<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 20, 1996
REGISTRATION NO. 333-
=============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------
HAWK CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 34-1608156 6719
----------------------- -------------------- --------------------
(State or other (I.R.S. Employer (Primary Standard
jurisdiction Identification Number) Industrial
of incorporation or Classification Code Number)
organization)
</TABLE>
200 PUBLIC SQUARE, SUITE 30-5000
CLEVELAND, OHIO 44114
(216) 861-3553
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
SEE TABLE OF ADDITIONAL REGISTRANTS
NORMAN C. HARBERT
CHAIRMAN OF THE BOARD
200 PUBLIC SQUARE, SUITE 30-5000
CLEVELAND, OHIO 44114
(216) 861-3553
- --------------------------------------------------------------------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With copies to:
MARC C. KRANTZ, ESQ.
KOHRMAN JACKSON & KRANTZ P.L.L.
ONE CLEVELAND CENTER, 20TH FLOOR
CLEVELAND, OHIO 44114
(216) 736-7204
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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===========================================================================================================
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER NOTE(1) OFFERING PRICE(1) FEE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series B 10 1/4% Senior Notes due
2003................................. $100,000,000 100% $100,000,000 $30,303
- -----------------------------------------------------------------------------------------------------------
Guarantees of Series B 10 1/4% Senior
Notes due 2003 by domestic
subsidiaries of Hawk Corporation..... -- -- -- (2)
===========================================================================================================
(1) Estimated, pursuant to Rule 457(a), solely for purposes of calculating the
registration fee.
(2) Pursuant to Rule 457(n) under the Securities Act of 1933, as amended, no
registration fee is payable with respect to the Guarantees.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
===========================================================================================================
</TABLE>
<PAGE> 2
TABLE OF ADDITIONAL REGISTRANTS
The address of the principal executive offices of each of the additional
Registrants listed below, and the name and address of the agent for service
therefor, is the same as is set forth for Hawk Corporation on the facing page of
this Registration Statement.
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<CAPTION>
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER
EXACT NAME OF ADDITIONAL REGISTRANT INCORPORATION OR CLASSIFICATION CODE IDENTIFICATION
AS SPECIFIED IN ITS CHARTER ORGANIZATION NUMBER NUMBER
- ------------------------------------------ ----------------- ------------------- ---------------
<S> <C> <C> <C>
Friction Products Co...................... Ohio 3499 34-1608009
Hawk Brake, Inc........................... Ohio 3499 34-1657454
Logan Metal Stampings, Inc................ Ohio 3460 34-1608159
Helsel, Inc............................... Delaware 3499 35-1957561
S.K. Wellman Holdings, Inc................ Delaware 6719 34-1805476
S.K. Wellman Corp......................... Delaware 3499 34-1804995
Wellman Friction Products U.K. Corp....... Delaware 3499 34-1832444
Hutchinson Products Corporation........... Delaware 3363 34-1847012
</TABLE>
i
<PAGE> 3
HAWK CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO
ITEM 501(B) OF REGULATION S-K
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<CAPTION>
ITEM
NO. FORM S-4 CAPTION CAPTION OR LOCATION IN PROSPECTUS
- ----- ---------------------------------------------------- ---------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Forepart of Registration State-
ment and Outside Front Cover Page
of Prospectus
2. Inside Front and Outside Back Cover Pages of Pro-
spectus............................................. Inside Front and Outside Back
Cover Pages of Prospectus
3. Risk Factors; Ratio of Earnings to Fixed Charges and
Other Information................................... Summary; Risk Factors; Unaudited
Pro Forma Consolidated Financial
Information; Selected
Consolidated Financial Data
4. Terms of the Transaction............................ Summary; The Transactions; Use of
Proceeds; The Exchange Offer;
Description of the Exchange
Notes; Certain U.S. Federal In-
come Tax Consequences; Regis-
tration Right; Plan of
Distribution
5. Pro Forma Financial Information..................... Summary; Unaudited Pro Forma
Consolidated Financial Informa-
tion; Management's Discussion and
Analysis of Pro Forma Results of
Operations and Financial
Condition
6. Material Contracts with the Company Being
Acquired............................................ Not Applicable
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters....... Not Applicable
8. Interests of Named Experts and Counsel.............. Legal Matters
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities...................... Not Applicable
10. Information with Respect to S-3 Registrants......... Not Applicable
11. Incorporation of Certain Information by Reference... Not Applicable
12. Information with Respect to S-2 or S-3
Registrants......................................... Not Applicable
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
ITEM
NO. FORM S-4 CAPTION CAPTION OR LOCATION IN PROSPECTUS
- ----- ---------------------------------------------------- ---------------------------------
<S> <C> <C>
13. Incorporation of Certain Information by Reference... Not Applicable
14. Information with Respect to Registrants Other Than
S-2 or S-3 Registrants.............................. Available Information; Summary;
Risk Factors; The Transactions;
Unaudited Pro Forma Consolidated
Financial Information; Man-
agement's Discussion and Analysis
of Pro Forma Results of
Operations and Financial Condi-
tion; Selected Consolidated Fi-
nancial Data; Management's
Discussion and Analysis of Finan-
cial Condition and Results of Op-
erations; Business; Description
of Certain Indebtedness;
Description of the Exchange
Notes; Change in Independent
Auditors; Financial Statements
15. Information With Respect to S-3 Companies........... Not Applicable
16. Information With Respect to S-2 or S-3 Companies.... Not Applicable
17. Information With Respect to Companies Other Than S-2
or S-3 Companies.................................... Not Applicable
18. Information if Proxies, Consents or Authorizations
Are to be Solicited................................. Not Applicable
19. Information if Proxies, Consents or Authorizations
Are Not to be Solicited or in an Exchange Offer..... The Exchange Offer; Management;
Principal Stockholders; Certain
Transactions; Description of
Certain Indebtedness
</TABLE>
iii
<PAGE> 5
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 20, 1996
PROSPECTUS
[HAWK LOGO]
HAWK CORPORATION
AND
FRICTION PRODUCTS CO., HAWK BRAKE, INC., LOGAN METAL STAMPINGS, INC., S.K.
WELLMAN HOLDINGS, INC.,
S.K. WELLMAN CORP., WELLMAN FRICTION PRODUCTS U.K. CORP., HELSEL, INC.
AND HUTCHINSON PRODUCTS CORPORATION
OFFER TO EXCHANGE $100,000,000 OF ITS SERIES B 10 1/4% SENIOR NOTES DUE 2003
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT FOR $100,000,000
OF ITS OUTSTANDING 10 1/4% SENIOR NOTES DUE 2003
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED (THE "EXPIRATION DATE").
Hawk Corporation, a Delaware corporation ("Hawk" or the "Company"), and each
of its domestic subsidiaries listed above, hereby offer to exchange (the
"Exchange Offer") up to $100,000,000 in aggregate principal amount of Hawk's new
Series B 10 1/4% Senior Notes due 2003 (the "Exchange Notes") for $100,000,000
in aggregate principal amount of Hawk's outstanding 10 1/4% Senior Notes due
2003 (the "Notes"). The terms of the Exchange Notes are identical in all
material respects (including principal amount, interest rate and maturity) to
the terms of the Notes for which they may be exchanged pursuant to the Exchange
Offer, except that the Exchange Notes will be freely transferable by holders
thereof (other than as provided herein) and will not be subject to any covenant
regarding registration. The Exchange Notes will evidence the same indebtedness
as the Notes and be entitled to the benefits of the Indenture (as defined)
governing the Notes.
Interest on the Exchange Notes will be payable semi-annually on June 1 and
December 1 of each year, commencing June 1, 1997. The Exchange Notes will mature
on December 1, 2003, unless previously redeemed. The Exchange Notes will be
redeemable in cash at the option of the Company, in whole or in part, on or
after December 1, 2000, at the redemption prices set forth herein, together with
accrued interest thereon to the date of redemption. In addition, the Company may
also redeem up to $35.0 million aggregate principal amount of Exchange Notes in
cash at its option at any time prior to December 1, 1999 at 110.25% of the
principal amount thereof, plus accrued interest to the date of redemption, with
the net proceeds of one or more Public Equity Offerings (as defined); provided,
however, that at least $65.0 million aggregate principal amount of Notes must
remain outstanding after any such redemption. Upon a Change of Control (as
defined), the Company will be required to offer to repurchase the Exchange Notes
at a purchase price equal to 101% of the principal amount thereof, plus accrued
and unpaid interest, if any, to the date of repurchase.
The Exchange Notes will be senior unsecured obligations of the Company,
ranking senior in right of payment to all subordinated indebtedness of the
Company. The Exchange Notes will rank pari passu in right of payment with all
other existing and future unsecured senior indebtedness of the Company. THE
EXCHANGE NOTES WILL BE GUARANTEED ON A SENIOR UNSECURED BASIS BY EACH OF THE
DOMESTIC SUBSIDIARIES OF THE COMPANY AND ANY FUTURE RESTRICTED SUBSIDIARIES (AS
DEFINED) THAT ARE NOT FOREIGN SUBSIDIARIES (AS DEFINED) (COLLECTIVELY, THE
"GUARANTORS"). HOWEVER, THE EXCHANGE NOTES WILL BE EFFECTIVELY SUBORDINATED TO
ALL FUTURE AND EXISTING SECURED INDEBTEDNESS OF THE COMPANY AND THE GUARANTORS
AND TO ALL FUTURE AND EXISTING INDEBTEDNESS OF THE COMPANY'S SUBSIDIARIES THAT
ARE NOT GUARANTORS. As of September 30, 1996, after giving pro forma effect to
the Transactions (as defined), the Company and the Guarantors would have had
approximately $1.6 million of secured indebtedness outstanding (exclusive of
unused commitments of $25.0 million under the New Revolving Credit Facility, as
defined) and no senior debt outstanding other than the Notes, and the
subsidiaries that are not Guarantors would have had approximately $1.0 million
of indebtedness outstanding.
The Notes were sold by the Company in connection with the concurrent
consummation of certain of the Transactions. See "The Transactions." The Notes
were originally issued and sold on November 27, 1996 in transactions not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon the exemption provided by Section 4(2) of the Securities Act.
Accordingly, the Notes may not be reoffered, resold or otherwise pledged,
hypothecated or transferred in the United States unless so registered or unless
an applicable exemption from the registration requirements of the Securities Act
is available. The Exchange Notes are being offered hereunder in order to satisfy
certain of the obligations of Hawk and the Guarantors under the registration
rights agreement relating to the Notes. See "The Exchange Offer -- Purpose of
the Exchange Offer."
Each holder who is a broker-dealer and who receives Exchange Notes for its
own account in exchange for Notes that were acquired by it as a result of
market-making activities or other trading activities will be required to
acknowledge that it will deliver a prospectus in connection with any resale by
it of such Exchange Notes. The Letter of Transmittal relating to the Exchange
Offer states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed to make available, for a period
of up to 120 days after consummation of the Exchange Offer, copies of this
Prospectus, as amended or supplemented, to any broker-dealer and any other
persons, if any, with similar prospectus delivery requirements, for use in
connection with any resale of Exchange Notes. In the absence of an exemption,
each broker-dealer that received the Notes from the Company in the Offering (as
defined) and not as a result of market-making or other trading activities must
comply with the registration requirements of the Securities Act. See
"Registration Rights" and "Plan of Distribution."
The Notes are designated for trading in the Private Offerings, Resales and
Trading through Automated Linkages ("PORTAL") market. The Exchange Notes
constitute securities for which there is no established trading market. The
Company and the Guarantors do not intend to list the Exchange Notes on any
national securities exchange or to seek admission thereof to trading in the
National Association of Securities Dealers Automated Quotation System. Any Notes
not tendered and accepted in the Exchange Offer will remain outstanding and will
continue to be subject to the restrictions on transfer set forth in the
Indenture. The Company and the Guarantors do not intend to register the Notes
under the Securities Act. To the extent that any Notes are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Notes could be
adversely affected. No assurance can be given as to the liquidity of the trading
market for either the Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Notes being tendered for exchange. The date of acceptance and exchange
of the Notes (the "Exchange Date") will be the first business day following the
Expiration Date. Notes tendered pursuant to the Exchange Offer may be withdrawn
at any time prior to the Expiration Date. Hawk and the Guarantors will pay all
expenses incident to the Exchange Offer. Neither Hawk nor any of the Guarantors
will receive any cash proceeds from the Exchange Offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE
OFFER.
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.
, 1997
<PAGE> 6
AVAILABLE INFORMATION
The Company and the Guarantors have filed with the Securities and Exchange
Commission (the "Commission"), Washington, D.C., a Registration Statement on
Form S-4 (together with all amendments, exhibits, schedules and supplements
thereto, the "Registration Statement") under the Securities Act with respect to
the Exchange Notes offered hereby. This Prospectus, which constitutes a part of
the Registration Statement, does not contain all of the information set forth in
the Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document referred to are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference to such exhibit. For
further information with respect to the Company and the Exchange Notes offered
hereby, reference is made to the Registration Statement. Copies of the
Registration Statement may be inspected without charge at the Commission's
principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549 and the Commission's Regional Offices located 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 all or any part thereof
may be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549 upon payment of fees prescribed by the
Commission. In addition, the Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission, including the Company and the Guarantors.
The Company and the Guarantors are not currently subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Upon completion of the Exchange Offer, the Company will be
subject to the informational requirements of the Exchange Act, and in accordance
therewith, will file periodic reports and other information with the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of any material so
filed can be obtained from the Public Reference Section of the Commission, upon
payment of certain fees prescribed by the Commission.
In addition, the Company and the Guarantors have agreed that, whether or
not required to do so by the rules and regulations of the Commission, for so
long as any of the Exchange Notes remain outstanding, they will furnish to the
holders of the Exchange Notes and file with the Commission (unless the
Commission will not accept such a filing) (1) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company and the Guarantors were
required to file such forms, including a "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by the Company's certified independent
accountants, and (2) all reports that would be required to be filed with the
Commission on Form 8-K if the Company and the Guarantors were required to file
such reports and (3) any other information, documents and other reports that the
Company and the Guarantors would be required to file with the Commission if they
were subject to Section 13 or 15(d) of the Exchange Act.
UNTIL , 1997 (25 DAYS AFTER THE DATE HEREOF), ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
2
<PAGE> 7
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Hawk is a holding company, the principal
assets of which consist of the capital stock of its manufacturing subsidiaries,
Friction Products Co. ("FPC"), S.K. Wellman Corp. ("SKW"), Helsel, Inc.
("Helsel") and Logan Metal Stampings, Inc. ("Logan"). In addition, in March
1996, the Company acquired the friction products assets of GKN Bound Brook
Limited ("GKN"). Unless otherwise indicated, industry and market data used in
this Prospectus were obtained from internal Company data that have not been
independently verified. Unless otherwise indicated, the information in this
Prospectus assumes completion of all the Transactions, as described in this
Prospectus. Holders of Notes considering tendering their Notes in the Exchange
Offer should read this Prospectus in its entirety. This Prospectus contains
forward-looking statements that involve certain risks and uncertainties. Actual
results and events may differ significantly from those discussed in the
forward-looking statements. Factors that might cause a difference include, but
are not limited to, those discussed in "Risk Factors."
THE COMPANY
GENERAL
Hawk designs, engineers, manufactures and markets friction products (83.5%
of sales in the first nine months of 1996) and precision engineered components
(16.5%). The Company is a leading worldwide supplier of friction products for
brakes, clutches and transmissions used in aerospace, industrial and specialty
applications. The Company is also a leading supplier of precision engineered
components primarily made from powder metals, including pump elements, gears,
transmission plates, pistons and anti-lock brake sensor rings, used in
industrial applications. The Company focuses on manufacturing products requiring
sophisticated engineering and production techniques for applications in
aerospace and specialty industrial markets where it has achieved a major market
position.
The Company is the largest independent supplier of friction materials to
the manufacturers of braking systems for the Boeing 727, 737 and 757, the
McDonnell Douglas DC-9, DC-10 and MD-80 and the Lockheed L-1011 aircraft and is
the largest supplier of friction materials to the general aviation
(non-commercial, non-military) market, supplying friction materials for aircraft
manufacturers such as Cessna, Lear, Gulfstream and Fokker. The Company believes
that it is a leading supplier of friction materials to manufacturers of
construction and agricultural equipment and large trucks, including Dana,
Caterpillar and John Deere. In addition, the Company is a major supplier of
friction products for use in specialty applications, such as brakes for
Harley-Davidson motorcycles, AM General Humvees and Bombardier, Polaris and
Arctco ("Arctic Cat") snowmobiles. The Company's precision engineered components
made from powder metals are used in a wide variety of industrial applications,
often as a lower cost replacement for parts manufactured by a traditional
forging, casting or stamping technology.
The Company believes that its diverse customer base and broad aftermarket
product line lessens its exposure to economic fluctuations. The Company
estimates that aftermarket sales of friction products have comprised
approximately 50% of the Company's net friction product sales in recent years.
The Company also believes that its principal tradenames are well-known in the
domestic and international marketplace and are associated with quality and
extensive customer support, including specialized product engineering and strong
aftermarket service.
Since its formation in 1989, Hawk has pursued a strategic plan of fostering
growth by making complementary acquisitions and broadening its customer base.
From 1991 to 1995, the Company's net sales and income from operations increased
at a compound annual rate of 41.6% and 34.2%, respectively, and for the nine
months ended September 30, 1996, the Company's sales and income from operations
(before non-recurring costs of $3.7 million for plant consolidation expenses)
increased 67.7% and 48.3%, respectively, compared to the nine months ended
September 30, 1995.
3
<PAGE> 8
Since 1994, the sales growth has been primarily driven by the acquisitions of
Helsel, SKW and the friction products assets of GKN. The acquisitions tripled
the net sales of the Company. In addition, the Company's net sales during the
period from 1991 to 1995 grew internally, without giving effect to the
acquisitions, at a compound annual rate of 12.9%.
BUSINESS STRATEGY
The Company seeks to grow by continuing to focus on a balanced product mix
targeted at high margin specialty applications. The principal elements of the
Company's business strategy include:
- Focus on High-Margin, Specialty Applications. The Company operates
in aerospace and specialty industrial markets that typically require
sophisticated engineering and production techniques. In developing new
applications, as well as in evaluating acquisitions, the Company seeks to
compete in markets requiring such engineering expertise and technical
capability, rather than in markets in which the primary competitive factor
is price. The Company believes margins for its products in these markets
are higher than in other markets that use standardized products. The
Company's gross margin in the first nine months of 1996 was 26.3%.
- Leveraging Customer Relationships. The Company's engineers work
closely with its customers to develop and design new products and improve
the performance of existing products. The Company believes that its
commitment to quality, service and just-in-time delivery have enabled it to
build and maintain strong and stable customer relationships. The Company
also believes that it is the sole source for specific applications with
respect to more than 85% of its sales. Each of the Company's 10 largest
customers have been customers of the Company or its predecessors for more
than 10 years. As further testimony to its customer satisfaction record,
the Company has received numerous preferred supplier awards from many of
its leading customers, including Aircraft Braking Systems, BFGoodrich
Aerospace, Dana, Caterpillar, Allison Transmission and John Deere.
- New Product Introduction. The Company believes that the
introduction of new products in conjunction with a new brake, clutch or
transmission system is particularly important in the friction products
business. This importance arises because the friction material is the
consumable, or wear, component of such systems. The introduction of new
friction products in conjunction with a new system provides the Company
with the opportunity to supply the aftermarket for the life of the system.
For example, on an aircraft braking system, this ability to service the
aftermarket will likely give the Company a stable market for its friction
products for the life of the aircraft, which can be 30 years or more. The
Company also seeks to grow by applying its existing products and
technologies to new specialized applications where its products have a
performance or technological advantage. For example, the Company has
recently introduced high performance friction material for use in racing
car brakes, which the Company believes may have additional applications in
the industrial market.
- Expanding International Sales. In recent years, the Company has
significantly expanded its international presence. With the acquisition of
SKW in 1995 and the friction products assets of GKN in 1996, the Company
has acquired manufacturing facilities in Italy and Canada, a sales office
in the United Kingdom and a worldwide distribution network for its
products. The Company's distributors are located in established markets
throughout Europe, Canada and the Far East, as well as emerging markets in
South and Central America and Southeast Asia. As a result of these
acquisitions, sales from the Company's international facilities grew from
6.7% of total Company net sales in the first nine months of 1995, to 15.7%
in the first nine months of 1996. The Company believes that its ability to
actively support multinational customers on a global basis will allow it to
increase its sales to new and existing customers.
4
<PAGE> 9
- Pursuit of Strategic Acquisitions. The fragmented friction product
and powder metal component industries are undergoing consolidation. The
Company will continue to seek to acquire complementary businesses with a
major market position that will enable it to expand its product offerings,
technical capabilities and customer base. In assimilating acquired
companies, the Company may rationalize operations to reduce costs and
improve profitability. For example, since the acquisition of SKW in 1995,
the Company has consolidated SKW's headquarters facility and one of SKW's
two U.S. manufacturing facilities into its existing facilities, resulting
in an estimated $5.4 million of annualized cost savings.
------------------------
Unless the context otherwise requires, the terms "Company" and "Hawk" as
used in this Prospectus refer to Hawk Corporation, a Delaware corporation, and
its consolidated subsidiaries. The Company's principal executive offices are
located at 200 Public Square, Suite 30-5000, Cleveland, Ohio 44114, and its
telephone number is (216) 861-3553.
Hawk has applied for the registration of the Wellman Friction Products
trademark. Velvetouch(R), Feramic(R) and Fibertuff(R) are registered trademarks
of the Company and Hawk Brake is a tradename of the Company. Trademarks of
corporations other than the Company are also referred to in this Prospectus.
THE TRANSACTIONS
The Company's outstanding 10 1/4% Senior Notes due 2003 (the "Notes") were
offered as a component of a series of transactions (the "Transactions") that the
Company implemented to finance the acquisition of Hutchinson Foundry Products
Company ("Hutchinson") and to improve the Company's operating and financial
flexibility. In addition to the offering of the Notes (the "Offering"), the
Transactions include: (1) the Company's repayment and termination of its
existing senior bank credit facility (the "Old Credit Facility"); (2) the
Company's and its domestic subsidiaries' execution of a new revolving credit
facility (the "New Revolving Credit Facility"); (3) the amendment to the
Company's 12% senior subordinated notes (the "Senior Subordinated Notes"); (4)
the merger (the "Hawk Controlling Stockholder Merger"), in a tax-free
reorganization, of Hawk Holding Corp., a Delaware corporation and a principal
stockholder of the Company ("Old Hawk"), with and into the Company; and (5) the
Hutchinson acquisition. The Transactions described in clauses (1) through (4)
above were completed concurrently with the Offering. The Company expects to
close the Hutchinson acquisition in the first quarter of 1997. See "The
Transactions" and "Certain Transactions -- Transactions Concurrent with the
Offering."
HUTCHINSON ACQUISITION
As part of the Company's strategy of acquiring complementary businesses
with a major market position that will expand the Company's product offerings,
technical capabilities and customer base, the Company has entered into a
definitive purchase agreement to acquire all the outstanding capital stock of
Hutchinson. Hutchinson designs and manufactures precision engineered components
consisting primarily of rotors for small motors used in small appliances and
office equipment. The Company plans to acquire Hutchinson for (1) $10.0 million
payable in cash at the closing of the acquisition, subject to adjustment for
changes in Hutchinson's stockholders' equity and actual 1996 Hutchinson
earnings, (2) notes (the "Hutchinson Acquisition Notes") consisting of 8.0%
two-year notes in the aggregate principal amount of $1.5 million, $500,000 of
which is convertible at the option of the holders thereof into shares of the
Company's Class A Common Stock, $0.01 par value per share ("Class A Common
Stock"), and (3) contingent payments to be made by the Company only if
Hutchinson meets certain earnings targets. The Company expects to close the
Hutchinson acquisition in the first quarter of 1997. There is no assurance that
the acquisition of Hutchinson will be completed, or if completed, that the
Company will be able to successfully integrate Hutchinson into its operations.
See "The Transactions -- Hutchinson Acquisition" and "Business -- Hutchinson
Acquisition."
5
<PAGE> 10
THE EXCHANGE OFFER
The Exchange Offer......... The Company and the Guarantors are offering to
exchange, pursuant to the Exchange Offer,
$100,000,000 aggregate principal amount of the
Company's new Series B 10 1/4% Senior Notes due
2003 (the "Exchange Notes") for $100,000,000
aggregate principal amount of the Company's
outstanding 10 1/4% Senior Notes due 2003 (the
"Notes"). The terms of the Exchange Notes are
identical in all material respects (including
principal amount, interest rate and maturity) to
the terms of the Notes for which they may be
exchanged pursuant to the Exchange Offer, except
that the Exchange Notes will be freely transferable
by holders thereof (other than as provided herein),
and will not be subject to any covenant regarding
registration. See "The Exchange Offer -- Terms of
the Exchange" and "The Exchange Offer -- Terms and
Conditions of the Letter of Transmittal" and
"Description of the Exchange Notes."
Interest Payments.......... Interest on the Exchange Notes shall accrue from
the last interest payment date (June 1 or December
1) on which interest was paid on the Notes so
surrendered or, if no interest has been paid on
such Notes, from November 27, 1996 (the "Issue
Date").
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Notes being
tendered for exchange.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997, unless
extended (the "Expiration Date"). Any Note not
accepted for exchange for any reason will be
returned without expense to the tendering holder
thereof as promptly as practicable after the
expiration or termination of the Exchange Offer.
Conditions of the Exchange
Offer..................... The Company and the Guarantors' obligation to
consummate the Exchange Offer will be subject to
certain conditions. See "The Exchange Offer --
Conditions to the Exchange Offer." The Company and
the Guarantors reserve the right to terminate or
amend the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition.
Withdrawal Rights.......... The tender of Notes pursuant to the Exchange Offer
may be withdrawn at any time prior to the
Expiration Date. See "The Exchange Offer --
Withdrawal Rights."
Procedures for Tendering
Notes..................... See "The Exchange Offer -- Tender Procedure."
6
<PAGE> 11
Federal Income Tax
Consequences.............. The exchange of Notes for Exchange Notes should not
be a taxable exchange for federal income tax
purposes. See "Certain U.S. Federal Income Tax
Consequences."
Consequences of the
Exchange Offer............ Holders of the Notes who do not tender their Notes
in the Exchange Offer will continue to hold such
Notes and will be entitled to all the rights and
limitations applicable thereto under the Indenture
dated as of November 27, 1996, among the Company,
the Guarantors and Bank One Trust Company, NA, as
trustee, relating to the Notes and the Exchange
Notes (the "Indenture"), except for any such rights
under the Registration Rights Agreement (the
"Registration Rights Agreement") dated November 27,
1996 by and among Schroder Wertheim & Co.
Incorporated, BT Securities Corporation and
McDonald & Company Securities, Inc., as Initial
Purchasers (the "Initial Purchasers"), that by
their terms terminate or cease to have further
effectiveness as a result of the making of, and the
acceptance for exchange of all validly tendered
Notes pursuant to, the Exchange Offer. Holders of
Notes who do not exchange their Notes for Exchange
Notes pursuant to the Exchange Offer will continue
to be subject to the restrictions on transfer of
such Notes as set forth in the legend thereon as a
consequence of the offer or sale of the Notes
pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of
the Securities Act and applicable state securities
laws. In general, the Notes may not be offered or
sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and
applicable state securities laws. The Company and
the Guarantors do not intend to register the Notes
under the Securities Act. All untendered Notes will
continue to be subject to the restrictions on
transfer set forth in the Indenture. To the extent
that Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered
Notes could be adversely affected.
Use of Proceeds............ There will be no cash proceeds to the Company or
any of the Guarantors from the exchange pursuant to
the Exchange Offer.
Exchange Agent............. Bank One Trust Company, NA is serving as Exchange
Agent in connection with the Exchange Offer.
7
<PAGE> 12
TERMS OF THE EXCHANGE NOTES
The terms of the Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the Exchange Notes will be freely transferable by holders thereof (other
than as provided herein) and will not be subject to any covenant regarding
registration.
The Exchange Notes......... $100,000,000 aggregate principal amount of Series B
10 1/4% Senior Notes due 2003.
Maturity................... December 1, 2003.
Interest Payment Dates..... June 1 and December 1 of each year, commencing June
1, 1997.
Guarantees................. The Exchange Notes will be guaranteed (the
"Guarantees") on a senior unsecured basis by each
of the domestic subsidiaries of the Company and any
future Restricted Subsidiaries (as defined) that
are not Foreign Subsidiaries (as defined) (each, a
"Guarantor"). See "Description of the Exchange
Notes -- The Guarantees."
Ranking.................... The Exchange Notes will be senior unsecured
obligations of the Company, ranking senior in right
of payment to all subordinated indebtedness of the
Company. The Guarantees will be senior unsecured
obligations of the Guarantors, ranking senior in
right of payment to all subordinated indebtedness
of the Guarantors. The Exchange Notes will rank
pari passu in right of payment with all other
existing and future unsecured senior indebtedness
of the Company. However, the Exchange Notes will be
effectively subordinated to all future and existing
secured indebtedness of the Company and the
Guarantors and to all future and existing
indebtedness of the Company's subsidiaries that are
not Guarantors. As of September 30, 1996, after
giving pro forma effect to the Transactions, the
Company and the Guarantors would have had
approximately $1.6 million of secured indebtedness
outstanding (exclusive of unused commitments of
$25.0 million under the New Revolving Credit
Facility) and no senior debt outstanding other than
the Exchange Notes, and the subsidiaries that are
not Guarantors would have had approximately
$947,000 of indebtedness outstanding. The Indenture
will permit the Company and its subsidiaries to
incur additional indebtedness, subject to certain
limitations. See "Risk Factors -- Ranking of the
Exchange Notes" and "Description of the Exchange
Notes -- Ranking."
Optional Redemption........ The Exchange Notes will be redeemable in cash at
the option of the Company, in whole or in part, on
or after December 1, 2000, at the redemption prices
set forth herein, together with accrued and unpaid
interest thereon, if any, to the date of
redemption. In addition, the Company may also
redeem up to $35.0 million aggregate principal
amount of Exchange Notes in cash at its option at
any time prior to December 1, 1999 at 110.25% of
the
8
<PAGE> 13
principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption, with
the net proceeds of one or more Public Equity
Offerings; provided, however, that at least $65.0
million aggregate principal amount of Exchange
Notes must remain outstanding after any such
redemption. See "Description of the Exchange
Notes -- Optional Redemption."
Change of Control.......... Upon a Change of Control, the Company will be
required to offer to repurchase the Exchange Notes
at a purchase price equal to 101% of the principal
amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase. See "Description
of the Exchange Notes -- Change of Control."
Certain Covenants.......... The Indenture contains certain covenants with
respect to the Company and its Restricted
Subsidiaries that restrict, among other things, (1)
the incurrence of additional indebtedness, (2) the
payment of dividends and other restricted payments,
(3) the creation of certain liens, (4) the sales of
certain assets, (5) sale and leaseback
transactions, (6) transactions with affiliates and
(7) issuance of capital stock by subsidiaries. The
Indenture also restricts the Company's ability to
consolidate or merge with or into, or to transfer
all or substantially all of its assets to, another
person. These restrictions and requirements are
subject to a number of important qualifications and
exceptions. See "Description of the Exchange
Notes -- Certain Covenants."
Risk Factors............... Noteholders should carefully consider the matters
set forth under the caption "Risk Factors" prior to
tendering their Notes in exchange for the Exchange
Notes offered hereby. See "Risk Factors."
9
<PAGE> 14
SUMMARY HISTORICAL AND PRO FORMA
CONSOLIDATED FINANCIAL AND OPERATING DATA
The summary consolidated financial data presented below under the captions
"Income Statement Data," "Other Data" and "Balance Sheet Data" as of and for
each of the three years ended December 31, 1993, 1994 and 1995, have been
derived from the audited consolidated financial statements of the Company. The
summary consolidated financial data as of and for the nine months ended
September 30, 1995 and 1996 have been derived from unaudited consolidated
financial statements of the Company, which have been prepared by management on
the same basis as the audited consolidated financial statements of the Company,
and, in the opinion of management of the Company, reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of such data for such periods and as of such dates. Operating results for the
nine month period ended September 30, 1996 are not necessarily indicative of the
results that may be expected for any other interim period or for the full year.
The unaudited pro forma income statement data and other data for the year ended
December 31, 1995 and the nine months ended September 30, 1996 includes the
historical operations of the Company and gives effect to the following as if
they occurred as of January 1, 1995: (1) the SKW and Hutchinson acquisitions;
(2) the sale of the Notes in the Offering; and (3) the completion of the other
components of the Transactions. The unaudited pro forma balance sheet data as of
September 30, 1996 includes the historical accounts of the Company and gives
effect to the following as if they occurred as of September 30, 1996: (1) the
sale of the Notes in the Offering; (2) the Hutchinson acquisition; and (3) the
completion of the other components of the Transactions. This data should be read
in conjunction with the more detailed information contained in the consolidated
financial statements and notes thereto, the "Unaudited Pro Forma Consolidated
Financial Information" and notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other financial
information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- ---------------------------------
PRO PRO
ACTUAL FORMA AS ACTUAL FORMA AS
------------------------------------ ADJUSTED ---------------------- ADJUSTED
1993 1994 1995 1995 1995 1996 1996
---- ---- ---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
INCOME STATEMENT DATA:
Net sales.......................... $ 28,417 $ 41,395 $ 84,643 $127,692 $ 55,841 $ 93,672 $ 99,850
Gross profit....................... 11,583 14,624 23,479 40,532 16,211 24,649 28,893
Plant consolidation expense(1)..... -- -- -- -- -- 3,749 3,749
Income from operations, before
plant consolidation expense...... 5,796 7,376 10,040 23,102 7,225 6,970 13,768
Net income (loss).................. 1,142 2,498 1,254 4,917 1,552 (1,269) (1,067)
OTHER DATA:
EBITDA(2).......................... $ 7,716 $ 9,842 $ 15,507 $ 31,466 $ 10,471 $ 13,606 $ 21,244
Depreciation and amortization...... 1,920 2,466 5,467 8,364 3,246 6,636 7,476
Interest expense................... 14,050 10,108
Ratio of EBITDA to interest
expense(3)....................... 2.2x 2.1x
Ratio of net debt to EBITDA(4)..... 3.7x 4.1x
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1996
-------------------------
PRO FORMA
BALANCE SHEET DATA: ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
Working capital, excluding current portion of long-term debt.......................... $ 26,013 $ 38,364
Total assets.......................................................................... 129,426 156,067
Long-term debt (including current portion)............................................ 102,146 130,221
Shareholders' equity (deficit)........................................................ (830) (2,791)
</TABLE>
(footnotes on the following page)
10
<PAGE> 15
- ---------------
(1) Reflects charges in the nine month period ended September 30, 1996, related
to the consolidation of certain manufacturing facilities into existing
Company facilities, including the relocation of machinery and equipment.
(2) As used herein, "EBITDA" is defined as income from operations plus
depreciation and amortization excluding plant consolidation expense. EBITDA
is a key measure of the financial performance of the Company because of (1)
the importance of maintaining cash flow in excess of debt-service
obligations and (2) the non-cash effect on earnings of generally high levels
of amortization expense associated with acquisitions. EBITDA does not
purport to represent cash provided by operating activities as reflected in
the Company's consolidated statements of cash flow, is not a measure of
financial performance under generally accepted accounting principles and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(3) Does not reflect interest income related to the investment of approximately
$11.5 million of proceeds of the Offering allocated to working capital and
general corporate purposes of the Company. See "Use of Proceeds."
(4) For purposes of the computation, net debt is equal to total long-term debt,
less cash and cash equivalents, and EBITDA for the interim period presented
has been annualized.
11
<PAGE> 16
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully by Noteholders prior to
tendering their Notes in exchange for the Exchange Notes offered hereby.
CONSEQUENCES OF THE EXCHANGE OFFER; TERMS OF THE EXCHANGE
Holders of Notes who do not exchange their Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Notes as set forth in the legend thereon as a consequence of
the offer or sale of the Notes pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state securities laws. In general, the Notes may not be offered
or sold, unless registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. The Company and the Guarantors do not intend
to register the Notes under the Securities Act. Based on interpretations by the
staff of the Commission set forth in a series of no-action letters issued to
third parties, the Company and the Guarantors believe that Exchange Notes issued
pursuant to the Exchange Offer in exchange for Notes may be offered for resale,
resold and otherwise transferred by holders thereof (other than any such holder
that is an "affiliate" of the Company and the Guarantors within the meaning of
Rule 405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business,
such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes and neither such holder nor any such other
person is engaging in or intends to engage in a distribution of such Exchange
Notes. However, the Company and the Guarantors have not sought, and do not
intend to seek, their own no-action letter, and there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer. Any holder who is an affiliate of Hawk and the Guarantors or
who tenders in the Exchange Offer for the purpose of participating in a
distribution of the Exchange Notes cannot rely on such interpretation by the
staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction. Each holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. Each holder who is a broker-dealer and who receives Exchange Notes for
its own account in exchange for Notes that were acquired by it as a result of
market-making activities or other trading activities will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. In the absence of an exemption, each broker-dealer that
received Notes from the Company in the Offering and not as a result of
market-making or other trading activities must comply with the registration
requirements of the Securities Act. See "Plan of Distribution." Holders of Notes
do not have any appraisal or dissenters' rights under the Delaware General
Corporation Law in connection with the Exchange Offer.
NECESSITY TO COMPLY WITH EXCHANGE PROCEDURES
To participate in the Exchange Offer, and to avoid the restrictions on
transfer of the Notes, holders of Notes must transmit a properly completed
Letter of Transmittal (as defined), including all other documents required by
such Letter of Transmittal, to the Exchange Agent at one of the addresses set
forth in the Letter of Transmittal on or prior to the Expiration Date. In
addition, either (1) certificates for the Notes must be received by the Exchange
Agent along with the Letter of Transmittal or (2) a timely confirmation of a
book-entry transfer of such Notes, if such procedure is available, into the
Exchange Agent's account at The Depository Trust Company pursuant to the
procedure for book-entry transfer described herein, must be received by the
Exchange Agent prior to the Expiration Date, or (3) the holder must timely
comply with the guaranteed delivery procedures described herein. See "The
Exchange Offer."
12
<PAGE> 17
BLUE SKY RESTRICTIONS ON RESALE OF EXCHANGE NOTES
In order to comply with the securities laws of certain jurisdictions, the
Exchange Notes may not be offered or resold by any holder unless they have been
registered or qualified for sale in such jurisdictions or an exemption from
registration or qualification is available and the requirements of such
exemption have been satisfied. The Company and the Guarantors have agreed,
pursuant to the Registration Rights Agreement and subject to certain specified
limitations therein, to register or qualify the Exchange Notes for offer or sale
under the securities or blue sky laws of such jurisdictions as any holder of
Notes reasonably requests. However, an exemption is generally available for
sales to registered broker-dealers and certain institutional buyers. Other
exemptions under applicable state securities laws may also be available.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE REQUIREMENTS
The Company has, and following the Exchange Offer will continue to have,
substantial indebtedness. As of September 30, 1996, on a pro forma basis after
giving effect to the Transactions, the Company would have had total
indebtedness, including current maturities, of $130.2 million and a
shareholders' deficit of $2.8 million. The Company's ability to make scheduled
payments of the principal of or interest on, or to refinance, its indebtedness
(including the Exchange Notes) and to make scheduled payments under its lease
agreements depends on its future performance, which is subject to economic,
financial, competitive and other factors beyond its control.
The Company's high level of debt and debt service requirements will have
several important effects on its future operations, including the following: (1)
the Company will have significant cash requirements to service debt, reducing
funds available for operations and future business opportunities and increasing
the Company's vulnerability to adverse general economic and industry conditions
and competition; (2) the Company's leveraged position will increase its
vulnerability to competitive pressures; (3) the financial covenants and other
restrictions contained in the New Revolving Credit Facility, the Indenture, the
Senior Subordinated Notes and other agreements relating to the Company's
indebtedness require the Company to meet certain financial tests and will
restrict its ability to borrow additional funds, to dispose of assets or to pay
cash dividends on, or repurchase, preferred or common stock; and (4) funds
available for working capital, capital expenditures, acquisitions and general
corporate purposes will be limited. Any default under the documents governing
indebtedness of the Company could have a significant adverse effect on the
market value of the Exchange Notes. Certain of the Company's competitors
currently operate on a less leveraged basis and may have greater operating and
financing flexibility than the Company.
Based upon the current level of operations, the Company believes that its
cash flow from operations, together with borrowings under the New Revolving
Credit Facility and its other sources of liquidity, will be adequate to meet its
anticipated requirements for working capital, capital expenditures, lease
payments, interest payments and scheduled principal payments. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." There can be no assurance,
however, that the Company's business will continue to generate cash flow at or
above current levels. If the Company is unable to generate sufficient cash flow
from operations in the future to service its debt and make necessary capital or
other expenditures, or if its future cash flows are insufficient to amortize all
required principal payments out of internally generated funds, the Company may
be required to refinance all or a portion of its existing debt, sell assets or
obtain additional financing. There can be no assurance that any such refinancing
or asset sales would be possible or that any additional financing could be
obtained.
RESTRICTIVE COVENANTS
The New Revolving Credit Facility, the Indenture and the Senior
Subordinated Notes contain a number of significant financial covenants and other
restrictions that, among other things, will restrict
13
<PAGE> 18
the ability of the Company to dispose of assets, incur additional indebtedness,
repay other indebtedness or amend other debt instruments, pay dividends, create
liens on assets, enter into investments or acquisitions, engage in mergers or
consolidations, make capital expenditures or engage in certain transactions with
subsidiaries and affiliates, and will otherwise restrict certain corporate
activities. See "Description of Certain Indebtedness" and "Description of the
Exchange Notes -- Certain Covenants."
The Company's ability to comply with the covenants contained in the New
Revolving Credit Facility, the Indenture and the Senior Subordinated Notes may
be affected by events beyond its control, including prevailing economic,
financial and industry conditions. The breach of any of such covenants or
restrictions could result in a default under the New Revolving Credit Facility,
the Indenture or the Senior Subordinated Notes, which would permit the senior
lenders or the holders of the Exchange Notes or the Senior Subordinated Notes,
as the case may be, to declare all amounts borrowed thereunder to be due and
payable, together with accrued and unpaid interest, and the commitments of the
senior lenders to make further extensions of credit under the New Revolving
Credit Facility could be terminated. If the Company were unable to repay its
indebtedness to its senior lenders, such lenders could proceed against the
collateral securing such indebtedness, which collateral consists of accounts
receivable and inventory of the Company and its domestic subsidiaries.
RELIANCE ON SIGNIFICANT CUSTOMERS
The Company's sales to Aircraft Braking Systems represented approximately
10.8% of the Company's consolidated net sales in the first nine months of 1996,
and approximately 13.8% of the Company's consolidated net sales in 1995. In
addition, the Company's top five customers accounted for approximately 40.3% of
the Company's consolidated net sales in the first nine months of 1996 and
approximately 40.9% of the Company's consolidated net sales in 1995. Thus, a
significant decrease or interruption in business from Aircraft Braking Systems,
or a loss of any of the Company's other significant customers, could have a
material adverse effect on the Company's financial condition, liquidity and
results of operations. Although the Company does have long-term contracts with
several of its significant customers, these contracts do not include minimum
purchase requirements and may be terminated by the customers at any time. See
"Business -- Customers."
RANKING OF THE EXCHANGE NOTES; HOLDING COMPANY STRUCTURE
The Company is a holding company, the principal assets of which consist of
the stock of its manufacturing subsidiaries. To meet its debt obligations, the
Company is dependent solely on payments from these subsidiaries. The Exchange
Notes will be senior unsecured obligations of the Company, ranking senior in
right of payment to all subordinated indebtedness of the Company. The Guarantees
are senior unsecured obligations of the Guarantors, ranking senior in right of
payment to all subordinated indebtedness of the Company. The Exchange Notes will
rank pari passu in right of payment with all other existing and future unsecured
senior indebtedness of the Company. However, the Exchange Notes will be
effectively subordinated to all future and existing secured indebtedness of the
Company and the Guarantors and to all future and existing indebtedness of the
Company's subsidiaries that are not Guarantors. As of September 30, 1996, after
giving pro forma effect to the Transactions, the Company and the Guarantors
would have had approximately $1.6 million of secured indebtedness outstanding
(exclusive of unused commitments of $25.0 million under the New Revolving Credit
Facility) and no senior debt outstanding other than the Exchange Notes, and the
subsidiaries that are not Guarantors would have had approximately $947,000 of
indebtedness outstanding. The Indenture governing the Exchange Notes will permit
the Company and its subsidiaries to incur additional indebtedness, subject to
certain limitations. See "Description of the Exchange Notes -- Ranking."
14
<PAGE> 19
FRAUDULENT CONVEYANCE CONSIDERATIONS
The Exchange Notes will be obligations of the Company and will be
unconditionally guaranteed, jointly and severally, on a senior unsecured basis
by the Guarantors. If a court in a lawsuit for the benefit of any unpaid
creditor of the Company or any of the Guarantors, or a representative of the
Company's or such Guarantor's creditors were to find that, at the time the
Company issued the Notes or exchanged the Exchange Notes or the Guarantor issued
its Guarantee, the Company or such Guarantor, as the case may be: (1) intended
to hinder, delay or defraud any existing or future creditor, or (2) did not
receive reasonably equivalent value for issuing the Notes, exchanging the
Exchange Notes or issuing the Guarantee, as the case may be, and (a) was
insolvent, (b) became insolvent as a result of the issuance of the Notes,
exchange of the Exchange Notes or issuance of such Guarantee, (c) was engaged or
about to engage in a business or a transaction for which its remaining assets
were unreasonably small in relation to the business or transaction, or (d)
intended to incur, or believed or reasonably should have believed that it would
incur, debts beyond its ability to pay as they became due, then such court could
void the Exchange Notes and the Guarantees and void such transactions.
Alternatively, in such event, such court could subordinate the claims of the
holders of Exchange Notes and the Guarantees to claims of other creditors of the
Company or such Guarantor, as the case may be, or take other action detrimental
to holders of the Exchange Notes and the Guarantees. Each of the Company and the
Guarantors may be viewed as insolvent if, at the time of or as a result of the
Offering, the Exchange Offer or the other components of the Transactions, the
sum of its debts is greater than the sum of all of its assets at a fair
valuation or if it generally is not paying its debts as they become due. The
Guarantees will contain a savings clause that limits the amount of the Guarantee
to the maximum amount that can be guaranteed by the Guarantors under applicable
federal and state laws relating to the insolvency of debtors.
In rendering their opinions in connection with the Offering and the
Exchange Offer, counsel for the Company and the Guarantors and counsel for the
Initial Purchasers have not, and will not, express any opinion as to the
applicability of federal or state fraudulent conveyance laws.
COMPETITION
The industries in which the Company competes are highly competitive and
fragmented, with many small manufacturers and only a few manufacturers
generating sales in excess of $50 million. The larger competitors have financial
and other resources substantially greater than those of the Company. The Company
competes for new business principally at the beginning of the development of new
applications and the redesign of existing applications by its customers. For
example, new model development for the Company's aircraft braking system
customers generally begins two to five years prior to full scale production of
new braking systems. Product redesign initiatives by customers typically involve
long lead times as well. Although the Company has been successful in the past in
obtaining this new business, there can be no assurance that the Company will
continue to obtain such business in the future. The Company also competes with
manufacturers using different technologies, such as technologies using carbon
composite ("carbon-carbon") friction materials for aircraft braking systems.
There can be no assurance that competition from these technologies or others
will not adversely affect the Company's operations in the future. See
"Business -- Competition."
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
Sales from the Company's international facilities grew from 6.7% of total
Company net sales in the first nine months of 1995 to 15.7% in the first nine
months of 1996. One of the elements of the Company's strategy is its continued
expansion into international markets. There are certain risks inherent in doing
business internationally, including unexpected changes in regulatory
requirements, export restrictions, currency controls, tariffs and other trade
barriers, difficulties in staffing and managing foreign operations, political
instability, fluctuations in currency exchange rates and potentially adverse tax
consequences. There can be no assurance that one or more of such factors
15
<PAGE> 20
will not have a material adverse effect on the Company's international
operations, and, consequently, on the Company's liquidity, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview" and
"Business -- Business Strategy."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a significant extent upon the performance
of its senior management team, including Norman C. Harbert, the Company's
Chairman of the Board, Chief Executive Officer and President, and Ronald E.
Weinberg, Vice-Chairman of the Board and Treasurer. Although the Company
believes that its senior management team has significant depth, the loss of
services of any of the Company's executive officers could have an adverse impact
on the Company. The Company maintains key man life insurance in the amount of
$1.0 million each on the lives of Mr. Harbert and Mr. Weinberg. The future
success of the Company will depend in large part on its continued ability to
attract and retain qualified personnel. See "Management."
ACQUISITION PLANS
The Company expects to close the Hutchinson acquisition in the first
quarter of 1997. There is no assurance that the acquisition of Hutchinson will
be completed, or if completed, that the Company will be able to successfully
integrate Hutchinson into its operations. In addition, the Company will continue
to seek to acquire complementary businesses with a major market position that
will expand the Company's product offerings, technical capabilities and customer
base. There is no assurance that any definitive acquisition agreements will be
reached or, if entered into, that any future acquisition will be successful or
will achieve results comparable to the Company's existing business. See
"Business -- Business Strategy."
SUPPLY AND PRICE OF RAW MATERIALS
The principal raw materials used by the Company are copper powder,
cellulose, steel and iron powder. The Company has no long-term supply agreements
with any of its major suppliers. However, the Company has generally been able to
obtain sufficient supplies of raw materials for its operations. An interruption
in the Company's supply of copper, steel or powder metal or a substantial
increase in the price of any of these raw materials could have a material
adverse effect on the Company's financial condition, liquidity and results of
operations. See "Business -- Suppliers and Raw Materials."
GOVERNMENT REGULATION
The Company's sales to manufacturers of aircraft braking systems
represented approximately 21.5% of the Company's consolidated net sales in the
first nine months of 1996, and approximately 26.1% of the Company's consolidated
net sales in 1995. Each aircraft braking system, including the friction products
supplied by the Company, must meet stringent Federal Aviation Administration
("FAA") criteria and testing requirements. The Company has been able to meet
these requirements in the past. However, there can be no assurance that a review
by the FAA of a braking system including the Company's materials will not result
in determinations that could have a material adverse effect on the Company's
financial condition or results of operations, nor can there be any assurance
that the Company or its customers will be able to continue to meet FAA
requirements in the future.
Manufacturers such as the Company are subject to stringent environmental
standards imposed by federal, state, local and foreign environmental laws and
regulations. The Company believes that it is in substantial compliance with all
material environmental laws and regulations applicable to its operations. There
can be no assurance, however, that a review of the Company's past, present or
future environmental compliance by courts or regulatory authorities will not
result in determinations
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that could have a material adverse effect on the Company's financial condition
or results of operations. See "Business -- Government Regulation."
PURCHASE OF EXCHANGE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Exchange Notes at 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase.
The source of funds for any such repurchase will be the Company's available cash
or cash generated from operating or other sources, including borrowings, sales
of assets, sales of equity or funds provided by a new controlling person. A
Change of Control will trigger an event of default under the New Revolving
Credit Facility that would permit the lenders thereto to accelerate the debt
under the New Revolving Credit Facility. However, there can be no assurance that
sufficient funds will be available at the time of any Change of Control to make
any required repurchases of Notes tendered and to repay indebtedness under the
New Revolving Credit Facility. See "Description of Certain Indebtedness -- New
Revolving Credit Facility" and "Description of the Exchange Notes -- Change of
Control."
ABSENCE OF A PUBLIC MARKET
The Notes are designated for trading in the PORTAL market. Prior to the
Exchange Offer, there has been no market for the Exchange Notes. The Company and
the Guarantors do not intend to list the Exchange Notes on any national
securities exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Initial
Purchasers, all of which are broker-dealers, have advised the Company that they
currently intend to make a market in the Exchange Notes, but they are not
obligated to do so and, if commenced, may discontinue such market making at any
time at the sole discretion of any of the Initial Purchasers. Accordingly, no
assurance can be made as to the development or liquidity of any market for the
Exchange Notes. In addition, such market-making activity will be subject to
limitations imposed by the Securities Act and the Exchange Act and may further
be limited during the Exchange Offer. If an active public market does not
develop, the market, price and liquidity of the Exchange Notes may be adversely
affected. If any of the Exchange Notes are traded after the Exchange Offer, they
may trade at a discount from the price at which an Exchange Noteholder purchased
Exchange Notes, depending on prevailing interest rates, the market for similar
securities and other factors, including general economic conditions and the
financial condition and performance of the Company. Noteholders considering
tendering their Notes in the Exchange Offer should be aware that they may be
required to bear the financial risks of the Exchange Notes for an indefinite
period of time. See "Description of the Exchange Notes."
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<PAGE> 22
THE TRANSACTIONS
The Notes were offered as a component of the Transactions that the Company
implemented to finance the acquisition of Hutchinson and to improve its
operating and financial flexibility. In addition to the Offering, the
Transactions include: (1) the Company's repayment and termination of the Old
Credit Facility; (2) the Company's and its domestic subsidiaries' execution of
the New Revolving Credit Facility; (3) the amendment to the Senior Subordinated
Notes; (4) the Hawk Controlling Stockholder Merger; and (5) the Hutchinson
acquisition. The Transactions described in clauses (1) through (4) above were
completed concurrently with the Offering. The Company expects to close the
Hutchinson acquisition in the first quarter of 1997.
OLD CREDIT FACILITY
The Old Credit Facility, which was entered into in June 1995 to finance the
Company's acquisition of SKW and refinance the Company's then-existing
indebtedness, was repaid in its entirety with the proceeds of the Offering and
all commitments thereunder were terminated. The Company did not incur any
prepayment penalties in connection with the termination of the Old Credit
Facility. See "Use of Proceeds."
NEW REVOLVING CREDIT FACILITY
The New Revolving Credit Facility consists of a revolving credit loan that
equals the lesser of (1) $25.0 million, or (2) the sum of 85% of eligible
accounts receivable and 60% of eligible inventory. The New Revolving Credit
Facility is secured by substantially all of the accounts receivable, inventory
and intangibles of the Company and its domestic subsidiaries. In addition, the
New Revolving Credit Facility contains financial and other covenants with
respect to the Company and its subsidiaries that, among other matters, would
prohibit the payment of any dividends to the Company by subsidiaries of the
Company in the event of a default under the terms of the New Revolving Credit
Facility, restrict the creation of certain liens, restrict capital expenditures
and require the maintenance of certain minimum interest coverage. Amounts
outstanding under the New Revolving Credit Facility are due November 27, 1999
and bear interest at a variable rate based on the London Interbank Offered Rate
("LIBOR") plus 2.25% per annum, or at the Company's option, a variable rate
based on the lending bank's prime rate plus 1.0% per annum. Interest payment
dates will vary depending on the interest rate option selected by the Company,
but generally, interest will be payable monthly. The commitment fee on the
unused portion of the New Revolving Credit Facility will be 0.5% per annum of
such unused portion. Currently, there are no amounts outstanding under the New
Revolving Credit Facility. See "Description of Certain Indebtedness -- New
Revolving Credit Facility."
SENIOR SUBORDINATED NOTES
The Senior Subordinated Notes were entered into in June 1995, along with
the Old Credit Facility, to finance the Company's acquisition of SKW and
refinance the Company's then-existing indebtedness. Principal payments on the
Senior Subordinated Notes are due in equal installments of $10.0 million on
January 31, 2004 and June 30, 2004 and 2005. Interest on the Senior Subordinated
Notes is payable quarterly at 12.0% per annum. The Senior Subordinated Notes are
guaranteed by certain domestic subsidiaries of the Company. Concurrently with
the closing of the Offering, the Company and the holders of the Senior
Subordinated Notes entered into an amendment that, among other matters, (1)
changed the initial principal payment date from June 30, 2003 to January 31,
2004, (2) subordinated the Senior Subordinated Notes to the Exchange Notes and
the New Revolving Credit Facility, and (3) subordinated the Senior Subordinated
Notes guarantees to the Guarantees. In addition, the holders of the Senior
Subordinated Notes granted a waiver to permit the Hawk Controlling Stockholder
Merger. See "Description of Certain Indebtedness -- Senior Subordinated Notes."
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<PAGE> 23
HAWK CONTROLLING STOCKHOLDER MERGER
Concurrently with the closing of the Offering, Old Hawk was merged with and
into the Company in a tax-free reorganization. Old Hawk had no material assets
other than the capital stock of the Company. Prior to the merger, Old Hawk owned
33.9% of the outstanding shares of Class A Common Stock of the Company and 1,250
shares of the redeemable 10% cumulative preferred stock, par value $0.01 per
share, Series A (the "Series A Preferred Stock") with a liquidation value of
$1.25 million, plus accrued and unpaid dividends. Old Hawk's only liabilities
were its debts to the Company and Old Hawk's stockholders in the aggregate
amount of approximately $870,000. As a result of the merger, the Series A
Preferred Stock owned by Old Hawk was canceled, and the Company issued new
redeemable 10% cumulative preferred stock, par value $0.01 per share, Series C
(the "Series C Preferred Stock") in the aggregate amount of approximately $1.19
million ($1.25 million less $61,000), which was equal to the liquidation value
of the Series A Preferred Stock owned by Old Hawk less $61,000 of indebtedness
of Old Hawk to the Company, which was canceled in the merger. In the merger, the
Company also canceled the shares of Class A Common Stock of the Company owned by
Old Hawk and then reissued the same amount of shares of Class A Common Stock pro
rata to the Old Hawk stockholders. See "Certain Transactions -- Transactions
Concurrent with the Offering."
HUTCHINSON ACQUISITION
As part of the Company's strategy of acquiring complementary businesses
with a major market position that will expand the Company's product offerings,
technical capabilities and customer base, the Company has entered into a
definitive purchase agreement to acquire all the outstanding capital stock of
Hutchinson. The Company plans to acquire Hutchinson for (1) $10.0 million
payable in cash at closing of the acquisition, subject to adjustment for changes
in Hutchinson's stockholders' equity and actual 1996 Hutchinson EBITDA, (2) the
Hutchinson Acquisition Notes, which are 8.0% two-year notes in the aggregate
original principal amount of $1.5 million, and (3) contingent payments to be
made by the Company in amounts equal to (a) 30.0% of the amount by which
Hutchinson's EBITDA exceeds $2.6 million in 1997, 1998 and 1999, and (b) a
maximum aggregate amount of $500,000, plus interest at 8.0% per annum, payable
in installments no greater than $167,000 on April 30, 1998, 1999 and 2000,
provided that the amount payable will be determined pursuant to a formula based
on Hutchinson's forecasted EBITDA versus actual EBITDA for the fiscal year
immediately preceding the payment date (the "$500,000 Contingent Payment
Obligation"). If the Company issues its Class A Common Stock in an initial
public offering prior to the maturity of the Hutchinson Acquisition Notes, the
holders of the Hutchinson Acquisition Notes may at their option convert up to
$500,000 of the original principal amount of the Hutchinson Acquisition Notes
into Class A Common Stock at the public offering price. Interest on the
Hutchinson Acquisition Notes will be payable quarterly and principal will be
payable in installments aggregating $1.0 million on the first anniversary date
thereof and $500,000 on the second anniversary date thereof; provided that the
holders of the Hutchinson Acquisition Notes may extend the final maturity date
by up to nine months to preserve their option to convert the Hutchinson
Acquisition Notes into Class A Common Stock. The Company will only be required
to make payments on the $500,000 Contingent Payment Obligation if certain EBITDA
thresholds are met in any of 1997, 1998 and 1999. Interest on the $500,000
Contingent Payment Obligation will be paid with the annual payments, if any, and
will be calculated as if such payment amount had been outstanding for one year.
The Company will not acquire any bank indebtedness owed by Hutchinson.
The acquisition of Hutchinson is conditioned upon customary closing
conditions, including completion of the Company's due diligence. The Company
anticipates that immediately following the Hutchinson acquisition, it will
remain in material compliance with all financial and other covenants set forth
in the Indenture, the New Revolving Credit Facility and the Senior Subordinated
Notes. The Company expects to close the Hutchinson acquisition in the first
quarter of 1997. There is no assurance that the acquisition of Hutchinson will
be completed, or if completed, that the Company will be able to successfully
integrate Hutchinson into its operations. See "Business -- Hutchinson
Acquisition."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Notes were originally issued and sold on the Issue Date in transactions
not registered under the Securities Act in reliance upon the exemption provided
by Section 4(2) of the Securities Act. In connection with the sale of the Notes,
Hawk and the Guarantors entered into the Registration Rights Agreement with the
Initial Purchasers pursuant to which the Company and the Guarantors agreed to
file a registration statement (the "Exchange Offer Registration Statement") with
respect to an offer to exchange the Notes for a new issue of debt securities of
the Company registered under the Securities Act with terms (other than
restrictions on transfer) substantially identical to those of the Notes and to
use its best efforts to cause the Exchange Offer Registration Statement to
become effective by the 120th day following the Issue Date and, upon becoming
effective, to commence the Exchange Offer and cause the same to remain open for
acceptance for not less than 20 business days after the date of commencement. If
the Exchange Offer is not consummated within 150 days after the Issue Date or,
under certain circumstances, if the Initial Purchasers so request, the Company
and the Guarantors agreed to file and use their best efforts to cause to be
declared effective a shelf registration statement (the "Shelf Registration
Statement") with respect to resales of the Notes from time to time and will use
its best efforts to keep the Shelf Registration Statement effective until three
years after the effective date thereof. See "Registration Rights."
The purpose of the Exchange Offer is to fulfill certain of Hawk's and the
Guarantors' obligations under the Registration Rights Agreement. This Prospectus
may not be used by any holder of the Notes or any holder of the Exchange Notes
to satisfy the registration and prospectus delivery requirements under the
Securities Act that may apply in connection with any resale of such Notes or
Exchange Notes. See "Terms of the Exchange" below.
Each holder who is a broker-dealer and who receives Exchange Notes for its
own account in exchange for Notes that were acquired by it as a result of
market-making activities or other trading activities will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal relating to the Exchange Offer
states that by so acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Notes where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. See "Plan of Distribution."
TERMS OF THE EXCHANGE
Hawk and the Guarantors hereby offer to exchange, subject to the conditions
set forth herein and in the Letter of Transmittal accompanying this Prospectus
(the "Letter of Transmittal"), $1,000 in principal amount of Exchange Notes for
each $1,000 in principal amount of the Notes. The terms of the Exchange Notes
are identical in all material respects (including principal amount, interest
rate and maturity) to the terms of the Notes for which they may be exchanged
pursuant to this Exchange Offer, except that the Exchange Notes will generally
be freely transferable by holders thereof (other than as provided below) and
will not be subject to any covenant regarding registration. The Exchange Notes
will evidence the same indebtedness as the Notes and will be entitled to the
benefits of the Indenture. See "Description of the Exchange Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Notes being tendered for exchange.
Hawk and the Guarantors are making the Exchange Offer in reliance upon an
interpretation by the staff of the Commission set forth in a series of no-action
letters issued to third parties. Based on such interpretation, Hawk and the
Guarantors believe that Exchange Notes issued pursuant to the
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<PAGE> 25
Exchange Offer in exchange for Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any holder which is an
"affiliate" of Hawk and the Guarantors within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business, such holders have no
arrangement with any person to participate in the distribution of such Exchange
Notes and neither such holder nor any such other person is engaging in or
intends to engage in a distribution of such Exchange Notes. However, Hawk and
the Guarantors have not sought, and do not intend to seek, their own no-action
letter, and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer. Any holder who
is an affiliate of Hawk and the Guarantors or who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes cannot
rely on such interpretation by the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each holder, other than a broker-dealer,
must acknowledge that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Notes. Each holder who is a broker-dealer and who
receives Exchange Notes for its own account in exchange for Notes that were
acquired by it as a result of market-making activities or other trading
activities will be required to acknowledge that it will deliver a prospectus in
connection with any resale by it of such Exchange Notes. The Letter of
Transmittal relating to the Exchange Offer states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of Exchange Notes received in exchange
for Notes where such Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed to
make available, for a period of up to 120 days after consummation of the
Exchange Offer, copies of this Prospectus, as amended or supplemented, to any
broker-dealer and any other persons, if any, with similar prospectus delivery
requirements, for use in connection with any resale of Exchange Notes. In the
absence of an exemption, each broker-dealer that received the Notes from the
Company in the Offering and not as a result of market-making or other trading
activities must comply with the registration requirements of the Securities Act.
See "Registration Rights" and "Plan of Distribution."
Interest on the Exchange Notes shall accrue from the last interest payment
date on which interest was paid on the Notes so surrendered or, if no interest
has been paid on such Notes, from the Issue Date.
Tendering holders of the Notes shall not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Notes pursuant
to the Exchange Offer.
Holders of Notes do not have any appraisal or dissenters' rights under the
Delaware General Corporation Law in connection with the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer shall expire on the Expiration Date. The term
"Expiration Date" means 5:00 p.m., New York City time, on ,
1997, unless Hawk and the Guarantors in their sole discretion extend the period
during which the Exchange Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date on which the Exchange Offer, as so
extended by Hawk and the Guarantors, shall expire. Hawk and the Guarantors
reserve the right to extend the Exchange Offer at any time and from time to time
by giving oral or written notice to the Exchange Agent and by timely public
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service. During any
extension of the Exchange Offer, all Notes previously tendered and not withdrawn
pursuant to the Exchange Offer will remain subject to the Exchange Offer.
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<PAGE> 26
The term "Exchange Date" means the first business day following the
Expiration Date. Hawk and the Guarantors expressly reserve the right to (1)
terminate the Exchange Offer and not accept for exchange any Notes if any of the
events set forth below under "Conditions to the Exchange Offer" shall have
occurred and shall not have been waived by Hawk and the Guarantors and (2) amend
the terms of the Exchange Offer in any manner that, in their good faith
judgment, is advantageous to the holders of the Notes, whether before or after
any tender of the Notes. Unless Hawk and the Guarantors terminate the Exchange
Offer prior to 5:00 p.m., New York City time, on the Expiration Date, Hawk and
the Guarantors will exchange the Exchange Notes for the Notes on the Exchange
Date.
TENDER PROCEDURE
The tender to Hawk and the Guarantors of Notes by a holder thereof pursuant
to one of the procedures set forth below and the acceptance thereof by Hawk and
the Guarantors will constitute a binding agreement between such holder and Hawk
and the Guarantors in accordance with the terms and subject to the conditions
set forth herein and in the Letter of Transmittal. This Prospectus, together
with the Letter of Transmittal, will first be sent out on or about
, 1997, to all holders of Notes known to Hawk and the
Guarantors and the Exchange Agent.
A holder of Notes may tender the same by (1) properly completing and
signing the Letter of Transmittal or a facsimile thereof (all references in this
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Notes being tendered and any required signature guarantees and
any other documents required by the Letter of Transmittal, to the Exchange Agent
at its address set forth on the Letter of Transmittal on or prior to the
Expiration Date (or complying with the procedure for book-entry transfer
described below) or (2) complying with the guaranteed delivery procedures
described below.
If tendered Notes are registered in the name of the signer of the Letter of
Transmittal and the Exchange Notes to be issued in exchange therefor are to be
issued (and any untendered Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to Hawk and the Guarantors and duly
executed by the registered holder, and the signature on the endorsement or
instrument of transfer must be guaranteed by a commercial bank or trust company
located or having an office, branch, agency or correspondent in the United
States, or by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc. (any of the foregoing
hereinafter referred to as an "Eligible Institution"). If the Exchange Notes
and/or Notes not exchanged are to be delivered to an address other than that of
the registered holder appearing on the note register for the Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
THE METHOD OF DELIVERY OF NOTES AND ALL OTHER DOCUMENTS IS AT THE ELECTION
AND RISK OF THE HOLDER. IF SENT BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
RETURN RECEIPT REQUESTED, BE USED, PROPER INSURANCE OBTAINED, AND THE MAILING BE
MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE
EXCHANGE AGENT ON OR BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR
NOTES SHOULD BE SENT TO HAWK AND THE GUARANTORS.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Notes at the book-entry
transfer facility for the purpose of facilitating the Exchange Offer, and
subject to the establishment thereof, any financial institution that is a
participant in the book-entry transfer facility's system may make book-entry
delivery of Notes by causing such book-entry transfer facility to transfer such
Notes into the Exchange Agent's account
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<PAGE> 27
with respect to the Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Notes may be effected through
book-entry transfer into the Exchange Agent's accounts at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth on the Letter of Transmittal on or prior to the Expiration Date, or,
if the guaranteed delivery procedures described below are complied with, within
the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Notes to reach the Exchange Agent before the Expiration
Date or the procedure for book-entry transfer cannot be completed on a timely
basis, a tender may be effected if the Exchange Agent has received at its office
listed on the Letter of Transmittal on or prior to the Expiration Date a letter,
telegram or facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight courier) from an Eligible Institution
setting forth the name and address of the tendering holder, the names in which
the Notes are registered and, if possible, the certificate numbers of the Notes
to be tendered, and stating that the tender is being made thereby and
guaranteeing that within five New York Stock Exchange trading days after the
date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, the Notes, in proper form for transfer (or a confirmation
of book-entry transfer of such Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal (and
any other required documents). Unless Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), Hawk and the Guarantors may,
at their option, reject the tender. Copies of a Notice of Guaranteed Delivery
that may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (1) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Notes (or a confirmation of book-entry transfer of such Notes
into the Exchange Agent's account at the book-entry transfer facility) is
received by the Exchange Agent, or (2) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Notes tendered pursuant to a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) by an Eligible Institution will be made only against deposit of
the Letter of Transmittal (and any other required documents) and the tendered
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Notes will be determined
by Hawk and the Guarantors, whose determination will be final and binding. Hawk
and the Guarantors reserve the absolute right to reject any Notes not properly
tendered or the acceptance for exchange of which may, in the opinion of Hawk's
and the Guarantors' counsel, be unlawful. Hawk and the Guarantors also reserve
the absolute right to waive any of the conditions of the Exchange Offer or any
defect or irregularity in the tender of any Notes. Unless waived, any defects or
irregularities in connection with tenders of Notes for exchange must be cured
within such reasonable period of time as Hawk and the Guarantors shall
determine. Neither Hawk, the Guarantors, the Exchange Agent nor any other person
will be under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
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TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Notes to Hawk and the Guarantors and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Notes to be assigned, transferred and exchanged.
The Transferor represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, Hawk and the Guarantors will acquire good and
unencumbered title to the tendered Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or Hawk and the Guarantors to
be necessary or desirable to complete the exchange, assignment and transfer of
tendered Notes or transfer ownership of such Notes on the account books
maintained by a book-entry transfer facility. The Transferor agrees that
acceptance of any tendered Notes by Hawk and the Guarantors and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by Hawk
and the Guarantors of certain of their obligations under the Registration Rights
Agreement. All authority conferred by the Transferor will survive the death or
incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of Hawk and the
Guarantors within the meaning of Rule 405 under the Securities Act and that it
is acquiring the Exchange Notes offered hereby in the ordinary course of such
Transferor's business and that such Transferor has no arrangement with any
person to participate in the distribution of such Exchange Notes. Each holder,
other than a broker-dealer, must acknowledge that it is not engaged in, and does
not intend to engage in, a distribution of Exchange Notes. Each Transferor that
is a broker-dealer receiving Exchange Notes for its own account must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Notes where such Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed to make available, for a period of up to 120
days after consummation of the Exchange Offer, copies of this Prospectus, as
amended or supplemented, to any broker-dealer and any other persons, if any,
with similar prospectus delivery requirements, for use in connection with any
resale of Exchange Notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Tenders of Notes pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date.
To be effective, a written, telegraphic, telex or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the Letter of Transmittal, and with respect to a facsimile
transmission, must be confirmed by telephone and an original delivered by
guaranteed overnight delivery. Any such notice of withdrawal must specify the
person named in the Letter of Transmittal as having tendered Notes to be
withdrawn, the certificate numbers of Notes to be withdrawn, the principal
amount of Notes to be withdrawn, a statement that such holder is withdrawing his
election to have such Notes exchanged, and the name of the registered holder of
such Notes, and must be signed by the holder in the same manner as the original
signature on the
24
<PAGE> 29
Letter of Transmittal (including any required signature guarantees) or be
accompanied by evidence satisfactory to Hawk and the Guarantors that the person
withdrawing the tender has succeeded to the beneficial ownership of the Notes
being withdrawn. The Exchange Agent will return the properly withdrawn Notes
promptly following receipt of notice of withdrawal. If Notes have been tendered
pursuant to the procedure for book-entry transfer, any notice of withdrawal must
specify the name and number of the account at the book-entry transfer facility
to be credited with the withdrawn Notes or otherwise comply with the book-entry
transfer facility procedure. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by Hawk and the
Guarantors, and such determination will be final and binding on all parties.
Any Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Notes that have been tendered
for exchange but that are not exchanged for any reason will be returned to the
holder thereof without cost to such holder (or, in the case of Notes tendered by
book-entry transfer into the Exchange Agent's account at the book-entry transfer
facility pursuant to the book-entry transfer procedures described above, such
Notes will be credited to an account with such book-entry transfer facility
specified by the holder) as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Notes may be
retendered by following one of the procedures described under "Tender Procedure"
above at any time on or prior to the Expiration Date.
ACCEPTANCE OF NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
For each Note accepted for exchange, the holder of such Note will receive
an Exchange Note having a principal amount equal to that of the surrendered
Note. For the purposes of the Exchange Offer, Hawk and the Guarantors shall be
deemed to have accepted for exchange validly tendered Notes when, as and if Hawk
and the Guarantors have given oral or written notice thereof to the Exchange
Agent.
The Exchange Agent will act as agent for the tendering holders of Notes for
the purposes of receiving Exchange Notes from Hawk and causing the Notes to be
assigned, transferred and exchanged. Upon the terms and subject to the
conditions of the Exchange Offer, delivery of Exchange Notes to be issued in
exchange for accepted Notes will be made by the Exchange Agent promptly after
acceptance of the tendered Notes. Tendered Notes not accepted for exchange by
Hawk and the Guarantors will be returned without expense to the tendering
holders (or, in the case of Notes tendered by book-entry transfer into the
Exchange Agent's account at the book-entry transfer facility pursuant to the
book-entry transfer procedures described above and in the Letter of Transmittal,
such non-exchanged Notes will be credited to an account maintained with such
book-entry transfer facility) promptly following the Expiration Date or, if Hawk
and the Guarantors terminate the Exchange Offer prior to the Expiration Date,
promptly after the Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, Hawk and the Guarantors will not be required to issue
Exchange Notes in respect of any properly tendered Notes not previously accepted
and may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service), or, at their option, modify or otherwise amend the Exchange Offer, if
any of the following events occur:
(1) the Exchange Offer would, in the reasonable judgment of the
Company and the Guarantors, violate applicable law or any applicable
interpretation of the staff of the Commission;
25
<PAGE> 30
(2) an action or proceeding shall have been instituted or threatened
in any court or by any governmental agency that might materially impair the
ability of the Company and the Guarantors to proceed with the Exchange
Offer;
(3) a material adverse development shall have occurred in any existing
action or proceeding with respect to the Company; or
(4) a governmental approval shall not have been obtained, which
approval the Company deems necessary for the consummation of the Exchange
Offer;
that, in the reasonable judgment of Hawk and the Guarantors in any case, and
regardless of the circumstances (including any action by Hawk and the
Guarantors) giving rise to any such condition, makes it inadvisable to proceed
with the Exchange Offer.
Hawk and the Guarantors expressly reserve the right to terminate the
Exchange Offer and not accept for exchange any Notes upon the occurrence of any
of the foregoing conditions (which represent all of the material conditions to
the acceptance by Hawk and the Guarantors of properly tendered Notes). In
addition, Hawk and the Guarantors may amend the Exchange Offer at any time prior
to the Expiration Date if any of the conditions set forth above occur. Moreover,
regardless of whether any of such conditions has occurred, Hawk and the
Guarantors may amend the Exchange Offer in any manner that, in their good faith
judgment, is advantageous to holders of the Notes.
The foregoing conditions are for the sole benefit of Hawk and the
Guarantors and may be waived by Hawk and the Guarantors, in whole or in part, in
the reasonable judgment of Hawk and the Guarantors. Any determination made by
Hawk and the Guarantors concerning an event, development or circumstance
described or referred to above will be final and binding on all parties.
Hawk and the Guarantors are not aware of the existence of any of the
foregoing events.
EXCHANGE AGENT
Bank One Trust Company, NA has been appointed as the Exchange Agent for the
Exchange Offer. Letters of Transmittal must be addressed to the Exchange Agent
at its address set forth on the Letter of Transmittal. Bank One Trust Company,
NA also acts as Trustee under the Indenture.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH ON THE LETTER OF TRANSMITTAL, WILL NOT CONSTITUTE
A VALID DELIVERY.
EXPENSES; SOLICITATION OF TENDERS
Hawk and the Guarantors have not retained any dealer-manager or similar
agent in connection with the Exchange Offer and will not make any payments to
brokers, dealers or others for soliciting acceptances of the Exchange Offer.
Hawk and the Guarantors will, however, pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for reasonable out-of-
pocket expenses in connection therewith. Hawk and the Guarantors will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this and related
documents to the beneficial owners of the Notes and in handling or forwarding
tenders for their customers.
No dealer, salesperson or other person has been authorized to give any
information or to make any representation in connection with the Exchange Offer
other than those contained in this Prospectus in connection with the Exchange
Offer made hereby and, if given or made, such information or representations
must not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the dates as of which information is furnished or
the date hereof. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Notes in any
26
<PAGE> 31
jurisdiction in which the making of the Exchange Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. The Company and
the Guarantors have agreed, pursuant to the Registration Rights Agreement and
subject to certain specified limitations therein, to register or qualify the
Exchange Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of Notes reasonably requests.
TRANSFER TAXES
Holders who tender their Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct
Hawk and the Guarantors to register Exchange Notes in the name of, or request
that Notes not tendered or not accepted in the Exchange Offer be returned to, a
person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
CONSEQUENCES OF THE EXCHANGE OFFER
Holders of Notes who do not tender their Notes in the Exchange Offer will
continue to hold such Notes and will be entitled to all the rights, and
limitations applicable thereto, under the Indenture, except for any such rights
under the Registration Rights Agreement that by their terms terminate or cease
to have further effectiveness as a result of the making of this Exchange Offer.
See "Description of the Exchange Notes." Holders of Notes who do not exchange
their Notes for Exchange Notes pursuant to the Exchange Offer will continue to
be subject to the restrictions on transfer of such Notes as set forth in the
legend thereon as a consequence of the offer or sale of the Notes pursuant to an
exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. Hawk and
the Guarantors do not intend to register the Notes under the Securities Act. All
untendered Notes will continue to be subject to the restrictions on transfer set
forth in the Indenture. To the extent that Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered Notes could be adversely
affected. No assurance can be given as to the liquidity of the trading market
for either the Notes or the Exchange Notes.
OTHER
Participation in the Exchange Offer is voluntary, and holders of Notes
should carefully consider whether to participate. Holders of the Notes are urged
to consult their financial and tax advisors in making their own decisions on
what action to take. See "Certain U.S. Federal Income Tax Consequences."
Hawk and the Guarantors may in the future seek to acquire untendered Notes
in open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. Hawk and the Guarantors have no present plan to acquire any
Notes that are not tendered in the Exchange Offer.
27
<PAGE> 32
USE OF PROCEEDS
There will be no cash proceeds to the Company or any of the Guarantors as a
result of the Exchange Offer.
The following table sets forth the estimated sources and uses of the
proceeds to the Company from the sale of the Notes in the Offering, and the
completion of the other components of the Transactions:
<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
SOURCES
The Notes............................................................. $100,000
Hutchinson Acquisition Notes(1)....................................... 1,500
--------
Total Sources.................................................... $101,500
========
USES
Repayment of Old Credit Facility(2)................................... $ 72,500
Acquisition of Hutchinson(1).......................................... 11,500
Working Capital and General Corporate Purposes(3)..................... 12,700
Fees and Expenses(4).................................................. 4,800
--------
Total Uses....................................................... $101,500
========
<FN>
- ---------------
(1) The Company has entered into a definitive purchase agreement to acquire all
the outstanding capital stock of Hutchinson for (a) $10.0 million payable in
cash at closing, subject to adjustment for changes in stockholders' equity
and actual 1996 Hutchinson earnings, (b) the Hutchinson Acquisition Notes,
which are 8.0% two-year notes in the aggregate original principal amount of
$1.5 million, and (c) contingent payments to be made by the Company only if
Hutchinson meets certain EBITDA targets. There is no assurance that the
acquisition of Hutchinson will be completed, or if completed, that the
Company will be able to successfully integrate Hutchinson into its
operations. See "Risk Factors -- Acquisition Plans" and
"Business -- Hutchinson Acquisition."
(2) Represents payment in full of the Old Credit Facility, together with accrued
and unpaid interest of approximately $345,000, which repayment occurred
concurrently with the closing of the sale of the Notes in the Offering. The
Old Credit Facility consisted of two term loans ("Old Term Loan A" and "Old
Term Loan B"), and a revolving credit facility ("Old Revolving Loan"). Old
Term Loan A was due in quarterly installments of principal ranging from $1.4
million to $2.7 million through June 30, 2000; Old Term Loan B was due in
quarterly installments of principal ranging from $55,000 to $2.6 million
through June 30, 2002; and the Old Revolving Loan was scheduled to mature on
June 30, 2000. Each Loan bore interest at a base rate determined in
accordance with certain published rates. Each Loan may have, at the
Company's option, borne interest at a variable rate based on LIBOR, plus
2.5% per annum in the case of Old Term Loan A and the Old Revolving Loan,
and plus 3.25% per annum in the case of Old Term Loan B. As of September 30,
1996, the applicable interest rate on Old Term Loan A was 8.00% per annum,
the applicable interest rate on the Old Revolving Loan was 8.25% per annum,
and the applicable interest rate on Old Term Loan B was 8.75%.
(3) Pending use, the Company will invest these proceeds in money market funds or
other short-term interest bearing securities.
(4) Includes estimated fees and expenses of the Exchange Offer, the Offering and
the Transactions, including the New Revolving Credit Facility and the
Hutchinson acquisition.
</TABLE>
28
<PAGE> 33
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at September 30, 1996, as adjusted to give effect to the sale of the
Notes in the Offering and the completion of the other components of the
Transactions. This table should be read in conjunction with the historical
consolidated financial statements of the Company and the unaudited pro forma
financial information and the respective notes thereto, included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1996
---------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term obligations (including current portion)
New Revolving Credit Facility(1)............................ $ -- $ --
10 1/4% Senior Notes due 2003............................... -- 100,000
Old Term Loan A............................................. 32,000 --
Old Term Loan B............................................. 21,725 --
Old Revolving Loan.......................................... 19,700 --
Other Obligations........................................... 2,508 2,508
Hutchinson Acquisition Notes................................ -- 1,500
Senior Subordinated Notes(2)................................ 26,213 26,213
-------- ---------
Total long-term obligations................................. $102,146 $ 130,221
======== =========
Detachable stock warrants, subject to put option(2).............. $ 4,600 $ 4,600
Total shareholders' equity (deficit)............................. (830) (2,791)
-------- ---------
Total capitalization........................................ $105,916 $ 132,030
======== =========
<FN>
- ---------------
(1) Borrowings of up to the lesser of (1) $25.0 million, or (2) the sum of 85%
of eligible accounts receivable and 60% of eligible inventory, under the New
Revolving Credit Facility are available at LIBOR plus 2.25% per annum or, at
the Company's option, a variable rate based on the lending bank's prime rate
plus 1.0% per annum, for working capital and general corporate purposes.
Currently, there are no amounts outstanding under the New Revolving Credit
Facility. See "Description of Certain Indebtedness -- New Revolving Credit
Facility."
(2) The Company issued $30.0 million aggregate principal amount of Senior
Subordinated Notes with detachable warrants to purchase Class B Common Stock
on June 30, 1995. The holders of the warrants have the right to put the
warrants to the Company. See "Description of Certain Indebtedness -- Senior
Subordinated Notes." The portion of the proceeds representing the current
value of the warrants, $4.6 million, was allocated to the detachable stock
warrants, subject to put option, and the resulting discount is being
amortized over the life of the debt as non-cash, imputed interest. The
discount is based on an effective interest rate of 14.2%. The unamortized
discount at September 30, 1996 was $3.8 million.
</TABLE>
29
<PAGE> 34
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma consolidated statement of operations of the Company
for the year ended December 31, 1995 and the nine months ended September 30,
1996 include the historical operations of the Company and give effect to the
following as if they occurred as of January 1, 1995: (1) the SKW and Hutchinson
acquisitions; (2) the sale of the Notes in the Offering; and (3) the completion
of the other components of the Transactions. The unaudited pro forma
consolidated balance sheet as of September 30, 1996 includes the historical
accounts of the Company and gives effect to the following as if they occurred as
of September 30, 1996: (1) the Hutchinson acquisition; (2) the sale of the Notes
in the Offering; and (3) the completion of the other components of the
Transactions. The unaudited pro forma consolidated financial information has
been prepared by the Company's management. The information is not designed to
represent and does not represent what the Company's results of operations
actually would have been had the aforementioned transactions been completed as
of the beginning of the periods indicated, or to project the Company's results
of operations for any future period. The pro forma adjustments are based on
available information and certain assumptions that the Company concurrently
believes are reasonable in the circumstances. The unaudited pro forma
consolidated financial information should be read in conjunction with the more
detailed information contained in the historical consolidated financial
statements and notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the historical financial
information included elsewhere in this Prospectus.
30
<PAGE> 35
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL FOR ADJUSTMENTS
--------------------------------------------- SKW AND FOR PRO FORMA
HAWK SKW HUTCHINSON HUTCHINSON PRO FORMA THE AS
CORPORATION ACQUISITION(1) ACQUISITION(1) ACQUISITIONS CONSOLIDATED OFFERING ADJUSTED
----------- -------------- -------------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............ $84,643 $34,916 $8,133 -- $127,692 -- $127,692
Cost of sales........ 61,164 26,617 5,417 $ (6,038)(2)(3) 87,160 -- 87,160
------- ------- ------ -------- -------- ------- --------
Gross profit..... 23,479 8,299 2,716 6,038 40,532 40,532
Expenses:
Selling, technical,
and
administrative
expenses......... 11,575 3,685 868 (2,158)(4) 13,970 -- 13,970
Amortization of
intangible
assets........... 1,864 87 493 814 (5) 3,258 $ 202 (9) 3,460
------- ------- ------ -------- -------- ------- --------
Total expenses... 13,439 3,772 1,361 (1,344) 17,228 202 17,430
------- ------- ------ -------- -------- ------- --------
Income (loss) from
operations......... 10,040 4,527 1,355 7,382 23,304 (202) 23,102
Interest expense..... 7,323 660 145 1,964 (6) 10,092 3,958 (10) 14,050
Other (income)
expense, net....... (130) (103) (7) 109 (7) (131) -- (131)
------- ------- ------ -------- -------- ------- --------
7,193 557 138 2,073 9,961 3,958 13,919
Income (loss) before
income taxes....... 2,847 3,970 1,217 5,309 13,343 (4,160) 9,183
Income taxes......... 1,593 1,696 486 2,238 (8) 6,013 (1,747)(11) 4,266
------- ------- ------ -------- -------- ------- --------
Net income (loss).... $ 1,254 $ 2,274 $ 731 $ 3,071 $ 7,330 $(2,413) $ 4,917
======= ======= ====== ======== ======== ======= ========
Other Data:
EBITDA............. $ 31,466
========
</TABLE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
HISTORICAL FOR ADJUSTMENTS
---------------------------- SKW AND FOR PRO FORMA
HAWK HUTCHINSON HUTCHINSON PRO FORMA THE AS
CORPORATION ACQUISITION(1) ACQUISITIONS CONSOLIDATED OFFERING ADJUSTED
----------- -------------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales........................... $93,672 $6,178 -- $99,850 -- $99,850
Cost of sales....................... 69,023 4,034 $ (2,100)(3) 70,957 -- 70,957
------- ------ -------- ------- ------- -------
Gross profit.................... 24,649 2,144 2,100 28,893 28,893
Expenses:
Selling, technical, and
administrative expenses......... 11,611 571 12,182 -- 12,182
Amortization of intangible
assets.......................... 2,319 117 325 (5) 2,761 $ 182 (9) 2,943
------- ------ -------- ------- ------- -------
Total expenses.................. 13,930 688 325 14,943 182 15,125
Income (loss) from operations before
plant consolidation expense,
interest expense and other
(income) expense.................. 10,719 1,456 1,775 13,950 (182) 13,768
Plant consolidation expense(12)..... 3,749 -- -- 3,749 -- 3,749
------- ------ -------- ------- ------- -------
Income (loss) from operations... 6,970 1,456 1,775 10,201 (182) 10,019
Interest expense.................... 7,321 9 (9)(6) 7,321 2,787 (10) 10,108
Other (income) expense, net......... 55 (7) -- 48 -- 48
------- ------ -------- ------- ------- -------
7,376 2 (9) (7,369) 2,787 10,156
Income (loss) before income taxes... (406) 1,454 1,784 2,832 (2,969) (137)
Income taxes........................ 863 596 718 (8) 2,177 (1,247)(11) 930
------- ------ -------- ------- ------- -------
Net income (loss)................... $(1,269) $ 858 $ 1,066 $ 655 $(1,722) $(1,067)
======= ====== ======== ======= ======= =======
Other Data:
EBITDA............................ $21,244
=======
</TABLE>
(footnotes on the following pages)
31
<PAGE> 36
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
(1) Represents the results of operations of SKW for the period
from January 1, 1995 through June 30, 1995 and the results
of operations of Hutchinson for the year ended December 31,
1995 and nine months ended September 30, 1996.
(2) Represents the elimination of additional cost of sales
resulting from the write-up of finished goods inventory to
fair market value for the SKW acquisition................... $ (2,438)
(3) Represents the cost savings the Company expects to realize
from the closure of the Company's LaVergne, Tennessee
manufacturing facility, which was announced in August, 1995
and completed in June, 1996. The Company believes it can
achieve such cost savings, which result principally from
elimination of (a) the LaVergne facility's fixed
manufacturing costs and (b) the affected employees' salaries
and benefits, partially offset by the hiring of new
employees at the Company's other manufacturing facilities.
The Company believes these cost savings will not impair its
sales volume as a result of available manufacturing capacity
in its other facilities..................................... $ (3,600) $ (2,100)
(4) Reflects the net effect to selling, technical, and
administrative expenses after giving effect to (a) the
elimination of a management fee charged to SKW by MLX Corp.
for the period from January 1, 1995 through June 30, 1995
and (b) cost savings the Company has realized and expects to
realize from the closing of its Solon, Ohio facility which
consisted solely of selling, technical and administrative
employees. The Company believes it will achieve such cost
savings from the elimination of affected employees' salaries
and benefits, without otherwise affecting its cost base or
impairing its sales as a result of available resources in
its other facilities.
Elimination of management fee........................... $ (600)
Cost savings related to the termination of selling,
technical and administrative personnel at the Solon,
Ohio facility........................................... (1,558)
--------
$ (2,158)
========
(5) Represents the incremental amortization due to (a) the
application of purchase accounting in the SKW and Hutchinson
acquisitions resulting from an increase in the basis of net
assets acquired and (b) the elimination of historical
amortization related to intangible assets not acquired in
the SKW and Hutchinson acquisitions. Intangible assets
include goodwill and deferred financing costs that are
amortized over 15 years and the life of the debt,
respectively.
Amortization of intangible assets from the SKW and
Hutchinson acquisitions................................. $ 1,394 $ 442
Elimination of historical amortization of intangible
assets not acquired in the SKW or Hutchinson
acquisitions............................................ (580) (117)
-------- --------
$ 814 $ 325
======== ========
</TABLE>
32
<PAGE> 37
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
------------------ ------------------
<S> <C> <C>
(6) Reflects the net effect on interest expense resulting from
(a) additional borrowings incurred to finance the SKW
acquisition and (b) the elimination of interest expense on
debt not assumed in the SKW and Hutchinson acquisitions. The
additional borrowings incurred to finance the SKW
acquisition bear interest at a variable interest rate
(assumed to be 8.9% per annum based on a weighted average
interest rate during 1995) through the year 2000. If the
interest rate on the variable rate debt were to change by
1/8 of one percent, interest expense would change by
approximately $78 for the year ended December 31, 1995.
Interest expense related to additional borrowings
incurred to finance the SKW acquisition................. $ 2,769
Elimination of SKW and Hutchinson historical interest
expense................................................. (805) $ (9)
-------- --------
$ 1,964 $ (9)
======== ========
(7) Represents the elimination of interest income recorded by
SKW for the period from January 1, 1995 through June 30,
1995 as the result of cash advances made to MLX Corp. from
1990 through 1994. No advances have been made to the Company
subsequent to the SKW acquisition........................... $ 109
(8) Represents the estimated income tax effect of the SKW and
Hutchinson acquisitions related pro forma adjustments using
the appropriate effective tax rate.......................... $ 2,238 $ 718
======== ========
(9) Represents the amortization of estimated deferred financing
costs resulting from (a) the sale of the Notes and (b)
elimination of historical amortization relating to the
repayment of existing debt. Deferred financing costs are
amortized over the life of the related debt.
Amortization of deferred financing costs related to the
sale of the Notes....................................... $ 762 $ 571
Elimination of amortization of deferred financing costs
related to the Old Credit Facility...................... (560) (389)
-------- --------
$ 202 $ 182
======== ========
(10) Represents the net effect on interest expense as the result
of (a) the elimination of historical interest expense after
the repayment of the Old Credit Facility, using proceeds
from the Offering and (b) the Offering assuming an interest
rate of 10.25% per annum.
Interest expense related to the Offering................ $ 10,250 $ 7,688
Elimination of historical interest expense.............. (6,292) (4,901)
-------- --------
$ 3,958 $ 2,787
======== ========
(11) Represents the estimated income tax effect of the pro forma
adjustments using an effective tax rate of 42%.............. $ (1,747) $ (1,247)
======== ========
(12) Represents non-recurring expenses incurred to relocate
machinery, equipment and inventory as a result of
consolidating manufacturing facilities.
</TABLE>
33
<PAGE> 38
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
HAWK HUTCHINSON PRO FORMA PRO FORMA
CORPORATION ACQUISITION(a) ADJUSTMENTS AS ADJUSTED
----------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash................................................. $ 1,894 $ 593 $10,471(b) $ 12,958
Accounts receivable.................................. 18,515 950 -- 19,465
Inventories.......................................... 20,346 307 -- 20,653
Deferred income taxes and other current assets....... 3,349 285 (61)(c) 3,573
-------- ------ ------- --------
Total current assets........................... 44,104 2,135 10,410 56,649
-------- ------ ------- --------
Property, plant and equipment.......................... 57,602 3,300 -- 60,902
less -- accumulated depreciation..................... (13,318) (1,046) -- (14,364)
-------- ------ ------- --------
Total property, plant and equipment............ 44,284 2,254 -- 46,538
-------- ------ ------- --------
Other Assets:
Intangible assets.................................... 35,506 938 10,727(d)(e) 47,171
Net assets for sale and other assets................. 5,532 177 -- 5,709
-------- ------ ------- --------
Total other assets............................. 41,038 1,115 10,727 52,880
-------- ------ ------- --------
TOTAL ASSETS........................................... $129,426 $5,504 $21,137 $156,067
======== ====== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................... $ 8,838 $ 295 -- $ 9,133
Accrued compensation................................. 5,813 392 -- 6,205
Other accrued expenses............................... 3,440 218 (711)(f) 2,947
-------- ------ ------- --------
Total current liabilities...................... 18,091 905 (711) 18,285
-------- ------ ------- --------
Long-Term Liabilities:
Long-term debt, including current portion............ 102,146 -- 28,075 (g) 130,221
Deferred income taxes................................ 2,748 308 -- 3,056
Other................................................ 2,671 25 -- 2,696
-------- ------ ------- --------
Total long-term obligations.................... 107,565 333 28,075 135,973
-------- ------ ------- --------
Detachable stock warrants, subject to put option and
redeemable preferred stock........................... 4,600 3,629 (3,629)(h) 4,600
Shareholders' equity (deficit)......................... (830) 637 (2,598)(i) (2,791)
-------- ------ ------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............. $129,426 $5,504 $21,137 $156,067
======== ====== ======= ========
</TABLE>
- ---------------
<TABLE>
<S> <C>
(a) Reflects adjustments to assets acquired and liabilities assumed of Hutchinson based on their
estimated fair values under the purchase method of accounting. The allocation of the aggregate
purchase price below is preliminary and assumes the historic net book value of tangible assets
approximates their fair value. The actual allocation will be based on management's final
evaluation of such assets and liabilities. Some portion of the excess of purchase price over the
historical cost of the net assets acquired may ultimately be allocated to specific tangible and
intangible assets and liabilities. The final allocation of purchase cost and the resulting effect
on net income may differ significantly from the pro forma amounts included herein.
(b) Represents the net adjustment to cash as a result of the following:
Proceeds from the sale of the Notes........................................................... $100,000
Purchase of common stock of Hutchinson, plus related fees and expenses........................ (10,200)
Repayment of Old Credit Facility, including accrued interest of $711.......................... (74,136)
Payment of fees and expenses related to the New Revolving Credit Facility and the sale of the
Notes.......................................................................................... (4,600)
Cash as of September 30, 1996 not acquired in connection with the Hutchinson acquisition...... (593)
--------
$ 10,471
========
(c) Represents the effect of the Hawk Controlling Stockholder Merger.................................. $ (61)
========
</TABLE>
34
<PAGE> 39
<TABLE>
<S> <C>
(d) Represents the net increase in intangible assets due to the application of purchase price
accounting for assets to be acquired in the Hutchinson acquisition, as a result of:
Elimination of historical intangible assets................................................... $ (814)
Fair value of intangible assets to be acquired as a result of the Hutchinson acquisition...... 8,841
Write-off of $1,900 of deferred financing costs relating to the early repayment in full of the
Old Credit Facility............................................................................ (1,900)
--------
$ 6,127
========
(e) Represents the net increase in intangible assets, specifically, deferred financing costs, as a
result of the following:
Deferred financing costs related to the sale of the Notes..................................... $ 3,975
Deferred financing costs related to the New Revolving Credit Facility......................... 625
--------
$ 4,600
========
(f) Represents the net decrease on other accrued expenses for the payment of accrued interest on the
Old Credit Facility............................................................................... $ (711)
========
(g) Represents the net effect on long-term debt resulting from:
Sale of the Notes............................................................................. $100,000
Repayment of Old Credit Facility, including current portion of $6,604......................... (73,425)
Hutchinson Acquisition Notes.................................................................. 1,500
--------
$ 28,075
========
(h) Represents the net effect on detachable stock warrants and redeemable preferred stock as a result
of:
Elimination of detachable stock warrants, in connection with the Hutchinson acquisition....... $ (2,269)
Elimination of redeemable preferred stock in conjunction with the Hutchinson acquisition...... (1,360)
--------
$ (3,629)
========
(i) Represents the net effect on shareholders' equity as a result of:
Elimination of shareholders' equity in connection with the Hutchinson acquisition............. $ (637)
Write-off of $1,900 of deferred financing costs relating to the early repayment in full of the
Old Credit Facility............................................................................ (1,900)
Represents the effect of the Hawk Controlling Stockholder Merger.............................. (61)
--------
$ (2,598)
========
</TABLE>
35
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF PRO FORMA RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
As discussed earlier and in greater detail below, the Company completed the
acquisitions of (1) Helsel in June 1994, (2) SKW in June 1995 and (3) the
friction products assets of GKN in March 1996. In addition, the Company expects
to close the acquisition of Hutchinson in the first quarter of 1997. Due to the
effects of these acquisitions and the related application of purchase
accounting, the historical consolidated financial data of the Company, Helsel
and SKW for periods through September 30, 1996 are not comparable. As a result,
the following discussion of pro forma results of operations and financial
condition is presented.
In June 1994, a group led by Mr. Harbert and Mr. Weinberg completed the
acquisition of the assets and certain related liabilities of Helsel in a
transaction accounted for under the purchase method of accounting. The aggregate
purchase price was approximately $8.6 million. The acquisition was financed
primarily through borrowings of approximately $5.1 million. In June 1995, Helsel
became a wholly-owned subsidiary of the Company upon its merger with a
subsidiary of the Company in a transaction accounted for as a pooling.
In June 1995, the Company completed the acquisition of the assets and
certain related liabilities of SKW in a transaction accounted for under the
purchase method of accounting. The aggregate purchase price was approximately
$61.6 million. The acquisition was financed through borrowings under the Old
Credit Facility and the issuance of the Senior Subordinated Notes.
In March 1996, the Company completed the acquisition of the friction
products assets of GKN in a transaction accounted for under the purchase method
of accounting. The aggregate purchase price was approximately $1.3 million. The
acquisition was financed through borrowings under the Old Credit Facility.
The Company has signed a definitive agreement to acquire Hutchinson for (1)
$10.0 million payable in cash at closing, subject to adjustment for changes in
stockholders' equity and actual 1996 Hutchinson EBITDA, (2) the Hutchinson
Acquisition Notes, which are 8.0% two-year notes in the aggregate original
principal amount of $1.5 million, and (3) contingent payments to be made by the
Company only if Hutchinson meets certain EBITDA targets. The cash payment will
be financed with the proceeds of the Offering. The acquisition of Hutchinson is
conditioned upon customary closing conditions, including completion of the
Company's due diligence. There is no assurance that the acquisition of
Hutchinson will be completed, or if completed, that the Company will be able to
successfully integrate Hutchinson into its operations.
The purchase prices for Helsel, SKW and the friction products assets of GKN
were, and the purchase price for Hutchinson will be, allocated to the estimated
fair market value of the assets acquired and liabilities assumed in the
acquisitions, any excess of the purchase price paid over the estimated fair
value of the net assets acquired was allocated to goodwill, which resulted in
approximately $24.6 million of goodwill reflected on the pro forma September 30,
1996 balance sheet. The annual amortization of goodwill will result in non-cash
charges to future operations of approximately $1.8 million per year based on a
15-year amortization period.
The derivation of certain of the pro forma financial information discussed
below is described in "Unaudited Pro Forma Consolidated Financial Information."
For purposes of the following discussion, the pro forma unaudited consolidated
statements of operations of the Company for the years ended December 31, 1994
and 1995, respectively, and the nine months ended September 30, 1995 and 1996,
respectively, were prepared to illustrate the estimated effects of the
acquisitions of Helsel, SKW, Hutchinson and the friction products assets of GKN
and the financing thereof as if the acquisitions had occurred at the beginning
of each respective period.
36
<PAGE> 41
The unaudited pro forma consolidated statement of operations data and the
unaudited pro forma consolidated balance sheet data do not purport to represent
(1) the actual results of operations or financial condition of the Company had
the acquisitions of Helsel, SKW, Hutchinson and the friction products assets of
GKN occurred on the dates assumed, or (2) the results of operations or financial
position to be expected in the future.
This section should be read in conjunction with the historical financial
statements of the Company, Helsel, SKW and Hutchinson, including the notes
thereto, and the other financial information pertaining to the Company, Helsel,
SKW and Hutchinson, including the information set forth under "Capitalization,"
"Unaudited Pro Forma Consolidated Financial Information," "Selected Consolidated
Financial Data," and "Management's Discussion and Analysis of Results of
Operations and Financial Condition," included elsewhere herein.
PRO FORMA RESULTS OF OPERATIONS
The following table presents, for the periods indicated, before giving
effect to the Offering and the application of net proceeds therefrom, certain
components from the Company's Unaudited Pro Forma Consolidated Statements of
Operations and the percentage of net sales represented by such components:
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ---------------------------------------
1994 1995 1995 1996
------------------ ------------------ ----------------- -----------------
$ % $ % $ % $ %
-------- ----- -------- ----- ------- ----- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............................ $118,436 100.0 $127,692 100.0 $97,059 100.0 $99,850 100.0
Gross profit......................... 34,141 28.8 40,532 31.7 30,598 31.5 28,893 28.9
Selling, technical and administrative
expenses........................... 14,494 12.2 13,970 10.9 10,934 11.3 12,182 12.2
Amortization of intangible assets.... 2,747 2.3 3,258 2.5 2,587 2.7 2,761 2.7
Income from operations before plant
consolidation expense.............. 16,900 14.3 23,304 18.3 17,077 17.5 13,950 14.0
EBITDA............................... 23,681 20.0 31,466 24.6 23,005 23.7 21,244 21.3
</TABLE>
The following comparisons of the financial results of the Company by period
shows, among other things, a decrease in pro forma gross profit margin for the
nine month period ended September 30, 1996 compared to the corresponding period
in 1995. This decrease is primarily a result of temporary production
inefficiencies arising from the relocation of manufacturing operations from the
LaVergne, Tennessee facility to the Medina and Brook Park, Ohio plants in the
first nine months of 1996, as well as certain other plant consolidation
activities undertaken by the Company during 1996. These plant consolidation
activities entailed the movement of more than 185 pieces of production equipment
from operating facilities, as well as the hiring of approximately 120 new
production employees at the Medina and Brook Park facilities to replace the
approximately 175 production employees at the Company's facility in LaVergne.
PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995
Pro Forma Net Sales. Pro forma net sales increased $2.8 million, or 2.9%,
from $97.1 million for the nine months ended September 30, 1995 to $99.9 million
for the nine months ended September 30, 1996. Friction product pro forma net
sales increased $3.2 million, or 4.2%, from $75.1 million in the nine months
ended September 30, 1995 to $78.2 million in the nine months ended September 30,
1996. This increase was primarily attributable to increased aftermarket pro
forma net sales of friction products used in construction and agricultural
equipment and increased pro forma net sales of specialty friction products,
partially offset by lower pro forma net sales of friction products for heavy
truck clutches resulting from lower truck production. Precision engineered
component pro forma net sales declined $396,000, or 1.8% from $22.0 million in
the nine months
37
<PAGE> 42
ended September 30, 1995 to $21.6 million in the nine months ended September 30,
1996. The decline was primarily attributable to lower pro forma net sales of
powder metal components used in hydraulic mechanisms.
Pro Forma Gross Profit. Pro forma gross profit for the first nine months
of 1996 was $28.9 million, a decrease of $1.7 million, or 5.6%, from $30.6
million in the first nine months of 1995. As a percentage of pro forma net
sales, pro forma gross profit was 28.9% in the first nine months of 1996 and
31.5% in the first nine months of 1995. Pro forma gross profit as a percentage
of sales decreased primarily as a result of costs associated with the start-up
of production (other than moving expenses) in connection with the manufacturing
facility consolidation program.
Pro Forma Selling, Technical and Administrative ("ST&A") Expenses. Pro
forma ST&A expenses increased $1.2 million, or 11.4%, from $10.9 million for the
nine months ended September 30, 1995 to $12.2 million for the nine months ended
September 30, 1996. As a percentage of pro forma net sales, pro forma ST&A
expenses increased from 11.3% to 12.2% over such periods, primarily as a result
of higher incentive compensation at the Company's friction products facilities
resulting from increased sales and profits from business transferred in
connection with the consolidation program and the establishment of an incentive
compensation program for employees of SKW.
Pro Forma Income from Operations before Plant Consolidation Expense. Pro
forma income from operations of $14.0 million for the first nine months of 1996
decreased $3.1 million, or 18.3%, compared to the $17.1 million pro forma income
from operations in the first nine months of 1995. As a percentage of pro forma
net sales, pro forma income from operations declined from 17.5% in the first
nine months of 1995 to 14.0% in the first nine months of 1996. The decrease
reflects the lower margins due to the costs associated with the manufacturing
facility consolidation program and the higher pro forma ST&A costs described
above.
PRO FORMA 1995 COMPARED TO 1994
Pro Forma Net Sales. Pro forma net sales increased $9.3 million, or 7.8%,
from $118.4 million in 1994 to $127.7 million in 1995. Friction product pro
forma net sales increased $7.6 million, or 8.4%, from $91.5 million in 1994 to
$99.1 million in 1995. The net friction products pro forma net sales increase
was attributable to increased pro forma net sales of linings for aircraft
braking systems due to the sustained improvement of the U.S. commercial airline
industry. Pro forma net sales for the Company's other friction products
businesses were unchanged as increased aftermarket pro forma net sales and pro
forma net sales of heavy truck clutches resulting from increased truck
production were offset by pro forma net sales declines to original equipment
manufacturers of construction and agricultural equipment. Precision engineered
component pro forma net sales increased $1.6 million, or 6.0%, from $27.0
million in 1994 to $28.6 million in 1995, as a result of increased pro forma net
sales of powder metal components for fluid power control applications and for
anti-lock brake sensor rings used in heavy trucks.
Pro Forma Gross Profit. Pro forma gross profit in 1995 was $40.5 million,
an increase of $6.4 million, or 18.7%, from $34.1 million in 1994. As a
percentage of pro forma net sales, pro forma gross profit was 28.8% in 1994 and
31.7% in 1995. Pro forma gross profit margins in the existing friction products
business grew due to the increased proportion of high margin aircraft brake
lining pro forma net sales. The 1995 pro forma gross profit includes pro forma
adjustments for $3.6 million of cost savings associated with the manufacturing
facility consolidation program.
Pro Forma ST&A Expenses. Pro forma ST&A expenses decreased $524,000, or
3.6%, from $14.5 million in 1994 to $14.0 million in 1995. As a percentage of
pro forma net sales, pro forma ST&A expenses declined from 12.2% to 10.9% over
such periods, primarily as a result of the reductions in overhead of SKW and the
increase in pro forma net sales.
Pro Forma Income from Operations Before Plant Consolidation Expense. Pro
forma income from operations increased $6.4 million, or 37.9%, from $16.9
million in 1994 to $23.3 million in 1995. As a percentage of pro forma net
sales, income from operations increased from 14.3% in 1994 to 18.3% in 1995,
primarily as a result of the manufacturing facility consolidation program and
lower pro forma ST&A expenses.
38
<PAGE> 43
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data presented below under the captions
"Income Statement Data," "Other Data" and "Balance Sheet Data" as of and for
each of the five years ended December 31, 1991, 1992, 1993, 1994 and 1995, have
been derived from the audited consolidated financial statements of the Company.
The selected consolidated financial data as of and for the nine months ended
September 30, 1995 and 1996 have been derived from unaudited consolidated
financial statements of the Company, which have been prepared by management on
the same basis as the audited consolidated financial statements of the Company,
and, in the opinion of management of the Company, reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair statement
of such data for such periods and as of such dates. Operating results for the
nine month period ended September 30, 1996 are not necessarily indicative of the
results that may be expected for any other interim period or for the full year.
This data should be read in conjunction with the more detailed information
contained in the consolidated financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial information included elsewhere in this
Prospectus.
39
<PAGE> 44
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales.................................................. $21,037 $24,931 $28,417 $41,395 $84,643 $55,841 $93,672
Cost of sales.............................................. 12,588 14,929 16,834 26,771 61,164 39,630 69,023
------- ------- ------- ------- ------- ------- -------
Gross profit............................................... 8,449 10,002 11,583 14,624 23,479 16,211 24,649
Operating expenses
Selling, technical, and administrative................... 4,049 4,582 4,833 6,294 11,575 7,927 11,611
Amortization of intangibles.............................. 1,304 1,304 954 954 1,864 1,059 2,319
Plant consolidation expense (1).......................... -- -- -- -- -- -- 3,749
------- ------- ------- ------- ------- ------- -------
Income from operations..................................... 3,096 4,116 5,796 7,376 10,040 7,225 6,970
Other expenses, net:
Interest expense........................................... 3,530 2,903 2,654 3,267 7,323 4,432 7,321
Other expense (income), net................................ -- -- -- (234) (130) -- 55
------- ------- ------- ------- ------- ------- -------
Income before income taxes, extraordinary item and
cumulative effect of change in accounting principle...... (434) 1,213 3,142 4,343 2,847 2,793 (406)
Income taxes............................................... (98) 494 1,716 1,845 1,593 1,241 863
------- ------- ------- ------- ------- ------- -------
Income (loss) before extraordinary item and cumulative
effect of change in accounting principle................. (336) 719 1,426 2,498 1,254 1,552 (1,269)
Extraordinary item, utilization of tax loss carryforward... -- (233) -- -- -- -- --
Cumulative effect of change in accounting for income
taxes.................................................... -- -- 284 -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss).......................................... ($ 336) $ 952 $ 1,142 $ 2,498 $ 1,254 $ 1,552 ($1,269)
======= ======= ======= ======= ======= ======= =======
OTHER DATA:
EBITDA (2)................................................. $5,251 $6,290 $7,716 $9,842 $15,507 $10,471 $13,606
EBITDA as a percentage of net sales........................ 25.0% 25.2% 27.2% 23.8% 18.3% 18.8% 14.5%
Capital additions.......................................... 471 446 586 1,871 3,781 2,622 9,142
Depreciation and amortization.............................. 2,155 2,174 1,920 2,466 5,467 3,246 6,636
Ratio of EBITDA to interest expense........................ 1.5x 2.2x 2.9x 3.0x 2.1x 2.4x 1.9x
Ratio of long term debt(including current portion)
to EBITDA (3)............................................ 5.5x 4.2x 3.1x 2.7x 6.1x 7.0x 5.6x
Ratio of earnings to fixed charges (4)..................... 1.2x 1.8x 2.0x 1.3x 1.4x
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).................................. $ (988) $ 1,053 $(3,709) $(4,076) $16,360 $20,487 $19,409
Property, plant and equipment, net......................... 6,466 6,020 5,627 10,166 39,460 39,269 44,284
Total assets............................................... 34,579 33,729 33,925 43,645 123,861 123,569 129,426
Long-term debt (including current portion)................. 28,942 26,457 24,050 26,726 94,906 97,714 102,146
Detachable stock warrants, subject to put option........... -- -- -- -- 4,600 4,600 4,600
Shareholders' equity (deficit)............................. 1,842 2,488 3,377 6,583 390 1,109 (830)
</TABLE>
- ---------------
(1) Reflects charges in the nine month period ended September 30, 1996, related
to the consolidation of certain manufacturing facilities into existing
Company facilities, including the relocation of machinery and equipment.
(2) As used herein, "EBITDA" is defined as income from operations plus
depreciation and amortization excluding plant consolidation expense. EBITDA
is a key measure of the financial performance of the Company because of (1)
the importance of maintaining cash flow in excess of debt-service
obligations and (2) the non-cash effect on earnings of generally high levels
of amortization expense associated with acquisitions. EBITDA does not
purport to represent cash provided by operating activities as reflected in
the Company's consolidated statements of cash flow, is not a measure of
financial performance under generally accepted accounting principles and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(3) For purposes of the computation, EBITDA for the interim periods presented
has been annualized.
(4) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items and accounting changes, interest
expense, amortization of deferred financing costs, income taxes and a
portion of rent expense representative of interest, by the sum of interest
expense, amortization of deferred financing costs, a portion of rent expense
representative of interest and preferred stock dividend requirements. The
ratio of earnings to fixed charges is not meaningful for periods that result
in a deficit. For the year ended December 31, 1991 and the nine months ended
September 30, 1996, the deficit of earnings to fixed charges was $887 and
$830, respectively.
40
<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in connection with the Company's
consolidated financial statements and notes thereto and other financial
information, included elsewhere in this Prospectus.
OVERVIEW
Hawk is a manufacturing holding company that through its operating
subsidiaries designs, engineers, manufactures and markets friction products
(83.5% of sales in the first nine months of 1996) and precision engineered
components (16.5%). Since 1989, Hawk has pursued a strategic plan of fostering
growth by making complementary acquisitions and broadening its customer base.
Set forth below is certain information with respect to those acquisitions:
<TABLE>
<CAPTION>
EFFECTIVE DATE YEAR
ACQUISITION OF ACQUISITION BUSINESS FOUNDED
- -------------------- -------------- ---------------------------------------------------- -------
<S> <C> <C> <C>
FPC and Logan March 1989 Aerospace and industrial friction products and 1961
powder metal for specialty industrial applications
Helsel June 1994 Powder metal for specialty fluid power applications 1974
SKW June 1995 Friction products for industrial applications 1924
GKN friction assets March 1996 Friction products for industrial applications 1944
</TABLE>
All of these acquisitions were asset purchases and were accounted for under
the purchase method of accounting, with the purchase price allocated to the
estimated fair market value of the assets acquired and liabilities assumed. In
the acquisitions, any excess of the purchase price paid over the estimated fair
value of the net assets acquired was allocated to goodwill, which resulted in
approximately $18.2 million of goodwill reflected on the September 30, 1996
balance sheet. The annual amortization of goodwill will result in non-cash
charges to future operations of approximately $1.2 million per year (of which
the majority of such amortization is deductible for tax purposes) based on a
15-year amortization period. The basis of presentation relating to the following
discussion of the "Results of Operations" fully reflects the effects of purchase
accounting and, accordingly, reflects the increased amortization expense.
The acquisition of Helsel significantly increased the precision engineered
component business of the Company, and the acquisitions of SKW and the friction
products assets of GKN brought to the Company a substantial industrial friction
product line to complement FPC's core aerospace friction product line. These
acquisitions caused a significant change in the Company's product mix and
resulted in a reduction in the Company's gross profit margin. The Company's FPC
business generated a gross profit margin of 40.8% in 1993. The acquisition of
Helsel had the effect of reducing the Company's overall gross profit margin to
35.3% in 1994. The acquisition of SKW had the effect of further reducing the
Company's overall gross profit margin to 27.8% in 1995, and 26.3% in the nine
months ended September 30, 1996. The Company believes that the gross profit
margins of the industrial and specialty friction products and precision
engineered components produced by SKW and Helsel, respectively, exceed gross
profit margins realized in other markets that use standardized products.
However, these margins are exceeded by those achieved by the Company's FPC
business, as a result of FPC's proprietary products and leading position in the
aerospace friction products market.
In 1995, the Company consolidated SKW's headquarters facility, which is
expected to result in an estimated annualized cost savings of $1.8 million due
to the elimination of redundant expenses. During 1996, the Company consolidated
one of SKW's two U.S. manufacturing facilities into its existing facilities,
which is expected to result in an estimated $3.6 million in annualized cost
savings from reduction of overhead expenses. The Company incurred $3.7 million
in non-recurring costs related to the manufacturing facility consolidation
program in the first nine months of 1996. The Company does not expect to incur
any additional material future costs relating to the manufacturing
41
<PAGE> 46
facility consolidation program. In addition, the manufacturing facility
consolidation program has had the effect of decreasing the gross profit margins
in 1996 primarily as a result of the temporary production inefficiences arising
from the relocation of manufacturing operations. The Company expects these
temporary production inefficiences to continue through the end of 1996.
At the time of the Offering, the Company incurred $1.9 million of
non-recurring extraordinary charges as a result of the write-off of previously
capitalized deferred financing costs arising from the termination of the Old
Credit Facility. The Company expects that the non-recurring charges relating to
the manufacturing facility consolidation program and the deferred financing
costs will cause the Company to incur a net loss in 1996. See "Description of
Certain Indebtedness -- Old Credit Facility."
The Company's foreign operations expose it to the risk of exchange rate
fluctuations. For example, because the Company's Italian operation typically
generates positive net cash flow, which is denominated in lire, a decline in the
value of the lira relative to the dollar would adversely affect the Company's
reported sales and earnings. In addition, the restatement of foreign currency
denominated assets and liabilities into U.S. dollars gives rise to foreign
exchange gains or losses which are recorded in stockholders' equity. The Company
does not currently participate in hedging transactions related to foreign
currency.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, items in the
Company's income statements as a percentage of net sales:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED
DECEMBER 31, SEPTEMBER 30,
----------------------------- -----------------
1993 1994 1995 1995 1996
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales........................................................ 100.0% 100.0% 100.0% 100.0% 100.0%
Gross profit..................................................... 40.8 35.3 27.8 29.0 26.3
Selling, technical & administrative expenses..................... 17.0 15.2 13.7 14.2 12.4
Plant consolidation expense...................................... -- -- -- -- 4.0
Amortization of intangible assets................................ 3.4 2.3 2.2 1.9 2.5
Income from operations........................................... 20.4 17.8 11.9 12.9 7.4
Interest expense................................................. 9.3 7.9 8.7 7.9 7.8
Other (income) expense, net...................................... -- (0.6) (0.2) -- --
Income (loss) before income taxes................................ 11.1 10.5 3.4 5.0 (0.4)
Income taxes..................................................... 7.0 4.5 1.9 2.2 0.9
Net income (loss)................................................ 4.0 6.0 1.5 2.8 (1.3)
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
Net Sales. Net sales increased $37.8 million, or 67.7%, from $55.8 million
in the nine months ended September 30, 1995 to $93.7 million in the nine months
ended September 30, 1996. Net friction product sales increased $38.1 million, or
95.0%, from $40.1 million in the nine months ended September 30, 1995 to $78.2
million in the nine months ended September 30, 1996. The net friction product
sales increase was primarily attributable to the purchase of SKW in June 1995.
Sales attributable to the acquired company in the first nine months of 1996 were
$51.8 million compared to $16.2 million of SKW sales that were included in the
Company's results for the third quarter of 1995, representing a net increase of
$35.6 million, or 93.4%, of the friction product net sales increase. The
remaining net friction product sales increase of $3.2 million in 1996, or 8.4%
of the increase, was primarily attributable to increased aftermarket sales of
friction products used in construction and agricultural equipment and increased
sales of specialty friction products. These sales increases were partially
offset by lower sales of friction products for heavy truck clutches resulting
from lower truck production. Precision engineered component net sales declined
$272,000, or 1.7%, from $15.7 million in the nine months ended September 30,
1995 to $15.4 million in the nine months
42
<PAGE> 47
ended September 30, 1996. The decline in precision engineered component sales
was primarily attributable to lower sales of powder metal components used in
hydraulic mechanisms.
Gross Profit. Gross profit in the first nine months of 1996 was $24.6
million, an increase of $8.4 million, or 52.1%, from $16.2 million in the first
nine months of 1995. As a percentage of net sales, gross profit was 26.3% in the
first nine months of 1996 and 29.0% in the first nine months of 1995. Gross
profit as a percentage of sales decreased primarily as a result of the change in
product mix resulting from the SKW acquisition and costs associated with the
start-up of production (other than moving expenses) in connection with the
manufacturing facility consolidation program.
ST&A Expenses. ST&A expenses increased $3.7 million, or 46.5%, from $7.9
million in the nine months ended September 30, 1995 to $11.6 million in the nine
months ended September 30, 1996. As a percentage of net sales, ST&A expenses
declined from 14.2% to 12.4% over such periods, primarily as a result of the
reductions in the overhead of SKW and the increase in net sales, as a result of
the SKW acquisition, partially offset by higher incentive compensation at the
Company's friction product facilities resulting from increased sales and profits
from business transferred in connection with the consolidation program and the
establishment of an incentive compensation program for employees of SKW.
Income from Operations. Income from operations of $7.0 million in the
first nine months of 1996 decreased $255,000, or 3.5%, from $7.2 million income
from operations in the first nine months of 1995. As a percentage of net sales,
income from operations declined from 12.9% in the first nine months of 1995 to
7.4% in the first nine months of 1996. In addition to the change in product mix
resulting from the SKW acquisition and production start-up costs and increased
ST&A expenses referred to above, the decrease reflects $3.7 million in
non-recurring costs in the first nine months of 1996 in connection with the SKW
manufacturing facility consolidation program and $1.3 million increased
amortization of goodwill and deferred financing costs primarily resulting from
the acquisition of SKW.
Interest Expense. Interest expense increased $2.9 million, or 65.2% from
$4.4 million in the first nine months of 1995 to $7.3 million in the first nine
months of 1996. The increase is primarily related to the higher average amount
of outstanding indebtedness in the first nine months of 1996 resulting from the
acquisition of SKW.
Income Taxes. The provision for income taxes decreased $378,000 from $1.2
million in the first nine months of 1995 (44.4% of pre-tax income) to $863,000
in the first nine months of 1996 (212.6% of pre-tax income). The high effective
tax rate in 1996 is primarily due to losses from domestic operations and
increased earnings from foreign operations.
Net Income (Loss). The net loss for the nine months ended September 30,
1996 was $1.3 million, a decrease of $2.8 million compared to net income of $1.6
million in the nine months ended September 30, 1995, as a result of the factors
noted above.
1995 COMPARED TO 1994
Net Sales. Net sales increased $43.2 million, or 104.5%, from $41.4
million in 1994 to $84.6 million in 1995. Friction product net sales increased
$33.8 million, or 110.9%, from $30.4 million in 1994 to $64.2 million in 1995.
The net friction product sales increase was attributable to the purchase of SKW
in June 1995, and to a lesser extent, to increased sales of linings for aircraft
braking systems due to the sustained improvement of the U.S. commercial airline
industry. Sales attributable to SKW in 1995, including brake lining sales, were
$32.3 million, or 95.7%, of the friction product net sales increase. Sales for
the Company's other friction products businesses were unchanged as increased
aftermarket sales and sales of heavy truck clutches resulting from increased
truck production were offset by sales declines to original equipment
manufacturers of construction and agricultural equipment. Precision engineered
component net sales increased
43
<PAGE> 48
$9.5 million, or 86.6%, from $10.9 million in 1994 to $20.4 million in 1995,
primarily as a result of the full year inclusion of Helsel which was acquired in
June 1994. The full year inclusion of Helsel, acquired in June 1994, accounted
for $9.2 million, or 97.4%, of the net sales increase in 1995. The remaining
precision engineered component sales increase was primarily due to increased
sales of powder metal components for fluid power control applications and for
anti-lock brake sensor rings for use in heavy trucks.
Gross Profit. Gross profit in 1995 was $23.5 million, an increase of $8.9
million, or 60.6%, from $14.6 million in 1994. As a percentage of net sales,
gross profit was 35.3% in 1994 and 27.7% in 1995. This change was primarily a
result of a change in product mix resulting from the acquisitions of SKW and
Helsel and $2.4 million in additional cost of sales as a result of the write up
of inventory purchased in the SKW acquisition to fair value. Gross profit
margins in the existing friction products business grew slightly due to the
increased proportion of high margin aircraft brake lining sales.
ST&A Expenses. ST&A expenses increased $5.3 million, or 83.9%, from $6.3
million in 1994 to $11.6 million in 1995. As a percentage of net sales, ST&A
expenses declined from 15.2% to 13.7% over such periods, primarily as a result
of the reductions in the overhead of SKW and the increase in net sales, as a
result of the SKW acquisition.
Income from Operations. Income from operations increased $2.7 million, or
36.1%, from $7.4 million in 1994 to $10.0 million in 1995. As a percentage of
net sales, income from operations declined from 17.8% in 1994 to 11.9% in 1995,
primarily as a result of the change in product mix following the SKW and Helsel
acquisitions and, to a lesser extent, increased amortization of goodwill and
deferred financing costs of $910,000, primarily as a result of the acquisitions.
Interest Expense. Interest expense increased $4.1 million, or 124.2%, from
$3.3 million in 1994 to $7.3 million in 1995. The increase is primarily related
to the higher average amount of outstanding indebtedness in 1995 resulting from
the acquisition of SKW.
Income Taxes. The provision for income taxes decreased $252,000 from $1.8
million in 1994 (42.5% of pre-tax income) to $1.6 million in 1995 (56.0% of
pre-tax income). The increase in the effective tax rate in 1995 was primarily
the result of increased non-deductible amortization, earnings from foreign
operations and adjustments to the Company's worldwide tax liability.
Net Income. Net income decreased $1.2 million, or 49.8%, from $2.5 million
in 1994 to $1.3 million in 1995, as a result of the factors noted above.
1994 COMPARED TO 1993
Net Sales. Net sales increased $13.0 million, or 45.7%, from $28.4 million
in 1993 to $41.4 million in 1994. Friction product net sales increased $3.7
million, or 13.6%, from $26.8 million in 1993 to $30.4 million in 1994. The net
friction product sales increase was primarily attributable to increased sales of
friction products for heavy truck clutches resulting from increased truck
production and for construction and agricultural equipment, and to a lesser
extent, increased sales of specialty friction products. Precision engineered
component net sales increased $9.3 million, or 574.2%, from $1.6 million in 1993
to $10.9 million in 1994, as a result of the acquisition of Helsel in June 1994.
Helsel accounted for $8.6 million, or 96.5%, of the net sales increase. The
remaining precision engineered component sales increase was primarily due to
increased sales of powder metal components for transmissions and other drive
mechanisms used in trucks and construction equipment.
Gross Profit. Gross profit in 1994 was $14.6 million, an increase of $3.0
million, or 26.3%, from $11.6 million in 1993. As a percentage of net sales,
gross profit was 35.3% in 1994 and 40.8% in 1993. This change was primarily the
result of the change in the Company's product mix following the June 1994
acquisition of Helsel. Gross profit margins in friction products were
essentially un-
44
<PAGE> 49
changed, as the growth in the business was relatively uniform and did not
represent a change in product mix.
ST&A Expenses. ST&A expenses increased $1.5 million, or 30.2%, from $4.8
million in 1993 to $6.3 million in 1994. As a percentage of net sales, ST&A
expenses declined from 17.0% to 15.2% over such periods, primarily as a result
of the increase in net sales, as a result of the Helsel acquisition, without a
proportionate increase in overhead expenses.
Income from Operations. Income from operations increased $1.6 million, or
27.3%, from $5.8 million in 1993 to $7.4 million in 1994. As a percentage of net
sales, income from operations decreased from 20.4% in 1993 to 17.8% in 1994,
primarily as a result of the change in product mix after the Helsel acquisition.
Interest Expense. Interest expense increased $613,000, or 23.1%, from $2.7
million in 1993 to $3.3 million in 1994. The increase is primarily related to
the higher average amount of outstanding indebtedness in 1994 resulting from the
acquisition of Helsel.
Income Taxes. The provision for income taxes increased $129,000 from $1.7
million in 1993 (54.6% of pre-tax income) to $1.8 million in 1994 (42.5% of
pre-tax income). The high effective tax rate in 1993 was primarily due to the
recording of expense associated with a federal tax audit relating to prior
years.
Net Income. Net income increased $1.4 million, or 118.7% from $1.1 million
in 1993 to $2.5 million in 1994, as a result of the factors noted above and, to
a lesser extent, a $284,000 charge incurred in 1993 relating to the cumulative
effect of a change in accounting for income taxes that arose from the adoption
by the Company in 1993 of Financial Accounting Standard Board Statement No. 109.
LIQUIDITY AND CAPITAL RESOURCES
The acquisitions of Helsel, SKW and the friction products assets of GKN
were financed primarily by the issuance of $30.0 million of the Senior
Subordinated Notes and borrowings under the Old Credit Facility in the amount of
$72.0 million. As a result of these acquisitions and the Offering, the Company
has, and following the Exchange Offer will continue to have, substantial
indebtedness. The Company will therefore be required to use a substantial
portion of its cash flow from operations for the payment of interest expense on
indebtedness.
Concurrently with the Offering, the Company and its domestic subsidiaries
entered into the New Revolving Credit Facility, consisting of a revolving credit
loan that will equal the lesser of (1) $25.0 million, or (2) the sum of 85% of
eligible accounts receivable and 60% of eligible inventory. The New Revolving
Credit Facility is secured by substantially all of the accounts receivable,
inventory and intangibles of the Company and its domestic subsidiaries. In
addition, the New Revolving Credit Facility contains financial and other
covenants with respect to the Company and its subsidiaries that, among other
matters, would prohibit the payment of any dividends to the Company by the
subsidiaries of the Company in the event of a default under the terms of the New
Revolving Credit Facility, restrict the creation of certain liens and require
the maintenance of certain minimum interest coverage. Amounts outstanding under
the New Revolving Credit Facility are due November 27, 1999 and bear interest at
a variable rate based on the London Interbank Offered Rate ("LIBOR") plus 2.25%
per annum, or at the Company's option, a variable rate based on the lending
bank's prime rate plus 1.0% per annum. Currently, there are no amounts
outstanding under the New Revolving Credit Facility.
The Company has outstanding $30.0 million of Senior Subordinated Notes.
Principal payments on these notes are due in equal installments of $10.0 million
on January 31, 2004, and June 30, 2004 and 2005. These notes contain certain
financial and other covenants and restrictions, including
45
<PAGE> 50
restrictions on the ability of less than wholly-owned subsidiaries of the
Company, if any, to pay dividends or make other distributions to the Company.
Net cash provided by operating activities was $3.5 million for the nine
months ended September 30, 1996 and net cash used in operating activities was
$30,000 for the nine months ended September 30, 1995. The $3.5 million increase
in cash provided by operating activities for the 1996 period was primarily a
result of higher depreciation and amortization and a reduction in working
capital requirements, partially offset by decreased net income. Net cash
provided by operating activities was $5.7 million for 1995, $4.8 million for
1994 and $3.2 million 1993. The $892,000 increase in net cash provided by
operating activities in 1995 versus 1994 resulted from higher non-cash charges
in 1995 for depreciation and amortization, partially offset by lower net income
and higher working capital requirements associated with the acquisition of SKW.
Net cash used in investing activities was $9.1 million and $64.2 million
for the nine months ended September 30, 1996 and 1995, respectively. The cash
used in investing activities in 1996 consisted entirely of purchases of
property, plant and equipment and in the nine months ended September 30, 1995
consisted of $61.6 million attributable to the acquisition of SKW and $2.6
million of capital expenditures. The 1996 net cash used in investing activities
includes $2.5 million for the purchase and relocation of the friction products
assets of GKN and capital expenditures pertaining to SKW. The net cash used in
investing activities of $65.4 million for 1995 reflects the purchase of SKW and
capital expenditures of $3.8 million. The net cash used in investing activities
of $6.5 million for 1994 reflects the Helsel acquisition and $1.9 million in
capital expenditures, and net cash used in investing activities of $586,000 for
1993 consists entirely of capital expenditures.
Net cash provided by financing activities was $6.8 million for the nine
months ended September 30, 1996 and $63.6 million for the nine months ended
September 30, 1995. The 1996 net cash provided by financing activities was
attributable to an increase in borrowings under the Old Credit Facility
attributable to capital expenditures, including the purchase and relocation of
the friction product assets of GKN. The increase in cash provided by financing
activities of $63.6 million for the nine months ended September 30, 1995 and of
$59.7 million for 1995 was primarily attributable to increased borrowings under
the Old Credit Facility, and the issuance of the Senior Subordinated Notes,
associated with the SKW acquisition, partially offset by repayment of the prior
credit facility and the redemption of stock warrants. The increase in net cash
provided by financing activities in 1994 over 1993 is primarily attributable to
borrowings of long-term debt.
The primary uses of capital by the Company will be (1) to pay interest on,
and to repay principal of, indebtedness, (2) for capital expenditures for
maintenance, replacement and acquisitions of equipment, expansion of capacity,
productivity improvements and product development, and (3) making additional
strategic acquisitions of complementary businesses. The Company's capital
expenditures were $3.8 million in 1995 and $9.1 million in the nine months ended
September 30, 1996, which includes $2.5 million to acquire and relocate the
friction products assets of GKN.
The Company believes that cash flow from operating activities, cash
available from the sale of the Notes in the Offering and additional funds
available under the New Revolving Credit Facility will be sufficient to meet its
currently anticipated operating and capital expenditure requirements through
1997.
INFLATION
Inflation generally affects the Company by increasing interest expense of
floating rate indebtedness and by increasing the cost of labor, equipment and
raw materials. The Company believes that the relatively moderate rate of
inflation over the past few years has not had a significant effect on its
results of operations.
46
<PAGE> 51
BUSINESS
HISTORY
In 1989, an investor group led by Norman C. Harbert, Chairman of the Board,
President and Chief Executive Officer and a stockholder of the Company, and
Ronald E. Weinberg, Vice-Chairman of the Board, Treasurer and a stockholder of
the Company, formed The Hawk Group of Companies, Inc., an Ohio corporation, to
acquire the assets and liabilities of FPC and Logan, each an Ohio corporation
that is now a wholly-owned subsidiary of the Company. The assets and liabilities
of Helsel were acquired in June 1994 by a group led by Mr. Harbert and Mr.
Weinberg, and, in June 1995, Helsel became a wholly-owned subsidiary of the
Company upon its merger with a subsidiary of the Company. The Company acquired
the capital stock of SKW in June 1995, at which time the Company was
reincorporated as a Delaware corporation by means of a parent-subsidiary merger.
In October 1996, the Company changed its name to Hawk Corporation. Concurrently
with the closing of the Offering, Old Hawk, a Delaware corporation that was a
principal stockholder of the Company, merged with and into the Company.
GENERAL
Hawk designs, engineers, manufactures and markets friction products (83.5%
of sales in the first nine months of 1996) and precision engineered components
(16.5%). The Company is a leading worldwide supplier of friction products for
brakes, clutches and transmissions used in aerospace, industrial and specialty
applications. The Company is also a leading supplier of precision engineered
components primarily made from powder metals, including pump elements, gears,
transmission plates, pistons and anti-lock brake sensor rings, used in
industrial applications. The Company focuses on manufacturing products requiring
sophisticated engineering and production techniques for applications in
aerospace and specialty industrial markets where it has achieved a major market
position.
The Company is the largest independent supplier of friction materials to
the manufacturers of braking systems for the Boeing 727, 737 and 757, the
McDonnell Douglas DC-9, DC-10 and MD-80 and the Lockheed L-1011 aircraft and is
the largest supplier of friction materials to the general aviation
(non-commercial, non-military) market, supplying friction materials for aircraft
manufacturers such as Cessna, Lear, Gulfstream and Fokker. The Company believes
that it is a leading supplier of friction materials to manufacturers of
construction and agricultural equipment and large trucks, including Dana,
Caterpillar and John Deere. In addition, the Company is a major supplier of
friction products for use in specialty applications, such as brakes for
Harley-Davidson motorcycles, AM General Humvees and Bombardier, Polaris and
Arctic Cat snowmobiles. The Company's precision engineered components made from
powder metals are used in a wide variety of industrial applications, often as a
lower cost replacement for parts manufactured by a traditional forging, casting
or stamping technology.
The Company believes that its diverse customer base and broad aftermarket
product line lessens its exposure to economic fluctuations. The Company
estimates that aftermarket sales of friction products have comprised
approximately 50% of the Company's net friction product sales in recent years.
The Company also believes that its principal tradenames are well-known in the
domestic and international marketplace and are associated with quality and
extensive customer support, including specialized product engineering and strong
aftermarket service.
Since Hawk's formation in 1989, Hawk has pursued a strategic plan of
fostering growth by making complementary acquisitions and broadening its
customer base. From 1991 to 1995, the Company's net sales and income from
operations increased at a compound annual rate of 41.6% and 34.2%, respectively,
and for the nine months ended September 30, 1996, the Company's sales and income
from operations (before non-recurring costs of $3.7 million for plant
consolidation expenses) increased 67.7% and 48.3%, respectively, compared to the
nine months ended Septem-
47
<PAGE> 52
ber 30, 1995. Since 1994, the sales growth has been primarily driven by the
acquisitions of Helsel, SKW and the friction products assets of GKN. The
acquisitions tripled the net sales of the Company. In addition, the Company's
net sales during the period from 1991 to 1995 grew internally, without giving
effect to the acquisitions, at a compound annual rate of 12.9%.
ACQUISITIONS
The Company believes that its management team has demonstrated the ability
to identify, complete and integrate strategic acquisitions. Building on the base
of its original FPC and Logan subsidiaries, the Company has successfully made or
plans to make the following acquisitions:
Helsel. The June 1994 Helsel acquisition expanded the Company's
precision engineered component business with the acquisition of a leading
manufacturer of powder metal components for the specialty fluid power
market. Since the acquisition, the Company has made approximately $5.0
million in capital improvements at Helsel, increasing its capacity by
approximately 29%. By focusing on Helsel's specialty in the fluid power
control market and increasing capacity, sales at Helsel have increased over
30% since its acquisition by the Company.
S.K. Wellman. The June 1995 SKW acquisition furthered the Company's
strategy of consolidating friction product manufacturers. While the
Company's FPC subsidiary has a leading position as a supplier of friction
products to the aerospace market, SKW is a leading supplier of friction
products to original equipment manufacturers in industrial markets. Tracing
its history back to the manufacture of transmission friction discs for the
Model T in the 1920s, SKW has brought an established, well-known industrial
product line to the Company to complement FPC's core aerospace product
line. In addition, the acquisition provided the Company with strategic
access to international markets through SKW's manufacturing facilities in
Italy and Canada and an established distribution network throughout Europe
and the Far East. Since the acquisition, the Company has consolidated one
of SKW's two U.S. manufacturing facilities and SKW's executive offices into
other facilities of the Company.
Friction Products Assets of GKN. In March 1996, the Company continued
its consolidation strategy with its acquisition of the friction products
assets of GKN (principally machinery and equipment), which were based in
the United Kingdom. This acquisition also expanded the Company's
international presence. Moreover, the strength of the GKN business, as a
leading supplier of friction products to the industrial aftermarket in
Europe, complemented the Company's industrial product lines focused on
original equipment manufacturers located in Europe. The Company has
consolidated the GKN operation with the Company's Italian facility, while
maintaining a sales office in the United Kingdom to service its worldwide
customers.
Hutchinson. The proposed acquisition of Hutchinson furthers the
Company's strategy of acquiring complementary businesses with a major
market position that will expand the Company's product offerings, technical
capabilities and customer base. Hutchinson designs and manufactures
precision engineered components consisting primarily of rotors for small
motors used in small appliances and office equipment. The Company believes
that Hutchinson is one of the largest independent domestic suppliers of
rotors for use in these small horsepower motors. Additionally, Hutchinson
manufactures aluminum extruded fan spacers for use in commercial diesel
engines for heavy off-road equipment and precision metal castings for use
in commercial hand power tools and gasoline pumping units. The Company also
believes Hutchinson has growth opportunities arising from the trend in
original equipment motor manufacturers to outsource their production of
rotors. See "Risk Factors -- Acquisition Plans" and "Business -- Hutchinson
Acquisition."
48
<PAGE> 53
Both the friction product and precision engineered metal component
industries are fragmented and are undergoing consolidation due in part to the
additional resources needed (1) to perform the research and development
necessary to satisfy customers' increasingly stringent quality and performance
criteria, and (2) to meet just-in-time delivery requirements. As a result, the
Company believes that it can continue to make strategic acquisitions of other
friction product and precision engineered component manufacturers. To effect its
acquisition strategy, the Company engages in discussions, from time to time,
with other manufacturers in friction products and complementary precision
engineered component businesses. However, other than the Hutchinson acquisition,
the Company has no outstanding commitments or agreements regarding any future
acquisitions. See "Risk Factors -- Acquisition Plans."
BUSINESS STRATEGY
The Company seeks to grow by continuing to focus on a balanced product mix
targeted at high margin specialty applications. The principal elements of the
Company's business strategy include:
- Focus on High-Margin, Specialty Applications. The Company operates
in aerospace and specialty industrial markets that typically require
sophisticated engineering and production techniques. In developing new
applications, as well as in evaluating acquisitions, the Company seeks to
compete in markets requiring such engineering expertise and technical
capability, rather than in markets in which the primary competitive factor
is price. The Company believes margins for its products in these markets
are higher than in other markets that use standardized products. The
Company's gross margin in the first nine months of 1996 was 26.3%.
- Leveraging Customer Relationships. The Company's engineers work
closely with its customers to develop and design new products and improve
the performance of existing products. The Company believes that its
commitment to quality, service and just-in-time delivery have enabled it to
build and maintain strong and stable customer relationships. The Company
also believes that it is the sole source for specific applications with
respect to more than 85% of its sales. Each of the Company's 10 largest
customers have been customers of the Company or its predecessors for more
than 10 years. As further testimony to its customer satisfaction record,
the Company has received numerous preferred supplier awards from many of
its leading customers, including Aircraft Braking Systems, BFGoodrich
Aerospace, Dana, Caterpillar, Allison Transmission and John Deere.
- New Product Introduction. The Company believes that the
introduction of new products in conjunction with a new brake, clutch or
transmission system is particularly important in the friction products
business. This importance arises because the friction material is the
consumable, or wear, component of such systems. The introduction of new
friction products in conjunction with a new system provides the Company
with the opportunity to supply the aftermarket for the life of that system.
For example, on an aircraft braking system, this ability to service the
aftermarket will likely give the Company a stable market for its friction
products for the life of the aircraft, which can be 30 years or more. The
Company also seeks to grow by applying its existing products and
technologies to new specialized applications where its products have a
performance or technological advantage. For example, the Company has
recently introduced high performance friction material for use in racing
car brakes, which the Company believes may have additional applications in
the industrial market.
49
<PAGE> 54
- Expanding International Sales. In recent years, the Company has
significantly expanded its international presence. With the acquisition of
SKW in 1995 and the friction products assets of GKN in 1996, the Company
has acquired manufacturing facilities in Italy and Canada, a sales office
in the United Kingdom and a worldwide distribution network for its
products. The Company's distributors are located in established markets
throughout Europe, Canada and the Far East, as well as emerging markets in
South and Central America and Southeast Asia. As a result of these
acquisitions, sales from the Company's international facilities grew from
6.7% of total Company net sales in the first nine months of 1995, to 15.7%
in the first nine months of 1996. The Company believes that its ability to
actively support multinational customers on a global basis will allow it to
increase its sales to new and existing customers.
- Pursuit of Strategic Acquisitions. The fragmented friction product
and powder metal component industries are undergoing consolidation. The
Company will continue to seek to acquire complementary businesses with a
major market position that will enable it to expand its product offerings,
technical capabilities and customer base. In assimilating acquired
companies, the Company may rationalize operations to reduce costs and
improve profitability. For example, since the acquisition of SKW in 1995,
the Company has consolidated SKW's headquarters facility and one of SKW's
two U.S. manufacturing facilities into its existing facilities, resulting
in an estimated $5.4 million of annualized cost savings.
PRODUCTS AND MARKETS
The Company focuses on supplying the aerospace and specialty industrial
markets that typically require sophisticated engineering and production
techniques. In the first nine months of 1996, the Company's sales by principal
end markets were:
[Pie Chart]
<TABLE>
<S> <C>
Other - 6.6%
Specialty - 7.9%
Heavy Truck - 13.0%
Agriculture - 13.2%
Precision Engineered Components - 16.5%
Construction - 21.3%
Aerospace - 21.5%
</TABLE>
50
<PAGE> 55
The table below sets forth the Company's net sales for the first nine
months of 1996 by principal end markets, principal products and selected
customers and applications.
<TABLE>
<CAPTION>
PRINCIPAL
END MARKETS PRINCIPAL SELECTED SELECTED
(IN MILLIONS) PRODUCTS CUSTOMERS APPLICATIONS
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
Friction Products: Brake Linings Aircraft Braking Systems Boeing 727, 737, 757
Aerospace ($20.2) BFGoodrich McDonnell Douglas DC-9,
Parker Hannifin DC-10, MD-80
Lockheed L-1011
- ------------------------------------------------------------------------------------------------------------------
Construction ($20.0) Brake Linings Caterpillar Caterpillar Crawler
Transmission Discs Allison Transmission Tractors, Motor Graders and
Volvo Wheel Loaders
Clark Harth Allison 7000/8000/9000
Series Transmissions
- ------------------------------------------------------------------------------------------------------------------
Agriculture ($12.4) Brake Linings John Deere John Deere 7000 and 8000
Transmission Discs New Holland Series Tractors
Clutch Buttons AGCO New Holland 150+ hp Tractors
Case-Poclain
- ------------------------------------------------------------------------------------------------------------------
Heavy Truck ($12.2) Clutch Buttons Dana Navistar,
Ford, Paccar and Mack
Class 6, 7, 8 Trucks
- ------------------------------------------------------------------------------------------------------------------
Specialty and Brake Linings Hayes Brake Harley-Davidson Motorcycles
Other($13.5) Transmission Discs Bombardier Snowmobiles
Kelsey-Hayes AM General Humvees
United Technologies Fuel Cells
- ------------------------------------------------------------------------------------------------------------------
Precision Engineered Powder Metal Gears, Hydro-Gear Hydrostatic Transmissions
Components ($15.4) Rotors and Parker Hannifin Fluid Power Controls
Transmission Components Caterpillar Construction Equipment
Vickers Industrial Pumps
Gilbarco Gasoline Pumps
Eaton Truck Transmissions
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Friction Products
The Company's friction products are made from proprietary composite
materials that primarily consist of metal powders and synthetic and natural
fibers. Friction products are the replacement elements used in brakes, clutches
and transmissions to absorb vehicular energy and dissipate it through heat and
normal mechanical wear. For example, the friction brake linings in aircraft
braking systems act to slow and stop airplanes when taxiing or landing. Friction
products manufactured by the Company also include friction linings for use in
automatic and power shift transmissions, clutch buttons that serve as the main
contact point between an engine and a transmission, and brake linings for use in
other types of braking systems.
The Company's friction products are custom-designed to meet the performance
requirements of a specific application and must meet or exceed the customer's
performance specifications, including temperature, pressure, component life and
noise level criteria. The engineering required in designing a friction material
for a specific application dictates a balance between the component life cycle
and the performance application of the friction material in, for example,
stopping or starting movement. Friction products are consumed through customary
use in a brake, clutch or transmission system and require regular replacement.
Because the friction material is the consumable, or wear, component of such
systems, new friction product introduction in conjunction with a new system
provides the Company with the opportunity to supply the aftermarket with that
friction product for the life of the system.
The principal markets served by the Company's friction products business
include manufacturers of aircraft brakes, truck clutches, heavy-duty
construction and agricultural vehicle brakes, clutches and transmissions, as
well as manufacturers of specialty motorcycle, snowmobile and performance racing
brakes. Based upon net sales, the Company believes that it is among the top
three worldwide manufacturers of friction products used in aerospace and
industrial applications.
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<PAGE> 56
The Company estimates that aftermarket sales of friction products have
historically comprised approximately 50.0% of the Company's net friction product
sales. The Company believes that its stable aftermarket sales component enables
the Company to reduce its risk to adverse economic cycles.
Aerospace. The Company is the largest independent supplier of friction
materials to the manufacturers of braking systems for the Boeing 727, 737 and
757, the McDonnell Douglas DC-9, DC-10 and MD-80 and the Lockheed L-1011
aircraft and is the largest supplier of friction materials to the general
aviation (non-commercial, non-military) market, supplying friction materials for
aircraft manufacturers such as Cessna, Lear, Gulfstream and Fokker. Each
aircraft braking system, including the friction materials supplied by the
Company, must meet stringent FAA criteria and certification requirements. New
model development and FAA testing for the Company's aircraft braking system
customers generally begins two to five years prior to full scale production of
new braking systems. If the Company and the aircraft brake manufacturer with
which the Company is working in conjunction, are successful in obtaining the
rights to supply an aircraft, the Company can generally supply its friction
products as long as that model continues to fly because it is generally
expensive to redesign a braking system and meet the FAA requirements. Moreover,
FAA maintenance requirements mandate that brake linings be changed after a
specified number of take-offs and landings, which varies by aircraft type,
resulting in a continued and steady market for the Company's aerospace friction
products.
Construction and Agricultural Vehicles and Equipment and Heavy
Trucks. The Company supplies a variety of friction products for use in brakes,
clutches and transmissions on construction and agricultural vehicles and
equipment and heavy trucks. These components are designed to precise tolerances
and permit the brakes to stop or slow a moving vehicle and the clutch and/or
transmission to engage or disengage. The Company believes it is a leading
supplier to original equipment manufacturers and to the aftermarket. The Company
believes that its trademark, Velvetouch(R), is well-known in the aftermarket for
these components. As with the Company's aerospace friction products, new
friction product introduction in conjunction with a new brake, clutch or
transmission system provides the Company with the opportunity to supply the
aftermarket with the friction product for the life of the system.
The Company supplies transmission discs and brake linings for manufacturers
of construction equipment, such as Caterpillar. The Company believes it is the
second largest domestic supplier of such friction products. Replacement
components for construction equipment are sold through Caterpillar and various
aftermarket distributors.
The Company also supplies clutch buttons, transmission discs and brake
linings for manufacturers of agricultural equipment, such as John Deere and New
Holland. The Company believes it is the second largest domestic supplier of such
friction products. Replacement components for agricultural equipment are sold
through these original equipment manufacturers as well as various aftermarket
distributors.
In addition, the Company supplies clutch buttons for heavy trucks to
original equipment manufacturers, such as Dana. The Company believes it is the
leading domestic supplier of replacement clutch buttons for heavy trucks.
Replacement components are sold through Dana and various aftermarket
distributors.
Specialty. The Company supplies friction products for use in other
specialty applications, such as brake pads for Harley-Davidson motorcycles, AM
General Humvees and Bombardier, Polaris Industries and Arctic Cat snowmobiles.
The Company believes that these markets are experiencing significant growth and
the Company will continue to increase its market share with its combination of
superior quality and longer product life. Under the "Hawk Brake" tradename, the
Company also supplies high performance friction material for use in racing car
brakes. The Company's high performance brake pad for race cars can operate in
temperatures of over 1,100 DEGREES Fahrenheit. The Company believes that this
performance racing material may have additional applications in the industrial
market.
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Other. In addition to providing metal stampings for its friction
business, the Company also sells transmission plates and other components to the
automotive and trucking industries.
Precision Engineered Components
The Company's engineered components are specialty engineered products
consisting primarily of powder metal components, such as pump elements, gears,
transmission plates, pistons and anti-lock brake sensor rings.
The principal markets served by the Company's precision engineered
components business include the fluid power industry and manufacturers of truck
and off-road vehicle transmissions, other drive mechanisms and anti-lock braking
systems. According to the Metal Powder Industries Foundation, an industry trade
group, the size of the worldwide market for powder metal products, including
powder metal components supplied to the automobile industry, was approximately
$3.0 billion in 1995, an increase of over 15% per year since 1991. The Company
focuses on the estimated $1.0 billion market for powder metal components used in
industrial applications. The Company believes that the market for powder metal
components will continue to grow as the Company's core powder metal technology
benefits from advances that permit production of powder metal components with
greater densities and closer tolerances that provide improved strength, hardness
and durability for demanding applications, and enable the Company's powder metal
components to be substituted for wrought steel or iron components.
Fluid Power and Industrial Applications. The Company manufactures a
variety of precision engineered components made from different powder metals for
use in (1) fluid power applications, such as pumps and other hydraulic
mechanisms, and (2) transmissions, other drive mechanisms and anti-lock braking
systems used in trucks and off-road equipment. As the Company's core powder
metal technology improves, enabling its components to be substituted for wrought
steel or iron components, the Company increasingly competes with companies using
forging, casting or stamping technologies. Powder metal components can often be
produced at a lower cost per unit than products manufactured with forging,
casting or stamping technologies due to the elimination of or substantial
reduction in secondary machining, lower material costs and the virtual
elimination of raw material waste. The Company believes that the current trend
of substitution of powder metal components for cast or forged components in
industrial applications will continue for the foreseeable future, providing the
Company with increased product and market opportunities.
HUTCHINSON ACQUISITION
As part of the Company's strategy of acquiring complementary businesses
with a major market position that will expand the Company's product offerings,
technical capabilities and customer base, the Company has entered into a
definitive purchase agreement to acquire all the outstanding capital stock of
Hutchinson. Hutchinson designs and manufactures precision engineered components
consisting primarily of rotors for small motors used in small appliances and
office equipment. The Company believes that Hutchinson is one of the largest
independent domestic suppliers of rotors for use in these small horsepower
motors. Additionally, Hutchinson manufactures aluminum extruded fan spacers for
use in commercial diesel engines for heavy off-road equipment and precision
metal castings for use in commercial hand power tools and gasoline pumping
units. The Company also believes Hutchinson has growth opportunities arising
from the trend in original equipment motor manufacturers to outsource their
production of rotors.
The Company currently expects that the present management of Hutchinson
will remain in place following the Hutchinson acquisition. Upon the acquisition
of Hutchinson, the Company expects to enter into an employment agreement with
Timothy J. Houghton, President and CEO and a principal stockholder of
Hutchinson. Under the terms of the proposed three year employment agreement, Mr.
Houghton will receive an annual base salary of $160,000 and a bonus determined
in
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accordance with a specified formula based on Hutchinson's EBITDA growth during
1997, 1998, and 1999.
Hutchinson owns its 35,000 square foot manufacturing facility and a 10,000
square foot warehouse, each of which is located in Alton, Illinois. The Company
believes that Hutchinson's facilities are adequate for its needs for the
foreseeable future.
As of September 30, 1996, Hutchinson employed approximately 86 people,
including 77 hourly employees and 9 salaried employees. The hourly employees are
covered under a collective bargaining agreement with the International
Association of Machinists and Aerospace Workers expiring in June 1998. The
Company believes that Hutchinson's relationship with its employees and their
union is good.
The Company expects to close the Hutchinson acquisition in the first
quarter of 1997. There is no assurance that the acquisition of Hutchinson will
be completed, or if completed, that the Company will be able to successfully
integrate Hutchinson into its operations. See "The Transactions -- Hutchinson
Acquisition."
MANUFACTURING
The manufacturing process for the Company's friction products and precision
engineered components made of powder metal materials are essentially similar. In
general, both use composite metal alloys in powder form to make high quality
powder metal components. The basic manufacturing steps, blending/compounding,
molding/compacting, sintering (or bonding) and secondary machining/treatment are
as follows:
- Blending/compounding: Composite metal alloys in powder form,
lubricants and other additives are blended together according to scientific
formulas, many of which are proprietary. The formulas are designed to
produce precise performance characteristics necessary for a customer's
particular application, and the Company often works together with its
customers to develop new formulas that will produce materials with greater
energy absorption characteristics, durability and strength.
- Molding/compacting: At room temperature, a specific amount of the
powder alloy is compacted under high pressure into the desired shape. The
Company's molding presses are capable of producing pressures of up to 3,000
tons. The Company believes that it has some of the largest presses in the
powder metal industry, which enable the Company to produce large, complex
components.
- Sintering: After compacting, the molded part is heated to a
specific temperature in computer-controlled furnaces, enabling the metal
powders to bond metallurgically and harden and strengthen the part while
retaining the desired shape. For friction materials, the friction composite
part is also bonded directly to a steel plate or core, creating a strong
continuous metallic part.
- Secondary machining/treatment: If required by customer
specifications, the part undergoes additional processing. These processing
operations are generally necessary to attain increased hardness or
strength, tighter dimensional tolerances or corrosion resistance. To
achieve these specifications, components are automatically re-pressed, heat
treated, precision coined, ground or drilled or applied with a corrosion
resistant coating, such as oil.
Certain of the Company's friction products, which are primarily used in
oil-cooled brakes and power shift transmissions, do not require all of the
foregoing steps. For example, molded composite friction materials are molded
under high temperatures and cured in electronically-controlled ovens and then
bonded to a steel plate or core with a resin-based polymer. Cellulose composite
friction materials are blended and formed into continuous sheets and then
stamped into precise shapes by
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computer-controlled die cutting machines. Like the molded composite friction
materials, cellulose composite friction materials are then bonded to a steel
plate or core with a resin-based polymer.
Quality Control. Throughout its design and manufacturing process, the
Company focuses on quality control. For product design, each Company
manufacturing facility uses state-of-the-art testing equipment to replicate
virtually any application required by the Company's customers. This equipment is
essential to the Company's ability to manufacture components that meet stringent
customer specifications. To insure that tight tolerances have been met and the
quality of its finished products, the Company uses statistical process controls,
a variety of electronic measuring equipment and computer-controlled testing
machinery. The Company has also established programs within each of its
facilities to detect and prevent potential quality problems.
TECHNOLOGY
The Company believes that it is an industry leader in the development of
systems, processes and technologies which allow the manufacture of friction
products with numerous performance advantages, such as greater wear resistance,
increased stopping power, lower noise and smoother engagement. For example, on
the DC-9 aircraft, which was originally manufactured in the 1960s, the Company's
brake linings have to be changed every 600 cycles (a cycle is one take off and
one landing). On the 757 aircraft, which was originally produced in the 1980s,
the Company's brake linings do not require replacement until after more than
1,500 cycles.
The Company maintains an extensive library of proprietary friction product
formulas that serve as a starting point for new product development. Each
formula has a written set of ingredients and processes to generate repeatability
in production. Some formulas may have as many as 15 different components. A 1.0%
to 2.0% change in the mixture can produce significantly different performance
characteristics.
The Company also believes that its precision engineered components business
is capable of producing powder metal components that are more complex and larger
than components produced by traditional methods. The Company has presses that
produce some of the largest powder metal parts in the world and its powder metal
technology permits the manufacture of complex components with specific
performance characteristics and close dimensional tolerances that would
otherwise be impractical or impossible to produce using conventional
metalworking processes.
CUSTOMERS
The Company's engineers closely work with customers to develop and design
new products and improve the performance of existing products. The Company
believes that its working relationship with its customers on development and
design, and the Company's commitment to quality, service and just-in-time
delivery has enabled it to build and maintain strong and stable customer
relationships. Each of the Company's 10 largest customers have been customers of
the Company or its predecessors for more than 10 years, and the Company believes
that it supplies over 85% of its products to its customers on a sole source
basis for specific applications.
The Company believes that its recent acquisitions have broadened product
lines and increased its technological capabilities and will further enhance its
relationships with its customers and expand its preferred supplier status. In
addition, because many of the Company's customers have instituted programs for
evaluating and rating suppliers, the Company believes that its relationship with
these customers will be enhanced. The programs, which test quality, cost control
and reliability of delivery among other factors, are used by the Company's
customers to determine who will be considered for new business. As testimony to
its customer satisfaction record, the Company has received numerous preferred
supplier awards from its leading customers, including Aircraft Braking Systems,
BFGoodrich Aerospace, Dana, Caterpillar and John Deere.
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The Company's sales to Aircraft Braking Systems represented approximately
10.8%, of the Company's consolidated net sales in the first nine months of 1996,
and approximately 13.8%, of the Company's consolidated net sales in 1995. In
addition, the Company's top five customers accounted for approximately 40.3% of
the Company's consolidated net sales in the first nine months of 1996 and
approximately 40.9% of the Company's consolidated net sales in 1995. Although
the Company does have long-term contracts with several of its significant
customers, these contracts do not include minimum purchase requirements and may
be terminated by the customers at any time. See "Risk Factors -- Reliance on
Significant Customers."
MARKETING AND SALES
The Company markets its friction products throughout the United States and
the world. In the United States, eight product managers have responsibility for
the sales and marketing of distinct Company friction product lines. The product
managers operate from the Company's facilities in Ohio. The product managers and
sales force work directly with the Company's engineers who provide the technical
expertise necessary for the development and design of new products and for the
improvement of the performance of existing products. In addition, the Company's
friction products for the replacement market are sold through domestic
distributors.
International sales for the Company's friction products are directed from
the Company's facilities in Canada and Italy and a sales office in the United
Kingdom. The Company has recently hired a Director of International Sales, who
is located in Ohio, and is primarily responsible for expanding the Company's
business in new international markets. The Company's international sales force
consists of six manufacturers' representatives and five distributors who
represent the Company's products in their respective countries throughout the
world.
The Company's marketing and sales of its precision engineered components
are directed by four product managers operating from the Company's facilities in
Ohio and Indiana. The Company markets its precision engineered components
throughout the world.
SUPPLIERS AND RAW MATERIALS
The principal raw materials used by the Company are copper powder,
cellulose, steel and iron powder. The Company believes that its relationships
with its suppliers are good. In an effort to ensure a continued source of supply
of the Company's raw materials at competitive prices, the Company concentrates
on developing relationships with its suppliers. In many instances, the Company
works in close consultation with its suppliers in the development on new
combinations of powder metal. Thus, although the Company has no long-term supply
agreements with any of its major suppliers, the Company has generally been able
to obtain sufficient supplies of these raw materials for its operations. See
"Risk Factors -- Supply and Price of Raw Materials."
COMPETITION
The industries in which the Company competes are highly competitive and
fragmented, with many small manufacturers and only a few manufacturers
generating sales in excess of $50 million. The larger competitors have financial
and other resources substantially greater than those of the Company. None of
these larger competitors competes with the Company in all of its product lines.
The Company believes that the principal competitive factors in the sale of its
friction products and precision engineered components are quality, engineering
expertise and technical capability, new product innovation, timely delivery and
service. The Company believes that it competes favorably with respect to each of
these factors.
The Company competes for new business principally at the beginning of the
development of new applications and the redesign of existing applications by its
customers. For example, new model development for the Company's aircraft braking
system customers generally begins two to five years prior to full scale
production of new braking systems. Product redesign initiatives by customers
typically involve long lead times as well. Although the Company has been
successful in
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the past in obtaining this new business, there can be no assurance that the
Company will continue to obtain such business in the future.
The Company also competes with manufacturers using different technologies.
The metallic aircraft braking systems for which the Company supplies friction
materials compete with a "carbon-carbon" braking system. Carbon-carbon braking
systems are significantly lighter than the metallic aircraft braking systems for
which the Company supplies friction materials, but are more expensive. The
carbon-carbon brakes are typically used on wide-body aircraft, such as the
Boeing 747 and military aircraft, where the advantages in reduced weight
justifies the additional expense. In addition, as the Company's core powder
metal technology improves, enabling its components to be substituted for wrought
steel or iron components, the Company also increasingly competes with companies
using forging, casting or stamping technologies. Powder metal components can
often be produced at a lower cost per unit than products manufactured with
forging, casting or stamping technologies due to the elimination of, or
substantial reduction in, secondary machining, lower material costs and the
virtual elimination of raw material waste. As a result, powder metal components
are increasingly being substituted for metal parts manufactured using more
traditional technologies. There can be no assurance that competition from these
technologies or others will not adversely affect the Company's operations in the
future. See "Risk Factors -- Competition."
GOVERNMENT REGULATION
The Company's sales to manufacturers of aircraft braking systems
represented approximately 21.5% of the Company's consolidated net sales in the
first nine months of 1996, and approximately 26.1% of the Company's consolidated
net sales in 1995. Each aircraft braking system, including the friction products
supplied by the Company, must meet stringent FAA criteria and testing
requirements. The Company has been able to meet these requirements in the past
and continuously reviews FAA compliance procedures to help insure continued and
future compliance.
Manufacturers such as the Company are subject to stringent environmental
standards imposed by federal, state, local and foreign environmental laws and
regulations. The Company is also subject to the federal Occupational Safety and
Health Act and similar foreign and state laws. The Company reviews its
procedures and policies for compliance with environmental and health and safety
laws and regulations and believes that it is in substantial compliance with all
such material laws and regulations applicable to its operations. The costs of
compliance with environmental, health and safety requirements have not been
material to the Company. See "Risk Factors -- Government Regulation."
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MANUFACTURING FACILITIES AND OTHER PROPERTIES
The Company's operations are conducted through the following manufacturing
facilities, all of which are owned by it, except as noted:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE PRINCIPAL FUNCTIONS
- ------------------------------- -------------- ---------------------------------------------
<S> <C> <C>
Akron, Ohio.................... 69,000 Manufacturing of metal components used in
friction products
Brook Park, Ohio............... 111,000 Manufacturing of friction products, Domestic
and International Sales, Research and
Development, and Administration
Cleveland, Ohio(1)............. 4,000 Principal executive offices
Medina, Ohio(2)................ 108,000 Manufacturing of friction products and powder
metal components, Sales, Marketing,
Research and Development, Customer Service
and Support, and Administration
Solon, Ohio(2)................. 58,000 Research and Development
Campbellsburg, Indiana......... 60,000 Manufacturing engineered components, Sales,
Marketing, Customer Service and Support,
and Administration
Concord, Ontario, Canada(3).... 15,000 Manufacturing of friction products,
Distribution and Warehousing
Orzinuovi, Italy(4)............ 75,000 Manufacturing of friction products,
International Sales and Marketing
<FN>
- ---------------
(1) Leased. The Company is party to an expense sharing arrangement under which
the Company shares the expenses of its corporate headquarters located in
Cleveland with a company owned by Mr. Weinberg. See "Certain
Transactions -- Other Transactions." In the fourth quarter of 1996, the
Company expects to move its principal executive offices to a different floor
in the same building.
(2) The Company has placed the Solon facility on the market for sale. The
Company does not anticipate incurring any material gain or loss as a result
of the sale. Following the completion of the sale, the Company anticipates
expanding its Medina facility to accommodate the consolidation of the Solon
facility. The additional space will be used for research and development and
for warehousing. See "Management's Discussion and Analysis of Financial
Condition and Results of Operation -- Liquidity and Capital Resources."
(3) Leased.
(4) The Company is expanding this facility by 22,000 square feet to accommodate
manufacturing equipment acquired in the acquisition of the friction products
assets of GKN.
</TABLE>
In June 1996, the Company closed its manufacturing facility located in
LaVergne, Tennessee that it acquired in the SKW acquisition and consolidated its
operations with existing Company facilities. The Company has placed the LaVergne
facility on the market for sale and does not anticipate incurring any material
gain or loss as a result of the sale.
The Company's Italian facility is subject to certain security interests
granted to its lenders.
The Company believes that substantially all of its property and equipment
is in good condition and that it has sufficient capacity to meet its current
operational needs. With the planned expansion of the Orzinuovi, Italy facility,
the Company believes that it will have sufficient capacity to accommodate its
needs through 1997.
EMPLOYEES
As of September 30, 1996, the Company had 919 employees, consisting of 124
management, supervisory and administrative personnel, 99 engineering, quality
control and laboratory personnel, 25 sales and marketing personnel and 671
manufacturing personnel.
Approximately 220 employees at the Company's Brook Park, Ohio plant are
covered under a collective bargaining agreement with the United International
Paperworkers Union expiring in
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October 2000; approximately 70 employees at the Company's Akron, Ohio facility
are covered under a collective bargaining agreement with the United Automobile
Workers expiring in July 1997; and approximately 130 employees at the Company's
Orzinuovi, Italy plant are represented by a national mechanics union under an
agreement that expired in June 1996 and by a local union under an agreement that
expires at the end of December 1996. Contract negotiations are ongoing between
the Italian national mechanics union and an Italian national industrial
association. The Company has experienced no strikes and believes its relations
with its employees and their unions to be good.
TRADEMARKS
Velvetouch(R), Feramic(R) and Fibertuff(R) are among the federally
registered trademarks of the Company. Velvetouch(R) is the Company's principal
trademark for use in the friction products aftermarket and is registered in 26
countries. In addition, the Company has a pending application with the United
States Patent and Trademark Office to register the trademark "Wellman Friction
Products." The Company also relies on common law, including the law of unfair
competition, to protect its trademarks and services. The Company is not aware of
any pending claims of infringement or other challenges to the Company's right to
use its trademarks.
LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the ordinary course
of business. In the Company's opinion, the outcome of these matters will not
have a material adverse effect on the Company's financial condition, liquidity
or results of operations.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
The directors, executive officers and significant employees of the Company
and their respective ages and positions held with the Company, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ------------------------------------------------------
<S> <C> <C>
Norman C. Harbert(1) 63 Chairman of the Board, Chief Executive Officer,
President and Director
Ronald E. Weinberg(1)(2) 55 Vice-Chairman of the Board, Treasurer and Director
Douglas D. Wilson 53 Executive Vice President
Jess F. Helsel 72 President -- Helsel, Inc.
Ronald E. Grambo 60 Executive Vice President -- S.K. Wellman Corp.
Thomas A. Gilbride 43 Vice President-Finance
Jeffrey H. Berlin 34 Vice President-Marketing and Corporate Development
Paul R. Bishop(2)(3) 53 Director
Byron S. Krantz(3) 61 Secretary and Director
Dan T. Moore, III(1) 56 Director
William J. O'Neill, Jr.(2) 63 Director
<FN>
- ---------------
(1) Member of the Nominating Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
</TABLE>
Norman C. Harbert has served as the Chairman of the Board, President, Chief
Executive Officer and Director of the Company since March 1989. Mr. Harbert has
over 38 years of manufacturing experience. From 1987 to 1988, Mr. Harbert was
Chairman, President and CEO of Maverick Tube Corporation, an oil drilling
equipment manufacturer, and from 1981 to 1986, he served as President and CEO of
Ajax Magnethermic Corporation, an international manufacturer of induction
heating and melting equipment. Prior to that time, Mr. Harbert served at
Reliance Electric Company for 22 years where, in 1980, his last position was as
General Manager, Rotating Products Group, with primary responsibility for a
division with annual sales of $250 million. Mr. Harbert is a director of New
West Eyeworks, Inc., a retail eyewear chain that operates throughout the western
United States, Second Bancorp Inc., a bank holding company, and Caliber System,
Inc., a transportation company (formerly known as Roadway Services, Inc.).
Ronald E. Weinberg has served as Vice-Chairman of the Board, Treasurer and
Director of the Company since March 1989. Mr. Weinberg has over 27 years of
experience in the ownership and management of operating companies, including a
number of manufacturing companies. In 1988, Mr. Weinberg led an investor group
in the acquisition of New West Eyeworks, Inc., a retail eyewear chain that
operates throughout the western United States, and Mr. Weinberg has served as
Chairman of the Board of that company since that date. In 1986, Mr. Weinberg led
an investor group in the acquisition of SunMedia Corp., which publishes a chain
of weekly newspapers in the Cleveland and Milwaukee markets and operates a
direct mail business, and Mr. Weinberg has served as Chairman of the Board of
that company since that date.
Douglas D. Wilson has served as the Executive Vice President of the Company
since September 1996, the President of FPC since January 1992 and the President
of SKW since June 1995. From November 1990 to December 1991, he was the
Executive Vice President of FPC. Mr. Wilson was President and Chief Executive
Officer of Cleveland Gear Company, a gear manufacturing business, from 1986 to
1990. Mr. Wilson served at Transamerica Delaval Inc., a manufacturing company,
for sixteen years as the General Manager of three different businesses: Gems
Sensors Division, Delroyd Gear Division and Adel Aerospace Division. Mr. Wilson
has been the Chairman of the
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Industry Advisory Group of the Center for Advanced Friction Studies at the
University of Illinois at Carbondale since its formation in April 1996.
Jess F. Helsel has served as President of Helco, Inc. (the predecessor to
Helsel) since 1974 and has continued in that capacity since the sale of Helsel's
assets to the Company in June 1994. Mr. Helsel has 45 years of experience in the
powder metal industry.
Ronald E. Grambo has served as the Executive Vice President of SKW since
June 1995. Mr. Grambo joined SKW in 1958 and served as the President of S.K.
Wellman Ltd., Inc. (the predecessor to SKW) from 1985 until its sale to the
Company in June 1995.
Thomas A. Gilbride has served as Vice President-Finance of the Company
since January 1993. Between March 1989 and January 1993, Mr. Gilbride was
employed by the Company in various financial and administrative capacities.
Jeffrey H. Berlin has served as the Vice President-Marketing and Corporate
Development of the Company since July 1994. From August 1991 to July 1994, Mr.
Berlin served the Company as its Director of Corporate Development. From 1989 to
1991, Mr. Berlin helped develop an acquisition program for American Consumer
Products, Inc., a manufacturer of consumer hardware products.
Paul R. Bishop has served as a Director since May 1993. Mr. Bishop has
served as the Chairman, President and Chief Executive Officer of H-P Products,
Inc., a manufacturer of central vacuum systems and fabricated tubing and
fittings, since 1977. Mr. Bishop has been a director of Belden & Blake
Corporation, an oil and gas drilling company, since April 1994 and a director of
Key Bank National Association, a bank holding company, since July 1992.
Byron S. Krantz has been the Secretary and a Director since March 1989. Mr.
Krantz has been a partner in the law firm of Kohrman Jackson & Krantz P.L.L.
since its formation in 1984.
Dan T. Moore, III has served as a Director since March 1989. Mr. Moore has
been the founder, owner and President of Dan T. Moore Company, Inc. since 1969,
Soundwich, Inc. since 1988, Flow Polymers, Inc. since 1985 and Perfect
Impression, Inc. since July 1994, all of which are manufacturing companies. He
has been a director of Invacare Corporation, a manufacturer of health care
equipment, since 1979.
William J. O'Neill, Jr. has served as a Director since March 1989. Mr.
O'Neill has been the President and Chief Executive Officer of Clanco Management
Corp., an O'Neill family office, since 1983. He has also served as the Managing
Partner of Clanco Partners I since March 1989.
COMPOSITION OF BOARD OF DIRECTORS
The Company's By-laws provide that the stockholders of the Company may
determine the authorized number of directors. Currently, the Company has six
directors authorized. Directors hold office for a term of one year or until
their successors have been duly elected and qualified. Under an existing
shareholders' agreement, certain shareholders have the right to designate one
member of the Board of Directors of the Company. See "Principal
Stockholders -- Stockholder Agreements."
The Company's executive officers serve at the discretion of the Board of
Directors, although the Company or its subsidiaries have entered into employment
agreements with Messrs. Harbert, Weinberg, Helsel and Grambo. See "Employment
Agreements."
Certain transactions among the Company and its directors or entities
affiliated with certain directors of the Company are described below in
"Principal Stockholders -- Stockholders' Agreements" and "Certain Transactions."
BOARD COMMITTEES
The Nominating Committee of the Board of directors was formed in September
1996 to recommend qualified candidates for election as directors of the Company.
The Audit Committee of
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the Board of Directors was formed in September 1996 to review the accounting and
reporting principles, policies and practices followed by the Company and the
adequacy of the Company's internal, financial and operating controls. The
Compensation Committee of the Board of Directors was formed in September 1996 to
review and make recommendations regarding the compensation of executive officers
of the Company and to review general policy relating to the compensation and
benefits of employees of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the Compensation Committee in September 1996, the
Board of Directors made all determinations with respect to executive officer
compensation. The Compensation Committee consists of Messrs. Bishop and Krantz.
Mr. Bishop was not at any time during 1995, or at any other time, an officer or
employee of the Company. Mr. Krantz is Secretary of the Company and a partner in
the law firm of Kohrman Jackson & Krantz P.L.L., which provides legal services
to the Company. See "Certain Transactions -- Other Transactions."
DIRECTOR COMPENSATION
After the Offering, the Company will pay each director, other than Messrs.
Harbert, Weinberg or Krantz, an annual fee of $5,000 plus $1,000 per board
meeting attended by each such director. The Company will also reimburse all
directors for all expenses incurred in connection with their services as
directors. No additional consideration is paid to the directors for committee
participation.
EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded or paid by the
Company during 1995 to its President and Chief Executive Officer and the
Company's four other most highly compensated officers and key employees
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS(1) COMPENSATION COMPENSATION
- ----------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Norman C. Harbert........................ $340,000 $350,000 $ 11,400(2) $ 12,500(3)
Chairman of the Board, President and
Chief Executive Officer
Ronald E. Weinberg....................... 231,000 350,000 13,400(4) --
Vice-Chairman of the Board and Treasurer
Douglas D. Wilson........................ 159,000 100,000 -- --
Executive Vice President
Jess F. Helsel........................... 150,000 910,000(5) 1,800(6) --
President -- Helsel
Ronald E. Grambo......................... 138,000 75,000 4,900(7) --
Executive Vice President -- SKW
</TABLE>
(footnotes on the following page)
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<PAGE> 67
- ---------------
(1) Bonuses earned in 1995 were paid in 1996.
(2) Includes $9,200 contributed by FPC to FPC's profit sharing plan on behalf of
Mr. Harbert and $2,200 in medical reimbursements.
(3) Represents the premium paid by the Company for a term life insurance policy
of which Mr. Harbert is the insured and his wife is the beneficiary.
(4) Includes $9,200 contributed by FPC to FPC's profit sharing plan on behalf of
Mr. Weinberg and $4,200 in medical reimbursements.
(5) Upon the Company's acquisition of Helsel, the Company entered into an
Employment Agreement with Mr. Helsel. His bonus is determined in accordance
with an earnings formula set forth in that Employment Agreement. See
"Employment Agreements."
(6) The amount listed was contributed by Helsel to Helsel's employee's savings
and investment plan, as a matching contribution relating to before-tax
contributions made by Mr. Helsel under such plan.
(7) The amount listed was contributed by SKW to SKW's retirement savings and
profit sharing plan, as a matching contribution relating to before-tax
contributions made by Mr. Grambo under such plan.
None of the Named Executive Officers received any perquisites or other
personal benefits, securities or property that exceeded the lesser of $50,000 or
10% of the salary and bonus for such Named Executive Officer during 1995.
BENEFIT PLANS
FPC Profit Sharing Plan. FPC maintains a tax-qualified profit sharing plan,
including features under section 401(k) of the Internal Revenue Code, that
covers the majority of its employees. The plan generally provides for voluntary
employee pre-tax contributions ranging from 1% to 10% and a discretionary FPC
contribution allocated to each employee based on compensation.
SKW Retirement Savings and Profit Sharing Plan. SKW also sponsors a
tax-qualified defined contribution plan, including features under section 401(k)
of the Internal Revenue Code, that covers the majority of its non-union U.S.
employees. The plan generally provides for voluntary employee pre-tax
contributions ranging from 1% to 15%, a 10% matching SKW contribution (up to a
maximum of 6/10 of 1% of an employee's compensation), and a discretionary SKW
contribution allocated to each employee based on compensation.
Helsel Employee's Savings and Investment Plan. Helsel maintains a
tax-qualified savings and investment plan, including features under section
401(k) of the Internal Revenue Code, that covers substantially all of its
employees. The plan generally provides for voluntary employee pre-tax
contributions ranging from 1% to 16%, a 50% matching contribution by Helsel (up
to a maximum of 2% of an employee's compensation), and a discretionary Helsel
contribution.
Helsel Employee's Retirement Plan. Helsel sponsors a tax-qualified defined
contribution plan that covers substantially all of its employees. The retirement
plan provides eligible employees with an annual Helsel contribution equal to 7%
of their compensation.
FPC Pension Plan. FPC sponsors a tax-qualified non-contributory, defined
benefit pension plan covering substantially all of its and Logan's employees.
The plan provides participating employees, hired on and after January 1, 1989,
with retirement benefits at normal retirement age (as defined in the plan) based
on specified formulas. In no event will the amount of retirement income
determined under these formulas and payable at the participant's retirement date
be greater than $90,000. In addition, federal law defines the maximum amount of
annual compensation that may be taken into account in calculating the amount of
the pension benefit as follows: 1989 -- $200,000; 1990 -- $209,200;
1991 -- $222,220; 1992 -- $228,860; 1993 -- $235,840; 1994 and future years --
$150,000 (indexed for inflation). The estimated annual benefit payable at normal
retirement age for each Named Executive Officer who is eligible to participate
in the FPC pension plan is as follows: Mr. Harbert -- $62,600; Mr.
Weinberg -- $77,200; and Mr. Wilson -- $67,500.
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EMPLOYMENT AGREEMENTS
Pursuant to Employment Agreements, each dated as of November 1, 1996, and
Wage Continuation Agreements, each dated June 30, 1995, as amended, Mr. Harbert
has agreed to serve as Chairman of the Board, President and Chief Executive
Officer of Hawk, and Mr. Weinberg has agreed to serve as Vice-Chairman of the
Board and Treasurer through December 2004. Mr. Harbert receives an annual base
salary of $395,000. Mr. Weinberg receives an annual base salary of $295,000.
Each receives an annual bonus based on the incentive compensation programs in
effect for the Company's subsidiaries. The base salary may be adjusted by the
Compensation Committee of the Board. Neither Mr. Harbert nor Mr. Weinberg may
engage in any competitive business while he is employed by the Company and for a
period of two years thereafter.
Mr. Harbert is required to devote substantially all of his business time
and effort to the Company but may serve on the boards of other companies and
charitable organizations. Mr. Weinberg devotes a substantial amount of his time
and effort to the business of the Company, but under the terms of his employment
agreement, he is not required to devote all of his time and efforts to the
business of the Company. Mr. Weinberg also serves as Chairman of the Board of
New West Eyeworks, Inc. and Chairman of the Board of SunMedia Corp. and devotes
a significant amount of his time and efforts to the business of those companies.
If either Mr. Harbert or Mr. Weinberg dies during the term of their respective
employment agreements or is no longer in the active employ of the Company solely
because of a mental or physical disability, the Company will pay 50% of his
annual base salary, but in no event less than 50% of his average salary in the
preceding two years before his death or disability, to his spouse annually until
the date of her death. If either Mr. Harbert or Mr. Weinberg is not married at
the time of his death or disability, the Company will pay, for a period of two
years, his base salary at the time of his death to his estate or beneficiaries.
If either becomes mentally or physically disabled during the term, the Company
will pay his annual base salary, at the same rate preceding the disability, for
the remainder of the term of the employment agreement. In the event of the death
or disability of either Mr. Harbert or Mr. Weinberg during the term, the Company
will also pay any of his bonus earned but not paid.
Upon the Company's acquisition of Helsel, the Company entered into an
Employment Agreement and Consulting Agreement with Jess F. Helsel, each
effective July 1, 1994. Mr. Helsel has agreed to serve as President of Helsel
through the expiration of the term of the employment agreement in June 1997. Mr.
Helsel receives an annual base salary of $150,000 and a bonus equal to 25% of
the amount by which Helsel's earnings before interest, income taxes,
depreciation, amortization, certain corporate charges and payment of Mr.
Helsel's bonus for a calendar year in the term exceed $1.4 million. If Mr.
Helsel becomes mentally or physically disabled during the term, the Company will
pay his annual base salary and bonus for the remainder of the term. Under the
terms of the Consulting Agreement, the Company will pay Mr. Helsel $150,000 for
each of the first two years after the expiration of the term of the employment
agreement and $75,000 for each of the third and fourth years after the
expiration of such term. Mr. Helsel may not engage in any competitive business
while he is employed by the Company and for a period of four years after the
expiration of the term of his employment agreement.
SKW is party to a Change of Ownership Employment Agreement with Ronald E.
Grambo, dated February 1, 1995. The terms of Mr. Grambo's employment agreement
became effective upon the acquisition of SKW by the Company on June 30, 1995.
The agreement terminates on June 30, 1998. Under the terms of the employment
agreement, Mr. Grambo is entitled to receive an annual base salary of at least
$140,000, and increases in the annual base salary substantially consistent with
other peer executives of SKW and its affiliated companies. In addition, Mr.
Grambo is entitled to participate in SKW's bonus program, as such program is
established by the board of directors of SKW. The annual bonus awarded to Mr.
Grambo may not be below $25,000. If Mr. Grambo dies or becomes disabled during
the term of the agreement, SKW will pay the sum of Mr. Grambo's annual base
salary through June 30, 1998 and any accrued, but unpaid, vacation pay. If Mr.
Grambo is dismissed "for cause," as defined in the agreement, the agreement
automatically terminates,
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without liability to SKW other than for unpaid annual base salary through the
termination date. Mr. Grambo may determine to terminate the agreement for "good
reason," such as an action by SKW that results in a diminution in his position,
authority, duties or responsibilities and as further defined in the agreement.
If the agreement is terminated for "good reason," SKW will pay the sum of Mr.
Grambo's annual base salary through June 30, 1998 and any accrued, but unpaid,
vacation pay and will continue to provide insurance and other benefits to Mr.
Grambo and his family through June 30, 1998. Mr. Grambo may not compete with SKW
for a one-year period after his employment agreement is terminated.
Upon the acquisition of Hutchinson, the Company expects to enter into an
employment agreement with Timothy J. Houghton, President and CEO and a principal
stockholder of Hutchinson. Under the terms of the proposed three year employment
agreement, Mr. Houghton will receive an annual base salary of $160,000 and a
bonus determined in accordance with a specified formula based on Hutchinson's
EBITDA growth during 1997, 1998 and 1999.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus,
information regarding the beneficial ownership of the Company's Class A Common
Stock and Class B Non-Voting Common Stock, $0.01 par value per share ("Class B
Common Stock," and together with the Class A Common Stock, the "Common Stock"),
by (1) each stockholder known by the Company to be the beneficial owner of more
than five percent of each class of the Company's outstanding shares of Common
Stock, (2) each director or executive officer who beneficially owns any shares
of Common Stock, and (3) all directors and executive officers of the Company as
a group. Unless otherwise indicated, the Company believes that all persons named
in the table have sole investment and voting power over the shares of Common
Stock owned. Unless otherwise specified, the address of all the stockholders is
the address of the Company set forth in this Prospectus.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK(2) COMMON STOCK(3)
--------------------- ---------------------
NAME OF BENEFICIAL OWNER (1) NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------ --------- ------- ------- -------
<S> <C> <C> <C> <C>
William J. O'Neill, Jr.(4)...................... 463,492 32.1% -- --
Clanco Partners I(5)............................ 461,757 32.0 -- --
Harbert Family Limited Partnership(6)........... 342,905 23.7 -- --
Norman C. Harbert(7)............................ 381,006 26.4 -- --
Weinberg Family Limited Partnership(8).......... 333,800 23.1 -- --
Ronald E. Weinberg(9)........................... 370,889 25.7 -- --
Connecticut General Life Insurance Company(10).. -- -- 211,514 66.7 %
CIGNA Mezzanine Partners III, L.P.(11).......... -- -- 105,456 33.3
Krantz Family Limited Partnership(12)........... 75,505 5.2 -- --
Byron S. Krantz(13)............................. 83,894 5.8 -- --
Jeffrey H. Berlin............................... 80,417 5.6 -- --
Douglas D. Wilson............................... 16,978 1.2 -- --
Thomas A. Gilbride.............................. 14,733 1.0 -- --
Dan T. Moore, III............................... 3,161 * -- --
Jess F. Helsel.................................. 1,735 * -- --
Paul R. Bishop.................................. 1,735 * -- --
All directors and executive officers as a group
(11 individuals).............................. 1,418,040 98.2% -- --
</TABLE>
(footnotes on the following page)
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<PAGE> 70
- ---------------
* Less than 1.0%.
(1) All listed stockholders owning shares of Class A Common Stock are parties
to agreements governing the voting and disposition of all Class A Common
Stock held by such stockholders. Each such party disclaims beneficial
ownership of the shares of Class A Common Stock owned by each other party.
See "Stockholders' Agreements."
(2) The Class A Common Stock is the only voting security of the Company. The
Class B Common Stock (as defined) is not entitled to vote. See "Description
of Capital Stock."
(3) The shares of Class B Common Stock are issuable upon the exercise of
warrants and may be converted on a one-for-one basis into Class A Common
Stock under certain circumstances.
(4) Includes 461,757 shares held by Clanco. Mr. O'Neill is the managing partner
of Clanco Partners I, an Ohio general partnership ("Clanco"), and as a
result has voting and dispositive power over the shares held by Clanco.
(5) Clanco is an Ohio general partnership whose address is c/o William J.
O'Neill, Jr., 30195 Chagrin Boulevard, Suite 310, Pepper Pike, Ohio 44124.
Its managing partner is William J. O'Neill, Jr.
(6) Harbert Family Limited Partnership is an Ohio limited partnership. Its
managing general partner is Norman C. Harbert.
(7) Includes 342,905 shares held by the Harbert Family Limited Partnership. Mr.
Harbert is the managing general partner of the Harbert Family Limited
Partnership and as a result has voting and dispositive power over the
shares held by the Harbert Family Limited Partnership.
(8) Weinberg Family Limited Partnership is an Ohio limited partnership. Its
managing general partner is Ronald E. Weinberg.
(9) Includes 333,800 shares held by the Weinberg Family Limited Partnership.
Mr. Weinberg is the managing general partner of the Weinberg Family Limited
Partnership and as a result has voting and dispositive power over the
shares held by the Weinberg Family Limited Partnership.
(10) Connecticut General Life Insurance Company is a Connecticut corporation
whose address is c/o CIGNA Investments, Inc., 900 Cottage Grove, Hartford,
Connecticut 06152-2307.
(11) CIGNA Mezzanine Partners III, L.P. is a Delaware limited partnership whose
address is c/o CIGNA Investments, Inc., 900 Cottage Grove, Hartford,
Connecticut 06152-2307.
(12) Krantz Family Limited Partnership is an Ohio limited partnership whose
address is c/o Byron S. Krantz, One Cleveland Center, 20th Floor,
Cleveland, Ohio 44114. Its managing general partner is Byron S. Krantz.
(13) Includes 75,505 shares held by the Krantz Family Limited Partnership. Mr.
Krantz is the managing general partner of the Krantz Family Limited
Partnership and as a result has voting and dispositive power over the
shares held by the Krantz Family Limited Partnership.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (1) 2,200,000
authorized shares of Class A Common Stock, 1,443,976 shares of which are
outstanding, (2) 375,000 authorized shares of Class B Common Stock, none of
which are outstanding, and (3) 500,000 authorized shares of Serial Preferred
Stock, $0.01 par value per share ("Preferred Stock"), of which 1,375 shares of
Series A Preferred Stock, 702 shares of redeemable 9% cumulative preferred
stock, par value $0.01 per share, Series B (the "Series B Preferred Stock") and
1,188.9 shares of Series C Preferred Stock are outstanding. The following
summary description of the capital stock of the Company does not purport to be
complete and is qualified in its entirety by reference to the Amended and
Restated Certificate of Incorporation of the Company, as amended (the
"Certificate"), and the By-laws of the Company, which are available as described
under "Available Information."
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Preferred Stock. The Board of Directors has the authority (without action
by the stockholders) to issue the authorized and unissued Preferred Stock in one
or more additional series, to designate the number of shares constituting any
such series, and to fix, by resolution, the preferences, rights, privileges,
restrictions and other rights thereof, including voting rights, liquidation
preferences, dividend rights and conversion and redemption rights of such
series. The Company does not currently intend to issue any additional shares of
Preferred Stock.
Concurrently with the closing of the Offering and pursuant to the Hawk
Controlling Stockholder Merger, the Company canceled 1,250 outstanding shares of
Series A Preferred Stock and issued 1,188.9 shares of Series C Preferred Stock.
Once cancelled, those shares of Series A Preferred Stock were permanently
retired. See "Certain Transactions -- Transactions Concurrent with the
Offering."
The following is a description of the terms of the Series A, Series B and
Series C Preferred Stock:
- The shares of Series A, Series B and Series C Preferred Stock have
identical powers, preferences, rights, qualifications, limitations and
restrictions except for dividend rights. Dividends on the Series A,
Series B and Series C Preferred Stock are cumulative and accrue at the
rate of 10% per annum, payable quarterly, for the Series A and Series C
Preferred Stock and 9% per annum, payable quarterly, for the Series B
Preferred Stock.
- The holders of the Series A, Series B and Series C Preferred Stock have
no voting rights unless: (1) an amendment to the Company's Certificate of
Incorporation is proposed that would change the preferences of the Series
A, Series B or Series C Preferred Stock or cause the issuance of
Preferred Stock with attributes that are senior to the Series A, Series B
or Series C Preferred Stock or increase the number of shares of Class A
Common Stock or Class B Common Stock, in which event they would have the
right, voting separately as a class, to approve the amendment; or (2) the
Company fails to declare and pay in cash the full amount of dividends
payable on the Series A, Series B or Series C Preferred Stock in any six
consecutive quarters, in which event the holders of either or both series
of Preferred Stock on which such dividends have not been paid would have
the right, subject to certain conditions and voting separately as a
class, to elect one director to the Board of Directors until all
dividends in default on such series of Preferred Stock have been paid in
full and dividends for the then current dividend period have been
declared and funds therefor set apart.
- The Company may, at any time and from time to time as may be determined
by the Board of Directors, redeem all but not less than all, of the
Series A, Series B and Series C Preferred Stock, provided the Company is
not in default in the payment of any dividends on such series of
Preferred Stock then outstanding, for $1,000 per share plus all accrued
and unpaid dividends to the date of redemption (or, in the case of the
Series A and Series C Preferred Stock, for a new debt instrument with
certain specified terms).
- Each share of Series A, Series B and Series C Preferred Stock is entitled
to a liquidation preference equal to $1,000 per share plus any accrued
and unpaid dividends thereon after payment of all debts and other
liabilities of the Company and before any payment or distribution is made
on the Common Stock (or any other subordinate class or series of stock of
the Company). The holders of the Series A, Series B and Series C
Preferred Stock have no preemptive rights to purchase or subscribe for
any stock or other securities and there are no conversion rights or
sinking fund provisions with respect to such stock. The Series A, Series
B and Series C Preferred Stock are not listed or quoted on any stock
exchange or market.
Common Stock. The powers, preferences and rights of the Class A Common
Stock, and the qualifications, limitations and restrictions thereof, are in all
respects identical to those of the Class B
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<PAGE> 72
Common Stock, except for voting and conversion rights. The Class B Common Stock
was issued to comply with certain regulatory requirements imposed upon
stockholders that are affiliates of insurance institutions.
Each holder of Class A Common Stock is entitled to one vote per share owned
of record on the applicable record date on all matters presented to a vote of
the stockholders, including the election of directors. Except as may otherwise
required by the Delaware General Corporation Law and the Certificate, the
holders of Class B Common Stock are not entitled to vote on any matters to be
voted on by the stockholders of the Company.
The Class B Common Stock is convertible into Class A Common Stock on a
one-for-one basis (1) automatically upon the closing of an underwritten public
offering pursuant to an effective registration statement under the Securities
Act, and (2) at the request of a third party transferee under certain
circumstances. In case of any merger or consolidation of the Company with any
other entity as a result of which the holders of Class A Common Stock are
entitled to receive cash, property, stock or other securities with respect to or
in exchange for their Class A Common Stock, or in case of any sale or conveyance
of all or substantially all of the assets of the Company, the holders of each
share of Class B Common Stock have the right thereafter to convert such share of
Class B Common Stock into the kind and amount of cash, property, stock or other
securities receivable upon such consolidation, merger, sale or conveyance by a
holder of one share of Class A Common Stock.
The holders of the Class A and Class B Common Stock have no preemptive
rights to purchase or subscribe for any stock or other securities and there are
no other conversion rights or redemption or sinking fund provisions with respect
to such stock.
STOCKHOLDER AGREEMENTS
The stockholders of the Company have entered into the following stockholder
agreements:
Shareholders' Agreement with CIGNA. Connecticut General Life Insurance
Company and CIGNA Mezzanine Partners III, L.P. (together, "CIGNA") entered into
a Shareholders' Agreement with the Company, Old Hawk, Mr. Harbert, Mr. Weinberg
and Mr. Krantz (collectively, the "Hawk Shareholders") in June 1995 in
connection with CIGNA's purchase of the Senior Subordinated Notes and an
aggregate of 316,970 warrants to purchase Class B Common Stock from the Company.
See "Description of Certain Indebtedness -- Senior Subordinated Notes." Under
this agreement, the Company has the option to repurchase the warrants and CIGNA
has the option to put the warrants back to the Company at prices based on a fair
market value formula. The Company's repurchase right commences June 30, 2001 and
CIGNA's put right commences June 30, 2000. The repurchase and put rights
terminate automatically upon an initial public offering by the Company. In the
event that any of the Hawk Shareholders desires to sell any or all of its or his
shares of Class A Common Stock (other than to certain eligible persons), the
agreement contains a "tag-along" provision giving CIGNA the right to include a
proportionate amount of the warrants or capital stock of the Company issued upon
exercise of the warrants in any such sale. The agreement also provides for a
"drag-along" provision giving CIGNA the right to sell all the warrants or
capital stock of the Company issued upon the exercise of the warrants in any
sale by the Hawk Shareholders of all their shares of Class A Common Stock to any
person or entity that is not a subsidiary or affiliate of the Company.
In addition, the agreement grants certain registration rights to the
holders of shares of Common Stock or other capital stock of the Company issued
upon exercise of the warrants (collectively, "Registrable Shares"). The holders
of at least 50% of the Registrable Shares have the right to demand registration
of all or any part of their Registrable Shares under the Securities Act. In
addition, in the event that the Company at any time proposes to register any of
its securities under the Securities Act (other than certain registrations of
shares offered solely to the Company's
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employees or existing stockholders), the holders of Registrable Shares will have
the right, subject to certain exceptions and limitations, to have the
Registrable Shares then owned by them included in such registration. The Company
has agreed that, in the event of any registration of Registrable Shares in
accordance with the provisions of the agreement, it will indemnify the holders
thereof, and certain related persons, against liabilities incurred in connection
with such registration, including liabilities arising under the Securities Act.
Registration expenses of the selling stockholders (other than underwriting or
any other fees, discounts or commissions incurred in the sale of the Registrable
Securities, certain transfer taxes and the fees and expenses of any accountants
or other representatives retained by such stockholders) will be paid by the
Company.
Shareholders' Agreement with Clanco and Its Affiliates. In June 1995, the
Company entered into a Shareholders' Agreement with Clanco, Clanco Partners III,
William J. O'Neill, Jr., the William J. O'Neill, Sr. Irrevocable Trust A, the
Dorothy K. O'Neill Revocable Trust, Martha B. Horsburgh and Sheldon M. Sager
(collectively, the "Clanco Shareholders"), and the Hawk Shareholders. The
agreement, as amended, imposes restrictions on the transfer by the Clanco
Shareholders of their shares of Class A Common Stock and Series A, Series B and
Series C Preferred Stock and grants to the Hawk Shareholders a right of first
refusal in the event that any of the Clanco Shareholders desires to sell any or
all of his, her or its shares of such stock to a bona fide offeror (other than
another Clanco Shareholder). In the event that the Hawk Shareholders desire to
sell any or all of their shares of Class A Common Stock or Series A, Series B or
Series C Preferred Stock in an arm's-length transaction, the agreement also
contains a "tag-along" provision that gives the Hawk Shareholders the right,
subject to certain exceptions and limitations, to demand that the Clanco
Shareholders sell a proportionate amount of their shares of such stock in that
sale. Pursuant to the agreement, the Clanco Shareholders have the right to
designate one member of the Board of Directors of the Company and the Hawk
Shareholders are required to vote their shares of Class A Common Stock in favor
of the election of that designee.
Stockholder's Agreement with Dan T. Moore, III. The Hawk Shareholders and
Dan T. Moore, III, a Director of the Company, are parties to a Stockholder's
Agreement, dated June 6, 1991, as amended, that (1) grants to the Hawk
Shareholders a right of first refusal in the event that Mr. Moore desires to
sell any or all of his shares of Class A Common Stock to a bona fide offeror and
(2) grants to Mr. Moore the option to put all of his shares to the Company at a
price based on a fair market value formula. The put right commences June 1, 1997
and terminates on May 31, 1999, is subordinated to the New Revolving Credit
Facility, the Notes and the Senior Subordinated Notes and is guaranteed by
Messrs. Harbert, Weinberg and Krantz. The agreement will terminate upon the
earlier of the purchase of all shares of Class A Common Stock owned by Mr. Moore
by any or all of the Hawk Shareholders or the consummation of an initial public
offering by the Company.
Shareholders' Agreement with All Other Stockholders. In June 1995, the
Company entered into a Shareholders' Agreement with Paul R. Bishop, Jeffrey H.
Berlin, Barry J. Feld, Thomas A. Gilbride, Jess F. Helsel, Fredric M. Roberts,
Gary Siciliano and Douglas D. Wilson (collectively, the "Other Shareholders")
and the Hawk Shareholders. The agreement, as amended, provides for, among other
things, restrictions on the transfer by the Other Shareholders of their shares
of Class A Common Stock and Series A, Series B and Series C Preferred Stock, a
right of first offer in favor of the Hawk Shareholders in the event that any of
the Other Shareholders desires to sell any or all of his shares of such stock,
and the mandatory purchase by the Hawk Shareholders of all of the shares of an
Other Shareholder upon the death, disability, retirement or termination of
employment of such Other Shareholder at the applicable price set forth therein.
In the event that the Hawk Shareholders desire to sell any or all of their
shares of Class A Common Stock or Series A, Series B or Series C Preferred Stock
in an arm's-length transaction, the agreement contains a "tag-along" provision
that gives the Hawk Shareholders the right to demand that the Other Shareholders
sell a proportionate amount of their shares of such stock in that sale. The
agreement also contains an irrevocable proxy and power of attorney granted by
each of the Other Shareholders to Mr. Harbert, Mr. Weinberg and Mr. Krantz, or
any of them, with respect to the voting of such Other Shareholder's shares of
Class A
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Common Stock. The agreement will terminate upon the sooner to occur of the
purchase by any of the Hawk Shareholders of all shares of Class A Common Stock
owned by the Other Shareholders, or the sale by the Hawk Shareholders of all of
their respective shares of Class A Common Stock.
Stockholders' Voting Agreement. Messrs. Harbert, Weinberg and Krantz have
also entered into a Stockholders' Voting Agreement, effective as of November 27,
1996, that provides that to the extent that any of them owns any shares of
voting stock of the Company, including any shares of Class A Common Stock, they
will vote those shares (1) in favor of electing Messrs. Harbert, Weinberg and
Krantz (so long as each desires to serve) or their respective designees to Board
of Directors of the Company, (2) in favor of electing such other directors to
Board of Directors as a majority of Messrs. Harbert, Weinberg and Krantz shall
direct and (3) with respect to such matters as are submitted to a vote of the
stockholders of the Company as a majority of Messrs. Harbert, Weinberg and
Krantz shall direct. If any of Messrs. Harbert, Weinberg or Krantz sells more
than 50% of the Class A Common Stock beneficially owned by such individual on
the date of the Offering, the obligation of the other parties to continue to
vote for the selling stockholder as a Director will terminate.
CERTAIN TRANSACTIONS
TRANSACTIONS CONCURRENT WITH THE OFFERING
Concurrently with the closing of the Offering, the Company completed the
Hawk Controlling Stockholder Merger, thereby merging Old Hawk with and into the
Company in a tax-free reorganization under Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended. Old Hawk had no material assets other than the
capital stock of the Company. Prior to the merger, Old Hawk owned 33.9% of the
outstanding shares of Class A Common Stock of the Company and 1,250 shares of
the Series A Preferred Stock with a liquidation value of $1.25 million, plus
accrued and unpaid dividends. Old Hawk's only liabilities were its debts to the
Company and Old Hawk's stockholders in the aggregate amount of approximately
$870,000. As a result of the merger, the Series A Preferred Stock owned by Old
Hawk was canceled, and the Company issued its Series C Preferred Stock in the
aggregate amount of approximately $1.19 million ($1.25 million less $61,000),
which was equal to the liquidation value of the Series A Preferred Stock owned
by Old Hawk less $61,000 of indebtedness of Old Hawk to the Company, which was
cancelled in the merger. In the merger, the Company also canceled the shares of
Class A Common Stock of the Company owned by Old Hawk and then reissued the same
amount of shares of Class A Common Stock pro rata to the Old Hawk stockholders.
The common stockholders of Old Hawk included: Norman C. Harbert, Chairman of the
Board, President, Chief Executive Officer and a stockholder of the Company who
owned 44.2% of Old Hawk; Ronald E. Weinberg, Vice-Chairman of the Board,
Treasurer and a stockholder of the Company who owned 42.1%; Byron S. Krantz, a
Director, Secretary and a stockholder of the Company who owned 9.7%; Thomas A.
Gilbride, Vice President-Finance and a stockholder of the Company who owned
1.9%; and Dan T. Moore, III, a Director of the Company, Douglas D. Wilson,
Executive Vice President and a shareholder of the Company, and Clanco, each of
whom owned less than 1.0%. William J. O'Neill, Jr., a Director and a stockholder
of the Company, is the managing partner of Clanco.
Old Hawk's liabilities included $61,000 of indebtedness to the Company
under a note that bore interest at the prime rate and was due on demand, and
approximately $809,000 of indebtedness to certain of its stockholders under a
note that bore interest at the prime rate plus 1.75% per annum and was due March
14, 1994. Upon the effectiveness of the Hawk Controlling Stockholder Merger, the
$61,000 indebtedness of Old Hawk to the Company was canceled. Of the $809,000
aggregate principal amount of indebtedness to stockholders, approximately
$364,000 was owed to Mr. Harbert for his portion of the note, $347,000 was owed
to Mr. Weinberg for his portion and $81,000 was owed to Mr. Krantz for his
portion. Upon the effectiveness of the Hawk Controlling Stockholder Merger, the
$809,000 aggregate principal amount of indebtedness was converted into Series C
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Preferred Stock with a liquidation value of $809,000, and the Company issued
Series C Preferred Stock with a liquidation value of $380,000 pro rata to the
Old Hawk stockholders.
STOCKHOLDER NOTES
Certain stockholders of the Company issued notes to the Company on June 30,
1995 (the "June 1995 Notes") as follows: by Mr. Harbert in the original
principal amount of approximately $802,000; by Mr. Weinberg in the original
principal amount of approximately $802,000; by Mr. Wilson in the original
principal amount of $162,500; and by Mr. Krantz in the original principal amount
of approximately $60,000. The June 1995 Notes are due and payable on July 1,
2002 and bore interest at the prime rate plus 1.25% per annum through September
30, 1996, and at the prime rate thereafter. The June 1995 Notes remain
outstanding.
In addition, Clanco issued a note to the Company on June 30, 1995 with the
same terms as the June 1995 Notes. The original principal amount of Clanco's
note was $162,500. Clanco repaid its note to the Company in full in August 1996.
THE 1995 HELSEL TRANSACTION
In June 1995, Helsel became a wholly-owned subsidiary of the Company.
Helsel was acquired in June 1994 by a group led by Mr. Harbert and Mr. Weinberg
and, although Helsel was operated by Hawk's management group from the date of
the 1994 acquisition, it was maintained as a separate company until its merger
in June 1995 with a subsidiary of the Company. Pursuant to the terms of that
merger, each outstanding share of common stock of Helsel was converted into
shares of Class A Common Stock of the Company at an exchange ratio based on an
independent valuation. Each outstanding share of the preferred stock of Helsel
was surrendered in exchange for one fully paid share of Series B Preferred Stock
of the Company. The terms of the Series B Preferred Stock of the Company are
identical in all material respects to the terms of the Helsel preferred stock.
At the time of the merger, the following directors and executive officers of the
Company or immediate family members of such persons became the beneficial owners
of the number of shares of Class A Common Stock and Series B Preferred Stock set
forth opposite their names:
<TABLE>
<CAPTION>
SHARES OF CLASS A SHARES OF CLASS B
NAME OF STOCKHOLDER COMMON STOCK COMMON STOCK
- --------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
William J. O'Neill, Jr.*................................. 2,203 315
Norman C. Harbert........................................ 1,645 158
Ronald E. Weinberg....................................... 1,645 158
Jeffrey H. Berlin........................................ 784 13
Byron S. Krantz.......................................... 365 35
Douglas D. Wilson........................................ 38 3
Thomas A. Gilbride....................................... 24 1
Paul R. Bishop........................................... 17 --
Jess F. Helsel........................................... 17 --
<FN>
- ---------------
* Includes 2,186 shares of Class A Common Stock issued to Clanco Partners III,
an Ohio general partnership of which Mr. O'Neill was the managing general
partner prior to its liquidation in 1995, and 315 shares of Series B Preferred
Stock issued to the William J. O'Neill, Sr. Irrevocable Trust A, of which Mr.
O'Neill is a co-trustee. Mr. O'Neill's mother, Dorothy K. O'Neill, is the
beneficiary of the trust.
</TABLE>
In connection with its acquisition of Helsel's assets from Helco, Inc.
("Helco"), the Company issued a secured promissory note in the original
principal amount of $500,000 to Helco, which note is due August 1, 1999. Jess F.
Helsel, the President of Helsel, is a director, officer and stockholder of
Helco. The note bears interest at the rate of prime plus 1% per annum (currently
9.25%), is payable in four equal annual principal installments of $125,000 and
quarterly installments of interest accrued
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<PAGE> 76
on the outstanding principal balance (currently $375,000), and is secured by a
security interest in Helsel's assets and certain guaranties made by the Company,
Mr. Harbert and Mr. Weinberg.
On July 1, 1994, the Company issued 9% subordinated notes to the investment
group formed to acquire Helsel, Inc. in the aggregate principal amount of
$200,000. One such note, in the original principal amount of $90,000, was issued
to the William J. O'Neill, Sr. Irrevocable Trust A, of which William J. O'Neill,
Jr. is a co-trustee. Mr. O'Neill is a director of the Company. All of these
notes were repaid in full in June 1995.
THE 1995 PARENT-SUBSIDIARY MERGER
In June 1995, in connection with the merger of Helsel into a subsidiary of
the Company and the acquisition of SKW, the Company, which until that time had
been an Ohio corporation, reincorporated as a Delaware corporation in a
parent-subsidiary merger. Pursuant to the terms of the merger, each outstanding
share of common stock of Hawk, the Ohio corporation, was converted into one
fully-paid share of Class A Common Stock of the Company. In addition, each
outstanding share of preferred stock of Hawk, the Ohio corporation, was, by
virtue of the merger, converted into one fully-paid share of Series A Preferred
Stock of the Company. The terms of the Series A Preferred Stock of the Company
are identical in all material respects to the terms of the preferred stock of
the Ohio corporation. At the time of the merger, Old Hawk received 490,000
shares of Class A Common Stock and 1,250 shares of Series A Preferred Stock, and
the following directors and executive officers of the Company and immediate
family members of such persons became the beneficial owners of the number of
shares of Class A Common Stock and Series A Preferred Stock set forth opposite
their names:
<TABLE>
<CAPTION>
SHARES OF CLASS A SHARES OF CLASS A
NAME OF STOCKHOLDER COMMON STOCK PREFERRED STOCK
- --------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
William J. O'Neill, Jr.(1)............................... 458,128 1,375
Norman C. Harbert(2)..................................... 162,812 --
Ronald E. Weinberg(3).................................... 162,812 --
Jeffrey H. Berlin........................................ 79,633 --
Byron S. Krantz(4)....................................... 36,109 --
Douglas D. Wilson........................................ 13,779 --
Thomas A. Gilbride....................................... 5,225 --
Paul R. Bishop........................................... 1,718 --
Jess F. Helsel........................................... 1,718 --
<FN>
- ---------------
(1) Includes 456,410 shares of Class A Common Stock and 985 shares of Series A
Preferred Stock owned by Clanco Partners I, of which Mr. O'Neill is the
managing general partner, 290 shares of Series A Preferred Stock owned by
the William J. O'Neill, Sr. Irrevocable Trust A, of which Mr. O'Neill is a
co-trustee, and 100 shares of Series A Preferred Stock owned by the Dorothy
K. O'Neill Revocable Trust, of which Mr. O'Neill is also a co-trustee. Mr.
O'Neill's mother, Dorothy K. O'Neill, is the beneficiary of both trusts.
(2) All 162,812 shares are owned by the Harbert Family Limited Partnership, of
which Mr. Harbert is the managing general partner.
(3) All 162,812 shares are owned by the Weinberg Family Limited Partnership, of
which Mr. Weinberg is the managing general partner.
(4) All 36,109 shares are owned by the Krantz Family Limited Partnership, of
which Mr. Krantz is the managing general partner.
</TABLE>
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<PAGE> 77
OTHER TRANSACTIONS
The Company is a party to an expense sharing arrangement under which the
Company shares the expenses of its Cleveland, Ohio headquarters with Weinberg
Capital Corporation, of which Mr. Weinberg is President and sole shareholder.
The Company pays (1) approximately 50% of the overhead costs of the
headquarters, including, without limitation, rent, utilities and copying
expenses, and (2) all clearly-identifiable and reasonable out-of-pocket
expenses, such as telephone and travel, incurred by personnel in the
headquarters office directly on behalf of the Company. The aggregate amount of
the payments by the Company for the shared headquarters were approximately
$91,000 in the first nine months of 1996, $140,000 in 1995, $95,000 in 1994 and
$83,000 in 1993.
Byron S. Krantz, a director and the Secretary of the Company, is a partner
of the law firm of Kohrman Jackson & Krantz P.L.L., which provides legal
services to the Company. The Company paid legal fees to Kohrman Jackson & Krantz
P.L.L. in 1995 of $440,000, for services in connection with a variety of
matters, including the acquisition of SKW, the reorganization of Helsel upon
which it became a wholly-owned subsidiary of the Company and the Old Credit
Facility.
The Company believes that the terms of the transactions and the agreements
described above are on terms at least as favorable as those which it could
otherwise have obtained from unrelated parties.
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following is a summary of certain indebtedness of the Company and its
subsidiaries that remains outstanding after the closing of the Transactions. To
the extent such summary contains descriptions of the New Revolving Credit
Facility and other loan documents, such descriptions do not purport to be
complete and are qualified in their entirety by reference to such documents,
which are available as described under "Available Information."
NEW REVOLVING CREDIT FACILITY
BT Commercial Corporation acted as agent and provided the New Revolving
Credit Facility, consisting of a revolving credit loan that equals the lesser of
(1) $25.0 million, or (2) the sum of 85% of eligible accounts receivable and 60%
of the value (at the lower of cost or market) of eligible inventory. The New
Revolving Credit Facility is secured by substantially all of the accounts
receivable, inventory and intangibles of the Company and its domestic
subsidiaries. In addition, the New Revolving Credit Facility contains financial
and other covenants with respect to the Company and its subsidiaries that, among
other matters, would prohibit the payment of any dividends to the Company by the
subsidiaries of the Company in the event of a default under the terms of the New
Revolving Credit Facility, restrict the creation of certain liens, restrict
capital expenditures and require the maintenance of certain interest coverage.
Amounts outstanding under the New Revolving Credit Facility are due November 27,
1999 and bear interest at a variable rate based on the London Interbank Offered
Rate ("LIBOR") plus 2.25% per annum, or at the Company's option, a variable rate
based on the lending bank's prime rate plus 1.0% per annum. Interest payment
dates will vary depending on the interest rate option selected by the Company,
but generally, interest will be payable monthly. The commitment fee on the
unused portion of the New Revolving Credit Facility will be 0.5% of such unused
portion. Currently, there are no amounts outstanding under the New Revolving
Credit Facility.
SENIOR SUBORDINATED NOTES
Under a Senior Subordinated Note and Warrant Purchase Agreement, dated as
of June 30, 1995, as amended, the Company has outstanding an aggregate of $30.0
million of Senior Subordinated Notes to Connecticut General Life Insurance
Company and CIGNA Mezzanine Partners III,
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<PAGE> 78
L.P. The Senior Subordinated Notes mature in equal installments of $10.0 million
on January 31, 2004 and June 30, 2004 and 2005. Interest on the Senior
Subordinated Notes is payable quarterly at 12.0% per annum. The Senior
Subordinated Notes are guaranteed by certain domestic subsidiaries of the
Company. Concurrently with the closing of the Offering, the Company and the
holders of the Senior Subordinated Notes entered into an amendment that, among
other matters, (1) changed the initial principal payment date from June 30, 2003
to January 31, 2004, (2) subordinated the Senior Subordinated Notes to the
Exchange Notes and the New Revolving Credit Facility, and (3) subordinated the
Senior Subordinated Note guarantees to the Guarantees. In addition, the holders
of the Senior Subordinated Notes granted a waiver to permit the Hawk Controlling
Stockholder Merger.
The Senior Subordinated Notes contain certain financial and other covenants
and restrictions with respect to the Company and its subsidiaries that include:
the mandatory prepayment of the Senior Subordinated Notes upon a "change in
control" (as defined), provided that the Company has obtained the consent of the
holders of the Exchange Notes and the notes issued under the New Revolving
Credit Facility; restrictions on the incurrence of additional indebtedness;
restrictions on the creation of certain liens; restrictions on mergers and
similar transactions; restrictions on certain asset and capital stock sales; and
restrictions on the ability of the Company to pay dividends or make other
distributions and on the ability of less than wholly-owned subsidiaries of the
Company, if any, to pay dividends or make other distributions to the Company.
The Company issued detachable warrants to the Senior Subordinated Note
holders to purchase 316,970 shares of Class B Common Stock at a price per share
of $0.01, subject to customary anti-dilution provisions. The warrants may be
exercised at anytime on or prior to June 30, 2005. The Company has the option to
repurchase the warrants and the warrant holders have the option to put the
warrants back to the Company at prices based on a fair market value formula. The
Company's repurchase right commences June 30, 2001 and the warrant holders put
right commences June 30, 2000. The repurchase and put rights terminate
automatically upon an initial public offering by the Company. See "Principal
Stockholders -- Description of Capital Stock -- Common Stock" and "Principal
Stockholders -- Stockholder Agreements."
CERTAIN OTHER INDEBTEDNESS
In connection with its acquisition of Helsel's assets from Helco, the
Company issued a secured promissory note in the original principal amount of
$500,000 to Helco, which note is due August 1, 1999. The note bears interest at
the rate of prime plus 1% per annum (currently 9.25%), is payable in four equal
annual principal installments of $125,000 and quarterly installments of interest
accrued on the outstanding principal balance (currently $375,000), and is
secured by a security interest in Helsel's assets and certain guaranties made by
the Company, Mr. Harbert and Mr. Weinberg.
In addition, Helsel has outstanding a capital lease securing certain
equipment. Lease payments are due monthly in the amount of approximately $21,900
through the termination date of September 1, 2002.
The Company's foreign subsidiaries have outstanding various bank loans and
capital leases in an aggregate principal amount of $947,000 with maturity dates
from April 1997 to October 2002.
DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued under an Indenture (the "Indenture"),
dated as of November 27, 1996, by and between the Company, the Guarantors and
Bank One Trust Company, NA, as trustee (the "Trustee"). Upon the issuance of the
Exchange Notes, or the effectiveness of a Shelf Registration Statement, the
Indenture will be subject to and governed by the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). As used in this "Description of the
Exchange Notes" section, references to the Exchange Notes shall include the
Notes that are not exchanged
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<PAGE> 79
pursuant to the Exchange Offer and the "Company" means Hawk, but not any of its
subsidiaries (unless the context otherwise requires).
The following is a summary of the material provisions of the Indenture.
This summary does not purport to be complete and is subject to the detailed
provisions of, and is qualified in its entirety by reference to, the Trust
Indenture Act, the Exchange Notes and the Indenture, including the definitions
of certain terms contained therein and including those terms made part of the
Indenture by reference to the Trust Indenture Act. A copy of the Indenture may
be obtained as described under "Available Information." The definitions of
certain terms used in the following summary are set forth below under "Certain
Definitions." Reference is made to the Indenture for the full definition of all
such terms, as well as any other capitalized terms used herein for which no
definition is provided.
MATURITY AND INTEREST
The Exchange Notes will be unsecured senior obligations of the Company
limited in aggregate principal amount to $100,000,000. The Exchange Notes will
mature on December 1, 2003. Interest on the Exchange Notes will accrue at the
rate of 10 1/4% per annum and will be payable semi-annually in arrears on June 1
and December 1 in each year, commencing on June 1, 1997, to holders of record on
the immediately preceding May 15 and November 15, respectively. Interest on the
Exchange Notes will accrue from the most recent date to which interest has been
paid or, if no interest has been paid, from the date of the original issuance of
the Exchange Notes (the "Issue Date"). Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.
Principal of, and premium, if any, and interest on, the Exchange Notes will
be payable at the office or agency of the Company maintained for such purpose in
the city of New York or, at the option of the Company, payment of interest may
be made by check mailed to the holders of the Exchange Notes at their respective
addresses as set forth in the register of holders of Exchange Notes. Until
otherwise designated by the Company, the Company's office or agency in the city
of New York will be the office of the Trustee maintained for such purpose. The
Exchange Notes will be issued in fully registered form, without coupons, and in
denominations of $1,000 and integral multiples thereof. No service charge will
be made for any transfer, exchange or redemption of Exchange Notes, except in
certain circumstances for any tax or other governmental charge that may be
imposed in connection therewith.
THE GUARANTEES
Each of the Guarantors will fully and unconditionally guarantee (each, a
"Guarantee") on a joint and several basis all of the Company's obligations under
the Exchange Notes and the Indenture, including its obligations to pay
principal, premium, if any, and interest with respect to the Exchange Notes.
