions
of the Purchased Equipment and any notices, amendments and defaults. To Seller's
knowledge, the principal balances, accrued and unpaid interest, and the current
and future payment obligations of obligors under the Purchased Loans are
accurately reflected in the Records. To Seller's knowledge, except as reflected
in the Records relating to the Purchased Loans, none of the Purchased Loans has
been altered, amended, modified or terminated.
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3.12 Accounting for Purchased Loans. To Seller's knowledge, the
Records accurately and completely reflect in all material respects the payment
history and present balances of unpaid principal and interest receivable as to
each Purchased Loan.
3.13 Purchased Loans - Compliance with Applicable Law. To Seller's
knowledge, none of the Purchased Loans constitutes a consumer credit or a
consumer loan within the meaning of the federal Truth-in-Lending Act or any
state consumer credit statute or regulation and, to Seller's knowledge, all of
the Purchased Loans were made in compliance in all material respects with all
applicable federal, state, local, and foreign laws and regulations.
3.14 Purchased Loans - Performance by Rockwell and RGS. To Seller's
knowledge, except as set forth on Schedule 3.14, Rockwell and RGS have timely
and fully performed all of their obligations in connection with the Purchased
Loans. To Seller's knowledge, all costs, expenses and fees incurred in making,
creating, filing and/or recording the Purchased Loans have been paid.
3.15 Purchased Loans - Absence of Defaults. To Seller's knowledge,
except as set forth in Schedule 3.15, no payment defaults have occurred with
respect to any Purchased Loan.
3.16 Purchased Loans - Absence of Disputes. To Seller's knowledge,
except as set forth in Schedule 3.16, none of the obligors on the Purchased
Loans have notified Rockwell or RGS of any disputes with respect to any of the
Purchased Loans, including, without limitation, any claim of offset or defense
to its obligations and such Purchased Loan. To Seller's knowledge, except as set
forth in Schedule 3.16, Seller has no knowledge of any event which could result
in such a dispute.
3.17 Payment and Disclosure of all Excise, Use, Sales and Other Taxes.
To Seller's knowledge, all excise, use, sales and other taxes, charges, fees and
the like obligations respecting the Purchased Assets have been paid through the
Closing and Seller has delivered or caused to be delivered to Purchaser an
accounting of all such items, including a list of all such items as are payable
on a recurring basis and will be payable after the Closing.
3.18 Bulk Sales. The transactions contemplated by this Agreement are
not subject to compliance with the bulk sales provisions of the Uniform
Commercial Code as in effect in any jurisdiction.
3.19 Disclosure. No representation or warranty by Seller contained
herein nor information furnished or to be furnished by Seller in connection
herewith contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements were made. The foregoing
representation
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and warranty set forth in this Section 3.19 is qualified as made to the Seller's
knowledge to the extent, but only to the extent, that the representations and
warranties set forth in this Agreement are expressly qualified as being made
subject to the Seller's knowledge.
4. REPRESENTATIONS AND WARRANTIES BY PURCHASER. Purchaser represents and
warrants to Seller and Rockwell as follows:
4.1 Organization, Standing and Qualification. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified as a foreign corporation under
the laws of the State of California.
4.2 Execution, Delivery and Performance of Agreement. None of the
execution, the delivery and the performance of this Agreement by Purchaser will
conflict with, result in a default, right to accelerate or loss of rights under,
or result in the creation of any claim, any lien or any encumbrance pursuant to,
(a) the certificate of incorporation or the bylaws of Purchaser, (b) any
agreement to which the Purchaser is a party or by which the Purchaser is bound,
(c) any law or any regulation by which the Purchaser is bound, (d) any decree,
injunction, judgment or order by which the Purchaser is bound, or (e) any other
governmental restriction by which Purchaser is bound. Purchaser is not required
to provide any notice to, or make any filing with, or to obtain the approval or
the consent of any government or any governmental agency with respect to the
Purchaser's execution, delivery and performance of this Agreement and the other
agreements, instruments and transactions contemplated hereby.
4.3 Authority. Purchaser has the full power and authority to execute
and deliver this Agreement and to perform its obligations hereunder and all
corporate proceedings required to be taken to duly authorize the execution,
delivery and performance of this Agreement by Purchaser have been properly
taken.
4.4 Valid and Binding Obligation. Each of this Agreement and the
other documents to be executed and delivered by Purchaser in connection herewith
constitutes the valid and binding obligation of Purchaser, enforceable against
Purchaser in accordance with its respective terms, except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws, now or hereafter in effect, relating to or affecting the
enforcement of creditors' rights generally, and except that the remedy of
specific performance and other equitable remedies are subject to judicial
discretion.
5. COVENANTS OF SELLER. Seller covenants and agrees as follows:
5.1 General. Seller shall take all such actions and do all things as
may be reasonably appropriate or advisable: (i) to assure that the
representations and the warranties of Seller set forth herein will be accurate
and complete as of the Closing and that all
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covenants and conditions precedent of Seller set forth in this Agreement
which are required to be performed by it at or prior to the Closing shall have
been performed at or prior to the Closing as provided in this Agreement; and
(ii) to consummate and make effective the transactions contemplated by this
Agreement.
5.2 Conduct in Ordinary Course. Seller shall confirm that prior to
the Closing, Rockwell and RGS: (a) conduct the business of RGS only in the
ordinary course of business and consistent with prior custom and practice and
shall not make any loan without the prior consent of Purchaser; (b) keep
available to Purchaser the services of the officers, the employees and the
agents of RGS reasonably necessary to effect the transactions contemplated
hereby; and (c) use reasonable efforts to cooperate with Purchaser and assist
Purchaser in obtaining the consent of any party where the consent of such party
is deemed necessary by Purchaser by reason of the transactions contemplated
hereby.
5.3 Notice of Change. Seller, upon obtaining actual knowledge, shall
provide Purchaser prompt written notice of any material change in any of the
information contained in any representation and any warranty by Seller hereunder
which occurs prior to the Closing.
5.4 Access to Information and Documents. Upon reasonable notice and
during regular business hours, Seller will give Purchaser and its
representatives full access to its personnel and all Records, any other books
and records relating to any of the Purchased Assets, and such other information
with respect to the Purchased Assets as Purchaser may from time to time
reasonably request, other than items withheld because of terms of
confidentiality agreements; provided, however, that access to such books,
records, documents and other information shall not unreasonably interfere with
the normal operations of Seller and its subsidiaries and affiliates.
5.5 Corporate Resolutions. At or prior to the Closing, Seller will
deliver to Purchaser a copy of the corporate resolutions of Seller approving the
execution and the delivery of this Agreement and the consummation of all of the
transactions contemplated hereby, duly certified by an officer of Seller.
5.6 Put Right. Seller hereby agrees that with respect to the
Purchased Equipment (the "Portugal Equipment") securing the Purchased Loans the
obligor with respect to which is Mirandela Artes Grafias S.A. (the "Portugal
Loans"), Purchaser may, after foreclosure upon the Portugal Equipment by
Purchaser at any time after the Closing and after ten (10) days prior written
notice by Purchaser to Seller, put to Seller for purchase by Seller (the
"Portugal Put Right") the Portugal Equipment for a purchase price equal to
$4,000,000 (the "Portugal Put Price"). Seller shall then have the right to sell
and otherwise remarket the Portugal Equipment, and in any event shall pay to
Purchaser in immediately available funds the full amount of the Portugal Put
Price on the earlier of (i) the sale or other remarketing of the Portugal
Equipment or any portion thereof, and (ii) the first anniversary of the exercise
by Purchaser of the Portugal Put Right irrespective of whether Seller has
succeeded in selling
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or remarketing the Portugal Equipment. In connection with the exercise of the
Portugal Put Right, Purchaser shall execute and deliver to Seller such bills of
sale, assignments and other sale and conveyancing instruments as Seller may
reasonably request to effect the transfer of title to Seller of the Portugal
Equipment.
5.7 Costs and Expenses. At or prior to the Closing, Seller shall
reimburse Purchaser for all reasonable costs and expenses including, without
limitation, (i) the fees, disbursements and other reasonable charges of
attorneys and paralegals, (ii) reasonable out-of-pocket expenses of Purchaser's
personnel, (iii) other legal, appraisal, valuation, title, audit, consulting,
search and filing fees, all as incurred by Purchaser or any of its affiliates in
connection with (x) the negotiation, preparation, review, execution, delivery,
collection and enforcement of the commitment letter and the term sheet dated
April 29, 1996 issued by Purchaser with reference hereto (the "Commitment
Letter"), the Service and Remarketing Agreement, and this Agreement, and (y) the
completion of Purchaser's verification of the existence of the Purchased
Equipment securing the Purchased Loans.
5.8 NYDN Purchase Agreement. Seller agrees that from and after the
Closing, the NYDN Agreement and the related agreements, to the extent Seller has
assumed or otherwise become obligated or entitled to rights and benefits
thereunder, shall not be amended or modified in any respect material to the
rights, benefits and obligations, including contingent rights and liabilities,
of Purchaser without Purchaser's prior written consent.
6. COVENANTS OF PURCHASER. Purchaser covenants and agrees as follows:
6.1 General. Purchaser shall take all such actions and do all things
as may be reasonably appropriate or desirable: (i) to assure that the
representations and the warranties of Purchaser set forth herein will be
accurate and complete as of the Closing and that all covenants of Purchaser set
forth in this Agreement which are required to be performed by it at or prior to
the Closing shall have been performed at or prior to the Closing as provided in
this Agreement; and (ii) to consummate and make effective the transactions
contemplated by this Agreement.
6.2 Notice of Change. Purchaser, upon obtaining actual knowledge,
shall provide Seller and Rockwell prompt written notice of any material change
in any of the information contained in any representation and any warranty of
Purchaser contained herein which occurs prior to the Closing.
6.3 Corporate Resolutions. At or prior to the Closing, Purchaser will
deliver to Seller a copy of the corporate resolutions of Purchaser approving the
execution and the delivery of this Agreement and the consummation of all of the
transactions contemplated hereby, duly certified by an officer of Purchaser.
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7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. The obligation of
Purchaser hereunder to purchase the Purchased Assets is subject to the
fulfillment of each of the following conditions at or prior to the Closing:
7.1 Representations and Warranties. All representations and all
warranties of Seller herein, of Rockwell under the Rockwell Agreement, or of
Seller or Rockwell in any document executed and delivered in connection herewith
or therewith shall be accurate and correct in all material respects on and as of
the Closing with the same force and effect as though all such representations
and warranties had been made on and as of such date, except (i) to the extent
such representations and warranties are by their express provisions made as of a
specific date, which need be true and correct only as of such date, and (ii) for
the effect of any activities or transactions which are contemplated by this
Agreement or the Rockwell Agreement.
7.2 Covenants. All covenants and all other obligations required by
this Agreement or the Rockwell Agreement to be performed by Seller or Rockwell
at or before the Closing shall have been duly and properly performed in all
material respects.
7.3 Closing Date. The Closing shall have occurred on or before
October 15, 1996.
7.4 No Material Adverse Change. There shall not have occurred a
change, which the Purchaser reasonably believes to be material and adverse, in
the financial condition or performance of the Purchased Assets from March 1,
1996 to the Closing.
7.5 Absence of Changes or Events. Since February 29, 1996, the
business of RGS shall have been conducted only in the ordinary course of
business and in accordance with prior custom and practice and RGS shall not have
instituted, settled or agreed to settle any action or any proceeding before any
court or governmental agency relating in any material respect to the Purchased
Assets.