Except as provided below in "Certain Covenants," the Company is not restricted
from selling or otherwise disposing of any of the Guarantors.
Pursuant to the Guarantees, if the Company defaults in payment of any
amount owing in respect of any Exchange Notes, each Guarantor will be obligated
to duly and punctually pay the same. Pursuant to the terms of the Indenture,
each of the Guarantors has agreed that its obligations under its Guarantee will
be unconditional, irrespective of the validity, regularity or enforceability of
the Exchange Notes or the Indenture, the absence of any action to enforce the
same or any other circumstance that might otherwise constitute a legal or
equitable discharge or defense of a guarantor.
Concurrently with the creation or acquisition by the Company of any
Subsidiary (other than a Foreign Subsidiary and other than an Unrestricted
Subsidiary), the Company, such Subsidiary and the Trustee shall execute and
deliver a supplement to the Indenture providing that such Subsidiary will be a
Guarantor thereunder.
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<PAGE> 80
If no Default exists or would exist under the Indenture, concurrently with
any sale or disposition (by merger or otherwise) of any Guarantor (other than a
transaction subject to the provisions described under "Merger, Consolidation and
Sale of Assets") by the Company or a Restricted Subsidiary to any person that is
not an Affiliate of the Company or any of the Restricted Subsidiaries that is in
compliance with the terms of the Indenture, such Guarantor and each Subsidiary
of such Guarantor that is also a Guarantor will automatically and
unconditionally be released from all obligations under its Guarantee.
The obligations of each Guarantor will be limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor, result in the obligations of such Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law.
RANKING
The Indebtedness of the Company evidenced by the Exchange Notes will rank
senior in right of payment to all subordinated indebtedness of the Company and
will rank pari passu in right of payment with all other existing and future
unsecured senior indebtedness of the Company. However, the Exchange Notes will
be effectively subordinated to all secured indebtedness of the Company and the
Guarantors and to all future and existing indebtedness, including trade
payables, of the Company's subsidiaries that are not Guarantors.
The Guarantees will be senior unsecured obligations of the Guarantors,
ranking senior in right of payment to all subordinated indebtedness of the
Guarantors and will rank pari passu in right of payment with all other existing
and future unsecured senior indebtedness of such Guarantor. However, the
Guarantees will be effectively subordinated to all secured indebtedness of the
Guarantors. See "Risk Factors -- Ranking of the Exchange Notes."
REDEMPTION
Mandatory Redemption. The Exchange Notes are not subject to any mandatory
sinking fund redemption prior to maturity.
Optional Redemption. The Exchange Notes are redeemable in cash at the
option of the Company, in whole or in part, at any time on or after December 1,
2000, at the redemption prices (expressed as percentages of the principal amount
of the Exchange Notes) set forth below, plus in each case accrued and unpaid
interest thereon, if any, to the date of redemption, if redeemed during the
twelve-month period beginning on December 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------- ----------
<S> <C>
2000......................................................... 105.125%
2001......................................................... 102.563%
2002 and thereafter.......................................... 100.000%
</TABLE>
In addition, at any time or from time to time on or prior to December 1,
1999, the Company may, at its option, redeem up to $35.0 million of the
aggregate principal amount of the Exchange Notes in cash with the net proceeds
of one or more Public Equity Offerings, at a redemption price equal to 110.25%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of redemption; provided, however, that (1) not less than $65.0 million
aggregate principal amount of the Exchange Notes is outstanding immediately
after giving effect to any such redemption (other than any Exchange Notes owned
by the Company or any of its Affiliates) and (2) such redemption is effected
within 60 days after the consummation of any such Public Equity Offering.
Selection and Notice. If less than all of the Exchange Notes are to be
redeemed at any time, selection of the Exchange Notes to be redeemed will be
made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Exchange Notes are
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<PAGE> 81
listed or, if the Exchange Notes are not listed on a securities exchange, on a
pro rata basis or by lot or any other method as the Trustee shall deem fair and
appropriate; provided, however, that Exchange Notes redeemed in part shall only
be redeemed in integral multiples of $1,000; provided, further, that any such
redemption pursuant to the provisions relating to a Public Equity Offering shall
be made on a pro rata basis or on as nearly a pro rata basis as practicable
(subject to the procedures of The Depository Trust Company or any other
depositary), unless such method is otherwise prohibited. Notices of any optional
or mandatory redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each holder of Exchange Notes to
be redeemed at such holder's registered address. If any Exchange Note is to be
redeemed in part only, the notice of redemption that relates to such Exchange
Note shall state the portion of the principal amount thereof to be redeemed, and
the Trustee shall authenticate and mail to the holder of the original Exchange
Note a new Exchange Note in principal amount equal to the unredeemed portion of
the original Exchange Note promptly after the original Exchange Note has been
canceled. On and after the redemption date, interest will cease to accrue on
Exchange Notes or portions thereof called for redemption.
CHANGE OF CONTROL
In the event of a Change of Control, each holder of Exchange Notes will
have the right, unless the Company has given a notice of redemption, subject to
the terms and conditions of the Indenture, to require the Company to offer to
purchase all or any portion (equal to $1,000 or an integral multiple thereof) of
such holder's Exchange Notes at a purchase price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest, if any, to
the date of purchase, in accordance with the terms set forth below (a "Change of
Control Offer").
The New Revolving Credit Facility restricts the Company's ability to
purchase Exchange Notes pursuant to a Change of Control Offer. Any additional
credit agreements or other agreements relating to unsubordinated indebtedness to
which the Company becomes a party may contain similar restrictions. Moreover,
the New Revolving Credit Facility contains a "change of control" provision that
is similar to the provision in the Indenture relating to a Change of Control,
and the occurrence of such a "change of control" would constitute a default
under the New Revolving Credit Facility. The New Revolving Credit Facility may
not permit the purchase of the Exchange Notes absent consent of the lenders
thereunder in the event of a Change of Control. Notwithstanding the foregoing,
the failure of the Company to effect a Change of Control Offer would constitute
an Event of Default under the Indenture.
If the Company is unable to obtain the requisite consents and/or repay all
indebtedness that restricts the Company's ability to repurchase the Exchange
Notes upon the occurrence of a Change of Control, the Company may not be able to
commence a Change of Control Offer to purchase the Exchange Notes within 30 days
of the occurrence of the Change of Control. Such failure would constitute an
Event of Default under the Indenture. The Company's failure to commence such a
Change of Control Offer would also constitute an event of default under the New
Revolving Credit Facility that would permit the lenders thereunder to accelerate
all of the Company's indebtedness under the New Revolving Credit Facility. If a
Change of Control were to occur, there can be no assurance that the Company
would have sufficient assets to first satisfy its obligations under the New
Revolving Credit Facility or other agreements relating to indebtedness, if
accelerated, and then to purchase all of the Exchange Notes that might be
delivered by holders seeking to accept a Change of Control Offer.
On or before the 30th day following the occurrence of any Change of
Control, the Company will mail to each holder of Exchange Notes at such holder's
registered address a notice stating: (1) that a Change of Control has occurred
and that such holder has the right to require the Company to purchase all or a
portion (equal to $1,000 or an integral multiple thereof) of such holder's
Exchange Notes at a purchase price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of purchase (the "Change of Control Purchase
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<PAGE> 82
Date"), which shall be a business day, specified in such notice, that is not
earlier than 30 days or later than 60 days from the date such notice is mailed;
(2) the amount of accrued and unpaid interest, if any, as of the Change of
Control Purchase Date; (3) that any Exchange Note not tendered will continue to
accrue interest; (4) that, unless the Company defaults in the payment of the
purchase price for the Exchange Notes payable pursuant to the Change of Control
Offer, any Exchange Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest on the Change of Control Purchase Date; (5)
the procedures, consistent with the Indenture, to be followed by a holder of
Exchange Notes in order to accept a Change of Control Offer or to withdraw such
acceptance; and (6) such other information as may be required by the Indenture
and applicable laws and regulations.
On the Change of Control Purchase Date, the Company will (1) accept for
payment all Exchange Notes or portions thereof tendered pursuant to the Change
of Control Offer, (2) deposit with the Paying Agent (as defined) the aggregate
purchase price of all Exchange Notes or portions thereof accepted for payment,
and (3) deliver or cause to be delivered to the Trustee all Exchange Notes
tendered pursuant to the Change of Control Offer. The Paying Agent shall
promptly mail to each holder of Exchange Notes or portions thereof accepted for
payment an amount equal to the purchase price for such Exchange Notes plus
accrued and unpaid interest, if any, thereon, and the Trustee shall promptly
authenticate and mail to each holder of Exchange Notes accepted for payment in
part a new Exchange Note equal in principal amount to any unpurchased portion of
the Exchange Notes, and any Exchange Note not accepted for payment in whole or
in part shall be promptly returned to the holder of such Exchange Note. On and
after a Change of Control Purchase Date, interest will cease to accrue on the
Exchange Notes or portions thereof accepted for payment, unless the Company
defaults in the payment of the purchase price therefor. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Purchase Date.
The Company will comply with the applicable tender offer rules, including
the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all
other applicable securities laws and regulations in connection with any Change
of Control Offer and will be deemed not to be in violation of any of the
covenants under the Indenture to the extent such compliance is in conflict with
such covenants.
CERTAIN COVENANTS
Limitation on Incurrence of Indebtedness. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, create,
incur, assume or directly or indirectly guarantee or in any other manner become
directly or indirectly liable for ("incur") any Indebtedness (including Acquired
Debt), except that the Company may incur Indebtedness (including Acquired Debt)
if, at the time of, and immediately after giving pro forma effect to, such
incurrence of Indebtedness, the Consolidated Cash Flow Coverage Ratio of the
Company for the most recently ended four fiscal quarters would be at least 2.0
to 1.0 if incurred during the period from the Issue Date through December 1,
1998, and 2.25 to 1.0 if incurred thereafter.
The foregoing limitations do not apply to the incurrence of any of the
following (collectively, "Permitted Indebtedness"), each of which shall be given
independent effect:
(1) Indebtedness of the Company arising under the New Revolving
Credit Facility in an aggregate principal amount not to exceed at any time
outstanding the greater of (a) $25.0 million, less any permanent reduction
in commitments thereunder, and (b) the sum, at such time, of (i) 85% of the
consolidated book value of net accounts receivable of the Company and the
Restricted Subsidiaries and (ii) 60% of the consolidated book value of
inventory of the Company and the Restricted Subsidiaries;
(2) Indebtedness of the Company represented by the Exchange Notes and
Indebtedness of the Guarantors represented by the Guarantees;
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(3) Indebtedness of the Company or any Restricted Subsidiary not
covered by any other clause of this paragraph that is outstanding on the
Issue Date ("Existing Indebtedness");
(4) Indebtedness owed by any Restricted Subsidiary to the Company or
to another Restricted Subsidiary, or owed by the Company to any Restricted
Subsidiary that, if owed to a Restricted Subsidiary that is not a
Guarantor, is unsecured and subordinated in right of payment to the payment
and performance of the Company's obligations under the Indenture and the
Exchange Notes; provided, however, that any such Indebtedness shall at all
times be held by a Person that is either the Company or a Restricted
Subsidiary; provided further, however, that upon either (a) the transfer or
other disposition of any such Indebtedness to a Person other than the
Company or another Restricted Subsidiary or (b) the sale, lease, transfer
or other disposition of shares of Capital Stock (including by consolidation
or merger) of any such Restricted Subsidiary to a Person other than the
Company or another Restricted Subsidiary, the incurrence of such
Indebtedness shall be deemed to be an incurrence that is not permitted by
this clause (4);
(5) Indebtedness of the Company or any Restricted Subsidiary arising
with respect to Interest Rate Agreement Obligations and Currency Agreement
Obligations incurred for the purpose of fixing or hedging interest rate
risk or currency risk with respect to any fixed or floating rate
Indebtedness that is permitted by the terms of the Indenture to be
outstanding or with respect to any receivable or liability the payment of
which is determined by reference to a foreign currency;
(6) Indebtedness represented by performance, completion, guarantee,
surety and similar bonds provided by the Company or any Restricted
Subsidiary in the ordinary course of business consistent with past
practice;
(7) Any Indebtedness incurred in connection with or given in exchange
for the renewal, extension, substitution, refunding, defeasance,
refinancing or replacement (a "refinancing") of any Indebtedness incurred
as permitted under the first paragraph of this covenant or any Indebtedness
described in clauses (1), (2) and (3) above and this clause (7)
("Refinancing Indebtedness"); provided, however, that: (a) the principal
amount of such Refinancing Indebtedness shall not exceed the principal
amount (or accreted amount, if less) of the Indebtedness so refinanced
(plus the premiums and reasonable expenses to be paid in connection
therewith, that, with respect to such premiums, shall not exceed the stated
amount of any premium or other payment required to be paid in connection
with such a refinancing pursuant to the terms of the Indebtedness being
refinanced); (b) if the Weighted Average Life to Maturity of the
Indebtedness being refinanced is equal to or greater than the Weighted
Average Life to Maturity of the Exchange Notes, the Refinancing
Indebtedness shall have a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Indebtedness
being refinanced; (c) with respect to Refinancing Indebtedness other than
Senior Debt incurred by the Company, such Refinancing Indebtedness shall
rank no more senior than, and, if applicable, shall be at least as
subordinated in right of payment to the Exchange Notes as, the Indebtedness
being refinanced; and (d) the obligor on such Refinancing Indebtedness
shall be the obligor on the Indebtedness being refinanced or the Company;
(8) Indebtedness of the Company or any Restricted Subsidiary (a)
representing Capitalized Lease Obligations and any refinancings thereof
and/or (b) in respect of Purchase Money Obligations for property acquired,
constructed or improved in the ordinary course of business and any
refinancings thereof, that taken together in the aggregate do not exceed
$5.0 million at any time outstanding;
(9) Indebtedness of the Company or any Restricted Subsidiary relating
to the acquisition of Hutchinson Foundry Products Company in an aggregate
amount not to exceed $2.0 million (the "Hutchinson Notes");
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(10) Commodity agreements entered into in the ordinary course of
business to protect against fluctuations in the prices of raw materials and
not for speculative purposes;
(11) Indebtedness incurred by the Company or any Restricted Subsidiary
constituting reimbursement obligations with respect to letters of credit
issued in the ordinary course of business, including, without limitation,
letters of credit in respect of workers' compensation claims or
self-insurance, or other Indebtedness with respect to reimbursement type
obligations regarding workers' compensation claims or self-insurance;
(12) Guarantees by the Company of Indebtedness of a Restricted
Subsidiary permitted to be incurred under the Indenture and Guarantees of
the Exchange Notes by the Guarantors;
(13) Indebtedness of the Company or any Restricted Subsidiary arising
from agreements providing for indemnification, adjustment of purchase price
or similar obligations, in each case incurred or assumed in connection with
the disposition of any business, assets or a Subsidiary, other than
guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or a Subsidiary for the purpose of
financing such acquisition; provided that the maximum liability in respect
of such Indebtedness shall not exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition; and
(14) Indebtedness of the Company or any Restricted Subsidiary in
addition to that described in clauses (1) through (13) above, and any
renewals, extensions, substitutions, refinancings or replacements of such
Indebtedness, so long as the aggregate principal amount of all such
Indebtedness incurred pursuant to this clause (14) does not exceed $5.0
million at any one time outstanding.
For purposes of determining any particular amount of Indebtedness under
this covenant, guarantees, Liens or obligations with respect to letters of
credit supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included.
Indebtedness of any Person that is outstanding at the time such Person
becomes a Restricted Subsidiary or is merged with or into or consolidated with
the Company or a Restricted Subsidiary shall be deemed to have been incurred at
the time such Person becomes a Restricted Subsidiary or is merged with or into
or consolidated with the Company or a Restricted Subsidiary, and Indebtedness
that is assumed at the time of the acquisition of any asset shall be deemed to
have been incurred at the time of such acquisition.
Limitation on Restricted Payments. The Indenture provides that the Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, make any Restricted Payment, unless at the time of and immediately
after giving effect to the proposed Restricted Payment (with the value of any
such Restricted Payment, if other than cash, to be determined reasonably and in
good faith by the Board of Directors of the Company):
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(2) the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the covenant described
under "Limitation on Incurrence of Indebtedness;" and
(3) the aggregate amount of all Restricted Payments made after the
Issue Date shall not exceed the sum of:
(a) an amount equal to 50% of the Company's aggregate cumulative
Consolidated Net Income accrued on a cumulative basis during the period
(treated as one accounting period) beginning on the Issue Date and
ending on the date of such proposed Restricted
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Payment (or, if such aggregate cumulative Consolidated Net Income for
such period shall be a deficit, minus 100% of such deficit); plus
(b) the aggregate amount of all net cash proceeds received since
the Issue Date by the Company from the issuance and sale (other than to
a Restricted Subsidiary) of, or equity contribution with respect to,
Capital Stock (other than Disqualified Stock) and the principal amount
of Indebtedness of the Company or any Restricted Subsidiary that has
been converted into or exchanged for Capital Stock (other than
Disqualified Stock), in any such case to the extent that such proceeds
are not used (i) to redeem, repurchase, retire or otherwise acquire
Capital Stock or any Indebtedness of the Company or any Restricted
Subsidiary pursuant to clause (2) of the next paragraph or (ii) to make
any Restricted Investment pursuant to clause (4) of the next paragraph;
plus
(c) the amount of the net reduction in Investments in Unrestricted
Subsidiaries resulting from (i) the payment of dividends or the
repayment in cash of the principal of loans or the cash return on any
Investment, in each case to the extent received by the Company or any
Restricted Subsidiary from Unrestricted Subsidiaries, (ii) the release
or extinguishment of any guarantee of Indebtedness of any Unrestricted
Subsidiary, and (iii) the redesignation of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued as provided in the definition of
"Investment"), such aggregate amount of the net reduction in Investments
not to exceed in the case of any Unrestricted Subsidiary the amount of
Restricted Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary, which amount was included in
the calculation of the amount of Restricted Payments; plus
(d) to the extent that any Restricted Investment that was made
after the Issue Date is sold for cash or otherwise liquidated or repaid
for cash, the amount of cash proceeds received with respect to such
Restricted Investment, net of taxes and the cost of disposition, not to
exceed the amount of Restricted Investments made after the Issue Date.
The foregoing provisions will not prohibit the following actions
(collectively, "Permitted Payments"):
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at such declaration date such payment would have
been permitted under the Indenture (which payment shall be deemed to have
been paid on such date of declaration for purposes of clause (3) of the
preceding paragraph);
(2) the redemption, repurchase, retirement or other acquisition of any
Capital Stock or any Indebtedness of the Company or any Restricted
Subsidiary in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Restricted Subsidiary) of, or equity
contribution with respect to, Capital Stock of the Company (other than any
Disqualified Stock), including without limitation the Hawk Controlling
Stockholder Merger that occurred concurrently with the Offering;
(3) any purchase or defeasance of Subordinated Indebtedness to the
extent required upon a Change of Control or Asset Sale (as defined therein)
by the Indenture or other agreement or instrument pursuant to which such
Subordinated Indebtedness was issued, but only if the Company (a) in the
case of a Change of Control, has complied with its obligations under the
provisions described under "Change of Control" or (b) in the case of an
Asset Sale, has applied the Net Proceeds from such Asset Sale in accordance
with the provisions described under "Limitation on Asset Sales;"
(4) any Restricted Investment made with the proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary) of,
or equity contribution with respect to, Capital Stock of the Company (other
than any Disqualified Stock);
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(5) loans or advances to employees of the Company or any of its
Subsidiaries which loans or advances exist on the Issue Date and other
loans or advances to employees of the Company or any Subsidiary to pay
reasonable relocation expenses;
(6) Restricted Investments in an amount such that the sum of the
aggregate amount of Restricted Investments made pursuant to this clause (6)
after the Issue Date does not exceed at any time $2.0 million; and
(7) the payment of any dividend on, or redemption of any or all of,
the Company's redeemable 10% cumulative preferred stock, par value, $0.01
per share, Series A; redeemable 9% cumulative preferred stock, par value,
$0.01 per share, Series B; and redeemable 10% cumulative preferred stock,
par value, $0.01 per share, Series C, in each case, outstanding on the
Issue Date.
provided, however, that in the case of clauses (3) and (6) of this paragraph, no
Default or Event of Default shall have occurred and be continuing.
For purposes of clause (3) of the first paragraph of this covenant, the
Permitted Payments referred to in clauses (1) and (6) above shall be included in
the aggregate amount of Restricted Payments made since the Issue Date, and any
other Permitted Payments described above shall be excluded.
Limitation on Asset Sales. The Indenture provides that the Company will
not, and will not permit any Restricted Subsidiary to, make any Asset Sale
unless (1) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value (as evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee) of the assets or other
property sold or disposed of in the Asset Sale and (2) at least 75% of such
consideration consists of either cash or Cash Equivalents; provided, however,
that for purposes of this covenant, "cash" shall include (a) the amount of any
Indebtedness (other than any Indebtedness that is by its terms subordinated to
the Notes) of the Company or such Restricted Subsidiary as shown on the
Company's or such Restricted Subsidiary's most recent balance sheet or in the
notes thereto that is assumed by the transferee of any such assets or other
property in such Asset Sale (and excluding any liabilities that are incurred in
connection with or in anticipation of such Asset Sale), but only to the extent
that such assumption is effected on a basis such that there is no further
recourse to the Company or any of the Restricted Subsidiaries with respect to
such liabilities and (b) any notes, obligations or securities received by the
Company or such Restricted Subsidiary from such transferee that are converted
within 60 days by the Company or such Restricted Subsidiary into cash (to the
extent of the cash received).
Within 180 days after any Asset Sale, the Company may elect to apply the
Net Proceeds from such Asset Sale to (1) permanently reduce any Senior Debt of
the Company and/or (2) make an investment in, or acquire assets and properties
that will be used in, the business of the Company and the Restricted
Subsidiaries existing on the Issue Date or in businesses reasonably related
thereto. Pending the final application of any such Net Proceeds, the Company or
any Restricted Subsidiary may temporarily reduce Indebtedness of the Company
under the New Revolving Credit Facility or temporarily invest such Net Proceeds
in any Investments described under clauses (1) through (3) of the definition of
Permitted Investments. Any Net Proceeds from an Asset Sale not applied or
invested as provided in the first sentence of this paragraph within 180 days of
such Asset Sale will be deemed to constitute "Excess Proceeds."
Each date that the aggregate amount of Excess Proceeds in respect of which
an Asset Sale Offer (as defined below) has not been made exceeds $5.0 million
shall be deemed an "Asset Sale Offer Trigger Date." As soon as practicable, but
in no event later than 20 business days after each Asset Sale Offer Trigger
Date, the Company shall commence an offer (an "Asset Sale Offer") to purchase
the maximum principal amount of Exchange Notes that may be purchased out of the
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Excess Proceeds. Any Exchange Notes to be purchased pursuant to an Asset Sale
Offer shall be purchased pro rata based on the aggregate principal amount of
Exchange Notes outstanding, and all Exchange Notes shall be purchased at an
offer price in cash in an amount equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of purchase. To the extent
that any Excess Proceeds remain after completion of an Asset Sale Offer, the
Company may use the remaining amount for general corporate purposes otherwise
permitted by the Indenture. In the event that the Company is prohibited under
the terms of any agreement governing outstanding Senior Debt of the Company from
repurchasing Exchange Notes with Excess Proceeds pursuant to an Asset Sale Offer
as set forth in the first sentence of this paragraph, the Company shall promptly
use all Excess Proceeds to permanently reduce such outstanding Senior Debt of
the Company. Upon the consummation of any Asset Sale Offer, the amount of Excess
Proceeds shall be deemed to be reset to zero.
Notice of an Asset Sale Offer shall be mailed by the Company not later than
the 20th business day after the related Asset Sale Offer Trigger Date to each
holder of Exchange Notes at such holder's registered address, stating: (1) that
an Asset Sale Offer Trigger Date has occurred and that the Company is offering
to purchase the maximum principal amount of Exchange Notes that may be purchased
out of the Excess Proceeds (to the extent provided in the immediately preceding
paragraph), at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of the purchase (the "Asset Sale Offer Purchase Date"), which shall be a
business day, specified in such notice, that is not earlier than 30 days or
later than 60 days from the date such notice is mailed, (2) the amount of
accrued and unpaid interest, if any, as of the Asset Sale Offer Purchase Date,
(3) that any Exchange Note not tendered will continue to accrue interest, (4)
that, unless the Company defaults in the payment of the purchase price for the
Exchange Notes payable pursuant to the Asset Sale Offer, any Exchange Notes
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Asset Sale Offer Purchase Date, (5) the procedures,
consistent with the Indenture, to be followed by a holder of Exchange Notes in
order to accept an Asset Sale Offer or to withdraw such acceptance, and (6) such
other information as may be required by the Indenture and applicable laws and
regulations.
On the Asset Sale Offer Purchase Date, the Company will (1) accept for
payment the maximum principal amount of Exchange Notes or portions thereof
tendered pursuant to the Asset Sale Offer that can be purchased out of Excess
Proceeds from such Asset Sale that are to be applied to an Asset Sale Offer, (2)
deposit with the Paying Agent the aggregate purchase price of all Exchange Notes
or portions thereof accepted for payment, and (3) deliver or cause to be
delivered to the Trustee all Exchange Notes tendered pursuant to the Asset Sale
Offer. If less than all Exchange Notes tendered pursuant to the Asset Sale Offer
are accepted for payment by the Company for any reason consistent with the
Indenture, selection of the Exchange Notes to be purchased by the Company shall
be in compliance with the requirements of the principal national securities
exchange, if any, on which the Exchange Notes are listed or, if the Exchange
Notes are not so listed, on a pro rata basis or by lot; provided, however, that
Exchange Notes accepted for payment in part shall only be purchased in integral
multiples of $1,000. The Paying Agent shall promptly mail to each holder of
Exchange Notes or portions thereof accepted for payment an amount equal to the
purchase price for such Exchange Notes plus accrued and unpaid interest, if any,
thereon, and the Trustee shall promptly authenticate and mail to such holder of
Exchange Notes accepted for payment in part a new Exchange Note equal in
principal amount to any unpurchased portion of the Exchange Notes, and any
Exchange Note not accepted for payment in whole or in part shall be promptly
returned to the holder of such Exchange Note. On and after an Asset Sale Offer
Purchase Date, interest will cease to accrue on the Exchange Notes or portions
thereof accepted for payment, unless the Company defaults in the payment of the
purchase price therefor. The Company will publicly announce the results of the
Asset Sale Offer on or as soon as practicable after the Asset Sale Offer
Purchase Date.
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The foregoing provisions will not apply to a transaction consummated in
compliance with the provisions of the Indenture described under "Merger,
Consolidation and Sale of Assets" below.
The Company will comply with the applicable tender offer rules, including
the requirements of Section 14(e) and Rule 14e-1 under the Exchange Act, and all
other applicable securities laws and regulations in connection with any Asset
Sale Offer and will be deemed not to be in violation of any of the covenants
under the Indenture to the extent such compliance is in conflict with such
covenants.
Limitation on Liens. The Indenture provides that the Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, create,
incur, assume or suffer to exist any Lien securing Indebtedness (other than
Permitted Liens) on any asset now owned or hereafter acquired, or any income or
profits therefrom, or assign or convey any right to receive income therefrom to
secure any such Indebtedness, unless (1) if such Lien secures Indebtedness that
is pari passu with the Exchange Notes, then the Exchange Notes are secured on an
equal and ratable basis with the obligations so secured until such time as such
obligation is no longer secured by a Lien or (2) if such Lien secures
Indebtedness that is subordinated to the Exchange Notes, any such Lien shall be
subordinated to a Lien granted to the holders of the Exchange Notes in the same
collateral as that securing such Lien to the same extent as such subordinated
Indebtedness is subordinated to the Exchange Notes.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Indenture provides that the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, create or otherwise
cause to become effective any consensual encumbrance or consensual restriction
on the ability of any Restricted Subsidiary to (1) pay dividends or make any
other distributions to the Company or any other Restricted Subsidiary on its
Capital Stock or with respect to any other interest or participation in, or
measured by, its profits, or pay any Indebtedness owed to the Company or any
other Restricted Subsidiary, (2) make loans or advances to, or issue Guarantees
for the benefit of, the Company or any other Restricted Subsidiary or (3)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of (a) the New Revolving Credit Facility, (b) applicable law, (c) any
instrument governing Indebtedness or Capital Stock of an Acquired Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition); provided,
however, that no such encumbrance or restriction is applicable to any Person, or
the properties or assets of any Person, other than the Acquired Person, (d) by
reason of customary non-assignment, subletting or net worth provisions in leases
or other agreements entered into in the ordinary course of business and
consistent with past practices, (e) Purchase Money Indebtedness for property
acquired in the ordinary course of business that impose restrictions only on the
property so acquired, (f) an agreement for the sale or disposition of assets or
the Capital Stock of such Restricted Subsidiary; provided, however, that such
restriction or encumbrance is only applicable to such Restricted Subsidiary or
assets, as applicable, and such sale or disposition otherwise is permitted by
the provisions described under "Limitation on Asset Sales;" provided, further,
however, that such restriction or encumbrance shall be effective only for a
period from the execution and delivery of such agreement through a termination
date not later than 180 days after such execution and delivery, (g) Refinancing
Indebtedness permitted under the Indenture, (h) the Indenture, the Exchange
Notes and the Guarantees, (i) other Indebtedness permitted to be incurred
subsequent to the Issue Date pursuant to the provisions of the covenant
described under "Limitation on Incurrence of Indebtedness;" provided, however,
that any such restrictions are ordinary and customary with respect to the type
of Indebtedness being incurred, (j) encumbrances and restrictions imposed by
Liens incurred in accordance with the covenant described under "Limitation on
Liens," (k) customary provisions in joint venture agreements and other similar
agreements, and (l) encumbrances and restrictions imposed by amendments,
restatements, renewals, replacements or refinancings of the contracts,
instruments or obligations referred
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to in clauses (a) through (k) above; provided that such encumbrances and
restrictions are, in the good faith judgment of the Company's Board of
Directors, no more restrictive, in any material respect, than those contained in
such contracts, instruments or obligations immediately prior to such amendment,
restatement, renewal, replacement or refinancing.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction or series of related transactions (including,
without limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company unless (1) such transaction or
series of transactions is on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could reasonably
be obtainable at such time in a comparable transaction in arm's-length dealings
with an unrelated third party and (2) the Company delivers to the Trustee (a)
with respect to any transaction or series of transactions involving aggregate
payments in excess of $500,000, an Officers' Certificate certifying that such
transaction or series of related transactions complies with clause (1) above and
(b) with respect to any transaction or series of transactions involving
aggregate payments in excess of $2.0 million, an Officers' Certificate
certifying that such transaction or series of related transactions has been
approved by a majority of the members of the Board of Directors of the Company
(and approved by a majority of the Independent Directors or, in the event there
is only one Independent Director, by such Independent Director), and (c) with
respect to any transaction or series of transactions involving aggregate
payments in excess of $5.0 million, an opinion as to the fairness to the Company
from a financial point of view issued by an investment banking firm of national
standing.
Notwithstanding the foregoing, this covenant will not apply to (1)
employment agreements or compensation or employee benefit arrangements with any
officer, director or employee of the Company or any of its Restricted
Subsidiaries entered into in the ordinary course of business (including
customary benefits thereunder and including reimbursement or advancement of
out-of-pocket expenses, and director's and officer's liability insurance), (2)
the expense sharing arrangement between the Company and Weinberg Capital
Corporation regarding the expenses incurred with respect to the Company's
Cleveland, Ohio headquarters, (3) the Hawk Controlling Stockholder Merger that
occurred concurrently with the Offering, (4) the secured promissory note in the
original principal amount of $500,000 issued to Helco, (5) the Hutchinson Notes,
(6) any transaction entered into by or among the Company or one of its
Restricted Subsidiaries with one or more Restricted Subsidiaries of the Company,
(7) any transaction permitted by the second paragraph under "Limitation on
Restricted Payments," (8) transactions permitted by, and complying with, the
provisions described under "Merger, Consolidation and Sale of Assets," and (9)
transactions with suppliers or other purchases or sales of goods or services, in
each case in the ordinary course of business (including, without limitation,
pursuant to joint venture agreements) and otherwise in compliance with the terms
of the Indenture which, in the reasonable determination of the Board of
Directors of the Company, are on terms no less favorable to the Company or its
Restricted Subsidiaries than those that could reasonably have been obtained at
such time from an unaffiliated party.
Limitation on Designation of Unrestricted Subsidiaries. The Indenture
provides that the Company will not designate any Subsidiary of the Company
(other than a newly created Subsidiary in which no Investment has previously
been made) as an "Unrestricted Subsidiary" under the Indenture (a "Designation")
unless:
(1) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(2) immediately after giving effect to such Designation, the Company
would be able to incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant described under "Limitation on
Incurrence of Indebtedness;" and
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(3) the Company would not be prohibited under the Indenture from
making an Investment at the time of Designation in an amount (the
"Designation Amount") equal to the greater of (a) the book value of such
Restricted Subsidiary on such date and (b) the Fair Market Value of such
Restricted Subsidiary on such date.
In the event of any such Designation, the Company shall be deemed to have made
an Investment in the Designation Amount constituting a Restricted Payment
pursuant to the covenant described under "Limitation on Restricted Payments" for
all purposes of the Indenture.
The Indenture will further provide that the Company will not designate an
Unrestricted Subsidiary as a Restricted Subsidiary (a "Redesignation"), unless:
(1) no Default shall have occurred and be continuing at the time of
and after giving effect to such Redesignation; and
(2) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Redesignation shall be deemed to
have been incurred at such time and shall have been permitted to be
incurred for all purposes of the Indenture.
An Unrestricted Subsidiary shall be deemed to be redesignated as a
Restricted Subsidiary at any time if (1) the Company or any other Restricted
Subsidiary (a) provides credit support for, or a guarantee of, any Indebtedness
of such Unrestricted Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) or (b) is directly or indirectly liable
for any Indebtedness of such Unrestricted Subsidiary, (2) a default with respect
to any Indebtedness of such Unrestricted Subsidiary (including any right that
the holders thereof may have to take enforcement action against it) would permit
(upon notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity or (3) such Unrestricted Subsidiary incurs
Indebtedness pursuant to which the lender has recourse to any of the assets of
the Company or any Restricted Subsidiary.
All Designations and Redesignations must be evidenced by Board Resolutions
delivered to the Trustee certifying compliance with the foregoing provisions.
Subsidiaries that are not designated by the Board of Directors as Restricted or
Unrestricted Subsidiaries will be deemed to be Restricted Subsidiaries. The
Designation of a Restricted Subsidiary as an Unrestricted Subsidiary shall be
deemed a Designation of all of the Subsidiaries of such Unrestricted Subsidiary
as Unrestricted Subsidiaries.
Provision of Financial Statements and Information. The Indenture provides
that, following effectiveness of the Exchange Offer, whether or not the Company
is then subject to Section 13(a) or 15(d) of the Exchange Act, the Company will
file with the Commission, so long as any Exchange Notes are outstanding, the
annual reports, quarterly reports and other periodic reports that the Company
would have been required to file with the Commission pursuant to such Section
13(a) or 15(d) if the Company were so subject, and such documents shall be filed
with the Commission on or prior to the respective dates (the "Required Filing
Dates") by which the Company would have been required so to file such documents
if the Company were so subject; provided the Commission will accept such
filings. The Company will also in any event (1) within 15 days of each Required
Filing Date, file with the Trustee, and supply the Trustee with copies for
delivery to the holders of the Exchange Notes, the annual reports, quarterly
reports and other periodic reports that the Company would have been required to
file with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act
if the Company were subject to such Sections and (2) if the Commission will not
accept the filing of such documents, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective holder of the Exchange Notes.
Additional Covenants. The Indenture also contains covenants with respect to
the following matters: (1) payment of principal, premium and interest; (2)
maintenance of an office or agency in
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The City of New York; (3) maintenance of corporate existence; (4) payment of
taxes and other claims; (5) maintenance of properties; and (6) maintenance of
insurance.
MERGER, CONSOLIDATION AND SALE OF ASSETS
The Indenture provides that the Company shall not, in any single
transaction or series of related transactions, consolidate or merge with or into
(whether or not the Company is the Surviving Person), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) in one or more related transactions to, another Person, and the
Company will not permit any Restricted Subsidiary to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries, taken
as a whole, to another Person, unless: (1) the Surviving Person is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (2) the Surviving Person (if other than the Company or
a Guarantor) assumes all the obligations of the Company under the Exchange
Notes, the Indenture and, if then in effect, the Registration Rights Agreement
pursuant to a supplemental indenture or other written agreement, as the case may
be, in a form reasonably satisfactory to the Trustee; (3) immediately after such
transaction, no Default or Event of Default shall have occurred and be
continuing; (4) immediately after giving effect to such transaction or series of
related transactions, (a) in the case of a transaction involving the Company,
the Surviving Person shall have a Consolidated Net Worth equal to or greater
than the Consolidated Net Worth of the Company immediately prior to such
transaction or series of related transactions or (b) in the case of a
transaction involving a Restricted Subsidiary of the Company, the Surviving
Person shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of such Restricted Subsidiary immediately prior to such
transaction or series of related transactions; and (5) after giving pro forma
effect to such transaction, the Surviving Person would be permitted to incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to the covenant described under "Limitation on Incurrence of
Indebtedness." Notwithstanding clauses (3), (4) and (5) above, any Restricted
Subsidiary that is a Guarantor may consolidate with, merge into or transfer all
or part of its properties and assets to the Company or another Restricted
Subsidiary that is a Guarantor.
In the event of any transaction (other than a lease) described in and
complying with the conditions listed in the immediately preceding paragraph in
which the Company or a Guarantor is not the Surviving Person, such Surviving
Person shall succeed to, and be substituted for, and may exercise every right
and power of, the Company, and the Company shall be discharged from its
obligations under, the Indenture, the Exchange Notes and the Registration Rights
Agreement.
EVENTS OF DEFAULT
The Indenture provides that each of the following constitutes an Event of
Default:
(1) a default for 30 days in the payment when due of interest on, or
Liquidated Damages (if any) with respect to, any Exchange Note;
(2) a default in the payment when due of principal on any Exchange
Note, whether upon maturity, acceleration, optional or mandatory
redemption, required repurchase or otherwise;
(3) failure to perform or comply with any covenant, agreement or
warranty in the Indenture (other than the defaults specified in clauses (1)
and (2) above) which failure continues for 60 days after written notice
thereof has been given to the Company by the Trustee or to the Company and
the Trustee by the holders of at least 25% in aggregate principal amount of
the then outstanding Exchange Notes;
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(4) the occurrence of one or more defaults under any agreements,
indentures or instruments under which the Company or any Restricted
Subsidiary then has outstanding Indebtedness in excess of $5.0 million in
the aggregate and, if not already matured at its final maturity in
accordance with its terms, such Indebtedness shall have been accelerated
and such acceleration is not rescinded, annulled or cured within 10 days
thereafter;
(5) one or more judgments, orders or decrees for the payment of money
in excess of $5.0 million, either individually or in the aggregate, shall
be entered against the Company or any Restricted Subsidiary or any of their
respective properties and which judgments, orders or decrees are not paid,
discharged, bonded or stayed or stayed pending appeal for a period of 60
days after their entry;
(6) certain events of bankruptcy, insolvency or reorganization of the
Company or any Restricted Subsidiary; or
(7) any Guarantee shall for any reason cease to be in full force and
effect or become invalid.
If any Event of Default (other than as specified in clause (6) of the
preceding paragraph with respect to the Company) occurs and is continuing, the
Trustee or the holders of at least 25% in aggregate principal amount of the then
outstanding Exchange Notes may, and the Trustee at the request of such holders
shall, declare all the Exchange Notes to be due and payable immediately by
notice in writing to the Company, and to the Company and the Trustee if by the
holders, specifying the respective Event of Default and that such notice is a
"notice of acceleration," and the Exchange Notes shall become immediately due
and payable. Notwithstanding the foregoing, in the case of an Event of Default
arising from the event specified in clause (6) of the preceding paragraph with
respect to the Company, the principal of, premium, if any, and any accrued
interest on all outstanding Exchange Notes shall ipso facto become immediately
due and payable without further action or notice. Holders of the Exchange Notes
may not enforce the Indenture or the Exchange Notes except as provided in the
Indenture.
The holders of a majority in aggregate principal amount of the Exchange
Notes then outstanding by notice to the Trustee may on behalf of the holders of
all of the Exchange Notes waive any existing Default or Event of Default and its
consequences under the Indenture except (1) a continuing Default or Event of
Default in the payment of the principal of, or premium, if any, or interest on,
the Exchange Notes (which may only be waived with the consent of each holder of
Exchange Notes affected), or (2) in respect of a covenant or provision which
under the Indenture cannot be modified or amended without the consent of the
holder of each Exchange Note outstanding. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding Exchange Notes
may direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from holders of the Exchange Notes notice of any continuing Default or
Event of Default (except a Default or Event of Default relating to the payment
of principal, premium or interest) if it determines that withholding notice is
in their interest.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required, upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
The Indenture provides that no recourse for the payment of the principal
of, premium, if any, interest on or Liquidated Damages, if any, with respect to
any of the Exchange Notes or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture, or in any of the Exchange Notes or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator, shareholder, officer, director, employee or controlling person of
the Company or of any
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successor Person thereof. Each Holder, by accepting the Exchange Notes, waives
and releases all such liability.
DEFEASANCE
The Company may, at its option and at any time, elect to have the
obligations of the Company and the Guarantors discharged with respect to the
outstanding Exchange Notes and the Guarantees ("defeasance"). Such defeasance
means that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Exchange Notes and to have satisfied
all other obligations under the Exchange Notes and the Indenture except for (1)
the rights of holders of the outstanding Exchange Notes to receive, solely from
the trust fund described below, payments in respect of the principal of,
premium, if any, and interest on such Exchange Notes when such payments are due,
(2) the Company's obligations with respect to the Exchange Notes concerning
issuing temporary Exchange Notes, registration of Exchange Notes mutilated,
destroyed, lost or stolen Exchange Notes, and the maintenance of an office or
agency for payment, (3) the rights, powers, trusts, duties and immunities of the
Trustee under the Indenture, and (4) the defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company and the Guarantors released with respect to certain
covenants that are described in the Indenture ("covenant defeasance") and any
omission to comply with such obligations shall not constitute a Default or an
Event of Default with respect to the Exchange Notes. In the event that a
covenant defeasance occurs, certain events (not including non-payment,
bankruptcy and insolvency events) described under "Events of Default" will no
longer constitute Events of Default with respect to the Exchange Notes.
In order to exercise either defeasance or covenant defeasance: (1) the
Company shall irrevocably deposit with the Trustee, as trust funds in trust, for
the benefit of the holders of the Exchange Notes, cash in United States dollars,
U.S. Government Obligations (as defined in the Indenture), or a combination
thereof, in such amounts as will be sufficient, in the report of a nationally
recognized firm of independent public accountants or a nationally recognized
investment banking firm, to pay and discharge the principal of, premium, if any,
and interest on the outstanding Exchange Notes to redemption or maturity; (2)
the Company shall have delivered to the Trustee an opinion of counsel in the
United States to the effect that the holders of the outstanding Exchange Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such defeasance or covenant defeasance, as the case may be, and will
be subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such defeasance or covenant
defeasance, as the case may be, had not occurred (in the case of defeasance,
such opinion must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable federal income tax laws); (3) no Default or
Event of Default shall have occurred and be continuing on the date of such
deposit or insofar as clause (iv) under the first paragraph under "Events of
Default" is concerned, at any time during the period ending on the 91st day
after the date of deposit; (4) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a Default under, the Indenture
or any other agreement or instrument to which the Company or any Guarantor is a
party or by which any of them is bound; (5) the Company shall have delivered to
the Trustee an opinion of counsel to the effect that (a) the trust funds will
not be subject to any rights of any creditors of the Company of any Guarantor
(other than holders of the Exchange Notes) and (b) after the 91st day following
the deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; and (6) the Company shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with and that no violations
under agreements governing any other outstanding Indebtedness would result
therefrom.
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SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights of registration of transfer or exchange of the
Exchange Notes, as expressly provided for in the Indenture) as to all
outstanding Exchange Notes when: (1) either (a) all the Exchange Notes
theretofore authenticated and delivered (except lost, stolen or destroyed
Exchange Notes that have been replaced or paid and Exchange Notes for whose
payment money has theretofore been deposited in trust and thereafter repaid to
the Company) have been delivered to the Trustee for cancellation or (b) all
Exchange Notes not theretofore delivered to the Trustee for cancellation have
become due and payable and the Company has irrevocably deposited or caused to be
deposited with the Trustee an amount in United States dollars sufficient to pay
and discharge the entire indebtedness on the Exchange Notes not theretofore
delivered to the Trustee for cancellation, for the principal of, premium, if
any, and interest to the date of deposit; (2) the Company and the Guarantors
have paid or caused to be paid all other sums payable under the Indenture, the
Exchange Notes and the Guarantees by the Company and the Guarantors; and (3) the
Company has delivered to the Trustee an Officers' Certificate and an opinion of
counsel each stating that all conditions precedent under the Indenture relating
to the satisfaction and discharge of the Indenture have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two paragraphs, the Indenture, the Exchange
Notes or the Guarantees may be amended or supplemented with the written consent
of the holders of at least a majority in aggregate principal amount of the then
outstanding Exchange Notes (including consents obtained in connection with a
tender offer or exchange offer for the Exchange Notes), and any existing Default
or Event of Default or compliance with any provision of the Indenture, the
Exchange Notes or the Guarantees may be waived with the consent of the holders
of a majority in principal amount of the then outstanding Exchange Notes
(including consents obtained in connection with a tender offer or exchange offer
for Exchange Notes).
Without the consent of each holder affected, an amendment or waiver shall
not (1) reduce the principal amount of the Exchange Notes whose holders must
consent to an amendment, supplement or waiver, (2) reduce the principal of or
change the fixed maturity of any Exchange Note, or alter or waive the provisions
with respect to the redemption of the Exchange Notes in a manner adverse to the
holders of the Exchange Notes other than with respect to a Change of Control
Offer or an Asset Sale Offer, (3) reduce the rate of or change the time for
payment of interest on any Exchange Notes, (4) waive a Default or Event of
Default in the payment of principal of, premium, if any, or interest on the
Exchange Notes (except that holders of at least a majority in aggregate
principal amount of the then outstanding Exchange Notes may (a) rescind an
acceleration of the Exchange Notes that resulted from a non-payment default, and
(b) waive the payment default that resulted from such acceleration), (5) make
any Exchange Note payable in money other than that stated in the Exchange Notes,
(6) make any change in the provisions of the Indenture relating to waivers of
past Defaults or the rights of holders of Exchange Notes to receive payments of
principal of, or premium, if any, or interest on, the Exchange Notes, (7)
following the occurrence of a Change of Control, amend, change or modify the
Company's obligation to make and consummate a Change of Control Offer in the
event of a Change of Control or modify any of the provisions or definitions with
respect thereto in a manner adverse to the holders of the Exchange Notes, or
following the occurrence of an Asset Sale, amend, change or modify the Company's
obligation to make and consummate an Asset Sale Offer or modify any of the
provisions or definitions with respect thereto in a manner adverse to the
holders of the Exchange Notes or (8) release any Guarantor from any of its
obligations under its Guarantee or the Indenture other than in compliance with
the Indenture.
Notwithstanding the foregoing, without the consent of any holder of
Exchange Notes, the Company, the Guarantors and the Trustee may amend or
supplement the Indenture, the Exchange Notes or the Guarantees (1) to cure any
ambiguity, defect or inconsistency, (2) to provide for
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uncertificated Exchange Notes in addition to or in place of certificated
Exchange Notes, (3) to provide for the assumption of the Company's obligations
to holders of the Exchange Notes in the event of any Disposition involving the
Company in which the Company is not the Surviving Person, (4) to make any change
that would provide any additional rights or benefits to the holders of the
Exchange Notes or that does not adversely affect the rights of any such holder,
(5) to release any Guarantee permitted to be released under the Indenture or (6)
to comply with the requirements of the Commission in order to effect or maintain
the qualification of the Indenture under the Trust Indenture Act.
TRANSFER AND EXCHANGE
The registered holder of a Exchange Note will be treated as the owner of it
for all purposes. A holder may transfer or exchange Exchange Notes in accordance
with the Indenture. The Exchange Agent (as defined) and the Trustee may require
a holder among other things to furnish appropriate endorsements and transfer
documents and the Company may require a holder to pay any taxes and fees
required by law or permitted by the Indenture. Neither the Company nor the
Exchange Agent shall be required to issue, register the transfer of or exchange
any Exchange Note (1) during a period beginning at the opening of business on
the day that the Trustee receives notice of any redemption from the Company and
ending at the close of business on the day the notice of redemption is sent to
holders, (2) selected for redemption, in whole or in part, except the unredeemed
portion of any Exchange Note being redeemed in part may be transferred or
exchanged, and (3) during a Change of Control Offer or an Asset Sale Offer if
such Exchange Note is tendered pursuant to such Change of Control Offer or Asset
Sale Offer and not withdrawn.
THE TRUSTEE
Bank One Trust Company, NA is the Trustee under the Indenture and has been
appointed by the Company as Exchange Agent and Paying Agent with regard to the
Exchange Notes. Bank One Columbus, NA, an affiliate of the Trustee, was a lender
to the Company under the Old Credit Facility, and received a portion of the
proceeds of the Notes used to repay and terminate the Old Credit Facility.
The Indenture (including the provisions of the Trust Indenture Act
incorporated by reference therein) contains limitations on the rights of the
Trustee thereunder, should it become a creditor of the Company, to obtain
payment of claims in certain cases or to realize on certain property received by
it in respect of any such claims, as security or otherwise. The Trustee is
permitted to engage in other transactions; provided, however, that if it
acquires any conflicting interest (as defined in the Trust Indenture Act), it
must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Exchange Notes and the Guarantees will be governed by
the laws of the State of Ohio, without regard to principles of conflicts of law.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for the definition of all other terms used in the
Indenture.
"Acquired Debt" means, with respect to any specified Person, Indebtedness
of any other Person (the "Acquired Person") existing at the time the Acquired
Person merges with or into, or becomes a Restricted Subsidiary of, such
specified Person, including Indebtedness incurred in connection with, or in
contemplation of, the Acquired Person merging with or into, or becoming a
Restricted Subsidiary of, such specified Person; provided, however, that
Indebtedness of such Acquired Person that is redeemed, defeased, retired or
otherwise repaid at the time of or
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immediately upon consummation of the transactions by which such Acquired Person
merges with or into or becomes a Restricted Subsidiary of such specified Person
shall not be Acquired Debt.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with") of any Person means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Sale" means (1) any sale, lease, conveyance or other disposition by
the Company or any Restricted Subsidiary of any assets (including by way of a
sale-and-leaseback) other than in the ordinary course of business, or (2) the
issuance or sale of Capital Stock of any Restricted Subsidiary, in the case of
each of (1) and (2), whether in a single transaction or a series of related
transactions, to any Person (other than to the Company or a Restricted
Subsidiary and other than directors' qualifying shares) for Net Proceeds in
excess of $100,000.
"Capital Lease Obligation" of any Person means, at the time any
determination thereof is to be made, the amount of the liability in respect of a
capital lease for property leased by such Person that would at such time be
required to be capitalized on the balance sheet of such Person in accordance
with GAAP.
"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) corporate stock or other equity
participations, including partnership interests, whether general or limited, of
such Person, including any Preferred Stock.
"Cash Equivalents" means: (1) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition thereof; (2)
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 maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Rating Services or Moody's Investors
Service, Inc.; (3) commercial paper maturing no more than one year from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from Standard & Poor's Rating Services or at least P-1 from Moody's
Investors Service, Inc.; (4) certificates of deposit or bankers' acceptances
(or, with respect to foreign banks, similar instruments) maturing within one
year from the date of acquisition thereof issued by any bank organized under the
laws of the United States of America or any state thereof or the District of
Columbia or any U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than $200 million; (5)
repurchase obligations with a term of not more than seven days for underlying
securities of the types described in clause (1) above entered into with any bank
meeting the qualifications specified in clause (4) above; and (6) investments in
money market funds that invest substantially all their assets in securities of
the types described in clauses (1) through (5) above.
"Cash Flow" means, with respect to any period, Consolidated Net Income for
such period, plus, to the extent deducted in computing such Consolidated Net
Income: (1) extraordinary net losses, plus (2) provision for taxes based on
income or profits and any provision for taxes utilized in computing the
extraordinary net losses under clause (1) hereof, plus (3) Consolidated Interest
Expense, plus (4) depreciation, amortization and all other non-cash charges
(including amortization of goodwill and other intangibles).
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"Change of Control" means the occurrence of any of the following events:
(1) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) (other than Permitted Holders) is or becomes (including by
merger, consolidation or otherwise) the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to
have beneficial ownership of all shares that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of 50% or more of the voting power of the
total outstanding Voting Stock of the Company; (2) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors of the Company (together with any new directors whose
election to such Board of Directors, or whose nomination for election by the
stockholders of the Company, 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 period
or whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of such Board of Directors of the
Company then in office; (3) the approval by the holders of Capital Stock of the
Company of any plan or proposal for the liquidation or dissolution of the
Company (whether or not otherwise in compliance with the terms of the
Indenture); or (4) the sale or other disposition (including by merger,
consolidation or otherwise) of all or substantially all of the Capital Stock or
assets of the Company to any Person or group (as defined in Rule 13d-5 of the
Exchange Act) (other than to the Permitted Holders) as an entirety or
substantially as an entirety in one transaction or a series of related
transactions.
"Consolidated Cash Flow Coverage Ratio" means, for any period, the ratio of
(1) the aggregate amount of Cash Flow for such period, to (2) Consolidated
Interest Expense for such period, determined on a pro forma basis after giving
pro forma effect to: (a) the incurrence of the Indebtedness giving rise to the
calculation of the Consolidated Cash Flow Coverage Ratio and (if applicable) the
application of the net proceeds therefrom, including to refinance other
Indebtedness, as if such Indebtedness was incurred, and the application of such
proceeds occurred, at the beginning of such period; (b) the incurrence,
repayment or retirement of any other Indebtedness by the Company and its
Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average balance of
such Indebtedness at the end of each month during such period; (c) in the case
of Acquired Debt, the related acquisition as if such acquisition had occurred at
the beginning of such period; and (d) any acquisition or disposition by the
Company and its Restricted Subsidiaries of any company or any business or any
assets out of the ordinary course of business, or any related repayment of
Indebtedness, in each case since the first day of such period, assuming such
acquisition or disposition had been consummated on the first day of such period.
"Consolidated Interest Expense" means, with respect to any period, the sum
of (1) the interest expense of the Company and its Restricted Subsidiaries for
such period, including, without limitation, (a) amortization of debt discount,
(b) the net payments, if any, under interest rate contracts (including
amortization of discounts), (c) the interest portion of any deferred payment
obligation and (d) accrued interest, plus (2) the interest component of the
Capital Lease Obligations paid, accrued and/or scheduled to be paid or accrued
by the Company and its Restricted Subsidiaries during such period, and all
capitalized interest of the Company and its Restricted Subsidiaries, plus (3)
all dividends paid during such period by the Company and its Restricted
Subsidiaries with respect to any Disqualified Stock (other than by any
Restricted Subsidiary to the Company or any other Restricted Subsidiary and
other than any dividend paid in Capital Stock (other than Disqualified Stock)),
and all dividends paid during such period by any Restricted Subsidiary with
respect to any Preferred Stock, in each case, as determined on a consolidated
basis in accordance with GAAP consistently applied.
"Consolidated Net Income" means, with respect to any period, the net income
(or loss) of the Company and its Restricted Subsidiaries for such period,
determined on a consolidated basis in
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accordance with GAAP consistently applied, adjusted to the extent included in
calculating such net income (or loss), by excluding, without duplication, (1)
all extraordinary gains but not losses (less all fees and expenses relating
thereto), (2) the portion of net income (or loss) of the Company and its
Restricted Subsidiaries allocable to interests in unconsolidated Persons or
Unrestricted Subsidiaries, except to the extent of the amount of dividends or
distributions actually paid to the Company or its Restricted Subsidiaries by
such other Person during such period, (3) net income (or loss) of any Person
combined with the Company or any of its Restricted Subsidiaries on a
"pooling-of-interests" basis attributable to any period prior to the date of
combination, (4) net gain but not losses (less all fees and expenses relating
thereto) in respect of disposition of assets (including, without limitation,
pursuant to sale and leaseback transactions) other than in the ordinary course
of business, or (5) the net income of any Restricted Subsidiary to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income to the Company is not at the time permitted, directly
or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Worth" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
GAAP, less (without duplication) amounts attributable to Disqualified Stock of
such Person.
"Currency Agreement Obligations" means the obligations of any person under
a foreign exchange contract, currency swap agreement or other similar agreement
or arrangement to protect such person against fluctuations in currency values.
"Default" means any event that is, or after the giving of notice or passage
of time or both would be, an Event of Default.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.
"Disqualified Stock" means (1) any Preferred Stock of any Restricted
Subsidiary and (2) any Capital Stock that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof (other than upon a change of control of the Company in
circumstances where the holders of the Exchange Notes would have similar
rights), in whole or in part on or prior to the stated maturity of the Exchange
Notes.
"Dollars" and "$" means lawful money of the United States of America.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an informed
and willing seller under no compulsion to sell and an informed and willing buyer
under no compulsion to buy.
"Foreign Subsidiary" means a Restricted Subsidiary not organized under the
laws of the United States or any political subdivision thereof and the
operations of which are located entirely outside the United States.
"GAAP" means generally accepted accounting principles in the United States
set forth in the Statements of Financial Accounting Standards and the
Interpretations, Accounting Principles Board
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Opinions and AICPA Accounting Research Bulletins that are applicable as of the
Issue Date and consistently applied.
"Guarantee" has the meaning ascribed to that term under "The Guarantees."
"guarantee" means, as applied to any obligation, (1) a guarantee (other
than endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (2) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"Guarantor" means (1) each of Friction Products Co., Logan Metal Stampings,
Inc., Hawk Brake, Inc., S.K. Wellman Holdings, Inc., S.K. Wellman Corp., Wellman
Friction Products U.K. Corp., Helsel, Inc., and Hutchinson Products Corporation
and (2) any other Subsidiary of the Company that guarantees the Exchange Notes.
"Indebtedness" means, with respect to any Person, without duplication, and
whether or not contingent, (1) all indebtedness of such Person for borrowed
money or that is evidenced by a note, bond, debenture or similar instrument, (2)
all obligations of such Person to pay the deferred or unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such service, (3) all Capital Lease Obligations of such
Person, (4) all obligations of such Person in respect of letters of credit or
bankers' acceptances issued or created for the account of such Person, (5) to
the extent not otherwise included in this definition, all net obligations of
such Person under Interest Rate Agreement Obligations or Currency Agreement
Obligations of such Person, (6) all liabilities of others of the kind described
in the preceding clause (1), (2) or (3) secured by any Lien on any property
owned by such Person, provided, however, that if the obligations secured by a
Lien (other than a Permitted Lien not securing any liability that would itself
constitute Indebtedness) or any assets or property have not been assumed by such
Person in full or are not such Person's legal liability in full, the amount of
such Indebtedness for purposes of this definition shall be limited to the lesser
of the amount of Indebtedness secured by such Lien and the Fair Market Value of
the property subject to such Lien; (7) all Disqualified Stock issued by such
Person and all Preferred Stock issued by a Subsidiary of such Person, and (8) to
the extent not otherwise included, any guarantee by such Person of any other
Person's indebtedness or other obligations described in clauses (1) through (7)
above. "Indebtedness" of the Company and the Restricted Subsidiaries shall not
include current trade payables incurred in the ordinary course of business and
payable in accordance with customary practices, and non-interest bearing
installment obligations and accrued liabilities incurred in the ordinary course
of business that are not more than 90 days past due. The principal amount
outstanding of any Indebtedness issued with original issue discount is the
accreted value of such Indebtedness. Notwithstanding the foregoing, Indebtedness
shall not include Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
drawn against insufficient funds in the ordinary course of business; provided
that such Indebtedness is extinguished within 3 business days of the incurrence
thereof.
"Independent Director" means a director of the Company other than a
director (1) who (apart from being a director of the Company or any Subsidiary
of the Company) is an employee, associate or Affiliate of the Company or a
Subsidiary of the Company, or (2) who is a director, employee, associate or
Affiliate of another party (other than the Company or any of its Subsidiaries)
to the transaction in question.
"Interest Rate Agreement Obligations" means, with respect to any Person,
the Obligations of such Person under (1) interest rate swap agreements, interest
rate cap agreements and interest
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rate collar agreements and (2) other agreements or arrangements designed to
protect such Person against fluctuations in interest rates.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness issued
by, any Person. "Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reasonable terms in
accordance with normal trade practices of the Company or such Restricted
Subsidiary, as the case may be. For the purposes of the "Limitation on
Restricted Payments" covenant, (1) "Investment" shall include and be valued at
the Fair Market Value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the Fair Market Value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (2) the amount of any Investment shall be the original
cost of such Investment plus the cost of all additional Investments by the
Company or any of its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or write-offs with
respect to such Investment, reduced by the payment of dividends or distributions
in connection with such Investment or any other amounts received in respect of
such Investment; provided, however, that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Common
Stock of any direct or indirect Restricted Subsidiary of the Company such that,
after giving effect to any such sale or disposition, the Company no longer owns,
directly or indirectly, greater than 50% of the outstanding Common Stock of such
Restricted Subsidiary, the Company shall be deemed to have made an Investment on
the date of any such sale or disposition equal to the Fair Market Value of the
Common Stock of such Restricted Subsidiary not sold or disposed of.
"Issue Date" means November 27, 1996.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in any asset and any filing of, or agreement to give, any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages owing under the
Registration Rights Agreement.
"Net Proceeds" means, with respect to any Asset Sale by any Person, the
aggregate cash or Cash Equivalent proceeds received by such Person and/or its
Affiliates in respect of such Asset Sale, which amount is equal to the excess,
if any, of (1) the cash or Cash Equivalent received by such Person and/or its
Affiliates (including any cash payments received by way of deferred payment
pursuant to, or monetization of, a note or installment receivable or otherwise,
but only as and when received) in connection with such Asset Sale, over (2) the
sum of (a) the amount of any Indebtedness that is secured by such asset and that
is required to be repaid by such Person in connection with such Asset Sale, plus
(b) all fees, commissions and other expenses incurred by such Person in
connection with such Asset Sale, plus (c) provision for taxes, including income
taxes, directly attributable to the Asset Sale or to required prepayments or
repayments of Indebtedness with the proceeds of such Asset Sale, plus (d) if
such Person is a Restricted
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Subsidiary, any dividends or distributions payable to holders of minority
interests in such Restricted Subsidiary from the proceeds of such Asset Sale.
"New Revolving Credit Facility" means the New Revolving Credit Facility
between the Company and the lenders named therein as the same may be amended,
modified, renewed, refunded, replaced or refinanced from time to time, including
(1) any related notes, letters of credit, 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,
and (2) any notes, guarantees, collateral documents, instruments and agreements
executed in connection with any such amendment, modification, renewal,
refunding, replacement or refinancing.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness.
"Permitted Holders" means any of Norman C. Harbert, Ronald E. Weinberg,
Byron S. Krantz, Clanco Partners I or any "group" (as defined in Rule 13d-5 of
the Exchange Act) consisting of any or all of the foregoing.
"Permitted Investments" means: (1) any Investment in the Company or any
Restricted Subsidiary that is a Guarantor; (2) any Investment in Cash
Equivalents; (3) any Investment in a Person (an "Acquired Person") if, as a
result of such Investment, (a) the Acquired Person becomes a Restricted
Subsidiary of the Company and becomes a Guarantor of the Exchange Notes, or (b)
the Acquired Person either (i) is merged, consolidated or amalgamated with or
into the Company or one of its Restricted Subsidiaries that is a Guarantor of
the Exchange Notes and the Company or such Restricted Subsidiary is the
Surviving Person, or (ii) transfers or conveys substantially all of its assets
to, or is liquidated into, the Company or one of its Restricted Subsidiaries
that is a Guarantor of the Exchange Notes; (4) Investments in accounts and notes
receivable acquired in the ordinary course of business; (5) any securities
received in connection with an Asset Sale that complies with the covenant
described under "Limitations on Asset Sales;" (6) Interest Rate Obligations and
Currency Agreement Obligations permitted pursuant to the second paragraph of the
covenant described under "Limitation on Incurrence of Indebtedness" above; and
(7) investments in or acquisitions of Capital Stock or similar interests in
Persons (other than Affiliates of the Company) received in the bankruptcy or
reorganization of or by such Person or any exchange of such investment with the
issuer thereof or taken in settlement of or other resolution of claims or
disputes.
"Permitted Liens" means: (1) Liens securing Indebtedness under the New
Revolving Credit Facility; (2) Liens securing Indebtedness of a Person existing
at the time that such Person is merged into or consolidated with the Company or
a Restricted Subsidiary, provided, however, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of such Person; (3) Liens on property acquired by
the Company or a Restricted Subsidiary, provided, however, that such Liens were
in existence prior to the contemplation of such acquisition and do not extend to
any other property; (4) Liens in respect of Interest Rate Obligations and
Currency Agreement Obligations permitted under the Indenture; (5) Liens in favor
of the Company, any Restricted Subsidiary or any Guarantor; (6) Liens existing
or created on the Issue Date; and (7) Liens securing the Exchange Notes.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends or
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distributions, or as to the distribution of assets upon any voluntary or
involuntary liquidation or dissolution of such Person, over Capital Stock of any
other class of such Person.
"Public Equity Offering" means an underwritten public offering of Capital
Stock (other than Disqualified Capital Stock) of the Company pursuant to an
effective registration statement filed under the Securities Act.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of the Company or the Restricted Subsidiaries,
and any additions and accessions thereto, that are purchased, constructed or
improved by the Company or any Restricted Subsidiary at any time after the Issue
Date; provided, however, that (1) any security agreement or conditional sales or
other title retention contract pursuant to which the Lien on such assets is
created (collectively, a "Security Agreement") shall be entered into within 90
days after the purchase or substantial completion of the construction of such
assets and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom, (2)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (3) (a) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Security Agreement is entered into exceed 100% of the purchase price
to the Company or any Restricted Subsidiary of the assets subject thereto or (b)
the Indebtedness secured thereby shall be with recourse solely to the assets so
purchased or acquired, any additions and accessions thereto and any proceeds
therefrom.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Payment" means: (1) any dividend or other distribution declared
or paid on any Capital Stock of the Company (other than (a) dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) of
the Company or (b) dividends or distributions payable to the Company or any
Restricted Subsidiary); (2) any payment to purchase, redeem or otherwise acquire
or retire for value any Capital Stock of the Company; (3) any payment to
purchase, redeem, defease or otherwise acquire or retire for value, prior to any
scheduled maturity, repayment or sinking fund payment, any Indebtedness that is
subordinated in right of payment to the Exchange Notes other than a purchase,
redemption, defeasance or other acquisition or retirement for value that is paid
for with the proceeds of Refinancing Indebtedness that is permitted under the
covenant described under "Certain Covenants -- Limitation on Incurrence of
Indebtedness;" or (4) any Restricted Investment.
"Restricted Subsidiary" means each direct or indirect Subsidiary of the
Company other than an Unrestricted Subsidiary.
"Senior Debt" means the principal of and interest (including post-petition
interest) on, and all other amounts owing in respect of, (1) the New Revolving
Credit Facility, (2) Indebtedness evidenced by the Exchange Notes, and (3) any
other Indebtedness incurred by the Company (including, but not limited to,
reasonable fees and expenses of counsel and all other charges, fees and expenses
incurred in connection with such Indebtedness), unless the instrument creating
or evidencing such Indebtedness or pursuant to which such Indebtedness is
outstanding expressly provides that such Indebtedness is on a parity with or
subordinated in right of payment to the Notes. Notwithstanding the foregoing,
Senior Debt shall not include (1) any Indebtedness for federal, state, local or
other taxes, (2) any Indebtedness among or between the Company, any of its
Subsidiaries and/or their Affiliates, (3) any Indebtedness incurred for the
purchase of goods or materials, or for services obtained, in the ordinary course
of business or any obligations in respect of any such Indebtedness, (4) any
Indebtedness that is incurred in violation of the Indenture, or (5)
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Indebtedness of the Company that is expressly subordinate or junior in right of
payment to any other Indebtedness of the Company.
"Subordinated Indebtedness" means Indebtedness of the Company subordinated
in right of payment to the Exchange Notes.
"Subsidiary" of a Person means (1) any corporation more than 50% of the
outstanding voting power of the Voting Stock of which is owned or controlled,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person, or by such Person and one or more other Subsidiaries thereof, (2)
any limited partnership of which such Person or any Subsidiary of such Person is
a general partner or (3) any other Person (other than a corporation or limited
partnership) in which such Person or one or more other Subsidiaries of such
Person, or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has more than 50% of the outstanding partnership or similar
interests or has the power, by contract or otherwise, to direct or cause the
direction of the policies, management and affairs thereof.
"Surviving Person" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.
"Unrestricted Subsidiary" means a Subsidiary of the Company designated as
such pursuant to and in compliance with the covenant described under "Limitation
on Designations of Unrestricted Subsidiaries" and not redesignated a Restricted
Subsidiary in compliance with such covenant.
"Voting Stock" of a Person means Capital Stock of such Person of the class
or classes pursuant to which the holders thereof have the general voting power
under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (1) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (2) the then outstanding
aggregate principal amount of such Indebtedness.
BOOK-ENTRY; DELIVERY AND FORM
Except as described in the next paragraph, the Company expects that the
Exchange Notes initially will each be represented by a single global certificate
in fully registered form (the "Global Note") and will be deposited with the
Trustee as custodian for The Depository Trust Company ("DTC") and registered in
the name of a nominee of DTC.
If a holder tendering Notes so requests, such holder's Exchange Notes will
be issued in registered form (the "Certificated Notes"). Certificated Notes will
initially be registered in the name of a nominee of DTC and be deposited with,
or on behalf of, DTC. Beneficial owners of Certificated Notes, however, may
request registration of such Certificated Notes in their names or in the names
of their nominees.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants and facilitate the clearance and settlement of
securities transactions between participants through electronic book-entry
changes in accounts of its participants, thereby
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eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies and clearing corporations and certain other organizations. Indirect
access to the DTC system is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a participant, either directly or indirectly ("indirect participants").
Global Note. The Company expects that upon the issuance of the Global Note,
DTC or its custodian will credit, on its book-entry registration and transfer
system, the respective principal amount of Exchange Notes of the individual
beneficial interests represented by such Global Note to the accounts of persons
who have accounts with such depositary. Ownership of beneficial interests in the
Global Note will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Note will be shown on, and the transfer of
that ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
participants (with respect to interests of persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of the
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture and the Exchange Notes. No beneficial owner of
an interest in the Global Note will be able to transfer that interest except in
accordance with DTC's applicable procedures, in addition to those provided for
under the Indenture.
Payments of the principal of, premium (if any) and interest on the Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Company nor the Trustee will have any responsibility
or liability for any aspect of the record relating to or payments made on
account of beneficial ownership interests in the Global Note or for maintaining,
supervising or reviewing any record relating to such beneficial ownership
interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium or interest in respect of the Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practice, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
The Company expects that transfers between participants in DTC will be
effected in the ordinary way in accordance with DTC rules and will be settled in
same-day funds. If a holder requires physical delivery of a Certificated Note
for any reason, including to sell Exchange Notes to persons in states which
require physical delivery of such Exchange Notes or to pledge such Exchange
Notes, such holder must transfer its interest in the Global Note in accordance
with the normal procedures of DTC and the procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
participants to whose account the DTC interest in the Global Note is credited
and only in respect of such portion of the aggregate principal amount of
Exchange Notes as to which such participant or participants have given such
direction. However, if there is an Event of Default under the Exchange Notes or
the Indenture, DTC will exchange the Global Note for Certificated Notes that it
will distribute to its participants.
Although DTC customarily agrees to the foregoing procedures in order to
facilitate transfers of interests in global notes among participants of DTC, it
is under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company, the
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Guarantors nor the Trustee will have any responsibility for the performance by
DTC or its participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
Certificated Securities. Subject to certain conditions, any person having a
beneficial interest in the Global Note may, upon request to the Trustee,
exchange such beneficial interest for Exchange Notes in the form of Certificated
Notes. Upon any such issuance, the Trustee is required to register such
Certificated Notes in the name of, and cause the same to be delivered to, such
person or persons (or the nominee of any thereof). In addition, if DTC is at any
time unwilling or unable to continue as a depositary for the Global Note and a
successor depositary is not appointed by the Company within 90 days,
Certificated Notes will be issued in exchange for the Global Note.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States federal income tax
consequences of the exchange of Notes for Exchange Notes pursuant to the
Exchange Offer and of the ownership of Exchange Notes as of the date hereof.
Except where noted, it deals only with Exchange Notes held as capital assets and
does not deal with special situations, such as those of dealers in securities or
currencies, financial institutions, life insurance companies, persons holding
Exchange Notes as a part of a hedging or conversion transaction or a straddle or
holders of Exchange Notes whose "functional currency" is not the U.S. dollar.
Furthermore, the discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in federal income tax consequences
different from those discussed below.
PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF NOTES OR
TENDERING NOTES FOR EXCHANGE NOTES PURSUANT TO THE EXCHANGE OFFER SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN LIGHT
OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The following paragraph sets forth the opinion of Kohrman Jackson & Krantz
P.L.L. relating to certain United States federal income tax consequences of the
exchange of Notes for Exchange Notes pursuant to the Exchange Offer as of the
date hereof. PERSONS CONSIDERING THE EXCHANGE OF NOTES FOR EXCHANGE NOTES SHOULD
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES IN
LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER
THE LAWS OF ANY OTHER TAXING JURISDICTION.
The exchange of the Notes for Exchange Notes pursuant to the Exchange Offer
should not be treated as an "exchange" for federal income tax purposes because
the Exchange Notes should not be considered to differ materially in kind or
extent from the Notes. Rather, the Exchange Notes received by a holder of Notes
should be treated as a continuation of the Notes in the hands of such holder. As
a result, there should be no federal income tax consequences to a holder
exchanging Notes for the Exchange Notes pursuant to the Exchange Offer.
PAYMENTS OF INTEREST
Except as set forth below, stated interest on an Exchange Note will
generally be taxable to a United States Holder as ordinary income from domestic
sources at the time it is paid or accrued in accordance with the United States
Holder's method of accounting for tax purposes. As used herein, a "United States
Holder" of an Exchange Note means a holder that is a citizen or resident of the
United States, a corporation, partnership or other entity created or organized
in or under the laws of
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the United States or any political subdivision thereof, or an estate or trust
the income of which is subject to United States federal income taxation
regardless of its source. A "Non-United States Holder" is a holder that is not a
United States Holder.
MARKET DISCOUNT
If a United States Holder purchases an Exchange Note for an amount that is
less than its stated principal amount, the amount of the difference will be
treated as "market discount" for federal income tax purposes, unless such
difference is less than a specified de minimis amount. Under the market discount
rules, a United States Holder will be required to treat any principal payment
on, or any gain on the sale, exchange, retirement or other disposition of, an
Exchange Note as ordinary income to the extent of the market discount which has
not previously been included in income and is treated as having accrued on such
Exchange Note at the time of such payment or disposition. In addition, the
United States Holder may be required to defer, until the maturity of the
Exchange Note or its earlier disposition in a taxable transaction, the deduction
of all or a portion of the interest expense on any indebtedness incurred or
continued to purchase or carry such Exchange Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Exchange Note, unless
the United States Holder elects to accrue on a constant interest method. A
United States Holder of an Exchange Note may elect to include market discount in
income currently as it accrues (on either a ratable or constant interest
method), in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service ("IRS").
AMORTIZABLE BOND PREMIUM
A United States Holder that purchases an Exchange Note for an amount in
excess of the sum of all amounts payable on the Exchange Note after the purchase
date other than stated interest will be considered to have purchased the
Exchange Note at a "premium." A United States Holder generally may elect to
amortize the premium over the remaining term of the Exchange Note on a constant
yield method. The amount amortized in any year will be treated as a reduction of
the United States Holder's interest income from the Exchange Note. Bond premium
on an Exchange Note held by a United States Holder that does not make such an
election will decrease the gain or increase the loss otherwise recognized on
disposition of the Exchange Note. The election to amortize premium on a constant
yield method once made applies to all debt obligations held or subsequently
acquired by the electing United States Holder on or after the first day of the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS.
SALE, EXCHANGE AND RETIREMENT OF EXCHANGE NOTES
A United States Holder's tax basis in an Exchange Note will, in general, be
the United States Holder's cost therefor, increased by market discount
previously included in income by the United States Holder and reduced by any
amortized premium and any cash payments on the Exchange Note other than stated
interest. Upon the sale, exchange, retirement or other disposition of an
Exchange Note, a United States Holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange, retirement or
other disposition (less any accrued interest, which will be taxable as such) and
the adjusted tax basis of the Exchange Note. Such gain or loss will be capital
gain or loss and will be long-term capital gain or loss if at the time of sale,
exchange, retirement or other disposition the Exchange Note has been held for
more than one year. Under current law, net capital gains of individuals are,
under certain circumstances, taxed at lower rates than items of ordinary income.
The deductibility of capital losses is subject to limitations.
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NON-UNITED STATES HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(1) no withholding of United States federal income tax will be
required with respect to the payment by the Company or any paying agent of
principal or interest on an Exchange Note owned by a Non-United States
Holder, provided (a) that the beneficial owner 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 within the meaning of
section 871(h)(3) of the Code and the regulations thereunder, (b) the
beneficial owner is not a controlled foreign corporation that is related to
the Company through stock ownership, (c) the beneficial owner is not a bank
whose receipt of interest on an Exchange Note is described in section
881(c)(3)(A) of the Code and (d) the beneficial owner satisfies the
statement requirement (described generally below) set forth in section
871(h) and section 881(c) of the Code and the regulations thereunder;
(2) no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-United States
Holder upon the sale, exchange, retirement or other disposition of an
Exchange Note; and
(3) an Exchange Note beneficially owned by an individual who at the
time of death is a Non-United States Holder will not be subject to United
States federal estate tax as a result of such individual's death, provided
that such 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 within the meaning of section 871(h)(3) of the Code and
provided that the interest payments with respect to such Note would not
have been, if received at the time of such individual's death, effectively
connected with the conduct of a United States trade or business by such
individual.
To satisfy the requirement referred to in clause (1)(d) above, the
beneficial owner of such Note, or a financial institution holding the Exchange
Note on behalf of such owner, must provide, in accordance with specified
procedures, a paying agent of the Company with a statement to the effect that
the beneficial owner is not a United States person. Pursuant to current
temporary Treasury regulations, these requirements will be met if (1) the
beneficial owner provides his name and address, and certifies, under penalties
of perjury, that he is not a United States person (which certification may be
made on an Internal Revenue Service Form W-8 (or successor form)) or (2) a
financial institution holding the Exchange Note on behalf of the beneficial
owner certifies, under penalties of perjury, that such statement has been
received by it and furnishes a paying agent with a copy thereof.
If a non-United States Holder cannot satisfy the requirements of the
"portfolio interest" exception described in clause (1) above, payments of
premium, if any, and interest made to such non-United States Holder will be
subject to a 30% withholding tax unless the beneficial owner of the Exchange
Note provides the Company or its paying agent, as the case may be, with a
properly executed (1) IRS Form 1001 (or successor form) claiming an exemption
from withholding under the benefit of a tap treaty or (2) IRS Form 4224 (or
successor form) stating that interest paid on the Exchange Note is not subject
to withholding tax because it is effectively connected with the beneficial
owner's conduct of a trade or business in the United States.
If a non-United States Holder is engaged in a trade or business in the
United States and premium, if any, or interest on the Exchange Note is
effectively connected with the conduct of such trade or business, the non-United
States Holder, although exempt from the withholding tax discussed above, will be
subject to United States federal income tax on such interest on a net income
basis in the same manner as if it were a United States Holder. In addition, if
such holder is a foreign corporation, it may be subject to a branch profits tax
equal to 30% of its effectively connected earnings and profits for the taxable
year, subject to adjustments. For this purpose, such
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premium, if any, and interest on an Exchange Note will be included in such
foreign corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of an Exchange Note generally will not be subject to United States
federal income tax unless (1) such gain or income is effectively connected with
a trade or business in the United States of the Non-United States Holder, or (2)
in the case of a Non-United States Holder who is an individual, such individual
is present in the United States for 183 days or more in the taxable year of such
sale, exchange, retirement or other disposition, and certain other conditions
are met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Exchange Notes and to the
proceeds of sale of an Exchange Note made to United States Holders other than
certain exempt recipients (such as corporations). A 31% backup withholding tax
will apply to such payments if the United States Holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income.
No information reporting or backup withholding will be required with
respect to payments made by the Company or any paying agent to Non-United States
Holders if a statement described in clause (1)(d) under "Non-United States
Holders" has been received and the payor does not have actual knowledge that the
beneficial owner is a United States person.
In addition, backup withholding and information reporting will not apply if
payments of the principal, interest or premium on an Exchange Note are paid or
collected by a foreign office of a custodian, nominee or other foreign agent on
behalf of the beneficial owner of such Exchange Note, or if a foreign office of
a broker (as defined in applicable Treasury regulations) pays the proceeds of
the sale of an Exchange Note to the owner thereof. If, however, such nominee,
custodian, agent or broker is, for United States federal income tax purposes, a
United States person, a controlled foreign corporation or a foreign person that
derives 50% or more of its gross income for certain periods from the conduct of
a trade or business in the United States, such payments will not be subject to
backup withholding but will be subject to information reporting, unless (1) such
custodian, nominee, agent or broker has documentary evidence in its records that
the beneficial owner is not a United States person and certain other conditions
are met or (2) the beneficial owner otherwise establishes an exemption.
Temporary Treasury regulations provide that the Treasury is considering whether
backup withholding will apply with respect to such payments of principal,
interest or the proceeds of a sale that are not subject to backup withholding
under the current regulations.
Payments of principal, interest and premium on an Exchange Note paid to the
beneficial owner of an Exchange Note by a United States office of a custodian,
nominee or agent, or the payment by the United States office of a broker of the
proceeds of sale of an Exchange Note, will be subject to both backup withholding
and information reporting unless the beneficial owner provides the statement
referred to in clause (1)(d) under "Non-United States Holders" and the payor
does not have actual knowledge that the beneficial owner is a United States
person or otherwise establishes an exemption. Under proposed United States
Treasury regulations not currently in effect, backup withholding will not apply
to such payments absent actual knowledge that the payee is a United States
person. The IRS recently proposed regulations addressing certain withholding,
certification and information rules which could affect the treatment of the
payment of the amounts described above (the "Proposed Regulations"). The
Proposed Regulations would provide alternative methods for satisfying the
certification requirement described in clause (1)(d) under "Non-United States
Holders." The Proposed Regulations also would require, in the case of Exchange
Notes held by foreign partnerships, that (1) the certification described in
clause (1)(d) under "Non-United States Holders" be provided by the partners
rather than by the foreign partnership and (2) the
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partnership provide certain information, including a United States taxpayer
identification number. A look through rule would apply in the case of tiered
partnerships. The Proposed Regulations are proposed to be effective for payments
made after December 31, 1997. There can be no assurance that the Proposed
Regulations will be adopted or as to the provisions they will include if and
when adopted in temporary or final form. Non-United States Holders should
consult their tax advisors regarding the application of these rules to their
particular situations, the availability of an exemption therefrom, the procedure
for obtaining such an exemption, if available, and the possible application of
the proposed United States Treasury regulations addressing the withholding and
information reporting rules.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
Under Proposed Treasury Regulations, not currently in effect, the statement
requirement referred to in clause (1)(d) under "Non-United States Holders" may
be satisfied with other documentary evidence for interest paid after December
31, 1997 with respect to an offshore account or through certain foreign
intermediaries.
REGISTRATION RIGHTS
The Company, the Guarantors and the Initial Purchasers entered into the
Registration Rights Agreement on the Issue Date pursuant to which the Company
and the Guarantors agreed, for the benefit of holders of the Notes, that they
will, at their expense (1) on or prior to the 45th day following the Issue Date,
file the Exchange Offer Registration Statement with the Commission with respect
to the Exchange Offer pursuant to which the Notes will be exchanged for the
Exchange Notes, which will have terms identical to the Notes (except that the
Exchange Notes will not contain terms with respect to transfer restrictions or
any provision relating to this paragraph) and (2) use their best efforts to
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act by the 120th day after the Issue Date. Upon effectiveness of
the Exchange Offer Registration Statement, the Company and the Guarantors will
offer to all holders of the Notes an opportunity to exchange their securities
for a like principal amount of the Exchange Notes. The Company and the
Guarantors agreed to keep the Exchange Offer open for acceptance for not less
than 20 business days (or longer, if required by applicable law) after the date
the Exchange Offer Registration Statement is declared effective, and will comply
with Regulation 14E and Rule 13e-4 under the Exchange Act (other than the filing
requirements of Rule 13e-4). For each Note surrendered to the Company for
exchange pursuant to the Exchange Offer, the holder of such Note will receive an
Exchange Note having a principal amount at maturity equal to that of the
surrendered Note. Interest on each Exchange Note will accrue from the last
interest payment date on which interest was paid on the Note surrendered in
exchange therefor or, if no interest has been paid on such Note, from the Issue
Date.
Under existing interpretations of the Commission contained in several
no-action letters to third parties, the Exchange Notes would generally be freely
transferable by holders thereof after the Exchange Offer without further
registration under the Securities Act (subject to certain representations
required to be made by each holder of Notes, as set forth below). However, any
purchaser of Notes who is an "affiliate" of the Company or who intends to
participate in the Exchange Offer for the purpose of distributing the Exchange
Notes (1) will not be able to rely on the interpretation of the staff of the
Commission, (2) will not be able to tender its Notes in the Exchange Offer and
(3) must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the Notes unless
such sale or transfer is made pursuant to an exemption from such requirements.
In addition, in connection with any resales of Exchange Notes, any broker-dealer
that acquired the Notes for its own account as a result of market making or
other trading activities must deliver a prospectus meeting the requirements of
the Securities Act. The
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Commission has taken the position that such broker-dealers may fulfill their
prospectus delivery requirements with respect to the Exchange Notes (other than
a resale of an unsold allotment from the original sale of the Notes) with the
prospectus contained in the Exchange Offer Registration Statement. The Company
has agreed to make available, for a period of up to 120 days after consummation
of the Exchange Offer, copies of this Prospectus, as it may be amended or
supplemented from time to time, to any such broker-dealer and any other persons,
if any, with similar prospectus delivery requirements, for use in connection
with any resale of Exchange Notes. A broker-dealer or any other person that
delivers such a prospectus to purchasers in connection with such resales will be
subject to certain of the civil liability provisions under the Securities Act
and will be bound by the provisions of the Registration Rights Agreement
(including certain indemnification rights and obligations thereunder).
Each holder of the Notes who wishes to exchange its Notes for Exchange
Notes in the Exchange Offer will be required to make certain representations to
the Company and the Guarantors, including that (1) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (2) it
has no arrangement with any person to participate in a public distribution
(within the meaning of the Securities Act) of the Exchange Notes and (3) it is
not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company
or any Guarantor, or if it is such an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable to it.
In addition, each holder who is not a broker-dealer will be required to
represent that it is not engaged in, and does not intend to engage in, a public
distribution of the Exchange Notes. The Letter of Transmittal relating to the
Exchange Offer states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. In the absence of an exemption, each broker-dealer
that received the Notes from the Company in the Offering and not as a result of
market-making or other trading activities must comply with the registration
requirements of the Securities Act.
In the event that (1) any changes in law or the applicable interpretations
of the Staff do not permit the Company and the Guarantors to effect the Exchange
Offer, (2) if for any other reason the Exchange Offer is not consummated by the
150th day following the Issue Date, (3) if any of the Initial Purchasers so
requests with respect to the Notes not eligible to be exchanged for Exchange
Notes in the Exchange Offer or (4) if any holder of Notes is not eligible to
participate in the Exchange Offer or does not receive freely tradeable Exchange
Notes in the Exchange Offer, then the Company and the Guarantors will, at their
expense, (a) promptly file the Shelf Registration Statement permitting resales
from time to time of the Notes, (b) use their best efforts to cause the Shelf
Registration Statement to become effective and (c) use their best efforts to
keep the Shelf Registration Statement current and effective until three years
from the date it becomes effective or such shorter period that will terminate
when all the Notes covered by the Shelf Registration Statement have been sold
pursuant thereto. The Company, at its expense, will provide to each holder of
the Notes copies of the prospectus, which is a part of the Shelf Registration
Statement, notify each such holder when the Shelf Registration Statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the Notes from time to time. A holder of Notes who sells
such Notes pursuant to the Shelf Registration Statement generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with such sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to such holder (including certain indemnification obligations). In
addition, each holder of the Notes will be required to deliver information to be
used in
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connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the
Registration Rights Agreement in order to have their Notes included in the Shelf
Registration Statement and to benefit from the provisions regarding liquidated
damages set forth in the following paragraph.
Although the Company and the Guarantors intend to file the registration
statements described above, as required, there can be no assurance that such
registration statements will be filed, or, if filed, that they will become
effective. In the event that (1) the Exchange Offer Registration Statement is
not filed with Commission on or prior to the 45th day after the Issue Date or
declared effective on or prior to the 120th day after the Issue Date, (2) the
Exchange Offer is not consummated on or prior to the 150th day following the
Issue Date, (3) the Shelf Registration Statement is not filed or declared
effective within the required time periods or (4) the Exchange Offer
Registration Statement or the Shelf Registration Statement is declared effective
but thereafter ceases to be effective (except as specifically permitted therein)
for a period of 15 consecutive days without being succeeded immediately by an
additional Exchange Offer Registration Statement or Shelf Registration
Statement, as the case may be, filed and declared effective (each such event, a
"Registration Default"), then the interest rate borne by the Notes shall be
increased by 0.50% per annum for the 90-day period following such Registration
Default. Such interest rate will increase by an additional 0.25% per annum at
the beginning of each subsequent 90-day period following such Registration
Default, up to a maximum aggregate increase of 1.50% per annum. From and after
the date that all Registration Defaults have been cured, the Notes will bear
interest at the rate set forth on the cover page of this Prospectus.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of Exchange Notes
received in exchange for Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed to
make available, for a period of up to 120 days after consummation of the
Exchange Offer, copies of this Prospectus, as amended or supplemented, to any
broker-dealer and any other persons, if any, with similar prospectus delivery
requirements, for use in connection with any resale of Exchange Notes. In the
absence of an exemption, each broker-dealer that received the Notes from the
Company in the Offering and not as a result of market-making or other trading
activities must comply with the registration requirements of the Securities Act.
Hawk and the Guarantors will not receive any cash proceeds from any sale of
Exchange Notes by broker-dealers. Exchange Notes received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such Exchange
Notes. Any broker-dealer that resells Exchange Notes that were received by it
for its own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act
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any profit on any such resale of Exchange Notes and any commission or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
Hawk and the Guarantors have jointly and severally agreed to pay all
expenses incident to the Exchange Offer other than commissions or concessions of
any brokers or dealers and will indemnify the holders of the Exchange Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes and the Guarantees
will be passed upon for the Company by Kohrman Jackson & Krantz P.L.L.,
Cleveland, Ohio. Byron S. Krantz, a partner in Kohrman Jackson & Krantz P.L.L.,
is a stockholder, the Secretary and a director of the Company. Marc C. Krantz, a
son of Byron S. Krantz and a partner in Kohrman Jackson & Krantz P.L.L., is the
Assistant Secretary of the Company. The Company paid legal fees to Kohrman
Jackson & Krantz P.L.L. in 1995 of $440,000, for services in connection with a
variety of matters, including the acquisition of SKW, the reorganization of
Helsel upon which it became a wholly-owned subsidiary of the Company and the Old
Credit Facility.
EXPERTS
The consolidated financial statements of the Company and subsidiaries as of
December 31, 1995 and for the year then ended, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of the Company and subsidiaries as of
December 31, 1994 and for the year then ended, appearing in this Prospectus and
Registration Statement have been audited, as to combination only, by Ernst &
Young LLP, independent auditors, as set forth in their report appearing
elsewhere herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of the Hawk Group of Companies, Inc.
and subsidiaries as of and for the years ended December 31, 1994 and 1993
included in this Prospectus have been audited by Deloitte and Touche LLP,
independent auditors, as stated in their report appearing herein and elsewhere
in the registration statement (which report expresses an unqualified opinion and
includes an explanatory paragraph relating to a change in method of accounting
for income taxes effective January 1, 1993 to conform with Statement of
Financial Accounting Standard No. 109), and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of Helsel as of December 31, 1994, and for the
period from July 1, 1994 through December 31, 1994, appearing in this Prospectus
and Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements of SKW and subsidiaries as of
December 31, 1994 and 1993, and for each of the two years in the period ended
December 31, 1994, and for the statements of operations and cash flows for the
nine month period ended September 30, 1995, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
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auditors, as set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The balance sheet of Houghton Acquisition Corporation d/b/a Hutchinson
Foundry Products Company as of December 31, 1995 and the related statements of
income, stockholders' equity and cash flows for the year then ended included in
this Prospectus have been audited by Coopers & Lybrand L.L.P., independent
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
CHANGE IN INDEPENDENT AUDITORS
In December 1995, the Board of Directors of the Company authorized the
Company to retain Ernst & Young LLP as its independent auditors. The Company's
engagement of Deloitte & Touche LLP, the independent auditors, terminated by its
terms in December 1994. The report of Deloitte & Touche LLP for the year ended
December 31, 1994 contained no adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or application of
accounting principles or practices. During the year ended December 31, 1994,
there were no disagreements with Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures.
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THE HAWK CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
HAWK CORPORATION
Report of Independent Auditors....................................................... F-3
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
(unaudited)........................................................................ F-4
Consolidated Statements of Income for the years ended December 31, 1993, 1994 and
1995 and the nine months ended September 30, 1995 and 1996 (unaudited)............. F-6
Consolidated Statements of Shareholders' Equity (Deficit) for the years ended
December 31, 1993, 1994 and 1995, and the nine months ended September 30, 1996
(unaudited)........................................................................ F-7
Consolidated Statements of Cash Flows for the year ended December 31, 1993, 1994 and
1995, and the nine months ended September 30, 1995 and 1996 (unaudited)............ F-8
Notes to Consolidated Financial Statements........................................... F-9
HAWK GROUP OF COMPANIES, INC. (AS PUBLISHED CONSOLIDATED FINANCIAL STATEMENTS)
Independent Auditors' Report......................................................... F-20
Consolidated Balance Sheets as of December 31, 1993 and 1994......................... F-21
Consolidated Statements of Income for the years ended December 31, 1993 and 1994..... F-22
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993
and 1994........................................................................... F-23
Consolidated Statements of Cash Flows for the years ended December 31, 1993 and
1994............................................................................... F-24
Notes to Consolidated Financial Statements........................................... F-25
HELSEL, INC.
Report of Independent Auditors....................................................... F-31
Balance Sheet as of December 31, 1994................................................ F-32
Statement of Income for the period from July 1, 1994 through December 31, 1994....... F-33
Statement of Shareholders' Equity for the period from July 1, 1994 through December
31, 1994........................................................................... F-34
Statement of Cash Flows for the period from July 1, 1994 through December 31, 1994... F-35
Notes to Financial Statements........................................................ F-36
S.K. WELLMAN CORP. FINANCIAL STATEMENTS
Report of Independent Auditors....................................................... F-39
Consolidated Balance Sheets as of December 31, 1993 and 1994......................... F-40
Consolidated Statements of Operations for the years ended December 31, 1993 and 1994
and the six months ended June 30, 1995............................................. F-42
Consolidated Statements of Shareholders' Equity for the years ended December 31, 1993
and 1994........................................................................... F-43
Consolidated Statements of Cash Flows for the years ended December 31, 1993 and 1994,
and the six months ended June 30, 1995............................................. F-44
Notes to Consolidated Financial Statements........................................... F-45
</TABLE>
F-1
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
HOUGHTON ACQUISITION CORPORATION D/B/A HUTCHINSON FOUNDRY PRODUCTS COMPANY FINANCIAL
STATEMENTS
Report of Independent Accountants.................................................... F-52
Balance Sheet as of December 31, 1995................................................ F-53
Statement of Income for the year ended December 31, 1995............................. F-54
Statement of Stockholders' Equity (Deficit) for the year ended December 31, 1995..... F-55
Statement of Cash Flows for the year ended December 31, 1995......................... F-56
Notes to Financial Statements........................................................ F-57
</TABLE>
F-2
<PAGE> 117
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Hawk Corporation
We have audited the accompanying consolidated balance sheet of Hawk
Corporation and subsidiaries as of December 31, 1995 and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Hawk
Corporation and subsidiaries at December 31, 1995, and the consolidated results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
We also have audited, as to combination only, the accompanying consolidated
balance sheet of Hawk Corporation and subsidiaries as of December 31, 1994, and
the related consolidated statements of income, shareholders' equity, and cash
flows for the year then ended. As described in Notes A and C to such statements,
these statements have been combined from the consolidated statements of The Hawk
Group of Companies, Inc. and subsidiaries and Helsel, Inc. which statements are
presented separately herein. The report of the other auditors who audited the
statements of The Hawk Group of Companies, Inc. appears elsewhere herein. Our
report on the statements of Helsel, Inc., also appears elsewhere herein. In our
opinion, the accompanying consolidated financial statements for 1994 have been
properly combined on the basis described in Notes A and C.
ERNST & YOUNG LLP
Cleveland, Ohio
October 1, 1996, except for Note M, as
to which the date is November 27, 1996
F-3
<PAGE> 118
HAWK CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- --------- SEPTEMBER 30,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................ $ 698 $ 771 $ 1,894
Accounts receivable, less allowance of $232, $276,
and $252 in 1994, 1995 and 1996, respectively.... 6,357 17,307 18,515
Inventories:
Raw materials and work-in-process................ 3,148 14,575 15,714
Finished products................................ 2,723 5,530 4,632
------- -------- --------
5,871 20,105 20,346
Deferred income taxes............................... 437 1,042 1,042
Other current assets................................ 795 1,984 2,307
------- -------- --------
Total current assets........................ 14,158 41,209 44,104
PROPERTY, PLANT AND EQUIPMENT:
Land................................................ 509 1,080 1,098
Buildings and improvements.......................... 3,524 6,619 7,522
Machinery and equipment............................. 10,888 38,990 44,206
Furniture and fixtures.............................. 669 1,118 1,211
Construction in progress............................ 75 653 3,565
------- -------- --------
15,665 48,460 57,602
Less accumulated depreciation....................... 5,499 9,000 13,318
------- -------- --------
Total property, plant and equipment......... 10,166 39,460 44,284
OTHER ASSETS:
Intangible assets................................... 17,387 36,966 35,506
Net assets held for sale............................ 3,604 3,604
Shareholder notes................................... 2,000 1,838
Other............................................... 1,934 622 90
------- -------- --------
Total other assets.......................... 19,321 43,192 41,038
------- -------- --------
TOTAL ASSETS.......................................... $ 43,645 $ 123,861 $ 129,426
======= ======== ========
</TABLE>
F-4
<PAGE> 119
HAWK CORPORATION
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
-------- --------- SEPTEMBER 30,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Line of credit...................................... $ 1,280
Accounts payable.................................... 1,728 $ 8,488 $ 8,838
Accrued compensation................................ 2,468 7,364 5,813
Other accrued expenses.............................. 2,256 3,537 3,440
Current portion of long-term debt................... 10,502 5,460 6,604
------- -------- --------
Total current liabilities................... 18,234 24,849 24,695
LONG-TERM LIABILITIES:
Long-term debt...................................... 16,224 89,446 95,542
Deferred income taxes............................... 2,604 2,348 2,748
Other............................................... 2,228 2,671
------- -------- --------
Total long-term liabilities................. 18,828 94,022 100,961
DETACHABLE STOCK WARRANTS, SUBJECT TO PUT OPTION...... 4,600 4,600
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $1,000 par value with 10%
cumulative dividend, 2,625 shares authorized,
issued and outstanding in 1994................... 2,625
Helsel preferred stock, $1,000 par value with 9%
cumulative dividend, 702 shares authorized,
issued and outstanding in 1994................... 702
Series A preferred stock, $.01 par value with 10%
cumulative dividend (2,625 shares authorized,
issued and outstanding); Series B preferred stock
with 9% cumulative dividend (702 shares
authorized, issued and outstanding).............. 1 1
Common stock, no par value; 12,000 shares
authorized, 7,500 issued and outstanding and 18
treasury shares in 1994.......................... 377
Helsel common stock, $3 par value, 100,000 shares
authorized, issued and outstanding in 1994....... 300
Class A common stock, $.01 par value; 2,200,000
shares authorized, 1,443,976 issued and
outstanding in 1995 and 1996..................... 14 14
Class B common stock, $.01 par value, 375,000 shares
authorized, none issued or outstanding
Retained earnings (deficit)......................... 2,579 496 (1,019)
Other equity adjustments............................ (121) 174
------- -------- --------
Total shareholders' equity (deficit)........ 6,583 390 (830)
------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............ $ 43,645 $ 123,861 $ 129,426
======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 120
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
--------------------------------- ----------------------
1993 1994 1995 1995 1996
-------- -------- --------- --------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales.............................. $ 28,417 $ 41,395 $ 84,643 $ 55,841 $ 93,672
Cost of sales.......................... 16,834 26,771 61,164 39,630 69,023
------- ------- --------- ------- ---------
Gross profit........................... 11,583 14,624 23,479 16,211 24,649
Expenses:
Selling, technical and administrative
expenses.......................... 4,833 6,294 11,575 7,927 11,611
Amortization of intangibles.......... 954 954 1,864 1,059 2,319
Plant consolidation expense.......... 3,749
------- ------- --------- ------- ---------
Total expenses......................... 5,787 7,248 13,439 8,986 17,679
------- ------- --------- ------- ---------
Income from operations................. 5,796 7,376 10,040 7,225 6,970
Interest expense....................... 2,654 3,267 7,323 4,432 7,321
Other (income) expense, net............ (234) (130) 55
------- ------- --------- ------- ---------
Income (loss) before income taxes and
cumulative change in accounting
principle............................ 3,142 4,343 2,847 2,793 (406)
Income taxes........................... 1,716 1,845 1,593 1,241 863
------- ------- --------- ------- ---------
Income (loss) before cumulative effect
of change in accounting principle.... 1,426 2,498 1,254 1,552 (1,269)
Cumulative effect of change in
accounting for income taxes.......... 284
------- ------- --------- ------- ---------
Net income (loss)...................... $ 1,142 $ 2,498 $ 1,254 $ 1,552 $ (1,269)
======= ======= ========= ======= =========
Preferred stock dividend
requirements......................... (263) (294) (326) (245) (246)
======= ======= ========= ======= =========
Net income (loss) applicable to common
shareholders......................... $ 879 $ 2,204 $ 928 $ 1,308 $ (1,515)
======= ======= ========= ======= =========
Net income (loss) per share applicable
to common shareholders............... $ 94 $ 2.32 $ .68 $ .86 $ (.86)
======= ======= ========= ======= =========
Number of shares used to compute per
share data........................... 931,667 950,000 1,355,473 1,523,219 1,760,946
======= ======= ========= ======= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 121
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HAWK CORPORATION
----------------------------------------------------------------------------- HELSEL, INC
COMMON -----------------------------
PREFERRED COMMON STOCK COMMON
PREFERRED STOCK STOCK $.01 ADDITIONAL RETAINED OTHER PREFERRED STOCK
STOCK $.01 PAR NO PAR PAR PAID-IN EARNINGS EQUITY STOCK $3 PAR RETAINED
10% VALUE VALUE VALUE CAPITAL (DEFICIT) ADJUSTMENTS 9% VALUE EARNINGS TOTAL
--------- -------- ------ ----- ---------- -------- ----------- --------- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1,
1993........... $ 2,625 $ 367 $ (504) $ 2,488
Net income...... 1,142 1,142
Preferred stock
dividend....... (263) (263)
Sale of stock... 10 10
------- ---- ----- ---- ------- ------- ----- ----- ----- ----- -------
Balance at
December 31,
1993........... 2,625 377 375 3,377
Purchase of
Helsel......... $ 702 $ 300 1,002
Net income...... 2,052 $ 446 2,498
Preferred stock
dividend....... (263) (31) (294)
------- ---- ----- ---- ------- ------- ----- ----- ----- ----- -------
Balance at
December 31,
1994........... 2,625 377 2,164 702 300 415 6,583
Merger of
Helsel and
Hawk........... (2,625) $ 1 (377) $ 14 $ 3,989 415 (702) (300) (415) 0
Net income...... 1,254 1,254
Preferred stock
dividend....... (326) (326)
Purchase of
warrants....... (3,989) (3,011) (7,000)
Foreign currency
translation
adjustment..... $ 207 207
Additional
minimum pension
liability...... (328) (328)
------- ---- ----- ---- ------- ------- ----- ----- ----- ----- -------
Balance at
December 31,
1995........... 0 1 0 14 0 496 (121) 0 0 0 390
Net loss
(unaudited)..... (1,269) (1,269)
Preferred
stock dividend
(unaudited).... (246) (246)
Foreign currency
translation
adjustment
(unaudited).... 295 295
------- ---- ----- ---- ------- ------- ----- ----- ----- ----- -------
BALANCE AT
SEPTEMBER
30, 1996
(UNAUDITED).... $ 0 $ 1 $ 0 $ 14 $ 0 $(1,019) $ 174 $ 0 $ 0 $ 0 $ (830)
======= ==== ===== ==== ======= ======= ===== ===== ===== ===== =======
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE> 122
HAWK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31 SEPTEMBER 30
---------------------------------- ----------------------
1993 1994 1995 1995 1996
-------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss).............................. $ 1,142 $ 2,498 $ 1,254 $ 1,552 $ (1,269)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating
activities:
Depreciation and amortization............. 1,920 2,466 5,467 3,246 6,636
Accretion of discount on debt............. 325 163 488
Deferred income taxes..................... 1,030 302 377
Changes in operating assets and liabilities,
net of acquired assets:
Accounts receivable....................... (352) (451) (53) (179) (1,208)
Inventories............................... (844) (380) (1,398) (1,614) (241)
Other assets.............................. (148) 4 (885) 13 (487)
Accounts payable.......................... 88 235 196 (1,174) 350
Other liabilities......................... 404 147 430 (2,037) (805)
-------- -------- -------- -------- --------
Net cash provided by (used in) operating
activities.................................. 3,240 4,821 5,713 (30) 3,464
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Helco, Inc......................... (4,627)
Purchase of S.K. Wellman Limited, Inc., net of
cash acquired............................... (61,607) (61,607)
Purchases of property, plant and equipment..... (586) (1,871) (3,781) (2,622) (9,142)
-------- -------- -------- -------- --------
Net cash used in investing activities.......... (586) (6,498) (65,388) (64,229) (9,142)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings on long-term debt..... 3,880 102,000 102,000 47,697
Payments on long-term debt..................... (2,407) (3,555) (30,726) (27,334) (40,945)
Net borrowings (payments) under revolving
credit lines................................ 1,280 (1,280) (1,280)
Purchase of warrants........................... (7,000) (7,000)
Proceeds from sale of preferred stock.......... 702
Proceeds from sale of common stock............. 10 300
Deferred financing costs....................... (2,799) (2,799)
Payments of preferred stock dividends.......... (263) (295) (326) (223) (246)
Other.......................................... (121) 197 295
-------- -------- -------- -------- --------
Net cash (used in) provided by financing
activities.................................. (2,660) 2,312 59,748 63,561 6,801
-------- -------- -------- -------- --------
NET (DECREASE) INCREASE IN CASH.................. (6) 635 73 (698) 1,123
CASH AT BEGINNING OF PERIOD...................... 38 63 698 698 771
-------- -------- -------- -------- --------
CASH AT END OF PERIOD............................ $ 32 $ 698 $ 771 $ 0 $ 1,894
======== ======== ======== ======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash payments for interest..................... $ 2,916 $ 2,743 $ 6,260 $ 3,532 $ 6,952
======== ======== ======== ======== ========
Cash payments for income taxes................. $ 600 $ 1,852 $ 1,929 $ 1,929 $ 330
======== ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-8
<PAGE> 123
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (UNAUDITED)
A. BASIS OF PRESENTATION
The consolidated financial statements of Hawk Corporation, formerly the
Hawk Group of Companies, Inc., and its wholly-owned subsidiaries, also include,
effective July 1, 1994, the accounts of Helsel, Inc. (Helsel) and effective July
1, 1995, the accounts of S.K. Wellman Limited, Inc. (Wellman) (collectively, the
Company). See Note C. All significant intercompany accounts and transactions
have been eliminated in the accompanying financial statements. Certain amounts
have been reclassified in 1993 and 1994 to conform with the 1995 presentation.
The Company operates in one principal business segment, the design,
engineering, manufacturing and marketing of friction products and precision
engineered components for aerospace, industrial and other specialty
applications.
The accompanying unaudited consolidated financial statements at September
30, 1996 and for the nine months ended September 30, 1995 and 1996 have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
nine-month period ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996.
B. SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
by the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and include expenditures
for additions and major improvements. Expenditures for repairs and maintenance
are charged to operations as incurred. The Company principally uses either the
straight-line or the unit method of depreciation for financial reporting
purposes based on annual rates sufficient to amortize the cost of the assets
over their estimated useful lives (5 to 40 years). Accelerated methods of
depreciation are used for federal income tax purposes.
INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over periods
ranging from 5 to 40 years. See Note D.
The ongoing value and remaining useful life of intangible assets are
subject to periodic evaluation and the Company currently expects the carrying
amounts to be fully recoverable. When events and circumstances indicate that
intangible assets might be impaired, an undiscounted cash flows methodology
would be used to determine whether an impairment loss would be recognized.
FOREIGN CURRENCY TRANSLATION
The assets and liabilities of the Company's foreign subsidiaries are
translated into U.S. dollars at year-end exchange rates. Revenues and expenses
are translated at weighted average exchange
F-9
<PAGE> 124
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
rates. Gains and losses resulting from translation are included in other equity
adjustments in the consolidated balance sheets.
REVENUE RECOGNITION
Revenue from the sale of the Company's products is recognized upon shipment
to the customer. Costs and related expenses to manufacture the products are
recorded as costs of sales when the related revenue is recognized.
SIGNIFICANT CONCENTRATIONS
The Company provides credit, in the normal course of its business, to
original equipment and after-market manufacturers in the aircraft and heavy
equipment industries. The Company's customers are not concentrated in any
specific geographic region. The Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses which, when
realized, have been within the range of management's expectations.
The percentage of consolidated net sales to major customers are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 NINE MONTHS ENDED
------------------------ SEPTEMBER 30,
1993 1994 1995 1996
---- ---- ---- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Customer A............................... 35.8% 22.6% 13.8% 10.8%
Customer B............................... 12.5 11.0 9.8 9.4
Customer C............................... 11.2 10.3 6.5 7.6
</TABLE>
Accounts receivable balances from these customers represent approximately
36% and 18% of the Company's consolidated accounts receivable at December 31,
1994 and 1995, respectively.
PRODUCT RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred. The Company's
expenditures for product development and engineering were approximately $840,000
in 1993, $1,158,000 in 1994 and $3,000,000 in 1995.
ADVERTISING
Advertising costs are expensed as incurred. Advertising expenses amounted
to approximately $92,000, $106,000 and $385,000 in 1993, 1994 and 1995,
respectively.
INCOME TAXES
The Company uses the liability method in measuring the provision for income
taxes and recognizing deferred tax assets and liabilities in the balance sheet.
The liability method requires that deferred income taxes reflect the tax
consequences of currently enacted rates for differences between the tax and
financial reporting bases of assets and liabilities.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1994 and 1995, the carrying value of the Company's
financial instruments approximate their fair value.
F-10
<PAGE> 125
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
NET INCOME (LOSS) PER SHARE
Net income (loss) per share is based on the weighted average number of
common shares and common share equivalents (warrants) outstanding during the
respective periods. Earnings avail-
able to common stockholders includes an adjustment for Preferred Stock dividends
paid during the respective periods.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 1995, 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, was issued. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the asset's carrying amount. The Company adopted SFAS No.
121 effective January 1, 1996. The adoption of SFAS No. 121 did not have a
material effect on the Company's financial position or results of operations.
C. BUSINESS ACQUISITIONS
Effective June 30, 1994, shareholders of the Company acquired substantially
all of the net assets of Helsel, for a total purchase price of approximately
$8.6 million. The acquisition was accounted for as a purchase. Accordingly, the
purchase price was allocated to assets and liabilities based on their estimated
fair values as of the date of the acquisition. The excess of fair market value
of identifiable assets less liabilities over the purchase price resulted in
negative goodwill, which was applied to reduce property, plant and equipment.
The acquisition was financed through long-term debt and the sale of $702,000 of
preferred stock and $300,000 of common stock. Effective June 30, 1995, Helsel
became a wholly-owned subsidiary of the Company whereby each outstanding share
of common stock of Helsel was converted into shares of common stock of the
Company at an exchange ratio based on an independent valuation. Additionally,
the Company issued one share of its 9% preferred stock for each share of Helsel
preferred stock surrendered. Because Helsel was an entity under common control,
its operating results are included in the Company's consolidated financial
statements since July 1, 1994.
A summary of the combination and financial results for Helsel and the
Company, as of December 31, 1994 and for the period July 1, 1994 through
December 31, 1994, is as follows:
<TABLE>
<CAPTION>
CONSOLIDATED
HAWK
HELSEL HAWK CORPORATION
------ ------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Total assets..................................... $8,804 $34,841 $ 43,645
Shareholders' equity............................. 1,417 5,166 6,583
Net sales........................................ 8,555 32,840 41,395
Income before income taxes....................... 787 3,556 4,343
Net income....................................... 446 2,052 2,498
</TABLE>
F-11
<PAGE> 126
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
On June 30, 1995, the Company acquired for cash substantially all of the
net assets of Wellman for approximately $62 million. The acquisition was
accounted for as a purchase. The excess of the purchase over the estimated fair
value of the net assets acquired is included in intangible assets. The operating
results of Wellman are included in the Company's consolidated statements of
income since the date of acquisition. As a result of this acquisition, the
Company is consolidating certain operating facilities. Accordingly, the net
carrying value of the facilities the Company plans to close and sell are
reflected as net assets held for sale on the accompanying balance sheets at
December 31, 1995 and September 30, 1996. The net assets held for sale are
stated at the lower of the carrying amount or fair value less costs to sell and
consist primarily of land and buildings. In addition, during the nine months
ended September 30, 1996, the Company incurred approximately $3.7 million of
costs relating to the consolidation of these operating facilities, including
expenses relating to the relocation of machinery and equipment.
The following unaudited pro forma consolidated results of operations give
effect to the above acquisitions as though they had occurred on January 1, 1994.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................. $ 109,568 $ 119,559
======== ========
Net income................................................ $ 6,278 $ 6,579
======== ========
</TABLE>
Pro forma net sales and net income are not necessarily indicative of the
net sales and net income that would have occurred had the acquisitions been made
at the beginning of the respective years or the results which may occur in the
future.
D. INTANGIBLE ASSETS
The components of intangible assets and related amortization periods are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Product certifications (19 to 40 years)....................... $ 20,820 $ 20,820
Goodwill (15 to 40 years)..................................... 2,366 18,154
Deferred financing costs (5 years)............................ 1,028 2,779
Proprietary formulations and patents (10 years)............... 1,806
Pension costs (15 or 25 years)................................ 703
Other......................................................... 910 779
------- -------
25,124 45,041
Accumulated amortization...................................... (7,737) (8,075)
------- -------
$ 17,387 $ 36,966
======= =======
</TABLE>
F-12
<PAGE> 127
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
E. LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
A Term Loan................................................... $ 35,200
B Term Loan................................................... 21,890
Revolving Credit Line......................................... $ 4,039 10,400
Revolving Step Down Loan...................................... 9,000
Senior Subordinated Notes..................................... 9,500 25,725
Subordinated Note Payable..................................... 700
Term Note..................................................... 3,472
Other......................................................... 15 1,691
------- -------
26,726 94,906
Less current portion.......................................... 10,502 5,460
------- -------
$ 16,224 $ 89,446
======= =======
</TABLE>
During 1994, the Company had a Secured Credit Agreement which provided for
borrowings totaling $30,250,000 under three separate credit facilities.
Borrowings under each credit facility were secured by the Company's accounts
receivable, inventories and property, plant and equipment in addition to the
common stock of its subsidiaries. The Company also had a term note payable to a
bank, two subordinated notes payable and a revolving line of credit with a
borrowing capacity of $2.5 million, after it's acquisition of Helsel in June
1994. As a result of the acquisition of Wellman in June 1995, the Company
entered into a new credit agreement with several participating banks, and repaid
all existing credit facilities. The new credit agreement consists of the
following:
A Term Loan -- Interest is payable quarterly at certain published
rates, including the rate of prime (8.5% at December 31, 1995) plus 1.25%
and, at the Company's option, an applicable London Interbank Offered Rate
(LIBOR) (5.875% at December 31, 1995) plus 2.5%, payable at various
interest periods per the credit agreement. Principal payments are due
quarterly, in accordance with a payment schedule, beginning in September
1995. The A Term loan matures on June 30, 2000.
B Term Loan -- Interest is payable quarterly at certain published
rates, including the rate of prime plus 2% and, at the Company's option,
LIBOR plus 3.25%, payable at various interest periods per the credit
agreement. Principal payments are due quarterly, in accordance with a
payment schedule, beginning in September 1995. The B Term loan matures on
June 30, 2002.
Revolving Credit Line -- The Revolving Credit Line makes available to
the Company a credit facility totaling $22,000,000 at December 31, 1995.
The Company pays a commitment fee of one half percent per annum on the
unused portion ($11,600,000 at December 31, 1995). Interest is payable
quarterly at certain published rates, including the rate of prime plus
1.25% or, alternatively at the Company's option, LIBOR plus 2.5%, payable
at various interest periods per the credit agreement. The Revolving Credit
Line matures in June 2000.
Substantially all of the Company's property, plant and equipment,
receivables and inventory are pledged as security under the agreement. The
agreement includes limitations on capital expendi-
F-13
<PAGE> 128
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
tures and certain covenants related to current ratio, interest ratio coverage,
dividend restrictions and minimum net worth requirements.
In addition, effective June 30, 1995, the Company issued $30,000,000 in
senior subordinated notes with $10,000,000 maturing on June 30, 2003, 2004 and
2005. Interest is payable quarterly at a fixed rate of 12%. In connection with
the senior subordinated notes, the Company issued detachable warrants to the
lender that provide the lender the option to purchase 316,970 shares of the
Company's Class B common stock at a per share price of $.01. The warrants are
exercisable through the year 2005. The Company has the option to repurchase the
warrants and the warrant holder has a put option to sell the warrants back to
the Company for cash at prices based on a fair market value formula beginning in
the year 2001. The warrant holders put option to sell the warrants back to the
Company is terminated upon the occurrence of certain events, including the
consummation of an initial public offering.
The portion of the proceeds representing the current value of the warrants
($4,600,000) is classified as detachable stock warrant, subject to put option on
the accompanying balance sheets and the resulting discount is being amortized
over the life of the debt as non-cash, imputed interest. The discount is based
on an effective interest rate of 14.2%. The unamortized discount at December 31,
1995 and September 30, 1996 totaled $4,275,000 and $3,950,000, respectively.
Aggregate principal payments due on long-term debt as of December 31, 1995
are as follows (in thousands): 1996 -- $5,460; 1997 -- $7,430; 1998 -- $9,390;
1999 -- $10,687; thereafter -- $66,214.
F. SHAREHOLDERS' EQUITY
During 1993, the Company sold 200 shares of common stock at $50 per share.
In accordance with a Merger Agreement and Plan of Reorganization dated June
30, 1995, the Company, formerly an Ohio corporation, was merged with and into a
Delaware corporation under the same name. Concurrently, each issued and
outstanding share of common stock, without par value, of the previous
corporation was converted into one fully paid share of Class A common stock, par
value $.01 per share, of the merged corporation. Additionally, each issued and
outstanding share of preferred stock, $1,000 par value per share, of the
previous corporation was converted into one fully paid share of Series A
preferred stock, par value $.01 per share, of the merged corporation.
The Company's authorized preferred stock includes 2,625 shares of Class A
preferred stock and 702 shares of Class B preferred stock. Dividends are
cumulative and at the rate of 10% of $1,000 per share for Class A preferred
stock and 9% of $1,000 per share for Class B preferred stock. Each share of
preferred stock is: (1) entitled to a liquidation preference equal to $1,000 per
share plus any accrued or unpaid dividends, (2) not entitled to vote, except in
certain circumstances, (3) redeemable in whole, for $1,000 per share plus all
accrued dividends to the date of redemption.
The Company's authorized common shares of 2,575,000 includes 2,200,000
shares of Class A voting and 375,000 shares of Class B non-voting. Each share of
the Class B common stock is convertible into one share of Class A common stock
upon the occurrence of certain events. All of the outstanding shares are Class
A.
In June 1995, the Company repurchased detachable warrants covering 2,000
shares of Class B common stock for a negotiated price of $7,000,000. The
warrants were originally issued in
F-14
<PAGE> 129
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
connection with a subordinated note that was paid in full when the Company
entered into its new credit agreement as described in Note E.
G. EMPLOYEE BENEFITS
The Company has several defined benefit pension plans which cover certain
employees. Benefits payable are based primarily on compensation and years of
service or a fixed annual benefit for each year of service. Certain hourly
employees are also covered under collective bargaining agreements. The Company
funds the plans in amounts sufficient to satisfy the minimum amounts required
under ERISA.
A summary of the components of net periodic pension cost (income) for the
plans is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1993 1994 1995
----- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost.......................................... $ 207 $ 246 $ 382
Interest cost......................................... 411 421 665
Actual return on plan assets.......................... (624) (165) (1,732)
Net amortization and deferral......................... 210 (293) 673
----- ----- -------
$ 204 $ 209 $ (12)
===== ===== =======
</TABLE>
A summary of the actuarially determined benefit obligations and trusteed
net assets for Company administered defined benefit pension plans is presented
below, along with a reconciliation of the plans' funded status to amounts
recognized in the Company's balance sheets. The plans' assets are primarily
invested in fixed income and equity securities.
<TABLE>
<CAPTION>
1994 1995 1995
-------- -------- -------------
ACCUMULATED
ASSETS EXCEED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
--------------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested................................................... $ (5,004) $ (5,960) $(2,559)
Non-vested............................................... (93) (60) (214)
------- ------- -------
$ (5,097) $ (6,020) $(2,773)
======= ======= =======
Projected benefit obligations.............................. $ (5,566) $ (6,634) $(2,773)
Plan assets at fair value.................................. 5,193 7,524 1,693
------- ------- -------
Projected benefit obligations less than (in excess of) plan
assets................................................... (373) 890 (1,080)
Unrecognized net loss...................................... 931 371 328
Prior service cost not yet recognized in net periodic
pension cost............................................. 134 361
Unrecognized net (asset) obligation........................ 134 (231) 151
Adjustment required to recognize minimum liability......... (840)
------- ------- -------
PREPAID (ACCRUED) PENSION COST AT DECEMBER 31.............. $ 692 $ 1,164 $(1,080)
======= ======= =======
</TABLE>
F-15
<PAGE> 130
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following assumptions were used in accounting for the defined benefit
plans:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Used to compute the projected benefit obligation as of December 31:
Discount rate....................................................... 8% 8%
Annual salary increase.............................................. 3% 3%
Expected long-term rate of return on plan assets for the year ended
December 31......................................................... 10% 10%
</TABLE>
The Company also sponsors several defined contribution plans which provide
voluntary employee contributions and, in certain plans, matching and
discretionary employer contributions. Expenses associated with these plans were
approximately $108,000 in 1993, $290,000 in 1994 and $920,000 in 1995.
H. LEASE OBLIGATIONS
The Company has capital lease commitments for buildings and equipment.
Future minimum annual rentals are: 1996 -- $515,000, 1997 -- $485,000,
1998 -- $442,000 1999 -- $240,000, 2000 -- $49,000, thereafter -- $89,000.
Amount representing interest is $388,000. Total capital lease obligations are
included in other long-term debt. Amortization of assets recorded under capital
leases is included with depreciation expense.
The Company leases certain office and warehouse facilities and equipment
under operating leases. Rental expense was approximately $52,000 in 1993,
$77,000 in 1994, and $270,000 in 1995. Future minimum lease commitments under
these agreements which have an original or existing term in excess of one year
as of December 31, 1995 are as follows: 1996 -- $488,000; 1997 -- $232,000;
1998 -- $84,000; 1999 -- $68,000 and 2000 -- $8,000.
I. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which requires
an asset and liability approach for recording income taxes rather than the
deferred method as prescribed by previous accounting standards. The cumulative
effect on prior years of this change in accounting principle decreased net
income by $284,000, and is reported separately in the consolidated statements of
income for the year ended December 31, 1993.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
---------------------------------
1993 1994 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................. $ 769 $ 1,369 $ 907
State and local..................................... 200 174 235
Foreign............................................. 74
------ ------ ------
969 1,543 1,216
Deferred:
Federal............................................. 672 237 365
State............................................... 75 65 12
------ ------ ------
TOTAL INCOME TAXES.................................... $ 1,716 $ 1,845 $ 1,593
====== ====== ======
</TABLE>
F-16
<PAGE> 131
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and income tax purposes. Significant components of the Company's deferred tax
assets and liabilities as of December 31, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1994 1995
------ ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Reserve for severance costs.................................... $ 237
Accrued vacation............................................... $ 104 259
Accrued pension costs.......................................... 52 466
Other accruals................................................. 51 509
Other.......................................................... 230 302
------ ------
Total deferred tax assets........................................ 437 1,773
Deferred tax liabilities:
Tax over book depreciation and amortization.................... 2,380 2,659
Other.......................................................... 224 420
------ ------
Total deferred tax liabilities................................... 2,604 3,079
------ ------
NET DEFERRED TAX LIABILITIES..................................... $2,167 $1,306
====== ======
</TABLE>
The provision for income taxes differs from the amounts computed by
applying the federal statutory rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Income tax at federal statutory rate......................... 34.0% 34.0% 34.0%
State and local tax, net of federal tax benefit.............. 5.8 3.0 5.7
Nondeductible goodwill amortization.......................... 6.5 2.2 7.2
Federal tax audit settlement................................. 5.6
Adjustment to worldwide tax liability and other, net......... 2.7 3.1 9.0
---- ---- ----
Provision for income taxes................................... 54.6% 42.3% 55.9%
==== ==== ====
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries were not
significant at December 31, 1995. Those earnings are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided. Upon distribution of these earnings in the
form of dividends or otherwise, the Company would be subject to both U.S. income
taxes and withholding taxes payable to various foreign countries which may be
offset by foreign tax credits.
J. CONTINGENCIES
The Company has wage continuation agreements with two of its
officers/shareholders. In the event the officer/shareholder dies or becomes
permanently disabled while employed by the Company, each agreement provides for
payments to be made annually to the officer/shareholder's spouse based on a
compensation formula, until the spouse's death.
F-17
<PAGE> 132
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
K. RELATED PARTIES
The Company has interest-bearing notes receivable from certain shareholders
totaling approximately $2,000,000 at December 31, 1995 and September 30, 1996.
The notes are due and payable on July 1, 2002 and bear interest at the prime
rate plus 1.25% through September 30, 1996 and at the prime rate thereafter.
L. GEOGRAPHIC INFORMATION
Geographic information for the year ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
DOMESTIC FOREIGN
OPERATIONS OPERATIONS TOTAL
--------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales....................................... $ 76,394 $ 8,249 $ 84,643
Income from operations.......................... 9,391 649 10,040
Net income...................................... 1,063 191 1,254
Total assets.................................... 109,896 13,965 123,861
</TABLE>
The Company had no foreign operations in 1993 or 1994.
M. SUBSEQUENT EVENTS
CERTAIN TRANSACTIONS
Effective November 27, 1996, the Company entered into certain transactions,
including: (1) the repayment of its existing Secured Credit Agreement Facility
and the issuance of new senior notes, (2) the execution of a new senior
revolving bank credit facility (New Revolving Credit Facility); (3) the
execution of an amendment to the Senior Subordinated Notes; and (4) the merger,
in a tax-free reorganization, of the Company with Hawk Holding Corp. (a
principal stockholder of the Company).
In connection with the repayment of the Secured Credit Agreement Facility,
the Company incurred an extraordinary charge of approximately $1.9 million as a
result of the write-off of previously capitalized deferred financing costs.
The new senior notes are fully and unconditionally guaranteed on a joint
and several basis by each of the domestic subsidiaries of the Company
(Guarantors). The Guarantors are direct or indirect wholly-owned subsidiaries of
the Company. The New Revolving Credit Facility contains covenants with respect
to the Company and its subsidiaries that, among other things, would prohibit the
payment of any dividends to the Company by the subsidiaries of the Company
(including the Guarantors) in the event of a default under the terms of the New
Revolving Credit Facility.
F-18
<PAGE> 133
HAWK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Consolidated condensed financial information of the Guarantors and foreign
subsidiaries of the Company is as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1995
------------------------------------------
FOREIGN
GUARANTORS SUBSIDIARIES TOTAL
---------- ------------ --------
<S> <C> <C> <C>
Current assets................................ $ 31,551 $ 9,658 $ 41,209
Total assets.................................. 109,896 13,965 123,861
Total liabilities............................. 112,476 6,395 118,871
Stock purchase warrants, subject to put
option...................................... 4,600 0 4,600
Shareholders' equity.......................... 7 383 390
Net sales..................................... 76,394 8,249 84,643
Cost of sales................................. 54,391 6,773 61,164
Income from operations........................ 9,391 649 10,040
Net income.................................... 1,063 191 1,254
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------------------------------
FOREIGN
GUARANTORS SUBSIDIARIES TOTAL
---------- ------------ --------
<S> <C> <C> <C>
Current assets................................ $ 32,718 $ 11,386 $ 44,104
Total assets.................................. 111,700 17,726 129,426
Total liabilities............................. 118,157 7,499 125,656
Stock purchase warrants, subject to put
option...................................... 4,600 4,600
Shareholders' equity (deficit)................ (2,138) 1,308 (830)
Net sales..................................... 79,001 14,671 93,672
Cost of sales................................. 57,810 11,213 69,023
Income from operations........................ 4,662 2,308 6,970
Net income (loss)............................. (2,048) 779 (1,269)
</TABLE>
PENDING ACQUISITION OF HUTCHINSON FOUNDRY PRODUCTS
The Company has entered into a definitive purchase agreement to acquire all
of the outstanding capital stock of Hutchinson Foundry Products Company
(Hutchinson). The Company plans to acquire Hutchinson for (1) $10.0 million in
cash, subject to adjustment, and (2) $1.5 million in 8.0% two-year convertible
notes and $500,000 in 8.0% three-year notes. The Company expects to close the
Hutchinson acquisition in the first quarter of 1997.
F-19
<PAGE> 134
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
The Hawk Group of Companies, Inc.
We have audited the accompanying consolidated balance sheets of The Hawk
Group of Companies, Inc. and Subsidiaries as of December 31, 1994 and 1993, and
the related consolidated statements of income, shareholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of The Hawk Group of Companies,
Inc. and Subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, the
Company changed its method of accounting for income taxes effective January 1,
1993 to conform with Statement of Financial Accounting Standards No. 109.
DELOITTE & TOUCHE LLP
Cleveland, Ohio
March 14, 1995
(April 10, 1995 as to Note 10)
F-20
<PAGE> 135
THE HAWK GROUP OF COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
ASSETS 1994 1993
------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash................................................................ $ 271 $ 32
Investments......................................................... 32 31
Accounts receivable, less allowance for doubtful accounts of $232
and $229 in 1994 and 1993, respectively (Note 2)................. 4,336 3,753
Inventories (Notes 2 and 3)......................................... 4,534 3,671
Deferred income taxes (Note 6)...................................... 322 192
Other current assets................................................ 736 603
------- -------
Total current assets........................................ 10,231 8,282
PROPERTY, PLANT AND EQUIPMENT -- NET (Notes 2 and 4).................. 5,548 5,627
INTANGIBLE AND OTHER ASSETS (Note 5).................................. 19,062 20,016
------- -------
TOTAL ASSETS.......................................................... $34,841 $33,925
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.................................................... $ 731 $ 769
Accrued incentive compensation...................................... 2,123 2,041
Accrued liabilities................................................. 1,619 1,227
Income taxes payable................................................ 95 404
Current portion of long-term debt (Note 2).......................... 9,539 7,550
------- -------
Total current liabilities................................... 14,107 11,991
LONG-TERM DEBT, Less current portion (Note 2)......................... 13,000 16,500
DEFERRED INCOME TAXES (Note 6)........................................ 2,568 2,057
SHAREHOLDERS' EQUITY:
10% preferred stock, $1,000 par value, 2,625 shares authorized,
issued and outstanding........................................... 2,625 2,625
Common stock, no par value, 12,000 shares authorized, 7,500 shares
outstanding and 18 treasury shares in both years................. 377 377
Accumulated earnings................................................ 2,164 375
------- -------
Total shareholders' equity.................................. 5,166 3,377
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................ $34,841 $33,925
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-21
<PAGE> 136
THE HAWK GROUP OF COMPANIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
NET REVENUES.......................................................... $32,840 $28,417
COST OF GOODS SOLD:
Material, labor and overhead........................................ 18,214 15,277
Incentive compensation.............................................. 944 739
Depreciation........................................................ 927 818
------- -------
TOTAL COST OF GOODS SOLD.............................................. 20,085 16,834
------- -------
GROSS PROFIT.......................................................... 12,755 11,583
OPERATING EXPENSES:
Technical and selling............................................... 1,769 1,496
Administrative...................................................... 2,043 1,905
Incentive compensation.............................................. 1,244 1,284
Depreciation........................................................ 172 148
Amortization........................................................ 954 954
------- -------
TOTAL OPERATING EXPENSES.............................................. 6,182 5,787
------- -------
OPERATING INCOME...................................................... 6,573 5,796
INTEREST.............................................................. 3,017 2,654
------- -------
INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE................................................ 3,556 3,142
INCOME TAXES (Note 6)................................................. 1,504 1,716
------- -------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE..... 2,052 1,426
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR INCOME TAXES (Note 6)... (284)
------- -------
NET INCOME............................................................ $ 2,052 $ 1,142
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-22
<PAGE> 137
THE HAWK GROUP OF COMPANIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACCUMULATED
PREFERRED COMMON EARNINGS
STOCK STOCK (DEFICIT) TOTAL
--------- ------ ----------- ------
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993.................... $ 2,625 $367 $ (504) $2,488
NET INCOME FOR 1993........................... 1,142 1,142
PREFERRED STOCK DIVIDENDS..................... (263) (263)
SALE OF STOCK (200 SHARES).................... 10 10
------ ---- ------ ------
BALANCE AT DECEMBER 31, 1993.................. 2,625 377 375 3,377
NET INCOME FOR 1994........................... 2,052 2,052
PREFERRED STOCK DIVIDENDS..................... (263) (263)
------ ---- ------ ------
BALANCE AT DECEMBER 31, 1994.................. $ 2,625 $377 $ 2,164 $5,166
====== ==== ====== ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-23
<PAGE> 138
THE HAWK GROUP OF COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1993
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................... $ 2,052 $ 1,142
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.................................... 2,053 1,920
Deferred income taxes -- noncurrent.............................. 511 1,222
Changes in current assets and liabilities:
Accounts receivable.............................................. (583) (352)
Inventories...................................................... (863) (844)
Deferred income taxes -- current................................. (130) (192)
Other current assets............................................. (133) (148)
Accounts payable and accrued liabilities......................... 436 88
Income taxes payable............................................. (309) 404
------- -------
Net cash provided by operating activities........................ 3,034 3,240
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES -- Capital expenditures.......... (1,021) (586)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt......................................... (1,511) (2,407)
Preferred stock dividends paid...................................... (263) (263)
Proceeds from sale of common stock.................................. 10
------- -------
Net cash provided by financing activities........................... (1,774) (2,660)
------- -------
NET INCREASE (DECREASE) IN CASH....................................... 239 (6)
CASH AT BEGINNING OF YEAR............................................. 32 38
------- -------
CASH AT END OF YEAR................................................... $ 271 $ 32
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-24
<PAGE> 139
THE HAWK GROUP OF COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994 AND 1993
(DOLLARS IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations -- The Hawk Group of Companies, Inc. (Company) is a leading
producer of the metallic friction materials used in commercial and general
aviation brake assemblies for both the original equipment and replacement
markets. Aviation products customers accounted for approximately 45% and 51% of
consolidated 1994 and 1993 revenues, respectively, and 61% and 49% of December
31, 1994 and 1993 accounts receivable, respectively.
Principles of Consolidation -- The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. Intercompany accounts, transactions and profits are eliminated in
consolidation.
Investments -- The Company records investments at cost, which approximates
market value.
Inventories -- Inventories are stated at the lower of cost or market. Cost
is determined using the first-in, first-out method.
Property, Plant and Equipment -- Property, plant and equipment are recorded
at cost less accumulated depreciation. Expenditures for maintenance, repairs and
minor replacements and betterments that do not materially prolong the useful
lives of the assets are expensed when incurred.
Depreciation expense is computed using the straight-line method over the
estimated useful lives of the assets. The useful lives range from 5 to 31.5
years. The composite method is used for the plant and equipment acquired as a
whole on March 14, 1989, and the unit method is used for individual assets
subsequently capitalized. The composite method of depreciation recognizes no
gain or loss on normal property dispositions because the property cost is
credited to the property accounts and charged to the accumulated depreciation
accounts. Any proceeds are credited to the accumulated depreciation accounts.
However, if there are any abnormal dispositions of property, the cost and
related depreciation amounts are removed from the accounts and any profit or
loss is reflected in income. The unit method of depreciation reflects any gain
or loss on property dispositions in income.
Intangible and Other Assets -- Goodwill is amortized using the
straight-line method over a period of 40 years. Other intangibles, principally
purchased technology, are amortized using the straight-line method over periods
of 3 to 41 years.
2. DEBT
The Company and its subsidiaries have a Secured Credit Agreement
(Agreement) which provides for borrowings totalling $30,250. The Agreement
provides for three borrowing facilities, each of which is secured by the
Company's accounts receivable, inventories and property, plant and equipment in
addition to the common stock of its subsidiaries. The Company made cash payments
for interest of $2,547 and $2,916 for 1994 and 1993, respectively.
F-25
<PAGE> 140
THE HAWK GROUP OF COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Borrowings under the Agreement consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
------- -------
<S> <C> <C>
Senior Subordinated Note...................................... $ 9,500 $ 9,500
Revolving Step Down Term Loan................................. 9,000 9,000
Working Capital Loan.......................................... 4,039 5,550
------- -------
Total............................................... 22,539 24,050
Less current portion.......................................... 9,539 7,550
------- -------
Long-term debt................................................ $13,000 $16,500
======= =======
</TABLE>
Senior Subordinated Note -- The Senior Subordinated Note is due in one
installment of $9,500 on December 31, 1996. Interest is payable quarterly at a
fixed rate of 14.393%.
Revolving Step Down Term Loan -- Interest on the Revolving Step Down Term
Loan is payable monthly at the prime rate plus 1.75% (10.25% at December 31,
1994). Maturities due each year are: 1995 -- $5,500 and 1996 -- $3,500.
Working Capital Loan -- The Working Capital Loan agreement makes available
to the Company a credit facility totalling $10,000. The Company pays a
commitment fee of one-half percent per annum on the unused portion. Interest is
payable monthly at the prime rate plus 1.75% (10.25% at December 31, 1994). The
Working Capital Loan matures on December 31, 1995. The Company has the ability,
with the consent of the lender, to extend this loan for one additional one year
period. It is management's intent to exercise this option.
Covenants -- The Agreement contains certain financial ratio and covenant
requirements such as minimum adjusted net worth and working capital, as defined.
Under the most restrictive covenants, the Company is required to maintain
minimum interest coverage, cash flow and total liabilities ratios.
Warrants -- In connection with the Agreement, the Company issued warrants
to the lender for the purchase of 2,500 shares of its Common Stock at a per
share price of $50. On December 31, 1990, the Company borrowed $1,250 under its
working capital facility and used the proceeds to repurchase warrants for 500
shares. The remaining warrants to purchase 2,000 shares are exercisable through
March 13, 1999, and are subject to certain antidilution adjustments. The Company
has the option to repurchase these warrants at stipulated prices.
3. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1993
------ ------
<S> <C> <C>
Raw materials.................................................... $2,388 $1,055
In process and finished goods.................................... 2,146 2,616
------ ------
$4,534 $3,671
====== ======
</TABLE>
F-26
<PAGE> 141
THE HAWK GROUP OF COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
------- -------
<S> <C> <C>
Land.............................................................. $ 440 $ 440
Buildings......................................................... 2,808 2,802
Machinery and equipment........................................... 6,667 5,723
Furniture and fixtures............................................ 669 590
Construction in progress.......................................... 75 75
------- -------
10,659 9,630
Accumulated depreciation.......................................... (5,111) (4,003)
------- -------
Property, plant and equipment -- net.............................. $ 5,548 $ 5,627
======= =======
</TABLE>
The Company leases its corporate headquarters together with an affiliate of
a shareholder of the Company. The Company's allocation of the annual rent
approximates $47. The lease expires in 1999. The expenses of maintaining this
office are also shared with the affiliate. Rental expense included in the
results of operations was $49 and $52 for 1994 and 1993, respectively.
5. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1993
------- -------
<S> <C> <C>
Product certifications........................................ $20,820 $20,820
Goodwill...................................................... 2,366 2,366
Debt issuance costs........................................... 750 750
Other......................................................... 2,585 2,585
------- -------
26,521 26,521
Accumulated amortization...................................... (7,459) (6,505)
------- -------
$19,062 $20,016
======= =======
</TABLE>
6. INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach for recording income taxes rather than
the deferred method as prescribed by previous accounting standards. The
cumulative effect on prior years of this change in accounting principles
decreased net income by $284, and is reported separately in the consolidated
statement of operations for the year ended December 31, 1993. As permitted under
SFAS No. 109, the Company elected not to restate the financial statements of any
prior years.
F-27
<PAGE> 142
THE HAWK GROUP OF COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes. The components of the net deferred tax asset (liability) at December
31, 1994 consist of the following:
<TABLE>
<CAPTION>
FEDERAL STATE LOCAL TOTAL
------- ----- ----- -------
<S> <C> <C> <C> <C>
Assets............................................. $ 268 $ 43 $ 11 $ 322
Liabilities........................................ (2,183) (353) (32) (2,568)
------- ----- ---- -------
Total.................................... $(1,915) $(310) $ (21) $(2,246)
======= ===== ==== =======
</TABLE>
Deferred tax assets result principally from provisions and accruals which
are deductible in future periods and uniform capitalization relating to
inventory costing. Deferred tax liabilities result principally from the
difference in amortization methods used for intangibles for tax purposes
compared to financial reporting purposes and the use of accelerated depreciation
methods for tax purposes compared to the straight-line method for financial
reporting purposes for property, plant and equipment.
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------
1994 1993
------ ------
<S> <C> <C>
CURRENT:
Federal........................................................ $1,026 $ 769
State.......................................................... 82 189
City........................................................... 15 11
------ ------
Total.................................................. 1,123 969
------ ------
DEFERRED:
Federal........................................................ 316 672
State.......................................................... 55 63
City........................................................... 10 12
------ ------
Total.................................................. 381 747
------ ------
Total income taxes............................................. $1,504 $1,716
====== ======
</TABLE>
The provision for income taxes differs from the amounts computed by
applying the federal statutory rate as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993
---------------------
1994 1993
----- -----
<S> <C> <C>
Income tax at federal statutory rate.......................... 34.0% 34.0%
State and local tax, net...................................... 3.0 5.8
Nondeductible goodwill amortization and other................. 2.2 6.5
Federal tax audit settlement.................................. 5.6
Other, net.................................................... 3.1 2.7
---- ----
Total income taxes.......................................... 42.3% 54.6%
==== ====
</TABLE>
The Company made cash payments for income taxes of $1,482 and $600 in 1994
and 1993, respectively.
F-28
<PAGE> 143
THE HAWK GROUP OF COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
7. RETIREMENT BENEFITS
The Company's subsidiaries sponsor a non-contributory, defined benefit
pension plan covering substantially all employees. The plan provides
participating employees with retirement benefits in accordance with benefit
provision formulas which are based on years of service and/or compensation. The
Company funds pension costs in accordance with the plan and legal requirements.
Pension cost for the plan is based on the projected unit credit actuarial
cost method using an assumed 8.0% discount rate for 1994 compared to 7.5% for
1993, 10% expected long-term rate of return on assets and 3% rate of increase in
compensation levels.
Components of net periodic pension cost of this plan were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1994 1993
----- -----
<S> <C> <C>
Service cost...................................................... $ 246 $ 207
Interest cost..................................................... 421 411
Actual return on plan assets...................................... (165) (624)
Net amortization and deferral..................................... (293) 210
----- -----
$ 209 $ 204
===== =====
</TABLE>
The funded status of the plan and the amounts recognized in the Company's
balance sheet are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1993
------ ------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation...................................... $5,004 $4,660
Unvested benefit obligation.................................... 93 460
------ ------
Accumulated benefit obligation................................. 5,097 5,120
Effect of projected future salary increases.................... 469 496
------ ------
Projected benefit obligation................................... 5,566 5,616
Plan assets at fair market value................................. 5,193 5,093
------ ------
Projected benefit obligation in excess of plan assets............ (373) (523)
Unrecognized net loss............................................ 931 990
Unamortized net obligation....................................... 134 134
------ ------
Prepaid pension cost............................................. $ 692 $ 601
====== ======
</TABLE>
In connection with a collective bargaining agreement, the Company
contributes to a pension plan based on hours worked by the covered employees.
Pension cost for this plan was $20 and $36 in 1994 and 1993, respectively.
The Company sponsors a defined contribution pension plan which covers a
majority of its employees. The plan provides for voluntary employee
contributions and elective salary deferral options with a discretionary Company
contribution. Expenses related to this plan were $131 and $108 in 1994 and 1993,
respectively.
F-29
<PAGE> 144
THE HAWK GROUP OF COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
8. COMMON STOCK
During 1993, the Company sold 200 shares of common stock at $50 per share,
thus increasing the number of common shares outstanding and reducing treasury
shares.
9. SUBSEQUENT EVENTS
On April 10, 1995, the Company entered into a definitive agreement with MLX
Corp., a publicly-held company, to purchase all of the capital stock of its
subsidiary S.K. Wellman Limited, Inc. (with revenues of approximately $60,000)
for a purchase price of approximately $60,000. The purchase will be financed
principally with proceeds from an umbrella financing arrangement which will also
be used to repay the Company's current indebtedness and any related costs and
settle any remaining obligations for the warrants the lender owns. The Company
will account for the transaction as a purchase if consummated.
F-30
<PAGE> 145
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Helsel, Inc.
We have audited the accompanying balance sheet of Helsel, Inc. as of
December 31, 1994, and the related statements of income, shareholders' equity
and cash flows for the period from July 1, 1994 through December 31, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Helsel, Inc. at December 31,
1994, and the results of its operations and its cash flows for the period from
July 1, 1994 through December 31, 1994 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Cleveland, Ohio
February 3, 1995
F-31
<PAGE> 146
HELSEL, INC.
BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash......................................................................... $ 427,091
Accounts receivable.......................................................... 2,021,147
Inventories.................................................................. 1,336,894
Deferred income taxes........................................................ 115,000
Prepaid expenses............................................................. 27,198
----------
Total current assets........................................................... 3,927,330
Property, plant and equipment:
Land......................................................................... 68,778
Building..................................................................... 716,131
Manufacturing equipment...................................................... 4,014,377
Office equipment............................................................. 206,434
----------
5,005,720
Less accumulated depreciation................................................ 387,488
----------
4,618,232
Deferred expenses, less accumulated amortization of $19,409.................... 258,788
----------
TOTAL ASSETS................................................................... $ 8,804,350
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Line of credit............................................................... $ 1,279,410
Accounts payable............................................................. 997,691
Accrued payroll and payroll taxes............................................ 837,420
Accrued income taxes......................................................... 50,000
Current portion of long-term debt............................................ 963,212
----------
Total current liabilities...................................................... 4,127,733
Long-term debt, less current portion........................................... 3,224,027
Deferred income taxes.......................................................... 36,000
Shareholders' equity:
Preferred stock -- par value $1,000 with 9% cumulative dividend; 702
authorized, issued and outstanding shares................................. 702,000
Common stock -- par value $3 per share; 100,000 shares authorized, issued and
outstanding............................................................... 300,000
Retained earnings............................................................ 414,590
----------
Total shareholders' equity..................................................... 1,416,590
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY..................................... $ 8,804,350
==========
</TABLE>
See notes to financial statements.
F-32
<PAGE> 147
HELSEL, INC.
STATEMENT OF INCOME
PERIOD FROM JULY 1, 1994 THROUGH DECEMBER 31, 1994
<TABLE>
<S> <C>
Net sales...................................................................... $ 8,554,937
Cost of goods sold............................................................. 6,685,804
----------
Gross margin................................................................... 1,869,133
Selling, general and administrative expenses................................... 887,443
Research and development costs................................................. 178,312
----------
Operating income............................................................... 803,378
Other income (expenses):
Tool sales................................................................... 221,365
Miscellaneous income......................................................... 12,921
Interest expense............................................................. (250,484)
----------
(16,198)
----------
Income before income taxes..................................................... 787,180
Income tax expense -- Note D................................................... 341,000
----------
NET INCOME..................................................................... $ 446,180
==========
</TABLE>
See notes to financial statements.
F-33
<PAGE> 148
HELSEL, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED COMMON RETAINED
STOCK STOCK EARNINGS TOTAL
--------- -------- -------- ----------
<S> <C> <C> <C> <C>
Balance at July 1, 1994.................. $ 0
Sale of stock............................ $ 702,000 $300,000 $1,002,000
Net income............................... $446,180 446,180
Dividends on preferred stock............. (31,590) (31,590)
-------- -------- -------- ----------
BALANCE AT DECEMBER 31, 1994............. $ 702,000 $300,000 $414,590 $1,416,590
======== ======== ======== ==========
</TABLE>
See notes to financial statements.
F-34
<PAGE> 149
HELSEL, INC.
STATEMENT OF CASH FLOW
PERIOD FROM JULY 1, 1994 THROUGH DECEMBER 31, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................................... $ 446,180
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization................................................ 413,146
Deferred income taxes........................................................ (79,000)
Loss on sale of equipment.................................................... 6,636
Changes in operating assets and liabilities, net of effect of acquired asset
and assumed liabilities:
Accounts receivable....................................................... 132,149
Inventories............................................................... 483,224
Other assets.............................................................. 169,380
Accounts payable.......................................................... 272,494
Other liabilities......................................................... (26,019)
----------
Net cash provided by operating activities...................................... 1,818,190
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of certain assets and assumption of certain liabilities of Helco,
Inc.......................................................................... (4,626,932)
Purchase of property and equipment............................................. (850,517)
----------
NET CASH USED IN INVESTING ACTIVITIES.......................................... (5,477,449)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from line of credit............................................... 1,279,410
Proceeds from long-term debt................................................... 3,880,000
Principal payments on long-term debt........................................... (2,043,470)
Proceeds from sale of stock.................................................... 1,002,000
Dividends paid................................................................. (31,590)
----------
Net cash provided by financing activities...................................... 4,086,350
----------
CASH AT END OF PERIOD.......................................................... $ 427,091
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period from July 1, 1994 through December 31, 1994 for:
Interest..................................................................... $ 195,747
==========
Income taxes................................................................. $ 370,000
==========
RECONCILIATION OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
Fair value of assets acquired.................................................. $ 8,615,284
Liabilities assumed............................................................ (3,488,352)
Subordinated note payable issued for acquisition of Helco, Inc................. (500,000)
----------
CASH PAID FOR ACQUISITION...................................................... $ 4,626,932
==========
</TABLE>
See notes to financial statements.
F-35
<PAGE> 150
HELSEL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
A. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Helsel, Inc. (the Company) acquired substantially all of the net assets of
Helco Inc. on July 1, 1994, for a total purchase price of approximately $8.6
million. The acquisition was accounted for as a purchase. Accordingly, the
purchase price was allocated to assets and liabilities based on their estimated
fair values as of the date of the acquisition. The excess of fair market value
of identifiable assets less liabilities over the purchase price resulted in
negative goodwill, which was applied to reduce property, plant and equipment.
The acquisition was financed through long-term and short-term debt and the sale
of $702,000 of preferred stock and $300,000 of common stock.
During the six month's ended December 31, 1994, the Company had sales
approximating $5,730,000 to four customers. At December 31, 1994 amounts due
from these customers, included in accounts receivable, was $1,386,000.
The company manufactures, markets and distributes powdered metal parts for
its customers located primarily throughout the midwestern United States.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is provided
over the estimated service lives of the respective classes of assets using
accelerated methods.
Deferred Expenses
The Company has capitalized certain costs related to the debt incurred as a
result of the acquisition and is amortizing those costs over the life of the
debt.
B. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<S> <C>
Raw materials.................................................. $ 266,524
Work-in process................................................ 496,821
Finished goods................................................. 573,549
----------
$ 1,336,894
==========
</TABLE>
F-36
<PAGE> 151
HELSEL, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
C. DEBT ARRANGEMENTS
Long-term debt consists of the following:
<TABLE>
<S> <C>
Term note, payable in four quarterly installments of $207,500
beginning October 1, 1994, and 23 quarterly installments of
$118,750 beginning August 1, 1995, interest is payable
monthly at the bank's prime lending rate (8.50% at December
31, 1994) plus 1.25% through June 30, 1995 and plus .75%
thereafter................................................... $ 3,472,500
Subordinated note, payable to the owner of Helco, Inc. in four
annual installments of $125,000 beginning August 1, 1996,
interest is payable quarterly at the prime lending rate per
the Wall Street Journal (8.25% at December 31, 1994) plus
1%........................................................... 500,000
Subordinated note, payable in 12 annual installments beginning
October 1, 1995, interest payable quarterly at 9%............ 200,000
Other.......................................................... 14,739
----------
4,187,239
Less current portion........................................... 963,212
----------
$ 3,224,027
==========
</TABLE>
The future maturities of long-term debt outstanding are as follows:
$963,212 in 1995; $703,408 in 1996; $603,616 in 1997; $603,836 in 1998; $600,667
in 1999, and $712,500 thereafter.
The Company has a revolving line of credit with a bank callable after June
30, 1997 with a borrowing capacity of $2.5 million, bearing interest at the
bank's prime lending rate (8.5% at December 31, 1994) plus .5%.
An additional line of credit for capital expenditures is available to the
Company through June 30, 1995 with a borrowing capacity of $700,000 bearing
interest at the bank's prime rate plus 1%. No amount was outstanding on this
line at December 31, 1994.
The term loan and credit line are collateralized by substantially all
tangible assets of the Company.
D. INCOME TAXES
Income taxes are summarized as follows:
<TABLE>
<S> <C>
Current:
Federal........................................................ $ 343,000
State.......................................................... 77,000
--------
420,000
Deferred......................................................... (79,000)
--------
$ 341,000
========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 1994 the
Company had deferred tax liabilities of $36,000 resulting
F-37
<PAGE> 152
HELSEL, INC.
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
from accelerated depreciation methods and deferred tax assets of $115,000
primarily related to accrued pension and salary expense.
The provision for income taxes differs from the amounts computed by
applying the federal statutory rate as follows:
<TABLE>
<S> <C>
Income tax at federal statutory rate.................................. 34.0%
State and local tax, net.............................................. 6.5
Other, net............................................................ 2.9
----
43.4%
====
</TABLE>
E. EMPLOYEE BENEFIT PLANS
The Company has a qualified defined contribution pension plan covering
substantially all of its employees. Contributions are based on a percent of the
individual employee's earnings. Contributions to the plan totaled $144,157
during the six months ended December 31, 1994.
The Company also sponsors an employees' savings and retirement plan in
which certain of its employees are eligible to participate. Participants may
elect to contribute a portion of their compensation to the plan. The Company is
required to contribute 50% of the participant's contribution, not to exceed 2%
of the participant's earnings. The Company contributed $15,157 to this plan
during the six months ended December 31, 1994.
F-38
<PAGE> 153
REPORT OF INDEPENDENT AUDITORS
BOARD OF DIRECTORS AND SHAREHOLDERS
S.K. WELLMAN LIMITED, INC.
We have audited the consolidated balance sheets of S.K. Wellman Limited,
Inc. and subsidiaries (a wholly-owned subsidiary of MLX Corp.) as of December
31, 1993 and 1994, and the related consolidated statements of operations,
shareholder's equity, and cash flows for the years then ended. We have also
audited the statements of operations and cash flows of S.K. Wellman Limited,
Inc. and subsidiaries for the six months ended June 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of S.K. Wellman
Limited, Inc. and subsidiaries at December 31, 1993 and 1994, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1993 and 1994 and the six months ended June 30, 1995 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Cleveland, Ohio
September 26, 1996
F-39
<PAGE> 154
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1993 1994
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 290 $ 446
Accounts receivable................................................. 8,357 9,638
Inventories:
Raw materials and work-in-process................................ 6,151 7,328
Finished products................................................ 2,298 2,353
------- -------
8,449 9,681
Prepaid expenses and other current assets........................... 585 957
Deferred income taxes............................................... 825 618
------- -------
Total current assets.................................................. 18,506 21,340
Property, plant and equipment:
Land and improvements............................................... 1,179 1,239
Buildings and improvements.......................................... 6,908 7,376
Machinery and equipment............................................. 15,686 17,581
Construction in progress............................................ 533 1,178
------- -------
24,306 27,374
Less accumulated depreciation and amortization...................... 12,250 14,012
------- -------
12,056 13,362
Other assets:
Receivable from MLX Corp............................................ 1,467 2,151
Intangible assets, less accumulated amortization of $3,060 in 1993
and $3,558 in 1994............................................... 2,370 1,925
Other............................................................... 536 510
------- -------
TOTAL ASSETS.......................................................... $34,935 $39,288
======= =======
</TABLE>
F-40
<PAGE> 155
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
1993 1994
------- -------
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable.................................................... $ 3,356 $ 4,615
Accrued compensation and benefits................................... 2,214 2,764
Accrued taxes....................................................... 403 769
Other accrued liabilities and expenses.............................. 1,481 1,552
Current portion of long-term debt................................... 53 61
------- -------
Total current liabilities............................................. 7,507 9,761
Long-term liabilities:
Debt................................................................ 12,390 10,997
Deferred income taxes............................................... 224 181
Other............................................................... 2,261 2,893
------- -------
Total long-term liabilities........................................... 14,875 14,071
Shareholder's equity:
Preferred stock, $100 par value--authorized 20,000 shares; none
outstanding
Common stock, $1 par value--authorized and outstanding 250,000
shares........................................................... 250 250
Retained earnings................................................... 14,044 16,838
Other equity adjustments............................................ (1,536) (1,427)
Cost of 3,750 shares of common stock held for retirement............ (205) (205)
------- -------
Total shareholder's equity............................................ 12,553 15,456
------- -------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............................ $34,935 $39,288
======= =======
</TABLE>
See notes to consolidated financial statements.
F-41
<PAGE> 156
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31 SIX MONTHS
---------------------- ENDED
1993 1994 JUNE 30, 1995
------- ------- -------------
<S> <C> <C> <C>
Net sales............................................ $57,036 $60,858 $34,916
Costs and expenses:
Cost of products sold.............................. 43,174 46,365 26,617
Selling, general and administrative expenses....... 6,196 6,772 3,085
MLX Corp. management fee........................... 950 1,200 600
Amortization of intangibles........................ 175 175 87
------- ------- -------
50,495 54,512 30,389
------- ------- -------
Operating earnings................................... 6,541 6,346 4,527
Interest expense..................................... (1,746) (1,369) (660)
Intercompany interest income......................... 151 185 109
Other (expense) income............................... (122) 115 (6)
------- ------- -------
Earnings before income taxes......................... 4,824 5,277 3,970
Provision for income taxes:
Federal income taxes............................... 1,422 1,489 1,016
Foreign, state and local income taxes.............. 533 994 680
------- ------- -------
1,955 2,483 1,696
------- ------- -------
NET EARNINGS......................................... $ 2,869 $ 2,794 $ 2,274
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-42
<PAGE> 157
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON TOTAL
COMMON RETAINED OTHER EQUITY STOCK HELD SHAREHOLDER'S
STOCK EARNINGS ADJUSTMENTS FOR RETIREMENT EQUITY
------ -------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1993........ $250 $ 14,552 $ (1,026) $ (205) $13,571
Net earnings....................... 2,869 2,869
Dividend to MLX Corp............... (3,377) (3,377)
Foreign currency translation
adjustment....................... (445) (445)
Pension adjustment................. (65) (65)
---- -------- -------- ------ -------
Balances at December 31, 1993...... 250 14,044 (1,536) (205) 12,553
Net earnings....................... 2,794 2,794
Foreign currency translation
adjustment....................... 109 109
---- -------- -------- ------ -------
BALANCES AT DECEMBER 31, 1994...... $250 $ 16,838 $ (1,427) $ (205) $15,456
==== ======== ======== ====== =======
</TABLE>
See notes to consolidated financial statements.
F-43
<PAGE> 158
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31 SIX MONTHS
---------------------- ENDED
1993 1994 JUNE 30, 1995
------- ------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings......................................... $ 2,869 $ 2,794 $ 2,274
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization................... 2,501 2,269 1,099
Changes in operating assets and liabilities:
Accounts receivable........................... (84) (1,281) (907)
Inventories and prepaid expenses.............. (507) (1,604) (891)
Accounts payable and accrued expenses......... 1,486 2,116 143
Deferred income taxes......................... (449) 191
Other......................................... (1,152) 124 301
------- ------- -------
Net cash provided by operating activities............ 4,664 4,609 2,019
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment........... (1,820) (2,983) (1,334)
Collection of intercompany advances and interest..... 1,731 1,140 372
Advances to MLX Corp................................. (1,247) (1,824)
------- ------- -------
Net cash used in investing activities................ (1,336) (3,667) (962)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings of long-term debt......................... 10,740 365
Repayments of long-term debt......................... (8,132) (1,750) (1,759)
Changes in capital lease obligations................. 599 256
Dividends paid to MLX Corp........................... (5,900)
------- ------- -------
Net cash used in financing activities................ (3,292) (786) (1,503)
------- ------- -------
Net increase (decrease) in cash...................... 36 156 (446)
Cash at beginning of period.......................... 254 290 446
------- ------- -------
CASH AT END OF PERIOD................................ $ 290 $ 446 $ 0
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-44
<PAGE> 159
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993 AND 1994
AND THE SIX MONTHS ENDED JUNE 30, 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
S.K. Wellman Limited, Inc. (S.K. Wellman or the Company), is a wholly-owned
subsidiary of MLX Corp. (MLX). The Company designs and manufactures proprietary
high-energy friction material and related products for original equipment and
aftermarket applications in the aircraft industry and for heavy equipment
brakes, transmissions and clutches. The Company serves many large manufacturing
companies around the world through subsidiary manufacturing and sales offices
located in Brook Park, Ohio; LaVergne, Tennessee; Solon, Ohio; Concord, Ontario;
Orzinuovi, Italy; and an affiliation with Tokai Carbon Co., Limited in Tokyo,
Japan.
On June 30, 1995, substantially all of the net assets of the Company were
acquired, for cash, by Hawk Corporation for a purchase price of approximately
$62 million. The acquisition was accounted for as a purchase. The operating
results of the Company have been included in Hawk Corporation's consolidated
financial statements since the date of acquisition.
Principles of Consolidation
The financial statements include the accounts of S.K. Wellman and its
wholly-owned subsidiaries. Upon consolidation, all significant intercompany
accounts and transactions have been eliminated.
Inventories
Inventories are stated at lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost and include expenditures
for additions and major improvements. Expenditures for repairs and maintenance
are charged to operations as incurred. Depreciation and amortization are
computed using the straight-line method over the estimated useful lives of the
respective assets.
Intangible Assets
Intangible assets are amortized using the straight-line method over the
weighted average lives indicated in the following table. The components of
intangible assets are as follows:
<TABLE>
<CAPTION>
1993 1994 LIFE
------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Excess of cost of acquired businesses over the
fair value of the net assets acquired........... $ 1,699 $ 1,699 10 years
Deferred financing costs.......................... 907 953 11 years
Proprietary formulations and patents.............. 1,806 1,806 10 years
Pension costs..................................... 1,018 1,025 15 years
------- -------
5,430 5,483
Accumulated amortization.......................... (3,060) (3,558)
------- -------
$ 2,370 $ 1,925
======= =======
</TABLE>
F-45
<PAGE> 160
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Product Research and Development
Costs incurred in research, product development and engineering ($3.4
million in 1993 and 1994 and $1.9 million for the six months ended June 30,
1995) are charged to operations as incurred. The Company recorded the research
and product development portion of this expense ($1.7 million in 1993, $1.4
million in 1994 and $.7 million for the six months ended June 30, 1995) as
selling, general and administrative expense in the Consolidated Statements of
Operations.
Foreign Currency Translation
The assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at current exchange rates with the resulting cumulative translation
adjustment reflected as an Other Equity Adjustment in shareholder's equity.
Exchange adjustments resulting from certain transactions, included in other
(expense) income in the accompanying Consolidated Statements of Operations were
a $255,000 loss in 1993, $95,000 income in 1994 and $10,000 income for the six
months ended June 30, 1995.
Income Taxes
In accordance with a tax sharing agreement between MLX and the Company, MLX
charges the Company for federal income taxes computed as if the Company was not
part of the consolidated federal income tax return. In addition, the Company
records provisions for foreign, state and local income taxes.
Deferred income taxes arise from temporary differences between income tax
and financial reporting and principally relate to accruals recorded for book
purposes that are not deductible for tax purposes until paid and the use of
accelerated depreciation methods for property, plant and equipment for income
tax purposes.
Reclassification
Certain reclassifications have been made in the 1993 financial statements
to conform with the 1994 and 1995 presentation.
B. RELATIONSHIP WITH MLX CORP.
The Company has a Management Services Agreement with MLX under which MLX
provides certain senior management and financial services to the Company for a
fee.
The Company advanced $4 million in cash to MLX in 1990 and made additional
advances totaling $1.2 million in 1993 and $1.8 million in 1994. The Company
charges MLX interest on these advances at a rate which is equal to the rate
which the Company pays on its senior credit facility. The intercompany balance
is adjusted quarterly for charges by MLX for federal income taxes on the
Company's taxable income.
F-46
<PAGE> 161
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C. LONG-TERM DEBT
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
1993 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Senior credit facility:
Revolving credit facility................................... $ 2,345 $ 1,981
Real estate term facility................................... 6,450 8,399
Mezzanine component......................................... 1,350 550
Equipment term note......................................... 420
Subordinated note............................................. 1,703
Note payable to bank.......................................... 175 128
------- -------
12,443 11,058
Less current portion.......................................... 53 61
------- -------
$12,390 $10,997
======= =======
</TABLE>
The Company has available a $19.7 million credit facility (the senior
credit facility). During 1994, the loan and security agreement was amended to
extend the expiration of the facility through January 1998 and to consolidate
the real estate term facility, the original equipment term note and the proceeds
used to repay the seller note into the consolidated term loan.
The senior credit facility provides for four borrowing components with
varying rates and repayment obligations. Included in the senior credit facility
is a secured revolving credit component with a maximum borrowing limit of $7.2
million which expires in January 1998. This revolving loan bears interest at
prime rate plus 1.25% (9.75%) at December 31, 1994 compared to prime rate plus
2.0% (8%) at December 31, 1993. The amount which may be borrowed is subject to
certain availability formulas regarding accounts receivable and inventory.
The senior credit facility also includes a secured consolidated term loan
component with an initial balance of $8.5 million. This loan requires monthly
amortization of $101,000 with any remaining unpaid balance payable in January
1998. The loan bears an initial interest rate of prime plus 2% dropping to prime
plus 1.75% after certain conditions are met.
These components of the senior credit facility are secured by a lien on
substantially all the North American assets of the Company and a pledge of the
common stock of its Italian subsidiary. The agreements require the Company to,
among other things, maintain specified levels of working capital, net worth and
profitability. This agreement also limits cash dividends and loans to MLX. Under
the most restrictive covenants, retained earnings in the amount of approximately
$1.3 million were free from limitations on the payment of dividends to MLX at
December 31, 1994.
An additional component of the senior credit facility is a $2 million,
unsecured, 30-month mezzanine term facility expiring in July 1995 with monthly
amortization requirements of $67,000 and an interest rate of prime plus 3.5%.
This facility may be prepaid, under certain circumstances, with no penalty.
The senior credit facility also has available a line of credit intended to
fund capital expenditures up to a maximum of $2 million. This note bears
interest at prime rate plus 1.75% and requires equal monthly amortization
payments based on a five year term with any remaining unpaid balance payable in
January 1997. Advances are made at the Company's request and may occur at any
time until January 1997. At December 31, 1994 no amounts were outstanding under
the arrangement.
F-47
<PAGE> 162
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The note payable to bank was used to fund certain capital expenditures in
Italy. The note bears interest at 9%, is unsecured, and is due in varying
quarterly installments through December 1996.
The Company intends to finance current maturities of long-term borrowings,
except the Italian note payable to bank, through availability under the
revolving credit facility.
Aggregate maturities and other reductions of debt are: 1995 -- $61,000;
1996 -- $1.3 million; 1997 -- $1.2 million and 1998 -- $8.5 million.
Interest paid was $1.4 million in 1993, $1.2 million in 1994 and $.6
million for the six months ended June 30, 1995.
D. EMPLOYEE BENEFITS
The Company sponsors a defined contribution pension plan which covers a
majority of its U.S. employees. The plan provides for voluntary employee
contributions, a matching Company contribution and a discretionary Company
contribution. Expenses related to this plan were $470,000, $516,000 and $285,000
in 1993, 1994 and for the six months ended June 30, 1995, respectively.
The Company and certain of its subsidiaries sponsor two non-contributory
defined benefit pension plans covering certain of their U.S. and Canadian
employees. Benefits under one plan is based on compensation during the years
immediately preceding retirement. Under the other plan, the benefits are based
on a fixed annual benefit for each year of credited service. It is the Company's
policy to make contributions to these plans sufficient to meet minimum funding
requirements of the applicable laws and regulations, plus such additional
amounts, if any, as the Company's actuarial consultants advise to be
appropriate. Plan assets consist principally of equity securities and fixed
income instruments.
A summary of the components of net periodic pension costs for the plans is
as follows:
<TABLE>
<CAPTION>
1993 1994
----- -----
(IN THOUSANDS)
<S> <C> <C>
Service cost...................................................... $ 105 $ 125
Interest cost..................................................... 259 160
Actual return on plan assets...................................... (281) 71
Net amortization and deferral..................................... 88 (227)
----- -----
$ 171 $ 129
===== =====
Assumptions used were:
Weighted average discount rate.................................. 7.44% 8.38%
Rate of increase in compensation levels......................... 6.00% 5.00%
Weighted average expected long-term
rate of return on assets..................................... 8.63% 8.63%
</TABLE>
F-48
<PAGE> 163
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents the funded status and amounts recognized in
the consolidated financial statements at December 31, 1993 and 1994, related to
the defined benefit plans (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1994
-------------------------------- --------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF
BENEFIT OBLIGATIONS
Vested benefit obligations.... $ (423) $(1,407) $(372) $(1,558)
====== ======= ===== =======
Accumulated benefit
obligations................. $ (434) $(1,613) $(381) $(1,772)
====== ======= ===== =======
Projected benefit
obligations................. $ (537) $(1,613) $(495) $(1,772)
Plan assets at fair value..... 1,012 984 891 1,038
------ ------- ----- -------
Projected benefit obligations
less than
(in excess of) plan
assets...................... 475 (629) 396 (734)
Unrecognized net loss......... 93 86 149
Prior service cost not yet
recognized in net periodic
pension cost................ 200 170 349
Unrecognized net obligation
(asset)
at January 1................ (284) 214 (246) 76
Adjustment required to
recognize minimum
liability................... (500) (574)
------ ------- ----- -------
PREPAID (ACCRUED) PENSION COST
AT DECEMBER 31.............. $ 284 $ (629) $ 320 $ (734)
====== ======= ===== =======
</TABLE>
The Company provides a fixed noncontributory benefit toward postretirement
health care for certain of its U.S. retired union employees. Projected future
costs of providing postretirement health care benefits are recognized as expense
as employees render service. In 1993, the Company recognized a transition
obligation amounting to approximately $540,000, for prior service costs as of
January 1, 1993. This transition obligation is being amortized into general and
administrative expenses over 20 years. The weighted average discount rate used
in determining the accumulated postretirement benefit obligation was 7%.
Postretirement benefit costs amounted to $62,000, $50,000 and $13,500 in 1993,
1994 and the six months ended June 30, 1995, respectively.
E. LEASES
The Company has lease commitments for buildings and equipment. Future
minimum annual rentals are: 1995 -- $211,000, 1996 -- $188,000, 1997 -- $158,000
1998 -- $115,000, 1999 -- $47,000, thereafter -- $135,000. Amount representing
interest is $211,000.
The Company leases certain office and warehouse facilities and equipment
under operating leases. Rental expense was $312,000, $367,000 and $162,000, in
1993, 1994 and the six months ended June 30, 1995, respectively. Future minimum
lease commitments under these agreements which have an original or existing term
in excess of one year as of December 31, 1994 are as
F-49
<PAGE> 164
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
follows: 1995 -- $259,000; 1996 -- $128,000; 1997 -- $76,000; 1998 -- $11,000
and 1999 -- $9,000.
F. INCOME TAXES
The results of the Company's operations are included in the consolidated
federal income tax returns of MLX Corp. Income taxes set forth in the
Consolidated Statements of Operations are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 SIX MONTHS
------------------ ENDED
1993 1994 JUNE 30, 1995
------ ------ -------------
<S> <C> <C> <C>
Federal:
Current......................................... $1,810 $1,298 $ 1,016
Deferred........................................ (388) 191 0
------ ------ ------
1,422 1,489 1,016
Foreign........................................... 219 699 424
State and local:
Current......................................... 375 295 256
Deferred........................................ (61)
------ ------ ------
314 295 256
------ ------ ------
$1,955 $2,483 $ 1,696
====== ====== ======
</TABLE>
The provision for income taxes differ from the amounts computed by applying
the federal statutory rate as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 SIX MONTHS
---------------- ENDED
1993 1994 JUNE 30, 1995
----- ----- -------------
<S> <C> <C> <C>
Income tax at federal statutory rate................ 34.0% 34.0% 34.0%
State and local tax, net............................ 4.3 3.7 4.3
Nondeductible goodwill amortization and other....... 0.6 0.9 0.7
Foreign tax rate differential....................... 3.5 6.1 3.8
Other, net.......................................... (1.9) 2.4 0.0
---- ---- ----
40.5% 47.1% 42.8%
==== ==== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income
F-50
<PAGE> 165
S.K. WELLMAN LIMITED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
tax purposes. Significant components of the Company's net deferred tax assets as
of December 31, 1993 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1993 1994
----- -----
<S> <C> <C>
Deferred tax assets:
Accrued vacation................................................ $ 321 $ 181
Inventory obsolescence.......................................... 193 93
Accrued pension................................................. 138 8
Other reserves.................................................. 173 336
---- ----
Total deferred tax assets......................................... 825 618
Deferred tax liabilities:
Tax over book depreciation...................................... (193) (201)
Other........................................................... (31) 20
---- ----
Total deferred tax liabilities.................................... (224) (181)
---- ----
Net deferred tax assets........................................... $ 601 $ 437
==== ====
</TABLE>
Undistributed earnings of the Company's foreign subsidiaries were not
significant at December 31, 1994. Those earnings are considered to be
indefinitely reinvested and, accordingly, no provision for U.S. federal and
state income taxes has been provided. Upon distribution of these earnings in the
form of dividends or otherwise, the Company would be subject to both U.S. income
taxes and withholding taxes payable to various foreign countries.
The Company paid foreign, state and local income taxes amounting to
$504,000 and $628,000 in 1993 and 1994, respectively.
G. OTHER MATTERS
Sales of foreign operations were $10.1 million, $11.8 million and $7.6
million in 1993, 1994 and for the six months ended June 30, 1995, respectively,
with operating earnings of $.9 million, $1.6 million and $1.2 million in 1993,
1994 and six months ended June 30, 1995, respectively, and net loss of $16,000,
net income of $514,000 and net income of $385,000 in 1993, 1994 and for the six
months ended June 30, 1995, respectively. Identifiable assets of foreign
operations were $9.4 million and $10.8 million at December 31, 1993 and 1994,
respectively.
The percentage of net sales to major customers was as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 SIX MONTHS
-------------- ENDED
1993 1994 JUNE 30, 1995
---- ---- -------------
<S> <C> <C> <C>
Customer A............................................. 16% 15% 17%
Customer B............................................. 9% 9% 13%
Customer C............................................. 14% 16% 12%
</TABLE>
The Company provides credit, in the normal course of its business, to
original equipment and after-market companies in the aircraft and heavy
equipment industries. The Company's customers are not concentrated in any
specific geographic region. The Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses which, when
realized, have been within the range of management's expectations.
F-51
<PAGE> 166
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Houghton Acquisition Corporation d/b/a
Hutchinson Foundry Products Company:
We have audited the accompanying balance sheet of Houghton Acquisition
Corporation d/b/a Hutchinson Foundry Products Company (the "Company") as of
December 31, 1995 and the related statements of income, stockholders' equity
(deficit) and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1995 and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
St. Louis, Missouri
February 2, 1996
F-52
<PAGE> 167
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
BALANCE SHEET
DECEMBER 31, 1995
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 21,945
Accounts receivable, net of estimated allowance for doubtful accounts of
$90,500.................................................................... 1,007,205
Inventories................................................................... 226,150
Prepaid expenses and other assets............................................. 35,608
Deferred income taxes......................................................... 124,000
----------
Total current assets.................................................. 1,414,908
----------
Property, plant and equipment................................................... 3,248,921
Less accumulated depreciation................................................... 827,744
----------
Property, plant and equipment, net.................................... 2,421,177
----------
OTHER ASSETS:
Prepaid pension cost.......................................................... 177,373
Debt financing costs, net of accumulated amortization of $196,238............. 10,586
Noncompete agreement, net of accumulated amortization of $300,000............. 200,000
Goodwill, net of accumulated amortization of $78,699.......................... 815,548
Other intangible assets, net of accumulated amortization of $1,286,134........ 28,755
----------
Total other assets.................................................... 1,232,262
----------
Total assets........................................................ $5,068,347
==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Borrowings on revolving line of credit........................................ $ 131,950
Current portion of long-term debt............................................. 100,000
Accounts payable.............................................................. 223,227
Accrued expenses.............................................................. 345,771
Income taxes payable.......................................................... 52,000
Preferred stock dividends payable............................................. 38,389
----------
Total current liabilities............................................. 891,337
Long-term liabilities:
Long-term debt, net of current portion........................................ 375,000
Deferred income taxes......................................................... 308,000
Cumulative redeemable preferred stock......................................... 1,360,000
Common stock purchase warrants subject to put option.......................... 2,269,470
Stockholders' equity (deficit).................................................. (135,460)
----------
Total liabilities and stockholders' equity (deficit)................ $5,068,347
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-53
<PAGE> 168
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Net sales....................................................................... $8,133,452
Cost of goods sold.............................................................. 5,417,039
----------
Gross profit.................................................................. 2,716,413
Selling, general and administrative expenses.................................... 868,470
Amortization expense............................................................ 493,160
----------
Income from operations........................................................ 1,354,783
----------
Other income (expense):
Interest expense.............................................................. (145,061)
Other, net.................................................................... 7,150
----------
(137,911)
----------
Income before provision for income taxes...................................... 1,216,872
Provision for income taxes...................................................... 486,000
----------
Net income.................................................................... $ 730,872
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-54
<PAGE> 169
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN RETAINED
CAPITAL -- EARNINGS
COMMON COMMON (ACCUMULATED
STOCK STOCK DEFICIT) TOTAL
------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Balance, January 1, 1995................... $5,000 $495,000 $ (439,274) $ 60,726
Net income................................. 730,872 730,872
Dividends on preferred stock............... (124,000) (124,000)
Accretion on preferred stock and stock
warrants................................. (803,058) 803,058
------ -------- ---------- ----------
Balance, December 31, 1995................. $5,000 $495,000 $ (635,460) $ (135,460)
====== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-55
<PAGE> 170
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income.................................................................. $ 730,872
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation............................................................. 289,064
Amortization............................................................. 493,160
Loss on disposals of equipment........................................... 10,918
Deferred income taxes.................................................... 14,000
Changes in assets and liabilities:
Accounts receivable.................................................... 53,736
Inventories............................................................ 80,534
Prepaid expenses and other assets...................................... (9,313)
Prepaid pension cost................................................... (28,714)
Accounts payable....................................................... (76,871)
Accrued expenses....................................................... (51,105)
Income taxes payable................................................... 30,825
-----------
Net cash provided by operating activities................................ 1,537,106
-----------
Cash flows from investing activities:
Purchases of property, plant and equipment.................................. (57,119)
Proceeds from disposals of equipment........................................ 32,000
-----------
Net cash used in investing activities.................................... (25,119)
-----------
Cash flows from financing activities:
Repayments of long-term debt................................................ (2,134,150)
Borrowings under revolving line of credit................................... 461,644
Repayments under revolving line of credit................................... (329,694)
Dividends paid on preferred stock........................................... (124,000)
-----------
Net cash used in financing activities.................................... (2,126,200)
-----------
Net decrease in cash and cash equivalents................................ (614,213)
Cash and cash equivalents, beginning of year.................................. 636,158
-----------
Cash and cash equivalents, end of year........................................ $ 21,945
===========
Supplemental disclosures:
Income taxes paid........................................................... $ 451,000
===========
Interest paid............................................................... $ 170,499
===========
Noncash financing activity -- Dividends declared but not paid as of December
31, 1995................................................................. $ 38,389
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-56
<PAGE> 171
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS:
Effective December 31, 1992, Houghton Acquisition Corporation (the
"Company") purchased substantially all of the assets of Hutchinson Foundry
Products Company. The Company's principal business is the production and sale of
rotors for use in subfractional horsepower motors and, to a lesser extent, the
machining and sale of aluminum extrusions and castings, principally fan spacers
used by engine manufacturers and gas nozzles used in gasoline pumping units. The
Company sells its products primarily in the Midwest region of the United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A. CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash, bank
deposits and highly liquid investments purchased with original
maturities of three months or less.
B. INVENTORIES: Inventories are stated at the lower of cost or market. Cost
is determined principally using the first-in, first-out method.
C. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment acquired in
conjunction with the Acquisition (see Note 1) were recorded at their
estimated fair value at the acquisition date based on independent
appraisals obtained near the acquisition date. Property, plant and
equipment purchased subsequent to the acquisition are recorded at cost.
Depreciation is computed by use of the straight-line method over the
estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Land improvements................................... 15 years
Buildings........................................... 20 years
Machinery and equipment............................. 10 years
Vehicles and computers.............................. 3-5 years
</TABLE>
Upon retirement or replacement, the cost and related accumulated
depreciation are removed from the respective accounts and any resulting
gain or loss is included in earnings. Expenditures for maintenance and
repairs are charged to operations as incurred, while renewals and
betterments which extend the useful lives of the assets are capitalized.
D. DEBT FINANCING COSTS: Costs incurred in connection with obtaining and
securing the bank loan agreement have been capitalized and are being
amortized over the period of the related borrowings. Amortization
expense for 1995 was $68,948.
E. NONCOMPETE AGREEMENT: In connection with the Acquisition (see Note 1),
the Company entered into a noncompete agreement with the seller valued
at $500,000. Under this noncompete agreement, the seller has agreed not
to compete with the Company through December 31, 1997.
The value of the noncompete agreement is being amortized over the term
of the agreement using the straight-line method. Amortization expense
was $100,000 for 1995.
F. GOODWILL: The excess of the purchase price over the fair value of the
tangible and identifiable intangible net assets of the Company has been
allocated to goodwill. Goodwill is being amortized on a straight-line
basis over a period of forty years. Amortization expense was $26,234 for
1995.
At each balance sheet date, management assesses whether there has been a
permanent impairment of the value of goodwill. The factors considered by
management in performing this assessment include current operating
results, trends and prospects as well as the effects of obsolescence,
demand, competition and other economic factors. Management has concluded
that no impairment of the value of goodwill has occurred as of December
31, 1995.
F-57
<PAGE> 172
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
G. OTHER INTANGIBLE ASSETS: Other intangible assets at December 31, 1995
consist of organization costs which are being amortized over five years.
Amortization expense related to these costs, as well as to a sales
agreement and a union employment agreement which became fully amortized
during 1995, amounted to $297,978 for 1995.
H. INCOME TAXES: Deferred tax liabilities and assets are recognized for the
expected future tax consequences of events that have been included in
the financial statements or tax returns. Deferred tax liabilities and
assets are determined based on the difference between the financial
statement and tax bases of assets and liabilities using enacted tax
rates as of the balance sheet date which are expected to be applied to
taxable income in the periods in which the deferred tax liability or
asset is expected to be settled or realized. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized.
I. PREFERRED STOCK AND STOCK WARRANTS: The proceeds received related to the
preferred stock and stock warrants have been allocated to the respective
instruments based upon their estimated fair values as of March 10, 1993,
the effective date of the related Securities Purchase Agreement. The
preferred stock is being accreted to its redemption value as of March
10, 1998 using the interest method. The stock warrants are being
accreted on a straight-line basis to their estimated value as of their
earliest put date, March 10, 1998, using a formula based on a multiple
of earnings adjusted for certain items as defined in the Securities
Purchase Agreement. Accretion is effected via corresponding decreases to
the Company's retained earnings.
J. ESTIMATES: The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
3. MAJOR CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK:
The Company has entered into an agreement with one of its largest customers
which entitles the Company to be this customer's exclusive supplier of die cast
rotors, under certain terms and conditions. The current agreement extends
through August 31, 1998.
During 1995, the Company had sales to two customers (each individually in
excess of ten percent of total Company net sales) amounting to approximately
$3.9 million or 48% of the Company's net sales. Management expects that sales to
the Company's major customers will continue to be a significant portion of its
annual sales. In addition, the Company had uncollateralized accounts receivable
from these two customers (each individually in excess of ten percent of total
Company accounts receivable) amounting to approximately $577,000 or 57% of the
Company's accounts receivable as of December 31, 1995. The Company performs
ongoing credit evaluations of its customers and has historically experienced
insignificant credit losses.
During 1995, a major customer of the Company filed for bankruptcy
protection. Management has provided an allowance for the potential
uncollectibility of a portion of this customer's receivable balance. The amount
the Company will ultimately realize could differ in the near term from the
amount assumed in arriving at the estimated allowance. Such difference would not
exceed approximately $90,000. The Company continues to sell product to this
customer on a cash-in-advance basis.
F-58
<PAGE> 173
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Substantially all of the Company's balances of cash and cash equivalents
are maintained in accounts at one financial institution.
4. INVENTORIES:
As of December 31, 1995 inventories consist of the following:
<TABLE>
<S> <C>
Raw materials................................................ $102,455
Work-in-process.............................................. 30,579
Finished goods............................................... 93,116
--------
$226,150
========
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following as of December 31,
1995:
<TABLE>
<S> <C>
Land and improvements...................................... $ 179,450
Buildings.................................................. 677,664
Machinery and equipment.................................... 2,329,588
Vehicles and computers..................................... 62,219
----------
$3,248,921
==========
</TABLE>
Depreciation expense amounted to $289,064 for the year ended December 31,
1995.
6. DEBT:
Long-term debt at December 31, 1995 consists of the following:
<TABLE>
<S> <C>
Subordinated debt -- Note payable to former owner, remaining
amount due December 31, 1997; interest payable quarterly at
floating rate tied to a bank's prime rate (10.5% at
December 31, 1995)......................................... $250,000
Obligation under noncompete agreement -- Payable in quarterly
installments through January 1, 1998....................... 225,000
--------
475,000
Less current portion......................................... 100,000
--------
$375,000
========
</TABLE>
Management estimates that the fair value of its outstanding long-term debt
approximates its carrying value.
The aggregate future annual maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1996................................................ $ 100,000
1997................................................ 350,000
1998................................................ 25,000
</TABLE>
The Company also has a senior revolving line of credit agreement with a
bank which provides for borrowings up to the lesser of $1 million or an amount
based on specified percentages of the
F-59
<PAGE> 174
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Company's eligible accounts receivable and inventory, as defined in the
agreement. Interest is payable monthly at a floating rate tied to bank's prime
rate (8.5% at December 31, 1995), plus .25% on the unused portion of the amount
available. The revolving line of credit has a maturity date of March 31, 1996.
The Company had an outstanding balance of $131,950 under the revolving line of
credit agreement as of December 31, 1995.
7. COMMON STOCK, PREFERRED STOCK AND STOCK WARRANTS:
Common stock consists of the following as of December 31, 1995:
<TABLE>
<S> <C>
Common stock; voting; $1 par value; 30,000 shares authorized; 5,000
shares issued and outstanding; 3,696 shares reserved for issuance
upon exercise of Common Stock Purchase Warrants..................... $ 5,000
===========
</TABLE>
Preferred stock consists of the following as of December 31, 1995:
<TABLE>
<S> <C>
Class A Cumulative Redeemable Preferred Stock; voting; $100 par value;
15,500 shares issued and outstanding; mandatory dividend rate of 8%
per annum payable quarterly; redeemable by the Company at any time,
however, redemption is mandatory by March 10, 1998; holders have the
option to redeem upon an event of default as defined in the related
Securities Purchase Agreement, registration of securities or if the
Company's president ceases to hold a majority of voting securities;
redemption price of $100 per share.................................. $ 1,360,000
===========
Stock warrants consist of the following as of December 31, 1995:
Common Stock Purchase Warrants; issued to holders of Class A
Cumulative Redeemable Preferred Stock; rights to purchase an
aggregate of 3,479 shares of Company's common stock, exercisable at
any time for $1 per share; on or after March 10, 1998, warrant
holders have the option to require the Company to purchase such
warrants, or any common stock obtained as result of prior exercise
of warrants, at a price based on a multiple of the Company's
adjusted earnings, as defined in the related Securities Purchase
Agreement; holders of stock issued upon exercise of warrants have
the right to cause the Company to register such shares under the
Securities Act of 1933; if not exercised, warrants terminate on the
sixth anniversary of the date all preferred stock has been
redeemed............................................................ $ 2,269,470
===========
</TABLE>
The Company has also issued other common stock purchase warrants to two
individuals to purchase an aggregate of 217 shares of the Company's common stock
on or before March 15, 1998 at an exercise price of approximately $446 per
share.
Pursuant to the terms of the Securities Purchase Agreement, preferred
stockholders and warrant holders are protected against dilution or other
impairment of their respective interests.
Amounts recorded during 1995 for accretion of the Cumulative Redeemable
Preferred Stock and Common Stock Purchase Warrants were $64,000 and $739,058,
respectively. Such amounts constitute noncash transactions for purposes of the
accompanying statement of cash flows.
F-60
<PAGE> 175
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
8. INCOME TAXES:
The Company's provision for income taxes for the year ended December 31,
1995 consists of the following:
<TABLE>
<S> <C>
Federal:
Current provision................................................ $ 381,000
Deferred provision............................................... 12,000
---------
393,000
---------
State:
Current provision................................................ 91,000
Deferred provision............................................... 2,000
---------
93,000
---------
$ 486,000
=========
</TABLE>
The provision for income taxes for the year ended December 31, 1995 differs
from the "expected" tax expense computed by applying the U.S. federal corporate
tax rate of 34% to income before provision for income taxes as follows:
<TABLE>
<S> <C>
Computed "expected" income tax provision........................... $ 403,000
State income tax provision, net of federal income tax benefit...... 59,000
Goodwill........................................................... 10,000
Other, net......................................................... 14,000
---------
$ 486,000
=========
</TABLE>
The significant components of the Company's deferred tax assets and
liabilities recognized in the accompanying balance sheet are as follows
<TABLE>
<S> <C>
Deferred tax assets:
Accrued vacation................................................. $ 47,000
Accrued officer's bonus.......................................... 41,000
Allowance for doubtful accounts.................................. 35,000
Other............................................................ 1,000
---------
Total deferred tax assets................................ 124,000
Deferred tax liabilities - Property, plant and equipment basis
differences...................................................... 308,000
---------
Net deferred tax liabilities........................... $ 184,000
=========
</TABLE>
9. EMPLOYEE BENEFIT PLANS:
The Company has a defined benefit retirement plan, Hutchinson Foundry
Retirement Plan for Employees (the "Plan"), which covers substantially all
employees of the Company. The Plan provides benefits in accordance with a
formula equal to $12-$14 per month (depending upon the participant's retirement
date) multiplied by the participants' years of service as of their retirement
date. Benefit payments to retired participants commence at age 65 (or at some
earlier date at a discounted amount as defined by the Plan, if so elected, for
early retirees) and continue for the life of the participant. Participants also
have the option of electing a lump sum distribution at retirement.
F-61
<PAGE> 176
HOUGHTON ACQUISITION CORPORATION D/B/A
HUTCHINSON FOUNDRY PRODUCTS COMPANY
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The Plan is funded in accordance with ERISA and approximately $18,000 of
contributions were required and made for 1995.
For the year ended December 31, 1995, net periodic pension income consists
of the following:
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
------------------------------------------------------------------ ---------
<S> <C>
Actual return on plan assets...................................... $ 160,672
Service cost...................................................... (17,134)
Interest cost..................................................... (31,426)
Net amortization and deferral..................................... (112,440)
Settlement gain................................................... 10,468
---------
Net periodic pension income..................................... $ 10,140
=========
</TABLE>
The following table presents the funded status of the Plan determined as of
December 31, 1995:
<TABLE>
<S> <C>
Actuarial present value of accumulated benefit obligation:
Vested........................................................... $ 392,196
Nonvested........................................................ 15,261
---------
Accumulated benefit obligation................................ $ 407,457
=========
Actuarial present value of projected benefit obligation............ $ 407,457
Plan assets at fair value.......................................... 646,550
---------
Plan assets in excess of projected benefit obligation............ 239,093
Unrecognized net gain.............................................. 61,720
---------
Prepaid pension cost.......................................... $ 177,373
=========
</TABLE>
Plan assets consist of corporate stocks and bonds, mutual funds and money
market accounts. The applicable portion of the unrecognized net loss is being
amortized over the average future working lifetime of the participants. The
assumptions used in developing the present value of the benefit obligations and
pension cost are as follows:
<TABLE>
<S> <C>
Weighted-average discount rate......................................... 7.5%
Long-term rate of return on assets..................................... 9.0%
</TABLE>
The Company also has a 401(k) defined contribution plan for substantially
all of its employees. Participants may contribute up to 15% of their
compensation each year. The Company, at its discretion, may elect to match a
percentage of employees' contributions each year, as determined by its Board of
Directors, not to exceed the maximum amount deductible for federal income tax
purposes. During 1995, the Company contributed $5,000 to the 401(k) plan.
F-62
<PAGE> 177
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<PAGE> 178
(This page intentionally left blank)
<PAGE> 179
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE EXCHANGE OFFER MADE HEREBY AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE SECURITIES
COVERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY EXCHANGE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THERE HAS BEEN
NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH INFORMATION
IS FURNISHED OR THE DATE HEREOF.
------------------------ ---------------------------
TABLE OF CONTENTS PROSPECTUS
------------------------ ---------------------------
<TABLE>
<CAPTION> $100,000,000
PAGE
---- [LOGO]
<S> <C> HAWK
Available Information...................... 2
Summary.................................... 3 HAWK CORPORATION
Risk Factors............................... 12
The Transactions........................... 18 OFFER TO EXCHANGE
The Exchange Offer......................... 20 SERIES B
Use of Proceeds............................ 28 10 1/4% SENIOR NOTES
Capitalization............................. 29 DUE 2003
Unaudited Pro Forma Consolidated FOR ALL OUTSTANDING
Financial Information.................... 30 10 1/4% SENIOR NOTES
Management's Discussion and DUE 2003
Analysis of Pro Forma Results of
Operations and Financial Condition....... 36 , 1997
Selected Consolidated Financial Data....... 39
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 41
Business................................... 47
Management................................. 60
Principal Stockholders..................... 65
Certain Transactions....................... 70
Description of Certain Indebtedness........ 73
Description of the Exchange Notes.......... 74
Certain U.S. Federal Income Tax
Consequences............................. 101
Registration Rights........................ 105
Plan of Distribution....................... 107
Legal Matters.............................. 108
Experts.................................... 108
Change in Independent Auditors............. 109
Index to Financial Statements.............. F-1
</TABLE>
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 180
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Section 102(b)(7) of the Delaware General Corporation
Law, as amended (the "DGCL"), which enables a corporation in its original
certificate or an amendment thereto to eliminate or limit the personal liability
of a director for violations of the director's fiduciary duty, except (1) for
any breach of the director's duty of loyalty to the corporation or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) pursuant to Section
174 of the DGCL (providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions) or (4) for any transaction
from which a director derived an improper personal benefit. The Certificate, a
copy of which is filed as Exhibit 3.1 to this Registration Statement, contains
provisions permitted by Section 102(b)(7) of the DGCL.
Reference also is made to Section 145 of the DGCL, which requires that a
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed legal 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 corporation as a director, officer, 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 officer, director, employee or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interests and, for criminal proceedings, had no reasonable
cause to believe that his conduct was unlawful. A Delaware corporation may
indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, 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 actually and reasonably incurred.
In addition, reference is made to Section 1701.13(E) of the Ohio General
Corporation Law, as amended (the "OGCL"), which provides that a corporation may
indemnify or agree to indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
other than an action by or in the right of the corporation, by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee, member, manager, or agent of another
corporation or other enterprise, against expenses, including attorney's fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, if he had no reasonable cause to believe his conduct was
unlawful. An Ohio corporation may indemnify officers and directors in an action
by or in the right of the corporation under the same conditions, except that no
indemnification is permitted (1) without judicial approval if the officer or
director is adjudged to be liable to the corporation, and (2) in connection with
any action or suit in which the only liability asserted against a director is
pursuant to Section 1701.95 of the OGCL with respect to the making of an
unlawful loan, dividend or other distribution. 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 actually and reasonably incurred.
II-1
<PAGE> 181
The certificates of incorporation of the Registrants that are Delaware
corporations provide for the indemnification of directors and officers of those
Registrants to the fullest extent permitted by the DGCL, and the articles of
incorporation of the Registrants that are Ohio corporations provide for the
indemnification of directors and officers of those Registrants to the fullest
extent permitted by the OGCL. At present, there is no pending litigation or
proceeding involving a director or officer of any Registrant as to which
indemnification is being sought, nor is any Registrant aware of any threatened
litigation that may result in claims for indemnification by any officer or
director.
Pursuant to the Purchase Agreement filed as Exhibit 4.1 to this
Registration Statement, the Initial Purchasers have agreed to indemnify each
officer, director, employee, representative, agent and controlling person of the
Registrants against certain civil liabilities that may be incurred in connection
with the Offering of the Notes, including certain liabilities under the
Securities Act and Exchange Act.
Pursuant to the Registration Rights Agreement filed as Exhibit 4.2 to this
Registration Statement, each holder of Exchange Notes and each participating
broker-dealer selling Exchange Notes during the 120 day period following the
effective date of this Registration Statement, and the directors, officers and
controlling persons of any such person or entity (each, a "Participant") have
agreed, severally and not jointly, to indemnify and hold harmless each of the
Registrants, each of their respective directors and officers who sign this
Registration Statement and of their respective controlling persons, with respect
to any information relating to such Participant furnished to the Registrants in
writing by such Participant expressly for use in any registration statement or
prospectus, any amendment or supplement thereto, or any preliminary prospectus.
The Registrants intend to maintain insurance policies that provide
protection, within the maximum liability limits of the policies and subject to a
deductible amount for each claim, to the Registrants under their respective
indemnification obligations and to the directors and officers with respect to
certain matters that are not covered by the Registrants' respective
indemnification obligations.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits: See the Exhibit Index following the signature pages to this
Registration Statement.
(b) Financial Statement Schedules: All schedules for which provision is
made in the applicable accounting regulations of the Commission are not required
under the related instructions or are not applicable, and therefore have been
omitted.
ITEM 22. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have 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 Registrants of expenses
incurred or paid by a director, officer or controlling person of the Registrants
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 Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-2
<PAGE> 182
(b) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration
Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(c) The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(d) The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 183
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
HAWK CORPORATION
By: /s/ NORMAN C. HARBERT
--------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board, Chief December 17, 1996
- -------------------------- Executive Officer, President and
Norman C. Harbert and Director (principal executive
officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board, December 19, 1996
- -------------------------- Treasurer and Director (principal
Ronald E. Weinberg financial officer)
/s/ THOMAS A. GILBRIDE Vice President-Finance December 17, 1996
- -------------------------- (principal accounting officer)
Thomas A. Gilbride
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- --------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- --------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- --------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- --------------------------
Dan T. Moore, III
</TABLE>
II-4
<PAGE> 184
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
FRICTION PRODUCTS CO.
By: /s/ NORMAN C. HARBERT
---------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board, Chief December 17, 1996
- -------------------------- Executive Officer and Director
Norman C. Harbert (principal executive officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board, December 19, 1996
- -------------------------- Treasurer and Director (principal
Ronald E. Weinberg financial officer)
/s/ THOMAS A. GILBRIDE Vice President-Finance December 17, 1996
- -------------------------- and Chief Financial Officer
Thomas A. Gilbride (principal accounting officer)
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- --------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- --------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- --------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- --------------------------
Dan T. Moore, III
</TABLE>
II-5
<PAGE> 185
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
HAWK BRAKE, INC.
By: /s/ NORMAN C. HARBERT
--------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board, Chief December 17, 1996
- -------------------------- Executive Officer and Director
Norman C. Harbert (principal executive officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board, December 19, 1996
- -------------------------- Treasurer and Director (principal
Ronald E. Weinberg financial officer)
/s/ THOMAS A. GILBRIDE Vice President-Finance December 17, 1996
- -------------------------- and Chief Financial Officer
Thomas A. Gilbride (principal accounting officer)
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- --------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- --------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- --------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- --------------------------
Dan T. Moore, III
</TABLE>
II-6
<PAGE> 186
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
LOGAN METAL STAMPINGS, INC.
By: /s/ NORMAN C. HARBERT
-------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board, Chief December 17, 1996
- ------------------------------- Executive Officer and Director
Norman C. Harbert (principal executive officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board, December 19, 1996
- ------------------------------- Treasurer and Director (principal
Ronald E. Weinberg financial officer)
/s/ THOMAS A. GILBRIDE Vice President-Finance December 17, 1996
- ------------------------------- and Chief Financial Officer
Thomas A. Gilbride (principal accounting officer)
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- -------------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- -------------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- -------------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- -------------------------------
Dan T. Moore, III
</TABLE>
II-7
<PAGE> 187
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
HELSEL, INC.
By: /s/ NORMAN C. HARBERT
-------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board and December 17, 1996
- ------------------------------- Director (principal executive
Norman C. Harbert officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board, December 19, 1996
- ------------------------------- Treasurer and Director (principal
Ronald E. Weinberg financial officer)
/s/ THOMAS A. GILBRIDE Assistant Treasurer (principal December 17, 1996
- ------------------------------- accounting officer)
Thomas A. Gilbride
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- -------------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- -------------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- -------------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- -------------------------------
Dan T. Moore, III
</TABLE>
II-8
<PAGE> 188
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
S.K. WELLMAN HOLDINGS, INC.
By: /s/ NORMAN C. HARBERT
---------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board, Chief December 17, 1996
- ------------------------------- Executive Officer and Director
Norman C. Harbert (principal executive officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board and December 19, 1996
- ------------------------------- Director (principal financial
Ronald E. Weinberg officer)
/s/ THOMAS A. GILBRIDE Treasurer and Chief Financial December 17, 1996
- ------------------------------- Officer (principal accounting
Thomas A. Gilbride officer)
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- -------------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- -------------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- -------------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- -------------------------------
Dan T. Moore, III
</TABLE>
II-9
<PAGE> 189
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
S.K. WELLMAN CORP.
By: /s/ NORMAN C. HARBERT
-------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board, Chief December 17, 1996
- ------------------------------- Executive Officer and Director
Norman C. Harbert (principal executive officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board, December 19, 1996
- ------------------------------- Treasurer and Director (principal
Ronald E. Weinberg financial officer)
/s/ THOMAS A. GILBRIDE Vice President-Finance December 17, 1996
- ------------------------------- and Chief Financial Officer
Thomas A. Gilbride (principal accounting officer)
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- -------------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- -------------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- -------------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- -------------------------------
Dan T. Moore, III
</TABLE>
II-10
<PAGE> 190
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
WELLMAN FRICTION PRODUCTS U.K. CORP.
By: /s/ NORMAN C. HARBERT
-------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board, Chief December 17, 1996
- ------------------------------- Executive Officer and Director
Norman C. Harbert (principal executive officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board and December 19, 1996
- ------------------------------- Director (principal financial
Ronald E. Weinberg officer)
/s/ THOMAS A. GILBRIDE Treasurer and Chief Financial December 17, 1996
- ------------------------------- Officer (principal accounting
Thomas A. Gilbride officer)
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- -------------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- -------------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- -------------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- -------------------------------
Dan T. Moore, III
</TABLE>
II-11
<PAGE> 191
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, thereunto duly authorized, in the City of Cleveland, State of Ohio,
on December 17, 1996.
HUTCHINSON PRODUCTS CORPORATION
By: /s/ NORMAN C. HARBERT
-------------------------
Norman C. Harbert,
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below hereby constitutes and appoints Ronald E. Weinberg and Byron S. Krantz his
true and lawful attorneys-in-fact, each acting alone, with full powers of
substitution, and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact or their substitutes, each acting alone, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ NORMAN C. HARBERT Chairman of the Board, Chief December 17, 1996
- ------------------------------- Executive Officer and Director
Norman C. Harbert (principal executive officer)
/s/ RONALD E. WEINBERG Vice-Chairman of the Board, December 19, 1996
- ------------------------------- Treasurer and Director (principal
Ronald E. Weinberg financial officer)
/s/ THOMAS A. GILBRIDE Vice President-Finance December 17, 1996
- ------------------------------- (principal accounting officer)
Thomas A. Gilbride
/s/ BYRON S. KRANTZ Secretary and Director December 16, 1996
- -------------------------------
Byron S. Krantz
/s/ PAUL R. BISHOP Director December 18, 1996
- -------------------------------
Paul R. Bishop
/s/ WILLIAM J. O'NEILL, JR. Director December 18, 1996
- -------------------------------
William J. O'Neill, Jr.
/s/ DAN T. MOORE, III Director December 16, 1996
- -------------------------------
Dan T. Moore, III
</TABLE>
II-12
<PAGE> 192
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<S> <C>
2.1 Stock Purchase Agreement, dated November 7, 1996, among the Company, Timothy
Houghton, CFB Venture Fund II, L.P., MorAmerica Capital Corporation, Community
Investment Partners II, L.P. and St. Louis Community Foundation setting forth the
terms of the Hutchinson acquisition (including, attached as exhibits thereto, the
form of Hutchinson Acquisition Notes, the form of the $500,000 Contingent Payment
Obligation and the form of Employment Agreement of the Company with Timothy
Houghton; and omitting certain exhibits and schedules setting forth the forms of
opinions of counsel, relating to the purchase price adjustment mechanism and
relating to the business of Houghton Acquisition Corporation d.b.a. Hutchinson
Foundry Products Company, which omitted exhibits and schedules the Registrants
undertake to furnish supplementally to the Commission upon request)
3.1 The Company's Amended and Restated Certificate of Incorporation
3.2 Certificate of Amendment of the Company's Amended and Restated Certificate of
Incorporation
3.3 The Company's Certificate of Designation of Series A and Series B Preferred Stock
3.4 The Company's Certificate of Designation of Series C Preferred Stock
3.5 Merger Agreement and Plan of Reorganization, effective as of November 27, 1996,
between Hawk Corporation and Hawk Holding Corp.
3.6 The Company's By-laws
4.1 Purchase Agreement, dated November 22, 1996, by and among the Company, Friction
Products Co., Hawk Brake, Inc., Logan Metal Stampings, Inc., Helsel, Inc., S.K.
Wellman Holdings, Inc., S.K. Wellman Corp., Wellman Friction Products U.K. Corp.,
Hutchinson Products Corporation, Schroder Wertheim & Co. Incorporated, BT
Securities Corporation and McDonald & Company Securities, Inc. (omitting certain
exhibits setting forth the form of Registration Rights Agreement included herein as
Exhibit and the form of opinion of counsel, which omitted exhibits the Registrants
undertake to furnish supplementally to the Commission upon request)
4.2 Registration Rights Agreement, dated as of November 27, 1996, by and among the
Company, Friction Products Co., Hawk Brake, Inc., Logan Metal Stampings, Inc.,
Helsel, Inc., S.K. Wellman Holdings, Inc., S.K. Wellman Corp., Wellman Friction
Products U.K. Corp., Hutchinson Products Corporation, Schroder Wertheim & Co.
Incorporated, BT Securities Corporation and McDonald & Company Securities, Inc.
4.3 Indenture, dated as of November 27, 1996, by and among the Company, Friction
Products Co., Hawk Brake, Inc., Logan Metal Stampings, Inc., Helsel, Inc., S.K.
Wellman Holdings, Inc., S.K. Wellman Corp., Wellman Friction Products U.K. Corp.,
Hutchinson Products Corporation, and Bank One Trust Company, NA, as Trustee
4.4 Form of 10 1/4% Senior Note due 2003 (including the Guarantees)
4.5 Form of Series B 10 1/4% Senior Note due 2003 (including the Guarantees)
4.6 Stockholders' Voting Agreement, effective as of November 27, 1996, by and among the
Company, Norman C. Harbert, the Harbert Family Limited Partnership, Ronald E.
Weinberg, the Weinberg Family Limited Partnership, Byron S. Krantz and the Krantz
Family Limited Partnership
4.7 Shareholders' Agreement, dated as of June 30, 1995, among the Company, Norman C.
Harbert, Ronald E. Weinberg, Byron S. Krantz, Jeffrey H. Berlin, Paul R. Bishop,
Thomas A. Gilbride, Jess F. Helsel, Gary Siciliano and Douglas D. Wilson (including
instruments of joinder executed by the Harbert Family Limited Partnership, the
Weinberg Family Limited Partnership, the Krantz Family Limited Partnership and
Gerald H. Gordon)
</TABLE>
II-13
<PAGE> 193
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<S> <C>
4.8 Form of letter agreement, effective November 27, 1996, amending the Shareholders'
Agreement, dated as of June 30, 1995, among the Company, Norman C. Harbert, the
Harbert Family Limited Partnership, Ronald E. Weinberg, the Weinberg Family Limited
Partnership, Byron S. Krantz, the Krantz Family Limited Partnership, Jeffrey H.
Berlin, Paul R. Bishop, Thomas A. Gilbride, Gerald H. Gordon, Jess F. Helsel, Gary
Siciliano and Douglas D. Wilson
4.9 Shareholders' Agreement, dated as of June 30, 1995, among the Company, Norman C.
Harbert, Ronald E. Weinberg, Byron S. Krantz, Clanco Partners I, Clanco Partners
III, William J. O'Neill, Jr., Sheldon M. Sager, Martha B. Horsburgh, the William J.
O'Neill, Sr. Irrevocable Trust A and the Dorothy K. O'Neill Revocable Trust
(including instruments of joinder executed by the Harbert Family Limited
Partnership, the Weinberg Family Limited Partnership and the Krantz Family Limited
Partnership)
4.10 Form of letter agreement, effective November 27, 1996, amending the Shareholders'
Agreement, dated as of June 30, 1995, among the Company, Norman C. Harbert, the
Harbert Family Limited Partnership, Ronald E. Weinberg, the Weinberg Family Limited
Partnership, Byron S. Krantz, the Krantz Family Limited Partnership, Clanco
Partners I, Clanco Partners III, William J. O'Neill, Jr., Sheldon M. Sager, Martha
B. Horsburgh, the William J. O'Neill, Sr. Irrevocable Trust A and the Dorothy K.
O'Neill Revocable Trust
4.11 Shareholders' Agreement, dated as of June 30, 1995, as amended, among the Company,
Connecticut General Life Insurance Company, CIGNA Mezzanine Partners III, L.P.,
Hawk Corporation, Norman C. Harbert, Ronald E. Weinberg and Byron S. Krantz
(including instruments of joinder executed by the Harbert Family Limited
Partnership, the Weinberg Family Limited Partnership and the Krantz Family Limited
Partnership)
4.12 Stockholder's Agreement, dated as of June 6, 1991, among Hawk Corporation, Norman
C. Harbert, Ronald E. Weinberg, Byron S. Krantz and Dan T. Moore, III
4.13 Letter agreement, effective November 27, 1996, amending the Stockholder's
Agreement, dated as of June 6, 1991, among Hawk Corporation, Norman C. Harbert,
Ronald E. Weinberg, Byron S. Krantz and Dan T. Moore, III
4.14 Form of the Warrant Certificates, each dated June 30, 1995, issued by the Company
in favor of each of Connecticut General Life Insurance Company and CIGNA Mezzanine
Partners III, L.P., and registered under the name CIG & Co.
5.1* Opinion of Kohrman Jackson & Krantz P.L.L. as to the validity of the Senior Notes
being registered
8.1* Opinion of Kohrman Jackson & Krantz P.L.L. as to the material United States federal
income tax consequences to the holders of the securities being offered
10.1 Employment Agreement, dated as of November 1, 1996, between the Company and Norman
C. Harbert
10.2 Wage Continuation Agreement, effective as of June 30, 1995, between the Company and
Norman C. Harbert
10.3 Letter agreement, dated November 1, 1996, amending the Wage Continuation Agreement,
effective as of June 30, 1995, between the Company and Norman C. Harbert
10.4 Employment Agreement, dated as of November 1, 1996, between the Company and Ronald
E. Weinberg
10.5 Wage Continuation Agreement, effective as of June 30, 1995, between the Company and
Ronald E. Weinberg
10.6 Letter agreement, dated November 1, 1996, amending the Wage Continuation Agreement,
effective as of June 30, 1995, between the Company and Ronald E. Weinberg
10.7 Employment Agreement, dated July 1, 1994, between Helsel, Inc. and Jess F. Helsel
</TABLE>
II-14
<PAGE> 194
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<S> <C>
10.8 Consulting Agreement, dated July 1, 1994, between Helsel, Inc. and Jess F. Helsel
10.9 Promissory Note, dated July 1, 1994, in the principal amount of $500,000, issued by
the Company to Helco, Inc.
10.10 Post-Employment Non-Compete Agreement, dated as of April 5, 1994, between MLX Corp.
and Ronald E. Grambo
10.11 Change of Ownership Employment Agreement, dated as of February 1, 1995, between
S.K. Wellman Limited, Inc. and Ronald E. Grambo
10.12 Form of the Promissory Notes, each dated June 30, 1995, issued by each of Norman C.
Harbert, Ronald E. Weinberg, Byron S. Krantz and Douglas D. Wilson to the Company
10.13 Letter agreement, dated October 1, 1996, amending the Promissory Notes, each dated
June 30, 1995, issued by each of Norman C. Harbert, Ronald E. Weinberg, Byron S.
Krantz and Douglas D. Wilson to the Company
10.14 Credit Agreement, dated as of November 27, 1996, among Friction Products Co., Hawk
Brake, Inc., Logan Metal Stampings, Inc., Helsel, Inc., S.K. Wellman Holdings,
Inc., S.K. Wellman Corp., Wellman Friction Products U.K. Corp. and Hutchinson
Products Corporation, as Borrowers, and the Company, as Funds Administrator, and BT
Commercial Corporation, as Lender and Agent (omitting certain exhibits and
schedules setting forth the form of various ancillary documents and relating to the
business of the Registrants, which omitted exhibits and schedules the Registrants
undertake to furnish supplementally to the Commission upon request)
10.15 Revolving Note, dated as of November 27, 1996, in the principal amount of up to
$25,000,000, made by Friction Products Co., Hawk Brake, Inc., Logan Metal
Stampings, Inc., Helsel, Inc., S.K. Wellman Holdings, Inc., S.K. Wellman Corp.,
Wellman Friction Products U.K. Corp. and Hutchinson Products Corporation in favor
of BT Commercial Corporation
10.16 General Security Agreement, dated as of November 27, 1996, made by Friction
Products Co., Hawk Brake, Inc., Logan Metal Stampings, Inc., Helsel, Inc., S.K.
Wellman Holdings, Inc., S.K. Wellman Corp., Wellman Friction Products U.K. Corp.
and Hutchinson Products Corporation in favor of BT Commercial Corporation, as Agent
10.17 Trademark Security Agreement, dated as of November 27, 1996, made by S.K. Wellman
Corp. in favor of BT Commercial Corporation, as Agent
10.18 Trademark Security Agreement, dated as of November 27, 1996, made by Friction
Products Co. in favor of BT Commercial Corporation, as Agent
10.19 Patent Security Agreement, dated as of November 27, 1996, made by S.K. Wellman
Corp. in favor of BT Commercial Corporation, as Agent
10.20 Patent Security Agreement, dated as of November 27, 1996, made by Friction Products
Co. in favor of BT Commercial Corporation, as Agent
10.21 Agency and Contribution Agreement, dated as of November 27, 1996, among the
Company, as Funds Administrator, and Friction Products Co., Hawk Brake, Inc., Logan
Metal Stampings, Inc., Helsel, Inc., S.K. Wellman Holdings, Inc., S.K. Wellman
Corp., Wellman Friction Products U.K. Corp. and Hutchinson Products Corporation, as
Borrowers
</TABLE>
II-15
<PAGE> 195
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<S> <C>
10.22 Form of the Senior Subordinated Note and Warrant Purchase Agreements, each dated as
of June 30, 1995, between the Company and each of Connecticut General Life
Insurance Company and CIGNA Mezzanine Partners III, L.P. (omitting certain annexes
relating to the business of the Registrants and certain exhibits setting forth the
form of various ancillary documents, including the form of Subordinated Notes
included as Exhibit 10.24 hereto, the form of Warrant Agreement included as Exhibit
10.25 hereto and the form of Subordinated Guarantee included as Exhibit 10.26
hereto, which omitted annexes and schedules the Registrants undertake to furnish
supplementally to the Commission upon request)
10.23 First Amendment to Note and Warrant Purchase Agreement, dated as of November 27,
1996, among the Company, Connecticut General Life Insurance Company and CIGNA
Mezzanine Partners III, L.P.
10.24 Form of the 12% Senior Subordinated Notes due June 30, 2005, each dated June 30,
1995, issued by the Company to each of Connecticut General Life Insurance Company
and CIGNA Mezzanine Partners III, L.P., and registered under the name CIG & Co.
10.25 Warrant Agreement, dated as of June 30, 1996, among the Company, Connecticut
General Life Insurance Company and CIGNA Mezzanine Partners III, L.P. (omitting the
attachment setting forth the form of Warrant Certificate included as Exhibit 4.14
hereto)
10.26 Form of the Subordinated Guarantee Agreements, each dated as of June 30, 1995, made
by each of Friction Products Co., Hawk Brake, Inc., Logan Metal Stampings, Inc.,
Helsel, Inc., S.K. Wellman Holdings, Inc. and S.K. Wellman Acquisition, Inc.
(n.k.a. S.K. Wellman Corp.) in favor of Connecticut General Life Insurance Company
and CIGNA Mezzanine Partners III, L.P.
10.27 Form of the First Amendment to Subordinated Guarantee Agreement, each dated as of
November 27, 1996, made by each of Friction Products Co., Hawk Brake, Inc., Logan
Metal Stampings, Inc., Helsel, Inc., S.K. Wellman Holdings, Inc. and S.K. Wellman
Corp. in favor of Connecticut General Life Insurance Company and CIGNA Mezzanine
Partners III, L.P.
10.28 Form of the Subordinated Guarantee Agreements, each dated as of November 27, 1996,
made by each of Wellman Friction Products U.K. Corp. and Hutchinson Products
Corporation in favor of Connecticut General Life Insurance Company and CIGNA
Mezzanine Partners III, L.P.
12.1 Computation of ratio of earnings to fixed charges
16.1 Letter of Deloitte & Touche LLP regarding its concurrence with the statements made
by the Registrants in "Change in Independent Auditors"
21.1 Subsidiaries of the Company
23.1* Consent of Kohrman Jackson & Krantz P.L.L. (to be included in its opinion to be
filed as Exhibit 5.1 hereto)
23.2 Consents of Ernst & Young LLP
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of Coopers & Lybrand L.L.P.
24.1 Reference is made to the Signatures section of this Registration Statement for the
Power of Attorney contained therein
25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act
of 1939 of Bank One Trust Company, NA
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
<FN>
- ---------------
*To be filed by amendment.