7.6 No Market Impairment. There shall not have occurred a substantial
impairment of the financial markets generally, which in the reasonable opinion
of Purchaser, has materially and adversely affected the funding of the purchase
of the Purchased Assets.
7.7 Terms of Transactions. The terms, conditions and structure of all
aspects of the Sale and of the sale by Rockwell to Seller of the stock and
assets of RGS shall be as in effect as of August 8, 1996, or, if amended,
supplemented or otherwise modified, as are reasonably satisfactory to Purchaser
and its counsel.
7.8 Delivery of Documents. Seller and Rockwell shall have executed
and delivered, or caused to be executed and delivered, to Purchaser this
Agreement, the Rockwell Agreement, the Service and Remarketing Agreement, the
Seller Principal Guaranty, the Seller Interest Guaranty, the Seller Hersant
Guaranty, the Seller Principal Letter of Credit, the
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Seller Interest Letter of Credit, the Rockwell Guaranty, an agreement between
Purchaser and Seller as to employment of mutually acceptable personnel with
respect to the administration of the Purchased Assets, and the other documents,
instruments and agreements contemplated hereby, each in form and substance
reasonably acceptable to Purchaser.
7.9 Opinion of Counsel. Purchaser shall have received an opinion of
Seller's counsel, dated the date of the Closing substantially in the form of
Exhibit 7.9.
7.10 Consents. All government and third party consents, filings,
and/or approvals necessary or advisable for the transactions contemplated hereby
shall have been received.
7.11 Litigation. There shall be no pending litigation, proceeding,
inquiry or other action which would be reasonably likely to result in an
injunction or other restraining order, material damages or other relief with
respect to the transactions contemplated hereby.
7.12 Due Diligence Investigation. Purchaser shall have completed its
verification of the existence of substantially all of the Purchased Equipment
securing the Purchased Loans and shall have been provided access, on the same
basis provided up to August 7, 1996, to all books, records and other information
respecting the Purchased Assets as the Purchaser deems necessary, including any
books, records and other information which is the subject of confidentiality
agreements.
7.13 Service and Remarketing Agreement. Seller and Purchaser shall
enter into an agreement (the "Service and Remarketing Agreement") providing for
warranty, maintenance and repair services and remarketing assistance with
respect to the Purchased Equipment securing the Purchased Loans and indemnifying
Purchaser against damages and claims arising from the use, operation or
ownership of the Equipment by the end-users thereof, or arising from the mere
nominal ownership of the Purchased Equipment by Purchaser, all on terms
reasonably acceptable to Purchaser and Seller.
7.14 Seller Hersant Guaranty. Seller shall have executed and
delivered to Purchaser a guaranty (the "Seller Hersant Guaranty") respecting the
Purchased Loans the obligors with respect to which are any of the Hersant
Affiliates (the "Hersant Loans") substantially identical in form and substance
to Exhibit 7.14.
7.15 Seller Principal Guaranty. Purchaser shall have received a
guaranty (the "Seller Principal Guaranty") executed and delivered by Seller
guaranteeing a portion of the principal balance of the Purchased Loans the
obligor with respect to which is Sunny Industries, Inc. ("Sunny") (the "Sunny
Loans") substantially identical in form and substance to Exhibit 7.15.
7.16 Seller Principal Letter of Credit. Purchaser shall have received
a letter of credit (the "Seller Principal Letter of Credit") for the account of
Seller and for the benefit
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of Purchaser, securing the Seller Principal Guaranty, issued by a bank
reasonably satisfactory to Purchaser and in form and substance reasonably
satisfactory to Purchaser.
7.17 Seller Interest Guaranty. Purchaser shall have received a
guaranty (the "Seller Interest Guaranty") executed and delivered by Seller
guaranteeing the payment of interest, accrued after the Closing, on the Sunny
Loans (the "Sunny Interest") and one half (1/2) of the interest, accrued after
the Closing on the NYDN Loans (the "NYDN Interest") substantially identical in
form and substance to Exhibit 7.17.
7.18 Seller Interest Letter of Credit. Purchaser shall have received
a letter of credit (the "Seller Interest Letter of Credit") issued for the
account of Seller and for the benefit of Purchaser, in an amount mutually
acceptable to Seller and Purchaser, issued by a bank reasonably satisfactory to
Purchaser and otherwise in form and substance reasonably satisfactory to
Purchaser, securing the obligations of Seller under the Seller Interest Guaranty
with respect to and to the extent of the NYDN Interest.
7.19 Rockwell Guaranty. Rockwell shall have executed and delivered to
Purchaser a guaranty (the "Rockwell Guaranty") of one-half (1/2) of the
regularly scheduled unpaid interest on the NYDN Loan which both accrued and is
payable to Purchaser during the period commencing on the Closing and ending on
the NYDN Termination Date substantially identical in form and substance to
Exhibit 7.19.
7.20 Payment of Fees and Expenses. Purchaser shall have received
payment in full of all fees and reimbursable expenses payable to Purchaser by
the Seller on or prior to the Closing.
7.21 Consummation of Acquisition of RGS. The acquisition by Seller of
the stock and/or assets of RGS shall have been consummated or shall be
consummated on a substantially contemporaneous basis.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER. The obligation of
Seller to sell to Purchaser the Purchased Assets is subject to the fulfillment
of each of the following conditions at or prior to the Closing:
8.1 Representations and Warranties. All representations and all
warranties of Purchaser herein or in any document executed and delivered in
connection herewith shall be accurate and correct in all material respects on
and as of the Closing with the same force and effect as though all such
representations and warranties had been made on and as of such date, except (i)
to the extent such representations and warranties are by their express
provisions made as of a specific date, which need be true and correct only as of
such date, and (ii) for the effect of any activities or transactions which are
contemplated by this Agreement.
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8.2 Covenants. All covenants and all other obligations required by
this Agreement to be performed by Purchaser at or before the Closing shall have
been duly and properly performed in all material respects.
8.3 Litigation. There shall be no pending litigation, proceeding,
inquiry or other action which would be reasonably likely to result in an
injunction or other restraining order, material damages or other relief with
respect to the transactions contemplated hereby.
8.4 Consents. All government and third party consents, filings,
and/or approvals necessary or advisable for the transactions contemplated hereby
shall have been received.
8.5 Consummation of Acquisition of RGS. The acquisition by Seller of
the stock and/or assets of RGS shall have been consummated or shall be
consummated on a substantially contemporaneous basis.
9. CLOSING.
9.1 Closing; Closing Date. The Closing shall take place
contemporaneously with and at the location of the closing of the acquisition by
Seller of the stock and/or assets of RGS or on such other date, at such other
time and at such other place as Seller and Purchaser may agree.
9.2 Deliveries by Seller at Closing. At the Closing, Seller and RGS
will deliver to Purchaser:
(a) Bill of Sale. A Bill of Sale duly executed by Seller
substantially in the form of Exhibit 9.2(a).
(b) Other Transfer Documents. Such other documents and
instruments, including, without limitation, Uniform Commercial Code
Financing Statement Assignments executed by Seller and RGS respecting the
collateral security for the Purchased Loans, assignments, and endorsements,
all in form and in substance reasonably satisfactory to Purchaser, and all
as may be reasonably requested by Purchaser to vest in Purchaser good and
marketable title to the Purchased Assets.
(c) Records. All Records with respect to the Purchased Assets,
delivered to the offices of Purchaser and/or to designee(s) of Purchaser,
together with a report, current as of the Closing, respecting all
Non-Performing Purchased Loans; provided that such condition as to delivery
of the Records may be satisfied by Seller if: (i) it causes to be so
delivered to Purchaser the executed originals of such of the Records as
constitute chattel paper and the originals of the UCC filings, other lien
filings, guaranties and similar instruments material to the value or
enforcement of the
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subject Purchased Loans; (ii) all of the remaining Records are delivered to
Purchaser within five (5) business days following the Closing; and (iii)
Rockwell shall have agreed in writing to provide Purchaser with reasonable
access during such five (5) business day period to the premises at which
are located such remaining Records.
(d) Letter Directing Rockwell. A letter of direction,
acknowledged and agreed to by Rockwell, directing Rockwell to cooperate
with Purchaser in the same manner Seller undertakes to cooperate with
Purchaser subsequent to the Closing pursuant to Sections 10.1 - 10.3
hereof.
(e) Notices to Debtors. A notice of assignment, executed by Goss
(as the successor to RGS) and Rockwell jointly, notifying each debtor
of the assignment of its Purchased Loan to Purchaser. Such notice shall be
in the form of Exhibit 9.2(e).
(f) Other Required Documents. All other documents, instruments
and agreements required to be delivered by Seller to Purchaser hereunder.
9.3 Purchaser's Deliveries at Closing. At the Closing, Purchaser
shall deliver to Seller:
(a) Payment. The payment required by Section 2.2 in immediately
available funds by wire transfer to an account specified by Seller.
(b) Other Required Documents. All documents, instruments and
agreements required to be delivered by Purchaser to Seller hereunder.
10. ADDITIONAL COMMITMENTS.
10.1 General. At any time and from time to time after the Closing,
Seller shall execute and deliver such other documents and take such action as
Purchaser may reasonably request to more effectively transfer, convey and assign
to Purchaser, and to confirm Purchaser's title to, all of the Purchased Assets,
to put Purchaser in actual possession and control thereof and to assist
Purchaser in exercising all rights with respect thereto. Seller shall refer all
inquiries relating to the Purchased Assets to Purchaser.
10.2 Payments Received by Seller. To the extent that, after the date
of Closing, Seller receives any payment with respect to any Purchased Loan, such
payment shall be held in trust for Purchaser, shall be kept separate from any
other funds, and such payment shall be delivered to Purchaser in the form
received duly endorsed to Purchaser.
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10.3 Communications Received by Seller To the extent that, after the
date of Closing, Seller receives correspondence or other communication with
respect to any Purchased Loan, it shall be promptly forwarded to Purchaser.
10.4 Excise, Use and Sales Taxes. Seller shall pay all excise, use and
sales taxes payable with respect to the sale of the Purchased Assets to
Purchaser, which taxes shall be paid, collected, reported and remitted in
accordance with applicable law.
11. INDEMNIFICATION.
11.1 Survival of Representations and Warranties. Each representation,
warranty and covenant made by Purchaser or Seller shall survive the Closing and
continue in full force and effect thereafter for a period of eighteen (18)
months.
11.2 Indemnification of Purchaser by Seller. Seller shall indemnify
and hold harmless Purchaser, its affiliates, successors and assigns (each an
"Indemnified Party") from and against all losses, claims, damages, costs,
obligations and Liabilities, including Liabilities for all reasonable attorneys'
fees and expenses (including attorney and expert fees and expenses incurred to
enforce the terms of this Agreement) (collectively, "Damages") suffered,
directly or indirectly, by any Indemnified Party:
(a) by reason of, or arising out of, any breach of any
representation or warranty made by Seller in or pursuant to this Agreement
or the Service and Remarketing Agreement, or any failure by Seller to
perform or fulfill any of its covenants or agreements set forth herein or
therein; or
(b) a rising out of or relating to the Purchased Assets and
arising from events occurring prior to the Closing, and arising in
connection with the Commitment Letter, this Agreement, or any other
transaction contemplated hereby except for any such Damages caused by the
gross negligence or willful misconduct of such Indemnified Party; provided,
that the foregoing items as covered by this subsection (b) shall not
include any Damages covered by subsection (a) or any decline in value of
the Purchased Assets due to changes in applicable laws or regulations,
changes in GAAP or interpretations thereof or changes in economic
conditions generally including changes in market rates of interest, and
shall not include any losses arising from the failure of an obligor to make
payment under a Purchased Loan due primarily to the financial condition and
creditworthiness of such obligor.