</TABLE>
II-16
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
among
HAWK CORPORATION
and
TIMOTHY HOUGHTON, CFB VENTURE FUND II, L.P.,
MORAMERICA CAPITAL CORPORATION,
COMMUNITY INVESTMENT PARTNERS II, L.P. and
ST. LOUIS COMMUNITY FOUNDATION
NOVEMBER 7, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
----
1. DEFINITIONS................................................................2
2. SALE AND PURCHASE OF SHARES................................................4
2.1 Sale and Purchase.................................................4
2.1.1 Payment of Estimated Purchase Price......................4
2.1.2 Purchase Price Adjustments...............................4
2.1.3 Closing Working Capital Schedule and EBITDA Statement....5
2.1.4 Payment of Final Purchase Price..........................6
2.1.5 EBITDA Payment...........................................7
2.2 The Closing.......................................................8
2.3 Deliveries of Sellers.............................................8
2.4 Deliveries of Buyer............................................. 10
3. REPRESENTATIONS AND WARRANTIES OF SELLERS.................................11
3.1 Organization, Power and Good Standing...........................11
3.2 Authority.......................................................11
3.3 No Violation....................................................12
3.4 Consents........................................................12
3.5 Subsidiaries; Investments.......................................12
3.6 Capitalization..................................................12
3.7 Title to Stock and Preferred Stock Notes........................13
3.8 Articles of Incorporation and By-Laws; Minute Books.............13
3.9 Financial Statements............................................13
3.10 Absence of Certain Changes......................................14
3.11 Receivables.....................................................14
3.12 Inventory.......................................................15
3.13 Tangible Property...............................................15
3.14 Intangible Property.............................................15
3.15 Commitments.....................................................15
3.16 Real Property...................................................16
3.17 Title...........................................................17
3.18 Indebtedness....................................................17
3.19 Taxes...........................................................17
3.20 Contracts.......................................................18
3.21 No Default, Violation or Litigation.............................18
3.22 Legislation or Regulation.......................................19
3.23 Insurance.......................................................19
3.24 Employment, Labor and Other Relations...........................19
3.25 Employee Benefits...............................................20
3.26 Approvals.......................................................22
3.27 Environmental Matters...........................................22
i
<PAGE> 3
3.28 Transactions With Affiliates...................................23
3.29 Principal Customers and Suppliers..............................24
3.30 Hart-Scott-Rodino..............................................24
3.31 Prior Noncompete Agreement.....................................24
3.32 Workers' Compensation..........................................24
3.33 Investment Purposes............................................24
3.34 Representations of Foundation..................................24
3.35 Limitation of Foundation Representations.......................25
4. REPRESENTATIONS AND WARRANTIES OF BUYER.................................25
4.1 Organization, Power and Good Standing.........................25
4.2 Authority......................................................26
4.3 No Violation...................................................26
4.4 Consents.......................................................26
5. COVENANTS...............................................................26
5.1 Pre-Closing Covenants of Sellers...............................26
5.1.1 Conduct of Business: No Material Change...............26
5.1.2 Maintain Business as Going Concern....................27
5.1.3 Investigation.........................................27
5.1.4 Preserve Accuracy of Representations and Warranties...27
5.1.5 Certain Consents to Assignment........................27
5.1.6 Environmental Audit...................................27
5.1.7 No Solicitation.......................................27
5.1.8 Status of Title.......................................28
5.1.9 Other Sellers Legal Opinion...........................28
5.1.10 General Industries Account Receivable.................29
5.2 Post Closing Covenants of the Sellers..........................29
5.2.1 Noncompete............................................29
5.2.2 Nonsolicitation.......................................29
5.2.3 Confidentiality.......................................29
5.2.4 Reasonable Restrictions...............................30
5.2.5 Houghton Noncompete...................................30
5.2.6 Waiver/Termination of Various Agreements..............30
5.3 Post Closing Covenants of the Buyer and Sellers................30
5.3.1 Cooperation Regarding Tax Matters.....................30
5.3.2 Proration of Real Property Taxes......................31
5.3.3 Workers' Compensation Payments........................31
6. CONDITIONS TO CLOSING...................................................31
6.1 Conditions to Buyer's Obligations..............................31
6.1.1 Representations and Warranties........................31
6.1.2 Consents and Approvals................................31
6.1.3 No Material Change....................................32
6.1.4 Environmental Matters.................................32
6.1.5 Title Insurance.......................................32
ii
<PAGE> 4
6.1.6 Lender's Approval.....................................32
6.1.7 No Suit...............................................32
6.1.8 Deliveries............................................32
6.1.9 Closing...............................................32
6.1.10 Redemption.............................................32
6.1.11 Board Approval.........................................32
6.2 Conditions to Sellers' Obligations.............................33
6.2.1 Representations and Warranties........................33
6.2.2 Approvals.............................................33
6.2.3 No Suit...............................................33
6.2.4 Deliveries............................................33
7. INDEMNIFICATION.........................................................33
7.1 Indemnification of Buyer.......................................33
7.2 Indemnification of Sellers.....................................34
7.3 Method of Asserting Claims.....................................34
7.4 Limitations on Indemnification Payments........................36
7.5 Survival.......................................................36
8. TERMINATION.............................................................36
8.1 Mutual Consent.................................................37
8.2 Breach.........................................................37
8.3 Conditions Precedent...........................................37
8.4 Title Defects..................................................37
8.5 Termination Date...............................................37
8.6 EBITDA Shortfall...............................................37
9. GENERAL PROVISIONS......................................................37
9.1 Waiver of Terms................................................37
9.2 Amendment of Agreement.........................................37
9.3 Payment of Expenses............................................37
9.4 Contents of Agreement, Parties in Interest, Assignment.........38
9.5 Notices........................................................38
9.6 Commissions and Finder's Fees..................................39
9.7 Severability...................................................39
9.8 Counterparts...................................................39
9.9 Headings.......................................................39
9.10 Mediation......................................................39
9.11 Governing Law: Jurisdiction....................................39
9.12 Seller's Knowledge.............................................39
9.13 Company's Knowledge............................................40
9.14 Instruments of Further Assurance...............................40
9.15 Publicity......................................................40
9.16 No Third Party Beneficiaries...................................40
9.17 Specific Performance...........................................40
9.18 Number and Gender..............................................40
iii
<PAGE> 5
iv
<PAGE> 6
EXHIBITS
2.1(ii)(x) Convertible Notes
2.1(ii)(y) EBITDA Notes
2.1.2 Agreed Working Capital Schedule
2.3(c) Legal Opinion of Seller's Counsel
2.3(f) Employment Agreement
2.4(a) Division of Sellers' Payments
2.4(f) Legal Opinion of Buyer's Counsel
3.1 Foreign Qualifications
3.4 Sellers' Consents
3.6 Capitalization
3.8 Corrections to Minute Book
3.11 Accounts Receivable
3.14 Intangible Property
3.16 Real Property
3.17 Title
3.18 Indebtedness
3.19 Taxes
3.20 Contracts
3.21 Default, Violation or Litigation
3.23 Insurance
3.24 Employment, Labor and Other Relations
3.25 Employee Benefits
3.26 Approvals
3.27 Environmental Matters
3.28 Transactions with Affiliates
3.29 Principal Customers and Suppliers
4.4 Buyer's Consents
5.3.3 Division of Workers' Compensation Refunds or Payments
iv
<PAGE> 7
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") dated as of November
7, 1996, is made by and among Hawk Corporation, a Delaware corporation
("Buyer"), and Timothy Houghton, an individual, residing in St. Louis County,
Missouri ("Houghton"), CFB Venture Fund II, L.P., a Missouri limited partnership
("CFB"), MorAmerica Capital Corporation, an Iowa corporation ("MorAmerica"),
Community Investment Partners II, L.P., a Missouri limited partnership ("CIP"),
and St. Louis Community Foundation, a Missouri non-profit trust ("Foundation,"
and Foundation, together with Houghton, CFB, MorAmerica and CIP, individually a
"Seller" and collectively, the "Sellers").
RECITALS:
WHEREAS, the total authorized capital stock of Houghton Acquisition
Corporation, a Missouri corporation, doing business as Hutchinson Foundry
Products Company (the "Company") consists of 30,000 shares of common stock,
$1.00 par value per share (the "Stock"), of which 5,000 shares are issued and
outstanding, and 15,500 shares of Class A 8% Cumulative Redeemable Preferred
Stock, $100.00 par value per share, of which 15,500 are issued and outstanding
(the "Preferred Stock");
WHEREAS, Charles Wulfing ("Wulfing") and Peggy H. Morris ("Morris") are
the holders of certain common stock purchase warrants (the "Warrants") which,
upon the exercise thereof, will entitle them to purchase in the aggregate,
217.4135 shares of Stock of the Company;
WHEREAS, the Wulfing and Morris Warrants shall, prior to the Closing of
the transaction contemplated by this Agreement, be purchased by Houghton;
WHEREAS, CFB, MorAmerica and CIP are the holders of Warrants that upon
exercise thereof will entitle them to purchase in the aggregate, 3,478.5865
shares of Stock of the Company;
WHEREAS, prior to or at Closing, the Preferred Stock will be redeemed
and canceled and the Warrants exercised for shares of Stock, and Sellers will
own of record and beneficially 8,696 shares of Stock, which will be all of the
issued and outstanding capital stock of the Company;
WHEREAS, the Sellers own or will own at the closing, of record and
beneficially, all of the outstanding Stock of the Company and any unpaid balance
arising from the redemption of the Preferred Stock, including accrued but unpaid
dividends, if any, shall be evidenced by notes payable to the holders of the
redeemed Preferred Stock (the "Preferred Stock Notes"); and
1
<PAGE> 8
WHEREAS, each Seller wishes to sell to Buyer, and Buyer wishes to
purchase from each Seller, all of the Stock and the Preferred Stock Notes upon
the terms and conditions set forth below.
THEREFORE, in consideration of the foregoing recitals and the mutual
covenants, warranties, representations and conditions contained in this
Agreement, the parties agree as follows:
1. DEFINITIONS
The following terms are defined in this Agreement as indicated below:
"Acquisition Transaction" is defined in Section 5.1.7.
"Adjustment Report" is defined in Section 2.1.3.
"Agreement" is defined in the first sentence.
"Agreed Working Capital" is defined in Section 2.1.2.
"Approvals" is defined in Section 3.26.
"Business" is defined in Section 3.4.
"Buyer" is defined in the first sentence.
"Capital Charges" is defined in Section 2.1.5(a).
"CERCLA" is defined in Section 3.27(c).
"CFB" is defined in the first sentence.
"CIP" is defined in the first sentence.
"Closing" is defined in Section 2.2.
"Closing Working Capital Schedule" is defined in Section 2.1.3(a).
"Closing Date" is defined in Section 2.2.
"Code" is defined in Section 3.25(d).
"Commitment" is defined in Section 5.1.8.
"Common Control Entity" is defined in Section 3.25(d).
"Company" is defined in the first "Whereas" clause.
"Company Financial Statements" is defined in Section 3.9.
"Contracts" is defined in Section 3.20.
"Convertible Notes" is defined in Section 2.1.
"Disputed Claim" is defined in Section 7.3(b).
"EBITDA" is defined in Section 2.1.2(ii).
"EBITDA Base" is defined in Section 2.1.5(a).
"EBITDA Notes" is defined in Section 2.1.
"EBITDA Payment" is defined in Section 2.1.5.
"EBITDA Statement" is defined in Section 2.1.3.
"Employee Plan" is defined in Section 3.25.
"Employment Agreement" is set forth in Exhibit 2.3(f)
"ERISA" is defined in Section 3.25.
"Estimated Purchase Price" is defined in Section 2.1.
"Final Closing Working Capital Schedule" is defined in Section 2.1.3.
2
<PAGE> 9
"Final EBITDA Statement" is defined in Section 2.1.3.
"Final Purchase Price" is defined in Section 2.1.4.
"Foundation" is defined in the first sentence.
"GAAP" is defined in Section 2.1.3.
"Hazardous Substance" is defined in Section 3.27(c).
"Houghton" is defined in the first sentence.
"Hutchinson Agreement" is defined in Section 3.31.
"Indebtedness" is defined in Section 3.18.
"Indemnitee" is defined in Section 7.3.(a).
"Indemnitor" is defined in Section 7.3(a).
"Independent Auditor" is defined in Section 2.1.3.
"Intangible Property" is defined in Section 3.14.
"Inventory Report" is defined in Section 2.1.3.
"Lien" is defined in Section 2.1.
"Loss" is defined in Section 7.1.
"MorAmerica" is defined in the first sentence.
"Morris" is defined in the second "Whereas" clause.
"'95 Period" is defined in Section 3.32.
"Notes" is defined in Section 2.1.
"Pension Plan" is defined in Section 3.25.
"Physical Inventory Date" is defined in Section 2.1.3.
"Preferred Stock" is defined in the first "Whereas" clause.
"Preferred Stock Notes" is defined in the sixth "Whereas" clause.
"RCRA" is defined in Section 3.27(e).
"Real Property" is defined in Section 3.16(a).
"Real Property Laws" is defined in Section 3.16(b).
"Release" is defined in Section 3.27(c).
"Restricted Period" is defined in Section 5.2.1.
"Restricted Territory" is defined in Section 5.2.1.
"Rights" is defined in Section 3.6.
"Sellers" is defined in the first sentence.
"September Balance Sheet" is defined in Section 3.9.
"September Balance Sheet Date" is defined in Section 3.9.
"Settlement Date" is defined in Section 2.1.3.
"Stock" is defined in the first "Whereas" clause.
"Survey" is defined in Section 5.1.8(a).
"Tangible Property" is defined in Section 3.13.
"Tax Search" is defined in Section 5.1.8.
"Taxes" is defined in Section 3.19.
"Title Company" is defined in Section 5.19.
"Title Defects" is defined in Section 5.1.8(b).
"UCC Search" is defined in Section 5.1.8.
"Warrants" is defined in the second "Whereas" clause.
"Welfare Plan" is defined in Section 3.25.
"Workers' Compensation Payments" is defined in Section 3.32.
"Wulfing" is defined in the second "Whereas" clause.
3
<PAGE> 10
2. SALE AND PURCHASE OF SHARES
2.1 Sale and Purchase. On the terms and subject to the conditions
contained in this Agreement, Sellers agree to sell to Buyer at the Closing, the
Preferred Stock Notes and the Stock, free and clear of any lien, security
interest, pledge, option, restriction on transfer or alienation, claim or any
other encumbrances ("Lien"), and Buyer agrees to purchase (a) the Preferred
Stock Notes for their face amounts, and (b) the Stock from Sellers for (i)
$10,000,000 (adjusted pursuant to Section 2.1.2 and 2.1.3) less any sums paid
for the Preferred Stock Notes pursuant to (a); (ii) convertible promissory notes
in substantially the form of Exhibit 2.1(ii)(x) (the "Convertible Notes"),
payable to Sellers in the proportions set forth in Exhibit 2.4(a), such notes
collectively being in the principal amount of $1,500,000 and promissory notes in
substantially the form of Exhibit 2.1(ii)(y) (the "EBITDA Notes"), payable to
Sellers in the proportions set forth in Exhibit 2.4(a), such notes collectively
being in the principal amount of $500,000 (the Convertible Notes and EBITDA
Notes, are collectively referred to as the "Notes"), ((a), (b)(i) and (b)(ii)
hereof collectively referred to as the "Estimated Purchase Price"); and (iii)
the EBITDA Payment as defined and calculated in the manner set forth in Section
2.1.5.
2.1.1 Payment of Estimated Purchase Price. On the Closing
Date, Buyer shall pay the Estimated Purchase Price in immediately available
federal funds and shall deliver the Notes.
2.1.2 Purchase Price Adjustments. The purchase price shall be
adjusted as follows:
(i) If the amount of working capital of the Company
set forth on the Closing Working Capital Schedule defined in Section
2.1.3(a) is greater than the working capital of the Company set forth
on the "Agreed Working Capital Schedule" attached hereto as Exhibit
2.1.2, then the purchase price shall be increased by an amount equal to
the dollar amount of such excess. If the amount of the working capital
of the Company as set forth on the Closing Working Capital Schedule is
less than the Agreed Working Capital of the Company, then the purchase
price shall be reduced by an amount equivalent to the dollar amount of
the shortfall.
(ii) If the Company's earnings before interest,
income taxes, depreciation and amortization ("EBITDA") for the
Company's calendar year ending December 31, 1996, set forth on the
EBITDA Statement defined in Section 2.1.3(a) is less than $2,425,000,
then the purchase price shall be reduced by an amount equal to the
amount of such deficiency multiplied by a factor of 4.5. The purchase
price will not be adjusted in the event the Company's EBITDA for the
calendar year ending December 31, 1996 is greater than $2,425,000. The
determination of the Company's EBITDA for the purpose of this
adjustment shall be calculated in the manner set forth in Section
2.1.3.
(iii) The proration of real estate taxes in
accordance with Section 5.4.
4
<PAGE> 11
2.1.3 Closing Working Capital Schedule and EBITDA Statement.
The Sellers shall:
(a) (i) within 45 days after the Closing Date, prepare and
deliver to Buyer a Closing Working Capital Schedule of the Company as
of the Closing Date audited by Coopers & Lybrand L.L.P. ("Closing
Working Capital Schedule"), together with the Company's financial
statements for the year ended December 31, 1996, audited by Coopers &
Lybrand L.L.P. and the Closing Date, if the Closing Date is subsequent
to January 3, 1997, and a statement setting forth the Company's EBITDA
for the year ended December 31, 1996, audited by Coopers & Lybrand
L.L.P. and the Closing Date, if it is subsequent to January 3, 1997
(the "EBITDA Statement"). The Closing Working Capital Schedule shall be
prepared from the historic books and records of the Company in
accordance with generally accepted accounting principles ("GAAP") in
all respects except that the Closing Working Capital Schedule shall not
reflect an allocation of the Estimated Purchase Price to the fair value
of the Company's assets acquired and liabilities assumed by the Buyer,
and GAAP shall be applied on a basis consistent with GAAP used for the
Company's December 31, 1995 audited financial statement. The EBITDA
Statement shall be prepared in accordance with GAAP in all respects,
and for purposes of calculating the EBITDA Statement, there shall be
added to the EBITDA an amount equal to Houghton's bonus for 1996. The
Sellers shall, upon such delivery, permit Buyer and its representatives
access to Coopers & Lybrand L.L.P.'s work papers used in connection
with the preparation of the Closing Working Capital Schedule and the
EBITDA Statement; and
(ii) on the Closing Date or the business day before
(the "Physical Inventory Date"), Sellers will take a physical count of
the inventory at each facility where inventory is located.
Representatives of Buyer will be permitted to observe the taking of the
physical inventory. Based thereon, Sellers shall prepare an inventory
report, prepared from the historic books and records of the Company in
accordance with GAAP, setting forth the quantity of the items of
inventory, inventory cost per unit for each of the items of inventory
and the price extension of the physical inventory ("Inventory Report").
Concurrently with the delivery to Buyer of the Closing Working Capital
Schedule and EBITDA Statement pursuant to Section (a)(i), the Sellers
shall deliver to Buyer the Inventory Report rolled forward from the
Physical Inventory Date to the Closing Date, if necessary, to reflect
the physical inventory of the Company's raw materials, work-in-process
and finished goods as of the Closing Date. The Inventory Report shall
be the basis for the inventory reflected on the Closing Working Capital
Schedule and shall be prepared in accordance with GAAP.
(b) Within 45 days after the date on which the Closing Working
Capital Schedule and EBITDA Statement are delivered to Buyer by the
Sellers pursuant to Section (a)(i), Buyer shall complete its
examination of the Closing Working Capital Schedule and EBITDA
Statement and shall deliver to the Sellers either the written
acknowledgment of Buyer accepting the Closing Working Capital Schedule
and/or the EBITDA Statement, as the case may be, or a written report of
Buyer's independent
5
<PAGE> 12
accountants, Ernst & Young, LLP, setting forth any proposed adjustments
to the Closing Working Capital Schedule and the EBITDA Statement
("Adjustment Report"). In the event Buyer fails to deliver such
acknowledgment or Adjustment Report, the Closing Working Capital
Schedule and the EBITDA Statement shall be deemed to be correct and to
have been finally determined for purposes of Section (c) hereof.
(c) In the event the Sellers and Buyer fail to agree to
Buyer's proposed adjustments to the Closing Working Capital Schedule
and/or EBITDA Statement, as the case may be, contained in the
Adjustment Report within 15 days after the Sellers receive the
Adjustment Report, then either party may notify the St. Louis office of
Arthur Andersen LLP of the need for their services as the Independent
Auditors (as defined below). Arthur Andersen LLP, acting as independent
auditors and not for the Sellers or Buyer ("Independent Auditors"),
shall make the final determination with respect to the correctness of
the proposed adjustments in the Adjustment Report in light of the terms
and provisions of this Agreement. The decision of the Independent
Auditors shall be final and binding on the Sellers and Buyer and the
fees and expenses of their services rendered pursuant to this Section
(c) hereof shall be borne equally by the Sellers and Buyer, provided
that the Independent Auditors determine the claims made by the Sellers
or Buyer to have been made in good faith. In the event, the Independent
Auditors determine that a claim was not made in good faith, then the
party advancing such claim shall bear the costs and expenses of the
Independent Auditors with regard to that claim. Should Arthur Andersen
LLP refuse for any reason whatsoever to perform the services herein
required, then the Sellers and Buyer shall mutually agree in writing to
and they shall select an accounting firm to serve in its place and
perform the services provided for and the determination of such firm,
including the determination that a claim was not made in good faith
shall be binding as if made by Arthur Andersen LLP.
(d) (i) The term Final Closing Working Capital Schedule, means
the Closing Working Capital Schedule delivered pursuant to Sections (a)
as adjusted, if at all, pursuant to Section (b) or in the event that
the Sellers and Buyer fail to agree, then as finally determined
pursuant to Section (c).
(ii) The term "Final EBITDA Statement" means the
EBITDA Statement delivered pursuant to Section (a) as adjusted, if at
all, pursuant to Section (b), or in the event that the Sellers and
Buyer fail to agree, then as finally determined pursuant to Section
(c).
(e) The date on which the Final Closing Working Capital
Schedule and Final EBITDA Statement are determined pursuant to Section
(d), shall be referred to as the "Settlement Date."
2.1.4 Payment of Final Purchase Price. The "Final Purchase
Price"shall be determined from the Final Closing Working Capital Schedule and
the Final EBITDA Statement in accordance with Sections 2.1.2 and 2.1.3 and paid
as follows:
6
<PAGE> 13
(a) (i) In the event the Final Purchase Price, exclusive of
any adjustment determined from the Final EBITDA Statement, is greater
than the Estimated Purchase Price, then Buyer shall pay the Sellers in
the proportions set forth in Exhibit 2.4(a) within five (5) days after
the Settlement Date, an amount equal to such excess, except no amount
shall be paid if the excess does not exceed $10,000.
(ii) In the event the Final Purchase Price, exclusive
of any adjustment determined from the Final EBITDA Statement, is less
than the Estimated Purchase Price, then the Sellers shall pay an amount
equal to such deficiency to Buyer, by Buyer setting such sums off
against the Convertible Notes in the proportions set forth in Exhibit
2.4(a), which offset shall be taken as a credit against the first
principal payment due under the Convertible Notes, except any amount in
excess of $50,000 shall be paid by Sellers, severally, in the
proportions set forth in Exhibit 2.4(a), within five (5) days after the
Settlement Date, except no amount shall be paid if the deficiency does
not exceed $10,000.
(b) If the Company's EBITDA as set forth on the Final EBITDA
Statement is less than $2,425,000, than the Final Purchase Price shall
be reduced as set forth in Section 2.1.2(ii), and Sellers shall pay an
amount equal to such deficiency to Buyer, by Buyer setting such sums
off against the Convertible Notes in the proportions set forth in
Exhibit 2.4(a), which offset shall be taken as a credit against the
first principal payment due under the Convertible Notes, except any
amount equal to or in excess of $50,000 shall be paid by Sellers,
severally, in the proportions set forth in Exhibit 2.4(a), within five
(5) days after the Settlement Date, except no amount shall be paid or
offset taken, if the deficiency is less than $10,000.
(c) Any payment made pursuant to this Section 2.1.4 shall be
made in immediately available federal funds. For purposes of
determining amounts to be paid hereunder, if the liability is greater
than $10,000, then the amount to be paid is the total amount of the
liability starting from the first dollar.
(d) In the event any sum due hereunder is not paid within five
(5) days after the Settlement Date, Sellers or Buyer shall be entitled
to enforce a claim with respect to this Section 2.1 only, by bringing
an action in any state court having exclusive subject matter
jurisdiction and located in St. Louis County, Missouri or in any
federal court having exclusive jurisdiction and located in St. Louis,
Missouri. Any amounts due and unpaid shall accrue interest at the same
rate as provided under the Notes. The prevailing party shall be
entitled to attorneys' fees and costs.
2.1.5 EBITDA Payment.
(a) As additional consideration for the Stock and Preferred
Notes and for the covenants, warranties and representations of Sellers
herein, for the Company's calendar years ending December 31, 1997, 1998
and 1999, Buyer shall pay to Sellers in the proportions set forth in
Exhibit 2.4(a), an amount (the "EBITDA Payment") equal to
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thirty percent (30%) of the amount by which the Company's EBITDA for
the applicable year exceeds $2,600,000 (the "EBITDA Base"). The
calculation of the EBITDA Payment for 1997 shall be thirty percent
(30%) of the excess above EBITDA Base. In the event the EBITDA in 1997
is less than the EBITDA Base, the difference shall be added to the
EBITDA Base in order to calculate the 1998 EBITDA Payment and the
EBITDA Payment for 1998 shall be thirty percent (30%) of the of the
excess above the adjusted EBITDA Base. In the event the difference is
not totally recouped in 1998, it shall be added to the 1999 EBITDA Base
before calculating the 1999 EBITDA Payment and the EBITDA Payment for
1999 shall be thirty percent (30%) of the excess above the adjusted
EBITDA Base. In the event the EBITDA in 1998 is less than the EBITDA
Base, the difference shall be add to the EBITDA Base in order to
calculate the 1999 EBITDA Payment and the EBITDA Payment for 1999 shall
be thirty percent (30%) of the excess above the adjusted EBITDA Base.
EBITDA for each annual period shall be reduced each year by an amount
calculated as twelve percent (12%) of the capital expenditures of the
Company in excess of One Hundred Thousand Dollars ($100,000) per annum
for each year in which such excess capital expenditures are made
("Capital Charges"). During 1997, such amount of $2,600,000 and such
capital expenditures of $100,000 shall be adjusted on a prorata basis
to reflect the Closing Date, however, no adjustment will be made if the
Closing Date is on or before January 7, 1997. Buyer shall make the
payment provided for herein within 30 days after receipt of the year
end audit or review of the Company's financial statements for the
preceding fiscal year, but in no event shall this payment be made later
than April 30 of each year.
(b) EBITDA shall be determined by Company's independent
accountant consistent with GAAP used for the Company's December 31,
1995 audited financial statement and a written report thereof shall be
delivered to Sellers. For purposes of this Section 2.1.5, the Company's
interest, income taxes, depreciation, amortization and corporate
charges to support a home office and other charges not directly
attributed to the operation of the business of the Company in its
ordinary course shall be added to the Company's net income (loss) and
Capital Charges, if any, shall be subtracted by said accountants to
determine EBITDA. Pass through charges such as insurance, accounting,
legal and travel expenses directly attributed to the operation of the
business of the Company in its ordinary course shall not be adjusted.
2.2 The Closing. The consummation of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Kohrman Jackson
& Krantz P.L.L., One Cleveland Center, 20th Floor, Cleveland, Ohio 44114, at
10:00 A.M. Eastern time on January 2, 1997, or such other date and time as Buyer
and Sellers agree in writing (the "Closing Date").
2.3 Deliveries of Sellers. At the Closing on the Closing Date, Sellers
will deliver the following to Buyer:
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(a) All instruments of transfer and conveyance of the Stock,
the stock certificates representing all of the shares of Stock duly
endorsed with signatures guaranteed in blank or with duly executed
stock powers attached, the Preferred Stock Notes duly assigned with
signatures guaranteed, and such other closing documents as have been
reasonably requested by Buyer, all in form and substance reasonably
acceptable to Buyer's counsel.
(b) (i) A certificate of Houghton dated as of the Closing Date
certifying that: (x) all of the representations and warranties made by
Houghton and the Company under this Agreement and the attached
Exhibits, and in all other documents given or delivered by or on behalf
of Sellers to Buyer, are accurate, true and complete, and (y) all of
the covenants, obligations and conditions to be performed as of the
Closing on Sellers' and the Company's part under this Agreement have
been duly performed in all material respects.
(ii) A certificate of an officer or general partner
of each Seller, other than Houghton and Foundation, as the case may be,
dated as of the Closing Date certifying that: (x) all of the
representations and warranties made by Sellers under this Agreement and
the attached Exhibits, and in all other documents given or delivered by
or on behalf of Sellers to Buyer, are accurate, true and complete; and
(y) all of the covenants, obligations and conditions to be performed as
of the Closing Date on Sellers' part under this Agreement have been
duly performed in all material respects.
(iii) A certificate of an officer of Foundation,
dated as of the Closing Date, certifying that all representations and
warranties made by Foundation under this Agreement are accurate, true
and complete, and all of the covenants, obligations and conditions to
be performed as of the Closing Date on Foundation's part under this
Agreement have been duly performed in all material respects.
(c) An opinion of Summers, Compton, Wells & Hamburg, counsel
to Houghton and the Company, dated the Closing Date, in substantially
the form attached as Exhibit 2.3(c) and the legal opinion(s) of counsel
to Sellers other than Houghton, dated the Closing Date, as provided in
Section 5.1.9.
(d) Resignations, dated the Closing Date, of all officers and
members of the Board of Directors of the Company.
(e) (i) copies of the Articles of Incorporation (or other
organizational documents), including all amendments thereto, of the
Company certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation, dated within ten days of
Closing; and (ii) certificate of good standing dated within ten days of
Closing with respect to the Company from the Secretary of State or
other appropriate official of its jurisdiction of incorporation and
each jurisdiction where the Company is qualified to do business.
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(f) Houghton shall have executed and delivered an Employment
Agreement (the "Employment Agreement") substantially in the form of
Exhibit 2.3(f).
(g) Certified copies of the resolutions or other necessary
corporate action.
(h) Any consents required to assign the Contracts.
(i) An ALTA policy of title insurance and the results of
the UCC Search and Tax Search as provided in Section 5.1.8.
(j) Evidence satisfactory to Buyer and Buyer's counsel that
all shares of Preferred Stock have been redeemed and canceled and all
the Warrants exercised for the shares of Stock.
(k) The minute and record books of the Company and the
corporate seal.
(l) Termination statements from all Company lenders and
Yamazen, Inc., Mazak Corporation and Hutchinson Development Company.
(m) "Bring-down Certificates" signed by Houghton and an
authorized representative of each Seller, other than Houghton and
Foundation, certifying (i) that no material or adverse change has
occurred in the financial condition of the Company from that shown on
the September Balance Sheet, (ii) that, to Sellers' knowledge, no
material or adverse change has occurred in the operation, prospects or
the results of operation of the Business, and (iii) to the
capitalization of the Company as of the Closing Date, including the
beneficial and record ownership of each Seller with respect to the
Company's Stock and the Preferred Stock Notes.
2.4 Deliveries of Buyer. At the Closing on the Closing Date, Buyer
will deliver the following to Sellers:
(a) $10,000,000 payable by wire transfer of immediately
available funds, payable first in an amount equal to the face amount of
the Preferred Stock Notes with interest therein, if any, and payable
second, to the accounts specified by Sellers set forth on Exhibit 2.4
to be delivered to Buyer from Sellers at or before Closing, and the
balance to the accounts of Sellers in the proportions set forth in
Exhibit 2.4(a).
(b) Convertible Notes substantially in the form attached as
Exhibit 2.1(ii)(x).
(c) EBITDA Notes substantially in the form attached as Exhibit
2.1(ii)(y).
(d) An executed Employment Agreement.
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(e) A certificate of Buyer, dated as of the Closing Date
certifying that: (i) all of the representations and warranties made by
Buyer under this Agreement and the attached Exhibits, and in all other
documents given or delivered by Buyer to Sellers, are accurate, true
and complete, and (ii) all of the covenants, obligations and conditions
to be performed as of the Closing on the part of Buyer under this
Agreement have been duly performed in all material respects.
(f) An opinion of Kohrman Jackson & Krantz P.L.L., counsel to
the Buyer, dated the Closing Date, in substantially the form attached
as Exhibit 2.4(f).
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Except as herein provided, the Sellers jointly and severally represent
and warrant to Buyer as follows:
3.1 Organization, Power and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Missouri, and has all requisite corporate power and authority to own or
hold under lease its properties and assets and to carry on its business as now
conducted, and the Company is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where it owns or leases
property or where the nature of its business makes such qualification necessary,
and the failure to qualify would not have a material adverse effect on the
Company or its Business, which jurisdictions are listed on Exhibit 3.1.
3.2 Authority. Each Seller represents and warrants severally that it
has all necessary power and authority, corporate and otherwise, as the case may
be, to make, execute and deliver this Agreement and all other agreements and
documents to be executed and delivered by it pursuant to this Agreement, and it
has taken all necessary actions required to be taken to authorize it to execute
and deliver this Agreement and such other agreements, and to perform all of its
obligations, undertakings and agreements to be observed and performed by it
hereunder and thereunder. Each Seller represents and warrants severally that
this Agreement has been, and all other agreements and documents to be executed
and delivered pursuant to this Agreement will be, duly executed and delivered by
the Seller and constitute a legal, valid and binding agreement of such Seller
enforceable in accordance with its terms subject, as to the enforcement of
remedies, to general equitable principles and to bankruptcy, insolvency and
similar laws affecting creditors' rights generally. Each Seller represents and
warrants severally that the Preferred Stock Notes to be issued by the Company
will be duly authorized, validly issued and outstanding, and such Preferred
Stock Notes shall constitute the legal valid and binding obligation of the
Company enforceable in accordance with its terms, subject to the enforcement of
remedies, to general equitable principles and to bankruptcy, insolvency and
similar laws affecting creditors' rights generally.
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3.3 No Violation. The execution, delivery and performance of this
Agreement and the Preferred Stock Notes and the consummation of the transactions
contemplated by this Agreement and the Preferred Stock Notes will not (a)
constitute a violation of, or be in conflict with, or result in a cancellation
of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or create (or cause the acceleration of
the maturity of) any debt, obligation or liability affecting, or result in the
creation or imposition of any Lien upon the Stock or any of the assets of the
Company under: (i) any term or provision of the certificate of incorporation or
by-laws (or other organizational document) of the Company or any Seller; (ii)
any judgment, ruling, decree, writ, order, regulation or rule of any court or
governmental authority; (iii) any statute, ordinance or law; or (iv) any
contract, agreement, indenture, lease or other commitment to which either the
Company or any of the Company's assets, properties or business is a party or by
which it is bound; or (b) cause any material change in the rights or obligations
of any party under any such contract, agreement, indenture, lease or commitment.
3.4 Consents. Except as disclosed in Exhibit 3.4, no consent of, or
notice to, any federal, state or local authority, or any private person or
entity, is required to be obtained or given by any Seller or the Company in
connection with the execution, delivery or performance of this Agreement, the
Preferred Stock Notes, or any other agreement or document to be executed,
delivered or performed hereunder by Sellers or the Company, or to enable Buyer
to continue to conduct the business of the Company in the manner in which it is
currently conducted (the "Business") after the Closing.
3.5 Subsidiaries; Investments. The Company has no direct or indirect
subsidiaries and does not, directly or indirectly, own or control or have any
capital or other equity interest or participation, or any interest convertible,
exchangeable or exercisable for, any capital or other equity interest or
participation in, nor is the Company, directly or indirectly, subject to any
obligation or requirement to provide funds to or invest in, any entity or
person.
3.6 Capitalization. The authorized capital stock of the Company
consists of (i) 30,000 shares of Stock, $1.00 par value, of which 5,000 shares
are issued and outstanding and 3,696 shares are reserved for issuance in
connection with the exercise of the Warrants; and (ii) 15,500 shares of Class A
Cumulative 8% Redeemable Preferred Stock, par value $100.00 per share, of which
15,500 are issued and outstanding. At or prior to Closing, all Preferred Stock
will be redeemed without any additional consideration from Buyer other than the
purchase price as herein provided. The issued capital stock of the Company is
validly issued and outstanding, fully paid and nonassessable and owned, as
indicated on Exhibit 3.6. Except for the Warrants as set forth on Exhibit 3.6,
there are no other shares of capital stock of the Company outstanding; there are
no outstanding options, warrants, convertible or exchangeable securities,
subscriptions, rights (including any preemptive rights), stock appreciation
rights, calls or commitments of any character whatsoever ("Rights") requiring
the issuance or sale of shares of any capital stock of the Company; and there
are no contracts or other agreements to issue additional shares of capital stock
of the Company or any Rights relating to such shares. Except as set forth in
Exhibit 3.6, other than this Agreement, there are no agreements, written or
oral, relating to the transfer or voting of the capital stock of the Company.
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<PAGE> 19
3.7 Title to Stock and Preferred Stock Notes.
(a) Each Seller severally warrants and represents that it is
the direct record and beneficial owner of the Stock set forth opposite
its name on Exhibit 3.6 and such Stock, will at Closing be free and
clear of any Lien. Upon delivery of and payment for the Stock as
provided for in this Agreement, each Seller warrants and represents
that the Buyer will acquire good and valid title to the Stock, free and
clear of any Lien.
(b) Each Seller severally warrants and represents that it is
the direct record and beneficial owner of the Preferred Stock set forth
opposite its name on Exhibit 3.6 and such Preferred Stock, which shall
be redeemed and paid for by the Preferred Stock Notes, will at Closing,
be free and clear of any Lien. Upon delivery of and payment for the
Preferred Stock Notes at Closing as provided for in this Agreement,
each Seller warrants and represents that the Buyer will acquire good
and valid title to the Preferred Stock Notes, free and clear of any
Lien.
3.8 Articles of Incorporation and By-Laws; Minute Books. Copies of the
Articles of Incorporation and By-Laws of the Company, and all amendments to
each, have been delivered to the Buyer and such copies, as so amended, are true,
complete and accurate. Except as disclosed on Exhibit 3.8, the minute books of
the Company contain true, complete and accurate records of all meetings and
consents in lieu of meetings of its stockholders, Board of Directors, and any
committees (or persons performing similar functions), since its date of
incorporation. The stock records of the Company are true, complete and accurate.
3.9 Financial Statements. The balance sheets of the Company as of
December 31, 1995, December 31, 1994 and December 31, 1993, and the related
statements of income, stockholders' equity and cash flows, for the years then
ended including the notes thereto, audited by Coopers & Lybrand L.L.P.,
independent certified public accountants and the unaudited balance sheet of the
Company as of September 30, 1996 and related statements of income, stockholders'
equity and cash flows for the nine-month period ended September 30, 1996
(collectively, the "Company's Financial Statements"), previously delivered to
Buyer, fairly present the financial position of the Company as of those dates
and the results of operations and the changes in stockholders' equity and cash
flows of the Company for the periods then ended. The Company Financial
Statements have been prepared in accordance with GAAP consistently applied. The
September 30, 1996 balance sheet is referred to below as the "September Balance
Sheet" and September 30, 1996 is referred to below as the "September Balance
Sheet Date."
The Company did not have any liabilities that were not fully and
adequately reflected or accrued against on the Company's Financial Statements.
The Company does not have any liabilities greater than $10,000 other than those
reflected on the Company's Financial Statements and those incurred since the
September Balance Sheet Date in the ordinary course of business. Sellers have no
knowledge of any circumstances, conditions, events or arrangements that may give
rise to any liabilities, individually or in the aggregate, material to the
Business of the Company except in the ordinary course of business.
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3.10 Absence of Certain Changes. Since the September Balance Sheet
Date, there has not been: (i) any material adverse change in the condition
(financial or otherwise) of the properties, assets, liabilities, results of
operation or business prospects of the Company; (ii) any damage, destruction or
loss (whether or not covered by insurance) materially and adversely affecting
the properties, assets, liabilities, financial condition, results of operations
or business prospects of the Company; (iii) any declaration, setting aside, or
payment of any dividend or other distribution in respect of the Company's
capital stock, or any direct or indirect redemption except as herein provided,
retirement, purchase or other acquisition of any of such stock except as herein
provided, (iv) any increase in the compensation, commissions or perquisites
payable or to become payable by the Company to any officer, employee, or agent
of the Company, or any payment of any bonus, profit sharing or other
extraordinary compensation to any employee of the Company (other than any such
increase or payment paid or to become payable in the ordinary course of business
consistent with past practices); (v) any change in the accounting methods or
practices followed by the Company or any change in depreciation or amortization
policies or rates previously adopted; (vi) any cancellation of any debts or
receivables owed to or claims held by the Company in an amount in excess of
$10,000; (vii) any assumption or entering into by the Company of any
Indebtedness; (viii) any sale, lease, abandonment or other disposition by the
Company of any real property, or, other than in the ordinary course of business,
of any machinery, equipment or other operating properties, or any intangible
assets utilized in the Business, in each case, in an amount in excess of
$10,000; (ix) any actual or threatened termination or cancellation of any
material contract with respect to the Company; (x) any individual or series of
related capital expenditures in excess of $50,000; (xi) any charitable
contributions or pledges; or (xii) any material change in the operating
practices of the Company.
No events or changes in circumstances have occurred that indicate
the carrying amount of long-lived assets on the September Balance Sheet to be
held and used, including related goodwill, may not be recoverable. Assets to be
disposed of on the September Balance Sheet are measured at the lower of carrying
amount or fair value less cost to sell.
Long-lived assets on the September Balance Sheet to be held and
used, including related goodwill, have been reviewed for impairment whenever
events or changes in circumstances have indicated that their carrying amounts
may not be recoverable. Where appropriate under State of Financial Accounting
Standards No. 121, such assets have been written down to fair value.
3.11 Receivables. All accounts and notes receivable reflected on the
September Balance Sheet and all accounts and notes receivable arising subsequent
to the September Balance Sheet Date, have arisen in the ordinary course of
business, represent valid obligations to the Company and, subject only to
recorded reserves for bad debts in a manner consistent with past practice, have
been collected or are collectible in the aggregate recorded amounts in
accordance with their terms. Exhibit 3.11 sets forth a true and correct aged
list of all accounts receivable of the Company as of the end of the month prior
to the date hereof.
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3.12 Inventory. The inventory of the Company as reflected on the
September Balance Sheet was, and is, in usable or salable condition in the
ordinary course of business at the amounts carried on the September Balance
Sheet and currently on the books and records of the Company, respectively. The
materials, supplies and work-in-process, and additions thereto, included in such
inventory are of at least standard quality for such items in the industry in
which the Company conducts its business; and are not in excess of the normal
purchasing patterns of the Company. Neither the Company nor any of the Sellers
has any knowledge of any adverse condition affecting the supply of materials
available to the Company. The amounts of the inventories reflected on the
September Balance Sheet and on the books and records of the Company have been
determined in accordance with GAAP.
3.13 Tangible Property. The machinery, equipment, furniture, leasehold
improvements, fixtures, vehicles, structures, any related capitalized items and
other tangible property owned by the Company (collectively, the "Tangible
Property"), is to the Company and Sellers' knowledge, in good operating
condition and repair, ordinary wear and tear excepted. The Company has good and
marketable title to all of its Tangible Property and all of the Tangible
Property is located on or in the Real Property. Since the September Balance
Sheet Date there has not been any interruption material to the Business due to
inadequate maintenance of the Tangible Property.
3.14 Intangible Property. Exhibit 3.14 lists all patents, trademarks,
service marks, trade names, copyrights, franchises, all applications for any of
the foregoing, and all permits, grants and licenses or other rights running to
or from the Company relating to any of the foregoing, including but not limited
to the Company's telephone numbers and e-mail addresses that are used in or
useful to the Business (the "Intangible Property"). The rights of the Company in
the Intangible Property are free and clear of any Liens. Sellers and the Company
have no knowledge of any adversely held patent, trademark, service mark, trade
name, copyright or franchise of any other person, and neither Seller nor the
Company have received any notice of any claim of any other person relating to
the Intangible Property or any process or confidential information of the
Company, or of any basis for any such charge or claim. To Sellers' and the
Company's knowledge, no further rights or licenses with respect to the operation
of the Business are required by the Company, and the rights of the Company are
not being violated or infringed by others. Other than as contemplated hereby,
the consummation of the transactions contemplated by the Agreement will not
impair the Company's rights with respect to the Intangible Property.
3.15 Commitments.
(a) At the September Balance Sheet Date, the Company had no
purchase commitments for inventories in excess of normal requirements
or at prices that were in excess of market at those dates, and no
important sales commitments that it is unable to fulfill or that are at
prices less than costs in inventories or expected costs to purchase or
manufacture, increased by selling expenses.
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(b) There are no agreements or commitments to repurchase
assets previously sold. At the September Balance Sheet Date, the
Company had no commitments outstanding for future contracts, short
sales, or hedge transactions.
3.16 Real Property.
(a) Exhibit 3.16 sets forth a list and summary legal
description of parcels of real property owned by the Company and all
buildings, structures and other improvements located on such real
property (singularly and together, the "Real Property"). The Real
Property constitutes all of the real property necessary to conduct the
Company's business as currently being conducted. Except as set forth on
Exhibit 3.16, there are no written or oral leases, subleases, licenses
or other agreements under which the Company is a lessor or lessee of
any real property. Except as set forth on Exhibit 3.16, there are no
options held by the Company or contractual obligations on the part of
the Company to purchase, acquire any interest in real property (whether
by purchase or lease) or to sell or dispose of any interest in Real
Property (whether by sale or lease).
(b) There are not, to Sellers' knowledge, any violations of
any federal, state, county or local statute, law, code, rule,
regulation, zoning or building ordinance or health or safety ordinance
(collectively, the "Real Property Laws") relating to the Real Property,
including the use and occupancy of the improvements located thereon.
The continued use, occupancy and operation by the Company of the Real
Property as currently used, occupied and operated complies, to Sellers'
knowledge, in all material respects with all Real Property Laws.
(c) To Sellers' knowledge, all permits have been issued to the
Company to enable the Real Property to be lawfully occupied, operated
and used in the manner currently being used and are in full force and
effect. No insurer has suspended, revoked, modified, annulled or
refused to issue any policy of casualty or liability insurance to the
Company with respect to the Real Property.
(d) To Sellers' knowledge, there is no existing, pending or
contemplated condemnation of any part of the Real Property or change in
the zoning classification of the Real Property. All components of all
buildings, structures and other improvements situated on the Real
Property, including, but not limited to, the roofs and structural
elements thereto and the heating, ventilation, air conditioning,
plumbing, electrical, mechanical, sewer, systems and facilities, are,
in all material respects, in good operating condition and repair. Since
January 1, 1993, no portion of the Real Property has suffered any
material damage or had its operation curtailed in any material respect
by fire, flood or other casualty.
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(e) Except as disclosed on Exhibit 3.16, the Real Property's
interest of the Company are not subject to any Lien. Except as
disclosed on Exhibit 3.16, the Company has not contracted or permitted
labor performed or materials provided to or in connection with the Real
Property within the last twelve (12) months or which might give rise to
the filing of a Lien against Real Property.
(f) The Real Property is all of the land, buildings,
structures and other improvements used in connection with the operation
of the Business. The Company has the right to use the Real Property for
the operations currently conducted and contemplated by the Company and
Sellers to be conducted thereon.
3.17 Title. Except as disclosed in Exhibit 3.17, the Company owns
outright and has good and marketable title to all of its assets, properties and
businesses, including, without limitation, all of the assets, properties and
businesses reflected on the September Balance Sheet, in each case, free and
clear of any Lien, except with respect to: (i) immaterial assets, properties and
businesses; (ii) assets, properties and businesses disposed of, or subject to
purchase or sales orders, in the ordinary course of business since the September
Balance Sheet Date; or (iii) Liens securing taxes, assessments, governmental,
regulatory or administrative charges or levies, or the claims of materialmen,
carriers, and like persons, that are not yet due and payable.
3.18 Indebtedness. Exhibit 3.18 includes a true and correct aged list
of all accounts payable of the Company as of September 30, 1996. The Company has
no liabilities or obligations relating to the borrowing of money or issuance of
any note, bond, indenture, loan, credit agreement or other evidence of
indebtedness or direct or indirect guaranty or assumption of indebtedness,
liabilities or obligations of others ("Indebtedness") other than the Preferred
Stock Notes and, for purposes hereof, the Lease Agreement with PNC Leasing Corp.
and the Company, dated August 5, 1996, and all addendums and schedules related
thereto.
3.19 Taxes. As used in this Agreement, the term "Taxes" means all
federal, state, county, local and foreign income, excise, property, sales, use,
payroll, employee's income and social security withholding, intangibles,
franchise, transfer, and other taxes of whatever nature, all penalties related
to such taxes and interest on such taxes and penalties, that relate to the
Company or could otherwise affect or become a Lien upon any assets of the
Company. Except as disclosed on Exhibit 3.19, all Taxes due and payable by the
Company with respect to all periods prior to and through the Closing Date have
been or will be duly and properly computed, reported, fully paid and discharged
and there are not and will not be on the Closing Date any unpaid Taxes, with
respect to any period prior to and through the Closing Date except for current
Taxes not yet due and payable, which unpaid taxes are properly and adequately
reflected on the Company's Financial Statements.
The Company has timely filed tax returns for all Taxes with
respect to the Company's assets or the Business that were required to be filed
prior to the Closing Date. All such tax returns were correct and complete in all
material respects. There are no penalty, interest or deficiency assessments or,
to the Sellers' knowledge, proposed penalty, interest or deficiency assessments,
with respect to Taxes of the Company that require payment by, relate to or could
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reasonably be expected to have a material adverse affect on the Business.
Neither any Seller nor the Company has waived any law or regulation fixing, or
consented to the extension of, any period of time for the assessment of any
Taxes, which waiver or consent is currently in effect.
3.20 Contracts. Except as disclosed on Exhibit 3.20, the Company is not
a party to, or bound by, any contracts, agreements, commitments or
understandings ("Contracts"): (i) for the employment of any officer or employee;
(ii) for any Indebtedness; (iii) for leasing personal property (including,
without limitation, leases for machinery and office equipment, furniture,
fixtures, vehicles, and tools); (iv) involving the payment or receipt of in
excess of $10,000 per annum or the term of which at any time exceeded one year
(including, without limitation, vendor supply contracts or customer "blanket"
purchase orders); (v) providing for the services of dealers, distributors, sales
representatives or similar representatives; (vi) relating to the ownership, use
or licensing of any patents, designs, trademarks, service marks, trade names,
brand names, copyrights, inventions, processes, know-how, formulae, trade
secrets or other proprietary rights; (vii) any covenants by or binding the
Company not to compete or to not disclose any confidential information of other
third parties; (viii) operating leases; or (ix) any other contract that is
material to the Business.
All of the Contracts constitute legal, valid and binding
obligations of the Company, and are in full force and effect, and neither the
Company nor, to Sellers' knowledge, any other party, has violated any provision
of, or committed or failed to perform any act which with notice, lapse of time
or both would constitute a default under the provisions of, any Contract, the
termination of which could have a material adverse effect upon the properties,
assets, liabilities, financial condition, results of operations or business
prospects of the Company. Correct and complete copies of all written Contracts
disclosed on Exhibit 3.20 have been provided to Buyer.
3.21 No Default, Violation or Litigation. The Company, to Sellers'
knowledge, is not in violation of any law, regulation or order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality (including, without limitation, laws,
regulations, orders, restrictions and compliance schedules applicable to
environmental standards and controls, wages and hours, civil rights and
occupational health and safety), other than violations individually or in the
aggregate that Sellers reasonably expect to have no material adverse effect on
the Business, the Company or its assets, and have not received any notice of
claimed noncompliance. To Sellers' knowledge, the Company is in compliance with
the federal Occupational Safety and Health Administration's standards concerning
exposure to noise (29 C.F.R. ss.1910.95). There are no lawsuits, proceedings,
claims or governmental investigations pending or, to the knowledge of Sellers,
threatened against or involving, the Company or against or involving any of the
assets of the Company, or against or involving any officers or directors of the
Company or that could otherwise materially affect the Business; and (ii) there
are no judgments, consents, decrees, injunctions, or any other judicial or
administrative mandates outstanding against the Company. None of the Sellers has
knowledge of any fact, event or circumstance that may give rise to any suit,
action, claim, proceeding or investigation that would be required to be set
forth on Exhibit 3.21 were it currently pending or threatened.
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3.22 Legislation or Regulation. To the knowledge of Sellers, since the
Balance Sheet Date, there has not been any legislation, statute, law, ordinance,
code, rule or regulation, either proposed or adopted, by any foreign, federal,
state, county or local government or any other governmental, regulatory or
administrative agency or authority prohibiting or in any way limiting the
Business, operations or prospects of the Company except for such prohibitions or
limitations which, individually or in the aggregate, would not have a material
adverse effect upon the Business.
3.23 Insurance. Exhibit 3.23 lists all insurance policies maintained by
or on behalf of the Company, specifying (i) the insurer, (ii) the amount of the
coverage, (iii) the type of insurance, (iv) the policy number and (v) any
currently pending claims thereunder or any claims asserted thereunder or under
similar policies since January 1, 1996. The Company has delivered to Buyer a
correct and complete copy of each such insurance policy. All such policies are,
and pending Closing will (or replacement policies will) continue to be, in full
force and effect, and the Company is not in default with respect to any
provision contained in any insurance policies, nor has it failed to give any
notice or present any claim thereunder in due and timely fashion.
All such insurance is in amounts and against such risks as are
necessary and appropriate to protect the Business and the Company's assets. The
Company has not been denied any insurance or indemnity bond coverage which it
has requested, or received any written notice from or on behalf of any insurance
carrier currently providing insurance relating to it (i) that insurance rates
may or will be substantially increased, (ii) that there will be no renewal of
policies presently in effect, or (iii) that material alterations to any of the
properties or business operations of the Company are necessary or required by
such carrier. Except as set forth on Exhibit 3.23, none of such insurance
policies are subject to retroactive premium adjustment in respect of prior
periods.
3.24 Employment, Labor and Other Relations. Exhibit 3.24 lists the
name, job classification and compensation (annual base salary, hourly wages and
annual bonus) of each of the officers and employees of the Company as of
September 30, 1996.
(a) Except as disclosed in Exhibit 3.24, the Company is not a
party to or is otherwise bound by any contract, agreement or collective
bargaining agreement with any labor union or organization or other
commitment respecting employment or compensation of any of its
officers, agents or employees, and, except as so disclosed, no
employees of the Company are represented by any labor union or similar
organization. The Company has not been involved in any labor strike,
dispute, slow down or work stoppage, or union organizing campaign,
except for the collective bargaining agreement so disclosed, involving
its employees and none has been threatened. To the knowledge of
Sellers, there is no existing or threatened labor disturbance by the
Company's employees or of any of the Company's principal suppliers,
contractors or customers that could have a material adverse effect upon
the properties, assets, liabilities, financial condition, results of
operations or business prospects of the Company.
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(b) Except as disclosed on Exhibit 3.24, to Sellers'
knowledge, there are no charges or complaints involving any federal,
state or local civil rights enforcement agency or court; complaints or
citations under the Occupational Safety and Health Act or any state or
local occupational safety act or regulation; unfair labor practice
charges or complaints with the National Labor Relations Board;
complaints involving violation of fair labor standard law or the Family
Medical Leave Act; or other claims, charges, actions, grievances, or
controversies pending, or, to the knowledge of any Seller, threatened
or proposed, involving the Company and any employee, former employee or
any labor union or other organization representing or claiming to
represent such employees' interests, which could materially and
adversely affect the Business.
(c) To Sellers' knowledge, the Company is and has been in
compliance in all material respects with all laws, rules and
regulations respecting employment and employment practices, terms and
conditions of employment and wages and hours, the sponsorship,
maintenance, administration and operation of (or the participation of
its employees in) occupational safety and health programs, and the
Company is not engaged in any violation of any law, rule or regulation
related to employment, including unfair labor practices or acts of
employment discrimination, which could materially and adversely affect
the Business.
(d) The Company has not had a plant closing or mass lay-off
(as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988) affecting in whole or in part any facility,
operating unit or employee of the Company since the effective date of
that act.
3.25 Employee Benefits. As used in this Agreement, the term "Employee
Plan" includes any pension, retirement, savings, disability, medical, dental,
health, life (including any individual life insurance policy on which the
Company makes premium payments, whether or not the Company is the owner,
beneficiary or both of such policy), death benefit, group insurance, profit
sharing, deferred compensation, stock option, bonus, incentive, vacation pay,
severance pay, or other employee benefit plan, trust, arrangement, contract,
agreement, policy or commitment, including without limitation, any pension plan
("Pension Plan") as defined in ss.3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and any welfare plan as defined in
ss.3(1) of ERISA ("Welfare Plan"), whether any of the foregoing is funded,
insured or self-funded, written or oral, (i) to which the Company is a party or
by which the Company, or any of the rights, properties or assets of the Company,
is bound or (ii) with respect to which the Company has made any payments,
contributions or commitments since January 1, 1993, or may otherwise have any
liability (whether or not the Company still maintains such plan, trust,
arrangement, contract, agreement, policy or commitment). With respect to the
Employee Plans:
(a) There are no Employee Plans or any employees entitled to
retiree benefits under any Welfare Plans except as disclosed on Exhibit
3.25;
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(b) The Company has no employee manuals or other written
statements of policies or practices relating to employment, except as
disclosed on Exhibit 3.25 and true and correct copies of such manuals
or policies have been provided to Buyer;
(c) The Company has not received any notice to correct any
violation of any applicable laws, rules or regulations relating to any
of the Employee Plans, programs or policies disclosed on Exhibit 3.25
or the manner in which they are administered, with which it has not
complied; and except as set forth on Exhibit 3.25, the provisions and
operations of all such Employee Plans, programs and policies are in
compliance with all applicable laws and governmental rules and
regulations, other than violations individually or in the aggregate
that Sellers and the Company reasonably expect to have no material
adverse effect on the Business, the Company or its assets;
(d) Except as disclosed in Exhibit 3.25, the Company and any
other trade or business (whether or not incorporated) which is under
common control with the Company or is treated as a single employer with
the Company ("Common Control Entity") under Section 414(b), (c) or (m)
of the Internal Revenue Code of 1986 ("Code") does not maintain or
contribute to, and has not maintained or contributed to, a Pension Plan
subject to the provisions of Title IV of ERISA, and to the knowledge of
Sellers, the Company has no potential liability under Title IV of
ERISA. None of the Plans which are subject to Title IV of ERISA has
incurred any "accumulated fund deficiency" within the meaning of
Section 302 of ERISA or Section 412 of the Code. The Company and any
Common Control Entity does not and has not had an obligation to
contribute to any multi-employer plan (within the meaning of Section
3(37) of ERISA). The Company maintains no Employee Plan except as
disclosed on Exhibit 3.25. Each employee benefit plan (within the
meaning of Section 3(3) of ERISA) maintained by, or contributed to,
by the Company has been administered in compliance in all material
respects with its terms and with all filings, reporting, disclosure
and other requirements of ERISA and the Code. Each such employee
welfare benefit plan which is a group health plan has been
administered in compliance in all material respects with its reporting
and notice requirements under Section 4980B of the Code. Neither the
Company nor any of its officers or directors has engaged in any
transaction in violation of the prohibited transactions provisions set
forth in Section 406 of ERISA;
(e) True and complete copies of the Employee Plans disclosed
in Exhibit 3.24 including the Plan document, summary plan description,
related trust agreements or annuity contracts (or any other funding
instruments), the most recent determination letter issued by the
Internal Revenue Service with respect to each Pension Plan, each IRS
Form 5500 series annual filing required to be filed with any
governmental agency for each Employee Plan for the three most recent
plan years and all actuarial reports prepared for the last three plan
years of each Pension Plan, other than an individual account plan, have
been provided to Buyer;
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(f) The most recent IRS Form 5500 series annual filing for
each Pension Plan subject to Title IV of ERISA disclosed in Exhibit
3.25 contains an accurate description of the financial status of each
such Pension Plan and, to Sellers' knowledge, there have been no
adverse changes since the most recent forms provided with respect to
each such Pension Plan; and
(g) Except as set forth on Exhibit 3.25, the Hutchinson
Foundry Retirement Plan for Employees, the Hutchinson Foundry Products
Company Retirement Plan for Employees, the Hutchinson Foundry Employees
401(k) Plan and the Hutchinson Foundry Products Company Profit Sharing
Plan comply in all material respects with all of the "qualified plan"
requirements contained in Sections 401(a) et seq. of the Code.
3.26 Approvals. The Company possesses or has applied for all material
governmental and other permits, licenses, consents, certificates, orders,
authorizations and approvals (the "Approvals") to own or hold under lease and
operate properties and assets and to carry on the Business as now conducted. The
Company has not received any notice of proceedings relating to the revocation or
modification of any such Approvals which, singly or in the aggregate, if the
subject of an unfavorable ruling or finding, could adversely and materially
affect the properties, assets, financial condition, results of operation or
business prospects of the Company. The Approvals are identified in Exhibit 3.26.
The Company is operating in compliance in all material respects with the
provisions, terms and conditions of the Approvals.
3.27 Environmental Matters.
(a) To Sellers' knowledge, the Real Property has been, and
continues to be, used and operated by the Company in compliance in all
material respects with all applicable federal, state and local
environmental laws, regulations and guidelines as enacted, amended or
reauthorized, promulgated, published or proposed.
(b) Except as set forth on Exhibit 3.27, to Sellers' knowledge
there are no (i) environmental audits, assessments or occupational
health studies undertaken by, or at the direction of, governmental
agencies or the Company; (ii) reports of sampling or analyses of water
(including groundwater analyses), soil, air or asbestos where
non-compliance or contamination is indicated; (iii) inspections of the
Real Property by the Environmental Protection Agency or other relevant
environmental authority; (iv) written communications with environmental
agencies relating to issues of noncompliance or contamination; and (v)
claims or complaints concerning environmental matters of the Company.
(c) To Sellers' knowledge, there has been no actual or
threatened "Release" of any "Hazardous Substance" at the Real Property
and any premises previously occupied by the Company or at any disposal
or treatment facility which received Hazardous Substances generated by
the Company or its predecessors. "Release" will have the meanings
assigned to it in the Comprehensive Environmental Response Compensation
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<PAGE> 29
and Liability Act of 1980, as amended ("CERCLA"). "Hazardous Substance"
will have the meanings assigned to it in CERCLA and, in addition, will
include fuel oil and petroleum and any constituent thereof and any
petroleum-based product.
(d) To Sellers' knowledge, the Company has not disposed,
handled, treated, or arranged for the storage, disposal, handling or
treatment of, any Hazardous Substance or other waste at a site or
location, or has leased, used, owned a site or location including but
not limited to any site which, pursuant to CERCLA or other similar
state law: (i) has been placed on the National Priorities List or its
state equivalent; (ii) the Environmental Protection Agency or relevant
state authority has proposed, or is proposing, to place on the National
Priorities List or state equivalent; (iii) is on notice of, or subject
to a claim, administrative order or other demand either to take
"removal" or "remedial" action as those terms are defined by CERCLA, or
to reimburse any person who has taken "removal" or "remedial" action in
connection with that site; (iv) has filed (or has had filed) with
respect to that site a notification of hazardous waste activities; or
(v) is on the Comprehensive Environmental Response Compensation
Liability Information System List.
(e) The Company has not owned or operated, nor does it
presently own or operate, any underground storage tanks as defined in
the Resource Conservation and Recovery Act ("RCRA"). To Sellers'
knowledge, all tanks and related pipes are presently and have been in
the past in good condition and do not leak.
(f) There are no hazardous wastes, drums or containers
disposed of or buried by the Company or, to Sellers' knowledge, any
other person, on, in or under the ground or any surface waters located
on the Real Property or any premises previously occupied by the
Company. Neither the Company, or to the knowledge of any Seller, any
third parties, have disposed of or buried any hazardous wastes, drums
or containers on, in or under the ground or any surface waters located
on the Real Property or any premises previously occupied by the
Company. None of the Company or any party acting on behalf of the
Company has disposed of or buried, or arranged to dispose of or bury,
any waste, drums or containers in or on the Real Property of a third
party other than those pursuant to and in compliance with RCRA.
(g) Except as disclosed in Exhibit 3.27, to Sellers'
knowledge, there have been no polychlorinated biphenyls, radon,
asbestos, lead-based paint, lead in the drinking water or urea
formaldehyde in or on the Real Property or any premises previously
occupied by the Company.
3.28 Transactions With Affiliates. Except as disclosed on Exhibit 3.28,
there are no contracts or arrangements (formal or informal, written or oral),
directly or indirectly, between the Company, on the one hand, and any of the
Sellers or any persons controlling, under common control with or controlled by
any Seller, on the other hand. Except as disclosed on Exhibit 3.28, no Seller
nor the Company nor any of their affiliates has any direct or indirect interest
in any entity involved in any business which is competitive with the Business.
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3.29 Principal Customers and Suppliers. Exhibit 3.29 lists the ten
largest customers and suppliers of the Company in terms of purchases and sales
during the fiscal year ended December 31, 1995, showing the total purchases and
sales by or from each such customer or supplier during such period. There has
not been any material adverse change in the business relationship of the Company
with any such named customer or supplier since January 1, 1993, or any other
material customer or supplier since the September Balance Sheet Date. The
Company is not required to provide bonding or any other security agreements in
connection with any transactions with any of its current customers or suppliers.
3.30 Hart-Scott-Rodino. Neither the net sales or the total assets of
the Company equal or are greater than $10,000,000 for the most recently
completed fiscal year of the Company.
3.31 Prior Noncompete Agreement. In connection with the acquisition of
substantially all of the assets of Hutchinson Foundry Products Company effective
December 31, 1992, the Company entered into a noncompete agreement with Thomas
K. Hutchinson (the "Hutchinson Agreement"). The Hutchinson Agreement is a legal,
valid and binding obligation of the Company and Thomas K. Hutchinson and is in
full force and effect. Neither the Company nor Thomas K. Hutchinson, to the
Company's and Sellers' knowledge, has violated any provision of, or committed or
failed to perform any act which, with notice, lapse of time or both, would
constitute a default under the Hutchinson Agreement. Any monetary obligation
outstanding under the Hutchinson Agreement shall be borne by the Sellers.
Neither the Company nor Sellers have any reason to believe or know that Thomas
K. Hutchinson or any affiliate will compete with the Company at or after the
expiration of the term of the Hutchinson Agreement.
3.32 Workers' Compensation. The Company was subject to a retrospective
rating plan for the period commencing December 31, 1992 and ending December 30,
1995 ("'95 Period"). In accordance with said plan, the policy maximum was
$553,467, of which $422,127 has been paid to date. The payments made by the
Company for the period from December 31, 1992 through December 30, 1996 are
collectively referred to as the "Workers' Compensation Payments." For the year
commencing December 31, 1995 and ending December 31, 1996, Company has paid
$172,446. Except for an audit adjustment premium which may arise as a result of
the 1996 payroll audit by the Company's insurance carrier and a maximum
additional premium for the '95 Period of $131,340, no further Workers'
Compensation Payments are payable for any prior period.
3.33 Investment Purposes. Each Seller severally represents it is
acquiring the Notes for its own account for investment purposes only and not
with a view to, or for resale in connection with, the distribution thereof, and
each Seller has no present intention of distributing or reselling the Notes.
3.34 Representations of Foundation. Foundation severally represents and
warrants to Buyer as follows:
(a) Foundation is a non-profit trust duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization.
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(b) Foundation has all necessary power and authority to make,
execute and deliver this Agreement and all other agreements and
documents to be executed and delivered by it pursuant to this
Agreement, and it has taken all necessary action required to be taken
to authorize it to execute and deliver this Agreement and to perform
all of its obligations, undertakings and agreements to be observed and
performed by it hereunder and thereunder. This Agreement has been, and
all other agreements and documents to be executed and delivered
pursuant to this Agreement will be duly executed and delivered by
Foundation, and constitute a legal, valid, binding agreement of
Foundation enforceable in accordance with its terms subject, as to the
enforcement of remedies, to general equitable principles and to
bankruptcy, insolvency and similar laws affecting creditors' rights
generally.
(c) Foundation is the direct record and beneficial owner of
the Stock set forth opposite its name on Exhibit 3.6, and such Stock
will, at Closing, be free and clear of any Lien. Upon delivery of and
payment for the Stock as provided in this Agreement, Buyer will acquire
good and valid title to the Stock, free and clear of any Lien.
(d) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement
will not constitute a violation of, or be in conflict with, or result
in a cancellation of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or
create (or cause the acceleration of the maturity of) any debt,
obligation or liability affecting, or result in the creation or
imposition of any Lien upon the Stock under (i) any term or provision
of the organizational documents of Foundation; or (ii) any judgment,
ruling, decree, writ, order, regulation or rule of any court or
governmental authority; or (iii) any statute, ordinance or law;
(e) Foundation is acquiring the Notes for its own account for
investment purposes only and not with a view to, or for resale in
connection with, the distribution thereof, and with no present
intention of distributing or reselling the Notes.
3.35 Limitation of Foundation Representations. The representations and
warranties of Foundation are limited to those contained in Section 3.34.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 Organization, Power and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite power and authority to own or hold under lease
its properties and assets and to carry on its business as now conducted.
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4.2 Authority. Buyer has all necessary power and authority, corporate
and otherwise, to make, execute and deliver this Agreement and all other
agreements and documents to be executed and delivered by it pursuant to this
Agreement; and Buyer has taken all necessary actions required to be taken to
authorize it to execute and deliver this Agreement and such other agreements,
and to perform all of its obligations, undertakings and agreements to be
observed and performed by it hereunder and thereunder. This Agreement has been,
and all other agreements and documents to be executed and delivered pursuant to
this Agreement will be, duly executed and delivered by Buyer, and constitutes
the legal, valid and binding agreement of Buyer enforceable in accordance with
its terms subject, as to the enforcement of remedies, to general equitable
principles and to bankruptcy, insolvency and similar laws affecting creditors'
rights generally.
4.3 No Violation. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not (a) constitute a violation of, or be in conflict with, or
result in a cancellation of, or constitute a default under (or an event which
with notice or lapse of time or both would constitute a default), or create (or
cause the acceleration of the maturity of) any debt, obligation or liability
affecting, or result in the creation or imposition of any security interest,
lien, or other encumbrance upon any of the assets owned or used by, or any of
the capital stock of Buyer under: (i) any term or provision of the certificate
of incorporation or by-laws (or other organizational documents) of Buyer; (ii)
any judgment, decree, order, regulation or rule of any court or governmental
authority; (iii) any statute, ordinance or law; or (iv) any contract, agreement,
indenture, lease or other commitment to which Buyer is a party or by which it is
bound; or (b) cause any material change in the rights or obligations of any
party under any such contract, agreement, indenture, lease or commitment.
4.4 Consents. Except as disclosed on Exhibit 4.4, no consent of, or
notice to, any federal, state or local authority, or any private person or
entity, is required to be obtained or given by Buyer in connection with the
execution, delivery or performance of this Agreement or any other Agreement or
document to be executed, delivered or performed hereunder by Buyer, or the
consummation of the transactions contemplated hereby.
5. COVENANTS
5.1 Pre-Closing Covenants of Sellers. The Sellers covenant and agree
with Buyer that from the date of this Agreement until the Closing or other
termination of this Agreement:
5.1.1 Conduct of Business: No Material Change. The Company
will conduct its business only in the ordinary course in conformity with past
practices, and except with Buyer's consent, which consent will not be
unreasonably withheld, it will not, except in the ordinary course of its
Business, (i) make any change in its business or operations, (ii) make any
change in the compensation of any officer or other employees of the Company,
(iii) hire any new employees, (iv) enter into any material contracts or
commitments involving the payment or receipt of in excess of $50,000 by the
Company or the term of which exceeds 30 days, (v) make any individual or series
of related capital expenditures in excess of $10,000, and (vi) enter into
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any other transaction affecting the Business. Without limiting the foregoing,
the Company will use its best efforts to avoid any change in its business which,
if occurring prior to the date of this Agreement, would have been subject to
disclosure pursuant to Section 3.10 of this Agreement.
5.1.2 Maintain Business as Going Concern. Sellers will use
their reasonable best efforts to cause the Company to preserve its business
organization and, to the extent reasonably possible, keep available the services
of its present officers, employees, and agents and will use its best efforts to
preserve the goodwill of its suppliers, customers and others having business
relations therewith.
5.1.3 Investigation. The Company shall allow Buyer and its
representatives full access to all operations, machinery, equipment,
inventories, property, offices, books, contracts, commitments, records and
affairs of the Company for the purpose of familiarizing themselves with the
operation and conduct of all aspects of the Business and for the purpose of
reasonable inspection, examination, audit, counting and copying; provided that
such access does not unreasonably interfere with the operation and conduct of
the Business.
5.1.4 Preserve Accuracy of Representations and Warranties. The
Company and Sellers shall refrain from taking any action which would render any
representation and/or warranty contained in this Agreement inaccurate as of the
Closing Date, except for changes specified in, permitted or contemplated by this
Agreement.
5.1.5 Certain Consents to Assignment. Sellers shall cause the
Company, at the request of Buyer, to obtain consents to assignment for all
contracts or agreements which require consent to assignment and which are being
transferred to Buyer, whether or not Buyer has agreed to waive such consents as
a condition to Closing, including but not limited to those consents described in
Exhibit 3.4.
5.1.6 Environmental Audit. The Buyer shall, at its expense,
obtain and deliver to Company, a "Phase I" environmental assessment of the Real
Property prepared by an environmental engineering firm appointed by Buyer.
Company shall provide, at its expense, any additional environmental assessments
or reports reasonably requested by Buyer and agreed to by Company.
5.1.7 No Solicitation. Sellers will not, and will not cause or
permit the Company to: (i) solicit or encourage any inquiries or proposals for,
or enter into any discussions or agreement with respect to, the acquisition of
any of the securities or other capital stock of the Company, the Business, or
all, or substantially all, of the assets of the Company (an "Acquisition
Transaction"); or (ii) except as required by law or regulation, furnish or cause
to be furnished any non-public information concerning the business and
operations of the Company to any person (other than any of the parties hereto,
and their agents and representatives, and any governmental or regulatory
authority or third party whose consent is required in connection with the
transactions contemplated by this Agreement). Each Seller will promptly notify
Buyer of any inquiry or proposal received by such Seller or the Company with
respect to any Acquisition Transaction. Each Seller will not, after the date
hereof, sell, transfer or otherwise dispose of,
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grant any option or proxy to any person with respect to, create any Lien upon,
or transfer any interest in, any of the securities or any shares of the capital
stock of the Company, or enter into any agreement to do so.
5.1.8 Status of Title. The Company shall, within 15 days after
the execution of this Agreement, furnish Buyer a commitment issued by Chicago
Title Insurance Company (the "Title Company"), committing such company to issue
an ALTA Owners Policy of Title Insurance (the "Commitment"), a Uniform
Commercial Code Search ("UCC Search"), and a special tax search (the "Tax
Search") with respect to the Business, and thereafter the following shall occur:
(a) Within 30 days following the date of this Agreement, the
Company shall obtain and furnish to Buyer a current updated "as built"
survey of the Real Property (the "Survey"), which Survey shall be
prepared in accordance with the ALTA/ACSM standards and certified to
the Buyer and the Title Company;
(b) Within 15 days after the date Buyer receives the
Commitment, UCC Search, Tax Search and the Survey, the Buyer shall
serve upon the Company a notice specifying those exceptions to title
shown on the Commitment, Tax Search and UCC Search and those
encroachments and other survey defects, if any, shown on the Survey,
which the Buyer does not approve (the "Title Defects");
(c) In the event the Buyer fails to notify the Company within
such 15 day period, then Buyer shall be deemed to have approved all
exceptions to title shown on the Commitment, Tax Search and UCC Search
and all matters shown on the Survey;
(d) Upon receipt by the Company of the Buyer's notification of
Title Defects, the Company shall use its best efforts (which, in the
case of any lien which may be discharged by the furnishing of a bond,
shall include appropriate arrangements for bonding or other discharge
of such lien or such mutually satisfactory arrangement for removal of
such lien as the parties may agree upon in writing) to cause the
removal of such defect prior to Closing;
(e) If prior to Closing the Company shall fail to eliminate
such exception, then Buyer may elect: (i) to accept the Real Property
with such additional Title Defect, but with a mutually acceptable
adjustment to the Estimated Purchase Price, or (ii) terminate this
Agreement.
5.1.9 Other Sellers Legal Opinion. CFB, CIP, MorAmerica and
Foundation shall, prior to Closing, deliver legal opinions of their respective
counsel, to Summers, Compton, Wells & Hamburg and Buyer opining to Section 3.2
and Section 3.3 of this Agreement.
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5.1.10 General Industries Account Receivable. The General
Industries account receivable in the amount of $100,443, which account
receivable was heretofore reserved against due to the General Industries
bankruptcy and subsequently partially reversed to the extent of approximately
$64,000, will be retained by the Company to the extent payments are received.
Neither Sellers nor the Company shall further reverse or write-up the General
Industries account receivable.
5.2 Post Closing Covenants of the Sellers.
5.2.1 Noncompete. For a period ending five years after the
Closing Date (the "Restricted Period") Sellers, other than Houghton, their
respective employees, officers, representatives, managers and directors shall
not directly or indirectly compete with the Company, whether personally or as an
owner, director, consultant, employee, manager, associate, partner, agent or
otherwise, in the business of the Company as such business is conducted by the
Company as of the Closing Date within the United States (the "Restricted
Territory"), provided, however, that the restriction contained in this Section
5.2.1 shall not apply to (i) any outstanding investment of any such Sellers
(other than Houghton) on the date of this Agreement in any corporation or other
entity that competes with the business of the Company, (ii) any binding
commitment that any such Sellers (other than Houghton) may have on the date of
this Agreement to invest funds in any corporation or other entity that competes
with the business of the Company, and (iii) any investment by any such Sellers
(other than Houghton) in a corporation or other entity that has a class of
securities registered under Section 12 of the Securities Exchange Act of 1934,
if such investment does not exceed five percent (5%) of the aggregate equity
interest or aggregate voting power of all classes of equity securities of such
corporation or other entity as of the date of this Agreement or at the time such
investment is made after the date of this Agreement.
5.2.2 Nonsolicitation. Except as may occur in connection with
or as a result of their investments described in clauses (i) through (iii) of
Section 5.2.1, Sellers other than Houghton, during the Restricted Period, and
their respective employees, officers, representatives, managers and directors,
will not solicit orders, directly or indirectly (whether as an owner,
consultant, manager, employee, director, partner, agent or otherwise), from any
customer of Buyer in the Restricted Territory for any product that is
substantially similar to any product that is offered by the Company as of the
Closing Date. During the Restricted Period, the Sellers, other than Houghton,
and their respective employees, officers, representatives, managers and
directors will not solicit the employment of any employee of the Company who
continued employment with the Company or the Buyer on and after the Closing
Date.
5.2.3 Confidentiality. Each Seller, other than Houghton,
further acknowledges that it has had access to confidential information of the
Company. Each Seller, other than Houghton, covenants and agrees that it will not
use for its own behalf or divulge to any third party, except pursuant to
subpoena and thereupon only after providing written notice to the Buyer and
allowing it seven (7) business days to quash the subpoena or obtain other
appropriate judicial remedy, any confidential information or trade secrets of
the Company. As used herein, confidential information will consist of all
information, knowledge or data relating to the
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<PAGE> 36
Company (including without limit all information relating to the Company,
production methods, customer and prospective customer lists, prices and trade
practices) which is not in the public domain or otherwise published or publicly
available. Except as may be required by law or regulation, and to the extent
reasonably possible, each Seller, other than Houghton, agrees to deliver to
Buyer at the Closing all material (and all copies thereof) that contains or
relates to confidential information.
5.2.4 Reasonable Restrictions. Each Seller, other than
Houghton, acknowledges that the restrictions contained in Sections 5.2.1-3 are
reasonable and necessary to protect the legitimate interests of Buyer, do not
cause such Seller undue hardship, and that any violations of any provision of
Sections 5.2.1-3 will result in irreparable injury to Buyer and that, therefore,
Buyer is entitled to preliminary and permanent injunctive relief in any court of
competent jurisdiction and to an equitable accounting of all earnings, profits
and other benefits arising from such violation, which rights will be cumulative
and in addition to any other rights or remedies to which Buyer may be entitled.
5.2.5 Houghton Noncompete. It is agreed that the noncompete,
nonsolicitation and confidentiality agreements of Houghton are set forth and
contained in the Employment Agreement.
5.2.6 Waiver/Termination of Various Agreements. Sellers, other
than Foundation, agree that effective with the execution of this Agreement, each
Seller shall have waived any rights arising from or under (i) the Securities
Purchase Agreement dated as of March 10, 1993 by and among the Company and
Sellers, other than Foundation; (ii) the Tag-Along Agreement dated as of March
10, 1993 by and among the Company and Sellers, other than Foundation; and (iii)
The Agreement Among Shareholders, Directors and The Company, dated as of March
10, 1993, by and among the Company, Sellers, other than Foundation and Thomas K.
Hutchinson, and Sellers, other than Foundation further agree that immediately
effective with the Closing of this Agreement, all such agreements shall be
terminated and of no further force or effect; provided, however, it is further
agreed that in the event this Agreement and the transactions contemplated hereby
are not consummated, then the waivers contained in this Section 5.2.6. will be
deemed null and void, all rights of Sellers, other than Foundation under such
agreement shall be reinstated and Sellers, other than Foundation shall be
entitled to the benefit of all such agreements.
5.3 Post Closing Covenants of the Buyer and Sellers.
5.3.1 Cooperation Regarding Tax Matters. The Buyer and Sellers
agree to furnish or cause to be furnished to each other, upon request, as
promptly as practicable, such information (including access to books, records,
computer files and personnel) and assistance relating to the Company as is
reasonably necessary for the filing of any return, for the preparation for any
audit, or for the prosecution or defense of any action with respect to Taxes.
Sellers and Buyer agree to retain or cause to be retained all books, records and
computer files pertinent to the Company until the applicable period for
assessment under all applicable law (giving effect to any and all extensions or
waivers) has expired, and to abide by or cause the abidance with all record
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<PAGE> 37
retention agreements entered into with any government. For a period of eight
years after the Closing Date, Buyer shall, and shall cause the Company to, give
Sellers reasonable notice prior to transferring, discarding or destroying any
such books, records or computer files relating to Tax matters, and if any Seller
so requests, Buyer shall, or shall cause the Company to, allow such Seller to
take possession of such books, records and computer files. The Buyer and Sellers
shall cooperate with each other in the conduct of any audit or other proceeding
involving the Company for any Tax purpose and shall each execute and deliver
such powers of attorney and other documents as are necessary to carry out the
intent of this Section.
5.3.2 Proration of Real Property Taxes. Sellers shall be
responsible to pay all real estate taxes and assessments for the period prior to
the Closing and Buyer shall be responsible for the real estate taxes and
assessments for the period after the Closing.
5.3.3 Workers' Compensation Payments. Sellers, exclusive of
the Foundation, shall be responsible in the proportions set forth in Exhibit
5.3.3, and shall pay all sums due under the workers' compensation retrospective
rating plan, including, but not limited to, audit premiums, audit adjustment
payments and retrospective adjustments, within 30 days after the Company has
given notice in accordance with Section 9.5 of any such liability or obligation,
which notice shall be accompanied by an applicable invoice or other supporting
documentation for said payment, and payment directions. In the event the Company
receives a refund, return of, or payment from the Workers' Compensation
Payments, Buyer shall, within ten (10) days of the receipt of such funds, cause
the Company to distribute to Sellers the funds in the proportions set forth in
Exhibit 5.3.3.
6. CONDITIONS TO CLOSING
6.1 Conditions to Buyer's Obligations. The obligations of Buyer to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to Closing of each of the following conditions:
6.1.1 Representations and Warranties. All representations and
warranties made by Sellers contained in this Agreement will be true and correct
on the date of this Agreement and as of the Closing Date as though such
representations and warranties were made as of the Closing Date, except for
those representations and warranties which have been specifically corrected
through the delivery to Buyer of a revised Exhibit after the date of this
Agreement and prior to Closing so that at Closing the representations and
warranties shall be true and correct as of the Closing Date, and Sellers will
have duly performed or complied with all of the obligations to be performed or
complied with by it under the terms of this Agreement on or prior to Closing.
6.1.2 Consents and Approvals. All material authorizations,
consents, waivers, approvals or other action required in connection with the
execution, delivery and performance of this Agreement by Sellers and the
consummation by Sellers of the transactions contemplated hereby, will have been
obtained, and Sellers will have obtained any authorizations, consents, waivers,
approvals or other action required in connection with the execution, delivery
and
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<PAGE> 38
performance of this Agreement to prevent a material breach or default by Sellers
under any material contract to which either any Seller or the Company is a party
and for the continuation of any agreement to which either any Seller or the
Company is a party and which relates and is material to the Business. Sellers
will have obtained the agreement of Thomas K. Hutchinson to the termination of
The Agreement Among Shareholders, Directors and The Company dated March 10,
1993.
6.1.3 No Material Change. No material adverse change will have
occurred (whether or not covered by insurance) in the assets, financial
condition or prospects of the Business.
6.1.4 Environmental Matters. Sellers shall have completed for
the filing with all appropriate governmental entities and/or agencies, the
Environmental Disclosure Document for Transfer of Real Property pursuant to the
Illinois Responsible Property Transfer Act of 1988.
6.1.5 Title Insurance. Sellers will provide for the Real
Property, satisfactory to Buyer, a current standard ALTA form including ALTA
Owner's Fee Policy of Title Insurance in the amount Buyer determines, Form
8-Environmental Protection Lien endorsement and the title policy shall be
without any exceptions except for the standard printed exceptions customarily
set forth in Schedule B to said form and containing zoning and other
endorsements reasonably requested by Buyer.
6.1.6 Lender's Approval. Buyer will have obtained, to the
extent required by all applicable loan agreements, the consent, approval, waiver
or other action required from its lenders in connection with the execution,
delivery and performance of this Agreement.
6.1.7 No Suit. No suit, action or other proceeding or
investigation will, to the knowledge of any party to this Agreement, be
threatened or pending before or by any governmental agency or by any third party
questioning the legality of this Agreement or the consummation of the
transactions contemplated hereby in whole or in part.
6.1.8 Deliveries. Sellers will have delivered the documents
required to be delivered by Section 2.3.
6.1.9 Closing. The Closing will have occurred by the Closing
Date.
6.1.10 Redemption. All of the issued and outstanding shares of
Preferred Stock shall have been redeemed and canceled, and holders of the
Warrants shall have exercised all Warrants prior to Closing.
6.1.11 Board Approval. Buyer's Board of Directors shall have
approved the terms and conditions of this Agreement and the transaction
contemplated hereby within fifteen (15) days of the execution of this Agreement,
it being agreed that if Buyer fails to notify Sellers in accordance with Section
9.5 within said time period that this Agreement has not been approved, it shall
be conclusively deemed to be approved by said Board.
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6.2 Conditions to Sellers' Obligations. The obligations of Sellers to
consummate the transactions contemplated by this Agreement are subject to the
fulfillment at or prior to the Closing of each of the following conditions:
6.2.1 Representations and Warranties. The representations and
warranties made by Buyer contained in this Agreement will be true and correct on
the date of this Agreement and as of the Closing Date as though such
representations and warranties were made as of the Closing Date, and Buyer will
have duly performed or complied with all of the obligations to be performed or
complied with by it under the terms of this Agreement on or prior to Closing.
6.2.2 Approvals. All material authorizations or approvals or
other action required in connection with the execution, delivery and performance
of this Agreement by Buyer, and the consummation by Buyer of the transactions
contemplated hereby, will have been obtained.
6.2.3 No Suit. No suit, action or other proceeding or
investigation will, to the knowledge of any party to this Agreement, be
threatened or pending before or by any governmental agency or by any third party
questioning the legality of this Agreement or the consummation of the
transactions contemplated hereby in whole or in part.
6.2.4 Deliveries. Buyer will have delivered the documents
required to be delivered by Section 2.4.
7. INDEMNIFICATION
7.1 Indemnification of Buyer. Subject to the limitations set forth in
Sections 7.4 and 7.5, Sellers, severally in the proportion set forth in Exhibit
2.4(a) except with regard to representations and warranties which certain
Sellers are solely the indemnifying party, then solely said representing and
warranting Seller, agrees to reimburse, indemnify and hold Buyer and its
directors, officers, shareholders, employees and agents and their respective
heirs and successors harmless from, against and in respect of all losses,
claims, damages, liabilities, taxes, costs and expenses, including, without
limitation, fines, penalties, court costs and reasonable attorneys' fees
(collectively, "Loss"), which Buyer may suffer or incur in connection with any
of the following:
(a) any untruth, inaccuracy, breach or omission of, from or in
the representations and warranties made to Buyer herein; or any
nonfulfillment of any covenant or agreement of Sellers under this
Agreement;
(b) the operation of the Business on or prior to the Closing
Date;
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(c) any fees, expenses or other payments incurred or owed by
the Company or Sellers to any brokers or third parties retained or
employed by it or the Company in connection with the transactions
contemplated by the Agreement;
(d) any Taxes of the Company for the period prior to the
Closing Date, and all Workers' Compensation Payments relating to claims
of Company for the period prior to the Closing Date, and taxes of
Sellers and Sellers' affiliates; and
(e) any claim made by a third party alleging facts which, if
true, would entitle Buyer to indemnification hereunder.
7.2 Indemnification of Sellers. Subject to the limitations set forth in
Section 7.5, Buyer agrees to reimburse, indemnify and hold each Seller and its
directors, officers, shareholders, employees and agents and their respective
heirs and successors harmless from, against and in respect of all Loss which
such Seller may suffer or incur in connection with any of the following:
(a) any untruth, inaccuracy, breach or omission of, from or
in, the representations and warranties made to Sellers herein; or any
nonfulfillment of any covenant or agreement of Buyer under this
Agreement;
(b) the operation of the Business and all Taxes for periods
after the Closing Date;
(c) any fees, expenses or other payments incurred or owed by
Buyer to any brokers or third parties retained or employed by it in
connection with the transactions contemplated by the Agreement;
(d) any claim made by a third party alleging facts which, if
true, would entitle the Sellers to indemnification hereunder pursuant
to the above; and
(e) any claim made by a third party alleging facts which, if
true, would entitle Sellers to indemnification hereunder.
7.3 Method of Asserting Claims.
(a) Notice of Claim. In the event that any legal proceedings
shall be instituted or any claim or demand shall be given by any
person, including but not limited to Buyer and Sellers, in respect of
which payment may be sought by any party from any other party under the
provisions of Sections 7.1 or 7.2, the party seeking indemnification
(the "Indemnitee") shall cause written notice of any claim of which it
has knowledge which is covered by this Agreement to be forwarded
promptly to the party from which indemnification is sought
("Indemnitor"). Such notice shall specify the amount and
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nature of the claim and the reason why it constitutes an indemnified
liability, it being understood that failure to so provide notice shall
not relieve the other party from liability except to the extent damages
or prejudice results from such failure.
(b) Payment of Claims. In the event of a Loss other than a
third party claim, the Indemnitor shall remit the amounts due, as
indicated in such notice, within thirty days of receipt thereof, unless
the Indemnitor asserts in a writing delivered to the Indemnitee that
the claim is not an indemnified liability or disputes the amount of the
Loss in good faith (a "Disputed Claim"), it being understood that the
failure by the Indemnitor to respond within thirty days of receipt of
such notice shall be deemed to be an acknowledgment of the correctness
of the amounts due as set forth in the notice; provided, however, it is
agreed that in the event Buyer suffers or incurs a Loss for which
indemnification is permitted by the foregoing, Buyer shall, subject to
the Disputed Claim provision herein, have the right, in addition to any
other remedies to which Buyer may be entitled to if Indemnitor fails to
pay such Loss to then pay such Loss and set off the amount therein,
first against the Convertible Notes and thereafter against the EBITDA
Notes in the proportion set forth in Exhibit 2.4(a) or against the
Convertible Note and/or EBITDA Note of the Indemnitor if the obligation
is its sole obligation. Should Indemnitor dispute the claim, Buyer
shall withhold payment upon the Notes in an amount equal to the amount
of such Loss. With respect to the payment of a disputed claim by and
between Sellers and Buyer which is subsequently resolved in favor of
the Indemnitor, interest shall be paid on withheld funds. Upon the
resolution of the Disputed Claim, the withheld funds shall be
distributed as claimant and Indemnitor agree in writing.
(c) Third Party Claims. Except as provided in Section 7.3(d),
in case any action is brought by a third party against any Indemnitee
with respect to which such Indemnitee is entitled to indemnification
hereunder and notice of such action to the Indemnitor has been given
pursuant to Section 7.3(a), the Indemnitor will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the Indemnitee within thirty days after receiving the
aforesaid notice from such Indemnitee, to assume the defense thereof
with counsel reasonably satisfactory to such Indemnitee. Such
Indemnitee shall cooperate with respect to any such participation or
defense. Notwithstanding the foregoing, the Indemnitee shall have the
right to employ its own counsel in any such case but the fees and
expenses of such counsel shall be at the expense of such Indemnitee,
unless (i) the employment of such counsel shall have been authorized in
writing by the Indemnitor, (ii) the Indemnitor shall not have employed
counsel reasonably satisfactory to such Indemnitee to have charge of
the defense of such action within thirty days after notice of
commencement of the action, or (iii) such Indemnitee shall have
reasonably concluded, based upon written advice of counsel, that there
may be defenses available to it which are different from or additional
to those available to the Indemnitor (in which case the Indemnitor
shall not have the right to direct the defense of such action on behalf
of the Indemnitee with respect to such different defenses), in any of
which events such fees and expenses of one additional counsel shall be
borne by the Indemnitor. Notwithstanding anything in this Article 7 to
the contrary, an Indemnitor shall not be liable for any settlement of
any claim or action effected without its written
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consent; provided, however, that such consent is not unreasonably
withheld. Upon payment of indemnification by the Indemnitor, the
Indemnitee, if requested in writing by the Indemnitor, will assign to
Indemnitor its right against any applicable account debtor or other
responsible party to the extent of the indemnification payment.
(d) Disputes With Customers and Suppliers. Anything in Article
7 to the contrary notwithstanding, in an action, proceeding or
investigation by any supplier or customer of the Company with respect
to business conducted by the Company prior to closing, notice shall be
given provided in Section 7.3(a), but unless Buyer otherwise agrees, it
shall have the exclusive right to defend, compromise and settle any
such matter, subject to the duty to consult with Indemnitor and its
counsel in connection with such defense during or prior to any final
resolution of the dispute. Buyer shall have the right , in addition to
any other remedies to which Buyer may be entitled, to set off any Loss
or set off and withhold, the amount claimed until the dispute is
resolved, at which time any excess withheld shall be distributed. No
interest shall be paid on the withheld funds.
7.4 Limitations on Indemnification Payments. Indemnitor shall not be
liable under this Article 7 except to the extent that aggregate amount of all
such claims against Indemnitor exceeds $150,000, and the aggregate liability of
Indemnitor pursuant to one or more claims of indemnity under this Article 7
shall not exceed $2,000,000. For purposes of determining amounts to be paid
hereunder, if the liability is greater than $150,000, than the amount to be paid
is the total amount of the liability starting from the first dollar.
Notwithstanding the foregoing, Indemnitor shall not be required to indemnify or
hold Indemnitee harmless against any individual Loss unless such Loss exceeds
$1,000, and no individual Loss of less than $1,000 shall be considered in
determining whether the aggregate Losses exceed the threshold and aggregate
liability limit set forth in the preceding sentence; provided, however, for
purposes hereof, the individual Loss limit of $1,000 refers to a single
category, not individual item, for example, accounts receivable is a category
and separate receivables or claims can be aggregated to determine whether the
$1,000 threshold is reached. The limitations contained in this Section 7.4 shall
not apply to Seller's indemnification for Losses described in Section 7.1(d)
above.
7.5 Survival. In the absence of fraud or intentional misrepresentation,
the representations and warranties of Sellers contained in Article 3 shall
survive the Closing for a period of eighteen (18) months following the Closing;
provided that the representations and warranties contained in Sections 3.19,
3.25, 3.27 and 3.32 shall terminate at the close of business on the (120th day)
following the expiration of the applicable statute of limitations. In the
absence of fraud or intentional misrepresentation, the representations and
warranties of Buyer contained in Article 4 shall survive the Closing for a
period of eighteen (18) months following the Closing.
8. TERMINATION
This Agreement and the transactions contemplated hereby may be
terminated without liability to any party prior to or at Closing, as follows:
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8.1 Mutual Consent. By mutual consent of all of the Buyer and Sellers.
8.2 Breach. By Buyer or Sellers by reason of the breach by the other in
any material respect of any of its representations, warranties, covenants or
agreements contained in this Agreement.
8.3 Conditions Precedent. By Buyer or Seller if the conditions
precedent to their respective obligations contained in Sections 6.1 or 6.2 have
not been met in all material respects on the Closing Date through no fault of
the terminating party.
8.4 Title Defects. By Buyer, pursuant to the terms of Section 5.1.9(e).
8.5 Termination Date. By Buyer or Sellers if, through no fault of the
terminating party, the transaction has not been closed by January 15, 1997.
8.6 EBITDA Shortfall. In the event Sellers determine in good faith that
the Company's EBITDA for year-end 1996 will be less than $2,250,000, Sellers
shall provide notice of such determination to Buyer in accordance with Section
9.5 by December 25, 1996, then either Buyer or Sellers may terminate this
Agreement and the transaction contemplated hereby prior to December 31, 1996.
9. GENERAL PROVISIONS
The parties further covenant and agree as follows:
9.1 Waiver of Terms. Any of the terms or conditions of this Agreement
may be waived at any time by the party or parties entitled to the benefit
thereof but only by a written notice signed by the party or parties waiving such
terms or conditions.
9.2 Amendment of Agreement. This Agreement may be amended or
supplemented at any time only by written instrument duly executed by each of the
parties.
9.3 Payment of Expenses. Each party will pay its own expenses,
including, without limitation, the expenses of its own counsel, investment
bankers and accountants, incurred in connection with the preparation, execution
and delivery of this Agreement and the other agreements and documents referred
to herein and the consummation of the transactions contemplated hereby and
thereby, except to the extent that Buyer shall bear the additional specific
expenses incurred by the Title Company in connection with the Commitment and
shall be responsible for the cost of the services and expenses of Coopers &
Lybrand L.L.P. incurred by Sellers in connection with the preparation and
delivery of the Closing Working Capital Schedule, the EBITDA Statement and the
Company's financial statements audited by Coopers & Lybrand L.L.P. for Company's
year ended December 31, 1996 and the Closing Date, if the Closing Date is
subsequent to January 3, 1997, to the extent of the amount which is in excess of
the annual audit expenses ordinarily incurred by the Company.
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9.4 Contents of Agreement, Parties in Interest, Assignment. This
Agreement and the other agreements and documents referred to herein set forth
the entire understanding of the parties with respect to the subject matter
hereof. Any previous agreements or understandings between the parties regarding
the subject matter hereof are merged into and superseded by this Agreement. All
representations, warranties, covenants, terms and conditions of this Agreement
and the documents contemplated hereby will be binding upon and inure to the
benefit of and be enforceable by the respective heirs, legal representatives,
successors and permitted assigns of the parties hereto; provided, however, that
none of the rights or obligations of any of the parties hereto may be assigned
without the prior written consent of the other party hereto, which consent will
not unreasonably be withheld.
9.5 Notices. All notices, requests, demands and other communications,
including but not limited to, the Closing Working Capital Schedule, the EBITDA
Statement and the Adjustment Report required or permitted to be given hereunder
will be by hand-delivery, certified or registered mail, return receipt
requested; fax, or overnight courier to the parties set forth below. Such
notices will be deemed given at the time personally delivered, if delivered by
hand or by courier; at the time received if sent certified or registered mail;
and when sent if faxed.
<TABLE>
<CAPTION>
<S> <C>
If to Sellers: Hutchinson Foundry Products Co. Copy to: Summers, Compton, Wells & Hamburg
3131 Alby Street 8909 Ladue Road
Alton, IL 62002 St. Louis, MO 63124
Fax: 618/465-5529 Fax: 314/991-2413
Attn: Timothy Houghton Attn: Michael M. Sayers
and
CFB Venture Fund II, L.P.
Capital For Business
11 South Meramec #1430
St. Louis, MO 63105
Fax: 314/746-8739
Attn: Stephen B. Broun
and
If to Buyer: Hawk Corporation Copy to: Kohrman Jackson & Krantz P.L.L.
200 Public Square 20th Floor One Cleveland Center
Suite 29-2500 Cleveland, Ohio 44114
Cleveland, Ohio 44114 Fax: 216/621-6536
Fax: 216/861-4546 Attn: Byron S. Krantz
Attn: Ronald E. Weinberg and
Jeffrey H. Berlin
</TABLE>
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9.6 Commissions and Finder's Fees. Buyer represents and warrants that
it has not retained or used the services of any individual, firm or corporation
in such a manner as to entitle such individual, firm or corporation to any
compensation for brokers' or finders' fees with respect to the transactions
contemplated hereby for which the Sellers would be liable. The Sellers represent
and warrant that, other than Goldsmith, Agio, Helms and Company, they have not
retained or used the services of any individual, firm or corporation in such a
manner as to entitle such individual, firm or corporation to any compensation
for brokers' or finders' fees with respect to the transactions contemplated
hereby for which the Buyer would be liable. The Sellers agree to pay the fees
and expenses of Goldsmith, Agio, Helms and Company.
9.7 Severability. If any provision contained in this Agreement is
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of such provision in every other respect and of the
remaining provisions of this Agreement will not be in any way impaired.
9.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. If the Agreement is
executed and transmitted by facsimile, the original signature page shall
thereupon be provided to all parties by regular mail.
9.9 Headings. The headings of the sections and the subsections of this
Agreement are inserted for convenience of reference only and do not constitute a
part hereof.
9.10 Mediation. If a dispute arises out of or relates to this
Agreement, or the breach thereof, and the dispute cannot be resolved through
direct discussions, then the parties agree to make a good faith effort to settle
the dispute by mediation under the Commercial Mediation Rules of the American
Arbitration Association before resorting to litigation, arbitration or some
other dispute resolution procedure. The mediation shall take place at the
regional office of the American Arbitration Association in Chicago, Illinois or
such other location as the parties and the mediator may agree. Each party shall
bear its proportional share of the costs of the mediation, including, but not
limited to, the fees and expenses of the mediator and the American Arbitration
Association, provided that each party shall bear the fees and expenses of its
own counsel, witnesses, experts, preparations and presentations.
9.11 Governing Law: Jurisdiction. This Agreement will be governed,
construed and enforced in accordance with the internal laws of the State of
Delaware, excluding any choice of law rules which may direct the application of
the laws of another jurisdiction.
9.12 Seller's Knowledge. For purposes of this Agreement,
representations, warranties, Exhibits, Schedule and other statements herein
based on any Seller's "knowledge" are made to the actual knowledge of each
Seller and in the case of Sellers who are not an individual, the actual
knowledge of its officers, directors, partners, principals or agents after
having made a good faith effort to ascertain the fact(s) in question by inquiry
to such officers or employees of the Company as would be reasonably likely to
have the information relating to the fact(s) in question.
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9.13 Company's Knowledge. For purposes of this Agreement,
representations, warranties, Exhibits, Schedule and other statements based on
Company's "knowledge" are made to the actual knowledge of the officers or
employees of the Company.
9.14 Instruments of Further Assurance. Each of the parties hereto
agrees, upon the request of any of the other parties, from time to time to
execute and deliver to such other party or parties all such instruments and
documents of further assurance or otherwise as are reasonable under the
circumstances, and to do any and all such acts and things as may reasonably be
required to carry out the obligations of such requested party hereunder.
9.15 Publicity. No notices to third parties or other publicity,
including press releases, concerning any of the transactions provided for herein
will be made by any party hereto unless planned and coordinated jointly among
the parties, except to the extent otherwise required by law or regulation.
9.16 No Third Party Beneficiaries. Nothing in this Agreement is
intended nor will it be construed to give any person, firm, corporation or other
entity, other than the parties hereto and their respective successors and
permitted assigns, any right, remedy or claim under or in respect of this
Agreement or any provisions hereof.
9.17 Specific Performance. Sellers acknowledge that breach of the
exclusivity covenant set forth in Section(s) 5.1.7 of this Agreement will
irreparably injure the Buyer and the Buyer may not have an adequate remedy at
law. Sellers, therefore, agree that in the event of such breach, the Buyer will
be entitled to equitable relief, including without limitation, right to specific
performance or temporary or permanent injunctive relief, in addition to any
other legal remedies that may be available.
9.18 Number and Gender. Where the context requires, the use of the
singular form shall include the plural, the use of the plural shall include the
singular, and the use of "it" shall include all genders.
[THIS SPACE INTENTIONALLY LEFT BLANK]
40
<PAGE> 47
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties as of the date first written above.
"SELLERS" "BUYER"
HAWK CORPORATION
/s/ Timothy Houghton By: /s/ Ronald E. Weinberg
- ---------------------------- -----------------------------------
TIMOTHY HOUGHTON Ronald E. Weinberg, Vice Chairman
CFB VENTURE FUND II, L.P.
By: CFB Partners, Inc., Its General Partner
By: /s/ Stephen B. Broun
-------------------------
Stephen B. Broun, Senior Vice President
MORAMERICA CAPITAL CORPORATION
By: InvestAmerica Venture Group, Inc.,
Its Manager
By: /s/ Kevin F. Mullane
-------------------------
Kevin F. Mullane
COMMUNITY INVESTMENT PARTNERS II, L.P.
By: /s/ Daniel A. Burkhardt
--------------------------
Daniel A. Burkhardt, Chairman
ST. LOUIS COMMUNITY FOUNDATION
By: /s/ Tullia Hamilton
--------------------------
Tullia Hamilton, Executive Director
41
<PAGE> 48
[EXHIBIT 2.1(ii)(X)]
CONVERTIBLE
PROMISSORY NOTE
Series H-1
[$_____________] No. ____
Cleveland, Ohio
________, 1996
FOR VALUE RECEIVED, the undersigned, HAWK CORPORATION, a Delaware
corporation (the "Corporation") promises to pay to the order of
[______________________], a(n) [ individual/corporation] ( the "Holder"), the
principal amount of ______________________________ Dollars ($_______________) in
two (2) installments, each payable annually on the anniversary of the Closing of
the Stock Purchase Agreement by and among the Corporation,
__________________________, __________________________,
__________________________ and Holder, dated November __, 1996 ("Stock Purchase
Agreement"), with the first installment of _______________________________
Dollars ($__________) due on first anniversary of the Closing on January ___,
1998 and with the last and final installment of ______________________________
Dollars ($_________) due on January ___, 1999, and to pay interest from the date
of this Promissory Note (the "Note") on such principal amount from time to time
outstanding at the rate per annum of eight percent (8%) until maturity, or
otherwise paid in full. Interest shall be computed on a 360-day year basis on
the actual number of days elapsed and shall be paid quarterly on the first
business day of April, July, October and January in each year.
The failure by the Corporation to make any payment of such interest or
principal on this Note on or before the date any such payment is due shall NOT
constitute an event of default ("Event of Default") unless:
1. Thirty days have elapsed from the payment due date without the
Corporation's payment of the amount due; and
2. Written notice listing the overdue amount has been sent by the
Holders via facsimile to Ronald E. Weinberg ("Weinberg") at
216-861- 4546, and Byron S. Krantz ("Krantz") at 216-621-6536; and
3. Ten days has elapsed without payment of the amount due by the
Corporation from the date the Holder's written notice has been sent
to both Weinberg and Krantz by facsimile; and
<PAGE> 49
4. If notice is provided before the end of the thirty days provided
for in Paragraph 1 above, the Event of Default shall occur at the
later of the thirty (30) days or ten (10) days after said notice
has been faxed.
In the Event of Default, the Note and all interest then due shall be
due and payable and the Holder may exercise any or all of the remedies provided
by law. If the Note is not paid at maturity, whether maturity occurs by lapse of
time or acceleration, the principal of and the unpaid interest on this Note,
thereafter until paid shall be at the per annum rate of twelve percent (12%).
In the event, but only in the event, the Corporation undertakes an
initial public offering of its Class A common stock, the Holder shall be
entitled to elect to convert an amount of the outstanding principal under this
Note to the Class A common stock of the Corporation subject to the initial
public offering; PROVIDED, HOWEVER, in no event shall the aggregate principal
amount subject to conversion pursuant to this and all Series H-1 notes exceed
the sum of Five Hundred Thousand Dollars ($500,000.00), nor shall such Holder be
entitled to convert an amount of principal in excess of its proportionate share
of the Five Hundred Thousand Dollars, as set forth in Exhibit 2.4(a) to the
Stock Purchase Agreement. The exercise price for the conversion of principal
into Class A common stock of the Corporation shall be equal to the initial
public offering price of the Corporation's Class A common stock. This option to
convert shall be effective from the date of this Note through the maturity date
of the Note; PROVIDED, HOWEVER, should the Holder desire to extend the option to
convert for an additional nine month period beyond the maturity date of this
Note, the Holder shall provide written notice, not less than thirty (30) days
before the maturity date of the Note, of its intent to extend the maturity date
of this Note to the Corporation at its principal office, which notice shall
include a waiver of the maturity date to the date to coincide with the
additional nine month option to convert period. Any exercise of the conversion
option as herein provided shall be in writing, in form and substance as set
forth on Exhibit A, attached hereto and incorporated herein by reference, and
duly executed and delivered by Holder to the Corporation at its principal
office, accompanied by payment, by certified or official bank check payable to
the order of the Corporation. Any right or option to convert a principal sum of
this Note to the Corporation's Class A common stock is expressly contingent on
the Corporation's engaging in an initial public offering and does not grant,
either express or implied, to the Holder any preemptive rights or right to
require registration of the Corporation's securities. Any amount of principal so
converted shall be deemed to have been paid in full at the earlier of the date
the securities are properly recorded in the name of the Holder or Holder's
designee in the record book of the Corporation or the date certificates are
issued and delivered to the Holder. In the event the exercise of the option to
convert results in the issuance of any fractional share of Class A common stock,
then in such event, Holder shall be entitled to cash in lieu of such fractional
share.
This Note shall be governed by and construed in accordance with the
laws of the State of Delaware.
2
<PAGE> 50
Holder shall be entitled to reasonable attorney's fees and costs in the
event Holder is forced to pursue collection of this Note.
This Note is subject to set-off pursuant to the terms of the Stock
Purchase Agreement.
All capitalized terms not otherwise defined in this Note shall have the
meanings set forth in the Stock Purchase Agreement.
This Note may be assigned to the Corporation's wholly-owned subsidiary,
Houghton Acquisition Corporation d/b/a Hutchinson Foundry Products Company,
following the Closing of the Stock Purchase Agreement.
This Note has been duly executed and delivered for value by the duly
authorized officer(s) of the Corporation.
HAWK CORPORATION
By: --------------------------------------
Title: --------------------------------------
3
<PAGE> 51
[EXHIBIT A]
FORM OF EXERCISE OF OPTION TO CONVERT
-------------------------------------
(To Be Executed By The Holder If The Holder Desires to Exercise the Option
to Convert Evidenced By And Subject to The Terms of The Foregoing Note)
To: -----------------------------------------------------
The undersigned hereby irrevocably elects to exercise his/her/its
option to convert _______________________________ Dollars of principal amount
outstanding under and evidenced by the Promissory Note of Corporation, dated
____________________, 199__, and to purchase thereunder, _________ shares of
Class A Common Stock of the Corporation, issuable upon exercise of the option to
convert and subject to the terms and conditions of the Note and accompanied
herewith by the surrender or other applicable assignment of the Note or relevant
portion thereof, and any applicable taxes payable by the undersigned pursuant to
the exercise of the option to convert.
The undersigned requests that certificate(s) for such shares are issued
in the name of:
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
(Please Print Name and Address)
Dated: _____________, 199___ NAME OF HOLDER:
--------------------------------------
(Print)
By:
---------------------------------
Name:
Title:
<PAGE> 52
[EXHIBIT 2.1(ii)(Y)]
EBITDA
PROMISSORY NOTE
Series H-2
[$_____________] No. _____
Cleveland, Ohio
________, 1996
FOR VALUE RECEIVED, the undersigned, HAWK CORPORATION, a Delaware
corporation (the "Corporation") promises to pay to the order of
[______________________], a(n) [ individual/corporation] ( the "Holder"), the
principal amount of ______________________________ Dollars ($_______________)
adjusted as follows below in three (3) equal installments each payable annually
on April 30 with the first installment due on April 30, 1998 and with the last
and final installment due on April 30, 2000, and to pay interest on such
principal amount actually paid at the rate per annum of eight percent (8%) per
annum (the "Note"). Interest shall be paid on the principal as if the amount of
principal paid in the installment hereunder had been owed for one (1) year.
The principal amount due herein shall be adjusted as follows:
(i) the payment due April 30, 1998 shall be calculated by dividing
the principal amount of this Note by three and multiplying said
number by a fraction the numerator of which is the EBITDA for
fiscal 1997 and the denominator of which is $3,099,000, it being
agreed that if the numerator is not $2,800,000 or more, no
payment shall be owed for fiscal 1997 and further that the EBITDA
numerator shall not exceed $3,099,000 for the purpose of this
calculation;
(ii) the payment due April 30, 1999 shall be calculated by dividing
the principal amount of this Note by three and multiplying said
number by a fraction the numerator of which is the EBITDA for
fiscal 1998 and the denominator of which is $3,225,000, it being
agreed that if the numerator is not $2,900,000 or more, no
payment shall be owed for fiscal 1998 and further that the EBITDA
numerator shall not exceed $3,225,000 for the purpose of this
calculation; and
(iii) the payment due April 30, 2000 shall be calculated by dividing
the principal amount of this Note by three and multiplying said
number by a fraction the numerator of which is the EBITDA for
fiscal 1999 and the denominator of which is $3,333,000, it being
agreed that if the numerator is not $3,000,000 or more, no
payment shall be owed for fiscal 1999 and further that the EBITDA
numerator shall not exceed $3,333,000 for the purpose of this
calculation.
<PAGE> 53
EBITDA shall be determined by Corporation's independent accountant
consistent with GAAP used for the Houghton Acquisition Corporation's (the
"Company") December 31, 1995 audited financial statement and a written report
thereof shall be delivered to Holder. Interest, taxes, depreciation,
amortization and corporate charges to support a home office for Corporation and
other charges not directly attributed to the operation of the business of
Company in its ordinary course shall be added to net income (loss), and excess
capital charges calculated as twelve percent (12%) of capital expenditures of
the Company in excess of One Hundred Thousand Dollars ($100,000) per annum shall
be subtracted by said accountants to determine EBITDA for the purpose hereof.
Pass through charges such as insurance, accounting, legal and travel expenses
directly attributed to the operation of the business of the Company in its
ordinary course shall not be adjusted.
The failure by the Corporation to make any payment of such interest and
principal on or before the date any such payment is due shall NOT constitute an
event of default ("Event of Default") unless:
1. Thirty days have elapsed from the payment due date without the
Corporation's payment of the amount due; and
2. Written notice listing the overdue amount has been sent by the
Holders via facsimile to Ronald E. Weinberg ("Weinberg") at
216-861- 4546, and Byron S. Krantz ("Krantz") at 216-621-6536;
and
3. Ten days has elapsed without payment of the amount due by the
Corporation from the date the Holder's written notice has been
sent to both Weinberg and Krantz by facsimile; and
4. If notice is provided before the end of the thirty days provided
for in Paragraph 1 above, the Event of Default shall occur at the
later of the thirty (30) days or ten (10) days after said notice
has been faxed.
In the Event of Default, the Note and all interest then due shall be
due and payable and the Holder may exercise any or all of the remedies provided
by law. If the Note is not paid at maturity, whether maturity occurs by lapse of
time or acceleration, the principal of and the unpaid interest on this Note,
thereafter until paid shall be at the per annum rate of twelve percent (12%).
This Note shall be governed by and construed in accordance with the
laws of the State of Delaware.
2
<PAGE> 54
This Note is subject to Corporation's rights and remedies of set off
pursuant to the terms of the Stock Purchase Agreement by and among the
Corporation, ______________________, ____________________________,
________________________________, and Holder dated November __, 1996. All
capitalized terms not otherwise defined in this Note shall have the
meanings set forth in the Stock Purchase Agreement.
This Note may be assigned to the Corporation's wholly-owned subsidiary,
Houghton Acquisition Corporation d/b/a Hutchinson Foundry Products Company,
following the Closing of the Stock Purchase Agreement.
Holder shall be entitled to reasonable attorney's fees and costs in the
event Holder is forced to pursue collection of this Note.
This Note has been duly executed and delivered for value by the duly
authorized officer(s) of the Corporation.
HAWK CORPORATION
By: ----------------------------------
Title: ----------------------------------
3
<PAGE> 55
EXHIBIT 2.3(F)
EMPLOYMENT AGREEMENT
--------------------
TIMOTHY J. HOUGHTON
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered
into on this ____ day of January, 1997, by and between HAWK CORPORATION, a
Delaware corporation (the "Company"), and TIMOTHY J. HOUGHTON, residing at 501
Stone Ridge, St.
Louis, Missouri 63122 ("Houghton").
WHEREAS, Houghton is currently employed by Houghton Acquisition
Corporation, a Missouri corporation, doing business as Hutchinson Foundry
Products Company, ("HFP") as its President and is a member of its Board of
Directors;
WHEREAS, the Company and Houghton have entered into a Stock
Purchase Agreement, dated November [__], 1996 (the "Stock Purchase Agreement"),
providing for the purchase by the Company of all of the common stock and certain
Preferred Stock Notes of HFP;
WHEREAS, HFP, after the closing of the Stock Purchase Agreement,
will be a wholly-owned subsidiary of the Company and the Company will assign
this Agreement in favor of HFP;
WHEREAS, Houghton has unique talents and experiences which are
of value to HFP; and
WHEREAS, Houghton has agreed to continue in his employment with
HFP following consummation of the Stock Purchase Agreement on the terms set
forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and of the
mutual covenants set forth herein, the Company and Houghton agree as follows:
1. EMPLOYMENT. The Company hereby employs Houghton, and Houghton
agrees to be employed by the Company, upon and subject to the Closing in the
position set forth in paragraph 3 below, for a period of three years commencing
on the Closing of the Stock Purchase Agreement, and terminating at the close of
business on December 31 prior to the third anniversary of the Closing. The
period during which Houghton is employed hereunder is hereinafter referred to as
the "Employment Period."
<PAGE> 56
2. COMPENSATION AND BENEFITS.
--------------------------
(a) BASE SALARY. The Company shall cause HFP to pay Houghton a
salary at the rate of $160,000 per year for each year of the Employment Period
(the "Base Salary"). The Company shall cause HFP to pay the Base Salary to
Houghton in equal installments on HFP's normal pay periods. Houghton's Base
Salary will be reviewed by the Company (without Houghton's participation)
annually, and will be subject to further increase, but not decrease, in the
Company's sole discretion.
(b) BONUS. During the Employment Period, Houghton shall be
entitled to earn an annual incentive bonus (the "Annual Bonus") based on the
growth of HFP's earnings before interest, income taxes, depreciation and
amortization ("EBITDA") for the applicable calendar year. Within 30 days after
the Company's receipt of the year end audit or review of the Company's financial
statements for the preceding fiscal year by the independent certified public
accountant of the Company (the "Financial Statements"), but in no event later
than April 30 of each year, the Company shall cause HFP to pay Houghton a cash
incentive payment for the fiscal year provided HFP's EBITDA for such year
exceeds, by a minimum of 10%, HFP's EBITDA for its fiscal year prior to that
year. The Annual Bonus for the 1997 fiscal year shall be calculated and
determined based upon HFP's actual EBITDA for fiscal year 1996 or $2,500,000,
whichever is greater ("1996 EBITDA"). Annual Bonus shall be payable if EBITDA
for 1997 exceeds 1996 EBITDA and for years subsequent to 1997 if HFP's EBITDA
exceeds the prior year (i) by 10% but less than 11% the Annual Bonus shall be
equal to 16 2/3 of 50% of Base Salary, (ii) by 11% but less than 12% the Annual
Bonus shall be equal to 33 1/3 of 50% of Base Salary, (iii) by 12% but less than
13% the Annual Bonus shall be equal to 50% of 50% of Base Salary, (iv) by 13%
but less than 14% the Annual Bonus shall be equal to 66 2/3 of 50% of Base
Salary, (v) by 14% but less than 15% the Annual Bonus shall be equal to 83 2/3%
of 50% of Base Salary, and (vi) by 15% or more, the Annual Bonus shall be equal
to 50% of Base Salary. In addition, Houghton shall receive a cash payment equal
to 5% of the EBITDA increase greater than 15% of EBITDA for each year except
with respect to 1996 for which the increase shall be based on the 1996 EBITDA of
the Employment Period. EBITDA shall be determined by the Company's independent
accountant consistent with GAAP used for HFP's December 31, 1995 audited
financial statement and a written report thereof shall be delivered to Houghton.
HFP's interest, income taxes, depreciation, amortization and corporate charges
to support a home office for Company and other charges not directly attributed
to the operation of the business of HFP in its ordinary course shall be added to
HFP's net income (loss) and excess capital charges calculated as twelve percent
(12%) of capital expenditures of HFP in excess of One Hundred Thousand Dollars
($100,000) shall be subtracted by said accountants to determine EBITDA for the
purpose hereof. Pass through charges such as insurance, accounting, legal and
travel expenses directly attributed to the operation of the business of HFP in
its ordinary course shall not be adjusted. The Company shall make available
copies of the financial statements to Houghton. Any disputes with respect to the
amount of HFP's EBITDA for purposes of this paragraph 2(b) shall be conclusively
resolved by the Company's auditors.
2
<PAGE> 57
(c) BENEFITS. The Company will cause HFP to provide Houghton with
health insurance benefits and disability insurance at least equivalent to those
previously provided to Houghton by HFP. In addition, the Company shall cause HFP
to provide or maintain $1,000,000 term life insurance coverage provided it is
available at standard rates for the benefit
of Houghton or his designated beneficiary. Houghton shall also be entitled to
participate, subject to any applicable eligibility requirements, in any HFP
benefit program offered to executive employees by HFP, including any 401(k),
retirement or pension plan.
(d) VACATION. Houghton shall be entitled to four weeks of paid
vacation during each year of the Employment Period. Unused paid vacation leave
may not be carried over to subsequent years.
(e) BUSINESS EXPENSES. During the Employment Period, the Company
shall cause HFP to reimburse Houghton for all reasonable and necessary business
expenses incurred in the ordinary course of HFP's business by Houghton on behalf
of HFP upon Houghton's submission of a written report that details the nature
and amount of such expenses consistent with Internal Revenue Service
requirements that will permit HFP to deduct such expenses (or a percentage
thereof) on HFP's federal income tax return as other than compensation. In
addition, the Company shall cause HFP to provide a country club allowance of
$600 per month during the term of this Agreement.
(f) AUTOMOBILE. During the Employment Period, the Company shall
cause HFP to continue to provide Houghton a vehicle comparable to his present
vehicle. At such time as the vehicle is three (3) years old, Houghton shall, in
his sole discretion, replace the vehicle with a vehicle that is comparable. All
vehicle costs shall be borne by HFP.
3. POSITION, DUTIES AND AUTHORITY.
------------------------------
(a) POSITION AND DUTIES. Houghton shall, during the Employment
Period, serve as President of HFP, reporting and responsible to the Chairman
and/or the Vice Chairman of the Board of Directors and such other person or
persons as may be designated by the Company. As President during the Employment
Period, Houghton shall perform such duties and responsibilities as the Company
shall request from time to time with respect to the business of HFP, including
but not limited to the following: (i) managing the policy, strategy and
day-to-day operations of the business; (ii) cooperating in the identification,
hiring and promotion of key management; (iii) promptly furnishing accurate
written reports, data, analyses or information pertaining to HFP as may be
required, from time to time, as determined by the Company; (iv) observing and
complying with such standards and procedures as may, from time to time, be
established by the Company; and (iv) performing such duties or functions as are
customarily assigned to the President of a company. During the Employment
Period, Houghton shall diligently perform his duties hereunder and devote
3
<PAGE> 58
substantially all of his working time for HFP and shall perform the services
hereunder to the best of his ability and skill and in such a manner as to
promote the best interest of the Company and HFP. As a matter of record, except
for the companies listed below which are the companies Houghton currently serves
as a Board member or trustee, Houghton shall not serve as a member or advisor to
any additional Board of Directors or Trustees without the Company's written
consent; provided, however, Houghton may serve as a member or advisor on behalf
of other non-profit companies without the Company's consent:
Steel Weld Company
Cardinal Glennon Children's Hospital
4. TERM AS PRESIDENT.
------------------
(a) TERM OF EMPLOYMENT. Houghton's term as President shall end
with the earliest to occur of:
(i) the death of Houghton;
(ii) the discharge of Houghton "For Cause" in accordance with
paragraph 4(b) below;
(iii) the discharge of Houghton because of a "Disability" in
accordance with paragraph 4(c) below;
(iv) the voluntary resignation of Houghton, after first
having given 90 days' prior written notice to the Company;
(v) HFP's material violation of any provision of this
Agreement; or
(vi) the expiration of the original three year term hereof.
(b) Termination for Cause. "For Cause" shall mean any one or more
of the following:
(i) Houghton's engaging in fraud, embezzlement,
misappropriation of funds or like conduct against HFP;
(ii) Houghton's commission of any crime constituting a felony
in the jurisdiction in which committed;
(iii) Houghton's commission of any criminal act against or
involving HFP (whether or not a felony);
4
<PAGE> 59
(iv) Houghton's material violation of any provision of this
Agreement;
(v) Houghton's violation of any federal, state or local law,
regulation or ordinance relating to personal conduct in the
workplace, such as laws, regulations or ordinances pertaining to
discrimination or harassment;
(vi) Houghton's breach of the representations and warranties
set forth in paragraph 7; or
(vii) Houghton's breach of obligations set forth in
paragraphs (a) through (f) in paragraph 6.
(c) TERMINATION FOR DISABILITY. The Company may terminated
Houghton as President hereunder at any time because of a "Disability," which
shall mean a physical or mental incapacity, whether partial or total, that has
prevented or will prevent Houghton from exercising the powers or performing the
duties assigned to him hereunder for a continuous period of three months or for
shorter periods aggregating 5 months during any 12 month period.
(d) PAYMENTS AND BENEFITS UPON TERMINATION. In the event of
termination as President, pursuant to (c) above because of a Disability which
prevents Houghton from rendering full-time services, the Company shall cause HFP
to continue to pay Houghton's Base Salary, Annual Bonus, and Benefits set forth
in 2(c) for the full fiscal year in which the disability occurs. All disability
insurance proceeds received by Houghton as a result of insurance maintained by
HFP shall be set off against the foregoing payment obligations. In the event
Houghton is terminated For Cause, Houghton shall be entitled only to
compensation and benefits provided in paragraph 2 relating to the period through
the date of termination For Cause, and he shall immediately return the Company's
vehicle. In the event of termination for any other reason except resignation as
Section 5 provides, the Company shall cause HFP to continue to pay Houghton's
Base Salary and benefits through the Employment Period and to pay the Annual
Bonus for the full year in which termination occurs. In addition, the Company
shall cause HFP to continue to provide and/or pay for the then existing health
care coverage to Houghton and/or his wife for the balance of the Employment
Period.
5. RESIGNATION. In the event of the voluntary resignation of Houghton,
his right to compensation and benefits as provided in paragraph 2 shall
terminate, and Houghton shall remain bound by the provisions of paragraph 6.
5
<PAGE> 60
6. PROPRIETARY RIGHTS.
-------------------
(a) TRADE SECRETS. Houghton acknowledges that as a result of his
employment hereunder, he will be making use of, acquiring and/or adding to
confidential information of a special and unique nature relating to such matters
as the Company's and its subsidiaries', including HFP's, trade secrets, systems,
procedures, manuals, confidential reports, formulae, designs, application
methods, parts lists, supplier lists, customer lists, price lists, pricing and
sales information, marketing strategies and other financial information,
drawings, business records, and other information which has not been published
or disseminated or otherwise become a matter of general public knowledge ("Trade
Secrets"). As an inducement to the Company to enter into this Agreement,
Houghton promises not to use or disclose, directly or indirectly, any Trade
Secrets to any person either during or after the Employment Period, except to
other employees of the Company and its subsidiaries, including HFP, as necessary
in the regular course of his employment, or except as otherwise expressly
authorized in writing by the Company.
(b) CONFIDENTIALITY. Houghton promises that all knowledge and
information that he may acquire from the Company and its subsidiaries, including
HFP, or from employees or consultants of the Company and its subsidiaries,
including HFP, regarding the Trade Secrets and other confidential information
shall for the period of time commencing as of the date of Houghton's termination
or the date Houghton receives his last payment from HFP, whichever is later, and
continuing for seven (7) years thereafter for all purposes be regarded as
strictly confidential and held in trust and solely for the benefit and use of
the Company and shall not, without the written permission of the Company, be
directly or indirectly disclosed by Houghton to any person other than to the
proper and duly authorized employees of the Company and its subsidiaries,
including HFP.
(c) DISCOVERIES OF HOUGHTON. On behalf of Houghton, his heirs and
representatives, Houghton promises to promptly communicate and fully disclose to
the Company and upon request shall, without additional compensation, assign and
execute all papers necessary to assign to the Company or its nominees, free of
encumbrance or restrictions, all inventions, ideas, designs, discoveries and
improvements which pertain or relate to the business of the company, whether
patentable or not, conceived or originated by Houghton solely or jointly with
others, at the expense of the company, or at the facilities of the Company, or
at the request of the Company, or in the course of Houghton's employment, or
based on knowledge or information obtained during the course of Houghton's
employment by the Company whether or not conceived during regular working hours.
This provision relates to any matters conceived partially or fully during the
term of this Agreement and within five years thereafter. All such assignments
shall include the patent rights in this and all foreign countries. All such
inventions, ideas, designs, discoveries and improvements shall be the exclusive
property of the Company. Houghton shall assist the Company in obtaining patents
6
<PAGE> 61
on all such inventions, ideas, designs, discoveries and improvements deemed
patentable by the Company and shall execute all documents and do all things
necessary to obtain letters patent, vest the Company with full and exclusive
title thereto, and protect the same against infringement by others.
(d) INTELLECTUAL PROPERTY OF HOUGHTON. As a matter of record, Houghton
lists below a complete list of all inventions, ideas, design, discoveries and
improvements, patented or unpatented, which Houghton has made or conceived prior
to the commencement of Houghton's employment by the Company, it being understood
that the inventions, ideas, designs, discoveries and improvements so listed are
excluded from this Agreement: none.
(e) PROPERTY OF THE COMPANY. Houghton recognizes further that all
records, drawings, data, computer programs, samples, models and all other
tangible materials or copies or extracts thereof relating to, in connection with
or otherwise concerning the Company's operations, investigations or business,
whether or not Trade Secrets, made or received by Houghton during his Employment
Period, are and shall be the property of the Company exclusively, and without
additional consideration, Houghton promises to keep the same at all times in the
Company's custody and subject to the Company's control and to surrender the same
at the termination of his employment if not before. All files, records,
documents, drawings, specifications, equipment and information with respect to
suppliers to the Company and customers of the Company, and similar items
relating to the business of the company, whether prepared by Houghton or
otherwise coming into the Company's possession, shall remain the exclusive
property of the Company. Houghton further agrees that he will not make or retain
any copies of any of the foregoing and that he will so represent to the Company
upon termination of his employment hereunder.
(f) NON-COMPETITION. Houghton agrees that during the Employment Period
and the five years next following the termination of the Employment Period or
the date Houghton receives his last payment from HFP, whichever is later, he
will not directly or indirectly or by acting in concert with others, whether as
an owner, employee, partner, shareholder, officer, licensor, licensee, trustee,
principal, consultant, agent, individually or in any other capacity, engage in
the business of the manufacture or sale of, or attempt to manufacture or sell,
products or services similar in kind or similar in purpose to those products or
services manufactured or sold by HFP, to any customer of HFP or to any person,
firm or corporation in competition with HFP, nor employ or attempt to employ or
solicit for any employment competitive with the Company or its subsidiaries,
including HFP, any of the Company's or its subsidiaries', including HFP's,
employees.
Houghton agrees that during his employment he will undertake no
planning for or organization of any business activity competitive with the work
he performs as an employee of the Company or its subsidiaries, including HFP,
nor will he combine or conspire with other employees of the Company or its
subsidiaries, including HFP, for the purpose of organizing any such competitive
business activity.
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<PAGE> 62
If Houghton violates this restrictive covenant and the Company
brings legal action for injunctive or other relief, the Company shall not, as a
result of the time involved in obtaining the relief, be deprived of the benefit
of the full period of the restrictive covenant. Accordingly, the restrictive
covenant shall be deemed to have the duration specified in this paragraph 6(f),
computed from the date the relief is granted, but reduced by the time between
the period when the restriction began to run and the date of the first violation
of the covenant by Houghton.
If any court shall determine that the lack of geographical
limitation of any restriction contained in this paragraph is unenforceable, it
is the intention of the parties that the restrictive covenants set forth herein
shall not thereby be permitted to be terminated but rather shall be deemed
amended to the extent required to render it valid and enforceable. Such
amendment shall apply only with respect to the operation of this paragraph in
the jurisdiction of the court that has made the adjudication.
(g) INJUNCTIVE RELIEF. Houghton acknowledges that breach by Houghton of
the restrictive covenants set forth in paragraph 6 of this Agreement will
irreparably injure the Company and/or HFP and the Company and/or HFP will not
have an adequate remedy at law, Houghton, therefore, consents and agrees that
for any threatened or actual violation or breach of any provisions of paragraph
6 of this Agreement, the Company will be entitled to equitable relief including
without limitation a temporary and permanent injunction against Houghton,
without the necessity of proving actual damage or the posting of a bond, in
addition to any other legal rights and remedies that the Company may have.
7. REPRESENTATIONS OF HOUGHTON. Houghton represents and warrants, on behalf
of himself, his immediate family and any person, firm or corporation in which he
has a substantial interest, that:
(a) They do not, and will not during the Employment Period, have any
direct or indirect ownership interest in any entity with which HFP has a
business relationship or competes with HFP, except that the ownership of
investments at no time exceeding 1% of the issued and outstanding capital
stock of a publicly-held corporation shall not constitute a breach of this
representation and warranty; and
(b) The execution of this Agreement or his employment by the Company,
will not break any agreement or covenant entered into by Houghton that is
currently in effect.
8. ACKNOWLEDGMENTS. Houghton hereby acknowledges that: (i) he has carefully
read all of the terms of this Agreement and that such terms have been fully
explained to him; (ii) he understands the consequences of each and every term of
this Agreement; (iii) he has had sufficient time and opportunity to consult with
his own legal advisor prior to signing this Agreement and that the Company has
encouraged him to seek and he has had the benefit
8
<PAGE> 63
of legal counsel of his choice prior to signing this Agreement; (iv) he
specifically understands that by signing this Agreement he is giving up certain
rights he otherwise may have had, and that he is agreeing to limit his freedom
to engage in certain employment during and after the term of this Agreement.
9. SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and, except as otherwise provided herein, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
10. REMEDIES CUMULATIVE. All remedies specified herein or otherwise
available shall be cumulative and in addition to any and every other remedy
provided hereunder or now or hereafter available.
11. NOTICES. All notices and other communications hereunder shall be sent
by facsimile, registered or certified mail as follows:
If to the Company: Hawk Corporation
(a Delaware corporation)
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114-2301
Attention: Ronald E. Weinberg
Fax: (216) 861-4546
With a copy to: Byron S. Krantz, Esq.
Kohrman Jackson & Krantz P.L.L.
20th Floor, One Cleveland Center
Cleveland, Ohio 44114-1724
Fax: (216) 621-6536
If to Houghton: Timothy J. Houghton
501 Stone Ridge
St. Louis, Missouri 63122
With a copy to: Michael M. Sayers, Esq.
Summers, Compton, Wells & Hamburg
8909 Ladue Road
St. Louis, Missouri 63124
Fax: (314) 991-2413
9
<PAGE> 64
or to such other address as may be specified by the parties by like notice and
will b deemed when so delivered personally, or if mailed, two days after the
date of mailing.
12. ASSIGNMENT. This Agreement is a personal services contract and it is
expressly agreed that the rights and interests of Houghton and the Company
hereunder may not be sold, transferred, assigned, pledged or hypothecated;
provided, however, that the Company may, in its sole discretion, assign this
Agreement to HFP following the closing of the Stock Purchase Agreement, pursuant
to the terms of an assignment agreement substantially in the form of Exhibit A
attached hereto.
13. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their heirs, representatives, successors and
permitted assigns.
14. GOVERNING LAW AND JURISDICTION. This Agreement is governed by, and
shall be construed and enforced in accordance with, the law (other than the law
of conflicts) of the State of Delaware. The Company may enforce any claim
arising out of or relating to this Agreement, in any federal court having
subject matter jurisdiction and located in St. Louis, Missouri or any state
court having subject matter jurisdiction and located in St. Louis County,
Missouri. Each of the parties hereto consents and agrees to the jurisdiction of
any state or federal court sitting in St. Louis County, Missouri and waives any
objection based on venue or forum non conveniens with respect to any action
instituted and agrees that any dispute concerning this Agreement shall be heard
only in the Courts described above.
15. CAPTIONS. The captions in this Agreement are included for convenience
only and shall not in any way affect the interpretation or construction of any
provision hereof.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and the same
agreement.
17. AMENDMENT; WAIVER. This Agreement may not be amended or modified other
than by a writing signed by each of the parties hereto. No waiver or failure to
act with respect to any breach or default hereunder shall be deemed to be a
waiver with respect to any subsequent breach or default, whether of a similar or
different nature.
18. INDEMNIFICATION.
(a) To the maximum extent permitted under the Delaware General
Corporation Law, the Company shall indemnify Houghton if he is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he is or was a director, officer, employee or agent of the Company, or is
or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (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,
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<PAGE> 65
except that nothing herein contained shall be deemed to provide indemnification
in the event the Company and/or any of its subsidiaries, individually or
collectively, brings suit against Houghton.
(b) To the maximum extent permitted under the Delaware General
Corporation Law, the Company shall indemnify Houghton if he is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection with the defense
or settlement of such action or suit.
19. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof, including a certain
employment agreement between Houghton and HFP dated January 1, 1993.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HAWK CORPORATION
By: -------------------------------------
Its: -------------------------------------
------------------------------------------
TIMOTHY J. HOUGHTON
11
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
THE HAWK GROUP OF COMPANIES, INC.
ARTICLE I
NAME
The name of the corporation is The Hawk Group of Companies, Inc. (the
"Corporation").
ARTICLE II
ADDRESS OF REGISTERED OFFICE IN DELAWARE
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation
Trust Company.
ARTICLE III
PURPOSE
The Corporation is formed for the purpose of engaging in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as it presently exists or may be
amended in the future (the "Delaware General Corporation Law").
ARTICLE IV
CAPITAL STRUCTURE
4.1 Authorized Capital Stock. The aggregate number of shares of
all classes of stock which the Corporation is authorized to issue is 2,578,327
shares, consisting of:
(a) 2,200,000 shares of Class A Common Stock, par value
$0.01 per share (the "Class A Common Stock");
(b) 375,000 shares of Class B Non-Voting Common Stock,
par value $0.01 per share (the "Class B Common Stock"); and
(c) 3,327 shares of Serial Preferred Stock, par value
$0.01 per share (the "Preferred Stock").
<PAGE> 2
4.2 Class A Common Stock and Class B Common Stock.
(a) Powers, Preferences and Rights. Except as may be
provided by this Certificate of Incorporation or by the Delaware General
Corporation Law, the powers, preferences and rights of the Class A Common Stock
and the Class B Common Stock, and the qualifications, limitations or
restrictions thereof, shall be in all respects identical.
(b) Voting Rights. Except as may be provided by this
Certificate of Incorporation or by the Delaware General Corporation Law, all
rights to vote and all voting power shall be vested exclusively in the holders
of the Class A Common Stock. Each holder of Class A Common Stock shall be
entitled to one vote for each share held of record on the applicable record
date on all matters presented for a vote of the stockholders of the
Corporation, including, without limitation, the election of directors. Except
as otherwise required by the Delaware General Corporation Law, the holders of
Class B Common Stock shall not be entitled to vote on any matters to be voted
on by the stockholders of the Corporation.
(c) Dividends; Recapitalizations. Except as may be
provided by this Certificate of Incorporation or by the Delaware General
Corporation Law, if, as and when dividends on the Class A Common Stock and the
Class B Common Stock are declared payable from time to time by the Board as
provided in this Section 4.2(c), whether payable in cash, property, stock or
other securities, the holders of Class A Common Stock and the holders of Class
B Common Stock shall be entitled to share equally, on a per share basis, in
such dividends; provided, however, that (i) if dividends are declared that are
payable in shares of Class A Common Stock, or in shares of Class B Common
Stock, dividends shall be declared that are payable at the same rate on both
classes of stock and the dividends payable in shares of Class A Common Stock
shall be payable only to holders of Class A Common Stock and dividends payable
in shares of Class B Common Stock shall be payable only to holders of Class B
Common Stock, and (ii) if the dividends consist of other voting securities of
the Corporation, the Corporation shall make available to each holder of Class B
Common Stock, at such holder's written request, dividends consisting of
non-voting securities (except as otherwise required by the Delaware General
Corporation Law) of the Corporation which non-voting securities are otherwise
identical to such voting securities and are convertible into such voting
securities on the same terms as the Class B Common Stock is convertible into
the Class A Common Stock. If the Corporation shall in any manner split,
subdivide, combine or reclassify the outstanding shares of Class A Common Stock
or Class B Common Stock, the outstanding shares of the other such class of
common stock shall be proportionally split, subdivided, combined or
reclassified in the same manner and on the same basis as the outstanding shares
of Class A Common Stock or Class B Common Stock, as the case may be, have been
subdivided or combined or reclassified.
(d) Mergers and Consolidations. In case of any merger
or consolidation of the Corporation with any other entity as a result of which
the holders of Class A Common Stock shall be entitled to receive cash,
property, stock or other securities with respect to or in exchange for Class A
Common Stock, or in case of any sale or conveyance of all or substantially all
of the assets of the Corporation, a holder of one share of Class B Common Stock
shall have the right thereafter, so long as the conversion rights set forth in
Section 4.2(e) hereof shall exist, to convert such share of Class B Common
Stock into the kind and amount of cash, property, stock or other securities
receivable upon such consolidation, merger, sale or conveyance by a holder of
one share of Class A Common Stock, and shall have no other conversion rights
with regard to such share of Class B
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<PAGE> 3
Common Stock. The provisions of this Section 4.2(d) shall similarly apply to
successive mergers, consolidations, sales or conveyances.
(e) Conversion of Class B Common Stock.
(i) Conversion at Qualified Public Offering.
Each share of Class B Common Stock sold in an underwritten public
offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended (a "Public Offering"), shall
automatically be converted into an equal number of shares of Class A
Common Stock immediately upon the closing of such sale.
(ii) Conversion Upon Certain Transfers. Each
share of Class B Common Stock shall be converted into an equal number
of shares of Class A Common Stock upon the written request (the
"Conversion Request") of any third party transferee ("Transferee")
acquiring such shares of Class B Common Stock from any holder of Class
B Common Stock so long as such Transferee (A) is not an affiliate of
the transferor of such Class B Common Stock and (B) makes such
Conversion Request within fifteen days of the date such Class B Common
Stock is transferred by such transferor to such Transferee.
Other than as set forth in Section 4.2(d) and in this
Section 4.2(e), a holder of Class B Common Stock shall have no conversion
rights with respect to such Class B Common Stock.
(f) Conversion Procedures. Any holder of shares of
Class B Common Stock desiring to convert such shares, or any such holder whose
shares shall have been automatically converted, into shares of Class A Common
Stock shall surrender the certificate or certificates representing the Class B
Common Stock being converted, or so converted, duly assigned or endorsed for
transfer to the Corporation (or accompanied by duly executed stock powers
relating thereto), at the principal executive office of the Corporation, or at
such office of a transfer agent for the Class B Common Stock or office in the
continental United States of an agent for conversion as may from time to time
be designated by notice to the holders of the Class B Common Stock by the
Corporation, accompanied by written notice of conversion. Such notice of
conversion shall specify (i) the number of shares of Class B Common Stock which
are the subject of such conversion, (ii) the name or names in which such holder
wishes the certificate or certificates for Class A Common Stock and for any
Class B Common Stock not to be so converted to be issued, (iii) the address to
which such holder wishes delivery to be made of such new certificates to be
issued upon such conversion, (iv) the date upon which the person giving such
notice acquired the Class B Common Stock which is the subject of such notice of
conversion and (v) that the conversion of such Class B Common Stock is required
pursuant to Section 4.2(e)(i) above or permitted pursuant to Section 4.2(e)(ii)
above. Upon surrender of a certificate representing Class B Common Stock for
conversion, the Corporation shall issue and send by hand delivery, by courier
or by overnight or first class mail (postage prepaid) to the holder thereof or
to such holder's designee, at the address designated by such holder, a
certificate or certificates for the number of shares of Class A Common Stock to
which such holder shall be entitled upon conversion. In the event that there
shall have been surrendered a certificate or certificates representing Class B
Common Stock, only part of which are to be converted, the Corporation shall
issue and send to such holder or such holder's designee, in the manner set
forth in the preceding sentence, a new certificate or certificates representing
the number
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<PAGE> 4
of Class B Common Stock which shall not have been converted. The issuance of
certificates representing shares of Class A Common Stock issuable upon the
conversion of shares of Class B Common Stock by the registered holder thereof
pursuant to the provisions of this Certificate of Incorporation shall be made
without charge to the converting holder for any tax imposed on the Corporation
in respect of the issue thereof; provided that the Corporation shall not be
required to pay any tax which may be payable with respect to any transfer
involved in the issue and delivery of any certificate in a name other than that
of the registered holder of the shares of Class B Common Stock being converted,
and the Corporation shall not be required to issue or deliver any such
certificate unless and until the person requesting the issue thereof shall have
paid the amount of such tax or shall have established to the satisfaction of
the Corporation that such tax has been paid. Shares of the Class B Common
Stock converted into Class A Common Stock as provided in this Section 4.2(f)
shall resume the status of authorized but unissued shares of Class B Common
Stock.
(g) Effective Date of Conversion. The issuance by the
Corporation of shares of Class A Common Stock upon a conversion of Class B
Common Stock into Class A Common Stock pursuant to Section 4.2(e)(i) above
shall be deemed to be effective upon the consummation or closing of the sale
pursuant to the Public Offering covering such Class B Common Stock. The
issuance by the Corporation of shares of Class A Common Stock upon conversion
of Class B Common Stock into Class A Common Stock pursuant to Section
4.2(e)(ii) above shall not be deemed to be effective until receipt of a timely
and complete Conversion Request from the Transferee, reasonably satisfactory in
form and substance to the Corporation. The person or persons entitled to
receive the Class A Common Stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such shares of Class A
Common Stock as of the effective date of conversion.
(h) Liquidating Distributions. Upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
or upon any sale or conveyance of all or substantially all of the assets of the
Corporation, after payment or provision for payment of all the liabilities of
the Corporation and the expenses of liquidation, and after the holders of the
Preferred Stock shall have been paid in full the amounts, if any, to which they
are entitled or a sum sufficient for such payment in full shall have been set
aside, the remaining assets of the Corporation available for distribution shall
be distributed ratably to the holders of the Class A Common Stock and Class B
Common Stock in accordance with their respective rights and interests. For the
purpose of this Section 4.2(h), such a merger, consolidation, sale or
conveyance shall not be deemed to be a liquidation or winding up of the
Corporation unless the transaction provides for the cessation of the business
of the Corporation.
(i) Reservation of Class A Common Stock. The
Corporation shall at all times reserve and keep available out of its authorized
and unissued Class A Common Stock, solely for issuance upon the conversion of
Class B Common Stock as herein provided, free from any preemptive rights or
other obligations, such number of shares of Class A Common Stock as shall from
time to time be issuable upon the conversion of all the Class B Common stock
then outstanding; provided that, except as provided in this Certificate of
Incorporation, the shares of Class A Common Stock so reserved shall not be
reduced or affected in any manner whatsoever so long as any shares of Class B
Common Stock are outstanding.
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<PAGE> 5
4.3 Amendment and Waiver. No amendment, modification or waiver
of any provisions of Sections 4.1 or 4.2 hereof or of this Section 4.3 which
adversely affects the rights, preferences or privileges of the Class A Common
Stock or Class B Common Stock shall be effective without the consent of the
holders of at least 51% of the outstanding shares of Class A Common Stock and
at least 51% of the outstanding shares of Class B Common Stock.
4.4 Preferred Stock.
(a) Designations by Board. The Preferred Stock may be
issued from time to time in one or more classes or series with such voting
rights, full or limited, or without voting rights, and with such designations,
preferences and relative, participating, optional or special rights, and
qualifications, limitations or restrictions as are stated herein and as shall
be stated and expressed in the resolution or resolutions providing for the
issue of such stock adopted by the Board as hereinafter prescribed.
(b) Terms of the Preferred Stock. Subject to the rights
of the holders of the Class A Common Stock and Class B Common Stock, authority
is hereby expressly granted to and vested in the Board to authorize the
issuance of the Preferred Stock from time to time in one or more classes or
series, to determine and take necessary proceedings to fully effectuate the
issuance and redemption of any such Preferred Stock and, with respect to each
class or series of Preferred Stock, to fix and state from time to time, by
resolution or resolutions providing for the issuance thereof, the following:
(i) the number of shares to constitute the class
or series and the designations thereof;
(ii) whether the class or series is to have voting
rights, full or limited, or to be without voting rights;
(iii) the preferences and relative, participating,
optional or special rights, if any, and qualifications, limitations or
restrictions thereof, if any, of the class or series;
(iv) whether the shares of the class or series
will be redeemable and, if redeemable, the redemption price or prices
and the time or times at which, and the terms and conditions upon
which, such shares will be redeemable and the manner of redemption;
(v) whether the shares of the class or series
will be subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares for retirement
and, if such retirement or sinking funds are to be established, the
annual amount thereof and the terms and conditions relative to the
operation thereof;
(vi) the dividend rate, whether dividends are
payable in cash, stock or otherwise, the conditions upon which and the
times when such dividends are payable, the preference or relation to
the payment of dividends on any other class or series of stock,
whether or not such dividends will be cumulative or noncumulative and,
if cumulative, the date or dates from which such dividends will
accumulate;
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<PAGE> 6
(vii) the preferences, if any, and the amounts
thereof that the holders of the class or series will be entitled to
receive upon the voluntary or involuntary dissolution, liquidation or
winding up of, or upon any distribution of the assets of, the
Corporation;
(viii) whether the shares of the class or series will
be convertible into, or exchangeable for, the shares of any other class
or classes, or of any other series of the same or any other class or
classes, of stock of the Corporation and the conversion price or prices,
or ratio or ratios, or rate or rates, at which such conversion or
exchange may be made, with such adjustments, if any, as shall be
expressed or provided for in such resolution or resolutions; and
(ix) such other special rights and protective
provisions with respect to the class or series as the Board may deem
advisable.
The shares of each class or series of Preferred Stock
may vary from the shares of any other class or series thereof in any or all of
the foregoing respects. The Board may from time to time increase the number of
shares of Preferred Stock designated for any existing class or series by a
resolution adding to such class or series authorized but unissued shares of
Preferred Stock not designated for any other class or series thereof. The
Board may from time to time decrease the number of shares of Preferred Stock
designated for any existing class or series by a resolution subtracting from
such class or series unissued shares of Preferred Stock designated for such
class or series, and the shares so subtracted shall become authorized, unissued
and undesignated shares of Preferred Stock.
ARTICLE V
INCORPORATORS
The name and mailing address of the incorporator is 1600 CNB Corp., 1375
East Ninth Street, Cleveland, Ohio 44114.
ARTICLE VI
INDEMNIFICATION AND LIMITATIONS OF LIABILITY
6.1 Indemnification Rights.
(a) To the maximum extent permitted under the Delaware
General Corporation Law, the Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that such person is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding.
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<PAGE> 7
(b) To the maximum extent permitted under the Delaware
General Corporation Law, the Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit.
6.2 Advancement of Expenses.
(a) To the maximum extent permitted under the Delaware
General Corporation Law, the Corporation shall pay all expenses (including
attorneys' fees) actually and reasonably incurred by any person by reason of
the fact that such person is or was a director of the Corporation in defending
any civil, criminal, administrative or investigative action, suit or proceeding
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount
if it is ultimately determined that he is not entitled to be indemnified by the
Corporation as authorized by the Delaware General Corporation Law.
(b) To the maximum extent permitted under the Delaware
General Corporation Law, the Corporation shall pay all expenses (including
attorneys' fees) actually and reasonably incurred by any person by reason of
the fact that such person is or was an officer of the Corporation in defending
any civil, criminal, administrative or investigative action, suit or proceeding
(other than an action by the Corporation on its own behalf, it being understood
that such an action does not include any derivative suit instituted by a
stockholder of the Corporation) in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such person to repay such amount if it is ultimately determined that he is not
entitled to be indemnified by the Corporation as authorized by the Delaware
General Corporation Law.
6.3 Limited Liability. To the maximum extent permitted under the
Delaware General Corporation Law, a director of the Corporation shall not be
liable to the Corporation or its stockholders for monetary damages for the
breach of his fiduciary duty as a director.
6.4 Nonexclusivity and Benefit. The indemnification rights granted
pursuant to this Article shall not be exclusive of other indemnification
rights, if any, granted to such person and shall inure to the benefit of the
heirs and legal representatives of such person.
6.5 Effect of Repeal, Amendment or Termination. To the maximum
extent permitted under the Delaware General Corporation Law, no repeal of or
restrictive amendment of this Article and no repeal, restrictive amendment or
termination of effectiveness of any law authorizing this Article will apply to
or affect adversely any right or protection of any director, officer, employee
or agent of the Corporation, for or with respect to any acts or omissions of
such person occurring prior to such repeal, amendment or termination of
effectiveness.
6.6 Retroactive Effect. To the maximum extent permitted under the
Delaware General Corporation Law, the indemnification and advancement of
expenses provided by this Article will apply with respect to acts or omissions
occurring prior to the adoption of this Article.
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<PAGE> 8
ARTICLE VII
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Section 203 of the Delaware General Corporation Law shall not apply to
"any business combination with any interested stockholder" (as defined in
Section 203 of the Delaware General Corporation Law) of the Corporation.
ARTICLE VIII
ELIMINATION OF WRITTEN BALLOT REQUIREMENT
The election of directors of the Corporation need not be by written
ballot.
ARTICLE IX
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the power conferred upon the
Board by the Delaware General Corporation Law, the Board shall have the power
to make, adopt, alter, amend and repeal from time to time the Bylaws of this
Corporation without any action on the part of the stockholders.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Incorporation as of this 30th day of June, 1995.
By: /s/ Norman C. Harbert
---------------------------------
Norman C. Harbert, Chairman
and
Attested to by:
/s/ Byron S. Krantz
---------------------------------
BYRON S. KRANTZ, Secretary
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<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
THE HAWK GROUP OF COMPANIES, INC.
The Hawk Group of Companies, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies
as follows:
A. The Amended and Restated Certificate of Incorporation of the
Corporation is hereby further amended as follows:
Article I is amended to read in its entirety as follows:
The name of the corporation is Hawk Corporation (the
"Corporation").
B. The amendment to the Amended and Restated Certificate of
Incorporation effected hereby has been proposed by the Board of Directors of
the Corporation and adopted by the stockholders of the Corporation in the
manner and by the vote prescribed by Section 242 of the General Corporation Law
of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by the undersigned duly authorized officers as of this 9th day of
October, 1996.
THE HAWK GROUP OF COMPANIES, INC.
By: /s/ Ronald E. Weinberg
--------------------------------
Ronald E. Weinberg, Vice-Chairman
Attest:
/s/ Marc C. Krantz
- -----------------------------------
Marc C. Krantz, Assistant Secretary
<PAGE> 1
EXHIBIT 3.3
CERTIFICATE OF DESIGNATION
OF SERIES A AND SERIES B PREFERRED STOCK OF
THE HAWK GROUP OF COMPANIES, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Ronald E. Weinberg and Byron S. Krantz, being the Vice-Chairman and
Secretary, respectively, of The Hawk Group of Companies, Inc., a Delaware
corporation (the "Corporation"), hereby certify that:
A. SERIES A PREFERRED STOCK. Pursuant to authority conferred upon the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors, at a
telephonic board meeting held on June 26, 1995, duly adopted a resolution
creating a series of 2,625 shares of Serial Preferred Stock, par value $0.01 per
share, as follows:
RESOLVED, that pursuant to the authority expressly vested in
the Board of Directors of the Corporation in accordance with the provisions of
its Certificate of Incorporation, a series of Preferred Stock of the Corporation
is hereby created, consisting of 2,625 shares of Serial Preferred Stock, par
value $0.01 per share (the "Series A Preferred Stock"), of which the powers,
designations, preferences and relative, participating, optional or other rights,
and qualifications and restrictions, shall be as follows:
1. Series A Preferred Stock.
(a) Dividends.
(i) The holders of Series A Preferred
Stock shall be entitled to receive, out of funds legally available for
that purpose, cash dividends at the rate of 10% of the Series A
Liquidation Preference (as defined in Section 1(b) below) per annum.
Such dividends shall be cumulative as of the day on which the Series A
Preferred Stock is first issued (the "Series A Issue Date") and shall
be payable in arrears, when and as declared by the Board, on the last
business day in April, July, October and January of each year such
Series A Preferred Stock is outstanding to holders of record on such
date, commencing in October following the Series A Issue Date and
prorated from the Series A Issue Date until October 31, 1995. Dividends
on account of arrearages for any past due dividends may be declared and
paid on any date to holders of record on such payment date. Arrearages
must be paid prior to the payment of current dividends and shall be
deemed to be paid first on account of the longest outstanding
arrearage.
(ii) If full cash dividends have been
declared and are not paid or made available to holders of all
outstanding shares of Series A Preferred Stock and funds legally
available are insufficient to permit payment in full in cash to all
such holders of the
<PAGE> 2
preferential amounts to which they are then entitled, the entire amount
legally available for payment of cash dividends shall be distributed
among the holders of the Series A Preferred Stock ratably in proportion
to the full amount to which they would otherwise be respectively
entitled, and any remainder not paid in cash to the holders of the
Series A Preferred Stock shall cumulate as provided in Section
1(a)(iii).
(iii) If, on any dividend payment date,
the holders of the Series A Preferred Stock have not received the full
dividends provided for in Section 1(a)(i), then such dividends shall
cumulate, whether or not declared, with additional dividends thereon
for each succeeding full dividend period during which such dividends
shall remain unpaid. Unpaid dividends for any period less than a full
dividend period shall cumulate on a day-to-day basis and shall be
computed on the basis of a 365-day year.
(iv) So long as any shares of Series A
Preferred Stock are outstanding, the Corporation shall not declare or
pay on any Class A Common Stock or Class B Common Stock (as defined in
the Certificate of Incorporation of the Corporation) any dividend
whatsoever, whether in cash, property or otherwise, nor shall the
Corporation make any distribution on any Class A Common Stock or Class
B Common Stock, nor shall any Class A Common Stock or Class B Common
Stock be purchased or redeemed by the Corporation, nor shall any monies
be paid or made available for a sinking fund for the purchase or
redemption of any Class A Common Stock or Class B Common Stock, unless
all dividends to which the holders of the Preferred Stock are entitled
to for all previous dividend periods have been paid or declared and a
sum of money sufficient for the payment thereof set apart.
(b) Liquidation Rights. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of
the Corporation, before any payment or distribution shall be made to
the holders of Class A Common Stock or Class B Common Stock, the
holders of each share of Series A Preferred Stock shall be entitled to
receive an amount equal to $1,000 per share (the "Series A Liquidation
Preference") plus any accrued or unpaid dividends thereon to such date.
After the payment or the setting apart for payment of amounts so
payable to the holders of the Series A Preferred Stock, the remaining
assets of the Corporation shall be available for distribution among the
holders of Class A Common Stock and Class B Common Stock according to
their respective rights and priorities. If the assets or surplus funds
to be distributed to the holders of the Series A Preferred Stock are
insufficient to permit the payment to such holders of the full
preferential amounts to which they are entitled, the assets and surplus
funds legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock in proportion to the
full preferential amount each such holder is otherwise entitled to
receive.
(c) Voting Rights.
(i) The holders of the issued and
outstanding shares of Series A Preferred Stock shall have no voting
rights except as set forth in this Section 1(c) and as required by the
Delaware General Corporation Law.
-2-
<PAGE> 3
(ii) Subject to Section 1(c)(i), if and
whenever the Corporation fails to declare and pay in cash the full
amount of dividends payable on the Series A Preferred Stock on any six
consecutive quarters, then the holders of the Series A Preferred Stock,
voting separately as a class, shall be entitled at the next annual
meeting of the stockholders of the Corporation, or at any special
meeting, to elect one director; provided, however, that if the holders
of the Series A Preferred Stock previously have elected an additional
director and the right to elect such director has not terminated, the
holders of the Series A Preferred Stock shall not be entitled to elect
an additional director under this Section 1(c)(ii) until such time as
the holders of the Series A Preferred Stock are no longer entitled to
elect an additional director, subject, however, to the right of the
holders of the Series A Preferred Stock to vote for the election of a
successor director should the director previously elected by the
holders of the Series A Preferred Stock resign from the Board, die or
be removed by the holders of the Series A Preferred Stock.
Upon the effective date of such
election, such director shall become an additional director of the
Corporation, and the authorized number of directors of the Corporation
thereupon automatically shall be increased by one director. The holders
of the Series A Preferred Stock may exercise the right to elect a
director until all dividends in default on the Series A Preferred Stock
have been paid in full, and dividends for the current dividend period
declared and funds therefor set apart, and when so paid and set apart,
the right of the holders of the Series A Preferred Stock to elect a
director pursuant to this Section 1(c)(ii) shall cease upon the day
prior to the next annual meeting of the stockholders of the
Corporation, the term of such director shall thereupon terminate, and
the authorized number of directors of the Corporation shall return to
the number of authorized directors otherwise in effect, but subject
always to the same provisions for the vesting of such special voting
rights in the case of any such future dividend default or defaults.
At any time when special voting
rights have been vested in the holders of the Series A Preferred Stock
pursuant to this Section 1(c)(ii), the Secretary of the Corporation
may, and upon the written request of the holders of 10% or more of the
number of shares of the Series A Preferred Stock then outstanding
addressed to such Secretary at the principal office of the Corporation
shall, call a special meeting of the holders of the Series A Preferred
Stock for the election of the director to be elected by them as
provided above, to be held in the case of such written request within
forty days after delivery of such request, and in either case to be
held at a place and upon the notice provided by the Delaware General
Corporation Law and in the By-Laws of the Corporation.
(iii) If any amendment to the Certificate
of Incorporation of the Corporation is proposed that would change the
preferences herein provided or cause the issuance of preferred shares
with attributes that are senior to the Series A Preferred Stock or
increase the number of shares of Class A Common Stock or Class B Common
Stock (except upon a public offering of the Class A Common Stock or
Class B Common Stock of the Corporation), then the holders of the
Series A Preferred Stock, voting separately as a class, shall be
entitled at a meeting of stockholders to vote on such amendment and
such amendment shall not be effected and no Series A Preferred Stock
prohibited hereby shall be issued absent the affirmative vote of the
holders of 75% of the issued and outstanding Series A Preferred Stock.
-3-
<PAGE> 4
(iv) Any holder of Series A Preferred
Stock entitled to vote on any matter pursuant to this Section 1(c) may
assign such voting rights, revocably or irrevocably, to any other
holder of Series A Preferred Stock.
(d) Redemption.
(i) The Corporation may, at any time and
from time to time as may be determined by the Board, redeem all but not
less than all, of the Series A Preferred Stock, provided the
Corporation is not in default in the payment of any dividends on the
Series A Preferred Stock then outstanding, for an amount equal to the
Series A Liquidation Preference plus all accrued dividends to the date
of redemption.
(ii) The redemption provided for in
Section 1(d)(i) may be for cash or for a debt instrument with an
interest rate of 10% payable quarterly for no more than five years
(except that the debt will accelerate in the event of a sale of more
than 50% of the aggregate issued and outstanding shares of Class A
Common Stock and Class B Common Stock or a sale of substantially all of
the assets of the Corporation) and a principal amount equal to the
Series A Liquidation Preference of any and all accrued but unpaid
dividends on the Series A Preferred Stock, a subordinated position with
regard to creditors (but not less than the same position of the Series
A Preferred Stock) and other rights comparable to the Series A
Preferred Stock, including the right to elect one director of the
Corporation as and to the extent provided below.
The debt instrument shall require
that if the Corporation fails to pay in cash the full amount of
interest payable on the debt for six consecutive quarters, then the
holders of the debt, voting in accordance with the principal amount of
the debt and with each $1,000 of debt constituting one vote, shall be
entitled at the next annual meeting of the stockholders of the
Corporation, or at any special meeting, to elect one director;
provided, however, that if the holders of the debt previously have
elected an additional director and the right to elect such director has
not terminated, the holders of the debt shall not be entitled to elect
an additional director, subject, however, to the right of the holders
of the debt to vote for the election of a successor director should the
director previously elected by the holders of the debt resign from the
Board, die or be removed by the holders of the debt. This right to
elect a director shall be set forth in an agreement in form and
substance satisfactory to counsel for the Corporation as a condition
precedent to the redemption of the Series A Preferred Stock with a debt
instrument.
(iii) The Corporation shall provide notice
of any redemption pursuant to this Section 1(d) specifying the time and
place of redemption, by first class or certified mail, postage prepaid,
to each holder of shares of Series A Preferred Stock at the address for
such holder last shown on the records of the Corporation or its
transfer agent, not more than sixty nor less than thirty days before
the applicable redemption date. Upon mailing of any such notice of
redemption, the Corporation shall become obligated to redeem Series A
Preferred Stock specified in such notice herein for cash or debt as
provided in Section 1(d)(ii).
-4-
<PAGE> 5
(iv) No redeemed shares of Series A
Preferred Stock shall be entitled to any dividends declared after the
redemption date, and on such date all rights of the holder of such
shares as a stockholder of the Corporation by reason of the ownership
of such shares shall cease, except the right to receive the price of or
debt issued for such shares without interest, upon presentation and
surrender of the certificate representing such shares, and such shares
will not after such redemption date be deemed to be outstanding.
(v) On or before the redemption date, if
the shares of Series A Preferred Stock are to be redeemed for cash, an
amount equal to the Series A Liquidation Preference, plus all accrued
dividends to the redemption date shall be deposited with a bank or
trust company in a trust fund for the benefit of the respective holders
of the shares designated for redemption with instructions and authority
to the bank or trust company to pay such price for such shares to the
respective holders, after the redemption date upon receipt of
notification from the Corporation that such holder has surrendered its
share certificate to the Corporation. The balance of any monies
deposited by the Corporation remaining unclaimed at the expiration of
sixty days following the redemption date shall thereafter be returned
to the Corporation upon its request.
(e) Series. Except as set forth in this Certificate
of Designation, the Series A Preferred Stock shall have the same
powers, designations, preferences and relative, participating, optional
or other rights, and qualifications and restrictions, as the Series B
Preferred Stock.
B. SERIES B PREFERRED STOCK. Pursuant to authority conferred upon the
Board of Directors of the Corporation by the Certificate of Incorporation of the
Corporation, and pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, the Board of Directors, at a
telephonic board meeting held on June 26, 1995, duly adopted a resolution
creating a series of 702 shares of Serial Preferred Stock, par value $0.01 per
share, as follows:
RESOLVED, that pursuant to the authority expressly vested in
the Board of Directors of the Corporation in accordance with the provisions of
its Certificate of Incorporation, a series of Preferred Stock of the Corporation
is hereby created, consisting of 702 shares of Serial Preferred Stock, par value
$0.01 per share (the "Series B Preferred Stock"), of which the powers,
designations, preferences and relative, participating, optional or other rights,
and qualifications and restrictions, shall be as follows:
2. Series B Preferred Stock.
(a) Dividends.
(i) The holders of Series B Preferred
Stock shall be entitled to receive, out of funds legally available for
that purpose, cash dividends at the rate of 9% of the Series B
Liquidation Preference (as defined in Section 2(b) below) per annum.
Such dividends shall be cumulative from the day on which the Series B
Preferred Stock is first issued (the "Series B Issue Date") and shall
be payable in arrears, when and as declared by the Board, on the first
business day in April, July, October and January of each year such
-5-
<PAGE> 6
Series B Preferred Stock is outstanding to holders of record on such
date, commencing in October following the Series B Issue Date and
prorated from the Series B Issue Date until October 2, 1995. Dividends
on account of arrearages for any past due dividends may be declared and
paid on any date to holders of record on such payment date. Arrearages
must be paid prior to the payment of current dividends and shall be
deemed to be paid first on account of the longest outstanding
arrearage.
(ii) If full cash dividends have been
declared and are not paid or made available to holders of all
outstanding shares of Series B Preferred Stock and funds legally
available are insufficient to permit payment in full in cash to all
such holders of the preferential amounts to which they are then
entitled, the entire amount legally available for payment of cash
dividends shall be distributed among the holders of the Series B
Preferred Stock ratably in proportion to the full amount to which they
would otherwise be respectively entitled, and any remainder not paid in
cash to the holders of the Series B Preferred Stock shall cumulate as
provided in Section 2(a)(iii).
(iii) If, on any dividend payment date,
the holders of the Series B Preferred Stock have not received the full
dividends provided for in Section 2(a)(i), then such dividends shall
cumulate, whether or not declared, with additional dividends thereon
for each succeeding full dividend period during which such dividends
shall remain unpaid. Unpaid dividends for any period less than a full
dividend period shall cumulate on a day-to-day basis and shall be
computed on the basis of a 365-day year.
(iv) So long as any shares of Series B
Preferred Stock are outstanding, the Corporation shall not declare or
pay on any Class A Common Stock or Class B Common Stock any dividend
whatsoever, whether in cash, property or otherwise, nor shall the
Corporation make any distribution on any Class A Common Stock or Class
B Common Stock, nor shall any Class A Common Stock or Class B Common
Stock be purchased or redeemed by the Corporation, nor shall any monies
be paid or made available for a sinking fund for the purchase or
redemption of any Class A Common Stock or Class B Common Stock, unless
all dividends to which the holders of the Series B Preferred Stock are
entitled to for all previous dividend periods have been paid or
declared and a sum of money sufficient for the payment thereof set
apart.
(b) Liquidation Rights. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of
the Corporation, before any payment or distribution shall be made to
the holders of Class A Common Stock or Class B Common Stock, the
holders of each share of Series B Preferred Stock shall be entitled to
receive an amount equal to $1,000 per share (the "Series B Liquidation
Preference") plus any accrued or unpaid dividends thereon to such date.
After the payment or the setting apart for payment of amounts so
payable to the holders of the Series B Preferred Stock, the remaining
assets of the Corporation shall be available for distribution among the
holders of Class A Common Stock and Class B Common Stock according to
their respective rights and priorities. If the assets or surplus funds
to be distributed to the holders of the Series B Preferred Stock are
insufficient to permit the payment to such holders of the full
preferential amounts to which they are entitled, the assets and surplus
funds legally available for distribution shall be
-6-
<PAGE> 7
distributed ratably among the holders of the Series B Preferred Stock
in proportion to the full preferential amount each such holder is
otherwise entitled to receive.
(c) Voting Rights.
(i) The holders of the issued and
outstanding shares of Series B Preferred Stock shall have no voting
rights except as set forth in this Section 2(c) and as required by the
Delaware General Corporation Law.
(ii) Subject to Section 2(c)(i), if and
whenever the Corporation fails to declare and pay in cash the full
amount of dividends payable on the Series B Preferred Stock on any six
consecutive quarters, then the holders of the Series B Preferred Stock,
voting separately as a class, shall be entitled at the next annual
meeting of the stockholders of the Corporation, or at any special
meeting, to elect one director; provided, however, that if the holders
of the Series B Preferred Stock previously have elected an additional
director and the right to elect such director has not terminated, the
holders of the Series B Preferred Stock shall not be entitled to elect
an additional director under this Section 2(c)(ii) until such time as
the holders of the Series B Preferred Stock are no longer entitled to
elect an additional director, subject, however, to the right of the
holders of the Series B Preferred Stock to vote for the election of a
successor director should the director previously elected by the
holders of the Series B Preferred Stock resign from the Board, die or
be removed by the holders of the Series B Preferred Stock.
Upon the effective date of such
election, such director shall become an additional director of the
Corporation, and the authorized number of directors of the Corporation
thereupon automatically shall be increased by one director. The holders
of the Series B Preferred Stock may exercise the right to elect a
director until all dividends in default on the Series B Preferred Stock
have been paid in full, and dividends for the current dividend period
declared and funds therefor set apart, and when so paid and set apart,
the right of the holders of the Series B Preferred Stock to elect a
director pursuant to this Section 2(c)(ii) shall cease upon the day
prior to the next annual meeting of the stockholders of the
Corporation, the term of such director shall thereupon terminate, and
the authorized number of directors of the Corporation shall return to
the number of authorized directors otherwise in effect, but subject
always to the same provisions for the vesting of such special voting
rights in the case of any such future dividend default or defaults.
At any time when special voting
rights have been vested in the holders of the Series B Preferred Stock
pursuant to this Section 2(c)(ii), the Secretary of the Corporation
may, and upon the written request of the holders of 10% or more of the
number of shares of the Series B Preferred Stock then outstanding
addressed to such Secretary at the principal office of the Corporation
shall, call a special meeting of the holders of the Series B Preferred
Stock for the election of the director to be elected by them as
provided above, to be held in the case of such written request within
forty days after delivery of such request, and in either case to be
held at a place and upon the notice provided by the Delaware General
Corporation Law and in the By-Laws of the Corporation.
-7-
<PAGE> 8
(iii) If any amendment to the Certificate
of Incorporation of the Corporation is proposed that would change the
preferences herein provided or cause the issuance of preferred shares
with attributes that are senior to the Series B Preferred Stock or
increase the number of shares of Class A Common Stock or Class B Common
Stock (except upon a public offering of the Class A Common Stock or
Class B Common Stock of the Corporation), then the holders of the
Series B Preferred Stock, voting separately as a class, shall be
entitled at a meeting of stockholders to vote on such amendment and
such amendment shall not be effected and no Series B Preferred Stock
prohibited hereby shall be issued absent the affirmative vote of the
holders of 75% of the issued and outstanding Series B Preferred Stock.
(iv) Any holder of Series B Preferred
Stock entitled to vote on any matter pursuant to this Section 2(c) may
assign such voting rights, revocably or irrevocably, to any other
holder of Series B Preferred Stock.
(d) Redemption.
(i) The Corporation may, at any time and
from time to time as may be determined by the Board, redeem all but not
less than all, of the Series B Preferred Stock, provided the
Corporation is not in default in the payment of any dividends on the
Series B Preferred Stock then outstanding, for an amount equal to the
Series B Liquidation Preference plus all accrued dividends to the date
of redemption.
(ii) The redemption provided for in
Section 2(d)(i) may be for cash or for a debt instrument with an
interest rate of 9% payable quarterly for no more than seven years
(except that the debt will accelerate in the event of a sale of more
than 50% of the aggregate issued and outstanding shares of Class A
Common Stock and Class B Common Stock or a sale of substantially all of
the assets of the Corporation or of Helsel) and a principal amount
equal to the Series B Liquidation Preference of any and all accrued but
unpaid dividends on the Series B Preferred Stock, a subordinated
position with regard to creditors (but not less than the same position
of the Series B Preferred Stock) and other rights comparable to the
Series B Preferred Stock, including the right to elect one director of
the Corporation as and to the extent provided below.
The debt instrument shall require
that if the Corporation fails to pay in cash the full amount of
interest payable on the debt for six consecutive quarters, then the
holders of the debt, voting in accordance with the principal amount of
the debt and with each $1,000 of debt constituting one vote, shall be
entitled at the next annual meeting of the stockholders of the
Corporation, or at any special meeting, to elect one director;
provided, however, that if the holders of the debt previously have
elected an additional director and the right to elect such director has
not terminated, the holders of the debt shall not be entitled to elect
an additional director, subject, however, to the right of the holders
of the debt to vote for the election of a successor director should the
director previously elected by the holders of the debt resign from the
Board, die or be removed by the holders of the debt. This right to
elect a director shall be set forth in an agreement in form and
substance satisfactory to counsel for the Corporation as a condition
precedent to the redemption of the Series B Preferred Stock with a debt
instrument.
-8-
<PAGE> 9
(iii) The Corporation shall provide notice
of any redemption pursuant to this Section 2(d) specifying the time and
place of redemption, by first class or certified mail, postage prepaid,
to each holder of shares of Series B Preferred Stock at the address for
such holder last shown on the records of the Corporation or its
transfer agent, not more than sixty nor less than thirty days before
the applicable redemption date. Upon mailing of any such notice of
redemption, the Corporation shall become obligated to redeem Series B
Preferred Stock specified in such notice herein for cash or debt as
provided in Section 2(d)(ii).
(iv) No redeemed shares of Series B
Preferred Stock shall be entitled to any dividends declared after the
redemption date, and on such date all rights of the holder of such
shares as a stockholder of the Corporation by reason of the ownership
of such shares shall cease, except the right to receive the price of or
debt issued for such shares without interest, upon presentation and
surrender of the certificate representing such shares, and such shares
will not after such redemption date be deemed to be outstanding.
(v) On or before the redemption date, if
the shares of Series B Preferred Stock are to be redeemed for cash, an
amount equal to the Series B Liquidation Preference, plus all accrued
dividends to the redemption date shall be deposited with a bank or
trust company in a trust fund for the benefit of the respective holders
of the shares designated for redemption with instructions and authority
to the bank or trust company to pay such price for such shares to the
respective holders, after the redemption date upon receipt of
notification from the Corporation that such holder has surrendered its
share certificate to the Corporation. The balance of any monies
deposited by the Corporation remaining unclaimed at the expiration of
sixty days following the redemption date shall thereafter be returned
to the Corporation upon its request.
(e) Series. Except as set forth in this Certificate
of Designation, the Series B Preferred Stock shall have the same
powers, designations, preferences and relative, participating, optional
or other rights, and qualifications and restrictions, as the Series A
Preferred Stock.
IN WITNESS WHEREOF, the undersigned have signed this Certificate of
Designation as of this 30th day of June, 1995.
/S/ RONALD E. WEINBERG
---------------------------------------
RONALD E. WEINBERG, Vice-Chairman
Attested by:
/S/ BYRON S. KRANTZ
-------------------------------------
BYRON S. KRANTZ, Secretary
- 9 -
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF DESIGNATION
OF
THE SERIES C PREFERRED STOCK
OF
HAWK CORPORATION
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Ronald E. Weinberg and Byron S. Krantz, being the Vice-Chairman of the
Board and Secretary, respectively, of Hawk Corporation, a Delaware corporation
(the "Corporation"), hereby certify that:
Pursuant to authority conferred upon the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation, and
pursuant to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, the Board of Directors, at a telephonic board meeting held
on November 16, 1996, duly adopted a resolution creating a new series of 1,189
shares of Serial Preferred Stock, par value $0.01 per share, as follows:
RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the Corporation is
hereby created, consisting of 1,189 shares of Serial Preferred Stock, par value
$0.01 per share (the "Series C Preferred Stock"), of which the powers,
designations, preferences and relative, participating, optional or other
rights, and qualifications and restrictions, shall be as follows:
3. Series C Preferred Stock.
(a) Dividends.
(i) The holders of Series C Preferred Stock shall
be entitled to receive, out of funds legally available for that purpose, cash
dividends at the rate of 10% of the Series C Liquidation Preference (as defined
in Section 3(b) below) per annum. Such dividends shall be cumulative as of the
day on which the Series C Preferred Stock is first issued (the "Series C Issue
Date") and shall be payable in arrears, when and as declared by the Board (as
defined in the Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") of the Corporation), on the last business day
in April, July, October and January of each year such Series C Preferred Stock
is outstanding to holders of record on such date, commencing in October
following the Series C Issue Date and prorated from the Series C Issue Date
until January 31, 1997. Dividends on account of arrearages for any past due
dividends may be declared and paid on any date to holders of record on such
payment date. Arrearages must be paid prior to the payment of current
dividends and shall be deemed to be paid first on account of the longest
outstanding arrearage.
<PAGE> 2
(ii) If full cash dividends have been declared and
are not paid or made available to holders of all outstanding shares of Series C
Preferred Stock and funds legally available are insufficient to permit payment
in full in cash to all such holders of the preferential amounts to which they
are then entitled, the entire amount legally available for payment of cash
dividends shall be distributed among the holders of the Series C Preferred
Stock ratably in proportion to the full amount to which they would otherwise be
respectively entitled, and any remainder not paid in cash to the holders of the
Series C Preferred Stock shall cumulate as provided in Section 3(a)(iii).
(iii) If, on any dividend payment date, the holders
of the Series C Preferred Stock have not received the full dividends provided
for in Section 3(a)(i), then such dividends shall cumulate, whether or not
declared, with additional dividends thereon for each succeeding full dividend
period during which such dividends shall remain unpaid. Unpaid dividends for
any period less than a full dividend period shall cumulate on a day-to-day
basis and shall be computed on the basis of a 365-day year.
(iv) So long as any shares of Series C Preferred
Stock are outstanding, the Corporation shall not declare or pay on any Class A
Common Stock or Class B Common Stock (as defined in the Certificate of
Incorporation of the Corporation) any dividend whatsoever, whether in cash,
property or otherwise, nor shall the Corporation make any distribution on any
Class A Common Stock or Class B Common Stock, nor shall any Class A Common
Stock or Class B Common Stock be purchased or redeemed by the Corporation, nor
shall any monies be paid or made available for a sinking fund for the purchase
or redemption of any Class A Common Stock or Class B Common Stock, unless all
dividends to which the holders of the Preferred Stock (as defined in the
Certificate of Incorporation of the Corporation) are entitled to for all
previous dividend periods have been paid or declared and a sum of money
sufficient for the payment thereof set apart.
(b) Liquidation Rights. In the event of any voluntary
or involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, before any payment or distribution shall be made to the holders of
Class A Common Stock or Class B Common Stock, the holders of each share of
Series C Preferred Stock shall be entitled to receive an amount equal to $1,000
per share (the "Series C Liquidation Preference") plus any accrued or unpaid
dividends thereon to such date. After the payment or the setting apart for
payment of amounts so payable to the holders of the Series C Preferred Stock,
the remaining assets of the Corporation shall be available for distribution
among the holders of Class A Common Stock and Class B Common Stock according to
their respective rights and priorities. If the assets or surplus funds to be
distributed to the holders of the Series C Preferred Stock are insufficient to
permit the payment to such holders of the full preferential amounts to which
they are entitled, the assets and surplus funds legally available for
distribution shall be distributed ratably among the holders of the Series C
Preferred Stock in proportion to the full preferential amount each such holder
is otherwise entitled to receive.
(c) Voting Rights.
(i) The holders of the issued and outstanding
shares of Series C Preferred Stock shall have no voting rights except as set
forth in this Section 3(c) and as otherwise required
- 2 -
<PAGE> 3
by the Delaware General Corporation Law (as defined in the Certificate of
Incorporation of the Corporation).
(ii) Subject to Section 3(c)(i), if and whenever
the Corporation fails to declare and pay in cash the full amount of dividends
payable on the Series C Preferred Stock on any six consecutive quarters, then
the holders of the Series C Preferred Stock, voting separately as a class,
shall be entitled at the next annual meeting of the stockholders of the
Corporation, or at any special meeting, to elect one director; provided,
however, that if the holders of the Series C Preferred Stock previously have
elected an additional director and the right to elect such director has not
terminated, the holders of the Series C Preferred Stock shall not be entitled
to elect an additional director under this Section 3(c)(ii) until such time as
the holders of the Series C Preferred Stock are no longer entitled to elect an
additional director, subject, however, to the right of the holders of the
Series C Preferred Stock to vote for the election of a successor director
should the director previously elected by the holders of the Series C Preferred
Stock resign from the Board, die or be removed by the holders of the Series C
Preferred Stock.
Upon the effective date of such election,
such director shall become an additional director of the Corporation, and the
authorized number of directors of the Corporation thereupon automatically shall
be increased by one director. The holders of the Series C Preferred Stock may
exercise the right to elect a director until all dividends in default on the
Series C Preferred Stock have been paid in full, and dividends for the current
dividend period declared and funds therefor set apart, and when so paid and set
apart, the right of the holders of the Series C Preferred Stock to elect a
director pursuant to this Section 1(c)(ii) shall cease upon the day prior to
the next annual meeting of the stockholders of the Corporation, the term of
such director shall thereupon terminate, and the authorized number of directors
of the Corporation shall return to the number of authorized directors otherwise
in effect, but subject always to the same provisions for the vesting of such
special voting rights in the case of any such future dividend default or
defaults.
At any time when special voting rights have
been vested in the holders of the Series C Preferred Stock pursuant to this
Section 3(c)(ii), the Secretary of the Corporation may, and upon the written
request of the holders of 10% or more of the number of shares of the Series C
Preferred Stock then outstanding addressed to such Secretary at the principal
office of the Corporation shall, call a special meeting of the holders of the
Series C Preferred Stock for the election of the director to be elected by them
as provided above, to be held in the case of such written request within forty
days after delivery of such request, and in either case to be held at a place
and upon the notice provided by the Delaware General Corporation Law and in the
By-Laws of the Corporation.
(iii) If any amendment to the Certificate of
Incorporation of the Corporation is proposed that would change the preferences
herein provided or cause the issuance of preferred shares with attributes that
are senior to the Series C Preferred Stock or increase the number of shares of
Class A Common Stock or Class B Common Stock (except upon a public offering of
the Class A Common Stock or Class B Common Stock of the Corporation), then the
holders of the Series C Preferred Stock, voting separately as a class, shall be
entitled at a meeting of stockholders to vote on such amendment and such
amendment shall not be effected and no Series C Preferred
- 3 -
<PAGE> 4
Stock prohibited hereby shall be issued absent the affirmative vote of the
holders of 75% of the issued and outstanding Series C Preferred Stock.
(iv) Any holder of Series C Preferred Stock
entitled to vote on any matter pursuant to this Section 3(c) may assign such
voting rights, revocably or irrevocably, to any other holder of Series C
Preferred Stock.
(d) Redemption.
(i) The Corporation may, at any time and from
time to time as may be determined by the Board, redeem all but not less than
all, of the Series C Preferred Stock, provided the Corporation is not in
default in the payment of any dividends on the Series C Preferred Stock then
outstanding, for an amount equal to the Series C Liquidation Preference plus
all accrued dividends to the date of redemption.
(ii) The redemption provided for in Section
3(d)(i) may be for cash or for a debt instrument with an interest rate of 10%
payable quarterly for no more than five years (except that the debt will
accelerate in the event of a sale of more than 50% of the aggregate issued and
outstanding shares of Class A Common Stock and Class B Common Stock or a sale
of substantially all of the assets of the Corporation) and a principal amount
equal to the Series C Liquidation Preference of any and all accrued but unpaid
dividends on the Series C Preferred Stock, a subordinated position with regard
to creditors (but not less than the same position of the Series C Preferred
Stock) and other rights comparable to the Series C Preferred Stock, including
the right to elect one director of the Corporation as and to the extent
provided below.
The debt instrument shall require that if the
Corporation fails to pay in cash the full amount of interest payable on the
debt for six consecutive quarters, then the holders of the debt, voting in
accordance with the principal amount of the debt and with each $1,000 of debt
constituting one vote, shall be entitled at the next annual meeting of the
stockholders of the Corporation, or at any special meeting, to elect one
director; provided, however, that if the holders of the debt previously have
elected an additional director and the right to elect such director has not
terminated, the holders of the debt shall not be entitled to elect an
additional director, subject, however, to the right of the holders of the debt
to vote for the election of a successor director should the director previously
elected by the holders of the debt resign from the Board, die or be removed by
the holders of the debt. This right to elect a director shall be set forth in
an agreement in form and substance satisfactory to counsel for the Corporation
as a condition precedent to the redemption of the Series C Preferred Stock with
a debt instrument.
(iii) The Corporation shall provide notice of any
redemption pursuant to this Section 3(d) specifying the time and place of
redemption, by first class or certified mail, postage prepaid, to each holder
of shares of Series C Preferred Stock at the address for such holder last shown
on the records of the Corporation or its transfer agent, not more than sixty
nor less than thirty days before the applicable redemption date. Upon mailing
of any such notice of redemption, the Corporation shall become obligated to
redeem Series C Preferred Stock specified in such notice herein for cash or
debt as provided in Section 3(d)(ii).
- 4 -
<PAGE> 5
(iv) No redeemed shares of Series C Preferred
Stock shall be entitled to any dividends declared after the redemption date,
and on such date all rights of the holder of such shares as a stockholder of
the Corporation by reason of the ownership of such shares shall cease, except
the right to receive the price of or debt issued for such shares without
interest, upon presentation and surrender of the certificate representing such
shares, and such shares will not after such redemption date be deemed to be
outstanding.
(v) On or before the redemption date, if the
shares of Series C Preferred Stock are to be redeemed for cash, an amount equal
to the Series C Liquidation Preference, plus all accrued dividends to the
redemption date shall be deposited with a bank or trust company in a trust fund
for the benefit of the respective holders of the shares designated for
redemption with instructions and authority to the bank or trust company to pay
such price for such shares to the respective holders, after the redemption date
upon receipt of notification from the Corporation that such holder has
surrendered its share certificate to the Corporation. The balance of any
monies deposited by the Corporation remaining unclaimed at the expiration of
sixty days following the redemption date shall thereafter be returned to the
Corporation upon its request.
(e) Series. Except as set forth in this Certificate of
Designation, the Series C Preferred Stock shall have the same powers,
designations, preferences and relative, participating, optional or other
rights, and qualifications and restrictions, as the Series A and Series B
Preferred Stock (as defined in the Certificate of Incorporation of the
Corporation).
IN WITNESS WHEREOF, the undersigned have signed this Certificate of
Designation as of this 27th day of November, 1996.
/s/ Ronald E. Weinberg
---------------------------------------
RONALD E. WEINBERG, Vice-Chairman
Attested by:
/s/ Byron S. Krantz
---------------------------------------
BYRON S. KRANTZ, Secretary
- 5 -
<PAGE> 1
EXHIBIT 3.5
MERGER AGREEMENT
AND
PLAN OF REORGANIZATION
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made and entered into as of this 22nd day of November, 1996, by and between HAWK
HOLDING CORP., a Delaware corporation ("Hawk Holding"), and HAWK CORPORATION, a
Delaware corporation ("Hawk Corp.") and partially-owned subsidiary of Hawk
Holding.
WHEREAS, the principal initial purchaser involved in the anticipated
offering by Hawk Corp. of Senior Notes due 2003 (the "Proposed Offering") has
indicated that a merger of Hawk Holding into Hawk Corp. would simplify the
ownership structure of Hawk Corp., which will have the desired effect of
reducing the deterrence of such structure on prospective investors;
WHEREAS, Hawk Holding was established as an acquisition vehicle for
industrial manufacturing corporations and Hawk Corp. currently acts as such
acquisition vehicle;
WHEREAS, the Merger (as defined below) would reduce state taxes and
other administrative costs; and
WHEREAS, the Merger will be consummated only upon the closing of the
Proposed Offering;
NOW, THEREFORE, the parties hereto agree as follows:
1. THE MERGER.
(a) Merger and Reorganization. On the Effective Date (as
defined below), Hawk Holding will be merged with and into Hawk Corp. (the
"Merger"), in accordance with the terms of this Agreement and the provisions of
section 251 of the Delaware General Corporation Law, as amended, in a
transaction qualifying as a reorganization within the meaning of section
368(a)(1)(A) of the Internal Revenue Code, as amended. Subject to Section 1(b)
below, the Merger will be completed by filing a copy of this Agreement with the
Secretary of State of Delaware.
(b) Effective Date. The effective date of the Merger will be
November 27, 1996 (the "Effective Date").
(c) Surviving Corporation. On the Effective Date, the separate
corporate existence of Hawk Holding will cease and Hawk Corp. will be the
survivor (the "Surviving Corporation").
(d) Certificate of Incorporation of Surviving Corporation. On
the Effective Date, the certificate of incorporation of Hawk Corp., as amended
and/or restated through the Effective Date and as further amended as set forth
in EXHIBIT A attached hereto, will become the certificate of incorporation of
the Surviving Corporation.
<PAGE> 2
(e) By-laws of Surviving Corporation. On the Effective Date,
the by-laws of Hawk Corp. will become the by-laws of the Surviving Corporation.
(f) Directors of Surviving Corporation. On the Effective Date,
the directors of Hawk Corp. will become the directors of the Surviving
Corporation.
(g) Officers of Surviving Corporation. On the Effective Date,
the officers of Hawk Corp. will become the officers of the Surviving
Corporation.
(h) Registered Office. On the Effective Date, the registered
office of the Surviving Corporation in the State of Delaware will be located at
1209 Orange Street, Wilmington, Delaware.
(i) Abandonment of Merger. The Merger may be abandoned at any
time prior to the filing of this Agreement with the Secretary of State of
Delaware or the Effective Date, whichever occurs later, at the direction of the
Board of Directors of either Hawk Holding or Hawk Corp., notwithstanding prior
approval of this Agreement and the Merger by the stockholders of Hawk Holding or
Hawk Corp.
2. CONVERSION OF SHARES AND OFFSET OF CERTAIN DEBTS.
(a) Conversion of Common Shares of Hawk Holding. On the
Effective Date, the shares of Common Stock, par value $0.01 per share, of Hawk
Holding ("Parent Common"), issued and outstanding at that time will, by virtue
of the Merger and without any action on the part of any holder thereof, be
converted into the number of fully paid shares of Class A Common Stock, par
value $0.01 per share, of Hawk Corp. ("Subsidiary Common") set forth below, and
outstanding certificates representing shares of Parent Common will thereafter
represent shares of Subsidiary Common. By virtue of the Merger, the stockholders
of Hawk Holding will receive the number of shares of Subsidiary Common set forth
opposite their respective names below:
<TABLE>
<CAPTION>
SHARES OF
SHARES OF SUBSIDIARY
STOCKHOLDER PARENT COMMON COMMON
- ----------------------------------------- ------------- ----------
<S> <C> <C>
Harbert Family Limited Partnership 308.25 194,894
Norman C. Harbert 34.25 21,655
Weinberg Family Limited Partnership 293.85 185,789
Ronald E. Weinberg 32.65 20,643
Krantz Family Limited Partnership 68.00 42,678
Byron S. Krantz 7.00 4,742
Thomas A. Gilbride 15.00 9,484
Gerald H. Gordon 1.00 632
Dan T. Moore, III 5.00 3,161
Clanco Partners I 5.00 3,161
Douglas D. Wilson 5.00 3,161
-------- ---------
775.00 490,000
</TABLE>
- 2 -
<PAGE> 3
Upon surrender by each holder of certificates representing Parent Common, the
appropriate number, determined in accordance with the preceding table, of shares
of Subsidiary Common shall be issued to each such holder.
(b) Cancellation of Subsidiary Common Shares Held by Hawk
Holding. On the Effective Date, all issued and outstanding shares of Subsidiary
Common held by Hawk Holding will, by virtue of the Merger, cease to exist and
any certificates representing such shares that have not been surrendered in
accordance with Section 2(a) above will be cancelled.
(c) Cancellation of Preferred Shares Held by Hawk Holding. On
the Effective Date, the 1,250 shares of Preferred Stock, par value $0.01 per
share, Series A, of Hawk Corp. ("Subsidiary Series A Preferred") held by Hawk
Holding will be cancelled and will cease to exist, and any certificates
representing such shares will be cancelled. All dividends accrued on said shares
of Subsidiary Series A Preferred through November 30, 1996 have been paid in
full.
(d) Issuance of New Preferred Shares to Stockholders of Hawk
Holding. On the Effective Date, Hawk Corp. will issue fully paid shares of
Preferred Stock, par value $0.01 per share, Series C, of Hawk Corp. ("Subsidiary
Series C Preferred") having a value (at the rate of $1,000 per share) equal to
the difference between (i) $1.25 million (representing the liquidation value of
the Subsidiary Series A Preferred that is cancelled pursuant to Section 2(c)
above), and (ii) $61,100 (representing the cancellation, as a result of the
Merger, of a note issued by Hawk Holding to Hawk Corp.). By virtue of the
Merger, the stockholders of Hawk Holding will receive the number of shares of
Subsidiary Series C Preferred set forth opposite their respective names below:
<TABLE>
<CAPTION>
SHARES OF SUBSIDIARY
STOCKHOLDER SERIES C PREFERRED
---------------------------------- -------------------
<S> <C>
Harbert Family Limited Partnership 150.970
Norman C. Harbert 380.975
Weinberg Family Limited Partnership 143.916
Ronald E. Weinberg 362.935
Krantz Family Limited Partnership 33.058
Byron S. Krantz 84.607
Thomas A. Gilbride 23.535
Gerald H. Gordon 1.560
Dan T. Moore, III 2.448
Clanco Partners I 2.448
Douglas D. Wilson 2.448
----------
1,188.900
</TABLE>
3. MISCELLANEOUS.
(a) Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware.
- 3 -
<PAGE> 4
(b) Amendment. This Agreement may be amended in accordance
with the provisions of Section 251 of the Delaware General Corporation Law at
any time prior to the filing hereof with the Secretary of State of Delaware or
the Effective Date, whichever occurs later, by means of a written instrument
signed by all parties hereto.
(c) Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
HAWK HOLDING CORP.,
a Delaware corporation
By: /s/ Ronald E. Weinberg
------------------------------------
Ronald E. Weinberg, Chairman
and
By: /s/ Byron S. Krantz
------------------------------------
Byron S. Krantz, Secretary
HAWK CORPORATION,
a Delaware corporation
By: /s/ Ronald E. Weinberg
------------------------------------
Ronald E. Weinberg, Vice-Chairman
and
By: /s/ Byron S. Krantz
------------------------------------
Byron S. Krantz, Secretary
- 4 -
<PAGE> 5
EXHIBIT A TO MERGER AGREEMENT
-----------------------------
The certificate of incorporation of Hawk Corp. (the Surviving
Corporation), amended and/or restated through the Effective Date (the
"Certificate of Incorporation"), is further amended as follows in accordance
with Sections 251(b)(3) and 251(e) of the Delaware General Corporation Law:
Section 4.1 of the Certificate of Incorporation is hereby amended and
restated in its entirety as follows:
4.1 Authorized Capital Stock. The aggregate number of shares
of all classes of stock which the Corporation is authorized to issue is
3,075,000 shares, consisting of:
(a) 2,200,000 shares of Class A Common Stock, par
value $0.01 per share (the "Class A Common Stock");
(b) 375,000 shares of Class B Non-Voting Common
Stock, par value $0.01 per share (the "Class B Common Stock"); and
(c) 500,000 shares of Serial Preferred Stock, par
value $0.01 per share (the "Preferred Stock").
<PAGE> 1
EXHIBIT 3.6
BY-LAWS
OF
THE HAWK GROUP OF COMPANIES, INC.
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of stockholders will be
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as may be designated by resolution of the
Board of Directors (the "Board"). Any other proper business may be transacted at
the annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by a Chairman of the Board, the
Vice Chairman of the Board, the Board, or the holders of a majority of the
issued and outstanding shares of stock of the Corporation.
Section 1.3. Notice of Meetings. Written notice of every meeting of
stockholders will be given, not less than ten nor more than sixty days before
the date of the meeting, to each stockholder entitled to vote at such meeting.
The notice will include the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. If mailed, notice will be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation.
Section 1.4. Waiver of Notice of Meetings of Stockholders. Any written
waiver of notice, signed by a stockholder entitled to notice, will be deemed
equivalent. to notice. Attendance of a stockholder at a meeting constitutes a
waiver of notice of such meeting, except when the stockholder attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, need be specified in any written
waiver of notice.
Section 1.5. Adjournments. Any meeting of stockholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such reconvened meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
reconvened meeting the Corporation may transact any business which could have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
reconvened meeting, a notice of the reconvened meeting will be given to each
stockholder of record entitled to vote at the meeting.
Section 1.6. Quorum. Except as otherwise provided by law, the Certificate
of Incorporation or these By-laws, at each meeting of stockholders the presence
in person or by proxy of the holders of shares of stock having a majority of the
votes which could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting will be necessary and sufficient to constitute a
quorum. Shares of its own stock belonging to the Corporation or to another
corporation,
<PAGE> 2
if a majority of the shares entitled to vote in the election of directors of
such other corporation is held, directly or indirectly, by the Corporation, will
neither be entitled to vote nor be counted for quorum purposes; provided,
however, that the foregoing does not limit the right of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
In the absence of a quorum, the stockholders so present may, by
majority vote, adjourn the meeting from time to time in the manner provided in
Section 1.5 of these By-laws until a quorum attends.
Section 1.7. Organization of Meetings. Meetings of stockholders will be
presided over by the Chairman of the Board, or if Chairman of the Board is not
present, by the Vice Chairman of the Board, or in the absence of the foregoing
persons by a chairman chosen at the meeting. The Secretary will act as secretary
of the meeting, but in his absence the chairman of the meeting may appoint any
person to act as secretary of the meeting.
Section 1.8. Action by Vote. Except as otherwise provided by the
Certificate of Incorporation, as amended, each stockholder entitled to vote at
any meeting of stockholders will be entitled to one vote for each share of stock
held by him which has voting power upon the matter in question.
At all meetings of stockholders for the election of directors a
plurality of the votes cast will be sufficient to elect. All other elections and
questions will, unless otherwise provided by law, the Certificate of
Incorporation or these By-laws, be decided by the vote of the holders of shares
of stock having a majority of the votes which could be cast by the holders of
all shares of stock entitled to vote thereon which are present in person or
represented by proxy at the meeting.
Voting at meetings of stockholders need not be by written ballot.
Section 1.9. Representation by Proxy. Each stockholder entitled to vote at
a meeting of stockholders may authorize another person or persons to act for him
by proxy. A duly executed proxy will be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation prior to the
taking of a vote.
Section 1.10. Inspectors of Election. The Board in advance of any meeting
of stockholders may appoint one or more Inspectors of Election to act at the
meeting or any adjournment of the meeting. If Inspectors of Election are not so
appointed, the chairman of the meeting may appoint one or more Inspectors of
Election. Each Inspector of Election, before entering upon the discharge of his
duties, must take and sign an oath faithfully to execute the duties of Inspector
of Election at such meeting with strict impartiality and according to the best
of his ability. If appointed, Inspectors of Election will take charge of the
polls and, when the vote is completed, will make a certificate of the result of
the vote taken and of such other facts as may be required by law. The Inspectors
of Election may appoint or retain other persons or entities to assist them in
the performance of their duties as inspectors.
2
<PAGE> 3
Section 1.11. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
may fix a record date, which record date will not precede the date upon which
the resolution fixing the record date is adopted by the Board and which record
date:
(1) in the case of determination of stockholders entitled to vote
at any meeting of stockholders or adjournment thereof, will,
unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting;
(2) in the case of determination of stockholders entitled to
express consent to corporate action in writing without a
meeting, will not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the
Board; and
(3) in the case of any other action, will not be more than sixty
days prior to such other action.
If no record date is fixed:
(1) the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders will be at
the close of business on the day next preceding the day on
which notice is given, or, if notice is waived, at the close
of business on the day next preceding the day on which the
meeting is held;
(2) the record date for determining stockholders entitled to
express consent to corporate action in writing without a
meeting when no prior action of the Board is required by law,
will be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is
delivered to the Corporation in accordance with applicable
law, or, if prior action by the Board is required by law,
will be at the close of business on the day on which the
Board adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other
purpose will be at the close of business on the day on which
the Board adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders will apply to any adjournment of the
meeting; provided, however, that the Board may fix a new record date for the
reconvened meeting.
3
<PAGE> 4
Section 1.12. List of Stockholders Entitled to Vote. The officer
responsible for maintaining the stock ledger of the Corporation shall prepare,
at least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list will be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place will be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list will also be produced and kept at the
time and place of the meeting during the whole time thereof and may be inspected
by any stockholder who is present. Upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of directors,
they will be ineligible for election to any office at such meeting. The stock
ledger will be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 1.13. Action By Written Consent of Stockholders. Unless otherwise
provided in the Certificate of Incorporation, as amended, any action required or
permitted to be taken at any meeting of the stockholders may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Every signature of any stockholder who signs a
written consent must be separately dated. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent will
be given to those stockholders who have not consented in writing.
ARTICLE II
Board of Directors
Section 2.1. Powers. Subject to applicable provisions of law and any
limitations in the Certificate of Incorporation or these By-laws, the Board will
manage the business and affairs of the Corporation and exercise all corporate
powers.
Section 2.2. Number. The Board will consist of one or more members, the
number of directors to be determined from time to time by resolution of the
Stockholders of the Corporation.
Section 2.3. Election; Resignation; Removal; Vacancies. At the first
annual meeting of stockholders and at each subsequent annual meeting, the
stockholders will elect directors each of whom will hold office for a term of
one year or until his successor is elected and qualified. Any director may
resign at any time upon written notice to the Corporation. Any director or the
entire Board may be removed with or without cause by the vote of the holders of
a majority of the shares of stock then entitled to vote in the election of
directors. Any newly created directorship or any vacancy occurring in the Board
for any cause may be filled by a majority of the remaining members of the Board,
although such majority is less. than a quorum, or by a plurality of the votes
cast at a meeting of stockholders, and each director so elected will hold office
until the expiration of the term of office of the director whom he has replaced
or until his successor is elected and qualified.
- 4 -
<PAGE> 5
The directors of the Corporation need not be elected by written
ballot.
Section 2.4. Regular Meetings. Regular meetings of the Board may be held at
such places within or without the State of Delaware and at such times as the
Board may determine. Notice of a regular meeting need not be given.
Section 2.5. Special Meetings. Special meetings of the Board may be held at
any time or place within or without the State of Delaware whenever called by the
Chairman or by the Vice Chairman of the Board. Notice of a special meeting of
the Board will be given by the person or persons calling the meeting at least
twenty-four hours before the special meeting.
Section 2.6. Waiver of Notice of Meetings of Directors. Any written waiver
of notice, signed by a director entitled to notice, will be deemed equivalent to
notice. Attendance of a director at a meeting will constitute a waiver of notice
of such meeting, except when the director attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of any regular or special meeting
of the directors, need be specified in any written waiver of notice.
Section 2.7. Quorum; Vote Required for Action. At all meetings of the Board
a majority of the whole Board will constitute a quorum for the transaction of
business. In the absence of a quorum, the directors present at the meeting may,
by majority vote, adjourn the meeting until a majority attends. Except in cases
in which the Certificate of Incorporation or these By-laws otherwise provide,
the vote of a majority of the directors present at a meeting at which a quorum
is present will be the act of the Board.
Section 2.8. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of the Corporation's directors or
officers, or between the Corporation and any other corporation, partnership,
association; or other organization in which one or more of the Corporation's
directors or officers are directors or officers, or have a financial interest,
will be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board or
committee thereof which authorizes the contract or transaction, or solely
because his or their votes are counted for such purpose, if:
(1) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to
the Board or the committee, and the Board or conmittee in
good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested
directors, even though the disinterested directors are less
than a quorum; or
(2) the material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract
or transaction is specifically approved in good faith by vote
of the stockholders; or
5
<PAGE> 6
(3) the contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the
Board, a committee thereof, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes the contract or transaction.
Section 2.9. Organization of Meetings. Meetings of the Board will be
presided over by the Chairman of the Board, if the Chairman of the Board is not
present, by the Vice Chairman of the Board, or in their absence by a chairman
chosen at the meeting. The Secretary will act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
Section 2.10. Telephonic Meetings Permitted. Members of the Board, or any
committee designated by the Board, may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to section will constitute presence in person at such meeting.
Section 2.11. Action by Written Consent of Directors. Unless
otherwise restricted by the Certificate of Incorporation or these By-laws, any
action required or permitted to be taken at any meeting of the Board, or of any
committee thereof, may be taken without a meeting if all members of the Board
or such committee, as the case may be, consent in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or such
committee.
Section 2.12. Compensation. In the discretion of the Board, the Corporation
may pay each director such fees for his services as director and reimburse him
for his reasonable expenses incurred in the performance of his duties as
director, as determined by the Board. Nothing contained in this section may be
construed to preclude any director from serving the Corporation in any other
capacity and receiving reasonable compensation for such service.
Section 2.13. Committees. The Board may, by resolution passed by a majority
of the whole Board, designate one or more committees, each committees to consist
of one or more of the directors of the Corporation. The Board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members of the
committee present at any meeting and not disqualified from voting, whether or
not he or they constitute a quorum, may unanimously appoint another member of
the Board to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent permitted by law and to the extent
provided in the resolution of the Board, will have and may exercise all the
powers and authority of the Board in the management of the business and affairs
of the Corporation.
Section 2.14 Committee Rules. Unless the Board otherwise provides, each
committee designated by the Board may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each committee will
conduct its business in the same manner as the Board conducts its business
pursuant to Article II of these By-laws.
6
<PAGE> 7
ARTICLE III
Officers
Section 3.1. Enumeration; Election. The Board will appoint a President,
Secretary and Treasurer, and it may, if it so determines, elect a Chairman
and/or Vice Chairman of the Board from among its members. The Board may also
appoint, or empower the Chairman or Vice Chairman of the Board, or the
President, to appoint such other officers and agents as the business of the
Corporation may require. Any number of offices may be held by the same person.
The Board may require any officer, agent or employee to give security for the
faithful performance of his duties.
Section 3.2. Term of Office; Resignation; Removal; Vacancies. Each officer
will hold office until his successor is elected and qualified or until his
earlier resignation or removal. Any officer may resign at any time upon written
notice to the Corporation. The Board may remove any officer with or without
cause at any time, but such removal will be without prejudice to the contractual
rights of such officer, if any, with the Corporation. Any vacancy occurring in
any office of the Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board.
Section 3.3. Powers and Duties. The officers of the Corporation will have
such powers and duties in the management of the Corporation as may be prescribed
in these By-laws and by the Board and, to the extent not so provided, as
generally pertain to their respective offices, subject to the control of the
Board.
Section 3.4. Compensation. The Board will determine the officers' salaries,
and no officer will be prevented from receiving such compensation by reason of
the fact that he is also a director of the Corporation.
ARTICLE IV
Stock
Section 4.1. Certificates. Every holder of stock will be entitled to have
a certificate signed by or in the name of the Corporation by two officers of the
Corporation, certifying the number of shares owned by him in the Corporation.
Any or all of the signatures on the certificate may be by facsimile. In case any
officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent, or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent, or registrar at the date of issue.
Section 4.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. Upon written request by a Stockholder, the Corporation may issue a
new certificate of stock in the place of any certificate previously issued by
the Corporation, alleged to have been lost, stolen or destroyed. The Corporation
may require the owner of the lost, stolen or destroyed certificate, or his legal
representative, to give the Corporation a bond sufficient to indemnify it
against any claim that
7
<PAGE> 8
may be made against it on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
Section 4.3. Transfer on Books. Subject to the restrictions, if any, stated
or noted on the stock certificate, shares of stock may be transferred on the
books of the Corporation by the surrender to the Corporation or its transfer
agent of the stock certificate properly endorsed or accompanied by a written
assignment and power of attorney properly executed, with any necessary transfer
stamps affixed, and with such proof of the authenticity of signature as the
Board or the transfer agent of the Corporation, may reasonably require.
Except as may be otherwise required by law, by the Certificate of
Incorporation or by these By-laws, the Corporation will be entitled to treat the
record holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to receive notice and
to vote or to give any consent with respect to such stock and to be held liable
for such calls and assessments, if any, as may lawfully be made on such stock,
regardless of any transfer, pledge or other disposition of such stock until the
shares have been properly transferred on the books of the Corporation.
It will be the duty of each stockholder to notify the Corporation
of his current post office address.
ARTICLE V
Miscellaneous
Section 5.1. Certificate of Incorporation. These By-laws are subject to
the Certificate of Incorporation of the Corporation, and in the case of a
conflict, the Certificate controls.
Section 5.2. Amendment of By-laws. These By-laws may be amended or
repealed, and new By-laws made, by the Board, subject to the stockholders' right
to amend and repeal By-laws made by the Board.
Section 5.3. Location of Books. The books and records of the Corporation
may be kept outside of the State of Delaware at such location or locations as
may be designated from time to time by the Board.
<PAGE> 1
EXHIBIT 4.1
Execution Copy
--------------
HAWK CORPORATION
$100,000,000 AGGREGATE PRINCIPAL AMOUNT OF
10 1/4% SENIOR NOTES DUE 2003
----------------
PURCHASE AGREEMENT
------------------
New York, New York
November 22, 1996
SCHRODER WERTHEIM & CO. INCORPORATED
BT SECURITIES CORPORATION
McDONALD & COMPANY SECURITIES, INC.
c/o SCHRODER WERTHEIM & CO. INCORPORATED
Equitable Center
787 Seventh Avenue
New York, New York 10019-6016
Ladies and Gentlemen:
Hawk Corporation, a Delaware corporation (the "COMPANY"),
proposes, subject to the terms and conditions stated herein, to issue and sell
to you (the "INITIAL PURCHASERS") $100,000,000 aggregate principal amount of
10 1/4% Senior Notes due 2003 (the "NOTES"), which Notes will be unconditionally
guaranteed (the "GUARANTEES"), on a senior unsecured basis, by each domestic
subsidiary of the Company existing on the Delivery Date and each domestic
subsidiary (other than Unrestricted Subsidiaries (as defined in the Memorandum))
created or acquired after the Delivery Date (the "GUARANTORS"). The Notes will
be issued pursuant to the provisions of an Indenture (the "INDENTURE") to be
entered into among the Company, the Guarantors and Bank One Trust Company, NA,
as trustee (the "TRUSTEE").
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), in reliance on
exemptions therefrom provided by Section 4(2) of the Securities Act and Rule
144A and Regulation S promulgated thereunder.
In connection with the offering and sale of the Notes (the
"OFFERING"), the Company has prepared a preliminary offering memorandum (such
preliminary offering memorandum, together with any amendment thereof or
supplement thereto, is herein referred to as the "PRELIMINARY OFFERING
MEMORANDUM") and will prepare a final offering memorandum (such final offering
memorandum, together with any amendment thereof or supplement
<PAGE> 2
2
thereto, is herein referred to as the "FINAL OFFERING MEMORANDUM"; and, together
with the Preliminary Offering Memorandum, each a "MEMORANDUM") setting forth or
including a description of the terms of the Notes, the terms of the Offering, a
description of the Company and any material developments relating to the Company
occurring after the date of the most recent financial statements included
therein.
You and your direct and indirect transferees will be entitled
to the benefits of a Registration Rights Agreement to be entered into between
the Company, the Guarantors and the Initial Purchasers substantially in the form
attached hereto as EXHIBIT A (the "REGISTRATION RIGHTS AGREEMENT"), pursuant to
which the Company and each Guarantor will agree to use its best efforts to file
and have declared effective a registration statement (an "EXCHANGE OFFER
REGISTRATION STATEMENT") with the Securities and Exchange Commission (the
"COMMISSION") registering the offer and sale of the Notes, Private Exchange
Notes or the Exchange Notes (each as defined in the Registration Rights
Agreement) under the Securities Act. This Agreement, the Notes, the Guarantees,
the Indenture and the Registration Rights Agreement are referred to herein as
the "OFFERING DOCUMENTS."
The Offering is a component of a series of transactions (the
"TRANSACTIONS") which include, in addition to the Offering: (1) the Company's
repayment and termination of its existing senior credit facility (the "OLD
SENIOR CREDIT FACILITY"); (2) the Company's execution of a new revolving credit
facility (the "NEW REVOLVING CREDIT FACILITY"); (3) the amendment to the
Company's 12% senior subordinated notes; (4) the merger of the Company with Hawk
Holding Corp., a Delaware corporation and a principal stockholder of the
Company; and (5) the acquisition of Hutchinson Foundry Products Company
("HUTCHINSON").
The agreements evidencing the Transactions (excluding the
Hutchinson acquisition) and the Offering Documents are referred to herein as the
"TRANSACTION DOCUMENTS."
This letter agreement confirms the understandings concerning
the purchase by you of the Notes from the Company.
1. The Company and each of the Guarantors represents and
warrants to and agrees with you that:
(a) The Preliminary Offering Memorandum, as of its date, did
not contain any untrue statement of a material fact or omit to state a
material fact (except for pricing terms and other financial terms
intentionally left blank) necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading, and the Final Offering Memorandum, as of its date did not,
and as of the Delivery Date (as defined below) will not, contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 1(a) do
not apply to statements or omissions contained in any Memorandum made
in reliance upon and in conformity
<PAGE> 3
3
with information relating to the Initial Purchasers furnished by the
Initial Purchasers to the Company in writing expressly for use in
either Memorandum.
(b) Neither the Company nor any of the Subsidiaries (as
defined below) has sustained, since the date of the most recent
financial statements included in the Memorandum, any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, which loss or
interference is material to the Company and the Subsidiaries, taken as
a whole. Except as described in the Final Offering Memorandum, since
the respective dates as of which information is given in the Final
Offering Memorandum there has not been any change in the capital stock
or short-term debt or long-term debt of the Company or any of the
Subsidiaries, or any change or development which could reasonably be
expected to have a material adverse effect upon the business,
operations, assets, condition (financial or otherwise) or prospects of
the Company and the Subsidiaries, taken as a whole, or an adverse
effect on the ability of the Company to perform its obligations under
the Offering Documents (a "MATERIAL ADVERSE EFFECT"), otherwise than as
set forth or contemplated in the Final Offering Memorandum.
(c) The Company and the Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title
to all personal property owned by them, in each case, free and clear of
all liens, adverse claims, encumbrances, security interests
(collectively, "LIENS") and defects except those arising under the Old
Senior Credit Facility (which shall be released concurrently with the
Offering upon termination of the Old Senior Credit Facility) and those
that are described or contemplated by the Final Offering Memorandum or
those that do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such
property by the Company and the Subsidiaries. Any real property and
buildings held under lease by the Company and the Subsidiaries are held
by them under valid, subsisting and enforceable lease with such
exceptions which do not have a Material Adverse Effect and do not
interfere with the use made and proposed to be made of such real
property and buildings by the Company and the Subsidiaries.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with all necessary corporate power and authority to own
its properties and to conduct its business as described in the Final
Offering Memorandum. The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
property, or conducts any business, so as to require such qualification
(except where the failure to so qualify, singly or in the aggregate
with all other such failures, would not have a Material Adverse
Effect). Each of the Company's subsidiaries (the "SUBSIDIARIES") is
listed on SCHEDULE I hereto. Except as described in the Final Offering
Memorandum, each of the Subsidiaries is wholly owned directly or
indirectly by the Company. Each of the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation, with all necessary
<PAGE> 4
4
corporate power and authority to own its properties and conduct its
business as described in the Final Offering Memorandum. Each of the
Subsidiaries has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases property, or conducts any
business, so as to require such qualification (except where the failure
to so qualify, singly or in the aggregate with all other such failures,
would not have a Material Adverse Effect).
(e) The Company had at the date indicated in the Final
Offering Memorandum an authorized issued and outstanding capitalization
as set forth in the column entitled "Actual" under the caption
"Capitalization" as set forth in the Final Offering Memorandum and,
based on the assumptions stated in the Final Offering Memorandum, the
Company would have had on the date indicated the adjusted
capitalization as set forth in the column entitled "As Adjusted" under
the caption "Capitalization" as set forth in the Final Offering
Memorandum. Except as described in each Memorandum, there are no
outstanding options, warrants, or other rights calling for the issuance
of, and there are no commitments, plans, or arrangements to issue, any
shares of capital stock of the Company or any security convertible or
exchangeable or exercisable for capital stock of the Company. All of
the issued and outstanding shares of capital stock of each Subsidiary
have been duly and validly authorized and issued, are fully paid and
non-assessable and are owned by the Company free and clear of all
Liens, except for Liens arising under the Old Senior Credit Facility,
which shall be released concurrently with the Offering. There are no
outstanding options, warrants or other rights to acquire, or
instruments convertible into or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock of
any Subsidiary.
(f) This Agreement has been duly authorized, executed and
delivered by the Company and each Guarantor and (assuming due
authorization, execution and delivery by the Initial Purchasers) is a
legally valid and binding agreement of the Company and each Guarantor,
enforceable against the Company and each such Guarantor in accordance
with its terms, except that (i) the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or
affecting creditors' rights generally, (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability (regardless of whether in a proceeding in equity or at
law) and (iii) rights to indemnity may be limited by state or federal
laws relating to securities and regulations or by policies underlying
such laws and regulations.
(g) The Indenture has been duly authorized by the Company and
each Guarantor and, when executed and delivered by the Company and each
Guarantor on the Delivery Date (assuming due authorization, execution
and delivery by the Trustee), will be a legally valid and binding
agreement of the Company and each Guarantor, enforceable against the
Company and each such Guarantor in accordance with its terms, except
that (i) the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer
or other
<PAGE> 5
5
similar laws relating to or affecting creditors' rights generally and
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability (regardless of whether in a
proceeding in equity or at law). The Indenture will conform in all
material respects to the description thereof in the Final Offering
Memorandum.
(h) The Notes have been duly and validly authorized by the
Company, and, when executed and authenticated in accordance with the
terms of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will be
legally valid and binding obligations of the Company, entitled to the
benefits of the Indenture and enforceable against the Company in
accordance with their terms, except that (i) the enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or
affecting creditors' rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability (regardless of whether considered in a proceeding in
equity or at law). The Notes will conform in all material respects to
the description thereof contained in the Final Offering Memorandum.
(i) The Exchange Notes and the Private Exchange Notes have
been duly and validly authorized by the Company, and, when executed,
authenticated and delivered in accordance with the terms of the
Indenture and the Registration Rights Agreement, will be legally valid
and binding obligations of the Company, entitled to the benefits of the
Indenture and enforceable against the Company in accordance with their
terms, except that (i) the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws relating to or affecting
creditors' rights generally and (ii) the availability of equitable
remedies may be limited by equitable principles of general
applicability (regardless of whether considered in a proceeding in
equity or at law).
(j) The Guarantees have been duly and validly authorized by
each Guarantor, and, when the Indenture is duly executed and delivered
by the Company and each Guarantor on the Delivery Date, will be legally
valid and binding obligations of each such Guarantor, enforceable
against each such Guarantor in accordance with its terms, except that
(i) the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws relating to or affecting creditors' rights generally and
(ii) the availability of equitable remedies may be limited by equitable
principles of general applicability (regardless of whether considered
in a proceeding in equity or at law).
(k) The Registration Rights Agreement has been duly and
validly authorized by the Company and each Guarantor and, when executed
and delivered by the Company and each Guarantor on the Delivery Date
(assuming due authorization, execution and delivery by the Initial
Purchasers), will be a legally valid and binding agreement of the
Company and each such Guarantor, enforceable against the Company and
each such Guarantor in accordance with its terms, except that (i) the
enforceability thereof may be
<PAGE> 6
6
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws relating to or
affecting creditors' rights generally, (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability (regardless of whether considered in a proceeding in
equity or at law) and (iii) rights to indemnity may be limited by state
or federal laws and regulations relating to securities or by policies
underlying such laws and regulations. The Registration Rights Agreement
will conform in all material respects to the description thereof
contained in the Final Offering Memorandum.
(l) The execution, delivery and performance by the Company of
the Offering Documents and the consummation of the Transactions
contemplated thereby will not (i) conflict with, or result in a breach
or violation of, any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, license, permit,
loan agreement, lease or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which any of them
or any of their respective properties or assets is bound or is subject,
(ii) violate any provision of the certificate of incorporation or the
by-laws of the Company or any of the Subsidiaries or any statute or any
order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of the Subsidiaries or any
of their properties or assets, or (iii) result in or require the
creation or imposition of any Lien, upon or with respect to any of the
properties of the Company or any of the Subsidiaries, except pursuant
to the terms of the Indenture. No consent, approval, authorization,
order, registration or qualification of or with any court of
governmental agency or body is required for the issue and sale of the
Notes or the consummation of the other Transactions, except such
consents, approvals, authorizations, registrations or qualifications as
(x) may be required under state securities or Blue Sky laws in
connection with the offer and sale of the Notes, (y) have been obtained
and are in full force and effect or (z) as contemplated in the
Registration Rights Agreement.
(m) There are no legal or governmental proceedings pending to
which the Company or any of the Subsidiaries is a party or of which any
of their respective properties or assets is the subject which, if
determined adversely, could reasonably be expected, singly or in the
aggregate, to have a Material Adverse Effect. To the Company's
knowledge, no such proceedings are threatened or contemplated by any
governmental agency or body or any other person.