Seller shall have no indemnification liability for the first Eight Hundred
Thousand Dollars ($800,000), in the aggregate, of Damages actually incurred by
Purchaser with respect to any claims pursuant to this Section 11.2, and such
Damages shall be the sole liability of Purchaser. At such time as the aggregate
amount of Damages actually incurred by Purchaser with respect to any claims
pursuant to this Section 11.2 exceeds in the aggregate Eight
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Hundred Thousand Dollars ($800,000), then the full amount of such excess shall
be Seller's indemnification liability. Notwithstanding any other provisions of
this Agreement to the contrary, in no event shall Damages include a party's
consequential or incidental damages in excess of Twenty Five Million Dollars
($25,000,000).
11.3 Matters Involving Third Parties.
(a) Notice of Third Party Claim. If any third party shall notify
any Indemnified Party with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against Seller ("Indemnifying
Party") under this Section 11 then the Indemnified Party shall promptly notify
each Indemnifying Party thereof in writing; provided, however, that a delay on
the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party of its obligation hereunder unless, and then
solely to the extent, the Indemnifying Party is thereby prejudiced.
(b) Defense of Third Party Claim. Any Indemnifying Party will
have the right to assume the defense of any claim or any litigation resulting
from a Third Party Claim with counsel of its choice reasonably satisfactory to
the Indemnified Party.
(c) Limitations on Defense. So long as the Indemnifying Party is
conducting the defense of the Third Party Claim in accordance with Section
11.3(b) above, (i) the Indemnified Party may retain separate co-counsel at its
sole cost and expense and participate in the defense of the Third Party Claim,
and (ii) the Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without the
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld.
(d) Other Procedures. In the event that the Indemnified Party
shall in good faith determine that (i) the Indemnified Party may have available
to it one or more defenses or counterclaims that are inconsistent with one or
more of those that may be available to the Indemnifying Party in respect of the
Third Party Claim, or (ii) settlement of, or an adverse judgment with respect
to, the Third Party Claim is likely to establish a precedent or practice
materially adverse to the continuing business interests of the Indemnified
Party, then the Indemnified Party shall have the right to take over and assume
control of the defense, settlement, negotiations or litigation relating to any
such Third Party Claim, at the sole cost of the Indemnifying Party, and if the
Indemnified Party does so take over and assume control, the Indemnified Party
may settle such Third Party Claim with the consent of the Indemnifying Party if
such settlement would require the payment of Damages by the Indemnifying Party,
which consent shall not be unreasonably withheld. In the event that the
Indemnifying Party does not accept the defense of any matter as above provided,
the Indemnified Party shall have the full right to defend against any such Third
Party Claim, and shall be entitled to settle or agree to pay in full such Third
Party Claim, and the Indemnifying Party shall remain responsible for all Damages
and costs of defense and shall reimburse the Indemnified Party therefor promptly
and periodically. In any event, the Indemnifying Party
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and the Indemnified Party shall cooperate in the defense of any claim or
litigation subject to this Section 11 and the records of each shall be available
to the other with respect to such defense.
11.4 Indemnification Sole Remedy. The foregoing indemnification
provisions shall be deemed to be the exclusive remedy of the Indemnified Party
in connection with or arising from any failure by the Indemnifying Party to
perform any of its covenants or obligations in this Agreement or in the
agreements related hereto or any breach by the Indemnifying Party of any
representation or warranty or the inaccuracy of any representation or warranty
of the Indemnifying Party contained in this Agreement.
11.5 Certain Limitations. The amount of any Damages or other
liability for which indemnification is provided under this Agreement shall be
net of any amounts recovered or, upon the exercise of reasonable best efforts,
recoverable by the Indemnified Party from third parties (including, without
limitation, amounts recovered or recoverable under insurance policies) with
respect to such Damages or other liability. Each Indemnified Party shall use its
reasonable best efforts to pursue promptly any claims or rights it may have
against all third parties which would reduce the amount of damages or other
liability for which indemnification is provided under this Agreement.
12. GENERAL PROVISIONS.
12.1 Notices. Except as otherwise provided herein, all notices and
correspondences hereunder shall be in writing and sent by certified or
registered mail, return receipt requested, or by overnight delivery service,
with all charges prepaid, to the addresses set forth below, or by facsimile
transmission, promptly confirmed in writing sent by first class mail, to the
telefacsimile numbers set forth below. All such notices and correspondence shall
be deemed given (i) if sent by certified or registered mail, three business days
after being postmarked, (ii) if sent by overnight delivery service, when
received at the above stated addresses or when delivery is refused and (iii) if
sent by telex or facsimile transmission, when receipt of such transmission is
acknowledged. Any party may specify such other address or telefacsimile number
by notice to all other parties given as provided in this Section 10.1.
If to Purchaser:
BT Commercial Corporation
300 S. Grand Avenue, 41st Floor
Los Angeles, CA 90071
Attn: Mr. Thomas Ventling
Fax: (213) 620-8394
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with a copy to:
Buchalter, Nemer, Fields & Younger
601 S. Figueroa Street, 24th Floor
Los Angeles, CA 90071
Attn: Matthew Kavanaugh, Esq.
Fax: (213) 896-0400
If to Seller:
Goss Graphic Systems, Inc.
c/o Stonington Partners, Inc.
767 Fifth Avenue, 48th Floor
New York, NY 10153
Attn: Mr. Alexis P. Michas
Fax: (212) 339-8585
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Andrew R. Brownstein, Esq.
Fax: (212) 403-2000
12.2 Integration: Amendment. This Agreement and the other documents
and agreements referred to herein constitute the entire agreement of Purchaser
and Seller with respect to the subject matter hereof. This Agreement may not be
modified, amended or terminated except by a written agreement specifically
referring to this Agreement signed by Purchaser and Seller.
12.3 Waiver. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
of the same or similar nature.
12.4 Binding Effect of Agreement. This Agreement shall be binding
upon and inure to the benefit of each party and its permitted successors and
assigns. Seller may not assign this Agreement or any of its rights hereunder
without the prior written consent of Purchaser, which consent may be withheld
for any reason. Purchaser may assign all or a portion of its rights hereunder
and under the associated agreements and instruments to purchase and/or own any
of the Purchased Assets to an affiliate, a special purpose entity formed for the
purpose of acquiring the Purchased Assets, in connection with a securitization
of the Purchased Assets or otherwise, or to any other designee, and Purchaser
may act as
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agent in forming a syndicate to join with Purchaser in purchasing the Purchased
Assets or to invest in ownership of the Purchased Assets after the Closing.
Purchaser has assigned its rights to purchase certain of the Purchased Assets
relating to Purchased Equipment located in Canada to Purchaser's affiliate, BT
Bank of Canada, and Purchaser has assigned its rights to purchase certain of the
Purchased Assets relating to Purchased Equipment located in Australia to
Purchaser's affiliate, Bankers Trust Australia Limited, and a portion of the
Purchase Price has been allocated to the purchase of such Purchased Assets and
will be paid by such assignees, all as more fully set forth in the Bill of Sale.
Other than any such assignees or designees of Purchaser, there are no intended
third party beneficiaries of this Agreement and this Agreement does not confer
any right or any remedy on any person other than Purchaser and Seller.
12.5 Headings. The section headings and the Table of Contents are for
convenience only and shall not affect the meaning or construction of any
provision of this Agreement.
12.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed one original.
12.7 Public Announcements. Except as required by law or upon order of
any governmental authority, neither Purchaser nor Seller shall, without the
prior written consent of the other, make any public announcement with respect to
the subject matter of this Agreement and the transactions contemplated hereby
other than a standard tombstone-style announcement. The parties agree to consult
with each other prior to any other public announcement.
12.8 Governing Law. The validity, interpretation and enforcement of
this Agreement and any dispute arising out of or in connection with this
Agreement, whether sounding in contract, tort, equity or otherwise, shall be
governed by the internal laws (as opposed to the conflicts of laws provisions)
and decisions of the State of California.
12.9 SUBMISSION TO JURISDICTION. ALL DISPUTES AMONG THE PARTIES
HERETO, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE
RESOLVED ONLY BY STATE AND FEDERAL COURTS LOCATED IN LOS ANGELES, CALIFORNIA,
AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE TAKEN.
12.10 JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVE ANY RIGHT TO A
TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
12.11 Delays. No delay or omission of a party hereto to exercise any
right or remedy hereunder shall impair any such right or operate as a waiver
thereof.
12.12 Severability. In case any provision in or obligation under this
Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or obligations
shall not in any way be affected or impaired thereby.
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IN WITNESS WHEREOF, Purchaser and Seller have caused this Agreement to
be duly executed and delivered as of the date first above written.
BT COMMERCIAL CORPORATION
By:________________________________________
Title:__________________________________
GOSS GRAPHIC SYSTEMS, INC.
By:________________________________________
Title:__________________________________
EXHIBIT 10.7.1
FORM OF
GUARANTY
(Seller Interest Guaranty)
This GUARANTY (this "Guaranty"), dated as of _________, 1996, is
executed and delivered by GOSS GRAPHIC SYSTEMS, INC., a Delaware corporation
("Guarantor"), with reference to the following facts:
R E C I T A L S
WHEREAS, in connection with the sale of the stock and/or assets of the
Rockwell Graphic Systems business unit ("RGS") of Rockwell International
Corporation, a Delaware corporation ("Rockwell"), to Guarantor, Guarantor wishes
to effect a sale of a portfolio of loans of RGS, and associated instruments,
agreements, documents and collateral, all as more particularly described below,
arising from the sale of printing and like equipment in the conduct of RGS'
business.
WHEREAS, Guarantor desires to sell and BT Commercial Corporation, a
Delaware corporation ("BTCC"), desires to purchase such loans and certain other
related assets of Guarantor pursuant to the terms of that certain Loan Portfolio
Purchase Agreement, dated as of even date herewith (the "Purchase Agreement").
WHEREAS, as a condition precedent to BTCC's entering into the Purchase
Agreement, BTCC has required under Section 9.17 of the Purchase Agreement that
Guarantor execute this Guaranty in favor of BTCC.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of BTCC, as follows:
1. Definitions and Construction.
(a) Definitions. All initially capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Purchase
Agreement. In addition, the following terms, as used in this Guaranty, shall
have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978
(11 U.S.C. Sections 101 et seq.), as amended or supplemented from time to time,
and any successor statute, and any and all rules issued or promulgated in
connection therewith.
"Defaulted NYDN Interest Payment" has the meaning set forth
in Section 4 hereof.
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"Defaulted Sunny Interest Payment" has the meaning set forth
in Section 4 hereof.
"Guaranteed Obligations" has the meaning set forth in
Section 3 hereof.
"NYDN" means Daily News, L.P.
"NYDN Agreement" means that certain Sales and Purchase
Agreement, dated as of ________________, pursuant to the terms of which the NYDN
Loans were created.
"NYDN Interest" has the meaning set forth in Section 3
hereof.
"NYDN Loans" means the Purchased Loans with respect to which
NYDN is the obligor.
"NYDN Termination Date" means the earlier of (X) the date of
Completion (as defined in the NYDN Agreement, on or before April 15, 1997 (as
the same maybe extended due to Force Majeure (as defined in the NYDN Agreement))
or (Y) June 30,1997.
"Obligors" means Sunny and NYDN.