(n) The Company and the Subsidiaries have all material
licenses, permits and other approvals or authorizations of and from
governmental agencies and bodies ("PERMITS") as are necessary under
applicable law to own their respective properties and to conduct their
respective businesses in the manner now being conducted and as proposed
to be conducted as described in the Final Offering Memorandum. The
Company and the Subsidiaries have fulfilled and performed all of their
respective obligations with respect to such Permits, and no event has
occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or result in any other material
impairment of the rights of the holder of any such Permits.
<PAGE> 7
7
(o) Each of Ernst & Young LLP, Deloitte & Touche LLP and
Coopers & Lybrand LLP who have certified certain financial statements
of the Company and other entities in the Final Offering Memorandum, are
independent public accountants under rule 101 of AICPA's Code of
Professional Conduct and its interpretation and rulings.
(p) The consolidated financial statements included in the
Final Offering Memorandum present fairly in all material respects the
financial condition, the results of operations and the cash flows of
the entities shown as of the dates and for the periods therein
specified in conformity with generally accepted accounting principles
("GAAP") consistently applied throughout the periods involved, except
as otherwise stated therein. The unaudited PRO FORMA financial
statements included in the Final Offering Memorandum comply in all
material respects with the applicable accounting requirements of the
Securities Act and in the Company's opinion, the assumptions used in
the preparation thereof are reasonable and the adjustments used therein
are appropriate to give effect to the transactions or circumstances
referred to therein.
(q) There is no presently existing dispute or controversy
between the Company or any of the Subsidiaries and any of their
respective employees which has had or is likely to have, and the
Company has no reason to believe that the relationship of the Company
and the Subsidiaries with their unions or employees is likely to have,
a Material Adverse Effect.
(r) The Company and the Subsidiaries own or possess adequate
patents, patent rights, inventions, trademarks, service marks, trade
names and copyrights necessary to conduct their business as presently
conducted and as proposed to be conducted, as described in the Final
Offering Memorandum. Neither the Company nor any of the Subsidiaries
has received any notice of infringement of or conflict with asserted
rights of others with respect to any material patent, patent rights,
inventions, trademarks, service marks, trade names or copyrights.
(s) Neither the Company nor any of the Subsidiaries is in
violation of any provision of their respective certificate of
incorporation, by-laws or other corporate governance documents. The
Company and each of the Subsidiaries is in compliance with all laws,
rules, regulations, orders, judgments, writs and decrees applicable to
them other than those which, singly or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(t) Assuming consummation of the Transactions, no default
exists, and no event has occurred which, with notice or lapse of time,
or both, would constitute a default in the due performance and
observance of any term, covenant or condition of any indenture,
mortgage, deed of trust, license, permit, loan agreement, lease or
other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which any of them or any of their
respective properties or assets is bound or is subject, which default,
singly or in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
<PAGE> 8
8
(u) The Company and the Subsidiaries have timely filed all
federal income and other material tax returns and notices. The Company
has no knowledge, or any reasonable grounds to know, of any tax
deficiencies which would have a Material Adverse Effect. The Company
and its Subsidiaries have paid all federal, state, local and foreign
taxes of any nature which are shown on its returns to be due, in each
case except as may be set forth or adequately reserved for in the
financial statements included in each Memorandum in accordance with
GAAP. The amounts currently set up as provisions for taxes or otherwise
by the Company and the Subsidiaries on their books and records are
sufficient for the payment of all their unpaid federal, foreign, state,
county and legal taxes accrued through the dates as of which they
relate, and for which the Company and the Subsidiaries may be liable in
their own right, or as a transferee of the assets of, or as successor
to any other corporation, association, partnership, joint venture or
other entity.
(v) Since the date as of which information is given in the
Preliminary Offering Memorandum through the date hereof, and except as
may otherwise be disclosed in the Final Offering Memorandum, neither
the Company nor any of the Subsidiaries has sold or otherwise disposed
of any capital stock of the Company or the Subsidiaries, directly or
indirectly.
(w) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or
specific authorization; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with GAAP and
to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(x) The Company, immediately before and after the consummation
of the Transactions, will be Solvent. As used herein, the term
"SOLVENT" means, with respect to the Company on a particular date (i)
the fair market value of the assets of the Company is greater than the
total amount of liabilities (including contingent liabilities) of the
Company, (ii) the present fair saleable value of the assets of the
Company is greater than the amount that will be required to pay the
probable liabilities of the Company on its debts as they become
absolute and matured, (iii) the Company is able to realize upon its
assets and pay its debts and other liabilities, including contingent
obligations, as they mature and (iv) such entity does not have an
unreasonably small capital, so as to impair the Company's ability to
conduct its business and meet its obligations.
(y) Neither the Company nor any of its affiliates (as defined
in Rule 501(b) of Regulation D under the Securities Act, an
"AFFILIATE") has directly, or through any agent, (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Securities Act) which is or will be
integrated with the sale of the Notes in a manner that would require
the registration under the
<PAGE> 9
9
Securities Act of the Notes or (ii) engaged in any form of general
solicitation or general advertising in connection with the offering of
the Notes (as those terms are used in Regulation D under the Securities
Act) or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act.
(z) Neither the Company nor any of the Subsidiaries is, or
will be after giving effect to the Offering, the application of the
proceeds therefrom and the Transactions, 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 (the
"INVESTMENT COMPANY ACT").
(aa) Assuming the representations and warranties of the
Initial Purchasers are true and correct, it is not necessary in
connection with the offer, sale and delivery of the Notes to the
Initial Purchasers in the manner contemplated by this Agreement to
register the Notes under the Securities Act or to qualify the Indenture
under the Trust Indenture Act of 1939, as amended.
(bb) The Company and the Subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals could not reasonably be expected individually or
in the aggregate to result in a Material Adverse Effect.
(cc) When the Notes are issued and delivered pursuant to this
Agreement, the Notes will not be of the same class (within the meaning
of Rule 144A under the Securities Act) as securities of the Company
which are listed on a national securities exchange registered under
Section 6 of the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the Commission promulgated thereunder
(collectively, the "EXCHANGE ACT"), or quoted in a U.S. automated
inter-dealer quotation system.
(dd) The Company and each of its Subsidiaries maintains
insurance covering their properties, operations, personnel and
businesses. Such insurance insures against such losses and risks as are
adequate in accordance with customary industry practice to protect the
Company and the Subsidiaries and their businesses. Neither the Company
nor any of its Subsidiaries has received notice from any insurer or
agent of such insurer that substantial capital improvements or other
expenditures will have to be made in order to continue such insurance.
All such insurance is outstanding and duly in force on the date hereof
and will be outstanding and duly in force on the Delivery Date.
<PAGE> 10
10
2. On the basis of the representations and warranties
contained in this Agreement, and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to the several Initial Purchasers,
and the Initial Purchasers agree, severally, to purchase from the Company, at a
purchase price of 97% of the principal amount thereof (such purchase price being
net of the Initial Purchasers' discount), (i) $50,000,000 aggregate principal
amount of Notes, in the case of Schroder Wertheim & Co. Incorporated, (ii)
$42,500,000 aggregate principal amount of Notes, in the case of BT Securities
Corporation, and (iii) $7,500,000 aggregate principal amount of Notes, in the
case of McDonald & Company Securities, Inc.
3. Certificates in definitive form for the Notes to be
purchased by you hereunder shall be delivered by or on behalf of the Company to
you (the Initial Purchasers) for your account against payment by you of the
purchase price therefor by wire transfer of immediately available funds to an
account or accounts specified by the Company by written notice to the Initial
Purchasers (given at least two business days prior to the Delivery Date), for
the purchase price of the Notes being sold by the Company in New York, New York,
at 9:30 A.M., New York City time, on November 27, 1996, or at such other time,
date and place as you and the Company may agree upon in writing, such time and
date being herein called the "DELIVERY DATE."
Certificates for the Notes so to be delivered will be in good
delivery form, and in such denominations and registered in such names as you may
request not less than 48 hours prior to the Delivery Date. Such certificates
will be made available for checking and packaging in New York, New York, at
least 24 hours prior to the Delivery Date.
4. The Initial Purchasers acknowledge that the Notes have not
been registered under the Securities Act and may not be sold except pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act or pursuant to an effective registration
statement under the Securities Act. Accordingly, the Initial Purchasers propose
to offer the Notes for resale only to certain investors (as further described in
subparagraph (a) of this Paragraph 4) upon the terms and conditions set forth in
this Agreement and the Final Offering Memorandum at the purchase price initially
set forth on the cover page of the Final Offering Memorandum. Each of the
Initial Purchasers hereby severally represents and warrants to, and agrees with
the Company, that:
(a) It is an institutional "accredited investor" (as defined
in 501(a)(1), (2), (3) or (7) under the Securities Act) and will offer
or sell the Notes only to persons who it reasonably believes are
"qualified institutional buyers" within the meaning of Rule 144A in
transactions meeting the requirements of Rule 144A and to a limited
number of other institutional "accredited investors" (as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that, prior
to their purchase of the Notes, deliver to the Initial Purchasers a
letter substantially in the form attached to each Memorandum as ANNEX
A; and
<PAGE> 11
11
(b) It has not and will not offer or sell the Notes by any
form of general solicitation or general advertising, including but not
limited to, the methods described in Rule 502(c) of Regulation D under
the Securities Act.
5. In consideration of the agreements of the several Initial
Purchasers contained in this Agreement, the Company and the Guarantors covenant
and agree:
(a) To furnish to you, without charge, as many copies of the
Final Offering Memorandum and any supplements and amendments thereto as
you may reasonably request.
(b) Before amending or supplementing any Memorandum subsequent
to the execution of this Agreement, to furnish to you a copy of each
such proposed amendment or supplement and not to use any such proposed
amendment or supplement to which you reasonably object.
(c) If, at any time prior to the completion of the
distribution of the Notes to persons that are not your Affiliates (as
determined by you), any event occurs as a result of which the Final
Offering Memorandum would include any untrue statement of a material
fact, or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if for any other reason it is necessary at any time
to amend or supplement the Final Offering Memorandum to comply with
applicable law, to notify you thereof and to prepare, at the expense of
the Company, an amendment or supplement to the Final Offering
Memorandum that corrects such statement or omission or effects such
compliance.
(d) To endeavor to qualify the Notes for offer and sale under
the securities or Blue Sky laws of such jurisdictions in the United
States as you shall reasonably request; PROVIDED, HOWEVER, that neither
the Company nor any Guarantor shall be obligated to file any general
consent to service of process or to qualify as a foreign corporation or
as a dealer in securities in any jurisdiction in which it is not so
qualified or to subject itself to taxation in respect of doing business
in any jurisdiction in which it is not otherwise so subject. The
Company and the Guarantors will file such statements and reports as may
be required by the laws of each jurisdiction in which the Notes have
been qualified as above provided. The Company and the Guarantors will
also supply you with such information as is necessary for the
determination of the legality of the Notes in such jurisdictions as you
may request.
(e) Not to, and will not permit any of their Affiliates to,
sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act) which could
be integrated with the sale of the Notes in a manner which would
require the registration under the Securities Act of the Notes.
(f) Except following the effectiveness of the Exchange Offer
Registration Statement (as defined in the Registration Rights
Agreement), not to solicit any offer to buy or offer to sell the Notes
by means of any form of general solicitation or general
<PAGE> 12
12
advertising (as these terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act.
(g) While any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, to make available, upon request, to any holder or
beneficial owner of outstanding Notes the information specified in Rule
144A(d)(4) under the Securities Act, unless the Company is then subject
to Section 13 or 15(d) of the Exchange Act.
(h) To use their best efforts to permit the Notes to be
designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers,
Inc. relating to trading in the PORTAL Market and to permit the Notes
to be eligible for clearance and settlement through the Depository
Trust Company.
(i) For a period of five years following the Delivery Date, to
furnish to the Initial Purchasers copies of any annual reports,
quarterly reports and current reports filed with the Commission on
Forms 10-K, 10-Q and 8-K, or such other similar forms as may be
designated by the Commission, and such other documents, reports and
information as shall be furnished by the Company and the Guarantors to
the Trustee or to the holders of the Notes pursuant to the Indenture.
(j) Not to, and will not permit any of their Affiliates to,
resell any Notes that have been acquired by any of them.
(k) To use the proceeds from the sale of the Notes in the
manner set forth in the Final Offering Memorandum and in a manner that
will not result in the Company becoming an "investment company" or an
entity "controlled by" an investment company within the meaning of the
Investment Company Act, and the rules and regulations of the
Commission thereunder.
(l) Not to, and will cause each of their Affiliates not to,
offer, sell, contract to sell or grant any option to purchase or
otherwise transfer or dispose of any debt security, or any security
convertible into or in exchange for, any such debt security of the
Company or any such Subsidiary (other than (x) any private loan, credit
or financing agreement with a bank or similar institution, (y) the
Notes, the Exchange Notes and the Private Exchange Notes and (z) as
contemplated in the Transactions), for a period of 180 days after the
date of this Agreement, without your prior written consent.
6. The Company and the Guarantors covenant and agree, jointly
and severally, to pay or cause to be paid: (i) the fees, disbursements and
expenses of counsel and accountants for the Company and the Trustee and its
counsel, and all other expenses, in connection with the preparation and printing
of each Memorandum and amendments and supplements thereto and the furnishing of
copies thereof, including charges for mailing, air
<PAGE> 13
13
freight and delivery and counting and packaging thereof to the Initial
Purchasers and dealers; (ii) all expenses in connection with the qualification
of the Notes for offering and sale under state securities laws as provided in
Section 5(d) hereof, including disbursements and expenses for counsel for the
Initial Purchasers in connection with such qualification and in connection with
Blue Sky surveys; (iii) any fees charged by rating agencies for the rating of
the Notes; (iv) the costs and expenses in connection with the preparation,
issuance and delivery of the Notes; and (v) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section 6, including the fees, if any,
incurred in connection with the admission of the Notes for trading in any
appropriate market systems, the cost of the Company's personnel and other
internal costs, the cost of printing and engraving the certificates representing
the Notes and all expenses and property, excise and similar taxes incident to
the sale and delivery of the Notes to be sold by the Company to the Initial
Purchasers hereunder; PROVIDED that such costs and expenses shall not (except as
provided in (ii) above) include fees and expenses of counsel to the Initial
Purchasers.
7. Your obligations hereunder shall be subject, in your
discretion, to the following additional conditions:
(a) The representations and warranties of the Company and the
Guarantors contained in this Agreement shall be true and correct as of
the date hereof and as of the Delivery Date. The Company and the
Guarantors shall have performed all covenants and agreements and
satisfied all conditions on their part to be performed or satisfied
hereunder at or prior to the Delivery Date.
(b) The sale of the Notes by the Company hereunder shall not
be enjoined (temporarily or permanently) on the Delivery Date.
(c) Subsequent to the date as of which information is given in
the Final Offering Memorandum, except in each case as described in or
as contemplated by the Final Offering Memorandum, the Company and the
Subsidiaries shall not have incurred any liabilities or obligations,
direct or contingent, that are material to the Company and the
Subsidiaries or entered into any transactions that are material to the
business, condition (financial or other), results of operations or
prospects of the Company or any of the Subsidiaries.
(d) Subsequent to the date of this Agreement and prior to the
Delivery Date, there shall not have occurred any downgrading, nor shall
any notice have been given of any intended or potential downgrading or
of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any of the
Company's securities, including the Notes, by any "nationally
recognized statistical rating organization" as such term is defined for
purposes of Rule 436(g)(2) under the Securities Act.
(e) You shall have received on the Delivery Date certificates
of the Company and the Guarantors dated the Delivery Date and signed
by, the Chief Executive Officer
<PAGE> 14
14
or the President and by the Chief Financial Officer of the Company and
each Guarantor, to the effect set forth in clauses (a), (b), (c) and
(d) above, as applicable.
(f) Kohrman Jackson & Krantz P.L.L., counsel to the Company
and the Guarantors, shall have furnished to you their written opinion,
dated the Delivery Date, in the form attached hereto as EXHIBIT B.
(g) Simpson Thacher & Bartlett, counsel to the Initial
Purchasers, shall have furnished to the Initial Purchasers a written
opinion, dated the Delivery Date, in form and substance satisfactory to
you, and such counsel shall have received such papers and information
as they may reasonably request to enable them to pass upon the matters
covered by such opinion.
(h) You shall have received on each of the dates hereof and
the Delivery Date a letter, dated the date hereof or the Delivery Date,
as the case may be, in form and substance reasonably satisfactory to
you, from each of Ernst & Young LLP, Deloitte & Touche LLP, and Coopers
& Lybrand LLP.
(i) (i) Since the date of this Agreement, neither the Company
nor any of the Subsidiaries shall have sustained any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree; and (ii)
since the respective dates as of which information is given in the
Final Offering Memorandum, there shall not have been any change in the
capital stock or short-term debt or long-term debt of the Company or
any of the Subsidiaries nor any other change, which could reasonably be
expected to have a Material Adverse Effect otherwise than as set forth
or contemplated in the Final Offering Memorandum, the effect of which,
in any such case described in clause (i) or (ii), is in your judgment
so material and adverse as to make it impracticable or inadvisable to
proceed with the Offering or the delivery of the Notes on the terms and
in the manner contemplated in the Final Offering Memorandum.
(j) Subsequent to the execution and delivery of this
Agreement, (i) there shall have been no declaration of war by the
Government of the United States; (ii) there shall not have occurred any
material adverse change in the financial or securities markets in the
United States or in political, financial or economic conditions in the
United States or any outbreak or material escalation of hostilities or
other calamity or crisis, the effect of which is such as to make it, in
the judgment of the Initial Purchasers, impracticable to market the
Notes or to enforce contracts for the resale of Notes and (iii) no
event shall have occurred resulting in (A) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange
or the Nasdaq National Market being suspended or limited or minimum or
maximum prices being generally established on such exchange or market,
or (B) additional material governmental restrictions, not in force on
the date of this Agreement, being imposed upon trading in securities
generally by such exchange or by order of the Commission or any court
or
<PAGE> 15
15
other governmental authority or (C) a general banking moratorium being
declared by either Federal or New York authorities.
(k) The Company and each Guarantor shall have furnished or
caused to be furnished to you at the Delivery Date any additional
certificates signed by the officers of the Company and each Guarantor,
as the case may be, satisfactory to you as to such matters as you may
reasonably request.
(l) The Company, the Guarantors and the Initial Purchasers
shall have entered into the Registration Rights Agreement.
(m) All of the Transactions (other than the Offering, the
application of the proceeds therefrom and the Hutchinson acquisition)
shall have been consummated in accordance with the Transaction
Documents.
8. (a) The Company and each Guarantor agrees, jointly and
severally, to indemnify and hold harmless the Initial Purchasers against any
losses, claims, damages or liabilities ("LOSSES"), joint or several, to which
any of the Initial Purchasers may become subject, under the Securities Act, the
Exchange Act, any other federal or state statutory law or regulation, at common
law or otherwise, insofar as such Losses (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in either Memorandum, or the omission or alleged
omission to state therein a material fact necessary to make the statements made
therein not misleading, and will reimburse the Initial Purchasers for any legal
or other expenses reasonably incurred by the Initial Purchasers in connection
with investigating, preparing to defend, defending or appearing as a third-party
witness in connection with any such action or claim; PROVIDED, HOWEVER, that the
Company and the Guarantors shall not be liable to any Initial Purchaser in any
such case to the extent that any such Loss arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
relating to such Initial Purchaser made in either Memorandum in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such Initial Purchaser expressly for use therein; PROVIDED, FURTHER
HOWEVER, that the foregoing indemnification with respect the Preliminary
Offering Memorandum shall not inure to the benefit of any Initial Purchaser if a
copy of the Final Offering Memorandum (as then amended or supplemented) was not
sent or given by or on behalf of the Initial Purchasers to the person asserting
any Losses, if required by law so to have been delivered, and if the Final
Offering Memorandum (as amended or supplemented) would have cured the defect
giving rise to such Losses.
(b) In addition to any obligations of the Company and the
Guarantors under Section 8(a), the Company and each Guarantor agrees that it
shall perform its indemnification obligations under Section 8(a) (as modified by
the last paragraph of this Section 8(b)), with respect to counsel fees and
expenses and other expenses reasonably incurred by making payments within 45
days to the Initial Purchasers in the amount of the statements of the Initial
Purchasers' counsel or other statements which shall be forwarded by the Initial
Purchasers, and that it shall make such payments notwithstanding the absence of
a judicial determination as to the propriety and enforceability of the
obligation to reimburse the Initial Purchasers for such
<PAGE> 16
16
expenses and the possibility that such payments might later be held to have been
improper by a court and a court orders return of such payments.
The indemnity agreement in Section 8(a) shall be in addition
to any liability which the Company or any Guarantor may otherwise have and shall
extend upon the same terms and conditions to each person, if any, who controls
any of the Initial Purchasers within the meaning of the Securities Act or the
Exchange Act, and to the officers, directors, employees, representatives and
agents of any of the Initial Purchasers or any such control person.
(c) Each of the Initial Purchasers will, severally and not
jointly, indemnify and hold harmless the Company and the Guarantors against any
Losses to which the Company or the Guarantors may become subject, under the
Securities Act, the Exchange Act, any federal or state statutory law or
regulation, at common law or otherwise, insofar as such Losses (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in either Memorandum, 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, 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 either Memorandum in reliance upon and in conformity with
written information furnished to the Company by or on behalf of such Initial
Purchaser relating to such Initial Purchaser expressly for use therein, and will
reimburse the Company and the Guarantors for any legal or other expenses
reasonably incurred by the Company or the Guarantors in connection with
investigating, preparing to defend or defending any such action or claim.
The indemnity agreement in this Section 8(c) shall be in
addition to any liability which the Initial Purchasers may otherwise have and
shall extend, upon the same terms and conditions, to each officer, director,
employee, representative and agent of the Company and the Guarantors and to each
person, if any, who controls the Company or any Guarantor within the meaning of
the Securities Act or the Exchange Act.
(d) Promptly after receipt by an indemnified party under
Section 8(a) or 8(c) of notice of the commencement of any action (including any
governmental investigation), such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party under Section 8(a) or 8(c)
except to the extent it was unaware of such action and has been prejudiced in
any material respect by such failure or from any liability which it may have to
any indemnified party otherwise than under such Section 8(a) or 8(c). In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to, such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof,
<PAGE> 17
17
the indemnifying party shall not be liable to such indemnified party under such
subsection for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. If, however, (i) the indemnifying party has authorized
the employment of counsel for the indemnified party at the expense of the
indemnifying party or (ii) an indemnified party shall have reasonably concluded
that representation of such indemnified party and the indemnifying party by the
same counsel would be inappropriate under applicable standards of professional
conduct due to actual or potential differing interests between them and the
indemnified party so notifies the indemnifying party in writing, setting forth
the reasons therefor, then the indemnified party shall be entitled to employ
counsel different from counsel for the indemnifying party, at the expense of the
indemnifying party and the indemnifying party shall not have the right to assume
the defense of such indemnified party. In no event shall the indemnifying
parties be liable for fees and expenses or more than one counsel (in addition to
local counsel) for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same set of allegations or circumstances. The counsel with respect to which
fees and expenses shall be so reimbursed shall be designated in writing by
Schroder Wertheim & Co. Incorporated in the case of parties indemnified pursuant
to Section 8(a) and by the Company in the case of parties indemnified pursuant
to Section 8(c).
The Company shall not be liable for any settlement of any such
action or proceeding effected without its consent (not to be unreasonably
withheld) and if settled with its written consent or if there is a final
judgment for the plaintiff, the Company agrees to indemnify and hold harmless
the Initial Purchasers and each other person referred to in Section 8(b) to the
extent provided herein. Without limiting the generality of the foregoing, no
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which any such indemnified party is or has been threatened to be made a party
and to which the indemnity herein is applicable; PROVIDED, HOWEVER, that an
indemnifying party may effect such a settlement without the consent of the
indemnified party if such settlement includes an unconditional release of such
indemnified party from all liability for claims that are the subject matter of
such proceeding or the indemnifying party indemnifies the indemnified party in
writing and posts a bond for an amount equal to the maximum liability for all
such claims as contemplated above.
(e) In order to provide for just and equitable contribution
under the Securities Act in any case in which (i) any indemnified party makes
claim for indemnification pursuant to Section 8(a) hereof, but is judicially
determined (by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that Section 8(a) provides for indemnification in such
case or (ii) contribution under the Securities Act may be required on the part
of the Initial Purchasers or any such controlling person in circumstances for
which indemnification is provided under Section 8(c), then, and in each such
case, the Company and the Guarantors, on the one hand, and the Initial
Purchasers, on the other hand, severally and not jointly, shall contribute to
the aggregate Losses to which they may be subject as an indemnifying party
hereunder (after contribution from others) in such proportion so that the
Initial Purchasers are responsible for the portion represented by the
<PAGE> 18
18
percentage that the total discounts paid to the Initial Purchasers appearing on
the cover page of the Final Offering Memorandum bears to the total proceeds to
the Company (net of discounts of the Initial Purchasers) appearing thereon and
the Company and the Guarantors are responsible for the remaining portion;
PROVIDED, HOWEVER, that, in any such case, (x) no Initial Purchaser shall be
required to contribute any amount in excess of such Initial Purchaser's discount
applicable to the Notes and (y) no person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to a contribution from any person who was not guilty of such
fraudulent misrepresentation. The amount paid or payable by the Initial
Purchasers result of this Section 8(e) shall be deemed to include any legal or
other expenses reasonably incurred preparing to defend or defending any such
claim.
(f) Promptly after receipt by any party to this Agreement of
notice of the commencement of any action, suit or proceeding, such party will,
if a claim for contribution in respect thereof is to be made against another
party (the "CONTRIBUTING PARTY"), notify the contributing party of the
commencement thereof; but the omission so to notify the contributing party will
not relieve it from any liability which it may have to any other party for
contribution under the Securities Act, the Exchange Act or otherwise, except to
the extent it was unaware of such action and has been prejudiced in any material
respect by such failure or from any liability which it may have to any other
party other than for contribution under the Securities Act, the Exchange Act or
otherwise. In case any such action, suit or proceeding is brought against any
party, and such party notifies a contributing party of the commencement thereof,
the contributing party will be entitled to participate therein with the
notifying party and any other contributing party similarly notified.
9. The respective indemnities, agreements, representations,
warranties and other statements of the Company, the Guarantors and the Initial
Purchasers, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Initial Purchasers or any controlling person of the
Initial Purchasers, the Company, the Guarantors, or an officer or director or
controlling person of the Company or any Guarantor and shall survive delivery of
and payment for the Notes.
10. The obligations of the Initial Purchasers hereunder may be
terminated by the Initial Purchasers by notice given to and received by the
Company prior to delivery of and payment for the Notes, if, prior to that time,
any of the events described in Section 7(d), 7(i), or 7(j) shall have occurred
or if the Initial Purchasers shall decline to purchase the Notes for any other
reason permitted under this Agreement.
11. If (a) the Company shall fail to tender the Notes for
delivery to the Initial Purchasers for any reason permitted under this Agreement
or (b) the Initial Purchasers shall decline to purchase the Notes for any reason
permitted under this Agreement (including the termination of this Agreement
pursuant to Section 10), the Company shall reimburse the Initial Purchasers for
the fees and expenses of their counsel and for such other out-of-pocket expenses
as shall have been incurred by them in connection with this Agreement and the
<PAGE> 19
19
proposed purchase of the Notes, and upon demand, the Company shall pay the full
amount thereof to the Initial Purchasers.
12. All statements, requests, notices and agreements hereunder
shall be in writing or by written telecommunication, and shall be sufficient in
all respects if delivered or sent by registered mail, if to the Initial
Purchasers, to them in care of Schroder Wertheim & Co. Incorporated at 787
Seventh Avenue, New York, New York 10019, Attention: High Yield Department; and
if to the Company to Hawk Corporation at the address of the Company set forth in
the Final Offering Memorandum, Attention: Chief Executive Officer.
13. This Agreement shall be binding upon, and inure solely to
the benefit of, you, the Company, the Guarantors and, to the extent provided in
Section 8 and Section 9 hereof, controlling persons, officers, directors,
employees, representatives and agents referred to in Section 8, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Notes from the Initial Purchasers shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to
principles of conflicts of law).
16. 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.
17. Each Guarantor, by its execution and delivery of a
counterpart to this Agreement, agrees that it shall be jointly and severally
liable for all obligations and liabilities of the Company hereunder.
<PAGE> 20
[SIGNATURE PAGE]
If the foregoing is in accordance with your understanding,
please sign and return to us a counterpart hereof, and upon the acceptance
hereof by you, this letter and such acceptance hereof shall constitute a binding
agreement among you, the Company and the Guarantors.
Very truly yours,
HAWK CORPORATION
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
FRICTION PRODUCTS CO.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HAWK BRAKE, INC.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
LOGAN METAL STAMPINGS, INC.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HELSEL, INC.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
<PAGE> 21
21
S.K. WELLMAN HOLDINGS, INC.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
WELLMAN FRICTION PRODUCTS U.K.
CORP.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
S.K. WELLMAN CORP.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HUTCHINSON PRODUCTS CORPORATION
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
<PAGE> 22
22
Accepted as of the date hereof:
SCHRODER WERTHEIM & CO.
INCORPORATED
By: /s/ James L. Amine
-------------------------------
Name: James L. Amine
Title: Director
BT SECURITIES CORPORATION
By: /s/ A. Penn
-------------------------------
Name: A. Penn
Title: M.D.
McDONALD & COMPANY SECURITIES, INC.
By: /s/ Christopher Gorman
-------------------------------
Name: Christopher Gorman
Title: Managing Director
<PAGE> 23
ANNEX I TO
PURCHASE AGREEMENT
------------------
Subsidiaries of the Company
---------------------------
Friction Products Co.
Hawk Brake, Inc.
Logan Metal Stampings, Inc.
Helsel, Inc.
S.K. Wellman Holdings, Inc.
S.K. Wellman Corp.
Wellman Friction Products U.K. Corp.
S.K. Wellman S.p.A.
The S.K. Wellman Company of Canada, Ltd.
Hutchinson Products Corporation
<PAGE> 1
EXHIBIT 4.2
EXECUTION COPY
Exhibit A to
Purchase Agreement
------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of November 27, 1996
By and Among
HAWK CORPORATION,
FRICTION PRODUCTS CO.,
HAWK BRAKE, INC.,
LOGAN METAL STAMPINGS, INC.,
HELSEL, INC.,
S.K. WELLMAN HOLDINGS, INC.,
WELLMAN FRICTION PRODUCTS U.K. CORP.,
S.K. WELLMAN CORP.,
and
HUTCHINSON PRODUCTS CORPORATION,
and
SCHRODER WERTHEIM & CO. INCORPORATED,
BT SECURITIES CORPORATION,
and
McDONALD & COMPANY SECURITIES, INC.
as Initial Purchasers
10 1/4% Senior Notes due 2003
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Definitions................................................................................................. 1
2. Exchange Offer.............................................................................................. 5
3. Shelf Registration.......................................................................................... 8
4. Additional Interest......................................................................................... 9
5. Registration Procedures..................................................................................... 11
6. Registration Expenses....................................................................................... 19
7. Indemnification............................................................................................. 19
8. Rules 144 and 144A.......................................................................................... 23
9. Underwritten Registrations.................................................................................. 23
10. Miscellaneous.............................................................................................. 23
(a) No Inconsistent Agreements.................................................................... 23
(b) Adjustments Affecting Registrable Notes....................................................... 24
(c) Amendments and Waivers........................................................................ 24
(d) Notices....................................................................................... 24
(e) Successors and Assigns........................................................................ 25
(f) Counterparts.................................................................................. 25
(g) Headings...................................................................................... 25
(h) Governing Law................................................................................. 25
(i) Severability.................................................................................. 25
(j) Securities Held by the Company or their Affiliates............................................ 26
(k) Third Party Beneficiaries..................................................................... 26
(l) Attorneys' Fees............................................................................... 26
(m) Entire Agreement.............................................................................. 26
Schedule I Subsidiary Guarantors
</TABLE>
- i -
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "AGREEMENT") is dated
as of November 27, 1996, by and among HAWK CORPORATION, a Delaware corporation
(the "COMPANY"), each subsidiary of the Company named on Schedule I hereto (the
"GUARANTORS") and SCHRODER WERTHEIM & CO. INCORPORATED, BT SECURITIES
CORPORATION and McDONALD & COMPANY SECURITIES CORPORATION (the "INITIAL
PURCHASERS"), on the other hand.
This Agreement is entered into in connection with the Purchase
Agreement, dated as of November 22, 1996, among the Company, the Guarantors and
the Initial Purchasers (the "PURCHASE AGREEMENT"), which provides for the sale
by the Company and the Guarantors to the Initial Purchasers of $100,000,000
aggregate principal amount of the Company's 10 1/4% Senior Notes due 2003 (the
"NOTES") which Notes shall be unconditionally guaranteed on a senior unsecured
basis (the "GUARANTEES" and, together with the Notes, the "SECURITIES") by each
domestic subsidiary of the Company on the date hereof (the "ISSUE DATE") and
each domestic subsidiary of the Company (other than Unrestricted Subsidiaries,
as defined in the Purchase Agreement) created or acquired thereafter
(collectively, the "GUARANTORS"). In order to induce the Initial Purchasers to
enter into the Purchase Agreement, the Company and the Guarantors have agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Initial Purchasers and any subsequent holder or holders of the Notes. The
execution and delivery of this Agreement is a condition to the Initial
Purchasers' obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
Section 1. DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
"ADDITIONAL INTEREST" shall have the meaning set forth in
Section 4 hereof.
"ADVICE" shall have the meaning set forth in Section 5 hereof.
"AGREEMENT" shall have the meaning set forth in the
introductory paragraphs hereto.
"APPLICABLE PERIOD" shall have the meaning set forth in
Section 2 hereof.
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
"COMPANY" shall have the meaning set forth in the preamble of
this Agreement and shall also include the Company's permitted successors and
assigns.
"COMMISSION" shall mean the Securities and Exchange
Commission.
<PAGE> 4
2
"EFFECTIVENESS DATE" shall mean, with respect to any
Registration Statement, the 120th day after the Issue Date.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in
Section 3(a) hereof.
"EVENT DATE" shall have the meaning set forth in Section 4
hereof.
"EXCHANGE ACT" shall mean Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"EXCHANGE GUARANTEE" shall have the meaning set forth in
Section 2(a) hereof.
"EXCHANGE NOTES" shall have the meaning set forth in Section 2
hereof.
"EXCHANGE OFFER" shall have the meaning set forth in Section 2
hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall have the meaning
set forth in Section 2 hereof.
"EXCHANGE SECURITIES" shall have the meaning set forth in
Section 2(a) hereof.
"FILING DATE" shall mean, (A) if no Registration Statement has
been filed by the Company pursuant to this Agreement, the 45th day after the
Issue Date; PROVIDED, HOWEVER, that if a Shelf Notice is given within 10 days of
the Filing Date, then the Filing Date with respect to the Initial Shelf
Registration shall be the 15th calendar day after the date of the giving of such
Shelf Notice; and (B) in each other case (which may be applicable
notwithstanding the consummation of the Exchange Offer), the 45th day after the
delivery of a Shelf Notice.
"HOLDER" shall mean any holder of a Registrable Note or
Registrable Notes.
"INDEMNIFIED PERSON" shall have the meaning set forth in
Section 7(c) hereof.
"INDEMNIFYING PERSON" shall have the meaning set forth in
Section 7(c) hereof.
"INDENTURE" shall mean the Indenture, dated as of November 27,
1996, by and between the Company and Bank One Trust Company, NA, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time in accordance with the terms thereof.
"INITIAL PURCHASERS" shall have the meaning set forth in the
preamble hereof.
<PAGE> 5
3
"INITIAL SHELF REGISTRATION" shall have the meaning set forth
in Section 3(a) hereof.
"INSPECTORS" shall have the meaning set forth in Section 5(n)
hereof.
"ISSUE DATE" shall mean November 27, 1996, the date of
original issuance of the Notes.
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on
which banking institutions in New York, New York are required by law, regulation
or executive order to remain closed.
"NASD" shall have the meaning set forth in Section 5(s)
hereof.
"PARTICIPANT" shall have the meaning set forth in Section 7(a)
hereof.
"PARTICIPATING BROKER-DEALER" shall mean any broker-dealer
that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act)
of Exchange Notes received by such broker-dealer in the Exchange Offer or any
other person with similar prospectus delivery requirements for use in connection
with any resale of Exchange Notes.
"PERSON" shall mean an individual, trustee, corporation,
partnership, joint stock company, trust, unincorporated association, union,
business association, firm, government or agency or political subdivision
therefor other legal entity.
"PRIVATE EXCHANGE" shall have the meaning set forth in Section
2 hereof.
"PRIVATE EXCHANGE NOTES" shall have the meaning set forth in
Section 2 hereof.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A promulgated under the Securities Act and any term sheet
filed pursuant to Rule 434 under the Securities Act), as amended or supplemented
by any prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"PURCHASE AGREEMENT" shall have the meaning set forth in the
introductory paragraphs hereof.
"RECORDS" shall have the meaning set forth in Section 5(n)
hereof.
<PAGE> 6
4
"REGISTRABLE NOTES" shall mean each Note upon its issuance and
at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv)
hereof is applicable upon original issuance and at all times subsequent thereto
and each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the Commission and such
Note, Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under state and federal
securities laws, or (iii) such Note, Exchange Note or Private Exchange Note, as
the case may be, ceases to be outstanding for purposes of the Indenture.
"REGISTRATION STATEMENT" shall mean any appropriate
registration statement of the Company, including, but not limited to, the
Exchange Offer Registration Statement, filed with the Commission under the
Securities Act, and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule (other than Rule 144A) or regulation hereafter adopted by the Commission
providing for offers and sales of securities made in compliance therewith
resulting in offers and sales by subsequent holders that are not affiliates of
an issuer of such securities being free of the registration and prospectus
delivery requirements of the Securities Act.
"RULE 144A" shall mean Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule (other than Rule 144) or regulation hereafter adopted by the Commission.
"RULE 415" shall mean Rule 415 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"SHELF NOTICE" shall have the meaning set forth in Section 2
hereof.
"SHELF REGISTRATION" shall have the meaning set forth in
Section 3(b) hereof.
<PAGE> 7
5
"SUBSEQUENT SHELF REGISTRATION" shall have the meaning set
forth in Section 3(b) hereof.
"TIA" shall mean the Trust Indenture Act of 1939, as amended.
"TRUSTEE" shall mean the trustee under the Indenture and the
trustee (if any) under any indenture governing the Exchange Notes and Private
Exchange Notes.
"UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING" shall
mean a registration in which securities of the Company are sold to an
underwriter for reoffering to the public.
Section 2. Exchange Offer
--------------
(a) The Company and the Guarantors shall file with the
Commission, no later than the Filing Date, a Registration Statement (the
"EXCHANGE OFFER REGISTRATION STATEMENT") on an appropriate registration form
with respect to a registered offer (the "EXCHANGE OFFER") to exchange any and
all of the Registrable Notes for a like aggregate principal amount of notes (the
"EXCHANGE NOTES") unconditionally guaranteed on a senior unsecured basis by the
Guarantors (the "EXCHANGE GUARANTEE" and, together with the Exchange Notes, the
"EXCHANGE SECURITIES") of the Company that are identical in all material
respects to the Notes except that the Exchange Notes shall contain no
restrictive legend thereon. The Exchange Offer shall comply with all applicable
tender offer rules and regulations under the Exchange Act and other applicable
law. The Company and the Guarantors shall use their diligent best efforts to (x)
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act on or before the Effectiveness Date; (y) keep the Exchange
Offer open for at least 20 days (or longer if required by applicable law) after
the date that notice of the Exchange Offer is mailed to Holders; and (z)
consummate the Exchange Offer on or prior to the 150th day following the Issue
Date. For purposes of this Section 2(a) only, if after the Exchange Offer
Registration Statement is initially declared effective by the Commission, the
Exchange Offer or the issuance of the Exchange Notes thereunder is interfered
with by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, the Exchange Offer
Registration Statement shall he deemed not to have become effective for purposes
of this Agreement.
Interest on the Exchange Notes issued pursuant to the
Registered Exchange Offer will accrue from the last interest payment date on
which interest was paid on the Notes surrendered in exchange therefor or, if no
interest has been paid on the Notes, from the date of original issue of the
Notes.
Each holder of the Notes who wishes to exchange its Notes for
Exchange Notes in the Exchange Offer will be required to make the following
representations to the Company and the Guarantors, (1) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (2) it
has no arrangement with any person to participate in a
<PAGE> 8
6
public distribution (within the meaning of the Securities Act) of the Exchange
Notes and (3) it is not an "affiliate," as defined in Rule 405 of the Securities
Act, of the Company or any Guarantor, or if it is such an affiliate, that it
will comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable to it.
In addition, each holder who is not a broker-dealer will be
required to represent that it is not engaged in, and does not intend to engage
in, a public distribution of the Exchange Notes. Each holder who is a
broker-deal and who receives Exchange Notes for its own account in exchange will
be required to acknowledge that it will deliver a prospectus in connection with
any resale by it of such Exchange Notes.
Upon consummation of the Exchange Offer in accordance with
this Section 2, the provisions of this Agreement shall continue to apply,
MUTATIS MUTANDIS, solely with respect to Registrable Notes that are Private
Exchange Notes, Exchange Notes as to which Section 2(c)(iv) is applicable and
Exchange Notes held by Participating Broker-Dealers, and the Company shall have
no further obligation to register Registrable Notes (other than Private Exchange
Notes and other than in respect of any Exchange Notes as to which clause
2(c)(iv) hereof applies) pursuant to Section 3 hereof.
No securities other than the Exchange Notes shall be included
in the Exchange Offer Registration Statement.
(b) The Company and the Guarantors shall include within the
Prospectus contained in the Exchange Offer Registration Statement a section
entitled "Plan of Distribution," which shall contain a summary statement of the
positions taken or policies made by the staff of the Commission with respect to
the potential "underwriter" status of any Participating Broker-Dealer, whether
such positions or policies have been publicly disseminated by the staff of the
Commission or such positions or policies represent the prevailing views of the
staff of the Commission. Such "Plan of Distribution" section shall also
expressly permit the use of the Prospectus by all Persons subject to the
prospectus delivery requirements of the Securities Act, including all
Participating Broker-Dealers, and include a statement describing the means by
which Participating Broker-Dealers may resell the Exchange Notes in compliance
with the Securities Act.
The Company and the Guarantors shall use their diligent best
efforts to keep the Exchange Offer Registration Statement effective and to amend
and supplement the Prospectus contained therein in order to permit such
Prospectus to be lawfully delivered by all Persons subject to the prospectus
delivery requirements of the Securities Act for such period of time as is
necessary to comply with applicable law in connection with any resale of the
Exchange Notes covered thereby; PROVIDED, HOWEVER, that such period shall not
exceed 120 days after such Exchange Offer Registration Statement is declared
effective (or such longer period if extended pursuant to the last paragraph of
Section 5 hereof) (the "APPLICABLE PERIOD").
<PAGE> 9
7
If, prior to consummation of the Exchange Offer, any Holder
holds any Notes acquired by it that have, or that are reasonably likely to be
determined to have, the status of an unsold allotment in an initial
distribution, or if any Holder is not entitled to participate in the Exchange
Offer, the Company upon the request of any such Holder shall simultaneously with
the delivery of the Exchange Notes in the Exchange Offer, issue and deliver to
any such Holder, in exchange (the "PRIVATE EXCHANGE") for such Notes held by any
such Holder, a like principal amount of notes (the "PRIVATE EXCHANGE NOTES") of
the Company that are identical in all material respects to the Exchange Notes.
The Private Exchange Notes shall be issued pursuant to the same indenture as the
Exchange Notes and bear the same CUSIP number as the Exchange Notes.
In connection with the Exchange Offer, the Company and the
Guarantors shall:
(1) mail to each Holder entitled to participate in the
Exchange Offer a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an
appropriate letter of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of
New York;
(3) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last
Business Day on which the Exchange Offer shall remain open; and
(4) otherwise comply in all material respects with all
applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer
and the Private Exchange, if any, the Company and the Guarantors shall:
(1) accept for exchange all Notes tendered and not validly
withdrawn pursuant to the Exchange Offer and the Private
Exchange;
(2) deliver to the Trustee for cancellation all Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly
to each Holder of Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the
Notes of such Holder so accepted for exchange.
The Exchange Offer and the Private Exchange shall not be
subject to any conditions, other than that (i) the Exchange Offer or Private
Exchange, as the case may be, does not violate applicable law or any applicable
interpretation of the staff of the Commission,
<PAGE> 10
8
(ii) no action or proceeding shall have been instituted or threatened in any
court or by any governmental agency which might materially impair the ability of
the Company and the Guarantors to proceed with the Exchange Offer or the Private
Exchange, and no material adverse development shall have occurred in any
existing action or proceeding with respect to the Company and (iii) all
governmental approvals shall have been obtained, which approvals the Company
deems necessary for the consummation of the Exchange Offer or Private Exchange.
The Exchange Notes and the Private Exchange Notes shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture (in either case, with such changes as are necessary to
comply with any requirements of the Commission to effect or maintain the
qualification thereof under the TIA) and which, in either case, has been
qualified under the TIA and shall provide that the Exchange Notes shall not be
subject to the transfer restrictions set forth in the Indenture. The Indenture
or such indenture shall provide that the Exchange Notes, the Private Exchange
Notes and the Notes shall vote and consent together on all matters as one class
and that none of the Exchange Notes, the Private Exchange Notes or the Notes
will have the right to vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently
prevailing interpretations of the staff of the Commission, the Company and the
Guarantors are not permitted to effect the Exchange Offer, (ii) the Exchange
Offer is not consummated within 150 days of the Issue Date, (iii) any holder of
Private Exchange Notes so requests, or (iv) in the case of any Holder that
either is not eligible to participate in the Exchange Offer or participates in
the Exchange Offer and does not receive Exchange Notes on the date of the
exchange that may be sold without restriction under state and federal securities
laws (other than due solely to the status of such Holder as an affiliate of the
Company within the meaning of the Securities Act), in the case of each of
clauses (i) to and including (iv) of this sentence, then the Company shall
promptly deliver to the Holders and the Trustee written notice thereof (the
"SHELF NOTICE") and shall file a Shelf Registration pursuant to Section 3
hereof.
Section 3. Shelf Registration
------------------
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) SHELF REGISTRATION. The Company and the Guarantors shall
file with the Commission a Registration Statement for an offering to be made on
a continuous basis pursuant to Rule 415 covering all of the Registrable Notes
not exchanged in the Exchange Offer, Private Exchange Notes and Exchange Notes
as to which Section 2(c)(iv) is applicable (the "INITIAL SHELF REGISTRATION").
The Company and the Guarantors shall use their diligent best efforts to file
with the Commission the Initial Shelf Registration as promptly as practicable.
The Initial Shelf Registration shall be on Form S-1 or another appropriate form
<PAGE> 11
9
permitting registration of such Registrable Notes for resale by Holders in the
manner or manners designated by them (including, without limitation, one or
more underwritten offerings). The Company shall not permit any securities other
than the Registrable Notes to be included in the Initial Shelf Registration or
any Subsequent Shelf Registration (as defined below).
The Company and the Guarantors shall use their best efforts to
cause the Initial Shelf Registration to be declared effective under the
Securities Act on or prior to the Effectiveness Date and to keep the Initial
Shelf Registration continuously effective under the Securities Act for the
period ending on the date which is three years from the Effectiveness Date,
subject to extension pursuant to the last paragraph of Section 5 hereof (the
"EFFECTIVENESS PERIOD"), or such shorter period ending when (i) all Registrable
Notes covered by the Initial Shelf Registration have been sold in the manner set
forth and as contemplated in the Initial Shelf Registration or (ii) a Subsequent
Shelf Registration covering all of the Registrable Notes covered by and not sold
under the Initial Shelf Registration or an earlier Subsequent Shelf Registration
has been declared effective under the Securities Act; PROVIDED, HOWEVER, that
the Effectiveness Period in respect of the Initial Shelf Registration shall be
extended to the extent required to permit dealers to comply with the applicable
prospectus delivery requirements of Rule 174 under the Securities Act and as
otherwise provided herein.
(b) SUBSEQUENT SHELF REGISTRATIONS. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), the Company and the
Guarantors shall use their diligent best efforts to obtain the prompt withdrawal
of any order suspending the effectiveness thereof, and in any event shall within
20 days of such cessation of effectiveness amend the Initial Shelf Registration
in a manner to obtain the withdrawal of the order suspending the effectiveness
thereof, or file an additional "shelf" Registration Statement pursuant to Rule
415 covering all of the Registrable Notes covered by and not sold under the
Initial Shelf Registration or an earlier Subsequent Shelf Registration (each, a
"SUBSEQUENT SHELF REGISTRATION"). If a Subsequent Shelf Registration is filed,
the Company and the Guarantors shall use their diligent best efforts to cause
the Subsequent Shelf Registration to be declared effective under the Securities
Act as soon as practicable after such filing and to keep such Registration
Statement continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "SHELF REGISTRATION" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) SUPPLEMENTS AND AMENDMENTS. The Company and the Guarantors
shall promptly supplement and amend the Shelf Registration if required by the
rules, regulations or instructions applicable to the registration form used for
such Shelf Registration, if required by the Securities Act, or if reasonably
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any underwriter
of such Registrable Notes.
<PAGE> 12
10
Section 4. Additional Interest
-------------------
(a) The Company, the Guarantors and the Initial Purchasers
agree that the Holders will suffer damages if the Company or the Guarantors fail
to fulfill their obligations under Section 2 or Section 3 hereof and that it
would not be feasible to ascertain the extent of such damages with precision.
Accordingly, the Company agrees to pay, as liquidated damages, additional
interest on the Notes ("ADDITIONAL INTEREST") under the circumstances and to the
extent set forth below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration has been filed on or prior
to the applicable Filing Date or (B) notwithstanding that the Company
has consummated or will consummate the Exchange Offer, the Company and
the Guarantors are required to file a Shelf Registration and such Shelf
Registration is not filed on or prior to the Filing Date applicable
thereto, then, commencing on the day after any such Filing Date,
Additional Interest shall accrue on the principal amount of the Notes
at a rate of 0.50% per annum for the first 90 days immediately
following each such Filing Date, and such Additional Interest rate
shall increase by an additional 0.25% per annum at the beginning of
each subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration
Statement nor the Initial Shelf Registration is declared effective by
the Commission on or prior to the relevant Effectiveness Date or (B)
notwithstanding that the Company has consummated or will consummate the
Exchange Offer, the Company and the Guarantors are required to file a
Shelf Registration and such Shelf Registration is not declared
effective by the Commission on or prior to the Effectiveness Date in
respect of such Shelf Registration, then, commencing on the day after
such Effectiveness Date, Additional Interest shall accrue on the
principal amount of the Notes at a rate of 0.50% per annum for the
first 90 days immediately following the day after such Effectiveness
Date, and such Additional Interest rate shall increase by an
additional 0.25% per annum at the beginning of each subsequent 90-day
period; or
(iii) if (A) the Exchange Offer Registration Statement or
(B), if applicable, a Shelf Registration has been declared effective
but thereafter ceases to be effective (except as specifically permitted
in such Registration Statement) at any time during the Effectiveness
Period for period of fifteen consecutive days, then Additional Interest
shall accrue on the principal amount of the Notes at a rate of 0.50%
per annum for the first 90 days commencing on the day such Exchange
Offer Registration Statement or Shelf Registration, as the case may be,
ceases to be effective, and such Additional Interest rate shall
increase by an additional 0.25% per annum at the beginning of each such
subsequent 90-day period;
<PAGE> 13
11
PROVIDED, HOWEVER, that the Additional Interest rate on the Notes may not exceed
at any one time in the aggregate 1.5% per annum; PROVIDED, FURTHER, HOWEVER,
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (a)(i) above of this Section 4), (2) upon the effectiveness of the
Exchange Offer Registration Statement or the applicable Shelf Registration
Statement as required hereunder (in the case of clause (a)(ii) of this Section
4), or (3) upon the effectiveness of the applicable Exchange Offer Registration
Statement or Shelf Registration Statement which had ceased to remain effective
(in the case of (a)(iii) of this Section 4), Additional Interest on the Notes in
respect of which such events relate as a result of such clause (or the relevant
subclause thereof), as the case may be, shall cease to accrue.
(b) The Company shall notify the Trustee within one Business
Day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "EVENT DATE"). Any amounts of
Additional Interest due pursuant to clause (a)(i), (a)(ii) or (a)(iii) of this
Section 4 will be payable in cash semi-annually on each June 1 and December 1
(to the holders of record on the May 15 and November 15 immediately preceding
such dates), commencing with the first such date occurring after any such
Additional Interest commences to accrue. The amount of Additional Interest will
be determined by multiplying the applicable Additional Interest rate by the
principal amount of the Registrable Notes, multiplied by a fraction, the
numerator of which is the number of days such Additional Interest rate was
applicable during such period (determined on the basis of a 360-day year
comprised of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed), and the denominator of which is 360.
Section 5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement
pursuant to Sections 2 or 3 hereof, the Company and the Guarantors shall effect
such registrations to permit the sale of the securities covered thereby in
accordance with the intended method or methods of disposition thereof, and
pursuant thereto and in connection with any Registration Statement filed by the
Company and the Guarantors hereunder the Company and the Guarantors shall:
(a) Prepare and file with the Commission prior to the
applicable Filing Date, a Registration Statement or Registration
Statements as prescribed by Sections 2 or 3 hereof, and use their
diligent best efforts to cause each such Registration to become
effective and remain effective as provided herein; PROVIDED, HOWEVER,
that, if (1) such filing is pursuant to Section 3 hereof, or (2) a
Prospectus contained in the Exchange Offer Registration Statement filed
pursuant to Section 2 hereof is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period relating thereto, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, the Company and the Guarantors shall furnish to
and afford the Holders of the Registrable Notes covered by such
Registration Statement or each such Participating
<PAGE> 14
12
Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (in
each case at least five Business Days prior to such filing, or such
later date as is reasonable under the circumstances). The Company and
the Guarantors shall not file any Registration Statement or Prospectus
or any amendments or supplements thereto if the Holders of a majority
in aggregate principal amount of the Registrable Notes covered by such
Registration Statement, or any such Participating Broker-Dealer, as the
case may be, their counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to each Shelf Registration Statement or
Exchange Offer Registration Statement, as the case may be, as may be
necessary to keep such Registration Statement continuously effective
for the Effectiveness Period or the Applicable Period, as the case may
be; cause the related Prospectus to be supplemented by any Prospectus
supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act applicable to each of them with
respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any
such Prospectus. The Company and the Guarantors shall be deemed not to
have used their diligent best efforts to keep a Registration Statement
effective during the Effective Period of the Applicable Period, as the
case may be, relating thereto if the Company or any Guarantor
voluntarily takes any action that would result in selling Holders of
the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable
Notes or such Exchange Notes during that period unless such action is
required by applicable law.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period relating thereto, notify the selling Holders of Registrable
Notes, or each such Participating Broker-Dealer, as the case may be,
their counsel and the managing underwriters, if any, promptly (but in
any event within one Business Day), and confirm such notice in writing,
(i) when a Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement
or any post-effective amendment, when the same has become effective
under the Securities Act (including in such notice a written statement
that any Holder may, upon request, obtain, at the sole expense of the
Company, one conformed copy of such
<PAGE> 15
13
Registration Statement or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the
Commission of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use
of any preliminary prospectus or the initiation of any proceedings for
that purpose, (iii) if at any time when a prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Company and
the Guarantors contained in any agreement (including any underwriting
agreement) contemplated by Section 5(m) hereof cease to be true and
correct in all material respects, (iv) of the receipt by the Company of
any notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (v) of the happening
of any event, the existence of any condition or any information
becoming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in or amendments or
supplements to such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading, and (vi) of the Company's determination that
a post-effective amendment to a Registration Statement would be
appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, use their diligent best efforts to prevent the issuance of any
order suspending the effectiveness of a Registration Statement or of
any order preventing or suspending the use of a Prospectus or
suspending the qualification (or exemption from qualification) of any
of the Registrable Notes or the Exchange Notes to be sold by any
Participating Broker-Dealer, for sale in any jurisdiction, and, if any
such order is issued, to use their diligent best efforts to obtain the
withdrawal of any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3
and if requested by the managing underwriter or underwriters (if any),
the Holders of a majority in
<PAGE> 16
14
aggregate principal amount of the Registrable Notes being sold in
connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter
or underwriters (if any), such Holders, any Participating Broker-Dealer
or counsel for any of them determine is reasonably necessary to be
included therein, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable
after the Company has received notification of the matters to be
incorporated in such prospectus supplement or post-effective amendment,
and (iii) supplement or make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, furnish to each selling Holder of Registrable Notes and to each
such Participating Broker-Dealer who so requests and to counsel and
each managing underwriter, if any, at the sole expense of the Company,
one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including
financial statements and schedules, and, if requested, all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, deliver to each selling Holder of Registrable Notes, or each
such Participating Broker-Dealer, as the case may be, their respective
counsel, and the underwriters, if any, at the sole expense of the
Company, as many copies of the Prospectus or Prospectuses (including
each form of preliminary prospectus) and each amendment or supplement
thereto and any documents incorporated by reference therein as such
Persons may reasonably request; and, subject to the last paragraph of
this Section 5, the Company and the Guarantors hereby consent to the
use of such Prospectus and each amendment or supplement thereto by each
of the selling Holders of Registrable Notes or each such Participating
Broker-Dealer, as the case may be, and the underwriters or agents, if
any, and dealers (if any), in connection with the offering and sale of
the Registrable Notes covered by, or the sale by Participating
Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and
any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, use its best efforts to register or
qualify, and to cooperate with the selling Holders of
<PAGE> 17
15
Registrable Notes or each such Participating Broker-Dealer, as the case
may be, the managing underwriter or underwriters, if any, and their
respective counsel in connection with the registration or qualification
(or exemption from such registration or qualification) of, such
Registrable Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions within the United States as any selling
Holder, Participating Broker-Dealer, or the managing underwriter or
underwriters reasonably request; PROVIDED, HOWEVER, that where Exchange
Notes held by Participating Broker-Dealers or Registrable Notes are
offered other than through an underwritten offering, the Company agrees
to cause the Company's counsel to perform Blue Sky investigations and
file registrations and qualifications required to be filed pursuant to
this Section 5(h); keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective and do any and all other
acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; PROVIDED, HOWEVER, that each of the
Company and the Guarantors shall not be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or
(C) subject itself to taxation in excess of a nominal dollar amount in
any such jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3
hereof, cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may request.
(j) Use their diligent best efforts to cause the Registrable
Notes covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
reasonably necessary to enable the seller or sellers thereof or the
underwriter or underwriters, if any, to consummate the disposition of
such Registrable Notes, except as may be required solely as a
consequence of the nature of such selling Holder's business, in which
case the Company and the Guarantors will cooperate in all reasonable
respects with the filing of such Registration Statement and the
granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any
<PAGE> 18
16
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable
prepare and (subject to Section 5(a) hereof) file with the Commission,
at the sole expense of the Company, a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Notes being
sold thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus will not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(l) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Registrable Notes.
(m) In connection with any underwritten offering of
Registrable Notes pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary in underwritten offerings of
debt securities similar to the Notes and take all such other actions as
are reasonably requested by the managing underwriter or underwriters in
order to expedite or facilitate the registration or the disposition of
such Registrable Notes and, in such connection, (i) make such
representations and warranties to, and covenants with, the underwriters
with respect to the business of the Company and its subsidiaries
(including any acquired business, properties or entity, if applicable)
and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each
case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities similar to the Notes, and
confirm the same in writing if and when requested; (ii) obtain the
written opinions of counsel to the Company and the Guarantors and
written updates thereof in form, scope and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to
the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by the managing underwriter or underwriters; (iii)
obtain "cold comfort" letters and updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial
data are, or are required to be, included or incorporated by reference
in the Registration Statement), addressed to each of the underwriters,
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten
<PAGE> 19
17
offerings and such other matters as reasonably requested by the
managing underwriter or underwriters as permitted by the Statement on
Auditing Standards No. 72; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing under
such underwriting agreement, or as and to the extent required
thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required
to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, make available for inspection by any selling Holder of such
Registrable Notes being sold, or each such Participating Broker-Dealer,
as the case may be, any underwriter participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant
or other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "INSPECTORS"), at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and instruments of the Company and its
subsidiaries (collectively, the "RECORDS") as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the officers, directors and employees of
the Company and its subsidiaries to supply all information reasonably
requested by any such Inspector in connection with such Registration
Statement and Prospectus. Each Inspector shall agree in writing that it
will not disclose any records that the Company determines, in good
faith, to be confidential and that it notifies the Inspectors in
writing are confidential unless (i) the disclosure of such Records is
necessary or advisable to avoid or correct a misstatement or omission
in such Registration Statement or Prospectus, (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction, (iii) disclosure of such information is
necessary or advisable in connection with any action, claim, suit or
proceeding, directly or indirectly, involving or potentially involving
such Inspector and arising out of, based upon, relating to, or
involving this Agreement or the Purchase Agreement, or any transactions
contemplated hereby or thereby or arising hereunder or thereunder, or
(iv) the information in such Records has been made generally available
to the public; PROVIDED, HOWEVER, that such Inspector shall take such
actions as are reasonably necessary to protect the confidentiality of
such information (if practicable) to the extent such action is
otherwise not inconsistent with, an impairment of or in derogation of,
the rights and interests of the Holder or any Inspector.
<PAGE> 20
18
(o) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a) hereof, as the case may
be, to be qualified under the TIA not later than the effective date of
the first Registration Statement relating to the Registrable Notes; and
in connection therewith, cooperate with the trustee under any such
indenture and the Holders of the Registrable Notes, to effect such
changes to such indenture as may be required for such indenture to be
so qualified in accordance with the terms of the TIA; and execute, and
use their respective best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other
forms and documents required to be filed with the Commission to enable
such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the
Commission and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the date of a Registration
Statement, which statement shall cover said 12-month periods.
(q) Upon consummation of the Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company and the
Guarantors, in a form customary for underwritten transactions,
addressed to the Trustee for the benefit of all Holders of Registrable
Notes participating in the Exchange Offer or the Private Exchange, as
the case may be, that the Exchange Notes or Private Exchange Notes, as
the case may be, and the related indenture constitute legal, valid and
binding obligations of the Company, enforceable against the Company in
accordance with its respective terms, subject to customary exceptions
and qualifications.
(r) If the Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company (or to such other Person as directed by the Company) in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be, mark, or cause to be marked, on such Registrable Notes
that such Registrable Notes are being cancelled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; in no
event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(s) Cooperate with each selling Holder of Registrable Notes
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings
<PAGE> 21
19
required to be made with the National Association of Securities
Dealers, Inc. (the "NASD").
(t) Use their respective diligent best efforts to take all
other steps necessary or advisable to effect the registration of the
Exchange Notes and/or Registrable Notes covered by a Registration
Statement contemplated hereby.
The Company may require each seller of Registrable Notes as to
which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable Notes
as the Company may, from time to time, reasonably request. The Company may
exclude from such registration the Registrable Notes of any seller so long as
such seller fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such seller not materially misleading.
If any such Registration Statement refers to any Holder by
name or otherwise as the holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the securities
covered thereby and that such holding does not imply that such Holder will
assist in meeting any future financial requirements of the Company, or (ii) in
the event that such reference to such Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to such Holder in any amendment or supplement to the
Registration Statement filed or prepared subsequent to the time that such
reference ceases to be required.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
actual receipt of any notice from the Company of the happening of any event of
the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof,
such Holder will forthwith discontinue disposition of such Registrable Notes
covered by such Registration Statement or Prospectus or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, until
such Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof, or
until it is advised in writing (the "ADVICE") by the Company that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto. In the event that the Company shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration State-
<PAGE> 22
20
ment or Exchange Notes to be sold by such Participating Broker Dealer, as the
case may be, shall have received (x) the copies of the supplemented or amended
Prospectus contemplated by Section 5(k) hereof or (y) the Advice.
Section 6. Registration Expenses
---------------------
All fees and expenses incident to the performance of or compliance with
this Agreement by the Company and the Guarantors shall be borne by the Company
and the Guarantors, whether or not the Exchange Offer Registration Statement or
any Shelf Registration is filed or becomes effective or the Exchange Offer is
consummated, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws of such jurisdictions (x) where the holders of
Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate principal amount
of the Registrable Notes included in any Registration Statement or in respect of
Registrable Notes or Exchange Notes to be sold by any Participating
Broker-Dealer during the Applicable Period, as the case may be, (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company and the Guarantors and reasonable fees and disbursements of one special
counsel for all of the sellers of Registrable Notes (exclusive of any counsel
retained pursuant to Section 7 hereof), (v) fees and disbursements of all
independent certified public accountants referred to in Section 5(m)(iii) hereof
(including, without limitation, the expenses of any special audit and "cold
comfort letters" required by or incident to such performance), (vi) Securities
Act liability insurance, if the Company desires such insurance, (vii) fees and
expenses of all other Persons retained by the Company, (viii) internal expenses
of the Company (including, without limitation, all salaries and expenses of
officers and employees of the Company performing legal or accounting duties),
(ix) the expense of any annual audit, (x) the fees and expenses incurred in
connection with the listing of the securities to be registered on any securities
exchange, and the obtaining of a rating of the securities, in each case, if
applicable, and (xi) the expenses relating to printing, word processing and
distributing all Registration Statements, underwriting agreements, indentures
and any other documents necessary in order to comply with this Agreement.
Section 7. Indemnification
---------------
<PAGE> 23
21
(a) The Company and the Guarantors, jointly and severally,
agree to indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the Applicable Period,
the officers and directors of each such Person, and each Person, if any, who
controls any such Person within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act (each, a "PARTICIPANT"), from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the reasonable legal fees and other expenses actually
incurred in connection with any suit, action or proceeding or any claim
asserted) caused by, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) or Prospectus (as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, or caused by, arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the case of the
Prospectus in light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with information relating to
any Participant furnished to the Company in writing by such Participant
expressly for use therein; PROVIDED, FURTHER HOWEVER, that the foregoing
indemnification with respect to the Preliminary Offering Memorandum shall not
inure to the benefit of any Initial Purchaser if a copy of the Final Offering
Memorandum (as then amended or supplemented) was not sent or given by or on
behalf of the Initial Purchasers to the person asserting any Losses, if required
by law so to have been delivered, and if the Final Offering Memorandum (as
amended or supplemented) would have cured the defect giving rise to such Losses.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless each of the Company and the Guarantors, each of
their respective directors, officers who sign the Registration Statement and
each Person who controls each of the Company and the Guarantors within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to
the same extent (but on a several, and not joint, basis) as the foregoing
indemnity from the Company and the Guarantors to each Participant, but only with
reference to information relating to such Participant furnished to the Company
or the Guarantors in writing by such Participant expressly for use in any
Registration Statement or Prospectus, any amendment or supplement thereto, or
any preliminary prospectus. The liability of any Participant under this
paragraph shall in no event exceed the proceeds received by Participant from
sales of Registrable Notes or Exchange Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought
pursuant to either of the two preceding paragraphs, such Person (the
"INDEMNIFIED PERSON") shall promptly notify the Persons against whom such
indemnity may be sought (the "INDEMNIFYING PERSONS") in writing, and the
Indemnifying
<PAGE> 24
22
Persons, upon request of the Indemnified Person, shall retain counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Persons may reasonably designate in such proceeding
and shall pay the fees and expenses actually incurred by such counsel related to
such proceeding; PROVIDED, HOWEVER, that the failure to so notify the
Indemnifying Persons shall not relieve any of them of any obligation or
liability which any of them may have hereunder or otherwise except to the extent
they were unaware of such proceeding and have been materially prejudiced in any
material respect by such failure. In any such proceeding, any Indemnified Person
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Persons and the Indemnified Person shall have mutually agreed to
the contrary, (ii) the Indemnifying Persons shall have failed within a
reasonable period of time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding (including
any impleaded parties) include both any Indemnifying Person and the Indemnified
Person or any affiliate thereof and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that, unless there exists a conflict among
Indemnified Persons, the Indemnifying Persons shall not, in connection with any
one such proceeding or separate but substantially similar related proceedings in
any jurisdiction arising out of the same general allegations, be liable for the
fees and expenses of more than one separate firm (in addition to any local
counsel) for all Indemnified Persons, and that all such fees and expenses shall
be reimbursed promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and shall be reasonably acceptable
to the Company and any such separate firm for the Company and the Guarantors,
their respective directors, their respective officers and such control Persons
of the Company and the Guarantors shall be designated in writing by the Company
and shall be reasonably acceptable to the Holders. The Indemnifying Persons
shall not be liable for any settlement of any proceeding effected without their
prior written consent (which consent shall not be unreasonably withheld or
delayed), but if settled with such consent or if there be a final judgment for
the plaintiff for which the Indemnified Persons are entitled to indemnification
pursuant to this Agreement, each of the Indemnifying Persons agrees to indemnify
and hold harmless each Indemnified Person from and against any loss or liability
by reason of such settlement or judgment. No Indemnifying Person shall, without
the prior written consent of the Indemnified Persons (which consent shall not be
unreasonably withheld or delayed), effect any settlement or compromise of any
pending or threatened proceeding in respect of which any Indemnified Person is
or could have been a party, or indemnity could have been sought hereunder by
such Indemnified Person, unless such settlement (A) includes an unconditional
written release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of such
Indemnified Person.
<PAGE> 25
23
(d) If the indemnification provided for in the first and
second paragraphs of this Section 7 is for any reason unavailable to, or
insufficient to hold harmless, an Indemnified Person in respect of any losses,
claims, damages or liabilities referred to therein, then each Indemnifying
Person under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder and in order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect (i) the relative benefits received by the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other from the offering of the Notes or (ii) if the allocation provided by the
foregoing clause (i) is not permitted by applicable law, not only such relative
benefits but also the relative fault of the Indemnifying Person or Persons on
the one hand and the Indemnified Person or Persons on the other in connection
with the statements or omissions or alleged statements or omissions that
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof) as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Participants on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering (net of discounts but before deducting expenses) of the Notes
received by the Company bears to the total proceeds received by such Participant
from the sale of Registrable Notes or Exchange Notes, as the case may be. The
relative fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or the Guarantors on the one hand or such Participant or
such other Indemnified Person, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by PRO RATA
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
<PAGE> 26
24
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the Indemnifying Party to the Indemnified Party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company and the Guarantors set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Holder or any person who
controls a Holder, the Company or any Guarantor, their respective directors or
officers or any person controlling the Company or any Guarantor, and (ii) any
termination of this Agreement.
(g) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
Section 8. Rules 144 and 144A
------------------
The Company and the Guarantors covenant that, whether or not
required to do so by the rules and regulations of the Commission, for so long as
any of the Exchange Notes remain outstanding, they will furnish to the holders
of the Exchange Notes and file with the Commissions (unless the Commission will
not accept such a filing) (1) all quarterly and annual financial information
that would be required to be contained in a filing with the Commission on Forms
10-Q and 10-K if the Company and the Guarantors were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants, and (2) all
reports that would be required to be filed with the Commission on Form 8-K if
the Company and the Guarantors were required to file such reports and (3) any
other information, documents and other reports which the Company and the
Guarantors would be required to file with the Commission if it were subject to
Section 13 or 15(d) of the Exchange Act. In addition, for so long as any of the
Notes remain outstanding, the Company and the Guarantors agree to make available
to any prospective purchaser of the Notes or beneficial owner of the Notes in
connection with any sale thereof the information required by Rule 144A(d)(4)
under the Securities Act. Each of the Company and the Guarantors further
covenants that it will take such further action as any Holder of Registrable
Notes may reasonably request, all to the extent required from time to time to
enable such holder to sell Registrable Notes without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144(k) and Rule 144A under the Securities Act, as such Rules may be amended from
time to time, or (b) any similar rule or regulation hereafter adopted by the
Commission.
Section 9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or
<PAGE> 27
25
managers that will manage the offering will be selected by the Holders of a
majority in aggregate principal amount of such Registrable Notes included in
such offering and shall be reasonably acceptable to the Company.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
Section 10. Miscellaneous
-------------
(a) NO INCONSISTENT AGREEMENTS. Neither the Company nor the
Guarantors has, as of the date hereof, nor shall the Company or the Guarantors,
after the date of this Agreement, enter into any agreement with respect to any
of its securities that is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's other issued and outstanding securities under any such agreements.
Neither the Company nor the Guarantors has entered, nor will enter into, any
agreement with respect to any of its securities which will grant to any Person
piggy-back registration rights with respect to any Registration Statement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. Neither the
Company nor the Guarantors shall, directly or indirectly, take any action with
respect to the Registrable Notes as a class that would adversely affect the
ability of the Holders of Registrable Notes to include such Registrable Notes in
a registration undertaken pursuant to this Agreement.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given except pursuant to a
written agreement duly signed and delivered by (i) the Company, (ii) the
Guarantors and (iii)(A) the Holders of not less than a majority in aggregate
principal amount of the then outstanding Registrable Notes and (B) in
circumstances that would adversely affect the Participating Broker-Dealers, the
Participating Broker-Dealers holding not less than a majority in aggregate
principal amount of the Exchange Notes held by all Participating Broker-Dealers;
PROVIDED, HOWEVER, that Section 7 and this Section 10(c) may not be amended,
modified or supplemented except pursuant to a written agreement duly signed and
delivered by each Holder and each Participating Broker-Dealer (including any
person who was a Holder or Participating Broker-Dealer of Registrable Notes or
Exchange Notes, as the case may be, disposed of pursuant to any Registration
Statement) affected by any such amendment, modification or supplement.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates
<PAGE> 28
26
exclusively to the rights of Holders of Registrable Notes whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders of
Registrable Notes may be given by Holders of at least a majority in aggregate
principal amount of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) NOTICES. All notices and other communications (including,
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) If to a Holder of the Registrable Notes or any
Participating Broker-Dealer, at the most current address of such Holder
or Participating Broker-Dealer, as the case may be, set forth on the
records of the registrar under the Indenture.
(ii) If to the Company or the Guarantors, at the address
as follows:
Hawk Corporation
200 Public Square, Suite 29-2500
(or after December 20, 1996, Suite 30-5000)
Cleveland, Ohio 44114
Facsimile No.: (216) 861-4546
Attention: Chief Executive Officer
All such notices and communications shall be deemed to have
been duly given: when delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged, if telecopied; and on the next Business Day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address and in the manner specified in such Indenture.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers; PROVIDED, HOWEVER,
that this Agreement shall not inure to the benefit of or be binding upon a
successor or assign of a Holder unless and to the extent such successor or
assign holds Registrable Notes.
(f) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so
<PAGE> 29
27
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
(i) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the
parties hereto shall use their best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
(j) SECURITIES HELD BY THE COMPANY OR THEIR AFFILIATES.
Whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company,
the Guarantors or any of their respective affiliates (as such term is defined in
Rule 405 under the Securities Act) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
(k) THIRD PARTY BENEFICIARIES. Holders and beneficial owners
of Registrable Notes and Participating Broker-Dealers are intended third party
beneficiaries of this Agreement, and this Agreement may be enforced by such
Persons.
(l) ATTORNEYS' FEES. As between the parties to this Agreement,
in any action or proceeding brought to enforce any provision of this Agreement,
or where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to its
costs and expenses and any other available remedy.
(m) ENTIRE AGREEMENT. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained
<PAGE> 30
28
herein and therein and any and all prior oral or written agreements,
representations, or warranties, contracts, understandings, correspondence,
conversations and memoranda between the Holders on the one hand and the Company
and the Guarantors on the other, or between or among any agents,
representatives, parents, subsidiaries, affiliates, predecessors in interest or
successors in interest with respect to the subject matter hereof and thereof are
merged herein and replaced hereby.
(n) JOINT AND SEVERAL LIABILITY. Each subsidiary of the
Company, by its execution and delivery of a counterpart to this Agreement,
agrees that it shall be jointly and severally liable for all obligations and
liabilities of the Company hereunder.
<PAGE> 31
29
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
HAWK CORPORATION
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
FRICTION PRODUCTS CO.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HAWK BRAKE, INC.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
LOGAN METAL STAMPINGS, INC.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HELSEL, INC.
By: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
S.K. WELLMAN HOLDINGS, INC.
BY: /S/ Ronald E. Weinberg
-----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
<PAGE> 32
30
WELLMAN FRICTION PRODUCTS U.K.
CORP.
By: /S/ Ronald E. Weinberg
----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
S.K. WELLMAN CORP.
By: /S/ Ronald E. Weinberg
----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HUTCHINSON PRODUCTS CORPORATION
By: /S/ Ronald E. Weinberg
----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
SCHRODER WERTHEIM & CO.
INCORPORATED
BT SECURITIES CORPORATION
McDONALD & COMPANY SECURITIES,
INC.
By: SCHRODER WERTHEIM & CO.
INCORPORATED
By: /s/ James L. Amine
------------------------------
Name: James L. Amine
Title: Director
<PAGE> 33
Schedule I to
Registration Rights Agreement
Subsidiary Guarantors
---------------------
Friction Products Co.
Hawk Brake, Inc.
Logan Metal Stampings, Inc.
Helsel, Inc.
S.K. Wellman Holdings, Inc.
S.K. Wellman Corp.
Wellman Friction Products U.K. Corp.
Hutchinson Products Corporation
<PAGE> 1
EXHIBIT 4.3
EXECUTION COPY
HAWK CORPORATION,
THE GUARANTORS NAMED HEREIN
and
BANK ONE TRUST COMPANY, NA
as Trustee
________________________
INDENTURE
Dated as of November 27, 1996
________________________
$100,000,000
10 1/4% Senior Notes due 2003
Series B 10 1/4% Senior Notes due 2003
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Section Indenture Section
- ----------- -----------------
<S> <C>
310(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(a)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8; 7.10; 11.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.3
313(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6; 11.2
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.6
314(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6; 4.9; 11.2
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.4
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.4
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5
(f) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
315(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(b)
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5; 11.2
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(a)
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1(c)
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.11
316(a) (last sentence) . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.5
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.4
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4
317(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.8
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4
318(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ____
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1
- -----------------
<FN>
N.A. means Not Applicable
NOTE: This Cross-Reference table shall not, for any purpose, be deemed to be
a part of this Indenture.
</TABLE>
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Incorporation by Reference of TIA . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.3 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE II
THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.1 Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.2 Execution and Authentication; Aggregate Principal Amount . . . . . . . . . . 17
SECTION 2.3 Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.4 Paying Agent To Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.5 Noteholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.6 Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.7 Replacement Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.8 Outstanding Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.9 Treasury Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.10 Temporary Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.11 Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.12 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.13 CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.14 Deposit of Monies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.15 Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.16 Book-Entry Provisions for Global Security . . . . . . . . . . . . . . . . . . 25
SECTION 2.17 Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . 26
(a) Transfers to Non-U.S. Persons . . . . . . . . . . . . . . . . . . . . . 26
(b) Transfers to Accredited Investors . . . . . . . . . . . . . . . . . . . 26
(c) Transfers to QIBS . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
(d) Private Placement Legend . . . . . . . . . . . . . . . . . . . . . . . 27
(e) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) Transfers of Notes Held by Affiliates . . . . . . . . . . . . . . . . . 28
SECTION 2.18 Liquidated Damages Under Registration Rights Agreement . . . . . . . . . . . 28
ARTICLE III
REDEMPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.1 Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.2 Selection of Notes To Be Redeemed . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 3.3 Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
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SECTION 3.4 Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . 30
SECTION 3.5 Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . 30
SECTION 3.6 Notes Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.1 Payment of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.2 Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . 31
SECTION 4.3 Corporate Existence . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.4 Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . 32
SECTION 4.5 Maintenance of Properties and Insurance . . . . . . . . . . . . . . . 32
SECTION 4.6 Compliance Certificate; Notice of Default . . . . . . . . . . . . . . 32
SECTION 4.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.8 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . 33
SECTION 4.9 Provision of Financial Statements and Information . . . . . . . . . . 33
SECTION 4.10 Limitation on Incurrence of Indebtedness . . . . . . . . . . . . . . 34
SECTION 4.11 Limitation on Restricted Payments . . . . . . . . . . . . . . . . . 37
SECTION 4.12 Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.13 Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries . . . . . . . 40
SECTION 4.14 Limitation on Transactions with Affiliates . . . . . . . . . . . . . 41
SECTION 4.15 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 4.16 Limitation on Asset Sales . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4.17 Limitation on Designation of Unrestricted Subsidiaries . . . . . . . 46
ARTICLE V
SUCCESSOR CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 5.1 Merger, Consolidation and Sale of Assets . . . . . . . . . . . . . . 47
SECTION 5.2 Successor Corporation Substituted . . . . . . . . . . . . . . . . . . 48
ARTICLE VI
DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 6.2 Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 6.3 Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.4 Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 6.5 Control by Majority . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.6 Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 6.7 Rights of Holders To Receive Payment . . . . . . . . . . . . . . . . 52
SECTION 6.8 Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.9 Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . 53
</TABLE>
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SECTION 6.10 Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 6.11 Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE VII
TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.1 Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.2 Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.3 Individual Rights of Trustee . . . . . . . . . . . . . . . . . . 56
SECTION 7.4 Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.5 Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 7.6 Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . 57
SECTION 7.7 Compensation and Indemnity . . . . . . . . . . . . . . . . . . . 57
SECTION 7.8 Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . 58
SECTION 7.9 Successor Trustee by Merger, Etc . . . . . . . . . . . . . . . . 59
SECTION 7.10 Eligibility; Disqualification . . . . . . . . . . . . . . . . . . 59
SECTION 7.11 Preferential Collection of Claims Against Company . . . . . . . 60
ARTICLE VIII
SATISFACTION AND DISCHARGE; DEFEASANCE . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.1 Satisfaction and Discharge of Indenture . . . . . . . . . . . . . 60
SECTION 8.2 Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . 61
SECTION 8.3 Application of Trust Money . . . . . . . . . . . . . . . . . . . 63
SECTION 8.4 Repayment to the Company . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.5 Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 8.6 Acknowledgment of Discharge by Trustee . . . . . . . . . . . . . 64
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 9.1 Without Consent of Holders . . . . . . . . . . . . . . . . . . . 65
SECTION 9.2 With Consent of Holders . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9.3 Compliance with TIA . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 9.4 Revocation and Effect of Consents . . . . . . . . . . . . . . . . 67
SECTION 9.5 Notation on or Exchange of Notes . . . . . . . . . . . . . . . . 68
SECTION 9.6 Trustee To Sign Amendments, Etc . . . . . . . . . . . . . . . . . 68
</TABLE>
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ARTICLE X
GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.1 Unconditional Guarantee . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.2 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10.3 Successors and Assigns; Release of a Guarantor . . . . . . . . . . 69
SECTION 10.4 Limitation of Guarantor's Liability . . . . . . . . . . . . . . . 70
SECTION 10.5 Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 10.6 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.7 Execution of Guarantee . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.8 Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . 71
SECTION 10.9 Additional Guarantors . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 10.10 Modification . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.1 TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 11.3 Communications by Holders with Other Holders . . . . . . . . . . . 73
SECTION 11.4 Certificate and Opinion as to Conditions Precedent . . . . . . . . 73
SECTION 11.5 Statements Required in Certificate or Opinion . . . . . . . . . . 74
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . 74
SECTION 11.7 Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 11.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.9 No Adverse Interpretation of Other Agreements . . . . . . . . . . 75
SECTION 11.10 No Recourse Against Others . . . . . . . . . . . . . . . . . . . 75
SECTION 11.11 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.12 Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.14 Independence of Covenants . . . . . . . . . . . . . . . . . . . . 76
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
</TABLE>
- iv -
<PAGE> 7
INDENTURE, dated as of November 27, 1996, between Hawk
Corporation, a Delaware corporation (the "COMPANY"), the Guarantors (as defined
herein), and Bank One Trust Company, NA a national banking corporation, as
Trustee (the "TRUSTEE").
The Company has duly authorized the creation of an issue of
10 1/4% Senior Notes due 2003 (the "INITIAL NOTES") and Series B 10 1/4% Senior
Notes due 2003 to be issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement (the "EXCHANGE NOTES" and, together with the
Initial Notes, the "NOTES") and, to provide therefor, the Company has duly
authorized the execution and delivery of this Indenture. All things necessary
to make the Notes, when duly issued and executed by the Company, and
authenticated and delivered hereunder, the valid obligations of the Company,
and to make this Indenture a valid and binding agreement of the Company, have
been done.
Each party hereto agrees as follows for the benefit of the
other party and for the equal and ratable benefit of the Holders of the Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1 Definitions.
------------
"ACCREDITED INVESTOR" means an "accredited investor" as that
term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"ACQUIRED DEBT" means, with respect to any specified Person,
Indebtedness of any other Person (the "ACQUIRED PERSON") existing at the time
the Acquired Person merges with or into, or becomes a Restricted Subsidiary of,
such specified Person, including Indebtedness incurred in connection with, or
in contemplation of, the Acquired Person merging with or into, or becoming a
Restricted Subsidiary of, such specified Person; provided, however, that
Indebtedness of such Acquired Person which is redeemed, defeased, retired or
otherwise repaid at the time of or immediately upon consummation of the
transactions by which such Acquired Person merges with or into or becomes a
Restricted Subsidiary of such specified Person shall not be Acquired Debt.
"AFFILIATE" means, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified Person. For purposes of
this definition, "CONTROL" (including, with correlative meanings, the terms
"CONTROLLING", "CONTROLLED BY" and "UNDER COMMON CONTROL WITH") of any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through
the ownership of voting securities, by agreement or otherwise.
"AGENT" means any Registrar, Paying Agent or co-Registrar.
"AGENT MEMBERS" has the meaning provided in Section 2.16(a).
<PAGE> 8
2
"ASSET SALE" means (i) any sale, lease, conveyance or other
disposition by the Company or any Restricted Subsidiary of any assets
(including by way of a sale-and-leaseback) other than in the ordinary course of
business, or (ii) the issuance or sale of Capital Stock of any Restricted
Subsidiary, in the case of each of (i) and (ii), whether in a single
transaction or a series of related transactions, to any Person (other than to
the Company or a Restricted Subsidiary and other than directors' qualifying
shares) for Net Proceeds in excess of $100,000.
"ASSET SALE OFFER" has the meaning provided in Section
4.16(c).
"ASSET SALE OFFER PURCHASE DATE" has the meaning provided in
Section 4.16(d).
"ASSET SALE OFFER TRIGGER DATE" has the meaning provided in
Section 4.16(c).
"AUTHENTICATING AGENT" has the meaning provided in Section
2.2.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.
"BOARD OF DIRECTORS" means, as to (a) any corporate Person,
the board of directors of such Person or any duly authorized committee thereof,
(b) any partnership, limited liability company or comparably organized Person
which is ultimately controlled by a corporate general partner, managing member
or other corporation, the "Board of Directors" of such corporation as specified
in clause (a) of this definition and (c) any partnership, limited liability
company or comparably organized Person which is ultimately controlled by
individuals, such controlling individuals.
"BOARD RESOLUTION" means, with respect to any Person, a duly
adopted resolution of the Board of Directors.
"BUSINESS DAY" means a day that is not a Legal Holiday.
"CAPITAL LEASE OBLIGATION" of any Person means, at the time
any determination thereof is to be made, the amount of the liability in respect
of a capital lease for property leased by such Person that would at such time
be required to be capitalized on the balance sheet of such Person in accordance
with GAAP.
"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) corporate stock or other
equity participations, including partnership interests, whether general or
limited, of such Person, including any Preferred Stock.
"CASH EQUIVALENTS" means (i) marketable direct obligations
issued by, or unconditionally guaranteed by, the United States Government or
issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public
<PAGE> 9
3
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Rating Services or Moody's Investors
Service, Inc.; (iii) commercial paper maturing no more than one year from the
date of creation thereof and, at the time of acquisition, having a rating of at
least A-1 from Standard & Poor's Rating Services or at least P-1 from Moody's
Investors Service, Inc.; (iv) certificates of deposit or bankers' acceptances
(or, with respect to foreign banks, similar instruments) maturing within one
year from the date of acquisition thereof issued by any bank organized under
the laws of the United States of America or any state thereof or the District
of Columbia or any U.S. branch of a foreign bank having at the date of
acquisition thereof combined capital and surplus of not less than $200 million;
(v) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clause (i) above entered into
with any bank meeting the qualifications specified in clause (iv) above; and
(vi) investments in money market funds that invest substantially all their
assets in securities of the types described in clauses (i) through (v) above.
"CASH FLOW" means, with respect to any period, Consolidated
Net Income for such period, plus, to the extent deducted in computing such
Consolidated Net Income: (i) extraordinary net losses, plus (ii) provision for
taxes based on income or profits and any provision for taxes utilized in
computing the extraordinary net losses under clause (i) hereof, plus (iii)
Consolidated Interest Expense, plus (iv) depreciation, amortization and all
other non-cash charges (including amortization of goodwill and other
intangibles).
"CHANGE OF CONTROL" means the occurrence of any of the
following events after the Issue Date: (i) any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act) (other than one
or more Permitted Holders) is or becomes (including by merger, consolidation or
otherwise) the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a Person shall be deemed to have beneficial
ownership of all shares that such Person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly
or indirectly, of 50% or more of the voting power of the total outstanding
Voting Stock of the Company; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election to
such Board of Directors, or whose nomination for election by the stockholders
of the Company, 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 period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of such Board of Directors of the Company then
in office; (iii) the approval by the holders of Capital Stock of the Company of
any plan or proposal for the liquidation or dissolution of the Company (whether
or not otherwise in compliance with the terms of this Indenture); or (iv) the
sale or other disposition (including by merger, consolidation or otherwise) of
all or substantially all of the Capital Stock or assets of the Company to any
Person or group (as defined in Rule 13d-5 of the Exchange Act) (other than to
one or more of the Permitted Holders) as an entirety or substantially as an
entirety in one transaction or a series of related transactions.
"CHANGE OF CONTROL OFFER" has the meaning provided in Section
4.15(a).
<PAGE> 10
4
"CHANGE OF CONTROL PURCHASE DATE" has the meaning provided in
Section 4.15(b).
"COMMISSION" means the Securities and Exchange Commission, as
from time to time constituted or, if at any time after the execution of this
Indenture such Commission is not existing and performing the duties now
assigned to it under the TIA, then the body performing such duties at such
time.
"COMMON STOCK" of any Person means any and all shares,
interests, participations, or other equivalents (however designated) of such
Person's common stock whether now outstanding or issued after the Issue Date.
"COMPANY" means the party named as such in the first paragraph
of this Indenture until a successor replaces it pursuant to this Indenture and
thereafter means such successor.
"CONSOLIDATED CASH FLOW COVERAGE RATIO" means, for any period,
the ratio of (i) the aggregate amount of Cash-Flow for such period, to (ii)
Consolidated Interest Expense for such period, determined on a pro forma basis
after giving pro forma effect to (a) the incurrence of the Indebtedness giving
rise to the calculation of the Consolidated Cash Flow Coverage Ratio and (if
applicable) the application of the net proceeds therefrom, including to
refinance other Indebtedness, as if such Indebtedness was incurred, and the
application of such proceeds occurred, at the beginning of such period; (b) the
incurrence, repayment or retirement of any other Indebtedness by the Company
and its Restricted Subsidiaries since the first day of such period as if such
Indebtedness was incurred, repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit facility shall be computed based upon the average balance of
such Indebtedness at the end of each month during such period); (c) in the case
of Acquired Debt, the related acquisition as if such acquisition had occurred
at the beginning of such period; and (d) any acquisition or disposition by the
Company and its Restricted Subsidiaries of any company or any business or any
assets out of the ordinary course of business, or any related repayment of
Indebtedness, in each case since the first day of such period, assuming such
acquisition or disposition had been consummated on the first day of such
period.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to any
period, the sum of (i) the interest expense of the Company and its Restricted
Subsidiaries for such period, including, without limitation, (a) amortization
of debt discount, (b) the net payments, if any, under interest rate contracts
(including amortization of discounts), (c) the interest portion of any deferred
payment obligation and (d) accrued interest, plus (ii) the interest component
of the Capital Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by the Company and its Restricted Subsidiaries during such period, and
all capitalized interest of the Company and its Restricted Subsidiaries, plus
(iii) all dividends paid during such period by the Company and its Restricted
Subsidiaries with respect to any Disqualified Stock (other than by any
Restricted Subsidiary to the Company or any other Restricted Subsidiary and
other than any dividend paid in Capital Stock (other than Disqualified Stock)),
and all dividends paid
<PAGE> 11
5
during such period by any Restricted Subsidiary with respect to any Preferred
Stock, in each case, as determined on a consolidated basis in accordance with
GAAP consistently applied.
"CONSOLIDATED NET INCOME" means, with respect to any period,
the net income (or loss) of the Company and its Restricted Subsidiaries for
such period, determined on a consolidated basis in accordance with GAAP
consistently applied, adjusted to the extent included in calculating such net
income (or loss), by excluding, without duplication, (i) all extraordinary
gains and losses (less all fees and expenses relating thereto), (ii) the
portion of net income (or loss) of the Company and its Restricted Subsidiaries
allocable to interests in unconsolidated Persons or Unrestricted Subsidiaries,
except to the extent of the amount of dividends or distributions actually paid
to the Company or its Restricted Subsidiaries by such other Person during such
period, (iii) for purposes of Section 4.11, net income (or loss) of any Person
combined with the Company or any of its Restricted Subsidiaries on a "pooling
of interests" basis attributable to any period prior to the date of
combination, (iv) net gains and losses (less all fees and expenses relating
thereto) in respect of disposition of assets (including, without limitation,
pursuant to sale and leaseback transactions) other than in the ordinary course
of business, or (v) the net income of any Restricted Subsidiary to the extent
that the declaration of dividends or similar distributions by that Restricted
Subsidiary of that income to the Company is not at the time permitted, directly
or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders.
"CONSOLIDATED NET WORTH" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with GAAP, less (without duplication) amounts attributable to
Disqualified Stock of such person.
"COVENANT DEFEASANCE" has the meaning provided in Section
8.2(b).
"CURRENCY AGREEMENT OBLIGATIONS" means the obligations of any
person under a foreign exchange contract, currency swap agreement or other
similar agreement or arrangement to protect such person against fluctuations in
currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"DEFAULT" means any event that is, or after the giving of
notice or passage of time or both would be, an Event of Default.
"DEFAULT INTEREST PAYMENT DATE" has the meaning provided in
Section 2.12.
"DEFEASANCE" has the meaning provided in Section 8.2(a).
"DESIGNATION" has the meaning provided in Section 4.17(a).
"DESIGNATION AMOUNT" has the meaning provided in Section
4.17(a).
<PAGE> 12
6
"DISPOSITION" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of such
Person's assets.
"DISQUALIFIED STOCK" means (i) any Preferred Stock of any
Restricted Subsidiary and (ii) that portion of any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof (other than upon a change of
control of the Company in circumstances where the holders of the Notes would
have similar rights), in whole or in part on or prior to the stated maturity of
the Notes.
"DOLLARS" and "$" means lawful money of the United States of
America.
"DTC" means The Depository Trust Company, its nominees and
successors.
"EVENT OF DEFAULT" has the meaning provided in Section 6.1.
"EXCESS PROCEEDS" has the meaning provided in Section 4.16(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXCHANGE NOTES" has the meaning provided in the preamble to
this Indenture.
"EXISTING INDEBTEDNESS" has the meaning provided in Section
4.10(b)(iii).
"FAIR MARKET VALUE" means, with respect to any asset or
property, the sale value that would be obtained in an arm's-length transaction
between an informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy.
"FOREIGN SUBSIDIARY" means a Restricted Subsidiary not
organized under the laws of the United States or any political subdivision
thereof and the operations of which are located entirely outside the United
States.
"GAAP" means generally accepted accounting principles in the
United States set forth in the Statements of Financial Accounting Standards and
the Interpretations, Accounting Principles Board Opinions and American
Institute of Certified Public Accountants Accounting Research Bulletins, which
are applicable as of the Issue Date and consistently applied.
"GLOBAL NOTE" has the meaning provided in Section 2.1.
"GUARANTEE" means, as applied to any obligation, (1) a
guarantee (other than endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any
part or all of such obligation and (2) an agreement, direct or
<PAGE> 13
7
indirect, contingent or otherwise, the practical effect of which is to assure
in any way the payment or performance (or payment of damages in the event of
non-performance) of all or any part of such obligation, including, without
limiting the foregoing, the payment of amounts drawn down by letters of credit.
"GUARANTEE" means the guarantee of the Notes by a Guarantor as
described in Section 10.1.
"GUARANTOR" means (1) each Subsidiary of the Company in
existence on the Issue Date which are each of Friction Products Co., Logan
Metal Stampings, Inc., Hawk Brake, Inc., S.K. Wellman Holdings, Inc., S.K.
Wellman Corp., Wellman Friction Products U.K. Corp., Hutchinson Products
Corporation and Helsel, Inc. and (2) each Subsidiary (other than Foreign
Subsidiaries and Unrestricted Subsidiaries) created or acquired by the Company
after the Issue Date that guarantees the Notes.
"HAWK CONTROLLING STOCKHOLDER MERGER" means the merger, in a
tax-free reorganization, of Hawk Holding Corp., a Delaware corporation and a
principal stockholder of the Company, with and into the Company.
"HOLDER" means the Person in whose name a Note is registered
on the Registrar's books.
"INCUR" has the meaning provided in Section 4.10(a).
"INDEBTEDNESS" means, with respect to any Person, without
duplication, and whether or not contingent, (i) all indebtedness of such Person
for borrowed money or which is evidenced by a note, bond, debenture or similar
instrument, (ii) all obligations of such Person to pay the deferred or unpaid
purchase price of property or services, which purchase price is due more than
six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such service, (iii) all Capital
Lease Obligations of such Person, (iv) all obligations of such Person in
respect of letters of credit or bankers' acceptances issued or created for the
account of such Person, (v) to the extent not otherwise included in this
definition, all net obligations of such Person under Interest Rate Agreement
Obligations or Currency Agreement Obligations of such Person, (vi) all
liabilities of others of the kind described in the preceding clause (i), (ii)
or (iii) secured by any Lien on any property owned by such Person; PROVIDED,
HOWEVER, if the obligations secured by a Lien (other than a Permitted Lien not
securing any liability that would itself constitute Indebtedness) on any assets
or property have not been assumed by such Person in full or are not such
Person's legal liability in full, the amount of such Indebtedness for purposes
of this definition shall be limited to the lesser of the amount of Indebtedness
secured by such Lien and the Fair Market Value of the property subject to such
Lien, (vii) all Disqualified Stock issued by such Person and all Preferred
Stock issued by a Subsidiary of such Person, and (viii) to the extent not
otherwise included, any guarantee by such Person of any other Person's
indebtedness or other obligations described in clauses (i) through (vii) above.
"Indebtedness" of the Company and the Restricted Subsidiaries shall not include
current trade payables incurred in the ordinary course of business and payable
in accordance with customary practices, and non-interest
<PAGE> 14
8
bearing installment obligations and accrued liabilities incurred in the
ordinary course of business that are not more than 90 days past due. The
principal amount outstanding of any Indebtedness issued with original issue
discount is the accreted value of such Indebtedness. Notwithstanding the
foregoing, Indebtedness shall not include Indebtedness arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently drawn against insufficient funds in the ordinary
course of business; PROVIDED that such Indebtedness is extinguished within 3
Business Days of the incurrence thereof.
"INDENTURE" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"INDEPENDENT DIRECTOR" means a director of the Company other
than a director (i) who (apart from being a director of the Company or any
Subsidiary of the Company) is an employee, associate or Affiliate of the
Company or a Subsidiary of the Company, or (ii) who is a director, employee,
associate or Affiliate of another party (other than the Company or any of its
Subsidiaries) to the transaction in question.
"INITIAL NOTES" has the meaning provided in the preamble to
this Indenture.
"INITIAL PURCHASERS" means Schroder Wertheim & Co.
Incorporated, BT Securities Corporation and McDonald & Company Securities, Inc.
"INTEREST" on the Notes means interest (including Liquidated
Damages) on the Notes.
"INTEREST PAYMENT DATE" means the stated maturity of a payment
of interest on the Notes.
"INTEREST RATE AGREEMENT OBLIGATIONS" means, with respect to
any Person, the Obligations of such Person under (i) interest rate swap
agreements, interest rate cap agreements and interest rate collar agreements,
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended, to the date hereof and from time to time hereafter.
"INVESTMENT" means, with respect to any Person, any direct or
indirect loan or other extension of credit (including, without limitation, a
guarantee) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition by such Person of any
Capital Stock, bonds, notes, debentures or other securities or evidences of
Indebtedness issued by, any other Person. "Investment" shall exclude travel
and similar advances to officers and employees of the Company in the ordinary
course of business and extensions of trade credit by the Company and its
Restricted Subsidiaries on commercially reasonable terms in accordance with
normal trade practices of the Company or such Restricted Subsidiary, as the
case may be. For the purposes of Section 4.11, (i) "Investment" shall include
and be
<PAGE> 15
9
valued at the Fair Market Value of the net assets of any Restricted Subsidiary
(to the extent of the Company's equity interest in such Restricted Subsidiary)
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the Fair Market Value of the net assets of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary and (ii) the amount of any Investment shall
be the original cost of such Investment plus the cost of all additional
Investments by the Company or any of its Restricted Subsidiaries, without any
adjustments for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the payment of dividends
or distributions in connection with such Investment or any other amounts
received in respect of such Investment; PROVIDED, HOWEVER, that no such payment
of dividends or distributions or receipt of any such other amounts shall reduce
the amount of any Investment if such payment of dividends or distributions or
receipt of any such amounts would be included in Consolidated Net Income. If
the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Common Stock of any direct or indirect Restricted Subsidiary of
the Company such that, after giving effect to any such sale or disposition, the
Company no longer owns, directly or indirectly, greater than 50% of the
outstanding Common Stock of such Restricted Subsidiary, the Company shall be
deemed to have made an Investment on the date of any such sale or disposition
equal to the Fair Market Value of the Common Stock of such Restricted
Subsidiary not sold or disposed of.
"ISSUE DATE" means November 27, 1996, the date the Notes are
originally issued under this Indenture.
"LEGAL HOLIDAY" has the meaning provided in Section 11.7.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in any asset and any filing of, or agreement to give, any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"LIQUIDATED DAMAGES" means all liquidated damages owing under
the Registration Rights Agreement.
"MATURITY DATE" means December 1, 2003.
"NET PROCEEDS" means, with respect to any Asset Sale by any
Person, the aggregate cash or Cash Equivalent proceeds received by such Person
and/or its Affiliates in respect of such Asset Sale, which amount is equal to
the excess, if any, of (i) the cash or Cash Equivalent received by such Person
and/or its Affiliates (including any cash payments received by way of deferred
payment pursuant to, or monetization of, a note or installment receivable or
otherwise, but only as and when received) in connection with such Asset Sale,
over (ii) the sum of (a) the amount of any Indebtedness that is secured by such
asset and which is required to be repaid by such Person in connection with such
Asset Sale, plus (b) all fees, commissions and other expenses incurred by such
Person in connection with such Asset Sale, plus (c)
<PAGE> 16
10
provision for taxes, including income taxes, directly attributable to the Asset
Sale or to required prepayments or repayments of Indebtedness with the proceeds
of such Asset Sale., plus (d) if such Person is a Restricted Subsidiary, any
dividends or distributions payable to holders of minority interests in such
Restricted Subsidiary from the proceeds of such Asset Sale.
"NEW REVOLVING CREDIT FACILITY" means the New Revolving Credit
Facility between the Company and the lenders named therein as the same may be
amended, modified, renewed, refunded, replaced or refinanced from time to time,
including (1) any related notes, letters of credit, 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, and (2) any notes, guarantees, collateral documents, instruments
and agreements executed in connection with any such amendment, modification,
renewal, refunding, replacement or refinancing.
"NON-U.S. PERSON" means a person who is not a U.S. person, as
defined in Regulation S.
"NOTES" mean the Initial Notes and the Exchange Notes treated
as a single class of securities, as amended or supplemented from time to time
in accordance with the terms hereof, that are issued pursuant to this
Indenture.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursement obligations, damages and other liabilities
payable under the documentation governing any Indebtedness including all
obligations of the Company and the Guarantors under this Indenture, the Notes
and the Guarantees.
"OFFERING MEMORANDUM" means the Offering Memorandum dated
, 1996 of the Company relating to the offering of the Initial Notes;
PROVIDED that after the issuance of Exchange Notes, all references herein to
"Offering Memorandum" shall be deemed references to the prospectus relating to
the Exchange Notes.
"OFFICER" means, with respect to any Person, the Chairman of
the Board of Directors, the Vice-Chairman of the Board of Directors, the Chief
Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Treasurer, the Controller, or the Secretary of such Person, or any
other officer designated by the Board of Directors serving in a similar
capacity.
"OFFICERS' CERTIFICATE" means, with respect to any Person, a
certificate signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of such Person and otherwise complying with
the requirements of Sections 11.4 and 11.5, as they relate to the making of an
Officers' Certificate.
"OFFSHORE PHYSICAL NOTES" has the meaning provided in Section
2.1.
<PAGE> 17
11
"OPINION OF COUNSEL" means a written opinion from legal
counsel who is reasonably acceptable to the Trustee complying with the
requirements of Sections 11.4 and 11.5, as they relate to the giving of an
Opinion of Counsel.
"PAYING AGENT" has the meaning provided in Section 2.3.
"PERMITTED HOLDERS" means any of Norman C. Harbert, Ronald E.
Weinberg, Byron S. Krantz, Clanco Partners I or any "group" (as defined in Rule
13d-5 of the Exchange Act) consisting of any or all of the foregoing.
"PERMITTED INDEBTEDNESS" has the meaning provided in Section
4.10(b).
"PERMITTED INVESTMENTS" means (i) any Investment in the
Company or any Restricted Subsidiary that is a Guarantor of the Notes; (ii) any
investment in cash or Cash Equivalents; (iii) any Investment in a Person (an
"ACQUIRED PERSON") if, as a result of such Investment, (a) the Acquired Person
becomes a Restricted Subsidiary and becomes a Guarantor of the Notes or (b) the
Acquired Person either (1) is merged, consolidated or amalgamated with or into
the Company or one of its Restricted Subsidiaries that is a Guarantor of the
Notes and the Company or such Restricted Subsidiary is the Surviving Person, or
(2) transfers or conveys substantially all of its assets to, or is liquidated
into, the Company or one of its Restricted Subsidiaries that is a Guarantor of
the Notes; PROVIDED that any Investment pursuant to this clause (iii) in a
Person that is or becomes a Foreign Subsidiary shall not constitute the
transfer of property (other than cash); (iv) Investments in accounts and notes
receivable acquired in the ordinary course of business; (v) any notes,
obligations or other securities received in connection with an Asset Sale that
complies with Section 4.16; (vi) Interest Rate Obligations and Currency
Agreement Obligations permitted pursuant to Section 4.10(b)(v); and (vii)
investments in or acquisitions of Capital Stock or similar interests in Persons
(other than Affiliates of the Company) received in the bankruptcy or
reorganization of or by such Person or any exchange of such investment with the
issuer thereof or taken in settlement of or other resolution of claims or
disputes.
"PERMITTED LIENS" means (i) Liens securing Indebtedness under
the New Revolving Credit Facility; (ii) Liens securing Indebtedness of a Person
existing at the time that such Person is merged into or consolidated with the
Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of such Person; (iii) Liens on property
acquired by the Company or a Restricted Subsidiary; PROVIDED, HOWEVER, that
such Liens were in existence prior to the contemplation of such acquisition and
do not extend to any other property; (iv) Liens in respect of Interest Rate
Obligations and Currency Agreement Obligations permitted under this Indenture;
(v) Liens in favor of the Company, any Restricted Subsidiary or any Guarantor;
(vi) Liens existing or created on the Issue Date; and (vii) Liens securing the
Notes.
"PERMITTED PAYMENTS" has the meaning provided in Section
4.11(b).
<PAGE> 18
12
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"PHYSICAL NOTES" has the meaning provided in Section 2.1.
"PREFERRED STOCK" as applied to the Capital Stock of any
Person, means Capital Stock of any class or classes (however designated) which
is preferred as to the payment of dividends or distributions, or as to the
distribution of assets upon any voluntary or involuntary liquidation or
dissolution of such Person, over Capital Stock of any other class of such
Person.
"PRINCIPAL" of any Indebtedness (including the Notes) means
the principal amount of such Indebtedness plus the premium, if any, on such
Indebtedness.
"PRIVATE PLACEMENT LEGEND" means the legend initially set
forth on the Notes in the form set forth in Section 2.15.
"PUBLIC EQUITY OFFERING" means an underwritten public offering
of Capital Stock (other than Disqualified Capital Stock) of the Company
pursuant to an effective registration statement filed under the Securities Act.
"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by
a Lien on assets related to the business of the Company or the Restricted
Subsidiaries, and any additions and accessions thereto, which are purchased,
constructed or improved by the Company or any Restricted Subsidiary at any time
after the Issue Date; PROVIDED, HOWEVER, that (i) any security agreement or
conditional sales or other title retention contract pursuant to which the Lien
on such assets is created (collectively, a "SECURITY AGREEMENT") shall be
entered into within 90 days after the purchase or substantial completion of the
construction or improvement of such assets and shall at all times be confined
solely to the assets so purchased, constructed or improved, any additions and
accessions thereto and any proceeds therefrom, (ii) at no time shall the
aggregate principal amount of the outstanding Indebtedness secured thereby be
increased, except in connection with the purchase of additions and accessions
thereto and except in respect of fees and other obligations in respect of such
indebtedness and (iii) (a) the aggregate outstanding principal amount of
Indebtedness secured thereby (determined on a per asset basis in the case of
any additions and accessions) shall not at the time such Security Agreement is
entered into exceed 100% of the purchase price or cost of construction or
improvement to the Company or any Restricted Subsidiary of the assets subject
thereto or (b) the Indebtedness secured thereby shall be with recourse solely
to the assets so purchased, constructed or improved, any additions and
accessions thereto and any proceeds therefrom.
"QUALIFIED INSTITUTIONAL BUYER" or "QIB" shall have the
meaning specified in Rule 144A under the Securities Act.
"RECORD DATE" means the Record Dates specified in the Notes;
PROVIDED, HOWEVER, that if any such date is a Legal Holiday, the Record Date
shall be the first day immediately preceding such specified day that is not a
Legal Holiday.
<PAGE> 19
13
"REDEMPTION DATE," when used with respect to any Note to be
redeemed, means the date fixed for such redemption pursuant to this Indenture
and the Notes.
"REDEMPTION PRICE," when used with respect to any Note to be
redeemed, means the price fixed for such redemption pursuant to this Indenture
and the Notes.
"REDESIGNATION" has the meaning provided in Section 4.17(b).
"REFINANCING" has the meaning provided in Section
4.10(b)(vii).
"REFINANCING INDEBTEDNESS" has the meaning provided in Section
4.10(b)(vii).
"REGISTRAR" has the meaning provided in Section 2.3.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement dated on or about the Issue Date between the Company, the Guarantors
and the Initial Purchasers for the benefit of themselves and the Holders as the
same may be amended from time to time in accordance with the terms thereof.
"REGULATION S" means Regulation S under the Securities Act.
"REQUIRED FILING DATES" has the meaning provided in Section
4.9(a).
"RESTRICTED INVESTMENT" means an Investment other than a
Permitted Investment.
"RESTRICTED PAYMENT" means (i) any dividend or other
distribution declared or paid on any Capital Stock of the Company (other than
(a) dividends or distributions payable solely in Capital Stock (other than
Disqualified Stock) of the Company or (b) dividends or distributions payable to
the Company or any Restricted Subsidiary); (ii) any payment to purchase, redeem
or otherwise acquire or retire for value any Capital Stock of the Company;
(iii) any payment to purchase, redeem, defease or otherwise acquire or retire
for value, prior to any scheduled maturity, repayment or sinking fund payment,
any Subordinated Indebtedness other than a purchase, redemption, defeasance or
other acquisition or retirement for value that is paid for with the proceeds of
Refinancing Indebtedness that is permitted under Section 4.10(b)(vii); or (iv)
any Restricted Investment.
"RESTRICTED SECURITY" has the meaning assigned to such term in
Rule 144(a)(3) under the Securities Act; PROVIDED, HOWEVER, that the Trustee
shall be entitled to request and conclusively rely on an Opinion of Counsel
with respect to whether any Note constitutes a Restricted Security.
"RESTRICTED SUBSIDIARY" means each direct or indirect
Subsidiary of the Company other than an Unrestricted Subsidiary.
"RULE 144A" means Rule 144A under the Securities Act.
<PAGE> 20
14
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"SENIOR DEBT" means the principal of and interest (including
post-petition interest) on, and all other amounts owing in respect of, (x) the
New Revolving Credit Facility, (y) Indebtedness evidenced by the Notes and (z)
any other Indebtedness incurred by the Company (including, but not limited to,
reasonable fees and expenses of counsel and all other charges, fees and
expenses incurred in connection with such Indebtedness), unless the instrument
creating or evidencing such Indebtedness or pursuant to which such Indebtedness
is outstanding expressly provides that such Indebtedness is subordinated in
right of payment to the Notes. Notwithstanding the foregoing, Senior Debt
shall not include (i) any Indebtedness for federal, state, local or other
taxes, (ii) any Indebtedness of the Company to any of its Subsidiaries or any
of its Affiliates, (iii) any Indebtedness incurred for the purchase of goods or
materials, or for services obtained, in the ordinary course of business or any
obligations in respect of any such Indebtedness, (iv) any Indebtedness that is
incurred in violation of this Indenture or (v) Indebtedness of the Company that
is expressly subordinate or junior in right of payment (other than as a result
of the indebtedness being unsecured) to any other Indebtedness of the Company.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X
promulgated pursuant to the Securities Act, as such Regulation S-X is in effect
on the Issue Date.
"SUBORDINATED INDEBTEDNESS" means Indebtedness of the Company
subordinated in right of payment to the Notes.
"SUBSIDIARY" of a Person means (i) any corporation more than
50% of the outstanding voting power of the Voting Stock of which is owned or
controlled, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person, or by such Person and one or more other
Subsidiaries thereof, or (ii) any limited partnership of which such Person or
any Subsidiary of such Person is a general partner, or (iii) any other Person
(other than a corporation or limited partnership) in which such Person or one
or more other Subsidiaries of such Person, or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has more than 50% of the
outstanding partnership or similar interests or has the power, by contract or
otherwise, to direct or cause the direction of the policies, management and
affairs thereof.
"SURVIVING PERSON" means, with respect to any Person involved
in or that makes any Disposition, the Person formed by or surviving such
Disposition or the Person to which such Disposition is made.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. Section
Section 77aaa-77bbbb), as amended, as in effect on the date of this Indenture,
except as otherwise provided in Section 9.3.
<PAGE> 21
15
"TRUST OFFICER" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer this Indenture, or in the case of
a successor trustee, an officer assigned to the department, division or group
performing the corporation trust work of such successor and assigned to
administer this Indenture.
"TRUSTEE" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of the Company
designated as such pursuant to and in compliance with Section 4.17 and not
redesignated a Restricted Subsidiary in compliance with such covenant.
"U.S. GOVERNMENT OBLIGATIONS" mean direct obligations of, and
obligations guaranteed by, the United States of America for the payment of
which the full faith and credit of the United States of America is pledged.
"U.S. LEGAL TENDER" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"U.S. PHYSICAL NOTES" has the meaning provided in Section 2.1.
"VOTING STOCK" of a Person means Capital Stock of such Person
of the class or classes pursuant to which the holders thereof have the general
voting power under ordinary circumstances to elect at least a majority of the
board of directors, managers or trustees of such Person (irrespective of
whether or not at the time stock of any other class or classes shall have or
might have voting power by reason of the happening of any contingency).
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required scheduled payment
of principal, including payment at final maturity, in respect thereof, with (b)
the number of years (calculated to the nearest one-twelfth) that will elapse
between such date and the making of such payment, by (ii) the then outstanding
aggregate principal amount of such Indebtedness.
SECTION 1.2 Incorporation by Reference of TIA.
----------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this indenture have the following meanings:
"INDENTURE SECURITIES" means the Notes.
"INDENTURE SECURITY HOLDER" means a Holder or a Noteholder.
<PAGE> 22
16
"INDENTURE TO BE QUALIFIED" means this Indenture.
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the
Trustee.
"OBLIGOR" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by Commission
rule and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.3 Rules of Construction.
----------------------
Unless the context otherwise requires:
1. a term has the meaning assigned to it;
2. an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP as in effect on the date
hereof;
3. "OR" is not exclusive;
4. words in the singular include the plural, and words in the
plural include the singular;
5. a reference to a Section or Article shall be to a Section
or Article of this Indenture;
6. "HEREIN", "HEREOF" and other words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
7. any reference to a statute, law or regulation means that
statute, law or regulation as amended and in effect from time to time
and includes any successor statute, law or regulation; PROVIDED,
HOWEVER, that any reference to the Bankruptcy Law shall mean the
Bankruptcy Law as applicable to the relevant case.
<PAGE> 23
17
ARTICLE II
THE NOTES
---------
SECTION 2.1 Form and Dating.
----------------
The Initial Notes and the Trustee's certificate of
authentication relating thereto shall be substantially in the form of EXHIBIT A
hereto. The Exchange Notes and the Trustee's certificate of authentication
relating thereto shall be substantially in the form of EXHIBIT B hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or depository rule or usage. The Company and the Trustee shall
approve the form of the Notes and any notation, legend or endorsement on them.
Each Note shall be dated the date of its issuance and shall show the date of
its authentication.
The terms and provisions contained in the Notes, annexed
hereto as EXHIBITS A AND B, shall constitute, and are hereby expressly made, a
part of this Indenture and, to the extent applicable, the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Notes in
registered form, substantially in the form set forth in EXHIBIT A (the "GLOBAL
NOTE"), deposited with the Trustee, as custodian for DTC, duly executed by the
Company and authenticated by the Trustee as hereinafter provided and shall bear
the legend set forth in Section 2.15(a) and (b). The aggregate principal
amount of the Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for DTC, as
hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in EXHIBIT A (the "OFFSHORE
PHYSICAL NOTES") duly executed by the Company and authenticated by the Trustee
as hereinafter provided and shall bear the legend set forth in Section 2.15(a).
Notes offered and sold to Accredited Investors shall be issued, and Notes
offered and sold in reliance on Rule 144A may be issued, in the form of
permanent certificated Notes in registered form, in substantially the form set
forth in EXHIBIT A (the "U.S. PHYSICAL NOTES"), duly executed by the Company
and authenticated by the Trustee as hereinafter provided and shall bear the
legend set forth in Section 2.15(a). The Offshore Physical Notes and the U.S.
Physical Notes are sometimes collectively herein referred to as the "PHYSICAL
NOTES."
SECTION 2.2 Execution and Authentication; Aggregate Principal
-------------------------------------------------
Amount.
-------
Two Officers, or an Officer and an Assistant Secretary, shall
sign, or one Officer shall sign and one Officer or an Assistant Secretary (each
of whom shall, in each case,
<PAGE> 24
18
have been duly authorized by all requisite corporate actions) shall attest to,
the Notes for the Company by manual or facsimile signature.
If an Officer or Assistant Secretary whose signature is on a
Note was an Officer or Assistant Secretary at the time of such execution but no
longer holds that office or position at the time the Trustee authenticates the
Note, the Note shall nevertheless be valid.
A Note shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall authenticate (i) Initial Notes for original
issue in the aggregate principal amount not to exceed $100,000,000 and (ii)
Exchange Notes from time to time for issue only in exchange for a like
principal amount of Initial Notes, in each case upon a written order of the
Company. Such order shall specify the amount of Notes to be authenticated and
the date on which the Notes are to be authenticated, whether the Notes are to
be Initial Notes or Exchange Notes and whether the Notes are to be issued as
Physical Notes or a Global Note or such other information as the Trustee may
reasonably request. The aggregate principal amount of Notes outstanding at any
time may not exceed $100,000,000, except as provided in Section 2.7.
The Trustee may appoint an authenticating agent (the
"AUTHENTICATING AGENT") reasonably acceptable to the Company to authenticate
Notes. Unless otherwise provided in the appointment, an Authenticating Agent
may authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
Authenticating Agent. An Authenticating Agent has the same rights as an Agent
to deal with the Company or with any Affiliate of the Company.
The Notes shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent.
---------------------------
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where (a) Notes may be presented or surrendered for registration of transfer or
for exchange ("REGISTRAR"), (b) Notes may be presented or surrendered for
payment ("PAYING AGENT") and (c) notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Registrar shall
keep a register of the Notes and of their transfer and exchange. The Company,
upon prior written notice to the Trustee, may have one or more co-Registrars
and one or more additional Paying Agents reasonably acceptable to the Trustee.
The term "PAYING AGENT" includes any additional Paying Agent. The Company may
act as its own Paying Agent, except that for the purposes of payments on the
Notes pursuant to Sections 4.15 and 4.16, neither the Company nor any Affiliate
of the Company may act as Paying Agent.
<PAGE> 25
19
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture, which agreement shall incorporate
the provisions of the TIA and implement the provisions of this Indenture that
relate to such Agent. The Company shall notify the Trustee, in advance, of the
name and address of any 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.
The Company initially appoints the Trustee as Registrar,
Paying Agent and agent for service of demands and notices in connection with
the Notes, until such time as the Trustee has resigned or a successor has been
appointed. Any of the Registrar, the Paying Agent or any other agent may
resign upon 30 days' notice to the Company.
SECTION 2.4 Paying Agent To Hold Assets in Trust.
-------------------------------------
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of the Holders or the Trustee all assets held by the Paying Agent for
the payment of principal of, or interest on, the Notes (whether such assets
have been distributed to it by the Company or any other obligor on the Notes),
and the Company and the Paying Agent shall notify the Trustee of any Default by
the Company (or any other obligor on the Notes) in making any such payment.
The Company at any time may require a Paying Agent to distribute all assets
held by it to the Trustee and account for any assets disbursed and the Trustee
may at any time during the continuance of any payment Default, upon written
request to a Paying Agent, require such Paying Agent to distribute all assets
held by it to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been delivered by the
Company to the Paying Agent, the Paying Agent shall have no further liability
for such assets.
SECTION 2.5 Noteholder Lists.
-----------------
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of the Holders. If the Trustee is not the Registrar, the Company
shall furnish or cause the Registrar to furnish to the Trustee before each
Record Date and at such other times as the Trustee may request in writing a
list as of such date and in such form as the Trustee may reasonably require of
the names and addresses of the Holders, which list may be conclusively relied
upon by the Trustee.
SECTION 2.6 Transfer and Exchange.
----------------------
When Notes are presented to the Registrar or a co-Registrar
with a request to register the transfer of such Notes or to exchange such Notes
for an equal principal amount of Notes of other authorized denominations, the
Registrar or co-Registrar shall register the transfer or make the exchange as
requested if its requirements for such transaction are met; PROVIDED, HOWEVER,
that the Notes presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Company or the Registrar or co-Registrar,
duly executed by the Holder thereof or his attorney duly authorized in writing.
To permit registrations of transfer and
<PAGE> 26
20
exchanges, the Company shall execute and the Trustee shall authenticate Notes
at the Registrar's or co-Registrar's request. No service charge shall be made
for any registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchanges or transfers pursuant to
Sections 2.10, 3.6, 4.15, 4.16 or 9.5, in which event the Company shall be
responsible for the payment of such taxes).
The Registrar or co-Registrar shall not be required to
register the transfer of or exchange of any Note (i) during a period beginning
at the opening of business 15 days before the mailing of a notice of redemption
of Notes and ending at the close of business on the day of such mailing, (ii)
selected for redemption in whole or in part pursuant to Article III, except the
unredeemed portion of any Note being redeemed in part and (iii) during a Change
of Control Offer or an Asset Sale Offer if such Note is tendered pursuant to
such Change of Control Offer or Asset Sale Offer and not withdrawn.
Any Holder of the Global Note shall, by acceptance of such
Global Note, agree that transfers of beneficial interests in such Global Notes
may be effected only through a book-entry system maintained by the Holder of
such Global Note (or its agent), and that ownership of a beneficial interest in
the Note shall be required to be reflected in a book-entry system.
SECTION 2.7 Replacement Notes.
------------------
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note claims that the Note has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Note if the Trustee's requirements are met. If required by the Trustee or the
Company, such Holder must provide an indemnity bond or other indemnity of
reasonable tenor, sufficient in the reasonable judgment of both the Company and
the Trustee, to protect the Company, the Trustee or any Agent from any loss
which any of them may suffer if a Note is replaced. Every replacement Note
shall constitute an additional obligation of the Company.
SECTION 2.8 Outstanding Notes.
------------------
Notes outstanding at any time are all the Notes that have been
authenticated by the Trustee except those cancelled by it, those delivered to
it for cancellation and those described in this Section as not outstanding.
Subject to the provisions of Section 2.9, a Note does not cease to be
outstanding because the Company or any of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.7 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding unless
the Trustee receives proof satisfactory to it that the 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 2.7.
<PAGE> 27
21
If on a Redemption Date or the Maturity Date the Paying Agent
(other than the Company) holds U.S. Legal Tender or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Notes payable on that date and is not prohibited from paying such money to the
Holders thereof pursuant to the terms of this Indenture, then on and after that
date such Notes cease to be outstanding and interest on them ceases to accrue.
SECTION 2.9 Treasury Notes.
---------------
In determining (x) whether the Holders of the required
principal amount of Notes have concurred in any director, waiver, consent or
notice or (y) how much principal amount of Notes remains outstanding after a
redemption under Paragraph 6(b) of the Notes, Notes owned by the Company or an
Affiliate shall be considered as though they are not outstanding, except that
for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent under clause (x) above, only
Notes which a Trust Officer of the Trustee actually knows are so owned shall be
so considered. The Company shall notify the Trustee, in writing, when it or,
to the Company's knowledge, any of its Affiliates repurchases or otherwise
acquires Notes, of the aggregate principal amount of such Notes so repurchased
or otherwise acquired.
SECTION 2.10 Temporary Notes.
----------------
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes upon receipt, or a
written order of the Company in the form of an Officers' Certificate. The
Officers' Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to be
authenticated. Temporary Notes shall be substantially in the form of
definitive Notes but may have variations that the Company considers appropriate
for temporary Notes and so indicates in the Officers' Certificate. Without
unreasonable delay, the Company shall prepare and the Trustee shall
authenticate upon receipt of a written order of the Company pursuant to Section
2.2 definitive Notes in exchange for temporary Notes.
SECTION 2.11 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 transfer, exchange or payment. The Trustee,
or at the direction of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the Company, shall
dispose, in its customary manner, of all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.7, the Company may not
issue new Notes to replace Notes that it has paid or delivered to the Trustee
for cancellation. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are
surrendered to the Trustee for cancellation pursuant to this Section 2.11.
<PAGE> 28
22
SECTION 2.12 Defaulted Interest.
-------------------
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest to the Persons who are Holders on a
subsequent special record date, which special record date shall be the
fifteenth day next preceding the date fixed by the Company for the payment of
defaulted interest or the next succeeding Business Day if such date is not a
Business Day. The Company shall notify the Trustee in writing of the amount of
defaulted interest proposed to be paid on each Note and the date of the
proposed payment (a "DEFAULT INTEREST PAYMENT DATE"), and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such defaulted interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such defaulted interest as provided
in this Section; PROVIDED, HOWEVER, that in no event shall the Company deposit
monies proposed to be paid in respect of defaulted interest later than 11:00
a.m. of the proposed Default Interest Payment Date. At least 15 days before
the subsequent special record date, the Company shall mail (or cause to be
mailed) to each Holder, as of a recent date selected by the Company, with a
copy to the Trustee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and interest payable on
such defaulted interest, if any, to be paid. Notwithstanding the foregoing,
any interest which is paid prior to the expiration of the 30-day period set
forth in Section 6.1(i) shall be paid to Holders as of the regular record date
for the Interest Payment Date for which interest has not been paid.
Notwithstanding the foregoing, the Company may make payment of any defaulted
interest in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Notes may be listed, and upon such notice
as may be required by such exchange.
SECTION 2.13 CUSIP Number.
-------------
The Company in issuing the Notes may use "CUSIP" number, and,
if so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; PROVIDED, HOWEVER, that no representation
is hereby deemed to be made by the Trustee as to the correctness or accuracy of
the CUSIP number printed in the notice or on the Notes, and that reliance may
be placed only on the other identification number printed on the Notes. The
Company shall promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14 Deposit of Monies.
------------------
Prior to 11:00 a.m. New York City time on each Interest
Payment Date, Maturity Date, Redemption Date, Change of Control, Purchase Date
and Asset Sale Offer Purchase Date, the Company shall have deposited with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date, Maturity Date, Redemption
Date, Change of Control Purchase Date and Asset Sale Control Purchase Date, as
the case may be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date, Maturity Date,
<PAGE> 29
23
Redemption Date, Change of Control Purchase Date and Asset Sale Offer Purchase
Date, as the case may be.
SECTION 2.15 Restrictive Legends.
--------------------
(a) Each Global Note and Physical Note that constitutes a
Restricted Security shall bear the following legend (the "PRIVATE PLACEMENT
LEGEND") on the face thereof until after the third anniversary of the Issue
Date, unless otherwise agreed by the Company and the Holder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR")
(AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT
WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS
SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY, EXCEPT (A) TO THE
ISSUER OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS
FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A
SIGNED-LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D)
OUTSIDE THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS
SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE
YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY, IF THE PROPOSED
TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS
<PAGE> 30
24
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
EACH PURCHASER BY ITS PURCHASE OF THIS SECURITY SHALL BE DEEMED TO
HAVE REPRESENTED AND COVENANTED THAT EITHER (I) IT IS NOT ACQUIRING
THE SECURITY FOR OR ON BEHALF OF ANY PENSION OR WELFARE PLAN (AS
DEFINED IN SECTION 3 OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974 ("ERISA")) OR (II) IF IT IS ACQUIRING THE SECURITY FOR OR ON
BEHALF OF A PENSION OR WELFARE PLAN, THE APPLICABLE CONDITIONS OF
PROHIBITED TRANSACTION EXEMPTION 91-38, 90-L, 84-14 OR 95-60 ISSUED BY
THE DEPARTMENT OF LABOR HAVE BEEN SATISFIED OR THE PLAN IS A
GOVERNMENTAL PLAN THAT IS NOT SUBJECT TO TITLE I OF ERISA OR SECTION
4975 OF THE INTERNAL REVENUE CODE OF 1986 AS AMENDED.
(b) Each Global Note shall also bear the following
legend on the face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY, OR BY ANY SUCH
NOMINEE OF THE DEPOSITORY, OR BY THE DEPOSITORY OR NOMINEE OF SUCH
SUCCESSOR DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE &
<PAGE> 31
25
CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.17 OF THE INDENTURE.
SECTION 2.16 Book-Entry Provisions for Global Security.
------------------------------------------
(a) The Global Note initially shall (i) be registered in
the name of DTC or the nominee of such DTC, (ii) be delivered to the Trustee as
custodian for such DTC and (iii) bear legends as set forth in Section 2.15.
Members of, or participants in, DTC ("Agent Members") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by DTC, or the Trustee as its custodian, or under the Global Note,
and DTC may be treated by the Company, the Trustee and any Agent as the
absolute owner of the Global Note for all purposes whatsoever. Notwithstanding
the foregoing, nothing herein shall prevent the Company, the Trustee or any
Agent from giving effect to any written certification, proxy or other
authorization furnished by DTC or impair, as between DTC and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
holder of any Note.
(b) Transfers of the Global Note shall be limited to
transfers in whole, but not in part, to DTC, its successors or their respective
nominees. Interests of beneficial owners in the Global Note may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
DTC and the provisions of Section 2.17. In addition, Physical Notes shall be
transferred to all beneficial owners in exchange for their beneficial interest
in the Global Note if (i) DTC notifies the Company that it is unwilling or
unable to continue as DTC for the Global Note and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a written
request from DTC to issue Physical Notes.
(c) In connection with any transfer or exchange of a
portion of the beneficial interest in the Global Note to beneficial owners
pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes
are to be issued) reflect on its books and records the date and a decrease in
the principal amount of the Global Note in an amount equal to the principal
amount of the beneficial interest in the Global Note to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver, one or
more Physical Notes of like tenor and amount.
(d) In connection with the transfer of the entire Global
Note to beneficial owners pursuant to paragraph (b), the Global Note shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by DTC in exchange for its beneficial interest in the Global
Note, an equal aggregate principal amount of Physical Notes of authorized
denominations.
<PAGE> 32
26
(e) Any Physical Note constituting a Restricted Security
delivered in exchange for an interest in the Global Note pursuant to paragraph
(b) or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c)
of Section 2.17, bear the legend regarding transfer restrictions applicable to
the Physical Notes set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.17 Special Transfer Provisions.
----------------------------
(a) TRANSFERS TO NON-U.S. PERSONS. The following
provisions shall apply with respect to the registration of any proposed
transfer of a Note constituting a Restricted Security to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any
Note constituting a Restricted Security, whether or not such Note
bears the Private Placement Legend, if (x) the requested transfer is
after the third anniversary of the Issue Date (PROVIDED, HOWEVER, that
neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Note, or portion thereof, at any time on
or prior to the third anniversary of the Issue Date) or (y) the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member
holding a beneficial interest in the Global Note, upon receipt by the
Registrar of the certificate, if any, required by paragraph (i) above
and written instructions given in accordance with the procedures of
DTC and the Registrar, then (x) the Registrar shall reflect on its
books and records the date and (if the transfer does not involve a
transfer of outstanding Physical Notes) a decrease in the principal
amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and
(y) the Company shall execute and the Trustee shall authenticate and
deliver one or more Physical Notes of like tenor and amount.
(b) TRANSFERS TO ACCREDITED INVESTORS. The following
provisions shall apply with respect to the registration of any proposed
transfer of a Note constituting a Restricted Security to any Accredited
Investor that is not a QIB:
(i) the Registrar shall register the transfer of any
Note constituting a Restricted Security, whether or not such Note
bears the Private Placement Legend, if (x) the requested transfer is
after the third anniversary of the Issue Date (PROVIDED, HOWEVER, that
neither the Company nor any Affiliate of the Company has held any
beneficial interest in such Note, or portion thereof, at any time on
or prior to the third anniversary of the Issue Date) or (y) the
proposed transferee has delivered to the Registrar a certificate
substantially in the form of Exhibit C hereto; and
<PAGE> 33
27
(ii) if the proposed transferee is an Agent Member and
the Notes to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in the Global Note, upon
receipt by the Registrar of written instructions given in accordance
with DTC's and the Registrar's procedures, the Registrar shall reflect
on its books and records the date and an increase in the principal
amount of the Global Note in an amount equal to the principal amount
of the Physical Notes to be transferred, and the Trustee shall cancel
the Physical Notes so transferred.
(c) TRANSFERS TO QIBS. The following provisions shall apply
with respect to the registration of any proposed transfer of a Note
constituting a Restricted Security to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the
box provided for on the form of Note stating, or has otherwise advised
the Company and the Registrar in writing, that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Note stating, or
has otherwise advised the Company and the Registrar in writing, that
it is purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and
the Notes to be transferred consist of Physical Notes which after
transfer are to be evidenced by an interest in the Global Note, upon
receipt by the Registrar of written instructions given in accordance
with DTC's and the Registrar's procedures, the Registrar shall reflect
on its books and records the date and an increase in the principal
amount of the Global Note in an amount equal to the principal amount
of the Physical Notes to be transferred, and the Trustee shall cancel
the Physical Notes so transferred.
(d) PRIVATE PLACEMENT LEGEND. Upon the transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless (i) the request transfer is after the third anniversary
of the Issue Date (PROVIDED, HOWEVER, that neither the Company nor any
Affiliate of the Company has held any beneficial interest in such Note, or
portion thereof, at any time prior to or on the third anniversary of the Issue
Date), or (ii) there is delivered to the Registrar an Opinion of Counsel
reasonably satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the Securities Act.
<PAGE> 34
28
(e) GENERAL. By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this indenture.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.16 or this Section
2.17. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time during
the Registrar's normal business hours upon the giving of reasonable written
notice to the Registrar.
(f) TRANSFERS OF NOTES HELD BY AFFILIATES. Any
certificate (i) evidencing a Note that has been transferred to an Affiliate of
the Company within three years after the Issue Date, as evidenced by a notation
on the Assignment Form for such transfer or in the representation letter
delivered in respect thereof, for so long as such Note is held by such
Affiliate, or (ii) evidencing a Note that has been acquired from an Affiliate
(other than by an Affiliate) in a transaction or a chain of transactions not
involving any public offering, shall, until three years after the last date on
which the Company or any Affiliate of the Company was an owner of such Note, in
each case, bear the legend in substantially the form set forth in Section
2.15(a), unless otherwise agreed by the Company (with written notice thereof to
the Trustee).
SECTION 2.18 Liquidated Damages Under Registration Rights
--------------------------------------------
Agreement.
----------
Under certain circumstances, the Company shall be obligated to
pay certain liquidated damages to the Holders, all as set forth in Section 4 of
the Registration Rights Agreement. The terms thereof are hereby incorporated
herein by reference.
ARTICLE III
REDEMPTION
----------
SECTION 3.1 Notices to Trustee.
-------------------
If the Company elects to redeem Notes pursuant to Paragraph 6
of the Notes, it shall notify the Trustee and the Paying Agent in writing of
the Redemption Date and the principal amount of the Notes to be redeemed.
The Company shall give each notice provided for in this
Section 3.1 at least 60 days before the Redemption Date (unless a shorter
notice period shall be satisfactory to the Trustee, as evidenced in a writing
signed on behalf of the Trustee), together with an Officers' Certificate
stating that such redemption shall comply with the conditions contained herein
and in the Notes.
<PAGE> 35
29
SECTION 3.2 Selection of Notes To Be Redeemed.
----------------------------------
If fewer than all of the Notes are to be redeemed at any time,
the Trustee shall select the Notes to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed or, if the Notes are not listed on a national securities
exchange, by lot or by such method as the Trustee shall deem fair and
appropriate; PROVIDED, HOWEVER, that if the Notes are redeemed pursuant to
Paragraph 6(b) of the Notes, the Notes shall be redeemed solely on a PRO RATA
basis or on as nearly a PRO RATA basis as practicable (subject to the
procedures of DTC or any other depositary), unless such method is otherwise
prohibited. If the Notes are listed on any national securities exchange, the
Company shall notify the Trustee of the requirements of such exchange in
respect of any redemption. The Trustee shall make the selection from the Notes
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Notes selected for redemption and, in the case of
any Note selected for partial redemption, the principal amount thereof to be
redeemed. Notes in denominations of $1,000 may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 or any integral
multiple thereof) of the principal of Notes that have denominations larger than
$1,000. Provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
SECTION 3.3 Notice of Redemption.
---------------------
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause to be mailed a notice of redemption by
first class mail to each Holder whose Notes are to be redeemed, with a copy to
the Trustee and any Paying Agent. At the Company's request, the Trustee shall
give the notice of redemption in the Company's name and at the Company's
expense. The Company shall provide such notices of redemption to the Trustee
at least five days before the intended mailing date.
Each notice for redemption shall identify (including the CUSIP
number) the Notes to be redeemed and shall state:
1. the Redemption Date;
2. the Redemption Price and the amount of accrued
interest, if any, to be paid;
3. the name and address of the Paying Agent;
4. the subparagraph of the Notes pursuant to which such
redemption is being made;
5. that Notes called for redemption must be surrendered
to the Paying Agent to collect the Redemption Price plus accrued
interest, if any;
<PAGE> 36
30
6. that, unless the Company defaults in making the
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date, and the only remaining right
of the Holders of such Notes is to receive payment of the Redemption
Price plus accrued interest, if any, upon surrender to the Paying
Agent of the Notes redeemed;
7. 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, and upon surrender of such Note, a new Note or Notes
in the aggregate principal amount equal to the unredeemed portion
thereof will be issued; and
8. if fewer than all the Notes are to be redeemed, the
identification of the particular Notes (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Notes to be
redeemed and the aggregate principal amount of Notes to be outstanding
after such partial redemption.
SECTION 3.4 Effect of Notice of Redemption.
-------------------------------
Once notice of redemption is mailed in accordance with Section
3.3, Notes called for redemption become due and payable on the Redemption Date
and at the Redemption Price plus accrued interest, if any. Upon surrender to
the Trustee or Paying Agent, such Notes called for redemption shall be paid at
the Redemption Price plus accrued interest thereon to the Redemption Date, but
installments of interest, the maturity of which is on or prior to the
Redemption Date, shall be payable to Holders of record at the close of business
on the relevant record dates referred to in the Notes.
SECTION 3.5 Deposit of Redemption Price.
----------------------------
On or before the Redemption Date and in accordance with
Section 2.14 hereof, the Company shall deposit with the Paying Agent U.S. Legal
Tender sufficient to pay the Redemption Price plus accrued interest, if any, of
all Notes to be redeemed on that date. The Paying Agent shall promptly return
to the Company any U.S. Legal Tender so deposited which is not required for
that purpose, except with respect to monies owed as obligations to the Trustee
pursuant to Article Seven.
If the Company complies with the preceding paragraph, then,
unless the Company defaults in the payment of such Redemption Price plus
accrued interest, if any, interest on the Notes to be redeemed will cease to
accrue on and after the applicable Redemption Date, whether or not such Notes
are presented for payment.
SECTION 3.6 Notes Redeemed in Part.
-----------------------
Upon surrender of a Note that is to be redeemed in part, the
Trustee shall authenticate for the Holder a new Note or Notes equal in
principal amount to the unredeemed portion of the Note surrendered.
<PAGE> 37
31
ARTICLE IV
COVENANTS
---------
SECTION 4.1 Payment of Notes.
-----------------
(a) The Company shall pay the principal of and interest on
the Notes on the dates and in the manner provided in the Notes and in this
Indenture.
(b) An installment of principal of or interest on the
Notes shall be considered paid on the date it is due if the Trustee or Paying
Agent (other than the Company or any of its Affiliates) holds, prior to 11:00
a.m. New York City time on that date, U.S. Legal Tender designated for and
sufficient to pay the installment in full and is not prohibited from paying
such money to the Holders pursuant to the terms of this Indenture or the Notes.
(c) The Company shall pay, to the extent such payments
are lawful, interest on overdue principal and on overdue installments of
interest (without regard to any applicable grace periods) from time to time on
demand at the rate borne by the Notes. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
(d) Notwithstanding anything to the contrary contained in
this Indenture, the Company may, to the extent it is required to do so by law,
deduct or withhold income or other similar taxes imposed by the United States
of America from principal or interest payments hereunder.
SECTION 4.2 Maintenance of Office or Agency.
--------------------------------
The Company shall maintain the office or agency required under
Section 2.3. The Company shall give prior written notice to the Trustee of the
location, and any change in the location of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the address, of the
Trustee set forth in Section 12.2.
SECTION 4.3 Corporate Existence.
--------------------
Except as otherwise permitted by Article V or by Section 4.16,
the Company shall do or cause to be done, at its own cost and expense, all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate existence of each of the Restricted Subsidiaries in
accordance with the respective organizational documents of each such Restricted
Subsidiary and the material rights (charter and statutory) and franchises of
the Company and each such Restricted Subsidiary; PROVIDED, HOWEVER, that the
Company shall not be required to preserve, with respect to itself, any material
right or franchise and, with respect to any Restricted Subsidiary, any such
existence, material right or franchise, if the Board of Directors of the
Company shall determine in good faith that the preservation thereof is no
<PAGE> 38
32
longer desirable in the conduct of the business of the Company and the
Restricted Subsidiaries, taken as a whole.
SECTION 4.4 Payment of Taxes and Other Claims.
----------------------------------
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (i) all material taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon it or any
Restricted Subsidiary or properties of it or any Subsidiary and (ii) all
material lawful claims for labor, materials and supplies that, if unpaid, might
by law become a Lien upon the property of it or any Restricted Subsidiary;
PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge
or cause to be paid or discharged any such tax, assessment, charge or claim
whose amount, applicability or validity is being contested in good faith by
appropriate negotiations or proceedings properly instituted and diligently
conducted for which adequate reserves, to the extent required under GAAP, have
been taken.
SECTION 4.5 Maintenance of Properties and Insurance.
----------------------------------------
(a) The Company shall, and shall cause each Restricted
Subsidiary to, maintain all properties used or useful in the conduct of its
business in good working order and condition (subject to ordinary wear and
tear) and make all necessary repairs, renewals, replacements, additions,
betterments and improvements thereto and actively conduct and carry on its
business; PROVIDED, HOWEVER, that nothing in this Section 4.5 shall prevent the
Company or any Restricted Subsidiary from discontinuing the operation and
maintenance of any of its properties, if such discontinuance is (i) in the
ordinary course of business pursuant to customary business terms or (ii) in the
good faith judgment of the Board of Directors or other governing body of the
Company or the Restricted Subsidiary, as the case may be, desirable in the
conduct of their respective businesses and is not disadvantageous in any
material respect to the Holders.
(b) The Company shall provide or cause to be provided,
for itself and each Restricted Subsidiary, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the good faith
judgment of the Company, are adequate and appropriate for the conduct of the
business of the Company and such Restricted Subsidiary in a prudent manner,
with reputable insurers or with the government of the United States of America
or an agency or instrumentality thereof, in such amounts, with such
deductibles, and by such methods as shall be customary, in the good faith
judgment of the Company, for companies similarly situated in the industry.
SECTION 4.6 Compliance Certificate; Notice of Default.
------------------------------------------
(a) The Company shall deliver to the Trustee, within 105
days after the end of the Company's fiscal year, a certificate signed by the
Chairman of the Board of Directors, the Vice-Chairman of the Board of
Directors, the Chief Executive Officer, the President or any Vice President and
by the Chief Financial Officer, Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary of the Company (PROVIDED, HOWEVER, that
one of such
<PAGE> 39
33
signatories shall be the Company's principal executive officer, principal
financial officer or principal accounting officer), as to such Officers'
knowledge of the Company's compliance with all conditions and covenants under
this Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and in the event any Default exists, such Officers shall
specify the nature of such Default. The Officers' Certificate shall also
notify the Trustee should the Company elect to change the manner in which it
fixes its fiscal year end or change its independent certified public
accountants.
(b) (i) If any Default or Event of Default has occurred
and is continuing or (ii) if any Holder seeks to exercise any remedy hereunder
with respect to a claimed Default under this Indenture or the Notes, the
Company shall deliver to the Trustee, at its address set forth in Section 12.2
hereof, by registered or certified mail or by facsimile transmission followed
by hard copy by registered or certified mail an Officers' Certificate
specifying such event, notice or other action within five Business Days of its
becoming aware of such occurrence.
SECTION 4.7 Compliance with Laws.
---------------------
The Company shall comply, and shall cause each Restricted
Subsidiary to comply, with all applicable statutes, rules, regulations, orders
and restrictions of the United States of America, all states and municipalities
hereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of their respective businesses and the ownership of their
respective properties, except for such noncompliances as would not singly or in
the aggregate have a material adverse effect on the financial condition,
business or results of operations of the Company and the Restricted
Subsidiaries, taken as a whole.
SECTION 4.8 Waiver of Stay, Extension or Usury Laws.
----------------------------------------
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
or any usury law or other law that would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.9 Provision of Financial Statements and
-------------------------------------
Information.
------------
(a) Following effectiveness of the Exchange Offer (as
defined in the Registration Rights Agreement), whether or not the Company is
then subject to Section 13(a) or 15(d) of the Exchange Act, the Company will
file with the Commission, so long as any Notes are outstanding, the annual
reports, quarterly reports and other periodic reports which
<PAGE> 40
34
the Company would have been required to file with the Commission pursuant to
such Section 13(a) or 15(d) if the Company were so subject, and such documents
shall be filed with the Commission on or prior to the respective dates (the
"REQUIRED FILING DATES") by which the Company would have been required so to
file such documents if the Company were so subject; PROVIDED the Commission
will accept such filings. Upon qualification of this Indenture under the TIA,
the Company shall also comply with the provisions of TIA Section 314(a).
(b) The Company will also in any event (i) within 15
days of each Required Filing Date, file with the Trustee, and supply the
Trustee with copies for delivery to the holders of the Notes, the annual
reports, quarterly reports and other periodic reports which the Company would
have been required to file with the Commission pursuant to Section 13(a) or
15(d) of the Exchange Act if the Company were subject to such Sections and (ii)
if the Commission will not accept the filing of such documents promptly upon
written request and payment of the reasonable cost of duplication and delivery,
supply copies of such documents to any prospective holder of the Notes.
(c) The Company shall provide to any Holder or any
beneficial owner of Notes any information reasonably requested by such Holder
or such beneficial owner concerning the Company and the Subsidiaries (including
financial statements) necessary in order to permit such Holder or such
beneficial owner to sell or transfer Notes in compliance with Rule 144A under
the Securities Act.
SECTION 4.10 Limitation on Incurrence of Indebtedness.
-----------------------------------------
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, create, incur, issue, assume or directly or
indirectly guarantee or in any other manner become directly or indirectly
liable for ("INCUR") any Indebtedness (including Acquired Debt), except that
the Company may incur Indebtedness (including Acquired Debt) if, at the time
of, and immediately after giving pro forma effect to, such incurrence of
Indebtedness, the Consolidated Cash Flow Coverage Ratio of the Company for the
most recently ended four fiscal quarters would be at least 2.0 to 1.0 if
incurred during the period from the Issue Date through December 1, 1998, and
2.25 to 1.0 if incurred thereafter.
(b) The foregoing limitations will not apply to the
incurrence of any of the following (collectively, "PERMITTED INDEBTEDNESS"),
each of which shall be given independent effect:
(i) Indebtedness of the Company arising under the New
Revolving Credit Facility in an aggregate principal amount not to
exceed at any time outstanding the greater of (x) $25.0 million, less
any permanent reduction in commitments thereunder, and (y) the sum, at
such time, of (I) 85% of the consolidated book value of net accounts
receivable of the Company and the Restricted Subsidiaries and (II) 60%
of the consolidated book value of inventory of the Company and the
Restricted Subsidiaries;
(ii) Indebtedness of the Company represented by the
Initial Notes and the Exchange Notes and Indebtedness of the
Guarantors represented by the Guarantees;
<PAGE> 41
35
(iii) Indebtedness of the Company or any Restricted
Subsidiary not covered by any other clause of this paragraph which is
outstanding on the Issue Date ("EXISTING INDEBTEDNESS");
(iv) Indebtedness owed by any Restricted Subsidiary to
the Company or to another Restricted Subsidiary, or owed by the
Company to any Restricted Subsidiary that, if owed to a Restricted
Subsidiary that is not a Guarantor, is unsecured and subordinated in
right of payment to the payment and performance of the Company's
obligations under the Indenture and the Notes; PROVIDED, HOWEVER, that
any such Indebtedness shall at all times be held by a Person which is
either the Company or a Restricted Subsidiary; PROVIDED, FURTHER,
HOWEVER, that upon either (a) the transfer or other disposition of any
such Indebtedness to a Person other than the Company or another
Restricted Subsidiary or (b) the sale, lease, transfer or other
disposition of shares of Capital Stock (including by consolidation or
merger) of any such Restricted Subsidiary to a Person other than the
Company or another Restricted Subsidiary, the incurrence of such
Indebtedness shall be deemed to be an incurrence that is not permitted
by this clause (iv);
(v) Indebtedness of the Company or any Restricted
Subsidiary arising with respect to Interest Rate Agreement Obligations
and Currency Agreement Obligations incurred for the purpose of fixing
or hedging interest rate risk or currency risk with respect to any
fixed or floating rate Indebtedness that is permitted by the terms of
this Indenture to be outstanding or with respect to any receivable or
liability the payment of which is determined by reference to a foreign
currency;
(vi) Indebtedness represented by performance,
completion, guarantee, surety and similar bonds provided by the
Company or any Restricted Subsidiary in the ordinary course of
business consistent with past practice;
(vii) Any Indebtedness incurred in connection with or
given in exchange for the renewal, extension, substitution, refunding,
defeasance, refinancing or replacement, in whole or in part, (a
"REFINANCING") of any Indebtedness incurred as permitted under Section
4.10(a) or any Indebtedness described in clauses (i), (ii) or (iii)
above and this clause (vii) ("REFINANCING INDEBTEDNESS"); PROVIDED,
HOWEVER, that (a) the principal amount of such Refinancing
Indebtedness shall not exceed the principal amount (or accreted
amount, if less) of the Indebtedness so refinanced (plus the premiums
and reasonable expenses to be paid in connection therewith, which,
with respect to such premiums, shall not exceed the stated amount of
any premium or other payment required to be paid in connection with
such a refinancing pursuant to the terms of the Indebtedness being
refinanced); (b) if the Weighted Average Life to Maturity of the
Indebtedness being refinanced is equal to or greater than the Weighted
Average Life to Maturity of the Notes, the Refinancing Indebtedness
shall have a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of the Indebtedness being
refinanced; (c) with respect to Refinancing Indebtedness other than
Senior Debt incurred by the Company, such Refinancing Indebtedness
shall rank no more senior than, and, if applicable, shall be at least
as subordinated in right of
<PAGE> 42
36
payment to the Notes as, the Indebtedness being refinanced; and (d)
the obligor on such Refinancing Indebtedness shall be the obligor on
the Indebtedness being refinanced or the Company;
(viii) Indebtedness of the Company or any Restricted
Subsidiary (a) representing Capitalized Lease Obligations and any
refinancings thereof and/or (b) in respect of Purchase Money
Obligations for property acquired, constructed or improved in the
ordinary course of business and any refinancings thereof, which taken
together in the aggregate do not exceed $5.0 million at any time
outstanding;
(ix) Indebtedness of the Company or any Restricted
Subsidiary relating to the acquisition of Hutchinson Foundry Products
Company in an aggregate amount not to exceed $2.0 million (the
"Hutchinson Notes");
(x) commodity agreements entered into in the ordinary
course of business to protect against fluctuations in the prices of
raw materials and not for speculative purposes;
(xi) Indebtedness incurred by the Company or any
Restricted Subsidiary constituting reimbursement obligations with
respect to letters of credit issued in the ordinary course of
business, including, without limitation, letters of credit in respect
of workers' compensation claims or self-insurance, or other
Indebtedness with respect to reimbursement type obligations regarding
workers' compensation claims or self-insurance;
(xii) (a) Guarantees by the Company of Indebtedness of a
Restricted Subsidiary permitted to be incurred under this Indenture
and (b) Guarantees of the Notes by the Guarantors;
(xiii) Indebtedness of the Company or any Restricted
Subsidiary arising from agreements providing for indemnification,
adjustment of purchase price or similar obligations, in each case
incurred or assumed in connection with the disposition of any
business, assets or a Subsidiary, other guarantees of Indebtedness
incurred by any Person acquiring all or any portion of such business,
assets or a Subsidiary for the purpose of financing such acquisition;
provided that the maximum liability in respect of such Indebtedness
shall not exceed the gross proceeds actually received by the Company
and its Restricted Subsidiaries in connection with such disposition;
and
(xiv) Indebtedness of the Company or any Restricted
Subsidiary in addition to that described in clauses (i) through (xiii)
above, and any renewals, extensions, substitutions, refinancings or
replacements of such Indebtedness, so long as the aggregate principal
amount of all such Indebtedness incurred pursuant to this clause (xiv)
does not exceed $5.0 million at any one time outstanding.
(c) For purposes of determining any particular amount of
Indebtedness under this Section 4.10, guarantees, Liens or obligations with
respect to letters of credit
<PAGE> 43
37
supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included.
(d) Indebtedness of any Person which is outstanding at
the time such Person becomes a Restricted Subsidiary or is merged with or into
or consolidated with the Company or a Restricted Subsidiary shall be deemed to
have been incurred at the time such Person becomes a Restricted Subsidiary or
is merged with or into or consolidated with the Company or a Restricted
Subsidiary, and Indebtedness which is assumed at the time of the acquisition of
any asset shall be deemed to have been incurred at the time of such
acquisition.
SECTION 4.11 Limitation on Restricted Payments.
----------------------------------
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, make any Restricted Payment,
unless at the time of and immediately after giving effect to the proposed
Restricted Payment (with the value of any such Restricted Payment, if other
than cash, to be determined reasonably and in good faith by the Board of
Directors of the Company):
(i) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence thereof;
(ii) the Company could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant
to Section 4.10(a); and
(iii) the aggregate amount of all Restricted Payments
made after the Issue Date shall not exceed the sum of:
(A) an amount equal to 50% of the Company's
aggregate cumulative Consolidated Net Income accrued on a
cumulative basis during the period (treated as one accounting
period) beginning on the Issue Date and ending on the date of
such proposed Restricted Payment (or, if such aggregate
cumulative Consolidated Net Income for such period shall be a
deficit, minus 100% of such deficit); plus
(B) the aggregate amount of all net cash proceeds
received since the Issue Date by the Company from the issuance
and sale (other than to a Restricted Subsidiary) of, or equity
contribution with respect to, Capital Stock (other than
Disqualified Stock) and the principal amount of Indebtedness
of the Company or any Restricted Subsidiary that has been
converted into or exchanged for Capital Stock (other than
Disqualified Stock), in any such case to the extent that such
proceeds are not used (x) to redeem, repurchase, retire or
otherwise acquire Capital Stock or any Indebtedness of the
Company or any Restricted Subsidiary pursuant to clause (ii)
of the next paragraph or (y) to make any Restricted Investment
pursuant to clause (iv) of the next paragraph; plus
<PAGE> 44
38
(C) the amount of the net reduction in Investments
in Unrestricted Subsidiaries resulting from (x) the payment of
dividends or the repayment in cash of the principal of loans
or the cash return on any Investment, in each case to the
extent received by the Company or any Restricted Subsidiary
from Unrestricted Subsidiaries, (y) the release or
extinguishment of any guarantee of Indebtedness of any
Unrestricted Subsidiary, and (z) the redesignation of
Unrestricted Subsidiaries as Restricted Subsidiaries (valued
as provided in the definition of "Investment"), such aggregate
amount of the net reduction in Investments not to exceed in
the case of any Unrestricted Subsidiary the amount of
Restricted Investments previously made by the Company or any
Restricted Subsidiary in such Unrestricted Subsidiary, which
amount was included in the calculation of the amount of
Restricted Payments; plus
(D) to the extent that any Restricted Investment
that was made after the Issue Date is sold for cash or
otherwise liquidated or repaid for cash, the amount of cash
proceeds received with respect to such Restricted Investment,
net of taxes and the cost of disposition, not to exceed the
amount of Restricted Investments made after the Issue Date.
(b) Section 4.11(a) shall not prohibit the following actions
(collectively, "PERMITTED PAYMENTS"):
(i) the payment of any dividend within 60 days after
the date of declaration thereof, if at such declaration date such
payment would have been permitted under this Indenture (which payment
shall be deemed to have been paid on such date of declaration for
purposes of Section 4.11(a)(iii));
(ii) the redemption, repurchase, retirement or other
acquisition of any Capital Stock or any Indebtedness of the Company or
any Restricted Subsidiary in exchange for, or out of the proceeds of,
the substantially concurrent sale (other than to a Restricted
Subsidiary) of, or equity contribution with respect to, Capital Stock
of the Company (other than any Disqualified Stock), including without
limitation the Hawk Controlling Stockholder Merger that will occur
concurrently with the Offering;
(iii) any purchase or defeasance of Subordinated
Indebtedness to the extent required upon a Change of Control or Asset
Sale (as defined therein) by the indenture or other agreement or
instrument pursuant to which such Subordinated Indebtedness was
issued, but only if the Company (x) in the case of a Change of
Control, has complied with its obligations under Section 4.15 or (y)
in the case of an Asset Sale, has applied the Net Proceeds from such
Asset Sale in accordance with Section 4.16;
(iv) any Restricted Investment the sole consideration
for which consists of, or is made with the proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary)
of, or equity contribution with respect to, Capital Stock of the
Company (other than any Disqualified Stock);
<PAGE> 45
39
(v) loans or advances to employees of the Company or
any of its Subsidiaries which loans or advances exist on the Issue
Date, and other loans or advances to employees of the Company or any
Subsidiary to pay reasonable relocation expenses;
(vi) Restricted Investments in an amount such that the
sum of the aggregate amount of Restricted Investments made pursuant to
this clause (vi) after the Issue Date does not exceed $2.0 million at
any one time outstanding; and
(vii) the payment of any dividend on, or redemption of
any or all of, the Company's redeemable 10% cumulative preferred
stock, par value, $0.01 per share, Series A; redeemable 9% cumulative
preferred stock, par value, $0.01 per share, Series B; and redeemable
10% cumulative preferred stock, par value, $0.01 per share, Series C,
in each case, outstanding on the Issue Date.
PROVIDED, HOWEVER, that in the case of clauses (iii) and (vi) of this Section
4.11(b), no Default or Event of Default shall have occurred and be continuing.
(c) For purposes of Section 4.11(a)(iii), the Permitted
Payments referred to in clauses (i) and (vi) of Section 4.11(b) shall be
included in the aggregate amount of Restricted Payments made since the Issue
Date, and any other Permitted Payments described above shall be excluded.
(d) Not later than thirty (30) days after the end of any
fiscal quarter of the Company during which any Restricted Payment or Restricted
Investment has been made, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment or Restricted Investment
complies with this Indenture and setting forth in reasonable detail the basis
upon which the required calculations were computed, which calculations may be
based upon the Company's latest available internal quarterly financial
statements.
SECTION 4.12 Limitation on Liens.
--------------------
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien securing Indebtedness (other than Permitted Liens) on any asset now
owned or hereafter acquired, or any income or profits therefrom, or assign or
convey any right to receive income therefrom to secure any such Indebtedness,
unless (i) if such Lien secures Indebtedness that is pari passu with the Notes,
then the Notes are secured on an equal and ratable basis with the obligations
so secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness that is subordinated to the Notes, any
such Lien shall be subordinated to a Lien granted to the Holders of the Notes
in the same collateral as that securing such Lien to the same extent as such
subordinated Indebtedness is subordinated to the Notes.
<PAGE> 46
40
SECTION 4.13 Limitation on Dividends and Other Payment
-----------------------------------------
Restrictions Affecting Restricted Subsidiaries.
-----------------------------------------------
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise cause to become
effective any consensual encumbrance or consensual restriction on the ability
of any Restricted Subsidiary to (i) pay dividends or make any other
distributions to the Company or any other Restricted Subsidiary on its Capital
Stock or with respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to the Company or any other
Restricted Subsidiary, (ii) make loans or advances to, or issue guarantees for
the benefit of, the Company or any other Restricted Subsidiary or (iii)
transfer any of its properties or assets to the Company or any other Restricted
Subsidiary, except for such encumbrances or restrictions existing under or by
reason of:
(a) the New Revolving Credit Facility;
(b) applicable law;
(c) any instrument governing Indebtedness or Capital Stock of
an Acquired Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition); PROVIDED, HOWEVER, that no such
encumbrance or restriction is applicable to any Person, or the
properties or assets of any Person, other than the Acquired Person;
(d) by reason of customary non-assignment, subletting or net
worth provisions in leases or other agreements entered into the
ordinary course of business and consistent with past practices;
(e) Purchase Money Indebtedness for property acquired in the
ordinary course of business that impose restrictions only on the
property so acquired;
(f) an agreement for the sale or disposition of assets or the
Capital Stock of a Restricted Subsidiary; PROVIDED, HOWEVER, that such
restriction or encumbrance is only applicable to such Restricted
Subsidiary or assets, as applicable, and such sale or disposition
otherwise is permitted by Section 4.16; PROVIDED, FURTHER, HOWEVER,
that such restriction or encumbrance shall be effective only for a
period from the execution and delivery of such agreement through a
termination date not later than 180 days after such execution and
delivery;
(g) this Indenture, the Notes and the Guarantees;
(h) Indebtedness (including Refinancing Indebtedness)
permitted to be incurred subsequent to the Issue Date pursuant to
Section 4.10; PROVIDED, HOWEVER, that any such restrictions are
ordinary and customary with respect to the type of Indebtedness being
incurred;
<PAGE> 47
41
(i) encumbrances and restrictions imposed by Liens incurred in
accordance with Section 4.12;
(j) customary provisions in joint venture agreements and other
similar agreements; and
(k) encumbrances and restrictions imposed by amendments,
restatements, renewals, replacements or refinancings of the contracts,
instruments or obligations referred to in clauses (a) through (j)
above; PROVIDED that such encumbrances and restrictions are, in the
good faith judgment of the Company's Board of Directors, no more
restrictive, in any material respect, than those contained in such
contracts, instruments or obligations immediately prior to such
amendment, restatement, renewal, replacement or refinancing.
SECTION 4.14 Limitation on Transactions with Affiliates.
-------------------------------------------
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, enter into or suffer to exist
any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate of the Company unless (1) such transaction or
series of transactions is on terms that are no less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could
reasonably be obtainable at such time in a comparable transaction in
arm's-length dealings with an unrelated third party, and (2) the Company
delivers to the Trustee (a) with respect to any transaction or series of
transactions involving aggregate payments in excess of $500,000, an Officers'
Certificate certifying that such transaction or series of related transactions
complies with clause (1) above and (b) with respect to any transaction or
series of transactions involving aggregate payments in excess of $2.0 million,
an Officers' Certificate certifying that such transaction or series of related
transactions has been approved by a majority of the members of the Board of
Directors of the Company (and approved by a majority of the Independent
Directors or, in the event there is only one Independent Director, by such
Independent Director), and (c) with respect to any transaction or series of
transactions involving aggregate payments in excess of $5.0 million, an opinion
as to the fairness to the Company from a financial point of view issued by an
investment banking firm of national standing.
(b) Section 4.14(a) will not apply to (i) employment
agreements or compensation or employee benefit arrangements with any officer,
director or employee of the Company or any of its Restricted Subsidiaries
entered into in the ordinary course of business (including customary benefits
thereunder and including reimbursement or advancement of out-of-pocket
expenses, and director's and officer's liability insurance); (ii) the expense
sharing arrangement between the Company and Weinberg Capital Corporation
regarding the expenses incurred with respect to the Company's Cleveland, Ohio
headquarters; (iii) the Hawk Controlling Stockholder Merger that will occur
concurrently with the Offering; (iv) the secured promissory note in the
original principal amount of $500,000 issued to Helco, Inc.; (v) the Hutchinson
Notes; (vi) any transaction entered into by or among the Company or one of its
Restricted Subsidiaries with one or more Restricted Subsidiaries of the
Company; (vii)
<PAGE> 48
42
any transaction permitted by Section 4.11(b); (viii) transactions permitted by,
and complying with, Article Five; and (ix) transactions with suppliers or other
purchases or sales of goods or services, in each case in the ordinary course of
business (including, without limitation, pursuant to joint venture agreements)
and otherwise in compliance with the terms of this Indenture which, in the
reasonable determination of the Board of Directors of the Company, are on terms
no less favorable to the Company or its Restricted Subsidiaries than those that
could reasonably have been obtained at such time from an unaffiliated party.
SECTION 4.15 Change of Control.
------------------
(a) In the event of a Change of Control, each Holder
shall have the right, unless the Company has given a notice of redemption,
subject to the terms and conditions of this Indenture, to require the Company
to offer to purchase all or any portion (equal to $1,000 or an integral
multiple thereof) of such Holder's Notes at a purchase price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid
interest, if any, to the date of purchase, in accordance with the terms set
forth below (a "CHANGE OF CONTROL OFFER").
In the event of any Change of Control, the Company shall not,
and shall not cause or permit any of the Restricted Subsidiaries to, purchase,
redeem or otherwise acquire or retire any Indebtedness of the Company ranking
junior or subordinate to the Notes pursuant to any analogous provisions
relating to such Indebtedness until after the 91st day after the Change of
Control Payment Date (as such date may be extended).
(b) On or before the 30th day following the occurrence
of any Change of Control, the Company shall mail, by first-class mail (with a
copy to the Trustee), to each Holder at such Holder's registered address a
notice stating: (i) that a Change of Control has occurred and that such holder
has the right to require the Company to purchase all or a portion (equal to
$1,000 or an integral multiple thereof) of such holder's Notes at a purchase
price in cash equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase (the "CHANGE OF
CONTROL PURCHASE DATE"), which shall be a Business Day, specified in such
notice, that is not earlier than 30 days or later than 60 days from the date
such notice is mailed; (ii) the amount of accrued and unpaid interest, if any,
as of the Change of Control Purchase Date; (iii) that any Note not tendered
will continue to accrue interest; (iv) that, unless the Company defaults in the
payment of the purchase price for the Notes payable pursuant to the Change of
Control Offer, any Notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest on the Change of Control Purchase Date;
(v) that Holders electing to have a Note purchased pursuant to a Change of
Control Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the second Business Day prior to the Change of Control Purchase
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the second Business Day prior to the
Change of Control Purchase Date, a facsimile transmission or letter setting
forth the name of the Holder, the principal amount of the Notes the Holder
delivered for purchase and a statement that such Holder is withdrawing his
election to have such Notes purchased; (vii) that Holders whose Notes are
purchased only in part will be issued new Notes in a principal
<PAGE> 49
43
amount equal to the unpurchased portion of the Notes surrendered; PROVIDED,
HOWEVER, that each Note purchased and each new Note issued shall be in an
original principal amount of $1,000 or integral multiples thereof; (viii) the
circumstances and relevant facts regarding such Change of Control; and (ix)
such other information as may be required by applicable laws and regulations.
(c) On the Change of Control Purchase Date, the Company
will (i) accept for payment all Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal
Tender Sufficient to pay the aggregate purchase price of all Notes or portions
thereof accepted for payment, and (iii) deliver or cause to be delivered to the
Trustee all Notes tendered pursuant to the Change of Control Offer. The Paying
Agent shall promptly mail to each holder of Notes or portions thereof accepted
for payment an amount equal to the purchase price for such Notes plus accrued
and unpaid interest, if any, thereon, and the Trustee shall promptly
authenticate and mail to each holder of Notes accepted for payment in part a
new Note equal in principal amount to any unpurchased portion of the Notes, and
any Note not accepted for payment in whole or in part shall be promptly
returned to the holder of such Note. On and after a Change of Control Purchase
Date, interest will cease to accrue on the Notes or portions thereof accepted
for payment, unless the Company defaults in the payment of the purchase price
therefor. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Purchase
Date.
(d) The Company will comply with the applicable tender
offer rules, including the requirements of Section 14(e) and Rule 14e-1 under
the Exchange Act, and all other applicable securities laws and regulations in
connection with any Change of Control Offer and will be deemed not to be in
violation of any of the covenants under this Indenture to the extent such
compliance is in conflict with such covenants.
SECTION 4.16 Limitation on Asset Sales.
--------------------------
(a) The Company shall not, and shall not permit any
Restricted Subsidiary to, make any Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time
of such Asset Sale at least equal to the Fair Market Value (as evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or other property sold or disposed of
in the Asset Sale and (ii) at least 75% of such consideration consists of
either cash or Cash Equivalents; PROVIDED, HOWEVER, that for purposes of this
Section 4.16, "cash" shall include (x) the amount of any Indebtedness (other
than any Indebtedness that is by its terms subordinated to the Notes) of the
Company or such Restricted Subsidiary as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet or in the notes thereto that
is assumed by the transferee of any such assets or other property in such Asset
Sale (and excluding any liabilities that are incurred in connection with or in
anticipation of such Asset Sale), but only to the extent that such assumption
is effected on a basis such that there is no further recourse to the Company or
any of the Restricted Subsidiaries with respect to such liabilities and (y) any
notes, obligations or securities received by the Company or such Restricted
Subsidiary from
<PAGE> 50
44
such transferee that are converted within 60 days by the Company or such
Restricted Subsidiary into cash (to the extent of the cash received).
(b) Within 180 days after any Asset Sale, the Company may
elect to apply the Net Proceeds from such Asset Sale to (a) permanently reduce
any Senior Debt of the Company and/or (b) make an investment in, or acquire
assets and properties that will be used in, the business of the Company and the
Restricted Subsidiaries existing on the Issue Date or in businesses reasonably
related thereto. Pending the final application of any such Net Proceeds, the
Company or any Restricted Subsidiary may temporarily reduce Indebtedness of the
Company under the New Revolving Credit Facility or temporarily invest such Net
Proceeds in any Investments described under clauses (i) through (iii) of the
definition of Permitted Investments. Any Net Proceeds from an Asset Sale not
applied or invested as provided in the first sentence of this Section 4.16(b)
within 180 days of such Asset Sale will be deemed to constitute "EXCESS
PROCEEDS."
(c) Each date that the aggregate amount of Excess
Proceeds in respect of which an Asset Sale Offer (as defined below) has not
been made exceeds $5.0 million shall be deemed an "ASSET SALE OFFER TRIGGER
DATE." As soon as practicable, but in no event later than 20 business days
after each Asset Sale Offer Trigger Date, the Company shall commence an offer
(an "ASSET SALE OFFER") to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds. Any Notes to be purchased
pursuant to an Asset Sale Offer shall be purchased pro rata based on the
aggregate principal amount of Notes outstanding, and all Notes shall be
purchased at an offer price in cash in an amount equal to 100% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. To the extent that any Excess Proceeds remain after completion of an
Asset Sale Offer, the Company may use the remaining amount for general
corporate purposes otherwise permitted by this Indenture. In the event that
the Company is prohibited under the terms of any agreement governing
outstanding Senior Debt of the Company from repurchasing Notes with Excess
Proceeds pursuant to an Asset Sale Offer as set forth in the first sentence of
this Section 4.16(c), the Company shall promptly use all Excess Proceeds to
permanently reduce such outstanding Senior Debt of the Company. Upon the
consummation of any Asset Sale Offer, the amount of Excess Proceeds shall be
deemed to be reset to zero.
(d) Notice of an Asset Sale Offer shall be mailed, by
first-class mail (with a copy to the Trustee), by the Company not later than
the 20th business day after the related Asset Sale Offer Trigger Date to each
holder of Notes at such holder's registered address, stating: (i) that an Asset
Sale Offer Trigger Date has occurred and that the Company is offering to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds (to the extent provided in the immediately preceding
paragraph), at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the date
of the purchase (the "ASSET SALE OFFER PURCHASE DATE"), which shall be a
business day, specified in such notice, that is not earlier than 30 days or
later than 60 days from the date such notice is mailed, (ii) the amount of
accrued and unpaid interest, if any, as of the Asset Sale Offer Purchase Date,
(iii) that any Note not tendered will continue to accrue interest, (iv) that,
unless the Company defaults in the payment of the purchase price for the Notes
payable pursuant to the Asset Sale Offer, any Notes accepted for
<PAGE> 51
45
payment pursuant to the Asset Sale Offer shall cease to accrue interest after
the Asset Sale Offer Purchase Date, (v) that Holders electing to have a Note
purchased pursuant to a Asset Sale Offer will be required to surrender the
Note, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Note completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day prior to
the Asset Sale Offer Purchase Date, (vi) that Holders will be entitled to
withdraw their election if the Paying Agent receives, not later than the second
Business Day prior to the Asset Sale Offer Purchase Date, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Notes the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased, (vii) that
Holders whose Notes are purchased only in part will be issued new Notes in a
principal amount equal to the unpurchased portion of the Notes surrendered;
PROVIDED, HOWEVER, that each Note purchased and each new Note issued shall be
in an original principal amount of $1,000 or integral multiples thereof, and
(viii) such other information as may be required by applicable laws and
regulations.
(e) On the Asset Sale Offer Purchase Date, the Company
will (i) accept for payment the maximum principal amount of Notes or portions
thereof tendered pursuant to the Asset Sale Offer that can be purchased out of
Excess Proceeds from such Asset Sale that are to be applied to an Asset Sale
Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the aggregate purchase price of all Notes or portions thereof accepted for
payment, and (iii) deliver or cause to be delivered to the Trustee all Notes
tendered pursuant to the Asset Sale Offer. If less than all Notes tendered
pursuant to the Asset Sale Offer are accepted for payment by the Company for
any reason consistent with this Indenture, selection of the Notes to be
purchased by the Company shall be in compliance with the requirements of the
principal national securities exchange, if any, on which the Notes are listed
or, if the Notes are not so listed, on a pro rata basis or by lot; PROVIDED,
HOWEVER, that Notes accepted for payment in part shall only be purchased in
integral multiples of $1,000. The Paying Agent shall promptly mail to each
holder of Notes or portions thereof accepted for payment an amount equal to the
purchase price for such Notes plus accrued and unpaid interest, if any,
thereon, and the Trustee shall promptly authenticate and mail to such holder of
Notes accepted for payment in part a new Note equal in principal amount to any
unpurchased portion of the Notes, and any Note not accepted for payment in
whole or in part shall be promptly returned to the holder of such Note. On and
after an Asset Sale Offer Purchase Date, interest will cease to accrue on the
Notes or portions thereof accepted for payment, unless the Company defaults in
the payment of the purchase price therefor. The Company will publicly announce
the results of the Asset Sale Offer on or as soon as practicable after the
Asset Sale Offer Purchase Date.
(f) This Section 4.16 will not apply to a transaction
consummated in compliance with Article Five.
(g) The Company will comply with the applicable tender
offer rules, including the requirements of Section 14(e) and Rule 14e-1 under
the Exchange Act, and all other applicable securities laws and regulations in
connection with any Asset Sale Offer and
<PAGE> 52
46
will be deemed not to be in violation of any of the covenants under this
Indenture to the extent such compliance is in conflict with such covenants.
SECTION 4.17 Limitation on Designation of Unrestricted
-----------------------------------------
Subsidiaries.
-------------
(a) The Company shall not designate any Subsidiary of the
Company (other than a newly created Subsidiary in which no Investment has
previously been made) as an "Unrestricted Subsidiary" under this Indenture (a
"DESIGNATION") unless:
(i) no Default shall have occurred and be continuing at
the time of or after giving effect to such Designation;
(ii) immediately after giving effect to such
Designation, the Company would be able to incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section
4.10(a); and
(iii) the Company would not be prohibited under this
Indenture from making an Investment at the time of Designation in an
amount (the "DESIGNATION AMOUNT") equal to the greater of (x) the book
value of such Restricted Subsidiary on such date and (y) the Fair
Market Value of such Restricted Subsidiary on such date.
In the event of any such Designation, the Company shall be deemed to have made
an Investment constituting a Restricted Payment pursuant to for all purposes of
this Indenture in an amount equal to the Designation Amount.
(b) The Company shall not designate an Unrestricted
Subsidiary as a Restricted Subsidiary (a "REDESIGNATION"), unless:
(i) no Default shall have occurred and be continuing at
the time of and after giving effect to such Redesignation; and
(ii) all Liens and Indebtedness of such Unrestricted
Subsidiary outstanding immediately following such Redesignation shall
be deemed to have been incurred at such time and shall have been
permitted to be incurred for all purposes of this Indenture.
An Unrestricted Subsidiary shall be deemed to be redesignated as a
Restricted Subsidiary at any time if (a) the Company or any other Restricted
Subsidiary (i) provides credit support for, or a guarantee of, any Indebtedness
of such Unrestricted Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) or (ii) is directly or indirectly
liable for any Indebtedness of such Unrestricted Subsidiary, (b) a default with
respect to any Indebtedness of such Unrestricted Subsidiary (including any right
which the holders thereof may have to take enforcement action against it) would
permit (upon notice, lapse of time or both) any holder of any other Indebtedness
of the Company or any Restricted Subsidiary to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its final scheduled maturity, or (c) such Unrestricted Subsidiary
<PAGE> 53
47
incurs indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any Restricted Subsidiary, except in the case of
clause (i) to the extent permitted under Section 4.11.
(c) All Designations and Redesignations shall be evidenced by
Board Resolutions delivered to the Trustee certifying compliance with the
foregoing provisions. Subsidiaries that are not designated by the Board of
Directors as Restricted or Unrestricted Subsidiaries will be deemed to be
Restricted Subsidiaries. The Designation of a Restricted Subsidiary as an
Unrestricted Subsidiary shall be deemed a Designation of all of the
Subsidiaries of such Unrestricted Subsidiary as Unrestricted Subsidiaries.
ARTICLE V
SUCCESSOR CORPORATION
---------------------
SECTION 5.1 Merger, Consolidation and Sale of Assets.
-----------------------------------------
(a) The Company shall not, in any single transaction or
series of related transactions, consolidate or merge with or into (whether or
not the Company is the Surviving Person), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) in one or more related transactions to, another Person, and the
Company will not permit any Restricted Subsidiary to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the properties and assets of the Company and the Restricted Subsidiaries, taken
as a whole, to another Person, unless (i) the Surviving Person is a corporation
organized or existing under the laws of the United States, any state thereof or
the District of Columbia; (ii) the Surviving Person (if other than the Company
or a Guarantor) assumes all the obligations of the Company under the Notes,
this Indenture and, if then in effect, the Registration Rights Agreement
pursuant to a supplemental indenture or other written agreement, as the case
may be, in a form reasonably satisfactory to the Trustee; (iii) immediately
after such transaction, no Default or Event of Default shall have occurred and
be continuing; (iv) immediately after giving effect to such transaction or
series of related transactions, (a) in the case of a transaction involving the
Company, the Surviving Person shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to
such transaction or series of related transactions or (b) in the case of a
transaction involving a Restricted Subsidiary of the Company, the Surviving
Person shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of such Restricted Subsidiary immediately prior to such
transaction or series of related transactions; and (v) after giving pro forma
effect to such transaction, the Surviving Person would be permitted to incur at
least $1.00 of additional indebtedness (other than Permitted Indebtedness)
pursuant to Section 4.10(a). Notwithstanding clauses (iii), (iv) and (v)
above, any Restricted Subsidiary that is a Guarantor may consolidate with,
merge into or transfer all
<PAGE> 54
48
or part of its properties and assets to the Company or another Restricted
Subsidiary that is a Guarantor.
In the event of any transaction (other than a lease) described
in and complying with the conditions listed in the immediately preceding
paragraph in which the Company or a Guarantor is not the Surviving Person, such
Surviving Person shall succeed to, and be substituted for, and may exercise
every right and power of, the Company, and the Company shall be discharged from
its obligations under, this Indenture, the Notes and the Registration Rights
Agreement.
(b) In connection with any such consolidation, merger,
amalgamation, transfer, lease or disposition, the Company or such Person shall
have delivered to the Trustee (i) an Officers' Certificate and an Opinion of
Counsel, each in form and substance reasonably satisfactory to the Trustee,
stating that such consolidation, amalgamation, merger, sale, assignment,
conveyance, transfer, lease or disposition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
comply with this Indenture and that all conditions precedent therein provided
for relating to such transaction have been complied with, and (ii) if a
supplemental indenture is required in connection with such transaction, an
Opinion of Counsel, in form and substance reasonably satisfactory to the
Trustee, that such supplemental indenture constitutes the legal, valid, binding
and enforceable obligation of the Surviving Entity.
(c) For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one or
more Subsidiaries, the Capital Stock of which constitutes all or substantially
all of the properties and assets of the Company, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
SECTION 5.2 Successor Corporation Substituted.
----------------------------------
Upon any consolidation, amalgamation or merger, or any sale,
assignment, conveyance, transfer, lease or disposition of all or substantially
all of the properties and assets of the Company in accordance with Section
5.01, the Surviving Entity or the Transaction Survivor, as the case may be,
shall succeed to, and be substituted for, and may exercise every rich and power
of the Company under this Indenture, with the same effect as if such successor
had been named as the Company in this Indenture; and thereafter, except in the
case of a lease, the Company shall be discharged from all obligations and
covenants under this Indenture and the Notes.
ARTICLE VI
DEFAULT AND REMEDIES
--------------------
SECTION 6.1 Events of Default.
------------------
<PAGE> 55
49
"EVENTS OF DEFAULT", wherever used herein, means any one of
the following events (whatever the reason for such Event of Default and whether
it shall be voluntary or involuntary or be 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):
(i) the Company defaults for 30 days in the payment
when due of interest on, or Liquidated Damages (if any) with respect
to, any Note;
(ii) the Company defaults in the payment when due of
principal on any Note, whether upon maturity, acceleration, optional
or mandatory redemption, required repurchase or otherwise;
(iii) the Company's or any Guarantor's failure to perform
or comply with any covenant, agreement or warranty in this Indenture
(other than the defaults specified in clauses (i) and (ii) above)
which failure continues for 60 days after written notice thereof has
been given to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in aggregate principal amount
of the then outstanding Notes;
(iv) the occurrence of one or more defaults under any
agreements, indentures or instruments under which the Company or any
Restricted Subsidiary then has outstanding Indebtedness in excess of
$5.0 million in the aggregate and, if not already matured at its final
maturity in accordance with its terms, such Indebtedness shall have
been accelerated and such acceleration is not rescinded, annulled or
cured within 10 days thereafter;
(v) one or more judgments, orders or decrees for the
payment of money in excess of $5.0 million, either individually or in
the aggregate, shall be entered against the Company or any Restricted
Subsidiary or any of their respective properties and which judgments,
orders or decrees are not paid, discharged, bonded or stayed or stayed
pending appeal for a period of 60 days after their entry; or
(vi) the Company or any Significant Subsidiary shall (A)
commence a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consent to the entry of a judgment, decree or
order for relief against it in an involuntary case or proceeding under
any Bankruptcy Law, (C) consent to the appointment of a Custodian of
it or for substantially all of its property, (D) consent to or
acquiesce in the institution of a bankruptcy or an insolvency
proceeding against it, (E) make a general assignment for the benefit
of its creditors, (F) admit in writing its inability to pay its debts
as they become due, or (G) take any corporate action to authorize or
effect any of the foregoing; or
(vii) a court of competent jurisdiction shall enter a
judgment, decree or order for relief in respect of the Company or any
Significant Subsidiary in an involuntary case or proceeding under any
Bankruptcy Law which shall (A) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or
<PAGE> 56
50
composition in respect of the Company or any Significant Subsidiary,
(B) appoint a Custodian of the Company or any Significant Subsidiary
or for substantially all of its property or (C) order the winding-up
or liquidation of its affairs; and such judgment, decree or order
shall remain unstayed and in effect for a period of 60 consecutive
days; or
(viii) any Guarantee ceases to be in full force and effect
(except as contemplated by the terms of this Indenture) or any
Guarantor denies or disaffirms its obligations under this Indenture or
its Guarantee.
The Company shall provide an Officers' Certificate to the
Trustee within five days of the occurrence of any Default or Event of Default
(PROVIDED, HOWEVER, that pursuant to Section 4.6 hereof the Company shall
provide such certification at least annually whether or not they know of any
Default or Event of Default) that has occurred and, if applicable, describe
such Default or Event of Default and the status thereof.
SECTION 6.2 Acceleration.
-------------
(a) If any Event of Default (other than as specified in
clause (vi) or (vii) of Section 6.1 with respect to the Company) occurs and is
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of the then outstanding Notes may, and the Trustee at the request of
such Holders shall, declare all the Notes to be due and payable immediately by
notice in writing to the Company, and to the Company and the Trustee if by the
Holders, specifying the respective Event of Default and that such notice is a
"notice of acceleration," and the Notes shall become immediately due and
payable. Notwithstanding the foregoing, in the case of an Event of Default
arising from the events specified in clause (vi) or (vii) of Section 6.1 with
respect to the Company, the principal of, premium, if any, and any accrued
interest on all outstanding Notes shall ipso facto become immediately due and
payable without further action or notice.
(b) Any time after a declaration of acceleration, but
before a judgment or decree for payment of the money due has been obtained by
the Trustee, the Holders of a majority in principal amount of the Notes
outstanding, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if (i) the Company has paid or
deposited with the Trustee a sum sufficient to pay (A) all sums paid or
advanced by the Trustee and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, (B) all
overdue interest (including any interest accrued subsequent to an Event of
Default specified in clause (vi) or (vii) of Section 6.1 hereof) on all Notes,
(C) the principal of and premium, if any, on any Notes which have become due
otherwise than by such declaration or occurrence of acceleration and interest
thereon at the rate borne by the Notes, and (D) to the extent that payment of
such interest is lawful, interest upon overdue interest at the rate borne by
the Notes; and (ii) all Events of Default, other than the non-payment of
principal of Notes which have become due solely by such declaration or
occurrence of acceleration, have been cured or waived; and (iii) the rescission
would not conflict with any judgment, order or decree of any court of competent
jurisdiction.
<PAGE> 57
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(c) The Holders of a majority in aggregate principal
amount of the Notes then outstanding by notice to the Trustee may, on behalf of
the Holders of all of the Notes, waive any existing Default or Event of Default
and its consequences under this Indenture except (i) a continuing Default or
Event of Default in the payment of the principal of, or premium, if any, or
interest on, the Notes (which may be waived only with the consent of each
Holder of Notes affected), or (ii) in respect of a covenant or provision which
under this Indenture cannot be modified or amended without the consent of the
Holder of each Note outstanding.
SECTION 6.3 Other Remedies.
---------------
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect
the payment of the principal of or interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 6.4 Waiver of Past Defaults.
------------------------
Subject to Sections 2.9, 6.7 and 9.2, prior to the declaration
of acceleration of the Notes, the Holders of not less than a majority in
principal amount of the outstanding Notes by written notice to the Trustee may
on behalf of all of the Holders waive any past Default or Event of Default and
its consequences, except a Default in the payment of principal of or interest
on any Note as specified in clauses (i) and (ii) of Section 6.1 or a Default in
respect of any term or provision of this Indenture that may not be modified or
amended without the consent of each Holder affected as provided in Section 9.2.
In case of any such waiver, the Company, the Trustee and the Holders shall be
restored to their former positions and rights hereunder and under the Notes,
respectively. This paragraph of this Section 6.4 shall be in lieu of Section
316(a)(1)(B) of the TIA and such Section 316(a)(1)(B) of the TIA is hereby
expressly excluded from this Indenture and the Notes, as permitted by the TIA.
Upon any such waiver, such Default shall cease to exist and be
deemed to have been cured and not to have occurred, and any Event of Default
arising therefrom shall be deemed to have been cured and not to have occurred
for every purpose of this Indenture and the Notes, but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereon.
<PAGE> 58
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SECTION 6.5 Control by Majority.
--------------------
Subject to Section 2.9, the Holders of a majority in principal
amount of the outstanding Notes may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it, including, without limitation, any remedies
provided for in Section 6.3; PROVIDED, HOWEVER, that the Trustee may take any
other action deemed proper by the Trustee which is not inconsistent with such
direction. Subject to Section 7.1, however, the Trustee may refuse to follow
any direction that the Trustee reasonably believes conflicts with any law or
this Indenture, that the Trustee determines may be unduly prejudicial to the
rights of another Holder or that exposes the Trustee to personal liability.
This Section 6.5 shall be in lieu of Section 316(a)(1)(A) of the TIA, and such
Section 316(a)(1)(A) of the TIA is hereby expressly excluded from this
Indenture and the Notes, as permitted by the TIA.
SECTION 6.6 Limitation on Suits.
--------------------
No Holder shall have any right to institute any proceeding,
judicial or otherwise with respect to this Indenture, or for the appointment of
a receiver or trustee, or for any other remedy hereunder, unless:
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of
the outstanding Notes shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its
own name as Trustee;
(c) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of
a majority in principal amount of the outstanding Notes.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.7 Rights of Holders To Receive Payment.
-------------------------------------
Notwithstanding any other provision of this Indenture or of
the Notes, the right of any Holder to receive payment of the principal of and
interest on a Note, on or after the respective due dates expressed in such
Note, or to bring suit for the enforcement of any such
<PAGE> 59
53
payment on or after such respective dates, shall not be impaired or affected
without the express prior written consent of such Holder.
SECTION 6.8 Collection Suit by Trustee.
---------------------------
If an Event of Default in payment of principal or interest
specified in clause (i) or (ii) of Section 6.1 of this Indenture occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any other obligor on the Notes for the
whole amount of the principal and accrued interest remaining unpaid, together
with interest on overdue principal and, to the extent that payment of such
interest is lawful, interest on overdue installments of interest as set forth
in Section 4.1 and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.9 Trustee May File Proofs of Claim.
---------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any
other obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, taxes, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 7.7. The Company's payment obligations under this Section 6.9 shall be
secured in accordance with the provisions of Section 7.7 hereunder. 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 6.10 Priorities.
-----------
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: if the Holders are forced to proceed against the
Company directly without the Trustee, to Holders for their collection
costs;
<PAGE> 60
54
Third: subject to Article Ten, to Holders for amounts due and
unpaid on the Notes for principal and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal and interest, respectively; and
Fourth: to the Company or any other obligor on the Notes, as
their interests may appear, or as a court of competent jurisdiction
may direct.
The Trustee, upon prior notice to the Company, may fix a
record date and payment date for any payment to Holders pursuant to this
Section 6.10.
SECTION 6.11 Undertaking for Costs.
----------------------
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.6, or a suit by a Holder or
group of Holders of more than 10% in principal amount of the outstanding Notes.
ARTICLE VII
TRUSTEE
-------
SECTION 7.1 Duties of Trustee.
------------------
(a) If a Default or an Event of Default has occurred and
is continuing, the Trustee shall exercise such of the rights and powers vested
in it by this Indenture and use the same degree of care and skill in its
exercise thereof as a prudent person would exercise or use under the
circumstances in the conduct of his own affairs.
(b) Except during the continuance of a Default or an
Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture that are adverse to the
Trustee; and
(2) In the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, in the case of any such certificates or
opinions that by any provision hereof are specifically required to be
furnished to the
<PAGE> 61
55
Trustee, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) Notwithstanding anything to the contrary herein
contained, the Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(1) This paragraph does not limit the effect of
paragraph(b) of this Section 7.1;
(2) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts;
and
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.2, 6.4 or 6.5.
(d) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder or in the exercise
of any of its rights or powers if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way
relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this
Section 7.1 and Section 7.2.
(f) The Trustee shall not be liable for interest on any
money or assets received by it except as the Trustee may agree in writing with
the Company. Assets held in trust by the Trustee need not be segregated from
other assets of the Trustee except to the extent required by law.
SECTION 7.2 Rights of Trustee.
------------------
Subject to Section 7.1:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any document believed by it to
be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel of its selection and may require an Officers'
Certificate or an Opinion of Counsel, which shall conform to Sections
12.4 and 12.5. The Trustee shall not be liable for any action it takes
or omits to take in good faith in reliance on such Officers'
Certificate or Opinion of Counsel.
<PAGE> 62
56
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(d) The Trustee shall not be liable for any action that it
takes or omits to take in good faith which it reasonably believes to
be authorized or within its rights or powers.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall
determine to make such further inquiry or investigation, it shall be
entitled, upon reasonable notice to the Company, to examine the books,
records, and premises of the Company, personally or by agent or
attorney and to consult with the officers and representatives of the
Company, including the Company's accountants and attorneys.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
security or indemnity reasonably satisfactory to the Trustee against
the costs, expenses and liabilities which may be incurred by it in
compliance with such request, order or direction.
(g) The Trustee shall not be required to give any bond or
surety in respect of the performance of its powers and duties
hereunder.
(h) Delivery of reports, information and documents to the
Trustee under Section 4.9 hereof is for informational purposes only
and the Trustee's receipt of the foregoing shall not constitute
constructive notice of any information contained therein or
determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder (as to which
the Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 7.3 Individual Rights of Trustee.
-----------------------------
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Company, any
Subsidiary, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However,
the Trustee must comply with Sections 7.10 and 7.11 hereof.
<PAGE> 63
57
SECTION 7.4 Trustee's Disclaimer.
---------------------
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, and it shall not be accountable for
the Company's use of the proceeds from the Notes, and it shall not be
responsible for any statement of the Company in this Indenture or the Notes
other than the Trustee's certificate of authentication.
SECTION 7.5 Notice of Default.
------------------
If a Default or an Event of Default occurs and is continuing
and if it is known to a Trust Officer, the Trustee shall mail to each Holder
notice of the uncured Default or Event of Default within 90 days after such
Default or Event of Default occurs. Except in the case of a Default or an
Event of Default in payment of principal of, or interest on, any Note,
including an accelerated payment, a Default in payment on the Change of Control
Payment Date pursuant to a Change of Control Offer or on the Proceeds Purchase
Date pursuant to an Asset Sale Offer or a Default in compliance with Article
Five hereof, the Trustee may withhold the notice if and so long as its Board of
Directors, the executive committee of its Board of Directors or a committee of
its directors and/or Trust Officers in good faith determines that withholding
the notice is in the interest of the Holders. The foregoing sentence of this
Section 7.5 shall be in lieu of the proviso to Section 315(b) of the TIA and
such proviso to Section 315(b) of the TIA is hereby expressly excluded from
this Indenture and the Notes, as permitted by the TIA.
SECTION 7.6 Reports by Trustee to Holders.
------------------------------
Within 60 days after each May 15 of each year beginning with
1996, the Trustee shall, to the extent that any of the events described in TIA
Section 313(a) occurred within the previous twelve months, but not otherwise,
mail to each Holder a brief report dated as of such date that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section Section
313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders
shall be mailed to the Company and filed with the Commission and each stock
exchange, if any, on which the Notes are listed.
The Company shall promptly notify the Trustee if the Notes
become listed on any stock exchange and the Trustee shall comply with TIA
Section 313(d).
SECTION 7.7 Compensation and Indemnity.
---------------------------
The Company shall pay to the Trustee from time to time such
compensation for its services as has been agreed to in writing signed by the
Company and Trustee. The Trustee's compensation shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it in connection with the performance of its duties
<PAGE> 64
58
under this Indenture. Such expenses shall include the reasonable fees and
expenses of the Trustee's agents and counsel.
The Company shall indemnify each of the Trustee (or any
predecessor Trustee) and its agents, employees, stockholders, Affiliates and
directors and officers for, and hold them harmless against, any and all loss,
liability, damage, claim or expense (including reasonable fees and expenses of
counsel), including taxes (other than taxes based on the income of the Trustee)
incurred by them except for such actions to the extent caused by any
negligence, bad faith or willful misconduct on their part, arising out of or in
connection with the acceptance or administration of this trust including the
reasonable costs and expenses of defending themselves against any claim or
liability in connection with the exercise or performance of any of their
rights, powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. At the Trustee's sole discretion, the Company shall defend the
claim and the Trustee shall cooperate and may participate in the defense;
PROVIDED, HOWEVER, that any settlement of a claim shall be approved in writing
by the Trustee. Alternatively, the Trustee may at its option have separate
counsel of its own choosing and the Company shall pay the reasonable fees and
expenses of such counsel.
To secure the Company's payment obligations in this Section
7.7, the Trustee shall have a lien prior to the Notes on all assets or money
held or collected by the Trustee, in its capacity as Trustee, except assets or
money held in trust to pay principal of or interest on particular Notes.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(vi) or (vii) occurs, such expenses
and the compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law.
The provisions of this Section 7.7 shall survive the
termination of this Indenture.
SECTION 7.8 Replacement of Trustee.
-----------------------
The Trustee may resign by so notifying the Company. The
Holders of a majority in principal amount of the outstanding Notes may remove
the Trustee by so notifying the Company and the Trustee and may appoint a
successor Trustee. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
<PAGE> 65
59
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall notify each Holder of
such event and 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 Notes may appoint a successor Trustee to replace the
successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after
that, the retiring Trustee shall transfer all property held by it as Trustee to
the successor Trustee, subject to the lien provided in Section 7.7, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Holder.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10, any Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding any resignation or replacement of the Trustee
pursuant to this Section 7.8, the Company's obligations under Section 7.7 shall
continue for the benefit of the retiring Trustee.
SECTION 7.9 Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; PROVIDED, HOWEVER, that
such corporation shall be otherwise qualified and eligible under this Article
Seven.
SECTION 7.10 Eligibility; Disqualification.
------------------------------
This Indenture shall always have a Trustee who satisfies the
requirement of TIA Section Section 310(a)(1), (2) and (5). The Trustee (or,
in the case of a corporation included in a bank holding company system, the
related bank holding company) shall have a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report of
condition. In addition, if the Trustee is a corporation included in a bank
holding company system, the Trustee, independently of such bank holding
company, shall meet the capital requirements of TIA Section 310(a)(2). The
Trustee shall comply with TIA Section 310(b); PROVIDED, HOWEVER, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities, or certificates of interest or
participation in other
<PAGE> 66
60
securities, of the Company are outstanding, if the requirements for such
exclusion set forth in TIA Section 310(b)(1) are met. The provisions of TIA
Section 310 shall apply to the Company, as obligor of the Notes.
SECTION 7.11 Preferential Collection of Claims Against
-----------------------------------------
Company.
--------
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311(b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein. The provisions of TIA Section 311 shall apply to the
Company, as obligor on the Notes.
ARTICLE VIII
SATISFACTION AND DISCHARGE; DEFEASANCE
--------------------------------------
SECTION 8.1 Satisfaction and Discharge of Indenture.
----------------------------------------
(a) This Indenture shall be discharged and shall cease to be
of further effect (except as to surviving rights of registration of transfer or
exchange of Notes herein expressly provided for) as to all outstanding Notes
and the Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging satisfaction and discharge of this Indenture,
when:
(i) either
(1) All Notes theretofore authenticated and
delivered (other than (x) Notes which have been lost, stolen
or destroyed and which have been replaced or paid as provided
in Section 2.7 hereof and (y) Notes for whose payment money
has theretofore been deposited in trust by the Company and
thereafter repaid to the Company or discharged from such
trust) have been delivered to the Trustee for cancellation; or
(2) all Notes not theretofore delivered to the
Trustee for cancellation (other than (x) Notes which have been
lost, stolen or destroyed and which have been replaced or paid
as provided in Section 2.7 hereof and (y) Notes for whose
payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust) have been
called for redemption pursuant to the terms of this Indenture
or have otherwise become due and payable, and the Company, in
each case, has irrevocably deposited or caused to be deposited
with the Trustee in trust for the purpose U.S. Legal Tender
sufficient to pay and discharge the entire indebtedness on
such Notes not theretofore delivered to the Trustee for
cancellation, for the principal of, premium, if any, and
interest to the date of such deposit;
<PAGE> 67
61
(ii) the Company and the Guarantors have paid or caused
to be paid all other sums payable hereunder by the Company and the
Guarantors; and
(iii) the Company has delivered to the Trustee an
Officers' Certificate and an opinion of Counsel each stating that all
conditions precedent herein provided for relating to the satisfaction
and discharge of this Indenture have been complied with.
(b) Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company to the Trustee under Section 7.7
hereof shall survive and, if money shall have been deposited with the Trustee
pursuant to clause (a)(i)(2) of this Section 8.1, the obligations of the
Trustee under Sections 8.3 and 8.4 shall survive.
SECTION 8.2 Defeasance or Covenant Defeasance.
----------------------------------
(a) Subject to the satisfaction of the conditions in
Section 8.2(c) hereof, the Company may, at its option by Board Resolution, at
any time, with respect to the Notes, elect to have the obligations of the
Company and the Guarantors discharged with respect to the outstanding Notes
("DEFEASANCE"). Upon such defeasance, the Company shall be deemed to have paid
and discharged the entire indebtedness represented by the outstanding Notes and
the Guarantees, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.4 hereof and the other Sections of and matters under
this Indenture referred to in (i) and (ii) below, and to have satisfied all its
other obligations under such Notes and this Indenture, except for the
following, which shall survive until otherwise terminated or discharged
hereunder: (i) the rights of Holders of Notes to receive solely from the trust
fund described in Section 8.2(c) and as more fully set forth in such Section,
payments in respect of the principal of and interest on such Notes when such
payments are due, (ii) the Company's obligations under Sections 2.3, 2.5, 2.6,
2.7 and 4.2, (iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder, including, without limitation, the Trustee's rights under
Section 7.7, and (iv) this Article Eight. Subject to compliance with this
Article Eight, the Company may exercise its option under this Section 8.2(a)
notwithstanding the prior exercise of its option under Section 8.2(b) with
respect to the Notes.
(b) Subject to the satisfaction of the conditions in
Section 8.2(c) hereof, the Company may, at its option by Board Resolution, at
any time, elect to effect covenant defeasance ("COVENANT DEFEASANCE"). On and
after the date such conditions are satisfied, (i) the Company shall be released
from its obligations under any covenant or provision contained in Sections 4.4,
4.5, 4.6(a), 4.7 and 4.9 through 4.19, (ii) clauses (iii) through (vi) of
Section 6.1 hereof shall not apply, and (iii) the provisions of Articles Five,
Ten and Eleven shall not apply, and the Notes shall thereafter be deemed to be
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants and the provisions of Articles Five, Ten and
Eleven, but shall continue to be deemed "outstanding" for all other purposes
hereunder. For this purpose, such covenant defeasance means that, with respect
to the Notes, the Company may omit to comply with and shall have no liability
in respect of any term, condition or limitation set forth in any such Section
or Article, whether directly or indirectly, by reason of any reference
elsewhere herein to any such Section or Article or by reason of any reference
in
<PAGE> 68
62
any such Section or Article to any other provision herein or in any other
document and such omission to comply shall not constitute a Default or an Event
of Default under clauses (iii) through (vi) of Section 6.1 hereof, but, except
as specified above, the remainder of this Indenture shall be unaffected
thereby.
(c) In order to effect defeasance or covenant defeasance,
the following conditions must be satisfied:
(i) the Company shall have irrevocably deposited with
the Trustee (or another trustee satisfying the requirements of Section
7.10 hereof who agrees to comply with the provisions of this Article
Eight applicable to it), as trust funds in trust, for the benefit of
the Holders of such Notes, U.S. Legal Tender, U.S. Government
Obligations or a combination thereof, in such amounts as will be
sufficient (in the opinion of a nationally recognized firm of
independent public accountants or a nationally recognized investment
banking firm, as evidenced by a written report), without consideration
of reinvestment of interest of such U.S. Government Obligations, to
pay the principal of, premium, if any, and interest on the outstanding
Notes (except lost, stolen or destroyed Notes which have been replaced
or paid) to maturity or redemption, as the case may be, and the
Company shall have irrevocably instructed the Trustee (or such other
trustee) to apply such U.S. Legal Tender or U.S. Government
Obligations to said payments in respect of the Notes;
(ii) the Company shall have delivered to the Trustee one
or more Opinions of Counsel in the United States (which counsel or
counsels shall be independent of the Company) to the effect that:
(A) the holders of the outstanding Notes will
not recognize income gain or loss for Federal income tax
purposes as a result of such defeasance or covenant
defeasance, as the case may be, and will be subject to Federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or
covenant defeasance, as the case may be, had not occurred
(which opinion, in the case of defeasance, shall be based upon
a ruling of the Internal Revenue Service or a change in
applicable Federal income tax law occurring after the Issue
Date);
(B) the trust funds will not be subject to any
rights of holders of Indebtedness of the Company (other than
holders of the Notes); and
(C) assuming no bankruptcy of the Company occurs
between the date of deposit and the 91st day following the
deposit, after the 91st day following the deposit the trust
funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally;
<PAGE> 69
63
(iii) no Default or Event of Default shall have occurred
and be continuing on the date of such deposit or, in the case of
Section 6.1(vi) or (vii), at any time during the period ending on the
91st day after the date of such deposit;
(iv) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any
other material agreement or instrument to which the Company is a party
or by which it is bound;
(v) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Company with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others;
(vi) no event or condition shall exist that would
prevent the Company from making payments of the principal of and
interest on the Notes on the date of such deposit or at any time
during the period ending on the 91st day after the date of such
deposit; and
(vii) the Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent (other than conditions requiring the passage of
time) to either defeasance or covenant defeasance, as the case may be,
have been complied with and that no violations under agreements
governing any other outstanding Indebtedness of the Company would
result therefrom.
Opinions required to be delivered under this Section may have
qualifications customary for opinions of the type required.
SECTION 8.3 Application of Trust Money.
---------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal
Tender or U.S. Government Obligations deposited with it pursuant to Section 8.1
or 8.2, and shall apply the deposited U.S. Legal Tender and the money from U.S.
Government Obligations in accordance with this Indenture to the payment of the
principal of and interest on the Notes. The Trustee shall be under no
obligation to invest said U.S. Legal Tender or U.S. Government Obligations
except as it may agree in writing with the Company.
The Company shall pay, and indemnify the Trustee against, any
tax, fee or other charge imposed on or assessed against the Legal Tender or
U.S. Government Obligations deposited pursuant to Section 8.1 or 8.2 or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of outstanding
Notes.
<PAGE> 70
64
SECTION 8.4 Repayment to the Company.
-------------------------
Subject to Sections 8.1 and 8.2, the Trustee and the Paying
Agent shall promptly pay to the Company upon request any excess U.S. Legal
Tender or U.S. Government Obligations held by them at any time and thereupon
shall be relieved from all liability with respect to such money. The Trustee
and the Paying Agent shall pay to the Company upon request any money held by
them for the payment of principal or interest that remains unclaimed for one
year; PROVIDED, HOWEVER, that the Trustee or such Paying Agent, before being
required to make any payment, may at the expense of the Company cause to be
published once in a newspaper of general circulation in the City of New York or
mail to each Holder entitled to such money notice that such money remains
unclaimed and that after a date specified therein which shall be at least 30
days from the date of such publication or mailing any unclaimed balance of such
money then remaining will be repaid to the Company. After payment to the
Company, Holders entitled to such money must look to the Company for payment as
general creditors unless an applicable law designates another Person.
SECTION 8.5 Reinstatement.
--------------
If the Trustee or Paying Agent is unable to apply any U.S.
Legal Tender or U.S. Government Obligations in accordance with Section 8.1 or
8.2 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 and the Guarantors' obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.1 or 8.2, as the case may be, until
such time as the Trustee or Paying Agent is permitted to apply all such U.S.
Legal Tender or U.S. Government Obligations in accordance with Section 8.1 or
8.2, as the case may be; PROVIDED, HOWEVER, that if the Company has made any
payment of interest on or principal of any 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 U.S. Legal Tender or
U.S. Government Obligations held by the Trustee or Paying Agent.
SECTION 8.6 Acknowledgment of Discharge by Trustee.
---------------------------------------
After (i) the conditions of Section 8.1 or 8.2(a) have been
satisfied, (ii) the Company has paid or caused to be paid all other sums
payable hereunder by the Company and (iii) the Company has delivered to the
Trustee an Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent referred to in clause (i), above, relating to the
satisfaction and discharge or defeasance of this Indenture have been complied
with, the Trustee upon request shall acknowledge in writing the discharge of
the Company's and the Guarantors' obligations under this Indenture except for
those surviving obligations specified in Section 8.1 or 8.2, as the case may
be.
<PAGE> 71
65
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
SECTION 9.1 Without Consent of Holders.
---------------------------
The Company and the Guarantors, when authorized by a Board
Resolution, and the Trustee, together, may amend or supplement this Indenture,
the Notes or the Guarantees without notice to or consent of any Holder:
(i) to cure any ambiguity, defect or inconsistency;
PROVIDED, HOWEVER, that such amendment or supplement does not
adversely affect the rights of any Holder;
(ii) to effect the assumption by a successor Person of
all obligations of the Company under the Notes, this Indenture and the
Registration Rights Agreement in the event of any Disposition
involving the Company in which the Company is not the Surviving
Person;
(iii) to provide for uncertificated Notes in addition to
or in place of certificated Notes;
(iv) to comply with any requirements of the Commission
in order to effect or maintain the qualification of this Indenture
under the TIA;
(v) to make any change that would provide any
additional benefit or rights to the Holders;
(vi) to provide for issuance of the Exchange Notes
(which will have terms substantially identical in all material
respects to the Initial Notes except that the transfer restrictions
contained in the Initial Notes will be modified or eliminated, as
appropriate), and which will be treated together with any outstanding
Initial Notes, as a single issue of securities;
(vii) to make any other change that does not adversely
affect the rights of any Holder under this Indenture; or
(viii) to add Guarantees with respect to the Notes or to
secure the Notes, or to release any Guarantee that is permitted to be
released under this Indenture;
PROVIDED, HOWEVER, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such amendment or supplement complies with the provisions
of this Section 9.1.
<PAGE> 72
66
SECTION 9.2 With Consent of Holders.
------------------------
(a) Subject to Section 6.7, the Company and the Guarantors,
when authorized by a Board Resolution, and the Trustee, together, with the
written consent of the Holder or Holders of not less than a majority in
aggregate principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for the Notes),
may amend or supplement this Indenture, the Notes and the Guarantees without
notice to any other Holder. Subject to Section 6.2 and 6.7, the Holder or
Holders of not less than a majority in aggregate principal amount of the then
outstanding Notes may waive compliance by the Company with any provision of
this Indenture or the Notes without notice to any other Holder.
(b) Notwithstanding Section 9.2(a) hereof, no amendment,
supplement or waiver, including a waiver pursuant to Section 6.4, shall,
without the prior written consent of each Holder of each Note affected thereby:
(i) reduce the principal amount of the Notes whose
holders must consent to an amendment, supplement or waiver;
(ii) reduce the principal of or change the fixed
maturity of any Note, or alter or waive the provisions with respect to
the redemption of the Notes in a manner adverse to the holders of the
Notes other than with respect to a Change of Control Offer or an Asset
Sale Offer;
(iii) reduce the rate of or change the time for payment
of interest on any Notes;
(iv) waive a Default or Event of Default in the payment
of principal of, premium, if any, or interest on the Notes (except
that holders of at least a majority in aggregate principal amount of
the then outstanding Notes may (a) rescind an acceleration of the
Notes that resulted from a non-payment default and (b) waive the
payment default that resulted from such acceleration);
(v) make any Note payable in money other than that
stated in the Notes;
(vi) make any change in the provisions of this Indenture
relating to waivers of past Defaults or Events of Default or the
rights of holders of Notes to receive payments of principal of, or
premium, if any, or interest on, the Notes; or
(vii) following the occurrence of a Change of Control,
amend, change or modify the Company's obligation to make and
consummate a Change of Control Offer in the event of a Change of
Control or modify any of the provisions or definitions with respect
thereto in a manner adverse to the holders of the Notes, or following
the occurrence of an Asset Sale, amend, change or modify the Company's
obligation to make and consummate an Asset Sale Offer or modify any of
the provisions or definitions with respect thereto in a manner adverse
to the holders of the Notes.
<PAGE> 73
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(c) It shall not be necessary for the consent of the Holders
under this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
(d) After an amendment, supplement or waiver under this
Section 9.2 becomes effective, the Company shall mail to the Holders affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such supplemental
indenture.
SECTION 9.3 Compliance with TIA.
--------------------
Every amendment, waiver or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect; PROVIDED, HOWEVER, that this
Section 9.3 shall not of itself require that this Indenture or the Trustee be
qualified under the TIA or constitute any admission or acknowledgment by any
party hereto that any such qualification is required prior to the time this
Indenture and the Trustee are required by the TIA to be so qualified.
SECTION 9.4 Revocation and Effect of Consents.
----------------------------------
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note that evidences the same debt
as the consenting Holder's Note, even if notation of the consent is not made on
any Note. Subject to the following paragraph, any such Holder or subsequent
Holder may revoke the consent as to such Holder's Note or portion of such Note
by notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver. An amendment, supplement
or waiver becomes effective upon receipt by the Trustee of such Officers'
Certificate and evidence of consent by the Holders of the requisite percentage
in principal amount of outstanding Notes.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be at least 30 days
prior to the first solicitation of such consent. If a record date is fixed,
then notwithstanding the second sentence of the immediately preceding
paragraph, those Persons who were Holders at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder, unless it makes any change described in Section
9.2(b), in which case, the amendment, supplement or waiver shall bind only each
Holder of a Note who has consented to it and every subsequent Holder of a Note
or portion of a Note that evidences the same debt as the consenting Holder's
Note; PROVIDED, HOWEVER, that any such waiver shall not impair or
<PAGE> 74
68
affect the right of any Holder to receive payment of principal of and interest
on a 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 without the consent of such Holder.
SECTION 9.5 Notation on or Exchange of Notes.
---------------------------------
If an amendment, supplement or waiver changes the terms of a
Note, the Trustee may require the Holder of such Note to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Note about the
changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Note shall issue and
the Trustee shall authenticate a new Note that reflects the changed terms.
SECTION 9.6 Trustee To Sign Amendments, Etc.
--------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article Nine; PROVIDED, HOWEVER, that the Trustee
may, but shall not be obligated to, execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an Opinion of Counsel and an Officers' Certificate
each stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture. Such Opinion of Counsel shall not be an expense of the Trustee or
the Holders.
ARTICLE X
GUARANTEES
----------
SECTION 10.1 Unconditional Guarantee.
------------------------
Each Guarantor hereby unconditionally, jointly and severally,
guarantees of a senior unsecured basis (such guarantee to be referred to herein
as a "Guarantee") to each Holder of a Note authenticated and delivered by the
Trustee and to the Trustee and its successors and assigns that: (i) the
principal of, premium, if any, and interest on the Notes will be promptly paid
in full when due, subject to any applicable grace period, whether at maturity,
by acceleration or otherwise and interest on the overdue principal and interest
on any overdue interest, to the extent lawful, of the Notes and all other
Obligations of the Company to the Holders of the Notes or the Trustee hereunder
or thereunder will be promptly paid in full or performed, all in accordance
with the terms hereof and thereof; and (ii) in case of any extension of time of
payment or renewal of any Notes or of any such other Obligations, the same will
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, subject to any applicable grace period, whether at
stated maturity, by acceleration or otherwise, subject, however, in the case of
clauses (i) and (ii) above, to the limitations set forth in Section 10.4. Each
Guarantor hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the validity, regularity or enforceability of the Notes or this
Indenture, the absence of any action to enforce the same, any waiver or consent
<PAGE> 75
69
by any Holder of the Notes with respect to any provisions hereof or thereof,
the recovery of any judgment against the Company, and action to enforce the
same or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of a guarantor. Each Guarantor hereby waives
diligence, presentment, demand of payment, filing of claims with a court in the
event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands
whatsoever and covenants that this Guarantee will not be discharged except by
complete performance of the Obligations contained in the Notes, this Indenture
and in this Guarantee. If any Holder of the Notes or the Trustee is required
by any court or otherwise to return to the Company or any Guarantor, or any
custodian, trustee, liquidator or other similar official acting in relation to
the Company or any Guarantor, any amount paid by the Company or any Guarantor
to the Trustee or such Holder, this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect. Each Guarantor
further agrees that, as between each Guarantor, on the one hand, and the
Holders of the Notes and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Article VI
for the purposes of this Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (y) in the event of any acceleration of such Obligations
as provided in Article VI, such obligations (whether or not due and payable)
shall forthwith become due and payable by each Guarantor for the purpose of
this Guarantee.
SECTION 10.2 Severability.
-------------
In case any provision of this Article X or any Guarantee shall
be invalid, illegal or unenforceable, the validity, legality, and
enforceability of the remaining provisions hereof or thereof shall not in any
way be affected or impaired thereby.
SECTION 10.3 Successors and Assigns; Release of a Guarantor.
-----------------------------------------------
This Article X shall be binding upon the Guarantors and their
successors and assigns and shall enure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by any Holder or the Trustee, the rights and privileges
conferred upon that party in this Indenture and in the Notes shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions of this Indenture.
If no Default exists or would exist under this Indenture, if
all of the assets of any Guarantor or all of the Capital Stock of any Guarantor
is sold or disposed of (including by merger, consolidation, issuance or
otherwise) by the Company or any of the Restricted Subsidiaries to any person
that is not an Affiliate of the Company or any of the Restricted Subsidiaries
if a transaction constituting an Asset Sale (other than pursuant to a
transaction subject to the provisions of clause (a) or (b) of Section 5.1), and
if the Net Proceeds from such Asset Sale are used in accordance with Section
4.16, then (a) such Guarantor and each wholly-owned Restricted Subsidiary of
such Guarantor that is also a Guarantor (in the event of a sale or other
disposition of all of the Capital Stock of such Guarantor) or (b) the
corporation or other entity acquiring such assets (in the event of a sale or
other disposition of all or
<PAGE> 76
70
substantially all of the assets of such Guarantor) shall be released and
discharged of its Guarantee obligations.
The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a request by the Company accompanied by an
Officers' Certificate of the Company and Opinion of Counsel certifying as to
the compliance with this Section 10.3. Any Guarantor not so released remains
liable for the full amount of principal of, premium and interest on the
Securities and other Obligations as provided in this Article X.
SECTION 10.4 Limitation of Guarantor's Liability.
------------------------------------
Each Guarantor and by its acceptance hereof each Holder of
Notes hereby confirms that it is the intention of all such parties that the
guarantee by such Guarantor pursuant to its Guarantee not constitute a
fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the
Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any
similar Federal or state law. To effectuate the foregoing intention, the
Holders of Notes and such Guarantor hereby irrevocably agree that the
obligations of such Guarantor under its Guarantee shall be limited to the
maximum amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor and after giving effect to any collections from
or payments made by or on behalf of any other Guarantor in respect of the
Obligations of such other Guarantor under its Guarantee or pursuant to Section
10.5, result in the obligations of such Guarantor under its Guarantee not
constituting such fraudulent transfer or conveyance.
SECTION 10.5 Contribution.
-------------
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, INTER SE, that in the event any payment
or distribution is made by any Guarantor (a "FUNDING GUARANTOR") under its
Guarantee, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a PRO RATA amount based on the Adjusted Net Assets (as
defined below) of each Guarantor (including the Funding Guarantor) for all
payments, damages and expenses incurred by that Funding Guarantor in
discharging the Company's obligations with respect to the Notes or any other
Guarantor's obligations with respect to its Guarantee. "Adjusted Net Assets"
of such Guarantor at any date shall mean the lesser of (x) the amount by which
the fair value of the property of such Guarantor exceeds the total amount of
liabilities, including, without limitation, contingent liabilities (after
giving effect to all other fixed and contingent liabilities incurred or assumed
on such date (other than liabilities of such Guarantor under Indebtedness
subordinated to such Guarantor's Guarantee)), but excluding liabilities under
the Guarantee, of such Guarantor at such date and (y) the amount by which the
present fair salable value of the assets of such Guarantor at such date exceeds
the amount that will be required to pay the probable liability of such
Guarantor on its debts (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date and after giving effect to any
collection from any Subsidiary of such Guarantor in respect of the obligations
of such Subsidiary under its Guarantee, if any), excluding debt in respect of
the Guarantee of such Guarantor, as they become absolute and matured.
<PAGE> 77
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SECTION 10.6 Waiver of Subrogation.
----------------------
Until all Guarantee Obligations are paid in full, each
Guarantor hereby irrevocably waives any claims or other rights which it may now
or hereafter acquire against the Company that arise from the existence,
payment, performance or enforcement of such Guarantor's obligations under its
Guarantee and this Indenture, including, without limitation, any right of
subrogation, reimbursement, exoneration, indemnification, and any right to
participate in any claim or remedy of any holder of Notes against the Company,
whether or not such claim, remedy or right arises in equity, or under contract,
statute or common law, including, without limitation, the right to take or
receive from the Company, directly or indirectly, in cash or other property or
by set-off or in any other manner, payment or security on account of such claim
or other rights. If any amount shall be paid to any Guarantor in violation of
the preceding sentence and the Notes shall not have been paid in full, such
amount shall have been deemed to have been paid to such Guarantor for the
benefit of, and held in trust for the benefit of, the Holders of the Notes, and
shall forthwith be paid to the Trustee for the benefit of such Holders to be
credited and applied upon the Notes, whether matured or unmatured, in
accordance with the terms of this Indenture. Each Guarantor acknowledges that
it will receive direct and indirect benefits from the financing arrangements
contemplated by this Indenture and that the waiver set forth in this Section
10.6 is knowingly made in contemplation of such benefits.
SECTION 10.7 Execution of Guarantee.
-----------------------
To evidence its guarantee to the Holders of Notes set forth in
this Article X, each Guarantor hereby agrees to execute its Guarantee in
substantially the form included in the Notes, which shall be endorsed on each
Note ordered to be authenticated and delivered by the Trustee. Each Guarantor
hereby agrees that its Guarantee set forth in this Article X shall remain in
full force and effect notwithstanding any failure to endorse on each Note a
notation of such Guarantee. Each such Guarantee shall be signed on behalf of
each Guarantor by two Officers, or an Officer and an Assistant Secretary or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions) shall attest to such Guarantee prior to the authentication of the
Notes on which it is endorsed, and the delivery of such Notes by the Trustee,
after the authentication thereof hereunder, shall constitute due delivery of
such Guarantee on behalf of such Guarantor. Such signatures upon the Guarantee
may be by manual or facsimile signature of such officers and may be imprinted
or otherwise reproduced on the Guarantee, and in case any such officer who
shall have signed the Guarantee shall cease to be such officer before the Notes
on which such Guarantee is endorsed shall have been authenticated and delivered
by the Trustee or disposed of by the Company, such Notes nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
Guarantee had not ceased to be such officer of the Guarantor.
SECTION 10.8 Waiver of Stay, Extension or Usury Laws.
----------------------------------------
Each Guarantor covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or
<PAGE> 78
72
advantage of, any stay or extension law or any usury law or other law that
would prohibit or forgive each such Guarantor from performing its Guarantee as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or which may affect the covenants or the performance of this Indenture; and (to
the extent that it may lawfully do so) such Guarantor hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 10.9 Additional Guarantors.
----------------------
Concurrently with the creation or acquisition by the Company
of any Subsidiary (other than a Foreign Subsidiary and other than an
Unrestricted Subsidiary), the Company, such Subsidiary and the Trustee shall
execute and deliver a supplement to this Indenture providing that such
Subsidiary will be a Guarantor hereunder. Each such supplement shall be in a
form reasonably satisfactory to the Trustee.
SECTION 10.10 Modification.
-------------
No modification, amendment or waiver of any provision of this
Article X, nor the consent to any departure by the Guarantors therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Trustee, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand
on the Guarantors in any case shall entitle the Guarantors to any other or
further notice or demand in the same, similar or other circumstances.
ARTICLE XI
MISCELLANEOUS
-------------
SECTION 11.1 TIA Controls.
-------------
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control; PROVIDED, HOWEVER,
that this Section 12.1 shall not of itself require that this Indenture or the
Trustee be qualified under the TIA or constitute any admission or
acknowledgment by any party hereto that any such qualification is required
prior to the time this Indenture and the Trustee are required by the TIA to be
so qualified.
SECTION 11.2 Notices.
--------
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
<PAGE> 79
73
if to the Company or any Guarantor:
Hawk Corporation
200 Public Square,
Suite 29-2500
Cleveland, OH 44114
Telecopier No.: (216) 861-4546
Attn: Chief Executive Officer
if to the Trustee:
Bank One Trust Company, NA
100 E. Broad Street
Columbus, Ohio 43215
Attention: Corporate Trust Trustee
Administration
Telecopier Number: 614-248-5195
Each of the Company, the Guarantors the Trustee by written
notice to the other may designate additional or different addresses for notices
to such Person. Any notice or communication to the Company or the Trustee
shall be deemed to have been given or made as of the date so delivered if
personally delivered; when answered back, if telexed; when receipt is
acknowledged, if faxed; and five (5) calendar days after mailing if sent by
registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by
the addressee).
Any notice or communication mailed to a Holder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.3 Communications by Holders with Other Holders.
---------------------------------------------
Holders may communicate pursuant to TIA Section 312(b) with
their Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA Section 312(c).
SECTION 11.4 Certificate and Opinion as to Conditions
----------------------------------------
Precedent.
----------
Upon any request or application by the Company to the trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
<PAGE> 80
74
(a) an Officers' Certificate, in form and substance
satisfactory to the Trustee, stating that, in the opinion of the
signers, all conditions precedent to be performed by the Company, if
any, provided for in this Indenture relating to the proposed action
have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent to be performed by the
Company, if any, provided for in this Indenture relating to the
proposed action have been complied with.
SECTION 11.5 Statements Required in Certificate or Opinion.
----------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture, other than the Officers'
Certificate required by Section 4.6 shall include:
(a) a statement that the Person making such
certificate or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(c) a statement that, in the opinion of such Person,
he has made such examination or investigation as is reasonably
necessary to enable him to express an informed opinion as to
whether or not such covenant or condition has been complied
with; and
(d) a statement as to whether or not, in the opinion
of each such Person, such condition or covenant has been
complied with.
SECTION 11.6 Rules by Trustee, Paying Agent, Registrar.
------------------------------------------
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.7 LEGAL HOLIDAYS. A "LEGAL HOLIDAY" used with
respect to a particular place of payment is a Saturday, a Sunday or a day on
which banking institutions in New York, New York or at such place of payment
are not required to be open. If a payment date is a Legal Holiday at such
place, payment may be made at such place on the next succeeding day that is not
a Legal Holiday, and no interest shall accrue for the intervening period.
<PAGE> 81
75
SECTION 11.8 Governing Law.
--------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF OHIO WITHOUT REGARD TO ITS
PRINCIPLES OF CONFLICT OF LAWS. Each of the parties hereto agrees to submit to
the jurisdiction of the courts of the State of Ohio in any action or proceeding
arising out of or relating to this Indenture.
SECTION 11.9 No Adverse Interpretation of Other Agreements.
----------------------------------------------
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of the subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10 No Recourse Against Others.
---------------------------
A director, officer, employee, stockholder or incorporator, as
such, of the Company or of the Trustee shall not have any liability for any
obligations of the Company under the Notes, the Guarantees or this Indenture or
for any claim based on, in respect of or by reason of such obligations or their
creations. Each Holder by accepting a Note waives and releases all such
liability. Such waiver and release are part of the consideration for the
issuance of the Notes and the Guarantees.
SECTION 11.11 Successors.
-----------
All agreements of the Company and the Guarantors in this
Indenture and the Notes shall bind their respective successors. All agreements
of the Trustee in this Indenture shall bind its successors.
SECTION 11.12 Duplicate Originals.
--------------------
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall represent
the same agreement.
SECTION 11.13 Severability.
-------------
In case any one or more of the provisions in this Indenture or
in the Notes shall be held invalid, illegal or unenforceable, in any respect
for any reason, the validity, legality and enforceability of any such provision
in every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
<PAGE> 82
76
SECTION 11.14 Independence of Covenants.
--------------------------
All covenants and agreements in this Indenture and the Notes
shall be given independent effect so that if any particular action or condition
is not permitted by any of such covenants, the fact that it would be permitted
by an exception to, or otherwise be within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.
<PAGE> 83
77
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
HAWK CORPORATION
By: /s/ Ronald E. Weinberg
-----------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
FRICTION PRODUCTS CO.
By: /s/ Ronald E. Weinberg
-----------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HAWK BRAKE, INC.
By: /s/ Ronald E. Weinberg
-----------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
LOGAN METAL STAMPINGS, INC.
By: /s/ Ronald E. Weinberg
---------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HELSEL, INC.
By: /s/ Ronald E. Weinberg
-----------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
<PAGE> 84
78
S.K. WELLMAN HOLDINGS, INC.
By: /s/ Ronald E. Weinberg
-----------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
WELLMAN FRICTION PRODUCTS U.K. CORP.
By: /s/ Ronald E. Weinberg
-----------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
S.K. WELLMAN CORP.
By: /s/ Ronald E. Weinberg
-----------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
HUTCHINSON PRODUCTS CORPORATION
By: /s/ Ronald E. Weinberg
-----------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman
BANK ONE TRUST COMPANY, NA, as Trustee
By: /s/ Ted J. Kravits
-----------------------------------------
Name: Ted J. Kravits
Title: Assistant Vice President
<PAGE> 85
EXHIBIT A
HAWK CORPORATION
10 1/4% SENIOR NOTE DUE 2003
CUSIP No.: 420089 AB 0
No. $
HAWK CORPORATION, a Delaware corporation (the "Company", which
term includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of on December 1,
2003.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
HAWK CORPORATION
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
Certificate of Authentication
This is one of the 10 1/4% Senior Notes due 2003 referred to in the
within-mentioned Indenture.
BANK ONE TRUST COMPANY, NA, as Trustee
By:
--------------------------------------
Authorized Signatory
Date of Authentication:
A-1
<PAGE> 86
(REVERSE OF SECURITY)
10 1/4% Senior Note due 2003
1. INTEREST. HAWK CORPORATION, a Delaware corporation
(the "Company"), promises to pay interest on the principal amount of this Note
at the rate PER ANNUM shown above. Interest on the Notes will accrue from the
most recent date on which interest has been paid or, if no interest has been
paid, from November 27, 1996. The Company will pay interest semi-annually in
arrears on each Interest Payment Date. Interest will be computed on the basis
of a 360-day year of twelve 30-day months and, in the case of a partial month,
the actual number of days elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest (without regard to any applicable grace
periods) to the extent lawful, from time to time on demand at the rate borne by
the Notes.
2. METHOD OF PAYMENT. The Company shall pay interest on
the Notes (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Notes are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall 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 ("U.S. Legal
Tender"). However, the Company may pay principal and interest by its check
payable in such U.S. Legal Tender. The Company may deliver any such interest
payment to the Paying Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, Bank One
Trust Company, NA (the "Trustee") will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar without notice
to the Holders.
4. INDENTURE. The Company issued the Notes under an
indenture, dated as of November 27, 1996 (the "Indenture"), between the
Company, the Guarantors named therein (the "GUARANTORS") and the Trustee. This
Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 10 1/4% Senior Notes due 2003 (the "Initial Notes"). The
Notes are limited in aggregate principal amount to $100,000,000. The Notes
include the Initial Notes and the Exchange Notes, as defined below, issued in
exchange for the Initial Notes pursuant to the Indenture. The Initial Notes
and the Exchange Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. 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. Code Section Sections 77aaa-77bbbb) (the "TIA"),
as in effect on the date of the Indenture. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and the TIA for a statement of them. The Notes
are general unsecured senior obligations of the Company. Each Holder, by
accepting a
A-2
<PAGE> 87
Note, agrees to be bound by all of the terms and provisions of the Indenture,
as the same may be amended from time to time in accordance with its terms.
5. GUARANTEES. To guarantee the due and punctual payment of
the principal and interest, if any, on the Notes and all other amounts payable
by the Company under the Indenture and the Notes when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according
to the terms of the Notes and the Indenture, the Guarantors have, jointly and
severally, unconditionally guaranteed such obligations on a senior unsecured
basis pursuant to the terms of the Indenture. The Guarantees are general
unsecured senior obligations of the Company.
6. REDEMPTION. (a) OPTIONAL REDEMPTION. The Notes are
redeemable, at the Company's option, in whole or in part, at any time on and
after December 1, 2000 at the redemption prices (expressed as percentages of
the principal amount of the Notes) if redeemed during the twelve-month period
commencing on December 1 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon, if any, to the Redemption Date:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.125%
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.563%
2002 and thereafter . . . . . . . . . . . . . . . . . . . . 100.000%
</TABLE>
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any
time or from time to time on or prior to December 1, 1999, the Company may, at
its option, redeem up to $35.0 million aggregate principal amount of the Notes
with the net proceeds of one or more Public Equity Offerings, at a redemption
price equal to 110.25% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption; provided, however, that (x) not
less than $65.0 million aggregate principal amount of the Notes is outstanding
immediately after giving effect to any such redemption (other than any Notes
owned by the Company or any of its Affiliates) and (y) such redemption is
effected within 60 days after the consummation of any such Public Equity
Offering.
The Notes are not entitled to the benefit of any sinking fund.
7. NOTICE OF REDEMPTION. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the Redemption Date to
each Holder of Notes to be redeemed at such Holder's registered address. Notes
in denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with
the Paying Agent for redemption on such Redemption Date, then, unless the
Company defaults in the payment of such Redemption Price plus accrued interest,
if any, the Notes called for redemption will cease to bear interest from
A-3
<PAGE> 88
and after such Redemption Date and the only right of the Holders of such Notes
will be to receive payment of the Redemption Price plus accrued interest, if
any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the
Indenture provide that, after certain Asset Sales (as defined in the Indenture)
and upon the occurrence of a Change of Control (as defined in the Indenture),
and subject to further limitations contained therein., the Company will make an
offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. REGISTRATION RIGHTS. Pursuant to the Registration
Rights Agreement dated as of the date of the Indenture, among the Company and
Schroder Wertheim & Co. Incorporated, BT Securities Corporation and McDonald &
Company Securities, Inc., as initial purchasers of the Initial Notes, the
Company is obligated to consummate an exchange offer pursuant to which the
Holder of this Note shall have the right to exchange this Note for the
Company's Series B 10 1/4% Senior Notes due 2003 (the "Exchange Notes"), which
shall have been registered under the Securities Act, in like principal amount
and having terms identical in all material respects as the Initial Notes. The
Holders of the Initial Notes shall be entitled to receive certain additional
interest payments in the event such exchange offer is not consummated and upon
certain other conditions, all pursuant to and in accordance with the terms of
the Registration Rights Agreement.
10. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in
registered form, without coupons, and in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in
connection therewith as permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Notes or portions thereof selected
for redemption.
11. PERSONS DEEMED OWNERS. The registered Holder of a
Note shall be treated as the owner of it for all purposes.
12. UNCLAIMED MONEY. If money for the payment of
principal or interest remains unclaimed for one year, the Trustee and the
Paying Agent will pay the money back to the Company. After that, all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the
Company at any time deposits with the Trustee U.S. Legal Tender or U.S.
Government Obligations sufficient to pay the principal of and interest on the
Notes to redemption or maturity and complies with the other provisions of the
Indenture relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Notes (including certain covenants, but
excluding its obligation to pay the principal of and interest on the Notes).
A-4
<PAGE> 89
14. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be
amended or supplemented with the written consent of the Holders of not less
than a majority in aggregate principal amount of the Notes then outstanding,
and any past Default or Event of Default or noncompliance with any provision
may be waived with the written consent of the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect
or inconsistency, provide for uncertificated Notes in addition to or in place
of certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect the rights of any Holder of a Note.
15. RESTRICTIVE COVENANTS. The Indenture imposes
certain limitations on the ability of the Company and the Restricted
Subsidiaries to, among other things, incur additional Indebtedness, make
Restricted Payments or Restricted Investments, create or incur Liens, enter
into transactions with Affiliates, create dividend or other payment
restrictions affecting Restricted Subsidiaries and issue Preferred Stock of
Restricted Subsidiaries, and on the ability of the Company and the Restricted
Subsidiaries to merge or consolidate with any other Person or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of the
assets of the Company and the Restricted Subsidiaries. Such limitations are
subject to a number of important qualifications and exceptions. Pursuant to
Section 4.6 of the Indenture, the Company must annually report to the Trustee
on compliance with such limitations.
16. SUCCESSORS. When a successor assumes, in accordance
with the Indenture, all the obligations of its predecessor under the Notes and
the Indenture, the predecessor, subject to certain exceptions, will be released
from those obligations.
17. DEFAULTS AND REMEDIES. If an Event of Default
occurs and is continuing, the Trustee or the Holders of not less than 25% in
aggregate principal amount of Notes then outstanding may declare all the Notes
to be due and payable in the manner, at the time and with the effect provided
in the Indenture. Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee is not obligated to enforce
the Indenture or the Notes unless it has received indemnity reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal or
interest when due, for any reason or a Default in compliance with Article V of
the Indenture) if it determines that withholding notice is in their interest.
18. TRUSTEE DEALINGS WITH COMPANY. 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 the Company, the Subsidiaries or
their respective Affiliates as if it were not the Trustee.
A-5
<PAGE> 90
19. NO RECOURSE AGAINST OTHERS. No stockholder,
director, officer, employee or incorporator, as such, of the Company or any
Guarantor shall have any liability for any obligation of the Company or any
Guarantor under the Notes, the Guarantees or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes and the Guarantees.
20. AUTHENTICATION. This Note shall not be valid until
the Trustee or Authenticating Agent manually signs the certificate of
authentication on this Note.
21. GOVERNING LAW. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of Ohio, as
applied to contracts made and performed within the State of Ohio without regard
to principles of conflict of laws.
22. ABBREVIATIONS AND DEFINED TERMS. Customary
abbreviations may be used in the name of a Holder of a Note or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes as a convenience to
the Holders of the Notes. No representation is made as to the accuracy of such
numbers as printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: Hawk Corporation, 200 Public
Square, Suite 29-2500, Cleveland, OH 44114, Attn: Vice President - Finance.
A-6
<PAGE> 91
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Note upon which this notation is endorsed and each hereinafter referred to as a
"Guarantor," which term includes any successor person under the Indenture) have
unconditionally guaranteed on a senior unsecured basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of, premium and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of
interest on the overdue principal and interest, if any, on the Notes, to the
extent lawful, and the due and punctual performance of all other obligations of
the Company to the Holders or the Trustee all in accordance with the terms set
forth in Article X of the Indenture and (ii) in case of any extension of time
of payment or renewal of any Notes or any of such other obligations, that the
same will be promptly paid in full when due or performed in accordance with the
terms of the extension or renewal, whether at stated maturity, by acceleration
or otherwise.
No stockholder, officer, director, employee or incorporator,
as such, past, present or future, of any Guarantor shall have any liability
under the Guarantee by reason of his or its status as such stockholder,
officer, director, employee or incorporator.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which the Guarantee
is noted shall have been executed by the Trustee under the Indenture by the
manual signature of one of its authorized officers.
GUARANTORS:
FRICTION PRODUCTS CO.
By:_________________________________
Name:
Title:
HAWK BRAKE, INC.
By:_________________________________
Name:
Title:
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<PAGE> 92
LOGAN METAL STAMPINGS, INC.
By:_________________________________
Name:
Title:
HELSEL, INC.
By:_________________________________
Name:
Title:
S.K. WELLMAN HOLDINGS, INC.
By:_________________________________
Name:
Title:
WELLMAN FRICTION PRODUCTS U.K. CORP.
By:_________________________________
Name:
Title:
S.K. WELLMAN CORP.
By:_________________________________
Name:
Title:
HUTCHINSON PRODUCTS CORPORATION
By:_________________________________
Name:
Title:
A-8
<PAGE> 93
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________________________, agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
Dated: Signed:
------------------------- ------------------------------------
(sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
----------------------------------------------------------
(Signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Exchange Act.)
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the
Securities Act of 1933, as amended, covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer:
[Check One]
---------
(1) ___ to the Company or a subsidiary thereof; or
(2) ___ pursuant to and in compliance with Rule 144A under the
Securities Act of 1933, as amended ("Rule 144A"); or
A-9
<PAGE> 94
(3) ___ to an "accredited investor" (as defined in Rule 501(a)(1), (2),
(3), or (7) under the Securities Act of 1933, as amended) that
has furnished to the Trustee a signed letter containing certain
representations and agreements (the form of which letter is
attached to the Indenture as Exhibit C and can be obtained from
the Trustee); or
(4) ___ outside the United States to a "foreign person" in compliance
with Rule 904 of Regulation S under the Securities Act of 1933,
as amended; or
(5) ___ pursuant to the exemption from registration provided by Rule
144 under the Securities Act of 1933, as amended, if available;
or
(6) ___ pursuant to an effective registration statement under the
Securities Act of 1933, as amended; or
(7) ___ pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than
the registered Holder thereof; PROVIDED, HOWEVER, that if box (3), (4), (5) or
(7) is checked, the Company or the Trustee may require, prior to registering
any such transfer of the Notes, in its sole discretion, such written legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not
be obligated to register this Note in the name of any person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.17 of the Indenture shall have
been satisfied.
Dated: Signed:
---------------------- -------------------------------------
(Sign exactly as name appears on the
other side of this Security)
Signature Guarantee:
----------------------------------------------------------
A-10
<PAGE> 95
TO BE COMPLETED BY PURCHASER IF BOX (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
---------------------------------------------
------------------------------------------------------------------------
NOTICE: To be executed by an executive
officer
A-11
<PAGE> 96
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$
-----------------
Dated:
------------------------- --------------------------------------------
NOTICE: The signature on this assignment
must correspond with the name as it appears
upon the face of the within Note in every
particular without alteration or
enlargement or any change whatsoever and be
guaranteed.
Signature Guarantee:
-----------------------------------------------------------
(Signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Exchange Act.)
A-12
<PAGE> 97
EXHIBIT B
---------
HAWK CORPORATION
SERIES B 10 1/4 % SENIOR NOTE DUE 2003
CUSIP No.:
No. $
HAWK CORPORATION, a Delaware corporation (the "Company", which
term includes any successor entity), for value received promises to pay to
or registered assigns, the principal sum of Dollars, on
December 1, 2003.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
HAWK CORPORATION
By:_________________________________
Name:
Title:
By:_________________________________
Name:
Title:
Certificate of Authentication
This is one of the Series B 10 1/4 % Senior Notes due 2003
referred to in the within-mentioned Indenture.
BANK ONE TRUST COMPANY, NA,
as Trustee
By:_________________________________
Authorized Signatory
Date of Authentication:
B-1
<PAGE> 98
(REVERSE OF SECURITY)
Series B 10 1/4% Senior Note due 2003
[TO CONFORM]
B-2
<PAGE> 99
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$
------------------
Dated:
----------------------- ------------------------------------------
NOTICE: The signature on this assignment
must correspond with the name as it appears
upon the face of the within Note in every
particular without alteration or
enlargement or any change whatsoever and be
guaranteed.
Signature Guarantee:
-----------------------------------
(Signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Exchange Act.)
B-3
<PAGE> 100
EXHIBIT C
---------
[Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors]
------------------------------------------
________________, _____
Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43215
Attention: Corporate Trust Trustee Administration
Re: Hawk Corporation (the "Company")
10 1/4% Senior Notes due 2003 (the "Notes")
-------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of $
aggregate principal amount of the Notes, we confirm that:
1. We have received a copy of the Offering Memorandum
(the "Offering Memorandum"), dated November 22, 1996, relating to the
Notes and such other information as we deem necessary in order to make
our investment decision. We acknowledge that we have read and agreed
to the matters stated in the section entitled "Transfer Restrictions"
of the Offering Memorandum.
2. We understand that any subsequent transfer of the
Notes is subject to certain restrictions and conditions set forth in
the Indenture dated as of November 27, 1996 relating to the Notes (the
"Indenture") and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Notes except in compliance
with, such restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act").
3. We understand that the Notes have not been registered
under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Notes within three
years after the original issuance of the Notes, we will do so only (A)
to the Company or any subsidiary thereof, (B) inside the United States
in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined therein), (C) inside the United
States to an "accredited investor" (as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act) that, prior to
such transfer,
C-1
<PAGE> 101
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you a signed letter substantially in the form of this letter, (D)
outside the United States in accordance with Regulation S under the
Securities Act, (E) pursuant to the exemption from registration
provided by Rule 144 under the Securities Act (if available), or (F)
pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of
the Notes from us a notice advising such purchaser that resales of the
Notes are restricted as stated herein.
4. We understand that, on any proposed resale of any
Notes, we will be required to furnish to you and the Company such
certification, written legal opinions and other information as you and
the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that
the Notes purchased by us will bear a legend to the foregoing effect.
5. We are an "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment, as the case may be.
6. We are acquiring the Notes purchased by us for our
own account or for one or more accounts (each of which is an
"accredited investor") as to each of which we exercise sole investment
discretion.
You, the Company and counsel for the Company are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or
a copy hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
----------------------------------
Authorized Signature
C-2
<PAGE> 102
EXHIBIT D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
________________, _______
Bank One Trust Company, NA
100 East Broad Street
Columbus, Ohio 43215
Attention: Corporate Trust Trustee Administration
Re: Hawk Corporation (the "Company")
10 1/4% Senior Notes due 2003 (the "Notes")
-------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $
aggregate principal amount of the Notes, we confirm that such sale
has been effected pursuant to and in accordance with Regulation S under the
U.S. Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, we represent that:
(1) the offer of the Notes was not made to a person in
the United States;
(2) either (a) at the time the buy offer was originated,
the transferee was outside the United States or we and any person
acting on our behalf reasonably believed that the transferee was
outside the United States, or (b) the transaction was executed in, on
or through the facilities of a designated off-shore securities market
and neither we nor any person acting on our behalf knows that the
transaction has been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
D-1
<PAGE> 103
You, the Company and counsel for the Company are
entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with respect
to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------------------
Authorized Signature
D-2
<PAGE> 1
EXHIBIT 4.4
FORM OF
HAWK CORPORATION
10 1/4% SENIOR NOTE DUE 2003
CUSIP No.: __________
No. _____ $____________
HAWK CORPORATION, a Delaware corporation (the "Company", which
term includes any successor entity), for value received promises to pay to
_______________ or registered assigns, the principal sum of _______________
Dollars on December 1, 2003.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
HAWK CORPORATION
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
Certificate of Authentication
This is one of the 10 1/4% Senior Notes due 2003 referred to in the
within-mentioned Indenture.
BANK ONE TRUST COMPANY, NA,
as Trustee
By:______________________________
Authorized Signatory
Date of Authentication:
<PAGE> 2
2
(REVERSE OF SECURITY)
10 1/4% Senior Note due 2003
1. INTEREST. HAWK CORPORATION, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate PER ANNUM shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from November 27, 1996. The Company will pay interest semi-annually in arrears
on each Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest (without regard to any applicable grace
periods) to the extent lawful, from time to time on demand at the rate borne by
the Notes.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall 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 ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, BANK ONE TRUST
COMPANY, NA (the "Trustee") will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. INDENTURE. The Company issued the Notes under an indenture,
dated as of November 27, 1996 (the "Indenture"), between the Company, the
Guarantors named therein (the "GUARANTORS") and the Trustee. This Note is one of
a duly authorized issue of Initial Notes of the Company designated as its
10 1/4% Senior Notes due 2003 (the "Initial Notes"). The Notes are limited in
aggregate principal amount to $100,000,000. The Notes include the Initial Notes
and the Exchange Notes, as defined below, issued in exchange for the Initial
Notes pursuant to the Indenture. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein. 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. Code
sections 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture.
Notwithstanding anything to the contrary herein, the Notes are subject to all
such terms, and Holders of Notes are referred to the Indenture and the TIA for a
statement of them. The
<PAGE> 3
3
Notes are general unsecured senior obligations of the Company. Each Holder, by
accepting a Note, agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time in accordance with its
terms.
5. GUARANTEES. To guarantee the due and punctual payment of
the principal and interest, if any, on the Notes and all other amounts payable
by the Company under the Indenture and the Notes when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according to
the terms of the Notes and the Indenture, the Guarantors have, jointly and
severally, unconditionally guaranteed such obligations on a senior unsecured
basis pursuant to the terms of the Indenture. The Guarantees are general
unsecured senior obligations of the Company.
6. REDEMPTION. (a) OPTIONAL REDEMPTION. The Notes are
redeemable, at the Company's option, in whole or in part, at any time on and
after December 1, 2000 at the redemption prices (expressed as percentages of the
principal amount of the Notes) if redeemed during the twelve-month period
commencing on December 1 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon, if any, to the Redemption Date:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000...................................................... 105.125%
2001...................................................... 102.563%
2002 and thereafter....................................... 100.000%
</TABLE>
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any
time or from time to time on or prior to December 1, 1999, the Company may, at
its option, redeem up to $35.0 million aggregate principal amount of the Notes
with the net proceeds of one or more Public Equity Offerings, at a redemption
price equal to 10 1/4% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption; provided, however, that (x) not
less than $65.0 million aggregate principal amount of the Notes is outstanding
immediately after giving effect to any such redemption (other than any Notes
owned by the Company or any of its Affiliates) and (y) such redemption is
effected within 60 days after the consummation of any such Public Equity
Offering.
The Notes are not entitled to the benefit of any sinking fund.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued interest, if any,
the Notes called for redemption will cease to bear interest from
<PAGE> 4
4
and after such Redemption Date and the only right of the Holders of such Notes
will be to receive payment of the Redemption Price plus accrued interest, if
any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. REGISTRATION RIGHTS. Pursuant to the Registration Rights
Agreement dated as of the date of the Indenture, among the Company and Schroder
Wertheim & Co. Incorporated, BT Securities Corporation and McDonald & Company
Securities Inc., as initial purchasers of the Initial Notes, the Company is
obligated to consummate an exchange offer pursuant to which the Holder of this
Note shall have the right to exchange this Note for the Company's Series B
10 1/4% Senior Notes due 2003 (the "Exchange Notes"), which shall have been
registered under the Securities Act, in like principal amount and having terms
identical in all material respects as the Initial Notes. The Holders of the
Initial Notes shall be entitled to receive certain additional interest payments
in the event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the Registration
Rights Agreement.
10. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in
registered form, without coupons, and in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
12. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for one year, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
13. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
<PAGE> 5
5
14. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding, and any
past Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of not less than a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect the rights of any Holder of a Note.
15. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and the Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make Restricted Payments or
Restricted Investments, create or incur Liens, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting Restricted
Subsidiaries and issue Preferred Stock of Restricted Subsidiaries, and on the
ability of the Company and the Restricted Subsidiaries to merge or consolidate
with any other Person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company and the
Restricted Subsidiaries. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.6 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.
16. SUCCESSORS. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
17. DEFAULTS AND REMEDIES. If an Event of Default occurs and
is continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest when due, for any reason or a
Default in compliance with Article V of the Indenture) if it determines that
withholding notice is in their interest.
18. TRUSTEE DEALINGS WITH COMPANY. 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 the Company, the Subsidiaries or
their respective Affiliates as if it were not the Trustee.
<PAGE> 6
6
19. NO RECOURSE AGAINST OTHERS. No stockholder, director,
officer, employee or incorporator, as such, of the Company or any Guarantor
shall have any liability for any obligation of the Company or any Guarantor
under the Notes, the Guarantees or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder of a
Note by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes and the
Guarantees.
20. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
21. GOVERNING LAW. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of Ohio, as
applied to contracts made and performed within the State of Ohio, without regard
to principles of conflict of laws.
22. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common),
CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: Hawk Corporation, 200 Public
Square, Suite 29-2500, Cleveland, OH 44114, Attn: Vice President - Finance (or
after December 20, 1996, Suite 30-5000).
<PAGE> 7
7
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Note upon which this notation is endorsed and each hereinafter referred to as a
"Guarantor," which term includes any successor person under the Indenture) have
unconditionally guaranteed on a senior unsecured basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of, premium and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal and interest, if any, on the Notes, to the extent
lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set forth
in Article X of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director, employee or incorporator,
as such, past, present or future, of any Guarantor shall have any liability
under the Guarantee by reason of his or its status as such stockholder, officer,
director, employee or incorporator.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GUARANTORS:
FRICTION PRODUCTS CO.
By:
---------------------------
Name:
Title:
HAWK BRAKE, INC.
By:
---------------------------
Name:
Title:
<PAGE> 8
8
LOGAN METAL STAMPINGS, INC.
By:
---------------------------
Name:
Title:
HELSEL, INC.
By:
---------------------------
Name:
Title:
S.K. WELLMAN HOLDINGS, INC.
By:
---------------------------
Name:
Title:
WELLMAN FRICTION PRODUCTS U.K.
CORP.
By:
---------------------------
Name:
Title:
S.K. WELLMAN CORP.
By:
---------------------------
Name:
Title:
HUTCHINSON PRODUCTS CORPORATION
By:
---------------------------
Name:
<PAGE> 9
9
Title:
<PAGE> 10
10
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________________________, agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
Dated: Signed:
-------------------- ----------------------------------------
(sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
------------------------------------------------------------
(Signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the Exchange
Act.)
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended covering resales of this Note (which effectiveness shall
not have been suspended or terminated at the date of the transfer) and (ii) the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer:
[Check One]
-----------
(1) --- to the Company or a subsidiary thereof; or
(2) --- pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended ("Rule 144A"); or
(3) --- to an "accredited investor" (as defined in Rule 501(a)(1), (2), (3), or
(7) under the Securities Act of 1933, as amended) that has furnished
to the Trustee a
<PAGE> 11
11
signed letter containing certain representations and
agreements (the form of which letter is attached to the
Indenture as Exhibit C and can be obtained from the Trustee);
or
(4) --- outside the United States to a "foreign person" in compliance with Rule
904 of Regulation S under the Securities Act of 1933, as amended; or
(5) --- pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended, if available; or
(6) --- pursuant to an effective registration statement under the Securities
Act of 1933, as amended; or
(7) --- pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[ ] The transferee is an Affiliate of the Company.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED, HOWEVER, that if box (3), (4), (5) or (7)
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in its sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, as amended.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.17 of the Indenture shall have been satisfied.
Dated: Signed:
------------------- --------------------------------------------
(Sign exactly as name appears on the other
side of this Security)
Signature Guarantee:
-----------------------------------------------------------
<PAGE> 12
12
TO BE COMPLETED BY PURCHASER IF BOX (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:
--------------------------- ------------------------------------
NOTICE: To be executed by an
executive officer
<PAGE> 13
13
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$
------------------------
Dated:
--------------------------- ------------------------------
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in every
particular without alteration or
enlargement or any change
whatsoever and be guaranteed.
Signature Guarantee:
-------------------------------------------------------
(Signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the Exchange
Act.)
<PAGE> 1
EXHIBIT 4.5
FORM OF
HAWK CORPORATION
SERIES B 10 1/4% SENIOR NOTE DUE 2003
CUSIP No.: __________
No. _____ $____________
HAWK CORPORATION, a Delaware corporation (the "Company", which
term includes any successor entity), for value received promises to pay to
_______________ or registered assigns, the principal sum of _______________
Dollars on December 1, 2003.
Interest Payment Dates: June 1 and December 1
Record Dates: May 15 and November 15
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
HAWK CORPORATION
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Certificate of Authentication
This is one of the Series B 10 1/4% Senior Notes due 2003 referred to in the
within-mentioned Indenture.
BANK ONE TRUST COMPANY, NA,
as Trustee
By:
---------------------------------
Authorized Signatory
Date of Authentication:
<PAGE> 2
2
(REVERSE OF SECURITY)
Series B 10 1/4% Senior Note due 2003
1. INTEREST. HAWK CORPORATION, a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from November 27, 1996. The Company will pay interest semi-annually in arrears
on each Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months and, in the case of a partial month, the
actual number of days elapsed.
The Company shall pay interest on overdue principal and on
overdue installments of interest (without regard to any applicable grace
periods) to the extent lawful, from time to time on demand at the rate borne by
the Notes.
2. METHOD OF PAYMENT. The Company shall pay interest on the
Notes (except defaulted interest) to the Persons who are the registered Holders
at the close of business on the Record Date immediately preceding the Interest
Payment Date even if the Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must surrender Notes to
a Paying Agent to collect principal payments. The Company shall 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 ("U.S. Legal Tender"). However,
the Company may pay principal and interest by its check payable in such U.S.
Legal Tender. The Company may deliver any such interest payment to the Paying
Agent or to a Holder at the Holder's registered address.
3. PAYING AGENT AND REGISTRAR. Initially, BANK ONE TRUST
COMPANY, NA (the "Trustee") will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-Registrar without notice to the
Holders.
4. INDENTURE. The Company issued the Notes under an indenture,
dated as of November 27, 1996 (the "Indenture"), between the Company, the
Guarantors named therein (the "Guarantors") and the Trustee. This Note is one of
a duly authorized issue of Exchange Notes of the Company designated as its
Series B 10 1/4% Senior Notes due 2003 (the "Exchange Notes"). The Notes are
limited in aggregate principal amount to $100,000,000. The Notes include the
Initial Notes, as defined in the Indenture, and the Exchange Notes issued in
exchange for the Initial Notes pursuant to the Indenture. The Initial Notes and
the Exchange Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. 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. Code sections 77aaa-77bbbb) (the "TIA"), as in
effect on the date of the Indenture. Notwithstanding anything to the contrary
herein, the Notes are subject to all such terms, and Holders of Notes are
referred to the Indenture and the
<PAGE> 3
3
TIA for a statement of them. The Notes are general unsecured senior obligations
of the Company. Each Holder, by accepting a Note, agrees to be bound by all of
the terms and provisions of the Indenture, as the same may be amended from time
to time in accordance with its terms.
5. GUARANTEES. To guarantee the due and punctual payment of
the principal and interest, if any, on the Notes and all other amounts payable
by the Company under the Indenture and the Notes when and as the same shall be
due and payable, whether at maturity, by acceleration or otherwise, according to
the terms of the Notes and the Indenture, the Guarantors have, jointly and
severally, unconditionally guaranteed such obligations on a senior unsecured
basis pursuant to the terms of the Indenture. The Guarantees are general
unsecured senior obligations of the Company.
6. REDEMPTION. (a) OPTIONAL REDEMPTION. The Notes are
redeemable, at the Company's option, in whole or in part, at any time on and
after December 1, 2000 at the redemption prices (expressed as percentages of the
principal amount of the Notes) if redeemed during the twelve-month period
commencing on December 1 of the year set forth below, plus, in each case,
accrued and unpaid interest thereon, if any, to the Redemption Date:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2000.............................................................. 105.125%
2001.............................................................. 102.563%
2002 and thereafter............................................... 100.000%
</TABLE>
(b) OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERINGS. At any
time or from time to time on or prior to December 1, 1999, the Company may, at
its option, redeem up to $35.0 million aggregate principal amount of the Notes
with the net proceeds of one or more Public Equity Offerings, at a redemption
price equal to 10 1/4% of the principal amount thereof plus accrued and unpaid
interest, if any, to the date of redemption; provided, however, that (x) not
less than $65.0 million aggregate principal amount of the Notes is outstanding
immediately after giving effect to any such redemption (other than any Notes
owned by the Company or any of its Affiliates) and (y) such redemption is
effected within 60 days after the consummation of any such Public Equity
Offering.
The Notes are not entitled to the benefit of any sinking fund.
7. NOTICE OF REDEMPTION. Notice of redemption will be mailed
at least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price
<PAGE> 4
4
plus accrued interest, if any, the Notes called for redemption will cease to
bear interest from and after such Redemption Date and the only right of the
Holders of such Notes will be to receive payment of the Redemption Price plus
accrued interest, if any.
8. OFFERS TO PURCHASE. Sections 4.15 and 4.16 of the Indenture
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and subject
to further limitations contained therein., the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. DENOMINATIONS; TRANSFER; EXCHANGE. The Notes are in
registered form, without coupons, and in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and to
pay certain transfer taxes or similar governmental charges payable in connection
therewith as permitted by the Indenture. The Registrar need not register the
transfer of or exchange of any Notes or portions thereof selected for
redemption.
10. Persons Deemed Owners. The registered Holder of a Note
shall be treated as the owner of it for all purposes.
11. UNCLAIMED MONEY. If money for the payment of principal
or interest remains unclaimed for one year, the Trustee and the Paying Agent
will pay the money back to the Company. After that, all liability of the Trustee
and such Paying Agent with respect to such money shall cease.
12. DISCHARGE PRIOR TO REDEMPTION OR MATURITY. If the Company
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
13. AMENDMENT; SUPPLEMENT; WAIVER. Subject to certain
exceptions set forth in the Indenture, the Indenture or the Notes may be amended
or supplemented with the written consent of the Holders of not less than a
majority in aggregate principal amount of the Notes then outstanding, and any
past Default or Event of Default or noncompliance with any provision may be
waived with the written consent of the Holders of not less than a majority in
aggregate principal amount of the Notes then outstanding. Without notice to or
consent of any Holder, the parties thereto may amend or supplement the Indenture
or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article V of the Indenture or make any other
change that does not adversely affect the rights of any Holder of a Note.
<PAGE> 5
5
14. RESTRICTIVE COVENANTS. The Indenture imposes certain
limitations on the ability of the Company and the Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make Restricted Payments or
Restricted Investments, create or incur Liens, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting Restricted
Subsidiaries and issue Preferred Stock of Restricted Subsidiaries, and on the
ability of the Company and the Restricted Subsidiaries to merge or consolidate
with any other Person or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of the assets of the Company and the
Restricted Subsidiaries. Such limitations are subject to a number of important
qualifications and exceptions. Pursuant to Section 4.6 of the Indenture, the
Company must annually report to the Trustee on compliance with such limitations.
15. SUCCESSORS. When a successor assumes, in accordance with
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor, subject to certain exceptions, will be released from
those obligations.
16. DEFAULTS AND REMEDIES. If an Event of Default occurs and
is continuing, the Trustee or the Holders of not less than 25% in aggregate
principal amount of Notes then outstanding may declare all the Notes to be due
and payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. The Trustee is not obligated to enforce the Indenture
or the Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest when due, for any reason or a
Default in compliance with Article V of the Indenture) if it determines that
withholding notice is in their interest.
17. TRUSTEE DEALINGS WITH COMPANY. 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 the Company, the Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS. No stockholder, director,
officer, employee or incorporator, as such, of the Company or any Guarantor
shall have any liability for any obligation of the Company or any Guarantor
under the Notes, the Guarantees or the Indenture or for any claim based on, in
respect of or by reason of, such obligations or their creation. Each Holder of a
Note by accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of the Notes and the
Guarantees.
19. AUTHENTICATION. This Note shall not be valid until the
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
<PAGE> 6
6
20. GOVERNING LAW. This Note and the Indenture shall be
governed by and construed in accordance with the laws of the State of Ohio, as
applied to contracts made and performed within the State of Ohio, without regard
to principles of conflict of laws.
21. ABBREVIATIONS AND DEFINED TERMS. Customary abbreviations
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP NUMBERS. Pursuant to a recommendation promulgated by
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: Hawk Corporation, 200 Public
Square, Suite 29-2500, Cleveland, OH 44114, Attn: Vice President - Finance (or
after December 20, 1996, Suite 30-5000).
<PAGE> 7
7
GUARANTEE
The Guarantors (as defined in the Indenture referred to in the
Note upon which this notation is endorsed and each hereinafter referred to as a
"Guarantor," which term includes any successor person under the Indenture) have
unconditionally guaranteed on a senior unsecured basis (such guarantee by each
Guarantor being referred to herein as the "Guarantee") (i) the due and punctual
payment of the principal of, premium and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on the overdue principal and interest, if any, on the Notes, to the extent
lawful, and the due and punctual performance of all other obligations of the
Company to the Holders or the Trustee all in accordance with the terms set forth
in Article X of the Indenture and (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, that the same
will be promptly paid in full when due or performed in accordance with the terms
of the extension or renewal, whether at stated maturity, by acceleration or
otherwise.
No stockholder, officer, director, employee or incorporator,
as such, past, present or future, of any Guarantor shall have any liability
under the Guarantee by reason of his or its status as such stockholder, officer,
director, employee or incorporator.
The Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Notes upon which the Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
GUARANTORS:
FRICTION PRODUCTS CO.
By:
--------------------------------
Name:
Title:
HAWK BRAKE, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 8
8
LOGAN METAL STAMPINGS, INC.
By:
--------------------------------
Name:
Title:
HELSEL, INC.
By:
--------------------------------
Name:
Title:
S.K. WELLMAN HOLDINGS, INC.
By:
--------------------------------
Name:
Title:
WELLMAN FRICTION PRODUCTS U.K.
CORP.
By:
--------------------------------
Name:
Title:
S.K. WELLMAN CORP.
By:
--------------------------------
Name:
Title:
HUTCHINSON PRODUCTS CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE> 9
9
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ____________________________, agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
Dated: Signed:
------------------ -----------------------------------------
(sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
---------------------------------------------------------
(Signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the Exchange
Act.)
In connection with any transfer of this Note occurring prior
to the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended covering resales of this Note (which effectiveness shall
not have been suspended or terminated at the date of the transfer) and (ii) the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer:
[Check One]
-----------
(1) -- to the Company or a subsidiary thereof; or
(2) -- pursuant to and in compliance with Rule 144A under the Securities Act of
1933, as amended ("Rule 144A"); or
<PAGE> 10
10
<TABLE>
<S> <C>
(3) -- to an "accredited investor" (as defined in Rule 501(a)(1), (2), (3), or
(7) under the Securities Act of 1933, as amended) that has furnished to the
Trustee a signed letter containing certain representations and agreements
(the form of which letter is attached to the Indenture as Exhibit C and can
be obtained from the Trustee); or
(4) -- outside the United States to a "foreign person" in compliance with Rule
904 of Regulation S under the Securities Act of 1933, as amended; or
(5) -- pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, as amended, if available; or
(6) -- pursuant to an effective registration statement under the Securities Act
of 1933,as amended; or
(7) -- pursuant to another available exemption from the registration
requirements of the Securities Act of 1933, as amended.
</TABLE>
and unless the box below is checked, the undersigned confirms that such Note is
not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
[ ] The transferee is an Affiliate of the Company.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; PROVIDED, HOWEVER, that if box (3), (4), (5) or (7)
is checked, the Company or the Trustee may require, prior to registering any
such transfer of the Notes, in its sole discretion, such written legal opinions,
certifications (including an investment letter in the case of box (3) or (4))
and other information as the Trustee or the Company has reasonably requested to
confirm that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
of 1933, as amended.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.17 of the Indenture shall have been satisfied.
Dated: Signed:
------------------ -----------------------------------------
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee:
---------------------------------------------------------
<PAGE> 11
11
TO BE COMPLETED BY PURCHASER IF BOX (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A and is aware that the sale
to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:
----------------------------- ------------------------------------
NOTICE: To be executed by an
executive officer
<PAGE> 12
12
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state
the amount you elect to have purchased:
$
-----------------------
Dated:
------------------------ -------------------------------
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in every
particular without alteration or
enlargement or any change whatsoever
and be guaranteed.
Signature Guarantee:
-------------------------------------------------------
(Signature must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the Exchange
Act.)
<PAGE> 1
EXHIBIT 4.6
STOCKHOLDERS' VOTING AGREEMENT
THIS STOCKHOLDERS' VOTING AGREEMENT ("Agreement") is made and entered
into as of this 22nd day of November, 1996, by and among HAWK CORPORATION, a
Delaware corporation (the "Company"), NORMAN C. HARBERT ("Harbert"), the HARBERT
FAMILY LIMITED PARTNERSHIP, an Ohio limited partnership ("Harbert FLP"), RONALD
E. WEINBERG, SR. ("Weinberg"), the WEINBERG FAMILY LIMITED PARTNERSHIP, an Ohio
limited partnership ("Weinberg FLP"), BYRON S. KRANTZ ("Krantz") and the KRANTZ
FAMILY LIMITED PARTNERSHIP, an Ohio limited partnership ("Krantz FLP").
WHEREAS, Harbert, Weinberg and Krantz are the managing general partners
of Harbert FLP, Weinberg FLP and Krantz FLP, respectively;
WHEREAS, Harbert FLP, Weinberg FLP, Krantz FLP, Harbert, Weinberg and
Krantz are referred to herein collectively as the "Stockholders" and
individually as a "Stockholder;"
WHEREAS, as of the Effective Date (as defined below), each Stockholder
will be the legal and beneficial owner of the number of shares of Class A Common
Stock, par value $0.01 per share, of the Company ("Common Stock"), set forth
opposite his or its name on Annex I attached hereto and incorporated herein by
reference;
WHEREAS, each of Harbert, Weinberg and Krantz is currently a director
of the Company;
WHEREAS, Carl J. Harbert II, Ronald E. Weinberg, Jr. and Marc C. Krantz
are the sons and designated successors of Harbert, Weinberg and Krantz,
respectively, for purposes of this Agreement and are referred to herein
collectively as the "Designated Successors" and individually as a "Designated
Successor;"
WHEREAS, the parties believe that it is in their mutual best interest
(i) that qualified persons serve the Company as members of its board of
directors (the "Board of Directors") to provide advice as to the Company's
management, policies, administration and development and (ii) to make provision
for the voting of the Common Stock and any other class of capital stock of the
Company entitled to vote (together with the Common Stock, "Voting Stock") held
by the Stockholders and certain other matters concerning the governance of the
Company; and
WHEREAS, the parties desire to set forth their understandings and
agreements in writing;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises hereinafter set forth and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. SCOPE AND TERM OF AGREEMENT.
1.1 Scope of Agreement. This Agreement shall govern (i) the
voting of all shares of Voting Stock of which any party to this Agreement is now
or hereafter becomes the legal or
<PAGE> 2
beneficial owner, including, without limitation, any shares of Voting Stock
acquired upon the exercise of any stock options issued by the Company, and (ii)
all action taken by any of the Stockholders with respect to any matter submitted
to a vote of the stockholders of the Company. For purposes of this Agreement,
the term "beneficial owner" shall have the meaning assigned to such term in Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended. For
purposes of this Agreement, it is hereby understood and agreed that Harbert,
Weinberg and Krantz are, and that (upon succeeding to the rights and obligations
of their respective fathers hereunder) the Designated Successors will be, the
beneficial owners of the shares of Common Stock now or hereafter owned by
Harbert FLP, Weinberg FLP and Krantz FLP (or the successors thereof),
respectively.
1.2 No Restrictions on Transfer of Stock. This Agreement shall
not restrict in any manner whatsoever the sale, transfer, pledge or other
disposition of the shares of Voting Stock owned by any Stockholder.
1.3 Effective Date; Term of Agreement. This Agreement shall
become effective only upon the date of consummation of the offering of 10 1/4%
Senior Notes due 2003 contemplated by that certain Offering Memorandum of the
Company dated November 22, 1996, as amended from time to time (the "Effective
Date"), and shall continue until terminated pursuant to Section 1.4 hereof.
1.4 Termination of Agreement. This Agreement shall terminate
upon the first to occur of (i) the death of the last of the Designated
Successors having any rights or obligations hereunder or (ii) the mutual written
agreement of all the parties hereto to terminate this Agreement; provided,
however, that the provisions of Sections 2.1 and 2.2 hereof shall terminate
sooner in the event that none of Harbert, Weinberg and Krantz (or any designee
thereof) remains on the Board of Directors.
2. ELECTION OF DIRECTORS AND OTHER STOCKHOLDER MATTERS.
2.1 Election of Harbert, Weinberg, Krantz and Designated
Successors as Directors. Subject to Section 2.4 hereof, each Stockholder agrees
to take, or cause any persons or entities under his or its control to take, all
necessary or desirable actions within his, its or such person's or entity's
control (whether as a director, member of a committee of the Board of Directors
or officer of the Company and including, without limitation, voting all shares
of Voting Stock under his or its direction or control and, to the extent
permitted by the certificate of incorporation or by-laws of the Company, each as
then in effect, executing and delivering written consents of stockholders and
calling special stockholders' meetings) to elect to the Board of Directors, to
the extent that he desires to serve, (i) each of Harbert, Weinberg and Krantz
(or such other person as Harbert, Weinberg or Krantz or, in the event of the
death or resignation of any one of them, his Designated Successor, may designate
in his stead), and (ii) following the death or resignation of any of Harbert,
Weinberg or Krantz, his Designated Successor.
2.2 Election of Other Directors. Each Stockholder agrees to
take, or cause any persons or entities under his or its control to take, all
necessary or desirable actions within his, its
- 2 -
<PAGE> 3
or such person's or entity's control (whether as a director, member of a
committee of the Board of Directors or officer of the Company and including,
without limitation, voting all shares of Voting Stock under his or its direction
or control and, to the extent permitted by the certificate of incorporation or
by-laws of the Company, each as then in effect, executing and delivering written
consents of stockholders and calling special stockholders' meetings) to elect to
the Board of Directors such directors (other than Harbert, Weinberg and Krantz
or any designees thereof, the election of which shall be governed by Section 2.1
hereof) as a majority of Harbert, Weinberg and Krantz (or, in the event of the
death or resignation of any one of them, his Designated Successor) shall direct.
2.3 Other Stockholder Matters. Each Stockholder agrees to
take, or cause any persons or entities under his or its control to take, all
necessary or desirable actions within his, its or such person's or entity's
control (whether as a director, member of a committee of the Board of Directors
or officer of the Company and including, without limitation, voting all shares
of capital stock of the Company (to the extent entitled to vote) under his or
its direction or control and, to the extent permitted by the certificate of
incorporation or by-laws of the Company, each as then in effect, executing and
delivering written consents of stockholders and calling special stockholders'
meetings) with respect to such matters as are submitted to a vote of the
stockholders of the Company (other than the election of directors, which shall
be governed by Sections 2.1 and 2.2 hereof) as a majority of Harbert, Weinberg
and Krantz (or, in the event of the death or resignation of any one of them, his
Designated Successor) shall direct.
2.4 Effect of Sale of Shares. In the event that any of
Harbert, Weinberg and Krantz (or any Designated Successor who succeeds to the
rights and obligations of his father hereunder) ceases to be the beneficial
owner of fifty percent (50%) of the shares of Common Stock that he is currently
the beneficial owner of, then he (and his Designated Successor) shall cease to
have the right under Section 2.1 hereof to be elected (or have a designee
elected) to the Board of Directors; provided that, notwithstanding his (or his
Designated Successor's) ceasing to have such right under Section 2.1 hereof, he
(or his Designated Successor) shall continue to be obligated to take such
actions as are required of him under Sections 2.1, 2.2 and 2.3 hereof.
2.5 Agreement of the Company. The Company hereby agrees that
it shall not give effect to any vote cast or other action taken by any
Stockholder with respect to any matter submitted to a vote of the stockholders
of the Company, unless such vote or action is in accordance with the terms of
this Agreement.
3. REMEDIES.
3.1 Specific Performance. The parties hereto agree that the
failure of any party to observe the obligations provided by this Agreement will
result in irreparable damage to the non-defaulting party and that the
non-defaulting party may seek specific performance of such obligations in any
state or federal court having subject matter jurisdiction and located in
Cleveland, Ohio.
- 3 -
<PAGE> 4
3.2 Submission to Jurisdiction; Consent to Service of Process;
Venue. For the purpose of any action or proceeding instituted with respect to
this Agreement, each party other than the Company hereby irrevocably submits to
the jurisdiction of any state or federal court having subject matter
jurisdiction and located in Cleveland, Ohio. Each party other than the Company
also irrevocably consents to the service or process out of said courts by
mailing a copy thereof, by registered mail, postage prepaid, to such party at
his or its address set forth in Section 4.1 hereof or at such other address
furnished to the other parties hereto in the manner provided in Section 4.1
hereof, and each party hereby agrees that such service, to the fullest extent
permitted by law (i) shall be deemed in every respect effective service of
process upon him or it in any such suit, action or proceeding and (ii) shall be
taken and held to be valid personal service upon and personal delivery to him or
it. Each party other than the Company also hereby irrevocably waives, to the
fullest extent permitted by law, any objection which he or it may have or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court located in Cleveland, Ohio and any claim that any such
suit, action or proceeding brought in such a court has been brought in an
inconvenient forum. Notwithstanding anything in this Agreement to the contrary,
the Company shall have the right to serve process in any manner permitted by law
and to bring an action or proceeding in respect hereof in any country, state,
county or place having jurisdiction over such action.
4. MISCELLANEOUS PROVISIONS.
4.1 Notices. All notices or other forms or communication
between or among any of the parties shall be given in writing and sent by
registered or certified U.S. mail, return receipt requested, first-class postage
prepaid, or personally delivered, to such party at the address set forth below
unless notice of a change of address is furnished to the other parties in the
manner provided in this Section:
If to any Stockholder: The address set forth next to his or
its name on Annex I hereto.
If to Harbert or Weinberg: c/o Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
If to Krantz: c/o Kohrman Jackson & Krantz P.L.L.
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
If to the Company: Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
Attention: Norman C. Harbert
4.2 Amendment. No change in, modification of or amendment to
this Agreement shall be valid unless the same is in writing and signed by all
parties hereto.
- 4 -
<PAGE> 5
4.3 Waiver. No waiver of any provision of this Agreement shall
be valid unless in writing and signed by the person against whom it is sought to
be enforced. The failure of any party at any time to insist upon strict
performance of any condition, promise, agreement and understanding set forth
herein shall not be construed as a waiver or relinquishment of the right to
insist upon strict performance of the same condition, promise, agreement or
understanding at a future date.
4.4 Assignment. No party may assign any of his or its rights
or obligations under this Agreement without the written consent of all other
parties hereto.
4.5 Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective heirs,
beneficiaries, legatees, distributees, estates, executors, administrators,
personal representatives, successors and permitted assigns, as the case may be.
4.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts made and to be performed entirely within that State.
4.7 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provisions were omitted.
4.8 Integration. This Agreement sets forth all of the
promises, agreements, conditions and understandings among the parties hereto
with respect to the subject matter hereof, and supersedes and is intended to be
an integration of any and all prior agreements or understandings with respect
thereto.
4.9 Execution in Counterparts. 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.
- 5 -
<PAGE> 6
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
HAWK CORPORATION
By: /S/ Byron S. Krantz
---------------------------------
Its: Secretary
--------------------------------
/S/ Norman C. Harbert
------------------------------------
NORMAN C. HARBERT, individually
HARBERT FAMILY LIMITED PARTNERSHIP
By: /S/ Norman C. Harbert
---------------------------------
Norman C. Harbert,
its Managing General Partner
/S/ RONALD E. WEINBERG
------------------------------------
RONALD E. WEINBERG, individually
WEINBERG FAMILY LIMITED PARTNERSHIP
By: /S/ Ronald E. Weinberg
---------------------------------
Ronald E. Weinberg,
its Managing General Partner
/S/ Byron S. Krantz
------------------------------------
BYRON S. KRANTZ, individually
KRANTZ FAMILY LIMITED PARTNERSHIP
By: /S/ Byron S. Krantz
---------------------------------
Byron S. Krantz,
its Managing General Partner
- 6 -
<PAGE> 7
ANNEX I
TO STOCKHOLDERS' VOTING AGREEMENT
<TABLE>
<CAPTION>
Name and Address of Stockholder Shares of Common Stock Owned
- ------------------------------- ----------------------------
<S> <C>
Norman C. Harbert.......................................................38,101
P.O. Box 127
Hiram, Ohio 44234
Harbert Family Limited Partnership.....................................342,905
P.O. Box 127
Hiram, Ohio 44234
Ronald E. Weinberg......................................................37,089
982 Chestnut Run
Gates Mills, Ohio 44040
Weinberg Family Limited Partnership....................................333,800
982 Chestnut Run
Gates Mills, Ohio 44040
Byron S. Krantz..........................................................8,389
825-50 Windward #25K
Aurora, Ohio 44202
Krantz Family Limited Partnership.......................................75,505
825-50 Windward #25K
Aurora, Ohio 44202
</TABLE>
<PAGE> 1
EXHIBIT 4.7
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (this "Agreement") is made and entered
into on this 30th day of June, 1995, by and among THE HAWK GROUP OF COMPANIES,
INC., a Delaware corporation (the "Company"), PAUL BISHOP ("Bishop"), JEFFREY H.
BERLIN ("Berlin"), BARRY J. FELD ("Feld"), THOMAS A. GILBRIDE ("Gilbride"), JESS
F. HELSEL ("Helsel"), FREDRIC M. ROBERTS ("Roberts"), GARY SICILIANO
("Siciliano") and DOUGLAS D. WILSON ("Wilson") (collectively, the
"Shareholders," and individually, a "Shareholder"), and HAWK CORPORATION, a
Delaware corporation ("Hawk"), NORMAN C. HARBERT ("Harbert"), RONALD E. WEINBERG
("Weinberg") and BYRON S. KRANTZ ("Krantz") (Hawk, Harbert, Weinberg and Krantz
are collectively, the "Hawk Shareholders").
WHEREAS, certain of the Shareholders were owners of record and
beneficially of shares of common stock of The Hawk Group of Companies, Inc., an
Ohio corporation and the predecessor to the Company;
WHEREAS, certain of the Shareholders were owners of record and
beneficially of shares of common and preferred stock of Helsel, Inc., a Delaware
corporation which was merged with and into a wholly-owned subsidiary of the
Company; and in connection with the merger, the shares of common stock and
preferred stock of Helsel, Inc. were cancelled and, in exchange therefore,
shares of the Company were issued to the Shareholders;
WHEREAS, each Shareholder is the legal and beneficial owner of the
number of shares of Series A Common Stock, $0.01 par value ("Common Stock"), and
Series B Preferred Stock, $0.01 par value ("Preferred Stock"), of the Company
(the Common Stock and Preferred Stock being collectively referred to herein as
the "Stock") as set forth opposite his name on Annex I attached hereto and
incorporated herein by reference;
WHEREAS, certain of the shares of Common Stock held by certain
Shareholders are subject to divestiture (such shares being hereinafter referred
to as the "Unvested Shares"), which divestiture is dependent upon the occurrence
of certain events;
WHEREAS, Annex II attached hereto and incorporated herein by reference
sets forth the current number of Unvested Shares and the events of divestiture
relating thereto;
WHEREAS, the Hawk Shareholders are the legal and beneficial owners of
the number of shares of Stock set forth opposite his or its name on Annex III
attached hereto and incorporated herein by reference;
WHEREAS, the parties believe that it is in their respective best
interests to make provisions for the voting of and the future disposition of the
Stock held by the Shareholders and certain other matters; and
<PAGE> 2
WHEREAS, the parties desire to set forth their understandings and
agreements in writing;
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises hereinafter set forth and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. SCOPE OF AGREEMENT AND STOCK TRANSFER RESTRICTIONS.
---------------------------------------------------
1.1 No Shareholder may sell, exchange, deliver, assign, pledge,
mortgage, hypothecate, encumber, transfer or permit to be transferred, whether
voluntarily, involuntarily or of operation of law, and whether resulting from
his death or disability or otherwise (collectively, "Transfer"), all or any part
of the Stock now owned or hereafter acquired by said Shareholder; provided,
however, that if such Shareholder desires to sell all (and not less than all) of
the shares of Stock which he owns of record or beneficially at any time
(including any Unvested Shares), he may offer said shares for sale to the Hawk
Shareholders, at the applicable "Purchase Price" set forth in Section 1.6
hereof, by giving notice (the "Notice") to each of the Hawk Shareholders and the
Company of his desire to do so. The Notice shall state the total number of
shares of Stock owned by such Shareholder and being offered for sale.
1.2 For a period of twenty (20) days after receipt of the Notice
(the "First Period"), Hawk shall have the right to purchase all (and not less
than all) of the shares so offered. If Hawk elects not to purchase the shares of
Stock, it shall give notice to the other Hawk Shareholders and to the
Shareholder offering such shares of Stock for sale.
1.3 If Hawk elects not to purchase all of the shares of Stock so
offered within the First Period, for a period of twenty (20) days after the
expiration of the First Period (the "Second Period"), the Hawk Shareholders
(other than Hawk) shall have the option to purchase, on the same terms and
conditions offered to Hawk, all (and not less than all) of such Shareholders'
shares of Stock (including any Unvested Shares). If one or all of the Hawk
Shareholders (other than Hawk) elect to purchase all of said shares, they shall
purchase said shares on a pro rata basis in accordance with their respective
holdings of the Company's Common Stock or on such other basis as they may
mutually agree.
1.4 During the period on or before the second anniversary of the
effective date of this Agreement, if after the expiration of the Second Period,
the shares offered for sale by a Shareholder remain unsold, the Shareholder
shall continue to hold and own said shares and shall not thereafter Transfer
said shares (unless to the Hawk Shareholders and/or the Company as herein
provided). On and after the second anniversary of the effective date of this
Agreement, if after the expiration of the Second Period, the shares offered for
sale by the Shareholders remain unsold, the Shareholders may Transfer said
shares (but not any Unvested Shares).
2
<PAGE> 3
1.5 Any Transfer other than in accordance with the terms and
provisions of this Agreement shall be void and shall not Transfer any right,
title or interest in or to said Stock to the purported transferee.
1.6 For purposes of this Agreement, the purchase price ("Purchase
Price") of: (i) any Unvested Shares purchased hereunder shall be the book value
(hereinafter referred to as "Book Value") of each share, which Book Value shall
be the greater of the following amounts: (a) the purchase price paid by the
Shareholder for a share of Common Stock or (b) the amount determined by dividing
the amount shown as Common Stock and Retained Earnings Paid-In Capital on the
Company's balance sheet for the preceding year, as prepared and certified by the
certified public accounting firm servicing the Company, by the number of shares
of Common Stock issued and outstanding as of the end of such preceding year and
adjusted for any stock splits or stock dividends; and (ii) all other shares of
Common Stock purchased hereunder shall be determined pursuant to the formula set
forth in Annex IV attached hereto and incorporated herein by reference.
2. TRANSFER UPON DEATH OR DISABILITY OF SHAREHOLDER.
2.1 In the event of the death or mental or physical disability of
any Shareholder hereof, the Hawk Shareholders shall be required to purchase all
(and not less than all) of the shares of Stock (including any Unvested Shares)
owned of record or beneficially by such Shareholder, at the applicable Purchase
Price; provided, however, that the Hawk Shareholders shall be so required to
purchase such shares of Stock (including any Unvested Shares) in proportion to
the number of shares owned by him relative to the shares owned by the other Hawk
Shareholders, such proportion being determined immediately prior to the purchase
of such shares of Stock (or in such other proportion as they may mutually
agree).
2.2 In the event of the death of any Shareholder, the Hawk
Shareholders shall purchase the shares of Stock (including any Unvested Shares)
owned of record or beneficially by such Shareholder as of the date of his death.
All incidents of ownership of such shares, including but not limited to the
right to vote, attend meetings, execute written consents or perform any acts
with respect to said shares, shall vest in the Hawk Shareholders in proportion
to their shareholdings, on the date of such Shareholders' death. From and after
such date of death, the Hawk Shareholders, shall have and are hereby granted the
right, power and authority to exercise any such rights of ownership. The vesting
of such incidents of ownership shall occur in the Hawk Shareholders, on the date
of the death of such Shareholder even if the certificates representing the
shares of Stock have not yet been transferred to the Hawk Shareholders, and even
if no other act evidencing such transfer has yet been performed. Any and all
acts necessary to formally transfer the ownership of said Stock to the Hawk
Shareholders shall be performed as of the date of such Shareholders' death.
2.3 (a) In the event of the mental or physical disability of any
Shareholder, the Hawk Shareholders shall be required to purchase the shares of
Stock (including any Unvested Shares) of such Shareholder as of the date
occurring six (6) months after the date that such
3
<PAGE> 4
Shareholder's mental or physical disability commenced, so long as such
Shareholder is still mentally or physically disabled at that time. Any and all
acts necessary to formally transfer the ownership of Stock to the Hawk
Shareholders shall be performed as of the date occurring six (6) months after
the date of commencement of the Shareholder's disability.
(b) All incidents of ownership of a Shareholder's shares of
Stock, including but not limited to the right to vote, attend meetings, execute
written consents in lieu of any shareholders' meeting, execute any other
consents or perform any acts with respect thereto, shall vest in the Hawk
Shareholders in proportion to their shareholdings on the date of Shareholder's
disability as determined pursuant to Section 2.3 hereof. From and after such
date, the Hawk Shareholders shall have and are hereby granted the right, power
and authority to exercise any such incidents of ownership. Such ownership rights
shall continue in the Hawk Shareholders so long as such Shareholder is disabled
(until the Hawk Shareholders purchase the Stock pursuant to Section 2.1 hereof)
or so long as the term of that certain Irrevocable Proxy granted in Section 6.0
hereof for the benefit of the Hawk Shareholders shall not have expired,
whichever is longer. The vesting of such rights of ownership shall occur in the
Hawk Shareholders, on the date of such Shareholder's disability even if the
shares of Stock have not yet been transferred to the Hawk Shareholders, and even
if no other act evidencing such transfer has yet been performed.
(c) For purposes of this Section 2, a Shareholder shall become
"mentally or physically disabled" as of the time the Board of Directors of the
Company (the "Board") shall find, on the basis of medical evidence satisfactory
to the Board, that as a result of a mental or physical condition, the
Shareholder is unable to substantially perform his normal duties of employment
or is prevented from engaging in the same level of performance as he engaged in
prior to the onset of such condition. Shareholder shall submit to an examination
by a physician and/or psychiatrist, selected at the discretion of the Board, as
is necessary to obtain the medial evidence needed by the Board to determine
whether the Shareholder has become "mentally or physically disabled." Each
Shareholder hereby waives the confidentiality of the results or conclusions of
such medical examination and shall take such action as is necessary to disclose
the results or conclusions of such examination to the Board. In the event that
the Shareholder fails to submit to an examination or to take the necessary
action to disclose the results of an examination, the Shareholder shall be
deemed to be "mentally or physically disabled."
3.0 TRANSFER UPON RETIREMENT OR TERMINATION OF
EMPLOYMENT OF A SHAREHOLDER.
3.1 In the event of any Shareholder's retirement from the Company
or the termination of his employment with the Company or any corporation
controlled or managed by, controlling or managing, or under control or
management with the Company or the Hawk Shareholders (other than Hawk) (an
"Affiliated Company"), the Hawk Shareholders shall be required to purchase all
of the shares of Stock (including any Unvested Shares) owned by such retired or
terminated Shareholder, at the applicable Purchase Price; provided, however,
that if Shareholder is terminated from his employment "for cause" (as defined
below), then the Hawk Shareholders shall be required to purchase all of the
Stock (including Unvested Shares) then owned by Shareholder which shall be equal
to the lesser of Book Value or the price actually paid for such shares. Each
Hawk Shareholder shall purchase such shares of Stock in proportion to the number
of shares owned by him relative to the shares owned by the other Hawk
Shareholders, such proportion being
4
<PAGE> 5
determined immediately prior to the purchase of such shares of Stock (or in such
other proportion as they may mutually agree). "For cause" shall mean any one
or more of the following:
(i) Shareholder's engaging in fraud, embezzlement,
misappropriation of funds or like conduct against the Company or
any of its Affiliated Companies;
(ii) Shareholders' conviction (or plea of nolo contendere) on a
felony charge;
(iii) Shareholder's violation of any federal, state or local
law, regulation or ordinance relating to personal conduct in the
workplace, such as laws, regulations or ordinances pertaining to
discrimination or harassment;
(iv) Shareholder's breach of any confidentiality obligation
owed to the Company or its Affiliated Companies.
3.2 In the event of Shareholder's retirement from or the
termination of his employment with the Company or any of its Affiliated
Companies, the Hawk Shareholders shall purchase Shareholder's Stock pursuant to
this Section 3 as of the date of retirement by Shareholder or the date of
termination of Shareholder's employment, as the case may be.
3.3 All incidents of ownership of the shares of Stock, including
but not limited to the right to vote, attend meetings, execute written consents
in lieu of any shareholders' meeting, execute any other consent or perform any
acts with respect to said shares of Stock, shall vest in the Hawk Shareholders
in proportion of their shareholdings on the date of Shareholder's retirement
from or the termination of his employment, as the case may be, and from and
after such date, the Hawk Shareholders shall have and is hereby granted the
right, power and authority to exercise any such rights of ownership. The vesting
of such incidents of ownership shall occur in the Hawk Shareholders on the date
of Shareholder's retirement from or the termination of his employment, as the
case may be, even if the certificates representing Shareholder's shares of Stock
of the Company have not yet been transferred to the Hawk Shareholders and even
if no other act evidencing such transfer has yet been performed. Any and all
acts necessary to formally transfer the ownership of the shares of Stock of the
Company from Shareholder to the Hawk Shareholders.
3.4 In the event the Hawk Shareholders are incapable, for any
reason whatsoever, of purchasing the Stock of any Shareholder as required by
Section 2 or Section 3 hereof, then the Company shall be required to the extent
permitted by applicable law, to purchase the part (even to the extent of all) of
the Stock which the Hawk Shareholders are incapable of purchasing, upon the same
terms and conditions as would apply to the purchase by the Hawk Shareholders,
and all references herein to the Hawk Shareholders with respect to such purchase
shall be deemed to be references to the Hawk Shareholders and/or the Company.
5
<PAGE> 6
4. EXECUTION OF DOCUMENTS AND FURTHER ACTION.
------------------------------------------
The parties hereto agree that, in the event any Shareholder's
shares of Stock are transferred pursuant to the terms and conditions of this
Agreement, each party shall execute all documents, deliver all certificates,
assignments, releases, consents, instruments and other documents and perform all
acts required to effectuate said transaction.
5. TAG-ALONG.
----------
5.1 In the event the Hawk Shareholders desire to sell, in an
arm's-length transaction, all or any portion of the shares of Stock which they
own of record or beneficially (the "Sale"), they shall give notice (the
"Notice") of their intention to do so to the Shareholders. The Notice shall
include (a) the number of shares of Common Stock and Preferred to be sold by the
Hawk Shareholders in the Sale, (b) the principal terms of the Sale, including
the minimum price at which the shares are intended to be sold, (c) the
percentage which such amount of shares to be sold constitutes with respect to
the aggregate amount of shares held by all parties hereto, and (d) a demand by
the Hawk Shareholders (the "Demand") to cause the number of shares held by the
Shareholders to be included with their shares to be sold, on the same terms and
conditions as they shall sell their shares, which terms and conditions shall not
be materially less favorable to the Shareholders than as set forth in the
Notice.
Each of the Shareholders agrees that in the event the Hawk
Shareholders make such a Demand, he shall accept such Demand, which acceptance
shall be irrevocable and shall bind him to sell his shares simultaneously with
the Sale to the purchasers and on the same terms and conditions as the Hawk
Shareholders shall sell their shares. Each of the Shareholders shall be bound
and obligated to sell all of his shares, the number of which shall be set forth
in his written acceptance of the Demand.
Each party hereto shall take such actions and execute such
documents and instruments as shall be necessary or desirable to consummate the
Sale expeditiously.
5.2 Except as provided in Section 5.4 hereof, each of the Hawk
Shareholders agrees that he will not sell any or all of his shares of Stock
without effecting a sale of the Shareholders' shares of Stock on the same terms
and conditions, pursuant to Section 5.1 hereof. In the event that the Hawk
Shareholders sell less than all of their shares of Stock, the same proportion of
the Shareholders' shares of Stock shall also be sold.
5.3 Notwithstanding anything in this Agreement to the contrary,
none of the provisions of this Section 5 shall apply in the event that any of
the Hawk Shareholders desires to sell to any other Hawk Shareholder, or desires
to transfer to any family member or trust for the benefit of such Hawk
Shareholder or family member, all or any portion of the shares of Stock which he
or it owns of record or beneficially.
6
<PAGE> 7
5.4 Notwithstanding anything in this Agreement to the contrary,
none of the provisions of this Section 5 shall apply in the event that the
Company or the Hawk Shareholders shall cause the Sale to be effected pursuant to
an effective registration statement under the Securities Act or pursuant to Rule
144 under the Securities Act (or any comparable rule then in effect).
5.5 All costs and expenses incurred by the Hawk Shareholders in
connection with the Sale, including without limitation all attorneys' fees,
costs and disbursements and any finders' fees or brokerage commissions, together
with the reasonable fees and disbursements of one counsel representing the Hawk
Shareholders and the Shareholders in connection with the Sale, shall be
allocated pro rata between the Hawk Shareholders and the Shareholders with each
party paying that portion of costs and expenses which equals the percentage
obtained by dividing the amount of gross proceeds received by such party in the
Sale by the total amount of gross proceeds received by all parties to the Sale.
The portion of all costs and expenses allocable to each Shareholder which the
Hawk Shareholders shall have incurred or paid shall promptly be paid by such
Shareholder to the Hawk Shareholders, all disbursements for such costs and
expenses being made at or prior to the closing of the Sale.
6.0 IRREVOCABLE PROXY.
------------------
6.1 Each Shareholder hereby irrevocably appoints Harbert, Weinberg
and Krantz, or any of them, as his true and lawful attorneys and proxies, with
full power of substitution and resubstitution, for and in his name, to (i) vote
all of the shares of Common Stock of which such Shareholder is now or
hereinafter the record owner at all annual, special and other meetings of
shareholders of the Company, and at any other time, for the election of the
Board and any other matters presented to the shareholders of the Company for a
vote at any such meeting, (ii) execute written consents on behalf of such
Shareholder in lieu of any meetings of the shareholders of the Company for the
election of the Board and any other matters presented to the shareholders for
written consent, and (iii) execute any other consents, waivers or releases
requested by the Company of the shareholders of the Company.
6.2 It is understood and agreed that the aforesaid appointment and
proxy granted by each Shareholder is irrevocable and coupled with an interest
within the meaning of section 212 of the Delaware General Corporation Law and
section 1701.48 of the Ohio General Corporation Law. It is further understood
and agreed that the aforesaid appointment and proxy of each of Harbert,
Weinberg and Krantz related to voting rights only with respect to each such
Shareholders shares of Common Stock and does not relate to any other rights
incident to his ownership of shares of Common Stock (including, without
limitation, the right to receive dividends and any other distributions on such
shares).
6.3 The tag along and irrevocable proxy set forth in Sections 5 and
6, respectively, shall remain in full force and effect until this Agreement is
terminated pursuant to Section 7 hereof and shall not terminate by operation of
law, whether by the death, bankruptcy or adjudication of
7
<PAGE> 8
incompetency or insanity of either Harbert, Weinberg or Krantz, the Transfer of
all or any part of the shares of Stock now or hereafter held by any Shareholder
or the occurrence of any other event.
6.4 Neither Harbert, Weinberg nor Krantz shall be liable to any
Shareholder by reason of any act or omission to act performed or omitted by any
of them in connection with any of the rights specified in this Section 6 other
than actual fraud, gross negligence or criminal conduct.
7. AMENDMENT, WAIVER AND TERMINATION.
----------------------------------
7.1 No change in, modification of or amendment to this Agreement
shall be valid unless the same is in writing and signed by all parties hereto.
7.2 No waiver of any provision of this Agreement shall be valid
unless in writing and signed by the person against whom it is sought to be
enforced. The failure of any party at any time to insist upon strict performance
of any condition, promise, agreement and understanding set forth herein shall
not be construed as a waiver or relinquishment of the right to insist upon
strict performance of the same condition, promise, agreement or understanding at
a future date.
7.3 This Agreement shall terminate upon the first to occur of any
of the following: (i) the purchase by the Company, Hawk, Harbert, Weinberg
and/or Krantz of all of Common Stock owned by the Shareholders and the payment
in full therefor; (ii) the sale by Hawk, Harbert, Weinberg, and/or Krantz of all
of their respective shares of Common Stock; or (iii) the mutual agreement of all
the parties hereto.
8. LEGENDS, NOTICES AND REMEDIES.
------------------------------
8.1 The Company shall include on each certificate representing the
Stock held by any of the Shareholders (including any shares of Common Stock and
Preferred hereafter acquired by any of the Shareholders) legends in
substantially the form set forth in Annex V attached hereto and incorporated
herein by reference. Upon the termination of this Agreement pursuant to Section
7.3 hereof, each Shareholder shall surrender to the Company the certificate(s)
representing his shares of Stock which bear the legends required by this
Section, and the Company shall issue a new certificate in lieu thereof for an
equal number of shares without such legends.
8.2 All notices or other forms or communication provided for herein
shall be given in writing and sent by registered or certified U.S. mail, return
receipt requested, first-class postage prepaid, and to such party at the address
set forth below unless notice of a change of address is furnished to the other
parties in the manner provided in this Section.
If to any Shareholder: The address set forth below to his name on
Annex I hereto.
8
<PAGE> 9
If to the Company: The Hawk Group of Companies, Inc.
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
Attention: Norman C. Harbert
With a copy to: Kohrman Jackson & Krantz
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
Attention: Byron S. Krantz, Esq.
If to Hawk: Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
Attention: Ronald E. Weinberg
With a copy to: Kohrman Jackson & Krantz
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
Attention: Byron S. Krantz, Esq.
If to Harbert: Norman C. Harbert
c/o The Hawk Group of Companies, Inc.
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
With a copy to: Kohrman Jackson & Krantz
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
Attention: Byron S. Krantz, Esq.
If to Weinberg: Ronald E. Weinberg
Weinberg Capital Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
With a copy to: Kohrman Jackson & Krantz
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
Attention: Byron S. Krantz, Esq.
If to Krantz: Byron S. Krantz
Kohrman Jackson & Krantz
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
9
<PAGE> 10
8.3 The parties hereto agree that the failure of any party to
observe the obligations provided by this Agreement will result in irreparable
damage to the non-defaulting party and that the non-defaulting party may seek
specific performance of such obligations in any state or federal court having
subject matter jurisdiction and located in Cleveland, Ohio.
8.4 For the purpose of any action or proceeding instituted with
respect to this Agreement, each Shareholder hereby irrevocably submits to the
jurisdiction of any state or federal court having subject matter jurisdiction
and located in Cleveland, Ohio. Each Shareholder also irrevocably consents to
the service or process out of said courts by mailing a copy thereof, by
registered mail, postage prepaid, to such Shareholder at his address set forth
in Annex I hereto or at such other address furnished to the other parties hereto
in the manner provided in Section 8.2 hereof, and each Shareholder hereby agrees
that such service, to the fullest extent permitted by law (i) shall be deemed in
every respect effective service of process upon him in any such suit, action or
proceeding and (ii) shall be taken and held to be valid personal service upon
and personal delivery to him. Nothing herein contained shall affect the right of
the Company, Hawk, Harbert, Weinberg or Krantz to serve process in any other
manner permitted by law or preclude the Company, Hawk, Harbert, Weinberg or
Krantz from bringing an action or proceeding in respect hereof in any other
country, state, county or place having jurisdiction over such action. Each
Shareholder hereby irrevocably waives, to the fullest extent permitted by law,
any objection which he may have or hereafter have to the laying of the venue of
any such suit, action or proceeding brought in any such court located in
Cleveland, Ohio and any claim that any such suit, action or proceeding brought
in such a court has been brought in an inconvenient forum.
9. MISCELLANEOUS PROVISIONS.
9.1 This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
9.2 The invalidity or unenforceability of any particular provision
of this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
9.3 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.
9.4 This Agreement, which includes the Annexes attached hereto,
sets forth all of the promises, agreements, conditions and understandings among
the parties hereto with respect to the subject matter hereof, and supersedes and
is intended to be an integration of any and all prior agreements or
understandings.
10
<PAGE> 11
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
THE HAWK GROUP OF COMPANIES, INC.
By: /s/ Norman C. Harbert /s/ Barry J. Feld
- ------------------------------- -------------------------------
Its: Chairman Barry J. Feld
HAWK CORPORATION /s/ Thomas A. Gilbride
-------------------------------
Thomas A. Gilbride
By /s/ Norman C. Harbert
- -------------------------------
Its: Chairman /s/ Jess F. Helsel
-------------------------------
Jess F. Helsel
/s/ Fredric M. Roberts /s/ Gary Siciliano
- ------------------------------- -------------------------------
Fredric M. Roberts Gary Siciliano
/s/ Douglas Wilson /s/ Norman C. Harbert
- ------------------------------- -------------------------------
Douglas Wilson Norman C. Harbert
/s/ Paul Bishop /s/ Ronald E. Weinberg
- ------------------------------- -------------------------------
Paul Bishop Ronald E. Weinberg
/s/ Byron S. Krantz /s/ Jeffrey H. Berlin
- ------------------------------- -------------------------------
Byron S. Krantz Jeffrey H. Berlin
11
<PAGE> 12
ANNEX I
-------
SHARES OF CLASS A SHARES OF SERIES B
SHAREHOLDER COMMON STOCK PREFERRED STOCK
- ------------- ------------------- -------------------
Paul Bishop 1,735
Jeffrey H. Berlin 80,417 13
Barry J. Feld 3,817 3
Thomas A. Gilbride 5,429 1
Jess F. Helsel 1,735
Fredric M. Roberts 1,735
Gary Siciliano 8,817 3
Douglas D. Wilson 13,817 3
<PAGE> 13
ANNEX II
--------
SHAREHOLDER CURRENT NUMBER OF "UNVESTED SHARES"
----------- -----------------------------------
Jeffrey H. Berlin 1,200(1)/47,050(2)
Thomas A. Gilbride 1,800(1)
Gary Siciliano 3,000(1)
Douglas D. Wilson 6,000(1)
- ------------------------
(1) Until December 21, 1997, the Unvested Shares of any of these Shareholders
are subject to divestiture upon the earlier to occur of (i) the sale of all
of his shares of Stock to any of the Hawk Shareholders pursuant to Section
1 of the Shareholders' Agreement, (ii) his death, (iii) the date he is
deemed by the Board of Directors of the Company, or any corporation
controlled or managed by, controlling or managing, or under control or
management with the Company or the Hawk Shareholders (other than Hawk) (an
"Affiliated Company"), to have become "mentally or physically disabled" (as
defined in Section 2.3(c) of the Shareholders' Agreement), or (iv) his
retirement from, or the termination (with or without cause) of his
employment with, the Company or any Affiliated Company (each of the
foregoing events being hereinafter referred to as an "Event of
Termination"), in accordance with the following schedule:
Occurrence of an Percentage of
Event of Termination Shares Divested
-------------------- ---------------
Prior to 12/21/95 60%
Prior to 12/21/96 40%
Prior to 12/21/97 20%
After 12/21/97 0%
Upon the occurrence of any Event of Termination, such Shareholder shall
automatically cease to own and to have any rights whatsoever (including
but not limited to the rights to vote and receive dividends and
distributions) with respect to the then applicable number of Unvested
Shares.
<PAGE> 14
(2) Until June 29, 1998, the Unvested Shares of this Shareholder are subject to
divestiture upon the occurrence of an Event of Termination in accordance
with the following schedule:
Occurrence of an Percentage of
Event of Termination Shares Divested
-------------------- ---------------
Prior to 6/29/96 60%
Prior to 6/29/97 40%
Prior to 6/29/98 20%
After 6/29/98 0%
Upon the occurrence of any Event of Termination, such Shareholder shall
automatically cease to own and to have any rights whatsoever (including
but not limited to the rights to vote and receive dividends and
distributions) with respect to the then applicable number of Unvested
Shares.
<PAGE> 15
ANNEX III
---------
SHARES OF CLASS A
SHAREHOLDER COMMON STOCK SHARES OF PREFERRED STOCK
- ----------- ------------ -------------------------
SERIES A SERIES B
Hawk Corporation 4,900 1,250
Norman C. Harbert 164,457 158
Byron S. Krantz 36,474 35
Ronald E. Weinberg 164,457 158
<PAGE> 16
ANNEX IV
--------
The "Purchase Price" per share of the Common Stock (other than any
Unvested Shares) shall be calculated as of the applicable valuation date by
dividing (A) an amount equal to (i) the product of (a) the average of the
Company's "Adjusted Operating Profit" (as defined below) for the two (2) most
recent twelve (12) month periods ended December 31, and (b) the number five (5)
LESS (ii) the amount of "Funded Indebtedness" (as defined below) as of the end
of the most recent twelve (12) month period ended December 31, by (B) the total
number of shares of Common Stock then outstanding on a fully diluted basis
(including all shares issuable upon the exercise of any warrants or options to
purchase Common Stock).
For purposes of computing the Purchase Price, the term:
"Adjusted Operating Profit" means an amount equal to
the Company's "Net Income" (as defined below) for the most recent
twelve (12) month period ended December 31 before deduction of any
amounts which, in conformity with generally accepted accounting
principles ("GAAP"), are set forth on the Company's consolidated
statement of income for such fiscal period opposite the captions (a)
"depreciation," (b) "amortization," (c) "extraordinary pre-tax gain,"
(d) "extraordinary pre-tax loss," (e) "interest expense," (f) "income
tax expense" and (g) "deferred income taxes," or any like captions, to
the extent the foregoing amounts are actually deducted by the Company
and its subsidiaries from net revenues on a consolidated basis, in
conformity with GAAP, in determining Net Income for such fiscal period.
"Funded Indebtedness" means (a) all indebtedness of
the Company and its subsidiaries, on a consolidated basis, solely for
money borrowed and owing, PLUS (b) the aggregate liquidation preference
payable under the Company's Certificate of Incorporation, as amended
and restated through the date of this Agreement, with respect to all
shares of its Serial Preferred Stock, $0.01 par value ("Preferred
Stock"), then outstanding in the event of a liquidation of the Company,
pLUS (c) all accrued but unpaid dividends on its Preferred Stock then
outstanding, LESS (d) the aggregate amount of all cash, cash
equivalents and warrant and option exercise proceeds of the Company and
its subsidiaries other than the amount of any indebtedness of the
Company that is convertible into Common Stock.
"Net Income" means the consolidated net income or
loss of the Company and its subsidiaries, as it would appear on a
consolidated statement of income of the Company and its subsidiaries
for any fiscal period, prepared in conformity with GAAP.
The following is an example of the calculation of the Purchase Price
that assumes that the Adjusted Operating Profit for the last two years was
$6,290,000.00 and $6,800,000.00, respectively, that the Funded Indebtedness for
the previous year was $26,457,000.00 and that there are 9,500 shares of Common
Stock outstanding (on a fully diluted basis) on the applicable valuation date:
<PAGE> 17
Page 2 of 2
<TABLE>
<S> <C> <C>
Adjusted Operating Profit:
Year A $ 6,290,000.00
Year B 6,800,000.00
---------------
Total $13,090,000.00
==============
Average $ 6,545,000.00
Market Valuation (5 times
average Adjusted Operating
Profit): $32,725,000.00
Less Funded Indebtedness: $26,457,000.00
Total: $ 6,268,000.00
==============
Purchase Price per share: $ 659.79
==============
</TABLE>
<PAGE> 18
ANNEX V
-------
THE ENCUMBERING, TRANSFER OR OTHER DISPOSITION OF THE SHARES OF STOCK
EVIDENCED BY THIS CERTIFICATE IS RESTRICTED UNDER THE TERMS OF THAT
CERTAIN SHAREHOLDERS' AGREEMENT DATED AS OF JUNE 30, 1995, AS MAY BE
AMENDED FROM TIME TO TIME, THE PROVISIONS OF WHICH ARE HEREIN
INCORPORATED BY REFERENCE. SUCH SHAREHOLDERS' AGREEMENT PROVIDES, AMONG
OTHER THINGS, THAT THIS SECURITY MAY NOT BE SOLD OR TRANSFERRED TO ANY
PERSON WHO HAS NOT EXPRESSLY ASSUMED THE OBLIGATIONS OF SUCH AGREEMENT
AND CONTAINS, AMONG OTHER PROVISIONS, PROVISIONS WHICH COULD LIMIT THE
TRANSFER OF THIS SECURITY. A COPY OF THIS AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY. UPON THE WRITTEN REQUEST OF THE HOLDER
HEREOF, THE COMPANY SHALL FURNISH A COPY OF SUCH AGREEMENT, WITHOUT
CHARGE.
<PAGE> 19
[LOGO]
INSTRUMENT OF JOINDER
To: Chairman of the Board
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Shareholders' Agreement, dated as of June 30, 1995 and amended through the
date hereof (the "Agreement"), among Hawk Corporation, a Delaware
corporation f.k.a. The Hawk Group of Companies, Inc. (the "Company"),
Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz, Paul R. Bishop,
Jeffrey H. Berlin, Barry J. Feld, Thomas A. Gilbride, Jess F. Helsel,
Fredric M. Roberts, Gary Siciliano and Douglas D. Wilson
The undersigned hereby agrees to become a party to, and to be bound by the
terms and conditions of, the Agreement, effective on the transfer of 342,905
shares of Class A Common Stock, par value $0.01 per share, of the Company from
Norman C. Harbert to the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Instrument of Joinder
on this 21st day of November, 1996.
HARBERT FAMILY LIMITED PARTNERSHIP
/s/ Norman C. Harbert
---------------------------------
(Signature)
11292 Garfield Road
---------------------------------
(Street Address)
Hiram, OH 44234
---------------------------------
(City, State and Zip Revised Code)
330-369-7272
---------------------------------
(Area Code and Telephone Number)
Applied for
---------------------------------
(Social Security or Employer
Identification Number)
<PAGE> 20
[LOGO]
INSTRUMENT OF JOINDER
To: Chairman of the Board
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Shareholders' Agreement, dated as of June 30, 1995 and amended through the
date hereof (the "Agreement"), among Hawk Corporation, a Delaware
corporation f.k.a. The Hawk Group of Companies, Inc. (the "Company"),
Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz, Paul R. Bishop,
Jeffrey H. Berlin, Barry J. Feld, Thomas A. Gilbride, Jess F. Helsel,
Fredric M. Roberts, Gary Siciliano and Douglas D. Wilson
The undersigned hereby agrees to become a party to, and to be bound by
the terms and conditions of, the Agreement, effective on the transfer of 333,800
shares of Class A Common Stock, par value $0.01 per share, of the Company from
Ronald E. Weinberg to the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Instrument of
Joinder on this 21st day of November, 1996.
WEINBERG FAMILY LIMITED PARTNERSHIP
/s/ Ronald E. Weinberg
---------------------------------
(Signature)
982 Chestnut Run
---------------------------------
(Street Address)
Gates Mills, OH 44040
---------------------------------
(City, State and Zip Revised Code)
216-423-7272
---------------------------------
(Area Code and Telephone Number)
Applied for
---------------------------------
(Social Security or Employer
Identification Number)
<PAGE> 21
[LOGO]
INSTRUMENT OF JOINDER
To: Chairman of the Board
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Shareholders' Agreement, dated as of June 30, 1995 and amended through the
date hereof (the "Agreement"), among Hawk Corporation, a Delaware
corporation f.k.a. The Hawk Group of Companies, Inc. (the "Company"),
Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz, Paul R. Bishop,
Jeffrey H. Berlin, Barry J. Feld, Thomas A. Gilbride, Jess F. Helsel,
Fredric M. Roberts, Gary Siciliano and Douglas D. Wilson
The undersigned hereby agrees to become a party to, and to be bound by the
terms and conditions of, the Agreement, effective on the transfer of 75,505
shares of Class A Common Stock, par value $0.01 per share, of the Company from
Byron S. Krantz to the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Instrument of Joinder
on this 21st day of November, 1996.
KRANTZ FAMILY LIMITED PARTNERSHIP
/s/ Byron S. Krantz
---------------------------------
(Signature)
825-50 Windward
---------------------------------
(Street Address)
Aurora, OH 44202
---------------------------------
(City, State and Zip Revised Code)
216-562-4114
---------------------------------
(Area Code and Telephone Number)
Applied for
---------------------------------
(Social Security or Employer
Identification Number)
<PAGE> 22
[LOGO]
INSTRUMENT OF JOINDER
To: Chairman of the Board
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Shareholders' Agreement, dated as of June 30, 1995 and amended through the
date hereof (the "Agreement"), among Hawk Corporation, a Delaware
corporation f.k.a. The Hawk Group of Companies, Inc. (the "Company"),
Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz, Paul R. Bishop,
Jeffrey H. Berlin, Barry J. Feld, Thomas A. Gilbride, Jess F. Helsel,
Fredric M. Roberts, Gary Siciliano and Douglas D. Wilson
The undersigned hereby agrees to become a party to, and to be bound by the
terms and conditions of, the Agreement, effective on the issuance of 632 shares
of Class A Common Stock, par value $0.01 per share, of the Company to the
undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Instrument of Joinder
on this 20th day of November, 1996.
GERALD H. GORDON
/s/ Gerald H. Gordon
---------------------------------
(Signature)
6960 W. Fitzwater Rd.
---------------------------------
(Street Address)
Brecksville, Ohio 44141
---------------------------------
216-526-8277
---------------------------------
(Area Code and Telephone Number)
###-##-####
---------------------------------
(Social Security or Employer
Identification Number)
<PAGE> 1
EXHIBIT 4.8
[logo]
HAWK
November 1, 1996
[NAME AND ADDRESS
OF STOCKHOLDER]
Dear [NAME OF STOCKHOLDER]:
Reference is hereby made to that certain Shareholders' Agreement dated
June 30, 1995, by and among HAWK CORPORATION, a Delaware corporation formerly
known as The Hawk Group of Companies, Inc. (the "Company"), PAUL BISHOP, JEFFREY
H. BERLIN, BARRY J. FELD, THOMAS A. GILBRIDE, JESS F. HELSEL, FREDERIC M.
ROBERTS, GARY SICILIANO and DOUGLAS D. WILSON (collectively, the "Shareholders,
" and individually a "Shareholder") and HAWK HOLDING CORP., a Delaware
corporation formerly known as Hawk Corporation, NORMAN C. HARBERT, RONALD E.
WEINBERG and BYRON S. KRANTZ (the "Shareholders' Agreement").
This letter will confirm your agreement that the third recital
paragraph of the Shareholders' Agreement is hereby amended and restated in its
entirety as follows:
"WHEREAS, each Shareholder is the legal and beneficial owner
of the number of shares of Class A Common Stock, $0.01 par value
("Common Stock"), and the number of shares of Series B and Series C
Preferred Stock, $0.01 par value (collectively, "Preferred Stock"), of
the Company (the Common Stock and Preferred Stock are collectively
referred to herein as the "Stock") as set forth opposite his name on
Annex I attached hereto and incorporated herein by reference;"
This letter also will confirm your agreement that Annex I to the
Shareholders' Agreement is hereby amended and restated in its entirety as set
forth in Annex I attached to this letter.
The foregoing amendments will become effective only upon the closing of
the Company's offering of 10 1/4% Senior Notes due 2003. Please acknowledge your
agreement to the foregoing by signing and dating the enclosed copy of this
letter in the space provided below and return it to Steven C. Bersticker in the
enclosed envelope.
Very truly yours,
HAWK CORPORATION
By:
----------------------------------
Its:
---------------------------------
ACKNOWLEDGED AND AGREED:
- -----------------------------------
[NAME OF STOCKHOLDER]
<PAGE> 2
ANNEX I
-------
<TABLE>
<CAPTION>
SHARES OF CLASS A SHARES OF SERIES B SHARES OF SERIES C
SHAREHOLDER COMMON STOCK PREFERRED STOCK PREFERRED STOCK
- ----------- ----------------- ------------------ ------------------
<S> <C> <C> <C>
Paul Bishop 1,735 -- --
Jeffrey H. Berlin 80,417 13 --
Barry J. Feld 3,817 3 --
Thomas A Gilbride 14,733 1 23.535
Gerald H. Gordon 632 -- 1.560
Jess F. Helsel 1,735 -- --
Fredric M. Roberts 1,735 -- --
Gary Siciliano 8,817 3 --
Douglas D. Wilson 16,978 3 2.448
</TABLE>
<PAGE> 1
EXHIBIT 4.9
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT (the "Agreement") is made and entered into
as of June 30, 1995, by and among THE HAWK GROUP OF COMPANIES, INC., a Delaware
corporation (the"Company"), HAWK CORPORATION, a Delaware corporation ("Hawk"),
RONALD E. WEINBERG ("Weinberg"), NORMAN C. HARBERT ("Harbert"), BYRON S. KRANTZ
("Krantz"), CLANCO PARTNERS I AND CLANCO PARTNERS III, both Ohio general
partnerships (together, the "Partnerships"), WILLIAM J. O'NEILL, JR.
("O'Neill"), WILLIAM J. O'NEILL, SR. IRREVOCABLE TRUST A (the "Irrevocable
Trust"), the DOROTHY K. O'NEILL REVOCABLE TRUST (the "Revocable Trust"), MARTHA
B. HORSBURGH ("Horsburgh") and SHELDON M. SAGER ("Sager"). Hawk, Weinberg,
Harbert and Krantz shall herein collectively be referred to as the "Hawk
Shareholders." The Partnerships, O'Neill, the Irrevocable Trust, the Revocable
Trust, Horsburgh and Sager shall herein collectively be referred to as
"Shareholders".
WHEREAS, certain of the Shareholders were owners of record and
beneficially of shares of common and preferred stock of The Hawk Group of
Companies, an Ohio corporation and the predecessor to the Company;
WHEREAS, certain of the Shareholders were owners of record and
beneficially of shares of common and preferred stock of Helsel, Inc., which was
merged with and into a wholly-owned subsidiary of the Company; and in connection
with the merger, the shares of common stock and preferred stock of Helsel, Inc.
were cancelled and in exchange therefore, shares of the Company were issued to
the Shareholders;
WHEREAS, each Shareholder is now the legal and beneficial owner of the
number of shares of Series A common stock, $0.01 par value ("Common Stock"),
Series A Preferred Stock $0.01 par value ("Series A Preferred Stock") and Series
B Preferred Stock, $0.01 par value ("Series B Preferred Stock") of the Company
(the Common Stock, Series A Preferred Stock and Series B Preferred Stock are
referred to herein as the, "Stock") as set forth opposite his or her name on
Annex I attached hereto;
WHEREAS, the Hawk Shareholders are legal and beneficial owners of
shares of Stock of the Company;
WHEREAS, the parties believe that it is in their best interests to make
provisions for the future disposition of the Stock held by Shareholders and
certain other matters; and
WHEREAS, the parties desire to set forth their understandings and
agreements in writing.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises hereinafter set forth and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
<PAGE> 2
1. REPRESENTATIONS AND WARRANTIES IN CONNECTION WITH
PURCHASE OF STOCK. Each Shareholder hereby represents and warrants to the Hawk
Shareholders and the Company that:
A. It is aware that no market exists for the resale of the
Stock, nor is it anticipated that a market will develop, and that it may be
required to hold indefinitely its shares of Stock.
B. It has acquired its shares of Stock for investment and not
for distribution or resale.
C. It has reviewed, is aware of, and understands all
restrictions imposed upon further distribution or resale of the Stock, including
the fact that the certificates representing its shares of Stock will bear
several legends restricting transfer or resale, and it has reviewed all
restrictions imposed by the Articles of Incorporation and any amendments
thereto.
D. It is aware of the fact that no federal or state agency has
made any finding or determination as to the fairness for public or private
investment, nor have they made any recommendation or endorsement of the
securities of the Company for investment.
2. SCOPE OF AGREEMENT. This Agreement shall govern all transfers
of shares of Stock (now owned or hereafter acquired) by Shareholders, whether
voluntary, involuntary, by operation of law, or otherwise and shall supersede in
all respects all prior agreements, oral or written, relating to the Stock;
provided, however, that this Agreement shall not supersede any agreement
executed contemporaneously herewith.
3. RIGHT OF FIRST REFUSAL BY THE HAWK SHAREHOLDERS.
A. In the event that any Shareholder receives a Bona Fide
Offer (as hereinafter defined) to purchase all or a portion of its shares of
Stock and it is willing to accept such Bona Fide Offer, such Shareholder
("Selling Shareholder") shall offer to sell such shares of Stock to the Hawk
Shareholders at the same price and upon the same terms and conditions as are
contained in the Bona Fide Offer by promptly sending Registered Notice (as
hereinafter defined) to the Hawk Shareholders. Notwithstanding the provisions of
the prior sentence, the Shareholders may transfer their shares of Stock to each
other, or to any one of the partners of the Partnerships, and such a transfer
shall not invoke the right of first refusal set forth in this Section 3(A).
B. Upon receipt of the Registered Notice pursuant to Section
3(A), Hawk shall have the right, at its option, for a period of twenty (20) days
after receipt of the Registered Notice (the "First Period"), to purchase all the
shares of Stock offered by Selling Shareholder at the same price and upon the
same terms and conditions as are contained in the Bona Fide Offer. If Hawk
elects not to purchase the shares of Stock so offered, it shall give notice to
the other
- 2 -
<PAGE> 3
Hawk Shareholders and to the selling Shareholder offering such shares of Stock
for sale. For a period of twenty (20) days after the expiration of the First
Period, the Hawk Shareholders (other than Hawk) shall have the option to
purchase, on the same terms and conditions as are contained in the Bona Fide
Offer, provided, however, that each Hawk Shareholder (other than Hawk) shall
purchase such shares in proportion to the number of shares owned by him relative
to the shares owned by the other Hawk Shareholders, such proportion being
determined immediately prior to the exercise of the purchase option in question.
Any Hawk Shareholder who does not desire to purchase all of the shares to which
he is entitled pursuant to the provisions contained in this section shall be
deemed to have assigned and does hereby assign his or its right to purchase such
shares proportionately to the other Hawk Shareholders or in such other
proportion as they may mutually agree. (The Hawk Shareholders shall collectively
be referred to as "Buyers".)
C. The Hawk Shareholders shall, within the time periods set
forth in Section 3(B) send to Selling Shareholder either a notice of acceptance
("Acceptance") stating that they have elected to purchase all the shares of
Stock offered by Selling Shareholder or a notice of refusal ("Refusal") of their
election to purchase no shares of stock offered by Selling Shareholder.
D. If Selling Shareholder shall not have received an
Acceptance by the end of the option periods set forth in Section 3(B), the Hawk
Shareholders shall be deemed to have waived any and all rights with respect to
Selling Shareholder's sale of stock as set forth in the Registered Notice.
4. BONA FIDE OFFER; REGISTERED NOTICE.
A. The term "Bona Fide Offer" shall mean an offer, in writing,
signed by an offeror or offerors, who must be a person or entity financially
capable of carrying out the terms of such Bona Fide Offer ("Bona Fide Offeror"),
in a form legally enforceable against such offeror or offerors. Registered
Notice of a Bona Fide Offer shall contain a true and complete copy of the Bona
Fide Offer, setting forth the price and all terms and conditions, with the
name(s), address(es), both home and office, and business(es) or other
occupation(s) of the offeror or offerors. Any notice which does not contain
substantially all such requisite information shall not meet the requirements of
this Section 4.
B. Whenever in this Agreement the term "Registered Notice,"
"Acceptance" or "Refusal" is used, such term shall mean notice sent by
registered or certified mail, return receipt requested, and postage prepaid to
the appropriate entity(ies) or person(s) listed in Section 15.
5. RESTRICTION ON SALES TO BONA FIDE OFFEROR. Until the Hawk
Shareholders have exercised their rights of first refusal, as herein provided,
or until Selling Shareholder has consummated its sale to the Bona Fide Offeror
in the event any of the shares of Stock are not purchased by the Buyers pursuant
to their rights of first refusal, Buyers and the
- 3 -
<PAGE> 4
Shareholders shall be prohibited from contacting, offering to sell, or selling
their shares of Stock to any such Bona Fide Offeror.
6. SETTLEMENT AND COMPLIANCE.
A. Settlement shall be held on the purchase of shares of Stock
within 10 days after the end of the option periods provided for herein or on
such other date as the Buyer(s) and Selling Shareholder may agree. At
settlement, the party exercising the option to purchase shall deliver cash or
certified check or bank check to the party selling the Stock, which party shall
in turn deliver to the purchaser the original certificate evidencing seller's
ownership of the shares, duly endorsed for transfer, with signature guaranteed
and bearing such documentary stamps, if any, as are necessary, and such
assignments, certificates of authority, tax releases, consents to transfer,
instruments and evidences of title of the seller and of his compliance with this
Agreement as may be reasonably required by the purchaser or by counsel for the
purchaser.
B. Strict compliance shall be required with each and every
provision of this Agreement and particularly with the procedures set forth in
Articles 3 through 5, it being understood and agreed that Shareholders and the
Hawk Shareholders shall not have the right or power to sell or assign any shares
of Stock, or any interest therein, except as provided in this Agreement.
7. TAG-ALONG RIGHTS.
A. In the event the Hawk Shareholders desire to sell, in an
arm's-length transaction, all or any portion of the shares of Common Stock which
they own of record or beneficially (the "Sale"), they shall give notice (the
"Notice") of their intention to do so to the Shareholders. The Notice shall
include (a) the number of shares of Common Stock to be sold by the Hawk
Shareholders in the Sale, (b) the principal terms of the Sale, including the
minimum price at which the shares are intended to be sold, (c) the percentage
which such amount of shares to be sold constitutes with respect to the aggregate
amount of shares held by all parties hereto, and (d) a demand by the Hawk
Shareholders (the "Demand") to cause the number of shares held by the
Shareholders to be included with their shares to be sold, on the same terms and
conditions as they shall sell their shares, which terms and conditions shall not
be materially less favorable to the Shareholders than as set forth in the
Notice.
In the event the Hawk Shareholders make such a Demand, the
Shareholders shall have the right but not the obligation to sell the shares then
held by the Shareholder on the same terms and conditions as the Hawk
Shareholders shall sell their shares; provided, however, in the event the Hawk
Shareholders make a Demand and deliver to the Shareholders a fairness opinion in
accordance with this Section 7(A), the Shareholders shall be obligated to accept
such Demand, which acceptance shall be irrevocable and shall bind such
Shareholder to sell his or its shares simultaneously with the Sale to the
purchasers and on the same terms and conditions as the Hawk Shareholders shall
sell their shares. Upon acceptance of a Demand, each of the
- 4 -
<PAGE> 5
Shareholders shall be bound and obligated to sell all of his shares, the number
of which shall be set forth in his written acceptance of the Hawk Shareholders
Demand.
A fairness opinion as to the minimum price at which the shares
of Common Stock are to be sold shall be from a nationally recognized certified
independent accounting firm or investment banking firm mutually acceptable to
the Hawk Shareholders and the Shareholders.
Each party hereto shall take such actions and execute such
documents and instruments as shall be necessary or desirable to consummate the
Sale expeditiously.
B. Except as provided in Section 7(C) and Section 7(D) hereof,
each of the Hawk Shareholders agrees that it or he will not sell any or all of
its or his shares of Common Stock without effecting a sale of the Shareholders'
shares of Common Stock on the same terms and conditions, pursuant to this
Section 7 hereof. In the event that the Hawk Shareholders sell less than all of
its shares of Common Stock, the same proportion of the Shareholders' shares of
Common Stock shall also be sold.
C. Notwithstanding anything in this Agreement to the contrary,
the Hawk Shareholders may sell or otherwise transfer all or any portion of the
shares of Common Stock which they own of record or beneficially, to the other
Hawk Shareholders or any family member of the Hawk Shareholders or trust for the
benefit of the Hawk Shareholders or any family member, without complying with
the provisions of this Section 7.
D. Notwithstanding anything in this Agreement to the contrary,
none of the provisions of this Section 7 shall apply in the event The Company or
the Hawk Shareholders shall cause a sale to be effected pursuant to an effective
registration statement under the Securities Act or pursuant to Rule 144 under
the Securities Act (or any comparable rule then in effect).
E. All costs and expenses incurred by the Hawk Shareholders
and the Shareholders in connection with the Sale, including without limitation,
all reasonable attorneys' fees, costs and disbursements and any finders' fees or
brokerage commissions, together with the reasonable fees and disbursements of
one counsel representing the Hawk Shareholders and the Shareholders in
connection with the Sale, shall be allocated pro rata among the Hawk
Shareholders and the Shareholders with each person paying that portion of costs
and expenses which equals the percentage obtained by dividing the amount of
gross proceeds received by such person in the Sale by the total amount of gross
proceeds received by all persons to the Sale. The portion of all costs and
expenses allocable to the Shareholders which the Hawk Shareholders shall have
incurred or paid shall promptly be paid the Shareholders to the Hawk
Shareholders, all disbursements for such costs and expenses being made at or
prior to the closing of the Sale.
8. BOARD MEMBERSHIP RIGHTS. The Company and the Hawk Shareholders
agree that at all times during which the Shareholders shall own any Common
Stock, the
- 5 -
<PAGE> 6
Company and the Hawk Shareholders agree (i) to grant to the Shareholders the
right, which may be exercised in their sole discretion, to designate one person
to serve on the Board of Directors of the Company and its Subsidiaries and (ii)
to vote its or his respective shares of Common Stock of the Company in favor of
the election of such designee. Each Director so elected, shall hold office until
a successor is designated in accordance with this Section 8, or until such
person's resignation, death or removal from office, by or as director by the
Partnerships.
9. AGREEMENT BINDING UPON TRANSFEREES. In the event that, at
any time or from time to time, any shares of Stock are transferred to any party
pursuant to and in accordance with the provisions of this Agreement the
transferee shall take such shares of stock pursuant to all provisions,
conditions and covenants of this Agreement, and, as a condition precedent to the
transfer of such shares of stock, the transferee shall agree (for and on behalf
of himself or itself, his or its legal representatives and his or its
transferees and assigns) in writing to be bound, as the transferor hereunder is
bound, by all provisions of this Agreement as a party hereto.
10. TRANSFER. Shareholders and the Hawk Shareholders agree that,
in the event any of them desires to make a transfer within the provisions
hereof, they shall furnish to the other such evidence of its compliance with
this Agreement as may be required by the counsel for the Hawk Shareholders.
11. ENDORSEMENT ON STOCK CERTIFICATES. The Company shall include
on each certificate representing Stock a statement in substantially the
following form:
The encumbering, transfer or other disposition of the shares
of stock evidenced by this Certificate is restricted under the
terms of that certain Shareholders' Agreement dated as of June
30, 1995, as may be amended from time to time, the provisions
of which are herein incorporated by reference. Such
Shareholders' Agreement provides, among other things, that
this security may not be sold or transferred to any person who
has not expressly assumed the obligations of such Agreement
and contains, among other provisions, provisions which could
limit the transfer of this security. A copy of this Agreement
is on file at the principal office of the Company. Upon the
written request of the holder hereof, the Company shall
furnish a copy of such agreement, without charge.
12. SPECIFIC PERFORMANCE. The parties hereto agree that the
shares of Stock are unique, that failure to perform the obligations provided by
this Agreement will result in
- 6 -
<PAGE> 7
irreparable damage and that specific performance of these obligations may be
obtained by suit in equity.
13. PARTIES TO DO ALL ACTS NECESSARY TO TRANSFER PURSUANT TO THE
TERMS OF THIS AGREEMENT. The parties agree that in the event any shares of Stock
are transferred pursuant to the terms and conditions of this Agreement, each
party will execute all documents, deliver all certificates, assignments,
releases, consents, instruments and other documents and perform all acts
required to effectuate said transaction.
14. SUBMISSION TO JURISDICTION. The parties agree that failure of
any party to observe the obligations provided by this Agreement will result in
irreparable damage to the non-defaulting party and that specific performance of
these obligations may be sought by the non-defaulting party in any state or
federal court having subject matter jurisdiction and located in Cleveland, Ohio.
For the purpose of any action or proceeding instituted with respect to this
Agreement, Shareholders hereby irrevocably submit to the jurisdiction of such
courts. Shareholders further irrevocably consent to the service of process out
of said courts by mailing a copy thereof, by registered mail, postage prepaid,
to Shareholders at the address set forth below or at the address furnished to
the other parties hereto in the manner provided in paragraph 15 hereof and
Shareholders agree that such service, to the fullest extent permitted by law (i)
shall be deemed in every respect effective service of process upon it in any
such suit, action or proceeding and (ii) shall be taken and held to be valid
personal service upon and personal delivery to it. Nothing herein contained
shall affect the right of any party to serve process in any other manner
permitted by law or preclude any party from bringing an action or proceeding in
respect hereof in any other country, state, county or place having jurisdiction
over such action. Each party hereby irrevocably waives, to the fullest extent
permitted by law, any objection which they may have or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any such
court located in Cleveland, Ohio and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
15. NOTICES. All notices or other forms of communication provided
for herein shall be given in writing and sent by registered or certified U.S.
mail, return receipt requested, first-class postage prepaid, and to such party
at the address set forth below unless notice of a change of address is furnished
to all other parties in the manner provided in this paragraph 15.
If to The Company: The Hawk Group of Companies, Inc.
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
ATTN: Ronald E. Weinberg
If to Hawk: Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
ATTN: Ronald E. Weinberg
- 7 -
<PAGE> 8
If to Weinberg: Ronald E. Weinberg
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114
ATTN: Ronald E. Weinberg
If to Harbert: Norman C. Harbert
Post Office Box 127
Hiram, Ohio 44234
If to Krantz: Byron S. Krantz
Kohrman Jackson & Krantz
20th Floor, One Cleveland Center
Cleveland, Ohio 44114
With a Copy to: Kohrman Jackson & Krantz
One Cleveland Center
20th Floor
Cleveland, Ohio 44114
ATTN: Byron S. Krantz
If to the Partnerships: Clanco Partners I and III
Clanco Management Corp.
30195 Chagrin Boulevard
Suite 310
Pepper Pike, Ohio 44124
If to O'Neill: William J. O'Neill, Jr.
Clanco Management Corp.
30195 Chagrin Boulevard
Suite 310
Pepper Pike, Ohio 44124
If to the Irrevocable Trust William J. O'Neill, Jr.
and Revocable Trust: Clanco Management Corp.
30195 Chagrin Boulevard
Suite 310
Pepper Pike, Ohio 44124
If to Horsburgh: Martha B. Horsburgh
1247 Oakridge
Cleveland Heights, Ohio 44121
- 8 -
<PAGE> 9
With a Copy to: Sheldon M. Sager, Esq.
Clanco Management Corp.
30195 Chagrin Boulevard
Suite 310
Pepper Pike, Ohio 44124
If to Sager: Sheldon M. Sager
3195 Kersdale Road
Pepper Pike, Ohio 44124
16. INVALID OR UNENFORCEABLE PROVISIONS. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted.
17. BENEFIT AND BURDEN. This Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their successors and
permitted transferees.
18. GENDER. The use of any gender herein shall be deemed to be or
include the other genders and the use of the singular herein shall be deemed to
be or include the plural and vice versa wherever appropriate.
19. AMENDMENTS. No change in, modification of or amendment to this
Agreement shall be valid unless the same is in writing and signed by all parties
hereto. No waiver of any provision of this Agreement shall be valid unless in
writing and signed by the person against whom it is sought to be enforced. The
failure of any party at any time to insist upon strict performance of any
condition, promise, agreement and understanding set forth herein shall not be
construed as a waiver or relinquishment of the right to insist upon strict
performance of the same condition, promise, agreement or understanding at a
future date.
20. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
/s/ Ronald E. Weinberg /s/ Norman C. Harbert
- --------------------------- --------------------------
Ronald E. Weinberg Norman C. Harbert
/s/ Byron S. Krantz /s/ William J. O'Neill, Jr.
- --------------------------- ---------------------------
Byron S. Krantz William J. O'Neill, Jr.
- 9 -
<PAGE> 10
/s/ Sheldon M. Sager /s/ Sheldon M. Sager
- ------------------------------- ------------------------------
Martha B. Horsburgh, by Sheldon M. Sager Sheldon M. Sager
Attorney-in-Fact
HAWK CORPORATION THE HAWK GROUP OF COMPANIES,
INC.
By /s/ Norman C. Harbert By /s/ Norman C. Harbert
---------------------------- ----------------------------
Its Chairman Its Chairman
--------------------------- ---------------------------
CLANCO PARTNERS I CLANCO PARTNERS III
By /s/ William J. O'Neill, Jr. By /s/ William J. O'Neill, Jr.
---------------------------- ----------------------------
William J. O'Neill, Jr. William J. O'Neill, Jr.
Its Managing Partner Its Managing Partner
WILLIAM J. O'NEILL, SR. DOROTHY K. O'NEILL
IRREVOCABLE TRUST A REVOCABLE TRUST
By /s/ William J. O'Neill, Jr. By /s/ William J. O'Neill, Jr.
---------------------------- ----------------------------
William J. O'Neill, Jr., Trustee William J. O'Neill, Jr., Trustee
- 10 -
<PAGE> 11
ANNEX I
-------
<TABLE>
<CAPTION>
Common Stock Class A Preferred Stock
-------------------- ---------------
Number of Shares Number of Shares
Common Stock Series A Series B
------------ -------- --------
<S> <C> <C>
Clanco Partners I 240,000 985
Clanco Partners III 218,596
William J. O'Neill, Sr. 290 315
Irrevocable Trust A
Dorothy K. O'Neill 100
Revocable Trust
William J. O'Neill, Jr. 1,735
Sheldon M. Sager 5,899 6
Martha B. Horsburgh 4,858 7
</TABLE>
- 11 -
<PAGE> 12
HAWK
[LOGO]
INSTRUMENT OF JOINDER
To: Chairman of the Board
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Shareholders' Agreement, dated as of June 30, 1995 and amended through
the date hereof (the "Agreement"), among Hawk Corporation, a Delaware
corporation f.k.a. The Hawk Group of Companies, Inc. (the "Company"),
Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz, Clanco Partners
I, Clanco Partners III, William J. O'Neill, Jr., the William J.
O'Neill, Sr. Irrevocable Trust A, the Dorothy K. O'Neill Revocable
Trust, Martha B. Horsburgh and Sheldon M. Sager
The undersigned hereby agrees to become a party to, and to be bound by
the terms and conditions of, the Agreement, effective on the transfer of 342,905
shares of Class A Common Stock, par value $0.01 per share, of the Company from
Norman C. Harbert to the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Instrument of
Joinder on this 21st day of November, 1996.
HARBERT FAMILY LIMITED PARTNERSHIP
/s/ Norman C. Harbert
----------------------------------
(Signature)
11292 Garfield Road
----------------------------------
(Street Address)
Hiram, OH 44234
----------------------------------
(City, State and Zip Revised Code)
330-369-7272
----------------------------------
(Area Code and Telephone Number)
Applied for
----------------------------------
(Social Security or Employer
Identification Number)
<PAGE> 13
HAWK
[LOGO]
INSTRUMENT OF JOINDER
To: Chairman of the Board
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Shareholders' Agreement, dated as of June 30, 1995 and amended through
the date hereof (the "Agreement"), among Hawk Corporation, a Delaware
corporation f.k.a. The Hawk Group of Companies, Inc. (the "Company"),
Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz, Clanco Partners
I, Clanco Partners III, William J. O'Neill, Jr., the William J.
O'Neill, Sr. Irrevocable Trust A, the Dorothy K. O'Neill Revocable
Trust, Martha B. Horsburgh and Sheldon M. Sager
The undersigned hereby agrees to become a party to, and to be bound by
the terms and conditions of, the Agreement, effective on the transfer of 333,800
shares of Class A Common Stock, par value $0.01 per share, of the Company from
Ronald E. Weinberg to the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Instrument of
Joinder on this 21st day of November, 1996.
WEINBERG FAMILY LIMITED PARTNERSHIP
/s/ Ronald E. Weinberg
----------------------------------
(Signature)
982 Chestnut Run
----------------------------------
(Street Address)
Gates Mills, OH 44040
----------------------------------
(City, State and Zip Revised Code)
216-423-7272
----------------------------------
(Area Code and Telephone Number)
Applied for
----------------------------------
(Social Security or Employer
Identification Number)
<PAGE> 14
HAWK
[LOGO]
INSTRUMENT OF JOINDER
To: Chairman of the Board
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Shareholders' Agreement, dated as of June 30, 1995 and amended through
the date hereof (the "Agreement"), among Hawk Corporation, a Delaware
corporation f.k.a. The Hawk Group of Companies, Inc. (the "Company"),
Norman C. Harbert, Ronald E. Weinberg, Byron S. Krantz, Clanco Partners
I, Clanco Partners III, William J. O'Neill, Jr., the William J.
O'Neill, Sr. Irrevocable Trust A, the Dorothy K. O'Neill Revocable
Trust, Martha B. Horsburgh and Sheldon M. Sager
The undersigned hereby agrees to become a party to, and to be bound by
the terms and conditions of, the Agreement, effective on the transfer of 75,505
shares of Class A Common Stock, par value $0.01 per share, of the Company from
Byron S. Krantz to the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Instrument of
Joinder on this 21st day of November, 1996.
KRANTZ FAMILY LIMITED PARTNERSHIP
/s/ Byron S. Krantz
----------------------------------
(Signature)
825-50 Windward
----------------------------------
(Street Address)
Aurora, OH 44202
----------------------------------
(City, State and Zip Revised Code)
216-562-4114
----------------------------------
(Area Code and Telephone Number)
Applied for
----------------------------------
(Social Security or Employer
Identification Number)
<PAGE> 1
EXHIBIT 4.10
[logo]
HAWK
November 1, 1996
[NAME AND ADDRESS
OF STOCKHOLDER]
Dear [NAME OF STOCKHOLDER]:
Reference is hereby made to that certain Shareholders' Agreement, dated
June 30, 1995, by and among HAWK CORPORATION, a Delaware corporation formerly
known as The Hawk Group of Companies, Inc. (the "Company"), CLANCO PARTNERS I,
CLANCO PARTNERS III, WILLIAM J. O'NEILL IRREVOCABLE TRUST A, DOROTHY K. O'NEILL
REVOCABLE TRUST, WILLIAM J. O'NEILL, JR., MARTHA B. HORSBURGH and SHELDON M.
SAGER (collectively, the "Shareholders," and individually a "Shareholder") and
HAWK HOLDING CORP., a Delaware corporation formerly known as Hawk Corporation,
NORMAN C. HARBERT, RONALD E. WEINBERG and BYRON S. KRANTZ (the "Shareholders'
Agreement").
This letter will confirm your agreement that the third recital
paragraph of the Shareholders' Agreement is hereby amended and restated in its
entirety as follows:
"WHEREAS, each Shareholder is the legal and beneficial owner
of the number of shares of Class A Common Stock, $0.01 par value
("Common Stock"), and the number of shares of Series B and Series C
Preferred Stock, $0.01 par value (collectively, "Preferred Stock"), of
the Company (the Common Stock and Preferred Stock are collectively
referred to herein as the "Stock") as set forth opposite his name on
Annex I attached hereto and incorporated herein by reference;"
This letter also will confirm your agreement that Annex I to the
Shareholders' Agreement is hereby amended and restated in its entirety as set
forth in Annex I attached to this letter.
The foregoing amendments will become effective only upon the closing of
the Company's offering of 10 1/4% Senior Notes due 2003. Please acknowledge your
agreement to the foregoing by signing and dating the enclosed copy of this
letter in the space provided below and return it to Steven C. Bersticker in the
enclosed envelope.
Very truly yours,
HAWK CORPORATION
By:
----------------------------------
Its:
---------------------------------
ACKNOWLEDGED AND AGREED:
- -----------------------------------
[NAME OF STOCKHOLDER]
<PAGE> 2
ANNEX I
-------
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------ ----------------------------
Class A Series A Series B Series C
------------ -------- -------- --------
<S> <C> <C> <C> <C>
Clanco Partners I 461,757 985 -- 2.448
William J. O'Neill, Sr. -- 290 315 --
Irrevocable Trust A
Dorothy K. O'Neill -- 100 -- --
Revocable Trust
William J. O'Neill, Jr. 1,735 -- -- --
Sheldon M. Sager 5,899 -- 6 --
Martha B. Horsburgh 4,858 -- 7 --
</TABLE>
<PAGE> 1
EXHIBIT 4.11
SHAREHOLDERS' AGREEMENT
SHAREHOLDERS' AGREEMENT (as the same may hereafter be amended, supplemented
or modified, this "AGREEMENT"), dated as of June 30, 1995, among THE HAWK GROUP
OF COMPANIES, INC., a Delaware corporation, together with its successors and
assigns, (the "COMPANY"), each of the Purchasers (the "PURCHASERS") named on
Annex 1 hereto, and each of member of the MANAGEMENT STOCKHOLDERS named on Annex
2 hereto.
RECITALS
A. Certain capitalized terms used in this Agreement shall have the meanings
ascribed to them in Section 9 hereof.
B. The Board of Directors has authorized the issuance of the Class A Common
Stock, the Class B Common Stock and an aggregate of Three Hundred Sixteen
Thousand Nine Hundred Seventy (316,970) Warrants, each Warrant representing the
right to purchase, upon the terms and subject to the conditions set forth in the
Warrant Agreement, one (1) share of Class B Common Stock.
C. The Company and the Purchasers have entered into the Senior Subordinated
Note and Warrant Purchase Agreements (collectively, as they may be amended from
time to time, the "NOTE PURCHASE AGREEMENT"), each dated as of June 30, 1995,
pursuant to which the Company has agreed to sell, and the Purchasers have agreed
to purchase, Thirty Million Dollars ($30,000,000) in aggregate principal amount
of the Company's 12% Senior Subordinated Notes due June 30,2005 (the
"SUBORDINATED NOTES"), and the Warrants, for an aggregate consideration of
Thirty Million Dollars ($30,000,000) in cash.
D. To induce the Purchasers to enter into the Note Purchase Agreement and
consummate the transactions contemplated therein, the Company, the Management
Stockholders and the Purchasers have agreed to enter into this Agreement to
create and define certain rights as among and between themselves as further
specified herein.
NOW THEREFORE, in consideration of the foregoing and the mutual promises
herein contained, the Company, the Management Stockholders and the Purchasers
mutually agree as follows:
1. HOLDERS' PUT RIGHTS.
1.1 GRANTING OF PUT; PUT OPTION PURCHASE PRICE. Subject to the limitations
set forth in Section 1.6 hereof, at any time or from time to time after the Put
Effective Date but on or before the Expiration Date, each holder of any Warrant
Shares, upon written notice to the Company (a "PUT NOTICE"), shall be entitled
to sell, and the Company shall be obligated to purchase from such holder, any or
all of the Warrant Shares held by such holder at the Put Option Purchase Price.
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1.2 PUT NOTICE. Each Put Notice delivered pursuant to Section 1.1 shall
specify:
(a) the name of the holder of Warrant Shares delivering such Put
Notice;
(b) that such holder is exercising its option, pursuant to this
Section 1, to sell certain of the Warrant Shares held by such holder; and
(c) the number of, and a description of, the Warrant Shares being
tendered, including a statement, to the extent relevant, of:
(i) the number of shares of Class B Common Stock sought to be
sold by such holder that were issued upon the exercise of any Warrant;
(ii) the total number of shares of Class A Common Stock sought to
be sold by such holder that were issued upon the conversion of the
shares of Class B Common Stock that were issued upon the exercise of
any Warrant;
(iii) the total number of Warrants sought to be sold by such
holder that have not been exercised or cancelled; and
(d) the total number of Put Notices delivered to the Company by such
holder prior to the subject Put Notice given pursuant to this Section 1.
1.3 COMPANY NOTICES.
(a) The Company, within thirty (30) days of receipt of such Put
Notice, shall deliver to the holder or holders exercising its or their put
option pursuant to this Section 1, a notice (i) specifying the Put
Repurchase Date, (ii) providing the names and addresses of each of the
other holders of Warrant Shares and the number of Warrant Shares held by
such other holders which are subject to another Put Notice or Put Notices
at such time and (iii) stating the type and number of the Warrant Shares
held by each such other holder.
(b) The Company, not less than ten (10) days prior to the Put
Repurchase Date, shall deliver to the holder or holders exercising its or
their put option pursuant to this Section 1, a notice containing a detailed
calculation of the Share Price with respect to the Class B Common Stock and
(if such holder holds Class A Common Stock at such time) the Class A Common
Stock and containing a detailed calculation of the Put Option Purchase
Price with respect to the Warrant Shares which are to be so repurchased
from such holder.
1.4 OBLIGATION TO PURCHASE WARRANT SHARES. The Company shall be obligated,
subject to Section 1.6 hereof, to purchase all of such holder's or holders'
Warrant Shares which are the subject of such Put Notice, and shall pay the Put
Option Purchase Price with respect to the exercise of the put option which is
the subject of each such Put Notice payable to such holder or holders in
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immediately available funds, on the Put Repurchase Date with respect to such Put
Notice, against delivery by such holder or holders of any and all certificates
or other instruments evidencing the Warrant Shares which are the subject of such
Put Notice, together with appropriate stock powers or other instruments of
transfer or assignment duly endorsed in blank.
1.5 CANCELLATION OF WARRANTS. Any Warrants purchased by the Company
pursuant to this Section 1 shall be cancelled and shall not be reissued;
provided, however, any Warrant Shares purchased by the Company pursuant to this
Section 1, may be reissued and sold to employees of the Company.
1.6 LIMITATIONS ON RIGHT OF REPURCHASE. Notwithstanding anything contained
in this Section 1 to the contrary, the Company shall not be obligated to
purchase all of such holder's or holders' Warrant Shares which are the subject
of the Put Notice or obligated to pay the Put Option Purchase Price in respect
of a Put Notice, if, at any time:
(a) payment of the Put Option Purchase Price at such time would result
in a breach of, or default or event of default in respect of, the Note
Purchase Agreement, the Senior Debt or the Subordinated Notes without the
written consent of those holders of the Senior Debt and the Subordinated
Notes the consent of which would be necessary to waive such breach, default
or event of default;
(b) payment of the Put Option Purchase Price is, at such time,
prohibited by applicable law or the Company's Certificate of Incorporation,
as restated and amended on June 30, 1995;
(c) the aggregate value of the Put Option Purchase Price at such time
is less than $500,000 (unless such Put Option Purchase Price is in respect
of all Warrant Shares held by such holder or holders at such time, in which
case this clause (c) shall not apply); or
(d) the total number of Put Notices delivered to the Company by such
holder prior to the subject Put Notice pursuant to this Section 1 shall be
more than four (4);
provided, however, with respect to (a) and (b) above, that if such breach, event
of default, default or violation would not result from the purchase of any
number of Warrant Shares which is less than the total number of shares the
Company is obligated to purchase on the Put Repurchase Date, the Company shall
purchase on the Put Repurchase Date the maximum number of shares it may so
purchase, allocated among the holders which have elected to have their Warrant
Shares so repurchased ratably according to the number of Warrant Shares so
tendered (without regard to whether such Warrant Shares are shares of Class A
Common Stock, Class B Common Stock or stock underlying the Warrants).
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2. SPECIAL RIGHT OF REPURCHASE.
2.1 GRANTING CALL; PRICE. At any time after the Call Effective Date but on
or before the Expiration Date, the Company may give written notice to each
holder of Warrant Shares (a "REPURCHASE NOTICE") of its intention to repurchase
all, but not less than all, of the Warrant Shares held by each such holder, at a
purchase price equal to the Repurchase Price with respect to such holder.
2.2 REPURCHASE NOTICE. Such Repurchase Notice shall:
(a) state that the Company intends to purchase, pursuant to this
Section 2, the Warrant Shares from each of the holders thereof;
(b) specify the date on which the Company will repurchase the Warrant
Shares of each such holder, which date shall be not less than forty-five
(45) days nor more than ninety (90) days from the date of such Repurchase
Notice (the "REPURCHASE DATE");
(c) provide the names and addresses of each of such holders, and state
the type and number of the Warrant Shares held by each such holder;
(d) contain a detailed calculation of the Share Price with respect to
the Class B Common Stock and (if such holder holds Class A Common Stock at
such time) the Class A Common Stock; and
(e) contain a detailed calculation of the Repurchase Price with
respect to the Warrant Shares which shall be due to each such holder in
connection with such repurchase.
2.3 OBLIGATION TO REPURCHASE. The Repurchase Notice having been so given to
each such holder, the Company shall be obligated to purchase all of each such
holder's Warrant Shares, and shall pay the Repurchase Price payable to each such
holder in immediately available funds, on the Repurchase Date, and each such
holder shall be obligated to deliver to the Company in exchange therefore, any
and all certificates or other instruments evidencing its respective Warrant
Shares, together with appropriate stock powers or other instruments of transfer
or assignment duly endorsed in blank.
2.4 RECAPTURE PROVISIONS UPON CALL.
(a) If the Company purchases Warrant Shares pursuant to this Section 2
and subsequently, at any time up to the date six (6) months after the
completion of such purchase (the "RESALE DATE"):
(i) the Company issues additional Common Stock or Rights (other
than Common Stock issuable upon exercise of any Right and Class A
Common Stock issuable upon conversion of any Class B Common Stock); or
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(ii) there occurs:
(A) a stock sale, reorganization, recapitalization or other
transaction the result of which is that following such
reorganization, recapitalization or other transaction, a Person
who was not immediately before such reorganization,
recapitalization or other transaction a stockholder acquires
control of the Company, whether in one or a series of
transactions; or
(B) a sale of all or substantially all of the Company's
Common Property;
and the consideration involved in such subsequent sale, reorganization,
recapitalization or other transaction reflects a per share value of the
Common Stock which is greater, on a per share basis, than that upon which
the Repurchase Price for such repurchase was based, then the Company shall
remit to the Persons from whom such Warrant Shares were repurchased an
amount equal to the product of:
(1) the difference of:
(x) the actual fair market value of the consideration on a
per share basis involved in such subsequent resale, issuance,
sale, reorganization, recapitalization or other transaction;
minus
(y) the quotient of the aggregate Repurchase Price paid to
all holders of Warrant Shares divided by the number of shares of
Warrant Shares involved in such repurchase;
multiplied by
(2) the number of shares of Warrant Shares involved in such
repurchase;
pro rata according to the quantity of the Warrant Shares sold by them.
(b) If all or any portion of the consideration involved in any sale,
reorganization, recapitalization or other transaction described in Section
2.4(a) hereof is non-cash consideration, a determination of the value of
such consideration shall be made by the Board of Directors, and the Company
shall notify each Person who sold Warrant Shares in such repurchase of the
Board of Directors' determination of value (the "BOARD VALUE"). If the
Persons who sold a majority of the Warrant Shares involved in the
repurchase, within twenty (20) days after the Company shall have given such
holders notice of the Board Value, request an independent determination of
the fair market value of such consideration, then such determination shall
be made by a qualified, nationally recognized, independent firm qualified
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to do appraisals and selected by agreement among the Company and the
Persons who sold a majority of the Warrant Shares involved in such
repurchase. If the independent value determined as aforesaid is more than
one hundred five percent (105%) of the Board Value, then the Company shall
pay the fees and out-of-pocket disbursements of such firm ("VALUATION
EXPENSE") in connection with such valuation, but otherwise the Persons who
sold a majority of the Warrant Shares involved in such repurchase shall pay
such Valuation Expense pro rata in accordance with the quantity of Warrant
Shares sold by each such Person. The Company shall instruct the firm that
is selected to make such determination to complete the valuation as
promptly as practicable.
3. TAG-ALONG RIGHTS IN RESPECT OF SALE OF STOCK BY OTHER STOCKHOLDERS OR
COMPANY.
3.1 RIGHT TO SELL PROPORTIONATE NUMBER OF SHARES. Each Management
Stockholder hereby agrees that each such Person will not sell all or any portion
of the Issuable Shares owned by such Person unless, as part of such transaction,
each holder of Warrant Shares shall have the right to sell a proportionate
amount of the Warrant Shares then held by such holder at the same price and on
the same terms, and to the same purchaser or purchasers.
For purposes of this Section 3.1, the "proportionate amount" which a holder
of Warrant Shares shall be entitled to sell with respect to any proposed
transaction shall be equal to the product (calculated as of the date of such
proposed transaction) of:
(a) the total number of Warrant Shares then owned by such holder;
times
(b) the quotient of :
(i) the aggregate number of Issuable Shares proposed to be sold
in such transaction by the Management Stockholders; divided by
(ii) the aggregate number of Issuable Shares owned by the
Management Stockholders participating in such sale.
Notwithstanding the provisions of the first paragraph of this Section 3.1,
a Management Stockholder may sell or otherwise transfer any portion of the
Issuable Shares owned by such Management Stockholder to an Eligible Transferee
without complying with the provisions of this Section 3, provided that such
Eligible Transferee shall have assumed in writing, as provided for in Section
8.1 hereof, all of the obligations of its transferor imposed by this Agreement
and shall have agreed to be bound by each of the terms and provisions of this
Agreement to which such transferor was bound, pursuant to an undertaking
substantially in the form set forth as Exhibit A hereto.
3.2 NOTICE OF PROPOSED SALE. If any one or more Management Stockholders
intends to sell any Issuable Shares as provided in Section 3.1, such Management
Stockholders intending to sell
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any Issuable Shares shall provide to each of the holders o the Warrant Shares
written notice of such intention not less than forty-five (45) days prior to the
closing of such proposed sale. Such written notice (the "NOTICE OF SALE") shall
specify in detail the terms of such proposed sale (including the type of
Security proposed to be sold and the price per share), shall state the date on
which such proposed sale is to be consummated and shall designate one (1) Person
to whom notice of the determination to participate in such proposed sale should
be delivered.
3.3 ELECTION BY HOLDERS. Upon receipt of a Notice of Sale each holder of
Warrant Shares shall have twenty (20) days to deliver written notice of its
election to participate in such sale and the number of Warrant Shares which it
elects to sell, which number shall not exceed its proportionate amount. If such
notice is not received from a holder of Warrant Shares within the twenty (20)
day period specified above, the Management Stockholders or the Company, as the
case may be, shall have the right to sell or otherwise transfer the Issuable
Shares, Common Stock or Rights, as the case may be, to the proposed transferee
without any participation by such holder, but only (i) on the terms and
conditions stated in the Notice of Sale and (ii) if the sale or transfer of such
Issuable Shares, Common Stock or Rights is consummated not later than ninety
(90) days after the end of such twenty (20) day period.
3.4 PRO RATA CUTBACK OF NUMBER OF SHARES SOLD. In the event that the
Management Stockholders intending to sell Issuable Shares (or an underwriter
acting on their behalf) shall be unable to sell the aggregate number of shares
to be sold by the Management Stockholders and which the holders of the Warrant
Shares have elected to sell pursuant to Section 3.1 hereof at the price
specified in the Notice of Sale, then the number of Issuable Shares to be sold
by the Management Stockholders and such holders of Warrant Shares electing to
sell such Issuable Shares shall be reduced ratably (as between such groups and,
with respect to the holders of Warrant Shares, as among the members of such
group) to the extent necessary to reduce the total number of Issuable Shares to
be included in such offering to the maximum number which the selling Management
Stockholders (or an underwriter acting on their behalf) can sell at such price.
Whether or not any such adjustment in the number of Issuable Shares to be sold
is required to be made, the Management Stockholders shall give each such holder
which shall have elected to sell Issuable Shares, written notice of the number
of shares it is permitted to sell pursuant to this Section 3 (after giving
effect to the provisions of this Section 3.4) not less than fifteen (15) days
prior to the date of such sale.
3.5 EXERCISE. Unless the Management Stockholders or the Company, as the
case may be, otherwise agree, all Warrant Shares to be sold by the holders of
Warrant Shares pursuant to this Section 3 shall be shares of Class A Common
Stock. The Company shall, if necessary, permit the holders of Warrant Shares to
exercise and/or convert their respective Warrant Shares into shares of Class A
Common Stock in contemplation of such holders' delivery of Class A Common Stock
at the closing of any such sale, whether or not at such time such Warrant Shares
are exercisable or convertible to Class A Common Stock in accordance with their
respective terms or the terms of any agreements governing such Warrant Shares at
such time.
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3.6 CLOSING OF SALE. Each holder of Warrant Shares electing to participate
in a sale described in any Notice of Sale shall deliver to the purchaser
specified in such Notice of Sale, against payment of the total purchase price
for the Warrant Shares to be purchased (at the price per share specified in such
Notice of Sale), on the closing date specified in such Notice of Sale, a
certificate or certificates representing the number of Warrant Shares which it
has elected to sell (net of any reduction pursuant to the applicable paragraph
of Section 3.4) pursuant to this Section 3, together with appropriate
instruments of transfer duly endorsed in blank.
3.7 EXPENSE OF SALE. All expenses and costs of any sale of Warrant Shares
pursuant to the first paragraph of Section 3.1 shall be for the account of and
paid by the Management Stockholders, provided that such expenses and costs shall
include the fees and disbursements for only one counsel for all holders of
Warrant Shares.
4. OTHER STOCKHOLDER DRAG-ALONG RIGHTS.
4.1 DRAG-ALONG SALE RIGHTS.
(a) If the Management Stockholders at any time shall transfer, sell or
otherwise dispose of, or enter into a binding agreement to transfer, sell
or otherwise dispose of, directly or indirectly, all of the Issuable Shares
owned by such Persons to a Person other than any Subsidiary or any
Affiliate of the Company for an all-cash consideration (a "DRAG-ALONG
SALE"), each holder of Warrant Shares shall have the obligation, upon the
written request of the Management Stockholders at such time given pursuant
to Section 4.1(c) hereof, to participate in such Drag-Along Sale by selling
all, but not less than all, of the Warrant Shares held by it.
(b) Any such sale by the holders of Warrant Shares shall be on the
same terms and conditions and for the same amount of consideration (on a
per share basis) as is to be received in the proposed Drag-Along Sale by
the Management Stockholders, except that a holder of Warrant Shares shall
not be required to make any representations or warranties except as to
title to and authority to convey the Warrants or shares of Common Stock to
be sold by it; provided, however, that if any Management Stockholder shall
be entitled to receive from the purchaser of all of the Issuable Shares a
consideration greater than its pro rata share thereof (based upon the
aggregate number of Issuable Shares), then the holders of Warrant Shares
shall be entitled to receive a consideration per share not less than the
highest consideration per share paid to any Management Stockholder in
connection with such sale.
(c) The Management Stockholders, at least thirty (30) days before the
proposed date of any Drag-Along Sale, shall provide each holder of Warrant
Shares with written notice thereof. Such notice shall set forth
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(i) the name and address of the proposed transferee in the
Drag-Along Sale,
(ii) the identity of each Management Stockholder and each other
stockholder participating in such transfer and the number of shares of
Common Stock, Rights and other Issuable Shares beneficially owned by
each of such Persons,
(iii) the proposed amount of consideration to be paid for the
shares of Common Stock, Rights, and other Issuable Shares to be sold
in such Drag-Along Sale and the terms and conditions of payment
offered by the proposed transferee,
(iv) the number of outstanding shares of Common Stock of each
class at such time, and
(v) a statement that the Management Stockholders intend to
exercise their rights under this Section 4.
4.2 DRAG-ALONG SALE.
Upon receipt of any such notice required by Section 4.1(c) hereof, each
holder of Warrant Shares shall become obligated to sell, transfer or dispose of
its Warrant Shares upon the terms and conditions of such Drag-Along Sale so long
as each Management Stockholder shall simultaneously sell, transfer or dispose
all of its Issuable Shares upon identical terms and conditions and such sales
are consummated within ninety (90) days of the date of such notice. Assuming the
Drag-Along Sale is conducted in compliance with this Section 4, each holder of
Warrant Shares waives any rights it may have, under the laws of the State of
Delaware or otherwise, to appraisal of its Issuable Shares as a dissenting
stockholder and agrees to vote in favor of and otherwise consent to such
Drag-Along Sale.
5. BOARD RIGHTS.
5.1 BOARD OBSERVATION RIGHTS. At any time, and from time to time, during
which any CIGNA Affiliate shall hold any Warrant Shares, CIGNA Investments shall
have the right to have its designated representative attend (or, in the case of
a telephonic meeting, to listen by telephone to) any meeting of the Board of
Directors at its sole expense. The Company shall give each CIGNA Affiliate
holding Warrant Shares prior written notice of each such meeting, to be given no
later than the date notice is actually given to the directors. In the event that
CIGNA Investments has notified the Company in writing that it will be in
attendance at any such meeting, all information provided to the directors at or
prior to such meeting in respect of the matters to be discussed thereat.
5.2 COOPERATION WITH CIGNA INVESTMENTS. At all times during which any CIGNA
Affiliate shall hold any Warrant Shares, the Company shall permit CIGNA
Investments, at its expense, to visit and inspect any of the Properties of the
Company or any Subsidiary, to examine all
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their respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs, finances
and accounts with their respective officers, employees and independent public
accountants (and by this provision the Company authorizes said accountants to
discuss the finances and affairs of the Company and the Subsidiaries) all at
such reasonable times during regular business hours and without interference
with the ordinary course of business and as often as may be reasonably
requested. The Company shall be permitted to accompany Cigna Investments on such
visits and inspections of any of the Properties.
5.3 REMEDIES. The Company and the Purchasers agree that the remedies of the
CIGNA Affiliates at law in respect of any breach by the Company of their
obligations pursuant to this Section 5 would be inadequate and that, upon any
finding by any court of competent jurisdiction that the Company has breached any
such obligation, the CIGNA Affiliates which are holders of Warrant Shares shall
be entitled to, and the Company agrees that it will not contest, upon any such
finding of any such breach, the award of specific performance and injunctive
relief in favor of the CIGNA Affiliates which are holders of Warrant Shares and
compelling the Company to comply with such obligations.
6. REGISTRATION RIGHTS.
6.1 REQUIRED REGISTRATION.
(A) FILING OF REGISTRATION STATEMENT. The Company will, upon the
written request of the Initiating Holders requesting that the Company
effect the registration under the Securities Act of all or part of such
Initiating Holders' Registrable Securities and specifying the Registrable
Securities to be sold and the intended method of disposition thereof,
promptly give written notice of such requested registration to all holders
of Registrable Securities, and thereupon will use its best efforts to
effect the registration (the "REQUIRED REGISTRATION") under the Securities
Act of:
(i) the Registrable Securities that the Company has been so
requested to register by the Initiating Holders; and
(ii) all other Registrable Securities that the Company has been
requested to register by the holders thereof by written request given
to the Company within thirty (30) days after the giving of such
written notice by the Company (which request shall specify the
Registrable Securities to be sold and the intended method of
disposition of such Registrable Securities);
all to the extent required to permit the disposition (in accordance with
the intended method thereof as aforesaid) of the Registrable Securities so
to be registered; provided, however, that the Company shall be required to
effect only one (1) registration pursuant to this Section 6.1 that is
deemed effected under Section 6.1(e) hereof.
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(b) TIME FOR FILING AND EFFECTIVENESS. On or before the date which is
ninety (90) days after the request for such registration, the Company shall
file with the SEC the Required Registration with respect to all Registrable
Securities to be so registered, and shall use its best efforts to cause
such Required Registration to become effective as promptly as practicable
after the filing thereof, but in no event later than the day which is one
hundred eighty (180) days after the request for such registration.
(c) SELECTION OF UNDERWRITERS. If Registrable Securities that the
Company has been requested to register pursuant to a Required Registration
are to be disposed of in an underwritten public offering, the underwriters
of such offering shall be one or more underwriting firms of recognized
national standing selected by the Company and reasonably acceptable to the
Requisite Holders.
(d) PRIORITY ON REQUIRED REGISTRATIONS. If the managing underwriter
shall advise the Company in writing (with a copy to each holder of
Registrable Securities requesting sale) that, in such underwriter's
opinion, the number of shares of Securities requested to be included in
such Required Registration exceeds the number that can be sold in such
offering within a price range acceptable to the Company (such writing to
state the basis of such opinion and the approximate number of shares of
Securities that may be included in such offering without such effect), the
Company will include in such Required Registration, to the extent of the
number of shares of Securities that the Company is so advised can be sold
in such offering:
(i) first, Registrable Securities requested to be sold by the
holders of Warrant Shares pursuant to this Section 6.1, pro rata among
the holders requesting sale on the basis of the number of Registrable
Securities requested to be so registered by such holders; and
(ii) second, all other Securities proposed to be registered by
the Company, the Management Stockholders and any other stockholders,
in such proportions as the Company, the Management Stockholders and
such other stockholders shall agree.
(e) WHEN REQUIRED REGISTRATION IS DEEMED EFFECTED. A Required
Registration pursuant to this Section 6.1 shall not be deemed to have been
effected for purposes of the proviso to Section 6.1(a) hereof if:
(i) the registration does not become effective and remain
effective for a period of at least one hundred eighty (180) days,
without interference by the issuance by the SEC of any stop order with
respect thereto;
(ii) all the Registrable Securities requested to be registered in
connection therewith were not sold;
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(iii) the Requisite Holders withdraw their request for
registration in its entirety at any time because the Requisite Holders
reasonably believed that the registration statement or any prospectus
related thereto contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or
necessary to make the statements made therein (in the case of any
prospectus, in light of the circumstances under which they were made)
not misleading, notified the Company of such fact and requested that
the Company correct such alleged misstatement or omission, and the
Company has refused to correct such alleged misstatement or omission;
or
(iv) the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with
such Required Registration are not satisfied, other than by reason of
some act or omission by the holders of the Registrable Securities that
were to have been registered and sold.
6.2 INCIDENTAL REGISTRATION.
(a) FILING OF REGISTRATION STATEMENT. If the Company at any time
proposes to register any of its Common Stock (an "INCIDENTAL REGISTRATION")
under the Securities Act (other than pursuant to a registration statement
on Form S-4 or Form S-8 or any successor forms thereto, in connection with
an offer made solely to existing Security holders or employees of the
Company), for sale to the public in a public offering, it will each such
time give prompt written notice to all holders of Registrable Securities of
its intention to do so, which notice shall be given to all such holders at
least sixty (60) Business Days prior to the date that a registration
statement relating to such registration is proposed to be filed with the
SEC. Upon the written request of any such holder to include its shares
under such registration statement (which request shall be made within
fifteen (15) Business Days after the receipt of any such notice and shall
specify the Registrable Securities intended to be disposed of by such
holder), the Company will use its best efforts to effect the registration
of all Registrable Securities that the Company has been so requested to
register by such holder; provided, however, that if, at any time after
giving written notice of its intention to register any Securities and prior
to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason not to
register such Securities, the Company may, at its election, give written
notice of such determination to each such holder and, thereupon, shall be
relieved of its obligation to register any Registrable Securities of such
Persons in connection with such registration.
(b) SELECTION OF UNDERWRITERS. Notice of the Company's intention to
register such Securities shall designate the proposed underwriters of such
offering (which shall be one or more underwriting firms of recognized
national standing) and shall contain the Company's agreement to use its
best efforts, if requested to do so, to arrange for such underwriters to
include in such underwriting the Registrable Securities that the Company
has been so requested to sell pursuant to this Section 6.2, it being
understood that the holders of
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Registrable Securities shall have no right to select different underwriters
for the disposition of their Registrable Securities.
(c) PRIORITY ON INCIDENTAL REGISTRATIONS. If the managing underwriter
shall advise the Company in writing (with a copy to each holder of
Registrable Securities requesting sale) that, in such underwriter's
opinion, the number of shares of Securities requested to be included in
such Incidental Registration exceeds the number that can be sold in such
offering within a price range acceptable to the Company (such writing to
state the basis of such opinion and the approximate number of shares of
Securities that may be included in such offering without such effect), the
Company will include in such Incidental Registration, to the extent of the
number of shares of Securities that the Company is so advised can be sold
in such offering:
(i) in the case of any registration initiated by the Company for
the purpose of selling Securities for its own account:
(A) first, shares that the Company proposes to issue and
sell for its own account; and
(B) second, Registrable Securities requested to be sold by
the holders of Warrant Shares pursuant to this Section 6.2 and
all Securities proposed to be registered by the Management
Stockholders and any other stockholders, pro rata among such
holders on the basis of the number of Issuable Shares requested
to be so registered by such holders; and
(ii) in the case of a registration initiated by any other
stockholder pursuant to demand or required registration rights in
favor of such other stockholder:
(A) first, shares that the Company proposes to issue and
sell for its own account; and
(B) second, Registrable Securities requested to be sold by
the holders of Warrant Shares pursuant to this Section 6.2 and
all Securities proposed to be registered by the other
stockholders, pro rata among such holders on the basis of the
number of Issuable Shares requested to be so registered by such
holders.
6.3 REGISTRATION PROCEDURES. The Company will use its best efforts to
effect each Required Registration pursuant to Section 6.1 hereof and any
Incidental Registration of any Registrable Securities as provided in Section 6.2
hereof, and to cooperate with the sale of such Registrable Securities in
accordance with the intended method of disposition thereof as promptly as is
practicable, and the Company will as expeditiously as possible:
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(a) subject, in the case of an Incidental Registration, to the proviso
in Section 6.2(a), prepare and file with the SEC the registration statement
and use its best efforts to cause the Registration to become effective;
provided, however, that before filing any registration statement or
prospectus or any amendments or supplements thereto, the Company will
furnish to the holders of the Registrable Securities covered by such
registration statement, their counsel, and the underwriters, if any, and
their counsel, copies of all such documents proposed to be filed at least
fifteen (15) days prior thereto, which documents will be subject to the
reasonable review, within such fifteen (15) day period, of such holders,
their counsel and the underwriters; and the Company will not file any
registration statement or amendment thereto or any prospectus or any
supplement thereto (including such documents incorporated by reference) to
which the Requisite Holders shall reasonably object within such fifteen
(15) day period;
(b) subject, in the case of an Incidental Registration, to the proviso
in Section 6.2(a), prepare and file with the SEC such amendments and
post-effective amendments to any registration statement and any prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by
such registration statement until such time as all of such Securities have
been disposed of in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement and
cause the prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Securities Act; provided, however, that the Company shall have no
obligation to file any amendment or supplement more than nine (9) months
after the effective date of such registration statement.
(c) furnish to each holder of Registrable Securities included in such
Registration and the underwriter or underwriters, if any, without charge,
such number of copies of the preliminary prospectus and any amendments or
supplements thereto and any documents incorporated by reference therein, as
such holder or underwriter may reasonably request in order to facilitate
the disposition of the Registrable Securities being sold by such holder in
conformity with (i) the requirements of the Securities Act and (ii) the
holder's proposed method of distribution;
(d) notify each holder of the Registrable Securities of any stop order
or other order suspending the effectiveness of any registration statement,
issued or threatened by the SEC in connection therewith, and take all
reasonable actions required to prevent the entry of such stop order or to
remove it or obtain withdrawal of it at the earliest possible moment if
entered;
(e) if requested by the managing underwriter or underwriters or any
holder of Registrable Securities in connection with any sale pursuant to a
registration statement, promptly incorporate in a prospectus supplement or
post-effective amendment such
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<PAGE> 15
information relating to such underwriting as the managing underwriter or
underwriters or such holder reasonably requests to be included therein; and
make all required filings of such prospectus supplement or post-effective
amendment as soon as practicable after being notified of the matters
incorporated in such prospectus supplement or post-effective amendment;
(f) on or prior to the date on which a Registration is declared
effective, use its best efforts to register or qualify, and cooperate with
the holders of Registrable Securities included in such Registration, the
underwriter or underwriters, if any, and their counsel, in connection with
the registration or qualification of the Registrable Securities covered by
such Registration for offer and sale under the securities or "blue sky"
laws of each state and other jurisdiction of the United States as any such
holder or underwriter reasonably requests in writing; use its best efforts
to keep each such registration or qualification effective, including
through new filings, or amendments or renewals, during the period such
registration statement is required to be kept effective; and do any and all
other acts or things necessary or advisable to enable the disposition in
all such jurisdictions reasonably requested of the Registrable Securities
covered by such Registration; provided, however, that the Company will not
be required to qualify generally to do business in any jurisdiction where
it is not then so qualified or to take any action which would subject it to
general service of process in any such jurisdiction where it is not then so
subject or qualify as a dealer of securities;
(g) in connection with any sale pursuant to a Registration, cooperate
with the holders of Registrable Securities and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Securities
to be sold under such Registration, and enable such Securities to be in
such denominations and registered in such names as the managing underwriter
or underwriters, if any, or such holders may request;
(h) use its best efforts to cause the Registrable Securities to be
registered with or approved by such other governmental agencies or
authorities within the United States and having jurisdiction over the
Company or any Subsidiary as may reasonably be necessary to enable the
seller or sellers thereof or the underwriter or underwriters, if any, to
consummate the disposition of such Securities;
(i) make available for inspection by any holder of Registrable
Securities included in any Registration, any underwriter participating in
any disposition pursuant to any Registration, and any attorney, accountant
or other agent retained by any such seller or underwriter, all financial
and other records, pertinent corporate documents and properties of the
Company, as shall be reasonably necessary to enable them to exercise their
due diligence responsibility, and cause the Company's officers, directors
and employees to supply all information reasonably requested by any such
Person in connection with such Registration;
(j) use its best efforts to obtain:
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<PAGE> 16
(i) at the time of effectiveness of each Registration, a "comfort
letter" from the Company's independent certified public accountants
covering such matters of the type customarily covered by "cold comfort
letters" as the Requisite Holders and the underwriters reasonably
request; and
(ii) at the time of any underwritten sale pursuant to the
registration statement, a "bring-down comfort letter," dated as of the
date of such sale, from the Company's independent certified public
accountants covering such matters of the type customarily covered by
such comfort letters as the Requisite Holders and the underwriters
reasonably request;
(k) use its best efforts to obtain, at the time of effectiveness of
each Incidental Registration and at the time of any sale pursuant to each
Registration, an opinion or opinions, favorable to the Requisite Holders in
form and scope, from counsel for the Company in customary form;
(l) notify each seller of Registrable Securities covered by such
Registration, upon discovery that, or upon the happening of any event as a
result of which, the prospectus included in such Registration, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and promptly prepare, file with the SEC
and furnish to such seller or holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so
that, as thereafter delivered to the purchasers or prospective purchasers
of such 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 to make the statements therein not misleading in the
light of the circumstances under which they are made;
(m) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make generally available to its security
holders (as contemplated by Section 11(a) under the Securities Act) an
earnings statement satisfying the provisions of Rule 158 under the
Securities Act no later than ninety (90) days after the end of the twelve
(12) month period beginning with the first month of the Company's first
fiscal quarter commencing after the effective date of the registration
statement, which statement shall cover said twelve (12) month period;
(n) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by each Registration from and after
a date not later than the effective date of such Registration;
(o) use its best efforts to cause all Registrable Securities covered
by each Registration to be listed subject to notice of issuance, prior to
the date of first sale of such Registrable Securities pursuant to such
Registration, on each securities exchange on which
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<PAGE> 17
the Common Stock (or other Securities issuable upon exercise of the
Warrants) issued by the Company are then listed, and admitted to trading,
or on NASDAQ, if the Common Stock or any such other Securities are then
admitted to trading on NASDAQ; and
(p) enter into such agreements (including underwriting agreements in
customary form) and take such other actions as the Requisite Holders shall
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities.
The Company may require each holder of Registrable Securities that will be
included in such Registration to furnish the Company with such information in
respect of such holder of its Registrable Securities that will be included in
such Registration as the Company may reasonably request in writing and as is
required by applicable laws or regulations.
6.4 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, the Company will give the holders of such
Registrable Securities so registered, their underwriters, if any, and their
respective counsel and accountants the opportunity to participate in the
preparation of such registration statement (other than reports and proxy
statements incorporated therein by reference and lawfully and properly filed
with the SEC) and each prospectus included therein or filed with the SEC, and
each amendment thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss the business
of the Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary, in the reasonable
opinion of such holders' or such underwriters' to conduct a reasonable
investigation within the meaning of the Section 11(b)(3) of the Securities Act.
6.5 RIGHTS OF REQUESTING HOLDERS. Each holder of Registrable Securities
which makes a written request therefor within sixty (60) days after the notice
to such holders provided for in Section 6.1 or Section 6.2 hereof, as the case
may be, hereof, shall have the right to receive the copies of the information,
notices and other documents described in Section 6.3(c), Section 6.3(l) and
Section 6.3(m) hereof in connection with any proposed Registration by the
Company under the Securities Act.
6.6 REGISTRATION EXPENSES. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities, including,
without limitation, any such registration not effected by the Company; provided,
however, the Company shall not be liable for (i) any discounts or commissions to
any underwriter with respect to an Incidental Registration or (ii) any stock
transfer taxes incurred upon exercise of the Warrant Shares sold by any holder
of Warrant Shares.
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6.7 INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company shall indemnify, each
holder of Registrable Securities, its officers, directors and agents, if
any, and each Person, if any, who controls such holder within the meaning
of section 15 of the Securities Act, against all losses, claims, damages,
liabilities (or proceedings in respect thereof) and expenses (under the
Securities Act or common law or otherwise), joint or several, resulting
from any violation by the Company of the provisions of the Securities Act
or any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus (and as amended or
supplemented if amended or supplemented) or any preliminary prospectus or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
(in the case of any prospectus, in light of the circumstances under which
they were made) not misleading, except to the extent that such losses,
claims, damages, liabilities (or proceedings in respect thereof) or
expenses are caused by any untrue statement or alleged untrue statement
contained in or by any omission or alleged omission from information
concerning any holder furnished in writing to the Company by such holder
expressly for use therein. If the offering pursuant to any registration
statement provided for under this Section 6 is made through underwriters,
no action or failure to act on the part of such underwriters (whether or
not such underwriter is an Affiliate of any holder of Registrable
Securities) shall affect the obligations of the Company to indemnify any
holder of Registrable Securities or any other Person pursuant to the
preceding sentence. If the offering pursuant to any registration statement
provided for under this Section 6 is made through underwriters, the Company
agrees, to the extent required by such underwriters, to enter into an
underwriting agreement in customary form with such underwriters and to
indemnify such underwriters, their officers, directors and agents, if any,
and each Person, if any, who controls such underwriters within the meaning
of section 15 of the Securities Act to the same extent as hereinbefore
provided with respect to the indemnification of the holders of Registrable
Securities; provided that the Company shall not be required to indemnify
any such underwriter, or any officer or director of such underwriter or any
Person who controls such underwriter within the meaning of section 15 of
the Securities Act, to the extent that the loss, claim, damage, liability
(or proceedings in respect thereof) or expense for which indemnification is
claimed results from such underwriter's failure to send or give a copy of
an amended or supplemented final prospectus to the Person asserting an
untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable
Securities to such Person if such statement or omission was corrected in
such amended or supplemented final prospectus prior to such written
confirmation and the underwriter was provided with such amended or
supplemented final prospectus.
(b) INDEMNIFICATION BY THE HOLDERS. In connection with any
registration statement in which a holder of Registrable Securities is
participating, each such holder, severally and not jointly, shall
indemnify, to the fullest extent permitted by law, the Company, each
underwriter and their respective officers, directors and agents, if any,
and
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<PAGE> 19
each Person, if any, who controls the Company or such underwriter within
the meaning of section 15 of the Securities Act, against any losses,
claims, damages, liabilities (or proceedings in respect thereof) and
expenses resulting from any untrue statement or alleged untrue statement of
a material fact or any omission or alleged omission of a material fact
required to be stated in the registration statement or prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein (in the case of any prospectus, in
light of the circumstances under which they were made) not misleading, but
only to the extent that such untrue statement is contained in or such
omission is from information so concerning a holder furnished in writing by
such holder expressly for use therein; provided, however, that such
holder's obligations hereunder shall be limited to an amount equal to the
proceeds to such holder of the Registrable Securities sold pursuant to such
registration statement.
(c) CONTROL OF DEFENSE. Any Person entitled to indemnification under
the provisions of this Section 6.7 shall give prompt notice to the
indemnifying party of any claim with respect to which it seeks
indemnification and unless in such indemnified party's reasonable judgment
a conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim, permit such indemnifying party to
assume the defense of such claim, with counsel reasonably satisfactory to
the indemnified party; and if such defense is so assumed, such indemnifying
party shall not enter into any settlement without the consent of the
indemnified party if such settlement attributes liability to the
indemnified party and such indemnifying party shall not be subject to any
liability for any settlement made without its consent (which shall not be
unreasonably withheld); and any underwriting agreement entered into with
respect to any registration statement provided for under this Section 6
shall so provide to the extent required by the underwriters. In the event
an indemnifying party shall not be entitled, or elects not, to assume the
defense of a claim, such indemnifying party shall not be obligated to pay
the fees and expenses of more than one counsel or firm of counsel for all
parties indemnified by such indemnifying party in respect of such claim,
unless any such indemnified party has been advised by legal counsel that a
conflict of interest may exist between such indemnified party and any other
of such indemnified parties in respect to such claim.
(d) CONTRIBUTION. If for any reason the foregoing indemnity is
unenforceable, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such losses,
claims, damages, liabilities or expenses:
(i) in such proportion as is appropriate to reflect the relative
benefits received by the indemnifying party on the one hand and the
indemnified party on the other; or
(ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the
indemnified party than the amount hereinafter calculated, in such
proportion as is appropriate to reflect not only the
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<PAGE> 20
relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other but also the relative fault of
the indemnifying party and the indemnified party as well as any other
relevant equitable considerations.
Notwithstanding the foregoing, no holder of Registrable Securities shall be
required to contribute any amount in excess of the amount such holder would
have been required to pay to an indemnified party if the indemnity under
Section 6.7(b) hereof was available. 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. The obligation of any Person to
contribute pursuant to this Section 6.7 shall be several and not joint.
(e) TIMING OF PAYMENTS. An indemnifying party shall make payments
of all amounts required to be made pursuant to the foregoing
provisions of this Section 6.7 to or for the account of the
indemnified party from time to time promptly upon receipt of bills or
invoices relating thereto or when otherwise due or payable.
(f) SURVIVAL. The indemnity and contribution agreements contained
in this Section 6.7 shall remain in full force and effect regardless
of any investigation made by or on behalf of a participating holder of
Registrable Securities, its officers, directors, agents or any Person,
if any, who controls such holder as aforesaid, and shall survive the
transfer of such Securities by such holder.
6.8 HOLDBACK AGREEMENTS; REGISTRATION RIGHTS TO OTHERS.
(a) In connection with each underwritten sale of Registrable
Securities, the Company agrees, and each holder of Registrable
Securities by acquisition of such Registrable Securities agrees, to
enter into customary holdback agreements concerning sale or
distribution of Registrable Securities and other equity Securities of
the Company, except, in the case of any holder of Registrable
Securities, to the extent that such holder is prohibited by applicable
law or exercise of fiduciary duties from agreeing to withhold
Registrable Securities from sale or is acting in its capacity as a
fiduciary or investment adviser. Without limiting the scope of the
term "fiduciary," a holder shall be deemed to be acting as a fiduciary
or an investment adviser if its actions or the Registrable Securities
proposed to be sold are subject to the Employee Retirement Income
Security Act of 1974, as amended, or the Investment Company Act of
1940, as amended, or if such Registrable Securities are held in a
separate account under applicable insurance law or regulation.
(b) If the Company shall at any time after the date hereof
provide to any holder of any Securities of the Company rights with
respect to the registration of such Securities under the Securities
Act:
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(i) such rights shall not be in conflict with or adversely
affect any of the rights provided in this Section 6 to the
holders of Registrable Securities; and
(ii) if such rights are provided on terms or conditions more
favorable to such holder than the terms and conditions provided
in this Section 6, the Company will provide (by way of amendment
to this Section 6 or otherwise) such more favorable terms or
conditions to the holders of Registrable Securities.
6.9 OTHER REGISTRATION OF COMMON STOCK. If any shares of Common Stock
required to be reserved for purposes of exercise of Warrants or conversion of
any class of Common Stock into any other class of Common Stock require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
conversion, the Company will, at its expense and as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be.
6.10 AVAILABILITY OF INFORMATION. The Company will comply with the
reporting requirements of Sections 13 and 15(d) of the Exchange Act and will
comply with all other public information reporting requirements of the SEC as
from time to time in effect, and cooperate with the holders of Registrable
Securities, so as to permit disposition of the Registrable Securities pursuant
to an exemption from the Securities Act for the sale of any Registrable
Securities (including, without limitation, the current public information
requirements of Rule 144(c) and Rule 144A under the Securities Act). The Company
will also cooperate with each holder of any Registrable Securities in supplying
such information as may be reasonably necessary for such holder to complete and
file any information reporting forms presently or hereafter required by the SEC
as a condition to the availability of an exemption from the Securities Act for
the sale of any Registrable Securities.
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7. INFORMATION AS TO COMPANY
7.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each Purchaser and each other holder of at
least twenty-five percent (25%) of the Warrant Shares outstanding at such time:
(a) MONTHLY STATEMENTS -- as soon as practicable after the end of each
monthly fiscal period in each fiscal year of the Company, commencing with
the monthly fiscal period of the Company ending August 31, 1995, and in any
event within thirty (30) days thereafter, duplicate copies of the Company's
internal monthly operating statements, including without limitation:
(i) a consolidated balance sheet of the Company and the
Subsidiaries as at the end of such fiscal month, and
(ii) consolidated statements of income and cash flows of the
Company and the Subsidiaries, for such fiscal month and for the
portion of the fiscal year ending with such fiscal month,
setting forth in comparative form, the figures for such month and for the
portion of the fiscal year of the Company ended as of such month, together
with the figures for the corresponding periods in the previous fiscal year,
all in reasonable detail, prepared in accordance with GAAP applicable to
monthly financial statements generally;
(b) QUARTERLY STATEMENTS -- as soon as practicable after the end of
each fiscal quarter in each fiscal year of the Company (other than the last
fiscal quarter of each such fiscal year), commencing with the fiscal
quarter of the Company ending September 30, 1995, and in any event within
forty-five (45) days thereafter, duplicate copies of:
(i) consolidated and consolidating balance sheets of the Company
and the Subsidiaries as at the end of such fiscal quarter, and
(ii) consolidated and consolidating statements of income, changes
in shareholders' equity and cash flows of the Company and the
Subsidiaries, for such fiscal quarter and (in the case of the second
and third fiscal quarters) for the portion of the fiscal year ending
with such fiscal quarter,
setting forth in comparative form, the figures for such fiscal quarter and
for the portion of the fiscal year of the Company ended as of such fiscal
quarter, together with the figures for the corresponding periods in the
previous fiscal year, all in reasonable detail, prepared in accordance with
GAAP applicable to quarterly financial statements generally, and certified
as fairly presenting, in all material respects, the consolidated financial
position and results
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of operations and cash flows of the Company and the Subsidiaries as at the
end of, and for, such period subject to changes resulting from year-end
adjustments, by a principal financial officer of the Company, it being
understood that the financial statements required to be delivered pursuant
to clause (a) above with respect to the third month of a fiscal quarter of
the Company and the financial statements required to be delivered pursuant
to this clause (b) may be delivered together so long as all substantive
requirements set forth in clause (a) and clause (b) of this Section have
been satisfied, provided that nothing herein shall be deemed to permit the
Company to deliver the financial statements required by clause (a) above
later than thirty (30) days after the end of any monthly fiscal period;
(c) ANNUAL STATEMENTS -- as soon as practicable after the end of each
fiscal year of the Company, and in any event within one hundred twenty
(120) days thereafter, duplicate copies of:
(i) consolidated and consolidating balance sheets of the Company
and the Subsidiaries, as at the end of such fiscal year, and
(ii) consolidated and consolidating statements of income, and
consolidated statements of changes in shareholders' equity and cash
flows of the Company and the Subsidiaries, for such fiscal year,
setting forth in each case in comparative form the consolidated figures for
the previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) in the case of such consolidated financial statements, an
opinion thereon of independent certified public accountants of
recognized national standing selected by the Company, which opinion
shall, without qualification, state that such financial statements
present fairly, in all material respects, the consolidated financial
position of the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity with
GAAP, and that the examination of such accountants in connection with
such financial statements has been made in accordance with generally
accepted auditing standards, and that such audit provides a reasonable
basis for such opinion in the circumstances,
(B) a statement from such independent certified public
accountants that such consolidating statements were prepared using the
same work papers as were used in the preparation of such consolidated
statements;
(d) AUDIT REPORTS AND MANAGEMENT LETTERS -- promptly upon receipt
thereof, a copy of each other report (including, without limitation, any
letters to the Company or any Subsidiary from the Company's or such
Subsidiary's auditors concerning the internal accounting controls of the
Company and/or the Subsidiaries) submitted to the Company or
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<PAGE> 24
any Subsidiary by independent accountants in connection with any annual,
interim or special audit made by them of the books of the Company or any
Subsidiary;
(e) SEC AND OTHER REPORTS -- promptly upon their becoming available
one copy of each financial statement, report, notice or proxy statement
sent by the Company or any Subsidiary to stockholders generally, and of
each regular or periodic report and any registration statement, prospectus
or written communication (other than transmittal letters), and each
amendment thereto, in respect thereof filed by the Company or any
Subsidiary with, or received by, such Person in connection therewith from,
the National Association of Securities Dealers, any securities exchange or
the Securities and Exchange Commission or any successor agency; and
(f) REQUESTED INFORMATION -- with reasonable promptness, such other
data and information as from time to time may be reasonably requested in
writing, including, without limitation, (i) information required by 17
C.F.R. ss.230.144A, as amended from time to time, and (ii) information
delivered to any holder or holders of Debt of the Company (other than Debt
evidenced by the Subordinated Notes) pursuant to the terms of the loan or
credit agreement or other instrument governing or evidencing such Debt.
8. RESTRICTIONS ON TRANSFER AND OTHER AGREEMENTS.
8.1 RESTRICTIONS ON TRANSFER TO TRANSFEREES. No party hereto shall sell,
assign, transfer or otherwise dispose of any Issuable Shares to any transferee
under any circumstance, and the Company shall neither issue nor sell any
additional Issuable Shares, to any transferee, unless such transferee shall have
assumed in writing all of the obligations of its transferor imposed by this
Agreement and shall have agreed to be bound by each of the terms and provisions
of this Agreement to which such transferor was bound, pursuant to an undertaking
substantially in the form set forth as Exhibit A hereto.
8.2 COOPERATION BY THE COMPANY. The Company shall refuse to register any
transfer of any Issuable Shares to any transferee unless the Company shall have
received from the prospective transferee a written agreement to be bound by the
provisions of this Agreement as required by Section 8.1 hereof, and such other
evidence as the Company may reasonably require to establish compliance with such
Section 8.1. The Company shall be protected in, and shall have no liability to
any other stockholder for, and no such holder shall assert any claim against the
Company for, failing to register any transfer of any Issuable Shares in an
effort to comply with the provisions of this Agreement, unless such refusal to
transfer is made in bad faith.
8.3 LEGENDING OF CERTIFICATES. Each certificate representing any Issuable
Shares shall bear the following legend:
"THE ENCUMBERING, TRANSFER OR OTHER DISPOSITION OF THE SHARES OF STOCK
EVIDENCED BY THIS CERTIFICATE IS
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RESTRICTED UNDER THE TERMS OF THAT CERTAIN SHAREHOLDERS' AGREEMENT
DATED AS OF JUNE 30, 1995, AS MAY BE AMENDED FROM TIME TO TIME, THE
PROVISIONS OF WHICH ARE HEREIN INCORPORATED BY REFERENCE. SUCH
SHAREHOLDERS' AGREEMENT PROVIDES, AMONG OTHER THINGS, THAT THIS
SECURITY MAY NOT BE SOLD OR TRANSFERRED TO ANY PERSON WHO HAS NOT
EXPRESSLY ASSUMED THE OBLIGATIONS OF SUCH AGREEMENT AND CONTAINS, AMONG
OTHER PROVISIONS, PROVISIONS WHICH COULD LIMIT THE TRANSFER OF THIS
SECURITY. A COPY OF THIS AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE
OF THE COMPANY. UPON THE WRITTEN REQUEST OF THE HOLDER HEREOF, THE
COMPANY SHALL FURNISH A COPY OF SUCH AGREEMENT, WITHOUT CHARGE."
8.4 SECURITIES ACT RESTRICTIONS; LEGEND. The Company shall not register
any transfer of Issuable Shares if it has reason to believe that such transfer
is being requested in violation of the registration requirements of Section 5 of
the Securities Act. Except as otherwise permitted by Section 8.5 hereof, each
certificate representing an Issuable Share shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED OR SOLD EXCEPT IN A TRANSACTION REGISTERED UNDER SUCH ACT OR
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT."
8.5 TERMINATION OF RESTRICTIONS.
(A) WITH RESPECT TO SHARES SOLD IN A PUBLIC OFFERING. Each and
all of the provisions of this Agreement shall terminate immediately as
to any Issuable Shares (but this Agreement shall remain in force with
respect to any remaining Issuable Shares):
(i) when such Issuable Shares have been effectively
registered under the Securities Act and disposed of in
accordance with the registration statement covering such
Issuable Shares; or
(ii) when they shall have been distributed to the
public pursuant to Rule 144 (or any successor provision)
under the Securities Act; or
(iii) when they shall have been otherwise transferred
and subsequent disposition of them shall not require
registration or qualification under the Securities Act or
any similar state law then in force.
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Whenever such restrictions shall terminate as to any Issuable Shares, the
holder thereof shall be entitled to receive from the Company, without
expenses (other than transfer taxes, if any), new Issuable Shares of like
tenor not bearing the applicable legends set forth in Section 8.3 or
Section 8.4 hereof.
(b) UPON A TAG-ALONG SALE. The provisions of Section 1 and Section 2
of this Agreement shall terminate immediately with respect to Warrant
Shares sold in any sale pursuant to Section 3 of this Agreement.
8.6 TERMINATION OF VARIOUS PROVISIONS. The provisions of Section 1, Section
2, Section 3 and Section 5.1 of this Agreement shall terminate on the Initial
Public Offering Date.
9. DEFINED TERMS.
As used herein, the following terms have the respective meanings set forth
below or set forth in the Section hereof following such term:
AFFILIATE -- means, at any time, a Person (other than a Subsidiary or a
Purchaser):
(a) that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the
Company;
(b) that beneficially owns or holds five percent (5%) or more of any
class of the Voting Stock of the Company; or
(c) five percent (5%) or more of the Voting Stock (or in the case of a
Person that is not a corporation, five percent (5%) or more of the equity
interest) of which is beneficially owned or held by the Company or a
Subsidiary;
at such time.
As used in this definition,
Control -- means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
AGREEMENT -- the introductory paragraph hereof.
BOARD OF DIRECTORS -- means the board of directors of the Company or any
committee thereof that, in the instance, shall have the lawful power to exercise
the power and authority of such board of directors.
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<PAGE> 27
BOARD VALUE -- Section 2.4(b).
BUSINESS DAY -- means a day other than a Saturday, a Sunday or a day on
which banks in the State of Connecticut are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
CALL EFFECTIVE DATE -- means the date which is the sixth (6th) anniversary
of the Closing Date.
CIGNA AFFILIATE -- means the Purchasers, CIGNA Investments and any Person
controlled by, controlling or under common control with, or advised with respect
to its investments by, CIGNA Investments.
CIGNA INVESTMENTS -- means CIGNA Investments, Inc.
CLASS A COMMON STOCK -- means "Class A Common Stock" as defined in the
Warrant Agreement.
CLASS B COMMON STOCK -- means "Class B Common Stock" as defined in the
Warrant Agreement.
CLOSING DATE -- means the first date any Warrants are issued hereunder.
COMMON STOCK -- means and includes:
(a) the common stock of the Company (including Class A Common Stock
and Class B Common Stock);
(b) any other equity securities of the Company which are not limited
to a fixed sum or a fixed percentage of par value in respect of
participation in dividends and distributions in liquidation; and
(c) any other Securities of the Company or any other Person that the
holders of the Warrants at any time shall be entitled to receive, or shall
have received, upon the exercise of the Warrants, in lieu of or in addition
to Common Stock, or that at any time shall be issuable or shall have been
issued in exchange for or in replacement of Common Stock or such additional
Securities.
COMPANY -- the introductory paragraph hereof.
DRAG-ALONG SALE -- Section 4.1(a) hereof.
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<PAGE> 28
ELIGIBLE TRANSFEREE - means any other Person in the Management Stockholder
and the spouse, lineal descendants, parents and siblings of any Person in the
Management Stockholder and any trust for the direct or indirect benefit of one
or more of the foregoing.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
EXPIRATION DATE -- means 5:00 p.m. (Hartford time) on the tenth (10th)
anniversary of the Closing Date.
FAIR VALUE -- means, with respect to any share of Common Stock, the
quotient of:
(a) the sum of:
(i) the fair salable value of the Company, as a going concern,
giving effect to all Property thereof and subject to all liabilities
thereof, that would be realized in an arm's length sale between an
informed and willing buyer and an informed and willing seller, under
no compulsion to buy or sell, respectively, as of a date that is
within fifteen (15) days of the date as of which the determination is
to be made, determined by the Valuation Agent, such determination to
be made without regard to the absence of a liquid or ready market for
such Common Stock; plus
(ii) the aggregate Purchase Price of all Warrants remaining
unexercised at such time; divided by
(b) the sum of:
(i) the total number of shares of Common Stock outstanding at
such time; plus
(ii) the aggregate number of shares of Common Stock issuable in
respect of Warrants remaining unexercised at such time.
INCIDENTAL REGISTRATION -- Section 6.2 hereof.
INITIAL PUBLIC OFFERING DATE -- means the first date upon which Common
Stock shall have been issued or sold pursuant to an underwritten public offering
(whether on a firm commitment basis or a best efforts basis if such best efforts
are successful) thereof pursuant to an effective registration statement filed
with the SEC pursuant to the Securities Act.
INITIATING HOLDERS -- means, at any time, the holders (other than the
Company or any Affiliate or any Subsidiary) of at least fifty percent (50%) of
the Warrant Shares at such time (excluding any Warrant Shares held directly or
indirectly by the Company or any Affiliate or
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<PAGE> 29
Subsidiary). For purposes of this definition, holders of Warrants at any time
shall be deemed to be holders of the Common Stock that is at such time issuable
upon exercise in full of such Warrants, whether or not such holders are then
entitled so to exercise such Warrants pursuant to the terms thereof.
ISSUABLE SHARE -- means and includes at any time,
(a) a share of issued and outstanding Common Stock, and
(b) a Right (including, without limitation, a Warrant), and (without
duplication) all shares of Common Stock issuable upon exercise of such
Right, in each case at such time;
For purposes of this definition of "Issuable Share", a Right to acquire one
share of Common Stock shall constitute one Issuable Share, and a Person shall be
deemed to own an Issuable Share if such Person has a Right to acquire such share
whether or not such Right is exercisable at such time.
MANAGEMENT STOCKHOLDER -- The introductory paragraph hereof.
NASDAQ -- means the National Association of Securities Dealers Automated
Quotation System.
NOTE PURCHASE AGREEMENT -- Recital C.
NOTICE -- Section 3.2.
PERSON -- means an individual, partnership, corporation, limited liability
company, trust, unincorporated organization, or a government or agency or
political subdivision thereof.
PROPERTY -- means any and all interests in any kind of property of asset
whatsoever, whether real, personal or mixed and whether tangible or intangible.
PURCHASE PRICE -- means, at any time, the exercise price of one Warrant at
such time.
PURCHASERS -- the introductory paragraph hereof.
PUT EFFECTIVE DATE -- means the date of the fifth (5th) anniversary of the
Closing Date.
PUT NOTICE -- Section 1.1.
PUT OPTION PURCHASE PRICE -- means, with respect to the exercise of any
option to sell by any holder of Warrant Shares pursuant to any Put Notice
delivered under Section 1 hereof by any holder of Warrant Shares, the sum of:
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<PAGE> 30
(a) the product of:
(i) the number of shares of Class B Common Stock purchasable with
the Warrants sought to be sold by such holder and which are the
subject of such Put Notice and not yet exercised; multiplied by
(ii) the greater of Zero Dollars ($0) and the difference of:
(A) the Share Price of Class B Common Stock determined as of
the date of such Put Notice; minus
(B) the Purchase Price at such time;
plus
(b) the product of:
(i) the number of shares of Class B Common Stock previously
purchased with Warrants and sought to be sold by the holder thereof;
multiplied by
(ii) the Share Price of Class B Common Stock determined as of the
date of such Put Notice;
plus
(c) the product of:
(i) the number of shares of Class A Common Stock sought to be
sold by such holder that have been issued upon the conversion of Class
B Common Stock that was issued upon the exercise of any Warrant and
which shares are the subject of such Put Notice; multiplied by
(ii) the Share Price of Class A Common Stock determined as of the
date of such Put Notice.
PUT REPURCHASE DATE -- means, with respect to the exercise of any put
option pursuant to Section 1 of this Agreement, a date designated by the Company
which is not less than sixty (60) but not more than ninety (90) days after the
date of receipt by the Company of the Put Notice relating to the exercise of
such put option.
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<PAGE> 31
REGISTRABLE SECURITIES -- means, at any time:
(a) any shares of Common Stock that have been issued upon the exercise
of any Warrant;
(b) any shares of Common Stock into which such shares of Common Stock
shall have been converted at any time; and
(c) any shares of Common Stock that are issuable upon the exercise of
the Warrants or the conversion of Common Stock referred to in clause (a) or
clause (b) above.
For purposes of Section 6 hereof and the definition of "Requisite Holders"
herein, holders of Warrants at any time shall be deemed to be holders of
Registrable Securities described in clauses (b) and (c) of this definition that
are at such time issuable upon exercise in full of such Warrants, whether or not
such holders are then entitled so to exercise such Warrants pursuant to the
terms thereof.
As to any particular Registrable Securities once issued, such Securities shall
cease to be Registrable Securities:
(i) when 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) when they shall have been distributed to the public pursuant to
Rule 144 (or any successor provision) under the Securities Act;
(iii) when they shall have been otherwise transferred and subsequent
disposition of them shall not require registration or qualification under
the Securities Act or any similar state law then in force; or
(iv) when they shall have ceased to be outstanding or (with respect to
Registrable Securities described in clause (a) of this definition) issuable
upon exercise of the Warrants.
REGISTRATION -- means the Required Registration and each Incidental
Registration.
REGISTRATION EXPENSES -- means all expenses incident to the Company's
performance of or compliance with Section 6.1 through Section 6.5 hereof,
inclusive, including, without limitation, all registration and filing fees, fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), expenses of printing certificates
for the Registrable Securities in a form eligible for deposit with Depositary
Trust Company, messenger and delivery expenses, internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
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<PAGE> 32
performing legal or accounting duties), and fees and disbursements of counsel
for the Company and its independent certified public accountants (including the
expenses of any management review, cold comfort letters or any special audits
required by or incident to such performance and compliance), securities acts
liability insurance (if the Company elects to obtain such insurance), the
reasonable fees and expenses of any special experts retained by the Company in
connection with such registration, fees and expenses of other Persons retained
by the Company and fees and expenses of counsel (including local counsel) for
holders of Registrable Securities, selected by the Requisite Holders; but not
including any underwriting fees, discounts or commissions attributable to the
sale of Registrable Securities or fees and expenses of more than one counsel
representing the holders of Registrable Securities or any other selling
expenses, discounts or commissions incurred in connection with the sale of
Registrable Securities.
REPURCHASE DATE -- Section 2.2.
REPURCHASE NOTICE -- Section 2.1.
REPURCHASE PRICE -- means, with respect to each holder of Warrant Shares,
in connection with any repurchase of all the Warrant Shares pursuant to any
Repurchase Notice pursuant to Section 2 of this Agreement, an amount equal to
the sum of:
(a) the product of:
(i) the number of shares of Class B Common Stock purchasable with
the Warrants held by such holder on the date of such Repurchase Notice
and not yet exercised; multiplied by
(ii) the greater of Zero Dollars ($0) and the difference of:
(A) the Share Price of Class B Common Stock determined as of
the date of such Repurchase Notice; minus
(B) the Purchase Price at such time;
plus
(A) the product of:
(i) the number of shares of Class B Common Stock previously
purchased with Warrants and held by the holder thereof on the date of
such Repurchase Notice; multiplied by
(ii) the Share Price of Class B Common Stock determined as of the
date of such Repurchase Notice;
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<PAGE> 33
plus
(c) the product of:
(i) the number of shares of Class A Common Stock held by such
holder on the date of such Repurchase Notice that have been issued
upon the conversion of Class B Common Stock that was issued upon the
exercise of any Warrant; multiplied by
(ii) the Share Price of Class A Common Stock determined as of the
date of such Repurchase Notice.
REQUIRED HOLDERS -- means, at any time, the holders (other than the Company
or any Affiliate or Subsidiary) of at least fifty-one percent (51%) of the
Warrant Shares at such time (excluding any Warrant Shares held directly or
indirectly by the Company or any Affiliate or Subsidiary). For purposes of this
definition, holders of Warrants at any time shall be deemed to be holders of the
Common Stock that is at such time issuable upon exercise in full of such
Warrants, whether or not such holders are then entitled so to exercise such
Warrants pursuant to the terms thereof).
REQUIRED REGISTRATION -- Section 6.1(a).
REQUISITE HOLDERS -- means, with respect to any registration or proposed
registration of Registrable Securities pursuant to Section 6 hereof, any holder
or holders (other than the Company or any Affiliate or Subsidiary) holding at
least fifty-one percent (51%) of the shares of Registrable Securities (excluding
any shares of Registrable Securities directly or indirectly held by the Company
or any Affiliate or Subsidiary) to be so registered.
RESALE DATE - Section 2.4
RIGHT -- means and includes any warrant (including, without limitation, any
Warrant), option or other right, to acquire Common Stock and including, without
limitation, any right pursuant to the provisions of any Security convertible or
exchangeable into Common Stock.
SEC -- means, at any time, the Securities and Exchange Commission or any
other federal agency at such time administering the Securities Act.
SECURITIES ACT -- means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
SECURITY -- means "security" as defined by Section 2(1) of the Securities
Act.
SENIOR DEBT -- means "Senior Debt" as defined in the Note Purchase
Agreement.
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<PAGE> 34
SHARE PRICE -- means, as of any date of determination with respect to any
share of Common Stock of any class, the Fair Value of one share of such Common
Stock, as of the date of determination.
SUBORDINATED NOTES -- Recital C.
SUBSIDIARY -- means, as to any Person, any corporation in which such Person
or one or more Subsidiaries of such Person or such Person and one or more
Subsidiaries of such Person owns sufficient voting securities to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
corporation. The term "Subsidiary," as used herein without reference to any
Person, shall mean a Subsidiary of the Company.
VALUATION AGENT -- means a firm of independent certified public
accountants, an investment banking firm or a securities rating service (which
firm or service shall own no Securities of, and shall not be an Affiliate,
Subsidiary or a related Person of, the Company), in each case, of recognized
national standing retained by the Company and reasonably acceptable to the
Required Holders.
VALUATION EXPENSE -- Section 2.4(b).
VOTING STOCK -- means, with respect to any corporation, any shares of stock
of such corporation whose holders are entitled under ordinary circumstances to
vote for the election of directors of such corporation (irrespective of whether
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
WARRANT -- has the meaning ascribed to such term in the Warrant Agreement.
WARRANT AGREEMENT -- means the Warrant Agreement, dated as of the even date
herewith, among the Company and the Purchasers, pursuant to which the Warrants
were issued, as the same may be amended and modified from time to time.
WARRANT SHARES -- means the following:
(a) any shares of Common Stock that have been issued upon the exercise
of any Warrant;
(b) any shares of Common Stock into which such shares of Common Stock
shall have been converted at any time; and
(c) any shares of Common Stock that are issuable upon the exercise of
the Warrants or the conversion of Common Stock referred to in clause (a) or
clause (b) above.
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<PAGE> 35
For purposes of Section 3 hereof, holders of Warrants at any time shall be
deemed to be holders of Warrant Shares described in clauses (b) and (c) of this
definition that are at such time issuable upon exercise in full of such
Warrants, whether or not such holders are then entitled so to exercise such
Warrants pursuant to the terms thereof.
10. MISCELLANEOUS.
10.1 NOTICES. Notices or demands authorized by this Agreement to be given
or made to the parties hereto shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed as follows, or telexed, telecopied,
or delivered by overnight or other courier to the following addresses:
(a) if to the Company, at:
The Hawk Group of Companies, Inc.
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Attention: Ronald E. Weinberg
TEL: 216-861-4540
FAX: 216-861-4546
or such other address as the Company shall designate in writing;
(b) if to the Management Stockholder, then at the respective addresses
set forth in Annex II hereto;
or such other address as the Management Stockholder shall designate to each
holder of Warrant Shares in writing; and
(c) if to any holder of Warrant Shares, if such holder is a Purchaser,
then at the address set forth in Annex 1 hereto for such Purchaser, or, if
such holder is not a Purchaser, then at the address provided to the Company
by such holder or such other address as such holder shall designate to the
Company in writing.
The Company, upon the written request of any holder of Warrant Shares, will
promptly supply such holder with a list of the names and addresses of each party
hereto at such time.
10.2 AMENDMENTS AND WAIVERS.
(a) The provisions of Section 1, Section 2, Section 3, Section 4,
Section 5, Section 7, Section 8, and Section 10 hereof, and of any term
defined in Section 9 hereof as used in any such Section, may be amended,
modified or supplemented, and compliance with
35
<PAGE> 36
any such Section hereof waived, only by a writing duly executed by or on
behalf of the Required Holders and the Company.
(b) the provisions of Section 6 hereof, and of any term defined in
Section 9 hereof as used in Section 6 hereof, may be amended, modified or
supplemented only by a writing duly executed by or on behalf of the
Required Holders and the Company; provided, however, that compliance by the
Company with the provisions of Section 6 hereof, with respect to any
particular Registration, may be waived by the Requisite Holders with
respect to such Registration.
10.3 AVAILABILITY OF INFORMATION. At any time that any class of the Common
Stock is registered under section 12(b) or section 12(g) of the Exchange Act,
the Company will comply with the reporting requirements of sections 13 and 15(d)
of the Exchange Act (whether or not it shall be required to do so pursuant to
such Sections) and will comply with all other public information reporting
requirements of the SEC from time to time in effect. In addition, the Company
shall file such reports and information, and shall make available to the public
and to the holders of Warrant Shares such information, as shall be necessary to
permit such holders to offer and sell Issuable Shares pursuant to the provisions
of Rules 144 and 144A promulgated under the Securities Act. The Company will
also cooperate with each such holder in supplying such information as may be
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the SEC as a condition to the availability of
an exemption from the registration provisions of the Securities Act in
connection with the sale of any Issuable Shares. The Company will furnish to
each such holder, promptly upon their becoming available, copies of all
financial statements, reports, notices and proxy statements sent or made
available generally by the Company to its stockholders, and copies of all
regular and periodic reports and all registration statements and prospectuses
filed by the Company with any securities exchange or with the SEC.
10.4 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE
INTERNAL LAW OF THE STATE OF CONNECTICUT.
10.5 JURISDICTION; JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
CONNECTICUT STATE COURT SITTING IN CONNECTICUT IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND
INSTRUMENTS CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE OF THE PARTIES HERETO SHALL SEEK
A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION
PROCEDURE BASED UPON OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT OR
ANY OF THE WARRANTS AND EACH OF THE PARTIES HERETO HEREBY WAIVES ANY AND ALL
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RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE
OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY SUCH PROCEEDING
IS BROUGHT IN ACCORDANCE WITH THIS SECTION 10.5.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
10.7 DESCRIPTIVE HEADINGS. Descriptive headings of the several sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
10.8 SEVERABILITY. The fact that any given provision of this Agreement is
found to be unenforceable, void or voidable under the laws of any jurisdiction
shall not effect the validity of the remaining provisions of this Agreement in
such jurisdiction, and shall not effect the enforceability of the entire
Agreement under the laws of any other jurisdiction.
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<PAGE> 38
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered, all as of the date and year first above written.
THE HAWK GROUP OF CONNECTICUT GENERAL LIFE
COMPANIES, INC. INSURANCE COMPANY
By CIGNA Investments, Inc.
By: /s/ Ronald E. Weinberg By: /s/ Claire M. Porter
---------------------------- -------------------------------
Name: Ronald E. Weinberg Name: Claire M. Porter
Title: Vice Chairman of the Board Title: Vice President
/s/ Norman C. Harbert CIGNA MEZZANINE PARTNERS III, L.P.
- ------------------------------- By CIGNA Investments, Inc. (as Agent)
Norman C. Harbert
/s/ Ronald E. Weinberg By: /s/ Claire M. Porter
- ------------------------------- -------------------------------
Ronald E. Weinberg Name: Claire M. Porter
Title: Vice President
/s/ Byron S. Krantz
- -------------------------------
Byron S. Krantz
HAWK CORPORATION
By: /s/ Ronald E. Weinberg
----------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman of the Board
<PAGE> 39
ANNEX 1
NAMES AND ADDRESSES OF PURCHASERS
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
c/o CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division (S-307)
Fax: (203) 726-7203
CIGNA MEZZANINE PARTNERS III, L.P.
c/o CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division (S-307)
Fax: (203) 726-7203
Annex 1-1
<PAGE> 40
ANNEX 2
NAMES AND ADDRESSES OF MANAGEMENT STOCKHOLDER
HAWK CORPORATION
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114
NORMAN C. HARBERT
c/o Hawk Corporation
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114
BYRON S. KRANTZ
Kohrman Jackson & Krantz
20th Floor, One Cleveland Center
Cleveland, Ohio 44114
RONALD E. WEINBERG
Hawk Corporation
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114
Annex 2-1
<PAGE> 41
EXHIBIT A
FORM OF TRANSFEREE UNDERTAKING
[LETTERHEAD OF TRANSFEREE]
[Dated ________]
[Addressed to the Company,
each Other Stockholder at such time and
each holder of Warrant Shares at such time]
Re: The Hawk Group of Companies, Inc. (the "Company") Issuable Shares
Ladies and Gentlemen:
Pursuant to Section 7 of that certain Shareholders' Agreement dated as of
June 30, 1995 (as amended, the "Shareholders' Agreement") between the Company,
the holders of Warrant Shares (as defined therein) and the Management
Stockholders (as defined therein), ________ [name of transferee] (the
"Transferee"), as owner and holder of ________ shares of ________ [type of
Issuable Shares], hereby confirms and agrees that it has assumed and is subject
to the obligations of a Management Stockholder, as provided in the Shareholders'
Agreement.
The address where notices and communications pursuant to Section 10.1 of
the Shareholders' Agreement can be delivered to the Transferee is as follows:
[Transferee]
IN WITNESS WHEREOF, the Transferee executes and delivers this agreement,
as of the date and year first above written.
[TRANSFEREE]
By:
------------------------------
Name:
Title:
Exhibit A-1
<PAGE> 42
HAWK
[LOGO]
November 21, 1996
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
c/o CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division (S-307)
CIGNA MEZZANINE PARTNERS III, L.P.
c/o CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
HAWK CORPORATION
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Hawk Corporation (the "Company," f.k.a. The Hawk Group of Companies,
Inc.) Issuable Shares
Ladies and Gentlemen:
Pursuant to Section 7 of that certain Shareholders' Agreement dated as of
June 30, 1995 (as amended, the "Shareholders' Agreement") between the Company,
the holders of Warrant Shares (as defined therein) and the Management
Stockholders (as defined therein), Harbert Family Limited Partnership, an Ohio
limited partnership (the "Transferee"), as owner and holder of 342,905 shares of
Class A Common Stock, par value $0.01 per share, of the Company, hereby confirms
and agrees that it has assumed and is subject to the obligations of a Management
Stockholder, as provided in the Shareholders' Agreement.
The address where notices and communications pursuant to Section 10.1 of
the Shareholders' Agreement can be delivered to the Transferee is as follows:
Harbert Family Limited Partnership, c/o Hawk Corporation, 200 Public Square,
Suite 29-2500, Cleveland, Ohio 44114-2301.
IN WITNESS WHEREOF, the Transferee executes and delivers this agreement,
as of the date and year first above written.
HARBERT FAMILY LIMITED PARTNERSHIP
By: /s/ Norman C. Harbert
------------------------------
Name: Norman C. Harbert
Title: Managing General Partner
<PAGE> 43
HAWK
[LOGO]
November 21, 1996
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
c/o CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division (S-307)
CIGNA MEZZANINE PARTNERS III, L.P.
c/o CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
HAWK CORPORATION
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Hawk Corporation (the "Company," f.k.a. The Hawk Group of Companies,
Inc.) Issuable Shares
Ladies and Gentlemen:
Pursuant to Section 7 of that certain Shareholders' Agreement dated as of
June 30, 1995 (as amended, the "Shareholders' Agreement") between the Company,
the holders of Warrant Shares (as defined therein) and the Management
Stockholders (as defined therein), Weinberg Family Limited Partnership, an Ohio
limited partnership (the "Transferee"), as owner and holder of 333,800 shares of
Class A Common Stock, par value $0.01 per share, of the Company, hereby confirms
and agrees that it has assumed and is subject to the obligations of a Management
Stockholder, as provided in the Shareholders' Agreement.
The address where notices and communications pursuant to Section 10.1 of
the Shareholders' Agreement can be delivered to the Transferee is as follows:
Weinberg Family Limited Partnership, c/o Hawk Corporation, 200 Public Square,
Suite 29-2500, Cleveland, Ohio 44114-2301.
IN WITNESS WHEREOF, the Transferee executes and delivers this agreement,
as of the date and year first above written.
WEINBERG FAMILY LIMITED PARTNERSHIP
By: /s/ Ronald E. Weinberg
-------------------------------
Name: Ronald E. Weinberg
Title: Managing General Partner
<PAGE> 44
HAWK
[LOGO]
November 21, 1996
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
c/o CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division (S-307)
CIGNA MEZZANINE PARTNERS III, L.P.
c/o CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
HAWK CORPORATION
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: Hawk Corporation (the "Company," f.k.a. The Hawk Group of Companies,
Inc.) Issuable Shares
Ladies and Gentlemen:
Pursuant to Section 7 of that certain Shareholders' Agreement dated as of
June 30, 1995 (as amended, the "Shareholders' Agreement") between the Company,
the holders of Warrant Shares (as defined therein) and the Management
Stockholders (as defined therein), Krantz Family Limited Partnership, an Ohio
limited partnership (the "Transferee"), as owner and holder of 75,505 shares of
Class A Common Stock, par value $0.01 per share, of the Company, hereby confirms
and agrees that it has assumed and is subject to the obligations of a Management
Stockholder, as provided in the Shareholders' Agreement.
The address where notices and communications pursuant to Section 10.1 of
the Shareholders' Agreement can be delivered to the Transferee is as follows:
Krantz Family Limited Partnership, c/o Kohrman Jackson & Krantz P.L.L., One
Cleveland Center, 20th Floor, Cleveland, Ohio 44114.
IN WITNESS WHEREOF, the Transferee executes and delivers this agreement,
as of the date and year first above written.
KRANTZ FAMILY LIMITED PARTNERSHIP
By: /s/ Byron S. Krantz
-----------------------------
Name: Byron S. Krantz
Title: Managing General Partner
<PAGE> 1
EXHIBIT 4.12
STOCKHOLDER'S AGREEMENT
-----------------------
THIS STOCKHOLDERS' AGREEMENT (the "Agreement") is made and entered into
as of the 6th day of June, 1991, by and among HAWK CORPORATION, a Delaware
corporation ("Hawk"), NORMAN C. HARBERT, RONALD E. WEINBERG and BYRON S. KRANTZ
(collectively, the "Principal Stockholders" and each individually a "Principal
Stockholder") and DAN T. MOORE ("Stockholder").
WHEREAS, Hawk has authorized capital stock consisting of 1,000 shares
of common stock, $.01 par value;
WHEREAS, Stockholder, in accordance with a Stock Subscription Agreement
of even date herewith (the "Stock Purchase Agreement"), has become the legal and
beneficial owner of ten (10) shares of common stock of Hawk (the "Stock");
WHEREAS, the Principal Stockholders own in the aggregate 734 shares of
common stock;
WHEREAS, the parties believe that it is in their best interest to make
provisions for the future disposition of the Stock held by Stockholder and
certain other matters; and
WHEREAS, the parties desire to set forth their understandings and
agreements in writing.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
promises hereinafter set forth and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. REPRESENTATIONS AND WARRANTIES IN CONNECTION WITH PURCHASE OF
STOCK. Stockholder hereby represents and warrants to Hawk that:
A. He is aware that no market exists for the resale of the
Stock, nor is it anticipated that a market will develop, and that he may be
required to hold the Stock indefinitely.
B. He is purchasing the Stock for investment and not for
distribution or resale.
C. He has reviewed, is aware of, and understands all restrictions
imposed upon further distribution or resale of the Stock, including the fact
that the certificates representing
<PAGE> 2
its shares of Stock will bear the legends set forth in Paragraph 9 hereof, and
he has reviewed all restrictions imposed by (i) the Certificate of Incorporation
and any amendments thereto; (ii) the Tag Along Agreement by and between Hawk and
Stockholder of even date herewith (the "Tag Along Agreement"); and (iii) the
Irrevocable Proxy executed by Stockholder in favor of the Principal Stockholders
of even date herewith (the "Proxy"). He is aware of the fact that no federal or
state agency has made any finding or determination as to the fairness for public
or private investment, nor have they made any recommendation or endorsement of
the securities of Hawk for investment.
E. He has reviewed the financial records of Hawk and is aware of
what other persons subscribing for securities of Hawk are paying for said
securities and is aware of the book value of the securities of Hawk.
F. He has made a thorough investigation of Hawk and has
independently evaluated the risk and rewards of owning securities in Hawk.
2. A. SCOPE OF AGREEMENT. This Agreement shall govern all transfers
of shares of Stock (now owned or hereafter acquired) by Stockholder, whether
voluntary, involuntary, by operation of law and shall supersede in all respects
all prior agreements, oral or written, relating to the Stock; provided, however,
that this Agreement shall not supersede any agreement executed contemporaneously
herewith, including (but not limited to) the Stock Subscription Agreement, the
Tag Along Agreement and the Proxy.
B. TRANSFERS TO IMMEDIATE FAMILY MEMBERS AND OTHERS BY PRINCIPAL
STOCKHOLDERS. Neither the Stockholder nor any Principal Stockholder shall be
precluded by the terms of this Agreement from transferring all or any part of
the shares of common stock of Hawk now owned or hereafter acquired by such
person to "Immediate Family Members", provided, however, that all of the
provisions of this Agreement shall continue to apply to the shares and to the
holder thereof, and provided further, however, that no such transfer shall be
made or be effective unless and until the transferee of such shares becomes a
party to this Agreement pursuant to Paragraph 6 hereof. "Immediate Family
Members" shall include each parent, spouse, child, brother, sister or the spouse
of a child, brother or sister of the individual, and each trust created for the
benefit of one or more of such persons and each custodian of property of one or
more such persons. The parties further agree that a transfer by the Stockholder
or a Principal Stockholder of the shares of Common Stock of Hawk into any
401(k), individual retirement account ("IRA") or other retirement or pension
plan shall not violate the terms and provisions of this Agreement, provided,
-2-
<PAGE> 3
however, that no such transfer shall be made or be effective unless and until
the transferee becomes a party to and agrees to be bound by the terms and
provisions of this Agreement and other agreements as provided in Paragraph 6.
3. A. RIGHT OF FIRST REFUSAL BY HAWK AND PRINCIPAL STOCKHOLDERS.
(i) In the event that Stockholder receives a Bona Fide
Offer (as hereinafter defined) to purchase all or a portion of his shares of
stock of Hawk and it is willing to accept such Bona Fide Offer, Stockholder
shall offer to sell such shares of stock to Hawk at the same price and upon the
same terms and conditions as are contained in the Bona Fide Offer by promptly
sending Notice of Sale (as hereinafter defined) to Hawk and the Principal
Stockholders.
(ii) For a period of ten (10) days from receipt of
the Notice of Sale pursuant to Section 3.B.(ii), Hawk shall have the right, at
its option, to purchase all (but not less than all) the shares of stock so
offered at the same price and on the same terms and conditions as set forth in
the Bona Fide Offer, by delivery of notice to such effect to Stockholder. If
Hawk shall not elect to purchase all the shares of stock offered within such ten
(10) day period for any reason whatsoever, then the Principal Stockholders of
Hawk on the date of the Notice of Sale shall have the right, at their option,
for a period of ten (10) days after the expiration of such ten (10) day period,
to purchase all (but not less than all) the shares of stock offered by
Stockholder at the same price and upon the same terms and conditions as are
contained in the Bona Fide Offer; PROVIDED, however, that each Principal
Stockholder shall purchase said shares in proportion to the number of shares
owned by him relative to the shares owned by all the Principal Stockholders,
such proportion being determined immediately prior to the exercise of the
purchase option in question. Any Principal Stockholder who does not desire to
purchase all of the shares to which he is entitled pursuant to the provisions
contained in this section shall be deemed to have assigned and does hereby
assign his right to purchase said shares proportionately to the other Principal
Stockholders. (Hawk and the Principal Stockholders shall collectively be
referred to as "Buyers" and may individually be referred to as "Buyer".)
(iii) Hawk shall, within the time period set forth in
Section 3.A.(ii) send to Stockholder either a notice of acceptance
("Acceptance") stating that it elects to purchase all the shares of stock
offered by Stockholder, or a notice of refusal ("Refusal") stating that it
elects to purchase no shares of stock offered by Stockholder. Hawk shall
promptly send a copy of any Refusal to each Principal Stockholder.
-3-
<PAGE> 4
The Principal Stockholders shall, within the time period set
forth in Section 3.A.(ii), send to Stockholder either an Acceptance that they as
a group elect to purchase all the shares of stock offered by Stockholder or a
Refusal that they as a group elect to purchase no shares of stock offered by
Stockholder.
(iv) The parties agree that during either option
period referred to in Section 3.A.(ii) Hawk and Principal Stockholders may agree
between themselves to purchase all (but not less than all) the shares of stock
offered by Stockholder.
(v) Notwithstanding any provision to the contrary
contained herein, if Stockholder shall not have timely received from Hawk or the
Principal Stockholders, or both, an Acceptance for the purchase of all shares at
issue by the end of the second option period set forth in Section 3.A.(ii),
(whether the reason for failure to deliver a Notice of Acceptance is the belief
that the offer to purchase is not a Bona Fide Offer because the Bona Fide
Offeror is allegedly financially incapable of carrying out the terms of such
offer, or otherwise), Hawk and Principal Stockholders shall be deemed to have
waived any and all rights with respect to Stockholder's sale of stock as set
forth in the Notice of Sale, and Stockholder shall be free to sell such shares
to the Bona Fide Offeror.
B. BONA FIDE OFFER; NOTICE OF SALE.
(i) The term "Bona Fide Offer" shall mean an offer, in writing,
signed by an offeror or offerors, who must be a person or entity financially
capable of carrying out the terms of such Bona Fide Offer ("Bona Fide Offeror"),
which may contain conditions, contingencies and provisions as are reasonable or
customary in stock purchase transactions. The term "Notice of Sale" as used
herein shall mean a notice containing a true and complete copy of the Bona Fide
Offer, setting forth the price and all terms and conditions, with the name(s),
address(es), both home and office, and business(es) or other occupation(s) of
the offeror or offerors. Any Notice of Sale which does not contain substantially
all such requisite information shall not meet the requirements of this Paragraph
3.
(ii) Whenever, in this Agreement, the term "Notice of Sale,"
"Acceptance" or "Refusal" is used, such term shall mean notice sent in
accordance with Paragraph 8.
C. RESTRICTION ON SALES TO BONA FIDE OFFEROR. Until Hawk or the
Principal Stockholders, as the case may be, have exercised their rights of first
refusal, as herein provided, or until Stockholder has consummated his sale to
the Bona Fide Offeror in the event any of the subject shares are not purchased
by the Buyers pursuant to their rights of first refusal, Buyers
-4-
<PAGE> 5
shall be prohibited from contacting, offering to sell, or selling their shares
of common stock of Hawk to any such Bona Fide Offeror so identified by
Stockholder.
D. SETTLEMENT AND COMPLIANCE.
(i) Settlement shall be held on the purchase of shares of Stock
within 10 days after the end of the option period provided for herein or on such
other date as the Buyer(s) and Stockholder may agree. At settlement, the party
exercising the option to purchase shall deliver cash or certified check or bank
check to Stockholder, which party shall deliver to the purchaser the original
certificate evidencing Stockholder's ownership of the shares, duly endorsed for
transfer, signature guaranteed.
(ii) Strict compliance shall be required with each and every
provision of this Agreement it being understood and agreed that Stockholder
shall not have the right or power to sell or assign any shares of common stock
of Hawk, or any interest therein, except as provided in this Agreement.
4. AGREEMENT BINDING UPON TRANSFEREES. In the event that, at any
time or from time to time, any shares of common stock of Hawk are transferred to
any party pursuant to and in accordance with the provisions of this Agreement,
the transferee shall take such shares of common stock pursuant to all
provisions, conditions and covenants of this Agreement, and, as a condition
precedent to the transfer of such shares of common stock, the transferee shall
agree (for and on behalf of himself or itself, his or its legal representatives
and his or its transferees and assigns) in writing to be bound, as the
transferor hereunder is bound, by all provisions of this Agreement as a party
hereto. Stockholder agrees that in the event he desires to make a transfer
within the provisions hereof, Stockholder shall furnish to Hawk evidence of his
compliance with this Agreement as may be required by the Board of Directors of,
counsel for, or governing body of, Hawk.
5. PUT.
A. Effective upon the sixth anniversary of the date of this
Agreement and continuing for a twenty-four month period thereafter, Stockholder
shall have the right, at his option, to demand the purchase by Hawk (the "Put")
of all, but not less than all, of the Stock of Hawk owned of record or
beneficially by Stockholder (the "Put Shares"), upon the terms and conditions
set forth in this Paragraph 5. At the closing of the purchase and sale of the
Put Shares, Stockholder, upon payment of the Put Purchase Price (as defined in
Paragraph 5.C below), will deliver to Hawk the certificates for the Put Shares
duly endorsed for transfer with signatures guaranteed.
-5-
<PAGE> 6
Notwithstanding the foregoing, Stockholder may exercise the Put only in the
event Hawk or The Hawk Group of Companies, Inc. has not had, or is not in the
process of, a public offering of its Common Stock or securities, as the case may
be, by the filing of a registration statement under the Securities Act of 1933,
as amended (the "Act").
B. In order to exercise the Put, Stockholder shall provide
written notice of such exercise to Hawk of its desire to do so, which notice
must be sent to Hawk in accordance with Paragraph 8 ("Put Notice").
C. The per share purchase price to be paid by Hawk for
each of the Put Shares ("Put Purchase Price") shall be an amount equal to (A)
the "Hawk Group Purchase Price" (as hereinafter defined), multiplied by (B) the
result obtained upon dividing (i) the number of shares of The Hawk Group of
Companies, Inc. ("Hawk Group") owned by Hawk by (ii) the total number of
outstanding shares of Hawk Group, on a fully diluted basis, including shares
exercisable upon the exercise of all outstanding warrants to purchase Hawk Group
common stock PLUS (C) Hawk's investment in Hawk Group preferred stock LESS (D)
Hawk's indebtedness, divided by (E) the total number of outstanding shares of
Hawk on a fully diluted basis. The "Aggregate Purchase Price" shall be an amount
equal to the product obtained by multiplying the Put Purchase Price by the
number of Put Shares being sold.
The "Hawk Group Purchase Price" shall be an amount (as of the most
recently completed twelve-month period ended December 31) equal to the product
obtained by multiplying eight and one-half (8 1/2) by (i) the "EBDIT" of The
Hawk Group of Companies, Inc. (earnings before depreciation and amortization,
interest and income taxes), LESS (ii) the sum of debt, preferred stock and
accrued preferred stock dividends reduced by warrant exercise proceeds and cash.
D. The Aggregate Purchase Price shall be paid by Hawk as follows:
(i) in the event the Aggregate Purchase Price is greater than the amount paid
for the Put Shares initially, $20,300 per share multiplied by the number of Put
Shares (the "Initial Purchase Price"), an amount equal to the Initial Purchase
Price shall be paid on the closing of the Put in immediately available funds and
the remainder of the Aggregate Purchase Price, (A) if twenty-five percent (25%)
or less than the Aggregate Purchase Price, shall be paid on the first year
anniversary of the closing of the Put, (B) if less than fifty percent (50%) but
greater than twenty-five percent (25%) of the Aggregate Purchase Price, shall be
paid in two equal annual installments on the first and second year
anniversaries of the closing of the Put, and (C) if greater than fifty percent
(50%) of the Aggregate Purchase Price, shall be paid in three equal
-6-
<PAGE> 7
annual installments on the first, second and third year anniversaries of the
closing of the Put, together with accrued and unpaid interest at the prime rate
of interest announced by National City Bank, Cleveland, Ohio as of the closing
of the Put which interest shall commence to accrue on the closing of the Put;
the foregoing obligation to be evidenced by promissory note(s) in favor of
Stockholder, and (ii) in the event the Aggregate Purchase Price is less than or
equal to the Initial Purchase Price of the Put Shares, the Aggregate Purchase
Price shall be paid on the closing of the Put in immediately available funds.
E. Notwithstanding any provision to the contrary contained herein,
the Principal Stockholders hereby jointly and severally guarantee
unconditionally the payment and performance obligations of Hawk under this
Paragraph 5. The Principal Stockholders further covenant and agree as follows:
(i) All obligations of the Principal Stockholders hereunder
shall remain in full force and effect until all of the duties and obligations of
Hawk under Paragraph 5 have been met in full.
(ii) Upon the occurrence of a default in payment under this
Paragraph 5, Stockholder may proceed hereunder and shall have the right to
proceed first and directly against the Principal Stockholders without proceeding
against or exhausting any other remedies which Stockholder may have.
(iii) This guaranty is an unconditional and absolute guaranty,
irrespective of the validity or enforceability of the Agreement in which it is
contained, or any circumstances which might otherwise constitute a legal or
equitable discharge or defense of the Principal Stockholders.
(iv) Stockholder shall not be deemed, by any act of omission
or commission, to have waived any of his rights or remedies hereunder unless
such waiver is in writing. A waiver with reference to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to
any subsequent event.
(v) All terms, provisions, and agreements contained in this
Paragraph shall inure to the benefit of and be enforceable by Stockholder, his
successors and assigns, and shall be binding upon the Principal Stockholders and
their respective successors and assigns.
6. PARTIES TO DO ALL ACTS NECESSARY TO TRANSFER PURSUANT TO
THE TERMS OF THIS AGREEMENT. The parties agree that in the event Stockholder's
Stock is transferred pursuant to the terms and conditions of this Agreement,
each party will execute
-7-
<PAGE> 8
all documents, deliver all certificates, assignments, releases, consents,
instruments and other documents and perform all acts required to effectuate said
transaction.
7. SUBMISSION TO JURISDICTION. The parties agree that failure of
any party to observe the obligations provided by this Agreement will result in
irreparable damage to the non-defaulting party and that specific performance of
these obligations may be sought by the non-defaulting party in any state or
federal court having subject matter jurisdiction and located in Cleveland, Ohio.
For the purpose of any action or proceeding instituted with respect to this
Agreement, Stockholder hereby irrevocably submits to the jurisdiction of such
courts. Stockholder further irrevocably consents to the service of process out
of said courts by mailing a copy thereof, by registered mail, postage prepaid,
to Stockholder at the address set forth below or at the address furnished to the
other parties hereto in the manner provided in Paragraph 8 hereof and
Stockholder agrees that such service, to the fullest extent permitted by law (i)
shall be deemed in every respect effective service of process upon him in any
such suit, action or proceeding and (ii) shall be taken and held to be valid
personal service upon and personal delivery to him. Nothing herein contained
shall affect the right of Hawk to serve process in any other manner permitted by
law or preclude Hawk from bringing an action or proceeding in respect hereof in
any other country, state, county or place having jurisdiction over such action.
Stockholder hereby irrevocably waives, to the fullest extent permitted by law,
any objection which he may have or hereafter have to the laying of the venue of
any such suit, action or proceeding brought in any such court located in
Cleveland, Ohio and any claim that any such suit, action or proceeding brought
in such a court has been brought in an inconvenient forum.
8. NOTICES. All notices or other forms of communication provided
for herein shall be given in writing and sent by registered or certified U.S.
mail, return receipt requested, first-class postage prepaid, and to such party
at the address set forth below unless notice of a change of address is
furnished to all other parties in the manner provided in this Paragraph 8.
If to Hawk or the Hawk Corporation
Principal Stockholders: BP America Building
Suite 29-2500
200 Public Square
Cleveland, Ohio 44114
Attn: Ronald E. Weinberg
-8-
<PAGE> 9
With a Copy to: Kohrman Jackson & Krantz
One Cleveland Center
20th Floor
1375 East 9th Street
Cleveland, Ohio 44114
Attn: Byron S. Krantz
If to Stockholder: Dan T. Moore
820 Superior Avenue
Suite 800
Cleveland, Ohio 44113
With a Copy to: Calfee, Halter & Griswold
1800 Society Building
Cleveland, Ohio 44114
Attn: John Paul Batt
9. ENDORSEMENT ON STOCK CERTIFICATES. Hawk shall include on each
certificate representing the Stock (including any shares of common stock of Hawk
hereafter acquired by Stockholder) an appropriate investment warranty legend
and, in addition thereto, a statement in substantially the following form:
The encumbering, transfer or other disposition of the shares of stock
evidenced by the within Certificate is restricted under the terms of
that certain Stockholders' Agreement dated June 6, 1991 by and between
Hawk Corporation, Norman C. Harbert, Ronald E. Weinberg, Byron S.
Krantz and Dan T. Moore, a copy of which agreement is on file at the
principal office of Hawk Corporation. Upon the written request of the
holder hereof, Hawk Corporation shall furnish a copy of such agreement,
without charge.