"Purchase Documents" means the Purchase Agreement, this
Guaranty, and the other agreements, documents and instruments executed in
connection therewith.
"Sunny" means Sunny Industries, Inc.
"Sunny Interest" has the meaning set forth in Section 3
hereof.
"Sunny Loans" means the Purchased Loans with respect to
which Sunny is the obligor.
"Sunny Notes" means, collectively, the promissory notes of
Obligor in favor of Rockwell Graphic Systems, Inc. dated January 25, 1995 and
April 20, 1996, respectively, and as the same may be amended, supplemented, or
otherwise modified from time to time.
"Sunny Termination Date" the earlier of (x) the date Sunny
makes a scheduled payment of interest, as and when due under the terms of the
Sunny Notes or (y) the first anniversary of the Closing.
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(b) Construction. Unless the context of this Guaranty clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, and the term "including" is not limiting. The
words "hereof," "herein," "hereby," "hereunder," and other similar terms refer
to this Guaranty as a whole and not to any particular provision of this
Guaranty. Any reference herein to any of the Purchase Documents includes any and
all alterations, amendments, extensions, modifications, renewals, or supplements
thereto or thereof, as applicable. Neither this Guaranty nor any uncertainty or
ambiguity herein shall be construed or resolved against BTCC or Guarantor,
whether under any rule of construction or otherwise. On the contrary, this
Guaranty has been reviewed by Guarantor, BTCC, and their respective counsel, and
shall be construed and interpreted according to the ordinary meaning of the
words used so as to fairly accomplish the purposes and intentions of BTCC and
Guarantor.
2. Guaranteed Obligations. Subject to the conditions and limitations
contained in Section 4 hereof, Guarantor hereby irrevocably and unconditionally
guarantees to BTCC, as and for Guarantor's own debt, until final and
indefeasible payment thereof has been made, payment of the Guaranteed
Obligations.
3. Limited Guaranty. "Guaranteed Obligations" means the interest
accruing and payable by Sunny pursuant to the terms of the Sunny Notes
(regardless of any action or omission to act by Rockwell or Guarantor), after
the Closing and through and including the Sunny Termination Date, on the Sunny
Loans (the "Sunny Interest"), and one half (1/2) of the interest accruing and
payable by NYDN pursuant to the terms of the NYDN Agreement (regardless of any
action or omission to act by Rockwell or Guarantor), after the Closing and
through and including the NYDN Termination Date, on the NYDN Loans (the "NYDN
Interest").
4. Payment and Performance Under This Guaranty.
(a) NYDN Interest Guaranty. If NYDN fails to make a regularly
scheduled payment of NYDN Interest as and when due under the terms of the NYDN
Agreement (including any applicable grace period) (a "Defaulted NYDN Interest
Payment"), then, upon receipt of written demand from BTCC, Guarantor shall
promptly pay to BTCC an amount equal to one-half (1/2) of such Defaulted NYDN
Interest Payment.
(b) Sunny Interest Guaranty. If Sunny makes any regularly
scheduled payment of interest on the Sunny Loans as and when due under the terms
of the Sunny Notes, this Guaranty and Guarantor's obligations in respect of the
Sunny Interest automatically terminate and are of no further force or effect and
Guarantor has no obligation to make any payment hereunder in respect of a
written demand received by Guarantor after such termination. Subject to the
immediately preceding sentence, if Sunny fails to make a regularly scheduled
payment of Sunny Interest as and when due under the terms of the Sunny Notes
(the "Defaulted Sunny Interest Payment"), then, upon receipt of a written demand
from
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BTCC, Guarantor shall promptly pay to BTCC an amount equal to the Defaulted
Sunny Interest Payment.
5. Primary Obligations. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Purchase Documents or with respect to the
Guaranteed Obligations. Guarantor agrees that Guarantor is jointly and severally
liable, with any other guarantor of the Guaranteed Obligations, to BTCC, to the
extent and subject to the limitations set forth in Sections 3 and 4 hereof, that
the obligations of Guarantor hereunder are independent of the obligations of the
Obligors or any other guarantor, and that a separate action may be brought
against Guarantor to enforce this Guaranty whether an action is brought against
the Obligors or any other guarantor or whether the Obligors or any such other
guarantor are joined in such action. Guarantor agrees that, subject to the terms
and conditions of Sections 3 and 4 hereof, Guarantor's liability hereunder shall
be immediate and shall not be contingent upon the exercise or enforcement by
BTCC of whatever remedies it may have against the Obligors or any other
guarantor, or the enforcement of any lien or realization upon any security BTCC
may at any time possess. Guarantor agrees that any release which may be given by
BTCC to any other guarantor shall not release Guarantor. Guarantor consents and
agrees that BTCC shall be under no obligation to marshal any assets of the
Obligors or any other guarantor in favor of Guarantor, or against or in payment
of any or all of the Guaranteed Obligations.
6. Waivers.
(a) Guarantor absolutely, unconditionally, knowingly, and
expressly waives:
(i) (1) notice of acceptance hereof; (2) notice of the
amount of the Guaranteed Obligations, subject, however, to Guarantor's right to
make inquiry of BTCC to ascertain the amount of the Guaranteed Obligations at
any reasonable time; (3) notice of any adverse change in the financial condition
of the Obligors or of any other fact that might increase Guarantor's risk
hereunder; (4) notice of any event giving rise to a claim of indemnification
under the Purchase Documents; and (5) all other notices (except if such notice
is specifically required to be given to Guarantor hereunder or under the
Purchase Documents) and demands to which Guarantor might otherwise be entitled.
(ii) its right, under Sections 2845 or 2850 of the
California Civil Code, or otherwise, to require BTCC to institute suit against,
or to exhaust any rights and remedies which BTCC has or may have against, the
Obligors or any third party, or against any collateral for the Guaranteed
Obligations provided by the Obligors or any third party. In this regard,
Guarantor agrees that Guarantor is bound to the payment of all
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Guaranteed Obligations, whether now existing or hereafter accruing, as fully as
if such Guaranteed Obligations were directly owing to BTCC by Guarantor.
Guarantor further waives any defense arising by reason of any disability or
other defense (other than the defense that the Guaranteed Obligations shall have
been fully and finally performed and indefeasibly paid) of the Obligors or by
reason of the cessation from any cause whatsoever of the liability of the
Obligors in respect thereof.
(iii) (1) any rights to assert against BTCC any defense
(legal or equitable), set-off, counterclaim, or claim which Guarantor may now or
at any time hereafter have against the Obligors or any other party liable to
BTCC; (2) any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense Guarantor has to performance hereunder, and
any right Guarantor has to be exonerated, provided by Sections 2819, 2822, or
2825 of the California Civil Code, or otherwise, arising by reason of: the
impairment or suspension of BTCC's rights or remedies against the Obligors; the
alteration by BTCC of the Guaranteed Obligations; any discharge of the Obligors'
obligations to BTCC by operation of law as a result of BTCC's intervention or
omission; or the acceptance by BTCC of anything in partial satisfaction of the
Guaranteed Obligations; (4) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable to
the Guaranteed Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to Guarantor's liability
hereunder.
(b) Guarantor absolutely, unconditionally, knowingly, and
expressly waives any defense arising by reason of or deriving from any election
by BTCC under Bankruptcy Code Section 1111(b) to limit the amount of, or any
collateral securing, its claim against the Obligors.
(c) Until indefeasible payment in full is received by BTCC of all
amounts outstanding in respect of the NYDN Loans and the Sunny Loans (including,
without limitation, principal, interest, fees and expenses), Guarantor hereby
absolutely, unconditionally, knowingly, and expressly agrees that it shall not
exercise: (i) any right of subrogation Guarantor has or may have as against the
Obligors with respect to the Guaranteed Obligations; (ii) any right to proceed
against the Obligors or any other person or entity, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Guarantor may
now have or hereafter have as against the Obligors with respect to the
Guaranteed Obligations; and (iii) any right to proceed or seek recourse against
or with respect to any property or asset of the Obligors.
(d) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY,
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GUARANTOR HEREBY ABSOLUTELY, KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES
AND AGREES NOT TO ASSERT ANY AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR
INDIRECTLY UNDER ANY ONE OR MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808,
2809, 2810, 2815, 2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND
2850, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL CODE.
7. Obligations Unconditional. Guarantor consents and agrees that,
without notice to or by Guarantor, and without affecting or impairing the
obligations of Guarantor hereunder, BTCC may, by action or inaction:
(a) compromise, settle, extend the duration or the time for the
payment of, or discharge the performance of, or may refuse to or otherwise not
enforce this Guaranty, the other Purchase Documents, the Purchased Assets, or
any part thereof, with respect to the Obligors or any other Person;
(b) grant other indulgences to the Obligors or any other Person
in respect of the Guaranteed Obligations;
(c) amend or modify in any manner and at any time (or from time
to time) any of the Purchase Documents or the Purchased
Assets with respect to the Obligors; or
(d) release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release, or
waive any security for the Guaranteed Obligations or any
other guaranty of the Guaranteed Obligations, or any portion
thereof.
8. No Election. BTCC shall have all of the rights to seek recourse
against Guarantor to the fullest extent provided for herein, and no election by
BTCC to proceed in one form of action or proceeding, or against any party, or on
any obligation, shall constitute a waiver of BTCC's right to proceed in any
other form of action or proceeding or against other parties unless BTCC has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by BTCC under any document
or instrument evidencing the Guaranteed Obligations shall serve to diminish the
liability of Guarantor under this Guaranty except to the extent that BTCC
finally and unconditionally shall have realized indefeasible payment by such
action or proceeding.
9. Term; Indefeasible Payment. Except as otherwise expressly provided
herein (including, without limitations, as set forth in Section 4), this
Guaranty shall remain in effect until the full and indefeasible payment of the
Guaranteed Obligations. The Guaranteed Obligations shall not be considered
indefeasibly paid for purposes of this
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Guaranty unless and until all payments to BTCC in respect of the Guaranteed
Obligations are no longer subject to any right on the part of any Person,
including the Obligors, any Obligor as a debtor in possession, or any trustee
(whether appointed under the Bankruptcy Code or otherwise) of any of the
Obligors' assets, to invalidate or set aside such payments or to seek to recoup
the amount of such payments or any portion thereof, or to declare same to be
fraudulent or preferential. In the event that, for any reason, any portion of
such payments to BTCC is set aside or restored, whether voluntarily or
involuntarily, after the making thereof, then the obligation intended to be
satisfied thereby shall be revived and continued in full force and effect as if
said payment or payments had not been made, and, subject to the limitations set
forth in Sections 3 and 4 hereof, Guarantor shall be liable for the full amount
BTCC is required to repay in respect thereof.
10. Financial Condition of the Obligors. Guarantor represents and
warrants to BTCC that Guarantor is currently informed of the financial condition
of the Obligors and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations.
Guarantor hereby covenants that Guarantor will continue to keep informed of the
Obligors' financial condition, the financial condition of other guarantors, if
any, and of all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all present
and future indebtedness of the Obligors owing to Guarantor is postponed in favor
of and subordinated to payment, in full, in cash, of the Guaranteed Obligations.
In this regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness until the Guaranteed Obligations have been indefeasibly paid
in full.