10. Termination of Agreement. This Agreement shall terminate upon
the occurrence of either of the following events:
A. The purchase by Hawk and/or Principal Stockholders of
all the shares of Stock owned by Stockholder and the payment in full therefor;
or
B. The agreement of all the parties hereto.
Upon the termination of this Agreement, Stockholder shall surrender to
Hawk the stock certificates representing his shares of Stock which bear the
restrictive endorsement referred to in Paragraph 9 hereof, and Hawk shall issue
a new certificate in lieu thereof for an equal number of shares without the
restrictive endorsement referred to in Paragraph 9.
-9-
<PAGE> 10
11. INVALID OR UNENFORCEABLE PROVISIONS. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted.
12. AMENDMENTS. No change in, modification of or amendment to
this Agreement shall be valid unless the same is in writing and signed by all
parties hereto. No waiver of any provision of this Agreement shall be valid
unless in writing and signed by the person against whom it is sought to be
enforced. The failure of any party at any time to insist upon strict performance
of any condition, promise, agreement and understanding set forth herein shall
not be construed as a waiver or relinquishment of the right to insist upon
strict performance of the same condition, promise, agreement or understanding at
a future date.
13. GOVERNING LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Ohio.
14. EXECUTION IN COUNTERPARTS. 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.
15. ENTIRE AGREEMENT. Except for the terms of the Tag Along
Agreement and the Proxy, this Agreement sets forth all of the promises,
agreements, conditions, understandings, warranties and representations between
the parties hereto with respect to the subject matter hereof and this Agreement
revokes all prior agreements or understandings with respect to the subject
matter hereof and is, and is intended to be, an integration of any and all prior
agreements or understandings, oral or written, with respect to the subject
matter hereof.
- 10-
<PAGE> 11
Dated the day and year first above set forth.
HAWK CORPORATION
By: /s/ Ronald E. Weinberg
______________________________
Its: Chm.
______________________________
/s/ Ronald E. Weinberg
______________________________________
Ronald E. Weinberg
/s/ Norman C. Harbert
______________________________________
Norman C. Harbert
/s/ Byron S. Krantz
______________________________________
Byron S. Krantz
/s/ Dan T. Moore
______________________________________
Dan T. Moore
- 11 -
<PAGE> 1
EXHIBIT 4.13
HAWK
[LOGO]
November 1, 1996
Mr. Norman C. Harbert
and Mr. Ronald E. Weinberg
c/o Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Byron S. Krantz, Esq.
c/o Kohrman Jackson & Krantz P.L.L.
One Cleveland Center, 20th Floor
Cleveland, Ohio 44114
Mr. Dan T. Moore, III
c/o Dan T. Moore Company
127 Public Square, Suite 3010
Cleveland, Ohio 44114
Re: AMENDMENT OF STOCKHOLDER'S AGREEMENT
Gentlemen:
This letter will amend that certain Stockholder's Agreement, dated as
of June 6, 1991, by and among Hawk Holding Corp., a Delaware corporation f.k.a.
Hawk Corporation ("Hawk Holding"), Norman C. Harbert, Ronald E. Weinberg and Dan
T. Moore (the "Agreement"), effective upon the closing of the private placement
of 10 1/4% Senior Notes due 2003 by Hawk Corporation, a Delaware corporation
f.k.a. The Hawk Group of Companies, Inc. ("Hawk"), in order to facilitate the
proposed merger of Hawk Holding with and into Hawk (the "Hawk Merger") pursuant
to which Hawk will assume the obligations of Hawk Holding under the Agreement.
Unless otherwise provided herein or the context requires otherwise, capitalized
terms used herein without definition shall have the meanings assigned to them in
the Agreement.
1. Notwithstanding the preamble and first three recitals of the
Agreement, all references in the Agreement to "Stock" owned by Stockholder shall
refer to any shares of Class A Common Stock, par value $0.01 per share, of Hawk
Corporation, a Delaware corporation f.k.a. The Hawk Group of Companies, Inc.,
now or hereafter owned by Stockholder, and (ii) unless the context requires
otherwise, all references to "Hawk" or "The Hawk Group of Companies" in the
Agreement shall refer to Hawk Corporation, a Delaware corporation f.k.a. The
Hawk Group of Companies, Inc. Following the Hawk Merger, Stockholder will be the
legal and beneficial owner of 3,161 shares of Stock.
<PAGE> 2
Mr. Norman C. Harbert
Mr. Ronald E. Weinberg
Mr. Dan T. Moore, III
November 1, 1996
Page 2
- -------------------------------
2. The following subsection (F) is hereby added to Paragraph 5 of the
Agreement:
"F. Notwithstanding anything contained in this Paragraph 5 to
the contrary, Hawk shall not be obligated to purchase all of the Put
Shares or obligated to pay the Put Purchase Price in respect of a Put
Notice, if, at any time:
(i) payment of the Put Purchase Price at such time
would result in a breach of, or default or event of default in respect
of, Hawk's revolving credit facility with BT Commercial Corporation,
subordinated debt in favor of Connecticut General Life Insurance
Company and CIGNA Mezzanine Partners III, L.P., 10 1/4% Senior Notes
due 2003 or any indebtedness incurred in substitution or replacement of
any of the foregoing indebtedness without the advance written consent
of the holders of such indebtedness, the consent of which would be
necessary to waive such breach, default or event of default; or
(ii) payment of the Put Purchase Price is, at such
time, prohibited by applicable law or Hawk's Certificate of
Incorporation, as restated and/or amended from time to time;
provided, however, that if such breach, event of default, default or
violation would not result from the purchase of any number of Put
Shares which is less than the total number of Put Shares that Hawk is
obligated to purchase pursuant to a Put Notice, then the Company shall
purchase the maximum number of Put Shares that it may so purchase; and
provided further, however, that the Principal Stockholders shall in
such event purchase the number of Put Shares that Hawk is not so
obligated to purchase, or pay such portion of the Put Purchase Price as
Hawk is not obligated to pay, in accordance with the provisions of
Paragraph 5(E) above."
3. Paragraph 5(C) of the Agreement is hereby amended and restated in
its entirety as follows:
"C. The per share purchase price to be paid by Hawk for each
of the Put Shares ("Put Purchase Price") shall be an amount equal to
(i) the "Hawk Purchase Price" (as hereinafter defined), multiplied by
(ii) the result obtained by dividing (a) the number of shares of Stock
then owned by Stockholder by (b) the total number of shares of Stock
then outstanding on a fully diluted basis, including shares issuable
upon the exercise of all outstanding warrants to purchase Stock. The
"Aggregate Purchase Price" shall be an amount equal to the product
obtained by multiplying the Put Purchase Price by the amount of Put
Shares being sold.
The "Hawk Purchase Price" shall be an amount (as of the most
recently completed twelve-month period ended December 31) equal to the
difference between
<PAGE> 3
Mr. Norman C. Harbert
Mr. Ronald E. Weinberg
Mr. Dan T. Moore, III
November 1, 1996
Page 3
- ------------------------
(i) the product obtained by multiplying eight and one-half (8.5) by the
"EBDIT" of Hawk (earnings before depreciation and amortization,
interest and income taxes), and (ii) the sum of debt, preferred stock
and accrued preferred stock dividends reduced by warrant exercise
proceeds and cash."
Please acknowledge the foregoing by signing the enclosed copy of this
letter below and returning it to me in the enclosed envelope as soon as
possible.
Very truly yours,
HAWK HOLDING CORP.
By: /s/ Byron S. Krantz
--------------------------------
Byron S. Krantz, Secretary
Enclosure
ACKNOWLEDGED AND AGREED:
/s/ Norman C. Harbert
- ---------------------------------
Norman C. Harbert
/s/ Ronald E. Weinberg
- ---------------------------------
Ronald E. Weinberg
/s/ Byron S. Krantz
- ---------------------------------
Byron S. Krantz
/s/ Dan T. Moore, III
- ---------------------------------
Dan T. Moore, III
<PAGE> 1
EXHIBIT 4.14
THE ENCUMBERING, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY
THIS CERTIFICATE IS RESTRICTED UNDER THE TERMS OF THAT CERTAIN SHAREHOLDERS'
AGREEMENT DATED AS OF JUNE 30, 1995, AS MAY BE AMENDED FROM TIME TO TIME, THE
PROVISIONS OF WHICH ARE HEREIN INCORPORATED BY REFERENCE. SUCH SHAREHOLDERS'
AGREEMENT PROVIDES, AMONG OTHER THINGS, THAT THIS SECURITY MAY NOT BE SOLD OR
TRANSFERRED TO ANY PERSON WHO HAS NOT EXPRESSLY ASSUMED THE OBLIGATIONS OF SUCH
AGREEMENT AND CONTAINS, AMONG OTHER PROVISIONS, PROVISIONS WHICH COULD LIMIT THE
TRANSFER OF THIS SECURITY. A COPY OF THIS AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY. UPON THE WRITTEN REQUEST OF THE HOLDER HEREOF, THE
COMPANY SHALL FURNISH A COPY OF SUCH AGREEMENT, WITHOUT CHARGE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
A TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
FORM OF WARRANT CERTIFICATE
THE HAWK GROUP OF COMPANIES, INC.
No. WR-_____ __________ Warrants
Date: June 30, 1995 PPN: __________
This Warrant Certificate certifies that CIG & CO., or registered
assigns, is the registered holder of _________________________ Warrants. Each
Warrant entitles the owner thereof to purchase at any time on or prior to 5:00
p.m. Eastern Time on June 30, 2005 (the "Expiration Date"), one (1) fully paid
and nonassessable share of Class B Common Stock of THE HAWK GROUP OF COMPANIES,
INC. (together with its successors and assigns, the "Company"), a Delaware
corporation, at a Purchase Price of one cent ($.01) upon presentation and
surrender of this Warrant Certificate with a form of election to purchase duly
executed and delivery to the Company of the payment of the Purchase Price in the
manner set forth in the Warrant Agreement. The number of shares of Class B
Common Stock that may be purchased upon exercise of each Warrant and the
Purchase Price are the number and the Purchase Price as of the date hereof, and
are subject to adjustment as referred to below.
The Warrants are issued pursuant to the Warrant Agreement (as it may
from time to time be amended or supplemented, the "Warrant Agreement"), dated as
of June 30, 1995, among the Company and the Purchasers (as defined therein), and
are subject to all of the terms, provisions and conditions thereof, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the
<PAGE> 2
rights, obligations, duties and immunities of the Company and the holders of the
Warrant Certificates. Capitalized terms used, but not defined, herein have the
respective meanings ascribed to them in the Warrant Agreement.
As provided in the Warrant Agreement, the Purchase Price and the number
of shares of Class B Common Stock that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. As further set forth in,
and subject to, the Warrant Agreement, the expiration date of this Warrant
Certificate is 5:00 p.m. Eastern Time on June 30, 2005.
This Warrant Certificate shall be exercisable, at the election of the
holder, either as an entirety or in part from time to time. If this Warrant
Certificate shall be exercised in part, the holder shall be entitled to receive,
upon surrender hereof, another Warrant Certificate or Warrant Certificates for
the number of Warrants not exercised. This Warrant Certificate, with or without
other Warrant Certificates, upon surrender in the manner set forth in the
Warrant Agreement, may be exchanged for another Warrant Certificate or Warrant
Certificates of like tenor evidencing Warrants entitling the holder to purchase
a like aggregate number of shares of Class B Common Stock as the Warrants
evidenced by the Warrant Certificate or Warrant Certificates surrendered shall
have entitled such holder to purchase.
Except as expressly set forth in the Warrant Agreement, no holder of
this Warrant Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of shares of Class B Common Stock or of any
other Securities of the Company that may at any time be issued upon the exercise
hereof, nor shall anything contained in the Warrant Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
holder of a share of Class B Common Stock in the Company or any right to vote
upon any matter submitted to holders of shares of Class B Common Stock at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of Securities,
change of par value, consolidation, merger, conveyance, or otherwise) or, except
as provided in the Warrant Agreement, to receive notice of meetings, or to
receive dividends or subscription rights, or otherwise, until the Warrant or
Warrants evidenced by this Warrant Certificate shall have been exercised as
provided in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE STATE OF CONNECTICUT.
2
<PAGE> 3
WITNESS the signature of a proper officer of the Company as of the date
first above written.
THE HAWK GROUP OF COMPANIES, INC.
By:
------------------------------
Name:
Title:
3
<PAGE> 4
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE)
FOR VALUE RECEIVED, _______________________________________ hereby
sells, assigns and transfers unto
- ----------------------------------------------------------------------------
(Please print name and address of transferee.)
the accompanying Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint:
------------------------------------------------------------------------------
attorney, to transfer the accompanying Warrant Certificate on the books of the
Company, with full power of substitution.
Dated: ____________________, ________.
[HOLDER]
By ________________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the accompanying Warrant Certificate or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
4
<PAGE> 5
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO EXERCISE THE WARRANT CERTIFICATE)
To THE HAWK GROUP OF COMPANIES, INC.:
The undersigned hereby irrevocably elects to exercise
______________________________ Warrants represented by the accompanying Warrant
Certificate to purchase the shares of Class B Common Stock issuable upon the
exercise of such Warrants and requests that certificates for such shares be
issued in the name of:
- -------------------------------------------------------------------------------
(Please print name and address.)
- -----------------------------------------------------------
(Please insert social security or other identifying number.)
If such number of Warrants shall not be all the Warrants evidenced by the
accompanying Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Warrants shall be registered in the name of and delivered to:
- ------------------------------------------------------------------------------
(Please print name and address.)
- -----------------------------------------------------------
(Please insert social security or other identifying number.)
Dated: __________________, ______.
[HOLDER]
By__________________________________
NOTICE
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of the accompanying Warrant Certificate or any
prior assignment thereof in every particular, without alteration or enlargement
or any change whatsoever.
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this
1st day of November, 1996, by and between HAWK CORPORATION, a Delaware
corporation ("Employer"), and NORMAN C. HARBERT ("Employee").
1. EMPLOYMENT. Employer hereby employs Employee and Employee agrees to be
employed by Employer for a period commencing on November 1, 1996 and terminating
on December 31, 2004. Such period, together with the period of any extension or
renewal upon the mutual agreement of Employer and Employee, of such employment
is herein referred to as the "Employment Period."
2. COMPENSATION AND BENEFITS. Provided that Employee's employment hereunder
is not terminated in accordance with this Agreement, during the Employment
Period Employee shall receive as compensation:
(a) Salary: Salary at the annual rate of $395,000, payable not less
frequently than semi-monthly (as adjusted from time to time, "Base Wages").
(b) Employee Benefit Programs: Employee shall have the right to
participate, subject to any applicable eligibility requirements, in all
corporate employee benefit programs offered to executive employees by Employer
and any other plans made available by Employer in the future to its executives
and key management employees, including, if any, Employer's 401(k) plan and
health and life insurance programs.
(c) Executive Bonus Plan: Employee shall receive a bonus for fiscal
year 1996, and for each year thereafter throughout the Employment Period, based
on the incentive compensation program in effect for the Employer and its
subsidiaries, Friction Products Co. and
<PAGE> 2
Logan Metal Stampings, Inc., consistent with their respective customary and
historical executive incentive compensation programs. Throughout the Employment
Period, Employee shall also be entitled to receive a bonus under the executive
incentive compensation program to be developed and implemented for each of
Employer's other subsidiaries, Helsel, Inc. and S.K. Wellman, each of which
shall be based upon the creation of an executive bonus pool derived from all
earnings which exceed certain targeted amounts, which targeted amounts are to be
determined by each of the boards of directors of Helsel, Inc. and S.K. Wellman
Corp. (or the compensation committees thereof), as the case may be, and which
executive bonus pool shall be 27.5% to 30% of the available bonus pool.
(d) Business Expenses: Employer shall promptly reimburse Employee for
all reasonable and necessary business expenses incurred by Employee on behalf of
Employer and its parent, wholly-owned subsidiaries or affiliated entities during
the Employment Period. Employee shall submit to Employer appropriate expense
reports that detail such expenses and includes copies of receipts where
appropriate.
(e) Automobile Expenses: Employee shall be entitled to receive a car
allowance in the amount of $950 per month, payable semi-monthly. Employer shall
provide property and liability insurance on Employee's automobile and reimburse
Employee for the reasonable maintenance and repair costs incurred with respect
to Employee's automobile.
3. ADJUSTMENTS TO COMPENSATION.
(a) The Board of Directors of Employer ("Board"), or the Compensation
Committee thereof, will review Employee's Base Wages no less than annually at
which time it will determine increases to Employee's Base Wages.
- 2 -
<PAGE> 3
(b) Employee hereby authorizes Employer to withhold and withdraw from
amounts payable to Employee under this Agreement all applicable amounts required
by federal, state and local laws.
4. DUTIES. Employee shall, during the Employment Period, serve as the
Chairman of the Board, President and Chief Executive Officer of Employer. During
the Employment Period, Employee shall perform such duties and responsibilities
as are customarily assigned to the Chairman of the Board, President and Chief
Executive Officer, including overseeing the strategic development and
profitability of the business, and Employee shall be primarily responsible for
all day-to-day management and operational matters. Employee shall be required to
devote substantially all of his time and efforts to the business and affairs of
Employer, provided that Employee may (i) serve on the boards of directors of
other companies and on the boards of trustees of charitable organizations, and
(ii) devote a portion of his time and efforts to the making and management of
personal investments, in each case for so long as Employee continues to
substantially perform his duties and functions hereunder to the best of his
ability and skill in such a manner as to promote the best interests of Employer.
Employee further agrees to serve as a director on the boards of directors of
Employer's parent, subsidiaries or affiliated entities and in one or more
executive offices of any of Employer's parent, subsidiaries or affiliated
entities.
5. LIMITATIONS ON AUTHORITY.
(a) Notwithstanding anything else herein contained, Employee shall
adhere to the written limitations on authority as issued from time to time by
the Board. Nothing contained herein shall be deemed to restrict the power of the
Board to limit the authority of Employee. Any violation
- 3 -
<PAGE> 4
of the terms of this Section 5(a) shall be deemed to be a material violation of
a provision of this Employment Agreement.
(b) Notwithstanding anything else herein contained, the parties agree
that any of the matters set forth below shall be determined by Employee and
Ronald E. Weinberg ("Weinberg") jointly:
(i) The (A) hiring and termination of all key management
employees; (B) evaluations of key management employees together with
salary reviews; and (C) increases in compensation of key management
employees;
(ii) The entering into and/or execution of contracts, agreements,
joint ventures and other commitments which would have a material
effect on the business, financial condition and affairs, properties,
assets, obligations, and operation of Employer and its subsidiaries on
either an individual or a combined basis;
(iii) The formulation of the annual budget and business plan of
Employer and its subsidiaries on both an individual and a combined
basis;
(iv) The formulation of the business goals of Employer and its
subsidiaries on both an individual and a combined basis;
(v) The merger, consolidation, combination, liquidation, or sale
of all or substantially all the assets or stock of Employer and its
subsidiaries on either an individual or a combined basis and the
acquisition or purchase of all or substantially all the assets or
stock of another company or entity;
(vi) The purchase of or investment in or acquisition of any
asset, product or business other than in the ordinary course of
business;
- 4 -
<PAGE> 5
(vii) The loan of any funds of Employer or any of its
subsidiaries other than in the ordinary course of business;
(viii) The purchase or sale by Employer or any of its
subsidiaries of any asset from or to any person, firm or corporation
related to or controlled by either Employee or Weinberg;
(ix) All contributions and payments by Employer or any of its
subsidiaries to bonus, retirement or similar plans; and
(x) Any other matter which would have a material effect on the
business, operations, financial condition or affairs, assets or
properties of Employer and its subsidiaries on either an individual or
a combined basis.
6. DEATH OF EMPLOYEE. In the event Employee should die during the
Employment Period and:
(a) at the time of Employee's death, Employee has a wife, then: (i)
payments shall be made pursuant to and in accordance with that certain Wage
Continuation Agreement between Employer and Employee dated June 30, 1995, as
amended or restated from time to time (the "Wage Continuation Agreement"), which
is herein incorporated by reference; (ii) Employer shall pay to Employee's wife
the amount of bonus which Employee would have received under Section 2(c) hereof
for the year of Employee's death which shall be prorated for the portion of the
year ending upon the date of death; and (iii) Employer shall continue to provide
and/or pay for the existing health care coverage to Employee's wife to the
maximum extent allowable in all respects under applicable law; PROVIDED,
HOWEVER, that when Employee's surviving spouse attains the age of sixty-five
(65) years, Medicare shall be the primary provider of medical coverage and the
existing
- 5 -
<PAGE> 6
health care coverage shall be the secondary payor; and PROVIDED FURTHER,
HOWEVER, that the combined benefits of Medicare and the Medicare supplemental
policy shall be substantially the same as then available under the Employer's
existing health care coverage for active employees; or
(b) at the time of Employee's death, Employee has no wife, then
Employer shall: (i) for a period of two (2) years, continue to pay Employee's
Base Wages at the same monthly rate earned by Employee immediately prior to his
death to Employee's beneficiaries or estate; and (ii) pay to Employee's
beneficiaries or his estate, the amount of bonus which the Employee would have
received under Section 2(c) hereof for the year of Employee's death which shall
be prorated for the portion of the year ending upon the date of death.
7. DISABILITY OF EMPLOYEE.
(a) In the event that Employee becomes "mentally or physically
disabled" (as hereinafter defined) during the Employment Period, Employer shall
continue to pay Employee's Base Wages to Employee for the remainder of the
Employment Period after the onset of such disability, at the same monthly rate
earned by Employee immediately prior to his disability. The amount of the bonus
which Employee is to receive under Section 2(c) hereof for the year of the onset
of the disability shall be prorated for the portion of the year ending upon the
date of disability. If Employee shall die after Employee becomes mentally or
physically disabled, then the provisions of Section 6 hereof shall apply.
(b) For purposes of this Agreement, Employee shall become "mentally or
physically disabled" as of the time the Board shall find, on the basis of
medical evidence satisfactory to the Board, in its sole discretion, that as a
result of a mental or physical condition Employee is unable to substantially
perform his normal duties of employment hereunder or is prevented from
- 6 -
<PAGE> 7
engaging in substantially the same level of performance as he engaged in prior
to the onset of such condition, and that such disability is likely to continue
for a substantial period of time. Employee shall submit to an examination by a
physician, selected at the discretion of the Board and paid for by the Employer,
as is necessary to obtain the medical evidence needed by the Board to determine
whether Employee has become "mentally or physically disabled." Employee hereby
waives the confidentiality of the results or conclusions of such medical
examination and shall take such action as is necessary to disclose the results
or conclusions of such examination to the Board. In the event Employee fails to
submit to such examination or to take the necessary action to disclose the
results of the examination, Employee shall be deemed to be "mentally or
physically disabled."
8. TERMINATION.
(a) Employer may terminate Employee's employment hereunder at any time
for cause, which shall be deemed to include the following: (i) Employee's
engaging in fraud, misappropriation of funds, embezzlement or like conduct
committed against Employer; or (ii) Employee's conviction of a felony.
(b) Employee's employment hereunder may be terminated by Employer in
the event of Employee's voluntarily leaving the employ of Employer.
(c) If Employer terminates the employment of Employee for cause
pursuant to Section 8(a), then Employer shall not be obligated to make any
further payments to Employee under this Agreement or otherwise (including,
without limitation, any accrued and unpaid bonuses and severance benefits),
except for amounts of any earned and unpaid Base Wages. If Employer terminates
Employee's employment pursuant to Section 8(b) hereof, then Employer and/or its
successor (whether direct or indirect, by purchase, merger, consolidation, by
operation of law or
- 7 -
<PAGE> 8
otherwise), shall be obligated to continue to pay Employee the Base Wages
through the date that Employee voluntarily leaves the employ of Employer;
PROVIDED, HOWEVER, that Employee shall not be entitled to any bonus payments. If
Employer terminates Employee's employment for any reason other than for cause as
set forth in Section 8(a) hereof, then Employer and/or its successor (whether
direct or indirect, by purchase, merger, consolidation, by operation of law or
otherwise), shall be obligated to continue to pay Employee the Base Wages for
the remainder of the Employment Period and any bonuses he would have earned if
still employed through the end of the Employment Period, and shall be further
obligated to continue to provide and/or pay for the existing health care
coverage to Employee for the remainder of the Employment Period.
(d) In the event that Employee's employment with Employer is
terminated by Employer or by Employee, the parties agree that the provisions of
Sections 8(c), 9, 10, 11, 12, 13, 14, 17, 18, 21, 24 and 25 hereof shall survive
such termination and continue in full force and effect.
9. NON-COMPETITION. Employee recognizes and acknowledges that the business
of Employer is the manufacture, marketing and development of friction materials,
metal stampings and powder metals. Employee agrees that within the United
States, Canada and Italy and any other location in which the Employer engaged in
all or part of the above-described business at any time during the Employment
Period, and for two (2) years from and after the date of the termination of
Employee's employment hereunder (the "Restricted Period"), Employee shall not,
in any manner, directly or indirectly on behalf of himself or any other person,
firm, business or corporation;
(a) Establish, operate or engage in, financially or otherwise, as an
owner, partner, shareholder, officer, director, licensor, licensee, principal,
agent, employee, trustee, consultant or in any other relationship or capacity,
the business of the Employer;
- 8 -
<PAGE> 9
(b) Request or instigate any account or customer of Employer or its
subsidiaries or affiliates to withdraw, diminish, curtail or cancel any of its
business with Employer or its subsidiaries or affiliates; or
(c) Hire, solicit, or encourage to either leave the employment of or
cease working with Employer or its subsidiaries or affiliates (i) any current
employee of Employer or its subsidiaries or affiliates, or (ii) any employee who
has left the employment of or ceased working with Employer or its subsidiaries
or affiliates within one (1) year of the date of termination of such employee's
employment with Employer.
In the event of Employee's breach of any provision of this Section, the
running of the Restricted Period shall be automatically tolled (i.e., no part of
the Restricted Period shall expire) from and after the date of the first such
breach.
10. CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges that
confidential information, including, without limitation, information, knowledge
or data: (i) of a business nature such as, but not limited to, information about
cost, price, rates, profits, purchasing, suppliers, advertising, customers,
sales, marketing, promotion, compensation, employment, personnel, including
information regarding present and prospective customers and the business affairs
and financial condition of Employer; (ii) of a technical nature such as, but not
limited to, methods, know-how, processes and research; (iii) pertaining to
future developments such as, but not limited to, research and development
projects and future marketing, advertising or promotion; and (iv) pertaining to
trade secrets of Employer; and including all other matters which Employer treats
as confidential (the items described above being hereafter collectively referred
to as "Confidential Information"), are valuable, special and unique assets of
Employer. During and after the Restricted
- 9 -
<PAGE> 10
Period, Employee shall keep secret and retain in strictest confidence, shall not
use for the benefit of himself or others except in connection with the business
and affairs of Employer, any and all Confidential Information learned or
obtained by Employee before or after the date of this Agreement, and shall not
disclose such Confidential Information to anyone outside of Employer either
during or after employment by Employer, except as required in the course of
performing duties of his employment with Employer, without the express written
consent of Employer or as required by law. For the purposes of the above
disclosure exception, it is expressly recognized that, during the Employment
Period, Employee's duties include, without limitation, providing certain
information about the Company to bankers, investors, the press, governmental
agencies, and other members of the financial community in general, and such
dissemination of information will not constitute a violation of this Section 10.
11. PROPERTY OF EMPLOYER. Employee agrees to deliver promptly to the
Employer all manuals, letters, notes, notebooks, reports, computer programs and
files, memoranda, customer and supplier lists and all other materials relating
in any way to the business of Employer and in any way obtained by Employee
during the period of his employment with the Employer which are in his
possession or under his control, and all copies thereof, (i) upon termination of
Employee's employment with Employer, or (ii) at any other time at Employer's
request. Employee further agrees that he will not make or retain any copies of
any of the foregoing and that he will so represent to Employer upon termination
of his employment hereunder.
12. RIGHTS AND REMEDIES UPON BREACH. Both parties recognize that the rights
and obligations set forth in this Agreement are special, unique and of
extraordinary character. If Employee breaches, or threatens to commit a breach
of, any of the provisions of Sections 9
- 10 -
<PAGE> 11
through 11 hereof (hereinafter referred to as the "Restrictive Covenants"), then
Employer shall have the right and remedy to injunctive relief, which right and
remedy shall be in addition to, and not in lieu of, any other rights and
remedies available to Employer pursuant to this Agreement, any applicable law or
in equity. The right and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed that any such breach or threatened breach will cause irreparable injury
to Employer and that money damages will not provide adequate remedy to Employer.
As to the covenants contained in Section 9 hereof, specific performance shall be
for a period of time equal to the unexpired portion of the Restricted Period,
giving full effect to the tolling provision of Section 9 hereof, and beginning
on the earlier of the date on which the court's order becomes final and
nonappealable or the date on which all appeals have been exhausted.
13. DISCLOSURE. Employer may notify anyone employing Employee or evidencing
an intention to employ Employee as to the existence and provisions of this
Agreement and of the Restrictive Covenants.
14. INDEMNIFICATION.
(a) Employer shall indemnify Employee (and his legal representative or
other successors) to the fullest extent provided by the articles or certificate
of incorporation and by-laws or code of regulations (or other governing
document) of Employer and any wholly-owned subsidiary, as may be amended or
restated from time to time.
(b) Employee shall indemnify Employer against any and all losses
incurred by Employer as a result of Employee's acts of willful misconduct or
fraud.
- 11 -
<PAGE> 12
15. ASSIGNMENT. This Agreement is a personal services contract and it is
expressly agreed that the rights and interests of Employee hereunder may not be
sold, transferred, assigned, pledged or hypothecated (other than by will or the
laws of descent and distribution).
16. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their heirs, representatives and permitted
successors and assigns.
17. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
18. BLUE-PENCILLING. If at any time it shall be determined that any of the
provisions of this Agreement are unreasonable as to time or area, or both, by
any court of competent jurisdiction, Employer shall be entitled to enforce such
provision for such period of time and within such area as may be determined to
be reasonable by such court.
19. REPRESENTATIONS OF EMPLOYEE. Employee represents and warrants, on
behalf of himself, his immediate family and any person, firm or corporation in
which he has a substantial interest, that:
(a) They are not indebted to Employer in any amount whatsoever;
(b) They do not, and will not during the Restricted Period, have any
direct or indirect ownership interest in any entity with which Employer has a
business relationship or competes with Employer; PROVIDED, HOWEVER, that the
ownership of, or investments in, at no time
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<PAGE> 13
exceeding 5% of the issued and outstanding capital stock of an entity with
annual revenues in excess of $20 million shall not constitute a breach of this
representation and warranty;
(c) They are not and will not become, during the Employment Period,
directly or indirectly, interested in any material contract with Employer (other
than this Agreement); and
(d) The execution of this Agreement or his employment by Employer will
not breach any agreement or covenant entered into by him that is currently in
effect.
Excluded from the foregoing representations and warranties are (i) any and
all transactions related to Weinberg Capital Corporation, (ii) any and all
transactions relating to the purchase and financing, as amended, of the assets
or stock, as the case may be, of Logan Machine Co., Helsel, Inc. and S.K.
Wellman Limited, Inc., (iii) any and all transactions relating to that certain
Shareholder Note, dated June 30, 1995 in favor of Employer, and (iv)
transactions disclosed to the Board done on terms at least as favorable to the
Company as those which it could otherwise have obtained from unrelated third
parties.
20. CONFLICTS OF INTEREST. In the event that Employee engages in or
contemplates engagement in a transaction which does affect or could affect the
business of Employer, Employee agrees to immediately disclose in writing to the
Board all material information relating to same. Additionally, in the event that
Employer engages in or contemplates engagement in a transaction in which
Employee has a financial or personal interest, Employee shall, immediately upon
his learning of said engagement or contemplated engagement, disclose in writing
to the Board all material information relating to said interest.
21. ACKNOWLEDGMENT. Employee acknowledges that: (i) he has carefully read
all of the terms of this Agreement, and that such terms have been fully
explained to him; (ii) he
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<PAGE> 14
understands the consequences of each and every term of this Agreement; (iii) he
has had sufficient time and an opportunity to consult with his own legal advisor
prior to signing this Agreement; (iv) he had other employment opportunities at
the time he entered into this Agreement; (v) he specifically understands that by
signing this Agreement he is giving up certain rights he may have otherwise had,
and that he is agreeing to limit his freedom to engage in certain employment
during and after the termination of this Agreement; and (vi) the limitations to
his right to compete contained in this Agreement represent reasonable
limitations as to scope, duration and geographical area, and that such
limitations are reasonably related to protection which the Employer reasonably
requires.
22. NOTICES. All notices, requests, demands or other communications
hereunder shall be sent by registered or certified mail to:
Employer: Board of Directors
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Copy to: Byron S. Krantz, Esq.
Kohrman Jackson & Krantz P.L.L.
20th Floor
One Cleveland Center
Cleveland, Ohio 44114
Employee: Norman C. Harbert
Suite 29-2500
200 Public Square
Cleveland, Ohio 44114-2301
23. CAPTIONS. The captions in this Agreement are included for convenience
only and shall not in any way affect the interpretation or construction of any
provision hereof.
24. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with the laws of the State of Ohio.
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<PAGE> 15
25. SUBMISSION TO JURISDICTION. Employer may enforce any claim arising out
of or relating to this Agreement, or arising from or related to the employment
relationship existing in connection with this Agreement in any state or federal
court having subject matter jurisdiction and located in Cleveland, Ohio. For the
purpose of any action or proceeding instituted with respect to any such claim,
Employee hereby irrevocably submits to the jurisdiction of such courts and
irrevocably consents to the service of process out of said courts by mailing a
copy thereof, by registered mail, postage prepaid, to Employee and agrees that
such service, to the fullest extent permitted by law, (i) shall be deemed in
every respect effective service of process upon him in any such suit, action or
proceeding, and (ii) shall be taken and held to be valid personal service upon
and personal delivery to him. Nothing herein contained shall affect the right of
Employer to serve process in any other manner permitted by law or preclude
Employer from bringing an action or proceeding in respect hereof in any other
country, state or place having jurisdiction over such action. Employee
irrevocably waives, to the fullest extent permitted by law, any objection which
he has or may have to the laying of the venue of any such suit, action or
proceeding brought in any such court located in Cleveland, Ohio, and any claim
that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum.
26. WAIVER OF BREACH. The waiver by either party of a breach of any
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
27. AMENDMENT. This Agreement may be amended only in a writing executed by
both parties hereto.
28. ENTIRE AGREEMENT. This Agreement and the Wage Continuation Agreement
constitute the entire agreement between the parties and this Agreement
supersedes all prior and
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<PAGE> 16
contemporaneous agreements, understandings, negotiations and discussions,
whether written or oral, of the parties hereto relating to the transactions
contemplated by this Agreement and the Wage Continuation Agreement. No course of
conduct or dealing between the parties shall be deemed to amend this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hand as of the
date first written above.
"EMPLOYER" "EMPLOYEE"
HAWK CORPORATION
By: /s/ Ronald E. Weinberg /s/ Norman C. Harbert
---------------------------- -----------------------------
Ronald E. Weinberg Norman C. Harbert
Its: Vice-Chairman and Treasurer
Attested to:
By: /s/ Byron S. Krantz
---------------------------
Byron S. Krantz
Its: Secretary
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<PAGE> 1
EXHIBIT 10.2
WAGE CONTINUATION AGREEMENT OF
THE HAWK GROUP OF COMPANIES, INC.
THIS AGREEMENT is made and entered into as of this 30th day of June,
1995, by and between The Hawk Group of Companies, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), and Norman C. Harbert,
individually (hereinafter referred to as the Employee").
WHEREAS, the Employee is employed by the Corporation;
WHEREAS, the Corporation recognizes the valuable services heretofore
performed for it by the Employee and wishes to encourage his continued
employment by providing this additional compensation for the Employee's services
to the Corporation;
WHEREAS, the Employee has no present intention to retire;
WHEREAS, the Employee wishes to be assured that the spouse of the
Employee at the time of his death (the "Spouse") will be entitled to a certain
minimum amount of compensation for the lifetime of the Spouse after his death;
and
WHEREAS, the parties hereto wish to provide the terms and conditions
upon which the Corporation shall pay such additional compensation to the Spouse
after the Employee's death;
NOW THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the parties hereto agree as follows:
1. CONSIDERATION.
(a) In consideration of the Employee remaining in its employ, the
Corporation agrees that, in the event of death of the Employee (i) while the
Employee is in the active employ of the Corporation or (ii) while the Employee
is no longer in the active employ of the Corporation solely because the Employee
is mentally or physically disabled, the Corporation shall pay to the Spouse a
wage continuation payment. The "wage continuation payment" shall be an amount
equal to 50 percent of the Employee's salary, but in no event less than 50
percent of the Employee's
<PAGE> 2
average salary in the two calendar years preceding (i) the Employee's death (in
the event of death while the Employee is in the active employ of the
Corporation) or (ii) the Employee becoming mentally or physically disabled (in
the event of death while the Employee is no longer in the active employ of the
Corporation solely because the Employee is mentally or physically disabled). The
phrase "mentally or physically disabled" shall have the meaning ascribed to it
in the Employment Agreement entered into between the Corporation and the
Employee on June 30, 1995. The term "salary" shall mean Form W-2 salary from the
Corporation subject to income tax other than any bonuses and benefits paid to
the Employee. The amount shall be payable to the Spouse in equal monthly
installments commencing with the first day of the first month following the
month of the Employee's death and shall continue monthly until the death of the
Spouse.
(b) In the event that, upon the death of the Employee, the Spouse is
not then living, the Corporation shall not be obligated to make any payments
hereunder, and neither the Employee's estate, his heirs or his other
beneficiaries shall have any claim thereto.
2. TERMINATION. In the event that the employment of the Employee by the
Corporation is terminated for any reason other than his (i) death or (ii) the
Employee becoming mentally or physically disabled, this Agreement shall
thereupon terminate, and the Corporation shall have no further obligation
hereunder. Nothing contained herein shall be construed to be a contract of
employment for any term of years, nor as conferring upon the Employee the right
to continue in the employ of the Corporation in any capacity. It is expressly
understood by the parties thereto that this Agreement relates exclusively to
salary continuation benefits in return for the Employee's services and is not
intended to be an employment contract.
2
<PAGE> 3
3. PAYMENT. Nothing contained in the Agreement and no action taken
pursuant to its provisions by either party hereto shall create, or be construed
to create, a trust of any kind, or a fiduciary relationship between the
Corporation and the Employee or the Spouse. The payments to the Spouse shall be
made from assets which shall continue, for all purposes, to be a part of the
general assets of the Corporation, and no person, other than the Corporation,
shall have, by virtue of the provisions of the Agreement, any interest in such
assets. To the extent that any person acquires a right to receive payments from
the Corporation under the provisions hereof, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
4. INSURANCE. In the event that, in its discretion, the Corporation
purchases an insurance policy or policies insuring the life of the Employee to
allow the Corporation to recover, in whole, or in part, the cost of providing
the benefits hereunder, neither the Employee nor the Spouse shall have any
rights whatsoever therein; the Corporation shall be the sole owner and
beneficiary thereof and shall possess and may exercise all incidents of
ownership therein.
5. PROHIBITIONS. Neither the Employee nor the Spouse shall have any
power or right to transfer, assign, anticipate, hypothecate or otherwise
encumber any part or all of the amounts payable under, nor shall such amounts be
subject to seizure by any creditor of any such beneficiary, by a preceding by
law or in equity, and no such benefit shall be transferable by operation of law
in the event of bankruptcy, insolvency or death of the Employee or the Spouse.
Any such attempted assignment or transfer shall be void and shall terminate this
Agreement, and the Corporation shall thereupon have no further liability
hereunder.
6. AMENDMENT. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
3
<PAGE> 4
7. BINDING. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, and the Employee and
his successors, assigns, heirs, executors, administrators and the Spouse.
8. NOTICE. Any notice, consent or demand required or permitted to be
given under the provisions of the Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last address as shown on the records
of the Corporation.
9. CONSTRUCTION. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
State of Delaware.
10. INTEGRATION. This Agreement supersedes all prior arrangements,
understandings, conversations and negotiations between the parties with respect
to the subject matter of this Agreement and shall constitute the entire
agreement between the parties with respect to such matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day of the first above written.
ATTESTED TO: THE HAWK GROUP OF COMPANIES,INC.
By: /s/Byron S. Krantz By: /s/Ronald E. Weinberg
----------------------------- ---------------------------------
Byron S. Krantz Ronald E. Weinberg
Secretary Vice Chairman
/s/Norman C. Harbert
---------------------------------
Norman C. Harbert, Employee
4
<PAGE> 1
EXHIBIT 10.3
[HAWK LOGO]
November 1, 1996
Mr. Norman C. Harbert
c/o Hawk Corporation
Suite 29-2500
200 Public Square
Cleveland, Ohio 44114-2301
Re: AMENDMENT OF WAGE CONTINUATION AGREEMENT
Dear Norm:
This letter will confirm that the reference in Section 1(a) of that
certain Wage Continuation Agreement, dated as of June 30, 1995, by and between
Hawk Corporation (f.k.a. The Hawk Group of Companies, Inc.), a Delaware
corporation, and Norman C. Harbert to that certain "Employment Agreement entered
into between the Corporation and the Employee on June 30, 1995" is hereby
amended to "Employment Agreement entered into between the Corporation and the
Employee as of November 1, 1996, as amended and/or restated from time to time."
Please acknowledge the foregoing by signing the enclosed copy of this
letter below and returning it to Steven C. Bersticker, Esq. in the enclosed,
postage-prepaid envelope as soon as possible.
HAWK CORPORATION
By: /s/ Ronald E. Weinberg
----------------------------------
Ronald E. Weinberg, Vice-Chairman
Enclosure
ACKNOWLEDGED AND AGREED:
/s/ Norman C. Harbert
- -------------------------------------
Norman C. Harbert
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of this
1st day of November, 1996, by and between HAWK CORPORATION, a Delaware
corporation ("Employer"), and RONALD E. WEINBERG ("Employee").
1. EMPLOYMENT. Employer hereby employs Employee and Employee agrees to be
employed by Employer for a period commencing on November 1, 1996 and terminating
on December 31, 2004. Such period, together with the period of any extension or
renewal upon the mutual agreement of Employer and Employee, of such employment
is herein referred to as the "Employment Period."
2. COMPENSATION AND BENEFITS. Provided that Employee's employment hereunder
is not terminated in accordance with this Agreement, during the Employment
Period Employee shall receive as compensation:
(a) Salary: Salary at the annual rate of $295,000, payable not less
frequently than semi-monthly (as adjusted from time to time, "Base Wages").
(b) Employee Benefit Programs: Employee shall have the right to
participate, subject to any applicable eligibility requirements, in all
corporate employee benefit programs offered to executive employees by Employer
and any other plans made available by Employer in the future to its executives
and key management employees, including, if any, Employer's 401(k) plan and
health and life insurance programs.
(c) Executive Bonus Plan: Employee shall receive a bonus for fiscal
year 1996, and for each year thereafter throughout the Employment Period, based
on the incentive compensation program in effect for the Employer and its
subsidiaries, Friction Products Co. and
<PAGE> 2
Logan Metal Stampings, Inc., consistent with their respective customary and
historical executive incentive compensation programs. Throughout the Employment
Period, Employee shall also be entitled to receive a bonus under the executive
incentive compensation program to be developed and implemented for each of
Employer's other subsidiaries, Helsel, Inc. and S.K. Wellman, each of which
shall be based upon the creation of an executive bonus pool derived from all
earnings which exceed certain targeted amounts, which targeted amounts are to be
determined by each of the boards of directors of Helsel, Inc. and S.K. Wellman
Corp. (or the compensation committees thereof), as the case may be, and which
executive bonus pool shall be 27.5% to 30% of the available bonus pool.
(d) Business Expenses: Employer shall promptly reimburse Employee for
all reasonable and necessary business expenses incurred by Employee on behalf of
Employer and its parent, wholly-owned subsidiaries or affiliated entities during
the Employment Period. Employee shall submit to Employer appropriate expense
reports that detail such expenses and includes copies of receipts where
appropriate.
(e) Automobile Expenses: Employee shall be entitled to receive a car
allowance in the amount of $950 per month, payable semi-monthly. Employer shall
provide property and liability insurance on Employee's automobile and reimburse
Employee for the reasonable maintenance and repair costs incurred with respect
to Employee's automobile.
3. ADJUSTMENTS TO COMPENSATION.
(a) The Board of Directors of Employer ("Board"), or the Compensation
Committee thereof, will review Employee's Base Wages no less than annually at
which time it will determine increases to Employee's Base Wages.
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<PAGE> 3
(b) Employee hereby authorizes Employer to withhold and withdraw from
amounts payable to Employee under this Agreement all applicable amounts required
by federal, state and local laws.
4. DUTIES. Employee shall, during the Employment Period, serve as the
Vice-Chairman of the Board and Treasurer of Employer. During the Employment
Period, Employee shall perform such duties and responsibilities as are
customarily assigned to the Vice-Chairman of the Board and Treasurer, including
overseeing the strategic development and profitability of the business, and
Employee shall be primarily responsible for all matters of finance and
relationships with financial institutions and issues relating thereto. It is
understood and agreed, however, that Employee shall not be required to devote
substantially all of his time and efforts to the business and affairs of
Employer so long as Employee substantially performs the duties and functions
provided for herein to the best of his ability and skill in such a manner as to
promote the best interests of Employer. Employee further agrees to serve as a
director on the boards of directors of Employer's parent, subsidiaries or
affiliated entities and in one or more executive offices of any of Employer's
parent, subsidiaries or affiliated entities.
5. LIMITATIONS ON AUTHORITY.
(a) Notwithstanding anything else herein contained, Employee shall
adhere to the written limitations on authority as issued from time to time by
the Board. Nothing contained herein shall be deemed to restrict the power of the
Board to limit the authority of Employee. Any violation of the terms of this
Section 5(a) shall be deemed to be a material violation of a provision of this
Employment Agreement.
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<PAGE> 4
(b) Notwithstanding anything else herein contained, the parties agree
that any of the matters set forth below shall be determined by Employee and
Norman C. Harbert ("Harbert") jointly:
(i) The (A) hiring and termination of all key management
employees; (B) evaluations of key management employees together with
salary reviews; and (C) increases in compensation of key management
employees;
(ii) The entering into and/or execution of contracts, agreements,
joint ventures and other commitments which would have a material
effect on the business, financial condition and affairs, properties,
assets, obligations, and operation of Employer and its subsidiaries on
either an individual or a combined basis;
(iii) The formulation of the annual budget and business plan of
Employer and its subsidiaries on both an individual and a combined
basis;
(iv) The formulation of the business goals of Employer and its
subsidiaries on both an individual and a combined basis;
(v) The merger, consolidation, combination, liquidation, or sale
of all or substantially all the assets or stock of Employer and its
subsidiaries on either an individual or a combined basis and the
acquisition or purchase of all or substantially all the assets or
stock of another company or entity;
(vi) The purchase of or investment in or acquisition of any
asset, product or business other than in the ordinary course of
business;
(vii) The loan of any funds of Employer or any of its
subsidiaries other than in the ordinary course of business;
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<PAGE> 5
(viii) The purchase or sale by Employer or any of its
subsidiaries of any asset from or to any person, firm or corporation
related to or controlled by either Employee or Harbert;
(ix) All contributions and payments by Employer or any of its
subsidiaries to bonus, retirement or similar plans; and
(x) Any other matter which would have a material effect on the
business, operations, financial condition or affairs, assets or
properties of Employer and its subsidiaries on either an individual or
a combined basis.
6. DEATH OF EMPLOYEE. In the event Employee should die during the
Employment Period and:
(a) at the time of Employee's death, Employee has a wife, then: (i)
payments shall be made pursuant to and in accordance with that certain Wage
Continuation Agreement between Employer and Employee dated June 30, 1995, as
amended or restated from time to time (the "Wage Continuation Agreement"), which
is herein incorporated by reference; (ii) Employer shall pay to Employee's wife
the amount of bonus which Employee would have received under Section 2(c) hereof
for the year of Employee's death which shall be prorated for the portion of the
year ending upon the date of death; and (iii) Employer shall continue to provide
and/or pay for the existing health care coverage to Employee's wife to the
maximum extent allowable in all respects under applicable law; PROVIDED,
HOWEVER, that when Employee's surviving spouse attains the age of sixty-five
(65) years, Medicare shall be the primary provider of medical coverage and the
existing health care coverage shall be the secondary payor; and PROVIDED
FURTHER, HOWEVER, that the combined
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<PAGE> 6
benefits of Medicare and the Medicare supplemental policy shall be substantially
the same as then available under the Employer's existing health care coverage
for active employees; or
(b) at the time of Employee's death, Employee has no wife, then
Employer shall: (i) for a period of two (2) years, continue to pay Employee's
Base Wages at the same monthly rate earned by Employee immediately prior to his
death to Employee's beneficiaries or estate; and (ii) pay to Employee's
beneficiaries or his estate, the amount of bonus which the Employee would have
received under Section 2(c) hereof for the year of Employee's death which shall
be prorated for the portion of the year ending upon the date of death.
7. DISABILITY OF EMPLOYEE.
(a) In the event that Employee becomes "mentally or physically
disabled" (as hereinafter defined) during the Employment Period, Employer shall
continue to pay Employee's Base Wages to Employee for the remainder of the
Employment Period after the onset of such disability, at the same monthly rate
earned by Employee immediately prior to his disability. The amount of the bonus
which Employee is to receive under Section 2(c) hereof for the year of the onset
of the disability shall be prorated for the portion of the year ending upon the
date of disability. If Employee shall die after Employee becomes mentally or
physically disabled, then the provisions of Section 6 hereof shall apply.
(b) For purposes of this Agreement, Employee shall become "mentally or
physically disabled" as of the time the Board shall find, on the basis of
medical evidence satisfactory to the Board, in its sole discretion, that as a
result of a mental or physical condition Employee is unable to substantially
perform his normal duties of employment hereunder or is prevented from engaging
in substantially the same level of performance as he engaged in prior to the
onset of such
- 6 -
<PAGE> 7
condition, and that such disability is likely to continue for a substantial
period of time. Employee shall submit to an examination by a physician, selected
at the discretion of the Board and paid for by the Employer, as is necessary to
obtain the medical evidence needed by the Board to determine whether Employee
has become "mentally or physically disabled." Employee hereby waives the
confidentiality of the results or conclusions of such medical examination and
shall take such action as is necessary to disclose the results or conclusions of
such examination to the Board. In the event Employee fails to submit to such
examination or to take the necessary action to disclose the results of the
examination, Employee shall be deemed to be "mentally or physically disabled."
8. TERMINATION.
(a) Employer may terminate Employee's employment hereunder at any time
for cause, which shall be deemed to include the following: (i) Employee's
engaging in fraud, misappropriation of funds, embezzlement or like conduct
committed against Employer; or (ii) Employee's conviction of a felony.
(b) Employee's employment hereunder may be terminated by Employer in
the event of Employee's voluntarily leaving the employ of Employer.
(c) If Employer terminates the employment of Employee for cause
pursuant to Section 8(a), then Employer shall not be obligated to make any
further payments to Employee under this Agreement or otherwise (including,
without limitation, any accrued and unpaid bonuses and severance benefits),
except for amounts of any earned and unpaid Base Wages. If Employer terminates
Employee's employment pursuant to Section 8(b) hereof, then Employer and/or its
successor (whether direct or indirect, by purchase, merger, consolidation, by
operation of law or otherwise), shall be obligated to continue to pay Employee
the Base Wages through the date that
- 7 -
<PAGE> 8
Employee voluntarily leaves the employ of Employer; PROVIDED, HOWEVER, that
Employee shall not be entitled to any bonus payments. If Employer terminates
Employee's employment for any reason other than for cause as set forth in
Section 8(a) hereof, then Employer and/or its successor (whether direct or
indirect, by purchase, merger, consolidation, by operation of law or otherwise),
shall be obligated to continue to pay Employee the Base Wages for the remainder
of the Employment Period and any bonuses he would have earned if still employed
through the end of the Employment Period, and shall be further obligated to
continue to provide and/or pay for the existing health care coverage to Employee
for the remainder of the Employment Period.
(d) In the event that Employee's employment with Employer is
terminated by Employer or by Employee, the parties agree that the provisions of
Sections 8(c), 9, 10, 11, 12, 13, 14, 17, 18, 21, 24 and 25 hereof shall survive
such termination and continue in full force and effect.
9. NON-COMPETITION. Employee recognizes and acknowledges that the business
of Employer is the manufacture, marketing and development of friction materials,
metal stampings and powder metals. Employee agrees that within the United
States, Canada and Italy and any other location in which the Employer engaged in
all or part of the above-described business at any time during the Employment
Period, and for two (2) years from and after the date of the termination of
Employee's employment hereunder (the "Restricted Period"), Employee shall not,
in any manner, directly or indirectly on behalf of himself or any other person,
firm, business or corporation;
(a) Establish, operate or engage in, financially or otherwise, as an
owner, partner, shareholder, officer, director, licensor, licensee, principal,
agent, employee, trustee, consultant or in any other relationship or capacity,
the business of the Employer;
- 8 -
<PAGE> 9
(b) Request or instigate any account or customer of Employer or its
subsidiaries or affiliates to withdraw, diminish, curtail or cancel any of its
business with Employer or its subsidiaries or affiliates; or
(c) Hire, solicit, or encourage to either leave the employment of or
cease working with Employer or its subsidiaries or affiliates (i) any current
employee of Employer or its subsidiaries or affiliates, or (ii) any employee who
has left the employment of or ceased working with Employer or its subsidiaries
or affiliates within one (1) year of the date of termination of such employee's
employment with Employer.
In the event of Employee's breach of any provision of this Section, the
running of the Restricted Period shall be automatically tolled (i.e., no part of
the Restricted Period shall expire) from and after the date of the first such
breach.
10. CONFIDENTIAL INFORMATION. Employee recognizes and acknowledges that
confidential information, including, without limitation, information, knowledge
or data: (i) of a business nature such as, but not limited to, information about
cost, price, rates, profits, purchasing, suppliers, advertising, customers,
sales, marketing, promotion, compensation, employment, personnel, including
information regarding present and prospective customers and the business affairs
and financial condition of Employer; (ii) of a technical nature such as, but not
limited to, methods, know-how, processes and research; (iii) pertaining to
future developments such as, but not limited to, research and development
projects and future marketing, advertising or promotion; and (iv) pertaining to
trade secrets of Employer; and including all other matters which Employer treats
as confidential (the items described above being hereafter collectively referred
to as "Confidential Information"), are valuable, special and unique assets of
Employer. During and after the Restricted
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<PAGE> 10
Period, Employee shall keep secret and retain in strictest confidence, shall not
use for the benefit of himself or others except in connection with the business
and affairs of Employer, any and all Confidential Information learned or
obtained by Employee before or after the date of this Agreement, and shall not
disclose such Confidential Information to anyone outside of Employer either
during or after employment by Employer, except as required in the course of
performing duties of his employment with Employer, without the express written
consent of Employer or as required by law. For the purposes of the above
disclosure exception, it is expressly recognized that, during the Employment
Period, Employee's duties include, without limitation, providing certain
information about the Company to bankers, investors, the press, governmental
agencies, and other members of the financial community in general, and such
dissemination of information will not constitute a violation of this Section 10.
11. PROPERTY OF EMPLOYER. Employee agrees to deliver promptly to the
Employer all manuals, letters, notes, notebooks, reports, computer programs and
files, memoranda, customer and supplier lists and all other materials relating
in any way to the business of Employer and in any way obtained by Employee
during the period of his employment with the Employer which are in his
possession or under his control, and all copies thereof, (i) upon termination of
Employee's employment with Employer, or (ii) at any other time at Employer's
request. Employee further agrees that he will not make or retain any copies of
any of the foregoing and that he will so represent to Employer upon termination
of his employment hereunder.
12. RIGHTS AND REMEDIES UPON BREACH. Both parties recognize that the rights
and obligations set forth in this Agreement are special, unique and of
extraordinary character. If Employee breaches, or threatens to commit a breach
of, any of the provisions of Sections 9
- 10 -
<PAGE> 11
through 11 hereof (hereinafter referred to as the "Restrictive Covenants"), then
Employer shall have the right and remedy to injunctive relief, which right and
remedy shall be in addition to, and not in lieu of, any other rights and
remedies available to Employer pursuant to this Agreement, any applicable law or
in equity. The right and remedy to have the Restrictive Covenants specifically
enforced by any court having equity jurisdiction, it being acknowledged and
agreed that any such breach or threatened breach will cause irreparable injury
to Employer and that money damages will not provide adequate remedy to Employer.
As to the covenants contained in Section 9 hereof, specific performance shall be
for a period of time equal to the unexpired portion of the Restricted Period,
giving full effect to the tolling provision of Section 9 hereof, and beginning
on the earlier of the date on which the court's order becomes final and
nonappealable or the date on which all appeals have been exhausted.
13. DISCLOSURE. Employer may notify anyone employing Employee or evidencing
an intention to employ Employee as to the existence and provisions of this
Agreement and of the Restrictive Covenants.
14. INDEMNIFICATION.
(a) Employer shall indemnify Employee (and his legal representative or
other successors) to the fullest extent provided by the articles or certificate
of incorporation and by-laws or code of regulations (or other governing
document) of Employer and any wholly-owned subsidiary, as may be amended or
restated from time to time.
(b) Employee shall indemnify Employer against any and all losses
incurred by Employer as a result of Employee's acts of willful misconduct or
fraud.
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<PAGE> 12
15. ASSIGNMENT. This Agreement is a personal services contract and it is
expressly agreed that the rights and interests of Employee hereunder may not be
sold, transferred, assigned, pledged or hypothecated (other than by will or the
laws of descent and distribution).
16. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto, their heirs, representatives and permitted
successors and assigns.
17. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect by a court of competent jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
of this Agreement, but this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
18. BLUE-PENCILLING. If at any time it shall be determined that any of the
provisions of this Agreement are unreasonable as to time or area, or both, by
any court of competent jurisdiction, Employer shall be entitled to enforce such
provision for such period of time and within such area as may be determined to
be reasonable by such court.
19. REPRESENTATIONS OF EMPLOYEE. Employee represents and warrants, on
behalf of himself, his immediate family and any person, firm or corporation in
which he has a substantial interest, that:
(a) They are not indebted to Employer in any amount whatsoever;
(b) They do not, and will not during the Restricted Period, have any
direct or indirect ownership interest in any entity with which Employer has a
business relationship or competes with Employer; PROVIDED, HOWEVER, that the
ownership of, or investments in, at no time
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<PAGE> 13
exceeding 5% of the issued and outstanding capital stock of an entity with
annual revenues in excess of $20 million shall not constitute a breach of this
representation and warranty;
(c) They are not and will not become, during the Employment Period,
directly or indirectly, interested in any material contract with Employer (other
than this Agreement); and
(d) The execution of this Agreement or his employment by Employer will
not breach any agreement or covenant entered into by him that is currently in
effect.
Excluded from the foregoing representations and warranties are (i) any and
all transactions related to Weinberg Capital Corporation, (ii) any and all
transactions relating to the purchase and financing, as amended, of the assets
or stock, as the case may be, of Logan Machine Co., Helsel, Inc. and S.K.
Wellman Limited, Inc., (iii) any and all transactions relating to that certain
Shareholder Note, dated June 30, 1995 in favor of Employer, and (iv)
transactions disclosed to the Board done on terms at least as favorable to the
Company as those which it could otherwise have obtained from unrelated third
parties.
20. CONFLICTS OF INTEREST. In the event that Employee engages in or
contemplates engagement in a transaction which does affect or could affect the
business of Employer, Employee agrees to immediately disclose in writing to the
Board all material information relating to same. Additionally, in the event that
Employer engages in or contemplates engagement in a transaction in which
Employee has a financial or personal interest, Employee shall, immediately upon
his learning of said engagement or contemplated engagement, disclose in writing
to the Board all material information relating to said interest.
21. ACKNOWLEDGMENT. Employee acknowledges that: (i) he has carefully read
all of the terms of this Agreement, and that such terms have been fully
explained to him; (ii) he
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<PAGE> 14
understands the consequences of each and every term of this Agreement; (iii) he
has had sufficient time and an opportunity to consult with his own legal advisor
prior to signing this Agreement; (iv) he had other employment opportunities at
the time he entered into this Agreement; (v) he specifically understands that by
signing this Agreement he is giving up certain rights he may have otherwise had,
and that he is agreeing to limit his freedom to engage in certain employment
during and after the termination of this Agreement; and (vi) the limitations to
his right to compete contained in this Agreement represent reasonable
limitations as to scope, duration and geographical area, and that such
limitations are reasonably related to protection which the Employer reasonably
requires.
22. NOTICES. All notices, requests, demands or other communications
hereunder shall be sent by registered or certified mail to:
Employer: Board of Directors
Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Copy to: Byron S. Krantz, Esq.
Kohrman Jackson & Krantz P.L.L.
20th Floor
One Cleveland Center
Cleveland, Ohio 44114
Employee: Ronald E. Weinberg
Suite 29-2500
200 Public Square
Cleveland, Ohio 44114-2301
23. CAPTIONS. The captions in this Agreement are included for convenience
only and shall not in any way affect the interpretation or construction of any
provision hereof.
24. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with the laws of the State of Ohio.
- 14 -
<PAGE> 15
25. SUBMISSION TO JURISDICTION. Employer may enforce any claim arising out
of or relating to this Agreement, or arising from or related to the employment
relationship existing in connection with this Agreement in any state or federal
court having subject matter jurisdiction and located in Cleveland, Ohio. For the
purpose of any action or proceeding instituted with respect to any such claim,
Employee hereby irrevocably submits to the jurisdiction of such courts and
irrevocably consents to the service of process out of said courts by mailing a
copy thereof, by registered mail, postage prepaid, to Employee and agrees that
such service, to the fullest extent permitted by law, (i) shall be deemed in
every respect effective service of process upon him in any such suit, action or
proceeding, and (ii) shall be taken and held to be valid personal service upon
and personal delivery to him. Nothing herein contained shall affect the right of
Employer to serve process in any other manner permitted by law or preclude
Employer from bringing an action or proceeding in respect hereof in any other
country, state or place having jurisdiction over such action. Employee
irrevocably waives, to the fullest extent permitted by law, any objection which
he has or may have to the laying of the venue of any such suit, action or
proceeding brought in any such court located in Cleveland, Ohio, and any claim
that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum.
26. WAIVER OF BREACH. The waiver by either party of a breach of any
provisions of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
27. AMENDMENT. This Agreement may be amended only in a writing executed by
both parties hereto.
28. ENTIRE AGREEMENT. This Agreement and the Wage Continuation Agreement
constitute the entire agreement between the parties and this Agreement
supersedes all prior and
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<PAGE> 16
contemporaneous agreements, understandings, negotiations and discussions,
whether written or oral, of the parties hereto relating to the transactions
contemplated by this Agreement and the Wage Continuation Agreement. No course of
conduct or dealing between the parties shall be deemed to amend this Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hand as of the
date first written above.
"EMPLOYER" "EMPLOYEE"
HAWK CORPORATION
By: /s/ Norman C. Harbert /s/ Ronald E. Weinberg
------------------------------ -----------------------------
Norman C. Harbert Ronald E. Weinberg
Its: Chairman, President and CEO
Attested to:
By: /s/ Byron S. Krantz
------------------------------
Byron S. Krantz
Its: Secretary
- 16 -
<PAGE> 1
EXHIBIT 10.5
WAGE CONTINUATION AGREEMENT OF
THE HAWK GROUP OF COMPANIES, INC.
THIS AGREEMENT is made and entered into as of this 30th day of June,
1995, by and between The Hawk Group of Companies, Inc., a Delaware corporation
(hereinafter referred to as the "Corporation"), and Ronald E. Weinberg,
individually (hereinafter referred to as the Employee").
WHEREAS, the Employee is employed by the Corporation;
WHEREAS, the Corporation recognizes the valuable services heretofore
performed for it by the Employee and wishes to encourage his continued
employment by providing this additional compensation for the Employee's services
to the Corporation;
WHEREAS, the Employee has no present intention to retire;
WHEREAS, the Employee wishes to be assured that the spouse of the
Employee at the time of his death (the "Spouse") will be entitled to a certain
minimum amount of compensation for the lifetime of the Spouse after his death;
and
WHEREAS, the parties hereto wish to provide the terms and conditions
upon which the Corporation shall pay such additional compensation to the Spouse
after the Employee's death;
NOW THEREFORE, in consideration of the premises and of the mutual
promises herein contained, the parties hereto agree as follows:
1. CONSIDERATION.
(a) In consideration of the Employee remaining in its employ, the
Corporation agrees that, in the event of death of the Employee (i) while the
Employee is in the active employ of the Corporation or (ii) while the Employee
is no longer in the active employ of the Corporation solely because the Employee
is mentally or physically disabled, the Corporation shall pay to the Spouse a
wage continuation payment. The "wage continuation payment" shall be an amount
equal
<PAGE> 2
to 50 percent of the Employee's salary, but in no event less than 50 percent of
the Employee's average salary in the two calendar years preceding (i) the
Employee's death (in the event of death while the Employee is in the active
employ of the Corporation) or (ii) the Employee becoming mentally or physically
disabled (in the event of death while the Employee is no longer in the active
employ of the Corporation solely because the Employee is mentally or physically
disabled). The phrase "mentally or physically disabled" shall have the meaning
ascribed to it in the Employment Agreement entered into between the Corporation
and the Employee on June 30, 1995. The term "salary" shall mean Form W-2 salary
from the Corporation subject to income tax other than any bonuses and benefits
paid to the Employee. The amount shall be payable to the Spouse in equal monthly
installments commencing with the first day of the first month following the
month of the Employee's death and shall continue monthly until the death of the
Spouse.
(b) In the event that, upon the death of the Employee, the Spouse is
not then living, the Corporation shall not be obligated to make any payments
hereunder, and neither the Employee's estate, his heirs or his other
beneficiaries shall have any claim thereto.
2. TERMINATION. In the event that the employment of the Employee by the
Corporation is terminated for any reason other than his (i) death or (ii) the
Employee becoming mentally or physically disabled, this Agreement shall
thereupon terminate, and the Corporation shall have no further obligation
hereunder. Nothing contained herein shall be construed to be a contract of
employment for any term of years, nor as conferring upon the Employee the right
to continue in the employ of the Corporation in any capacity. It is expressly
understood by the parties thereto that this Agreement relates exclusively to
salary continuation benefits in return for the Employee's services and is not
intended to be an employment contract.
2
<PAGE> 3
3. PAYMENT. Nothing contained in the Agreement and no action taken
pursuant to its provisions by either party hereto shall create, or be construed
to create, a trust of any kind, or a fiduciary relationship between the
Corporation and the Employee or the Spouse. The payments to the Spouse shall be
made from assets which shall continue, for all purposes, to be a part of the
general assets of the Corporation, and no person, other than the Corporation,
shall have, by virtue of the provisions of the Agreement, any interest in such
assets. To the extent that any person acquires a right to receive payments from
the Corporation under the provisions hereof, such right shall be no greater than
the right of any unsecured general creditor of the Corporation.
4. INSURANCE. In the event that, in its discretion, the Corporation
purchases an insurance policy or policies insuring the life of the Employee to
allow the Corporation to recover, in whole, or in part, the cost of providing
the benefits hereunder, neither the Employee nor the Spouse shall have any
rights whatsoever therein; the Corporation shall be the sole owner and
beneficiary thereof and shall possess and may exercise all incidents of
ownership therein.
5. PROHIBITIONS. Neither the Employee nor the Spouse shall have any
power or right to transfer, assign, anticipate, hypothecate or otherwise
encumber any part or all of the amounts payable under, nor shall such amounts be
subject to seizure by any creditor of any such beneficiary, by a preceding by
law or in equity, and no such benefit shall be transferable by operation of law
in the event of bankruptcy, insolvency or death of the Employee or the Spouse.
Any such attempted assignment or transfer shall be void and shall terminate this
Agreement, and the Corporation shall thereupon have no further liability
hereunder.
6. AMENDMENT. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
3
<PAGE> 4
7. BINDING. This Agreement shall be binding upon and inure to the
benefit of the Corporation and its successors and assigns, and the Employee and
his successors, assigns, heirs, executors, administrators and the Spouse.
8. NOTICE. Any notice, consent or demand required or permitted to be
given under the provisions of the Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last address as shown on the records
of the Corporation.
9. CONSTRUCTION. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
State of Ohio.
10. INTEGRATION. This Agreement supersedes all prior arrangements,
understandings, conversations and negotiations between the parties with respect
to the subject matter of this Agreement and shall constitute the entire
agreement between the parties with respect to such matter..
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day of the first above written.
ATTESTED TO: THE HAWK GROUP OF COMPANIES, INC.
By: /s/Byron S. Krantz By:/s/Norman C. Harbert
--------------------------- ---------------------------------------
Byron S. Krantz Norman C. Harbert
Secretary President and Chief Executive Officer
/s/Ronald E. Weinberg
---------------------------------------
Ronald E. Weinberg, Employee
4
<PAGE> 1
EXHIBIT 10.6
[HAWK LOGO]
November 1, 1996
Mr. Ronald E. Weinberg
c/o Weinberg Capital Corporation
Suite 29-2500
200 Public Square
Cleveland, Ohio 44114-2301
Re: AMENDMENT OF WAGE CONTINUATION AGREEMENT
Dear Ron:
This letter will confirm that the reference in Section 1(a) of that
certain Wage Continuation Agreement, dated as of June 30, 1995, by and between
Hawk Corporation (f.k.a. The Hawk Group of Companies, Inc.), a Delaware
corporation, and Ronald E. Weinberg to that certain "Employment Agreement
entered into between the Corporation and the Employee on June 30, 1995" is
hereby amended to "Employment Agreement entered into between the Corporation and
the Employee as of November 1, 1996, as amended and/or restated from time to
time."
Please acknowledge the foregoing by signing the enclosed copy of this
letter below and returning it to Steven C. Bersticker, Esq. in the enclosed,
postage-prepaid envelope as soon as possible.
HAWK CORPORATION
By: /s/ Norman C. Harbert
----------------------------------
Norman C. Harbert, Chairman
Enclosure
ACKNOWLEDGED AND AGREED:
/s/ Ronald E. Weinberg
- -------------------------------------
Ronald E. Weinberg
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
--------------------
JESS F. HELSEL,
aka J. F. HELSEL
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into on
this 1st day of July, 1994, by and between HELSEL, INC., a Delaware corporation
("Buyer") and JESS F. HELSEL, aka J. F. HELSEL, a resident of Salem, Indiana
("Helsel") .
WHEREAS, Helsel is currently employed by Helsel, Inc., an Indiana
corporation ("Company") as its President and is a member of its Board of
Directors;
WHEREAS, Company, Helsel and Buyer have entered into an Asset Purchase
Agreement, dated May 16, 1994 (the "Asset Agreement"), providing for the
purchase by Buyer of substantially all of the assets of Company, except its
cash;
WHEREAS, Helsel has unique talents and experiences which are of value to
Buyer;
WHEREAS, Helsel is willing to continue in his employment with Buyer
following consummation of the Asset Agreement on the terms set forth in this
Agreement.
NOW, THEREFORE, in consideration for the foregoing, and of the mutual
covenants set forth herein, Buyer and Helsel agree as follows:
1. EMPLOYMENT. Buyer hereby employs Helsel, and Helsel agrees to be
employed by Buyer, in the position set forth in paragraph 3 below, for a period
of three years commencing on the Closing of the Asset Agreement, and terminating
at the close of business of Buyer on the date following the third anniversary of
the Closing. The period during which Helsel is employed hereunder is hereinafter
referred to as the "Employment Period."
2. COMPENSATION.
(a) BASE SALARY. Buyer shall pay Helsel a salary at the rate of
$150,000 per year for each year of the Employment Period (the "Base Salary").
Buyer shall pay the Base Salary to Helsel in equal installments on the Buyer's
normal pay periods.
<PAGE> 2
(b) BONUS. Helsel shall earn an annual bonus (the "Annual Bonus") for
calendar years 1994, 1995 and 1996. Buyer shall pay to Helsel additional
compensation in an amount equal to 25% of the amount by which Buyer's earnings
before interest, income taxes, depreciation, amortization for the applicable
calendar year exceed $1,400,000. (For purposes of this bonus calculation, home
office administration charges of Buyer or its affiliates, except direct expenses
approved in advance by Helsel, shall be excluded). During 1994, such amount of
$1,400,000 shall be adjusted to reflect the commencement of Helsel's employment
pursuant to paragraph 1. For example, if Helsel's employment commences July 1,
1994, the amount serving as the basis for the 1994 bonus shall be 6/12 of
$1,400,000. Buyer shall pay the Annual Bonus to Helsel within 30 days after
completion of the year end audit or review of Buyer's financial statements for
the preceding calendar year by the independent certified public accountant of
Buyer (the "Financial Statements"), but in no event shall the Annual Bonus be
paid later than April 1 of each year. Buyer shall deliver copies of the
Financial Statements to Helsel.
(c) HELSEL HEALTH INSURANCE. During the Employment Period, Helsel
shall receive health insurance benefits equivalent to those he is currently
receiving as an employee of Company. Helsel shall also have the right to
participate, subject to any applicable eligibility requirements, in any Buyer
benefit program offered to executive employees by Buyer, including, if any,
Buyer's 401(k) plan, disability insurance and life insurance programs.
(d) VACATION. Helsel shall be entitled to four weeks of paid vacation
during each year of the Employment Period. Unused paid vacation leave may not be
carried over to subsequent years.
(e) BUSINESS EXPENSES. During the Employment Period, Buyer shall
reimburse Helsel for all reasonable and necessary business expenses incurred by
Helsel on behalf of Buyer upon Helsel's submission of a written report that
details the nature and amount of such expenses consistent with Internal Revenue
Service requirements that will permit Buyer to deduct such expenses (or a
percentage thereof) on Buyer's federal income tax return as other than
compensation.
(f) AUTOMOBILE. During the Employment Period, Helsel shall provide a
vehicle comparable to the Oldsmobile stationwagon he presently is provided with
and such vehicle shall be replaced when deemed necessary by Helsel in his
reasonable discretion.
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<PAGE> 3
3. POSITION, DUTIES AND AUTHORITY.
(a) POSITION AND DUTIES. Helsel shall, during the Employment Period,
serve as President of Buyer, reporting and responsible to the Chairman of the
Board and the Board of Directors. As President during the Employment Period,
Helsel shall perform such duties and responsibilities as the Chairman of the
Board shall request from time to time with respect to the business of the Buyer,
including but not limited to the following: (i) managing the policy, strategy
and day-to-day operations of the business; (ii) cooperating with the Chairman of
the board in the identification, hiring and promotion of key management; (iii)
promptly furnishing accurate written reports, data, analyses or information
pertaining to the Buyer as may be required, from time to time, as determined
either by the Chairman of the Board or the Board of Directors; (iv) observing
and complying with such standards and procedures as may, from time to time, be
established by the Chairman of the Board; and (iv) performing such duties or
functions as are customarily assigned to the President of a company. During the
Employment Period, Helsel shall expend substantially all of his working time for
the Buyer and shall perform the services hereunder to the best of his ability
and skill and in such a manner as to promote the best interest of Buyer.
4. TERM AS PRESIDENT.
(a) Term of Employment. Helsel's term as President shall end with the
earliest to occur of:
(i) the death of Helsel;
(ii) the discharge of Helsel "For Cause" in accordance with
paragraph 4(b) below;
(iii) the discharge of Helsel because of a "Permanent Disability"
in accordance with paragraph 4(c) below;
(iv) the voluntary resignation of Helsel, after first having
given 90 days' prior written notice to Buyer; or
(v) the expiration of the original three year term hereof.
(b) Termination for Cause. "For Cause" shall mean any one or more of
the following:
(i) Helsel's engaging in fraud, embezzlement, misappropriation of
funds or like conduct against Buyer;
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<PAGE> 4
(ii) Helsel's conviction (or plea of nolo contendere) on a felony
charge;
(iii) Helsel's material violation of any provision of this
Agreement;
(iv) Helsel's violation of any federal, state or local law,
regulation or ordinance relating to personal conduct in the workplace,
such as laws, regulations or ordinances pertaining to discrimination
or harassment;
(v) Helsel's breach of the representations and warranties set
forth in paragraph 7; or
(vi) Helsel's breach of obligations set forth in paragraphs (a)
through (f) in paragraph 6.
(c) TERMINATION FOR DISABILITY. Buyer may terminate Helsel as
President hereunder at any time because of a "Permanent Disability," which shall
mean a physical or mental incapacity that has prevented or will prevent Helsel
from exercising the powers or performing the duties assigned to him hereunder
for a continuous period of three months.
(d) PAYMENTS AND BENEFITS UPON TERMINATION. In the event of
termination as President, pursuant to (c) above because of a Permanent
Disability which prevents Helsel from rendering full-time services, he shall,
nevertheless, continue as a consultant for Buyer. In the event of termination as
President for Permanent Disability, Buyer shall continue to pay Helsel's Base
Salary and Annual Bonus as consulting fees for the balance of the Employment
Period. In the event of termination for any other reason, Buyer shall continue
to pay Helsel's Base Salary and Annual Bonus as severance pay for the balance of
the Employment Period. In addition, Buyer shall continue to provide and/or pay
for the then existing health care coverage to Helsel and/or his wife for the
balance of the Employment Period.
5. RESIGNATION. In the event of the voluntary resignation of Helsel, his
right to Base Salary and Annual Bonus shall terminate, and Helsel shall remain
bound by the provisions of paragraph 6.
6. PROPRIETARY RIGHTS.
(a) TRADE SECRETS. Helsel acknowledges that as a result of his
employment hereunder, he will be making use of, acquiring and/or adding to
confidential information of a special and unique nature relating to such matters
as Buyer's trade secrets, systems, procedures, manuals, confidential
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<PAGE> 5
reports, formulae, designs, application methods, parts lists, supplier lists,
customer lists, price lists and other financial information, drawings, business
records, and other information which has not been published or disseminated or
otherwise become a matter of general public knowledge ("Trade Secrets"), and as
an inducement to Buyer to enter into this Agreement, Helsel promises not to use
or disclose, directly or indirectly, any Trade Secrets to any person either
during or after the Employment Period, except to other employees of Buyer as
necessary in the regular course of his employment, or except as otherwise
expressly authorized by Buyer.
(b) CONFIDENTIALITY. Helsel promises that all knowledge and
information that he may acquire from Buyer, or from Employees or consultants of
Buyer regarding the Trade Secrets and other confidential information shall for
all time and for all purposes be regarded as strictly confidential and held in
trust and solely for the benefit and use of Buyer and shall not, without the
written permission of Buyer, be directly or indirectly disclosed by Helsel to
any person other than to the proper and duly authorized Employees of Buyer.
(c) DISCOVERIES OF HELSEL. On behalf of Helsel, his heirs and
representatives, Helsel promises to promptly communicate and fully disclose to
Buyer and upon request shall, without additional compensation, assign and
execute all papers necessary to assign to Buyer or its nominees, free of
encumbrance or restrictions, all inventions, ideas, designs, discoveries and
improvements which pertain or relate to the business of Buyer, whether
patentable or not, conceived or originated by Helsel solely or jointly with
others, at the expense of Buyer, or at the facilities of Buyer, or at the
request of Buyer, or in the course of Helsel's employment, or based on knowledge
or information obtained during the course of Helsel's employment by Buyer
whether or not conceived during regular working hours. This provision relates to
any matters conceived partially or fully during the term of this Agreement and
within five years thereafter. All such assignments shall include the patent
rights in this and all foreign countries. All such inventions, ideas, designs,
discoveries and improvements shall be the exclusive property of Buyer. Helsel
shall assist Buyer in obtaining patents on all such inventions, ideas, designs,
discoveries and improvements deemed patentable by Buyer and shall execute all
documents and do all things necessary to obtain letters patent, vest Buyer with
full and exclusive title thereto, and protect the same against infringement by
others.
(d) INTELLECTUAL PROPERTY OF HELSEL. As a matter of record, Helsel
lists below a complete list of all inventions, ideas, design, discoveries and
improvements, patented or unpatented, which Helsel has made or conceived prior
to the commencement of Helsel's employment by Buyer, it being understood that
the inventions, ideas, designs,
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<PAGE> 6
discoveries and improvements so listed are excluded from this Agreement: none.
(e) PROPERTY OF BUYER. Helsel recognizes further that all records,
drawings, data, computer programs, samples, models and all other tangible
materials or copies or extracts thereof touching Buyer's operations,
investigations or business, whether or not Trade Secrets, made or received by
Helsel during his Employment Period, are and shall be the property of Buyer
exclusively, and without additional consideration, Helsel promises to keep the
same at all times in Buyer's custody and subject to Buyer's control and to
surrender the same at the termination of his employment if not before. All
files, records, documents, drawings, specifications, equipment and information
with respect to suppliers to Buyer and customers of Buyer, and similar items
relating to the business of Buyer, whether prepared by Helsel or otherwise
coming into Buyer's possession, shall remain the exclusive property of Buyer.
Helsel further agrees that he will not make or retain any copies of any of the
foregoing and that he will so represent to Buyer upon termination of his
employment hereunder.
(f) NON-COMPETITION. Helsel agrees that during the Employment Period
and the four years next following the termination of the Employment Period, he
will not directly or indirectly or by acting in concert with others, whether as
an owner, employee, partner, shareholder, officer, licensor, licensee, trustee,
principal, consultant, agent, individually or in any other capacity, engage in
the business of the manufacture or sale of, or attempt to manufacture or sell,
products or services similar in kind or similar in purpose to those products or
services manufactured or sold by Buyer, to any customer of Buyer or to any
person, firm or corporation in competition with Buyer within the State of Ohio,
Indiana or any state in which Buyer has an office or facility, or any state in
which Buyer does business at the expiration of the Employment Period, nor employ
or attempt to employ or solicit for any employment competitive with Buyer, any
of Buyer's Employees.
Helsel agrees that during his employment he will undertake no
planning for or organization of any business activity competitive with the work
he performs as an Helsel of Buyer, nor will he combine or conspire with other
Employees of Buyer for the purpose of organizing any such competitive business
activity.
If Helsel violates this restrictive covenant and Buyer brings
legal action for injunctive or other relief, Buyer shall not, as a result of the
time involved in obtaining the relief, be deprived of the benefit of the full
period of the restrictive covenant. Accordingly, the restrictive covenant shall
be deemed to have the duration specified in this paragraph 6(f), computed from
the date the relief is granted, but reduced by the time between the period
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<PAGE> 7
when the restriction began to run and the date of the first violation of the
covenant by Helsel.
If any court shall determine that the duration or geographical
limit of any restriction contained in this paragraph is unenforceable, it is the
intention of the parties that the restrictive covenants set forth herein shall
not thereby be permitted to be terminated but rather shall be deemed amended to
the extent required to render it valid and enforceable. Such amendment shall
apply only with respect to the operation of this paragraph in the jurisdiction
of the court that has made the adjudication.
(g) INJUNCTIVE RELIEF. Helsel hereby consents and agrees that for any
threatened or actual violation of any provisions of this paragraph 6 of this
Agreement, a restraining order and/or an injunction may issue against Helsel,
without the necessity of proving actual damage or the posting of a bond, in
addition to any other rights Buyer may have.
7. REPRESENTATIONS OF HELSEL. Helsel represents and warrants, on behalf of
himself, his immediate family and any person, firm or corporation in which he
has a substantial interest, that:
(a) They do not, and will not during the Employment Period, have any
direct or indirect ownership interest in any entity with which Buyer has a
business relationship or competes with Buyer, except that the ownership of
investments at no time exceeding 1% of the issued and outstanding capital
stock of a publicly-held corporation shall not constitute a breach of this
representation and warranty; and
(b) The execution of this Agreement or his employment by Buyer, will
not break any agreement or covenant entered into by Helsel that is
currently in effect.
8. ACKNOWLEDGMENTS. Helsel hereby acknowledges that: (i) he has carefully
read all of the terms of this Agreement and that such terms have been fully
explained to him; (ii) he understands the consequences of each and every term of
this Agreement; (iii) he has had sufficient time and opportunity to consult with
his own legal advisor prior to signing this Agreement and that Buyer has
encouraged him to seek and he has had the benefit of legal counsel of his choice
prior to signing this Agreement; (iv) he specifically understands that by
signing this Agreement he is giving up certain rights he otherwise may have had,
and that he is agreeing to limit his freedom to engage in certain employment
during and after the term of this Agreement.
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<PAGE> 8
9. SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and, except as otherwise provided herein, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
10. REMEDIES CUMULATIVE. All remedies specified herein or otherwise
available shall be cumulative and in addition to any and every other remedy
provided hereunder or now or hereafter available.
11. NOTICES. All notices and other communications hereunder shall be sent
by registered or certified mail as follows:
If to Buyer: Helsel, Inc.
(a Delaware corporation)
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114
With a copy to: Byron S. Krantz, Esq.
Kohrman Jackson & Krantz
20th Floor, One Cleveland Center
Cleveland, Ohio 44114
If to Helsel: Jess F. Helsel,
aka, J. F. Helsel
Box 477, R.F.D., #3
Salem, Indiana 47167
With a copy to: Lynn H. Coyne, Esq.
Andrews, Harrell, Mann,
Chapman, & Emery
Graham Plaza, Suite 400
205 North College Avenue
Bloomington, Indiana 47402-2639
12. ASSIGNMENT. This Agreement is a personal services contract and it is
expressly agreed that the rights and interests of Helsel and Buyer hereunder may
not be sold, transferred, assigned, pledged or hypothecated; provided, however,
that Buyer may, in its sole discretion, elect to pay any and all monetary
obligations arising out of or related to this Agreement from any entity related
to or affiliated with Buyer.
13. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their heirs, representatives, successors and
permitted assigns.
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<PAGE> 9
14. GOVERNING LAW AND JURISDICTION. This Agreement is governed by, and
shall be construed and enforced in accordance with, the law (other than the law
of conflicts) of the State of Indiana. Buyer may enforce any claim arising out
of or relating to this Agreement, in any federal court having subject matter
jurisdiction and located in Indianapolis, Indiana or any state court having
subject matter jurisdiction and located in Washington County, Indiana. For the
purpose of any action or proceeding instituted with respect to any such claim,
Helsel and Buyer hereby irrevocably submit to the jurisdiction of such courts
and irrevocably consent to the service of process out of such courts by mailing
a copy thereof, by registered mail, postage prepaid, to Helsel and/or Buyer, as
the case may be, and agree that such service, to the fullest extent permitted by
law, (i) shall be deemed in every respect effective service of process upon
Helsel and/or Buyer in any such suit, action or proceeding, and (ii) shall be
taken and held to be valid personal service upon and personal delivery to Helsel
or Buyer. Nothing herein contained shall affect the right of any party to serve
process in any other manner permitted by law or preclude any party from bringing
an action or proceeding in respect hereof in any other country, state or place
having jurisdiction over such action. Helsel and Buyer irrevocably waive, to the
fullest extent permitted by law, any objection which it or he has or may have to
the laying of the venue of any such suit, action or proceeding brought in any
such court located in Indianapolis, Indiana, and any claim that any such suit,
action or proceeding brought in such a court has been brought in an inconvenient
forum.
15. CAPTIONS. The captions in this Agreement are included for convenience
only and shall not in any way affect the interpretation or construction of any
provision hereof.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and the same
agreement.
17. AMENDMENT; WAIVER. This Agreement may not be amended or modified other
than by a writing signed by each of the parties hereto. No waiver or failure to
act with respect to any breach or default hereunder shall be deemed to be a
waiver with respect to any subsequent breach or default, whether of a similar or
different nature.
18. ACTIVITIES. The Company has been advised by Consultant that Son engages
in activities that may compete or be considered to compete with the Company; it
is understood and agreed that no actions or activities of Son shall be deemed a
breach of this Agreement, unless such activities result from the use of Trade
Secrets or confidential information from the Company.
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<PAGE> 10
19. INDEMNIFICATION.
(a) To the maximum extent permitted under the Delaware General
Corporation Law, Buyer shall indemnify Helsel if he is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Buyer) by reason of the fact that he is or
was a director, officer, employee or agent of Buyer, or is or was serving at the
request of Buyer as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding.
(b) To the maximum extent permitted under the Delaware General
Corporation Law, Buyer shall indemnify Helsel if he is a party or is threatened
to be made a party to any threatened, pending or completed action or suit by or
in the right of Buyer to procure a judgment in its favor by reason of the fact
that such person is or was a director, officer, employee or agent of Buyer, or
is or was serving at the request of Buyer as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit.
20. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"BUYER"
HELSEL, INC.
By: /s/ Norman C. Harbert
------------------------------
Its: Chairman
-----------------------------
/s/ Jess F. Helsel
--------------------------------
Jess F. Helsel, aka J. F. Helsel
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<PAGE> 1
EXHIBIT 10.8
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (this "Agreement") is made and entered into as of
this 1st day of July, 1994, by and between HELSEL, INC., a Delaware corporation
(the "Company") and JESS F. HELSEL, aka J. F. HELSEL, a resident of Salem,
Indiana ("Consultant").
RECITALS:
WHEREAS, Consultant was formerly the sole shareholder and President of
Helsel, Inc., an Indiana corporation ("Seller").
WHEREAS, the Company, Consultant and Seller have entered into an Asset
Purchase Agreement dated May 16, 1994, providing for the purchase by the Company
of substantially all of the assets of Seller, except for its cash.
WHEREAS, on the date hereof, Consultant and the Company have entered into
an Employment Agreement (the "Employment Agreement") pursuant to which
Consultant shall be employed by the Company for a period of three years.
WHEREAS, after the termination of employment under the Employment
Agreement, the Company desires to obtain certain services of Consultant, and
Consultant is willing to provide such services, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration for the foregoing, and of the mutual
covenants set forth herein, the Company and Consultant agree as follows:
1. ENGAGEMENT. The Company hereby engages Consultant and Consultant agrees
to be engaged by the Company as a consultant for a period of four years
commencing on the date of termination of the Employment Period as such term is
defined in the Employment Agreement of even date, and terminating at the close
of business on the date one day after the fourth anniversary of the termination
of such Employment Period (the "Consulting Period").
<PAGE> 2
2. DUTIES. During the Consulting Period, Consultant shall assist the
management of the Company in the areas of marketing, production, and research
and development, and shall be available for consultation throughout the
Consulting Period. The exact time and duties shall be those to which the parties
mutually agree; provided, however, that it is understood and agreed that (i)
Consultant will be able to perform most of those duties from Indiana, and (ii)
in the event any travel is required, the reasonable expenses thereof will be
reimbursed by the Company.
3. NON-COMPETITION. During the period commencing on the first day of the
Consulting Period and continuing for 12 full calendar months after the
termination of the Consulting Period (the "Restricted Period"), Consultant shall
not directly or indirectly or by acting in concert with others, whether as an
owner, employee, partner, shareholder, officer, licensor, licensee, trustee,
principal, consultant, agent, individually or in any other capacity, engage in
the business of, the manufacture or sale of, or attempt to manufacture or sell,
products or services similar in kind or similar in purpose to those products or
services manufactured or sold by the Company, to any customer of the Company or
to any person, firm or corporation in competition with the Company within the
State of Ohio, Indiana or any state in which the Company has an office or
facility, or any state in which the Company does business at the expiration of
the Consulting Period, nor employ or attempt to employ or solicit for any
employment competitive with the Company, any of the Company's employees.
Consultant agrees that during the Restricted Period he will undertake no
planning for or organization of any business activity competitive with the work
he performs as a Consultant of the Company, nor will he combine or conspire with
employees of the Company for the purpose of organizing any such competitive
business activity.
If Consultant violates this restrictive covenant and the Company brings
legal action for injunctive or other relief, the Company shall not, as a result
of the time involved in obtaining the relief, be deprived of the benefit of the
full period of the restrictive covenant. Accordingly, the restrictive covenant
shall be deemed to have the duration specified in this paragraph 3, computed
from the date the relief is granted, but reduced by the time between the period
when the restriction began to run and the date of the first violation of the
covenant by Consultant.
If any court shall determine that the duration or geographical limit of
any restriction contained in this paragraph is unenforceable, it is the
intention of the parties that the restrictive covenants set forth herein shall
not thereby be permitted to be terminated, but rather shall be
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<PAGE> 3
deemed amended to the extent required to render it valid and enforceable. Such
amendment shall apply only with respect to the operation of this paragraph in
the jurisdiction of the court that has made the adjudication.
4. COMPENSATION. During the Consulting Period, the Corporation shall pay
and provide for, and Consultant shall be entitled to receive from the
Corporation as compensation for the consulting services to be rendered
hereunder, a fee of $450,000 over the Consulting Period, payable in the amount
of $150,00 per annum for the first two years and $75,000 per annum for the final
two years of the Consulting Period. Such compensation shall be paid in arrears
at the end of each calendar quarter, with the first quarter ending September 30,
1997.
5. PROPRIETARY RIGHTS.
(a) TRADE SECRETS. Consultant acknowledges that as a result of this
agreement, he will be making use of, acquiring and/or adding to confidential
information of a special and unique nature relating to such matters as the
Company's trade secrets, systems, procedures, manuals, confidential reports,
formulae, designs, application methods, parts lists, supplier lists, customer
lists, price lists and other financial information, drawings, business records,
and other information which has not been published or disseminated or otherwise
become a matter of general public knowledge ("Trade Secrets"), and as an
inducement to the Company to enter into this Consulting Agreement, Consultant
promises not to use or disclose, directly or indirectly, any Trade Secrets to
any person either during or after the Consulting Period, except to employees of
the Company as necessary in the regular course of his duties as provided herein,
or except as otherwise expressly authorized by the Company.
(b) CONFIDENTIALITY. Consultant promises that all knowledge and
information that he may acquire from the Company, or from employees or
consultants of the Company regarding the Trade Secrets and other confidential
information shall for all time and for all purposes be regarded as strictly
confidential and held in trust and solely for the benefit and use of the Company
and shall not, without the written permission of the Company, be directly or
indirectly disclosed by Consultant to any person other than to the proper and
duly authorized employees of the Company.
(c) DISCOVERIES OF CONSULTANT. On behalf of Consultant, his heirs and
representatives, Consultant promises to promptly communicate and fully disclose
to the Company and upon request shall, without additional compensation, assign
and execute all papers necessary to assign to the Company or its nominees, free
of encumbrance or restrictions, all inventions, ideas, designs, discoveries and
improvements which pertain or
-3-
<PAGE> 4
relate to the business of the Company, whether patentable or not, conceived or
originated by Consultant solely or jointly with others, at the expense of the
Company, or at the facilities of the Company, or at the request of the Company,
or during the Consulting Period, or based on knowledge or information obtained
during the course of the Consulting Period by the Company whether or not
conceived during regular working hours. This provision relates to any matters
conceived partially or fully during the term of this Agreement and within one
year thereafter. All such assignments shall include the patent rights in this
and all foreign countries. All such inventions, ideas, designs, discoveries and
improvements shall be the exclusive property of the Company. Consultant shall
assist the Company in obtaining patents on all such inventions, ideas, designs,
discoveries and improvements deemed patentable by the Company and shall execute
all documents and do all things necessary to obtain letters patent, vest the
Company with full and exclusive title thereto, and protect the same against
infringement by others.
(d) PROPERTY OF THE COMPANY. Consultant recognizes further that all
records, drawings, data, computer programs, samples, models and all other
tangible materials or copies or extracts thereof touching the Company's
operations, investigations or business, whether or not Trade Secrets, made or
received by Consultant during the Consulting Period, are and shall be the
property of the Company exclusively, and without additional consideration,
Consultant promises to keep the same at all times in the Company's custody and
subject to the Company's control and to surrender the same at the termination of
his employment if not before. All files, records, documents, drawings,
specifications, equipment and information with respect to suppliers to the
Company and customers of the Company, and similar items relating to the business
of the Company, whether prepared by Consultant or otherwise coming into the
Company's possession, shall remain the exclusive property of the Company.
Consultant further agrees that he will not make or retain any copies of any of
the foregoing and that he will so represent to the Company upon termination of
his employment hereunder.
6. DEATH OR DISABILITY. In the event of the death or disability of
Consultant prior to the conclusion of the Consulting Period, the balance of the
installments required by this Agreement shall be paid to Consultant's designated
beneficiary or, if no beneficiary has been designated, to his estate.
7. CONSULTANT NOT AN EMPLOYEE. The Company shall have no right to
direct or control Consultant and Consultant shall have no authority to direct or
control agents, officers, or employees of the Company. It is understood that
Consultant is not an Employee of the Company for any purpose and shall not
- 4 -
<PAGE> 5
be subject to supervision or direction by the Company. It is agreed and
understood that the Company shall not withhold federal or state income or FICA
taxes from its payments to Consultant.
8. INDEMNIFICATION. In the event of a final and binding determination of
any federal, state or local governmental agency, or of a court of competent
jurisdiction, that the Company is obligated for taxes or other charges arising
out of the services of Consultant pursuant to this Agreement, Consultant shall
indemnify and hold the Company harmless from any liability for taxes or other
charges (to include interest and/or penalty). The Company may exercise rights of
set-off on monies otherwise due Consultant from the Company or its affiliates in
order to affect this result.
9. REPRESENTATIONS OF CONSULTANT. Consultant represents and warrants, on
behalf of himself, his immediate family and any person, firm or corporation in
which he has a substantial interest, that:
(a) They do not, and will not during the Consulting Period, have any
direct or indirect ownership interest in any entity with which the Company
has a business relationship or competes with the Company, except that the
ownership of investments at no time exceeding 1% of the issued and
outstanding capital stock of a publicly-held corporation shall not
constitute a breach of this representation and warranty; and
(b) The execution of this Agreement or his engagement by the Company,
will not break any agreement or covenant entered into by Consultant that is
currently in effect.
10. ACKNOWLEDGMENTS. Consultant hereby acknowledges that: (i) he has
carefully read all of the terms of this Agreement and that such terms have been
fully explained to him; (ii) he understands the consequences of each and every
term of this Agreement; (iii) he has had sufficient time and opportunity to
consult with his own legal advisor prior to signing this Agreement and that the
Company has encouraged him to seek and he has had the benefit of legal counsel
of his choice prior to signing this Agreement; (iv) he specifically understands
that by signing this Agreement he is giving up certain rights he otherwise may
have had, and that he is agreeing to limit his freedom to engage in certain
employment during and after the term of this Agreement.
-5-
<PAGE> 6
11. SEVERABILITY. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement, and, except as otherwise provided herein, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
12. REMEDIES CUMULATIVE. All remedies specified herein or otherwise
available shall be cumulative and in addition to any and every other remedy
provided hereunder or now or hereafter available.
13. NOTICES. All notices and other communications hereunder shall be sent
by registered or certified mail as follows:
If to the Company: Helsel, Inc.,
a Delaware corporation
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114
With a copy to: Byron S. Krantz, Esq.
Kohrman Jackson & Krantz
20th Floor
One Cleveland Center
Cleveland, Ohio 44114
If to Consultant: Jess F. Helsel,
aka J. F. Helsel
Box 477, R.F.D., #3
Salem, Indiana 47167
With a copy to: Lynn H. Coyne, Esq.
Harrell, Coyne & Emery
Graham Plaza, Suite 400
205 North College Avenue
Bloomington, IN 47404-5667
14. ASSIGNMENT. This Agreement is a personal services contract and it is
expressly agreed that the rights and interests of Consultant and the Company
hereunder may not be sold, transferred, assigned, pledged or hypothecated;
provided, however, that the Company may, in its sole discretion, elect to pay
any and all monetary obligations arising out of or related to this Agreement
from any entity related to or affiliated with the Company.
- 6 -
<PAGE> 7
15. BINDING EFFECT. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their heirs, representatives, successors and
permitted assigns.
16. GOVERNING LAW AND JURISDICTION. This Agreement is governed by, and
shall be construed and enforced in accordance with, the law (other than the law
of conflicts) of the State of Indiana. The Company may enforce any claim arising
out of or relating to this Agreement, in any state court having subject matter
jurisdiction and located in Washington County, Indiana or any federal court
having subject matter jurisdiction and located in Indianapolis, Indiana. For the
purpose of any action or proceeding instituted with respect to any such claim,
the Company and Consultant hereby irrevocably submit to the jurisdiction of such
courts and irrevocably consent to the service of process out of such courts by
mailing a copy thereof, by registered mail, postage prepaid, to the Company or
Consultant, as the case may be, and agree that such service, to the fullest
extent permitted by law, (i) shall be deemed in every respect effective service
of process upon the Company and/or Consultant in any such suit, action or
proceeding, and (ii) shall be taken and held to be valid personal service upon
and personal delivery to the Company or Consultant. Nothing herein contained
shall affect the right of any party to serve process in any other manner
permitted by law or preclude any party from bringing an action or proceeding in
respect hereof in any other country, state or place having jurisdiction over
such action. The Company and Consultant irrevocably waive, to the fullest extent
permitted by law, any objection which it or he has or may have to the laying of
the venue of any such suit, action or proceeding brought in any such court
located in Indianapolis, Indiana, and any claim that any such suit, action or
proceeding brought in such a court has been brought in an inconvenient forum.
17. CAPTIONS. The captions in this Agreement are included for convenience
only and shall not in any way affect the interpretation or construction of any
provision hereof.
18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and the same
agreement.
19. AMENDMENT; WAIVER. This Agreement may not be amended or modified other
than by a writing signed by each of the parties hereto. No waiver or failure to
act with respect to any breach or default hereunder shall be deemed to be a
waiver with respect to any subsequent breach or default, whether of a similar or
different nature.
20. ACTIVITIES. The Company has been advised by Consultant that Son engages
in activities that may compete or be considered to compete with the Company; it
is understood and agreed that no actions or activities of Son shall be deemed a
breach of this Agreement, unless such activities result from the use of Trade
Secrets or confidential information from the Company.
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<PAGE> 8
21. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements and
understandings relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"THE COMPANY"
HELSEL, INC.
By: /s/ Norman C. Harbert
-----------------------------
Its: Chairman
----------------------------
"CONSULTANT"
/s/ Jess F. Helsel
---------------------------------
Jess F. Helsel aka J. F. Helsel
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<PAGE> 1
Original delivered to Jess F. Helsel on June 30, 1994
EXHIBIT 10.9
THIS SECURED PROMISSORY NOTE (INCLUDING ANY RIGHTS UNDER THIS SECURED PROMISSORY
NOTE AND ANY SECURITY FOR THIS SECURED PROMISSORY NOTE) IS SUBJECT TO A
SUBORDINATION AGREEMENT AMONG HELSEL, INC., A DELAWARE CORPORATION, HELSEL,
INC., AN INDIANA CORPORATION AND SOCIETY NATIONAL BANK, DATED JULY 1, 1994, AS
SUCH SUBORDINATION AGREEMENT MAY BE FROM TIME TO TIME AMENDED OR RESTATED.
SECURED
-------
PROMISSORY NOTE
---------------
$500,000 Campbellsburg, Indiana
July 1, 1994
FOR VALUE RECEIVED, the undersigned, HELSEL, INC., a Delaware corporation
(the "Corporation") promises to pay to the order of HELCO, INC., formerly
HELSEL, INC., an Indiana corporation (the "Holder"), the principal amount of
Five Hundred Thousand Dollars ($500,000) in four (4) equal installments of One
Hundred Twenty Five Thousand Dollars ($125,000) each, payable annually on the
first of August in each year, commencing on August 1, 1996, with the final
installment due on August 1, 1999, and to pay interest from the date of this
Promissory Note (the "Note") on such principal amount from time to time
outstanding at a rate per annum which shall be one (1) percentage point in
excess of the prime rate as quoted in the WALL STREET JOURNAL on the date hereof
or if the rate is quoted the rate on the first publication date thereafter. Such
prime rate shall be adjusted annually on the anniversary date to the prime rate
then quoted in the WALL STREET JOURNAL from the date hereof until maturity.
Interest shall be computed on a 360-day year basis on the actual number of days
elapsed and shall be paid quarterly on the last day of August, November,
February and May, in each year.
The failure by the Corporation to make any payment of interest or principal
on this Note on or before the date any such payment is due shall NOT constitute
an event of default ("Event of Default") unless:
1. Thirty days have elapsed from the payment due date without the
Corporation's payment of the late amount; and
2. Written notice listing the overdue amount has been sent by the Holder
via facsimile to Ronald E. Weinberg ("Weinberg") at 216-861-4546 and Byron S.
Krantz ("Krantz") at 216-621-6536; and
<PAGE> 2
3. Ten days have elapsed without payment of the late amount by the
Corporation from the date the Holder's written notice has been sent to both
Weinberg and Krantz by facsimile; and
4. If notice is provided before the end of the thirty days provided for in
Section 1 above, the Event of Default shall occur at the later of the 30 days or
ten days after said notice has been faxed.
In the Event of Default, the Note and all interest then due shall be due
and payable and the Holder may exercise all or any of the remedies provided by
law. If the Note is not paid at maturity, whether maturity occurs by lapse of
time or acceleration, the principal of and the unpaid interest on this Note,
thereafter until paid, shall bear interest at a rate per annum which shall be
five (5) percentage points in excess of the prime rate as quoted in the WALL
STREET JOURNAL on that date or the first publication date thereafter.
This Note will be secured by (1) a second priority security interest in the
Collateral as such term is defined in the Society Bank Credit Facility and
Security Agreement dated July 1, 1994, between Buyer and Society National Bank,
a national banking association and (2) two Guarantees, the first by Hawk
Corporation and the second from Ronald E. Weinberg and Norman C. Harbert, in the
form set forth in the Asset Purchase Agreement dated May 16, 1994, on Exhibit
4.3(a)(v) and 4.3(a)(v)(1) respectively.
This Note shall be governed by and construed in accordance with the laws of
the State of Indiana.
This Note may be prepaid in whole or in part at any time without premium or
penalty. Any prepayment shall be applied first to accrued and unpaid interest,
and then to unpaid installments of principal.
This Note has been duly executed and delivered for value by the duly
authorized officers of the Corporation.
HELSEL, INC., a Delaware
corporation
By: /s/ Jess F. Helsel
--------------------------
Title: President
------------------------
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<PAGE> 3
EXHIBIT 10.10
MLX CORP. / S.K. WELLMAN GROUP
POST-EMPLOYMENT NON-COMPETE AGREEMENT
(EXECUTIVE & SENIOR MANAGEMENT PERSONNEL)
THIS AGREEMENT, made and entered into on and as of the date last set forth
below by THE UNDERSIGNED INDIVIDUAL (herein referred to as "Employee") for the
benefit and in favor of MLX CORP. ("MLX") AND ITS SUBSIDIARIES (MLX and its
subsidiaries herein referred to as the "MLX Companies").
WHEREAS, Employee has accepted or presently holds an executive or senior
management position with one of the MLX Companies (S.K. Wellman Group); and
WHEREAS, by reason of the nature of Employee's position with S.K. Wellman
Group, he/she is eligible to participate in an incentive compensation plan
sponsored by the MLX Companies, and agrees to certain restrictions upon
Employee's ability to engage in activities in competition with and/or otherwise
disadvantageous to the MLX Companies subsequent to termination of Employee's
employment (through resignation, retirement, dismissal, layoff or otherwise)
with the MLX Companies, or any of them;
NOW, THEREFORE, as an inducement to the S.K. Wellman Group to hire and employ
Employee and/or to continue Employee in their employ and in consideration of
other good and valuable consideration (including without limitation the
eligibility of Employee to participate in an incentive compensation plan and
arrangements sponsored by the MLX Companies), Employee, intending to be
legally bound, hereby confirms, acknowledges and agrees as follows:
A. DEFINITIONS
As used in this Agreement, the following terms and phrases shall have the
following meanings:
1. "Restricted Post-Employment Period." "Restricted Post-Employment Period"
shall mean the period of twelve (12) consecutive calendar months from and after
the date of termination of Employee's employment (through resignation,
retirement, dismissal, layoff or otherwise) with the S.K. Wellman Group.
2. "Restricted Geographic Territory." "Restricted Geographic Territory" shall
mean the area within fifty miles of the location where the employee is based at
the time of termination and any other base of operation within the two years
immediately prior to termination. In addition, employee shall not be employed
by any company (or company's division as the case may be) which manufactures or
sells products which directly compete with products of MLX's S.K. Wellman
subsidiaries on the continent of North America or Europe.
B. POST-EMPLOYMENT RESTRICTION ON COMPETITIVE ACTIVITIES
Employee agrees that, in the event that Employee's employment with the S.K.
Wellman Group shall terminate for any reason (through resignation, dismissal,
retirement or otherwise), Employee shall not at any time during and throughout
the Restricted Post-Employment Period engage, directly or indirectly, in any of
the following restricted activities:
(a) The employment of Employee by, or the serving by Employee as an
officer, employee, consultant, advisor, agent or director of or to, any
company or other enterprise (including sole proprietorship) engaged in any
commercial activity within the Restricted Geographic Territory in
competition with the commercial activities then engaged in by the S.K.
Wellman Group, where Employee's activity involves any financial,
accounting, purchasing, engineering, research, design, development,
manufacturing, marketing, sales, customer support, service, credit,
collections, order processing, warehousing, shipping, distribution,
personnel, management or other activities or functions of a like-
<PAGE> 4
MLX CORP./SPECIALTY FRICTION MATERIALS GROUP
POST-EMPLOYMENT NON-COMPETE AGREEMENT
DISTRICT SALES MANAGER/SALES REPRESENTATIVE
PAGE 2
kind or similar nature to (or otherwise substantially related to)
activities or functions conducted, managed or supervised (directly or
indirectly) by Employee at any time during Employee's employment with
the S.K. Wellman Group; or
(b) The management, administration or supervision, whether direct or
indirect, of any individual or group of individuals engaged in any of
the prohibited competitive activities or functions described in
subparagraph (a) or subparagraph (b) above; or
(c) The ownership (as shareholder, partner, fiduciary or otherwise) of
any interest in any company or other enterprise engaged in any
commercial activity within the Restricted Geographic Territory in
competition with the commercial activities then engaged in by the S.K.
Wellman Group (or any subsidiary, division or other operation thereof);
provided, however, that the provisions of the subparagraph (c) shall
not be deemed to prohibit, limit or restrict the ownership by Employee
of five percent (5%) or less of the outstanding securities, of
any class, of any company or other enterprise, whether or not in
competition with the S.K. Wellman Group, where such securities are
publicly traded on a national securities exchange, listed on the
National Association of Securities Dealers Automatic Quotation System
(NASDAQ) or quoted in the daily listing of over-the-counter market
securities.
C. POST-EMPLOYMENT RESTRICTION ON SOLICITATION OF EMPLOYEES
Employee agrees that, in the event that Employee's employment with the MLX
Companies shall terminate for any reason (through resignation, dismissal,
retirement or otherwise), Employee shall not at anytime during and throughout
the Restricted Post-Employment Period solicit or induce, or sid or assist any
other person, party or entity to solicit or induce, any other employee of the
MLX Companies, or any of them, to leave the employ of the MLX Companies.
D. INJUNCTIVE RELIEF
Employee acknowledges and agrees that, in the event of any breach or violation
of the provisions of this Agreement, (i) the MLX Companies will suffer
irreparable harm, (ii) monetary damages alone will be inadequate to compensate
the MLX Companies, and (iii) the MLX Companies, or any of them, shall be
authorized and entitled to obtain from any court of competent jurisdiction
temporary, preliminary and permanent injunctive relief without the need to
prove actual damages as well as an equitable accounting (at Employee's expense)
of all profits or benefits arising out of such violation by Employee, which
rights and remedies shall be cumulative and in addition to any other rights or
remedies to which the MLX Companies, or any of them, may otherwise be entitled
in law or in equity.
E. MISCELLANEOUS
1. Employment-At-Will; No Contract of Employment. This Agreement does not
constitute a contract of employment or obligate the MLX Companies, or any of
them, to employ Employee for any stated period or an indefinite period of time;
it being expressly understood and agreed by Employee that Employee's
employment with the S.K. Wellman Group is and shall be on an employment-at-will
basis.
2. No Impairment of Separate Agreements Relating to Confidentiality,
Nondisclosure or Personal Use of Proprietary Information of the MLX Companies.
This Agreement shall not be deemed to limit, restrict or impair the validity or
enforceability of the provisions of any separate agreement executed by Employee
in favor of the MLX Companies, or any of them, relating to the confidentiality,
nondisclosure, prohibition on
Form SKW-HPP-103-F1
<PAGE> 1
EXHIBIT 10.10
MLX CORP. / S.K. WELLMAN GROUP
POST-EMPLOYMENT NON-COMPETE AGREEMENT
(EXECUTIVE & SENIOR MANAGEMENT PERSONNEL)
THIS AGREEMENT, made and entered into on and as of the date last set forth
below by THE UNDERSIGNED INDIVIDUAL (herein referred to as "Employee") for the
benefit and in favor of MLX CORP. ("MLX") AND ITS SUBSIDIARIES (MLX and its
subsidiaries herein referred to as the "MLX Companies").
WHEREAS, Employee has accepted or presently holds an executive or senior
management position with one of the MLX Companies (S.K. Wellman Group); and
WHEREAS, by reason of the nature of Employee's position with S.K. Wellman
Group, he/she is eligible to participate in an incentive compensation plan
sponsored by the MLX Companies, and agrees to certain restrictions upon
Employee's ability to engage in activities in competition with and/or otherwise
disadvantageous to the MLX Companies subsequent to termination of Employee's
employment (through resignation, retirement, dismissal, layoff or otherwise)
with the MLX Companies, or any of them;
NOW, THEREFORE, as an inducement to the S.K. Wellman Group to hire and employ
Employee and/or to continue Employee in their employ and in consideration of
other good and valuable consideration (including without limitation the
eligibility of Employee to participate in an incentive compensation plan and
arrangements sponsored by the MLX Companies), Employee, intending to be
legally bound, hereby confirms, acknowledges and agrees as follows:
A. DEFINITIONS
As used in this Agreement, the following terms and phrases shall have the
following meanings:
1. "Restricted Post-Employment Period." "Restricted Post-Employment Period"
shall mean the period of twelve (12) consecutive calendar months from and after
the date of termination of Employee's employment (through resignation,
retirement, dismissal, layoff or otherwise) with the S.K. Wellman Group.
2. "Restricted Geographic Territory." "Restricted Geographic Territory" shall
mean the area within fifty miles of the location where the employee is based at
the time of termination and any other base of operation within the two years
immediately prior to termination. In addition, employee shall not be employed
by any company (or company's division as the case may be) which manufactures or
sells products which directly compete with products of MLX's S.K. Wellman
subsidiaries on the continent of North America or Europe.
B. POST-EMPLOYMENT RESTRICTION ON COMPETITIVE ACTIVITIES
Employee agrees that, in the event that Employee's employment with the S.K.
Wellman Group shall terminate for any reason (through resignation, dismissal,
retirement or otherwise), Employee shall not at any time during and throughout
the Restricted Post-Employment Period engage, directly or indirectly, in any of
the following restricted activities:
(a) The employment of Employee by, or the serving by Employee as an
officer, employee, consultant, advisor, agent or director of or to, any
company or other enterprise (including sole proprietorship) engaged in any
commercial activity within the Restricted Geographic Territory in
competition with the commercial activities then engaged in by the S.K.
Wellman Group, where Employee's activity involves any financial,
accounting, purchasing, engineering, research, design, development,
manufacturing, marketing, sales, customer support, service, credit,
collections, order processing, warehousing, shipping, distribution,
personnel, management or other activities or functions of a like-
<PAGE> 2
MLX CORP./SPECIALTY FRICTION MATERIALS GROUP
POST-EMPLOYMENT NON-COMPETE AGREEMENT
DISTRICT SALES MANAGER/SALES REPRESENTATIVE
PAGE 2
kind or similar nature to (or otherwise substantially related to)
activities or functions conducted, managed or supervised (directly or
indirectly) by Employee at any time during Employee's employment with
the S.K. Wellman Group; or
(b) The management, administration or supervision, whether direct or
indirect, of any individual or group of individuals engaged in any of
the prohibited competitive activities or functions described in
subparagraph (a) or subparagraph (b) above; or
(c) The ownership (as shareholder, partner, fiduciary or otherwise) of
any interest in any company or other enterprise engaged in any
commercial activity within the Restricted Geographic Territory in
competition with the commercial activities then engaged in by the S.K.
Wellman Group (or any subsidiary, division or other operation thereof);
provided, however, that the provisions of the subparagraph (c) shall
not be deemed to prohibit, limit or restrict the ownership by Employee
of five percent (5%) or less of the outstanding securities, of
any class, of any company or other enterprise, whether or not in
competition with the S.K. Wellman Group, where such securities are
publicly traded on a national securities exchange, listed on the
National Association of Securities Dealers Automatic Quotation System
(NASDAQ) or quoted in the daily listing of over-the-counter market
securities.
C. POST-EMPLOYMENT RESTRICTION ON SOLICITATION OF EMPLOYEES
Employee agrees that, in the event that Employee's employment with the MLX
Companies shall terminate for any reason (through resignation, dismissal,
retirement or otherwise), Employee shall not at anytime during and throughout
the Restricted Post-Employment Period solicit or induce, or sid or assist any
other person, party or entity to solicit or induce, any other employee of the
MLX Companies, or any of them, to leave the employ of the MLX Companies.
D. INJUNCTIVE RELIEF
Employee acknowledges and agrees that, in the event of any breach or violation
of the provisions of this Agreement, (i) the MLX Companies will suffer
irreparable harm, (ii) monetary damages alone will be inadequate to compensate
the MLX Companies, and (iii) the MLX Companies, or any of them, shall be
authorized and entitled to obtain from any court of competent jurisdiction
temporary, preliminary and permanent injunctive relief without the need to
prove actual damages as well as an equitable accounting (at Employee's expense)
of all profits or benefits arising out of such violation by Employee, which
rights and remedies shall be cumulative and in addition to any other rights or
remedies to which the MLX Companies, or any of them, may otherwise be entitled
in law or in equity.
E. MISCELLANEOUS
1. Employment-At-Will; No Contract of Employment. This Agreement does not
constitute a contract of employment or obligate the MLX Companies, or any of
them, to employ Employee for any stated period or an indefinite period of time;
it being expressly understood and agreed by Employee that Employee's
employment with the S.K. Wellman Group is and shall be on an employment-at-will
basis.
2. No Impairment of Separate Agreements Relating to Confidentiality,
Nondisclosure or Personal Use of Proprietary Information of the MLX Companies.
This Agreement shall not be deemed to limit, restrict or impair the validity or
enforceability of the provisions of any separate agreement executed by Employee
in favor of the MLX Companies, or any of them, relating to the confidentiality,
nondisclosure, prohibition on
Form SKW-HPP-103-F1
<PAGE> 3
MLX CORP./SPECIALTY FRICTION MATERIALS GROUP
POST-EMPLOYMENT NON-COMPLETE AGREEMENT
DISTRICT SALES MANAGER/SALES REPRESENTATIVE
PAGE 3
personal use or acknowledgement of ownership of confidential, secret, trade
secret or other proprietary information of the MLX Companies, or any of them,
which agreements are independent of, and separate and apart from, the
provisions of this Agreement.
3. INVALIDITY OR UNENFORCEABILITY. The invalidity or unenforceability of any
term or condition of this Agreement shall not affect or impair the validity or
enforceability of the remaining terms and conditions hereof, each of which
shall remain in full force and effect. To the extent any term or condition of
this Agreement is held by a court of competent jurisdiction to be invalid or
unenforceable by reason of the duration geographic scope, nature of activity
restricted or otherwise, said court shall, in lieu of striking or rendering
unenforceable the offending term or condition hereof, interpret and reform said
terms or conditions in a manner designed to permit the fullest enforcement
thereof by the MLX Companies in accordance with then applicable law.
4 AMENDMENT, MODIFICATION OR WAIVER. No amendment, modification or claimed
waiver of any of the provisions of this Agreement shall be valid and
enforceable against the MLX Companies, or any of them, unless approved in
advance in writing by the Chairman and Chief Executive Officer of MLX.
5. SURVIVAL. The provisions of this Agreement shall survive termination of
Employee's employment (through resignation, retirement, dismissal, layoff or
otherwise) with the S.K. Wellman Group.
6. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Employee, intending to be legally bound, has executed this
Post-Employment Non-Compete Agreement in favor of MLX Companies on and as of
this 5 day of April , 1994.
--- --------- -
/s/ Ronald E. Grambo (Seal)
-----------------------------
Signature of Employee
Print Name: Ronald E. Grambo
--------------------------------
Address: 725-17 Windward Dr.
----------------------------------
Aurora, OH
----------------------------------
Social Security No.: ###-##-####
-----------------------
<PAGE> 1
EXHIBIT 10.11
CHANGE OF OWNERSHIP
-------------------
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between S. K. Wellman Limited, Inc., a Michigan
corporation (the "Company") and Ronald E. Grambo (the "Executive"), dated as of
the 1st day of February 1995.
The Board of Directors of the Company (the "Board"), has determined that it
is in the best interest of the Company and its shareholders to assure that the
Company will have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as defined in Section
2) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS. (a) The "Effective Date" shall mean the mean the
first date during the Change of Control Period (as defined in Section 1(b)) on
which a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's employment
with the Company is terminated prior to the date on which the Change of Control
occurs, and if it is reasonably demonstrated by the Executive that such
termination of employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect the Change of Control or (ii) otherwise
arose in connection with or anticipation of the Change of Control, then for all
purposes of this Agreement the "Effective Date, shall mean the date immediately
prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (such date and each annual anniversary thereof
shall be hereinafter referred to as the "Renewal Date"), the Change of Control
Period shall be automatically extended so as to terminate three years from such
Renewal Date, unless at least 60 days prior to the Renewal Date the Company
shall give notice to the Executive that the Change of Control Period shall not
be so extended.
<PAGE> 2
2. CHANGE IN CONTROL. (a) As used herein means the first occurrence of
either of the following events: (i) the acquisition, directly or indirectly, by
any individual, corporation, association, trust, unincorporated organization or
other entity (a "Person") of securities of the Company representing an aggregate
of eighty percent (80%) or more of the combined voting power of the Company's
then outstanding securities; or (ii) the acquisition by any Person of all or
substantially all of the assets of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company, in accordance with the terms and provisions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. TERMS OF EMPLOYMENT. (a) Position and Duties. (i) During the Employment
Period, (A) the Executive's position including status, offices, titles and
reporting requirements), authority, duties and responsibilities shall be at
least commensurate in all respects with the most significant of those held or
exercised by, or assigned to Executive at any time during the 90-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office which is the headquarters of the
Company and is less than 35 miles from such location.
(ii) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on civic or charitable boards or
committees, (B) deliver lectures, or fulfill speaking engagements and (C) manage
personal investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this agreement. It is expressly understood and
agreed that to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such activities
(or the conduct of activities similar in nature and scope thereto) subsequent to
the Effective Date shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid on a monthly basis, at least equal to twelve times the highest
monthly base salary paid or payable to the Executive by the Company and its
affiliated companies during the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period, the
Annual Base Salary shall be reviewed at least annually and shall be increased at
any time, and from time to time, as shall be substantially consistent with
increases in base salary generally awarded in the ordinary course of business to
other peer executives of the Company and its affiliated companies. Any increase
in Annual Base Salary shall not serve to limit or
<PAGE> 3
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
4.1. ANNUAL BONUS PARTICIPATION. In addition to the Annual Base Salary the
Executive shall be entitled to participate in the Company's Senior Management
Bonus Program (the "Bonus Program") or its successor programs. For purposes of
this plan the Annual Target Bonus (as defined in the Bonus Program) will be
$50,000 (fifty thousand dollars) annually. The criteria for evaluation of
performance and bonus award will be in line with criteria set forth in the Bonus
Program, as established or amended by the Company's board of directors from time
to time in its sole discretion. However, in no instances, as long as the
Executive is performing his duties satisfactorily, may the bonus award be below
50% of the target bonus amount or $25,000 (twenty-five thousand dollars).
4.2. VACATION AND INSURANCE BENEFITS. Executive shall be entitled to four
(4) weeks of vacation during each year of his employment by the Company, as well
as insurance coverage, including, without limitation, life, medical, dental, and
disability insurance consistent in each case with the insurance benefits
provided by the Company to other similarly situated senior executives.
4.3. OTHER BENEFITS. Executive shall be entitled to share in any employee
benefits provided by the Company on the same basis as other similarly
situated senior executives, so long as the Company provides or offers such
benefits to such employees.
5. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company's board of directors determines in good faith
that the Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability provided below), the Company may give
to the Executive written notice in accordance with Section 13(b) of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the inability of the
Executive, due to illness, accident or other physical or mental incapacity, to
perform the duties provided for herein for an aggregate of ninety (90) days
during any 180 consecutive day period during the term hereof.
(b) CAUSE. The Company may terminate the Executive's employment during the
Employment Period for Cause. For purposes of this Agreement, "cause" shall mean
(i) repeated violations by Executive of the Executive's obligations under
Section 4(a) (other than as a result of incapacity due to physical or mental
illness) which are demonstrably willful and deliberate on the Executive's part,
which are committed in bad faith or without reasonable belief that such
<PAGE> 4
violations are in the best interests of the Company and which are not remedied
in a reasonable period of time after receipt of written notice from the Company
specifying such violations or (ii) the conviction of the Executive of a felony
involving moral turpitude.
(c) GOOD REASON. The Executive's employment may be terminated during the
employment the Employment Period by the Executive for Good Reason. For purposes
of this Agreement, "Good Reason" shall mean
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as contemplated
by Section 4(a), or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities that a
reasonable man holding a similar position would find untenable, excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions of
Section 4 (b), other than an isolated, insubstantial and inadvertent failure not
occurring in had faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be based at any office or
location other than that described in Section 4(a) (i) (B);
(iv) any purported termination by the Company of the Executive's employment
otherwise than as expressly permitted by this Agreement; or
(d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or by
the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 13 (b) For purposes
of this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) if the Date of Termination
(as defined below) is other than the date of receipt of such notice, specifies
the termination date which date shall be not more than 15 days after the giving
of such notice). The failure by the Executive or the Company to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive or the
Company hereunder or preclude the Executive or the Company from asserting such
fact or circumstance in enforcing the Executive's or the Company's rights
hereunder.
(e) DATE OF TERMINATION. "Date of Termination", means if the Executive's
employment is terminated by the Company for Cause, or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if the Executive's employment is
terminated by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the
<PAGE> 5
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) If, during the
Employment Period, the Company shall terminate the Executive's employment other
than for Cause or Disability or the Executive shall terminate employment for
Good Reason;
(i) the Company shall pay to the Executive in a lump sum in cash within 30
days after the Date of Termination the aggregate of the following amounts: (A)
the sum of (1) the Executive's aggregate Annual Base Salary through the end of
the Employment Period, including any portion thereof previously deferred by the
Executive, to the extent not theretofore paid, and (2) any accrued vacation pay,
in each case to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to as the
"Accrued Obligations"), and
(ii) for the remainder of the Employment Period, or such longer period as
any plan, program, practice or policy of the Company may provide, the Company
shall continue 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, programs, practices and policies described in Sections 4.2 and 4.3.
(B) DEATH. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations of the Company to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations (which shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination) and
the timely payment or provision of Other Benefits as provided in Section 4.3.
(C) DISABILITY. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period in accordance with the
terms of Section 5(a), this Agreement shall terminate without further
obligations of the Company to the Executive, other than for payment of Accrued
Obligations (which shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination) and the timely payment or provision of
Other Benefits as provided in Section 4.3.
(D) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment shall
be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations of the Company to the Executive other than
the obligation to pay to the Executive Annual Base Salary through the Date of
Termination plus the amount of any compensation previously deferred by the
Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Employment Period, excluding a termination
<PAGE> 6
for Good Reason, this Agreement shall terminate without further obligations of
the Company to the Executive, other than for Accrued Obligations and the timely
payment or provision of Other Benefits as provided in Section 4.3. In such case,
all Accrued Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination.
8. FULL SETTLEMENT: RESOLUTION OF DISPUTES. (a) The Company's obligations
to make payments provided for in this Agreement and otherwise to perform its
obligations pursuant to this Agreement, and otherwise, shall not be affected by
any set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Executive or others. In no event shall
the Executive be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive under any provisions
of this Agreement and such amounts shall not be reduced whether or not the
Executive obtains other employment.
9.0. CONFIDENTIAL INFORMATION/SOLICITATION OF CUSTOMERS - As used herein,
"Confidential Information" means all information relating to the Company's
business of manufacturing specialty friction products (the "Company's business")
which derives economic value, actual or potential, from not being generally
known to other Persons, including, without limitation, technical or nontechnical
data, formula (including cost and/or pricing formulae), compilations, programs,
devices, methods, techniques, processes, financial data, names, addresses,
telephone numbers, contact persons and other identifying information relating to
Customers (as defined below) and potential Customers; compilations and lists of
Customers, and potential Customers; information with respect to the needs and
requirements of various Customers for the Company's products and services,
including the dates on which any contracts held by the Company with such
Customers will terminate and be subject to renewal or on which renewal orders
will be placed by the Customers; rate and price information on products and
services provided by the Company to its Customers; compilations and lists of the
Company's suppliers and other vendors; information with respect to the Company's
relationships with its suppliers and other vendors, including the dates on which
any contracts held by the Company with its suppliers or vendors will terminate
or be subject to renewal; and all business records and personal data relating to
the Company's employees and agents, including compensation arrangements of such
employees and agents with the Company. Notwithstanding the foregoing,
"Confidential Information" does not include: (a) any information that is or
shall become generally known to the industry in the public or the industry in
which the Company conducts business through no fault of Executive, (b) any
information received by Executive in good faith from any other Person who has
the right to disclose such information and who has not received such
information, either directly or indirectly, from the Company, (c) any
information that Executive can demonstrate was within his legitimate possession
prior to the time of his original employment by the Company, or (d) any
information that does not constitute a trade secret under applicable law on or
after the third anniversary of the expiration or termination of Executive's
employment hereunder.
9.1. CUSTOMERS. As used herein, "customers" means all Persons to whom any
employee or agent of the Company has heretofore offered or sold or hereafter
offers or sells any of the Company's products or services, or with whom any such
employee or agent has developed a relationship relating to the Company's
Business.
<PAGE> 7
9.2. RELATIONSHIP OF THE COMPANY AND EXECUTIVE. Executive acknowledges that
prior to and during the term of this Agreement, the Company has furnished and
will furnish to Executive Confidential Information which could be used by
Executive on behalf of a competitor of the Company to its substantial detriment.
In view of the foregoing, Executive acknowledges and agrees that the restrictive
covenants contained in Sections 9.3 and 9.4 below are reasonabLy necessary to
protect the Company's legitimate business interests and good will.
9.3 COVENANT AGAINST DISCLOSURE OR USE OF CONFIDENTIAL INFORMATION. In
consideration of his employment hereunder and the payment by the Company to
Executive of the compensation described herein, and based, in part, on the
matters stated in Section 9.2 above, Executive agrees that he shall protect the
Company's Confidential Information and shall not disclose to any Person, or
otherwise use, except in connection with his duties performed in accordance with
this Agreement, any Confidential Information; provided, however, that Executive
may make disclosures required by a valid order or subpoena issued by a court or
administrative agency or competent jurisdiction, in which event Executive will
promptly notify the Company of such order or subpoena to provide the Company an
opportunity to protect its interests. Executive's obligations under this
Section 9.3 shall survive any expiration or termination of this Agreement.
9.4 COVENANT AGAINST SOLICITATION OF CUSTOMERS. During the term of this
Agreement and for a period of twenty-four (24) months after any termination or
expiration of this Agreement, for any reason, Executive shall not, directly or
indirectly, individually or on behalf of any Person, solicit Executive Customers
(as defined below) for the purpose of providing products or services which are
competitive with the products or services offered by the Company. For purposes
of this provision, the term "Executive Customers" means Customers (I) that were
solicited or served by Executive during the term hereof, (ii) whose dealings
with the Company were coordinated or supervised, in whole or in part, by
Executive, or (iii) with respect to whom Executive obtained Confidential
Information during the one-year period immediately prior to any termination or
expiration of this Agreement.
9.5 REMEDIES. Executive acknowledges that if he breaches or threatens to
breach his covenants and agreements in this Section 9 of this Agreement, his
actions may cause irreparable harm and damage to the Company which could not be
compensated in damages. Accordingly, if Executive breaches or threatens to
breach any of the covenants and agreements contained in this Section 9 of this
Agreement, the Company shall be entitled to injunctive relief, in addition to
any other rights or remedies available to the Company.
10. POST-EMPLOYMENT NON-COMPETE AGREEMENT. As an inducement for S. K.
Wellman Group to enter into this Agreement with the Executive, and in
consideration of other good and valuable consideration, the Executive intending
to be legally bound, hereby confirms, acknowledges and agrees that the
Post-Employment Non-Compete Agreement executed by the Executive on April 5,
1994 and attached hereto as "Attachment A" shall remain in force after a change
in control has occurred and this Agreement becomes effective.
<PAGE> 8
11. RETURN OF COMPANY DOCUMENTS AND EQUIPMENT. Upon the termination or
expiration of his employment hereunder, Executive agrees to deliver promptly to
the Company any and all Company files, customer lists, catalogs, price lists,
management reports, memoranda, research, Company forms, financial data and
reports, and other documents supplied to or created by him which contain
Confidential Information (including all copies of the foregoing) together with
all of the Company's equipment and other materials in his possession or control.
12. SUCCESSORS. (a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive-otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
(c) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to assume expressly and agree to perform
this Agreement. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets an
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
13. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing and
shall be (I) given by hand delivery to the other party, (ii) sent by registered
or certified mail, return receipt requested, postage prepaid, (iii) sent by
national express courier service, or (iv) sent by facsimile transmission to the
intended recipient, addressed as follows:
If to the Executive:
--------------------
At the most current address of record
designated in the executives personnel file.
If to the Company:
------------------
S.K. Wellman Limited, Inc.
6180 Cochran Road
Solon, Ohio 44139
<PAGE> 9
or to such other address an either party shall half furnished to the other in
writing in accordance herewith. Notices and other communications shall be deemed
to have been received immediately (if delivered personally or given by confirmed
facsimile) or five days after mailing, or the second day after delivery to a
national express courier service, and in proving the same it shall be sufficient
to show that the envelope containing the notice was duly addressed, stamped and
posted (or that the envelope was delivered to the national express courier
service) or that receipt was confirmed by the recipient (as the case may be).
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withhold pursuant
to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or either party's failure to assert any
right the Executive or the Company, as the case may be, may have hereunder,
including, without the limitation, , the right of the Executive to terminate
employment for Good Reason pursuant to Section 5 (c) (i) - (iv) , shall not be
deemed to be a waiver of such provision or right or any other provision or right
of this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set Executive's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Ronald E. Grambo
-------------------------------
S.K. Wellman Limited, Inc.
By: /s/ Brian R. Esher
----------------------------
Date: 2/19/95
---------------------------
Attachment "A" - MLX/S. K. Wellman Post-Employment Non-Compete Agreement
<PAGE> 1
EXHIBIT 10.12
FORM OF
PROMISSORY NOTE
$____________ June 30, 1995
Cleveland, Ohio
FOR VALUE RECEIVED, the undersigned, _________________ ("Maker"),
hereby promises to pay to the order of THE HAWK GROUP OF COMPANIES, INC., a
Delaware corporation, or any successor thereof ("Holder"), the principal amount
of ___________________________________________ Dollars ($__________), payable on
July 1, 2002, unless sooner due as provided herein, and to pay interest
(computed on the basis of a 365-day year based on the actual number of days
elapsed) on the outstanding principal balance hereof at the Prime Lending Rate
(as defined in the Credit Agreement among The Hawk Group of Companies, Inc.,
Various Banks and Bankers Trust Company, as Agent, of even date herewith) plus
1.25% per annum, subject to the limitations set forth below.
This Note is due and payable as follows:
1. Interest shall accrue from the date hereof and shall be
payable quarterly in arrears on the first day of April, July, October and
January of each year, commencing October 1, 1995, until the principal sum hereof
is paid in full (whether by prepayment, maturity, acceleration or otherwise).
Interest for any period less than a full quarter shall accrue on a day-to-day
basis and shall be computed on the basis of a 365-day year. Notwithstanding the
foregoing, in the event that, at any time or from time to time prior to the
maturity of this Note, Holder fails to declare or timely pay any quarterly
dividend on any class, or series or any class, of the preferred stock of Holder
("Preferred Stock"), then the next quarterly interest payment due hereunder
shall be added to the outstanding principal balance hereof and shall thereafter
bear interest at the base rate set forth above until paid.
2. In the event that Holder redeems any or all of the shares
of any class, or series of any class, of Preferred Stock prior to the maturity
of this Note, then Maker shall be obligated, without notice or demand, and
without premium or penalty, to prepay a portion of the outstanding principal
balance hereof equal to the aggregate redemption price that Holder pays,
directly or indirectly, to Maker for the shares of such class or series of
Preferred Stock that Holder redeems, directly or indirectly, from Maker.
3. Maker may, at any time or from time to time, prepay all or
any part of the amounts due hereunder without premium or penalty; provided,
however, that any prepayment shall be applied first against accrued interest, if
any, and then against the outstanding principal balance hereof (including any
interest accrued and added to principal).
4. All payments on or in respect of this Note shall be made to
Holder, by 5:00 p.m. on the due date of each such payment, at 200 Public Square,
Suite 29-2500, Cleveland,
<PAGE> 2
Ohio 44114, or, at the option of Holder, at such other place as Holder may, at
any time or from time to time, designate to Maker in writing.
5. In the event that the outstanding principal balance
(including any interest accrued and added to principal) or any payment of
interest due hereunder is not paid in full on the due date thereof, and such
default continues for a period of ten (10) days after receipt of written notice
thereof from Holder to Maker, then the outstanding principal balance of this
Note, together with all accrued and unpaid interest thereon, shall at once
become due and payable at the option of Holder, without notice or demand, and
Holder shall be entitled to exercise any rights and remedies available to Holder
under this Note and applicable law. Interest on such accelerated amount shall
accrue from the date of default until such amount and any accrued and unpaid
interest thereon is paid in full at the rate of 2% per annum above the base rate
set forth above, but in no event in excess of the maximum permitted by
applicable law. Any such interest shall be computed on the basis of a 365-day
year based on the actual number of days elapsed.
6. In the event this Note is placed in the hands of an
attorney for collection, or suit is brought on the same, or the same is
collected through bankruptcy or other judicial proceedings, then Maker agrees
and promises to pay all attorneys' fees and collection costs, including all
out-of-pocket expenses, reasonably incurred by Holder.
7. Any demand or notice hereunder to Maker may be made by
delivering the same to the address of Maker last known to Holder, or by mailing
the same by regular U.S. mail, postage prepaid, to said address, or by
transmitting the same by telecopier, answerback received, to the telecopier
number of Maker last known to Holder, with the same effect as if delivered to
Maker in person.
8. This Note has not been registered under the Securities Act
of 1933, as amended (the "Act"), and therefore Holder may not sell, assign or
transfer this Note unless Maker has received an opinion from counsel acceptable
to Maker that such sale, assignment or transfer will not violate any applicable
securities laws. Maker is not under any obligation to register this Note under
either the Act or any state securities laws.
9. This Note is governed by, and shall be construed and
enforced in accordance with, the laws of the State of Ohio, without regard to
conflicts of law principles.
10. The provisions hereof shall inure to the benefit of, and
shall be binding upon, Holder, Maker and their respective successors and
permitted assigns.
IN WITNESS WHEREOF, Maker has executed this Note on the date first set
forth above.
---------------------------
- 2 -
<PAGE> 1
EXHIBIT 10.13
HAWK
[LOGO]
October 1, 1996
Mr. Norman C. Harbert,
Mr. Ronald E. Weinberg,
Mr. Byron S. Krantz,
Mr. Douglas D. Wilson and
Mr. Jeffrey H. Berlin
c/o Hawk Corporation
200 Public Square, Suite 29-2500
Cleveland, Ohio 44114-2301
Re: AMENDMENT OF STOCKHOLDER NOTES TO HAWK CORPORATION
Gentlemen:
This letter sets forth the agreement of Hawk Corporation (the
"Corporation," f.k.a. The Hawk Group of Companies, Inc.) to reduce the base rate
of interest set forth in those certain Promissory Notes, each dated June 30,
1995, issued by each of you to the Corporation to the Prime Lending Rate (as
defined in the Credit Agreement among The Hawk Group of Companies, Inc., Various
Banks and Bankers Trust Company, as Agent, dated June 30, 1995), or the
equivalent rate set forth in any successor senior credit facility of the
Corporation, effective as of October 1, 1996.
Sincerely,
HAWK CORPORATION
By: /s/ Byron S. Krantz
-----------------------
Byron S. Krantz, Secretary
<PAGE> 1
EXHIBIT 10.14
================================================================================
$25,000,000
CREDIT AGREEMENT
AMONG
FRICTION PRODUCTS CO.
HAWK BRAKE, INC.
HELSEL, INC.
HUTCHINSON PRODUCTS CORPORATION
LOGAN METAL STAMPINGS, INC.
S.K. WELLMAN HOLDINGS, INC.
S.K. WELLMAN CORP.
WELLMAN FRICTION PRODUCTS U.K. CORP.
AS BORROWERS
EACH OF THE FINANCIAL INSTITUTIONS
INITIALLY A SIGNATORY HERETO,
TOGETHER WITH THOSE ASSIGNEES
PURSUANT TO SECTION 11.8 HEREOF
AS LENDERS
WITH
HAWK CORPORATION
AS HAWK FUNDS ADMINISTRATOR
AND
BT COMMERCIAL CORPORATION,
AS AGENT
DATED AS OF NOVEMBER 27, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. DEFINITIONS......................................................................................... 1
1.1 GENERAL DEFINITIONS............................................................... 1
1.2 ACCOUNTING TERMS AND DETERMINATIONS............................................... 17
1.3 OTHER TERMS; HEADINGS............................................................. 18
ARTICLE 2. REVOLVING LOANS..................................................................................... 18
2.1 COMMITMENTS....................................................................... 18
2.2 BORROWING OF REVOLVING LOANS...................................................... 18
2.3 NOTICE OF REQUEST FOR LENDER ADVANCES............................................. 19
2.4 PERIODIC SETTLEMENT OF AGENT ADVANCES;
INTEREST AND FEES; STATEMENTS..................................................... 20
2.5 SHARING OF PAYMENTS............................................................... 21
2.6 DEFAULTING LENDERS................................................................ 21
2.7 ALLOCATION OF REVOLVING LOANS AND
EXPENSES.......................................................................... 22
ARTICLE 3. LETTERS OF CREDIT................................................................................... 23
3.1 ISSUANCE OF LETTERS OF CREDIT..................................................... 23
3.2 TERMS OF LETTERS OF CREDIT........................................................ 24
3.3 NOTICE OF ISSUANCE................................................................ 24
3.4 LENDERS' PARTICIPATION............................................................ 24
3.5 PAYMENTS OF AMOUNTS DRAWN UNDER LETTERS
OF CREDIT......................................................................... 25
3.6 PAYMENT BY LENDERS................................................................ 25
3.7 OBLIGATIONS ABSOLUTE.............................................................. 25
3.8 AGENT'S EXECUTION OF APPLICATIONS AND
OTHER ISSUING BANK DOCUMENTATION;
RELIANCE ON CREDIT AGREEMENT BY ISSUING
BANK.............................................................................. 25
ARTICLE 4. COMPENSATION, REPAYMENT AND REDUCTION OF COMMITMENTS................................................ 26
4.1 INTEREST ON REVOLVING LOANS....................................................... 26
4.2 UNUSED LINE FEE................................................................... 27
4.3 LETTER OF CREDIT FEES............................................................. 27
4.4 INTEREST AND LETTER OF CREDIT FEES
AFTER EVENT OF DEFAULT............................................................ 28
4.5 COLLATERAL MONITORING FEE......................................................... 28
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
4.6 EXPENSES.......................................................................... 28
4.7 MANDATORY PAYMENT OF REVOLVING LOANS;
REDUCTIONS OF COMMITMENTS......................................................... 28
4.8 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS
OF ACCOUNT........................................................................ 28
4.9 PAYMENT PROCEDURES................................................................ 29
4.10 COLLECTION OF ACCOUNTS............................................................ 29
4.11 DISTRIBUTION AND APPLICATION OF
COLLECTIONS AND OTHER AMOUNTS..................................................... 30
4.12 CALCULATIONS...................................................................... 30
4.13 SPECIAL PROVISIONS RELATING TO LIBOR
RATE LOANS........................................................................ 30
4.14 INDEMNIFICATION IN CERTAIN EVENTS................................................. 34
ARTICLE 5. CONDITIONS PRECEDENT................................................................................ 35
5.1 CONDITIONS PRECEDENT TO INITIAL
REVOLVING LOAN AND LETTER OF CREDIT............................................... 35
5.2 CONDITIONS PRECEDENT TO ALL REVOLVING
LOANS AND LETTERS OF CREDIT....................................................... 36
ARTICLE 6. REPRESENTATIONS AND WARRANTIES...................................................................... 37
6.1 ORGANIZATION AND QUALIFICATION.................................................... 37
6.2 AUTHORITY......................................................................... 38
6.3 ENFORCEABILITY.................................................................... 38
6.4 NO CONFLICT....................................................................... 38
6.5 CONSENTS AND FILINGS.............................................................. 38
6.6 GOVERNMENT REGULATION............................................................. 38
6.7 SOLVENCY.......................................................................... 39
6.8 RIGHTS IN COLLATERAL; PRIORITY OF LIENS........................................... 39
6.9 FINANCIAL DATA.................................................................... 39
6.10 LOCATIONS OF OFFICES, RECORDS AND
INVENTORY......................................................................... 39
6.11 SUBSIDIARIES; OWNERSHIP OF STOCK.................................................. 40
6.12 NO JUDGMENTS OR LITIGATION........................................................ 40
6.13 NO DEFAULTS....................................................................... 40
6.14 LABOR MATTERS..................................................................... 41
6.15 COMPLIANCE WITH LAW............................................................... 41
6.16 ERISA............................................................................. 41
6.17 COMPLIANCE WITH ENVIRONMENTAL LAWS................................................ 41
6.18 INTELLECTUAL PROPERTY............................................................. 42
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
6.19 LICENSES AND PERMITS.............................................................. 42
6.20 TAXES AND TAX RETURNS............................................................. 42
6.21 MATERIAL CONTRACTS................................................................ 43
6.22 ACCURACY AND COMPLETENESS OF
INFORMATION....................................................................... 43
6.23 NO CHANGE......................................................................... 44
ARTICLE 7. AFFIRMATIVE COVENANTS............................................................................... 44
7.1 FINANCIAL REPORTING............................................................... 44
7.2 COLLATERAL REPORTING.............................................................. 45
7.3 NOTIFICATION REQUIREMENTS......................................................... 46
7.4 CORPORATE EXISTENCE............................................................... 48
7.5 BOOKS AND RECORDS; INSPECTIONS.................................................... 48
7.6 INSURANCE......................................................................... 48
7.7 TAXES............................................................................. 49
7.8 COMPLIANCE WITH LAWS.............................................................. 49
7.9 USE OF PROCEEDS................................................................... 49
7.10 FISCAL YEAR....................................................................... 49
7.11 MAINTENANCE OF PROPERTY........................................................... 49
7.12 ERISA DOCUMENTS................................................................... 49
7.13 ENVIRONMENTAL AND OTHER MATTERS................................................... 50
7.14 FURTHER ACTIONS................................................................... 51
7.15 DEPOSIT OF COLLECTIONS AND OTHER
PROCEEDS OF COLLATERAL.............................................................51
ARTICLE 8. NEGATIVE COVENANTS.................................................................................. 51
8.1 INTEREST COVERAGE................................................................. 51
8.2 CAPITAL EXPENDITURES.............................................................. 51
8.3 ADDITIONAL INDEBTEDNESS........................................................... 52
8.4 LIENS............................................................................. 53
8.5 CONTINGENT OBLIGATIONS............................................................ 54
8.6 SALE OF ASSETS.................................................................... 54
8.7 RESTRICTED PAYMENTS............................................................... 54
8.8 INVESTMENTS....................................................................... 55
8.9 AFFILIATE TRANSACTIONS............................................................ 55
8.10 ADDITIONAL NEGATIVE PLEDGES....................................................... 56
8.11 ADDITIONAL SUBSIDIARIES........................................................... 56
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES...................................................................... 56
9.1 EVENTS OF DEFAULT................................................................. 56
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
Page
<S> <C>
9.2 ACCELERATION, TERMINATION OF
COMMITMENTS AND CASH COLLATERALIZATION............................................ 57
9.3 RESCISSION OF ACCELERATION........................................................ 58
9.4 REMEDIES.......................................................................... 58
9.5 RIGHT OF SETOFF................................................................... 59
9.6 LICENSE OF USE OF SOFTWARE AND OTHER
INTELLECTUAL PROPERTY............................................................. 59
9.7 APPLICATION OF PROCEEDS; SURPLUS;
DEFICIENCIES...................................................................... 59
ARTICLE 10. THE AGENT.......................................................................................... 59
10.1 APPOINTMENT OF AGENT............................................................. 59
10.2 NATURE OF DUTIES OF AGENT........................................................ 60
10.3 LACK OF RELIANCE ON AGENT........................................................ 60
10.4 CERTAIN RIGHTS OF THE AGENT...................................................... 61
10.5 RELIANCE BY AGENT................................................................ 61
10.6 INDEMNIFICATION OF AGENT......................................................... 61
10.7 THE AGENT IN ITS INDIVIDUAL CAPACITY............................................. 62
10.8 HOLDERS OF NOTES................................................................. 62
10.9 SUCCESSOR AGENT.................................................................. 62
10.10 COLLATERAL MATTERS............................................................... 63
ARTICLE 11. MISCELLANEOUS...................................................................................... 64
11.1 GOVERNING LAW.................................................................... 64
11.2 SUBMISSION TO JURISDICTION....................................................... 65
11.3 SERVICE OF PROCESS............................................................... 65
11.4 JURY TRIAL....................................................................... 65
11.5 LIMITATION OF LIABILITY.......................................................... 66
11.6 DELAYS........................................................................... 66
11.7 NOTICES.......................................................................... 66
11.8 ASSIGNMENTS AND PARTICIPATIONS................................................... 66
11.9 CONFIDENTIALITY.................................................................. 68
11.10 INDEMNIFICATION.................................................................. 68
11.11 AMENDMENTS AND WAIVERS........................................................... 69
11.12 COUNTERPARTS AND EFFECTIVENESS................................................... 70
11.13 SEVERABILITY..................................................................... 70
11.14 MAXIMUM RATE..................................................................... 70
11.15 ENTIRE AGREEMENT; SUCCESSORS AND
ASSIGNS.......................................................................... 71
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
Page
<S> <C>
11.16 JOINT AND SEVERAL LIABILITY OF
BORROWERS................................................................ 71
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
<S> <C>
ANNEXES
-------
ANNEX I List of Lenders; Commitment Amounts;
Applicable Lending Offices
SCHEDULES
---------
SCHEDULE A Closing Document List
SCHEDULE B Disclosure Schedules
SCHEDULE B, PART 6.1 States in which Qualified
SCHEDULE B, PART 6.9 Contingent Obligations and Other
Liabilities
SCHEDULE B, PART 6.10 Chief Executive Offices; Locations
of Collateral
SCHEDULE B, PART 6.11 Subsidiaries
SCHEDULE B, PART 6.12 Pending Judgments, Litigation and
other Claims
SCHEDULE B, PART 6.14 Labor Contracts
SCHEDULE B, PART 6.16 Plans
SCHEDULE B, PART 6.17 Environmental Matters
SCHEDULE B, PART 6.20 Tax Matters; Tax Sharing Agreements
SCHEDULE B, PART 6.21 Material Contracts
SCHEDULE B, PART 8.3 Existing Indebtedness
SCHEDULE B, PART 8.4 Existing Liens
SCHEDULE B, PART 8.8 Existing Investments
SCHEDULE B, PART 8.9 Other Affiliate Transactions
EXHIBITS
--------
EXHIBIT A Form of Borrowing Base Certificate
EXHIBIT B Form of Notice of Borrowing
EXHIBIT C Form of Revolving Note
EXHIBIT D Form of Notice of Continuation
EXHIBIT E Form of Notice of Conversion
EXHIBIT F Form of Compliance Certificate
EXHIBIT G Form of Assignment and Assumption
Agreement
</TABLE>
vi
<PAGE> 8
THIS CREDIT AGREEMENT ("CREDIT AGREEMENT") is entered into as of
November 27, 1996, among FRICTION PRODUCTS CO., an Ohio corporation ("FRICTION
PRODUCTS"), HAWK BRAKE, INC., an Ohio corporation ("HAWK BRAKE"), HELSEL, INC.,
a Delaware corporation ("HELSEL"), HUTCHINSON PRODUCTS CORPORATION, a Delaware
corporation ("HUTCHINSON"), LOGAN METAL STAMPINGS, INC., an Ohio corporation
("LOGAN"), S.K. WELLMAN HOLDINGS, INC., a Delaware corporation ("WELLMAN
HOLDINGS"), S.K. WELLMAN CORP., a Delaware corporation ("WELLMAN CORP.") and
WELLMAN FRICTION PRODUCTS U.K. CORP., a Delaware corporation ("WELLMAN
FRICTION") (Friction Products, Hawk Brake, Helsel, Hutchinson, Logan, Wellman
Holdings, Wellman Corp. and Wellman Friction each sometimes hereinafter referred
to individually as a "BORROWER" and collectively as the "BORROWERS"); each
financial institution identified on ANNEX I (together with its successors and
permitted assigns, hereinafter referred to individually as a "LENDER" and
collectively as the "LENDERS"); HAWK CORPORATION, a Delaware corporation,
formerly known as The Hawk Group of Companies, Inc. ("HAWK"), acting in its
capacity as borrowing agent hereunder for the Borrowers (Hawk, in such capacity,
the "HAWK FUNDS ADMINISTRATOR"); and BT COMMERCIAL CORPORATION, a Delaware
corporation (in its individual capacity, hereinafter referred to as "BTCC"),
acting in its capacity as agent for the Lenders (in such capacity, together with
its successors in such capacity, hereinafter referred to as the "AGENT").
ARTICLE 1. DEFINITIONS.
------------
1.1 GENERAL DEFINITIONS.
ACCOUNT has the meaning set forth in the Security Agreement.
AFFILIATE of a Person means another Person who directly or indirectly
controls, is controlled by, is under common control with or is a director or
officer of, such Person. For purposes of this definition, "control" means the
possession, directly or indirectly, of the power to vote five percent (5%) or
more of the securities having ordinary voting power for the election of
directors or the direct or indirect power to direct the management and policies
of a business.
AGENT ADVANCES has the meaning set forth in SECTION 2.2.
ALLOCATION ACCOUNT has the meaning set forth in SECTION 2.7(b).
1
<PAGE> 9
APPLICABLE LENDING OFFICE means, with respect to each Lender, such
Lender's LIBOR Lending Office in the case of a LIBOR Rate Loan, and such
Lender's Domestic Lending Office in the case of a Prime Rate Loan.
ASSIGNMENT AND ASSUMPTION AGREEMENT has the meaning set forth in
SECTION 11.8(b).
AUDITORS means a nationally recognized firm of independent public
accountants selected by the Borrowers and reasonably satisfactory to the Agent;
PROVIDED, THAT for purposes of this Credit Agreement, the firm of Ernst & Young
LLP shall be deemed to be satisfactory to the Agent.
BANKRUPTCY CODE means Title 11 of the U.S. Code (11 U.S.C. Sections 101
et seq.), as amended from time to time, and any successor statute.
BENEFIT PLAN means a "defined benefit plan" (as defined in Section
3(35) of ERISA) for which any Borrower, any Subsidiary of any Borrower or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
BORROWER AGENCY AGREEMENT means that certain Contribution and Agency
Agreement of even date herewith among Hawk, in its capacity as borrowing agent
for the Borrower's hereunder and under the other Credit Documents.
BORROWING means a borrowing of Revolving Loans of the same Type by the
Hawk Funds Administrator for the joint and several account of the Borrowers from
(or, in the case of Agent Advances, on behalf of) the Lenders on a pro rata
basis on a given date (whether pursuant to SECTION 2.2 or resulting from
continuations or conversions of Revolving Loans on a given date pursuant to
SECTIONS 4.13(a) and (b), respectively) having, in the case of LIBOR Loans, the
same Interest Period.
BORROWING BASE means, at any time, the sum at such time of:
(a) eighty-five percent (85%) of Eligible Accounts
Receivable, PLUS
(b) the lesser of $16,000,000 and sixty percent (60%)
of Eligible Inventory.
2
<PAGE> 10
In addition, the Agent, in the exercise of its Permitted Discretion,
may (i) establish and increase or decrease reserves against Eligible Accounts
Receivable and Eligible Inventory, (ii) 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 date of this Credit Agreement, and (iii)
impose additional restrictions (or eliminate the same) to the standards of
eligibility set forth in the definitions of "ELIGIBLE ACCOUNTS RECEIVABLE" and
"ELIGIBLE INVENTORY."
BORROWING BASE CERTIFICATE means a certificate of the Hawk Funds
Administrator concerning the Borrowing Base, in each case provided under SECTION
7.2 and substantially in the form of EXHIBIT A.
BT ACCOUNT has the meaning set forth in SECTION 4.10.
BUSINESS DAY means any day that is neither a Saturday nor a Sunday nor
a day on which commercial banks in Chicago, Illinois are required or permitted
by law to be closed and, when used in connection with LIBOR Rate Loans, this
definition will also exclude any day on which commercial banks are not open for
dealing in United States dollar deposits in the London (U.K.) interbank market.
CAPITAL EXPENDITURES means, for any Person for any period, the sum of
all expenditures which have been, or should have been, capitalized by such
Person for financial statement purposes in accordance with GAAP during such
period (whether payable in cash or other property or accrued as a liability),
including the capitalized portion of capital leases and that portion of
Investments made by such Person allocable to property, plant or equipment.
Capital Expenditures shall exclude (i) production tooling expenses otherwise
capitalized in accordance with GAAP, (ii) expenditures representing all or any
part of the purchase price payable on account of the Hutchinson Acquisition and
(iii) proceeds of a casualty loss applied to the repair or replacement of the
property affected by the casualty loss. "CASUALTY LOSS", as used herein, means,
for any Person, (i) the loss, damage, or destruction of any asset or property
owned or used by such Person, (ii) the condemnation, confiscation, or other
taking, in whole or in part, of any such asset or property, or (iii) the
diminishment of the use of any such asset or property so as to render
impracticable or unreasonable the use thereof for its intended purpose.
3
<PAGE> 11
CASH EQUIVALENTS means, as to any Person, (i) securities issued or
directly and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (PROVIDED, THAT the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (ii) time deposits and certificates of
deposit of any commercial bank organized under the laws of the United States,
any State thereof or the District of Columbia having, or which is the principal
banking subsidiary of, a bank holding company organized under the laws of the
United States, any State thereof, or the District of Columbia having, capital,
surplus and undivided profits aggregating in excess of $100,000,000 and having a
long-term unsecured debt rating of at least "B+" or the equivalent thereof from
Standard & Poor's Corporation ("S&P") or "B-2" or the equivalent thereof from
Moody's Investors Service, Inc. ("MOODY'S"), with maturities of not more than
six months from the date of acquisition by such Person, (iii) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in CLAUSE (i) above entered into with any bank meeting the
qualifications specified in CLAUSE (ii) above, (iv) commercial paper issued by
any Person incorporated in the United States rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's
and in each case maturing not more than six months after the date of acquisition
by such Person, (v) investments in money market funds substantially all of whose
assets are comprised of securities of the types described in clauses (i) through
(iv) above, and (vi) investments in other United States treasury securities,
federal agency securities, money market instruments, fixed rate mortgages
adjustable-rate mortgages, tax-exempt municipal notes and tax-exempt municipal
bonds, in each case disclosed in writing to the Agent by the Hawk Funds
Administrator prior to the Closing Date.
CHANGE OF CONTROL has the meaning set forth in the Senior Note
Indenture.
CLOSING DATE means the date of execution and delivery of this Credit
Agreement by all of the parties hereto.
CLOSING DOCUMENT LIST has the meaning set forth in SECTION 5.1.
CODE has the meaning set forth in SECTION 1.3.
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COLLATERAL means the Accounts, Inventory and other personal property
identified in the Collateral Documents as security for the Obligations.
COLLATERAL ACCESS AGREEMENT means an agreement in form and substance
reasonably satisfactory to the Agent pursuant to which a mortgagee or lessor of
real property on which Collateral is stored or otherwise located, or a
warehouseman, processor or other bailee of Inventory, acknowledges the Liens of
the Agent and, in the case of any such agreement with a mortgagee or lessor,
permits the Agent access to and use of such real property for a reasonable
amount of time following the occurrence and during the continuance of an Event
of Default to assemble, complete and sell any Collateral stored or otherwise
located thereon.
COLLATERAL DOCUMENTS means, collectively, the Security Agreement and
all other documents, agreements and instruments pursuant to which Liens are now
or hereafter granted to the Agent to secure any or all of the Obligations.
COLLECTIONS means all cash, funds, checks, notes, instruments and any
other form of remittance tendered by account debtors in payment of Accounts of
any Borrower.
COMMITMENT of a Lender means such Lender's commitment, on the terms and
subject to the conditions set forth herein, to make Revolving Loans and to
participate in Letters of Credit, up to the amount set forth below its name on
ANNEX I (as amended from time to time pursuant to SECTION 11.8(b)), as such
amount may be reduced from time to time in accordance with the terms and
provisions of this Credit Agreement.
CONSOLIDATED ENTITY means Hawk and those of its Subsidiaries (including
in any event each of the Borrowers) consolidated with it for purposes of
financial reporting.
CONSOLIDATED NET INCOME means the consolidated net income of the
Consolidated Entity.
CONTINGENT OBLIGATION means, with respect to any Person, any direct,
indirect, contingent or non-contingent guaranty or obligation of such Person
for the Indebtedness of another Person, except for endorsements in the ordinary
course of business.
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CREDIT DOCUMENTS means, collectively, this Credit Agreement, the
Revolving Notes, the Letters of Credit, each of the Collateral Documents and all
other documents, agreements and instruments now or hereafter executed in
connection herewith or therewith in each case as modified, amended, extended,
restated or supplemented from time to time.
CREDIT PARTIES means, collectively, the Borrowers and Hawk,
individually and in its capacity as Hawk Funds Administrator.
CURRENCY AGREEMENT means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement protecting against
fluctuations in currency values.
DEFAULT means an event, condition or default which with the giving of
notice, the passage of time or both would be an Event of Default.
DEFAULTING LENDER has the meaning set forth in SECTION 2.6.
DISBURSEMENT ACCOUNT means the operating account of the Hawk Funds
Administrator maintained with the Disbursement Account Bank.
DISBURSEMENT ACCOUNT BANK means Bankers Trust Company or any other
financial institution selected from time to time by the Agent and reasonably
acceptable to the Hawk Funds Administrator.
DOMESTIC LENDING OFFICE means, with respect to any Lender, the office
of such Lender specified as its "DOMESTIC LENDING OFFICE" on ANNEX I, as such
annex may be amended from time to time, which office shall in any event be
located in the United States.
EBITDA means, for any period, Consolidated Net Income (excluding
extraordinary items) for such period, PLUS (a) all Interest Expense, income tax
expense, depreciation and amortization (including amortization of any goodwill
or other intangibles) for such period; MINUS or PLUS (without double counting)
(b) gains and losses attributable to any fixed asset sales; PLUS or MINUS (c)
any other non-cash charges or gains which have been subtracted or added in
calculating such Consolidated Net Income.
ELIGIBLE ACCOUNTS RECEIVABLE means Accounts of the respective Borrowers
deemed by the Agent in the exercise of its Permitted Discretion to be eligible
for inclusion in the calculation of the Borrowing Base. In determining the
amount to be so included, the
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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 the Agent, no Account of any Borrower shall be
deemed to be an Eligible Account Receivable if:
(a) it arises out of a sale made by such Borrower to an
Affiliate of such Borrower or to any other Borrower; or
(b) it is unpaid more than 90 days after the original date of
invoice; or
(c) 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
(d) when aggregated with all other Accounts of an account debtor,
the Account exceeds twenty-five percent (25%) in face value of
all Accounts of all Borrowers then outstanding, to the extent
of such excess, unless supported by an irrevocable letter of
credit satisfactory to the Agent (as to form, substance and
issuer) and assigned to and directly drawable by the Agent; or
(e) the account debtor for the Account is a creditor of such
Borrower, has or has asserted a right of setoff against
such Borrower, has disputed its liability or made any
claim with respect to the Account or any other Account
which has not been resolved, but in each of the foregoing
cases, solely to the extent of the amount of such actual
or asserted right of setoff, or the amount of such
dispute or claim, as the case may be; or
(f) the account debtor is (or the assets of the account
debtor are) the subject of an Insolvency Event; or
(g) the Account is not payable in United States dollars or the
account debtor for the Account is located outside the
continental United States, unless the Account is supported by
an irrevocable letter of credit satisfactory to the Agent (as
to form, substance and issuer) and assigned to and directly
drawable by the Agent; or
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(h) the sale to the account debtor is on a guaranteed sale,
sale-and-return, sale on approval or consignment basis or made
pursuant to any other written agreement providing for
repurchase or return; or
(i) the account debtor is the United States of America or any
department, agency or instrumentality thereof, unless such
Borrower duly assigns its rights to payment of such Account to
the Agent pursuant to the Assignment of Claims Act of 1940, as
amended (31 U.S.C. Sections 3727 et seq.); or
(j) the goods giving rise to such Account have not been shipped
and delivered to and accepted by the account debtor, the
services giving rise to such Account have not been performed
and accepted or the Account otherwise does not represent a
final sale; or
(k) the Account does not comply with all Requirements of Law,
including, without limitation, the Federal Consumer Protection
Act, the Federal Truth-in-Lending Act and Regulation Z; or
(l) the 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
(m) the Account is not subject to a valid and perfected first
priority Lien in favor of the Agent or does not otherwise
conform to the representations and warranties contained in the
Credit Documents.
ELIGIBLE INVENTORY means the aggregate amount of Inventory of the
respective Borrowers deemed by the Agent in the exercise of its Permitted
Discretion to be eligible for inclusion in the calculation of the Borrowing
Base. In determining the amount to be so included, Inventory shall be valued at
the lower of cost or market on a basis consistent with the Borrowers' current
and historical accounting practice. Unless otherwise approved in writing by the
Agent, no Inventory of any Borrower shall be deemed 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
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(b) it is not located in the United States; or
(c) it is not located on property owned by a Borrower or by a
third party that has executed and delivered a Collateral
Access Agreement and, in the case of Inventory located on
property owned by such a third party, it is segregated or
otherwise separately identifiable from goods of others, if
any, stored on such property; or
(d) it is not subject to a valid and perfected first priority Lien
in favor of the Agent, except, with respect to such Inventory
stored at locations other than locations owned by a Borrower,
for Liens for unpaid rent or normal and customary warehousing
charges; or
(e) it consists of goods returned or rejected by such Borrower's
customers or goods in transit to third parties (other than to
warehouse sites covered by a Collateral Access Agreement); or
(f) it is not first-quality finished goods, is obsolete or slow
moving, or does not otherwise conform to the representations
and warranties contained in the Credit Documents.
ERISA means the Employee Retirement Income Security Act of 1974, 29
U.S.C. Sections 1000 et seq., amendments thereto, successor statutes, and
regulations or guidance promulgated thereunder.
ERISA AFFILIATE means any entity required to be aggregated with any
Borrower or any Subsidiary of any Borrower under Sections 414(b), (c), (m) or
(o) of the Internal Revenue Code.
EVENT OF DEFAULT has the meaning set forth in ARTICLE 9.
EXPENSES means all reasonable costs and expenses of the Agent incurred
in connection with the Credit Documents and the transactions contemplated
therein, including, without limitation, (i) the costs of conducting record
searches, examining collateral, opening bank accounts and lockboxes, depositing
checks, and receiving and transferring funds (including charges for checks for
which there are insufficient funds), (ii) the reasonable fees and expenses of
legal counsel and paralegals (including the allocated cost of internal counsel
and paralegals), accountants, appraisers and other consultants, experts or
advisors retained by the Agent,
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(iii) expenses incurred in connection with the assignments of or sales of
participations in the Revolving Loans, (iv) the cost of title insurance
premiums, real estate survey costs, and fees and taxes in connection with the
filing of financing statements, and (v) the costs of preparing and recording
Collateral Documents, releases of Collateral, and waivers, amendments, and
terminations of any of the Credit Documents. EXPENSES also means all reasonable
costs and expenses (including the reasonable fees and expenses of legal counsel
and other professionals) paid or incurred by the Agent and any Lender (i) during
the continuance of an Event of Default, (ii) in enforcing or defending its
respective rights under or in respect of this Credit Agreement, the Credit
Documents or any other document or instrument now or hereafter executed and
delivered in connection herewith or therewith, (iii) collecting the Revolving
Loans, (iv) foreclosing or otherwise collecting upon the Collateral or any part
thereof and (v) in obtaining any legal, accounting or other advice in connection
with any of the foregoing.
EXPIRATION DATE means November 27, 1999.
FEDERAL FUNDS RATE means, for any period, a fluctuating interest rate
per annum for each day during such period equal to the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
FEDERAL RESERVE BOARD means the Board of Governors of the Federal
Reserve System or any Governmental Authority succeeding to its functions.
FEES means, collectively, the Unused Line Fee, the Letter of Credit
Fees, the L/C Facing Fee, the Issuing Bank Fees, the Collateral Monitoring Fee
and the other fees provided for in that certain letter dated November 1, 1996
between BTCC and Hawk.
FINANCIAL STATEMENTS means the consolidated and consolidating balance
sheets, statements of operations, statements of cash flows and statements of
changes in shareholder's equity of the
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Consolidated Entity for the period specified, prepared in accordance with GAAP
and consistently with prior practices.
GAAP means generally accepted accounting principles in the United
States as in effect from time to time.
GOVERNING DOCUMENTS means certificates or articles of incorporation,
by-laws and other similar organizational or governing documents.
GOVERNMENTAL AUTHORITY means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
HAWK FUNDS ADMINISTRATOR means Hawk acting in its capacity as borrowing
agent for the Borrowers pursuant the Borrower Agency Agreement.
HAWK MERGER means the merger, in a tax-free reorganization, of Hawk
Holding Corp., a Delaware corporation, with and into Hawk pursuant to the Hawk
Merger Documents.
HAWK PREFERRED STOCK means, collectively, Hawk's (i) preferred stock
series A, liquidation preference $1,000.00 per share, (ii) preferred stock
series B, liquidation preference $1,000.00 per share, and (iii) preferred stock
series C, liquidation preference $1,000.00 per share.
HAWK MERGER DOCUMENTS means, collectively, that certain Merger
Agreement and Plan of Reorganization dated as of November 21, 1996, between Hawk
and Hawk Holding Corp., a Delaware corporation, and all other documents,
agreements and instruments executed in connection therewith.
HELSEL DOCUMENTS means, collectively, the Helsel Note and all other
documents, agreements and instruments entered into relating to the issuance by
Helsel of the Helsel Note.
HELSEL NOTE means that certain Secured Promissory Note in the original
principal amount of $500,000, issued by Helsel and payable to Helco, Inc..
HIGHEST LAWFUL RATE means, at any given time during which any
Obligations shall be outstanding hereunder, the maximum nonusurious
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interest rate that at any time or from time to time may be contracted for,
taken, reserved, charged or received on such Obligations, under the laws of the
State of Illinois (or the law of any other jurisdiction whose laws may be
mandatorily applicable notwithstanding other provisions of this Credit Agreement
and any of the other Credit Documents), or under applicable federal laws which
may presently or hereafter be in effect and which allow a higher maximum
nonusurious interest rate than under the State of Illinois (or such other
jurisdiction's) law, in any case after taking into account, to the extent
permitted by applicable law, any and all relevant payments or charges under this
Credit Agreement and any other Credit Documents executed in connection herewith,
and any available exemptions, exceptions and exclusions.
HUTCHINSON ACQUISITION means the acquisition by Hawk or Hutchinson of
all of the issued and outstanding capital stock of Hutchinson Foundry Products
Company.
INDEBTEDNESS of a Person means, without duplication, (a) indebtedness
for borrowed money or for the deferred purchase price of property or services
(other than trade liabilities incurred in the ordinary course of business and
payable in accordance with customary practices), whether on open account or
evidenced by a note, bond, debenture or similar instrument, (b) obligations
under capital leases, (c) reimbursement obligations for letters of credit,
banker's acceptances or other credit accommodations, whether drawn or undrawn,
(d) liabilities, as determined by the Agent, under any Interest Rate Agreement
or Currency Agreement, (e) Contingent Obligations and (f) Indebtedness secured
by any Lien on any property of that Person, even if that Person has not assumed
such Indebtedness.
INITIAL FUNDING DATE means the date on which the initial Borrowing is
advanced or the initial Letter of Credit is issued, whichever occurs earlier.
INSOLVENCY EVENT means, with respect to any Person, the occurrence of
any of the following: (a) such Person shall be adjudicated insolvent or
bankrupt, or generally fail to pay, or admit in writing its inability to pay,
its debts as they become due, (b) the voluntary commencement of any proceeding
or the filing of any petition under any bankruptcy, insolvency or similar law,
(c) the seeking of dissolution or reorganization or the appointment of a
receiver, trustee, custodian or liquidator for it or a substantial portion of
its property, assets or business or to
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effect a plan or other arrangement with its creditors, (d) the filing of any
answer admitting the jurisdiction of the court and the material allegations of
an involuntary petition filed against it in any bankruptcy, insolvency or
similar proceeding, (e) the making by such Person of a general assignment for
the benefit of its creditors, or the consent to, or acquiescence in the
appointment of, a receiver, trustee, custodian or liquidator for a substantial
portion of such Person's property, assets or business. INSOLVENCY EVENT shall
also mean, with respect to any Person, the occurrence of any of the following:
an involuntary proceeding or involuntary petition shall be commenced or filed
against such Person under any bankruptcy, insolvency or similar law seeking the
dissolution or reorganization of it or the appointment of a receiver, trustee,
custodian or liquidator for it or of a substantial part of its property, assets
or business, or any writ, judgment, warrant of attachment, execution or similar
process shall be issued or levied against a substantial part of its property,
assets or business, and such proceedings or petitions shall not be dismissed, or
such writ, judgment, warrant of attachment, execution or similar process shall
not be released, vacated or fully bonded, within thirty (30) days after
commencement, filing, or levy, as the case may be, or any order for relief shall
be entered in any such proceeding.
INTEREST EXPENSE means, for any period, (a) the aggregate consolidated
expense of the Consolidated Entity for interest on Indebtedness for such period,
including, without limitation, (i) amortization of original issue discount, (ii)
incurrence fees (to the extent included in interest expense), (iii) the interest
portion of any deferred payment obligation, (iv) the interest component of any
capital lease obligation, MINUS (b) the aggregate interest income of the
Consolidated Entity for such period.
INTEREST PERIOD means, for any LIBOR Rate Loan, the period commencing
on the date of such Borrowing and ending on the last day of the period selected
by the Hawk Funds Administrator pursuant to the provisions below. The duration
of each such Interest Period shall be one, two, three or six months, in each
case as the Hawk Funds Administrator may, in an appropriate Notice of Borrowing,
Notice of Continuation or Notice of Conversion, select; PROVIDED, THAT the Hawk
Funds Administrator may not select any Interest Period that ends after the
Expiration Date. Whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day; PROVIDED,
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THAT if such extension would cause the last day of such Interest Period to occur
in the next following calendar month, the last day of such Interest Period shall
occur on the next preceding Business Day.
INTEREST RATE AGREEMENT means any interest rate protection or hedge
agreement, including, without limitation, interest rate future, option, swap,
and cap agreements.
INTERNAL REVENUE CODE means the Internal Revenue Code of 1986,
amendments thereto, successor statutes, and regulations or guidance promulgated
thereunder.
INVENTORY has the meaning set forth in the Security Agreement.
INVESTMENT means all expenditures made and all liabilities incurred
(contingently or otherwise) for or in connection with the acquisition of stock
or Indebtedness of, or for loans, advances, capital contributions or similar
transfers of property to, or acquisition of substantially all the assets of, a
Person. In determining the aggregate amount of Investments outstanding at any
particular time, (i) the amount of any Investment represented by a guaranty
shall be taken at not less than the principal amount of the obligations
guaranteed and outstanding; (ii) there shall be deducted in respect of each such
Investment any amount received as a return of capital (but only by repurchase,
redemption, retirement, repayment, liquidating dividend or liquidating
distribution); (iii) there shall not be deducted in respect of any Investment
any amounts received as earnings on such Investment, whether as dividends,
interest or otherwise; and (iv) there shall not be deducted from the aggregate
amount of Investments any decrease in the market value thereof.
ISSUING BANK means Bankers Trust Company or any Lender or other
financial institution that is acceptable to the Agent and the Borrowers which
may at any time issue or be requested to issue a Letter of Credit for the
account of any Borrower.
ISSUING BANK FEES has the meaning set forth in SECTION 4.3(b).
L/C FACING FEE has the meaning set forth in SECTION 4.3(a).
LENDER ADVANCES has the meaning set forth in SECTION 2.2.
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LETTER OF CREDIT FEE has the meaning set forth in SECTION 4.3(a).
LETTER OF CREDIT OBLIGATIONS means, without duplication, the sum of the
aggregate undrawn face amount of all Letters of Credit outstanding (including
guarantees with respect to Currency Agreements), PLUS the aggregate amount of
all drawings under Letters of Credit for which the Borrowers have not reimbursed
the Issuing Bank, PLUS the aggregate amount of all payments made by Lenders to
the Issuing Bank for their participations in Letters of Credit (including
guarantees with respect to Currency Agreements), for which the Borrowers have
not reimbursed the Lenders.
LETTER OF CREDIT REQUEST has the meaning set forth in SECTION 3.3.
LETTERS OF CREDIT means all letters of credit and guarantees with
respect to Currency Agreements issued for the account of any Borrower under
ARTICLE 3 and all amendments, renewals, extensions or replacements thereof.
LIBOR LENDING OFFICE means, with respect to any Lender, the office of
such Lender specified as its "LIBOR LENDING OFFICE" opposite its name on ANNEX
I, as such annex may be amended from time to time (or, if no such office is
specified, its Domestic Lending Office).
LIBOR RATE means, with respect to any Interest Period for each LIBOR
Rate Loan comprising part of the same Borrowing, an interest rate per annum
equal to the rate (rounded upward to the nearest whole multiple of one-sixteenth
(1/16) of one percent (1.00%) per annum, if such rate is not such a whole
multiple of one-sixteenth (1/16) of one percent (1.00%)) of the offered
quotation, if any, to first class banks in the London (U.K.) interbank market by
Bankers Trust Company for United States dollar deposits of amounts in
immediately available funds comparable to the principal amount of the LIBOR Rate
Loan of BTCC for which the LIBOR Rate is being determined with maturities
comparable to the Interest Period for which such LIBOR Rate will apply as of
approximately 10:00 a.m. Chicago time two (2) Business Days prior to the
commencement of such Interest Period.
LIBOR RATE LOAN means a Revolving Loan that bears interest as provided
in SECTION 4.1(b) hereof.
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LIEN means any lien, claim, charge, pledge, security interest,
assignment, hypothecation, deed of trust, mortgage, lease, conditional sale,
retention of title, or other preferential arrangement having substantially the
same economic effect as any of the foregoing, whether voluntary or imposed by
law.
LINE OF CREDIT means the aggregate revolving line of credit extended
pursuant to this Credit Agreement by the Lenders to the Borrowers for Revolving
Loans and Letters of Credit, in an amount up to $25,000,000, as such amount may
be reduced from time to time pursuant to the respective terms and provisions
hereof.
LOAN ACCOUNT has the meaning set forth in SECTION 4.8.
LOCKBOXES has the meaning set forth in SECTION 4.10.
LOCKBOX ACCOUNT has the meaning set forth in SECTION 4.10.
LOCKBOX AGREEMENT has the meaning set forth in SECTION 4.10.
LOCKBOX BANK has the meaning set forth in SECTION 4.10.
MAJORITY LENDERS means those Lenders holding in the aggregate more than
fifty-percent (50%) of the total Commitments, or if the Commitments are
terminated, those Lenders owed more than fifty-percent (50%) of the Revolving
Loans and Letter of Credit Obligations then outstanding.
MATERIAL ADVERSE EFFECT means a material adverse effect on (i) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of the Credit Parties taken as a whole, (ii)
the ability of any Credit Party to perform its obligations under the Credit
Documents to which it is a party, or on the ability of the Agent or the Lenders
to enforce the Obligations or realize upon the Collateral, or (iii) the value of
the Collateral or the amount which the Agent or the Lenders would be likely to
receive (after giving consideration to delays in payment and costs of
enforcement) in the liquidation of such Collateral.
MATERIAL CONTRACT means any contract or other arrangement to which a
Credit Party or any Subsidiary of a Credit Party is a party (other than the
Credit Documents) for which breach, nonperformance, cancellation or failure to
renew could reasonably be expected to have a Material Adverse Effect.
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MOODY'S means Moody's Investors Services, Inc., or any successor
thereto.
MULTIEMPLOYER PLAN means a "multiemployer plan" (as defined in Section
4001(a) (3) of ERISA) to which a Borrower, any Subsidiary of Borrower or any
ERISA Affiliate has contributed within the past six years or with respect to
which a Borrower or any Subsidiary of a Borrower could reasonably be expected to
incur any liability.
NOTE DOCUMENTS means, collectively, the Senior Note Documents, the
Subordinated Note Documents and the Helsel Note Documents, in each case as in
effect on the date hereof and as amended, restated, supplemented or otherwise
modified from to time to time hereafter in accordance with the terms and
provisions hereof.
NOTICE OF BORROWING means an irrevocable and binding notice delivered
by the Hawk Funds Administrator to the Agent either by telephone or by facsimile
transmission (and if by telephone, promptly confirmed in writing), of the
request by the Hawk Funds Administrator, for and on behalf of the Borrowers, for
a Borrowing, which notice shall be substantially in the form of EXHIBIT B.
NOTICE OF CONTINUATION has the meaning set forth in SECTION 4.13(a).
NOTICE OF CONVERSION has the meaning set forth in SECTION 4.13(b).
OBLIGATIONS means the unpaid principal and interest hereunder
(including interest accruing on or after the occurrence of an Insolvency Event)
in respect of Revolving Loans, reimbursement obligations under Letters of
Credit, Fees, Expenses and all other obligations and liabilities of the
Borrowers to the Agent, the Issuing Bank or any of the Lenders under this Credit
Agreement, the Revolving Notes or any of the other Credit Documents.
OLD BT DEBT means the Indebtedness evidenced by the $79,000,000 Credit
Agreement dated as of June 30, 1995, as amended, by and among Hawk, various
financial institutions and Bankers Trust Company, as agent.
PERMITTED ACQUISITION means the purchase or other acquisition by a
Borrower or any Subsidiary of a Borrower, in a single or series of transactions,
of (a) all or substantially all of the issued and outstanding capital stock of
any other Person, or (b)
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all or substantially all of the assets of any other Person, or all or
substantially all of the assets comprising one or more business units of any
other Person; PROVIDED, THAT, in each case, before and after giving effect
thereto, there shall be unused availability under the Borrowing Base in an
amount equal to at least twenty percent (20%) of the Line of Credit in effect at
such time.
PERMITTED DISCRETION means the Agent's judgment exercised in good faith
based upon its consideration of any factor that is reasonable from the
perspective of an asset-based secured lender which the Agent believes in good
faith will or could reasonably be expected to affect the value of any
Collateral, including any Inventory or Accounts of any Borrower or the amount
which the Agent and the Lenders would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of such Collateral.
PERMITTED LIENS means the Liens referred to in CLAUSES (a) through (i)
of SECTION 8.4.
PERSON means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, entity, party or government (including any
division, agency or department thereof), and its successors, heirs and assigns.
PLAN means any Benefit Plan, Multiemployer Plan, or Retiree Health
Plan, or any employee benefit plan, fund, program or arrangement, whether oral
or written, maintained or contributed to by any Borrower or any Subsidiary of
any Borrower, or with respect to which any of them could reasonably be expected
to incur liability.
PRIME LENDING RATE means the rate which Bankers Trust Company announces
as its prime lending rate, from time to time. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Bankers Trust Company and each of the Lenders
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate.
PRIME RATE LOAN means a Revolving Loan that bears interest as provided
in SECTION 4.1(a) hereof.
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PROPORTIONATE SHARE of a Lender means a fraction, expressed as a
percentage, obtained by dividing its Commitment by the Line of Credit or, if the
Commitments are terminated, by dividing its then outstanding Revolving Loans and
Letter of Credit participations by the then outstanding aggregate Revolving
Loans and Letter of Credit Obligations.
PURCHASE MONEY LIENS has the meaning set forth in SECTION 8.3(f).
REGISTER has the meaning set forth in SECTION 11.8(c).
REGULATION D means Regulation D of the Federal Reserve Board, as in
effect from time to time.
REGULATION G means Regulation G of the Federal Reserve Board, as in
effect from time to time.
REGULATION Z means Regulation Z of the Federal Reserve Board, as in
effect from time to time.
REPORTABLE EVENT means any of the events described in Section 4043 of
ERISA and the regulations thereunder.
REQUIREMENT OF LAW means, with respect to any Person, (a) the Governing
Documents of such Person, (b) any law, treaty, rule or regulation or
determination of an arbitrator, court or other Governmental Authority binding on
such Person, 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.
RETIREE HEALTH PLAN means an "employee welfare benefit plan" within the
meaning of Section 3(1) of ERISA, and any other plan, program or arrangement,
whether oral or written, that provides benefits to persons after termination of
employment, other than as required by Section 601 of ERISA.
REVOLVING LOANS has the meaning set forth in SECTION 2.1.
REVOLVING NOTE means a promissory note of the Borrowers payable to the
order of any Lender, substantially in the form of EXHIBIT C, as amended,
restated, supplemented or otherwise modified from time to time, and including
all notes issued in replacement of, or in substitution or exchange for, any
Revolving Note.
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S&P means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
SECURITY AGREEMENT means the Security Agreement of even date herewith
executed by the Borrowers in favor Agent.
SENIOR NOTE DOCUMENTS means, collectively, the Senior Note Indenture,
the Senior Notes and all other documents, agreements and instruments executed
and delivered pursuant thereto or in connection therewith.
SENIOR NOTE INDENTURE means the 10-1/4% Senior Note Indenture dated as
of November 27, 1996, between Hawk and Bank One Trust Company, NA, in its
capacity as trustee thereunder.
SENIOR NOTES means the 10-1/4% Senior Notes Due 2003 of Hawk issued
pursuant to the Senior Note Indenture.
SETTLEMENT DATE has the meaning set forth in SECTION 2.4.
SUBORDINATED NOTE DOCUMENTS means, collectively, the Subordinated Note
Purchase Agreement, the Subordinated Notes, the Subordinated Noteholder Warrant
Documents and all other documents, agreements and instruments entered into
relating to the issuance by Hawk of the Subordinated Notes and the Subordinated
Noteholder Warrants, respectively.
SUBORDINATED NOTE PURCHASE AGREEMENT means, collectively, the separate
and several Senior Subordinated Note and Warrant Purchase Agreements, each dated
as of June 30, 1995, entered into by and between Hawk and each of Connecticut
General Life Insurance Company and Cigna Mezzanine Partners III, L.P.,
respectively, as amended pursuant to that certain First Amendment to Note and
Warrant Purchase Agreement dated as of November 27,1996, by and between Hawk and
each of Connecticut General Life Insurance Company and Cigna Mezzanine Partners
III, L.P.
SUBORDINATED NOTEHOLDER WARRANT AGREEMENT means that certain Warrant
Agreement dated as of June 30, 1995, among Hawk, Connecticut General Life
Insurance Company and Cigna Mezzanine Partners III, L.P..
SUBORDINATED NOTEHOLDER WARRANT DOCUMENTS means, collectively, the
Subordinated Noteholder Warrants, the Subordinated Noteholder Warrant
Agreement and all other documents, agreements and
20
<PAGE> 28
instruments entered into relating to the issuance by Hawk of the
Subordinated Noteholder Warrants.
SUBORDINATED NOTEHOLDER WARRANTS means, collectively, the warrants for
the purchase of the common stock of Hawk issued to the holders of the
Subordinated Notes on or about June 30, 1995.
SUBORDINATED NOTES means, collectively, the unsecured 12% Senior
Subordinated Notes Due 2005 of Hawk.
SUBSIDIARY of a Person means a corporation or other entity in which
that Person directly or indirectly owns or controls the shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or appoint other managers of such corporation or other
entity; PROVIDED, THAT, notwithstanding the foregoing, neither The S.K. Wellman
Company of Canada Limited, a corporation organized under the laws of the
Province of Ontario, Canada, nor S. K. Wellman S.p.A, a corporation organized
under the laws of Italy, shall be deemed to be a Subsidiary of any Credit Party
for purposes of this Credit Agreement or any of the other Credit Documents.
TERMINATION EVENT means (i) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower, any
Subsidiary of any Borrower or any ERISA Affiliate from a Benefit Plan during a
plan year in which it was a "substantial employer" (as defined in Section
4001(a) (2) of ERISA); (iii) the providing of notice of intent to terminate a
Benefit Plan in a distress termination (as described in Section 4041 (c) of
ERISA); (iv) the institution by the Pension Benefit Guaranty Corporation of
proceedings to terminate a Benefit Plan or Multiemployer Plan; (v) any event or
condition (a) which could reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan or Multiemployer Plan, or (b) that may result in
termination of a Multiemployer Plan pursuant to Section 4041A of ERISA; or (vi)
the partial or complete withdrawal, within the meaning of Sections 4203 and 4205
of ERISA, of a Borrower, any Subsidiary of a Borrower or any ERISA Affiliate
from a Multiemployer Plan.
TYPE means a LIBOR Rate Loan or a Prime Rate Loan.
UNUSED LINE FEE has the meaning set forth in SECTION 4.2.
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1.2 ACCOUNTING TERMS AND DETERMINATIONS.
------------------------------------
Unless otherwise defined or specified herein, all accounting terms used
in this Credit Agreement shall be construed in accordance with GAAP, applied on
a basis consistent in all material respects with the Financial Statements
referred to in SECTION 6.9. All accounting determinations for purposes of
determining compliance with the financial covenants contained in ARTICLE 8 shall
be made in accordance with GAAP as in effect on the Closing Date and applied on
a basis consistent in all material respects with the audited Financial
Statements delivered to the Agent on or before the Closing Date. The Financial
Statements required to be delivered hereunder from and after the Closing Date,
and all financial records, shall be maintained in accordance with GAAP. If GAAP
shall change from the basis used in preparing the audited Financial Statements
delivered to the Agent on or before the Closing Date, the certificates required
to be delivered pursuant to SECTION 7.1 demonstrating compliance with the
covenants contained herein shall include, at the election of the Borrowers or
upon the request of the Majority Lenders, calculations setting forth the
adjustments necessary to demonstrate that the Borrowers are in compliance with
the financial covenants based upon GAAP as in effect on the Closing Date.
1.3 OTHER TERMS; HEADINGS.
----------------------
Terms used herein and not otherwise defined in ARTICLE 1 that are
defined in the Uniform Commercial Code in effect in the State of Illinois (the
"CODE") shall have the meanings given in the Code. Each of the words "hereof,"
"herein," and "hereunder" refer to this Credit Agreement as a whole. An Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in accordance with SECTION 11.11 hereof. References to Articles,
Sections, Annexes, Schedules, and Exhibits are internal references to this
Credit Agreement, and to its attachments, unless otherwise specified. The
headings and the Table of Contents are for convenience only and shall not affect
the meaning or construction of any provision of this Credit Agreement.
ARTICLE 2. REVOLVING LOANS.
----------------
2.1 COMMITMENTS.
------------
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<PAGE> 30
Subject to the terms and conditions set forth in this Credit Agreement,
and in reliance on the representations and warranties of the Borrowers set forth
herein, on and after the Closing Date and to but excluding the Expiration Date,
each Lender severally agrees to make loans and advances to the Borrowers on a
joint and several basis (each a "REVOLVING LOAN") in an amount not to exceed at
any time its Proportionate Share of the lesser at such time of (a) the Line of
Credit and (b) the Borrowing Base MINUS, in each case, the then outstanding
Letter of Credit Obligations. The Revolving Loans of each Lender shall be
evidenced by a Revolving Note dated as of the Closing Date and executed by each
of the Borrowers in the maximum amount of such Lender's Commitment.
2.2 BORROWING OF REVOLVING LOANS.
-----------------------------
Revolving Loans may be made available to the Hawk Funds Administrator
for the account of the Borrowers directly by the Lenders ("LENDER ADVANCES") or,
in the circumstances described in SECTION 2.2(b), from the Agent acting on
behalf of the Lenders ("AGENT ADVANCES").
(a) LENDER ADVANCES. Subject to the determination by the Agent
and the Lenders that the conditions for borrowing contained in SECTION
5.2 are satisfied, upon receipt of a Notice of Borrowing from the Hawk
Funds Administrator received by the Agent before 12:00 noon Chicago
time on a Business Day, Lender Advances of Revolving Loans shall be
made to the extent of each Lender's Proportionate Share of the
requested Borrowing.
(b) AGENT ADVANCES. The Agent is authorized by the Lenders,
but is not obligated, to make Agent Advances upon a receipt of any
Notice of Borrowing received by the Agent before 3:00 P.M. Chicago time
on a Business Day. Agent Advances shall be subject to periodic
settlement with the Lenders under SECTION 2.4. Agent Advances may be
made only in the following circumstances:
(i) NORMAL COURSE AGENT ADVANCES. For
administrative convenience, the Agent may, but is not
obligated, to make Agent Advances up to the amount available
for borrowing under SECTION 2.1 in reliance upon the actual or
deemed representations of the Borrowers under SECTION 5.2 that
the conditions for borrowing are satisfied.
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<PAGE> 31
(ii) OTHER AGENT ADVANCES. When the conditions for
borrowing under SECTION 5.2 cannot be fulfilled, and
notwithstanding the Borrowing Base limitation of SECTION 2.1,
the Agent may, but is not obligated, to continue to make Agent
Advances for seven (7) Business Days or until sooner
instructed by the Majority Lenders to cease, in an aggregate
amount at any time not to exceed $2,000,000.
(c) DISBURSEMENT OF REVOLVING LOANS. The proceeds of
Revolving Loans shall be transmitted: (x) in the circumstances
described in SECTION 3.5, by the Agent directly to the Issuing Bank,
and (y) in all other circumstances, by the Agent or Lenders, as the
case may be, to the Disbursement Account.
(d) NOTICES OF BORROWING. Notices of Borrowing may be given
under this Section by telephone or facsimile transmission, and, if by
telephone, promptly confirmed in writing. The Hawk Funds Administrator
shall specify in each Notice of Borrowing whether the conditions for
the requested Borrowing are satisfied. The Borrowers may request one or
more Borrowings of Revolving Loans constituting Prime Rate Loans on the
same Business Day. Each Notice of Borrowing for LIBOR Rate Loans shall
be given not later than noon Chicago time on the third Business Day
prior to the proposed Borrowing. Each Notice of Borrowing shall, unless
otherwise specifically provided herein, consist entirely of Revolving
Loans of the same Type and, if such Borrowing is to consist of LIBOR
Rate Loans, shall be in an aggregate amount of not less than $2,000,000
or an integral multiple of $1,000,000 in excess thereof. The right of
the Borrowers to choose LIBOR Rate Loans is subject to the provisions
of SECTION 4.13. Once given, a Notice of Borrowing is irrevocable and
binding on the Borrowers. The Hawk Funds Administrator shall provide to
the Agent a list, with specimen signatures, of officers and other
Persons, if any, authorized to request Revolving Loans. The Agent is
entitled to rely upon such list until it is replaced by the Hawk Funds
Administrator.
2.3 NOTICE OF REQUEST FOR LENDER ADVANCES.
--------------------------------------
Subject to the last sentence of this Section, the Agent shall give each
Lender prompt notice by telephone or facsimile transmission of a Notice of
Borrowing that is received pursuant to SECTION 2.2(a) and is to be satisfied by
Lender Advances. No later than 3:00 P.M. Chicago time on the date of receipt of
such notice,
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each Lender shall make available for the account of its Applicable Lending
Office to the Agent at the Agent's address for deposit into the Disbursement
Account, its Proportionate Share of such Borrowing in immediately available
funds. Unless the Agent receives contrary written notice prior to any such
Borrowing, it is entitled to assume that each Lender will make available its
Proportionate Share of the Borrowing and in reliance upon that assumption, but
without any obligation to do so, may advance such Proportionate Share on behalf
of the Lender, without the necessity of giving daily notice to each Lender of
the receipt of a Notice of Borrowing.
2.4 PERIODIC SETTLEMENT OF AGENT ADVANCES; INTEREST AND FEES;
---------------------------------------------------------
STATEMENTS.
-----------
(a) THE SETTLEMENT DATE; ALLOCATION OF INTEREST AND FEES. The
amount of each Lender's Proportionate Share of Revolving Loans shall be
computed weekly (or more frequently in the Agent's discretion) and
shall be adjusted upward or downward based on all Revolving Loans
(including Agent Advances) and repayments received by the Agent as of
5:00 P.M. Chicago time on the last Business Day of the period specified
by the Agent (such date, the "SETTLEMENT DATE").
(b) SUMMARY STATEMENTS; SETTLEMENTS. The Agent shall deliver
to each of the Lenders promptly after the Settlement Date a summary
statement of the account of outstanding Revolving Loans (including
Agent Advances) for the period, the amount of repayments received for
the period, and the amount allocated to each Lender of the interest and
Unused Line Fee for the period. After application of payments under
SECTION 4.11, as reflected on the summary statement, (i) the Agent
shall transfer to each Lender its allocated share of interest and
Unused Line Fee, and its Proportionate Share of repayments received by
the Agent in respect of the period covered by such summary statement;
and (ii) each Lender shall transfer to the Agent, or the Agent shall
transfer to each Lender, such amounts as are necessary to insure that,
after giving effect to all such transfers, the amount of Revolving
Loans made by each Lender shall be equal to such Lender's Proportionate
Share of the aggregate amount of Revolving Loans outstanding as of such
Settlement Date. If the summary statement requires transfers to be made
to the Agent by the Lenders and is received by the Lenders prior to
12:00 noon Chicago time on a Business Day, such transfers shall be made
in immediately available funds no later than 3:00 P.M. Chicago time
that day;
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<PAGE> 33
and, if received after 12:00 noon Chicago time, then no later than 3:00
P.M. Chicago time on the next Business Day. The obligation of each
Lender to transfer such funds is irrevocable, unconditional and without
recourse to or warranty by the Agent.
(c) DISTRIBUTION OF INTEREST AND UNUSED LINE FEES. Interest on
the Revolving Loans (including Agent Advances) and the Unused Line Fee
shall be allocated by the Agent to each Lender (i) in the case of
interest, in accordance with the Revolving Loans actually advanced by
and repaid to such Lender and (ii) in the case of the Unused Line Fee,
in accordance with the Proportionate Share of such Lender. Interest
shall accrue from and including the date Revolving Loans are advanced
and to but excluding the date such Revolving Loans are either repaid by
the Borrowers or, if later, actually settled under this Section.
Promptly after the end of each month, the Agent shall distribute to
each Lender its portion, allocated as provided above, of the interest
and Unused Line Fee which has been received by the Agent during such
month.
2.5 SHARING OF PAYMENTS.
--------------------
If any Lender shall obtain any payment (whether made voluntarily or
involuntarily, or through the exercise of any right of set-off, or otherwise) on
account of the Revolving Loans made by it or its participation in the Letter of
Credit Obligations in excess of its Proportionate Share of payments on account
of the Revolving Loans or Letter of Credit Obligations obtained by all the
Lenders, such Lender shall forthwith purchase from the other Lenders such
participations in the Revolving Loans made by them or in their participation in
Letters of Credit as shall be necessary to cause such purchasing Lender to share
the excess payment ratably with each of them; PROVIDED, THAT if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each other Lender shall be rescinded and each such
other Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery, together with an amount equal to such other Lender's
ratable share (according to the proportion of (i) the amount of such Lender's
required repayment to (ii) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing Lender
in respect to the total amount so recovered. The Borrowers agree that any Lender
so purchasing a participation from another Lender pursuant to this SECTION 2.5,
to the fullest extent permitted by
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law, may exercise all of its rights of payment (including the right of set-off)
with respect to such participation as fully as if such Lender were the direct
creditor of the Borrowers in the amount of such participation.
2.6 DEFAULTING LENDERS.
-------------------
(a) A Lender who fails to pay the Agent its Proportionate
Share of any Revolving Loans (including Agent Advances) made available
by the Agent on such Lender's behalf, or who fails to pay any other
amounts owing by it to the Agent, is a "DEFAULTING LENDER." The Agent
is entitled to recover from such Defaulting Lender all such amounts
owing by such Defaulting Lender on demand. If the Defaulting Lender
does not pay such amounts on the Agent's demand, the Agent shall
promptly notify the Hawk Funds Administrator and the Borrowers shall
pay such amounts to the Agent (to the extent the Agent has made such
amounts available to or for the account of the Borrowers) within five
(5) Business Days of the receipt by the Hawk Funds Administrator of
such notice. In addition, the Defaulting Lender or the Borrowers shall
pay to the Agent for its own account interest on such amount for each
day from the date it was made available by the Agent to the Borrowers
to the date it is recovered by the Agent at a rate per annum equal to
(x) the overnight Federal Funds Rate PLUS the Expenses and losses, if
any, incurred as a result of the Defaulting Lender's failure to perform
its obligations, if paid by the Defaulting Lender, or (y) the then
applicable rate of interest calculated under SECTION 4.1, if paid by
the Borrowers. Nothing herein shall be deemed to relieve any Lender of
its obligation to fulfill its commitments hereunder or to prejudice any
rights which the Borrowers may have against any Lender as a result of
any default by such Lender hereunder.
(b) The failure of any Lender to fund its Proportionate Share
of a Revolving Loan shall not relieve any other Lender of its
obligation to fund its Proportionate Share of a Revolving Loan.
Conversely, no Lender shall be responsible for the failure of another
Lender to fund its Proportionate Share of a Revolving Loan.
(c) The Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by the Borrowers to the
Agent for the Defaulting Lender's benefit; nor shall a
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Defaulting Lender be entitled to the sharing of any payments hereunder.
Amounts payable to a Defaulting Lender shall instead be paid to or
retained by the Agent. The Agent may hold and, in its discretion,
re-lend to the Borrowers the amount of all such payments received by it
for the account of such Lender. For purposes of voting or consenting to
matters with respect to the Credit Documents and determining
Proportionate Shares, such Defaulting Lender shall be deemed not to be
a "LENDER" and such Lender's Commitment shall be deemed to be zero
(-0-). This section shall remain effective with respect to such Lender
until (x) the Obligations shall have been declared or shall have become
immediately due and payable or (y) the Majority Lenders, the Agent and
the Borrowers shall have waived such Lender's default in writing. The
operation of this Section shall not be construed to increase or
otherwise affect the Commitment of any Lender, or relieve or excuse the
performance by the Borrowers of their respective duties and obligations
hereunder.
2.7 ALLOCATION OF REVOLVING LOANS AND EXPENSES.
-------------------------------------------
(a) The Borrowers maintain an integrated cash management
system reflecting their interdependence on one another and the mutual benefits
shared among them as a result of their respective operations. In order to
efficiently fund and operate their respective businesses and minimize the number
of Borrowings which they will make under this Credit Agreement and thereby
reduce the administrative costs and record keeping required in connection
therewith, including the necessity to enter into and maintain separately
identified and monitored borrowing facilities, the Borrowers have requested, and
the Agent and the Lenders have agreed that, subject to SECTION 11.16, (i) all
Revolving Loans will be advanced to and for the account of the Borrowers on a
joint and several basis to the Disbursement Account and (ii) all Letters of
Credit will be issued pursuant to an application therefor executed by the Hawk
Funds Administrator on behalf and for the account of the Borrower or Borrowers
specified by the Hawk Funds Administrator in such application. Each of the
Borrowers hereby acknowledges that it will be receiving a direct benefit from
each Revolving Loan made and each Letter of Credit issued pursuant to this
Credit Agreement.
(b) In order to track more precisely the respective recipients
of the proceeds of each Revolving Loan and the Borrower receiving the primary
benefit from the issuance of each Letter of
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<PAGE> 36
Credit, and to assist the Hawk Funds Administrator, the Borrowers, the Agent and
the Lenders in administering the Revolving Loans and the Letters of Credit, each
of the Borrowers has agreed with the Agent and the Lenders to cause the Hawk
Funds Administrator to establish and maintain, and the Hawk Funds Administrator
hereby agrees to establish and maintain, accounts with respect to each Borrower
(each Borrower's "ALLOCATION ACCOUNT") in which the Hawk Funds Administrator
shall record its good faith allocation to each of the Borrowers of (w) the
proceeds, if any, of each Revolving Loan received by or for the account of such
Borrower, (x) payments made to the Agent on account of the Obligations of such
Borrower, (y) the aggregate face amount of all outstanding Letters of Credit
covering goods which such Borrower will receive and (z) all previously
unallocated Expenses.
(c) As soon as available, but not later than thirty (30) days
after the last Business Day of each month ending after the Initial Funding Date,
the Hawk Funds Administrator shall deliver to the Agent and each Borrower a
report prepared by or under the supervision of the chief financial officer of
the Hawk Funds Administrator, and certified by such officer, setting forth with
respect to each Borrower the balance of the Allocation Account of such Borrower
as of the end of, and all activity occurring in such Allocation Account during,
such month. Absent demonstrable error, each such monthly statement shall be
final, conclusive and binding on the respective Borrowers.
ARTICLE 3. LETTERS OF CREDIT.
------------------
3.1 ISSUANCE OF LETTERS OF CREDIT.
------------------------------
Subject to the terms and conditions hereof and in reliance on the
representations and warranties of the Borrowers set forth herein, the Agent
shall cause the Issuing Bank to issue Letters of Credit hereunder at the request
of the Hawk Funds Administrator and for its account, as more specifically
described below. The Agent shall not be obligated to cause the Issuing Bank to
issue any Letter of Credit if:
(a) issuance of the requested Letter of Credit (i) would cause
the Letter of Credit Obligations then outstanding to exceed $5,000,000
or (ii) would cause the sum of the Revolving Loans PLUS the Letter of
Credit Obligations then outstanding
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to exceed the lesser of (x) the Line of Credit and (y) the
Borrowing Base, in each case then in effect; or
(b) issuance of the Letter of Credit is enjoined, restrained
or prohibited by any Governmental Authority, Requirement of Law or any
request or directive of any Governmental Authority (whether or not
having the force of law) or would impose upon the Agent or the Issuing
Bank any material restriction, reserve, capital requirement, loss, cost
or expense (for which the Agent or the Issuing Bank is not otherwise
compensated) not in effect or known as of the Closing Date.
3.2 TERMS OF LETTERS OF CREDIT.
---------------------------
The proposed amount, terms and conditions, and form of each Letter of
Credit (and of any drafts or acceptances thereunder) shall be subject to
approval by the Issuing Bank. The term of each standby Letter of Credit shall
not exceed 360 days, but may be subject to annual renewal. The term of each
documentary Letter of Credit shall not exceed 120 days. No Letter of Credit
shall have an expiry date later than five (5) Business Days prior to the
Expiration Date.
3.3 NOTICE OF ISSUANCE.
-------------------
A request for issuance of a Letter of Credit (a "LETTER OF CREDIT
REQUEST") shall be given in writing. A Letter of Credit Request must be received
by the Agent no later than 1:00 P.M. Chicago time at least three (3) Business
Days (or such shorter period as may be agreed to by the Issuing Bank) in advance
of the proposed date of issuance.
3.4 LENDERS' PARTICIPATION.
-----------------------
Immediately upon issuance or amendment of any Letter of Credit, each
Lender shall be deemed to have irrevocably and unconditionally purchased and
received from the Issuing Bank, with out recourse or warranty, an undivided
interest and participation in all rights and obligations under such Letter of
Credit (other than fees and other amounts owing to the Issuing Bank) in
accordance with such Lender's Proportionate Share.
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3.5 PAYMENTS OF AMOUNTS DRAWN UNDER LETTERS OF CREDIT.
--------------------------------------------------
The Agent shall notify the Hawk Funds Administrator of the receipt by
the Agent of notice from the Issuing Bank of a draft or other presentation for
payment or drawing under a Letter of Credit not later than 11:00 A.M. Chicago
time on the Business Day immediately prior to the date on which the Issuing Bank
intends to honor such drawing. Unless the procedures set forth in SECTION 9.2(c)
shall be applicable, the Hawk Funds Administrator shall be deemed to have
concurrently given a Notice of Borrowing to the Agent to make a Revolving Loan
in the amount of and at the time of such drawing (which Revolving Loan shall be
a Prime Rate Loan), the proceeds of which shall be applied directly by the Agent
to reimburse the Issuing Bank for the amount of such drawing.
3.6 PAYMENT BY LENDERS.
-------------------
If a Revolving Loan is not made in an amount sufficient to reimburse
the Issuing Bank in full for the amount of any draw under a Letter of Credit,
the Agent shall promptly notify each Lender of the unreimbursed amount of such
drawing and of such Lender's respective participation therein. Each Lender shall
make available to the Agent, for the account of the Issuing Bank, the amount of
its participation in immediately available funds not later than 1:00 P.M.
Chicago time on the next Business Day after such Lender receives notice from the
Agent of the amount of such Lender's participation in such unreimbursed amount.
If any Lender fails to make available to the Agent the amount of such Lender's
participation, the Issuing Bank shall be entitled to recover such amount on
demand from such Lender together with interest at the Federal Funds Rate for the
first three Business Days and thereafter at the Prime Lending Rate. For each
Letter of Credit, the Agent shall promptly distribute to each Lender which has
funded the amount of its participation its Proportionate Share of all payments
subsequently received by the Agent from the Borrowers in reimbursement of
honored drawings.
3.7 OBLIGATIONS ABSOLUTE.
---------------------
The joint and several obligations of the Borrowers to reimburse the
Lenders under SECTION 3.5 hereof shall be unconditional and irrevocable and
shall be paid strictly in accordance with the terms of this Credit Agreement
under all circumstances including, without limitation, upon the occurrence and
during the continuance of an Event of Default.
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3.8 AGENT'S EXECUTION OF APPLICATIONS AND OTHER ISSUING BANK
--------------------------------------------------------
DOCUMENTATION; RELIANCE ON CREDIT AGREEMENT BY ISSUING
------------------------------------------------------
BANK.
-----
The Agent shall be authorized to execute, deliver and perform on behalf
of the Lenders such letter of credit applications, shipping indemnities, letter
of credit modifications and consents and other undertakings for the benefit of
the Issuing Bank as may be reasonably necessary or appropriate in connection
with the issuance or modification of Letters of Credit requested by the
Borrowers hereunder. The Lenders, the Agent, the Borrowers and the Hawk Funds
Administrator all expressly agree that the terms of this ARTICLE 3 and various
other provisions of this Credit Agreement identifying the Issuing Bank are also
intended to benefit the Issuing Bank and the Issuing Bank shall be entitled to
enforce the provisions hereof which are for its benefit.
ARTICLE 4. COMPENSATION, REPAYMENT AND REDUCTION
-------------------------------------
OF COMMITMENTS.
---------------
4.1 INTEREST ON REVOLVING LOANS.
----------------------------
(a) Interest on the unpaid principal amount of Revolving Loans
which are Prime Rate Loans shall be payable monthly in arrears, on the
first Business Day of each month, at an interest rate per annum equal
to the Prime Lending Rate PLUS one percent (1.0%) calculated on the net
balances owing to the Agent and the Lenders at the close of business
each day during such month. The rate hereunder shall change each day
the Prime Lending Rate changes.
(b) Interest on the unpaid principal amount of Revolving Loans
which are LIBOR Rate Loans shall be payable on the earliest to occur of
(i) the last day of each Interest Period with respect to such LIBOR
Rate Loans, (ii) ninety (90) days following the commencement of such
LIBOR Rate Loans, (iii) the date of conversion of such LIBOR Rate Loans
(or a portion thereof) to a Prime Rate Loan and (iv) the maturity of
such LIBOR Rate Loans, at an interest rate per annum equal during the
Interest Period for such LIBOR Rate Loans to the LIBOR Rate for the
Interest Period in effect for such LIBOR Rate Loans PLUS two and
one-quarter percent (2.25%). After maturity of such LIBOR Rate Loans
(whether by acceleration or
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otherwise), interest shall be payable upon demand. The Agent upon
determining the LIBOR Rate for any Interest Period shall promptly
notify the Hawk Funds Administrator and the Lenders by telephone
(confirmed promptly in writing) or in writing thereof. Each
determination by the Agent of an interest rate hereunder shall be
conclusive and binding for all purposes, absent demonstrable error.
(c) Notwithstanding the provisions of SECTION 4.1(b), the
Borrowers shall pay to each Lender, so long as and to the extent such
Lender shall be required under regulations of the Board of Governors of
the Federal Reserve System to maintain reserves with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities, additional interest on the unpaid principal amount of each
Revolving Loan comprised of LIBOR Rate Loans of such Lender, from the
date of such LIBOR Rate Loan until such principal amount is paid in
full, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the LIBOR Rate for the applicable Interest
Period for such LIBOR Rate Loan from (ii) the rate obtained by dividing
such LIBOR Rate by a percentage equal to 1 MINUS the stated maximum
rate (stated as a decimal) applicable two (2) Business Days before the
first day of such Interest Period of all reserves, if any, required to
be maintained against "EUROCURRENCY LIABILITIES" as specified in
Regulation D (or against any other category of liabilities which
includes deposits by reference to which the interest rate on LIBOR Rate
Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender
to United States residents) having a term equal to the Interest Period
applicable to such LIBOR Rate Loan. Such Lender shall as soon as
practicable provide notice to the Agent and the Hawk Funds
Administrator of any such additional interest arising in connection
with such LIBOR Rate Loan, which notice shall be conclusive and
binding, absent demonstrable error.
4.2 UNUSED LINE FEE.
----------------
The Borrowers shall pay to the Agent, for the ratable benefit of the
Lenders, a non-refundable fee (the "UNUSED LINE FEE") equal to one-half of one
percent (0.50%) per annum of the unused portion of the Line of Credit (with any
outstanding Letters of Credit constituting usage of the Line of Credit). The
Unused Line Fee shall accrue daily from the Closing Date until the Expiration
Date,
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and shall be due and payable monthly in arrears, on the first Business Day of
each month and on the Expiration Date.
4.3 LETTER OF CREDIT FEES.
----------------------
(a) The Agent, for the ratable benefit of the Lenders, shall
be entitled to charge to the account of the Borrowers on the first
Business Day of each month, a fee (the "LETTER OF CREDIT FEE"), in an
amount equal to two percent (2.0%) per annum of the daily weighted
average undrawn amount of Letters of Credit outstanding during the
immediately preceding month. In addition, the Agent, for its own
account, shall be entitled to charge to the account of the Borrowers on
the date of issuance of any standby Letter of Credit, a facing fee
equal to one-half of one percent (0.50%) on the initial face amount of
each such standby Letter of Credit (the "L/C FACING FEE").
(b) The Agent shall also be entitled to charge to the account
of the Borrowers, as and when incurred by the Agent or any Lender, the
customary charges, fees, costs and expenses charged to the Agent or any
Lender for the Borrower's account by any Issuing Bank (the "ISSUING
BANK FEES") in connection with the issuance, transfer, drawing,
amendment or negotiation of any Letters of Credit by the Issuing Bank.
Each determination by the Agent of Letter of Credit Fees, L/C Facing
Fees, Issuing Bank Fees and other fees, costs and expenses charged
under this Section shall be conclusive and binding for all purposes,
absent manifest error.
4.4 INTEREST AND LETTER OF CREDIT FEES AFTER EVENT OF
-------------------------------------------------
DEFAULT.
--------
From the date of occurrence of an Event of Default until the earlier of
the date upon which (i) all Obligations shall have been paid and satisfied in
full or (ii) such Event of Default shall have been waived, interest on the
Revolving Loans and Letter of Credit Fees on Letter of Credit Obligations shall
each be payable on demand at a rate per annum equal to, with respect to the
Revolving Loans, the rate in effect under SECTION 4.1, PLUS two percent (2%),
and with respect to the Letter of Credit Obligations, the rate at which Letter
of Credit Fees are charged pursuant to the first sentence of SECTION 4.3(a),
PLUS two percent (2%).
4.5 COLLATERAL MONITORING FEE.
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The Borrowers shall pay to the Agent, for its own account, a
non-refundable annual collateral monitoring fee (the "COLLATERAL MONITORING
FEE") in the amount of $25,000. The Collateral Monitoring Fee shall be fully
earned and payable on the Closing Date and on each anniversary thereof.
4.6 EXPENSES.
---------
The Borrowers shall reimburse the Expenses of the Agent or any Lender,
as the case may be, within five (5) Business Days of Agent's written demand
therefor.
4.7 MANDATORY PAYMENT OF REVOLVING LOANS; REDUCTIONS OF
---------------------------------------------------
COMMITMENTS.
------------
(a) Except during the period described in SECTION 2.2(b)(ii),
the aggregate outstanding principal amount of Revolving Loans PLUS
Letter of Credit Obligations at any time in excess of the lesser at
such time of (i) the Line of Credit and (ii) the Borrowing Base, shall
be immediately due and payable without the necessity of any demand.
(b) On the Expiration Date, the Commitment of each
Lender shall automatically reduce to zero (-0-) and may not be
reinstated.
(c) The Borrowers may reduce or terminate the Line of Credit
in whole or in part at any time and from time to time; PROVIDED, THAT
each such reduction must be in an amount not less than $5,000,000 (and
in increments of $1,000,000 in excess thereof). Once reduced, no
portion of the Line of Credit so reduced may be reinstated. If the
Borrowers seek to reduce the Line of Credit to less than $10,000,000,
then the Line of Credit shall be reduced to zero (-0-).
4.8 MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF ACCOUNT.
---------------------------------------------------
The Agent shall maintain an account on its books in the name of the
Borrowers (the "LOAN ACCOUNT") in which the Borrowers will be charged with all
loans and advances made by the Lenders to the Borrowers or for the account of
the Borrowers, including the Revolving Loans and all Letter of Credit
Obligations, the Fees, the Expenses and any other Obligations, as and when such
payments become due. The Loan Account will be credited with all payments
received by the Agent from the Borrowers or for the account of the
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Borrowers, including all amounts received in the BT Account from the Lockbox
Banks. After the end of each month, the Agent shall send the Hawk Funds
Administrator a monthly statement accounting for the charges, loans, advances
and other transactions occurring among and between the Agent, the Lenders and
the Borrowers during that month, PROVIDED, THAT the failure of the Agent to send
such statement to the Hawk Funds Administrator shall not relieve the Borrowers
of any Obligations. Absent demonstrable error, each monthly statement shall be
an account stated and shall be final, conclusive and binding on the Borrowers.
4.9 PAYMENT PROCEDURES.
-------------------
Payments of Fees, principal of and interest on the Revolving Loans and
Expenses payable to the Agent or any Lender shall be made in each case not later
than 2:00 P.M. Chicago time on the day when due, in immediately available
dollars, to the offices of the Agent, at the address set forth in SECTION 11.7,
or as the Agent may otherwise direct the Hawk Funds Administrator. The Borrowers
hereby authorize the Agent to charge the Loan Account with the amount of all
payments to be made hereunder and under the other Credit Documents, including
all Fees and Expenses, as and when such payments become due. The joint and
several obligations of the Borrowers to the Lenders with respect to such
payments shall be discharged by making such payments to the Agent pursuant to
this Section or by the charging of the Loan Account by the Agent.
4.10 COLLECTION OF ACCOUNTS.
-----------------------
Borrowers shall at all times maintain lockboxes ("LOCKBOXES") and shall
instruct all account debtors on the Accounts of the respective Borrowers to
remit all Collections to the Lockboxes. No later than the earlier to occur of
(i) the Initial Funding Date and (ii) January 31, 1997, the Borrowers, the Agent
and financial institutions selected by the Borrowers and acceptable to the Agent
(each a "LOCKBOX BANK") shall enter into agreements in form and substance
reasonably satisfactory to Agent, PROVIDED, THAT Agent agrees that Key Bank is
acceptable to Agent as a Lockbox Bank (each a "LOCKBOX AGREEMENT"), which, among
other things, shall provide for the opening of an account for the deposit of
Collections (a "LOCKBOX ACCOUNT") at each Lockbox Bank. All Collections, all
other cash payments made for Inventory and all other payments of any kind
constituting proceeds of Collateral and received by or for the account the
respective Borrowers from any Person, promptly upon receipt shall be deposited
into a Lockbox Account in the identical
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form in which such payment was made, whether by cash or check. Termination of
such arrangements shall also be subject to approval by the Agent. Upon the terms
and subject to the conditions set forth in the Lockbox Agreements, from and
after the Initial Funding Date, during any period of time when either (i) an
Event of Default has occurred and is continuing, or (ii) unused availability
under the Borrowing Base is less than $5,000,000, the Agent may, in its sole
discretion, cause all available amounts held in each Lockbox Account to be wired
each Business Day into an account (the ("BT ACCOUNT") maintained by the Agent
with Bankers Trust Company. Amounts received in the BT Account from the Lockbox
Banks shall be credited to the Loan Account and distributed and applied as set
forth in SECTION 4.11.
4.11 DISTRIBUTION AND APPLICATION OF COLLECTIONS AND OTHER
-----------------------------------------------------
AMOUNTS.
--------
All Collections received by the Agent, and all other amounts received
by the Borrowers and delivered to the Agent, shall be credited to the Loan
Account, unless an Event of Default has occurred and is continuing, in which
case such Collections and other amounts shall be distributed and applied in the
following order: FIRST, to the payment of any Fees, Expenses or other
Obligations due and payable to the Agent under any of the Credit Documents,
including Agent Advances and any other amounts advanced by the Agent on behalf
of the Lenders; SECOND, to the payment of any Fees, Expenses or other
Obligations due and payable to the Issuing Bank under any of the Credit
Documents; THIRD, to the ratable payment of any Fees, Expenses or other
Obligations due and payable to the Lenders under any of the Credit Documents
other than those Obligations specifically referred to in this Section; FOURTH,
to the ratable payment of interest due on the Revolving Loans; and, FIFTH, to
the ratable payment of principal due on the Revolving Loans.
4.12 CALCULATIONS.
-------------
All calculations of (i) interest hereunder and (ii) Fees, including,
without limitation, Unused Line Fees and Letter of Credit Fees, shall be made by
the Agent, on the basis of a year of 360 days, or, if such computation would
cause the interest and fees chargeable hereunder to exceed the Highest Lawful
Rate, 365/366 days, in each case for the actual number of days elapsed
(including the first day but excluding the last day) occurring in the period for
which such interest or Fees are payable. Each determination by
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the Agent of an interest rate, Fee or other payment hereunder shall be
conclusive and binding for all purposes, absent manifest error.