12. Payments; Application. All payments to be made hereunder by the
parties shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be made
without deduction (whether for taxes or otherwise) or offset. Except as
otherwise expressly provided herein, all payments made by Guarantor hereunder
shall be applied as follows: first, to all reasonable costs and expenses
(including reasonable attorneys' fees and expenses and reasonable attorneys'
fees and expenses incurred pursuant to proceedings with respect to Guarantor
arising under the Bankruptcy Code) incurred by BTCC in enforcing this Guaranty;
and second, to the Guaranteed Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on demand, all
reasonable attorneys' fees (including reasonable attorneys' fees incurred
pursuant to proceedings respecting Guarantor arising under the Bankruptcy Code)
and all other reasonable costs and expenses which may be incurred by BTCC in the
enforcement of this Guaranty.
14. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing), shall be
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sent by certified or registered mail, return receipt requested, or by overnight
delivery service, with all charges prepaid, and shall be given to such party at
its address or facsimile number set forth below (promptly confirmed in writing
sent by first class mail), or such other address or telecopier number as such
party may hereafter specify for the purpose by notice to the other party:
If to Guarantor: Goss Graphic Systems, Inc.
c/o Stonington Partners, Inc.
767 Fifth Avenue, 48th Floor
New York, NY 10153
Attn: Mr. Alexis P. Michas
Fax: (212) 339-8585
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Andrew R. Brownstein, Esq.
Fax: (212) 403-2000
If to BTCC: BT Commercial Corporation
300 S. Grand Avenue, 41st Floor
Los Angeles, CA 90071
Attn: Mr. Thomas Ventling
Fax: (213) 620-8394
with a copy to:
Buchalter, Nemer, Fields & Younger
601 S. Figueroa Street, 24th Floor
Los Angeles, CA 90071
Attn: Matthew Kavanaugh, Esq.
Fax: (213) 896-0400
Each such notice, request or other communication shall be effective upon
receipt; provided that any notice, request, or other communication given in
connection with BTCC's exercise of any of its rights or remedies hereunder, and
as to which there exists applicable statutory or common law governing such
notice, request or other communication, shall be effective in accordance with
such applicable statutory law irrespective of when received by Guarantor.
15. Cumulative Remedies. Except as otherwise expressly provided, no
remedy under this Guaranty or under any Purchase Document is intended to be
exclusive of
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any other remedy, but each and every remedy shall be cumulative and in addition
to any and every other remedy given hereunder or under any Purchase Document,
and those provided by law or in equity. No delay or omission by BTCC to exercise
any right under this Guaranty shall impair any such right nor be construed to be
a waiver thereof. No failure on the part of BTCC to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
16. Books and Records. Guarantor agrees BTCC's books and records
showing the account between BTCC and the Obligors shall be admissible in any
action or proceeding and shall be prima facie proof for the purpose of
establishing the items therein set forth.
17. Severability of Provisions. If any provision of this Guaranty is
for any reason held to be invalid, illegal or unenforceable in any respect, that
provision shall not affect the validity, legality or enforceability of any other
provision of this Guaranty.
18. Entire Agreement; Amendments and Waivers. This Guaranty, together
with the other Purchase Documents, constitutes the entire agreement between
Guarantor and BTCC pertaining to the subject matter contained herein. Any
provision of this Guaranty may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the party asserted to be
bound thereby, and then such amendment or waiver shall be effective only in the
specific instance and specific purpose for which given.
19. Successors and Assigns. This Guaranty shall bind the successors
and assigns of Guarantor, and shall inure to the benefit of the respective
successors and assigns of BTCC; provided, however, Guarantor may not assign this
Guaranty or delegate any of its duties hereunder without BTCC's prior written
consent, which may be withheld for any reason, and any such prohibited
assignment shall be absolutely null and void. BTCC reserves its right to sell,
assign, transfer, negotiate, or grant participations in all or any part of, or
any interest in, the rights and benefits hereunder pursuant to and in accordance
with the provisions of the Purchase Documents. In connection therewith, BTCC may
disclose all documents and information which BTCC now or hereafter may have
relating to Guarantor, Guarantor's business, or this Guaranty to any such
prospective or actual transferee.
20. Governing Law; Jurisdiction; Jury Trial.
(a) GOVERNING LAW. THIS GUARANTY SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF CALIFORNIA AND THE VALIDITY, CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO, SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE
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WITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
(b) JURISDICTION AND VENUE. THE PARTIES HERETO AGREE THAT ANY
ACTION OR PROCEEDING PURSUANT TO OR ARISING IN CONNECTION WITH THIS GUARANTY,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE HELD ONLY IN
THE CITY AND COUNTY OF LOS ANGELES, STATE OF CALIFORNIA.
(c) JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVE ANY RIGHT TO
A TRIAL BY JURY; ANY DISPUTES WILL BE RESOLVED BY A BENCH TRIAL.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date set forth in the first paragraph hereof.
GOSS GRAPHIC SYSTEMS, INC.,
a Delaware corporation
By:_________________________________________
Title:______________________________________
ACCEPTED AND AGREED:
BT COMMERCIAL CORPORATION,
a Delaware corporation
By___________________________
Title________________________
10
EXHIBIT 10.7.2
FORM OF
GUARANTY
(Seller Hersant Guaranty)
This GUARANTY (this "Guaranty"), dated as of _________, 1996, is
executed and delivered by GOSS GRAPHIC SYSTEMS, INC., a Delaware corporation
("Guarantor"), with reference to the following facts:
R E C I T A L S
WHEREAS, in connection with the sale of the stock and/or assets of
the Rockwell Graphic Systems business unit ("RGS") of Rockwell International
Corporation, a Delaware corporation ("Rockwell"), to Guarantor, Guarantor wishes
to effect a sale of a portfolio of loans of RGS, and associated instruments,
agreements, documents and collateral, all as more particularly described below,
arising from the sale of printing and like equipment in the conduct of RGS'
business.
WHEREAS, Guarantor desires to sell and BT Commercial Corporation, a
Delaware corporation ("BTCC"), desires to purchase such loans and certain other
related assets of Guarantor pursuant to the terms of that certain Loan Portfolio
Purchase Agreement, dated as of even date herewith (the "Purchase Agreement").
WHEREAS, as a condition precedent to BTCC's entering into the
Purchase Agreement, BTCC has required under Section 9.14 of the Purchase
Agreement that Guarantor execute this Guaranty in favor of BTCC.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of BTCC, as follows:
1. Definitions and Construction.
(a) Definitions. All initially capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Purchase
Agreement. In addition, the following terms, as used in this Guaranty, shall
have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of
1978 (11 U.S.C. Sections 101 et seq.), as amended or supplemented from time to
time, and any successor statute, and any and all rules issued or promulgated in
connection therewith.
"Guaranteed Obligations" has the meaning set forth in
Section 3 hereof.
<PAGE>
"Obligors" means any and all Hersant Affiliates which
are obligors with respect to the Hersant Loans.
"Purchase Documents" means the Purchase Agreement, this
Guaranty, and the other agreements, documents and instruments executed in
connection therewith.
(b) Construction. Unless the context of this Guaranty
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, and the term "including" is not
limiting. The words "hereof," "herein," "hereby," "hereunder," and other similar
terms refer to this Guaranty as a whole and not to any particular provision of
this Guaranty. Any reference herein to any of the Purchase Documents includes
any and all alterations, amendments, extensions, modifications, renewals, or
supplements thereto or thereof, as applicable. Neither this Guaranty nor any
uncertainty or ambiguity herein shall be construed or resolved against BTCC or
Guarantor, whether under any rule of construction or otherwise. On the contrary,
this Guaranty has been reviewed by Guarantor, BTCC, and their respective
counsel, and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of BTCC and Guarantor.
2. Guaranteed Obligations. Subject to the conditions and limitations
contained in Section 4 hereof, Guarantor hereby irrevocably and unconditionally
guarantees to BTCC, as and for Guarantor's own debt, until final and
indefeasible payment thereof has been made, payment of the Guaranteed
Obligations.
3. Limited Guaranty. "Guaranteed Obligations" means the aggregate
principal balance of the Hersant Loans outstanding from time to time in an
amount up to but not exceeding Ten Million Five Hundred Thousand Dollars
($10,500,000). Guarantor's liability with respect to this Guaranty shall be
reduced, dollar-for dollar, by the amount of all reductions of the aggregate
principal balance of the Hersant Loans below Ten Million Five Hundred Thousand
Dollars ($10,500,000).
4. Payment and Performance Under This Guaranty.
(a) BTCC may demand payment hereunder of the maximum amount
of Guaranteed Obligations and, promptly after receipt of such demand, Guarantor
shall make such payment, if:
(i) any Obligor defaults in respect of the payment in
full of two (2) consecutive regularly scheduled quarterly payments due under the
terms of the applicable Hersant Loan and BTCC notifies Guarantor in writing of
the first such default within thirty (30) days thereof; or
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(ii) BTCC notifies Guarantor in writing that an Obligor
has defaulted on a regularly scheduled semi-annual payment due under the terms
of the applicable Hersant Loan and such payment default continues uncured for
sixty (60) days after Guarantor's receipt of such notice.
(b) In the event that no demand on, or enforcement of, or
payment under this Guaranty occurs and BTCC is paid in full by the Obligors with
respect to the Guaranteed Obligations, then this Guaranty shall terminate and
BTCC shall pay Guarantor the sum of One Million Dollars ($1,000,000) within five
(5) business days of BTCC's receipt of such payment in full.
(c) Not later than five (5) days after BTCC's receipt of
payment in full of all amounts outstanding in respect of the Hersant Loans
(including, without limitation, principal, interest, fees and expenses), BTCC
shall promptly pay Guarantor the amount, if any, by which (a) the sum of (i)
principal payments made in respect of the Hersant Loans and (ii) amounts, if
any, paid by the Guarantor on this Guaranty exceeds (b) the aggregate principal
amount of the Hersant Loans outstanding on the date of the Closing.
5. Primary Obligations. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Purchase Documents or with respect to the
Guaranteed Obligations. Guarantor agrees that Guarantor is jointly and severally
liable, with any other guarantor of the Guaranteed Obligations, to BTCC, to the
extent and subject to the limitations set forth in Sections 3 and 4 hereof, that
the obligations of Guarantor hereunder are independent of the obligations of the
Obligors or any other guarantor, and that a separate action may be brought
against Guarantor to enforce this Guaranty whether an action is brought against
the Obligors or any other guarantor or whether the Obligors or any such other
guarantor are joined in such action. Guarantor agrees that, subject to the terms
and conditions of Sections 3 and 4 hereof, Guarantor's liability hereunder shall
be immediate and shall not be contingent upon the exercise or enforcement by
BTCC of whatever remedies it may have against the Obligors or any other
guarantor, or the enforcement of any lien or realization upon any security BTCC
may at any time possess. Guarantor agrees that any release which may be given by
BTCC to any other guarantor shall not release Guarantor. Guarantor consents and
agrees that BTCC shall be under no obligation to marshal any assets of the
Obligors or any other guarantor in favor of Guarantor, or against or in payment
of any or all of the Guaranteed Obligations.
6. Waivers.
(a) Guarantor absolutely, unconditionally, knowingly, and
expressly waives:
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(i) (1) notice of acceptance hereof; (2) notice of the
amount of the Guaranteed Obligations, subject, however, to Guarantor's right to
make inquiry of BTCC to ascertain the amount of the Guaranteed Obligations at
any reasonable time; (3) notice of any adverse change in the financial condition
of the Obligors or of any other fact that might increase Guarantor's risk
hereunder; (4) notice of any event giving rise to a claim of indemnification
under the Purchase Documents; and (5) all other notices (except if such notice
is specifically required to be given to Guarantor hereunder or under the
Purchase Documents) and demands to which Guarantor might otherwise be entitled.
(ii) its right, under Sections 2845 or 2850 of the
California Civil Code, or otherwise, to require BTCC to institute suit against,
or to exhaust any rights and remedies which BTCC has or may have against, the
Obligors or any third party, or against any collateral for the Guaranteed
Obligations provided by the Obligors or any third party. In this regard,
Guarantor agrees that Guarantor is bound to the payment of all Guaranteed
Obligations, whether now existing or hereafter accruing, as fully as if such
Guaranteed Obligations were directly owing to BTCC by Guarantor. Guarantor
further waives any defense arising by reason of any disability or other defense
(other than the defense that the Guaranteed Obligations shall have been fully
and finally performed and indefeasibly paid) of the Obligors or by reason of the
cessation from any cause whatsoever of the liability of the Obligors in respect
thereof.
(iii) (1) any rights to assert against BTCC any defense
(legal or equitable), set-off, counterclaim, or claim which Guarantor may now or
at any time hereafter have against the Obligors or any other party liable to
BTCC; (2) any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense Guarantor has to performance hereunder, and
any right Guarantor has to be exonerated, provided by Sections 2819, 2822, or
2825 of the California Civil Code, or otherwise, arising by reason of: the
impairment or suspension of BTCC's rights or remedies against the Obligors; the
alteration by BTCC of the Guaranteed Obligations; any discharge of the Obligors'
obligations to BTCC by operation of law as a result of BTCC's intervention or
omission; or the acceptance by BTCC of anything in partial satisfaction of the
Guaranteed Obligations; (4) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable to
the Guaranteed Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to Guarantor's liability
hereunder.
(b) Guarantor absolutely, unconditionally, knowingly, and
expressly waives any defense arising by reason of or deriving from any election
by BTCC under Bankruptcy Code Section 1111(b) to limit the amount of, or any
collateral securing, its claim against the Obligors.
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(c) Until BTCC has received full and final payment of all
amounts outstanding in respect of the Hersant Loans (including, without
limitation, principal, interest, fees and expenses), Guarantor hereby
absolutely, unconditionally, knowingly, and expressly agrees that it shall not
exercise: (i) any right of subrogation Guarantor has or may have as against the
Obligors with respect to the Guaranteed Obligations; (ii) any right to proceed
against the Obligors or any other person or entity, now or hereafter, for
contribution, indemnity, reimbursement, or any other suretyship rights and
claims, whether direct or indirect, liquidated or contingent, whether arising
under express or implied contract or by operation of law, which Guarantor may
now have or hereafter have as against the Obligors with respect to the
Guaranteed Obligations; and (iii) any right to proceed or seek recourse against
or with respect to any property or asset of the Obligors.
(d) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR
OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY ABSOLUTELY,
KNOWINGLY, UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY
AND ALL BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR
MORE OF CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820,
2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850, AND CHAPTER 2 OF TITLE 14 OF
THE CALIFORNIA CIVIL CODE.
7. Obligations Unconditional. Guarantor consents and agrees that,
without notice to or by Guarantor, and without affecting or impairing the
obligations of Guarantor hereunder, BTCC may, by action or inaction:
(a) compromise, settle, extend the duration or the time for
the payment of, or discharge the performance of, or may
refuse to or otherwise not enforce this Guaranty, the
other Purchase Documents, the Purchased Assets, or any
part thereof, with respect to the Obligors or any other
Person;
(b) grant other indulgences to the Obligors or any other
Person in respect of the Guaranteed Obligations;
(c) amend or modify in any manner and at any time (or from
time to time) any of the Purchase Documents or the
Purchased Assets with respect to the Obligors; or
(d) release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release, or
waive any security for the Guaranteed Obligations or any
other guaranty of the Guaranteed Obligations, or any
portion thereof.
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<PAGE>
8. No Election. BTCC shall have all of the rights to seek recourse
against Guarantor to the fullest extent provided for herein, and no election by
BTCC to proceed in one form of action or proceeding, or against any party, or on
any obligation, shall constitute a waiver of BTCC's right to proceed in any
other form of action or proceeding or against other parties unless BTCC has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by BTCC under any document
or instrument evidencing the Guaranteed Obligations shall serve to diminish the
liability of Guarantor under this Guaranty except to the extent that BTCC
finally and unconditionally shall have realized indefeasible payment by such
action or proceeding.
9. Term; Indefeasible Payment. Except as otherwise expressly
provided herein (including, without limitation, as set forth in Section 4
hereof), this Guaranty shall remain in effect until the full and indefeasible
payment of the Guaranteed Obligations. The Guaranteed Obligations shall not be
considered indefeasibly paid for purposes of this Guaranty unless and until all
payments to BTCC in respect of the Guaranteed Obligations are no longer subject
to any right on the part of any Person, including the Obligors, any Obligor as a
debtor in possession, or any trustee (whether appointed under the Bankruptcy
Code or otherwise) of any of the Obligors' assets, to invalidate or set aside
such payments or to seek to recoup the amount of such payments or any portion
thereof, or to declare same to be fraudulent or preferential. In the event that,
for any reason, any portion of such payments to BTCC is set aside or restored,
whether voluntarily or involuntarily, after the making thereof, then the
Guaranteed Obligation intended to be satisfied thereby shall be revived and
continued in full force and effect as if said payment or payments had not been
made, and, subject to the limitations set forth in Sections 3 and 4 hereof,
Guarantor shall be liable for the full amount BTCC is required to repay in
respect thereof.
10. Financial Condition of the Obligors. Guarantor represents and
warrants to BTCC that Guarantor is currently informed of the financial condition
of the Obligors and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations.
Guarantor hereby covenants that Guarantor will continue to keep informed of the
Obligors' financial condition, the financial condition of other guarantors, if
any, and of all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all present
and future indebtedness of the Obligors owing to Guarantor is postponed in favor
of and subordinated to payment, in full, in cash, of the Guaranteed Obligations.
In this regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness until the Guaranteed Obligations have been indefeasibly paid
in full.
12. Payments; Application. All payments to be made hereunder by the
parties shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be made
without deduction (whether
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<PAGE>
for taxes or otherwise) or offset. Except as otherwise expressly provided
herein, all payments made by Guarantor hereunder shall be applied as follows:
first, to all reasonable costs and expenses (including reasonable attorneys'
fees and expenses and reasonable attorneys' fees and expenses incurred pursuant
to proceedings in respect of Guarantor arising under the Bankruptcy Code)
incurred by BTCC in enforcing this Guaranty; and second, to the Guaranteed
Obligations.
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on demand,
all reasonable attorneys' fees (including reasonable attorneys' fees incurred
pursuant to proceedings respecting Guarantor arising under the Bankruptcy Code)
and all other reasonable costs and expenses which may be incurred by BTCC in the
enforcement of this Guaranty.
14. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing), shall be sent by certified or registered mail, return receipt
requested, or by overnight delivery service, with all charges prepaid, and shall
be given to such party at its address or facsimile number set forth below
(promptly confirmed in writing sent by first class mail), or such other address
or telecopier number as such party may hereafter specify for the purpose by
notice to the other party:
If to Guarantor: Goss Graphic Systems, Inc.
c/o Stonington Partners, Inc.
767 Fifth Avenue, 48th Floor
New York, NY 10153
Attn: Mr. Alexis P. Michas
Fax: (212) 339-8585
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Andrew R. Brownstein, Esq.
Fax: (212) 403-2000
If to BTCC: BT Commercial Corporation
300 S. Grand Avenue, 41st Floor
Los Angeles, CA 90071
Attn: Mr. Thomas Ventling
Fax: (213) 620-8394
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with a copy to:
Buchalter, Nemer, Fields & Younger
601 S. Figueroa Street, 24th Floor
Los Angeles, CA 90071
Attn: Matthew Kavanaugh, Esq.
Fax: (213) 896-0400
Each such notice, request or other communication shall be effective upon
receipt; provided that any notice, request, or other communication given in
connection with BTCC's exercise of any of its rights or remedies hereunder, and
as to which there exists applicable statutory or common law governing such
notice, request or other communication, shall be effective in accordance with
such applicable statutory law irrespective of when received by Guarantor.
15. Cumulative Remedies. Except as otherwise expressly provided, no
remedy under this Guaranty or under any Purchase Document is intended to be
exclusive of any other remedy, but each and every remedy shall be cumulative and
in addition to any and every other remedy given hereunder or under any Purchase
Document, and those provided by law or in equity. No delay or omission by BTCC
to exercise any right under this Guaranty shall impair any such right nor be
construed to be a waiver thereof. No failure on the part of BTCC to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
16. Books and Records. Guarantor agrees BTCC's books and records
showing the account between BTCC and the Obligors shall be admissible in any
action or proceeding and shall be prima facie proof for the purpose of
establishing the items therein set forth.
17. Severability of Provisions. If any provision of this Guaranty is
for any reason held to be invalid, illegal or unenforceable in any respect, that
provision shall not affect the validity, legality or enforceability of any other
provision of this Guaranty.
18. Entire Agreement; Amendments and Waivers. This Guaranty,
together with the other Purchase Documents, constitutes the entire agreement
between Guarantor and BTCC pertaining to the subject matter contained herein.
Any provision of this Guaranty may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the party asserted to be
bound thereby, and then such amendment or waiver shall be effective only in the
specific instance and specific purpose for which given.
19. Successors and Assigns. This Guaranty shall bind the successors
and assigns of Guarantor, and shall inure to the benefit of the respective
successors and assigns of BTCC; provided, however, Guarantor may not assign this
Guaranty or delegate any of its
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duties hereunder without BTCC's prior written consent, which may be withheld for
any reason, and any such prohibited assignment shall be absolutely null and
void. BTCC reserves its right to sell, assign, transfer, negotiate, or grant
participations in all or any part of, or any interest in, the rights and
benefits hereunder pursuant to and in accordance with the provisions of the
Purchase Documents. In connection therewith, BTCC may disclose all documents and
information which BTCC now or hereafter may have relating to Guarantor,
Guarantor's business, or this Guaranty to any such prospective or actual
transferee.
20. Governing Law; Jurisdiction; Jury Trial.
(a) GOVERNING LAW. THIS GUARANTY SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF CALIFORNIA AND THE VALIDITY, CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO, SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(b) JURISDICTION AND VENUE. THE PARTIES HERETO AGREE THAT ANY
ACTION OR PROCEEDING PURSUANT TO OR ARISING IN CONNECTION WITH THIS GUARANTY,
WHETHER SOUNDING IN CONTRACT,
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TORT, EQUITY OR OTHERWISE, SHALL BE HELD ONLY IN THE CITY AND COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA.
(c) JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVE ANY
RIGHT TO A TRIAL BY JURY; ANY DISPUTES WILL BE RESOLVED BY A BENCH TRIAL.
IN WITNESS WHEREOF, Guarantor has executed and delivered this
Guaranty as of the date set forth in the first paragraph hereof.
GOSS GRAPHIC SYSTEMS, INC.,
a Delaware corporation
By:_________________________________________
Title:______________________________________
ACCEPTED AND AGREED:
BT COMMERCIAL CORPORATION,
a Delaware corporation
By___________________________
Title________________________
10
EXHIBIT 10.7.3
FORM OF
GUARANTY
(Seller Principal Guaranty)
This GUARANTY (this "Guaranty"), dated as of _________, 1996, is
executed and delivered by GOSS GRAPHIC SYSTEMS, INC., a Delaware corporation
("Guarantor"), with reference to the following facts:
R E C I T A L S
WHEREAS, in connection with the sale of the stock and/or assets of the
Rockwell Graphic Systems business unit ("RGS") of Rockwell International
Corporation, a Delaware corporation ("Rockwell"), to Guarantor, Guarantor wishes
to effect a sale of a portfolio of loans of RGS, and associated instruments,
agreements, documents and collateral, all as more particularly described below,
arising from the sale of printing and like equipment in the conduct of RGS'
business.