4.13 SPECIAL PROVISIONS RELATING TO LIBOR RATE LOANS.
------------------------------------------------
(a) CONTINUATION. With respect to any Borrowing consisting of
LIBOR Rate Loans, the Borrowers may, subject to the provisions of
SECTION 4.13(c), elect to maintain such Borrowing or any portion
thereof as consisting of LIBOR Rate Loans by selecting a new Interest
Period for such Borrowing, which new Interest Period shall commence on
the last day of the immediately preceding Interest Period. Each
selection of a new Interest Period shall be made by notice given not
later than noon Chicago time on the third Business Day prior to the
date of any such continuation relating to LIBOR Rate Loans, by the Hawk
Funds Administrator to the Agent. Such notice by the Hawk Funds
Administrator of a continuation (a "NOTICE OF CONTINUATION") shall be
by telephone or facsimile transmission, and if by telephone, promptly
confirmed in writing, substantially in the form of EXHIBIT D, in each
case specifying (i) the date of such continuation, (ii) the Type of
Revolving Loans subject to such continuation, (iii) the aggregate
amount of Revolving Loans subject to such continuation and (iv) the
duration of the selected Interest Period. The Borrowers may elect to
maintain more than one Borrowing consisting of LIBOR Rate Loans by
combining such Borrowings into one Borrowing and selecting a new
Interest Period pursuant to this SECTION 4.13(a). If the Borrowers
shall fail to select a new Interest Period for any Borrowing consisting
of LIBOR Rate Loans in accordance with this SECTION 4.13(a), such
Revolving Loans will automatically, on the last day of the then
existing Interest Period therefor, convert into Prime Rate Loans. The
Agent shall give each Lender prompt notice by telephone or facsimile
transmission of each Notice of Continuation.
(B) CONVERSION. The Borrowers may on any Business Day (so long
as no Default or Event of Default has occurred and is continuing), upon
notice (each such notice, a "NOTICE OF CONVERSION") given to the
Agent, and subject to the provisions of SECTION 4.13(c), convert the
entire amount of or a portion of all Revolving Loans of one Type
comprising the same Borrowing into Revolving Loans of another Type;
PROVIDED, THAT any conversion of any LIBOR Rate Loans into Revolving
Loans of another Type shall be made on, and only on, the last day of an
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Interest Period for such LIBOR Rate Loans and, upon conversion of any
Prime Rate Loans into Revolving Loans of another Type, the Borrowers
shall pay accrued interest to the date of conversion on the principal
amount converted. Each such Notice of Conversion shall be given not
later than Noon Chicago time on the Business Day prior to the date of
any proposed conversion into Prime Rate Loans and on the third Business
Day prior to the date of any proposed conversion into LIBOR Rate Loans.
Subject to the restrictions specified above, each Notice of Conversion
shall be by telephone or facsimile transmission, and if by telephone,
promptly confirmed in writing, substantially in the form of EXHIBIT E,
in each case specifying (i) the requested date of such conversion, (ii)
the Type of Revolving Loans to be converted (iii) the portion of such
Type of Revolving Loan to be converted, (iv) the Type of Revolving
Loans such Revolving Loans are to be converted into and (v) if such
conversion is into LIBOR Rate Loans, the duration of the Interest
Period of such Revolving Loan. Each conversion shall be in an aggregate
amount of not less than $5,000,000 or an integral multiple of
$1,000,000 in excess thereof. The Borrowers may elect to convert the
entire amount of or a portion of all Revolving Loans of one Type
comprising more than one Borrowing into Revolving Loans of another Type
by combining such Borrowings into one Borrowing; PROVIDED, THAT if the
Borrowings so combined consist of LIBOR Rate Loans, such Loans shall
have Interest Periods ending on the same date.
(c) CERTAIN LIMITATIONS ON LIBOR RATE LOANS. The right
of the Borrowers to maintain, select, continue or convert
LIBOR Rate Loans shall be limited as follows:
(i) If the Agent is advised by Bankers Trust
Company that it is not offering United States dollar deposits
(in the applicable amounts) in the London interbank market,
or the Agent determines that adequate and fair means do not
otherwise exist for ascertaining the LIBOR Rate or LIBOR Rate
Loans comprising any requested Borrowing, continuation or
conversion, the right of the Borrowers to select or maintain
LIBOR Rate Loans for such Borrowing or any subsequent
Borrowing shall be suspended until the Agent shall notify the
Hawk Funds Administrator and the Lenders that the
circumstances causing such suspension no longer exists, and
each Revolving Loan shall be made as a Prime Rate Loan.
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(ii) If the Majority Lenders shall, at least one
Business Day before the date of any requested Borrowing,
continuation or conversion, notify the Agent that the LIBOR
Rate for Revolving Loans comprising such Borrowing will not
adequately reflect the cost to such Lenders of making or
funding their respective Revolving Loans for such Borrowing,
the right of the Borrowers to select LIBOR Rate Loans for such
Borrowing shall be suspended until the Agent shall notify the
Hawk Funds Administrator and the Lenders that the
circumstances causing such suspension no longer exist, and
each Revolving Loan comprising such Borrowing and each other
Borrowing requested during such period of suspension shall be
made as a Prime Rate Loan.
(iii) If at any time any Lender determines (which
determination shall, absent manifest error, be conclusive and
binding on all parties) that the making, continuation or
conversion of any Revolving Loan as a LIBOR Rate Loan by such
Lender has become unlawful or impermissible by reason of
compliance by that Lender with any law, governmental rule,
regulation or order of any Governmental Authority (whether or
not having the force of law), then, and in any such event,
such Lender may give notice of that determination in writing,
to the Agent and the Hawk Funds Administrator and the Agent
shall promptly transmit the notice to each other Lender. Until
such Lender gives notice otherwise, the right of the Borrowers
to select LIBOR Rate Loans from that Lender shall be suspended
and each Revolving Loan made by that Lender, notwithstanding
the Type of Revolving Loan made by the other Lenders, shall be
a Prime Rate Loan and each LIBOR Rate Loan outstanding from
that Lender shall automatically, on the last day of the
existing Interest Period therefor (or earlier, if so required
under such law, rule, regulation or order), convert to a Prime
Rate Loan.
(iv) No Agent Advance shall be made as a LIBOR Rate
Loan.
(v) No Revolving Loans may be made, continued or
converted as or to LIBOR Rate Loans at any time that a Default
or Event of Default shall have occurred and be continuing.
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(d) COMPENSATION.
------------
(i) Each Notice of Continuation and Notice of
Conversion shall be irrevocable by and binding on the
Borrowers. In the case of any Borrowing, continuation or
conversion that the related Notice of Borrowing, Notice of
Continuation or Notice of Conversion specifies is to be
comprised of LIBOR Rate Loans, the Borrowers shall indemnify
each Lender against any loss, cost or expense incurred by such
Person as a result of any failure to fulfill, on or before the
date for such Borrowing, continuation or conversion specified
in such Notice of Borrowing, Notice of Continuation or Notice
of Conversion, the applicable conditions set forth in ARTICLE
5, including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of
the liquidation or re-employment of deposits or other funds
acquired by such Lender to fund the Revolving Loan to be made
by such Lender as part of such Borrowing, continuation or
conversion.
(ii) If any payment of principal of, or conversion
or continuation of, any LIBOR Rate Loan is made other than on
the last day of the Interest Period for such Loan as a result
of a payment, prepayment, conversion or continuation of such
Loan or acceleration of the maturity of the Revolving Notes or
for any other reason, the Borrowers shall, upon demand by any
Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to
compensate such Lender for any additional losses, costs or
expenses which it may reasonably incur as a result of such
payment, including, without limitation, any loss (excluding
loss of anticipated profits), cost or expense incurred by
reason of the liquidation or re-employment of deposits or
other funds acquired by any Lender to fund or maintain such
Loan.
(iii) Calculation of all amounts payable to a Lender
under this SECTION 4.13(d) shall be made as though such Lender
elected to fund all LIBOR Rate Loans by purchasing United
States dollar deposits in its LIBOR Lending Office's interbank
Eurodollar market.
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4.14 INDEMNIFICATION IN CERTAIN EVENTS.
----------------------------------
(a) INCREASED COSTS. If after the Closing Date, either (i) any
change in or in the interpretation of any law or regulation is
introduced, including, without limitation, with respect to reserve
requirements applicable to the Agent, to any of the Lenders, Bankers
Trust Company or any other affiliated banking or financial institution
from whom any of the Lenders borrows funds or obtains credit (a
"FUNDING BANK"), or (ii) the Agent, a Funding Bank or any of the
Lenders complies with any future guideline or request from any central
bank or other Governmental Authority proposed or promulgated after the
date of the Agreement or (iii) the Agent, a Funding Bank or any of the
Lenders determines that the adoption of any applicable law, rule or
regulation regarding capital adequacy or any change therein, or any
change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with
the interpretation or administration thereof announced after the date
of this Credit Agreement has or would have the effect described below,
or the Agent, a Funding Bank or any of the Lenders complies with any
request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable
agency announced after the date of this Credit Agreement and in the
case of any event set forth in this clause (iii), such adoption, change
or compliance has or would have the direct or indirect effect of
reducing the rate of return on any of such Person's capital as a
consequence of its obligations hereunder to a level below that which
such Person could have achieved but for such adoption, change or
compliance (taking into consideration such Person's policies with
respect to capital adequacy) by an amount deemed by such Person to be
material, and any of the foregoing events described in CLAUSES (i),
(ii) OR (iii) increases the cost to the Agent, or any of the Lenders of
(A) funding or maintaining any Commitment or (B) issuing, causing the
issuance of making or maintaining any Letter of Credit or of purchasing
or maintaining any participation therein, or reduces the amount
receivable in respect thereof by the Agent or any Lender, then the
Borrowers shall upon demand by the Agent at any time within one hundred
eighty (180) days after the date on which an officer of the Agent, such
Funding Bank or such Lender, as the case may be, responsible for
overseeing this Credit Agreement knows or has reason to know of its
right to additional compensation under
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this SECTION 4.14(a), pay to the Agent, for the account of such Lender
or, as applicable, the Agent or a Funding Bank, additional amounts
sufficient to reimburse the Agent, such Funding Bank and such Lender
against such increase in cost or reduction in amount receivable;
PROVIDED, HOWEVER, that if the Agent or any such Lender or Funding
Bank, as the case may be, fails to deliver such demand within such 180
day period, such entity shall only be entitled to additional
compensation for any such costs incurred from and after the date that
is one hundred eighty (180) days prior to the date the Borrowers
received such demand; and PROVIDED FURTHER, HOWEVER, that before making
any such demand, the Agent and each Lender agree to use reasonable
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Applicable Lending Office if the
making of such a designation would avoid the need for, or reduce the
amount of, such increased cost and would not, in the reasonable
judgment of such Lender, be otherwise disadvantageous to such Lender. A
certificate as to the amount of such increased cost, and setting forth
in reasonable detail the calculation thereof, shall be submitted to the
Hawk Funds Administrator by the Agent, or the applicable Lender or
Funding Bank, and shall be conclusive absent demonstrable error.
(b) Each Lender will promptly notify the Agent, and the Agent
will promptly notify the Hawk Funds Administrator, of any event of
which it has knowledge that would entitle such entity to additional
compensation under this SECTION 4.14. Neither the Agent nor any Lender
shall request any additional compensation under this SECTION 4.14
unless it is generally making similar requests of other borrowers
similarly situated, and the Agent and each Lender agrees to use a
reasonable basis for calculating amounts allocable to its commitment to
lend or its Loans and Letter of Credit Obligations, if any, hereunder.
ARTICLE 5. CONDITIONS PRECEDENT.
---------------------
5.1 CONDITIONS PRECEDENT TO INITIAL REVOLVING LOAN AND LETTER
---------------------------------------------------------
OF CREDIT.
----------
The obligation of each Lender to fund its Proportionate Share of the
initial Borrowing (or, if it shall occur earlier, the obligation of the Agent to
cause the issuance by the Issuing Bank of the initial Letter of Credit and of
each Lender to purchase a
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<PAGE> 51
participation therein) is in each case subject to the satisfaction or waiver of
the following conditions precedent:
(a) CLOSING DOCUMENTS. The Agent and the Lenders shall have
received each of the agreements, opinions, reports, approvals,
consents, certificates and other documents set forth on the List of
Closing Documents attached hereto as SCHEDULE A (the "CLOSING DOCUMENT
LIST").
(b) FEES AND EXPENSES. All Fees and Expenses payable by the
Borrowers hereunder on or before the Initial Funding Date shall have
been paid in full.
(c) HAWK MERGER. The Hawk Merger shall have been
consummated, and shall have become effective, in each case pursuant to
the Hawk Merger Documents and all applicable Requirements of Law.
(d) ISSUANCE OF SENIOR NOTES. Hawk shall have received gross
cash proceeds of at least $100,000,000 from the issuance of the Senior
Notes and shall have used such proceeds to repay in full all of the Old
BT Debt and all documents, agreements and instruments evidencing and/or
executed in connection with the Old BT Debt shall have terminated and
shall be of no further force or effect.
(e) AMENDMENT OF SUBORDINATED NOTE DOCUMENTS. The
Subordinated Note Documents shall have been amended to permit the
issuance of the Senior Notes and the other transactions contemplated
by the Senior Note Documents.
(f) NO DEFAULT UNDER NOTE DOCUMENTS. Before and after giving
effect to the funding of such Borrowing or to the issuance of such
Letter of Credit, as the case may be, no default under any of the Note
Documents shall have occurred and be continuing.
(g) NOTE DOCUMENTS. Borrowers shall have delivered or caused
to be delivered to the Agent true and correct copies of the Note
Documents (certified as such by an officer of the Hawk Funds
Administrator), and all of the respective terms and conditions thereof
shall be in form and substance reasonably satisfactory to the Agent and
the Majority Lenders.
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(h) OTHER DOCUMENTS. Borrowers shall have delivered or caused
to be delivered to the Agent, in each case in form and substance
satisfactory to Agent, (i) all information required pursuant to SECTION
7.2 and (ii) such other business and/or financial and data and other
information as the Agent shall reasonably request.
(i) OFFICER'S CERTIFICATE. The Agent shall have received a
certificate dated the Initial Funding Date signed on behalf of the Hawk
Funds Administrator and each of the Borrowers by the Chairman or Vice
Chairman of the Hawk Funds Administrator stating that all of the
conditions set forth in SECTIONS 5.1(c) through (g), and SECTIONS
5.2(a) through (c), inclusive, have been satisfied on and as of such
date.
5.2 CONDITIONS PRECEDENT TO ALL REVOLVING LOANS AND LETTERS
-------------------------------------------------------
OF CREDIT.
----------
The obligation of each Lender to fund its Proportionate Share of any
requested Revolving Loan (or of the Agent to cause the Issuing Bank to issue any
requested Letter of Credit and of each Lender to purchase a participation
therein) is in each case subject to the satisfaction of the conditions precedent
set forth below. Each Notice of Borrowing, each Letter of Credit Request and
each issuance by any Borrower of a check drawn against, or request for transfer
from, the Disbursement Account shall constitute a representation and warranty to
the Agent and each Lender by the Borrowers that such conditions are satisfied.
(a) All representations and warranties contained in
this Credit Agreement and the other Credit
Documents are true and correct in all material
respects on and as of the date of such Notice of
Borrowing, Letter of Credit Request, or issuance of
a check drawn against, or request for transfer
from, the Disbursement Account both before and
after giving effect thereto and to the application
of the proceeds thereof, in each case as if then
made, other than representations and warranties
that expressly relate solely to an earlier date (in
which case such representations and warranties
shall have been true and accurate in all material
respects on and as of such earlier date);
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(b) No Default or Event of Default shall have occurred or
could reasonably be expected to result from the
making of the requested Revolving Loan or the
issuance of the requested Letter of Credit, which has
not been waived; and
(c) Since December 31, 1995 no event has occurred which
has had or could reasonably be expected to have a
Material Adverse Effect.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES.
-------------------------------
To induce the Agent and the Lenders to enter into this Credit Agreement
and to induce the Lenders to make the Loans and other financial accommodations
described herein, each of the Borrowers hereby represents and warrants to the
Agent and the Lenders that, after giving effect to the events described in
SECTIONS 5.1(d) and (e), the representations and warranties contained in this
ARTICLE 6 are true and correct. Such representations and warranties, and all
other representations and warranties made by the Borrowers in any other Credit
Documents, shall survive the execution and delivery of this Credit Agreement and
such other Credit Documents.
6.1 ORGANIZATION AND QUALIFICATION.
-------------------------------
Each Credit Party and each Subsidiary of each Credit Party (i) are
corporations duly organized, validly existing and in good standing under the
laws of the respective states or other jurisdictions of their incorporation,
(ii) have the power and authority to own their respective properties and assets
and to transact their respective businesses in which they presently are, or
propose to be, engaged and (iii) are duly qualified and are authorized to do
business and are in good standing in each of the respective jurisdictions where
they presently are, or propose to be, engaged in business, in each case, except
where any failures to do so could not reasonably be expected singly or in the
aggregate to have a Material Adverse Effect. SCHEDULE B, PART 6.1 lists all
jurisdictions in which each Credit Party and each Subsidiary of each Credit
Party are qualified to do business as foreign corporations.
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6.2 AUTHORITY.
----------
Each Credit Party and each Subsidiary of each Credit Party has the
requisite corporate power and authority to execute, deliver and perform the
respective Credit Documents to which they are parties. All corporate action
necessary for the execution, delivery and performance of any of the Credit
Documents by each Credit Party and each Subsidiary of each Credit Party which is
a party thereto has been taken.
6.3 ENFORCEABILITY.
---------------
This Credit Agreement and each of the other Credit Documents are the
legal, valid and binding obligations of each Credit Party and each Subsidiary of
each Credit Party which are parties thereto, enforceable in accordance with
their respective terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency or similar laws affecting creditors' rights generally,
and (ii) general principles of equity.
6.4 NO CONFLICT.
The execution, delivery and performance of each Credit Document by each
Credit Party and each Subsidiary of each Credit Party which are parties thereto
are not in contravention of (i) the Governing Documents of such Persons, or (ii)
any Requirement of Law, or (iii) any material indenture, contract, agreement or
instrument or other commitment to which any or all of such Persons are parties
or by which any of such Persons or any of its properties are bound, including,
in any event, any of the Note Documents, and will not, except as contemplated
herein, result in the imposition of any Liens upon any of the properties of any
of such Persons.
6.5 CONSENTS AND FILINGS.
---------------------
No consent, authorization, permit or filing is required in connection
with the execution, delivery and performance of this Credit Agreement or any
Credit Document by any Credit Party or any Subsidiary of any Credit Party which
are parties thereto, or in connection with the continuing operations of such
Persons, except (i) those that have been obtained or made and (ii) filings
necessary to create, perfect or retain the perfection of Liens against the
Collateral.
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6.6 GOVERNMENT REGULATION.
----------------------
No Borrower nor any Subsidiary of any Borrower is subject to regulation
under the Public Utility Holding Company Act of 1935, the Investment Company Act
of 1940, or any other similar Requirement of Law that limits the respective
abilities of such Persons to incur indebtedness or consummate the transactions
contemplated in this Credit Agreement and the other Credit Documents.
6.7 SOLVENCY.
---------
The fair saleable value of the assets of the Consolidated Entity
exceeds all its probable liabilities, including those to be incurred pursuant to
this Credit Agreement and the other Credit Documents. The Consolidated Entity
(i) does not have unreasonably small capital in relation to the business in
which it is or proposes to be engaged and (ii) has not incurred and does not
believe that it will incur, after giving effect to the transactions contemplated
by this Credit Agreement, debts beyond its ability to pay as such debts become
due.
6.8 RIGHTS IN COLLATERAL; PRIORITY OF LIENS.
----------------------------------------
All property constituting Collateral is owned or leased by the
respective Borrowers, free and clear of any and all Liens in favor of third
parties, other than Permitted Liens. Upon the proper filing of the UCC financing
and termination statements, in each case listed in the Closing Document List,
the security interests granted pursuant to the Credit Documents constitute valid
and enforceable first, prior (subject to Permitted Liens) and perfected Liens on
the Collateral, to the extent such Liens can be perfected by the filing of such
financing statements.
6.9 FINANCIAL DATA.
---------------
The Borrowers have provided or caused to be provided to the Agent and
each of the Lenders complete and accurate copies of the audited and unaudited
Financial Statements included in the Offering Memorandum dated November 22,
1996, relating to the Senior Notes. All such Financial Statements have been
prepared in accordance with GAAP consistently applied throughout the periods
involved and fairly present in all material respects the respective consolidated
financial positions, results of operations and cash flows of Persons indicated
for each of the periods covered subject, in the
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case of interim Financial Statements, to normal year-end audit adjustments. The
Consolidated Entity has no Contingent Obligation (or any other material
liabilities which were not incurred by the Borrowers in the ordinary course of
business) which is not reflected in such Financial Statements or the footnotes
thereto, or is not otherwise disclosed on SCHEDULE B, PART 6.9.
6.10 LOCATIONS OF OFFICES, RECORDS AND INVENTORY.
--------------------------------------------
(a) The address of the principal place of business and, if there is
more than one principal place of business, the chief executive office, of each
Borrower is set forth on SCHEDULE B, PART 6.10(a), as the same may be amended
after the Closing Date in accordance with SECTION 11.11. The books and records
of each Borrower, and all its chattel paper, if any, and records of Accounts,
are maintained exclusively at one or more of such locations.
(b) There is no location in which any Borrower has any Collateral
(except for vehicles and Inventory in transit and Inventory with an aggregate
book value for all Borrowers not exceeding $4,000,000, delivered to
third-parties for processing and similar services) other than those locations
identified on SCHEDULE B, PART 6.10(b), as the same may be amended after the
Closing Date in accordance with SECTION 11.11. A complete list of the legal name
and address of each warehouse at which Inventory of any Borrower is stored is
set forth on SCHEDULE B, PART 6.10(b), as the same may be amended after the
Closing Date in accordance with SECTION 11.11. None of the receipts received and
to be received by any Borrower from any warehouseman state that the Inventory
covered thereby is to be delivered to bearer or to the order of a named Person
or to a named Person and such named Person's assigns, in each case other than
such Borrower.
6.11 SUBSIDIARIES; OWNERSHIP OF STOCK.
---------------------------------
As of the Closing Date, (i) the only direct or indirect Subsidiaries of
the respective Credit Parties are those listed on SCHEDULE B, PART 6.11, (ii)
each Credit Party is the record and beneficial owner of all of the respective
shares of capital stock of each of its Subsidiaries listed on SCHEDULE B, PART
6.11, (iii) there are no proxies, irrevocable or otherwise, with respect to such
shares, and no equity securities of any of such Subsidiaries are or may become
required to be issued by reason of any options, warrants, scrip, rights to
subscribe to, calls or commitments of
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any character whatsoever relating to, or securities or rights convertible into
or exchangeable for, shares of any capital stock of any such Subsidiary, and
(iv) there are no contracts, commitments, understandings or arrangements by
which any such Subsidiary is or may become bound to issue additional shares of
its capital stock or securities convertible into or exchangeable for such
shares. All of such shares so owned by any Credit Party are owned by such Credit
Party free and clear of any Liens.
6.12 NO JUDGMENTS OR LITIGATION.
---------------------------
No judgments, orders, writs or decrees are outstanding against any
Credit Party or any Subsidiary of any Credit Party, nor is there now pending or,
to any Credit Party's knowledge, threatened, any litigation, contested claim,
investigation, arbitration, or governmental proceeding by or against any Credit
Party or any Subsidiary of any Credit Party other than (i) as set forth on
SCHEDULE B, PART 6.12, or (ii) with respect to matters arising after the Closing
Date, that singly or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
6.13 NO DEFAULTS.
------------
No Credit Party nor any Subsidiary of any Credit Party is in default
under (i) the Note Documents or (ii) any term of any other indenture, contract,
lease, agreement, instrument or commitment to which any of them is a party or by
which any of them is bound, in the case of the items described in CLAUSE (ii)
above, the default under which singly or in the aggregate could reasonably be
expected to have a Material Adverse Effect. No Credit Party knows of any dispute
regarding any such indenture, contract, lease, agreement, instrument or other
commitment.
6.14 LABOR MATTERS.
--------------
SCHEDULE B, PART 6.14 accurately sets forth all labor union contracts
to which any Borrower or any Subsidiary of any Borrower is a party as of the
Closing Date (including their dates of expiration). There are no existing or, to
the knowledge of any Borrower, threatened strikes, lockouts or other disputes
relating to any collective bargaining or similar agreement to which any Borrower
or any Subsidiary of any Borrower is a party that singly or in the aggregate
could reasonably be expected to have a Material Adverse Effect.
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6.15 COMPLIANCE WITH LAW.
--------------------
No Credit Party nor any Subsidiary of any Credit Party has violated or
failed to comply in any material respect with any Requirements of Law.
6.16 ERISA.
------
No Borrower, no Subsidiary of any Borrower and no ERISA Affiliate
maintains or contributes to any Plan other than those listed on SCHEDULE B, PART
6.16. Each Plan has been and is maintained and funded in accordance with its
terms and in compliance with all applicable provisions of ERISA and the Internal
Revenue Code. Each Borrower, each Subsidiary of a Borrower and each ERISA
Affiliate has fulfilled all contribution obligations for each Plan (including
obligations related to the minimum funding standards of ERISA and the Internal
Revenue Code). No Termination Event has occurred nor has any other event
occurred that may result in a Termination Event. No Borrower, no Subsidiary of
any Borrower, no ERISA Affiliate, and no fiduciary of any Plan is subject to any
direct or indirect liability with respect to any Plan under any Requirement of
Law or agreement. No Borrower, no Subsidiary of a Borrower and no ERISA
Affiliate, is required to provide security to any Plan under Section 401(a)(29)
of the Internal Revenue Code.
6.17 COMPLIANCE WITH ENVIRONMENTAL LAWS.
-----------------------------------
Except as disclosed on SCHEDULE B, PART 6.17 or, with respect to
matters arising after the Closing Date, as could not singly or in the aggregate
reasonably be expected to have a Material Adverse Effect, (i) the operations of
each Borrower and each Subsidiary of each Borrower comply with all applicable
federal, state and local environmental, health and safety statutes, regulations,
directions, ordinances, criteria and guidelines; (ii) no Borrower has received
notice that any of the operations of such Borrower or any of its Subsidiaries is
the subject of any judicial or administrative proceeding alleging the violation
of any federal, state or local environmental, health or safety statute,
regulation, direction, ordinance, criteria or guideline; (iii) none of the
operations of such Borrower or any of its Subsidiaries is the subject of any
federal or state investigation evaluating whether such Borrower or any of its
Subsidiaries disposed of any hazardous or toxic waste, substance or constituent
or other substance at any site that may require remedial action, or any federal
or state investigation
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evaluating whether any remedial action is needed to respond to a release of any
hazardous or toxic waste, substance or constituent or other substance into the
environment; (iv) no Borrower nor any Subsidiary of any Borrower has filed any
notice under any federal or state law indicating past or present treatment,
storage or disposal of a hazardous or toxic waste, substance or constituent or
reporting a spill or release of a hazardous or toxic waste, substance or
constituent or other substance into the environment; and (v) no Borrower nor any
Subsidiary of any Borrower has any contingent liability of which the Borrower
has knowledge, in connection with any release or potential release of any
hazardous or toxic waste, substance or constituent or other substance into the
environment, nor has the Borrower or any of its Subsidiaries received any
notice, letter or other indication of potential liability arising from the
disposal of any hazardous or toxic waste, substance or constituent or other
substance into the environment.
6.18 INTELLECTUAL PROPERTY.
----------------------
Each Borrower and each Subsidiary of each Borrower possesses such
assets, licenses, patents, patent applications, copyrights, service marks,
trademarks and trade names as are necessary or advisable to continue to conduct
their respective present and proposed business activities.
6.19 LICENSES AND PERMITS.
---------------------
Each Borrower and each Subsidiary of each Borrower has obtained and
holds in full force and effect, all franchises, licenses, leases, permits,
certificates, authorizations, qualifications, easements, rights of way and
other rights and approvals which are necessary or advisable for the operation of
its business as presently conducted and as proposed to be conducted, except
where the failure to obtain and hold any of the foregoing singly or in the
aggregate could not reasonably be expected to have a Material Adverse Effect.
6.20 TAXES AND TAX RETURNS.
----------------------
(a) Except as set forth on SCHEDULE B, PART 6.20, all income
tax returns required to be filed by each Credit Party and each
Subsidiary of each Credit Party have been timely filed. The information
filed is complete and accurate in all material respects. All deductions
taken in such income tax
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returns are appropriate and in accordance with applicable laws and
regulations, except deductions that may have been disallowed but are
being challenged in good faith and for which adequate reserves have
been made in accordance with GAAP.
(b) All taxes, assessments, fees and other governmental
charges for periods beginning prior to the date hereof, other than such
taxes, assessments, fees and other governmental charges that are not
yet due and payable, have been timely paid and no Credit Party nor any
Subsidiary of any Credit Party has any liability for taxes in excess of
the amounts so paid or reserves so established.
(c) Except as set forth in SCHEDULE B, PART 6.20, no material
deficiencies for taxes have been claimed, proposed or assessed by any
taxing or other Governmental Authority against any Credit Party or any
Subsidiary of any Credit Party and no tax liens have been filed. Except
as set forth in SCHEDULE B, PART 6.20, there are no pending or, to the
knowledge of any Credit Party, threatened audits, investigations or
claims for or relating to any liability for taxes and there are no
matters under discussion with any Governmental Authority which could
reasonably be expected to result in a material additional liability for
taxes. As of the Closing Date, either the federal income tax returns of
Hawk have been audited by the Internal Revenue Service and such audits
have been closed, or the period during which any assessments may be
made by the Internal Revenue Service has expired without waiver or
extension for all years up to and including the fiscal year of Hawk
ended December 31, 1996. Except as set forth in SCHEDULE B, PART 6.20,
as of the Closing Date, no extension of a statute of limitations
relating to taxes, assessments, fees or other governmental charges is
in effect with respect to any Credit Party or any Subsidiary of any
Credit Party.
(d) Except as set forth on SCHEDULE B, PART 6.20, no Credit
Party nor any Subsidiary of any Credit Party has any obligation under
any written tax sharing agreement or agreement regarding payments in
lieu of taxes.
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6.21 MATERIAL CONTRACTS.
-------------------
SCHEDULE B, PART 6.21, contains a true, correct and complete list of
all the Material Contracts in effect on the Closing Date. Except as described on
SCHEDULE B, PART 6.21, no Material Contract contains any burdensome restrictions
on any Credit Party or any Subsidiary of any Credit Party or any of their
respective properties that could prevent such Credit Party or Subsidiary from
conducting its business as conducted on the Closing Date. As of the Closing
Date, all of the Material Contracts are in full force and effect, and no
defaults currently exist thereunder by any Credit Party or Subsidiary of a
Credit Party that is a party thereto, or to the knowledge of any Credit Party,
any other party thereto.
6.22 ACCURACY AND COMPLETENESS OF INFORMATION.
-----------------------------------------
All factual information furnished by or on behalf of any Credit Party
or any Subsidiary of any Credit Party in writing to the Agent or any Lender for
purposes of or in connection with this Credit Agreement or any Credit Documents
or any transaction contemplated hereby or thereby, is or will be true and
accurate in all material respects on the date as of which such information is
dated or certified and, taken as a whole, is not incomplete by omitting to state
any material fact necessary to make such information not misleading at such
time.
6.23 NO CHANGE.
----------
Since December 31, 1995, no event has occurred which has had or could
reasonably be expected to have a Material Adverse Effect.
ARTICLE 7. AFFIRMATIVE COVENANTS.
----------------------
Until termination of this Credit Agreement and payment and satisfaction
of all Obligations due hereunder:
7.1 FINANCIAL REPORTING.
--------------------
The Credit Parties shall timely deliver to each Lender the following
information:
(a) AUDITOR'S ENGAGEMENT LETTER. As soon as available,
but in any event not later than the earlier of (i) 15 days
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prior to the end of each fiscal year or (ii) prior to the date the
Auditors commence work on the preparation of the annual audited
Financial Statement, a copy of the engagement letter between the Credit
Parties and their Auditors, which engagement letter shall notify such
Auditors that such annual audited Financial Statement will be delivered
by the Credit Parties to the Agent and Lenders, and stating that Agent
and Lenders shall be entitled to rely thereon with respect to the
transactions which are the subject of this Agreement.
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available, but not
later than 90 days after each fiscal year end: (i) the annual audited
consolidated, and unaudited consolidating, Financial Statements of the
Consolidated Entity; (ii) a comparison in reasonable detail to the
prior year annual audited Financial Statements; (iii) the Auditors'
unqualified opinion, "Management Letter" (if any) and statement
indicating whether the Auditors have obtained knowledge of the
existence of any Default or Event of Default during their audit; (iv) a
narrative discussion of the consolidated financial condition and
results of operations and the consolidated liquidity and capital
resources of the Consolidated Entity for such fiscal year, prepared by
the chief financial officer of Hawk; and (v) a compliance certificate
substantially in the form of EXHIBIT F with an attached schedule of
calculations demonstrating compliance with the financial covenants set
forth in ARTICLE 8.
(c) MONTHLY AND ANNUAL PROJECTIONS. Not later than 45 days
after each fiscal year end, beginning with the fiscal year ended
December 31, 1996, monthly projections of the financial condition and
results of operations of the Consolidated Entity for the next
succeeding year, and annual projections for each succeeding fiscal year
thereafter, through and including the fiscal year in which the
Expiration Date will occur, in each case containing projected
consolidating balance sheets, statements of operations, statements of
cash flows and statements of changes in shareholders equity.
(d) QUARTERLY FINANCIAL STATEMENTS. As soon as available,
but not later than 45 days after each end of each of the first three
fiscal quarters, and 90 days after the end of the last fiscal quarter:
(i) Financial Statements of the Consolidated Entity as of the fiscal
quarter then ended, and
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for the fiscal year to date; (ii) a comparison in reasonable detail to
the Financial Statements for the corresponding periods of the prior
fiscal year; (iii) the certification of the chief executive officer or
chief financial officer of Hawk that such Financial Statements have
been prepared in accordance with GAAP (subject to year-end audit
adjustments); (iv) a narrative discussion of the consolidated financial
condition and results of operations and the consolidated liquidity and
capital resources of the Consolidated Entity for such fiscal quarter
and fiscal year to date, prepared by the chief financial officer of
Hawk; and (v) a compliance certificate substantially in the form of
EXHIBIT F with an attached schedule of calculations demonstrating
compliance with the financial covenants set forth in ARTICLE 8.
(e) MONTHLY FINANCIAL STATEMENTS. As soon as available, but
not later than 90 days after the end of the last month in each fiscal
year, 45 days after end of the last month in each fiscal quarter and 30
days after the end of each other month: (i) a balance sheet for the
Consolidated Entity as at the end of such month and for the fiscal year
to date and statements of operations and cash flows for such month and
for the fiscal year to date; (ii) a comparison to the balance sheet,
statement of operations and statement of cash flows for the same
periods in the prior year; (iii) a certification by the chief executive
officer or chief financial officer of Hawk that such balance sheet,
statement of operations and statement of cash flows have been prepared
in accordance with GAAP (subject to year-end audit adjustments); and
(iv) a compliance certificate substantially in the form of EXHIBIT F
with an attached schedule of calculations demonstrating compliance with
the financial covenants set forth in ARTICLE 8.
(f) PUBLIC REPORTING. Promptly upon their becoming available,
copies of all regular and periodic reports, proxy statements and other
materials, if any, filed by any Borrower with the Securities and
Exchange Commission, or any Governmental Authority succeeding to any or
all of the functions of such Commission, or with any national
securities exchange, or distributed to the stockholders of any
Borrower.
7.2 COLLATERAL REPORTING.
---------------------
The Credit Parties shall timely deliver or cause to be delivered to the
Agent the following certificates and reports:
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(a) MONTHLY BORROWING BASE CERTIFICATES. Monthly, within
fifteen (15) Business Days after the last Business Day of each month,
and at any other time reasonably requested by the Agent, a Borrowing
Base Certificate, which shall be: (i) substantially in the form of
EXHIBIT A, detailing the Eligible Accounts Receivable and Eligible
Inventory, in each case of each of the Borrowers, as of each Friday of
the immediately preceding week (if a weekly Borrowing Base
Certificate), or as of the last Business Day of the immediately
preceding month (if a monthly Borrowing Base Certificate), or as of
such other date as the Agent may request; and (ii) prepared by or under
the supervision of the chief executive officer or chief financial
officers of each Borrower and certified by such officer subject only to
adjustment upon completion of the normal annual audit of physical
inventory. Each Borrowing Base Certificate shall have attached to it
such additional schedules and other information as the Agent may
reasonably request, including, without limitation, an aging of
Accounts.
(b) APPRAISALS. When requested by the Agent, (i) so long as an
Event of Default shall not have occurred and be continuing, no more
than once in any fiscal year of the Consolidated Entity and (ii) upon
the occurrence and during the continuance of an Event of Default, at
any time, a report of Inventory of each Borrower, based upon a physical
count, which shall describe each Borrower's Inventory by category and
by item (in reasonable detail) and report the then appraised value (at
lower of cost or market) of such Inventory.
(c) FURTHER ASSURANCES. When requested by the Agent, any
further information regarding the Collateral, business affairs and
financial condition of Hawk, any other Credit Party or any Subsidiary
of any Credit Party.
7.3 NOTIFICATION REQUIREMENTS.
--------------------------
The Credit Parties shall timely give to the Agent and each of the
Lenders the following notices:
(a) NOTICE OF DEFAULTS. Promptly, and in any event within five
(5) Business Days after becoming aware of the occurrence of a Default
or Event of Default, a certificate of the chief executive officer or
chief financial officer of the Hawk Funds Administrator specifying the
nature thereof and the
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proposed response of the Credit Parties with respect thereto, each in
reasonable detail.
(b) PROCEEDINGS OR ADVERSE CHANGES. Promptly, and in any event
within five (5) Business Days after any Credit Party becomes aware of
(i) any proceedings being instituted or threatened to be instituted by
or against such Credit Party or any of its Subsidiaries in any federal,
state, local or foreign court or before any commission or other
regulatory body (federal, state, local or foreign), which singly or in
the aggregate could reasonably be expected to have a Material Adverse
Effect, (ii) any order, judgment or decree in excess of $1,000,000
being entered against such Credit Party or any of its Subsidiaries or
any of their respective properties or assets or (iii) any actual or
prospective change, development or event which has had or could
reasonably be expected to have a Material Adverse Effect, a written
statement describing such proceeding, order, judgment, decree, change,
development or event and any action being taken with respect thereto by
such Credit Party or such Subsidiary.
(c) ERISA NOTICES. (i) Promptly, and in any event within
thirty (30) days after any Borrower, any Subsidiary of any Borrower or
any ERISA Affiliate knows or has reason to know that a Termination
Event has occurred, a written statement of the chief financial officer
of Hawk Funds Administrator describing such Termination Event and any
action that is being taken with respect thereto by such Borrower, such
Subsidiary or such ERISA Affiliate, and any action taken or threatened
by the Internal Revenue Service, Department of Labor or Pension Benefit
Guaranty Corporation. Each Borrower, each Subsidiary of each Borrower
and each ERISA Affiliate shall be deemed to know all facts known by the
administrator of any Benefit Plan of which it is the plan sponsor; (ii)
promptly, and in any event within three (3) Business Days after the
filing thereof with the Internal Revenue Service, a copy of each
funding waiver request filed with respect to any Benefit Plan and all
communications received by any Borrower, any Subsidiary of any Borrower
or any ERISA Affiliate with respect to such request; and (iii)
promptly, and in any event within three (3) Business Days after receipt
by any Borrower, any Subsidiary of any Borrower or any ERISA Affiliate,
of the PBGC's intention to terminate a Benefit Plan or to have a
trustee appointed to administer a Benefit Plan, copies of each such
notice.
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(d) ENVIRONMENTAL AND HEALTH AND SAFETY NOTICES. Promptly, and
in any event within thirty (30) days after receipt by any Credit Party
or any Subsidiary of any Credit Party of any notice, complaint or order
alleging any actual or prospective violation of any environmental,
health or safety Requirement of Law or alleging responsibility for
costs of a cleanup, together with a copy of such notice, complaint, or
order and a written statement describing any action being taken with
respect thereto by such Credit Party or Subsidiary.
(e) MATERIAL CONTRACTS. Promptly, and in any event within
thirty (30) days after any Material Contract of any Credit Party or any
Subsidiary of any Credit Party is terminated or amended or any new
Material Contract is entered into, a written statement describing such
event, with copies of amendments or new contracts, and an explanation
of any actions being taken with respect thereto.
(f) COLLATERAL MATTERS. At least thirty (30) Business Days
prior written notice to the Agent of any additional location of any
Collateral of any Borrower or in the location of the chief executive
office or places of business of any Borrower or any Subsidiary of any
Borrower from the respective locations specified in SCHEDULE B, PART
6.10. At least twenty (20) Business Days prior to any such change, the
Borrowers shall cause to be executed and delivered to the Agent any
financing statements or other documents reasonably required by the
Agent, all in form and substance reasonably satisfactory to the Agent.
7.4 CORPORATE EXISTENCE.
--------------------
Each Credit Party shall, and shall cause each of its Subsidiaries to,
(i) maintain its corporate existence (except that Subsidiaries of a Borrower may
merge with each other and with such Borrower, PROVIDED, THAT the Agent receives
five (5) Business Days prior written notice thereof), (ii) maintain in full
force and effect all licenses, bonds, franchises, leases, trademarks and
qualifications to do business, and all patents, contracts and other similar
rights necessary or advisable for the profitable conduct of their businesses,
(iii) continue in, and limit their operations to, the same general lines of
business as presently conducted by them and (iv) in the case of each Credit
Party, maintain all material terms and provisions of its corporate charter and
bylaws in the form in effect on the Closing Date.
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7.5 BOOKS AND RECORDS; INSPECTIONS.
-------------------------------
Each Borrower agrees to maintain, and to cause each of its Subsidiaries
to maintain, books and records pertaining to the Collateral in such detail, form
and scope as is consistent with good business practice. Each Borrower agrees
that the Agent, or its agents, may enter upon the premises of such Borrower or
any of its Subsidiaries at any time and from time to time, during normal
business hours and upon reasonable notice under the circumstances, and at any
time at all upon the occurrence and during the continuance of an Event of
Default, under the supervision of an officer of such Borrower for the purposes
of (i) inspecting and verifying the Collateral, (ii) inspecting and/or copying
(at the expense of such Borrower) any and all records pertaining thereto, and
(iii) discussing the affairs, finances and business of such Borrower with the
Auditors or any officers, employees and directors of such Borrower.
7.6 INSURANCE.
----------
Each Borrower agrees to maintain, and to cause each of its Subsidiaries
to maintain, public liability insurance, fire and extended coverage 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 the Agent in its commercially
reasonable judgment. All policies covering the Collateral are to name the Agent
as an additional insured and/or the loss payee in case of loss, and are to
contain such other provisions as the Agent may reasonably require to fully
protect the Agent's interest in the Collateral and to any payments to be made
under such policies.
7.7 TAXES.
------
Each Credit Party agrees to pay, when due, and to cause each of its
Subsidiaries to pay when due, all taxes lawfully levied or assessed against such
Credit Party, such Subsidiary or any of the Collateral before any penalty or
interest accrues thereon; PROVIDED, THAT, unless such taxes have become a
federal tax or ERISA Lien on any of the assets of such Credit Party or such
Subsidiary, no such tax need be paid if the same is being contested, in good
faith, by appropriate proceedings promptly instituted and diligently conducted
and if an adequate reserve or
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other appropriate provision shall have been made therefor as required in order
to be in conformity with GAAP.
7.8 COMPLIANCE WITH LAWS.
---------------------
Each Credit Party agrees to comply, and to cause each of its
Subsidiaries to comply, in all material respects with all Requirements of Law
applicable to the Collateral or any part thereof, or to the operation of its
business or its assets generally, unless such Credit Party contests any such
Requirements of Law in a reasonable manner and in good faith.
7.9 USE OF PROCEEDS.
----------------
Proceeds of the Revolving Loans shall be used by the Borrowers solely
for ongoing working capital requirements and other general corporate purposes,
including Permitted Acquisitions; PROVIDED, THAT no Borrower shall use any
portion of the proceeds of any Revolving Loans for the purpose of purchasing or
carrying any "margin stock" (as defined in Regulation G) in any manner which
violates the provisions of Regulation G or X or of the terms and conditions of
this Credit Agreement or any other Credit Document.
7.10 FISCAL YEAR.
------------
Each Credit Party agrees to maintain, and to cause each of its
Subsidiaries to maintain, its fiscal year as a year ending December 31st.
7.11 MAINTENANCE OF PROPERTY.
------------------------
Each Borrower agrees to keep, and to cause each of its Subsidiaries to
keep, all property useful and necessary to their respective businesses in good
working order and condition (ordinary wear and tear excepted) in accordance with
their past operating practices.
7.12 ERISA DOCUMENTS.
----------------
Each Borrower will cause to be delivered to the Agent, upon the Agent's
request, each of the following: (i) a copy of each Plan (or, where any such plan
is not in writing, complete description thereof) (and if applicable, related
trust agreements or other funding instruments) and all amendments thereto, all
written interpretations thereof and written descriptions thereof that have
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been distributed to employees or former employees of such Borrower or any of its
Subsidiaries; (ii) the most recent determination letter issued by the Internal
Revenue Service with respect to each Benefit Plan; (iii) for the three most
recent plan years, Annual Reports on Form 5500 Series required to be filed with
any governmental agency for each Benefit Plan; (iv) all actuarial reports
prepared for the last three plan years for each Benefit Plan; (v) a listing of
all Multiemployer Plans, with the aggregate amount of the most recent annual
contributions required to be made by such Borrower or any ERISA Affiliate to
each such plan and copies of the collective bargaining agreements requiring such
contributions; (vi) any information that has been provided to such Borrower or
any ERISA Affiliate regarding withdrawal liability under any Multiemployer Plan;
and (vii) the aggregate amount of the most recent annual payments made to former
employees of such Borrower or any ERISA Affiliate under any Retiree Health Plan.
7.13 ENVIRONMENTAL AND OTHER MATTERS.
--------------------------------
(a) Each Credit Party and each of its Subsidiaries will
conduct their businesses so as to comply in all material respects with
all environmental, land use, occupational, safety or health laws,
regulations, directions, ordinances, criteria and guidelines in all
jurisdictions in which any of them is or may at any time be doing
business, except to the extent that such Credit Party or such
Subsidiary is contesting, in good faith by appropriate legal
proceedings, any such law, regulation, direction, ordinance, criteria,
guideline, or interpretation thereof or application thereof; PROVIDED,
THAT such Credit Party and each of its Subsidiaries shall comply with
the order of any court or other Governmental Authority relating to such
laws unless such Credit Party or such Subsidiary shall currently be
prosecuting an appeal or proceedings for review and shall have secured
a stay of enforcement or execution or other arrangement postponing
enforcement or execution pending such appeal or proceedings for review.
(b) If the Agent reasonably believes, or the Majority Lenders
reasonably believe, that the facts or circumstances evidence or suggest
that any Credit Party or any Subsidiary of any Credit Party is in
material non-compliance with any environmental law and that such
non-compliance could reasonably be expected to have a Material Adverse
Effect, then at the written request of the Agent or the Majority
Lenders,
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which request shall specify in reasonable detail the basis therefor, at
any time and from time to time, such Credit Party will provide at its
sole cost and expense a Phase I or Phase II environmental site
assessment report or update report concerning the site owned, operated
or leased by such Credit Party or such Subsidiary in respect of which
such material non-compliance is believed to have occurred and be
continuing, such report to be prepared by an environmental consulting
firm approved by the Agent and the Majority Lenders, indicating the
presence, release or absence of hazardous materials on or from such
site and the potential cost of any removal, remedial or corrective
action in connection with any such hazardous materials on such site.
7.14 FURTHER ACTIONS.
----------------
Each Credit Party shall take, and shall cause each of its Subsidiaries
to take, all such further actions and execute all such further documents and
instruments as the Agent may at any time determine in its sole discretion to be
necessary or desirable to further carry out and consummate the transactions
contemplated by the Credit Documents, to cause the execution, delivery and
performance of the Credit Documents to be duly authorized and to perfect or
protect the Liens (and the priority status thereof) of the Agent on the
Collateral.
7.15 DEPOSIT OF COLLECTIONS AND OTHER PROCEEDS OF COLLATERAL.
--------------------------------------------------------
From and after January 31, 1997, Borrowers shall cause all Collections
on all Accounts of Borrowers, and all other cash payments made for Inventory of
Borrowers, and all other payments of any kind constituting proceeds of
Collateral received by or for the account any Borrower from any Person, promptly
upon receipt thereof to be deposited into a Lockbox Account or the BT Account in
the identical form in which such payment was made, whether by cash or check.
ARTICLE 8. NEGATIVE COVENANTS.
-------------------
Until termination of this Credit Agreement and payment and satisfaction
of all Obligations due hereunder, each Credit Party shall comply with, and,
where required, shall cause each of its Subsidiaries to comply with, the
following covenants:
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8.1 INTEREST COVERAGE.
------------------
The Credit Parties shall not permit the "INTEREST COVERAGE RATIO" (as
hereinafter defined), determined as of March 31, 1997 and the last day of each
fiscal quarter of the Consolidated Entity ending thereafter, in each case for
the twelve-month period ending on such date, to be less than 1.0 to 1.0. For
purposes hereof, "INTEREST COVERAGE RATIO" means, for any period, the ratio of
(i) EBITDA MINUS, Capital Expenditures MINUS income taxes paid in cash, to (ii)
Interest Expense, in each case for such period.
8.2 CAPITAL EXPENDITURES.
---------------------
The Borrowers shall not make payments for Capital Expenditures in the
aggregate for all Borrowers during the fiscal year of the Consolidated Entity
ending December 31, 1997, and during any fiscal year of the Consolidated Entity
ending thereafter, in an amount greater than $10,000,000; PROVIDED, THAT (i) to
the extent that all or any portion of such amount is not used in any fiscal
year, up to seventy-five percent (75%) of such amount may be carried forward to
the immediately following fiscal year to be used for Capital Expenditures and
(ii) the aggregate amount of payments for Capital Expenditures made by Borrowers
in any fiscal year shall be determined without giving effect to any such
payments made with all or any part of the net cash proceeds of the sale of the
owned real property of certain Borrowers located in Solon, Ohio and LaVergne,
Tennessee, respectively.
8.3 ADDITIONAL INDEBTEDNESS.
------------------------
No Credit Party nor any Subsidiary of any Credit Party shall directly
or indirectly incur, create, assume or suffer to exist any Indebtedness other
than:
(a) Indebtedness under the Credit Documents;
(b) Indebtedness evidenced by the Senior Notes, in an
aggregate principal amount not exceeding $100,000,000 (as
reduced by any repayments of principal thereof on or after the
Closing Date);
(c) Indebtedness evidenced by the Subordinated Notes, in
an aggregate principal amount not exceeding $30,000,000 (as reduced
by any repayments of principal thereof on or after the Closing Date);
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(d) Indebtedness evidenced by the Helsel Note, in an
aggregate principal amount not exceeding $375,000 (as reduced
by any repayments of principal thereof on or after the Closing
Date);
(e) Indebtedness in the ordinary course of business under
Interest Rate Agreements, Currency Agreements and commodity agreements
entered into in the ordinary course of business to protect against
fluctuations in the prices of raw materials and not for speculative
purposes, in each case in form and substance reasonably satisfactory to
the Agent;
(f) Indebtedness described on SCHEDULE B, PART 8.3;
(g) Indebtedness secured by purchase money Liens on equipment
acquired after the date of this Credit Agreement not to exceed
$5,000,000 in the aggregate for all of the Credit Parties outstanding
at any one time ("PURCHASE MONEY LIENS") so long as (i) such
Indebtedness shall be from parties and on terms and conditions
satisfactory to the Agent, (ii) each Purchase Money Lien shall attach
only to the property to be acquired, (iii) a description shall have
been furnished to the Agent for any item of equipment for which the
purchase price is greater than $1,000,000, and (iv) the debt incurred
shall not exceed one hundred percent (100%) of the purchase price of
the item or items of equipment purchased;
(h) intercompany loans and advances permitted pursuant
to SECTION 8.8;
(i) Indebtedness represented by performance, completion,
guarantee, surety and similar bonds provided by a Borrower or a
Subsidiary of a Borrower in the ordinary course of business consistent
with past practice;
(j) Indebtedness not otherwise permitted to be incurred
under this SECTION 8.3, in an aggregate amount not to exceed
for all Borrowers $5,000,000 at any time outstanding; and
(k) Indebtedness refinancing, in whole or in part, any
Indebtedness incurred under CLAUSES (b), (c), (d) and (f) of this
SECTION 8.3; PROVIDED, THAT, the terms of any such refinancing
Indebtedness are no more restrictive in any material respect than the
terms of the Indebtedness so refinanced; and PROVIDED FURTHER, THAT the
principal amount of
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such refinancing Indebtedness shall not be increased above the
outstanding principal amount thereof immediately prior to such
refinancing.
8.4 LIENS.
------
No Credit Party nor any Subsidiary of any Credit Party shall directly
or indirectly create, incur, assume, or suffer to exist any Lien on any of its
property now owned or hereafter acquired except:
(a) Liens granted to the Agent under the Credit
Documents;
(b) Liens listed on SCHEDULE B, PART 8.4;
(c) Purchase Money Liens permitted under SECTION 8.3;
(d) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, common carriers, or landlords, liens for taxes, assessments
or other governmental charges, and other similar Liens arising by
operation of law, in each case for amounts that are not yet due and
payable or that are being diligently contested in good faith by a
Credit Party or Subsidiary of a Credit Party, so long as the Agent has
been notified thereof and adequate reserves are maintained by such
Person for their payment in accordance with GAAP;
(e) Attachment or judgment Liens not to exceed an aggregate of
$250,000 for all of the Credit Parties, excluding amounts (i) bonded to
the reasonable satisfaction of the Agent or (ii) covered by insurance
to the reasonable satisfaction of the Agent;
(f) Deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, under unemployment
insurance, or to secure public or statutory obligations;
(g) Deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like
nature arising in the ordinary course of business;
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(h) Easements, rights-of-way, restrictions and other similar
encumbrances on title to, or restrictions on the use of, real property,
which, in the aggregate, do not materially detract from the value of
the item of property subject thereto or materially interfere with the
ordinary conduct of the business of any Credit Party or any Subsidiary
of any Party;
(i) Liens on property and assets of a Person existing at the
time such Person is merged into or consolidated with any Borrower or
any Subsidiary of any Borrower or becomes a Subsidiary of any Borrower
or any of its Subsidiaries in accordance with the terms of the Credit
Agreement, PROVIDED, THAT such Liens were not created in contemplation
of such merger, consolidation or acquisition, as the case may be, and
do not extend to or cover any property or assets other than the
property and assets of the Person being merged into or consolidated
with such Borrower or such Subsidiary or being acquired by such
Borrower or such Subsidiary, as the case may be, and PROVIDED FURTHER,
THAT any Indebtedness secured by such Liens shall not otherwise be
prohibited under the terms of this Credit Agreement;
(j) Liens on property and assets of Helsel securing the
Indebtedness evidenced by the Helsel Note; and
(k) Extensions and renewals of any of the foregoing so long as
the aggregate amount of extended or renewed Liens are not increased and
are on terms and conditions no more restrictive than the terms and
conditions of the Liens extended or renewed.
8.5 CONTINGENT OBLIGATIONS.
-----------------------
No Credit Party nor any Subsidiary of any Credit Party shall directly
or indirectly incur, assume, or suffer to exist any Contingent Obligation,
excluding Contingent Obligations for Indebtedness permitted to be incurred under
SECTION 8.3, and Investments permitted under Section 8.8.
8.6 SALE OF ASSETS.
---------------
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, sell, lease, assign, transfer or otherwise dispose of any assets
other than (i) Inventory in the ordinary course of business; (ii) obsolete or
worn out property disposed of
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in the ordinary course of business; and (iii) dispositions of assets not
otherwise permitted under this SECTION 8.6, PROVIDED, THAT, (a) such
dispositions are for fair value and (b) at least seventy-five percent (75%) of
the aggregate consideration is paid in cash at the time of disposition and is
thereupon delivered to the Agent for application to the outstanding principal
balance of the Revolving Loans.
8.7 RESTRICTED PAYMENTS.
--------------------
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, (a) declare or pay any dividend (other than dividends payable
solely in capital stock of such Person) on, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of capital stock of such Person or any warrants, options or rights to
purchase any such capital stock, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of such Person or any of its
Subsidiaries; (b) make any optional payment or optional prepayment on or
optional redemption (including, without limitation, by making payments to a
sinking or analogous fund) or optional repurchase of any Indebtedness (other
than Indebtedness pursuant to this Credit Agreement); PROVIDED, THAT,
notwithstanding the foregoing:
(i) any Subsidiary of a Borrower may declare and pay dividends
to such Borrower or any other Subsidiary of such Borrower;
(ii) Borrowers may make distributions to Hawk to permit Hawk to pay
Federal, state and local income taxes attributable to the operations of
the Borrowers; PROVIDED, THAT such distributions do not exceed actual
payments by Hawk in respect of such taxes;
(iii) so long as before and after giving effect thereto no Default
or Event of Default shall have occurred and be continuing, Borrowers
may make distributions to Hawk to permit Hawk to pay its franchise
taxes and reasonable administrative expenses (including reasonable
professional fees and expenses);
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(iv) so long as before and after giving effect thereto no Default or
Event of Default shall have occurred and be continuing, Borrowers may
make distributions to Hawk to permit Hawk (x) to make regularly
scheduled payments of interest on the Senior Notes and Subordinated
Notes, respectively, and (y) to make regularly scheduled dividend
payments on the Hawk Preferred Stock; PROVIDED, THAT the proceeds of
such distributions are so used by Hawk within one Business Day of its
receipt thereof; and
(v) so long as (x) before and after giving effect thereto no
Default or Event of Default shall have occurred and be continuing, and
(y) no proceeds of any Loans are used to fund or otherwise finance all
or any part of any such purchase, Borrowers may make open market or
private purchases of the Senior Notes.
8.8 INVESTMENTS.
------------
No Credit Party shall, or shall permit any of its Subsidiaries to,
directly or indirectly, make any Investment in any Person, whether in cash,
securities, or other property of any kind including, without limitation, any
Subsidiary or Affiliate of any Credit Party, other than:
(a) excluding Investments permitted pursuant to CLAUSE (f) of
this SECTION 8.8, advances or loans made in the ordinary course of
business not to exceed $500,000 outstanding at any time to any one
Person and $1,000,000 in the aggregate for all Credit Parties
outstanding at any one time;
(b) Loans, Investments and advances between a Borrower
and any other Borrower and loans to, and other Investments in, a
Borrower by Hawk; provided, that each loan to, and other Investment in,
any Borrower by Hawk shall be subordinated in right and time of payment
to the prior indefeasible payment in full in cash of all Obligations;
(c) Cash Equivalents;
(d) Investments in account debtors received in connection with
the bankruptcy or reorganization, or in settlement of delinquent
obligations of customers, in the ordinary course of business and in
accordance with applicable collection and credit policies established
by such Credit Party or such Subsidiary, as the case may be;
(e) Loans, Investments and other advances between a Credit
Party and any shareholder of a Credit Party, to the
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extent existing on the date hereof and expressly set forth in
SCHEDULE B, PART 8.8;
(f) Investments in connection with Permitted
Acquisitions; and
(g) such other Investments as the Agent may approve in
writing in the exercise of its sole discretion.
8.9 AFFILIATE TRANSACTIONS.
-----------------------
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, enter into any transaction with (including, without limitation,
the purchase, sale or exchange of property or the rendering of any service to)
any Subsidiary or Affiliate of any Borrower, except in the ordinary course of
and pursuant to the reasonable requirements of such Borrower's or such
Subsidiary's business, as the case may be, and upon fair and reasonable terms no
less favorable in any material respect to Borrower or such Subsidiary than could
be obtained in a comparable arm's-length transaction with an unaffiliated
Person, except for transactions otherwise permitted under SECTIONS 8.7 and 8.8
or set forth on SCHEDULE B, PART 8.9;
8.10 ADDITIONAL NEGATIVE PLEDGES.
----------------------------
No Credit Party shall, or shall permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective, (a) any prohibition or restriction (including any agreement to
provide equal and ratable security to any other Person in the event a Lien is
granted to or for the benefit of the Agent and the Lenders) on the creation or
existence of any Lien upon the assets of such Borrower or any of its
Subsidiaries; or (b) any contractual obligation which may restrict or inhibit
the Agent's rights or ability to sell or otherwise dispose of the Collateral or
any part thereof after the occurrence of an Event of Default.
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8.11 ADDITIONAL SUBSIDIARIES.
------------------------
No Borrower shall, or shall permit any of its Subsidiaries to, directly
or indirectly, form or acquire any new Subsidiaries; PROVIDED, THAT Borrowers
may form or acquire new Subsidiaries in connection with a Permitted Acquisition,
so long as, (i) one hundred percent (100%) of the issued and outstanding capital
stock of each such Subsidiary is held at all times beneficially and of record by
a Borrower and (ii) effective upon such formation or acquisition, as the case
may be, (x) such Subsidiary is joined as a party to this Credit Agreement, as a
Borrower, is joined as a party to the Security Agreement, as a Grantor, and is
joined as a party to all other Credit Documents, and (y) Borrower shall have
taken all action necessary to cause the Lien granted by such Subsidiary to the
Agent under the Security Agreement to be perfected in all applicable
jurisdictions.
8.12 CHANGES TO NOTE DOCUMENTS.
--------------------------
No Credit Party shall, or shall permit any of its Subsidiaries to,
amend, restate, supplement or otherwise modify in any respect any of the Note
Documents, except for any of the foregoing which could not singly or in the
aggregate reasonably be expected to have a Material Adverse Effect and in any
event which (i) do not result in any increase in the amount of any payment or
distribution by any Credit Party or any Subsidiary of any Credit Party to any
Person thereunder or in connection therewith, (ii) are not otherwise prohibited
by the respective terms of this Credit Agreement or any of the other Credit
Documents, and (iii) do not materially increase the respective obligations of
any Credit Party or any Subsidiary of any Credit Party, or confer additional
rights on any other Person, in each case thereunder or in connection therewith.
ARTICLE 9. EVENTS OF DEFAULT AND REMEDIES.
-------------------------------
9.1 EVENTS OF DEFAULT.
------------------
The occurrence of any of the following events shall constitute an event
of default (each an "EVENT OF DEFAULT") hereunder:
(a) FAILURE TO PAY. The Borrowers shall fail to pay (i) any
principal of any Revolving Loan when the same shall become due and
payable, or (ii) any interest, Fees, Expenses or other amounts payable
under the Credit Documents within three (3) Business Days after the
same shall become due and payable.
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(b) BREACH OF CERTAIN COVENANTS. Any Credit Party shall
fail to comply with any covenant contained in ARTICLE 7 or
ARTICLE 8.
(c) BREACH OF REPRESENTATION OR WARRANTY. Any representation
or warranty made or deemed to be made by any Credit Party or any
Borrower in this Credit Agreement or in any other Credit Document (and
in any statement or certificate given under this Credit Agreement or
any other Credit Document), shall be false or misleading in any
material respect when made or deemed to be made.
(d) BREACH OF OTHER COVENANTS. Any Credit Party shall fail to
comply with any covenant contained in this Credit Agreement or any
other Credit Document, other than as set forth in SECTION 9.1(b), and
such failure shall continue for five (5) days after its occurrence.
(e) DISSOLUTION. Except for the merger or consolidation of a
Borrower with any other Borrower, any Credit Party shall dissolve,
wind up or otherwise cease its business.
(f) INSOLVENCY EVENT. Any Credit Party shall become the
subject of an Insolvency Event.
(g) CHANGE OF CONTROL. A Change of Control shall occur.
(h) CROSS DEFAULT. A default or event of default shall occur
(and continue beyond any applicable grace period) under (i) the Helsel
Note or (ii) any other note, agreement or instrument evidencing any
other Indebtedness of any Credit Party or any Subsidiary of any Credit
Party, which default or event of default permits the acceleration of
its maturity, PROVIDED, THAT, in the case of notes, agreements or
instruments referred to in CLAUSE (ii) above, the aggregate principal
amount of all such Indebtedness for which the default or event of
default has occurred exceeds $5,000,000.
(i) FAILURE OF ENFORCEABILITY OF CREDIT DOCUMENTS; SECURITY.
Any covenant, agreement or obligation of any Credit Party contained in
or evidenced by any of the Credit Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance
with its terms; any Credit Party shall deny or disaffirm its
obligations under any of the Credit Documents or any Liens granted in
connection therewith;
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or, any Liens granted on any of the Collateral shall be determined to
be void, voidable, invalid or unperfected, are subordinated or not
given the priority contemplated by this Credit Agreement.
9.2 ACCELERATION, TERMINATION OF COMMITMENTS AND CASH
-------------------------------------------------
COLLATERALIZATION.
------------------
Upon the occurrence and during the continuance of any Event of Default,
without prejudice to the rights of the Agent or any Lender to enforce its claims
against the Credit Parties:
(a) ACCELERATION. Upon the written request of the Majority
Lenders and by delivery of written notice to the Hawk Funds
Administrator from the Agent, all Obligations shall be immediately due
and payable (except with respect to any Event of Default set forth in
SECTION 9.1(f), in which case all Obligations shall automatically
become immediately due and payable without the necessity of any request
of the Majority Lenders or notice or other demand to the Hawk Funds
Administrator or any of the Borrowers) without presentment, demand,
protest or any other action or obligation of the Agent or any Lender.
(b) TERMINATION OF COMMITMENTS. Upon the written request of
the Majority Lenders, and by delivery of written notice to the Hawk
Funds Administrator from the Agent (except with respect to any Event of
Default set forth in SECTION 9.1(f)), in which case all of the
Commitments shall automatically and immediately terminate without the
necessity of any request of the Majority Lenders or notice or other
demand to the Hawk Funds Administrator or any of the Borrowers) the
Commitments shall be immediately terminated and, at all times
thereafter, all Revolving Loans made by any Lender pursuant to this
Credit Agreement shall be at such Lender's sole discretion, unless such
Event of Default is waived in accordance with SECTION 11.11, in which
case the Commitments shall be automatically reinstated.
(c) CASH COLLATERALIZATION. On demand of the Agent or the
Majority Lenders, the Borrowers shall immediately deposit with the
Agent for each Letter of Credit then outstanding, cash or Cash
Equivalents in an amount equal to 110% of the greatest amount drawable
thereunder. Such deposit shall be held by the Agent and used to
reimburse the Issuing Bank for
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the amount of each drawing made under such Letters of Credit, as and
when each such drawing is made.
9.3 RESCISSION OF ACCELERATION.
---------------------------
After acceleration of the maturity of all or any part of the
Obligations, if the Borrowers pay all accrued interest and all principal due
(other than by reason of the acceleration) and all Events of Default are waived
in accordance with SECTION 11.11, the Majority Lenders may elect in their sole
discretion, to rescind the acceleration and return to the Borrowers any cash
collateral, if any, deposited with the Agent pursuant to SECTION 9.2(c). (This
Section is intended only to bind all of the Lenders to a decision of the
Majority Lenders and not to confer any right on the Borrowers, even if the
described conditions for the Majority Lenders' election may be met.)
9.4 REMEDIES.
---------
Upon the occurrence and during the continuance of an Event of Default,
upon the written request and at the direction of the Majority Lenders, the Agent
may exercise any rights and remedies available to it under applicable law
(including under the Code) and under the Collateral Documents. The foregoing
rights and remedies are not intended to be exhaustive and the full or partial
exercise of any right or remedy shall not preclude the full or partial exercise
of any other right or remedy available under this Credit Agreement, any other
Credit Document, at equity or at law.
9.5 RIGHT OF SETOFF.
----------------
In addition to and not in limitation of all rights of offset that any
Lender may have under applicable law, upon the occurrence and during the
continuance of any Event of Default, and whether or not any Lender has made any
demand or the Obligations of any Credit Party have matured, each Lender shall
have the right to appropriate and apply to the payment of the Obligations of
such Credit Party all deposits and other obligations then or thereafter owing by
such Lender to such Credit Party. Each Lender exercising such rights shall
notify the Agent thereof and any amount received as a result of the exercise of
such rights shall be shared by the Lenders in accordance with SECTION 2.5.
9.6 LICENSE OF USE OF SOFTWARE AND OTHER INTELLECTUAL
-------------------------------------------------
PROPERTY.
---------
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Unless expressly prohibited by the licensor thereof, if any, the Agent
is hereby granted a license to use all computer software programs, data bases,
processes and materials used by the Borrowers in connection with their
respective businesses or in connection with any Collateral. The Agent agrees not
to use any such license prior to the occurrence of an Event of Default.
9.7 APPLICATION OF PROCEEDS; SURPLUS; DEFICIENCIES.
-----------------------------------------------
The net cash proceeds resulting from the Agent's exercise of any of the
foregoing rights against any Collateral (after deducting all of the Agent's
Expenses related thereto) shall be applied by the Agent to the payment of the
Obligations, whether due or to become due, in the order set forth in SECTION
4.11. The Borrowers shall remain liable to the Agent and the Lenders for any
deficiencies, and the Agent and the Lenders in turn agree to remit to the
Borrowers or its successors or assigns, any surplus resulting therefrom.
ARTICLE 10. THE AGENT.
----------
10.1 APPOINTMENT OF AGENT.
---------------------
(a) Each Lender hereby designates BTCC as Agent to act as
herein specified. Each Lender hereby irrevocably authorizes, and each
holder of any Revolving Note, by the acceptance of such Note, shall be
deemed irrevocably to authorize the Agent to take such action on its
behalf under the provisions of this Credit Agreement and the other
Credit Documents and any other instruments and agreements referred to
herein and therein and to exercise such powers and to perform such
duties hereunder and thereunder as are specifically delegated to or
required of the Agent by the terms hereof and thereof and such other
powers as are reasonably incidental thereto. The Agent shall hold all
Collateral and all payments of principal, interest, Fees (other than
Fees that are exclusively for the account of the Agent), charges and
Expenses received pursuant to this Credit Agreement or any other Credit
Document for the ratable benefit of the Lenders. The Agent may perform
any of its duties hereunder by or through its agents or employees.
(b) Other than rights of the Credit Parties under SECTION
10.9, the provisions of this ARTICLE 10 are for the benefit of the
Agent and the Lenders only and none of the
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Credit Parties or any other Persons shall have any rights as a third
party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Credit Agreement and the other Credit
Documents, the Agent shall act only for the Lenders and does not assume
and shall not be deemed to have assumed any obligation toward or
relationship of agency or trust with or for any Credit Party.
10.2 NATURE OF DUTIES OF AGENT.
--------------------------
The Agent has no duties or responsibilities except those expressly set
forth in the Credit Documents. Neither the Agent nor any of its officers,
directors, employees or agents shall be liable for any action taken or omitted
hereunder or in connection herewith, unless caused by its or their gross
negligence or willful misconduct. The duties of the Agent shall be mechanical
and administrative in nature; the Agent shall not have by reason of this Credit
Agreement or any of the other Credit Documents a fiduciary relationship in
respect of any Lender or any participant of any Lender; and nothing in this
Credit Agreement or any other Credit Document, expressed or implied, is intended
to or shall be so construed as to impose upon the Agent any obligations in
respect of this Credit Agreement or any other Credit Document, except as
expressly set forth herein or therein.
10.3 LACK OF RELIANCE ON AGENT.
--------------------------
(a) Independently and without reliance upon the Agent, each
Lender, to the extent it deems appropriate, has made and shall continue
to make (i) its own independent investigation of the financial or other
condition and affairs of each Credit Party in connection with the
taking or not taking of any action in connection herewith and (ii) its
own appraisal of the creditworthiness of each Credit Party, and, except
as expressly provided in this Credit Agreement, the Agent shall have no
duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect
thereto, whether coming into its possession before the making of the
Revolving Loans or at any time or times thereafter.
(b) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein
or in any document, certificate or other writing delivered in
connection herewith or for the execution,
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effectiveness, genuineness, validity, enforceability, collectibility,
priority or sufficiency of this Credit Agreement or any of the other
Credit Documents or the financial or other condition of any Credit
Party. The Agent shall not be required to make any inquiry concerning
either the performance or observance of any other terms, provisions or
conditions of this Credit Agreement or any of the other Credit
Documents, or the financial condition of any Credit Party, or the
existence or possible existence of any Default or Event of Default,
unless specifically requested to do so in writing by any Lender.
10.4 CERTAIN RIGHTS OF THE AGENT.
----------------------------
The Agent shall have the right to request instructions from the Lenders
by notice to each of such Lenders. If the Agent shall request instructions from
the Lenders with respect to any act or action (including the failure to act) in
connection with this Credit Agreement, the Agent shall be entitled to refrain
from such act or taking such action unless and until the Agent shall have
received instructions from such Lenders, and the Agent shall not incur liability
to any Person by reason of so refraining. Without limiting the foregoing, no
Lender shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting hereunder in accordance with the
instructions of the requisite Lenders required to give such instructions
hereunder. The Agent may give any notice required under ARTICLE 9 hereof without
the consent of any of the Lenders unless otherwise directed by the Majority
Lenders in writing and will, at the direction of the Majority Lenders, give any
such notice required under ARTICLE 9.
10.5 RELIANCE BY AGENT.
------------------
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate,
telex, teletype or telecopier message, cablegram, radiogram, order or other
documentary, facsimile or telephone message believed by it to be genuine and
correct and to have been signed, sent or made by the proper person. The Agent
may consult with legal counsel (including counsel for the Credit Parties with
respect to matters concerning the Credit Parties), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by
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it in good faith in accordance with the advice of such counsel, accountants or
experts.
10.6 INDEMNIFICATION OF AGENT.
-------------------------
To the extent the Agent is not reimbursed and indemnified by the
Borrowers, each Lender will reimburse and indemnify the Agent, in proportion to
its respective Commitment, for and against all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses (including
counsel fees and disbursements) or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
performing its duties hereunder, in any way relating to or arising out of this
Credit Agreement; 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 the Agent's gross
negligence or willful misconduct.
10.7 THE AGENT IN ITS INDIVIDUAL CAPACITY.
-------------------------------------
With respect to its obligation to lend under this Credit Agreement, the
Revolving Loans made by it and the Revolving Notes issued to it and its
participation in Letters of Credit issued hereunder, the Agent shall have the
same rights and powers hereunder as any other Lender or holder of a Revolving
Note or participation interests and may exercise the same as though it was not
performing the duties specified herein; and the terms "Lenders," "Lenders,"
"Majority Lenders," "holders of Revolving Notes," or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, acquire
equity interests in, and generally engage in any kind of banking, trust,
financial advisory or other business with any Credit Party or any Affiliate of
any Credit Party as if it were not performing the duties specified herein, and
may accept fees and other consideration from any Credit Party for services in
connection with this Credit Agreement and otherwise without having to account
for the same to the Lenders.
10.8 HOLDERS OF NOTES.
-----------------
The Agent may deem and treat the payee of any Revolving Note as the
owner thereof for all purposes hereof unless and until a written notice of the
assignment or transfer thereof shall have
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been filed with the Agent. Any request, authority or consent of any Person who,
at the time of making such request or giving such authority or consent, is the
holder of any Revolving Note, shall be conclusive and binding on any subsequent
holder, transferee or assignee of such Revolving Note or of any Revolving Note
or Revolving Notes issued in exchange therefor.
10.9 SUCCESSOR AGENT.
----------------
(a) The Agent may, upon five (5) Business Days' notice to the
Lenders and the Hawk Funds Administrator, resign at any time (effective
upon the appointment of a successor Agent pursuant to the provisions of
this SECTION 10.9) by giving written notice thereof to the Lenders and
the Hawk Funds Administrator. Upon any such resignation, the Majority
Lenders shall have the right, upon five (5) days' notice and approval
by the Credit Parties (which approval shall not be unreasonably
withheld or delayed) to appoint a successor Agent. If no successor
Agent shall have been so appointed by the Majority Lenders and accepted
such appointment, within thirty (30) days after the retiring Agent's
giving of notice of resignation, then the retiring Agent may, on behalf
of the Lenders, appoint a successor Agent, which shall be a bank or a
trust company or other financial institution which maintains an office
in the United States, or a commercial bank organized under the laws of
the United States of America or of any State thereof, or any Affiliate
of such bank or trust company or other financial institution which is
engaged in the banking business, having a combined capital and surplus
of at least $500,000,000.
(b) Upon the acceptance of any appointment as Agent hereunder
by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of
the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Credit Agreement and the other Credit
Documents. After any retiring Agent's resignation hereunder as Agent,
the provisions of this ARTICLE 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under or
in connection with this Credit Agreement.
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10.10 COLLATERAL MATTERS.
-------------------
(a) Each Lender authorizes and directs the Agent to enter into
the Collateral Documents for the benefit of the Lenders. Each Lender
hereby agrees, and each holder of any Revolving Note by the acceptance
thereof will be deemed to agree, that, except as otherwise set forth
herein or in the other Credit Documents, any action taken by the
Majority Lenders in accordance with the provisions of this Credit
Agreement and the other Credit Documents, and the exercise by the
Majority Lenders of the powers set forth herein or therein, together
with such other powers as are reasonably incidental thereto, shall be
authorized and binding upon all of the Lenders. The Agent is hereby
authorized on behalf of all of the Lenders, without the necessity of
any notice to or further consent from any Lender, from time to time so
long as an Event of Default shall not then exist, to take any action
with respect to any Collateral or Collateral Documents which may be
necessary to perfect and maintain the perfection of the Liens upon the
Collateral granted pursuant to the Collateral Documents.
(b) The Lenders hereby authorize the Agent, at its option and
in its discretion, to release any Lien granted to or held by the Agent
upon any Collateral (i) upon termination of the Commitments and payment
and satisfaction of all of the Obligations at any time arising under or
in respect of this Credit Agreement or the other Credit Documents or
the transactions contemplated hereby or thereby or (ii) if approved,
authorized or ratified in writing by the Majority Lenders, unless such
release is required to be approved by all of the Lenders pursuant to
SECTION 11.11. Upon request by the Agent at any time, the Lenders will
confirm in writing the Agent's authority to release particular types or
items of Collateral pursuant to this SECTION 10.10.
(c) The Agent shall have no obligation whatsoever to the
Lenders or to any other Person to assure that the Collateral exists or
is owned by any Borrower or is cared for, protected or insured or that
the Liens granted to the Agent in or pursuant to any of the Collateral
Documents have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular
priority, or to exercise or to continue exercising at all or in any
manner or under any duty of care, disclosure or fidelity any of the
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rights, authorities and powers granted or available to the Agent in
this SECTION 10.10 or in any of the Collateral Documents, it being
understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Agent may act in any manner it
may deem appropriate, in its sole discretion, given the Agent's own
interest in the Collateral as one of the Lenders and that the Agent
shall have no duty or liability whatsoever to the Lenders, except for
its gross negligence or willful misconduct. The Agent agrees to conduct
or cause to be conducted at least one audit of the Collateral during
each year that this Credit Agreement shall remain in effect.
10.11 ACTIONS WITH RESPECT TO DEFAULTS.
---------------------------------
In addition to the Agent's right to take actions on its own accord as
permitted under this Credit Agreement, the Agent shall take such action with
respect to a Default or Event of Default as shall be directed by the Majority
Lenders; PROVIDED, THAT until the Agent shall have received such directions, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable and in the best interests of the Lenders.
10.12 DELIVERY OF INFORMATION.
------------------------
The Agent shall not be required to deliver to any Lender originals or
copies of any documents, instruments, notices, communications or other
information received by the Agent from any of the Credit Parties or any
Subsidiary of any of the Credit Parties, the Majority Lenders, any Lender or any
other Person under or in connection with this Credit Agreement or any other
Credit Document except (i) as specifically provided in this Credit Agreement or
any other Credit Document and (ii) as specifically requested from time to time
in writing by any Lender with respect to a specific document, instrument, notice
or other written communication received by and in the possession of the Agent at
the time of receipt of such request and then only in accordance with such
specific request.
ARTICLE 11. MISCELLANEOUS.
--------------
11.1 GOVERNING LAW.
--------------
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS CREDIT AGREEMENT
AND EACH OF THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
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IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS.
11.2 SUBMISSION TO JURISDICTION.
---------------------------
ALL DISPUTES AMONG THE LENDERS AND THE CREDIT PARTIES (OR THE AGENT OR
HAWK FUNDS ADMINISTRATOR, RESPECTIVELY, ACTING ON THEIR BEHALF), WHETHER
SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE
AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO WHICH AN
APPEAL THEREFROM MAY BE TAKEN; PROVIDED, HOWEVER, THAT THE AGENT ON BEHALF OF
THE LENDERS, SHALL HAVE THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO
PROCEED AGAINST THE HAWK FUNDS ADMINISTRATOR OR ANY CREDIT PARTY OR THEIR
RESPECTIVE PROPERTIES IN ANY LOCATION REASONABLY SELECTED BY THE AGENT IN GOOD
FAITH TO ENABLE THE AGENT TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF THE AGENT. THE HAWK FUNDS ADMINISTRATOR AND
EACH OF THE OTHER CREDIT PARTIES AGREE THAT NONE OF SUCH PERSONS WILL ASSERT ANY
PERMISSIVE COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY
THE AGENT OR ANY LENDER. THE HAWK FUNDS ADMINISTRATOR AND EACH OF THE OTHER
CREDIT PARTIES WAIVE ANY OBJECTION THAT ANY OF SUCH PERSONS MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH THE AGENT OR ANY LENDER HAS COMMENCED A
PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON FORUM NON CONVENIENS.
11.3 SERVICE OF PROCESS.
-------------------
EACH OF THE HAWK FUNDS ADMINISTRATOR AND THE OTHER CREDIT PARTIES
HEREBY WAIVES PERSONAL SERVICE UPON IT AND, AS ADDITIONAL SECURITY FOR THE
OBLIGATIONS, HEREBY IRREVOCABLY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM,
WITH AN OFFICE ON THE DATE HEREOF AT 208 SOUTH LASALLE STREET, CHICAGO, ILLINOIS
60604, AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY SUCH PERSON WHICH
IRREVOCABLY AGREE IN WRITING TO SO SERVE AS ITS AGENT, TO RECEIVE ON ITS BEHALF
SERVICE OF ALL PROCESS ISSUED BY ANY COURT IN ANY LEGAL ACTION OR OTHER
PROCEEDING WITH RESPECT TO THIS CREDIT AGREEMENT OR ANY OTHER CREDIT DOCUMENT,
SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY SUCH PERSON TO BE EFFECTIVE AND
BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO THE HAWK FUNDS ADMINISTRATOR AT ITS ADDRESS
PROVIDED HEREIN EXCEPT THAT, UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY
FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS.
IF ANY AGENT APPOINTED BY THE HAWK FUNDS ADMINISTRATOR OR ANY OTHER CREDIT
PARTIES REFUSES TO ACCEPT
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SERVICE, EACH SUCH PERSON HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE AND EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF AGENT OR ANY LENDER TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY APPLICABLE LAW OR SHALL LIMIT THE RIGHT OF AGENT
OR ANY LENDER TO BRING PROCEEDINGS AGAINST THE HAWK FUNDS ADMINISTRATOR OR ANY
OTHER CREDIT PARTY IN THE COURTS OF ANY OTHER JURISDICTION.
11.4 JURY TRIAL.
-----------
THE HAWK FUNDS ADMINISTRATOR, EACH OF THE OTHER CREDIT PARTIES, THE
AGENT AND THE LENDERS HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY. INSTEAD, ANY
DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
11.5 LIMITATION OF LIABILITY.
------------------------
NEITHER THE AGENT NOR ANY LENDER SHALL HAVE ANY LIABILITY TO THE HAWK
FUNDS ADMINISTRATOR OR ANY OTHER CREDIT PARTY (WHETHER SOUNDING IN TORT,
CONTRACT, OR OTHERWISE) FOR LOSSES SUFFERED BY ANY SUCH PERSON IN CONNECTION
WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO THE TRANSACTIONS OR RELATIONSHIPS
CONTEMPLATED BY THIS CREDIT AGREEMENT, OR ANY OF THE OTHER CREDIT DOCUMENTS, OR
ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH, UNLESS IT IS
DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OR COURT ORDER BINDING ON THE
AGENT OR ANY SUCH LENDER, THAT THE LOSSES WERE THE RESULT OF ACTS OR OMISSIONS
CONSTITUTING GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
11.6 DELAYS.
-------
No delay or omission of the Agent or the Lenders in exercising any
right or remedy hereunder shall impair any such right or operate as a waiver
thereof.
11.7 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,
if to the Agent or any of the Lenders, then to BT Commercial Corporation, 233
South Wacker Drive, Chicago, Illinois 60606, Attention: Credit Department, if to
the Hawk Funds Administrator or any other Credit Party, then to Hawk Corporation
at 200 Public Square, Suite 30-5000, Cleveland,
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Ohio 44114-2301, Attention: President, or by facsimile transmission, promptly
confirmed in writing sent by first class mail, if to the Agent, or any of the
Lenders, at (312) 993-8096 and if to the Hawk Funds Administrator or any other
Credit Party at (216) 861-4546. 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.
11.8 ASSIGNMENTS AND PARTICIPATIONS.
-------------------------------
(a) BORROWER ASSIGNMENT. Neither the Hawk Funds Administrator
nor any of the other Credit Parties shall have any right to assign this
Credit Agreement or any of the other Credit Documents, or any rights or
obligations hereunder or thereunder, without the prior written consent
of the Agent and the Lenders.
(b) LENDER ASSIGNMENTS. Each Lender may assign to one or more
banks or other financial institutions all or a portion of its rights
and obligations under this Credit Agreement, the Revolving Notes and
the other Credit Documents, with the consent of the Agent and, solely
in the case of such assignments to a bank or other financial
institution not disclosed by the Agent to the Hawk Funds Administrator
prior to the Closing Date as a potential assignee, the consent of the
Hawk Funds Administrator (which consent, in the case of the Hawk Funds
Administrator, shall not be unreasonably withheld or delayed); and upon
execution and delivery to the Agent, for its acceptance and recording
in the Register, of an agreement in substantially the form of EXHIBIT G
(an "ASSIGNMENT AND ASSUMPTION AGREEMENT"), together with surrender of
any Revolving Note or Revolving Notes subject to such assignment and a
processing and recordation fee of $2,500, such assignment shall be
effective and ANNEX I hereto shall be deemed to be modified
accordingly. No such assignment shall be for less than $5,000,000 of
the Commitments unless it is to another Lender or is an assignment of
all of such Lender's rights and obligations under this Credit
Agreement. (This Section does not apply to branches and Affiliates of a
Lender, it being understood that a Lender may make, carry or transfer
Revolving Loans at or for the
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account of any of its branch offices or Affiliates without
consent of the Agent.)
(c) AGENT'S REGISTER. The Agent shall maintain a register of
the names and addresses of the Lenders, their Commitments, and the
principal amount of their Revolving Loans (the "REGISTER") at the
address specified for the Agent in SECTION 11.7. The Agent shall also
maintain a copy of each Assignment and Assumption Agreement delivered
to and accepted by it, and modify the Register to give effect to each
Assignment and Assumption Agreement. Upon its receipt of each
Assignment and Assumption Agreement and surrender of the affected
Revolving Note or Revolving Notes, the Agent will give prompt notice
thereof to the Hawk Funds Administrator and deliver to the Hawk Funds
Administrator a copy of the Assignment and Assumption Agreement and the
surrendered Revolving Note or Revolving Notes. Within five Business
Days after its receipt of such notice, the Borrowers shall execute and
deliver to the Agent a substitute Revolving Note or Revolving Notes to
the order of the assignee in the amount of the Commitment or
Commitments assumed by it and to the assignor in the amount of the
Commitment or Commitments retained by it, if any. Such substitute
Revolving Note or Revolving Notes shall re-evidence the Indebtedness
outstanding under the surrendered Revolving Note or Revolving Notes and
shall be dated as of the Closing Date. The Agent shall be entitled to
rely upon the Register exclusively for purposes of identifying the
Lenders hereunder. The Register shall be available for inspection by
the Credit Parties and the Lenders (or any of them) at any reasonable
time and from time to time upon reasonable notice to the Agent.
(d) PARTICIPATIONS. Each Lender may sell participations
(without the consent of the Agent, any Credit Party or any other
Lender) to one or more parties in or to all or a portion of its rights
and obligations under this Credit Agreement, the Revolving Notes and
the other Credit Documents. Notwithstanding a Lender's sale of a
participation interest, its obligations hereunder shall remain
unchanged. The Credit Parties, the Agent, and the other Lenders shall
continue to deal solely and directly with such Lender. No participant
shall have rights to approve any amendment or waiver of this Credit
Agreement or any of the other Credit Documents except to the extent
such amendment or waiver would (i) increase the participant's
obligation in respect of the Commitment of the
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Lender from whom the participant purchased its participation interest;
(ii) reduce the principal of, or stated rate or amount of interest on,
the Revolving Loans subject to such participation, (iii) postpone any
maturity date fixed for final payment of principal of the Revolving
Loans subject to the participation interest, and (iv) release any
guarantor of the Obligations or all or a substantial portion of the
Collateral, other than when otherwise permitted hereunder.
11.9 CONFIDENTIALITY.
----------------
Each Lender agrees that it will not disclose to any Person, without the
prior consent of the Hawk Funds Administrator, any information with respect to
any of the Credit Parties or any Subsidiary of any of the Credit Parties which
is furnished pursuant to this Credit Agreement and which is designated by the
respective Credit Parties to the Lenders in writing as confidential, PROVIDED,
THAT, each Lender may disclose any such information (a) to its employees,
auditors, or counsel, or to another Lender if the disclosing Lender or such
disclosing Lender's holding or parent company in its sole discretion determines
that any such party should have access to such information, (b) as has become
generally available to the public, (c) as may be required in any report,
statement or testimony submitted to any Governmental Authority having or
claiming to have jurisdiction over such Lender, (d) as may be required or
appropriate in response to any summons or subpoena or in connection with any
litigation, (e) in order to comply with any Requirement of Law, and (f) to any
actual or prospective transferee or participant, PROVIDED, FURTHER, that in each
such case, prior to such disclosure such prospective or actual transferee or
participant has agreed to preserve the confidentiality of such information on
terms substantially similar to those set forth in the SECTION 11.9 or on terms
otherwise satisfactory to the Hawk Funds Administrator. The Agent and each of
the Lenders acknowledge that the Credit Parties have designated the respective
information to be provided pursuant to SECTIONS 7.1(c) and 7.1(e) as
confidential.
11.10 INDEMNIFICATION.
----------------
The Borrowers hereby jointly and severally indemnify and agree to defend
and hold harmless the Agent and each of the Lenders and their respective
directors, officers, agents, employees and counsel from and against any and all
losses, claims, damages, liabilities, deficiencies, judgments or expenses
incurred by any of them (except
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to the extent that it is finally judicially determined to have resulted from
their own gross negligence or willful misconduct) arising out of or by reason of
(a) any litigations, investigations, claims or proceedings which arise out of or
are in any way related to (i) this Credit Agreement or the transactions
contemplated hereby, (ii) the issuance of the Letters of Credit, (iii) the
failure of the Issuing Bank to honor a drawing under any Letter of Credit, as a
result of any act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or Governmental Authority, (iv) any actual
or proposed use by any Borrower of the proceeds of the Revolving Loans or (v)
the Agent's or the Lenders' entering into this Credit Agreement, the other
Credit Documents or any other agreements and documents relating hereto,
including, without limitation, amounts paid in settlement, court costs and the
fees and disbursements of counsel incurred in connection with any such
litigation, investigation, claim or proceeding or any advice rendered in
connection with any of the foregoing and (b) any remedial or other action taken
by any of the Borrowers or any of the Lenders in connection with compliance by
any of the Borrowers or any Subsidiary of any of the Borrowers, or any of their
respective properties, with any federal, state or local environmental laws,
acts, rules, regulations, orders, directions, ordinances, criteria or
guidelines.
11.11 AMENDMENTS AND WAIVERS.
-----------------------
No amendment or waiver of any provision of this Credit Agreement, any
part of SCHEDULE B, or any other Credit Document shall be effective unless in
writing and signed by the Majority Lenders (or by the Agent on their behalf),
except that:
(a) the consent of all the Lenders is required to (i) increase
the Commitments, (ii) reduce the principal of, or interest on, any
Revolving Note, any Letter of Credit reimbursement obligations or any
Fees hereunder (other than Fees that are exclusively for the account of
the Agent), (iii) postpone any date fixed for any payment in respect of
principal of, or interest on, any Revolving Note, any Letter of Credit
reimbursement obligations or any Fees hereunder, (iv) change the
percentage of the Commitments, or any minimum requirement necessary for
the Lenders or the Majority Lenders to take any action hereunder, (v)
amend or waive this SECTION 11.11(a), or change the definition of
Majority Lenders or (vi) except as otherwise expressly provided in this
Credit Agreement, and other than in connection with the financing,
refinancing, sale
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or other disposition of any asset of a Borrower permitted under this
Credit Agreement, release any Liens in favor of the Agent on any of the
Collateral; and
(b) the consent of the Agent shall be required for any
amendment, waiver or consent affecting the rights or duties of the Agent
under any Credit Document, in addition to the consent of the Lenders
otherwise required by this Section.
Neither the consent of the Hawk Funds Administrator nor any other Credit
Party shall be required for any amendment, modification or waiver of the
provisions of ARTICLE 10 (other than SECTION 10.9). The Hawk Funds
Administrator, the other Credit Parties and the Lenders each hereby authorize
the Agent to modify this Credit Agreement by unilaterally amending or
supplementing ANNEX I to reflect assignments of the Commitments. Notwithstanding
the foregoing, the Credit Parties may amend SCHEDULE B, PARTS 6.1, 6.10 and
6.14, without the consent of the Majority Lenders.
11.12 COUNTERPARTS AND EFFECTIVENESS.
-------------------------------
This Credit Agreement and any waiver or amendment hereto may be executed
in any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. This
Credit Agreement shall become effective on the date on which all of the parties
hereto shall have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Agent.
11.13 SEVERABILITY.
-------------
In case any provision in or obligation under this Credit Agreement, the
Revolving Notes or any of the other Credit Documents 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.
11.14 MAXIMUM RATE.
-------------
Notwithstanding anything to the contrary contained elsewhere in this
Credit Agreement or in any other Credit Document, the Borrowers, the Agent, and
the Lenders hereby agree that all agreements among them under this Credit
Agreement and the other Credit Documents, whether now existing or hereafter
arising and whether written or oral, are expressly limited so that in no
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contingency or event whatsoever shall the amount paid, or agreed to be paid, to
the Agent or any Lender for the use, forbearance, or detention of the money
loaned to the Borrowers and evidenced hereby or thereby or for the performance
or payment of any covenant or obligation contained herein or therein, exceed the
Highest Lawful Rate. If due to any circumstance whatsoever, fulfillment of any
provisions of this Credit Agreement or any of the other Credit Documents at the
time performance of such provision shall be due shall exceed the Highest Lawful
Rate, then, automatically, the obligation to be fulfilled shall be modified or
reduced to the extent necessary to limit such interest to the Highest Lawful
Rate, and if from any such circumstance any Lender should ever receive anything
of value deemed interest by applicable law which would exceed the Highest Lawful
Rate, such excessive interest shall be applied pursuant to the terms hereof to
the reduction of the principal amount then outstanding hereunder or on account
of any other then outstanding Obligations and not to the payment of interest, or
if such excessive interest exceeds the principal unpaid balance then outstanding
hereunder and such other then outstanding Obligations, such excess shall be
refunded to the Borrowers. All sums paid or agreed to be paid to the Agent or
any Lender for the use, forbearance, or detention of the Obligations and other
Indebtedness of the Borrowers to the Agent or any Lender, to the extent
permitted by applicable law, shall be amortized, prorated, allocated and spread
throughout the full term of such Indebtedness, until payment in full thereof, so
that the actual rate of interest on account of all such Indebtedness does not
exceed the Highest Lawful Rate throughout the entire term of such Indebtedness.
The terms and provisions of this SECTION 11.14 shall control over every other
provision of this Credit Agreement, the other Credit Documents, and all
agreements among the Borrower, the Agent and the Lenders.
11.15 ENTIRE AGREEMENT; SUCCESSORS AND ASSIGNS.
-----------------------------------------
This Credit Agreement and the other Credit Documents constitute the
entire agreement among the Credit Parties, the Agent and the Lenders, supersede
any prior agreements among them, and shall bind and benefit each of such Persons
and their respective successors and permitted assigns.
11.16 JOINT AND SEVERAL LIABILITY OF BORROWERS.
-----------------------------------------
Each of the Borrowers shall be jointly and severally liable hereunder
and under each of the other Credit Documents with respect
89
<PAGE> 97
to all Obligations, regardless of which of the Borrowers actually receives the
proceeds of the Revolving Loans or the benefit of any other extensions of credit
hereunder, or the manner in which the Hawk Funds Administrator, the Borrowers,
the Agent or the Lenders account therefor in their respective books and records.
Notwithstanding the foregoing, (a) each Borrower's obligations and liabilities
with respect to proceeds of Revolving Loans which it receives or Letters of
Credit issued for its account, and related fees, costs and expenses, and (b)
each Borrower's obligations and liabilities arising as a result of the joint and
several liability of the Borrowers hereunder with respect to proceeds of
Revolving Loans received by, or Letters of Credit issued for the account of, any
of the other Borrowers, together with the related fees, costs and expenses,
shall be separate and distinct obligations, both of which are primary
obligations of such Borrower. Neither the joint and several liability of, nor
the Liens granted to the Agent under the Collateral Documents by, any of the
Borrowers shall be impaired or released by any action or inaction on the part of
the Agent or any Lender, or any other event or condition with respect to any
other Borrower, including any such action or inaction or other event or
condition, which might otherwise constitute a defense available to, or a
discharge of, such Borrower, or a guarantor or surety of or for any or all of
the Obligations.
90
<PAGE> 98
IN WITNESS WHEREOF, the respective parties hereto have caused this
Credit Agreement to be executed and delivered by their duly authorized officers
as of the date first set forth above.
HAWK CORPORATION, a Delaware
corporation, individually and in its
capacity as Hawk Funds Administrator
By: _______________________________
Name: _____________________________
Title: ____________________________
Credit Agreement
<PAGE> 99
BORROWERS:
FRICTION PRODUCTS CO.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HAWK BRAKE, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HELSEL, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HUTCHINSON PRODUCTS CORPORATION
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
LOGAN METAL STAMPINGS, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
Credit Agreement
<PAGE> 100
S.K. WELLMAN HOLDINGS, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
S.K. WELLMAN CORP.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
WELLMAN FRICTION PRODUCTS U.K. CORP.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
Credit Agreement
<PAGE> 101
BT COMMERCIAL CORPORATION,
individually and in its
capacity as Agent
By: /S/ Wayne D. Hillock
-----------------------------------
Wayne D. Hillock
Senior Vice President
Credit Agreement
<PAGE> 102
ANNEX I
TO
CREDIT AGREEMENT
DATED AS OF NOVEMBER 27, 1996
LIST OF LENDERS; COMMITMENT
AMOUNTS; APPLICABLE LENDING OFFICES
1. BT COMMERCIAL CORPORATION
233 South Wacker Drive
Chicago, Illinois 60606
COMMITMENT AMOUNT: $25,000,000
DOMESTIC LENDING OFFICE: 233 South Wacker Drive
Chicago, Illinois 60606
LIBOR LENDING OFFICE: 233 South Wacker Drive
Chicago, Illinois 60606
Credit Agreement
<PAGE> 1
EXHIBIT 10.15
REVOLVING NOTE
$25,000,000 NOVEMBER 27, 1996
FOR VALUE RECEIVED, each of the undersigned, (collectively, the
"Borrowers") jointly and severally promises to pay to the order of BT COMMERCIAL
CORPORATION, a Delaware corporation (the "LENDER") at c/o BT Commercial
Corporation, as Agent for the Lender, 233 South Wacker Drive, 84th Floor,
Chicago, Illinois 60606 (the "AGENT'S OFFICE") in lawful money of the United
States of America and in immediately available funds, the principal amount of
TWENTY-FIVE MILLION AND NO/100 DOLLARS ($25,000,000), or such lesser amount as
may then constitute the unpaid aggregate principal amount of the Revolving Loans
made by the Lender, on the Expiration Date or such earlier date as this
Revolving Note may become due in accordance with the terms of the Credit
Agreement referred to below. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings assigned thereto in the
Credit Agreement.
Each of the Borrowers further agrees to pay, on a joint and several
basis, interest at the Agent's Office, in like money, on the unpaid principal
amount owing hereunder from time to time from the date hereof on the dates and
at the rates specified in and calculated pursuant to Article 4 of the Credit
Agreement.
If any payment on this Revolving Note becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day, and with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
This Revolving Note is one of the Revolving Notes referred to in and
executed and delivered pursuant to that certain Credit Agreement dated as of
November 27, 1996 (as the same may be amended, restated, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT"), among the
Borrowers, Hawk Corporation, a Delaware corporation, as borrowing agent for the
Borrowers, the Lender, certain other financial institutions as parties thereto
and BT Commercial Corporation, as agent, to which reference is hereby made for a
statement of the terms and conditions under which the Revolving Loans evidenced
hereby are to be made and repaid.
This Revolving Note is secured by certain Collateral Documents.
Reference is made to such Collateral Documents and to the Credit Agreement for
the terms and conditions governing the Collateral which secures the Obligations.
<PAGE> 2
Each Borrower (and each endorser, guarantor or surety hereof) hereby
waives presentment, demand, protest and notice of any kind. No failure to
exercise and no delay in exercising any rights hereunder on the part of the
holder hereof shall operate as a waiver of such rights.
THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS REVOLVING NOTE
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND
DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS
PROVISIONS.
[SIGNATURE PAGES FOLLOW]
-2-
<PAGE> 3
IN WITNESS WHEREOF, each Borrower has caused this Revolving Note to be
executed and delivered by such Borrower's duly authorized officer as of the date
first set forth above.
FRICTION PRODUCTS CO., an Ohio
corporation
By: /s/ Thomas A. Gilbride
---------------------------------
Name: Thomas A. Gilbride
-------------------------------
Title: Vice President - Finance
------------------------------
HAWK BRAKE, INC., an Ohio corporation
By: /s/ Thomas A. Gilbride
---------------------------------
Name: Thomas A. Gilbride
-------------------------------
Title: Vice President - Finance
------------------------------
HELSEL, INC., a Delaware corporation
By: /s/ Thomas A. Gilbride
---------------------------------
Name: Thomas A. Gilbride
-------------------------------
Title: Vice President - Finance
-------------------------------
HUTCHINSON PRODUCTS CORPORATION, a
Delaware corporation
By: /s/ Thomas A. Gilbride
---------------------------------
Name: Thomas A. Gilbride
-------------------------------
Title: Vice President - Finance
------------------------------
LOGAN METAL STAMPINGS, INC., an Ohio
corporation
By: /s/ Thomas A. Gilbride
---------------------------------
Name: Thomas A. Gilbride
-------------------------------
Title: Vice President - Finance
-------------------------------
<PAGE> 4
S.K. WELLMAN HOLDINGS, INC., a Delaware
corporation
By: /s/ Thomas A. Gilbride
---------------------------------
Name: Thomas A. Gilbride
-------------------------------
Title: Vice President - Finance
-------------------------------
S.K. WELLMAN CORP., a Delaware corporation
By: /s/ Thomas A. Gilbride
---------------------------------
Name: Thomas A. Gilbride
-------------------------------
Title: Vice President - Finance
-------------------------------
WELLMAN FRICTION PRODUCTS U.K. CORP., a
Delaware corporation
By: /s/ Thomas A. Gilbride
---------------------------------
Name: Thomas A. Gilbride
-------------------------------
Title: Vice President - Finance
-------------------------------
<PAGE> 1
EXHIBIT 10.16
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT, dated as of November 27, 1996,
made by FRICTION PRODUCTS CO., an Ohio corporation ("FRICTION PRODUCTS"), HAWK
BRAKE, INC., an Ohio corporation ("HAWK BRAKE"), HELSEL, INC., a Delaware
corporation ("HELSEL"), HUTCHINSON PRODUCTS CORPORATION, a Delaware corporation
("HUTCHINSON"), LOGAN METAL STAMPINGS, INC., an Ohio corporation ("LOGAN"), S.K.
WELLMAN HOLDINGS, INC., a Delaware corporation ("WELLMAN HOLDINGS"), S.K.
WELLMAN CORP., a Delaware corporation ("WELLMAN CORP.") and WELLMAN FRICTION
PRODUCTS U.K. CORP., a Delaware corporation ("WELLMAN FRICTION") (Friction
Products, Hawk Brake, Helsel, Hutchinson, Logan, Wellman Holdings, Wellman Corp.
and Wellman Friction each sometimes hereinafter referred to individually as a
"GRANTOR" and collectively as "GRANTORS") in favor of BT COMMERCIAL CORPORATION,
a Delaware corporation ("BTCC"), acting in its capacity as agent (in such
capacity, "AGENT") for itself and each of the other "LENDERS" (as such term is
defined in the Credit Agreement referred to below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement dated as of
November 27, 1996 (such Credit Agreement, as it may be amended, restated,
supplemented or otherwise modified from time to time, being hereinafter referred
to as the "CREDIT AGREEMENT"), among Grantors, Agent, Lenders and Hawk
Corporation, a Delaware corporation, as borrowing agent for Grantors, Lenders
have severally agreed to make certain loans and other extensions of credit to or
for the account of Grantors upon the terms and subject to the conditions set
forth therein; and
WHEREAS, Lenders have required, as a condition, among others,
to the making of any such loans or other extensions of credit, that Grantors
execute and deliver this Security Agreement to Agent for its benefit and for the
ratable benefit of Lenders;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE> 2
1. DEFINED TERMS. Unless otherwise defined herein, terms defined in
the Credit Agreement are used herein as therein defined, and the following terms
shall have the following meanings (such meanings being equally applicable to
both the singular and plural forms of the terms defined);
"ACCOUNT DEBTOR" means the Person who is obligated on or
under an Account of any Grantor.
"ACCOUNT" means, with respect to each Grantor, any "account"
as such term is defined in section 9-106 of the UCC, now owned or
hereafter acquired by such Grantor and shall include, without
limitation, all present and future rights of such Grantor to payment
for goods sold or leased or for services rendered which are not
evidenced by instruments or chattel paper, and whether or not they have
been earned by performance.
"CHATTEL PAPER" means, with respect to each Grantor, any
"chattel paper," as such term is defined in section 9-105(1)(b) of the
UCC, now owned or hereafter acquired by such Grantor and constituting
Proceeds of, related to, or arising in connection with, Accounts,
Inventory or General Intangibles of such Grantor.
"COLLATERAL" has the meaning set forth in SECTION 2 of
this Security Agreement.
"CONTRACTS" means, with respect to each Grantor, all
contracts, undertakings, or other agreements (other than rights
evidenced by chattel paper, documents or instruments) in or under which
such Grantor may now or hereafter have any right, title or interest.
"DOCUMENTS" means, with respect to each Grantor, any
"documents," as such term is defined in section 9-105(l)(f) of the UCC,
now owned or hereafter acquired by such Grantor and constituting
Proceeds of, related to, or arising in connection with, Accounts,
Inventory or General Intangibles of such Grantor.
"GENERAL INTANGIBLES" means, with respect to each Grantor, any
"general intangibles," as such term is defined in section 9-106 of the
UCC, now owned or hereafter acquired by
-2-
<PAGE> 3
such Grantor and, in any event, shall include, without limitation, all
right, title and interest which such Grantor may now or hereafter have
in, under or to any Contracts, leasehold interests in real and personal
property, interests in partnerships and joint ventures, tax refunds,
deposit accounts (general or special) with and credits and other claims
against any financial institution, all customer lists, trademarks,
patents, rights in intellectual property, licenses, permits,
copyrights, trade secrets, proprietary or confidential information,
inventions (whether patented or patentable or not) and technical
information, procedures, designs), knowledge, know-how, software, data
bases, data, skill, expertise, experience, processes, models, drawings,
materials and records now owned or hereafter acquired by such Grantor,
goodwill and rights of indemnification.
"HEREBY," "HEREIN," "HEREOF," "HEREUNDER" and words of similar
import refer to this Security Agreement as a whole (including, without
limitation, all exhibits and schedules hereto) and not merely to the
specific section, paragraph or clause in which the respective word
appears.
"INSTRUMENT" means, with respect to each Grantor, any
"instrument," as such term is defined in section 9-105(1)(i) of the
UCC, now owned or hereafter acquired by such Grantor and constituting
Proceeds of, related to, or arising in connection with, Accounts,
Inventory or General Intangibles of such Grantor, other than
instruments that constitute, or are a part of a group of writings that
constitute, chattel paper.
"INVENTORY" means, with respect to each Grantor, any
"inventory," as such term is defined in section 9-109(4) of the UCC,
now owned or hereafter acquired by such Grantor and, in any event,
shall include, without limitation, all inventory, merchandise, goods
and other personal property now owned or hereafter acquired by such
Grantor which are held for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw
materials, work in process or materials used or consumed or to be used
or consumed in such Grantor's business, or the processing, packaging,
delivery or shipping of the same, and all finished goods.
"LICENSE" means any license as to which Agent has been granted
a security interest hereunder.
-3-
<PAGE> 4
"PROCEEDS" means "proceeds," as such term is defined in
section 9-306(1) of the UCC and, in any event, shall include with
respect to each Grantor, without limitation, (I) any and all proceeds
of any insurance, indemnity, warranty or guaranty payable to such
Grantor from time to time with respect to any of the Collateral, (Ii)
any and all payments (in any form whatsoever) made or due and payable
to such Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any part of
the Collateral by any Governmental Authority, and (III) any and all
other amounts from time to time paid or payable to such Grantor under
or in connection with any of the Collateral.
"SECURED OBLIGATIONS" means, collectively, the Obligations,
including, without limitation, all Indebtedness, liabilities and
obligations of each of the Grantors to Agent and Lenders arising out of
or in connection with this Security Agreement.
"SECURITY AGREEMENT" means this General Security Agreement, as
it may be amended, restated, supplemented or otherwise modified from
time to time, and shall refer to this Security Agreement as in effect
on the date such reference becomes operative.
"UCC" means the Uniform Commercial Code as the same may, from
time to time, be in effect in the State of Illinois, PROVIDED, THAT if,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Agent's lien on or Agent's security interest
in any Collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of Illinois, the term
"UCC" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for purposes of definitions
related to such provisions.
2. GRANT OF SECURITY INTERESTS. To secure the prompt and
complete payment, performance and observance when due (whether at stated
maturity, by acceleration or otherwise) of all of the Secured Obligations and to
induce Agent and each of the Lenders to enter into the Credit Agreement and to
make the Loans and other extensions of credit provided for therein in accordance
with the respective terms thereof, each of the Grantors hereby grants to Agent
for its benefit and the ratable benefit of the Lenders a
-4-
<PAGE> 5
continuing security interest in and to (and, if available, a right or setoff
against) all of the following property and interests in property of such
Grantor, whether now owned or existing or hereafter acquired or arising and
wheresoever located (all of such property and interests in property of all
Grantors being hereinafter, collectively, referred to as the "COLLATERAL"):
(a) Accounts;
(b) Chattel Paper;
(c) Contracts;
(d) Documents;
(e) General Intangibles;
(f) Instruments;
(g) Inventory;
(h) all monies and any and all other property and interests in
property of such Grantor now or hereafter coming into the actual
possession, custody or control of any of the Lenders or any agent or
affiliate of any of the Lenders in any way or for any purpose (whether
for safekeeping, deposit, custody, pledge, transmission, collection or
otherwise), and all rights and interests of such Grantor in respect of
any and all (i) drafts, letters of credit, stocks, bonds, and debt and
equity securities, whether or not certificated, and warrants, options,
puts and calls and other rights to acquire or otherwise relating to the
same, (ii) interest rate and currency exchange agreements, including,
without limitation, cap, collar, floor, forward and similar agreements
and interest rate protection agreements, (iii) cash and cash
equivalents, and (iv) proceeds of loans, advances and other financial
accommodations, including, without limitation, Loans, advances and
other financial accommodations made or extended under the Credit
Agreement; and
(i) to the extent not otherwise included, all Proceeds of each
of the foregoing and all accessions and additions to, substitutions and
replacements for, and rents, profits and products of each of the
foregoing.
-5-
<PAGE> 6
3. LIMITATIONS ON LENDER'S OBLIGATIONS. It is expressly agreed by each
of the Grantors that, anything herein to the contrary notwithstanding, such
Grantor shall remain liable under each of its Contracts and each of its Licenses
to observe and perform all the conditions and obligations to be observed and
performed by it thereunder and such Grantor shall perform all of its duties and
obligations thereunder, all in accordance with and pursuant to the terms and
provisions of each such Contract or License. Neither Agent nor any of the
Lenders shall have any obligation or liability under any Contract or License of
any of the Grantors by reason of or arising out of this Security Agreement or
the granting to Agent of a security interest therein or the receipt by Agent or
any of the Lenders of any payment relating to any Contract or License pursuant
hereto, nor shall Agent or any of the Lenders be required or obligated in any
manner to perform or fulfill any of the respective obligations of any Grantor
under or pursuant to any Contracts or Licenses of such Grantor, or to make any
payment, or to make any inquiry as to the nature or the sufficiency of any
payment received by it or the sufficiency of any performance by any party under
any such Contract or License, or to present or file any claim, or to take any
action to collect or enforce any performance or the payment of any amounts which
may have been assigned to Agent or any Lender or to which Agent or any Lender
may be entitled at any time or times.
4. NOTICE TO ACCOUNT DEBTORS. Upon the occurrence and during the
continuance of an Event of Default, Agent may at any time or times and without
prior notice to any of the Grantors, notify any or all Account Debtors, parties
to Contracts and obligors under Instruments and Chattel Paper, in each case with
respect to any Grantor, that the Accounts of such Grantor and the right, title
and interest of such Grantor in, to and under such Contracts, Instruments or
Chattel Paper, as the case may be, have been assigned to Agent and that payments
thereon or in connection therewith shall thereupon be made directly to Agent.
5. VERIFICATION OF ACCOUNTS. From and after the Initial Funding Date,
Agent shall have the right, at any time or times hereafter, in Agent's name or
in the name of a nominee of Agent, to communicate with Account Debtors, parties
to Contracts and obligors under Instruments and Chattel Paper of each of the
Grantors to verify with such Persons to Agent's satisfaction the existence,
amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper,
as the case may be. Agent shall have the right, at any time or times hereafter,
to make test
-6-
<PAGE> 7
verifications of the Accounts of each of the Grantors and physical verifications
of the Inventory of each of the Grantors in any manner and through any medium
that it considers advisable, and each of the Grantors agrees to furnish all such
assistance and information as Agent may reasonably require in connection
therewith.
6. REPRESENTATIONS AND WARRANTIES. Each of the Grantors hereby
represents and warrants that:
(a) Except for Permitted Liens, each of the Grantors is the
sole legal and beneficial owner of each item of Collateral in which
such Grantor purports to grant a security interest hereunder, having
good and marketable title thereto, free and clear of any and all Liens.
No amount payable under or in connection with any of the Accounts or
Contracts of any of the Grantors are evidenced by Instruments which
have not been endorsed and previously delivered to Agent.
(b) No effective security agreement, financing statement,
equivalent security or lien instrument or continuation statement
covering all or any part of the Collateral is on file or of record in
any public office, except such as may have been filed by Grantors in
favor of Agent pursuant to the Collateral Documents or such as relate
to Permitted Liens.
(c) This Security Agreement is effective to create a valid and
continuing Lien in favor of Agent for the benefit of Agent and the
ratable benefit of the Lenders on the Collateral with respect to which
a Lien may be perfected by filing pursuant to the UCC, and, assuming
such filing, the Lien created hereby will be prior to all other Liens
except Permitted Liens, and will be enforceable as such as against
creditors of and purchasers from the respective Grantors (other than
purchasers of Inventory of the respective Grantors in the ordinary
course of business).
(d) The principal place of business of each of the Grantors,
and the places where the records of each of the Grantors concerning
Collateral are kept are located at the respective addresses set forth
on SCHEDULE B, PART 6.1 of the Credit Agreement, and none of the
Grantors will change such principal place of business or remove such
records unless it has taken such action as is necessary to cause the
Lien of
-7-
<PAGE> 8
Lender in the Collateral to continue to be perfected. None of the
Grantors will change its principal place of business or the place where
its records concerning Collateral are kept without giving thirty (30)
days' prior written notice thereof to Agent.
(e) With respect to Accounts of each of the Grantors
scheduled, listed or otherwise referred to in any monthly Borrowing
Base Certificate delivered by the Hawk Funds Administrator to Agent
pursuant to SECTION 7.2(a) of the Credit Agreement, each of the
Grantors represents and warrants
that:
(i) they are genuine, in all material respects what
they purport to be and are not evidenced by a judgment;
(ii) except as expressly set forth in such monthly
Borrowing Base Certificate, they represent undisputed, bona
fide transactions completed in accordance with the terms and
provisions referred to or contained in any documents delivered
to Agent with respect thereto;
(iii) the face amounts thereof shown on such monthly
Borrowing Base Certificate, the applicable Grantor's books and
records and all invoices and statements which may be delivered
to Agent with respect thereto are actually owing to the
applicable Grantor on the date thereof;
(iv) no payments have been or shall be made thereon
except, from and after December 31, 1996, payments immediately
deposited into a Lockbox Account pursuant to SECTION 4.10 of
the Credit Agreement;
(v) except as expressly set forth in such monthly
Borrowing Base Certificate, there are no setoffs,
counterclaims or disputes existing or asserted with respect
thereto and the applicable Grantor has not made any agreement
with any Account Debtor for any deduction therefrom;
(vi) there are no facts, events or occurrences known
to the Grantors which in any way impair the validity or
enforcement thereof or tend to reduce the amount payable
thereunder as shown on the respective
-8-
<PAGE> 9
weekly or monthly Borrowing Base Certificate, any Grantor's
books and records and all invoices and statements delivered to
Agent with respect thereto;
(vii) to Grantor's knowledge, all Account Debtors
have the capacity to contract and are solvent;
(viii) such Grantor has no knowledge of any fact or
circumstances which could reasonably be expected to impair the
validity or collectibility thereof;
(ix) they have not been sold or transferred under,
and are not otherwise subject to, a factoring agreement;
(x) the Account Debtors are not parties to, and
they are not otherwise payable under or otherwise subject
to, a factoring agreement;
(xi) the Account Debtors are not Account Debtors on
any Account which has been sold or otherwise transferred
under, or is otherwise subject to, a factoring agreement;
and
(xii) to such Grantor's knowledge, there are no
proceedings or actions which are pending which could
reasonably be expected to result in a material adverse change
in any Account Debtor's financial condition.
(f) With respect to Inventory of each of the Grantors
Inventory scheduled, listed or otherwise referred to in any monthly
Borrowing Base Certificate, each of the Grantors represents and
warrants that:
(i) except for Inventory with an aggregate book value
for all Grantors not exceeding $4,000,000, delivered to
third-parties for processing and similar services, such
Inventory is not stored with a bailee, warehouseman, consignee
or similar third party unless such third party has entered
into a Collateral Access Agreement with respect to such
Inventory;
(ii) except as permitted under clause (i) of this
section (F), it is located on the premises of such Grantor
listed on SCHEDULE B, PART 6.10 to the Credit Agreement; and
-9-
<PAGE> 10
(iii) it is of good and merchantable quality, free
from any defects which would affect the market value of such
Inventory.
7. COVENANTS. Each of the Grantors covenants and agrees with
Agent and each of the Lenders that from and after the date of this Security
Agreement and until the Secured Obligations are fully paid and satisfied and the
Credit Agreement and each of the other Credit Documents have terminated pursuant
to the respective terms and provisions thereof:
(a) FURTHER DOCUMENTATION; PLEDGE OF INSTRUMENTS. At
any time and from time to time upon the written request of
Agent, and at the sole expense of such Grantor, each of the
Grantors will promptly and duly execute and deliver any and
all such further instruments and documents and take such
further action as Agent may reasonably deem necessary or
desirable to obtain the full benefits of this Security
Agreement and of the rights and powers herein granted,
including, without limitation, using its best efforts to
secure all consents and approvals necessary or appropriate for
the assignment to Agent of any License or Contract that
constitutes Collateral and that is held by such Grantor or in
which such Grantor has any rights not heretofore assigned, the
filing of any financing or continuation statements under the
UCC with respect to the Liens and security interests granted
hereby, transferring Collateral to Agent's possession (if a
security interest in such Collateral can be perfected by
possession) and using its best efforts to obtain waivers of
liens from landlords and mortgagees. Each of the Grantors
also authorizes Agent to file any such financing or
continuation statement without the signature of Grantor to the
extent permitted by applicable law. Each of the Grantors
further agrees that a carbon, photographic or other
reproduction of this Security Agreement or of a financing
statement is sufficient as a financing statement. If any
Collateral shall be or become evidenced by any Instrument, the
applicable Grantor will within ten (10) days notify Agent
thereof and upon Agent's request, such Instrument shall be
immediately pledged to Agent hereunder, and shall be duly
endorsed in a manner satisfactory to Agent and delivered to
Agent.
(b) MAINTENANCE OF RECORDS. Each of the Grantors will,
at all times hereafter, keep and maintain at its own cost and
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expense satisfactory and complete records of the Collateral of such
Grantor, including, without limitation, records sufficient to permit
the preparation of all reports, schedules and other information
required by Lender pursuant to SECTIONS 7.1 and 7.2 of the Credit
Agreement. Each of the Grantors will mark its books and records
pertaining to Collateral to evidence this Security Agreement and the
security interests granted hereby. All Chattel Paper will be marked
with the following legend: "This writing and the obligations evidenced
or secured hereby are subject to the security interest of BT Commercial
Corporation, as Agent." Upon the occurrence and during the continuance
of an Event of Default, if requested by Agent, the security interest of
Agent shall be noted on the certificate of title of each vehicle.
(c) INDEMNIFICATION. In any suit, proceeding or action brought
by Agent or any Lender relating to any Account, Chattel Paper,
Contract, General Intangible, Document or Instrument of any of the
Grantors for any sum owing thereunder, or to enforce any provision of
any Account, Chattel Paper, Contract, General Intangible, Document or
Instrument of any of the Grantors, the Grantors will jointly and
severally save, indemnify and keep Agent and each of the Lenders
harmless from and against all expense, loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or reduction of
liability whatsoever of the obligor thereunder, that arises out of the
unenforceability or non-conformity with any applicable law of such
Collateral or that arises out of a breach by any Grantor of any
obligation thereunder arising out of any other agreement, indebtedness
or liability at any time owing to, or in favor of, such obligor or its
successors from any Grantor.
(d) CONFIRMATION OF CERTAIN PROVISIONS OF THE CREDIT
DOCUMENTS. Each of the Grantors hereby confirms and agrees that it will
perform and observe all of the covenants and agreements set forth in
the Credit Agreement on its part to be performed or observed or that
any other Grantor has agreed to cause such Grantor to perform or
observe to the same extent as provided for in the Credit Agreement.
(e) SAFEKEEPING OF INVENTORY; INVENTORY COVENANTS.
Neither Agent nor any of the Lenders shall be responsible for:
(i) the safekeeping of the Inventory of any of the Grantors;
(ii) any loss or damage to the Inventory of any of the
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<PAGE> 12
Grantors; (iii) any diminution in the value of the Inventory of any of
the Grantors; or (iv) any act or default of any carrier, warehouseman,
bailee, forwarding agency or any other Person. As between each of the
Grantors and Agent, and each of the Grantors and Lenders, all risk of
loss, damage, destruction or diminution in value of the Inventory of
such Grantor shall be borne by such Grantor except in the case of
Agent's or any Lender's gross negligence or willful misconduct.
(f) LIMITATION ON LIENS ON COLLATERAL. No Grantor will create,
permit or suffer to exist, and each Grantor will defend, the Collateral
against and take such other action as is necessary to remove any Lien
on the Collateral, except Permitted Liens, and will defend the right,
title and interest of Agent in and to all of such Grantor's rights
under the Chattel Paper, Contracts, Documents, General Intangibles and
Instruments of such Grantor and to the Inventory of such Grantor and in
and to the Proceeds thereof against the claims and demands of all
Persons whomsoever.
(g) LIMITATIONS ON MODIFICATIONS OF ACCOUNTS. No Grantor will
(other than in the ordinary course of such Grantor's business so long
as an Event of Default shall not have occurred and be continuing),
without Agent's prior written consent, grant any extension of the time
of payment of any of the Accounts, Chattel Paper or Instruments of such
Grantor, compromise, compound or settle the same for less than the full
amount thereof, release, wholly or partly, any Person liable for the
payment thereof, or allow any credit or discount whatsoever thereon
other than trade discounts granted in the ordinary course of business
or otherwise deemed necessary by such Grantor in the exercise of its
reasonable business judgment of such Grantor.
(h) MAINTENANCE OF INSURANCE. Each of the Grantors will
maintain, with respect to the Collateral of such Grantor, insurance in
accordance with all of the requirements of SECTION 7.6 of the Credit
Agreement.
(i) LIMITATIONS ON DISPOSITION. No Grantor will sell, lease,
transfer or otherwise dispose of any of the Collateral of such Grantor,
or attempt or contract to do so, except as otherwise expressly
permitted under the Credit Agreement.
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<PAGE> 13
(j) FURTHER IDENTIFICATION OF COLLATERAL. Each of the Grantors
will, if requested by Agent, furnish to Agent statements and schedules
further identifying and describing the Collateral and such other
reports in connection with the Collateral as Agent may reasonably
request, all in reasonable detail.
(k) NOTICES. Each of the Grantors will advise Agent promptly,
in reasonable detail, (i) of any material Lien made or asserted against
any of the Collateral, (ii) of any material change in the composition
of the Collateral, and (iii) of the occurrence of any other event which
could reasonably be expected to have a material adverse effect on the
aggregate value of the Collateral or on the Lien granted hereunder.
(l) CONTINUOUS PERFECTION. No Grantor will change its name,
identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith
seriously misleading within the meaning of section 9-402(7) of the UCC
(or any other then applicable provision of the UCC) unless such Grantor
shall have given Agent at least thirty (30) days' prior written notice
thereof and shall have taken all action (or made arrangements to take
such action substantially simultaneously with such change if it is
impossible to take such action in advance) necessary or reasonably
requested by Agent to amend such financing statement or continuation
statement so that it is not seriously misleading.
8. AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT.
(a) Each of the Grantors hereby irrevocably constitutes and
appoints Agent, and any officer, employee or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of such
Grantor and in the name of such Grantor or in its own name, from time
to time in Agent's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate
action and to execute and deliver any and all documents and instruments
which Agent may deem necessary or desirable to accomplish the purposes
of this Security Agreement and, without limiting the generality of the
foregoing, hereby gives Agent, and any officer, employee or agent
thereof, the power
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<PAGE> 14
and right, on behalf of such Grantor, without notice to or assent by
such Grantor to do the following:
(i) at any time and from time to time from and after
the Initial Funding Date, to pay or discharge taxes and Liens
(other than Permitted Liens) levied or placed on or threatened
against the Collateral, to effect any insurance called for by
the terms of this Security Agreement and to pay all or any
part of the premiums therefor and the costs thereof;
(ii) from and after the Initial Funding Date and
following the occurrence and during the continuance of an
Event of Default (A) to ask, demand, collect, receive and give
acquittances and receipts for any and all moneys due and to
become due under any Collateral and, in the name of such
Grantor or its own name or otherwise, to take possession of
and endorse and collect any checks, drafts, notes, acceptances
or other Instruments for the payment of moneys due under any
Collateral; (B) to receive payment of and receipt for any and
all moneys, claims and other amounts due, and to become due at
any time, in respect or arising out of any Collateral; and (C)
to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notice in connection
with Accounts and other Documents constituting or relating to
the Collateral; (D) to direct any party liable for any payment
under any of the Collateral to make payment of any and all
moneys due, and to become due thereunder, directly to Agent or
as Agent shall direct; (E) to file any claim or to take any
other action or proceeding in any court of law or equity or
otherwise deemed appropriate by Agent for the purpose of
collecting any and all such moneys due under any Collateral
whenever payable; (F) to commence and prosecute any suits,
actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any part
thereof and to enforce any other right in respect of any
Collateral; (G) to defend any suit, action or proceeding
brought against Grantor with respect to any Collateral; (H) to
settle, compromise or adjust any suit, action or proceeding
described above and, in connection therewith, to give such
discharges or releases as Agent may deem appropriate; and (I)
generally to sell,
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<PAGE> 15
transfer, pledge, make any agreement with respect to or
otherwise deal with any of the Collateral as fully and
completely as though Agent were the absolute owner thereof for
all purposes, and to do, at Agent's option and such Grantor's
expense, at any time, or from time to time, all acts and
things which Agent reasonably deems necessary to protect,
preserve or realize upon the Collateral and Agent's Lien
thereon, in order to effect the intent of this Security
Agreement, all as fully and effectively as such Grantor might
do.
(b) Each of the Grantors hereby ratifies, to the extent
permitted by law, all that said attorneys shall lawfully do or cause to
be done by virtue hereof. The power of attorney granted pursuant to
this SECTION 8 is a power coupled with an interest and shall be
irrevocable until the Secured Obligations are paid and satisfied in
full and the Credit Agreement and each of the other Collateral
Documents have terminated pursuant to the respective terms and
provisions thereof.
(c) The powers conferred on Agent hereunder are solely to
protect the respective interests of Agent and the Lenders in the
Collateral and shall not impose any duty upon it to exercise any such
powers. Agent shall be accountable only for amounts that it actually
receives as a result of the exercise of such powers and neither Agent
nor any of its officers, directors, employees or agents shall be
responsible to any of the Grantors for any act or failure to act,
except for their own gross negligence or willful misconduct.
(d) Each of the Grantors also authorizes Agent, and any
officer, employee or agent thereof, at any time and from time to time
following the Initial Funding Date, (i) to communicate in its own name
with any party to any of such Grantor's Contracts with regard to the
assignment of the right, title and interest of such Grantor in and
under such Contracts hereunder and other matters relating thereto and
(ii) to execute, in connection with the sale provided for in SECTION
10(C) hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
9. PERFORMANCE BY AGENT OF A GRANTOR'S OBLIGATIONS. If
any of the Grantors fails to perform or comply with any of its
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<PAGE> 16
agreements contained herein and Agent, as provided for by the terms of this
Security Agreement, shall itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the reasonable expenses of Agent
incurred in connection with such performance or compliance, together with
interest thereon at the highest rate then in effect in respect of any of the
Loans, shall be payable by such Grantor to Agent on demand and shall constitute
Secured Obligations secured hereby.
10. REMEDIES; RIGHTS UPON DEFAULT.
(a) RIGHTS AND REMEDIES GENERALLY. Upon the occurrence of an
Event of Default, Agent shall have, in addition to any other rights and
remedies contained in this Security Agreement or in any of the other
Credit Documents, all of the rights and remedies of a secured party
under the UCC or other applicable laws, all of which rights and
remedies shall be cumulative, and none exclusive, to the extent
permitted by law. In addition to all such rights and remedies, the
sale, lease or other disposition of the Collateral, or any part
thereof, by Agent after an Event of Default may be for cash, credit or
any combination thereof, and Agent may purchase all or any part of the
Collateral at public or, if permitted by law, private sale, and in lieu
of actual payment of such purchase price, may set off the amount of
such purchase price against the Secured Obligations then owing. All
sales of the Collateral may be adjourned from time to time with or
without notice. Agent may, in its sole discretion, cause the Collateral
to remain on the respective premises of the Grantors, at such Grantors'
expense, pending sale or other disposition of the Collateral. Agent
shall have the right to conduct such sales on each Grantor's premises,
at Grantors' expense, or elsewhere, on such occasion or occasions as
Agent may see fit.
(b) ENTRY UPON PREMISES AND ACCESS TO INFORMATION. Upon
the occurrence and during the continuance of an Event of
Default, Agent shall have the right to enter upon the premises
of each of the Grantors where any Collateral is located (or is
reasonably believed to be located) without any obligation to
pay rent to such Grantor, or any other place or places where
the Collateral is reasonably believed to be located and kept,
and render the Collateral unusable or remove the Collateral
therefrom to the premises of Agent or any agent of Agent, for
such time as Agent may desire, in order effectively to collect
or liquidate the Collateral, and/or Agent may require each of
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<PAGE> 17
the Grantors to assemble the Collateral and make it available to Agent
at a place or places to be designed by Agent. Upon the occurrence and
during the continuance of an Event of Default, Agent shall have the
right to obtain access to each Grantor's data processing equipment,
computer hardware and software relating to the Collateral and to use
all of the foregoing and the information contained therein in any
manner Agent deems appropriate; and Agent shall have the right to
notify post office authorities to change the address for delivery of
each Grantor's mail to an address designated by Lender and to receive
and open all mail addressed to such Grantor and to deal with all mail
addressed to such Grantor relating to the Collateral or the rights and
remedies of any of the Lenders hereunder or under any of the Collateral
Documents.
(c) SALE OR OTHER DISPOSITION OF COLLATERAL BY LENDER. Any
notice required to be given by Agent of a sale, lease or other
disposition of, or other intended action by Agent with respect to, any
Collateral of a Grantor which is deposited in the United States
certified or registered mail, postage prepaid and duly addressed to
such Grantor at the address specified in SECTION 13 below, at least ten
(10) Business Days prior to such proposed action shall constitute fair
and reasonable notice to such Grantor of any such action, provided,
that Agent may give any shorter notice that is commercially reasonable
under the circumstances. The net proceeds realized by Agent upon any
such sale or other disposition, after deduction for the Expenses
incurred by Agent in connection therewith, shall be applied as provided
in SECTION 4.11 of the Credit Agreement toward satisfaction of the
Secured Obligations. Agent shall account to the respective Grantors for
any surplus realized upon any such sale or other disposition, and
Grantors shall remain jointly and severally liable for any deficiency.
The commencement of any action, legal or equitable, or the rendering of
any judgment or decree or any deficiency shall not affect Agent's
security interest in the Collateral until the Secured Obligations are
fully paid. Each of the Grantors agrees that Agent has no obligation to
preserve rights to the Collateral against any other Persons.
(d) WAIVER OF DEMAND, ETC.. Each of the Grantors hereby
waives presentment and demand for payment of any of the
Secured Obligations, protest and notice of dishonor or of the
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occurrence of any default with respect to any of the Secured
Obligations, and all other notices to which the Grantors might
otherwise be entitled, except as otherwise expressly provided herein,
in the Credit Agreement or in any of the other Credit Documents. Each
of the Grantors also waives the benefit of all valuation, appraisal and
exemption laws.
(e) COSTS AND EXPENSES. The Grantors also jointly and
severally agree to pay all Expenses incurred by Agent and each of the
Lenders in connection with the enforcement of their respective rights
and remedies hereunder.
11. LIMITATION ON DUTY IN RESPECT OF COLLATERAL. Agent and each of the
Lenders shall use reasonable care with respect to any Collateral in their
possession or under their control. Neither Agent nor any of the Lenders shall
have any duty as to any Collateral in its possession or control or in the
possession or control of any agent or nominee of any of such Persons or any
income thereon or as to the preservation of rights against prior parties or any
other rights pertaining thereto. Upon the request of Grantors, Agent shall
promptly account for any monies received by it in respect of any foreclosing on
or disposition of the Collateral.
12. REINSTATEMENT. This Security Agreement shall remain in full force
and effect and continue to be effective should any petition be filed by or
against any of the Grantors for liquidation or reorganization, should any of the
Grantors become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of the
assets of any of the Grantors, and shall continue to be effective or be
reinstated, as the case may be, if at any time payment, observance or
performance of the Secured Obligations, or any part thereof is, pursuant to
applicable law, rescinded or reduced in amount, or shall otherwise be restored
or returned by any obligee of the Secured Obligations, whether as a "voidable
preference", "fraudulent conveyance", or otherwise, all as though such payment
or performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned, the Secured Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
13. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request,
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<PAGE> 19
consent, approval, declaration or other communication shall or may be given to
or served upon any of the parties by any other party, or whenever any of the
parties desires to give or serve upon any other communication with respect to
this Security Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given (and
deemed to have been given) in the manner and to the respective addresses set
forth in SECTION 11.7 of the Credit Agreement. Failure or delay in delivering
copies of any such notice, demand, request, consent, approval, declaration or
other communication to any Persons designated in this Security Agreement or any
other Credit Document to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
14. SEVERABILITY. In case any provision in or obligation under
this Security Agreement or any Credit Document 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.
15. NO WAIVER; CUMULATIVE REMEDIES.
(a) Neither Agent nor any of the Lenders shall by any act,
delay, omission or otherwise be deemed to have waived any of its rights
or remedies hereunder, and no waiver shall be valid unless in writing,
approved by the Majority Lenders (or by all Lenders where the approval
of each Lender is required under the Credit Agreement) and signed by
Agent, and then only to the extent therein set forth. A waiver by Agent
or any of the Lenders of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which
Agent would otherwise have had on any future occasion. No failure to
exercise nor any delay in exercising on the part of Agent or any of the
Lenders, any right, power or privilege hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any right,
power or privilege hereunder preclude any other or future exercise
thereof or the exercise of any other right, power or privilege.
(b) The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and
are not exclusive of any rights and remedies provided by law
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<PAGE> 20
or any of the other Credit Documents. None of the terms or provisions
of this Security Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by Agent and, where
applicable, by each of the Grantors.
16. SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of each of the Grantors hereunder shall be binding upon the
successors and assigns of such Grantor and shall, together with the rights and
remedies of Agent and each of the Lenders hereunder, inure to the benefit of
Agent and the Lenders and their respective successors and assigns.
17. FURTHER INDEMNIFICATION. Each of the Grantors agrees to pay, and
to save Agent and each of the Lenders harmless from and against, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
excise, sales or other taxes which may be payable or determined to be payable
with respect to any of the Collateral or in connection with any of the
transactions contemplated by this Security Agreement.
18. CHOICE OF LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF
LAWS PROVISIONS.
19. WAIVER OF JURY TRIAL. EACH OF THE GRANTORS HEREBY WAIVES ANY RIGHT
TO A TRIAL BY JURY. INSTEAD, ANY DISPUTES WILL BE RESOLVED IN A BENCH TRIAL.
20. BOND. EACH OF THE GRANTORS HEREBY WAIVES THE POSTING OF ANY BOND
OTHERWISE REQUIRED TO BE POSTED BY AGENT OR ANY OF THE LENDERS IN CONNECTION
WITH ANY JUDICIAL PROCESS OR PROCEEDING TO OBTAIN POSSESSION OF, REPLEVY,
ATTACH, OR LEVY UPON COLLATERAL OR ANY OTHER SECURITY FOR THE SECURED
OBLIGATIONS, TO ENFORCE OR APPEAL ANY JUDGMENT OR OTHER COURT ORDER ENTERED IN
FAVOR OF AGENT OR ANY OF THE LENDERS, OR IN FAVOR OF THE HAWK FUNDS
ADMINISTRATOR OR ANY OF THE GRANTORS, AS THE CASE MAY BE, OR TO ENFORCE BY
SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR PERMANENT
INJUNCTION, THIS SECURITY AGREEMENT OR ANY OF THE OTHER CREDIT DOCUMENTS.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 21
IN WITNESS WHEREOF, each of the Grantors has caused this
Security Agreement to be executed and delivered by its duly authorized officer
as of the date first set forth above.
FRICTION PRODUCTS CO.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HAWK BRAKE, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HELSEL, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HUTCHINSON PRODUCTS CORPORATION
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
Security Agreement
<PAGE> 22
LOGAN METAL STAMPINGS, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
S.K. WELLMAN HOLDINGS, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
S.K. WELLMAN CORP.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
WELLMAN FRICTION PRODUCTS U.K.
CORP.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
ACCEPTED AND ACKNOWLEDGED,
AS OF NOVEMBER 27, 1996:
BT COMMERCIAL CORPORATION,
as Agent
By: /s/ Wayne D. Hillock
--------------------------
Its: Senior Vice President
-------------------------
Security Agreement
<PAGE> 1
EXHIBIT 10.17
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("AGREEMENT") made as of November 27,
1996, is executed by and between S.K. WELLMAN CORP., a Delaware corporation (the
"GRANTOR"), and BT COMMERCIAL CORPORATION, a Delaware corporation, acting in its
capacity as agent (in such capacity, "AGENT") for itself and each of the other
"Lenders" (as such term is defined in the Credit Agreement referred to below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement of even date
herewith (such Credit Agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being hereinafter referred to as the
"CREDIT AGREEMENT"), among the Grantor and certain affiliates of the Grantor
(the Grantor and each of such affiliates being hereinafter referred to
collectively as the "BORROWERS"), Agent, Lenders and Hawk Corporation, a
Delaware corporation, in its capacity as borrowing agent for the Borrowers
thereunder, Lenders have severally agreed to make certain loans and other
extensions of credit to or for the account of the Borrowers upon the terms and
subject to the conditions set forth therein;
WHEREAS, Grantor and Agent are parties to that certain General Security
Agreement of even date herewith (as amended, restated, supplemented or otherwise
modified from time to time, the "SECURITY AGREEMENT"), pursuant to which Grantor
has granted a security interest in certain of its assets to Agent for its
benefit and the ratable benefit of Lenders; and
WHEREAS, Lenders have required, as a condition, among others, to the
making of any loans or other extensions of credit under the Credit Agreement,
that Grantor execute and deliver this Agreement to Agent for its benefit and for
the ratable benefit of Lenders;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINED TERMS.
<PAGE> 2
(a) Unless otherwise defined herein, each capitalized term used herein
that is defined in the Credit Agreement shall have the meaning specified for
such term in the Credit Agreement. Unless otherwise defined herein or in the
Credit Agreement, each capitalized term used herein that is defined in the
Security Agreement shall have the meaning specified for such term in the
Security Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. INCORPORATION OF PREMISES. The premises set forth above are
incorporated into this Agreement by this reference thereto and are made a part
hereof.
3. INCORPORATION OF THE SECURITY AGREEMENT. The Credit Agreement and
the terms and provisions thereof are hereby incorporated herein in their
entirety by this reference thereto.
4. SECURITY INTEREST IN TRADEMARKS. To secure the prompt and complete
payment, performance and observance of all Obligations, Grantor hereby grants to
Agent for its benefit and the ratable benefit of Lenders a security interest in,
as and by way of a first mortgage and security interest having priority over all
other security interests, with power of sale to the extent permitted by
applicable law, all of Grantor's now owned or existing and hereafter acquired or
arising:
(a) trademarks, registered trademarks, trademark applications,
service marks, registered service marks and service mark applications,
including, without limitation, the trademarks, registered trademarks,
trademark applications, service marks, registered service marks and
service mark applications listed on SCHEDULE A attached hereto and made
a part hereof, and (i) all renewals thereof, (ii) all income,
royalties, damages and payments now and hereafter due and/or payable
under and with respect thereto, including, without
-2-
<PAGE> 3
limitation, payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or
dilutions thereof, (iii) the right to sue for past, present and future
infringements and dilutions thereof, (iv) the goodwill of Grantor's
business symbolized by the foregoing and connected therewith, and (v)
all of Grantor's rights corresponding thereto throughout the world (all
of the foregoing trademarks, registered trademarks and trademark
applications, and service marks, registered service marks and service
mark applications, together with the items described in CLAUSES (i)-(v)
in this PARAGRAPH 4(a), are sometimes hereinafter individually and/or
collectively referred to as the "TRADEMARKS"); and
(b) rights under or interests in any trademark license
agreements or service mark license agreements with any other party,
whether Grantor is a licensee or licensor under any such license
agreement, including, without limitation, those trademark license
agreements and service mark license agreements listed on SCHEDULE B
attached hereto and made a part hereof, together with any goodwill
connected with and symbolized by any such trademark license agreements
or service mark license agreements, and the right to prepare for sale
and sell any and all Inventory now or hereafter owned by Grantor and
now or hereafter covered by such licenses (all of the foregoing are
hereinafter referred to collectively as the "LICENSES").
5. RESTRICTIONS ON FUTURE AGREEMENTS. Grantor will not, without Agent's
prior written consent, enter into any agreement, including, without limitation,
any license agreement, which is inconsistent with this Agreement, and Grantor
further agrees that it will not take any action, and will use its best efforts
not to permit any action to be taken by others, including, without limitation,
licensees, or fail to take any action, which would in any material respect
affect the validity or enforcement of the rights transferred to Agent under this
Agreement.
6. NEW TRADEMARKS AND LICENSES. Grantor represents and warrants that,
from and after the Closing Date, (a) the Trademarks listed on SCHEDULE A include
all of the trademarks, registered trademarks, trademark applications, service
marks, registered service marks and service mark applications now owned or held
by Grantor, (b) the Licenses listed on SCHEDULE B include all of the trademark
license agreements and service mark license agreements
-3-
<PAGE> 4
under which Grantor is the licensee or licensor and (c) other than Permitted
Liens, no liens, claims or security interests in such Trademarks and Licenses
have been granted by Grantor to any Person other than Agent. If, prior to the
termination of this Agreement, Grantor shall (i) obtain rights to any new
trademarks, registered trademarks, trademark applications, service marks,
registered service marks or service mark applications, (ii) become entitled to
the benefit of any trademarks, registered trademarks, trademark applications,
trademark licenses, trademark license renewals, service marks, registered
service marks, service mark applications, service mark licenses or service mark
license renewals whether as licensee or licensor, or (iii) enter into any new
trademark license agreement or service mark license agreement, the provisions of
PARAGRAPH 4 above shall automatically apply thereto. Grantor shall give to Agent
written notice of events described in CLAUSES (i), (ii) and (iii) of the
preceding sentence promptly after the occurrence thereof, but in any event not
less frequently than on a quarterly basis. Grantor hereby undertakes to modify
and update (I) SCHEDULE A to include any future trademarks, registered
trademarks, trademark applications, service marks, registered service marks and
service mark applications and (ii) SCHEDULE B to include any future trademark
license agreements and service mark license agreements, which are Trademarks or
Licenses under PARAGRAPH 4 above or under this PARAGRAPH 6. Grantor hereby
authorizes Agent to file, in addition to and not in substitution for this
Agreement, a duplicate original of this Agreement containing on Schedule A or B
thereto, as the case may be, such future trademarks, registered trademarks,
trademark applications, service marks, registered service marks and service mark
applications, and trademark license agreements and service mark license
agreements.
7. ROYALTIES. Grantor hereby agrees that the use by Agent of the
Trademarks and Licenses as authorized hereunder in connection with Agent's
exercise of its rights and remedies under PARAGRAPH 15 or pursuant to SECTION 10
of the Security Agreement shall be coextensive with Grantor's rights thereunder
and with respect thereto and without any liability for royalties or other
related charges from Agent or any Lender to Grantor.
8. RIGHT TO INSPECT; FURTHER ASSIGNMENTS AND SECURITY INTERESTS. Agent
may at all reasonable times (and at any time when an Event of Default exists)
have access to, examine, audit, make copies (at Grantor's expense) and extracts
from and inspect Grantor's premises and examine Grantor's books, records and
-4-
<PAGE> 5
operations relating to the Trademarks and Licenses; PROVIDED, THAT in conducting
such inspections and examinations, Agent shall use reasonable efforts not to
disturb unnecessarily the conduct of Grantor's ordinary business operations.
From and after the occurrence of an Event of Default, Grantor agrees that Agent,
or a conservator appointed by Agent, shall have the right to establish such
reasonable additional product quality controls as Agent or such conservator, in
its sole and absolute judgment, may deem necessary to assure maintenance of the
quality of products sold by Grantor under the Trademarks and the Licenses or in
connection with which such Trademarks and Licenses are used. Grantor agrees (I)
not to sell or assign its respective interests in, or grant any license under,
the Trademarks or the Licenses without the prior and express written consent of
Agent, (II) to maintain the quality of such products as of the date hereof, and
(III) not to change the quality of such products in any material respect without
Agent's prior and express written consent.
9. NATURE AND CONTINUATION OF AGENT'S SECURITY INTEREST; TERMINATION OF
AGENT'S SECURITY INTEREST. This Agreement is made for collateral security
purposes only. This Agreement shall create a continuing security interest in the
Trademarks and Licenses and shall terminate only when the Obligations have been
paid and satisfied in full and the Credit Agreement, Security Agreement and all
of the other Credit Documents have terminated pursuant to the respective terms
and provisions thereof. When this Agreement has terminated, Agent shall promptly
execute and deliver to Grantor, at Grantor's expense, all termination statements
and other instruments as may be necessary or proper to terminate Agent's
security interest in the Trademarks and the Licenses, subject to any disposition
thereof which may have been made by Agent pursuant to this Agreement or the
Security Agreement.
10. DUTIES OF GRANTOR. Grantor shall have the duty, to the extent
desirable in the normal conduct of Grantor's business, to: (I) prosecute
diligently any trademark application or service mark application that is part of
the Trademarks pending as of the date hereof or hereafter until the termination
of this Agreement, and (ii) make application for trademarks or service marks
that are necessary in the operation of Grantor's business. Grantor further
agrees (i) not to abandon any Trademark or License without the prior written
consent of Agent, and (ii) to use its best efforts to maintain in full force and
effect the Trademarks and the Licenses that are or shall be necessary or
economically desirable in the operation of Grantor's business. Any expenses
incurred in
-5-
<PAGE> 6
connection with the foregoing shall be borne by Grantor. Neither Agent nor any
Lender shall have any duty with respect to the Trademarks and Licenses. Without
limiting the generality of the foregoing, neither Agent nor any Lender shall be
under any obligation to take any steps necessary to preserve rights in the
Trademarks or Licenses against any other parties, but may do so at its option
from and after the occurrence and during the continuance of an Event of Default,
and all expenses incurred in connection therewith shall be for the sole account
of Grantor and shall be added to the Obligations secured hereby.
11. AGENT'S RIGHT TO SUE. From and after the occurrence and during the
continuance of an Event of Default, Agent shall have the right, but shall not be
obligated, to bring suit in its own name to enforce the Trademarks and the
Licenses and, if Agent shall commence any such suit, Grantor shall, at the
request of Agent, do any and all lawful acts and execute any and all proper
documents required by Agent in aid of such enforcement. Grantor shall, upon
demand, promptly reimburse Agent for all costs and expenses incurred by Agent in
the exercise of its rights under this PARAGRAPH 11 (including, without
limitation, reasonable fees and expenses of attorneys and paralegals for Agent).
12. WAIVERS. Agent's failure, at any time or times hereafter, to
require strict performance by Grantor of any provision of this Agreement shall
not waive, affect or diminish any right of Agent thereafter to demand strict
compliance and performance therewith nor shall any course of dealing between
Grantor and Agent have such effect. No single or partial exercise of any right
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right. None of the undertakings, agreements, warranties, covenants
and representations of Grantor contained in this Agreement shall be deemed to
have been suspended or waived by Agent unless such suspension or waiver is in
writing signed by an officer of Agent and directed to Grantor specifying such
suspension or waiver.
13. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but the provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part hereof, in such jurisdiction, and shall not in
any manner affect such clause or
-6-
<PAGE> 7
provision in any other jurisdiction, or any other clause or provision of this
Agreement in any jurisdiction.
14. MODIFICATION. This Agreement cannot be altered, amended or
modified in any way, except by a writing signed by the parties hereto.
15. CUMULATIVE REMEDIES; POWER OF ATTORNEY. Grantor hereby irrevocably
designates, constitutes and appoints Agent (and all Persons designated by Agent
in its sole and absolute discretion) as Grantor's true and lawful
attorney-in-fact, with full power of substitution, and authorizes Agent and any
of Agent's designees, in Grantor's or Agent's name, upon the occurrence and
during the continuance of an Event of Default, to take any action and execute
any instrument which Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, and the giving by
Agent of notice to Grantor of Agent's intention to enforce its rights and claims
against Grantor, to (I) endorse Grantor's name on all applications, documents,
papers and instruments necessary or desirable for Agent in the use of the
Trademarks or the Licenses, (II) assign, pledge, convey or otherwise transfer
title in or dispose of the Trademarks or the Licenses to anyone on commercially
reasonable terms, (III) grant or issue any exclusive or nonexclusive license
under the Trademarks or, to the extent permitted, under the Licenses, to anyone
on commercially reasonable terms, and (IV) take any other actions with respect
to the Trademarks or the Licenses as Agent deems in its best interest. Grantor
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and shall be
irrevocable until all of the Obligations shall have been paid and satisfied in
full in cash and the Security Agreement, the Credit Agreement and each of the
other Credit Documents shall have terminated pursuant to the respective terms
and provisions thereof. Grantor acknowledges and agrees that this Agreement is
not intended to limit or restrict in any way the rights and remedies of Agent
under the Security Agreement, but rather is intended to facilitate the exercise
of such rights and remedies.
Agent shall have, in addition to all other rights and remedies given
it by the terms of this Agreement, all rights and remedies allowed by law and
the rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Trademarks or the Licenses may be
located or deemed located. Upon the occurrence of an Event of Default and the
election by
-7-
<PAGE> 8
Agent to exercise any of its remedies under Section 9-504 or Section 9-505 of
the Uniform Commercial Code with respect to the Trademarks and Licenses, Grantor
agrees to assign, convey and otherwise transfer title in and to the Trademarks
and the Licenses to Agent or any transferee of Agent and to execute and deliver
to Agent or any such transferee all such agreements, documents and instruments
as may be necessary, in Agent's sole discretion, to effect such assignment,
conveyance and transfer. All of Agent's rights and remedies with respect to the
Trademarks and the Licenses, whether established hereby, by the Security
Agreement, by any other agreements or by law, shall be cumulative and may be
exercised separately or concurrently. Notwithstanding anything set forth herein
to the contrary, it is hereby expressly agreed that upon the occurrence and
during the continuance of an Event of Default, Agent may exercise any of the
rights and remedies provided in this Agreement, the Security Agreement and any
of the other Credit Documents. Grantor agrees that any notification of intended
disposition of any of the Trademarks and Licenses required by law shall be
deemed reasonably and properly given if given at least ten (10) Business Days
before such disposition; PROVIDED, THAT Agent may give any shorter notice that
is commercially reasonable under the circumstances.
16. SUCCESSORS AND ASSIGNS. This Agreement and all obligations of
Grantor hereunder shall be binding upon the successors and assigns of Grantor
and shall, together with the rights and remedies of Agent and each of the
Lenders hereunder, inure to the benefit of Agent and the Lenders and their
respective successors and assigns.
17. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communications shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be given (and deemed to have been given) in the
manner and to the respective addresses set forth in SECTION 11.7 of the Credit
Agreement. Failure or delay in delivering copies of any such notice, demand,
request, consent, approval, declaration or other communication to any Persons
designated in the Credit Agreement to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
-8-
<PAGE> 9
18. CHOICE OF LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS TRADEMARK SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS.
19. SECTION TITLES. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
20. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
21. MERGER. This Agreement and the Credit Documents represent the
final agreement of Grantor and Agent with respect to the matters contained
herein and may not be contradicted by evidence of prior or contemporaneous
agreements, or subsequent oral agreements, between Grantor and Agent or between
Grantor and Lenders.
-9-
<PAGE> 10
IN WITNESS WHEREOF, Agent and Grantor have each caused this Agreement
to be executed and delivered by its duly authorized officers as of the date
first set forth above.
S.K. WELLMAN CORP., a Delaware
corporation
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
ACCEPTED AND AGREED TO AS OF
THE 27TH DAY OF NOVEMBER, 1996
BT COMMERCIAL CORPORATION, as Agent
By: /s/ Wayne D. Hillock
----------------------------------
Wayne D. Hillock
Senior Vice President
Trademark Security Agreement
<PAGE> 11
SCHEDULE A
TO
TRADEMARK SECURITY AGREEMENT
DATED AS OF NOVEMBER 27, 1996
TRADEMARKS
----------
<TABLE>
<CAPTION>
Trademark Registration Date Registration
- --------- ----------------- ------------
No.
<S> <C> <C>
FERAMIC 2/26/57 (Renewed 2/26/77) 642082
VELVETOUCH FERAMIC 10/2/56 (Renewed 10/2/76) 635202
VELVETOUCH 1/16/45 (Renewed 1/16/85) 411420
VELVETOUCH 9/26/33 (Renewed 9/26/93) 306579
FIBERSTUFF 10/23/90 1618791
VELVETOUCH ORGANIK 3/31/64 (Renewed 3/31/84) 767578
VELVETOUCH METALIK 3/6/62 (Renewed 3/6/82) 728316
VELVETOUCH CERAMIC 6/24/58 (Renewed 6/24/78) 663473
</TABLE>
TRADEMARK AND SERVICE MARK APPLICATIONS
---------------------------------------
Trademark Application Date Serial No.
- --------- ---------------- ----------
NONE
<PAGE> 12
SCHEDULE B
TO
TRADEMARK SECURITY AGREEMENT
DATED AS OF NOVEMBER 27, 1996
LICENSE AGREEMENTS
------------------
NONE
<PAGE> 13
STATE OF Ohio )
--------------------
) SS
COUNTY OF Cuyahoga )
--------------------
The foregoing Trademark Security Agreement was acknowledged before me
this 27TH day of November, 1996, by Thomas A. Gilbride, a Vice President-Finance
of S.K. WELLMAN CORP., a Delaware corporation, on behalf of such corporation.
/s/ Cheryl A. Sturges
-----------------------------
Notary Public
------, ----------------------
My commission expires:_______
CHERYL A. STURGES
Notary Public, State of Ohio, Cuy. Cty.
My Commission Expires June 27, 1999
Trademark Security Agreement
<PAGE> 14
STATE OF )
-------------------
) SS
COUNTY OF )
-------------------
The foregoing Trademark Security Agreement was acknowledged before me
this 27TH day of November, 1996, by Wayne D. Hillock, a Senior Vice President of
BT COMMERCIAL CORPORATION, a Delaware corporation, on behalf of such
corporation.
-----------------------------
Notary Public
_________ County, ____________
My commission expires:_______
Trademark Security Agreement
<PAGE> 1
EXHIBIT 10.18
TRADEMARK SECURITY AGREEMENT
THIS TRADEMARK SECURITY AGREEMENT ("AGREEMENT") made as of November 27,
1996, is executed by and between FRICTION PRODUCTS CO., an Ohio corporation (the
"GRANTOR"), and BT COMMERCIAL CORPORATION, a Delaware corporation, acting in its
capacity as agent (in such capacity, "AGENT") for itself and each of the other
"Lenders" (as such term is defined in the Credit Agreement referred to below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement of even date
herewith (such Credit Agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being hereinafter referred to as the
"CREDIT AGREEMENT"), among the Grantor and certain affiliates of the Grantor
(the Grantor and each of such affiliates being hereinafter referred to
collectively as the "BORROWERS"), Agent, Lenders and Hawk Corporation, a
Delaware corporation, in its capacity as borrowing agent for the Borrowers
thereunder, Lenders have severally agreed to make certain loans and other
extensions of credit to or for the account of the Borrowers upon the terms and
subject to the conditions set forth therein;
WHEREAS, Grantor and Agent are parties to that certain General Security
Agreement of even date herewith (as amended, restated, supplemented or otherwise
modified from time to time, the "SECURITY AGREEMENT"), pursuant to which Grantor
has granted a security interest in certain of its assets to Agent for its
benefit and the ratable benefit of Lenders; and
WHEREAS, Lenders have required, as a condition, among others, to the
making of any loans or other extensions of credit under the Credit Agreement,
that Grantor execute and deliver this Agreement to Agent for its benefit and for
the ratable benefit of Lenders;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINED TERMS.
<PAGE> 2
(a) Unless otherwise defined herein, each capitalized term used herein
that is defined in the Credit Agreement shall have the meaning specified for
such term in the Credit Agreement. Unless otherwise defined herein or in the
Credit Agreement, each capitalized term used herein that is defined in the
Security Agreement shall have the meaning specified for such term in the
Security Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and VICE VERSA, unless otherwise
specified.
2. INCORPORATION OF PREMISES. The premises set forth above are
incorporated into this Agreement by this reference thereto and are made a part
hereof.
3. INCORPORATION OF THE SECURITY AGREEMENT. The Credit Agreement and
the terms and provisions thereof are hereby incorporated herein in their
entirety by this reference thereto.
4. SECURITY INTEREST IN TRADEMARKS. To secure the prompt and complete
payment, performance and observance of all Obligations, Grantor hereby grants to
Agent for its benefit and the ratable benefit of Lenders a security interest in,
as and by way of a first mortgage and security interest having priority over all
other security interests, with power of sale to the extent permitted by
applicable law, all of Grantor's now owned or existing and hereafter acquired or
arising:
(a) trademarks, registered trademarks, trademark applications,
service marks, registered service marks and service mark applications,
including, without limitation, the trademarks, registered trademarks,
trademark applications, service marks, registered service marks and
service mark applications listed on SCHEDULE A attached hereto and made
a part hereof, and (i) all renewals thereof, (ii) all income,
royalties, damages and payments now and hereafter due and/or payable
under and with respect thereto, including, without
-2-
<PAGE> 3
limitation, payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or
dilutions thereof, (iii) the right to sue for past, present and future
infringements and dilutions thereof, (iv) the goodwill of Grantor's
business symbolized by the foregoing and connected therewith, and (v)
all of Grantor's rights corresponding thereto throughout the world (all
of the foregoing trademarks, registered trademarks and trademark
applications, and service marks, registered service marks and service
mark applications, together with the items described in CLAUSES (i)-(v)
in this PARAGRAPH 4(a), are sometimes hereinafter individually and/or
collectively referred to as the "TRADEMARKS"); and
(b) rights under or interests in any trademark license
agreements or service mark license agreements with any other party,
whether Grantor is a licensee or licensor under any such license
agreement, including, without limitation, those trademark license
agreements and service mark license agreements listed on SCHEDULE B
attached hereto and made a part hereof, together with any goodwill
connected with and symbolized by any such trademark license agreements
or service mark license agreements, and the right to prepare for sale
and sell any and all Inventory now or hereafter owned by Grantor and
now or hereafter covered by such licenses (all of the foregoing are
hereinafter referred to collectively as the "LICENSES").
5. RESTRICTIONS ON FUTURE AGREEMENTS. Grantor will not, without Agent's
prior written consent, enter into any agreement, including, without limitation,
any license agreement, which is inconsistent with this Agreement, and Grantor
further agrees that it will not take any action, and will use its best efforts
not to permit any action to be taken by others, including, without limitation,
licensees, or fail to take any action, which would in any material respect
affect the validity or enforcement of the rights transferred to Agent under this
Agreement.
6. NEW TRADEMARKS AND LICENSES. Grantor represents and warrants that,
from and after the Closing Date, (a) the Trademarks listed on SCHEDULE A include
all of the trademarks, registered trademarks, trademark applications, service
marks, registered service marks and service mark applications now owned or held
by Grantor, (b) the Licenses listed on SCHEDULE B include all of the trademark
license agreements and service mark license agreements
-3-
<PAGE> 4
under which Grantor is the licensee or licensor and (c) other than Permitted
Liens, no liens, claims or security interests in such Trademarks and Licenses
have been granted by Grantor to any Person other than Agent. If, prior to the
termination of this Agreement, Grantor shall (i) obtain rights to any new
trademarks, registered trademarks, trademark applications, service marks,
registered service marks or service mark applications, (ii) become entitled to
the benefit of any trademarks, registered trademarks, trademark applications,
trademark licenses, trademark license renewals, service marks, registered
service marks, service mark applications, service mark licenses or service mark
license renewals whether as licensee or licensor, or (iii) enter into any new
trademark license agreement or service mark license agreement, the provisions of
PARAGRAPH 4 above shall automatically apply thereto. Grantor shall give to Agent
written notice of events described in CLAUSES (i), (ii) and (iii) of the
preceding sentence promptly after the occurrence thereof, but in any event not
less frequently than on a quarterly basis. Grantor hereby undertakes to modify
and update (i) by amending SCHEDULE A to include any future trademarks,
registered trademarks, trademark applications, service marks, registered service
marks and service mark applications and (ii) SCHEDULE B to include any future
trademark license agreements and service mark license agreements, which are
Trademarks or Licenses under PARAGRAPH 4 above or under this PARAGRAPH 6.
Grantor hereby authorizes Agent to file, in addition to and not in substitution
for this Agreement, a duplicate original of this Agreement containing on
Schedule A or B thereto, as the case may be, such future trademarks, registered
trademarks, trademark applications, service marks, registered service marks and
service mark applications, and trademark license agreements and service mark
license agreements.
7. ROYALTIES. Grantor hereby agrees that the use by Agent of the
Trademarks and Licenses as authorized hereunder in connection with Agent's
exercise of its rights and remedies under PARAGRAPH 15 or pursuant to SECTION 10
of the Security Agreement shall be coextensive with Grantor's rights thereunder
and with respect thereto and without any liability for royalties or other
related charges from Agent or any Lender to Grantor.
8. RIGHT TO INSPECT; FURTHER ASSIGNMENTS AND SECURITY INTERESTS. Agent
may at all reasonable times (and at any time when an Event of Default exists)
have access to, examine, audit, make copies (at Grantor's expense) and extracts
from and inspect Grantor's premises and examine Grantor's books, records and
-4-
<PAGE> 5
operations relating to the Trademarks and Licenses; PROVIDED, THAT in conducting
such inspections and examinations, Agent shall use reasonable efforts not to
disturb unnecessarily the conduct of Grantor's ordinary business operations.
From and after the occurrence of an Event of Default, Grantor agrees that Agent,
or a conservator appointed by Agent, shall have the right to establish such
reasonable additional product quality controls as Agent or such conservator, in
its sole and absolute judgment, may deem necessary to assure maintenance of the
quality of products sold by Grantor under the Trademarks and the Licenses or in
connection with which such Trademarks and Licenses are used. Grantor agrees (i)
not to sell or assign its respective interests in, or grant any license under,
the Trademarks or the Licenses without the prior and express written consent of
Agent, (ii) to maintain the quality of such products as of the date hereof, and
(iii) not to change the quality of such products in any material respect without
Agent's prior and express written consent.
9. NATURE AND CONTINUATION OF AGENT'S SECURITY INTEREST; TERMINATION OF
AGENT'S SECURITY INTEREST. This Agreement is made for collateral security
purposes only. This Agreement shall create a continuing security interest in the
Trademarks and Licenses and shall terminate only when the Obligations have been
paid and satisfied in full and the Credit Agreement, Security Agreement and all
of the other Credit Documents have terminated pursuant to the respective terms
and provisions thereof. When this Agreement has terminated, Agent shall promptly
execute and deliver to Grantor, at Grantor's expense, all termination statements
and other instruments as may be necessary or proper to terminate Agent's
security interest in the Trademarks and the Licenses, subject to any disposition
thereof which may have been made by Agent pursuant to this Agreement or the
Security Agreement.
10. DUTIES OF GRANTOR. Grantor shall have the duty, to the extent
desirable in the normal conduct of Grantor's business, to: (I) prosecute
diligently any trademark application or service mark application that is part of
the Trademarks pending as of the date hereof or hereafter until the termination
of this Agreement, and (ii) make application for trademarks or service marks
that are necessary in the operation of Grantor's business. Grantor further
agrees (i) not to abandon any Trademark or License without the prior written
consent of Agent, and (ii) to use its best efforts to maintain in full force and
effect the Trademarks and the Licenses that are or shall be necessary or
economically desirable in the operation of Grantor's business. Any expenses
incurred in
-5-
<PAGE> 6
connection with the foregoing shall be borne by Grantor. Neither Agent nor any
Lender shall have any duty with respect to the Trademarks and Licenses. Without
limiting the generality of the foregoing, neither Agent nor any Lender shall be
under any obligation to take any steps necessary to preserve rights in the
Trademarks or Licenses against any other parties, but may do so at its option
from and after the occurrence and during the continuance of an Event of Default,
and all expenses incurred in connection therewith shall be for the sole account
of Grantor and shall be added to the Obligations secured hereby.
11. AGENT'S RIGHT TO SUE. From and after the occurrence and during the
continuance of an Event of Default, Agent shall have the right, but shall not be
obligated, to bring suit in its own name to enforce the Trademarks and the
Licenses and, if Agent shall commence any such suit, Grantor shall, at the
request of Agent, do any and all lawful acts and execute any and all proper
documents required by Agent in aid of such enforcement. Grantor shall, upon
demand, promptly reimburse Agent for all costs and expenses incurred by Agent in
the exercise of its rights under this PARAGRAPH 11 (including, without
limitation, reasonable fees and expenses of attorneys and paralegals for Agent).
12. WAIVERS. Agent's failure, at any time or times hereafter, to
require strict performance by Grantor of any provision of this Agreement shall
not waive, affect or diminish any right of Agent thereafter to demand strict
compliance and performance therewith nor shall any course of dealing between
Grantor and Agent have such effect. No single or partial exercise of any right
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right. None of the undertakings, agreements, warranties, covenants
and representations of Grantor contained in this Agreement shall be deemed to
have been suspended or waived by Agent unless such suspension or waiver is in
writing signed by an officer of Agent and directed to Grantor specifying such
suspension or waiver.
13. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but the provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part hereof, in such jurisdiction, and shall not in
any manner affect such clause or
-6-
<PAGE> 7
provision in any other jurisdiction, or any other clause or provision of
this Agreement in any jurisdiction.
14. MODIFICATION. This Agreement cannot be altered, amended or
modified in any way, except by a writing signed by the parties hereto.
15. CUMULATIVE REMEDIES; POWER OF ATTORNEY. Grantor hereby irrevocably
designates, constitutes and appoints Agent (and all Persons designated by Agent
in its sole and absolute discretion) as Grantor's true and lawful
attorney-in-fact, with full power of substitution, and authorizes Agent and any
of Agent's designees, in Grantor's or Agent's name, upon the occurrence and
during the continuance of an Event of Default to take any action and execute any
instrument which Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, and the giving by
Agent of notice to Grantor of Agent's intention to enforce its rights and claims
against Grantor, to (i) endorse Grantor's name on all applications, documents,
papers and instruments necessary or desirable for Agent in the use of the
Trademarks or the Licenses, (ii) assign, pledge, convey or otherwise transfer
title in or dispose of the Trademarks or the Licenses to anyone on commercially
reasonable terms, (iii) grant or issue any exclusive or nonexclusive license
under the Trademarks or, to the extent permitted, under the Licenses, to anyone
on commercially reasonable terms, and (iv) take any other actions with respect
to the Trademarks or the Licenses as Agent deems in its best interest. Grantor
hereby ratifies all that such attorney shall lawfully do or cause to be done by
virtue hereof. This power of attorney is coupled with an interest and shall be
irrevocable until all of the Obligations shall have been paid and satisfied in
full in cash and the Security Agreement, the Credit Agreement and each of the
other Credit Documents shall have terminated pursuant to the respective terms
and provisions thereof. Grantor acknowledges and agrees that this Agreement is
not intended to limit or restrict in any way the rights and remedies of Agent
under the Security Agreement, but rather is intended to facilitate the exercise
of such rights and remedies.
Agent shall have, in addition to all other rights and remedies given
it by the terms of this Agreement, all rights and remedies allowed by law and
the rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Trademarks or the Licenses may be
located or deemed located. Upon the occurrence of an Event of Default and the
election by
-7-
<PAGE> 8
Agent to exercise any of its remedies under Section 9-504 or Section 9-505 of
the Uniform Commercial Code with respect to the Trademarks and Licenses, Grantor
agrees to assign, convey and otherwise transfer title in and to the Trademarks
and the Licenses to Agent or any transferee of Agent and to execute and deliver
to Agent or any such transferee all such agreements, documents and instruments
as may be necessary, in Agent's sole discretion, to effect such assignment,
conveyance and transfer. All of Agent's rights and remedies with respect to the
Trademarks and the Licenses, whether established hereby, by the Security
Agreement, by any other agreements or by law, shall be cumulative and may be
exercised separately or concurrently. Notwithstanding anything set forth herein
to the contrary, it is hereby expressly agreed that upon the occurrence and
during the continuance of an Event of Default, Agent may exercise any of the
rights and remedies provided in this Agreement, the Security Agreement and any
of the other Credit Documents. Grantor agrees that any notification of intended
disposition of any of the Trademarks and Licenses required by law shall be
deemed reasonably and properly given if given at least ten (10) Business Days
before such disposition; PROVIDED, THAT Agent may give any shorter notice that
is commercially reasonable under the circumstances.
16. SUCCESSORS AND ASSIGNS. This Agreement and all obligations of
Grantor hereunder shall be binding upon the successors and assigns of Grantor
and shall, together with the rights and remedies of Agent and each of the
Lenders hereunder, inure to the benefit of Agent and the Lenders and their
respective successors and assigns.
17. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communications shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be given (and deemed to have been given) in the
manner and to the respective addresses set forth in SECTION 11.7 of the Credit
Agreement. Failure or delay in delivering copies of any such notice, demand,
request, consent, approval, declaration or other communication to any Persons
designated in the Credit Agreement to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
-8-
<PAGE> 9
18. CHOICE OF LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS TRADEMARK SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS,
WITHOUT REGARD TO CONFLICT OF LAWS PROVISIONS.
19. SECTION TITLES. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
20. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
21. MERGER. This Agreement and the Credit Documents represent the
final agreement of Grantor and Agent with respect to the matters contained
herein and may not be contradicted by evidence of prior or contemporaneous
agreements, or subsequent oral agreements, between Grantor and Agent or between
Grantor and Lenders.
-9-
<PAGE> 10
IN WITNESS WHEREOF, Agent and Grantor have each caused this Agreement
to be executed and delivered by its duly authorized officers as of the date
first set forth above.
FRICTION PRODUCTS CO., an Ohio
corporation
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
ACCEPTED AND AGREED TO AS OF
THE 27TH DAY OF NOVEMBER, 1996
BT COMMERCIAL CORPORATION, as Agent
By: /S/ Wayne D. Hillock
--------------------------------------
Wayne D. Hillock
Senior Vice President
Trademark Security Agreement
<PAGE> 11
SCHEDULE A
TO
TRADEMARK SECURITY AGREEMENT
DATED AS OF NOVEMBER 27, 1996
TRADEMARKS
----------
Trademark Registration Date Registration No.
- --------- ----------------- ----------------
NONE
TRADEMARK AND SERVICE MARK APPLICATIONS
---------------------------------------
<TABLE>
<CAPTION>
Trademark Application Date Serial No.
- --------- ---------------- ----------
<S> <C> <C>
FERRO-CARBON 2/20/96 75-060228
</TABLE>
<PAGE> 12
SCHEDULE B
TO
TRADEMARK SECURITY AGREEMENT
DATED AS OF NOVEMBER 27, 1996
LICENSE AGREEMENTS
------------------
NONE
<PAGE> 13
STATE OF Ohio )
--------------------
) SS
COUNTY OF Cuyahoga )
--------------------
The foregoing Trademark Security Agreement was acknowledged before me
this 27TH day of November, 1996, by Thomas A. Gilbride, a Vice President-Finance
of FRICTION PRODUCTS CO., an Ohio corporation, on behalf of such corporation.
/s/ Cheryl A. Sturges
-----------------------------
Notary Public
------, ----------------------
My commission expires:_______
CHERYL A. STURGES
Notary Public, State of Ohio, Cuy. Cty.
My Commission Expires June 27, 1999
Trademark Security Agreement
<PAGE> 14
STATE OF )
-------------------
) SS
COUNTY OF )
-------------------
The foregoing Trademark Security Agreement was acknowledged before me
this 27TH day of November, 1996, by Wayne D. Hillock, a Senior Vice President of
BT COMMERCIAL CORPORATION, a Delaware corporation, on behalf of such
corporation.
-----------------------------
Notary Public
_________ County, ____________
My commission expires:_______
Trademark Security Agreement
<PAGE> 1
EXHIBIT 10.19
PATENT SECURITY AGREEMENT
THIS PATENT SECURITY AGREEMENT ("AGREEMENT") made as of November 27,
1996, is executed by and between S.K. WELLMAN CORP., a Delaware corporation (the
"GRANTOR"), and BT COMMERCIAL CORPORATION, a Delaware corporation, acting in its
capacity as agent (in such capacity, "AGENT") for itself and each of the other
"Lenders" (as such term is defined in the Credit Agreement referred to below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement of even date
herewith (such Credit Agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being hereinafter referred to as the
"CREDIT AGREEMENT"), among the Grantor and certain affiliates of the Grantor
(the Grantor and each of such affiliates being hereinafter referred to
collectively as the "BORROWERS"), Agent, Lenders and Hawk Corporation, a
Delaware corporation, in its capacity as borrowing agent for the Borrowers
thereunder, Lenders have severally agreed to make certain loans and other
extensions of credit to or for the account of the Borrowers upon the terms and
subject to the conditions set forth therein;
WHEREAS, Grantor and Agent are parties to that certain General
Security Agreement of even date herewith (as amended, restated, supplemented or
otherwise modified from time to time, the "SECURITY AGREEMENT"), pursuant to
which Grantor has granted a security interest in certain of its assets to Agent
for its benefit and the ratable benefit of Lenders; and
WHEREAS, Lenders have required, as a condition, among others, to the
making of any loans or other extensions of credit under the Credit Agreement,
that Grantor execute and deliver this Agreement to Agent for its benefit and for
the ratable benefit of Lenders;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE> 2
1. DEFINED TERMS.
(a) Unless otherwise defined herein, each capitalized term used herein
that is defined in the Credit Agreement shall have the meaning specified for
such term in the Credit Agreement. Unless otherwise defined herein or in the
Credit Agreement, each capitalized term used herein that is defined in the
Security Agreement shall have the meaning specified for such term in the
Security Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
(c) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and VICE VERSA, unless otherwise
specified.
2. INCORPORATION OF PREMISES. The premises set forth above are
incorporated into this Agreement by this reference thereto and are made a part
hereof.
3. INCORPORATION OF THE SECURITY AGREEMENT. The Credit Agreement and
the terms and provisions thereof are hereby incorporated herein in their
entirety by this reference thereto.
4. SECURITY INTEREST IN PATENTS. To secure the prompt and complete
payment, performance and observance of all Obligations, Grantor hereby grants to
Agent for its benefit and the ratable benefit of Lenders a security interest in,
as and by way of a first mortgage and security interest having priority over all
other security interests, with power of sale to the extent permitted by
applicable law, all of Grantor's now owned or existing and hereafter acquired or
arising:
(a) Patents, registered patents, patent applications,
including, without limitation, the patents, registered patents and
patent applications listed on SCHEDULE A attached hereto and made a
part hereof, and (i) all renewals thereof, (ii) all income, royalties,
damages and payments now and hereafter due and/or payable under and
with respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith and damages and payments
for past or
-2-
<PAGE> 3
future infringements or dilutions thereof, (iii) the right to sue for
past, present and future infringements and dilutions thereof, and (iv)
all of Grantor's rights corresponding thereto throughout the world (all
of the foregoing patents, registered patents and patent applications,
together with the items described in CLAUSES (i)-(iv) in this PARAGRAPH
4(a), are sometimes hereinafter individually and/or collectively
referred to as the "PATENTS"); and
(b) rights under or interests in any patent license agreements
with any other party, whether Grantor is a licensee or licensor under
any such license agreement, including, without limitation, those patent
license agreements listed on SCHEDULE B attached hereto and made a part
hereof, and the right to prepare for sale and sell any and all
Inventory now or hereafter owned by Grantor and now or hereafter
covered by such licenses (all of the foregoing are hereinafter referred
to collectively as the "LICENSES").
5. RESTRICTIONS ON FUTURE AGREEMENTS. Grantor will not, without Agent's
prior written consent, enter into any agreement, including, without limitation,
any license agreement, which is inconsistent with this Agreement, and Grantor
further agrees that it will not take any action, and will use its best efforts
not to permit any action to be taken by others, including, without limitation,
licensees, or fail to take any action, which would in any material respect
affect the validity or enforcement of the rights transferred to Agent under this
Agreement.
6. NEW PATENTS AND LICENSES. Grantor represents and warrants that, from
and after the Closing Date, (a) the Patents listed on SCHEDULE A include all of
the patents, registered patents and patent applications now owned or held by
Grantor, (b) the Licenses listed on SCHEDULE B include all of the patent license
agreements under which Grantor is the licensee or licensor and (c) other than
Permitted Liens, no liens, claims or security interests in such Patents and
Licenses have been granted by Grantor to any Person other than Agent. If, prior
to the termination of this Agreement, Grantor shall (i) obtain rights to any new
patentable inventions, registered patents or patent applications, (ii) become
entitled to the benefit of any patents, registered patents, patent applications,
patent licenses or patent license renewals, whether as licensee or licensor or
(iii) enter into any new patent license agreement, the provisions of PARAGRAPH 4
above shall automatically apply thereto. Grantor shall give to Agent written
notice of
-3-
<PAGE> 4
events described in CLAUSES (i), (ii) and (iii) of the preceding sentence
promptly after the occurrence thereof, but in any event not less frequently than
on a quarterly basis. Grantor hereby undertakes to modify and update (i)
SCHEDULE A to include any future patents, registered patents and patent
applications, and (ii) SCHEDULE B to include any future patent license
agreements which are Patents or Licenses under PARAGRAPH 4 above or under this
PARAGRAPH 6. Grantor hereby authorizes Agent to file, in addition to and not in
substitution for this Agreement, a duplicate original of this Agreement
containing on Schedule A or B thereto, as the case may be, such future patents,
registered patents and patent applications, and patent license agreements.
7. ROYALTIES. Grantor hereby agrees that the use by Agent of the
Patents and Licenses as authorized hereunder in connection with Agent's exercise
of its rights and remedies under PARAGRAPH 15 or pursuant to SECTION 10 of the
Security Agreement shall be coextensive with Grantor's rights thereunder and
with respect thereto and without any liability for royalties or other related
charges from Agent or any Lender to Grantor.
8. RIGHT TO INSPECT; FURTHER ASSIGNMENTS AND SECURITY INTERESTS. Agent
may at all reasonable times (and at any time when an Event of Default exists)
have access to, examine, audit, make copies (at Grantor's expense) and extracts
from and inspect Grantor's premises and examine Grantor's books, records and
operations relating to the Patents and Licenses; PROVIDED, THAT in conducting
such inspections and examinations, Agent shall use reasonable efforts not to
disturb unnecessarily the conduct of Grantor's ordinary business operations.
From and after the occurrence of an Event of Default, Grantor agrees that Agent,
or a conservator appointed by Agent, shall have the right to establish such
reasonable additional product quality controls as Agent or such conservator, in
its sole and absolute judgment, may deem necessary to assure maintenance of the
quality of products sold by Grantor under the Patents and the Licenses or in
connection with which such Patents and Licenses are used. Grantor agrees (i) not
to sell or assign its respective interests in, or grant any license under, the
Patents or the Licenses without the prior and express written consent of Agent,
(ii) to maintain the quality of such products as of the date hereof, and (iii)
not to change the quality of such products in any material respect without
Agent's prior and express written consent.
-4-
<PAGE> 5
9. NATURE AND CONTINUATION OF AGENT'S SECURITY INTEREST; TERMINATION OF
AGENT'S SECURITY INTEREST. This Agreement is made for collateral security
purposes only. This Agreement shall create a continuing security interest in the
Patents and Licenses and shall terminate only when the Obligations have been
paid and satisfied in full and the Credit Agreement, the Security Agreement and
all of the other Credit Documents have terminated pursuant to the respective
terms and provisions thereof. When this Agreement has terminated, Agent shall
promptly execute and deliver to Grantor, at Grantor's expense, all termination
statements and other instruments as may be necessary or proper to terminate
Agent's security interest in the Patents and the Licenses, subject to any
disposition thereof which may have been made by Agent pursuant to this Agreement
or the Security Agreement.
10. DUTIES OF GRANTOR. Grantor shall have the duty, to the extent
desirable in the normal conduct of Grantor's business, to: (i) prosecute
diligently any patent application that is part of the Patents pending as of the
date hereof or hereafter until the termination of this Agreement, and (ii) make
application for patents that are necessary in the operation of Grantor's
business. Grantor further agrees (i) not to abandon any Patent or License
without the prior written consent of Agent, and (ii) to use its best efforts to
maintain in full force and effect the Patents and the Licenses that are or shall
be necessary or economically desirable in the operation of Grantor's business.
Any expenses incurred in connection with the foregoing shall be borne by
Grantor. Neither Agent nor any Lender shall have any duty with respect to the
Patents and Licenses. Without limiting the generality of the foregoing, neither
Agent nor any Lender shall be under any obligation to take any steps necessary
to preserve rights in the Patents or Licenses against any other parties, but may
do so at its option from and after the occurrence and during the continuance of
an Event of Default, and all expenses incurred in connection therewith shall be
for the sole account of Grantor and shall be added to the Obligations secured
hereby.
11. AGENT'S RIGHT TO SUE. From and after the occurrence and during the
continuance of an Event of Default, Agent shall have the right, but shall not be
obligated, to bring suit in its own name to enforce the Patents and the Licenses
and, if Agent shall commence any such suit, Grantor shall, at the request of
Agent, do any and all lawful acts and execute any and all proper documents
required by Agent in aid of such enforcement. Grantor shall, upon demand,
promptly reimburse Agent for all costs and expenses incurred by
-5-
<PAGE> 6
Agent in the exercise of its rights under this PARAGRAPH 11 (including, without
limitation, reasonable fees and expenses of attorneys and paralegals for Agent).
12. WAIVERS. Agent's failure, at any time or times hereafter, to
require strict performance by Grantor of any provision of this Agreement shall
not waive, affect or diminish any right of Agent thereafter to demand strict
compliance and performance therewith nor shall any course of dealing between
Grantor and Agent have such effect. No single or partial exercise of any right
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right. None of the undertakings, agreements, warranties, covenants
and representations of Grantor contained in this Agreement shall be deemed to
have been suspended or waived by Agent unless such suspension or waiver is in
writing signed by an officer of Agent and directed to Grantor specifying such
suspension or waiver.
13. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but the provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part hereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
14. MODIFICATION. This Agreement cannot be altered, amended or
modified in any way, except by a writing signed by the parties hereto.
15. CUMULATIVE REMEDIES; POWER OF ATTORNEY. Grantor hereby irrevocably
designates, constitutes and appoints Agent (and all Persons designated by Agent
in its sole and absolute discretion) as Grantor's true and lawful
attorney-in-fact, with full power of substitution, and authorizes Agent and any
of Agent's designees, in Grantor's or Agent's name, upon the occurrence and
during the continuance of an Event of Default, to take any action and execute
any instrument which Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, and the giving by
Agent of notice to Grantor of Agent's intention to enforce its rights and claims
against Grantor, to (I) endorse Grantor's name on all applications, documents,
papers and
-6-
<PAGE> 7
instruments necessary or desirable for Agent in the use of the Patents or the
Licenses, (ii) assign, pledge, convey or otherwise transfer title in or dispose
of the Patents or the Licenses to anyone on commercially reasonable terms, (iii)
grant or issue any exclusive or nonexclusive license under the Patents or, to
the extent permitted, under the Licenses, to anyone on commercially reasonable
terms, and (iv) take any other actions with respect to the Patents or the
Licenses as Agent deems in its best interest. Grantor hereby ratifies all that
such attorney shall lawfully do or cause to be done by virtue hereof. This power
of attorney is coupled with an interest and shall be irrevocable until all of
the Obligations shall have been paid and satisfied in full in cash and the
Security Agreement, the Credit Agreement and each of the other Credit Documents
shall have terminated pursuant to the respective terms and provisions thereof.
Grantor acknowledges and agrees that this Agreement is not intended to limit or
restrict in any way the rights and remedies of Agent under the Security
Agreement, but rather is intended to facilitate the exercise of such rights and
remedies.
Agent shall have, in addition to all other rights and remedies given it
by the terms of this Agreement, all rights and remedies allowed by law and the
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Patents or the Licenses may be located
or deemed located. Upon the occurrence of an Event of Default and the election
by Agent to exercise any of its remedies under Section 9-504 or Section 9-505 of
the Uniform Commercial Code with respect to the Patents and Licenses, Grantor
agrees to assign, convey and otherwise transfer title in and to the Patents and
the Licenses to Agent or any transferee of Agent and to execute and deliver to
Agent or any such transferee all such agreements, documents and instruments as
may be necessary, in Agent's sole discretion, to effect such assignment,
conveyance and transfer. All of Agent's rights and remedies with respect to the
Patents and the Licenses, whether established hereby, by the Security Agreement,
by any other agreements or by law, shall be cumulative and may be exercised
separately or concurrently. Notwithstanding anything set forth herein to the
contrary, it is hereby expressly agreed that upon the occurrence and during the
continuance of an Event of Default, Agent may exercise any of the rights and
remedies provided in this Agreement, the Security Agreement and any of the other
Credit Documents. Grantor agrees that any notification of intended disposition
of any of the Patents and Licenses required by law shall be deemed reasonably
and properly given if given at least ten (10) Business
-7-
<PAGE> 8
Days before such disposition; PROVIDED, THAT Agent may give any shorter notice
that is commercially reasonable under the circumstances.
16. SUCCESSORS AND ASSIGNS. This Agreement and all obligations
hereunder shall be binding upon the successors and assigns of Grantor and shall
together with the rights and remedies of Agent and each of the Lenders
hereunder, inure to the benefit of Agent and the Lenders and their respective
successors and assigns.
17. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be given (and deemed to have been given) in the
manner and to the respective addresses set forth in SECTION 11.7 of the Credit
Agreement. Failure or delay in delivering copies of any such notice, demand,
request, consent, approval, declaration or other communication to any Persons
designated in the Credit Agreement to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
18. CHOICE OF LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS PATENT SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD
TO CONFLICT OF LAWS PROVISIONS.
19. SECTION TITLES. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
20. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
21. MERGER. This Agreement and the Credit Documents represent the
final agreement of Grantor and Agent with respect to the matters contained
herein and may not be contradicted by
-8-
<PAGE> 9
evidence of prior or contemporaneous agreements, or subsequent oral agreements,
between Grantor and Agent or between Grantor and Lenders.
[SIGNATURE PAGE FOLLOWS]
-9-
<PAGE> 10
IN WITNESS WHEREOF, Agent and Grantor have each caused this Agreement
to be executed and delivered by its duly authorized officer as of the date first
set forth above.
S.K. WELLMAN CORP., a Delaware corporation
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
ACCEPTED AND AGREED TO AS OF
THE 27TH DAY OF NOVEMBER, 1996
BT COMMERCIAL CORPORATION, as Agent
By: /s/ Wayne D. Hillock
-----------------------------------
Wayne D. Hillock
Senior Vice President
Patent Security Agreement
<PAGE> 11
SCHEDULE A
TO
PATENT SECURITY AGREEMENT
DATED AS OF NOVEMBER 27, 1996
PATENTS
-------
<TABLE>
<CAPTION>
Patent Registration Date Registration No.
- ------ ----------------- ----------------
<S> <C> <C>
Friction Disc 7/14/81 4,278,162
</TABLE>
PATENT APPLICATIONS
-------------------
Patent Application Date Serial No.
- ------ ---------------- ----------
NONE
<PAGE> 12
SCHEDULE B
TO
PATENT SECURITY AGREEMENT
DATED AS OF NOVEMBER 27, 1996
LICENSE AGREEMENTS
------------------
NONE
<PAGE> 13
STATE OF Ohio )
--------------------
) SS
COUNTY OF Cuyahoga )
--------------------
The foregoing Patent Security Agreement was acknowledged before me this
27TH day of November, 1996, by Thomas A. Gilbride, a Vice President-Finance of
S.K. WELLMAN CORP., a Delaware corporation, on behalf of such corporation.
/s/ Cheryl A. Sturges
-----------------------------
Notary Public
------, ----------------------
My commission expires:_______
CHERYL A. STURGES
Notary Public, State of Ohio, Cuy. Cty.
My Commission Expires June 27, 1999
Patent Security Agreement
<PAGE> 14
STATE OF )
--------------------
) SS
COUNTY OF )
--------------------
The foregoing Patent Security Agreement was acknowledged before me this
27TH day of November, 1996, by Wayne D. Hillock, a Senior Vice President of BT
COMMERCIAL CORPORATION, a Delaware corporation, on behalf of such corporation.
-----------------------------
Notary Public
-------------, --------------
My commission expires:_______
Patent Security Agreement
<PAGE> 1
EXHIBIT 10.20
PATENT SECURITY AGREEMENT
THIS PATENT SECURITY AGREEMENT ("AGREEMENT") made as of November 27,
1996, is executed by and between FRICTION PRODUCTS CO., an Ohio corporation (the
"GRANTOR"), and BT COMMERCIAL CORPORATION, a Delaware corporation, acting in its
capacity as agent (in such capacity, "AGENT") for itself and each of the other
"Lenders" (as such term is defined in the Credit Agreement referred to below).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Credit Agreement of even date
herewith (such Credit Agreement, as it may be amended, restated, supplemented or
otherwise modified from time to time, being hereinafter referred to as the
"CREDIT AGREEMENT"), among the Grantor and certain affiliates of the Grantor
(the Grantor and each of such affiliates being hereinafter referred to
collectively as the "BORROWERS"), Agent, Lenders and Hawk Corporation, a
Delaware corporation, in its capacity as borrowing agent for the Borrowers
thereunder, Lenders have severally agreed to make certain loans and other
extensions of credit to or for the account of the Borrowers upon the terms and
subject to the conditions set forth therein;
WHEREAS, Grantor and Agent are parties to that certain General Security
Agreement of even date herewith (as amended, restated, supplemented or otherwise
modified from time to time, the "SECURITY AGREEMENT"), pursuant to which Grantor
has granted a security interest in certain of its assets to Agent for its
benefit and the ratable benefit of Lenders; and
WHEREAS, Lenders have required, as a condition, among others, to the
making of any loans or other extensions of credit under the Credit Agreement,
that Grantor execute and deliver this Agreement to Agent for its benefit and for
the ratable benefit of Lenders;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
<PAGE> 2
1. DEFINED TERMS.
(A) Unless otherwise defined herein, each capitalized term used herein
that is defined in the Credit Agreement shall have the meaning specified for
such term in the Credit Agreement. Unless otherwise defined herein or in the
Credit Agreement, each capitalized term used herein that is defined in the
Security Agreement shall have the meaning specified for such term in the
Security Agreement.
(B) The words "hereof," "herein" and "hereunder" and words of like
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section references are to
this Agreement unless otherwise specified.
(C) All terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa, unless otherwise
specified.
2. INCORPORATION OF PREMISES. The premises set forth above are
incorporated into this Agreement by this reference thereto and are made a part
hereof.
3. INCORPORATION OF THE SECURITY AGREEMENT. The Credit Agreement and
the terms and provisions thereof are hereby incorporated herein in their
entirety by this reference thereto.
4. SECURITY INTEREST IN PATENTS. To secure the prompt and complete
payment, performance and observance of all Obligations, Grantor hereby grants to
Agent for its benefit and the ratable benefit of Lenders a security interest in,
as and by way of a first mortgage and security interest having priority over all
other security interests, with power of sale to the extent permitted by
applicable law, all of Grantor's now owned or existing and hereafter acquired or
arising:
(A) patents, registered patents, patent applications,
including, without limitation, the patents, registered patents and
patent applications listed on SCHEDULE A attached hereto and made a
part hereof, and (i) all renewals thereof, (ii) all income, royalties,
damages and payments now and hereafter due and/or payable under and
with respect thereto, including, without limitation, payments under all
licenses entered into in connection therewith and damages and payments
for past or
-2-
<PAGE> 3
future infringements or dilutions thereof, (iii) the right to sue for
past, present and future infringements and dilutions thereof, and (iv)
all of Grantor's rights corresponding thereto throughout the world (all
of the foregoing patents, registered patents and patent applications,
together with the items described in CLAUSES (i)-(iv) in this PARAGRAPH
4(a), are sometimes hereinafter individually and/or collectively
referred to as the "PATENTS"); and
(b) rights under or interests in any patent license agreements
with any other party, whether Grantor is a licensee or licensor under
any such license agreement, including, without limitation, those patent
license agreements listed on SCHEDULE B attached hereto and made a part
hereof, and the right to prepare for sale and sell any and all
Inventory now or hereafter owned by Grantor and now or hereafter
covered by such licenses (all of the foregoing are hereinafter referred
to collectively as the "LICENSES").
5. RESTRICTIONS ON FUTURE AGREEMENTS. Grantor will not, without Agent's
prior written consent, enter into any agreement, including, without limitation,
any license agreement, which is inconsistent with this Agreement, and Grantor
further agrees that it will not take any action, and will use its best efforts
not to permit any action to be taken by others, including, without limitation,
licensees, or fail to take any action, which would in any material respect
affect the validity or enforcement of the rights transferred to Agent under this
Agreement.
6. NEW PATENTS AND LICENSES. Grantor represents and warrants that, from
and after the Closing Date, (a) the Patents listed on SCHEDULE A include all of
the patents, registered patents and patent applications now owned or held by
Grantor, (b) the Licenses listed on SCHEDULE B include all of the patent license
agreements under which Grantor is the licensee or licensor and (c) other than
Permitted Liens, no liens, claims or security interests in such Patents and
Licenses have been granted by Grantor to any Person other than Agent. If, prior
to the termination of this Agreement, Grantor shall (i) obtain rights to any new
patentable inventions, registered patents or patent applications, (ii) become
entitled to the benefit of any patents, registered patents, patent applications,
patent licenses or patent license renewals, whether as licensee or licensor or
(iii) enter into any new patent license agreement, the provisions of PARAGRAPH 4
above shall automatically apply thereto. Grantor shall give to Agent written
notice of
-3-
<PAGE> 4
events described in CLAUSES (i), (ii) and (iii) of the preceding sentence
promptly after the occurrence thereof, but in any event not less frequently than
on a quarterly basis. Grantor hereby undertakes to modify and update (i)
SCHEDULE A to include any future patents, registered patents and patent
applications, and (ii) SCHEDULE B to include any future patent license
agreements which are Patents or Licenses under PARAGRAPH 4 above or under this
PARAGRAPH 6. Grantor hereby authorizes Agent to file, in addition to and not in
substitution for this Agreement, a duplicate original of this Agreement
containing on Schedule A or B thereto, as the case may be, such future patents,
registered patents and patent applications, and patent license agreements.
7. ROYALTIES. Grantor hereby agrees that the use by Agent of the
Patents and Licenses as authorized hereunder in connection with Agent's exercise
of its rights and remedies under PARAGRAPH 15 or pursuant to SECTION 10 of the
Security Agreement shall be coextensive with Grantor's rights thereunder and
with respect thereto and without any liability for royalties or other related
charges from Agent or any Lender to Grantor.
8. RIGHT TO INSPECT; FURTHER ASSIGNMENTS AND SECURITY INTERESTS. Agent
may at all reasonable times (and at any time when an Event of Default exists)
have access to, examine, audit, make copies (at Grantor's expense) and extracts
from and inspect Grantor's premises and examine Grantor's books, records and
operations relating to the Patents and Licenses; PROVIDED, THAT in conducting
such inspections and examinations, Agent shall use reasonable efforts not to
disturb unnecessarily the conduct of Grantor's ordinary business operations.
From and after the occurrence of an Event of Default, Grantor agrees that Agent,
or a conservator appointed by Agent, shall have the right to establish such
reasonable additional product quality controls as Agent or such conservator, in
its sole and absolute judgment, may deem necessary to assure maintenance of the
quality of products sold by Grantor under the Patents and the Licenses or in
connection with which such Patents and Licenses are used. Grantor agrees (i) not
to sell or assign its respective interests in, or grant any license under, the
Patents or the Licenses without the prior and express written consent of Agent,
(ii) to maintain the quality of such products as of the date hereof, and (iii)
not to change the quality of such products in any material respect without
Agent's prior and express written consent.
-4-
<PAGE> 5
9. NATURE AND CONTINUATION OF AGENT'S SECURITY INTEREST; TERMINATION OF
AGENT'S SECURITY INTEREST. This Agreement is made for collateral security
purposes only. This Agreement shall create a continuing security interest in the
Patents and Licenses and shall terminate only when the Obligations have been
paid and satisfied in full and the Credit Agreement, the Security Agreement and
all of the other Credit Documents have terminated pursuant to the respective
terms and provisions thereof. When this Agreement has terminated, Agent shall
promptly execute and deliver to Grantor, at Grantor's expense, all termination
statements and other instruments as may be necessary or proper to terminate
Agent's security interest in the Patents and the Licenses, subject to any
disposition thereof which may have been made by Agent pursuant to this Agreement
or the Security Agreement.
10. DUTIES OF GRANTOR. Grantor shall have the duty, to the extent
desirable in the normal conduct of Grantor's business, to: (i) prosecute
diligently any patent application that is part of the Patents pending as of the
date hereof or hereafter until the termination of this Agreement, and (ii) make
application for patents that are necessary in the operation of Grantor's
business. Grantor further agrees (i) not to abandon any Patent or License
without the prior written consent of Agent, and (ii) to use its best efforts to
maintain in full force and effect the Patents and the Licenses that are or shall
be necessary or economically desirable in the operation of Grantor's business.
Any expenses incurred in connection with the foregoing shall be borne by
Grantor. Neither Agent nor any Lender shall have any duty with respect to the
Patents and Licenses. Without limiting the generality of the foregoing, neither
Agent nor any Lender shall be under any obligation to take any steps necessary
to preserve rights in the Patents or Licenses against any other parties, but may
do so at its option from and after the occurrence and during the continuance of
an Event of Default, and all expenses incurred in connection therewith shall be
for the sole account of Grantor and shall be added to the Obligations secured
hereby.
11. AGENT'S RIGHT TO SUE. From and after the occurrence and during the
continuance of an Event of Default, Agent shall have the right, but shall not be
obligated, to bring suit in its own name to enforce the Patents and the Licenses
and, if Agent shall commence any such suit, Grantor shall, at the request of
Agent, do any and all lawful acts and execute any and all proper documents
required by Agent in aid of such enforcement. Grantor shall, upon demand,
promptly reimburse Agent for all costs and expenses incurred by
-5-
<PAGE> 6
Agent in the exercise of its rights under this PARAGRAPH 11 (including, without
limitation, reasonable fees and expenses of attorneys and paralegals for Agent).
12. WAIVERS. Agent's failure, at any time or times hereafter, to
require strict performance by Grantor of any provision of this Agreement shall
not waive, affect or diminish any right of Agent thereafter to demand strict
compliance and performance therewith nor shall any course of dealing between
Grantor and Agent have such effect. No single or partial exercise of any right
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right. None of the undertakings, agreements, warranties, covenants
and representations of Grantor contained in this Agreement shall be deemed to
have been suspended or waived by Agent unless such suspension or waiver is in
writing signed by an officer of Agent and directed to Grantor specifying such
suspension or waiver.
13. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but the provisions of this Agreement are severable, and if any
clause or provision shall be held invalid and unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part hereof, in such jurisdiction, and shall not in
any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
14. MODIFICATION. This Agreement cannot be altered, amended or
modified in any way, except by a writing signed by the parties hereto.
15. CUMULATIVE REMEDIES; POWER OF ATTORNEY. Grantor hereby irrevocably
designates, constitutes and appoints Agent (and all Persons designated by Agent
in its sole and absolute discretion) as Grantor's true and lawful
attorney-in-fact, with full power of substitution, and authorizes Agent and any
of Agent's designees, in Grantor's or Agent's name, upon the occurrence and
during the continuance of an Event of Default, to take any action and execute
any instrument which Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, and the giving by
Agent of notice to Grantor of Agent's intention to enforce its rights and claims
against Grantor, to (i) endorse Grantor's name on all applications, documents,
papers and
-6-
<PAGE> 7
instruments necessary or desirable for Agent in the use of the Patents or the
Licenses, (ii) assign, pledge, convey or otherwise transfer title in or dispose
of the Patents or the Licenses to anyone on commercially reasonable terms, (iii)
grant or issue any exclusive or nonexclusive license under the Patents or, to
the extent permitted, under the Licenses, to anyone on commercially reasonable
terms, and (iv) take any other actions with respect to the Patents or the
Licenses as Agent deems in its best interest. Grantor hereby ratifies all that
such attorney shall lawfully do or cause to be done by virtue hereof. This power
of attorney is coupled with an interest and shall be irrevocable until all of
the Obligations shall have been paid and satisfied in full in cash and the
Security Agreement, the Credit Agreement and each of the other Credit Documents
shall have terminated pursuant to the respective terms and provisions thereof.
Grantor acknowledges and agrees that this Agreement is not intended to limit or
restrict in any way the rights and remedies of Agent under the Security
Agreement, but rather is intended to facilitate the exercise of such rights and
remedies.
Agent shall have, in addition to all other rights and remedies given it
by the terms of this Agreement, all rights and remedies allowed by law and the
rights and remedies of a secured party under the Uniform Commercial Code as
enacted in any jurisdiction in which the Patents or the Licenses may be located
or deemed located. Upon the occurrence of an Event of Default and the election
by Agent to exercise any of its remedies under Section 9-504 or Section 9-505 of
the Uniform Commercial Code with respect to the Patents and Licenses, Grantor
agrees to assign, convey and otherwise transfer title in and to the Patents and
the Licenses to Agent or any transferee of Agent and to execute and deliver to
Agent or any such transferee all such agreements, documents and instruments as
may be necessary, in Agent's sole discretion, to effect such assignment,
conveyance and transfer. All of Agent's rights and remedies with respect to the
Patents and the Licenses, whether established hereby, by the Security Agreement,
by any other agreements or by law, shall be cumulative and may be exercised
separately or concurrently. Notwithstanding anything set forth herein to the
contrary, it is hereby expressly agreed that upon the occurrence and during the
continuance of an Event of Default, Agent may exercise any of the rights and
remedies provided in this Agreement, the Security Agreement and any of the other
Credit Documents. Grantor agrees that any notification of intended disposition
of any of the Patents and Licenses required by law shall be deemed reasonably
and properly given if given at least ten (10) Business
-7-
<PAGE> 8
Days before such disposition; PROVIDED, THAT Agent may give any shorter notice
that is commercially reasonable under the circumstances.
16. SUCCESSORS AND ASSIGNS. This Agreement and all obligations
hereunder shall be binding upon the successors and assigns of Grantor and shall
together with the rights and remedies of Agent and each of the Lenders
hereunder, inure to the benefit of Agent and the Lenders and their respective
successors and assigns.
17. NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other party, or whenever any of the parties desires to give or
serve upon any other communication with respect to this Agreement, each such
notice, demand, request, consent, approval, declaration or other communication
shall be in writing and shall be given (and deemed to have been given) in the
manner and to the respective addresses set forth in SECTION 11.7 of the Credit
Agreement. Failure or delay in delivering copies of any such notice, demand,
request, consent, approval, declaration or other communication to any Persons
designated in the Credit Agreement to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication.
18. CHOICE OF LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF
THIS PATENT SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD
TO CONFLICT OF LAWS PROVISIONS.
19. SECTION TITLES. The section titles herein are for convenience of
reference only, and shall not affect in any way the interpretation of any of the
provisions hereof.
20. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
21. MERGER. This Agreement and the Credit Documents represent the
final agreement of Grantor and Agent with respect to the matters contained
herein and may not be contradicted by
-8-
<PAGE> 9
evidence of prior or contemporaneous agreements, or subsequent oral agreements,
between Grantor and Agent or between Grantor and Lenders.
[SIGNATURE PAGE FOLLOWS]
-9-
<PAGE> 10
IN WITNESS WHEREOF, Agent and Grantor have each caused this Agreement
to be executed and delivered by its duly authorized officer as of the date first
set forth above.
FRICTION PRODUCTS CO., an Ohio corporation
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
ACCEPTED AND AGREED TO AS OF
THE 27TH DAY OF NOVEMBER, 1996
BT COMMERCIAL CORPORATION, as Agent
By: /s/ Wayne D. Hillock
-------------------------------------
Wayne D. Hillock
Senior Vice President
Patent Security Agreement
<PAGE> 11
SCHEDULE A
TO
PATENT SECURITY AGREEMENT
DATED AS OF NOVEMBER 27, 1996
PATENTS
-------
<TABLE>
<CAPTION>
Patent Registration Date Registration No.
- ------ ----------------- ----------------
<S> <C> <C>
Rivetless Friction Pad
for Aircraft Brakes 1/16/73 3,710,914
</TABLE>
PATENT APPLICATIONS
-------------------
Patent Application Date Serial No.
- ------ ---------------- ----------
NONE
<PAGE> 12
SCHEDULE B
TO
PATENT SECURITY AGREEMENT
DATED AS OF NOVEMBER 27, 1996
LICENSE AGREEMENTS
NONE
<PAGE> 13
STATE OF Ohio )
--------------------
) SS
COUNTY OF Cuyahoga )
--------------------
The foregoing Patent Security Agreement was acknowledged before me this
27TH day of November, 1996, by Thomas A. Gilbride, a Vice President-Finance of
FRICTION PRODUCTS CO., an Ohio corporation, on behalf of such corporation.
/s/ Cheryl A. Sturges
-----------------------------
Notary Public
------, ----------------------
My commission expires:_______
CHERYL A. STURGES
Notary Public, State of Ohio, Cuy. Cty.
My Commission Expires June 27, 1999
Patent Security Agreement
<PAGE> 14
STATE OF )
--------------------
) SS
COUNTY OF )
--------------------
The foregoing Patent Security Agreement was acknowledged before me this
27TH day of November, 1996, by Wayne D. Hillock, a Senior Vice President of BT
COMMERCIAL CORPORATION, a Delaware corporation, on behalf of such corporation.
-----------------------------
Notary Public
-----------, ----------------
My commission expires:_______
Patent Security Agreement
<PAGE> 1
EXHIBIT 10.21
AGENCY AND CONTRIBUTION AGREEMENT
THIS AGENCY AND CONTRIBUTION AGREEMENT ("AGREEMENT") dated as of
November 27, 1996, by and among FRICTION PRODUCTS CO., an Ohio corporation
("FRICTION PRODUCTS"), HAWK BRAKE, INC., an Ohio corporation ("HAWK BRAKE"),
HELSEL, INC., a Delaware corporation ("HELSEL"), HUTCHINSON PRODUCTS
CORPORATION, a Delaware corporation ("HUTCHINSON"), LOGAN METAL STAMPINGS, INC.,
an Ohio corporation ("LOGAN"), S.K. WELLMAN HOLDINGS, INC., a Delaware
corporation ("WELLMAN HOLDINGS"), S.K. WELLMAN CORP., a Delaware corporation
("WELLMAN CORP."), WELLMAN FRICTION PRODUCTS U.K. CORP., a Delaware corporation
("WELLMAN FRICTION") (Friction Products, Hawk Brake, Helsel, Hutchinson, Logan,
Wellman Holdings, Wellman Corp. and Wellman Friction each sometimes hereinafter
referred to individually as a "BORROWER" and collectively as "BORROWERS") and
HAWK CORPORATION, a Delaware corporation, acting in its capacity as borrowing
agent for the Borrowers (in such capacity, the "HAWK FUNDS ADMINISTRATOR"). As
used herein, the term "CONTRIBUTOR" shall mean each of the Borrowers required to
make any payment to any other Borrower pursuant to PARAGRAPH 2(A) of this
Agreement. Except as otherwise defined herein, capitalized terms used herein
shall have the respective meanings assigned to those terms in the "CREDIT
AGREEMENT" (as hereinafter defined).
W I T N E S S E T H:
WHEREAS, Borrowers, the Hawk Funds Administrator, various lending
institutions from time to time parties thereto (the "LENDERS") and BT Commercial
Corporation, a Delaware corporation ("BTCC"), acting in its capacity as agent
(in such capacity, "AGENT") for itself and each of the other Lenders are parties
to a certain Credit Agreement dated as of November 27, 1996 (as amended,
restated, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), providing for the making of Revolving Loans and the issuance of,
and participation in Letters of Credit as contemplated therein; and
WHEREAS, each Borrower will obtain direct and indirect economic,
financial and other benefits from the incurrence of all Loans and the issuance
of all Letters of Credit under the Credit Agreement and, accordingly, each
Borrower is unconditionally and irrevocably jointly and severally liable for the
payment,
<PAGE> 2
performance and observance of all Obligations, as primary obligor and not merely
as surety; and
WHEREAS, Borrowers wish to enter into this Agreement (i) to effect an
equitable sharing of the Obligations and (ii) to designate and appoint the Hawk
Funds Administrator as agent for the Borrowers under the Credit Agreement and
other Credit Documents;
NOW THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. AGENCY. Each Borrower hereby designates and appoints the Hawk Funds
Administrator as its agent to act as specified in the Credit Agreement and each
of the other Credit Documents and the Hawk Funds Administrator hereby
acknowledges such designation and accepts such appointment. Each Borrower hereby
irrevocably authorizes and directs the Hawk Funds Administrator to take such
action on its behalf under the provisions of the Credit Agreement and the other
Credit Documents, and any other instruments and agreements referred to therein,
and to exercise such powers and to perform such duties thereunder as are
specifically delegated to or required of the Hawk Funds Administrator by the
respective terms thereof, and such other powers as are reasonably incidental
thereto, including without limitation, to take the following actions for and on
such Borrower's behalf:
(a) The Hawk Funds Administrator is authorized and empowered
to submit on behalf of each Borrower Notices of Borrowing to the Agent
in accordance with the provisions of SECTION 2.2(b) of the Credit
Agreement. The Hawk Funds Administrator shall submit such Notices of
Borrowing to the Agent as soon as practicable after receiving a request
to do so from a Borrower.
(b) The Hawk Funds Administrator is authorized and empowered
to receive on behalf of each Borrower the proceeds of the Revolving
Loans in accordance with the provisions of SECTION 2.2(c) of the Credit
Agreement. The Hawk Funds Administrator shall receive such proceeds
into the Disbursement Account and disburse to the applicable Borrower
as soon as practicable after the receipt thereof.
(c) The Hawk Funds Administrator is authorized and
empowered to submit on behalf of each Borrower Letter of
-2-
<PAGE> 3
Credit Requests to the Agent in accordance with the provisions of
SECTION 3.3 of the Credit Agreement. The Hawk Funds Administrator shall
submit any such Letter of Credit Request to the Agent as soon as
practicable after receiving a request to do so from a Borrower.
(d) The Hawk Funds Administrator is authorized and empowered
on behalf of each Borrower to submit Notices of Continuation and
Notices of Conversion to the Agent in accordance with the provisions of
the Credit Agreement. The Hawk Funds Administrator shall submit any
such Notice of Continuation or Notice of Conversion to the Agent as
soon as practicable after receiving a request to do so from a Borrower.
(e) The Hawk Funds Administrator is further authorized to take
all such actions on behalf of each Borrower necessary to exercise the
specific powers granted in PARAGRAPHS (a) through (d) above and to
perform such duties hereunder and under the Credit Agreement and
deliver such documents as delegated to or required of the Hawk Funds
Administrator by the terms hereof or of the Credit Agreement.
The Hawk Funds Administrator may perform any of its duties under the Credit
Agreement or any of the other Credit Documents by or through its agents or
employees.
2. CONTRIBUTION AMONG BORROWERS.
(a) At any time a payment in respect of the Obligations is
made by any Borrower, the right of contribution, if any, of each
Borrower against each Contributor shall be determined as provided in
the immediately following sentence, with the right of contribution of
each Borrower to be revised and restated as of each date on which such
a payment (a "RELEVANT PAYMENT") is made. At any time that a Relevant
Payment is made by a Borrower that results in the aggregate payments
made by such Borrower in respect of the Obligations to and including
the date of the Relevant Payment exceeding such Borrower's
"CONTRIBUTION PERCENTAGE" (as hereinafter defined) of the aggregate
payments made by all Borrowers in respect of the Obligations to and
including the date of the Relevant Payment (such excess, the "AGGREGATE
EXCESS AMOUNT"), each such Borrower shall have a right of contribution
against each Contributor that has made payments in respect of the
-3-
<PAGE> 4
Obligations to and including the date of the Relevant Payment in an
aggregate amount less than such Contributor's Contribution Percentage
of the aggregate payments made by all Borrowers in respect of the
Obligations to and including the date of the Relevant Payment (the
aggregate amount of such deficit, the "AGGREGATE DEFICIT AMOUNT") in an
amount equal to (x) a fraction the numerator of which is the Aggregate
Excess Amount of such Borrower and the denominator of which is the
Aggregate Excess Amount of all Borrowers MULTIPLIED BY (y) the
Aggregate Deficit Amount of such Contributor. A Borrower's rights of
contribution, if any, pursuant to the preceding sentences shall arise
at the time of each computation, subject to adjustment to the time of
any subsequent computation. As used in this Agreement, (i) each
Contributor's "CONTRIBUTION PERCENTAGE" shall mean the percentage
obtained by dividing (x) the Adjusted Net Worth of such Contributor by
(y) the aggregate Adjusted Net Worth of all Borrowers; (ii) the
"ADJUSTED NET WORTH" of each Borrower shall mean the greater of (x) the
Net Worth of such Borrower or (y) zero; and (iii) the "NET WORTH" of
each Borrower shall mean the amount by which the fair salable value of
such Borrower's assets on the Closing Date exceeds its existing debts
and other liabilities (including contingent liabilities, but without
giving effect to (1) any Obligations arising under the Credit Agreement
as a result of such Borrower's joint and several liability, (2) the
obligations of such Borrower hereunder and (3) the obligations of such
Borrower under any intercompany notes, in each case after giving effect
to the transactions occurring on the Closing Date.
(b) No Borrower will exercise any rights which it may acquire
by way of contribution under PARAGRAPH 2(a) until all of the
Obligations shall have been indefeasibly paid and satisfied in full and
the Credit Agreement and each of the other Credit Documents shall have
terminated pursuant to the respective terms and provisions thereof in
full, it being expressly recognized and agreed by each of the Borrowers
that such Borrower's right of contribution hereunder against any other
Borrower shall be expressly junior and subordinate to such other
Borrower's obligations under the Credit Agreement and the other Credit
Documents.
3. NO OTHER CONTRIBUTION OR SUBROGATION RIGHTS. Each of the Borrowers
recognizes and agrees that, except for the right of contribution, if any,
arising pursuant to SECTION 1, such Borrower
-4-
<PAGE> 5
shall have no right of contribution or subrogation against any other Borrower in
respect of any payment of any Obligation, any such right of contribution or
subrogation arising under law or otherwise being expressly waived by each of the
Borrowers.
4. AMENDMENT OR WAIVER. Any provision of this Agreement may be amended
or waived if, but only if, such amendment or waiver is in writing and is signed
by each of the parties hereto and consented to by the Majority Lenders.
5. BENEFIT OF AGREEMENT. The provisions of this Agreement shall be
binding upon and inure to the benefit of each of the parties hereto and their
respective successors and assigns.
6. TERMINATION. This Agreement, as it may be amended, supplemented or
otherwise modified from time to time, shall remain in full force and effect and
shall not be terminated unless and until all of the Obligations have been
indefeasibly paid and satisfied in full and the Credit Agreement and each of the
Credit Documents has terminated pursuant to the respective terms and provisions
thereof.
7. GOVERNING LAW. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS AND
DECISIONS OF THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAWS
PRINCIPLES.
8. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9. EFFECTIVENESS. This Agreement shall become effective as of the date
hereof upon execution hereof by each party and delivery of executed counterparts
hereof by or on behalf of such party to the Agent.
10. ADDITIONAL BORROWERS. At the time any Person becomes a "Borrower"
under the Credit Agreement after the Closing Date, it shall upon execution of a
counterpart hereof become a "Borrower" for all purposes of this Agreement.
[SIGNATURE PAGES FOLLOW]
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
FRICTION PRODUCTS CO.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HAWK BRAKE, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HELSEL, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HUTCHINSON PRODUCTS CORPORATION
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
LOGAN METAL STAMPINGS, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
Agency and
Contribution Agreement
<PAGE> 7
S.K. WELLMAN HOLDINGS, INC.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
S.K. WELLMAN CORP.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
WELLMAN FRICTION PRODUCTS U.K.
CORP.
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
HAWK CORPORATION, A DELAWARE
CORPORATION, IN ITS CAPACITY
AS HAWK FUNDS ADMINISTRATOR
By: /s/ Thomas A. Gilbride
-------------------------------
Name: Thomas A. Gilbride
-----------------------------
Title: Vice President-Finance
----------------------------
Agency and
Contribution Agreement
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EXHIBIT 10.22
THE HAWK GROUP OF COMPANIES, INC.
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FORM OF
SENIOR SUBORDINATED NOTE AND
WARRANT PURCHASE AGREEMENT
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DATED AS OF JUNE 30, 1995
$30,000,000 12% SENIOR SUBORDINATED NOTES DUE JUNE 30, 2005
OF THE HAWK GROUP OF COMPANIES, INC.
316,970 WARRANTS TO PURCHASE CLASS B COMMON STOCK
OF THE HAWK GROUP OF COMPANIES, INC.
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TABLE OF CONTENTS
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1. PURCHASE AND SALE OF SUBORDINATED NOTES AND WARRANTS................................................... 1
1.1 Issue of Subordinated Notes................................................................... 1
1.2 Issue of Warrants............................................................................. 2
1.3 The Closing................................................................................... 2
1.4 Purchase for Investment; ERISA................................................................ 3
1.5 Failure To Deliver, Failure of Conditions..................................................... 5
1.6 Expenses...................................................................................... 6
2. WARRANTIES AND REPRESENTATIONS......................................................................... 6
2.1 Nature of Business............................................................................ 7
2.2 Corporate Organization and Authority.......................................................... 7
2.3 Affiliates and Subsidiaries................................................................... 7
2.4 Financial Statements; Debt; Material Adverse Change; Pro Forma
Information................................................................................... 7
2.5 Full Disclosure............................................................................... 8
2.6 Pending Litigation............................................................................ 9
2.7 Title to Properties........................................................................... 9
2.8 Patents, Trademarks, Licenses, etc............................................................ 9
2.9 Sale is Legal and Authorized; Obligations are Enforceable..................................... 9
2.10 No Defaults................................................................................... 11
2.11 Consents...................................................................................... 11
2.12 Taxes......................................................................................... 12
2.13 Use of Proceeds............................................................................... 12
2.14 Private Offering.............................................................................. 13
2.15 Compliance with Law........................................................................... 13
2.16 Restrictions on the Company and Subsidiaries.................................................. 13
2.17 Pension Plans................................................................................. 14
2.18 Certain Laws.................................................................................. 16
2.19 Environmental Compliance...................................................................... 16
2.20 Capitalization................................................................................ 17
2.21 All Documents Provided........................................................................ 18
2.22 Merger of Helsel.............................................................................. 18
2.23 Acquisition of Wellman........................................................................ 19
3. CLOSING CONDITIONS..................................................................................... 19
3.1 Opinions of Counsel........................................................................... 19
3.2 Warranties and Representations True; Compliance with this Agreement........................... 20
3.3 Officers' Certificates........................................................................ 20
3.4 Legality...................................................................................... 20
3.5 Private Placement Numbers..................................................................... 20
3.6 Subsidiary Subordinated Guarantees............................................................ 20
3.7 Warrant Agreement; Shareholders' Agreement.................................................... 21
3.8 Reservation of Shares......................................................................... 21
3.9 Bank Loan Agreement........................................................................... 21
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TABLE OF CONTENTS (CONT.)