WHEREAS, Guarantor desires to sell and BT Commercial Corporation, a
Delaware corporation ("BTCC"), desires to purchase such loans and certain other
related assets of Guarantor pursuant to the terms of that certain Loan Portfolio
Purchase Agreement, dated as of even date herewith (the "Purchase Agreement").
WHEREAS, as a condition precedent to BTCC's entering into the Purchase
Agreement, BTCC has required under Section 9.15 of the Purchase Agreement that
Guarantor execute this Guaranty in favor of BTCC.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing, Guarantor hereby
agrees, in favor of BTCC, as follows:
1. Definitions and Construction.
(a) Definitions. All initially capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Purchase
Agreement. In addition, the following terms, as used in this Guaranty, shall
have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978
(11 U.S.C. Sections 101 et seq.), as amended or supplemented from time to time,
and any successor statute, and any and all rules issued or promulgated in
connection therewith.
"Guaranteed Obligations" has the meaning set forth in
Section 3 hereof.
<PAGE>
"Obligor" means Sunny Industries, Inc.
"Purchase Documents" means the Purchase Agreement, this
Guaranty, and the other agreements, documents and instruments executed in
connection therewith.
"Sunny Loans" means the Purchased Loans with respect to
which Obligor is obligor.
"Sunny Notes" means, collectively, the promissory notes of
Obligor in favor of Rockwell Graphic Systems, Inc., dated January 25, 1995 and
April 20, 1996, respectively, and as the same may be amended, supplemented, or
otherwise modified from time to time.
(b) Construction. Unless the context of this Guaranty
clearly requires otherwise, references to the plural include the singular,
references to the singular include the plural, and the term "including" is not
limiting. The words "hereof," "herein," "hereby," "hereunder," and other similar
terms refer to this Guaranty as a whole and not to any particular provision of
this Guaranty. Any reference herein to any of the Purchase Documents includes
any and all alterations, amendments, extensions, modifications, renewals, or
supplements thereto or thereof, as applicable. Neither this Guaranty nor any
uncertainty or ambiguity herein shall be construed or resolved against BTCC or
Guarantor, whether under any rule of construction or otherwise. On the contrary,
this Guaranty has been reviewed by Guarantor, BTCC, and their respective
counsel, and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of BTCC and Guarantor.
2. Guaranteed Obligations. Subject to the conditions and limitations
contained in Section 4 hereof, Guarantor hereby irrevocably and unconditionally
guarantees to BTCC, as and for Guarantor's own debt, until final and
indefeasible payment thereof has been made, payment of the Guaranteed
Obligations.
3. Limited Guaranty. "Guaranteed Obligations" means the principal
balance of the Sunny Loans outstanding from time to time in an amount up to but
not exceeding Five Million Dollars ($5,000,000).
4. Payment and Performance Under This Guaranty. This Guaranty,
including BTCC's right to demand payment hereunder, expires on the earlier of
(a) the first date the Obligor or any guarantor of the Guaranteed Obligations
(other than Guarantor) makes a scheduled payment of principal of the Sunny Loans
as and when due under the terms of the Sunny Notes and (b) the first anniversary
of the Closing (such earlier date, the "Expiration Date"). Notwithstanding
anything to the contrary contained herein, Guarantor has no obligation to make
any payment hereunder in respect of a written demand received by
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Guarantor after the Expiration Date. Subject to the two immediately preceding
sentences, if the November 15, 1996, principal payments in respect of the Sunny
Loans are not made as and when due, BTCC may demand full payment of the
Guaranteed Obligations and Guarantor shall make such payment promptly after its
receipt of such written demand. Not later than five (5) days after BTCC's
receipt of payment in full of all amounts outstanding in respect of the Sunny
Loans (including, without limitation, principal, interest, fees and expenses),
BTCC shall promptly pay Guarantor the amount, if any, by which (a) the sum of
(i) principal payments made in respect of the Sunny Loans and (ii) amounts, if
any, paid by the Guarantor on this Guaranty exceeds (b) $[18,193,927].
5. Primary Obligations. This Guaranty is a primary and original
obligation of Guarantor, is not merely the creation of a surety relationship,
and is an absolute, unconditional, and continuing guaranty of payment and
performance which shall remain in full force and effect without respect to
future changes in conditions, including any change of law or any invalidity or
irregularity with respect to the Purchase Documents or with respect to the
Guaranteed Obligations. Guarantor agrees that Guarantor is jointly and severally
liable, with any other guarantor of the Guaranteed Obligations, to BTCC, to the
extent and subject to the limitations set forth in Sections 3 and 4 hereof, that
the obligations of Guarantor hereunder are independent of the obligations of the
Obligor or any other guarantor, and that a separate action may be brought
against Guarantor to enforce this Guaranty whether an action is brought against
the Obligor or any other guarantor or whether the Obligor or any such other
guarantor is joined in such action. Guarantor agrees that, subject to the terms
and conditions of Sections 3 and 4 hereof, Guarantor's liability hereunder shall
be immediate and shall not be contingent upon the exercise or enforcement by
BTCC of whatever remedies it may have against the Obligor or any other
guarantor, or the enforcement of any lien or realization upon any security BTCC
may at any time possess. Guarantor agrees that any release which may be given by
BTCC to any other guarantor shall not release Guarantor. Guarantor consents and
agrees that BTCC shall be under no obligation to marshal any assets of the
Obligor or any other guarantor in favor of Guarantor, or against or in payment
of any or all of the Guaranteed Obligations.
6. Waivers.
(a) Guarantor absolutely, unconditionally, knowingly, and
expressly waives:
(i) (1) notice of acceptance hereof; (2) notice of the
amount of the Guaranteed Obligations, subject, however, to Guarantor's right to
make inquiry of BTCC to ascertain the amount of the Guaranteed Obligations at
any reasonable time; (3) notice of any adverse change in the financial condition
of the Obligor or of any other fact that might increase Guarantor's risk
hereunder; (4) notice of any event giving rise to a claim of indemnification
under the Purchase Documents; and (5) all other notices (except if such
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notice is specifically required to be given to Guarantor hereunder or under the
Purchase Documents) and demands to which Guarantor might otherwise be entitled.
(ii) its right, under Sections 2845 or 2850 of the
California Civil Code, or otherwise, to require BTCC to institute suit against,
or to exhaust any rights and remedies which BTCC has or may have against, the
Obligor or any third party, or against any collateral for the Guaranteed
Obligations provided by the Obligor or any third party. In this regard,
Guarantor agrees that Guarantor is bound to the payment of all Guaranteed
Obligations, whether now existing or hereafter accruing, as fully as if such
Guaranteed Obligations were directly owing to BTCC by Guarantor. Guarantor
further waives any defense arising by reason of any disability or other defense
(other than the defense that the Guaranteed Obligations shall have been fully
and finally performed and indefeasibly paid) of the Obligor or by reason of the
cessation from any cause whatsoever of the liability of the Obligor in respect
thereof.
(iii) (1) any rights to assert against BTCC any defense
(legal or equitable), set-off, counterclaim, or claim which Guarantor may now or
at any time hereafter have against the Obligor or any other party liable to
BTCC; (2) any defense, set-off, counterclaim, or claim, of any kind or nature,
arising directly or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed Obligations or any
security therefor; (3) any defense Guarantor has to performance hereunder, and
any right Guarantor has to be exonerated, provided by Sections 2819, 2822, or
2825 of the California Civil Code, or otherwise, arising by reason of: the
impairment or suspension of BTCC's rights or remedies against the Obligor; the
alteration by BTCC of the Guaranteed Obligations; any discharge of the Obligor's
obligations to BTCC by operation of law as a result of BTCC's intervention or
omission; or the acceptance by BTCC of anything in partial satisfaction of the
Guaranteed Obligations; (4) the benefit of any statute of limitations affecting
Guarantor's liability hereunder or the enforcement thereof, and any act which
shall defer or delay the operation of any statute of limitations applicable to
the Guaranteed Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to Guarantor's liability
hereunder.
(b) Guarantor absolutely, unconditionally, knowingly, and
expressly waives any defense arising by reason of or deriving from any election
by BTCC under Bankruptcy Code Section 1111(b) to limit the amount of, or any
collateral securing, its claim against the Obligor.
(c) Until BTCC has received full and final payment of all amounts
outstanding in respect of the Sunny Loans (including, without limitation,
principal, interest, fees and expenses), Guarantor hereby absolutely,
unconditionally, knowingly, and expressly agrees that it shall not exercise: (i)
any right of subrogation Guarantor has or may have as against the Obligor with
respect to the Guaranteed Obligations; (ii) any right to proceed against the
Obligor or any other person or entity, now or hereafter, for contribution,
4
<PAGE>
indemnity, reimbursement, or any other suretyship rights and claims, whether
direct or indirect, liquidated or contingent, whether arising under express or
implied contract or by operation of law, which Guarantor may now have or
hereafter have as against the Obligor with respect to the Guaranteed
Obligations; and (iii) any right to proceed or seek recourse against or with
respect to any property or asset of the Obligor.
(d) WITHOUT LIMITING THE GENERALITY OF ANY OTHER WAIVER OR OTHER
PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR HEREBY ABSOLUTELY, KNOWINGLY,
UNCONDITIONALLY, AND EXPRESSLY WAIVES AND AGREES NOT TO ASSERT ANY AND ALL
BENEFITS OR DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF
CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815, 2819, 2820, 2821,
2822, 2825, 2839, 2845, 2848, 2849, AND 2850, AND CHAPTER 2 OF TITLE 14 OF THE
CALIFORNIA CIVIL CODE.
7. Obligations Unconditional. Guarantor consents and agrees that,
without notice to or by Guarantor, and without affecting or impairing the
obligations of Guarantor hereunder, BTCC may, by action or inaction:
(a) compromise, settle, extend the duration or the time for the
payment of, or discharge the performance of, or may refuse to
or otherwise not enforce this Guaranty, the other Purchase
Documents, the Purchased Assets, or any part thereof, with
respect to the Obligor or any other Person;
(b) grant indulgences to the Obligor or any other Person in
respect of the Guaranteed Obligations;
(c) amend or modify in any manner and at any time (or from time
to time) any of the Purchase Documents or the Purchased
Assets with respect to the Obligors; or
(d) release or substitute any other guarantor, if any, of the
Guaranteed Obligations, or enforce, exchange, release, or
waive any security for the Guaranteed Obligations or any
other guaranty of the Guaranteed Obligations, or any portion
thereof.
8. No Election. BTCC shall have all of the rights to seek recourse
against Guarantor to the fullest extent provided for herein, and no election by
BTCC to proceed in one form of action or proceeding, or against any party, or on
any obligation, shall constitute a waiver of BTCC's right to proceed in any
other form of action or proceeding or against other parties unless BTCC has
expressly waived such right in writing. Specifically, but without limiting the
generality of the foregoing, no action or proceeding by BTCC under any
5
<PAGE>
document or instrument evidencing the Guaranteed Obligations shall serve to
diminish the liability of Guarantor under this Guaranty except to the extent
that BTCC finally and unconditionally shall have realized indefeasible payment
by such action or proceeding.
9. Term; Indefeasible Payment. Except as otherwise expressly provided
herein (including, without limitation, as set forth in Section 4 hereof), this
Guaranty shall remain in effect until the full and indefeasible payment of the
Guaranteed Obligations. The Guaranteed Obligations shall not be considered
indefeasibly paid for purposes of this Guaranty unless and until all payments to
BTCC in respect of the Guaranteed Obligations are no longer subject to any right
on the part of any Person, including the Obligor, Obligor as a debtor in
possession, or any trustee (whether appointed under the Bankruptcy Code or
otherwise) of any of the Obligor's assets, to invalidate or set aside such
payments or to seek to recoup the amount of such payments or any portion
thereof, or to declare same to be fraudulent or preferential. In the event that,
for any reason, any portion of such payments to BTCC is set aside or restored,
whether voluntarily or involuntarily, after the making thereof, then the
Guaranteed Obligation intended to be satisfied thereby shall be revived and
continued in full force and effect as if said payment or payments had not been
made, and, subject to the limitations set forth in Sections 3 and 4 hereof,
Guarantor shall be liable for the full amount BTCC is required to repay in
respect thereof.
10. Financial Condition of the Obligor. Guarantor represents and
warrants to BTCC that Guarantor is currently informed of the financial condition
of the Obligor and of all other circumstances which a diligent inquiry would
reveal and which bear upon the risk of nonpayment of the Guaranteed Obligations.
Guarantor hereby covenants that Guarantor will continue to keep informed of the
Obligor's financial condition, the financial condition of other guarantors, if
any, and of all other circumstances which bear upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations.
11. Subordination. Guarantor hereby agrees that any and all present
and future indebtedness of the Obligor owing to Guarantor is postponed in favor
of and subordinated to payment, in full, in cash, of the Guaranteed Obligations.
In this regard, no payment of any kind whatsoever shall be made with respect to
such indebtedness until the Guaranteed Obligations have been indefeasibly paid
in full.
12. Payments; Application. All payments to be made hereunder by the
parties shall be made in lawful money of the United States of America at the
time of payment, shall be made in immediately available funds, and shall be made
without deduction (whether for taxes or otherwise) or offset. Except as
otherwise expressly provided herein, all payments made by Guarantor hereunder
shall be applied as follows: first, to all reasonable costs and expenses
(including reasonable attorneys' fees and expenses and reasonable attorneys'
fees and expenses incurred pursuant to proceedings in respect of Guarantor
arising under the Bankruptcy Code) incurred by BTCC in enforcing this Guaranty;
and second, to the Guaranteed Obligations.
6
<PAGE>
13. Attorneys' Fees and Costs. Guarantor agrees to pay, on demand, all
attorneys' fees (including attorneys' fees incurred pursuant to proceedings in
respect of Guarantor arising under the Bankruptcy Code) and all other reasonable
costs and expenses which may be incurred by BTCC in the enforcement of this
Guaranty.
14. Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission or similar
writing), shall be sent by certified or registered mail, return receipt
requested, or by overnight delivery service, with all charges prepaid, and shall
be given to such party at its address or facsimile number set forth below
(promptly confirmed in writing sent by first class mail), or such other address
or telecopier number as such party may hereafter specify for the purpose by
notice to the other party:
If to Guarantor: Goss Graphic Systems, Inc.
c/o Stonington Partners, Inc.
767 Fifth Avenue, 48th Floor
New York, NY 10153
Attn: Mr. Alexis P. Michas
Fax: (212) 339-8585
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attn: Andrew R. Brownstein, Esq.
Fax: (212) 403-2000
If to BTCC: BT Commercial Corporation
300 S. Grand Avenue, 41st Floor
Los Angeles, CA 90071
Attn: Mr. Thomas Ventling
Fax: (213) 620-8394
with a copy to:
Buchalter, Nemer, Fields & Younger
601 S. Figueroa Street, 24th Floor
Los Angeles, CA 90071
Attn: Matthew Kavanaugh, Esq.
Fax: (213) 896-0400
7
<PAGE>
Each such notice, request or other communication shall be effective upon
receipt; provided that any notice, request, or other communication given in
connection with BTCC's exercise of any of its rights or remedies hereunder, and
as to which there exists applicable statutory or common law governing such
notice, request or other communication, shall be effective in accordance with
such applicable statutory law irrespective of when received by Guarantor.
15. Cumulative Remedies. Except as otherwise expressly provided, no
remedy under this Guaranty or under any Purchase Document is intended to be
exclusive of any other remedy, but each and every remedy shall be cumulative and
in addition to any and every other remedy given hereunder or under any Purchase
Document, and those provided by law or in equity. No delay or omission by BTCC
to exercise any right under this Guaranty shall impair any such right nor be
construed to be a waiver thereof. No failure on the part of BTCC to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
16. Books and Records. Guarantor agrees BTCC's books and records
showing the account between BTCC and the Obligor shall be admissible in any
action or proceeding and shall be prima facie proof for the purpose of
establishing the items therein set forth.
17. Severability of Provisions. If any provision of this Guaranty is
for any reason held to be invalid, illegal or unenforceable in any respect, that
provision shall not affect the validity, legality or enforceability of any other
provision of this Guaranty.
18. Entire Agreement; Amendments and Waivers. This Guaranty, together
with the other Purchase Documents, constitutes the entire agreement between
Guarantor and BTCC pertaining to the subject matter contained herein. Any
provision of this Guaranty may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the party asserted to be
bound thereby, and then such amendment or waiver shall be effective only in the
specific instance and specific purpose for which given.
19. Successors and Assigns. This Guaranty shall bind the successors
and assigns of Guarantor, and shall inure to the benefit of the respective
successors and assigns of BTCC; provided, however, Guarantor may not assign this
Guaranty or delegate any of its duties hereunder without BTCC's prior written
consent, which may be withheld for any reason, and any such prohibited
assignment shall be absolutely null and void. BTCC reserves its right to sell,
assign, transfer, negotiate, or grant participations in all or any part of, or
any interest in, the rights and benefits hereunder pursuant to and in accordance
with the provisions of the Purchase Documents. In connection therewith, BTCC may
disclose all documents and information which BTCC now or hereafter may have
relating to Guarantor, Guarantor's business, or this Guaranty to any such
prospective or actual transferee.
8
<PAGE>
20. Governing Law; Jurisdiction; Jury Trial.
(a) GOVERNING LAW. THIS GUARANTY SHALL BE DEEMED TO HAVE BEEN
MADE IN THE STATE OF CALIFORNIA AND THE VALIDITY, CONSTRUCTION, INTERPRETATION,
AND ENFORCEMENT HEREOF, AND THE RIGHTS OF THE PARTIES HERETO, SHALL BE
DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW.
(b) JURISDICTION AND VENUE. THE PARTIES HERETO AGREE THAT ANY
ACTION OR PROCEEDING PURSUANT TO OR ARISING IN CONNECTION WITH THIS GUARANTY,
WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE HELD ONLY IN
THE CITY AND COUNTY OF LOS ANGELES, STATE OF CALIFORNIA.
(c) JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVE ANY RIGHT TO
A TRIAL BY JURY; ANY DISPUTES WILL BE RESOLVED BY A BENCH TRIAL.
IN WITNESS WHEREOF, Guarantor has executed and delivered this Guaranty
as of the date set forth in the first paragraph hereof.
GOSS GRAPHIC SYSTEMS, INC.,
a Delaware corporation
By:_________________________________________
Title:______________________________________
ACCEPTED AND AGREED:
BT COMMERCIAL CORPORATION,
a Delaware corporation
By________________________
Title_____________________
9
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Goss Graphic Systems, Inc.:
As independent public accountants, we hereby consent to the use of our
report, dated July 16, 1996, and all references to our firm included in or made
a part of the attached registration statement.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois
October 9, 1996
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 3 to Registration Statement No.
333-08421 of Goss Graphic Systems, Inc. on Form S-1 of our report on the
Combined Financial Statements of Rockwell Graphic Systems, a business unit of
Rockwell International Corporation, dated November 3, 1995 as to the 1995 and
1994 financial statements and April 26, 1996 as to the 1993 financial
statements, except for Note 22, as to which the date is October 9, 1996 (which
expresses an unqualified opinion and includes an explanatory paragraph relating
to the preparation of the financial statements of a business unit of Rockwell
International Corporation) appearing in the Prospectus, which is part of such
Registration Statement, and of our report on the financial statement schedule of
Rockwell Graphic Systems dated November 3, 1995 as to the 1995 and 1994
financial information and April 26, 1996 as to the 1993 financial information
appearing elsewhere in such Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
October 9, 1996
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-------------
GOSS GRAPHIC SYSTEMS, INC.
(Exact name of obligor as specified in its charter)
Delaware 13-3888069
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
700 Oakmont Lane
Westmont, Illinois 60559
(Address of principal executive offices) (Zip code)
-------------
Senior Subordinated Notes due 2006
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 3.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
Trustee of all facts on which to base a responsive answer to Item 2, the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 4th day of October, 1996.
THE BANK OF NEW YORK
By:/s/ NANCY B. GILL
------------------------------------
Name: NANCY B. GILL
Title: ASSISTANT TREASURER
-4-
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business March 31, 1996, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
in Thousands
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ......................................... $ 2,461,550
Interest-bearing balances ................................. 835,563
Securities:
Held-to-maturity securities ............................... 802,064
Available-for-sale securities ............................. 2,051,263
Federal funds sold in domestic offices of the bank:
Federal funds sold .......................................... 3,885,475
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ........................................27,820,159
LESS: Allowance for loan and
lease losses .....................................509,817
LESS: Allocated transfer risk
reserve ............................................1,000
Loans and leases, net of unearned
income, allowance, and reserve .......................... 27,309,342
Assets held in trading accounts ............................. 837,118
Premises and fixed assets (including
capitalized leases) ....................................... 614,567
Other real estate owned ..................................... 51,631
Investments in unconsolidated
subsidiaries and associated
companies ................................................. 225,158
Customers' liability to this bank on
acceptances outstanding ................................... 800,375
Intangible assets ........................................... 436,668
Other assets ................................................ 1,247,908
------------
Total assets ................................................ $ 41,558,682
============
LIABILITIES
Deposits:
In domestic offices ....................................... $ 18,851,327
Noninterest-bearing ..............................7,102,645
Interest-bearing ................................11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs .......................... 10,965,604
Noninterest-bearing .................................37,855
Interest-bearing ................................10,927,749
Federal funds purchased and securities
sold under agreements to repurchase
in domestic offices of the bank and of
its Edge and Agreement subsidiaries,
and in IBFs:
Federal funds purchased ................................... 1,224,886
Securities sold under agreements
to repurchase ........................................... 29,728
Demand notes issued to the U.S. .............................
Treasury .................................................. 118,870
Trading liabilities ......................................... 673,944
Other borrowed money:
With original maturity of one year
or less ................................................. 2,713,248
With original maturity of more than
one year ................................................ 20,780
Bank's liability on acceptances executed
and outstanding ........................................... 803,292
Subordinated notes and debentures ........................... 1,022,860
Other liabilities ........................................... 1,590,564
------------
Total liabilities ........................................... 38,015,103
------------
EQUITY CAPITAL
Common stock ................................................ 942,284
Surplus ..................................................... 525,666
Undivided profits and capital
reserves .................................................. 2,078,197
Net unrealized holding gains
(losses) on available-for-sale
securities ................................................ 3,197
Cumulative foreign currency translation adjustments ......... (5,765)
------------
Total equity capital ........................................ 3,543,579
------------
Total liabilities and equity
capital ................................................... $ 41,558,682
============
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith )