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3.10 Acquisition and Merger........................................................................ 22
3.11 Equity Documents.............................................................................. 22
3.12 Letter from Bowles Hollowell Conner & Co...................................................... 22
3.13 Environmental Reports......................................................................... 22
3.14 Solvency Opinion.............................................................................. 23
3.15 Expenses...................................................................................... 23
3.16 Proceedings Satisfactory...................................................................... 23
4. PURCHASERS' SPECIAL RIGHTS............................................................................. 23
4.1 Direct Payment................................................................................ 23
4.2 Delivery Expenses............................................................................. 24
4.3 Issue Taxes................................................................................... 24
5. PAYMENTS OF PRINCIPAL.................................................................................. 24
5.1 Required Prepayments of Subordinated Notes and Payment at Maturity............................ 24
5.2 Optional Prepayments.......................................................................... 24
5.3 Offer to Prepay upon Change in Control........................................................ 25
5.4 Partial Prepayment Pro Rata................................................................... 27
5.5 Effect of Prepayment.......................................................................... 27
5.6 Notation of Subordinated Notes on Prepayment.................................................. 27
5.7 No Other Optional Prepayments................................................................. 27
5.8 Valuable Rights............................................................................... 27
5.9 Delivery of Subordinated Notes in Payment of Warrant Purchase Price........................... 28
6. REGISTRATION; SUBSTITUTION OF SUBORDINATED NOTES....................................................... 28
6.1 Registration of Subordinated Notes............................................................ 28
6.2 Exchange of Subordinated Notes................................................................ 28
6.3 Replacement of Subordinated Notes............................................................. 29
6.4 Limitation on Transfers....................................................................... 29
7. COMPANY BUSINESS COVENANTS............................................................................. 29
7.1 Payment of Taxes and Claims................................................................... 30
7.2 Maintenance of Properties and Corporate Existence............................................. 30
7.3 Payment of Subordinated Notes and Maintenance of Office....................................... 31
7.4 Debt Restrictions............................................................................. 31
7.5 Liens......................................................................................... 33
7.6 Merger, Consolidation, etc.................................................................... 36
7.7 Transfers of Property......................................................................... 37
7.8 Restricted Payments........................................................................... 39
7.9 Line of Business.............................................................................. 40
7.10 Transactions with Affiliates.................................................................. 40
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TABLE OF CONTENTS (CONT.)
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7.11 Pension Plans................................................................................. 40
7.12 Pro-Rata Offers............................................................................... 42
7.13 Private Offering.............................................................................. 42
7.14 Amendments to Acceptable Credit Facilities.................................................... 42
7.15 Provision of Subsidiary Subordinated Guarantees............................................... 42
8. INFORMATION AS TO COMPANY.............................................................................. 43
8.1 Financial and Business Information............................................................ 43
8.2 Officers' Certificates........................................................................ 46
8.3 Accountants' Certificates..................................................................... 47
8.4 Inspection.................................................................................... 47
9. EVENTS OF DEFAULT...................................................................................... 48
9.1 Nature of Events.............................................................................. 48
9.2 Default Remedies.............................................................................. 50
9.3 Annulment of Acceleration of Subordinated Notes............................................... 51
10. SUBORDINATION OF SUBORDINATED NOTES.................................................................... 52
10.1 General....................................................................................... 52
10.2 Default in Respect of Senior Debt............................................................. 52
10.3 Insolvency, etc............................................................................... 53
10.4 Turnover of Payments.......................................................................... 53
10.5 Obligations Not Impaired...................................................................... 54
10.6 Payment of Senior Debt; Subrogation........................................................... 54
10.7 Reliance of Holders of Senior Debt............................................................ 54
10.8 Reinstatement of Subordination................................................................ 55
11. INTERPRETATION OF THIS AGREEMENT....................................................................... 55
11.1 Terms Defined................................................................................. 55
11.2 Generally Accepted Accounting Principles...................................................... 78
11.3 Directly or Indirectly........................................................................ 78
11.4 Section Headings and Table of Contents and Construction....................................... 78
11.5 Governing Law; Jurisdiction................................................................... 79
12. MISCELLANEOUS.......................................................................................... 79
12.1 Communications................................................................................ 79
12.2 Indemnification of Each Holder................................................................ 80
12.3 Reproduction of Documents..................................................................... 81
12.4 Survival...................................................................................... 82
12.5 Successors and Assigns........................................................................ 82
12.6 Amendment and Waiver.......................................................................... 82
12.7 Payments, When Received....................................................................... 84
12.8 Duplicate Originals, Execution in Counterpart................................................. 84
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TABLE OF CONTENTS (CONT.)
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Annex 1 -- Information as to Purchasers
Annex 2 -- Payment Instructions at Closing
Annex 3 -- Information as to Company and Subsidiaries
Exhibit A -- Form of Subordinated Note
Exhibit B1 -- Form of Company Counsel's Closing Opinion
Exhibit B2 -- Form of Special Counsel's Closing Opinion
Exhibit C1 -- Form of Company Officer's Certificate
Exhibit C2 -- Form of Subsidiary Officer's Certificate
Exhibit D1 -- Form of Company Secretary's Certificate
Exhibit D2 -- Form of Subsidiary Secretary's Certificate
Exhibit E -- Form of Subsidiary Subordinated Guarantee Agreement
Exhibit F -- Form of Warrant Agreement
Exhibit G -- Form of Shareholders' Agreement
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THE HAWK GROUP OF COMPANIES, INC.
200 PUBLIC SQUARE
CLEVELAND, OHIO 44114-2301
FORM OF
SENIOR SUBORDINATED NOTE AND
WARRANT PURCHASE AGREEMENT
---------------------------------------------------
$30,000,000 12% SENIOR SUBORDINATED NOTES DUE JUNE 30, 2005
316,970 WARRANTS TO ACQUIRE CLASS B COMMON STOCK
Dated as of June 30, 1995
[NAME AND ADDRESS OF PURCHASER]
Ladies and Gentlemen:
THE HAWK GROUP OF COMPANIES, INC. (together with its successors and
assigns, the "COMPANY"), a Delaware corporation, hereby agrees with you as
follows:
1. PURCHASE AND SALE OF SUBORDINATED NOTES AND WARRANTS
1.1 ISSUE OF SUBORDINATED NOTES.
The Company will authorize the issue of Thirty Million Dollars
($30,000,000) in aggregate principal amount of its 12% Senior Subordinated Notes
Due June 30, 2005 (the "SUBORDINATED NOTES"). Each Subordinated Note shall:
(a) bear interest (computed on the basis of a 360-day year of
twelve 30-day months) on the unpaid principal balance thereof from the
date of such Subordinated Note at the rate of twelve percent (12%) per
annum, payable quarterly on the last day of each March, June, September
and December in each year commencing on the later of (i) September 30,
1995 or (ii) the payment date next succeeding the date of such
Subordinated Note, until the principal amount thereof shall be due and
payable;
(b) bear interest, payable on demand, on any overdue principal
(including any overdue prepayment of principal) and the Prepayment
Compensation Amount, if any, and (to the extent permitted by applicable
law) on any overdue installment of interest, at a rate equal to the
lesser of
(i) the highest rate allowed by applicable law or
(ii) the greater of
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(A) fourteen percent (14%) per annum, or
(B) two percent (2%) per annum in excess of
the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York from time to time
in New York City as its "Prime Rate;"
(c) mature on June 30, 2005; and
(d) be in the form of the Subordinated Note set out in
Exhibit A.
1.2 ISSUE OF WARRANTS.
The Company will authorize the issue (in accordance with the terms and
provisions of the Warrant Agreement) of Three Hundred Sixteen Thousand Nine
Hundred Seventy (316,970) Warrants.
1.3 THE CLOSING.
(a) PURCHASE AND SALE OF SUBORDINATED NOTES. The Company
hereby agrees to sell to you and you hereby agree to purchase from the
Company, in accordance with the provisions hereof, the aggregate
principal amount of Subordinated Notes set forth below your name on
Annex 1 at one hundred percent (100%) of the principal amount thereof.
(b) THE CLOSING. The closing (the "CLOSING") of the Company's
sale of Subordinated Notes shall be held on June 30, 1995 (the "CLOSING
DATE") at 10:00 a.m., local time, at the office of White & Case, 1155
Avenue of the Americas, New York, NY 10036-2787. At the Closing, the
Company shall deliver to you
(i) one or more Subordinated Notes (as set forth below
your name on Annex 1), in the denominations indicated on
Annex 1, in the aggregate principal amount of your purchase,
dated the Closing Date and registered in your name or as
indicated on Annex 1, and
(ii) one or more Warrant Certificates (as set forth
below your name on Annex 1) evidencing the number of
Warrants indicated on Annex 1, dated the Closing Date and
registered in your name or as indicated on Annex 1
against payment by federal funds wire transfer in immediately available
funds of the purchase price therefor, as directed by the Company on
Annex 2.
(c) OTHER PURCHASERS. Contemporaneously with the execution and
delivery hereof, the Company is entering into a separate Senior
Subordinated Note and Warrant Purchase Agreement identical (except for
the name and signature of the purchaser) to this Agreement (this
Agreement and such other separate Senior Subordinated Note and Warrant
Purchase Agreements, each as from time to time amended or modified,
being herein sometimes referred to as the "NOTE PURCHASE AGREEMENTS")
with each other purchaser (individually, an "OTHER PURCHASER," and
collectively, the "OTHER PURCHASERS")
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listed on Annex 1, providing for the sale to each Other Purchaser of
Subordinated Notes in the aggregate principal amount (and the issuance
of the number of Warrants) set forth below its name on such Annex. The
sales of the Subordinated Notes (and the issuance of the Warrants) to
you and to each Other Purchaser are to be separate sales.
1.4 PURCHASE FOR INVESTMENT; ERISA.
(a) PURCHASE FOR INVESTMENT. You warrant and represent to the
Company that
(i) you are an accredited investor (as such term is
defined in Rule 501 of Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act)
and that you are purchasing the Subordinated Notes listed on
Annex 1 below your name and the Warrants identified on such
Annex below your name for your own account and for investment
purposes only, with no present intention of selling or
distributing the Subordinated Notes or the Warrants or any
part thereof, but without prejudice to your right at all times
to
(A) sell or otherwise dispose of all or any part of the
Subordinated Notes or the Warrants under a registration
statement filed under the Securities Act, or in a
transaction exempt from the registration requirements of
such Act, and
(B) have control over the disposition of all of your
assets to the fullest extent required by any applicable law;
(ii) you understand that the Subordinated Notes and
Warrants have not been registered under the Securities Act, in
reliance upon the exemption from registration afforded by
Section 4(2), and that the Company's reliance upon the
availability of such exemption has been predicated in part on
the warranties and representations set forth herein;
(iii) you have reviewed the form of Warrant
Certificate and you understand such Warrant Certificate may
bear legends indicating that certain restrictions are imposed
on the Warrants and Warrant Shares as set forth by the certain
Shareholders' Agreement; and
(iv) the Company has made available to you at a
reasonable time prior to your execution of this Agreement the
opportunity to ask questions and receive answers concerning
the Company and the Subsidiaries, their operations, and the
financial statements of the Company and the Subsidiaries and
to obtain any additional information which the Company
possesses or can acquire without unreasonable effort or
expense that is necessary to verify the accuracy of the
information furnished to you by the Company. You are an
experienced investor familiar with business and financial
matters.
It is understood that, in making the representations set out
in Section 2.9(a), Section 2.9(b) and Section 2.11(a), the Company is
relying, to the extent applicable, upon your
3
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representation as aforesaid. All of the warranties and any
representations made herein shall survive the Closing.
(b) ERISA. You represent, with respect to the funds with which
you are acquiring the Subordinated Notes and the Warrants, if any,
that all of such funds are from or are attributable to one or more of:
(i) GENERAL ACCOUNT -- your general account assets or
assets of one or more segments of such general account, as the
case may be , and that either,
(A) 10% EXEMPTION -- such acquisition would
be exempt under the provisions of the proposed
prohibited transaction class exemption published by
the Department of Labor in the Federal Register on
August 22, 1994 (59 F.R. 43134, August 22, 1994);
provided that you are relying on the Company's
representations set forth in Section 2.17(c)(ii) in
determining
(I) whether there is any Pension
Plan that has an interest in your "insurance
company general account" (as defined in such
proposed exemption) and in respect of which
there exists "general account reserves" (as
determined under Section 807(d) of the IRC)
for the contract or contracts held by or on
behalf of such Pension Plan, and
(II) whether such reserves, when
aggregated with the amount of the "reserves"
for the contracts held by or on behalf of
any other "employee benefit plans"
maintained by the same "employer" in respect
of such Pension Plan or "affiliates" thereof
or by the same "employee organization" in
respect of such Pension Plan, exceed ten
percent (10%) of the total of all
liabilities of such insurance company
general account ("reserves" are determined
under Section 807(d) of the IRC, "employee
benefit plans" is defined in section 3 of
ERISA, "employer" is defined in section 3 of
ERISA, "affiliates" is defined in the
proposed exemption, and "employee
organization" is defined in section 3 of
ERISA), or
(B) GENERAL ACCOUNT EXEMPTION -- no part of
such assets constitutes assets of an "employee
pension benefit plan" (as defined in section 3 of
ERISA) maintained by the Company or any ERISA
Affiliate or of a "plan" (as defined in section 4975
of the IRC) maintained by any ERISA Affiliate (it is
understood that you are relying on the present and
continuing validity and applicability of Department
of Labor Interpretive Bulletin 29 C.F.R.
section 2509.75-2(b));
(ii) SEPARATE ACCOUNT -- a "separate account" (as
defined in section 3 of ERISA):
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(A) 10% POOLED SEPARATE ACCOUNT -- in
respect of which all requirements for an exemption
under DOL Prohibited Transaction Class Exemption 90-1
are met with respect to the use of such funds to
purchase the Subordinated Notes and Warrants, if any;
(B) IDENTIFIED PLAN ASSETS -- that is
comprised of employee benefit plans identified by you
in writing and with respect to which the Company
hereby warrants and represents that, as of the
Closing Date, neither the Company nor any ERISA
Affiliate is a "party in interest" (as defined in
section 3 of ERISA) or a "disqualified person" (as
defined in section 4975 of the IRC) with respect to
any plan so identified; or
(C) GUARANTEED SEPARATE ACCOUNT -- that is
maintained solely in connection with fixed
contractual obligations of an insurance company,
under which any amounts payable, or credited, to any
employee benefit plan having an interest in such
account and to any participant or beneficiary of such
plan (including an annuitant) are not affected in any
manner by the investment performance of the separate
account (as provided by 29 C.F.R.
section 2510.3-101(h)(1)(iii));
(iii) QUALIFIED PROFESSIONAL ASSET MANAGER -- an
"investment fund" managed by a "qualified professional asset
manager" (as such terms are defined in Part V of DOL
Prohibited Transaction Class Exemption 84-14) and all the
requirements for an exemption under such Exemption are met
with respect to the use of funds to purchase the Subordinated
Notes and the Warrants;
(iv) EXCLUDED PLAN -- an employee benefit plan that
is excluded from the provisions of section 406 of ERISA by
virtue of section 4(b) of ERISA; or
(v) EXEMPT FUNDS -- a separate investment account
that is not subject to ERISA and no funds of which come from
assets of an "employee benefit plan" or a "plan" or any other
entity that is deemed to hold assets of an "employee benefit
plan" or a "plan," ("employee benefit plan" is defined in
section 3 of ERISA, and "plan" is defined in section
4975(e)(1) of the IRC).
1.5 FAILURE TO DELIVER, FAILURE OF CONDITIONS.
If at the Closing the Company fails to tender to you the Subordinated
Notes or the Warrants to be purchased by you thereat, or if the conditions
specified in Section 3 to be fulfilled at the Closing have not been fulfilled,
you may thereupon elect to be relieved of all further obligations hereunder.
Nothing in this Section 1.5 shall operate to relieve the Company from any of
their obligations hereunder or to waive any of your rights against the Company.
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1.6 EXPENSES.
(a) GENERALLY. Whether or not the Subordinated Notes and the
Warrants are sold, the Company shall promptly (and in any event within
thirty (30) days of receiving any statement or invoice therefor) pay
all reasonable fees, expenses and costs relating hereto, including but
not limited to:
(i) the cost of reproducing this Agreement, the
Subordinated Notes, the Warrant Agreement, the Warrants and
each other Financing Document;
(ii) the reasonable fees and the disbursements of your
special counsel;
(iii) the out-of-pocket cost of delivering to your home
office or custodian bank, insured to your satisfaction, the
Subordinated Notes and Warrants purchased by you at the
Closing;
(iv) the reasonable fees and the expenses and
out-of-pocket costs incurred in complying with each of the
conditions to closing set forth in Section 3, including
without limitation, the fees and expenses of Environmental
Risk Limited and Valuation Research Corporation; and
(v) the expenses relating to the consideration,
negotiation, preparation or execution of any amendments,
waivers or consents pursuant to the provisions hereof or of
any other Financing Document, whether or not any such
amendments, waivers or consents are executed.
(b) COUNSEL. Without limiting the generality of the foregoing,
it is agreed and understood that the Company will pay, at the Closing,
the statement for reasonable fees and the disbursements of your special
counsel presented at the Closing and the Company will also pay upon
receipt of any statement thereof, each additional statement for
reasonable fees and the disbursements of your special counsel rendered
after the Closing in connection with the issuance of the Subordinated
Notes and the Warrants or the matters referred to in Section 1.6(a)(v).
(c) SURVIVAL. The obligations of the Company under this
Section 1.6 shall survive the payment or prepayment of the Subordinated
Notes and the suspension or termination of any or all of the provisions
hereof.
2. WARRANTIES AND REPRESENTATIONS
To induce you to enter into this Agreement and to purchase the
Subordinated Notes listed on Annex 1 below your name, the Company warrants and
represents, as of the Closing Date after giving effect to each of the
Acquisition, the Merger, and the execution and delivery by the Company of the
Bank Documents, as well as the application of the proceeds from the sale of the
Subordinated Notes and Warrants and the incurrence of Senior Debt as set forth
in PART 2.13 OF ANNEX 3, as follows:
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2.1 NATURE OF BUSINESS.
The Financing Memorandum (together with all exhibits and annexes
thereto, the "PLACEMENT MEMORANDUM"), dated February 1995, prepared by Bowles
Hollowell Conner & Co. (a copy of which has previously been delivered to you),
correctly describes in all material respects the general nature of the
businesses and principal Properties which the Company and the Subsidiaries own
or lease on the Closing Date.
2.2 CORPORATE ORGANIZATION AND AUTHORITY.
The Company and each Subsidiary:
(a) is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation;
(b) has all legal and corporate power and authority to own and
operate its Properties and to carry on its business as now conducted;
(c) has all licenses, certificates, permits, franchises and other
governmental authorizations necessary to own and operate its
Properties and to carry on its business as now conducted, except where
the failure to have such licenses, certificates, permits, franchises
and other governmental authorizations could not, in the aggregate for
all such failures, reasonably be expected to have a Material Adverse
Effect; and
(d) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation, in each state where the failure to be so qualified or
licensed and authorized and in good standing could, in the aggregate
for all such failures, reasonably be expected to have a Material
Adverse Effect.
2.3 AFFILIATES AND SUBSIDIARIES.
PART 2.3 OF ANNEX 3 sets forth:
(i) the name of each of the Affiliates (other than
officers, directors and members of their respective
immediate families) and the nature of the affiliation of
such Affiliates; and
(ii) the name of each Subsidiary, its jurisdiction of
incorporation (or organization) and the percentage of its
Voting Stock owned by the Company and each other Subsidiary.
2.4 FINANCIAL STATEMENTS; DEBT; MATERIAL ADVERSE CHANGE; PRO FORMA
INFORMATION.
(a) FINANCIAL STATEMENTS OF THE COMPANY. The historical financial
statements of the Company, the Subsidiaries, Helsel and Wellman
described in PART 2.4(a) OF ANNEX 3 have been prepared in accordance
with GAAP (except as otherwise indicated in the notes thereto), and
present fairly, in all material respects, the respective financial
position of the
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Company, the Subsidiaries, Helsel and Wellman, as the case may be, as
of the respective dates, and the respective results of their operations
and cash flows for the periods, covered thereby.
(b) DEBT. PART 2.4(b) OF ANNEX 3 correctly lists all
outstanding Debt of the Company and the Subsidiaries as of the Closing
Date, and provides the following information with respect to each item
of Debt:
(i) the type thereof;
(ii) the holder thereof;
(iii) the outstanding amount;
(iv) the portion which is classified as current
under GAAP, if any; and
(v) the collateral securing such Debt, if any.
(c) MATERIAL ADVERSE CHANGE. Since December 31, 1994, there
has been no change in the business, Properties or condition (financial
or otherwise) of the Company or any of the Subsidiaries, except changes
that, in the aggregate, have not had, a Material Adverse Effect.
(d) SUMMARY AND PRO FORMA FINANCIAL INFORMATION. The pro forma
and projected information described in PART 2.4(D) OF ANNEX 3 (the
"PROJECTIONS") have been derived from the financial statements
described in PART 2.4(a) OF ANNEX 3 and prepared with accounting
principles currently used by the Company, except as noted therein, and
all material assumptions on which such projections were based are
disclosed therein. The assumptions used in preparation of the
Projections were reasonable when made and continue to be reasonable.
Such Projections have been prepared in good faith, have a reasonable
basis and represent the good faith opinion of the Company as to the
projected results of the operations of the Company after giving effect
to the Acquisition, the Merger, the Bank Documents and the transactions
contemplated by the Financing Documents. No material facts have
occurred since the preparation of the Projections that would cause the
Projections, taken as a whole, not to be reasonably attainable.
Notwithstanding anything to the contrary in this Section 2.4(d), the
Company does not warrant the ability of the Company to achieve the
results presented in the Projections.
2.5 FULL DISCLOSURE.
The information set forth in the financial statements referred to in
Section 2.4(a), this Agreement, the Placement Memorandum and any written
statement furnished by or on behalf of the Company to you in connection with the
sale of the Subordinated Notes and the Warrants, taken as a whole, do not
contain any untrue statement of a material fact or omit a material fact
necessary to make the statements contained therein or herein not misleading in
light of the circumstances under which such information was provided. There is
no fact that the Company has not disclosed
8
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to you in writing that has had or, so far as the Company can now reasonably
foresee, will have a Material Adverse Effect.
2.6 PENDING LITIGATION.
There are no proceedings, actions or investigations pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
Subsidiary in any court or before any Governmental Authority or arbitration
board or tribunal that could, in the aggregate for all such proceedings, actions
or investigations, reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any Subsidiary is in default with respect to any
judgment, order, writ, injunction, or decree of any court, Governmental
Authority or arbitration board or tribunal that could, in the aggregate for all
such defaults, reasonably be expected to have a Material Adverse Effect. To the
knowledge of the Company, no Management Stockholder is party to any pending
proceedings, actions or investigations, nor does the Company have any knowledge
of any threatened proceedings, actions or investigations by any Management
Stockholder, adverse to the Company.
2.7 TITLE TO PROPERTIES.
Each of the Company and the Subsidiaries has good and marketable title
to all of the Property reflected as being owned by the Company and the
Subsidiaries, as the case may be, in the most recent balance sheets of such
Person referred to in Section 2.4(a) and all of the Property purported to have
been acquired by the Company or any Subsidiary, as the case may be, after said
date (except as sold or otherwise disposed of in the ordinary course of
business), free from Liens not otherwise permitted by Section 7.5. All leases
necessary for the conduct of the business of the Company and the Subsidiaries
are valid and subsisting and are in full force and effect, except for such
failures to be valid, subsisting and in full force and effect as could not, in
the aggregate for all such failures, reasonably be expected to have a Material
Adverse Effect.
2.8 PATENTS, TRADEMARKS, LICENSES, ETC.
Except as set forth in PART 2.8 OF ANNEX 3, each of the Company and the
Subsidiaries owns, possesses or has the right to use all of the patents,
trademarks, service marks, trade names, copyrights, licenses, and rights with
respect thereto (collectively, the "EXISTING INTANGIBLES"), necessary for the
present planned future conduct of its business, without any known conflict with
the rights of others. There are no current infringements of, or contests with
respect to the validity of, any Existing Intangible except for such
infringements or contests that could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
2.9 SALE IS LEGAL AND AUTHORIZED; OBLIGATIONS ARE ENFORCEABLE.
(a) SALE IS LEGAL AND AUTHORIZED. Each of the issue, sale and
delivery of the Subordinated Notes and the Warrants by the Company, the
execution and delivery by the Company of each of the Financing
Documents to which it is a party and the compliance by the Company with
all of the provisions of the Financing Documents to which it is a
party:
(i) is within the corporate powers of the Company; and
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(ii) does not conflict with, result in any material breach
in any of the provisions of, constitute a default under, or
result in the creation of any Lien (other than the Liens
permitted by Section 7.5) upon any Property of the Company or any
Subsidiary under the provisions of,
(A) any agreement, charter instrument, bylaw
or other instrument to which the Company or any
Subsidiary is a party or by which the Company or any
Subsidiary or any of their respective Properties may
be bound, or
(B) any order, judgment, decree, or ruling
of any court, arbitrator or Governmental Authority
applicable to the Company or any Subsidiary.
(b) SUBSIDIARY SUBORDINATED GUARANTEES LEGAL AND AUTHORIZED. The
execution and delivery by each Subsidiary of the Subsidiary
Subordinated Guarantee to which it is a party and the compliance by
each such Subsidiary with all of the provisions thereof:
(i) is within the corporate powers of such Subsidiary; and
(ii) does not conflict with, result in any material breach
in any of the provisions of, constitute a default under, or
result in the creation of any Lien (other than Liens permitted by
Section 7.5) upon any Property of such Subsidiary under the
provisions of,
(A) any agreement, charter instrument, bylaw
or other instrument to which such Subsidiary is a
party or by which such Subsidiary or any of its
Properties may be bound, or
(B) any order, judgment, decree, or ruling
of any court, arbitrator or Governmental Authority
applicable to the Company or any Subsidiary.
(c) OBLIGATIONS ARE ENFORCEABLE. The Company and each Subsidiary
has duly authorized by all necessary action on its part each of the
Financing Documents to which it is a party. Each of the Financing
Documents to which the Company is a party and, with respect to each
Subsidiary which is a party to a Subsidiary Subordinated Guarantee,
such Subsidiary Subordinated Guarantee, has been duly executed and
delivered by one or more duly authorized officers of the Company or
such Subsidiary, as the case may be, and constitutes a legal, valid
and binding obligation of the Company or such Subsidiary, as the case
may be, except, in each case:
(i) as such enforceability may be limited by applicable
bankruptcy, reorganization, arrangement, fraudulent conveyance,
insolvency, moratorium, or other similar laws affecting the
enforceability of creditors' rights generally;
(ii) as such enforceability may be subject to the
availability of equitable remedies; and
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(iii) that certain rights to indemnity and contribution may
be limited by applicable law.
2.10 NO DEFAULTS.
(a) SUBORDINATED NOTES AND WARRANTS. No event has occurred and
no condition exists that, upon the issue of the Subordinated Notes and
the Warrants and the execution and delivery of any of the Financing
Documents, would constitute a Default or an Event of Default.
(b) CHARTER INSTRUMENT, OTHER AGREEMENTS. Neither the Company
nor any Subsidiary is in violation in any respect of any term of any
charter instrument or bylaw, and neither the Company nor any Subsidiary
is in violation of any term of any agreement or other instrument to
which it is a party or by which it or any of its Property may be bound
which violations could, in the aggregate for all such violations,
reasonably be expected to have a Material Adverse Effect.
(c) CERTAIN COVENANTS. Except for the Acquisition, the Merger,
the execution of the Bank Documents and the other transactions
contemplated herein, the Company has not entered into any transaction
since the date of the most recent statement of financial condition
referred to in Section 2.4(a) that would have been prohibited by
Section 7.4 through Section 7.10, inclusive, had such Sections applied
since such date.
(d) OTHER DEBT. No event or condition exists with respect to
any Debt of the Company or any Subsidiary with an outstanding principal
amount in excess of One Million Dollars ($1,000,000) that would permit
(or with the lapse of time or the giving of notice would permit) a
Person to cause such Debt to become due and payable prior to its stated
maturity or its regularly scheduled dates of payment.
2.11 CONSENTS.
(a) GOVERNMENTAL CONSENTS. Neither the nature of the Company
nor any Subsidiary or their respective businesses or Properties, nor
any relationship between the Company or any Subsidiary and any other
Person, nor any circumstance in connection with the offer, issue, sale
or delivery of the Subordinated Notes or the Warrants and the execution
and delivery of any Financing Document or the performance thereof, is
such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority on the
part of the Company or any of the Subsidiaries as a condition to the
execution and delivery or performance of any Financing Document or the
offer, issue, sale or delivery of the Subordinated Notes and the
Warrants except where such failure to obtain such approval or
authorization could not, in the aggregate for all such failures,
reasonably be expected to have a Material Adverse Effect.
(b) THE ACQUISITION AND MERGER. All consents, approvals and
authorizations of, and filings, registrations and qualifications with,
any Governmental Authority or any other Person on the part of the
Company required in connection with the consummation of the Acquisition
and the Merger have been obtained or made and remain in full force and
effect,
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except for applicable "blue sky" filings and filing under the
Investment Canada Act which, in each case, are not required to be made
prior to the Closing Date.
2.12 TAXES.
(a) RETURNS FILED, TAXES PAID. All Federal, state, local and
other material tax returns required to be filed by the Company, Helsel
and any other Person with whom the Company or Helsel files a
consolidated return in any jurisdiction have in fact been filed on a
timely basis, except for any tax return for which an extension has been
timely filed, and all taxes, assessments, fees and other governmental
charges upon the Company and any such Person referred to herein, and
upon any of their respective Properties, income or franchises, that are
due and payable have been paid except for those taxes or assessments
that are being contested in good faith, by appropriate proceedings and
for which adequate book reserves have been established and exist with
respect thereto. The Company does not know of any proposed additional
tax assessment against it or any such Person. Except as set forth in
PART 2.12(a) OF ANNEX 3, as of the Closing Date, there is no current
audit being conducted by any Governmental Authority with respect to any
federal, state or local taxes due by the Company, any Subsidiary or
Helsel in any fiscal year.
(b) BOOK PROVISIONS ADEQUATE. The amount of the liability for
taxes reflected in each of the statements of financial condition
referred to in Section 2.4(a) is in each case an adequate provision for
taxes as of the dates of such statements of financial condition
(including, without limitation, any payment due pursuant to any tax
sharing agreement) as are or may become payable by any one or more of
the Company, Helsel and the other Persons consolidated with the Company
in such financial statements in respect of all tax periods ending on or
prior to such dates.
2.13 USE OF PROCEEDS.
(a) USE OF PROCEEDS. The Company shall apply the proceeds
from the sale of the Subordinated Notes as described in PART 2.13 OF
ANNEX 3.
(b) MARGIN SECURITIES. None of the transactions contemplated
by the Financing Documents (including, without limitation, the use of
the proceeds from the sale of the Subordinated Notes) violates, will
violate or will result in a violation of section 7 of the Exchange Act,
or any regulations issued pursuant thereto, including, without
limitation, Regulations G, T and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II. The Company does not
own, and does not intend to own, carry or purchase, or refinance
borrowings that were used to own, carry or purchase, any Margin
Security. The obligations of the Company under this Agreement and the
Subordinated Notes are not and will not be secured by any Margin
Security, and no Subordinated Notes are being sold on the basis of any
such collateral.
(c) OTHER LEGAL REQUIREMENTS. Neither the Company nor any
Subsidiary is an "enemy" or an "ally of the enemy" within the meaning
of section 2 of the Trading with the Enemy Act (50 U.S.C. App.
sections 1 et seq.), as amended. Neither the Company nor any
Subsidiary is in violation of, and the use of the proceeds of the
Subordinated Notes by the
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Company as contemplated by this Agreement will not violate, the Trading
with the Enemy Act, as amended, or any executive orders, proclamations
or regulations issued pursuant thereto, including, without limitation,
regulations administered by the Office of Foreign Asset Control of the
Department of the Treasury (31 C.F.R., Subtitle B, Chapter V).
2.14 PRIVATE OFFERING.
Neither the Company nor Bowles Hollowell Conner & Co. (the only Person
authorized or employed by the Company as agent, broker, dealer or otherwise in
connection with the offering or sale of the Subordinated Notes and the Warrants
or any similar Security) has offered any of the Subordinated Notes, the Warrants
or any similar Security of the Company for sale to, or solicited offers to buy
any thereof from, or otherwise approached or negotiated with respect thereto
with, any prospective purchaser, other than you and twenty (20) other
institutional investors, each of whom was offered all or a portion of the
Subordinated Notes and the Warrants at private sale for investment.
Neither the Company nor any Person acting for the Company as employee,
agent, broker, dealer or otherwise in connection with the transactions
contemplated by this Agreement (including, without limitation, the issuance of
the Warrants) has engaged in any conduct or entered into any agreements or
understandings so as to bring the transactions contemplated by any of the
Financing Documents within the provisions of section 5 of the Securities Act or
the registration provisions of any applicable state securities laws.
2.15 COMPLIANCE WITH LAW.
Except as set forth in PART 2.15 OF ANNEX 3, neither the Company nor
any Subsidiary is in violation of any law, ordinance, governmental rule or
regulation to which it is subject, which violations, in the aggregate, could
reasonably be expected to have a Material Adverse Effect.
2.16 RESTRICTIONS ON THE COMPANY AND SUBSIDIARIES.
Neither the Company nor any Subsidiary:
(a) is a party, nor, to the knowledge of the Company, is any
Management Stockholder a party, to any contract or agreement, or
subject to any charter or other corporate restriction that could
reasonably be expected to have a Material Adverse Effect;
(b) is a party to any contract or agreement that restricts its
right or ability to incur Debt or in the case of the Company, to issue
capital stock, or warrants, options or similar rights to purchase
capital stock, of the Company, other than the Financing Documents and
the agreements listed on PART 2.16(B) OF ANNEX 3, none of which
restricts the issuance of the Subordinated Notes or the Warrants or the
execution and delivery of, or compliance with, the Financing Documents
by the Company and the Subsidiaries; and
(c) has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its Property,
whether now owned or hereafter acquired, to be subject to a Lien not
permitted by Section 7.5.
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2.17 PENSION PLANS.
(a) RELATIONSHIP OF VESTED BENEFITS TO PENSION PLAN ASSETS.
Except as disclosed in PART 2.17(A) OF ANNEX 3, the present value of
all benefits, determined as of the most recent valuation date for such
benefits as provided in Section 7.11, vested under each Pension Plan
does not exceed the value of the assets of such Pension Plan allocable
to such vested benefits, determined as of such date as provided in
Section 7.11.
(b) ERISA REQUIREMENTS. Each of the Company and its ERISA
Affiliates,
(i) has fulfilled all obligations under the minimum
funding standards of ERISA and the IRC with respect to each
Pension Plan that is not a Multiemployer Plan,
(ii) has satisfied all respective contribution
obligations in respect of each Multiemployer Plan,
(iii) is in compliance in all material respects with
all other applicable provisions of ERISA and the IRC with
respect to each Pension Plan and each Multiemployer Plan,
and
(iv) has not incurred any liability under Title IV of
ERISA to the PBGC (other than in respect of required
insurance premiums, all of which that are due having been
paid), with respect to any Pension Plan, any Multiemployer
Plan or any trust established thereunder.
No Pension Plan, or trust created thereunder, has incurred any
accumulated funding deficiency (as such term is defined in section 302
of ERISA), whether or not waived, as of the last day of the most
recently ended plan year of such Pension Plan.
(c) PROHIBITED TRANSACTIONS.
(i) The issuance and sale by the Company of the
Subordinated Notes, and the Warrants, to you will not
constitute a "prohibited transaction" (as such term is
defined in section 406 of ERISA or section 4975 of the IRC)
that could subject any Person to the penalty or tax on
prohibited transactions imposed by section 502 of ERISA or
section 4975 of the IRC, and neither the Company or any
ERISA Affiliate, nor any "employee benefit plan" (as such
term is hereinafter defined) of the Company or any ERISA
Affiliate or any trust created thereunder or any trustee or
administrator thereof, has engaged in any "prohibited
transaction" that could subject any such Person, or any
other party dealing with such employee benefit plan or
trust, to such penalty or tax. The representation by the
Company in the preceding sentence is made in reliance upon
and subject to the accuracy of the representations in
Section 1.4(b) and furthermore, in connection with funds
with which you are acquiring the Subordinated Notes and the
Warrants and which are from or attributable to your general
account assets or assets of one or more segments of such
general account, this representation is made in reliance on
and
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subject to the fact that either: (A) such acquisition would be
exempt under the provisions of the proposed prohibited
transaction class exemption published by the Department of
Labor in the Federal Register on August 22, 1994 (59 F.R.
43134, August 22, 1994); or (B) no part of such assets
constitutes assets of an "employee pension benefit plan" (as
defined in section 3 of ERISA) maintained by the Company or
any ERISA Affiliate or of a "plan" (as defined in section 4975
of the IRC) maintained by any ERISA Affiliate (it is
understood that the Company is relying on the present and
continuing validity and applicability of Department of Labor
Interpretive Bulletin 29 C.F.R. section 2509.75-2(b)).
(ii) PART 2.17(c) OF ANNEX 3 completely lists all
ERISA Affiliates and all employee benefit plans with respect
to which the Company or any "affiliate" (as such term is
hereinafter defined) of the Company is a "party-in-interest"
(as such term is hereinafter defined) or in respect of which
the Subordinated Notes or the Warrants could constitute an
"employer security" (as such term is hereinafter defined).
As used in this Section 2.17(c), the terms "employee benefit plan" and
"party-in-interest" have the meanings specified in section 3 of ERISA
and "affiliate" and "employer security" have the meanings specified in
section 407(d) of ERISA.
(d) REPORTABLE EVENTS. Except as disclosed in PART 2.17(d) OF
ANNEX 3, no Pension Plan or trust created thereunder has been
terminated, and there have been no Reportable Events, with respect to
any Pension Plan or trust created thereunder or with respect to any
Multiemployer Plan, which reportable event or events will or could
result in the termination of such Pension Plan or Multiemployer Plan
and give rise to a liability of the Company or any ERISA Affiliate in
respect thereof.
(e) MULTIEMPLOYER PLANS. Except as set forth on PART 2.17(d)
OF ANNEX 3, neither the Company nor any ERISA Affiliate, is an employer
required to contribute to any Multiemployer Plan. Neither the Company
nor any ERISA Affiliate, has incurred, nor is expected to incur, any
withdrawal liability (that has not previously been fully satisfied)
under ERISA with respect to any Multiemployer Plan. None of the
Multiemployer Plans referred to on PART 2.17 OF ANNEX 3 have been
terminated under section 4041A of ERISA, have been placed in
reorganization status under Title IV of ERISA, or have been determined
to be "insolvent" (as such term is defined in section 4245 of ERISA).
(f) MULTIPLE EMPLOYER PENSION PLANS. Except as set forth on
PART 2.17(f) OF ANNEX 3 to this Agreement, neither the Company nor any
ERISA Affiliate, is a "contributing sponsor" (as such term is defined
in section 4001 of ERISA) in any Multiple Employer Pension Plan and
neither the Company nor any ERISA Affiliate has incurred (without fully
satisfying the same), or reasonably expects to incur, withdrawal
liability in respect of any such Multiple Employer Pension Plan listed
on PART 2.17(f) OF ANNEX 3 to this Agreement, which withdrawal
liability could, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
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(g) FOREIGN PENSION PLAN. All Foreign Pension Plans have been
established, operated, administered and maintained in compliance with
all laws, regulations and orders applicable thereto except for such
failures, in the aggregate for all such failures, to comply that could
not reasonably be expected to have a Material Adverse Effect. All
premiums, contributions and any other amounts required by applicable
Foreign Pension Plan documents or applicable laws have been paid or
accrued as required, except for such unpaid premiums, contributions and
amounts that, in the aggregate for all such obligations, could not
reasonably be expected to have a Material Adverse Effect.
2.18 CERTAIN LAWS.
(a) INVESTMENT COMPANY ACT. Neither the Company nor any
Subsidiary is, nor are they directly or indirectly controlled by, or
acting on behalf of any Person which is, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(b) HOLDING COMPANY STATUS. Neither the Company nor any
Subsidiary is a "holding company" or an "affiliate" of a "holding
company," or a "subsidiary company" of a "holding company," or a
"public utility" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
2.19 ENVIRONMENTAL COMPLIANCE.
(a) COMPLIANCE. Except as disclosed in the environmental
audits, and the reports listed in PART 2.19(a) OF ANNEX 3, true and
correct copies of which have been delivered to you or Environmental
Risk Limited or otherwise set forth in PART 2.19(a) OF ANNEX 3, each of
the Company and the Subsidiaries is in substantial compliance with all
applicable Environmental Protection Laws in effect in each jurisdiction
where it is presently doing business, and in which the failure to so
comply could, in the aggregate for all such failures, reasonably be
expected to have a Material Adverse Effect;
(b) LIABILITY. Neither the Company nor any Subsidiary is
subject to any liability under any Environmental Protection Law that
could, in the aggregate for all such liabilities, reasonably be
expected to have a Material Adverse Effect; and
(c) NOTICES. EXCEPT AS DESCRIBED ON PART 2.19(c) OF ANNEX 3,
neither the Company nor any Subsidiary has received any
(i) notice from any Governmental Authority by which
any of its present or previously-owned or leased real
Properties has been designated or listed by any Governmental
Authority charged with administering or enforcing any
Environmental Protection Law as a Hazardous Substance disposal
or removal site, "Super Fund" clean-up site, or candidate for
removal or closure pursuant to any Environmental Protection
Law,
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(ii) notice of any Lien arising under or in
connection with any Environmental Protection Law that has
attached to any revenues of, or to, any of its owned or leased
real Properties, or
(iii) summons, citation, notice, directive, letter,
or other written communication from any Governmental Authority
concerning any intentional or unintentional action or omission
by the Company or such Subsidiary in connection with its
ownership or leasing of any real property resulting in the
releasing, spilling, leaking, pumping, pouring, emitting,
emptying, dumping, or otherwise disposing of any Hazardous
Substance into the environment resulting in any violation of
any Environmental Protection Law,
which relates to an event or condition which in the aggregate for all
such events or conditions could reasonably be expected to result in a
Material Adverse Effect.
(d) ENVIRONMENTAL WARRANTIES AND REPRESENTATIONS. All
warranties and representations made by the Company relating to
environmental matters, including, without limitation, compliance with
all Environmental Protection Laws, notices, actions or orders relating
to environmental matters and Hazardous Substances are made solely and
exclusively in this Section 2.19.
2.20 CAPITALIZATION.
PART 2.20 OF ANNEX 3 correctly sets forth, before and after giving
effect to the issuance of the Warrants pursuant to this Agreement and the
Warrant Agreement:
(a) the authorized and outstanding shares of the capital stock
and other Securities of the Company;
(b) the name of each holder of the outstanding shares of the
Company's capital stock and the number of shares held by each such
holder;
(c) all options, warrants and other rights to purchase from
the Company any capital stock of the Company and the holders thereof;
and
(d) all obligations (contingent or otherwise) of the Company
to repurchase or otherwise acquire or retire any shares of capital
stock (or options to purchase the same) of the Company.
All such outstanding shares of capital stock have been duly authorized and
validly issued and are fully paid, non-assessable and not subject to any
restriction or preemptive rights. The Company has authorized and unissued, and
has reserved for issuance, a sufficient number of shares of:
(i) Class B Common Stock to permit the exercise, after giving
effect to the transactions contemplated hereby, of all of the
Warrants; and
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(ii) Class A Common Stock to permit the conversion, after
giving effect to the transactions contemplated hereby, of all of the
Class B Common Stock issuable upon the exercise of the Warrants.
Each such share of Common Stock when issued, will be fully paid and
nonassessable, free and clear of any Lien, and not subject to any preemptive
rights.
2.21 ALL DOCUMENTS PROVIDED.
The Company has provided to each of the Purchasers true, correct and
complete copies of each of the following documents:
(a) the Bank Loan Agreement and all documents and instruments
(except that certain letter agreement, dated April 7, 1995, between the
Company and Bankers Trust Co. with respect to fees and expenses payable
by the Company in connection with the Bank Loan Agreement (the "FEE
LETTER") executed in connection therewith (collectively, the "BANK
DOCUMENTS"), and there is no agreement or understanding between the
Company and the Banks except as set forth in the Bank Documents;
(b) the Acquisition Agreement and all documents pursuant to
which the Acquisition was consummated, together, in each case, with all
amendments and exhibits thereto, and all other documents and
instruments executed, delivered or filed, or to be filed, in connection
with the consummation of the Acquisition (collectively, the
"ACQUISITION DOCUMENTS");
(c) the Merger Agreement, the Certificate of Merger and all
other documents and instruments executed, delivered or filed, or to be
filed, in connection with the consummation of the Merger (collectively,
the "MERGER DOCUMENTS"); and
(d) all agreements or other documents which evidence or
otherwise set forth rights with respect to the capital stock or other
equity securities of the Company (collectively, the "EQUITY
DOCUMENTS").
2.22 MERGER OF HELSEL.
(a) The Merger has been consummated in accordance with the
Merger Agreement.
(b) The Certificate of Merger has been duly filed with the
Secretary of State of the State of Delaware and the Merger has been
effected in accordance therewith and with applicable Delaware and Ohio
law. Without limitation of the foregoing, Helsel has been merged with
and into Helsel Holdings, the separate corporate existence of Helsel
having ceased at the effective time of the Merger and Helsel Holdings
being the surviving corporation of the Merger (Helsel Holdings
concurrently with the Merger changing its corporate name to "Helsel,
Inc.").
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(c) As a result of the Merger, all and singular, the rights,
privileges, powers and franchises of Helsel, and all Property, real,
personal and mixed, and all debts due to Helsel on whatever account,
for stock subscriptions as well as all other things in action or
belonging to Helsel, are vested in Helsel Holdings; and all Property,
rights, privileges, powers and franchises, and all and every other
interest is as effectually the Property of Helsel Holdings as they were
of Helsel, and the title to any real estate vested by deed or otherwise
in Helsel has not reverted and is not in any way impaired by reason of
the Merger.
2.23 ACQUISITION OF WELLMAN.
(a) REPRESENTATIONS IN ACQUISITION DOCUMENTS. As of the
Closing Date, prior to giving effect to the Acquisition:
(i) each of the representations and warranties made by
the Company in the Acquisition Documents was true and
correct in all material respects; and
(ii) the Company has no knowledge that any
representation or warranty of Wellman or any other party in
the Acquisition Documents is untrue or misleading in any
material respect.
(b) COMPLIANCE WITH ACQUISITION DOCUMENTS. The Acquisition has
been completed as contemplated by the Acquisition Documents, and there
has been no waiver of any condition to the closing thereof which could
reasonably be expected to have a Material Adverse Effect. S.K. Wellman
Acquisition, Inc., a Delaware corporation, has acquired title to the
capital stock of Wellman pursuant to the terms of the Acquisition
Documents free of any Liens not permitted by Section 7.5.
3. CLOSING CONDITIONS
Your obligation to purchase and pay for the Subordinated Notes and the
Warrants to be delivered to you at the Closing is subject to the following
conditions precedent:
3.1 OPINIONS OF COUNSEL.
You shall have received from
(a) Kohrman Jackson & Krantz, counsel for the Company and the
Subsidiaries, and
(b) Hebb & Gitlin, a Professional Corporation, your special
counsel,
closing opinions, each dated as of the Closing Date, and substantially
in the respective forms set forth in Exhibit B1 and Exhibit B2, and as
to such other matters as you may reasonably request. This Section 3.1
shall constitute direction by the Company to counsel named in the
foregoing clause (a) to deliver such closing opinion to you. In
addition, you shall have received copies of the opinions delivered in
connection with the consummation
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of the Acquisition, accompanied by letters of counsel rendering such
opinions (or, by their terms) stating that you are entitled to rely on
such opinions as if they were addressed to you.
3.2 WARRANTIES AND REPRESENTATIONS TRUE; COMPLIANCE WITH THIS
AGREEMENT.
(A) WARRANTIES AND REPRESENTATIONS TRUE. The warranties and
representations contained in Section 2 shall be true in all material
respects on the Closing Date with the same effect as though made on
and as of that date.
(B) COMPLIANCE WITH THE FINANCING DOCUMENTS. The Company shall
have performed and complied in all material respects with all
agreements and conditions contained herein and in the Warrant Agreement
that, in each case, are required to be performed or complied with by
the Company on or prior to the Closing Date, and such performance and
compliance shall remain in effect on the Closing Date.
3.3 OFFICERS' CERTIFICATES.
You shall have received
(a) a certificate dated the Closing Date and signed on behalf
of the Company by a Senior Officer, substantially in the form of
Exhibit C1, certifying that the conditions specified in Section 3.2
have been fulfilled and that no Default or Event of Default will exist
on the Closing Date after giving effect to the consummation of the
transactions contemplated by this Agreement, and
(b) a certificate dated the Closing Date and signed on behalf
of the Company by the Secretary or an Assistant Secretary of the
Company, substantially in the form of Exhibit D1, with respect to the
matters therein set forth.
3.4 LEGALITY.
If you are an insurance company, the Subordinated Notes and the
Warrants shall on the Closing Date qualify as a legal investment for you under
applicable insurance law (without regard to any "basket" or "leeway" provisions)
and you shall have received such evidence as you may reasonably request to
establish compliance with this condition.
3.5 PRIVATE PLACEMENT NUMBERS.
The Company shall have obtained or caused to be obtained private
placement numbers for the Subordinated Notes and the Warrants from the CUSIP
Service Bureau of Standard & Poor's, a division of McGraw-Hill, Inc. and you
shall have been informed of such private placement numbers.
3.6 SUBSIDIARY SUBORDINATED GUARANTEES.
You shall have received:
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(a) a subordinated guarantee agreement (each, as amended from
time to time, a "SUBSIDIARY SUBORDINATED GUARANTEE") substantially in
the form of Exhibit E, executed and delivered by each Wholly-Owned
Domestic Subsidiary;
(b) a certificate from each Wholly-Owned Domestic Subsidiary
dated the Closing Date and signed by a senior officer of such
Wholly-Owned Domestic Subsidiary, substantially in the form of Exhibit
C2.
(c) a certificate from each Wholly-Owned Domestic Subsidiary
dated the Closing Date and signed by the Secretary or an Assistant
Secretary of such Wholly-Owned Domestic Subsidiary, substantially in
the form of Exhibit D2.
3.7 WARRANT AGREEMENT; SHAREHOLDERS' AGREEMENT.
(a) WARRANT AGREEMENT. The Company shall have executed and
delivered to you and each Other Purchaser the warrant agreement (as
amended from time to time, the "WARRANT AGREEMENT"), substantially in
the form of Exhibit F to this Agreement, in respect of the issuance, in
accordance therewith, of the warrants (the "WARRANTS") to purchase
shares of the Class B Common Stock, such Warrants to be represented by
warrant certificates (the "WARRANT CERTIFICATES") in the form of
Attachment A to the Warrant Agreement. The Company shall have issued to
you and the other Purchasers Warrants in the respective amounts set
forth below your name and each Other Purchaser's name on Annex 1.
(b) SHAREHOLDERS' AGREEMENT. The Company, the Purchasers and
the Management Stockholders shall have entered into a shareholders'
agreement (as amended from time to time, the "SHAREHOLDERS' AGREEMENT")
substantially in the form of Exhibit G; and all certificates evidencing
outstanding shares of the Common Stock shall have been affixed with the
required legends pursuant to Section 8.3 of the Shareholders' Agreement
giving notice of the restrictions imposed by the Shareholders'
Agreement.
3.8 RESERVATION OF SHARES.
The shares of Class B Common Stock issuable upon the exercise of each
Warrant shall have been duly authorized and reserved for issuance upon exercise
of the Warrants. The shares of Class A Common Stock issuable upon conversion of
the Class B Common Stock shall have been duly authorized and reserved for
issuance upon conversion of the Class B Common stock issuable upon exercise of
the Warrants.
3.9 BANK LOAN AGREEMENT.
The Company and the Banks shall have entered into the Bank Loan
Agreement, which agreement, and all documents and instruments executed and
delivered in connection therewith, shall be in form and substance satisfactory
to you. The Company shall have delivered to you a copy of a fully executed Bank
Loan Agreement and a photocopy of each other Bank Document, certified as true
and correct by an officer of the Company. All of conditions precedent to the
obligations of the Banks set forth in Section 5 of the Bank Loan Agreement shall
have been
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satisfied. On the Closing Date, the Banks shall have made, or made available, to
the Company (i) a term loan in principal amount not to exceed Sixty Million
Dollars ($60,000,000), and (ii) a revolving credit loan in an aggregate
principal amount up to the greater of (A) Twenty Million Dollars ($20,000,000)
and (B) the Maximum Revolver Amount from time to time, on the terms and
conditions contained in the Bank Loan Agreement (as in effect on the Closing
Date).
3.10 ACQUISITION AND MERGER.
(a) ACQUISITION. The Acquisition shall have been completed as
contemplated by the Acquisition Documents, and there shall have been no
waiver of any condition to the closing thereof which could reasonably
be expected to have a Material Adverse Effect.
(b) CONSUMMATION OF MERGER. All action necessary to constitute
the Merger a fully consummated, completed and effective transaction,
including, without limitation, the filing of the Certificate of
Ownership and Merger with the Secretary of State of the State of
Delaware, shall have been duly taken and you shall have received such
evidence thereof as you shall request.
(c) WARRANT REDEMPTION. The Company shall, for an aggregate
amount not to exceed $7,000,000 (including any prepayment fee or other
make-whole premium incurred in connection with the Household Warrant
Redemption or the related refinancing of Debt owing to Household),
against surrender of the certificates representing the Household
Warrants, have purchased all Household Warrants outstanding immediately
prior to the Closing Date and cancelled all certificates representing
the Household Warrants received in connection with such purchase (the
"HOUSEHOLD WARRANT REDEMPTION"). In connection with the Household
Warrant Redemption all rights of Household as a holder of such
Household Warrants shall have ceased except the rights to receive the
payments specified in the preceding sentence and certain indemnity,
expense or similar provisions which by their express terms are intended
to survive the Household Warrant Redemption. The Household Warrants
shall not be deemed outstanding for any purpose. You shall have
received evidence in form, scope and substance reasonably satisfactory
to you that the matters set forth in this Section 3.10(c) have been
satisfied on the Closing Date. There shall have been delivered to you
copies, certified as true and correct by a Senior Officer, of all
Household Warrant Redemption Documents, including the certificates
evidencing the Household Warrants so redeemed, all of which shall be in
form and substance reasonably satisfactory to you.
3.11 EQUITY DOCUMENTS.
The Company shall have delivered to you an executed copy of each Equity
Document, certified as true and correct as of the time of the Closing by an
officer of the Company.
3.12 LETTER FROM BOWLES HOLLOWELL CONNER & CO.
Bowles Hollowell Conner & Co. shall have delivered to you and your
special counsel a letter describing the manner of the offering of the
Subordinated Notes and the Warrants, in form and substance satisfactory to you
and your special counsel.
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3.13 ENVIRONMENTAL REPORTS.
You or Environmental Risk Limited shall have received an environmental
report or reports in respect of each of the real Properties listed in PART
2.19(a) OF ANNEX 3 and each such environmental report shall be acceptable to you
and Environmental Risk Limited.
3.14 SOLVENCY OPINION.
You shall have received a solvency opinion from Valuation Research
Corporation in respect of the Company on a stand alone basis and the Company and
the Subsidiaries on a consolidated basis and such solvency opinion shall be
acceptable to you.
3.15 EXPENSES.
All fees and disbursements required to be paid pursuant to Section
1.7(a) and Section 1.7(b) shall have been paid in full, including, without
limitation, the fees and expenses of Environmental Risk Limited and Valuation
Research Corporation.
3.16 PROCEEDINGS SATISFACTORY.
All proceedings taken in connection with the issuance and sale of the
Subordinated Notes and the Warrants and all documents and papers relating
thereto shall be satisfactory to you and your special counsel. You and your
special counsel shall have received copies of such documents and papers as you
or they may reasonably request in connection therewith or in connection with
your special counsel's closing opinion, all in form and substance satisfactory
to you and your special counsel.
4. PURCHASERS' SPECIAL RIGHTS
4.1 DIRECT PAYMENT.
Notwithstanding anything to the contrary herein or in the Subordinated
Notes, the Company shall pay all amounts payable with respect to each
Subordinated Note held by an Institutional Investor (without any presentment of
such Subordinated Notes and without any notation of such payment being made
thereon) by crediting, by federal funds bank wire transfer, the account of such
Institutional Investor in any bank in the United States of America as may be
designated in writing by such Institutional Investor, or in such other manner as
may be reasonably directed or to such other address in the United States of
America as may be reasonably designated in writing by such Institutional
Investor. Your address on Annex 1 shall be deemed to constitute notice,
direction or designation (as appropriate) to the Company with respect to direct
payments as aforesaid. In all other cases, all amounts payable with respect to
each Subordinated Note shall be made by check mailed and addressed to the
registered holder of each Subordinated Note at the address shown in the register
maintained by the Company pursuant to Section 6.1.
Each holder of Subordinated Notes agrees that in the event it shall
sell or transfer any Subordinated Note
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(a) it shall, prior to the delivery of such Subordinated Note
(unless it shall have already done so), make a notation thereon of all
principal, if any, prepaid on such Subordinated Note and shall also
note thereon the date to which interest shall have been paid on such
Subordinated Note, and
(b) it shall promptly notify the Company of the name and
address of the transferee of any such Subordinated Note so transferred
and the effective date of such transfer.
4.2 DELIVERY EXPENSES.
If any holder of Subordinated Notes surrenders any Subordinated Note to
the Company pursuant hereto, the Company shall pay the cost of delivering to or
from such holder's home office or custodian bank from or to the Company, insured
to the reasonable satisfaction of such holder, the surrendered Subordinated Note
and any Subordinated Note issued in substitution or replacement for the
surrendered Subordinated Note.
4.3 ISSUE TAXES.
The Company shall pay all stamp, duty, excise or other transfer taxes
in connection with the issuance and sale of the Subordinated Notes and in
connection with any modification of this Agreement and the Subordinated Notes
and shall save each holder of Subordinated Notes harmless without limitation as
to time against any and all liabilities with respect to all such taxes. The
obligations of the Company under this Section 4.3 shall survive the payment or
prepayment of the Subordinated Notes and the termination hereof.
5. PAYMENTS OF PRINCIPAL.
5.1 REQUIRED PREPAYMENTS OF SUBORDINATED NOTES AND PAYMENT AT
MATURITY.
The Company shall prepay, and there shall become due and payable, Ten
Million Dollars ($10,000,000) principal amount of the Subordinated Notes on each
of June 30, 2003 and June 30, 2004. Each such required prepayment shall be at
one hundred percent (100%) of the principal amount prepaid, together with
interest accrued thereon to the date of prepayment. The principal of the
Subordinated Notes remaining outstanding, together with interest accrued
thereon, shall become due and payable on June 30, 2005.
5.2 OPTIONAL PREPAYMENTS.
(a) OPTIONAL PREPAYMENTS. The Company may prepay the
Subordinated Notes in whole or in part, at any time in multiples of One
Hundred Thousand Dollars ($100,000) (or, if the aggregate outstanding
principal amount of the Subordinated Notes is less than One Hundred
Thousand Dollars ($100,000) at such time, then such principal amount),
together with
(i) interest on such principal amount then being
prepaid accrued to the prepayment date, and
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(ii) an amount equal to the Prepayment Compensation
Amount at such time with respect to the principal amount of
the Subordinated Notes being so prepaid.
(b) NOTICE OF OPTIONAL PREPAYMENT. The Company will give
notice of any optional prepayment of the Subordinated Notes to each
holder of Subordinated Notes not less than thirty (30) days or more
than sixty (60) days before the date fixed for prepayment, specifying:
(i) such date;
(ii) the Section hereof under which the prepayment is
to be made;
(iii) the principal amount of each Subordinated Note to
be prepaid on such date;
(iv) the interest to be paid on each such Subordinated
Note, accrued to the date fixed for payment; and
(v) a reasonably detailed calculation of the Prepayment
Compensation Amount (calculated as if the date of such
notice were the date of the prepayment), if any, due in
connection with such prepayment.
Such notice of prepayment shall also certify all facts that are
conditions precedent to any such prepayment and shall describe in
detail each Trigger Event which shall have occurred on or prior to the
specified prepayment date. Notice of prepayment having been so given,
the aggregate principal amount of the Subordinated Notes specified in
such notice, together with the Prepayment Compensation Amount, if any,
and accrued interest thereon shall become due and payable on the
specified prepayment date. Two (2) Business Days prior to such
prepayment, the Company shall deliver to each holder of Subordinated
Notes being prepaid a certificate of a Senior Financial Officer
specifying the calculation of such Prepayment Compensation Amount as of
such date. Each such certificate shall be accompanied by a copy of any
applicable documentation utilized by the Company in respect of such
calculation.
5.3 OFFER TO PREPAY UPON CHANGE IN CONTROL.
(a) NOTICE AND OFFER. In the event of a Change in Control
the Company will, within thirty (30) days prior to such Change in
Control, give written notice of such Change in Control to each holder
of Subordinated Notes by registered mail and, simultaneously with the
sending of such written notice, send a copy of such notice to each such
holder via an overnight courier of national reputation. Such written
notice shall contain, and such written notice shall constitute, an
irrevocable offer to prepay, subject to Section 5.3(d), all, but not
less than all, the Subordinated Notes held by such holder on a date
specified in such notice (the "CONTROL PREPAYMENT DATE") that is not
less than thirty (30) days and not more than sixty (60) days after the
date of such notice. If the Control Prepayment Date shall not be
specified in such notice, the Control Prepayment Date shall be the
thirtieth (30th) day after
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the date of such holder's receipt of such notice. In no event will the
Company take any action to consummate or finalize a Change in Control
unless contemporaneously with such action the Company prepays all
Subordinated Notes for which prepayment has been accepted pursuant to
Section 5.3(b)(i) (unless such prepayment is not required pursuant to
Section 5.3(d)).
(b) ACCEPTANCE AND PAYMENT; REJECTION.
(i) ACCEPTANCE AND PAYMENT. To accept such offered
prepayment, a holder of Subordinated Notes shall cause a
written notice of such acceptance to be delivered to the
Company prior to the Control Prepayment Date. If so accepted,
subject to Section 5.3(d), such offered prepayment shall be
due and payable on the Control Prepayment Date. Such offered
prepayment shall be made at one hundred percent (100%) of the
principal amount of the Subordinated Notes held by holders
having accepted such offer, together with interest on the
Subordinated Notes then being prepaid accrued to the Control
Prepayment Date.
(ii) REJECTION. A failure to respond to all written
offers of prepayment referred to in this Section 5.3 shall be
deemed to constitute a rejection of such offered prepayment
and shall be deemed to be a waiver of any and all rights to
receive such offered prepayment.
(c) OFFICER'S CERTIFICATE. Each offer to prepay the
Subordinated Notes pursuant to this Section 5.3 shall be accompanied
by a certificate, executed by a Senior Officer and dated the date of
such offer, specifying:
(i) the Control Prepayment Date;
(ii) the Section hereof under which such offer is made;
(iii) the principal amount of each Subordinated Note
offered to be prepaid; and
(iv) the interest that would be due on each
Subordinated Note offered to be prepaid, accrued to the date
fixed for payment;
(v) that the conditions of this Section 5.3 have been
fulfilled; and
(vi) in reasonable detail, the nature and date or
proposed date of the Change in Control.
(d) LIMITATION ON PREPAYMENT. Notwithstanding anything
contained in this Section 5.3 to the contrary, the Company shall not be
obligated to prepay the Subordinated Notes in connection with a Change
in Control on the Control Prepayment Date, if, at such time:
(i) there is any Senior Debt then outstanding, and
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(ii) the Company shall have failed to obtain, not
less than thirty (30) days prior to the Control Prepayment
Date, from the holders of all Senior Debt then outstanding, a
written consent (the "CONTROL PREPAYMENT CONSENT") of such
holders to the prepayment in full of all Subordinated Notes
required to be prepaid in connection with such Change in
Control pursuant to this Section 5.3.
5.4 PARTIAL PREPAYMENT PRO RATA.
If at the time any required or optional prepayment under Section 5.1 or
Section 5.2 is due there is more than one Subordinated Note outstanding, the
aggregate principal amount of each partial prepayment of the Subordinated Notes
shall be allocated among the holders of the Subordinated Notes at the time
outstanding in proportion, as nearly as practicable, to the respective unpaid
principal amounts of the Subordinated Notes then outstanding, with adjustments,
to the extent practicable, to equalize for any prior prepayments not in such
proportion.
5.5 EFFECT OF PREPAYMENT. Each prepayment of the Subordinated Notes
pursuant to Section 5.2 or Section 5.3 shall be applied to reduce ratably each
of the required prepayments of the Subordinated Notes remaining after the date
of such prepayment and the payment due at maturity pursuant to the provisions of
Section 5.1.
5.6 NOTATION OF SUBORDINATED NOTES ON PREPAYMENT.
Upon any partial prepayment of a Subordinated Note, such Subordinated
Note may, at the option of the holder thereof, be
(a) surrendered to the Company pursuant to Section 6.2 in
exchange for a new Subordinated Note in a principal amount equal to the
principal amount remaining unpaid on the surrendered Subordinated Note,
(b) made available to the Company for notation thereon of the
portion of the principal so prepaid, or
(c) marked by such holder with a notation thereon of the
portion of the principal so prepaid.
In case the entire principal amount of any Subordinated Note is prepaid, such
Subordinated Note shall be surrendered to the Company for cancellation and shall
not be reissued, and no Subordinated Note shall be issued in lieu of the prepaid
principal amount of any Subordinated Note.
5.7 NO OTHER OPTIONAL PREPAYMENTS.
Except as provided in Section 5.2 and in Section 5.3 or in accordance
with an offer made in compliance with Section 7.7 or Section 7.12, the Company
may not make any optional prepayment (whether directly or indirectly by purchase
or other acquisition) in respect of the Subordinated Notes.
5.8 VALUABLE RIGHTS.
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The Company acknowledges, and the parties hereto agree, that the right
of each holder to maintain its investment in the Subordinated Notes free from
repayment by the Company (except as herein specifically provided for) is a
valuable right and that the provision for the payment of the Prepayment
Compensation Amount by the Company in the event that the Subordinated Notes are
prepaid or are accelerated as a result of an Event of Default, is intended to
provide compensation for the deprivation of such right under such circumstances.
5.9 DELIVERY OF SUBORDINATED NOTES IN PAYMENT OF WARRANT PURCHASE
PRICE.
The Warrant Agreement provides that a holder of Warrants may tender
Subordinated Notes to the Company in partial or complete payment of the purchase
price for the shares of Class B Common Stock issued upon exercise of the
Warrants. Promptly following the receipt of any Subordinated Note so tendered,
the Company shall immediately cancel and retire the same (and no such
Subordinated Note shall be reissued) and shall issue to the holder thereof a new
Subordinated Note in the principal amount or such tendered Subordinated Note
remaining after deduction of the principal amount thereof applied to the payment
of the purchase price for the shares of Class B Common Stock. The Company and
you agree that a tender of Subordinated Notes in payment of the exercise price
in respect of the Warrants shall not be a prepayment nor deemed to be a
prepayment of the Subordinated Notes, but rather a conversion of such
Subordinated Notes, pursuant to the terms of the Warrant Agreement and the
Warrants, into Class B Common Stock.
6. REGISTRATION; SUBSTITUTION OF SUBORDINATED NOTES
6.1 REGISTRATION OF SUBORDINATED NOTES.
The Company shall cause to be kept at the office of its counsel,
Kohrman Jackson & Krantz, One Cleveland Center, 20th Floor, 1375 East 9th
Street, Cleveland, Ohio 44114 or at its office, maintained pursuant to Section
7.3, or at such other office of such counsel or the Company of which the Company
shall have given written notice to each holder of Subordinated Notes, a register
for the registration and transfer of Subordinated Notes. The name and address of
each holder of one or more Subordinated Notes, each transfer thereof and the
name and address of each transferee of one or more Subordinated Notes shall be
registered in the register. The Person in whose name any Subordinated Note shall
be registered shall be deemed and treated as the owner and holder thereof for
all purposes hereof, and the Company shall not be affected by any notice or
knowledge to the contrary.
6.2 EXCHANGE OF SUBORDINATED NOTES.
Upon surrender of any Subordinated Note at the office of the Company
maintained pursuant to Section 7.3 duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such
Subordinated Note or his attorney duly authorized in writing, the Company shall
execute and deliver, at the Company's expense (except as provided below), new
Subordinated Notes in exchange therefor, in denominations of at least One
Hundred Thousand Dollars ($100,000) (except as may be necessary to reflect:
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(a) any principal amount not evenly divisible by One Hundred
Thousand Dollars ($100,000);
(b) any Subordinated Note originally issued in an amount
greater than One Hundred Thousand Dollars ($100,000), but with a
remaining unpaid principal amount of less than One Hundred Thousand
Dollars ($100,000); or
(c) any Subordinated Note in a principal amount equal to the
Purchase Price (as such term is defined in the Warrant Agreement) of
any Warrant or Warrants issued for the purpose of permitting the holder
thereof to pay such Purchase Price with a principal amount of
Subordinated Notes);
in an aggregate principal amount equal to the unpaid principal amount of the
surrendered Subordinated Note. Each such new Subordinated Note shall be payable
to such Person as such holder may request and shall be substantially in the form
of Exhibit A. Each such new Subordinated Note shall be dated and bear interest
from the date to which interest shall have been paid on the surrendered
Subordinated Note or dated the date of the surrendered Subordinated Note if no
interest shall have been paid thereon. The Company may require payment of a sum
sufficient to cover any stamp tax or governmental charge imposed in respect of
any such transfer of Subordinated Notes.
6.3 REPLACEMENT OF SUBORDINATED NOTES.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any
Subordinated Note (which evidence shall be, in the case of an Institutional
Investor, notice from such Institutional Investor of such ownership and such
loss, theft, destruction or mutilation) and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such
Subordinated Note is an Institutional Investor, such holder's own
unsecured agreement of indemnity shall be deemed to be satisfactory),
or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a new
Subordinated Note, dated and bearing interest from the date to which interest
shall have been paid on such lost, stolen, destroyed or mutilated Subordinated
Note or dated the date of such lost, stolen, destroyed or mutilated Subordinated
Note if no interest shall have been paid thereon.
6.4 LIMITATION ON TRANSFERS.
Notwithstanding the foregoing provisions of this Section 6 or any other
provision contained in this Agreement, each holder of Subordinated Notes agrees
that it will not at any time sell, transfer or otherwise convey any of the
Subordinated Notes, or any portion thereof, to any Person which is, at the time
of such sale, transfer or conveyance, a Competitor without the prior written
consent of the Company.
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7. COMPANY BUSINESS COVENANTS
The Company covenants that on and after the Closing Date and so long as
any of the Subordinated Notes shall be outstanding:
7.1 PAYMENT OF TAXES AND CLAIMS.
The Company will, and will cause each Subsidiary to, pay before they
become delinquent,
(a) all taxes, assessments and governmental charges or levies
imposed upon it or its Property, and
(b) all claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons that, if unpaid, might
result in the creation of a Lien upon its Property,
provided, that items of the foregoing description need not be paid
(i) while being contested in good faith and by appropriate
proceedings as long as adequate book reserves have been established and
maintained and exist with respect thereto, and
(ii) so long as the title of the Company or the Subsidiary, as
the case may be, to, and its right to use, such Property, is not
materially adversely affected thereby.
7.2 MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE.
The Company will, and will cause each Subsidiary to,
(a) PROPERTY -- maintain all Property necessary in its
business in good working order and condition, ordinary wear and tear
excepted, in accordance with past practice;
(b) INSURANCE -- maintain, with financially sound and
reputable insurers, insurance with respect to its Property and business
against such casualties and contingencies, of such types (including,
without limitation, insurance with respect to losses arising out of
Property loss or damage, public liability, business interruption,
larceny, workers' compensation, embezzlement or other criminal
misappropriation) and in such amounts as is customary in the case of
corporations of established reputations engaged in the same or a
similar business and similarly situated;
(c) FINANCIAL RECORDS -- keep proper books of records and
accounts in which full, true and correct entries in conformity in all
material respects with GAAP and all requirements of law shall be made
of all its dealings and transactions in relation to its business and
activities;
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(d)CORPORATE EXISTENCE AND RIGHTS -- do or cause to be done
all things necessary
(i) to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and
franchises, subject to Section 7.6, except where the failure
to do so could not reasonably be expected to have a Material
Adverse Effect; and
(ii) to maintain each Subsidiary as a Subsidiary,
except as otherwise permitted by Section 7.6 and Section
7.7;
provided, that, in each case, the Company shall be permitted to
complete the Subsidiary Restructuring; and
(e) COMPLIANCE WITH LAW -- not be in violation of any law,
ordinance or governmental rule or regulation to which it is subject
(including, without limitation, any Environmental Protection Law) and
not fail to obtain any license, certificate, permit, franchise or other
governmental authorization necessary to the ownership of its Properties
or to the conduct of its business if such violation or failure to
obtain, in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
7.3 PAYMENT OF SUBORDINATED NOTES AND MAINTENANCE OF OFFICE.
The Company will punctually pay, or cause to be paid, the principal of
and interest (and Prepayment Compensation, if any) on, the Subordinated Notes,
as and when the same shall become due according to the terms hereof and of the
Subordinated Notes, and will maintain an office at the address of the Company
set forth in Section 12.1 where notices, presentations and demands in respect
hereof or the Subordinated Notes may be made upon it. Such office will be
maintained at such address until such time as the Company will notify the
holders of the Subordinated Notes of any change of location of such office,
which will in any event be located within the United States of America.
7.4 DEBT RESTRICTIONS.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, create, incur, issue, assume, guarantee or otherwise become
liable with respect to any Debt, except:
(a) SUBORDINATED NOTES -- Debt evidenced by the Subordinated
Notes;
(b) ACCEPTABLE CREDIT FACILITIES -- Debt outstanding from time
to time under Acceptable Credit Facilities in an aggregate amount not
exceeding (except to the extent otherwise permitted pursuant to this
Section 7.4) Sixty Million Dollars ($60,000,000) pursuant to a term
loan facility thereunder plus an amount outstanding under a revolving
credit facility thereunder not in excess of the greater of (x) Twenty
Million Dollars ($20,000,000) and (y) the Maximum Revolver Amount from
time to time;
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(c) CLOSING DATE DEBT -- Debt of the Company and the
Subsidiaries outstanding as of the Closing Date and described on PART
7.4 OF ANNEX 3;
(d) PURCHASE MONEY DEBT -- Debt secured by Purchase Money
Liens used to finance the purchase of Acceptable Property, so long as
the Debt secured by such Purchase Money Lien shall not exceed the
amount equal to the lesser of (x) the cost of acquisition or
construction of the particular Acceptable Property to which such Debt
relates, or (y) the Fair Market Value of such Acceptable Property at
such time;
(e) EXTENSIONS AND RENEWALS -- modifications, extensions,
refundings and refinancings of all or part of any Debt permitted
pursuant to clause (c) and clause (d), inclusive, of this Section 7.4
then outstanding, provided that immediately after giving effect to the
incurrence of such modification, extension, refunding or refinancing,
all of the following conditions are met:
(i) the aggregate principal (or, in the case of
letters of credit, face) amount or commitment amount of the
Debt is not increased in excess of the amount of such Debt
outstanding immediately prior to such modification, extension,
renewal or refinancing; and
(ii) the terms of such Debt so modified, extended,
renewed or refinanced are, in the aggregate, no less favorable
to the Company and/or its Subsidiaries, as the case may be,
than the terms of such Debt prior to such modification,
renewal, extension or refinancing;
(f) BASKET DEBT -- Debt (including without limitation, Debt
pursuant to Acceptable Credit Facilities in excess of the amount
permitted pursuant to Section 7.4(b)) of the Company and the
Subsidiaries not otherwise permitted under the provisions of clause (a)
through clause (e), inclusive, of this Section 7.4 provided that the
aggregate outstanding principal amount of Debt issued pursuant to this
clause (f) shall not at any time exceed Nine Million Dollars
($9,000,000);
(g) INTEREST RATE PROTECTION AGREEMENTS -- Debt of the Company
consisting of obligations under Interest Rate Protection Agreements
entered into in the ordinary course of business, including, without
limitation, the Interest Rate Protection Agreement required by Section
8.11 of the Bank Loan Agreement (as in effect of the Closing Date);
(h) OTHER HEDGING AGREEMENTS -- Debt of the Company under
Other Hedging Agreements, entered into in the ordinary course of
business and consistent with past practices, providing protection
against fluctuations in currency values so long as senior management of
the Company shall have determined that such Other Hedging Agreement is
for bona fide hedging purposes and not for speculative purposes; and
(i) INTERCOMPANY DEBT -- Debt of a Subsidiary owed to the
Company or to any Wholly-Owned Subsidiary or Debt of the Company owed
to a Wholly-Owned Subsidiary;
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(j) ADDITIONAL DEBT -- Debt (including without limitation,
Debt pursuant to Acceptable Credit Facilities in excess of the amount
permitted pursuant to clause (b) of this Section 7.4) not otherwise
permitted under clause (a) through clause (i), inclusive, of this
Section 7.4 provided that immediately after giving effect to the
incurrence of such Debt in accordance with this clause (j) and to the
concurrent retirement of other Debt:
(i) the ratio of Pro Forma Consolidated Net Income
Available for Fixed Charges at such time to Pro Forma Fixed
Charges at such time would not be less than 2.00 to 1.00;
and
(ii) immediately prior to and immediately after the
incurrence of such Debt, and after giving effect thereto, no
Default or Event of Default exists or would exist.
For purposes of this Section 7.4(j), it shall be assumed that:
(I) any Debt proposed to be incurred pursuant to this clause
(j) (and any Debt incurred pursuant to this clause (j) since the
beginning of the period of twelve (12) calendar months most recently
ended at the time of such proposed incurrence) had been incurred on the
first day of such period, and had been outstanding throughout such
period; and
(II) any Debt proposed to be contemporaneously retired with
the proceeds of the Debt proposed to be incurred pursuant to this
clause (j) (and any Debt retired with the proceeds of Debt incurred
pursuant to this clause (j) since the beginning of such period) had
been retired on the first day of such period.
For purposes of this Section 7.4, each Subsidiary created, acquired or formed
after the Closing Date shall be deemed to have incurred all Debt of such
Subsidiary which existed as of the date of the creation, acquisition of or
formation of such corporation as a Subsidiary.
7.5 LIENS.
(a) NEGATIVE PLEDGE. The Company will not, nor will it permit
any Subsidiary to, cause or permit to exist, or agree or consent to
cause or permit to exist in the future (upon the happening of a
contingency or otherwise), any of its Property, whether now owned or
hereafter acquired, to be subject to a Lien except:
(i) ORDINARY COURSE BUSINESS LIENS --
(A) TAXES, ETC. -- Liens securing taxes,
assessments or governmental charges or levies or, to
the extent incurred in the ordinary course of
business of the Company or such Subsidiary, the
claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like
Persons, provided that the payment thereof is not at
the time required by Section 7.1;
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(B) BUSINESS -- Liens incurred or deposits
made in the ordinary course of business
(I) in connection with workers'
compensation, unemployment insurance, social
security, pension and other like laws, and
(II) Liens (other than any Lien
imposed by ERISA) on Property of the Company
or any of the Subsidiaries incurred or
deposits made in the ordinary course of
business of the Company or such Subsidiary,
but not incurred in connection with Debt for
borrowed money, the obtaining of advances or
the payment of the deferred purchase price
of Property, in connection with (x) workers'
compensation, unemployment insurance, social
security, pension or other types of social
security or (y) securing the performance of
tenders, statutory obligations (other than
excise taxes), surety, stay, customs and
appeal bonds, statutory bonds, bids, leases,
government contracts, performance and return
of money bonds and other similar obligations
incurred in the ordinary course of business
(other than any of the foregoing which is of
a type described in Section 7.5(a)(ii)), or
(z) deposits made in the ordinary course of
business to secure liability for premiums to
insurance carriers; and
(C) REAL ESTATE -- Liens in the nature of
reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions,
leases and other similar title exceptions or
encumbrances affecting real Property, including,
without limitation, Permitted Encumbrances (as such
term is defined in the Bank Loan Agreement in effect
on the Closing Date), provided that such exceptions
and encumbrances do not in the aggregate materially
interfere with the use of such Property in the
ordinary conduct of the business of the Company and
the Subsidiaries, taken as a whole;
(ii) JUDICIAL LIENS -- Liens
(A) arising from judicial attachments and
judgments,
(B) securing appeal bonds, supersedeas
bonds, and
(C) arising in connection with court
proceedings (including, without limitation, surety
bonds and letters of credit or any other instrument
serving a similar purpose),
provided, in the case of this Section 7.5(a)(ii), that such
Liens do not constitute an Event of Default or the execution
or other enforcement of such Liens is effectively stayed, the
claims secured thereby are being actively contested in good
faith and
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by appropriate proceedings and adequate book reserves have
been maintained and exist with respect to such claims;
(iii) SENIOR DEBT LIENS -- Liens securing (A)
Acceptable Credit Facilities incurred pursuant to Section
7.4(b) and (B) Swaps incurred pursuant to Section 7.4(g) or
Section 7.4(h);
(iv) INTERGROUP LIENS -- Liens on Property of a
Subsidiary, provided that such Liens secure only obligations
owing to the Company or a Wholly-Owned Subsidiary;
(v) CLOSING DATE LIENS -- Liens in existence on the
Closing Date securing Debt and described on PART 7.5 OF
ANNEX 3;
(vi) PURCHASE MONEY LIENS -- Purchase Money Liens,
if, after giving effect thereto and to any concurrent
transactions the Debt secured by such Purchase Money Lien
shall have been incurred within the limitations of Section
7.4(d);
(vii) ACQUIRED PROPERTY LIENS -- Liens existing on
Acceptable Property acquired by the Company or a Subsidiary
after the Closing Date and Liens existing on Acceptable
Property of a Person at the time such Person becomes a
Subsidiary after the Closing Date, provided that such Lien
(A) was not placed on such Acceptable
Property, and does not secure Debt created, incurred,
issued or assumed, contemporaneously with or in any
manner in contemplation of, the acquisition of such
Acceptable Property or Person by the Company or such
Subsidiary, and
(B) does not extend to any other Property of
the Company or any Subsidiary after such acquisition;
(viii) RENEWALS AND EXTENSIONS -- Liens constituting
extensions, renewals or replacements, in whole or in part, of
Liens permitted pursuant to the foregoing clauses (iii)
through (vii), inclusive, provided that no such extension,
renewal or replacement Lien extends to any Property of the
Company or any Subsidiary other than the Property subject to
the Lien being extended, renewed or replaced, and the
aggregate amount of the obligations secured by such extension,
renewal or replacement Lien does not exceed the amount then
secured by the Lien being extended, renewed or replaced;
(ix) BASKET LIENS -- Liens securing Debt incurred in
accordance with clause (f) or clause (j) of Section 7.4 so
long as such Debt is not, in a liquidation of the assets of
the Company, required to be paid contemporaneously with or
after any payment on the Subordinated Notes;
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(x) MISCELLANEOUS LIENS -- Liens created by licenses,
leases or subleases granted to other Persons in the ordinary
course of business not interfering in any material respect
with the conduct of the business of the Company or any of the
Subsidiaries;
(xi) PRECAUTIONARY FILINGS -- Liens arising from
precautionary informational UCC financing statement filings
regarding operating leases entered into by the Company or any
of the Subsidiaries in the ordinary course of business; or
(xii) EQUAL AND RATABLE LIEN -- Liens on Property of
the Company or a Subsidiary securing obligations so long as
the Company or such Subsidiary shall have, simultaneously with
or prior to the time of the imposition of such Lien,
(A) made or caused to be made provision
whereby the Subordinated Notes are secured equally
and ratably as to such Property with such other
obligations pursuant to such agreements and
instruments as shall be approved by the Required
Holders, and
(B) caused to be delivered to each holder of
a Subordinated Note an opinion of independent counsel
satisfactory to the Required Holders to the effect
that such agreements and instruments are enforceable
in accordance with their terms and that such
agreements and instruments provide the holders of the
Subordinated Notes with Liens on such Property, to
the full extent that, and with the same priority as,
the holder of such other obligations.
(b) FINANCING STATEMENTS. The Company will not, and will not
permit any Subsidiary to, sign or file a financing statement under the
Uniform Commercial Code of any jurisdiction that names the Company or
such Subsidiary as debtor, or sign any security agreement authorizing
any secured party thereunder to file any such financing statement,
except, in any such case, a financing statement filed or to be filed to
perfect or protect a security interest that the Company or such
Subsidiary is entitled to create, assume or incur, or permit to exist,
under the foregoing provisions of this Section 7.5 or to evidence for
informational purposes a lessor's interest in Property leased to the
Company or any such Subsidiary.
(c) LIENS OF SUBSIDIARIES. Each Person which becomes a
Subsidiary after the Closing Date will be deemed to have granted on the
date such Person becomes a Subsidiary all the Liens in existence on its
Property on such date.
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(d) CONSTRUCTION. Nothing in this Section 7.5 shall be
construed to permit the incurrence or existence of any Debt not
otherwise permitted by this Agreement. Nothing in this Agreement that
permits the incurrence or existence of any Debt shall be construed to
permit the incurrence or existence of a Lien securing such Debt unless
such Lien is permitted by this Section 7.5.
7.6 MERGER, CONSOLIDATION, ETC.
The Company will not merge into, consolidate with, or sell, lease,
transfer or otherwise dispose of all or substantially all of its Property to,
any other Person or permit any other Person to consolidate with or merge into it
(except that a Subsidiary may merge into or consolidate with, or sell, lease,
transfer or otherwise dispose of all or substantially all of its Property to,
the Company) provided that the foregoing restriction does not apply to the
merger or consolidation of the Company with, or the sale, lease, transfer or
other disposition by the Company of all or substantially all of its Property to,
another corporation, including, without limitation, a Subsidiary, if:
(a) the corporation that results from such merger or
consolidation or that purchases, leases, or acquires all or
substantially all of such Property (the "SUCCESSOR CORPORATION") is
organized under the laws of the United States of America or any
jurisdiction thereof;
(b) the due and punctual payment of the principal of and
Prepayment Compensation Amount, if any, and interest on all of the
Subordinated Notes, according to their tenor, and the due and punctual
performance and observance of all the covenants in the Subordinated
Notes and this Agreement to be performed or observed by the Company,
are expressly assumed by the Successor Corporation pursuant to such
agreements and instruments with respect to such assumption as shall be
approved by the Required Holders, and the Company causes to be
delivered to each holder of Subordinated Notes an opinion of
independent counsel satisfactory to the Required Holders to the effect
that such agreements and instruments are enforceable in accordance with
their terms and the terms hereof; and
(c) immediately prior to and immediately after the
consummation of any such transaction, and after giving effect thereto,
no Default or Event of Default exists or would exist.
7.7 TRANSFERS OF PROPERTY; SUBSIDIARY STOCK.
(a) TRANSFERS OF PROPERTY. The Company will not, nor will it
permit any Subsidiary to, sell (including, without limitation, any sale
and subsequent leasing as lessee of such Property), lease as lessor,
transfer, or otherwise dispose of, in each case, other than the
granting or creation of any Lien permitted by Section 7.5(a) (and any
subsequent transfer upon the enforcement of any such Lien),
(individually, a "TRANSFER", and collectively "TRANSFERS") any Property
of the Company or any Subsidiary (including, without limitation,
Subsidiary Stock), except:
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(i) ORDINARY COURSE TRANSFERS -- Transfers of
inventory, of obsolete or worn out, or otherwise no longer
useful, Property and of Property without value, in each case
in the ordinary course of business of the Company or such
Subsidiary;
(ii) INTRAGROUP TRANSFERS -- Transfers from a
Subsidiary to the Company or a Wholly-Owned Subsidiary and
Transfers from the Company to a Wholly-Owned Subsidiary;
(iii) SUBSIDIARY STOCK TRANSFERS -- Transfers of
Subsidiary Stock permitted pursuant to the provisions of
Section 7.7(b);
(iv) PERMITTED FACILITY TRANSFERS -- Transfers of the
facilities operated by the Company or a Subsidiary located
at (x) LaVergne, Tennessee, (y) Brook Park, Ohio or (z)
Solon, Ohio; provided that (A) no more than two of such
facilities may be Transferred and (B) in each case, such
Transfers must be to a Person (other than an Affiliate) for
Acceptable Consideration; and
(v) OTHER TRANSFERS -- a Transfer of Property of the
Company or any Subsidiary to a Person so long as the sum of
the contributions (expressed as a percentage and exclusive
of losses) to Consolidated EBITDA for the four (4) fiscal
quarters of the Company then most recently ended prior to
such Transfer of
(A) such Property, plus
(B) each other item of Property of the
Company and the Subsidiaries transferred (other than
in Transfers referred to in the foregoing clause (i),
clause (ii) or clause (iv) or Transfers referred to
in clause (i), clause (ii) or clause (iii) of Section
7.7(b)) from the beginning of such period of four (4)
consecutive fiscal quarters to the date of such
Transfer,
does not exceed ten percent (10%).
Notwithstanding the foregoing, any Transfer of Property shall
be deemed to be excluded from the foregoing provisions of this Section
7.7 (including any calculation made pursuant to Section 7.7(a)(v)) if
such Transfer is to a Person for Acceptable Consideration and within
one hundred eighty (180) days after such Transfer, the Net Proceeds of
such Transfer are applied by the Company or such Subsidiary either (or
in a combination thereof) to:
(1) acquire new Property for use, or which is useful,
in the conduct of the business of the Company or such
Subsidiary; or
(2) prepay or repurchase Senior Debt or Subordinated
Notes, provided that any prepayment or repurchase of Senior
Debt under a facility or arrangement that permits the
reborrowing of such Senior Debt by the Company or the
Subsidiaries shall not be counted under this clause (2)
unless the availability to reborrow such Senior Debt is
permanently reduced by an amount equal to the
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principal amount of such Senior Debt repaid or repurchased
and provided further that if the Company shall elect not to
acquire new Property pursuant to clause (1) above or to
prepay or repurchase Senior Debt pursuant to this clause
(2), or if any Net Proceeds remain after the Company's
application thereof pursuant to clause (1) and/or this
clause 2, the Company shall offer to repurchase, at par,
together with interest accrued to the repurchase date,
Subordinated Notes, pro rata, from all holders of the
Subordinated Notes in an aggregate principal amount that is
not less than the amount equal to the amount of Net
Proceeds, or the remaining balance thereof. If such offer is
accepted by any holder of Subordinated Notes, such
prepayment shall be paid in accordance with Section 5.2(b)
provided that in no event shall the Prepayment Compensation
Amount be payable or paid in connection therewith. Any sums
remaining unapplied after the prepayment of all offers
accepted by the holders of the Subordinated Notes pursuant
to this clause (2) shall, for purposes of this Section
7.7(a), be deemed to have been applied in accordance with
this clause (2); and
immediately before and after the consummation of such Transfer, and
after giving effect thereto, no Default or Event of Default would
exist.
(b) TRANSFERS OF SUBSIDIARY STOCK. The Company will not, nor
will it permit any Subsidiary to, Transfer (including, without
limitation, any Transfer by means of a merger or consolidation) any
shares of the stock (or any warrants, rights or options to purchase
stock or other securities exchangeable for or convertible into stock)
of a Subsidiary (such stock, warrants, rights, options and other
securities herein called "SUBSIDIARY STOCK"), nor will any Subsidiary
issue, sell or otherwise dispose of any shares of its own Subsidiary
Stock, provided that the foregoing restrictions do not apply to:
(i) INTRAGROUP ISSUANCES -- the issuance by a
Subsidiary of shares of its own Subsidiary Stock to either
the Company or a Wholly-Owned Subsidiary;
(ii) INTRAGROUP TRANSFERS -- Transfers by the Company
or a Subsidiary of shares of Subsidiary Stock to the Company
or to a Wholly-Owned Subsidiary;
(iii) DIRECTORS' QUALIFYING SHARES -- the issuance by a
Subsidiary of directors' qualifying shares; and
(iv) OTHER TRANSFERS -- the Transfer of all of the
Subsidiary Stock of a Subsidiary owned by the Company and
the other Subsidiaries if:
(A) such Transfer satisfies all of the
requirements of Section 7.7(a)(v);
(B) in connection with such Transfer the
entire Investment (whether represented by stock,
Debt, claims or otherwise) of the Company and the
other Subsidiaries in such Subsidiary is Transferred
to a Person other than the Company or a Subsidiary
not being simultaneously disposed of or an Affiliate;
and
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(C) the Subsidiary being disposed of has no
continuing Investment in any other Subsidiary not
being simultaneously disposed of or in the Company.
For purposes of determining the contribution to Consolidated EBITDA of
Property constituting Subsidiary Stock being transferred, as provided
in clause (iv) immediately above, such contribution shall (x) be deemed
to be the aggregate contribution of all Property of the Subsidiary that
shall have issued such Subsidiary Stock and (y) take into consideration
the claim, if any, in and to Consolidated EBITDA in respect of the
minority interest owners of such Subsidiary.
7.8 RESTRICTED PAYMENTS AND RESTRICTED INVESTMENTS.
The Company will not, and will not permit any Subsidiary to, at any
time declare or make any Restricted Payment (other than the Household Warrant
Redemption and the Helsel Shareholder Note Prepayments) or Restricted Investment
unless immediately after, and after giving effect to, the proposed Restricted
Payment or Restricted Investment:
(a) the aggregate amount of Restricted Payments declared
during the period of three hundred sixty-five (365) days immediately
preceding the date of such Restricted Payment or Restricted Investment,
as the case may be, would not exceed fifty percent (50%) of
Consolidated Net Income for the fiscal year of the Company then most
recently ended; and
(b) Consolidated Net Worth at such time would exceed fifty
percent (50%) of Consolidated Total Capitalization at such time
determined as of the last day of the most recently ended fiscal quarter
of the Company; and
immediately prior to, and immediately after, and after giving effect to, the
proposed Restricted Payment or Restricted Investment, no Default or Event of
Default exists or would exist. Notwithstanding the foregoing limitations, the
Company may:
(i) pay cash dividends in respect of the Company's Existing
Preferred Stock, provided that immediately prior to and immediately
after, and after giving effect to, such payment no Default or Event of
Default exists or would exist; and
(ii) in connection with the exercise of any put of any Warrant
Shares by the holders of the Warrants or the exercise of the call
option by the Company pursuant to Section 1 or Section 2, respectively,
of the Shareholders' Agreement, pay to the holders of the Warrant
Shares the Put Option Purchase Price or Repurchase Price, as the case
may be, so long as at such time such Warrant Shares are held by holders
of the Subordinated Notes.
7.9 LINE OF BUSINESS.
The Company will not, and will not permit any Subsidiary to, engage in
any business if, as a result thereof, the general nature of the businesses of
the Company and the Subsidiaries, taken
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as a whole, would not be substantially the same as (or reasonably related to)
the businesses of the Company and the Subsidiaries as were conducted on the
Closing Date.
7.10 TRANSACTIONS WITH AFFILIATES.
Except for Permitted Affiliate Transactions, the Company will not, and
will not permit any Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale or exchange of Property or the rendering
of any service, with any Affiliate, except in the ordinary course of the
Company's or such Subsidiary's business and upon fair and reasonable terms no
less favorable to the Company or such Subsidiary than would obtain in a
comparable arm's-length transaction with a Person not an Affiliate.
7.11 PENSION PLANS.
(a) COMPLIANCE. The Company will, and will cause each ERISA
Affiliate to, at all times with respect to each Pension Plan, make
timely payment of contributions required to meet the minimum funding
standard set forth in ERISA or the IRC with respect thereto, and to
substantially comply with all other applicable provisions of ERISA.
(b) RELATIONSHIP OF VESTED BENEFITS TO PENSION PLAN ASSETS.
Except as disclosed in the actuarial reports listed on PART 2.17(A) OF
ANNEX 3, the present value of all employee benefits vested under each
Pension Plan exceeds the assets of such Pension Plan allocable to such
vested benefits as of the most recent actuarial valuation. The Company
or an ERISA Affiliate will continue to fund each of the Pension Plans
in accordance with the minimum funding requirements of ERISA and the
IRC. Except as required by the terms of the applicable collective
bargaining agreement or as required by either ERISA or the IRC, neither
the Company nor an ERISA Affiliate will increase benefits under any
Pension Plan if such benefit increase would cause the present value of
all employee benefits vested under each Pension Plan to exceed the
assets of such Pension Plan allocable to such vested benefits on the
effective date of the benefit increase, in each case determined
pursuant to Section 7.11(c).
(c) VALUATIONS. All assumptions and methods used to determine
the actuarial valuation of vested employee benefits under Pension Plans
and the present value of assets of Pension Plans will be reasonable in
the good faith judgment of the Company and will comply with all
requirements of law.
(d) PROHIBITED ACTIONS. The Company will not, and will not
permit any ERISA Affiliate to:
(i) engage in any "prohibited transaction" (as such
term is defined in section 406 of ERISA or section 4975 of the
IRC) that would result in the imposition of a tax or penalty
that could reasonably be expected to have a Material Adverse
Effect;
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(ii) incur with respect to any Pension Plan any
"accumulated funding deficiency" (as such term is defined in
section 302 of ERISA), whether or not waived;
(iii) terminate any Pension Plan in a manner that
could result in
(A) the imposition of a Lien on the Property
of the Company or any Subsidiary pursuant to section
4068 of ERISA or
(B) the creation of any liability under
section 4062 of ERISA that could reasonably be
expected to have a Material Adverse Effect;
(iv) fail to make any payment required by section 515
of ERISA that could reasonably be expected to have a
Material Adverse Effect; or
(v) at any time be an "employer" (as such term is
defined in section 3(5) of ERISA) required to contribute to
any Multiemployer Plan if, at such time, it could reasonably
be expected that the Company or any Subsidiary will incur
withdrawal liability in respect of such Multiemployer Plan and
such liability, if incurred, together with the aggregate
amount of all other withdrawal liability as to which there is
a reasonable expectation of incurrence by the Company or any
Subsidiary under any one or more Multiemployer Plans, could
reasonably be expected to have a material adverse effect on
the business, Properties or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or the
ability of the Company to perform its obligations set forth in
the Financing Documents.
(e) FOREIGN PENSION PLANS. The Company will, and will cause
each Subsidiary to, at all times, comply in all material respects with
all laws, regulations and orders applicable to the establishment,
operation, administration and maintenance of all Foreign Pension Plans,
and to pay when due all premiums, contributions and any other amounts
required by applicable Foreign Pension Plan documents or applicable
laws, except where the failure to comply with such laws, regulations
and orders, and to make such payments, in the aggregate for all such
failures, could not reasonably be expected to have a Material Adverse
Effect.
7.12 PRO-RATA OFFERS.
The Company will not, nor will it permit any Subsidiary or any
Affiliate, or any officer or director of any thereof, to, directly or
indirectly, acquire or make any offer to acquire any Subordinated Notes unless
the Company or such Subsidiary, Affiliate, officer or director shall have
offered to acquire Subordinated Notes, pro rata, from all holders of the
Subordinated Notes and upon the same terms. In case the Company acquires any
Subordinated Notes, such Subordinated Notes will thereafter be cancelled and no
Subordinated Notes will be issued in substitution therefor.
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7.13 PRIVATE OFFERING.
The Company will not, nor will it permit any Person acting on its
behalf to, offer the Subordinated Notes or any part thereof or any similar
Securities for issue or sale to, or solicit any offer to acquire any of the same
from, any Person so as to bring the issuance and sale of the Subordinated Notes
within the provisions of section 5 of the Securities Act.
7.14 AMENDMENTS TO ACCEPTABLE CREDIT FACILITIES.
The Company will not agree to any amendment or modification of any
Acceptable Credit Facility which amendment or modification increases the
principal amount of the Debt permitted to be incurred thereunder (other than as
permitted pursuant to Section 7.4). The Company will promptly deliver to each
holder of Subordinated Notes a copy of each amendment or other modification to
or waiver of any provision of any Acceptable Credit Facility and each agreement
or instrument evidencing any other Debt in an aggregate principal amount in
excess of Two Hundred Fifty Thousand Dollars ($250,000) of the Company entered
into after the Closing Date.
7.15 PROVISION OF SUBSIDIARY SUBORDINATED GUARANTEES.
Each Person that becomes a Wholly-Owned Domestic Subsidiary after the
Closing Date, and each Subsidiary which is not a Wholly-Owned Domestic
Subsidiary which delivers a guaranty in connection with the obligations incurred
under or pursuant to any Acceptable Credit Facility, shall execute and deliver
to each of the holders of the Subordinated Notes, within thirty (30) days after
the date on which such Person becomes a Wholly-Owned Domestic Subsidiary or such
Subsidiary delivers such guaranty, as the case may be, a Subsidiary Subordinated
Guarantee, in substantially the form of the Exhibit E, and such Subsidiary
Subordinated Guarantee shall remain in effect and enforceable at all times
during which such Person remains a Wholly-Owned Domestic Subsidiary or such
Subsidiary is obligated on such guaranty, except to the extent that such
Subsidiary Subordinated Guarantee is released in accordance with its terms.
8. INFORMATION AS TO COMPANY
8.1 FINANCIAL AND BUSINESS INFORMATION.
The Company shall deliver to each holder of Subordinated Notes:
(a) MONTHLY STATEMENTS -- as soon as practicable after the end
of each monthly fiscal period in each fiscal year of the Company,
commencing with the monthly fiscal period of the Company ending August
31, 1995, and in any event within thirty (30) days thereafter,
duplicate copies of the Company's internal monthly operating
statements, including without limitation:
(i) a consolidated balance sheet of the Company and the
Subsidiaries as at the end of such fiscal month, and
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(ii) consolidated statements of income and cash flows
of the Company and the Subsidiaries, for such fiscal month
and for the portion of the fiscal year ending with such
fiscal month,
setting forth in comparative form, the figures for such month and for
the portion of the fiscal year of the Company ended as of such month,
together with the figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP
applicable to monthly financial statements generally;
(b) QUARTERLY STATEMENTS -- as soon as practicable after the
end of each fiscal quarter in each fiscal year of the Company (other
than the last fiscal quarter of each such fiscal year), commencing with
the fiscal quarter of the Company ending September 30, 1995, and in any
event within forty-five (45) days thereafter, duplicate copies of:
(i) consolidated and consolidating balance sheets of
the Company and the Subsidiaries as at the end of such
fiscal quarter, and
(ii) consolidated and consolidating statements of
income, changes in shareholders' equity and cash flows of
the Company and the Subsidiaries, for such fiscal quarter
and (in the case of the second and third fiscal quarters)
for the portion of the fiscal year ending with such fiscal
quarter,
setting forth in comparative form, the figures for such fiscal quarter
and for the portion of the fiscal year of the Company ended as of such
fiscal quarter, together with the figures for the corresponding periods
in the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP applicable to quarterly financial statements
generally, and certified as fairly presenting, in all material
respects, the consolidated financial position and results of operations
and cash flows of the Company and the Subsidiaries as at the end of,
and for, such period subject to changes resulting from year-end
adjustments, by a principal financial officer of the Company, it being
understood that the financial statements required to be delivered
pursuant to clause (a) above with respect to the third month of a
fiscal quarter of the Company and the financial statements required to
be delivered pursuant to this clause (b) may be delivered together so
long as all substantive requirements set forth in clause (a) and clause
(b) of this Section have been satisfied, provided that nothing herein
shall be deemed to permit the Company to deliver the financial
statements required by clause (a) above later than thirty (30) days
after the end of any monthly fiscal period and such financial
statements shall be accompanied by the certificate required by Section
8.2;
(c) ANNUAL STATEMENTS -- as soon as practicable after the end
of each fiscal year of the Company, and in any event within one hundred
twenty (120) days thereafter, duplicate copies of:
(i) consolidated and consolidating balance sheets of
the Company and the Subsidiaries, as at the end of such
fiscal year, and
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(ii) consolidated and consolidating statements of
income, and consolidated statements of changes in
shareholders' equity and cash flows of the Company and the
Subsidiaries, for such fiscal year,
setting forth in each case in comparative form the consolidated figures
for the previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied by
(A) in the case of such consolidated
financial statements, an opinion thereon of
independent certified public accountants of
recognized national standing selected by the Company,
which opinion shall, without qualification, state
that such financial statements present fairly, in all
material respects, the consolidated financial
position of the companies being reported upon and
their results of operations and cash flows and have
been prepared in conformity with GAAP, and that the
examination of such accountants in connection with
such financial statements has been made in accordance
with generally accepted auditing standards, and that
such audit provides a reasonable basis for such
opinion in the circumstances,
(B) a statement from such independent
certified public accountants that such consolidating
statements were prepared using the same work papers
as were used in the preparation of such consolidated
statements, and
(C) the certificates required by Section 8.2
and Section 8.3;
(d) AUDIT REPORTS AND MANAGEMENT LETTERS -- promptly upon
receipt thereof, a copy of each other report (including, without
limitation, any letters to the Company or any Subsidiary from the
Company's or such Subsidiary's auditors concerning the internal
accounting controls of the Company and/or the Subsidiaries) submitted
to the Company or any Subsidiary by independent accountants in
connection with any annual, interim or special audit made by them of
the books of the Company or any Subsidiary;
(e) SEC AND OTHER REPORTS -- promptly upon their becoming
available one copy of each financial statement, report, notice or proxy
statement sent by the Company or any Subsidiary to stockholders
generally, and of each regular or periodic report and any registration
statement, prospectus or written communication (other than transmittal
letters), and each amendment thereto, in respect thereof filed by the
Company or any Subsidiary with, or received by, such Person in
connection therewith from, the National Association of Securities
Dealers, any securities exchange or the Securities and Exchange
Commission or any successor agency;
(f) ERISA -- promptly upon, and in any event within ten (10)
days of, becoming aware of the occurrence of any
(i) Reportable Event or
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(ii) "prohibited transactions" (as such term is defined
in section 406 or section 4975 of the IRC which prohibited
transactions are not exempted from the restrictions imposed
by such Sections by either Section 408 of ERISA, Section
4975 of the IRC, or any pending or final prohibited
transaction exemptions).
in connection with any Pension Plan or any trust created thereunder, a
written notice specifying the nature thereof, what action the Company
is taking or proposes to take with respect thereto, and, when known,
any action taken by the IRS, the Department of Labor or the PBGC with
respect thereto;
(g) ERISA WAIVERS -- prompt written notice of and a
description of any request pursuant to section 303 of ERISA or section
412 of the IRC for, or notice of the granting pursuant to said section
303 or section 412 of, a waiver in respect of all or part of the
minimum funding standard set forth in ERISA or the IRC, as the case may
be, of any Pension Plan, and, in connection with the granting of any
such waiver, the amount of any waived funding deficiency (as such term
is defined in said section 303 or said section 412) and the terms of
such waiver, in each of the cases specified in this clause (g), where
the effect of such conditions or events or of events or conditions
related thereto would reasonably be expected to have a Material Adverse
Effect;
(h) OTHER ERISA NOTICES -- prompt written notice of and, where
applicable, a description of
(i) any notice from the PBGC in respect of the
commencement of any proceedings pursuant to section 4042 of
ERISA to terminate any Pension Plan or for the appointment
of a trustee to administer any Pension Plan,
(ii) any distress termination notice delivered to the
PBGC under section 4041 of ERISA in respect of any Pension
Plan, and any determination of the PBGC in respect thereof,
(iii) the placement of any Multiemployer Plan in
reorganization status under Title IV of ERISA,
(iv) any Multiemployer Plan becoming "insolvent" (as
such term is defined in section 4245 of ERISA under Title IV
of ERISA,
(v) the whole or partial withdrawal of the Company or
any ERISA Affiliate from any Multiemployer Plan and the
withdrawal liability incurred in connection therewith, and
(vi) the withdrawal of the Company or any ERISA
Affiliate from any Multiple Employer Pension Plan and the
withdrawal liability under ERISA incurred in connection
therewith;
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in each of the cases specified in the foregoing clauses (i) through
(vi), inclusive, where the effect of such conditions or events or of
events or conditions related thereto would reasonably be expected to
have a Material Adverse Effect;
(i) NOTICE OF DEFAULT OR EVENT OF DEFAULT -- promptly upon,
and in any event within two (2) Business Days of, any Senior Officer
becoming aware of the existence of any condition or event which
constitutes a Default or an Event of Default, a written notice
specifying the nature and period of existence thereof and what action
the Company is taking or proposes to take with respect thereto;
(j) NOTICE OF CLAIMED DEFAULT -- promptly upon, and in any
event within two (2) Business Days of, any Senior Officer becoming
aware that the holder of any Subordinated Note, or of any evidence of
Debt or other Security of the Company or any Subsidiary, shall have
given notice or taken any other action with respect to a claimed Event
of Default or default, a written notice specifying the notice given or
action taken by such holder and the nature of the claimed Event of
Default or default and what action the Company is taking or proposes to
take with respect thereto;
(k) CERTAIN ENVIRONMENTAL MATTERS -- prompt written notice of
and a description of any event or circumstance that, had such event or
circumstance occurred or existed prior to the Closing Date, would have
been required to be disclosed as an exception to any statement set
forth in Section 2.19; and
(l) REQUESTED INFORMATION -- with reasonable promptness, such
other data and information as from time to time may be reasonably
requested in writing, including, without limitation, (i) information
required by 17 C.F.R. sec. 230.144A, as amended from time to time, and
(ii) information delivered to any holder or holders of Debt of the
Company (other than the Debt evidenced by the Subordinated Notes)
pursuant to the terms of the loan and credit agreement or other
instrument governing or evidencing such Debt (other than the Fee
Letter).
8.2 OFFICERS' CERTIFICATES.
Each set of financial statements delivered to each holder of
Subordinated Notes pursuant to Section 8.1(b) or Section 8.1(c) shall be
accompanied by a certificate of the chief financial officer of the Company
setting forth:
(a) COVENANT COMPLIANCE -- the information (including
reasonably detailed calculations) required in order to establish
whether the Company was in compliance with the requirements of Section
7.4, Section 7.5, Section 7.7 and Section 7.8 during the period covered
by the income statement then being furnished (including with respect to
each such Section, where applicable, the calculations of the maximum or
minimum amount, ratio or percentage, as the case may be, permissible
under the terms of such Sections, and the calculation of the amounts,
ratio or percentage then in existence); and
(b) EVENT OF DEFAULT -- a statement that the signer has
reviewed the relevant terms hereof and has made, or caused to be made,
under such officer's supervision, a
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review of the transactions and conditions of the Company and the
Subsidiaries from the beginning of the accounting period covered by the
income statements being delivered therewith to the date of the
certificate and that such review shall not have disclosed the existence
during such period of any condition or event which constitutes a
Default or an Event of Default or, if any such condition or event
existed or exists, specifying the nature and period of existence
thereof and what action the Company shall have taken or proposes to
take with respect thereto.
8.3 ACCOUNTANTS' CERTIFICATES.
Each set of annual financial statements delivered pursuant to Section
8.1(c) shall be accompanied by a certificate of the accountants who certify such
financial statements, stating that they have reviewed this Agreement and stating
further, whether, in making their audit, such accountants have become aware of
any condition or event which then constitutes a Default or an Event of Default,
and, if such accountants are aware that any such condition or event then exists,
specifying the nature and period of existence thereof.
8.4 INSPECTION.
The Company will permit the representatives of the Purchasers and each
other holder of at least ten percent (10%) in principal amount of Subordinated
Notes at the time outstanding (exclusive of Subordinated Notes then owned by any
one or more of the Company, any Subsidiary or any Affiliate) at the expense of
such Purchaser or holders (or, if a Default or Event of Default shall exist at
such time, at the expense of the Company), to visit and inspect any of the
Properties of the Company or any Subsidiary, to examine all their respective
books of account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants (and by
this provision the Company authorizes said accountants to discuss the finances
and affairs of the Company and the Subsidiaries) all at such reasonable times
during the regular business hours and without interference of the ordinary
course of business and as often as may be reasonably requested. The Company
shall be permitted to accompany such representatives on such visits and
inspections of any of the Properties.
9. EVENTS OF DEFAULT
9.1 NATURE OF EVENTS.
An "Event of Default" shall exist if any of the following occurs and is
continuing:
(a) PRINCIPAL OR PREPAYMENT COMPENSATION AMOUNT -- the Company
shall fail to make any payment of the principal or the Prepayment
Compensation Amount on any Subordinated Note on or before the date such
payment is due;
(b) INTEREST PAYMENTS -- the Company shall fail to make any
payment of interest on any Subordinated Note on or before the date five
(5) days after the date such payment is due;
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(c) COVENANT DEFAULTS -- the Company or any Subsidiary shall
fail to comply (i) with the provisions of Section 7.4 through and
including Section 7.8 or (ii) in any material respect with any other
provision hereof, and, in each case, such failure continues for more
than thirty (30) days after such failure shall first become known to
any Senior Officer;
(d) WARRANTIES OR REPRESENTATIONS -- any warranty,
representation or other statement by the Company, or of any Subsidiary,
contained herein, in the Warrant Agreement, any Subsidiary Subordinated
Guarantee or in any instrument furnished after the Closing Date in
compliance with or in reference hereto shall have been false or
misleading except for such false or misleading warranties,
representations or statements which could not, in the aggregate, be
reasonably expected to have a Material Adverse Effect;
(e) PAYMENTS ON ACCEPTABLE CREDIT FACILITY -- the Company or
any Subsidiary shall fail to make any payment on any Acceptable Credit
Facility when due and such payment default is not cured or waived
within thirty (30) days of the date such payment was originally due;
(f) FAILURE TO PREPAY SENIOR DEBT OR OBTAIN CONSENT -- in
connection with a Change in Control in which any holder of Subordinated
Notes at the time outstanding has accepted the prepayment offer
pursuant to Section 5.3(b), the Company shall have failed to either (i)
prepay in full, on or before the Business Day immediately preceding the
Control Prepayment Date with respect to such Change in Control, all
Senior Debt then outstanding or (ii) obtain, and deliver to the holders
of the Subordinated Notes, the Control Prepayment Consent as provided
in Section 5.3(d);
(g) ACCELERATION OF DEBT -- any event shall occur or any
condition shall exist in respect of not less than Four Million Dollars
($4,000,000) in aggregate amount of any Debt of the Company or any
Subsidiary (other than the Subordinated Notes), or under any agreement
securing or relating to such Debt, that
(i) causes such Debt to become due prior to its stated
maturity or prior to its regularly scheduled date or dates
of payment; or
(ii) permits any one or more of the holders thereof or
a trustee or agent therefor to require the Company or such
Subsidiary to repurchase such Debt from such holder and one
or more of such holders having not less than Four Million
Dollars ($4,000,000) in the aggregate amount of such Debt
shall have required such repurchase;
(h) INVOLUNTARY BANKRUPTCY PROCEEDINGS --
(i) a receiver, liquidator, custodian or trustee of the
Company or any Material Subsidiary, or of all or any
substantial part of the Property of any of such Persons,
shall be appointed by court order and such order remains in
effect for more than sixty (60) days; or an order for relief
shall be entered with respect to the
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Company or any Subsidiary, or the Company or any Material
Subsidiary shall be adjudicated a bankrupt or insolvent; or
(ii) a substantial part of the Property of such Persons
shall be sequestered by court order and such order remains
in effect for more than sixty (60) days; or
(iii) a petition shall be filed against the Company or
any Material Subsidiary under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and shall not be
dismissed within sixty (60) days after such filing;
(i) VOLUNTARY PETITIONS -- the Company or any Material
Subsidiary shall file a petition in voluntary bankruptcy or seeking
relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or
liquidation law of any jurisdiction, whether now or hereafter in
effect, or shall consent to the filing of any petition against it under
any such law;
(j) ASSIGNMENTS FOR BENEFIT OF CREDITORS, ETC. -- the Company
or a Material Subsidiary shall make a general assignment for the
benefit of its creditors, or shall consent to the appointment of a
receiver, liquidator or trustee of the Company or a Material Subsidiary
or of all or any substantial part of the Property of any of such
Persons; or
(k) UNDISCHARGED FINAL JUDGMENTS -- a final judgment or final
judgments for the payment of money aggregating in excess of Four
Million Dollars ($4,000,000) (net of any insurance coverage or the
amount of any creditworthy third-party indemnification as to which the
relevant insurer or such third-party, as the case may be, has agreed in
writing is applicable to such judgment or judgments) is or are
outstanding against one or more of the Company and the Subsidiaries
and:
(i) enforcement proceedings shall have been commenced
by any creditor upon any such judgment, or
(ii) any one of such judgments shall have been
outstanding for more than thirty (30) days from the date of
its entry and shall not have been discharged in full or
stayed.
If any action, condition, event or other matter would, at any time, constitute
an Event of Default under any provision of this Section 9.1, then an Event of
Default shall exist, regardless of whether the same or a similar action,
condition, event or other matter is addressed in a different provision of this
Section 9.1 and would not constitute an Event of Default at such time under such
different provision.
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9.2 DEFAULT REMEDIES.
(A) ACCELERATION ON EVENT OF DEFAULT.
(i) If an Event of Default specified in clause (h),
(i) or (j) of Section 9.1 shall exist with respect to the
Company, all of the Subordinated Notes at the time outstanding
shall automatically become immediately due and payable
together with interest accrued thereon and, to the extent
permitted by law, the Prepayment Compensation Amount at such
time with respect to the principal amount of such Subordinated
Notes, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, and,
(ii) If an Event of Default (other than an Event of
Default with respect to the Company specified in clause (h),
(i) or (j) of Section 9.1) shall exist, the holders of at
least sixty-six and two-thirds percent (66-2/3%) in principal
amount of the Subordinated Notes then outstanding (exclusive
of Subordinated Notes then owned by any one or more of the
Company, any Subsidiary or any Affiliate) may exercise any
right, power or remedy permitted to such holder or holders by
law, and shall have, in particular, without limiting the
generality of the foregoing, the right to declare the entire
principal of, and all interest accrued on, all the
Subordinated Notes then outstanding to be, and such
Subordinated Notes shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived,
and the Company shall forthwith pay to the holder or holders
of all the Subordinated Notes then outstanding the entire
principal of, and interest accrued on, the Subordinated Notes
and, to the extent permitted by law, the Prepayment
Compensation Amount at such time with respect to such
principal amount of such Subordinated Notes.
(b) ACCELERATION ON PAYMENT DEFAULT. During the existence of
an Event of Default described in Section 9.1(a) or Section 9.1(b), and
irrespective of whether the Subordinated Notes then outstanding shall
have been declared to be due and payable pursuant to Section
9.2(a)(ii), any Purchaser who is a holder of Subordinated Notes at such
time, or any holder or holders of at least twenty-five percent (25%) in
principal amount of the Subordinated Notes at the time outstanding
(exclusive of Subordinated Notes then owned by any one or more of the
Company, any Subsidiary, any Affiliate and any officer or director of
any thereof), who or which shall have not consented to any waiver with
respect to such Event of Default may, at its option, by notice in
writing to the Company, declare the Subordinated Notes then held by
such holder or holders to be, and such Subordinated Notes shall
thereupon become, forthwith due and payable together with all interest
accrued thereon, without any presentment, demand, protest or other
notice of any kind, all of which are hereby expressly waived, and the
Company shall forthwith pay to such holder or holders the entire
principal of and interest accrued on such Subordinated Notes and, to
the extent permitted by law, the Prepayment Compensation Amount at such
time with respect to such principal amount of such Subordinated Notes.
(c) OTHER REMEDIES. Subject to Section 10, during the
existence of an Event of Default and irrespective of whether the
Subordinated Notes then outstanding shall have
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been declared to be due and payable pursuant to Section 9.2(a)(ii) and
irrespective of whether any holder of Subordinated Notes then
outstanding shall otherwise have pursued or be pursuing any other
rights or remedies, any Purchaser who is a holder of Subordinated Notes
at such time, or any holder or holders of at least twenty-five percent
(25%) in principal amount of the Subordinated Notes at the time
outstanding (exclusive of Subordinated Notes then owned by any one or
more of the Company, any Subsidiary, any Affiliate and any officer or
director of any thereof), may proceed to protect and enforce its rights
hereunder and under such Subordinated Notes by exercising such remedies
as are available to such holder in respect thereof under applicable
law, either by suit in equity or by action at law, or both, whether for
specific performance of any agreement contained herein or in aid of the
exercise of any power granted herein, provided that the maturity of
such holder's Subordinated Notes may be accelerated only in accordance
with Section 9.2(a) and Section 9.2(b).
(d) NONWAIVER AND EXPENSES. No course of dealing on the part
of any holder of Subordinated Notes nor any delay or failure on the
part of any holder of Subordinated Notes to exercise any right shall
operate as a waiver of such right or otherwise prejudice such holder's
rights, powers and remedies. If the Company shall fail to pay when due
any principal of, or the Prepayment Compensation Amount or interest on,
any Subordinated Note, or shall fail to comply with any other provision
hereof, the Company shall pay to each holder of Subordinated Notes, to
the extent permitted by law, such further amounts as shall be
sufficient to cover the costs and expenses, including but not limited
to reasonable attorneys' fees, incurred by such holder in collecting
any sums due on such Subordinated Notes or in otherwise assessing,
analyzing or enforcing any rights or remedies that are or may be
available to it.
9.3 ANNULMENT OF ACCELERATION OF SUBORDINATED NOTES.
If a declaration is made pursuant to Section 9.2(a)(ii), then and in
every such case, the Required Holders may, by written instrument filed with the
Company, rescind and annul such declaration, and the consequences thereof,
provided that at the time such declaration is annulled and rescinded:
(a) no judgment or decree in respect of such declaration shall
have been entered for the payment of any moneys due on or pursuant
hereto or the Subordinated Notes;
(b) all arrears of interest upon all the Subordinated Notes
and all other sums payable hereunder and under the Subordinated Notes
(except any principal of, or interest or the Prepayment Compensation
Amount on, the Subordinated Notes which shall have become due and
payable by reason of such declaration under Section 9.2(a)(ii)) shall
have been duly paid; and
(c) each and every other Default and Event of Default shall
have been waived pursuant to Section 12.6 or otherwise made good or
cured,
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and provided further that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereon.
10. SUBORDINATION OF SUBORDINATED NOTES
10.1 GENERAL.
The Subordinated Debt is subordinate and junior in right of payment to
all Senior Debt to the extent provided in this Section 10.
10.2 DEFAULT IN RESPECT OF SENIOR DEBT.
(a) In the event the Company shall default in the payment of
Senior Debt under any Acceptable Credit Facility when the same becomes
due and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise, then, unless and until such default
shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, Property or Securities or by
set-off or otherwise) shall be made or agreed to be made on account of
any Subordinated Debt, or as a sinking fund for any Subordinated Debt,
or in respect of any redemption, retirement, purchase or other
acquisition of any Subordinated Debt.
(b) Upon the happening of any Senior Debt Covenant Default,
then, unless and until such Senior Debt Covenant Default shall have
been cured or waived or shall have ceased to exist, no direct or
indirect payment (in cash, Property or Securities or by set-off or
otherwise) shall be made or agreed to be made on account of any
Subordinated Debt, or as a sinking fund for any Subordinated Debt, or
in respect of any redemption, retirement, purchase or other acquisition
of any Subordinated Debt, during any period of up to one hundred eighty
(180) days after written notice of such Senior Debt Covenant Default
shall have been given to the Company by any holder of Senior Debt under
an Acceptable Credit Facility, provided that in no event shall such
payment be prohibited for more than one hundred eighty (180) days in
any three hundred sixty (360) day period and in all events such
payments will be permitted during at least one hundred eighty (180)
days during each three hundred sixty (360) day period.
(c) The Company shall give prompt notice to each holder of
Subordinated Debt of its receipt of any notice under or with respect to
Section 10.2(a) or Section 10.2(b).
10.3 INSOLVENCY, ETC.
In the event of:
(a) any insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding
relating to the Company, its creditors or its Property;
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(b) any proceeding for the liquidation, dissolution or other
winding-up of the Company, voluntary or involuntary, whether or not
involving insolvency or bankruptcy proceedings;
(c) any assignment by the Company for the benefit of creditors;
or
(d) any other marshalling of the assets of the Company;
all Senior Debt (including any interest thereon accruing after the commencement
of any such proceedings, whether or not such interest is allowed as a claim in
such proceedings) shall first be paid in full in cash before any payment or
distribution, whether in cash, Securities or other Property, shall be made to
any holder of any Subordinated Debt on account of any Subordinated Debt. Any
payment or distribution, whether in cash, Securities or other Property (other
than Securities of the Company or any other corporation provided for by a plan
or reorganization or readjustment the payment of which is subordinated, at least
to the extent provided in this Section 10 with respect to Subordinated Debt, to
the payment of all Senior Debt at the time outstanding and to any Securities
issued in respect thereof under any such plan or reorganization or
readjustment), which would otherwise (but for this Section 10) be payable or
deliverable in respect of Subordinated Debt shall be paid or delivered directly
to the holders of Senior Debt in accordance with the priorities then existing
among such holders until all Senior Debt (including any interest thereon
accruing after the commencing of any such proceedings, whether or not such
interest is allowed as a claim in such proceedings) shall have been paid in full
in cash. Each holder of any Subordinated Debt agrees duly and promptly to take
such action as may be reasonably requested at any time or from time to time by
the holders of Senior Debt, to file appropriate proofs of claim in respect of
such Subordinated Debt, and to execute and deliver such similar documents as may
be necessary or advisable to enable holders of the Senior Debt to enforce any
and all claims upon or in respect of Subordinated Debt and to receive any and
all payments or distributions to the extent required above.
10.4 TURNOVER OF PAYMENTS.
If:
(a) any payment or distribution shall be collected or received by
any holders of Subordinated Debt in contravention of any of the terms
of this Section 10 and prior to the payment in full in cash of the
Senior Debt at the time outstanding; and
(b) any holder of such Senior Debt shall have notified such
holders of Subordinated Debt, within three hundred sixty-five (365)
days of any such payment or distribution, of the facts by reason of
which such collection or receipt so contravenes this Section 10;
then such holders of Subordinated Debt will deliver such payment or
distribution, to the extent necessary to pay all such Senior Debt in full in
cash, to the holders of such Senior Debt and, until so delivered, the same shall
be held in trust by such holders of Subordinated Debt as the property of the
holders of such Senior Debt. If after any amount is delivered to the holders of
Senior Debt pursuant to this Section 10.4, whether or not such amounts have been
applied to the payment of
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Senior Debt, and the outstanding Senior Debt shall thereafter be paid in full in
cash by the Company or otherwise other than pursuant to this Section 10.4, the
holders of Senior Debt shall return to such holders of Subordinated Debt an
amount equal to the amount delivered to such holders of Senior Debt pursuant to
this Section 10.4.
10.5 OBLIGATIONS NOT IMPAIRED.
No present or future holder of any Senior Debt shall be prejudiced in
the right to enforce subordination of Subordinated Debt by any act or failure to
act on the part of the Company. Nothing contained in this Section 10 shall
impair, as between the Company and any holder of Subordinated Debt, the
obligation of the Company to pay to such holder the principal thereof and the
Prepayment Compensation Amount, if any, and interest thereon as and when the
same shall become due and payable in accordance with the terms thereof, or
prevent any holder of any Subordinated Debt from exercising all rights, powers
and remedies otherwise permitted by applicable law or under this Agreement, all
subject to the rights of the holders of the Senior Debt to receive cash,
Securities or other Property otherwise payable or deliverable to the holders of
Subordinated Debt.
10.6 PAYMENT OF SENIOR DEBT; SUBROGATION.
Upon the payment in full in cash of all Senior Debt, the holders of
Subordinated Debt shall be subrogated to all rights of any holder of Senior Debt
to receive any further payments or distributions applicable to the Senior Debt
until the Subordinated Debt shall have been paid in full in cash, and such
payments or distributions received by the holders of Subordinated Debt by reason
of such subrogation, of cash, Securities or other Property which otherwise would
be paid or distributed to the holders of Senior Debt, shall, as between the
Company and its creditors other than the holders of Senior Debt, on the one
hand, and the holders of Subordinated Debt, on the other hand, be deemed to be a
payment by the Company on account of Senior Debt and not on account of
Subordinated Debt.
10.7 RELIANCE OF HOLDERS OF SENIOR DEBT.
Each holder of Subordinated Debt by its acceptance thereof shall be
deemed to acknowledge and agree that the foregoing subordination provisions are,
and are intended to be, an inducement to and a consideration of each holder of
any Senior Debt, whether such Senior Debt was created or acquired before or
after the creation of Subordinated Debt, to acquire and 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
holding, or in continuing to hold, such Senior Debt.
10.8 REINSTATEMENT OF SUBORDINATION.
The obligations of each holder of Subordinated Debt under the
provisions set forth in this Section 10 shall continue to be effective, or be
reinstated, as the case may be, as to any payment in respect of any Senior Debt
that is rescinded or must otherwise be returned by the holder of such Senior
Debt upon the occurrence or as a result of any bankruptcy or judicial
proceeding, all as
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though such payment had not been made, and provided that such payment is
returned to the bankruptcy estate of the Company.
11. INTERPRETATION OF THIS AGREEMENT
11.1 TERMS DEFINED.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
ACCEPTABLE CONSIDERATION -- means with respect to any Transfer of any
Property, consideration received in connection with such Transfer which is
determined by the Board of Directors, in its good faith opinion, to be equal to
or in excess of the Fair Market Value of such Property and at least seventy
percent (70%) of such consideration is in cash.
ACCEPTABLE CREDIT FACILITY -- means the Bank Loan Agreement and the
other Bank Documents, in each case as amended (including by any amendment and
restatement), supplemented, modified or extended from time to time including
each loan or credit agreement and other related agreements extending the
maturity of, replacing, refinancing, refunding, or otherwise restructuring
(including, without limitation, increasing the amount of the available
borrowings thereunder provided that any such increase is permitted under Section
7.4), in whole or in part, the Debt under the Bank Loan Agreement or any other
Acceptable Credit Facility, whether by the same or any other agent, lender or
group of lenders, so long as, but only so long as the aggregate amount of Debt
incurred pursuant to such loan or credit agreement is, at the time of incurrence
thereof, permitted to be incurred pursuant to Section 7.4.
ACCEPTABLE PROPERTY -- means any plant (including land and
improvements), machinery and equipment used or useful in the ordinary course of
the business of the Company or any Subsidiary and which Property is acquired or
constructed (including by means of Capital Lease) by the Company or such
Subsidiary after the Closing Date.
ACCOUNTS RECEIVABLE -- means the receivables of the Company and the
Subsidiaries described as "Eligible Receivables" in an Acceptable Credit
Facility.
ACQUISITION -- means the acquisition and purchase of all of the issued
and outstanding capital stock of Wellman by the Company.
ACQUISITION DOCUMENTS -- Section 2.22(b).
AFFILIATE -- means, at any time, a Person (other than a Subsidiary or
a Purchaser)
(a) that directly or indirectly through one or more
intermediaries Controls, or is Controlled by, or is under common
Control with, the Company,
(b) that beneficially owns or holds five percent (5%) or more of
any class of the Voting Stock of the Company,
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(c) five percent (5%) or more of the Voting Stock (or in the case
of a Person that is not a corporation, five percent (5%) or more of
the equity interest) of which is beneficially owned or held by the
Company or a Subsidiary, or
(d) that is an officer or director (or a member of the immediate
family of an officer or director) of the Company or any Subsidiary,
at such time.
AGREEMENT, THIS -- means this Senior Subordinated Note and Warrant
Purchase Agreement, as it may be amended from time to time.
BANKS -- means the lending institutions party to the Bank Loan
Agreement from time to time.
BANK DOCUMENTS -- Section 2.21(a).
BANK LOAN AGREEMENT -- means the Credit Agreement, dated as of June 30,
1995 among the Company, the Banks and Bankers Trust Company, as agent
thereunder, as such agreement is amended (including any amendment and
restatement thereof), modified, supplemented or extended from time to time in a
manner not inconsistent with Section 7.4 and Section 7.14.
BOARD OF DIRECTORS -- means, at any time, the board of directors of the
Company or any committee thereof which, in the instance, shall have the lawful
power to exercise the power and authority of such board of directors.
BUSINESS DAY -- means, at any time, a day other than a Saturday, a
Sunday or, in the case of any Subordinated Note with respect to which the
provisions of Section 4.1 are applicable, a day on which the bank designated (by
the holder of such Subordinated Note) to receive (for such holder's account)
payments on such Subordinated Note is required by law (other than a general
banking moratorium or holiday for a period exceeding four (4) consecutive days)
to be closed.
CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee is required by GAAP to recognize the acquisition of an asset and the
incurrence of a liability at such time.
CERTIFICATE OF MERGER -- means the Certificate of Merger with respect
to the merger of Helsel with and into Helsel Holdings.
CHANGE IN CONTROL -- at any time means
(a) a sale, assignment, transfer or other disposition of the
capital stock of the Company such that Management Stockholders, in the
aggregate, shall cease to have, directly or indirectly, beneficial
ownership of more than forty percent (40%) of the Issuable Shares, or
(b) the merger or consolidation of the Company with or into
another Person if, after giving effect to such merger or
consolidation, Management Stockholders, in the
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aggregate, do not have, directly or indirectly, beneficial ownership of
more than forty percent (40%) of the capital stock of the surviving
entity.
CLASS A COMMON STOCK -- means the "Class A Common Stock" as defined in
the Warrant Agreement.
CLASS B COMMON STOCK -- means the "Class B Common Stock" as defined in
the Warrant Agreement.
CLOSING -- Section 1.3.
CLOSING DATE -- Section 1.3.
COMMON STOCK -- means the "Common Stock" as defined in the Warrant
Agreement.
COMPANY -- has the meaning specified in the introductory sentence
hereof.
COMPETITOR -- means, at any time, any Person that is engaged at such
time in a principal line of business which is substantially the same as, or
substantially similar to, any of the businesses in which the Company and the
Subsidiaries were engaged in on the Closing Date. Notwithstanding the foregoing,
"Competitor" shall not include any of the Purchasers, or (A) any (1) subsidiary
or affiliate of any Purchaser, (2) insurance company, (3) bank or savings and
loan association, (4) investment company (collectively, the "Institutional
Investors"), the primary businesses of which are any one or more of insurance,
the investment of funds as principal or on behalf of third parties, or the
providing of other financial services and (B) any broker, dealer or similar
intermediary that has acquired the Subordinated Notes for resale to
Institutional Investors.
CONSOLIDATED DEBT -- means, at any time, the aggregate amount of all
Debt of the Company and the Subsidiaries at such time without giving effect to
any intercompany items among such Persons.
CONSOLIDATED EBITDA -- means, for any period, the sum of
(a) Consolidated Net Income, plus
(b) to the extent, and only to the extent, that such
aggregate amount was deducted in the computation of
Consolidated Net Income for such period ,the aggregate amount
of
(i) federal, state and local income taxes,
(ii) Consolidated Interest Expense,
(iii) amortization (including, without limitation,
amortization of original issue discount) and depreciation,
(iv) other noncash charges,
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in each case accrued for such period by the Company and the Subsidiaries
determined on a consolidated basis.
CONSOLIDATED FIXED CHARGES -- means, for any period, the sum of
(a) Consolidated Interest Expense, plus
(b) Consolidated Operating Rental Expense,
in each case, for such period.
CONSOLIDATED INTEREST EXPENSE -- means, for any period, the aggregate
amount of interest accrued or capitalized on, or with respect to, Consolidated
Debt for such period, including, without limitation, imputed interest on Capital
Leases and interest on the Subordinated Notes, but excluding any amortization of
debt discount.
CONSOLIDATED NET INCOME -- means, with respect to any fiscal period,
net earnings (or loss) after income taxes of the Company and the Subsidiaries
for such period, determined on a consolidated basis for such Persons, but
excluding:
(a) net earnings (or loss) of any Subsidiary accrued prior
to the date it became a Subsidiary;
(b) any gain or loss (net of tax effects applicable thereto)
resulting from the sale, conversion or other disposition of
capital assets other than in the ordinary course of business;
(c) any extraordinary, unusual or nonrecurring gains or
losses;
(d) any gain arising from any reappraisal or write-up of
assets;
(e) any portion of the net earnings of any Subsidiary that
for any reason is unavailable for payment of dividends to the
Company or a Subsidiary;
(f) any gain or loss (net of tax effects applicable thereto)
during such period resulting from the receipt of any proceeds of
any insurance policy (other than proceeds of insurance policies
in respect of business interruption of the Company or any
Subsidiary);
(g) any earnings of any Person acquired by the Company or
any Subsidiary through purchase, merger or consolidation or
otherwise, or earnings of any Person substantially all of whose
assets have been acquired by the Company or any Subsidiary, for
any period prior to the date of acquisition;
(h) net earnings of any Person (other than a Subsidiary) in
which the Company or any Subsidiary shall have an ownership
interest unless such net earnings shall have actually been
received by the Company or such Subsidiary in the form of cash
distributions;
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(i) any restoration during such period to income of any
contingency reserve, except to the extent that provision for such
reserve was made during such period out of income accrued during
such period;
(j) any gain arising from the acquisition of any Securities
of the Company or any Subsidiary;
(k) any portion of earnings attributable to minority
interests in Subsidiaries; and
(l) any portion of the net earnings of the Company that
cannot be freely converted into United States dollars.
CONSOLIDATED NET INCOME AVAILABLE FOR FIXED CHARGES -- means, for any
period, the sum of
(a) Consolidated Net Income for such period plus
(b) to the extent, and only to the extent, that such
aggregate amount was deducted in the computation of Consolidated
Net Income for such period ,the aggregate amount of
(i) federal, state and local income taxes,
(ii) Consolidated Fixed Charges,
(iii) amortization (including, without limitation,
amortization of original issue discount),
in each case accrued for such period by the Company and the
Subsidiaries determined on a consolidated basis.
CONSOLIDATED NET WORTH -- means, at any time, total stockholders'
equity of the Company and the Subsidiaries at such time as would appear on a
consolidated balance sheet for such Persons prepared in accordance with GAAP.
CONSOLIDATED OPERATING RENTAL EXPENSE -- means, for any period, the
aggregate amount of Operating Rentals payable by the Company and the
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP. For purposes of this definition, it shall be assumed that:
(a) any Operating Lease which commenced after the beginning
of such period had commenced on the first day of such period and
had been in effect throughout such period; and
(b) any Operating Lease which terminated or expired after
the beginning of such period had terminated or expired on the
first day of such period.
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CONSOLIDATED TOTAL CAPITALIZATION -- means, at any time, the sum of (a)
Consolidated Net Worth, plus (b) Consolidated Debt, in each case determined at
such time.
CONTROL -- means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
CONTROL PREPAYMENT CONSENT -- Section 5.3(d).
CONTROL PREPAYMENT DATE -- Section 5.3(a).
DEBT -- means, at any time, with respect to any Person, without
duplication:
(a) its liabilities for borrowed money (whether or not
evidenced by a promissory note or a security);
(b) any liabilities for borrowed money secured by any Lien
existing on Property owned by such Person (whether or not such
liabilities have been assumed);
(c) any obligations in respect of any Capital Lease of such
Person;
(d) the present value of all payments due under any
arrangement for retention of title or any conditional sale
agreement (other than a Capital Lease) discounted at the implicit
rate, if known, with respect thereto or, if unknown, at eight
percent (8%) per annum;
(e) all obligations of such Person in respect of banker's
acceptances, other acceptances, letters of credit and other
instruments serving a similar function issued or accepted by
banks and other financial institutions for the account of such
Person (whether or not incurred in connection with the borrowing
of money);
(f) all Swaps of such Person; and
(g) any Guaranty of such Person of any obligation or
liability of another Person of a type described in any of clause
(a) through clause (f), inclusive of this definition.
DEFAULT -- means an event or condition the occurrence of which would,
with the lapse of time or the giving of notice or both, become an Event of
Default.
DISPOSED OF BUSINESS -- means, at any time, any business (which may be
a corporation (including a former Subsidiary, or a division thereof, a
partnership, sole proprietorship, limited liability company or other entity)
which shall have been sold or otherwise disposed of prior to such time by the
Company or any Subsidiary and with respect to which the Company or any
Subsidiary shall not have retained any interest in the equity Securities therein
or any Property thereof.
ELIGIBLE ACCOUNTS RECEIVABLE AMOUNT -- means, at any time, the amount
equal to ninety percent (90%) of the aggregate book value of Accounts Receivable
of the Company and the Subsidiaries at such time.
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ELIGIBLE INVENTORY AMOUNT -- means, at any time, an amount equal to
sixty percent (60%) of the aggregate book value of the Inventory of the Company
and the Subsidiaries at such time.
EMPLOYMENT AGREEMENTS -- means those certain separate Employment
Agreements between the Company and each of Norman C. Harbert and Ronald E.
Weinberg, in each case dated June 30, 1995.
ENVIRONMENTAL PROTECTION LAW -- means any federal, state, county,
regional or local law, statute, or regulation (including, without limitation,
CERCLA, RCRA and SARA) enacted in connection with or relating to the protection
or regulation of the environment, including, without limitation, those laws,
statutes, and regulations regulating the disposal, removal, production, storing,
refining, handling, transferring, processing, or transporting of Hazardous
Substances, and any regulations, issued or promulgated in connection with such
statutes by any Governmental Authority and any orders, decrees or judgments
issued by any court of competent jurisdiction in connection with any of the
foregoing.
As used in this definition:
CERCLA -- means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time to time
(by SARA or otherwise), and all rules and regulations promulgated in
connection therewith;
RCRA -- means the Resource Conservation and Recovery Act of
1976, as amended, and any rules and regulations issued in connection
therewith; and
SARA -- means the Superfund Amendments and Reauthorization Act
of 1986, as amended from time to time, and all rules and regulations
promulgated in connection therewith.
EQUITY DOCUMENTS -- Section 2.21(d).
ERISA -- means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
ERISA AFFILIATE -- means any corporation or trade or business that,
with respect to the Company,
(a) is a member of the same controlled group of corporations
(within the meaning of section 414(b) of the IRC) of the Company,
or
(b) is under common control (within the meaning of section
414(c) of the IRC) with the Company.
EVENT OF DEFAULT -- Section 9.1.
EXCHANGE ACT -- means the Securities Exchange Act of 1934, as amended.
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EXISTING INTANGIBLES -- Section 2.8.
EXISTING PREFERRED STOCK -- shall mean the Series A Preferred Stock of
the Company, $.01 par value, with a liquidation preference of $1,000.00 per
share and the Series B Preferred Stock of the Company, $.01 par value, with a
liquidation preference of $1,000.00 per share, in each case, as issued and
outstanding on the Closing Date pursuant to the terms of the certificate of
incorporation of the Company (as in effect on the Closing Date).
FAIR MARKET VALUE -- means, at any time with respect to any Property,
the sale value of such Property that would be realized in an arm's-length sale
at such time between an informed and willing buyer, and an informed and willing
seller, under no compulsion to buy or sell, respectively.
FEE LETTER -- Section 2.21(a).
FINANCING DOCUMENTS -- means the Note Purchase Agreements, the
Subordinated Notes, the Warrant Agreement, the Warrants, the Warrant
Certificates, the Shareholders' Agreement and the other agreements and
instruments to be executed pursuant to the terms of each of such Financing
Documents, as each may be amended from time to time.
FOREIGN PENSION PLAN -- means any plan, fund or other similar program
(a) established or maintained outside of the United States
of America by any one or more of the Company or the Subsidiaries
primarily for the benefit of the employees (substantially all of
whom are aliens not residing in the United States of America) of
the Company or such Subsidiaries, which plan, fund or other
similar program provides for retirement income for such employees
or results in a deferral of income for such employees in
contemplation of retirement, and
(b) not otherwise subject to ERISA.
GAAP -- means accounting principles as promulgated from time to time in
statements, opinions and pronouncements by the American Institute of Certified
Public Accountants and the Financial Accounting Standards Board and in such
statements, opinions and pronouncements of such other entities with respect to
financial accounting of for-profit entities as shall be accepted by a
substantial segment of the accounting profession in the United States.
GOVERNMENTAL AUTHORITY -- means
(a) the government of
(i) the United States of America and any State or other
political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business or which
asserts jurisdiction over the affairs of such Person or its
Property, or
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(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any
such government.
GUARANTY -- means with respect to any Person (for the purposes of this
definition, the "GUARANTOR") any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person (the "PRIMARY OBLIGOR") in any manner,
whether directly or indirectly, including (without limitation) obligations
incurred through an agreement, contingent or otherwise, by the Guarantor:
(a) to purchase such indebtedness or obligation or any
Property or assets constituting security therefor;
(b) to advance or supply funds
(i) for the purpose of payment of such indebtedness or
obligation, or
(ii) to maintain working capital or other balance sheet
condition or any income statement condition of the Primary
Obligor or otherwise to advance or make available funds for
the purchase or payment of such indebtedness or obligation;
(c) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the
owner of such indebtedness or obligation of the ability of the
Primary Obligor to make payment of the indebtedness or
obligation; or
(d) otherwise to assure the owner of the indebtedness or
obligation of the Primary Obligor against loss in respect
thereof.
For purposes of computing the amount of any Guaranty, in connection with any
computation of indebtedness or other liability, it shall be assumed that the
indebtedness or other liabilities that are the subject of such Guaranty are
direct obligations of the issuer of such Guaranty.
HAZARDOUS SUBSTANCES -- means any and all pollutants, contaminants,
toxic or hazardous wastes or any other substances that might pose a hazard to
health or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage,
or filtration of which is or shall be restricted, prohibited or penalized by any
applicable law (including, without limitation, asbestos, urea formaldehyde foam
insulation and polychlorinated biphenyls).
HAWK -- means the Company immediately prior to giving effect to the
transactions contemplated on the Closing Date.
HELSEL -- means Helsel, Inc., a Delaware corporation.
HELSEL HOLDINGS -- means Helsel Holdings, Inc., a Delaware corporation.
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HELSEL SELLER NOTE -- means that certain Secured Promissory Note of
Helsel in favor of Helco, Inc in the original principal amount of Five hundred
Thousand Dollars ($500,000).
HELSEL 9% SHAREHOLDER NOTES -- means the 9% Subordinated Notes, dated
July 1, 1994 issued by Helsel to various shareholders of Helsel in the aggregate
principal amount of Two Hundred Thousand Dollars ($200,000).
HELSEL SHAREHOLDER NOTE PREPAYMENTS -- means the prepayments, in full,
by the Company of the Helsel 9% Shareholder Notes (as in effect on the Closing
Date) provided that contemporaneously with such prepayments all such Helsel
Shareholder Notes are cancelled and returned to the Company.
HOUSEHOLD shall mean First Source Financial LLP, a Delaware limited
partnership, successor to Household Commercial Financial Services, Inc., a
Delaware corporation.
HOUSEHOLD WARRANT REDEMPTION shall have the meaning provided in Section
3.10(c).
HOUSEHOLD WARRANT REDEMPTION AGREEMENT shall mean the Warrant
Redemption Agreement, dated as of June 30, 1995, among Household and the Company
as in effect on the Closing Date, and as the same may be amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof.
HOUSEHOLD WARRANT REDEMPTION DOCUMENTS shall mean each of the documents
or agreements relating to the consummation of the Household Warrant Redemption,
including, without limitation, the Household Warrant Redemption Agreement.
HOUSEHOLD WARRANTS shall mean all of the warrants for the purchase of
capital stock of the Company owned by Household.
INTEREST RATE PROTECTION AGREEMENTS -- means any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement, interest rate floor agreement or other similar agreement
or arrangement with respect to the payment of interest.
INSTITUTIONAL INVESTOR -- means the Purchasers, any affiliate of any of
the Purchasers, and any holder of Subordinated Notes that is an "accredited
investor" as defined in section 2(15) of the Securities Act.
INVENTORY -- means all of the inventory of the Company and the
Subsidiaries described as "Eligible Inventory" in an Acceptable Credit Facility.
INVESTMENT -- means any investment, made in cash or by delivery of
Property, by either of the Company or any Subsidiary:
(a) in any Person, whether by acquisition of stock,
indebtedness or other obligation or security, or by loan, Guaranty,
advance, capital contribution or otherwise; or
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(b) in any Property.
IPO -- means the first offer for sale of Class A Common Stock of the
Company pursuant to an effective registration statement filed by the Company
under the Securities Act.
IRC -- means the Internal Revenue Code of 1986, together with all rules
and regulations promulgated pursuant thereto, as amended from time to time.
IRR -- means, with respect to any prepayment or acceleration of all but
not less than all of the Subordinated Notes concurrent with or after a Trigger
Event, the internal rate of return on the holders' investment in the
Subordinated Notes and Warrants, before any provision for the income taxes of
such holder with respect to such investment, determined in respect of the period
ending on the date of such prepayment or acceleration and beginning on the
Closing Date, calculated in accordance with accepted financial practice and in
the making of such determination giving effect to
(a) the aggregate purchase price at the Closing of the
Subordinated Notes and Warrants was Thirty Million Dollars
($30,000,000),
(b) all payments of principal of, and interest and the
Prepayment Compensation Amount, if any, on the Subordinated Notes
actually received by the holders of the Subordinated Notes prior to the
date of such prepayment or acceleration,
(c) all other payments of cash actually received, or to be
received, by the holders of Subordinated Notes on or prior to the date
of such prepayment or acceleration, including, without limitation,
pursuant to Section 1 through Section 6, inclusive, of the
Shareholders' Agreement and any sale or other transfer of the Warrants,
Warrant Shares or any part thereof, and
(d) in the event of an IPO in which the holders of the
Subordinated Notes do not sell any or all of the Warrant Shares held by
them at such time, the holders of the Subordinated Notes shall be
deemed to have received an amount equal to the initial public offering
price of the Class A Common Stock multiplied by the number of Warrant
Shares not sold by such holders in the IPO.
IRR AMOUNT -- means, with respect to the prepayment of all but not less
than all of the Subordinated Notes concurrent with or after a Trigger Event, the
amount necessary to give the holders of Subordinated Notes an IRR with respect
to such prepayment or acceleration equal to twenty percent (20%).
IRS -- means the Internal Revenue Service and any successor agency.
ISSUABLE SHARE -- means and includes at any time,
(a) a share of issued and outstanding Common Stock, and
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(b) a Right (including, without limitation, a Warrant), and
(without duplication) all shares of Common Stock issuable upon exercise
of such Right, in each case at such time.
For purposes of this definition of "Issuable Share", a Right to acquire one
share of Common Stock shall constitute one Issuable Share, and a Person shall be
deemed to own an Issuable Share if such Person has a Right to acquire such share
whether or not such Right is exercisable at such time.
LIEN -- means any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, assignment, conditional sale or trust receipt or a lease, consignment or
bailment for security purposes, and the filing of any financing statement under
the Uniform Commercial Code of any jurisdiction, or an agreement to give any of
the foregoing. The term "Lien" includes reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases and other
title exceptions and encumbrances affecting real property and includes, with
respect to stock, stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements. For the purposes hereof, the Company
and each Subsidiary is deemed to be the owner of any Property that it shall have
acquired or holds subject to a conditional sale agreement, Capital Lease or
other arrangement pursuant to which title to the Property has been retained by
or vested in some other Person for security purposes, and such retention or
vesting is deemed a Lien. The term "Lien" does not include negative pledge
clauses in agreements relating to the borrowing of money.
MAKE-WHOLE AMOUNT -- means, with respect to any date (a "PREPAYMENT
DATE") and any principal amount ("PREPAID PRINCIPAL") of Subordinated Notes
required or permitted for any reason to be paid prior to the regularly scheduled
maturity thereof on such Prepayment Date pursuant to this Agreement, the greater
of
(a) Zero Dollars ($0), and
(b) (i) the sum of the present values of the then
remaining scheduled payments of principal and interest that
would be payable in respect of such Prepaid Principal but
for such prepayment or acceleration, minus
(ii) the sum of
(A) the amount of such Prepaid Principal, plus
(B) the amount of interest accrued on such
Prepaid Principal since the scheduled interest
payment date immediately preceding such Prepayment
Date.
In determining such present values, a discount rate equal to the Make-Whole
Discount Rate with respect to such Prepayment Date and Prepaid Principal divided
by four (4), and a discount period of three (3) months of thirty (30) days each,
shall be used.
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As used in this definition:
Make-Whole Discount Rate -- means, with respect to any
Prepayment Date and Prepaid Principal, the sum of
(a) the per annum percentage rate (rounded to the
nearest three (3) decimal places) equal to the bond equivalent
yield to maturity derived from the annual yield to maturity of
the United States Treasury obligation listed in the Applicable
H.15 as of such Prepayment Date for the then most recently
available day in such Applicable H.15 with a Treasury Constant
Maturity (as defined in such Applicable H.15) equal to the
Weighted Average Life to Maturity of such Prepaid Principal
determined as of such Prepayment Date, plus
(b) two and one-half percent (2.50%) per annum.
For purposes of clause (a) of the preceding sentence, if no United
States Treasury obligation with a Treasury Constant Maturity
corresponding exactly to the Weighted Average Life to Maturity of such
Prepaid Principal is listed, the yields for the two (2) published
United States Treasury obligations with Treasury Constant Maturities
most closely corresponding to such Weighted Average Life to Maturity
(one (1) with a longer maturity and one (1) with a shorter maturity, if
available) shall be calculated pursuant to the immediately preceding
sentence and the Make-Whole Discount Rate shall be interpolated or
extrapolated from such yields on a straight-line basis.
Applicable H.15 -- means, on any date, United States Federal
Reserve Statistical Release H.15(519) or its successor publication then
most recently published and available to the public or, if no such
successor publication is available, then any other source of current
information in respect of interest rates on securities of the United
States of America that is generally available and, in the judgment of
the Required Holders, provides information reasonably comparable to the
H.15(519) report.
Weighted Average Life to Maturity -- means, with respect to
any Prepayment Date and Prepaid Principal, the number of years obtained
by dividing the Remaining Dollar-Years of such Prepaid Principal
determined on such Prepayment Date by such Prepaid Principal.
Remaining Dollar-Years -- means, with respect to any
Prepayment Date and Prepaid Principal, the result obtained by
(a) multiplying, in the case of each required
payment of principal (including payment at maturity) that
would be payable in respect of such Prepaid Principal but for
such prepayment,
(i) an amount equal to such required payment
of principal, by
(ii) the number of years (calculated to the
nearest one-twelfth (1/12) that will elapse between
such Prepayment Date and the date such
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required principal payment would be due if such
Prepaid Principal had not been so prepaid, and
(b) calculating the sum of each of the products
obtained in the preceding subsection (a).
MANAGEMENT STOCKHOLDERS -- means the Persons listed on PART 11.1(A) OF
ANNEX 3.
MARGIN SECURITY -- means "margin stock" within the meaning of
Regulations G, T, and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II, as amended from time to time.
MATERIAL ADVERSE EFFECT -- means a material adverse effect on
(a) the business, profits, Properties or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as
a whole,
(b) the ability of the Company to perform its
obligations set forth in this Agreement, or any other Financing
Documents, or
(c) the ability of any Wholly-Owned Domestic Subsidiary
to perform its obligations set forth under the Subsidiary Subordinated
Guarantee to which it is a party, or
(d) the validity or enforceability of this Agreement,
the Subordinated Notes, the Subsidiary Subordinated Guarantees or any
other Financing Documents.
MATERIAL SUBSIDIARY -- shall mean, at any time, any Subsidiary that (a)
has assets at such time comprising ten percent (10%) or more of the aggregate
amount of the assets of the Company and the Subsidiaries at such time as would
appear on a consolidated balance sheet of such Persons prepared in accordance
with GAAP or (b) contributed, for the most recently ended fiscal year of the
Company, ten percent (10%) or more of Consolidated Net Income for such fiscal
year.
MAXIMUM REVOLVER AMOUNT -- means, at any time, the amount equal to the
sum of (a) the Eligible Accounts Receivable Amount plus (b) the Eligible
Inventory Amount, in each case determined at such time.
MERGER -- means the merger of Helsel with and into Helsel Holdings.
MERGER AGREEMENT -- means the Merger Agreement, dated June 30, 1995,
between Helsel and Helsel Holdings.
MERGER DOCUMENTS -- Section 2.21(c).
MOODY'S -- means Moody's Investor Services, Inc.
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MULTIEMPLOYER PLAN -- means any multiemployer plan (as defined in
section 3(37) of ERISA) in respect of which the Company or any ERISA Affiliate
is an "employer" (as such term is defined in section 3 of ERISA).
MULTIPLE EMPLOYER PENSION PLAN -- means any employee benefit plan
within the meaning of section 3(3) of ERISA (other than a Multiemployer Plan),
subject to Title IV of ERISA, to which the Company or any ERISA Affiliate and an
employer (as such term is defined in section 3 of ERISA) other than the Company
or an ERISA Affiliate contribute.
NET INCOME AVAILABLE FOR FIXED CHARGES -- means, with respect to any
To-Be-Acquired Business for any period, the sum of the net income before taxes
of such Person for such period determined in accordance with GAAP plus (to the
extent, and only to the extent, that such amounts were deducted in the
computation of the net income of such Person) the aggregate amount of interest
expense, rental expense and amortization, in each case as may be agreed upon by
the Company and the Required Holders with respect to such period.
NET PROCEEDS -- means, with respect to any Transfer of Property, the
cash proceeds of such transfer net of any reasonable and ordinary transaction
costs and expenses incurred in connection with such Transfer.
NOTE PURCHASE AGREEMENTS -- Section 1.3.
OPERATING LEASE -- means, with respect to any Person, any lease under
which such Person is, or has the obligations of, the lessee, other than a
Capital Lease.
OPERATING RENTALS -- means, with respect to any Person, all fixed
payments that such Person is required to make as lessee under, or by the terms
of, any Operating Lease, including, without limitation, additional rentals (in
excess of fixed minimums) based upon a percentage of gross receipts.
OTHER HEDGING AGREEMENTS shall mean any foreign exchange contracts,
currency swap agreements or other similar agreements or arrangements designed to
protect against fluctuations of currency values or any commodity forward, future
or similar agreements or arrangements designed to protect against fluctuations
of the prices of commodities used by the Company or any of its Subsidiaries in
the ordinary course of business.
OTHER PURCHASER -- Section 1.3.
PBGC -- means the Pension Benefit Guaranty Corporation and any
successor corporation or governmental agency.
PENSION PLAN -- means, at any time, any "employee pension benefit plan"
(as such term is defined in section 3 of ERISA) maintained at such time by the
Company or any ERISA Affiliate for employees of the Company or such ERISA
Affiliate, excluding any Multiemployer Plan.
PERMITTED AFFILIATE TRANSACTIONS -- means
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(a) the loans by the Company to certain shareholders of
the Company evidenced by the Shareholder Notes (as in effect on the
Closing Date),
(b) the Helsel Shareholder Note Prepayments,
(c) the execution, delivery and performance by the Company
of the Employment Agreements (as in effect on the Closing Date),
(d) the execution, delivery and performance by the Company
of the Wage Continuation Agreements (as in effect on the Closing Date),
(e) payments by the Company to reimburse Weinberg Capital
Corporation for amounts paid by Weinberg Capital Corporation to
unaffiliated third parties on behalf of the Company with respect to
rent, overhead and administrative expenses for the executive offices of
the Company and reimbursement of travel expenses for officers of the
Company in connection with their duties as officers of the Company, in
all such cases, to the extent such reimbursement is for payments
actually made by Weinberg Capital Corporation to unaffiliated third
parties,
(f) payment by the Company of principal and interest on
the Helsel Seller Note (as in effect on the Closing Date),
(g) payment by the Company on the Closing Date of accrued
but unpaid management fees earned by Norman C. Harbert and Ronald E.
Weinberg as of July 1, 1995 in connection with the management of Helsel
in an aggregate amount not to exceed Fifty Thousand Dollars ($50,000),
(h) the consummation on the Closing Date of the Household
Warrant Redemption,
(i) payment by the Company of cash dividends in respect of
the Existing Preferred Stock in accordance with Section 7.8,
(j) payment by the Company of the Put Option Purchase
Price to the holders of the Warrants in accordance with Section 7.8,
and
(k) payment of customary fees to members of the Board of
Directors who are not also officers, employees or Affiliates (except if
such persons are Affiliates of the Company solely by virtue of their
position as directors of the Company or are representatives of Clanco
Partners I and III, each an Ohio partnership) in an aggregate amount
for each such member not to exceed Twelve Thousand Dollars ($12,000)
per year.
PERSON -- means an individual, partnership, corporation, trust,
unincorporated organization, or a government or agency or political subdivision
thereof.
PLACEMENT MEMORANDUM -- Section 2.1.
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PREPAYMENT COMPENSATION AMOUNT -- means, at such time, with respect to
a prepayment of the Subordinated Notes pursuant to Section 5.2 or upon the
acceleration the Subordinated Notes pursuant to Section 9.2:
(a) the Make-Whole Amount with respect to the principal
amount of such Subordinated Notes so prepaid or accelerated on the
date on which such action occurs, or
(b) in the event such prepayment is a prepayment of all but
not less than all of the Subordinated Notes and such prepayment is
concurrent with or after the occurrence of a Trigger Event, the lesser
of:
(i) the Make-Whole Amount with respect to the
principal amount of such Subordinated Notes so prepaid or
accelerated on the date on which such action occurs, and
(ii) the IRR Amount with respect to such prepayment
or acceleration.
PRO FORMA CONSOLIDATED NET INCOME AVAILABLE FOR FIXED CHARGES -- means
at any time Consolidated Net Income Available for Fixed Charges for the period
of twelve (12) calendar months then most recently ended assuming for such
calculation that
(a) each To-Be-Acquired Business proposed to be acquired at
such time was acquired on the first day of such period and each former
To-Be-Acquired Business actually acquired by the Company or a
Subsidiary since the beginning of such period was acquired on the first
day of such period,
(b) for all or any portion of such period prior to the
acquisition thereof by the Company or any Subsidiary, such Consolidated
Net Income Available for Fixed Charges shall include Net Income
Available for Fixed Charges for each such To-Be-Acquired Business for
all or such portion of such period prior to such acquisition, and
(c) each Disposed of Business at such time which shall have
been sold or disposed of after the beginning of such period was sold or
disposed of on the first day of such period.
PRO FORMA FIXED CHARGES -- means at any time the maximum amount payable
in any period of twelve (12) calendar months ended after such time in respect of
Consolidated Fixed Charges determined after giving effect to the acquisition by
the Company or any Subsidiary of any To-Be Acquired Business proposed to be
acquired at such time and the incurrence at such time by the Company and the
Subsidiaries of any additional Consolidated Debt and the retirement at such time
of any other Consolidated Debt with the proceeds thereof and based upon the
following assumptions (without duplication):
(a) no Consolidated Debt will be prepaid prior to the
regularly scheduled payment dates therefor and any such Consolidated
Debt which does not bear interest at a fixed rate will accrue interest
for the duration of such period at the rate of interest in effect at
such time,
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(b) all amounts which are owing with respect to Guaranties
issued by the Company or any Subsidiary (i) are direct obligations of
the Person which issued such Guaranty, (ii) are outstanding at such
date and (iii) are of the nature and type of, and bear interest at the
rate provided for in, the underlying obligation being so guarantied,
(c) with respect to any letters of credit or surety bonds
for which the Company or Subsidiary has a reimbursement obligation, the
full amount thereof shall have been drawn upon at such date and shall
not be reimbursed for the duration of such period and shall, subject to
the assumptions of clause (a) above, bear interest as provided for by
the terms of such letter of credit or surety bond, and
(d) with respect to any Operating Lease of the Company or
Subsidiary, no such Operating Lease will be terminated prior to its
regularly scheduled expiration date, any portion of future Consolidated
Operating Rental Expense which is determined on a basis other than
fixed rentals will in all future yearly periods be the same amount as
was payable in the fiscal year of the Company then most recently ended
.
PROJECTIONS -- Section 2.4(d).
PROPERTY -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
PURCHASE MONEY LIEN -- means
(a) a Lien held by any Person (whether or not the seller of
such assets) on Acceptable Property (or a group of related items of
Acceptable Property), which Lien secures all or a portion of the
related purchase price or construction costs of such Acceptable
Property, provided that such Lien
(i) encumbers only Acceptable Property acquired or
constructed with the proceeds of the Debt secured thereby, and
(ii) such Lien is not thereafter extended to any other
Property.
PURCHASERS -- means the Persons listed as purchasers of Subordinated
Notes on Annex 1.
PUT OPTION PURCHASE PRICE -- shall have the meaning ascribed to such
term in the Warrant Agreement.
REPORTABLE EVENT -- shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan other than those events as to which the 30-day
notice period is waived under subsection .13 through subsection .16, inclusive,
or subsection .18 through subsection .20, inclusive of PBGC Regulation Section
2615.
REPURCHASE PRICE -- shall have the meaning ascribed to such term in the
Warrant Agreement.
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REQUIRED HOLDERS -- means, at any time, the holders of greater than
fifty-one percent (51%) in principal amount of the Subordinated Notes at the
time outstanding (exclusive of Subordinated Notes then owned by any one or more
of the Company, any Subsidiary, any Affiliate and any officer or director of any
thereof).
RESTRICTED INVESTMENT -- means, at any time, all Investments except the
following:
(a) Investments in Subsidiaries or any corporation that
concurrently with such Investment becomes a Subsidiary;
(b) Investments in Property used or useful in the ordinary
course of business of the Company and the Subsidiaries;
(c) Investments in accounts receivable arising from the
sale of goods and services in the ordinary course of business of the
Company and the Subsidiaries;
(d) Investments in direct obligations of the United States
of America, or any agency thereof or obligations guaranteed by the
United States of America, provided that such obligations mature within
one (1) year from the date of acquisition thereof;
(e) Investments in time deposits or certificates of deposit
maturing within one (1) year from the date of acquisition issued by a
bank or trust company organized under the laws of the United States of
America or any state thereof having capital, surplus and undivided
profits aggregating at least One Hundred Million Dollars
($100,000,000), and the deposits of which are rated in one of the three
(3) highest rating categories by a credit rating agency of recognized
national standing;
(f) Investments in commercial paper rated "A-1" (or higher)
by Standard & Poor's or "P-1" (or higher) by Moody's (or any future
comparable ratings issued by Standard & Poor's or Moody's), provided
that such obligations mature within one (1) year from the date of
creation thereof;
(g) Investments in any money market fund which has all or
substantially all of its investments in Securities of the type
described in clause (d), clause (e) or clause (f) above or clause (k)
below;
(h) Investments in joint ventures not to exceed One Million
Dollars ($1,000,000) in the aggregate for all such Investments in
joint ventures;
(i) Investments of the type described in clause (d), clause
(e), clause (f) and clause ((k) without regard to maturity thereof,
provided that the aggregate amount of all such Investments outstanding
at any time shall not exceed Two Million Dollars ($2,000,000); and
(j) Investments in the Shareholder Notes;
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(k) Investments in repurchase obligations with a term of not
more than seven (7) days for underlying securities of the types
described in clause (d) above entered into with any bank meeting the
qualifications specified in clause (e) above;
(l) Investments represented by loans and advances in the
ordinary course of business and consistent with past practices to
employees of the Company and the Subsidiaries for moving, travel and
emergency expenses and other similar expenses, so long as the aggregate
principal amount thereof at any time outstanding (determined without
regard to any write-downs or write-offs of such loans and advances)
shall not exceed Two Hundred Thousand Dollars ($200,000);
(m) Investments represented by non-cash loans to employees
of the Company or the Subsidiaries in connection with such employee's
purchase of the capital stock of the Company pursuant to employee stock
option plans approved by the Board of Directors, and
(n) Investments represented by Swaps entered into in
accordance with Section 7.4(g) or Section 7.4(h).
RESTRICTED PAYMENT -- means:
(a) any dividend or other distribution (whether in the form
of cash or any other Property), direct or indirect, on account of any
shares of capital stock of the Company or any Subsidiary (other than
capital stock owned legally and beneficially by the Company or any of
the Wholly-Owned Subsidiaries), now or hereafter outstanding, except a
dividend payable solely in shares of common stock of the Company or
such Subsidiary, as the case may be, or
(b) any optional or mandatory redemption, retirement,
purchase or other acquisition, direct or indirect, of any shares of
capital stock of the Company or any Subsidiary (other than capital
stock owned legally and beneficially by the Company or any of the
Wholly-Owned Subsidiaries), now or hereafter outstanding, or of any
warrants, rights, or options to acquire any shares of such capital
stock.
RIGHT -- means and includes any warrant (including, without limitation,
any Warrant), option or other right, to acquire Common Stock and including,
without limitation, any right pursuant to the provisions of any Security
convertible or exchangeable into Common Stock.
SECURITIES ACT -- means the Securities Act of 1933, as amended.
SECURITY -- means "security" as defined in Section 2(1) of the
Securities Act.
SENIOR DEBT -- means and includes all obligations, liabilities and
indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, premium, interest (including, without
limitation, interest accruing after the filing of a petition initiating any
proceeding referred to in clause (h), clause (i) or clause (j) of Section 9.1 at
the rate specified in the instrument governing the relevant Debt whether or not
such interest is an allowable claim in such proceeding) fees, expenses,
indemnification, reimbursement obligations or otherwise, under
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(a) Acceptable Credit Facilities, and
(b) any agreement creating Debt described in Section 7.4(f),
Section 7.4(g), Section 7.4(h) or Section 7.4(j) so long as by its
terms such Debt is senior to the Subordinated Debt and only to the
extent the principal amount thereof shall have been permitted to be
incurred under such Sections;
so long as, in the case of clause (b) above, such obligation, liability and
indebtedness is not "unsecured indebtedness" or a "claim of a trade creditor"
within the meaning of Section 279 of the IRC.
SENIOR DEBT COVENANT DEFAULT -- means an event or condition, other than
an event or condition specified in Section 10.2(a), which gives the holders of
Senior Debt under any Acceptable Credit Facility the right to accelerate the
maturity of such Senior Debt as a direct result of a failure by the Company to
perform its obligations as set forth in any Acceptable Credit Facility.
SENIOR FINANCIAL OFFICER -- means any of the treasurer, controller or
any other senior financial officer of the Company.
SENIOR OFFICER -- means any of the president, any vice president, the
treasurer or any other senior executive or financial officer of the Company.
SHAREHOLDERS' AGREEMENT -- Section 3.8.
SHAREHOLDER NOTES -- means each of the following:
(a) the Promissory Note of Byron S. Krantz, dated June 30,
1995, in favor of the Company in the original principal amount of Sixty
Thousand Seven Hundred Thirty-Six and 50/100 Dollars ($60,736.50);
(b) the Promissory Note of Jeffrey H. Berlin, dated June 30,
1995, in favor of the Company in the original principal amount of Ten
Thousand Dollars ($10,000);
(c) the Promissory Note of Ronald E. Weinberg, dated June 30,
1995, in favor of the Company in the original principal amount of Eight
Hundred Two Thousand One Hundred Thirty-one and 75/100 Dollars
($802,131.75);
(d) the Promissory Note of Norman C. Harbert, dated June 30,
1995, in favor of the Company in the original principal amount of Eight
Hundred Two Thousand One Hundred Thirty-one and 75/100 Dollars
($802,131.75);
(e) the Promissory Note of Clanco Partners I, dated June 30,
1995, in favor of the Company in the original principal amount of One
Hundred Sixty-Two Thousand Five Hundred Dollars ($162,500.00); and
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(f) the Promissory Note of Douglas D. Wilson, dated June 30,
1995, in favor of the Company in the original principal amount of One
Hundred Sixty-Two Thousand Five Hundred Dollars ($162,500.00).
STANDARD & POOR'S -- means the Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc.
SUBORDINATED DEBT -- means and includes all obligations, liabilities
and indebtedness of the Company now or hereafter existing, whether fixed or
contingent, and whether for principal, Prepayment Compensation Amount,
pre-petition interest, fees, expenses, indemnification or otherwise, under the
Note Purchase Agreements or the Subordinated Notes, together with any
post-petition interest on the foregoing indebtedness which has been allowed by
the applicable bankruptcy court having jurisdiction over a bankruptcy or similar
proceeding involving the Company.
SUBORDINATED NOTES -- Section 1.1.
SUBSIDIARY -- means, at any time, a corporation of which the Company
owns, directly or indirectly, more than fifty percent (50%) (by number of votes)
of each class of the Voting Stock of such corporation at such time.
SUBSIDIARY RESTRUCTURING -- means the restructuring of the Subsidiaries
in the manner described in PART 11.1 OF ANNEX 3 with such changes thereto which
shall be approved by the Required Holders.
SUBSIDIARY STOCK -- Section 7.7(b).
SUBSIDIARY SUBORDINATED GUARANTEES -- Section 3.6.
SUCCESSOR CORPORATION -- Section 7.6.
SWAPS -- means, with respect to any Person, Interest Rate Protection
Agreements and Other Hedging Agreements and similar obligations obligating such
Person to make payments, whether periodically or upon the happening of a
contingency. For the purposes of this Agreement, the amount of the obligation
under any Swap shall be the amount determined in respect thereof as of the end
of the then most recently ended fiscal quarter of such Person, based on the
assumption that such Swap had terminated at the end of such fiscal quarter, and
in making such determination, if any agreement relating to such Swap provides
for the netting of amounts payable by and to such Person thereunder or if any
such agreement provides for the simultaneous payment of amounts by and to such
Person, then in each such case, the amount of such obligation shall be the net
amount so determined.
TO-BE-ACQUIRED BUSINESS -- means at any time any business (which may be
a corporation or a division thereof, a partnership, sole proprietorship, limited
liability company or other entity) which the Company or any Subsidiary has
agreed at such time (pursuant to a written agreement):
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(a) to acquire by purchase one hundred percent (100%) of
the equity Securities thereof; or
(b) to merge therewith or acquire all or substantially all
of the assets thereof.
TRANSFER -- Section 7.7(a).
TRIGGER EVENT -- means the occurrence of any one or more of the
following events:
(a) the holders of the Warrant Shares shall have exercised
their right, pursuant to the terms of the Section 1 of the
Shareholders' Agreement, to require the Company to purchase all of the
Warrant Shares and the Company shall have paid the Put Option Purchase
Price in connection therewith;
(b) the Company shall have exercised its right, pursuant to
the terms of the Section 2 of the Shareholders' Agreement, to require
the holders of the Warrant Shares to sell all of the Warrant Shares and
the Company shall have paid the Repurchase Price in connection
therewith;
(c) the holders of the Subordinated Notes sell or otherwise
transfer all of the Warrant Shares; or
(d) an IPO.
VOTING STOCK -- means capital stock of any class or classes of a
corporation the holders of which are ordinarily, in the absence of
contingencies, entitled to elect corporate directors (or Persons performing
similar functions) (irrespective of whether or not at any time of determination,
stock of any class or classes shall have or might have special voting power or
rights by reason of the happening of any contingency).
WAGE CONTINUATION AGREEMENTS -- means those certain separate Wage
Continuation Agreements between the Company and each of Norman C. Harbert and
Ronald E. Weinberg, in each case dated June 30, 1995.
WARRANT AGREEMENT -- Section 3.7.
WARRANT CERTIFICATE -- Section 3.7.
WARRANTS -- Section 3.7.
WARRANT SHARES -- shall have the meaning ascribed to such term in the
Shareholders' Agreement.
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WELLMAN -- means S.K. Wellman Limited, Inc., a Michigan corporation.
WELLMAN ACQUISITION AGREEMENT shall mean the Agreement for Purchase and
Sale of the Capital Stock of S.K. Wellman Limited, Inc., dated as of April 10,
1995 among Hawk Corporation, The Hawk Group of Companies, Inc, an Ohio
corporation (the predecessor to the Company) and MLX Corp., a Georgia
corporation, as in effect on the Closing Date.
WHOLLY-OWNED DOMESTIC SUBSIDIARY -- means, each Wholly-Owned Subsidiary
which is organized under the laws of the United States or any jurisdiction
thereof.
WHOLLY-OWNED SUBSIDIARY -- means, each Subsidiary one hundred percent
(100%) of all of the equity Securities (except directors' qualifying shares) and
voting Securities of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Subsidiaries.
11.2 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
Where the character or amount of any asset or liability or item of
income or expense, or any consolidation or other accounting computation is
required to be made for any purpose hereunder, it shall be done in accordance
with GAAP as in effect on the Closing Date, provided, that if any term defined
herein includes or excludes amounts, items or concepts that would not be
included in or excluded from such term if such term was defined with reference
solely to GAAP as in effect on the Closing Date, such term will be deemed to
include or exclude such amounts, items or concepts as set forth herein.
11.3 DIRECTLY OR INDIRECTLY.
Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
11.4 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION.
(a) SECTION HEADINGS AND TABLE OF CONTENTS, ETC.. The titles
of the Sections and the Table of Contents appear as a matter of
convenience only, do not constitute a part hereof and shall not affect
the construction hereof. The words "herein," "hereof," "hereunder" and
"hereto" refer to this Agreement as a whole and not to any particular
Section or other subdivision. Unless otherwise specified, references to
Sections are to Sections of this Agreement and references to an "Annex"
or an "Exhibit" are to an Annex or an Exhibit attached to this
Agreement.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
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11.5 GOVERNING LAW; JURISDICTION.
(a) GOVERNING LAW. THIS AGREEMENT AND THE SUBORDINATED NOTES SHALL
BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL
CONNECTICUT LAW.
(b) JURISDICTION; JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
CONNECTICUT COURT IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND INSTRUMENTS CONTEMPLATED HEREBY AND
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT
OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. NONE
OF THE PARTIES HERETO SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING,
COUNTERCLAIM OR OTHER LITIGATION PROCEDURE BASED UPON OR ARISING OUT OF OR
OTHERWISE RELATED TO THIS AGREEMENT OR ANY OF THE SUBORDINATED NOTES AND EACH OF
THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT EACH MAY HAVE TO ASSERT THE
DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY SUCH
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 11.5.
12. MISCELLANEOUS
12.1 COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder or under
the Subordinated Notes shall be in writing, shall be hand delivered,
deposited into the United States mail (registered or certified mail),
postage prepaid, or sent by overnight courier, and shall be addressed,
(i) if to the Company,
The Hawk Group of Companies, Inc.
200 Public Square
Cleveland, Ohio 44114-2301
Attention: Ronald E. Weinberg
TEL: (216) 861-4540
FAX: (216) 861-4546
with a copy to:
Kohrman Jackson & Krantz
1375 East 9th Street, 20th Floor
1 Cleveland Center
Cleveland, OH 44114-1724
Attention: Byron S. Krantz, Esq.
TEL: (216) 736-7210
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FAX: (216) 621-6536
or at such other address as the Company shall have furnished in writing
to all holders of the Subordinated Notes at the time outstanding, and
(ii) if to any of the holders of the Subordinated
Notes,
(A) if such holders are the Purchasers, at
their respective addresses set forth on Annex 1, and
further including any parties referred to on such
Annex 1 that are required to receive notices in
addition to such holders of the Subordinated Notes,
and
(B) if such holders are not the Purchasers,
at their respective addresses set forth in the
register for the registration and transfer of
Subordinated Notes maintained pursuant to Section
7.3,
or to any such party at such other address as such party may designate
by notice duly given in accordance with this Section 12.1 to the
Company (which other address shall be entered in such register).
(b) WHEN GIVEN. Any communication so addressed and deposited
in the United States mail, postage prepaid, by registered or certified
mail (in each case, with return receipt requested) shall be deemed to
be received on the third (3rd) succeeding Business Day after the day of
such deposit (not including the date of such deposit). Any notice so
addressed and otherwise delivered shall be deemed to be received when
actually received at the address of the addressee.
12.2 INDEMNIFICATION OF EACH HOLDER.
From and at all times after the date of this Agreement, and in addition
to all of the holders' of Subordinated Notes other rights and remedies against
the Company, the Company agrees to indemnify and hold harmless each holder of
the Subordinated Notes and each director, officer, employee, agent and affiliate
of each such holder against any and all claims (whether valid or not), losses,
damages, liabilities, costs and expenses of any kind or nature whatsoever
(including, without limitation, reasonable attorneys' fees, costs and expenses),
including without limitation claims arising under Environmental Protection Laws
or out of matters relating to Hazardous Substances, incurred by or asserted
against such holder or any such director, officer, employee, agent or affiliate,
from and after the date hereof, whether direct or indirect, as a result of or
arising from or in any way relating to any suit, action or proceeding (including
any inquiry or investigation) by any Person, whether threatened or initiated,
asserting a claim for any legal or equitable remedy against any Person under any
statute or regulation, including, but not limited to, any federal or state
securities laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the negotiation, preparation, execution,
performance or enforcement of this Agreement or the other Financing Documents or
any transactions contemplated herein or therein, or any of the transactions
contemplated hereunder, whether or not such holder or any such director,
officer, employee, agent or affiliate is a party to any such action, proceeding,
suit or the target of any such inquiry or investigation; provided, however, that
no indemnified party shall have
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the right to be indemnified hereunder for any liability resulting from the
willful misconduct or gross negligence of such indemnified party. All of the
foregoing losses, damages, costs and expenses of any holder of Subordinated
Notes shall be payable as and when incurred upon demand by such holder and shall
be additional obligations hereunder. The obligations of the Company and the
rights of the holder of Subordinated Notes under this Section 12.2 shall survive
payment of the Subordinated Notes and the termination hereof.
12.3 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation,
(a) consents, waivers and modifications that may hereafter be
executed,
(b) documents received by you at the closing of your purchase
of the Subordinated Notes (except the Subordinated Notes themselves),
and
(c) financial statements, certificates and other information
previously or hereafter furnished to you or any other holder of
Subordinated Notes,
may be reproduced by any holder of Subordinated Notes by any photographic,
photostatic, microfilm, micro-card, miniature photographic, digital or other
similar process and each holder of Subordinated Notes may destroy any original
document so reproduced. The Company agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by such holder of
Subordinated Notes in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence. Nothing in this Section 12.3 shall prohibit the Company
or any holder of Subordinated Notes from contesting the accuracy of any such
reproduction.
12.4 SURVIVAL.
All warranties, representations, certifications and covenants made by
the Company herein or in any certificate or other instrument delivered by it or
on its behalf hereunder shall be considered to have been relied upon by you and
shall survive the delivery to you of the Subordinated Notes regardless of any
investigation made by you or on your behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company hereunder.
12.5 SUCCESSORS AND ASSIGNS.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of all holders, from time to time, of
Subordinated Notes, and shall be enforceable by any such holder, whether or not
an express assignment to such holder of rights hereunder shall have been made by
you or your successor or assign.
82
<PAGE> 88
12.6 AMENDMENT AND WAIVER.
(a) REQUIREMENTS. This Agreement may be amended, and the
observance of any term hereof may be waived, with (and only with) the
written consent of the Company and the Required Holders; provided that
no such amendment or waiver of any of the provisions of Section 1,
Section 3 and Section 4 or any defined term used therein (provided that
the Required Holders can amend a defined term used in such Section for
purposes of other Sections), shall be effective as to any holder of
Subordinated Notes unless consented to by such holder in writing; and
provided further that no such amendment or waiver shall, without the
written consent of the holders of all Subordinated Notes (exclusive of
Subordinated Notes held by the Company, any Subsidiary or any
Affiliate) at the time outstanding,
(i) subject to Section 9.3, change the amount or time
of any prepayment or payment of principal or the Prepayment
Compensation Amount or the rate or time of payment of
interest,
(ii) amend Section 9,
(iii) amend the definition of Required Holders, or
(iv) amend this Section 12.6.
The holder of any Subordinated Note may specify that any such written
consent executed by it shall be effective only with respect to a
portion of the Subordinated Notes held by it (in which case it shall
specify, by dollar amount, the aggregate principal amount of
Subordinated Notes with respect to which such consent shall be
effective) and in the event of any such specification such holder shall
be deemed to have executed such written consent only with respect to
the portion of the Subordinated Notes so specified. Notwithstanding the
foregoing, no amendment or waiver of any of the provisions of Section
10, or any of the defined terms related thereto, shall be effective
without the written consent of the holders of all Senior Debt and all
Subordinated Notes (exclusive of Senior Debt and Subordinated Notes
held by the Company, any Subsidiary or any Affiliate) at the time
outstanding.
(b) SOLICITATION OF SUBORDINATED NOTEHOLDERS.
(i) SOLICITATION. The Company shall not solicit,
request or negotiate for or with respect to any proposed
waiver or amendment of any of the provisions hereof or the
Subordinated Notes unless each holder of the Subordinated
Notes (irrespective of the amount of Subordinated Notes then
owned by it) shall be informed thereof by the Company with
sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct
copies of any waiver or consent effected pursuant to the
provisions of this Section 12.6 shall be delivered by the
Company to each holder of outstanding Subordinated Notes
forthwith following the date on which the same shall have been
executed and
83
<PAGE> 89
delivered by all holders of outstanding Subordinated Notes
required to consent or agree to such waiver or consent.
(ii) PAYMENT. The Company, neither directly or
indirectly, shall pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or
otherwise, or grant any security, to any holder of
Subordinated Notes as consideration for or as an inducement to
the entering into by any holder of Subordinated Notes of any
waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to the
holders of all Subordinated Notes then outstanding.
(iii) SCOPE OF CONSENT. Any consent made pursuant to
this Section 12.6 by a holder of Subordinated Notes that has
transferred or has agreed to transfer its Subordinated Notes
to the Company, any Subsidiary or any Affiliate and has
provided or has agreed to provide such written consent as a
condition to such transfer shall be void and of no force and
effect except solely as to such holder, and any amendments
effected or waivers granted or to be effected or granted that
would not have been or would not be so effected or granted but
for such consent (and the consents of all other holders of
Subordinated Notes that were acquired under the same or
similar conditions) shall be void and of no force and effect,
retroactive to the date such amendment or waiver initially
took or takes effect, except solely as to such holder.
(c) BINDING EFFECT. Except as provided in Section 12.6(b),
any amendment or waiver consented to as provided in this Section 12.6
shall apply equally to all holders of Subordinated Notes and shall be
binding upon them and upon each future holder of any Subordinated Note
and upon the Company whether or not such Subordinated Note shall have
been marked to indicate such amendment or waiver. No such amendment or
waiver shall extend to or affect any obligation, covenant, agreement,
Default or Event of Default not expressly amended or waived or impair
any right consequent thereon.
12.7 PAYMENTS, WHEN RECEIVED.
(a) PAYMENTS DUE ON HOLIDAYS. If any payment due on, or with
respect to, any Subordinated Note shall fall due on a day other than a
Business Day, then such payment shall be made on the first Business Day
following the day on which such payment shall have so fallen due;
provided that if all or any portion of such payment shall consist of a
payment of interest, for purposes of calculating such interest, such
payment shall be deemed to have been originally due on such first
following Business Day, such interest shall accrue and be payable to
(but not including) the actual date of payment, and the amount of the
next succeeding interest payment shall be adjusted accordingly.
(b) PAYMENTS, WHEN RECEIVED. Any payment to be made to the
holders of Subordinated Notes hereunder or under the Subordinated Notes
shall be deemed to have been made on the Business Day such payment
actually becomes available to such holder at such holder's bank prior
to 11:00 a.m. (local time of such bank).
84
<PAGE> 90
12.8 DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two or more duplicate originals hereof may be signed by the parties,
each of which shall be an original but all of which together shall constitute
one and the same instrument. This Agreement may be executed in one or more
counterparts and shall be effective when at least one counterpart shall have
been executed by each party hereto, and each set of counterparts which,
collectively, show execution by each party hereto shall constitute one duplicate
original.
[Remainder of Page Intentionally Blank. Next page is signature page.]
85
<PAGE> 91
If this Agreement is satisfactory to you, please so indicate by signing
the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
THE HAWK GROUP OF COMPANIES, INC.
By_____________________________
Name:
Title:
ACCEPTED:
[NAME OF PURCHASER]
By__________________________
Name:
Title:
<PAGE> 92
[SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
of THE HAWK GROUP OF COMPANIES, INC.]
ANNEX 1
INFORMATION AS TO PURCHASERS
<TABLE>
<CAPTION>
PURCHASER NAME CONNECTICUT GENERAL LIFE INSURANCE COMPANY
- -------------- ---------------------------------------------------
<S> <C>
Name in Which CIG & CO.
Subordinated Note is
Registered
Name in Which Warrants
are registered
- ----------------------------------------------------------------------------------
Subordinated Note R-1 $3,327,000
Registration Number, R-2 $3,327,000
Principal Amount of Note R-3 $3,327,000
Warrant Certificate WR-1; 35,151.973 Warrants
Registration Number; WR-2; 35,151.973 Warrants
Number of Warrants WR-3; 35,151.973 Warrants
- ----------------------------------------------------------------------------------
Payment on Account of
Subordinated Note
Method Federal Funds Wire Transfer
Account Information Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA# 021000021
OBI = [Issue Name, Private Placement
Number, Description of Security with
Rate and Maturity, Amount of Interest
and/or Principal, the Amount of any
Prepayment, the Payable Date, the
Originators Contact Name and Telephone
Number]
- -----------------------------------------------------------------------------------
Accompanying Information Name of Company: The Hawk Group of Companies, Inc.
Description of
Security: 12% Senior Subordinated Notes due
June 30, 2005
Security Number: 42009# AA 7
Due Date and Application (as among principal,
premium and interest) of the payment being made:
Contact Name and Phone:
- ------------------------------------------------------------------------------------
</TABLE>
Annex 1-1
<PAGE> 93
ANNEX 1
INFORMATION AS TO PURCHASERS (CONT.)
================================================================================
PURCHASER NAME CONNECTICUT GENERAL LIFE INSURANCE COMPANY
Address for Notices Related CIG & Co.
to Payments c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2206
Attention: Securities Accounting S-206
with a copy to
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: (212) 552-3107/1005
- --------------------------------------------------------------------------------
Address for All other Notices CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division (S-307)
Fax: (203) 726-7203
- --------------------------------------------------------------------------------
Signature Page Format CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc.
By___________________________
- --------------------------------------------------------------------------------
Tax Identification Number 13-3574027
================================================================================
Annex 1-2
<PAGE> 94
ANNEX 1
INFORMATION AS TO PURCHASERS (CONT.)
<TABLE>
<CAPTION>
============================================================================================
PURCHASER NAME CIGNA MEZZANINE PARTNERS III, L.P.
- --------------------------------------------------------------------------------------------
<S> <C>
Name in Which CIG & CO.
Subordinated Note is
Registered
Name in Which Warrants
are registered
- --------------------------------------------------------------------------------------------
Note Registration Number, R-4 $20,019,000
Principal Amount of
Subordinated Note WR-4; 211,514.081 Warrants
Warrant Certificate
Registration Number;
Number of Warrants
- ----------------------------------------------------------------------------------------------
Payment on Account of
Subordinated Note
Method Federal Funds Wire Transfer
Account Information Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA# 021000021
OBI = [Issue Name, Private Placement
Number, Description of Security with
Rate and Maturity, Amount of Interest
and/or Principal, the Amount of any
Prepayment, the Payable Date, the
Originators Contact Name and Telephone
Number]
- --------------------------------------------------------------------------------------------
Accompanying Information Name of Company: The Hawk Group of Companies, Inc.
Description of
Security: 12% Senior Subordinated Notes due
June 30, 2005
Security Number: 42009# AA 7
Due Date and Application (as among principal, premium and
interest) of the payment being made:
Contact Name and Phone:
- --------------------------------------------------------------------------------------------
</TABLE>
Annex 1-3
<PAGE> 95
ANNEX 1
INFORMATION AS TO PURCHASERS (CONT.)
================================================================================
PURCHASER NAME CIGNA MEZZANINE PARTNERS III, L.P.
- -------------------------------------------------------------------------------
Address for Notices Related CIG & Co.
to Payments c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford CT 06152-2206
Attention: Securities Accounting S-206
with a copy to
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: (212) 552-3107/1005
- -------------------------------------------------------------------------------
Address for All other Notices CIG & Co.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division (S-307)
Fax: (203) 726-7203
- -------------------------------------------------------------------------------
Signature Page Format CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc.
By_______________________________
- --------------------------------------------------------------------------------
Tax Identification Number 13-3574027
================================================================================
Annex 1-4
<PAGE> 96
ANNEX 2
PAYMENT INSTRUCTIONS
In accordance with Section 1.3(b) of this Agreement, the Company
authorizes and directs you to make payment for the Subordinated
Note or Subordinated Notes being purchased by you by payment of the
purchase price therefor by federal funds wire transfer in
immediately available
funds to:
Bank:Bankers Trust Company, New York, New York
ABA No.:021-001-033
Account Name:The Hawk Group of Companies, Inc.
Account No.00-319-804
Annex 2-1
<PAGE> 1
EXHIBIT 10.23
FIRST AMENDMENT TO NOTE AND WARRANT PURCHASE AGREEMENT
This First Amendment dated as of November 27, 1996 (the or this "First
Amendment") to the separate and several Senior Subordinated Note and Warrant
Purchase Agreements, each dated as of June 30, 1995, is between The Hawk Group
of Companies, Inc., a Delaware corporation, now known as Hawk Corporation (the
"Company"), and each of the institutions which is a signatory to this First
Amendment (collectively, the "Noteholders").
RECITALS:
A. The Company has heretofore entered into separate and several Senior
Subordinated Note and Warrant Purchase Agreements, each dated as of June 30,
1995 (collectively, the "Note and Warrant Purchase Agreement"), with each of the
purchasers identified on Annex I thereto. The Company has heretofore issued
$30,000,000 of its 12% Senior Subordinated Notes due June 30, 2005 (the "Notes")
and 316,970 Warrants to Purchase Class B Common Stock of the Company (the
"Warrants") pursuant to the Note and Warrant Purchase Agreement. The Noteholders
are the holders of 100% of the outstanding principal amount of the Notes.
B. The Company and the Noteholders now desire to amend the Note and
Warrant Purchase Agreement in the respects, but only in the respects,
hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note and Warrant Purchase Agreement unless herein
defined or the context shall otherwise require.
D. All requirements of law have been fully complied with, and all other
acts and things necessary to make this First Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this First Amendment set forth in
Section 3.1 hereof, and in consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Noteholders hereby agree as follows:
SECTION 1. AMENDMENTS.
1.1. Section 5.1 of the Note and Warrant Purchase Agreement shall be
and hereby is amended in its entirety to read as follows:
"The Company shall prepay, and there shall become due and payable, Ten
Million Dollars ($10,000,000) principal amount of the Subordinated Notes on each
of January 31, 2004 and June 30, 2004. Each such required prepayment shall be at
one hundred percent (100%) of the principal amount prepaid, together with
interest accrued thereon to the date of prepayment. The principal of the
Subordinated Notes remaining outstanding, together with interest accrued
thereon, shall become due and payable on June 30, 2005."
1
<PAGE> 2
1.2. Section 7.4(b) of the Note and Warrant Purchase Agreement shall
be and hereby is amended in its entirety to read as follows:
"(b) Acceptable Credit Facilities -- Debt outstanding from time to time
under Acceptable Credit Facilities in an aggregate amount not exceeding (except
to the extent otherwise permitted pursuant to this Section 7.4) Twenty-Five
Million Dollars ($25,000,000);"
1.3. Section 10.2(a) of the Note and Warrant Purchase Agreement shall
be and hereby is amended by the deletion of the phrase "under any Acceptable
Credit Facility" in the first and second lines thereof.
1.4. Section 10.2(b) of the Note and Warrant Purchase Agreement shall
be and hereby is amended by the deletion of the phrase "under an Acceptable
Credit Facility" in the eighth and ninth lines thereof.
1.5. The definition of "Acceptable Credit Facility" in Section 11.1 of
the Note and Warrant Purchase Agreement shall be and hereby is amended by
deletion of the phrase "and the other Bank Documents" in the first and second
lines thereof, and replacement of such phrase with "and the agreements and
documents related thereto".
1.6. The definition of "Bank Loan Agreement" in Section 11.1 of the
Note and Warrant Purchase Agreement shall be and hereby is amended in its
entirety to read as follows:
"Bank Loan Agreement -- means the Credit Agreement dated as of November
27, 1996 among the Company, certain of its Subsidiaries, and BT Commercial
Corporation, as agent thereunder, as such agreement is amended (including any
amendment and restatement thereof), modified, supplemented or extended from time
to time in a manner not inconsistent with Section 7.4 and Section 7.14."
1.7. The definition of "Employment Agreements" in Section 11.1 of the
Note and Warrant Purchase Agreement shall be and hereby is amended in its
entirety to read as follows:
"Employment Agreements -- means those certain separate Employment
Agreements between the Company and each of Norman C. Harbert and Ronald E.
Weinberg, in each case dated as of November 1, 1996."
1.8. The definition of "Existing Preferred Stock" in Section 11.1 of
the Note and Warrant Purchase Agreement shall be and hereby is amended in its
entirety to read as follows:
"Existing Preferred Stock -- shall mean the Series A Preferred Stock of
the Company, $.01 par value, with a liquidation preference of $1,000.00 per
share and the Series B Preferred Stock of the Company, $.01 par value, with a
liquidation preference of $1,000.00 per share, in each case, as issued and
outstanding on the Closing Date pursuant to the terms of the certificate of
incorporation of the Company (as in effect on the Closing Date), and the Series
C Preferred Stock of the Company, $.01 par value, with a liquidation preference
of $1,000.00 per share, as issued and outstanding on November 27, 1996 pursuant
to the terms of the certificate of incorporation of the Company (as in effect on
November 27, 1996)."
2
<PAGE> 3
1.9. Paragraphs (c) and (d) of the definition of "Permitted Affiliate
Transactions" in Section 11.1 of the Note and Warrant Purchase Agreement
shall be and hereby are amended in their entirety to read as follows:
"(c) the execution, delivery and performance by the Company of the
Employment Agreements,
(d) the execution, delivery and performance by the Company of the Wage
Continuation Agreements,"
1.10. The definition of "Permitted Affiliate Transactions" in Section
11.1 of the Note and Warrant Purchase Agreement shall be and is hereby
amended further by the deletion of the word "and" at the end of paragraph
(j) thereof, by the replacement of the "." at the end of paragraph (k)
thereof with ", and" and by the addition of a new paragraph (l) as follows:
"(l) issuance by the Company of its Series C Preferred Stock, par
value $.01 per share, with a liquidation preference of $1,000.00 per share, to
stockholders and debtholders of Hawk Holding Corp., a Delaware corporation, in
exchange for the cancellation of 1,250 shares of Series A Preferred Stock of
the Company, par value $.01 per share, with a liquidation value of $1,000.00
per share, owned by Hawk Holding Corp. and $61,000 of Indebtedness owed by Hawk
Holding Corp. to the Company."
1.11. Paragraph (b) of the definition of "Restricted Payment" in
Section 11.1 of the Note and Warrant Purchase Agreement shall be and hereby is
amended in its entirety to read as follows:
"(b) any optional or mandatory redemption, retirement, purchase or
other acquisition, direct or indirect, of any share of capital stock of the
Company or any Subsidiary (other than capital stock owned legally and
beneficially by the Company or any of the Wholly-Owned Subsidiaries, and other
than the cancellation on November 27, 1996 of 1,250 shares of Series A
Preferred Stock of the Company, par value $.01 per share, with a liquidation
value of $1,000.00 per share, owned by Hawk Holding Corp., a Delaware
corporation), now or hereafter outstanding, or of any warrants, rights, or
options to acquire any shares of such capital stock."
1.12. The definition of "Subsidiary Senior Guarantee" in Section
3.1 of Exhibit E to the Note and Warrant Purchase Agreement shall be and hereby
is amended by deletion of the phrase "an Acceptable Credit Facility" in the
second line thereof, and replacement of such phrase with "any Senior Debt:".
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1. To induce the Noteholders to execute and deliver this First
Amendment, the Company represents and warrants (which representations and
warranties shall survive the execution and delivery of this First Amendment)
to the Noteholders that:
(a) this First Amendment has been duly authorized, executed
and delivered by it and this First Amendment constitutes the legal,
valid and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
3
<PAGE> 4
(b) the Note and Warrant Purchase Agreement, as amended by
this First Amendment, constitutes the legal, valid and binding
obligation, contract and agreement of the Company enforceable against
it in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws
or equitable principles relating to or limiting creditors' rights
generally;
(c) the execution, delivery and performance by the Company of
this First Amendment (i) has been duly authorized by all requisite
corporate action, and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory body
or agency, and (iii) will not (A) violate (1) any provision of law,
statute, rule or regulation or its certificate of incorporation or
bylaws, (2) any order of any court or any rule, regulation or order of
any other agency or government binding upon it, or (3) any provision of
any material indenture, agreement or other instrument to which it is a
party or by which its properties or assets are or may be bound, or (B)
result in a breach or constitute (alone or with due notice or lapse of
time or both) a default under any indenture, agreement or other
instrument referred to in clause (iii)(A)(3) of this Section 2.1(c);
and
(d) as of the date hereof and after giving effect to this
First Amendment, no Default or Event of Default has occurred or is
continuing.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
3.1. This First Amendment shall not become effective until, and shall
become effective when, each and every one of the following conditions shall have
been satisfied:
(a) executed counterparts of this First Amendment, duly
executed by the Company and the holders of at least 100% of the
outstanding principal amount of the Notes shall have been delivered to
the Noteholders;
(b) the Noteholders shall have received evidence satisfactory
to them that the Company has duly authorized the execution, delivery
and performance of the Bank Loan Agreement, and that the Bank Loan
Agreement has been duly executed and delivered by the Company, by
certain of its Subsidiaries and by BT Commercial Corporation;
(c) the Noteholders shall have received evidence satisfactory
to them that the Company has duly authorized the execution, delivery
and performance of the Indenture dated as of November 27, 1996, by and
between the Company and Bank One Trust Company, N.A., as trustee (the
"Indenture"), that the Company has duly authorized the issuance,
delivery and performance of the 10.25% Senior Notes due 2003 in an
aggregate principal amount of $100,000,000 (the "Senior Notes"), that
the Indenture has been duly executed and delivered by the Company and
the other parties thereto, and that the Senior Notes have been duly
issued and delivered by the Company;
(d) the Noteholders shall have received evidence satisfactory
to them that the Company has duly authorized the issuance and delivery
of 1,189 shares of its Series C Preferred Stock, par value $.01 per
share, with a liquidation preference of $1,000.00 per share (the
"Series C Preferred Stock"), and that such Series C Preferred Stock has
been duly issued and delivered;
4
<PAGE> 5
(e) the Noteholders shall have received evidence satisfactory
to them that the Company has duly authorized the execution, delivery
and performance of this First Amendment; and
(f) the representations and warranties of the Company set
forth in Section 2 hereof are true and correct on and with respect to
the date hereof.
Upon receipt of all of the foregoing, this First Amendment shall become
effective.
SECTION 4. MISCELLANEOUS.
4.1. This First Amendment shall be construed in connection with and as
part of the Note and Warrant Purchase Agreement, and except as modified and
expressly amended by this First Amendment, all terms, conditions and covenants
contained in the Note and Warrant Purchase Agreement and the Notes are hereby
ratified and shall be and remain in full force and effect.
4.2. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Note and Warrant Purchase Agreement without making specific
reference to this First Amendment but nevertheless all such references shall
include this First Amendment unless the context otherwise requires.
4.3. The descriptive headings of the various Sections or parts of this
First Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
4.4. This First Amendment shall be governed by and construed in
accordance with internal Connecticut law.
5
<PAGE> 6
4.5. The execution hereof by you shall constitute a contract between us
for the uses and purposes hereinabove set forth, and this First Amendment may be
executed in any number of counterparts, each executed counterpart constituting
an original, but all together only one agreement.
HAWK CORPORATION
By: /s/ Ronald E. Weinberg
-------------------------------
Name: Ronald E. Weinberg
Title: Vice-Chairman
Accepted and Agreed to:
CIGNA MEZZANINE PARTNERS III, L.P.
By CIGNA Investments, Inc. (Agent)
By: /s/ Stephen L. Roberts
-------------------------------
Name: Stephen L. Roberts
Title: Vice-President
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
By CIGNA Investments, Inc.
By: /s/ Stephen L. Roberts
-------------------------------
Name: Stephen L. Roberts
Title: Vice-President
6
<PAGE> 1
EXHIBIT 10.24
THE HAWK GROUP OF COMPANIES, INC.
FORM OF
12% SENIOR SUBORDINATED NOTE DUE JUNE 30, 2005
No. R-_____ New York, New York
$____________ June 30, 1995
PPN: _________
THE HAWK GROUP OF COMPANIES, INC. (the "Company"), a Delaware
corporation, for value received, hereby promises to pay to CIG & CO. or
registered assigns the principal sum of ______________________________ on June
30, 2005 and to pay interest (computed on the basis of a 360-day year of twelve
30-day months) on the unpaid principal balance thereof from the date of this
Subordinated Note at the rate of twelve percent (12%) per annum, quarterly on
the last day of each September, December, March and June in each year,
commencing on the later of (a) September 30, 1995 and (b) the payment date next
succeeding the date hereof, until the principal amount hereof shall become due
and payable; and to pay on demand interest on any overdue principal (including
any overdue prepayment of principal) and Prepayment Compensation Amount, if any,
and (to the extent permitted by applicable law) on any overdue installment of
interest, at a rate equal to the lesser of (i) the highest rate allowed by
applicable law or (ii) the greater of (A) fourteen percent (14%) per annum, and
(B) two percent (2%) per annum in excess of the rate of interest publicly
announced by Morgan Guaranty Trust Company of New York from time to time in New
York City as its "Prime Rate."
Payments of principal, Prepayment Compensation Amount, if any, and
interest shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for the payment of public and private
debts to the registered holder hereof at the address shown in the register
maintained by the Company for such purpose, in the manner provided in the Note
Purchase Agreement referred to below.
This Subordinated Note is one of an issue of Subordinated Notes of the
Company issued in an aggregate principal amount limited to Thirty Million
Dollars ($30,000,000) pursuant to the separate Senior Subordinated Note and
Warrant Purchase Agreements (collectively, as may be amended from time to time,
the "Note Purchase Agreement"), each dated as of June 30, 1995, between the
Company and each of the purchasers listed on Annex 1 thereto, and is entitled to
the benefits thereof. Capitalized terms used herein and not otherwise defined
herein have the meanings specified in the Note Purchase Agreement. As provided
in the Note Purchase Agreement, this Subordinated Note is subject to prepayment,
in whole or in part, in certain cases without a Prepayment Compensation Amount
and in other cases with a Prepayment Compensation Amount.
This Subordinated Note is a registered Subordinated Note and is
transferable only by surrender at the principal office of the Company as
specified in the Note Purchase Agreement, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of this
Subordinated Note or its attorney duly authorized in writing.
<PAGE> 2
Under certain circumstances, as specified in the Note Purchase
Agreement, the principal of this Subordinated Note (together with any applicable
Prepayment Compensation Amount) may be declared due and payable in the manner
and with the effect provided in the Note Purchase Agreement.
THIS SUBORDINATED NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY,
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, INTERNAL CONNECTICUT
LAW.
THE HAWK GROUP OF COMPANIES, INC.
By:_______________________________
Name:
Title:
2
<PAGE> 1
EXHIBIT 10.25
THE HAWK GROUP OF COMPANIES, INC.
------------------------
WARRANT AGREEMENT
------------------------
DATED AS OF JUNE 30, 1995
316,970 WARRANTS TO PURCHASE CLASS B COMMON STOCK,
$.01 PAR VALUE
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(NOT PART OF AGREEMENT)
PAGE
<S> <C> <C>
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES................................................... 1
1.1 Form of Warrant Certificates.................................................................. 1
1.2 Execution of Warrant Certificates; Registration Books......................................... 2
1.3 Transfer, Split Up, Combination and Exchange of Warrant Certificates; Lost
or Stolen Warrant Certificates................................................................ 2
1.4 Subsequent Issuance of Warrant Certificates................................................... 3
1.5 Special Agreements of Warrant Certificate Holders............................................. 3
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE........................................................ 4
2.1 Exercise of Warrants.......................................................................... 4
2.2 Issuance of Class B Common Stock.............................................................. 4
2.3 Unexercised Warrants.......................................................................... 4
2.4 Cancellation and Destruction of Warrant Certificates.......................................... 4
3. SPECIAL AGREEMENTS OF THE COMPANY...................................................................... 5
3.1 Reservation of Common Stock................................................................... 5
3.2 Common Stock To Be Duly Authorized and Issued, Fully Paid and
Nonassessable................................................................................. 5
3.3 Transfer Taxes................................................................................ 5
3.4 Class B Common Stock Record Date.............................................................. 6
3.5 Rights in Respect of Class B Common Stock..................................................... 6
3.6 Private Placement Number; CUSIP Number........................................................ 6
3.7 Right of Action............................................................................... 6
3.8 Survival...................................................................................... 7
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES;
FRACTIONAL SHARES...................................................................................... 7
4.1 Mechanical Adjustments........................................................................ 7
4.2 Fractional Shares............................................................................. 12
4.3 Additional Agreements of the Company.......................................................... 12
5. INTERPRETATION OF THIS AGREEMENT....................................................................... 13
5.1 Certain Defined Terms......................................................................... 13
5.2 Descriptive Headings.......................................................................... 18
5.3 Governing Law................................................................................. 19
6. MISCELLANEOUS.......................................................................................... 19
6.1 Expenses...................................................................................... 19
6.2 Amendment and Waiver.......................................................................... 19
6.3 Warrants Subject to Shareholders' Agreement................................................... 20
6.4 No Rights or Liabilities as Stockholder....................................................... 20
6.5 Directly or Indirectly........................................................................ 20
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS (CONTINUED)
(NOT PART OF AGREEMENT)
PAGE
<S> <C>
6.6 Survival of Representations and Warranties; Entire Agreement.................................. 20
6.7 Successors and Assigns........................................................................ 20
6.8 Notices....................................................................................... 20
6.9 Satisfaction Requirement...................................................................... 22
6.10 Severability.................................................................................. 22
6.11 Counterparts.................................................................................. 22
6.12 Jurisdiction; Jury Trial...................................................................... 22
6.13 Expiration.................................................................................... 22
</TABLE>
Attachment A -- Form of Warrant Certificate
ii
<PAGE> 4
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of June 30, 1995, among THE HAWK GROUP OF
COMPANIES, INC. (together with its successors and assigns, the "COMPANY"), a
Delaware corporation, and each of CONNECTICUT GENERAL LIFE INSURANCE COMPANY
("CONNECTICUT GENERAL") and CIGNA MEZZANINE PARTNERS III, L.P. ("CMP" and,
together with Connecticut General, collectively, the "PURCHASERS").
RECITALS:
A. Certain capitalized terms used in this Agreement shall have the
meanings ascribed to them in Section 5 hereof.
B. The Board of Directors has authorized the issuance of an aggregate
of Three Hundred Sixteen Thousand Nine Hundred Seventy (316,970) warrants (the
"WARRANTS") of the Company, each Warrant representing the right to purchase,
upon the terms and subject to the conditions hereinafter set forth, and subject
to adjustment as set forth herein, one (1) share of Class B Common Stock on the
terms and subject to the conditions hereinafter set forth.
C. The Company and the Purchasers have entered into the separate Senior
Subordinated Note and Warrant Purchase Agreements (collectively, as may
thereafter be amended from time to time, the "NOTE PURCHASE AGREEMENT"), each
dated as of even date herewith, pursuant to which the Company agreed to sell,
and the Purchasers have agreed to purchase, Thirty Million Dollars ($30,000,000)
in aggregate principal amount of the Company's 12% Senior Subordinated Notes due
2005 (the "SUBORDINATED NOTES"), and the Warrants, for an aggregate
consideration of Thirty Million Dollars ($30,000,000) in cash.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, the parties to this Agreement hereby agree as
follows:
1. FORM, EXECUTION AND TRANSFER OF WARRANT CERTIFICATES.
1.1 FORM OF WARRANT CERTIFICATES. The warrant certificates
(individually, a "WARRANT CERTIFICATE" and, collectively, the "WARRANT
CERTIFICATES") evidencing the Warrants, and the forms of assignment and of
election to purchase shares to be attached to such certificates, shall be
substantially in the form set forth in Attachment A hereto and may have such
letters, numbers or other marks of identification or designation as may be
required to comply with any law or with any rule or regulation of any
governmental authority, stock exchange or self-regulatory organization made
pursuant thereto. Each Warrant Certificate shall be dated the date of issuance
thereof by the Company, either upon initial issuance or upon transfer or
exchange, and on its face shall initially entitle the holder thereof to purchase
a number of shares of Class B Common Stock equal to the number of Warrants
represented by such Warrant Certificate at a price per share equal to the
Purchase Price, but the number of such shares and the Purchase Price shall be
subject to adjustment as provided herein.
1
<PAGE> 5
1.2 EXECUTION OF WARRANT CERTIFICATES; REGISTRATION BOOKS.
(A) EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed on behalf of the Company by an officer
of the Company authorized by the Board of Directors. In case the
officer of the Company who shall have signed any Warrant Certificate
shall cease to be such an officer of the Company before issuance and
delivery by the Company of such Warrant Certificate, such Warrant
Certificate nevertheless may be issued and delivered with the same
force and effect as though the individual who signed such Warrant
Certificate had not ceased to be such an officer of the Company, and
any Warrant Certificate may be signed on behalf of the Company by any
individual who, at the actual date of the execution of such Warrant
Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, notwithstanding the fact that at the date of the
execution of this Agreement any such individual was not such an
officer.
(B) REGISTRATION BOOKS. The Company will keep or cause to be
kept at the office of its counsel, Kohrman Jackson & Krantz, One
Cleveland Center, 20th Floor, 1375 East 9th Street, Cleveland, Ohio
44114, or at its office maintained at the address of the Company set
forth in Section 6.8 hereof, or at such other office of such counsel or
the Company in the United States of America of which the Company shall
have given notice to each holder of Warrant Certificates, books for
registration and transfer of the Warrant Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders
of the Warrant Certificates, the registration number and the number of
Warrants evidenced on its face by each of the Warrant Certificates and
the date of each of the Warrant Certificates.
1.3 TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF WARRANT
CERTIFICATES; LOST OR STOLEN WARRANT CERTIFICATES.
(A) TRANSFER, SPLIT UP, ETC. Any Warrant Certificate, with or
without other Warrant Certificates, may be transferred, split up,
combined or exchanged for another Warrant Certificate or Warrant
Certificates, entitling the registered holder or Transferee thereof to
purchase a like number of shares of Class B Common Stock as the Warrant
Certificate or Warrant Certificates surrendered then entitled such
registered holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Warrant Certificate shall
make such request in writing delivered to the Company, and shall
surrender the Warrant Certificate or Warrant Certificates to be
transferred, split up, combined or exchanged at the office of the
Company referred to in Section 1.2(b) hereof, whereupon the Company
shall deliver promptly to the Person entitled thereto a Warrant
Certificate or Warrant Certificates, as the case may be, as so
requested.
(B) LOSS, THEFT, ETC. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Warrant Certificate (which evidence
shall be, in the case of an Institutional Investor, notice from such
Institutional Investor of such ownership (or of ownership by such
Institutional Investor's nominee) and such loss, theft, destruction or
mutilation), and:
2
<PAGE> 6
(i) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to the Company; provided,
however, that if the holder of such Warrant Certificate is an
Institutional Investor or a nominee of an Institutional
Investor, such holder's own unsecured agreement of indemnity
shall be deemed to be satisfactory; or
(ii) in the case of mutilation, upon surrender and
cancellation thereof;
the Company at its own expense will execute and deliver, in lieu
thereof, a new Warrant Certificate, dated the date of such lost,
stolen, destroyed or mutilated Warrant Certificate and of like tenor,
in lieu of the lost, stolen, destroyed or mutilated Warrant
Certificate.
(C) LIMITATION ON TRANSFERS. Notwithstanding the foregoing
provisions of this Section 1.3 or any other provision contained in this
Agreement, each holder of Warrant Certificates agrees that it will not
at any time sell, transfer or otherwise convey any of the Warrants to
any Person which is a Competitor without the prior written consent of
the Company.
1.4 SUBSEQUENT ISSUANCE OF WARRANT CERTIFICATES. Subsequent to
the original issuance, no Warrant Certificates shall be issued except:
(a) Warrant Certificates issued upon any transfer, split up,
combination or exchange of Warrants pursuant to Section 1.3(a) hereof;
(b) Warrant Certificates issued in replacement of lost,
stolen, destroyed or mutilated Warrant Certificates pursuant to Section
1.3(b) hereof; and
(c) Warrant Certificates issued pursuant to Section 2.3 hereof
upon the partial exercise of any Warrant Certificate to evidence the
unexercised portion of such Warrant Certificate.
1.5 SPECIAL AGREEMENTS OF WARRANT CERTIFICATE HOLDERS. Every
holder of a Warrant Certificate by accepting the same consents and agrees with
the Company and with every other holder of a Warrant Certificate that:
(a) the Warrant Certificates are transferable only on the
registry books of the Company if surrendered at the office of the
Company referred to in Section 1.2(b) hereof, duly endorsed or
accompanied by an instrument of transfer (in the form attached hereto);
and
(b) the Company may deem and treat the Person in whose name
each Warrant Certificate is registered as the absolute owner thereof
and of the Warrants evidenced thereby (notwithstanding any notations of
ownership or writing on the Warrant Certificates made by anyone other
than the Company) for all purposes whatsoever, and the Company shall
not be affected by any notice to the contrary.
3
<PAGE> 7
2. EXERCISE OF WARRANTS; PAYMENT OF PURCHASE PRICE.
2.1 EXERCISE OF WARRANTS. At any time and from time to time on
or prior to the Expiration Date, the holder of any Warrant Certificate may
exercise the Warrants evidenced thereby, in whole or in part, by surrender of
such Warrant Certificate, with an election to purchase (a form of which is
attached to each Warrant Certificate) attached thereto duly executed, to the
Company at its office referred to in Section 1.2(b) hereof, together with
payment of the Purchase Price for each share of Class B Common Stock with
respect to which the Warrants are then being exercised. Such Purchase Price
shall be payable:
(a) in cash or by certified or official bank check payable to
the order of the Company or by wire transfer of immediately available
funds to the account of the Company; or
(b) by surrender of one or more Subordinated Notes to the
Company, in accordance with Section 5.9 of the Note Purchase Agreement,
in an aggregate principal amount which, together with any consideration
simultaneously delivered pursuant to Section 2.1(a) hereof, shall equal
such Purchase Price. Upon any such delivery of Subordinated Notes to
the Company, the Company shall pay to the tendering holder all accrued
and unpaid interest in respect of the Subordinated Notes so delivered
to and including the date of exercise, and shall cancel and retire such
Subordinated Note. The Company and the Purchasers agree that a tender
of Subordinated Notes in payment of the Purchase Price in respect of
the Warrants shall not be deemed a prepayment of the Subordinated
Notes, but rather a conversion of such Subordinated Notes, pursuant to
the terms of this Agreement and the Warrants, into Class B Common
Stock.
2.2 ISSUANCE OF CLASS B COMMON STOCK. Upon timely receipt of a
Warrant Certificate, with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price for each of the shares to be
purchased in the manner provided in Section 2.1 hereof and an amount equal to
any applicable transfer tax (if not payable by the Company as provided in
Section 3.3 hereof), the Company shall thereupon promptly cause certificates
representing the number of whole shares of Class B Common Stock then being
purchased to be delivered to or upon the order of the registered holder of such
Warrant Certificate, registered in such name or names as may be designated by
such holder, and, promptly after such receipt deliver the cash, if any, to be
paid in lieu of fractional shares pursuant to Section 4.2 hereof to or upon the
order of the registered holder of such Warrant Certificate.
2.3 UNEXERCISED WARRANTS. In case the registered holder of any
Warrant Certificate shall exercise less than all the Warrants evidenced
thereby, a new Warrant Certificate evidencing Warrants equal in number to the
number of Warrants remaining unexercised shall be issued by the Company to the
registered holder of such Warrant Certificate or to its duly authorized
assigns.
2.4 CANCELLATION AND DESTRUCTION OF WARRANT CERTIFICATES. All
Warrant Certificates surrendered to the Company for the purpose of exercise,
exchange, substitution or transfer shall be cancelled by it, and no Warrant
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall cancel and retire
any
4
<PAGE> 8
other Warrant Certificates purchased or acquired by the Company otherwise than
upon the exercise thereof.
3. SPECIAL AGREEMENTS OF THE COMPANY.
3.1 RESERVATION OF COMMON STOCK. The Company covenants and agrees
that it will at all times cause to be reserved and kept available:
(a) out of its authorized and unissued shares of Class B
Common Stock such number of shares of Class B Common Stock as will be
sufficient to permit the exercise in full of all Warrants issued
hereunder and all other rights, warrants or options exercisable into,
and the conversion of all Securities convertible into, Class B Common
Stock; and
(b) out of its authorized and unissued shares of Class A
Common Stock such number of shares of Class A Common Stock as will be
sufficient to permit the conversion in full of all Class B Common Stock
issued or issuable hereunder and all other rights, warrants or options
exercisable into, and the conversion of all Securities convertible
into, Class A Common Stock.
3.2 COMMON STOCK TO BE DULY AUTHORIZED AND ISSUED, FULLY PAID AND
NONASSESSABLE. Upon payment of the aggregate Purchase Price, the Company
covenants and agrees that it will take all such action as may be necessary to
ensure that
(a) all shares of Class B Common Stock delivered upon the
exercise of any Warrants at the time of delivery of the certificates
representing such shares, and
(b) all shares of Class A Common Stock delivered upon the
conversion of any Class B Common Stock at the time of delivery of the
certificates representing such shares,
shall be duly and validly authorized and issued and fully paid and
nonassessable, free of any preemptive rights and free of any Lien created by, or
arising out of actions of, the Company or any Subsidiary.
3.3 TRANSFER TAXES. The Company covenants and agrees that it will
pay when due and payable any and all federal and state transfer taxes and
charges that may be payable in respect of the initial issuance or delivery of:
(a) each Warrant Certificate;
(b) each Warrant Certificate issued in exchange for any other
Warrant Certificate pursuant to Section 1.3(a) or Section 2.3 hereof;
(c) each share of Class B Common Stock issued upon the
exercise of any Warrant; and
(d) each share of Class A Common Stock issued upon conversion
of any share of Class B Common Stock issued upon the exercise of any
Warrant.
5
<PAGE> 9
The Company shall not, however, be required to:
(i) pay any transfer tax that may be payable in respect of the
transfer or delivery of Warrant Certificates or the issuance or
delivery of certificates for shares of Common Stock in a name other
than that of the registered holder of the Warrant Certificate
evidencing any Warrant surrendered for exercise or the certificate
representing the shares of Class B Common Stock presented for
conversion, as the case may be (any such tax being payable by the
holder of such Warrant Certificate or Class B Common Stock at the time
of surrender); or
(ii) issue or deliver any such certificates referred to in the
foregoing clause (i) for shares of Class B Common Stock upon the
exercise of any Warrant until any such tax referred to in the foregoing
clause (i) shall have been paid.
3.4 CLASS B COMMON STOCK RECORD DATE. Each Person in whose name
any certificate for shares of Class B Common Stock is issued upon the exercise
of Warrants shall for all purposes be deemed to have become the holder of
record of the Class B Common Stock represented thereby on, and such certificate
shall be dated, the date upon which the Warrant Certificate evidencing such
Warrants was duly surrendered with an election to purchase attached thereto
duly executed and payment of the aggregate Purchase Price (and any applicable
transfer taxes, if payable by such Person) was made.
3.5 RIGHTS IN RESPECT OF CLASS B COMMON STOCK. Except as
otherwise set forth herein or in the Shareholders' Agreement, prior to the
exercise of the Warrants evidenced thereby, the holder of a Warrant Certificate
shall not be entitled to any rights of a stockholder in the Company with
respect to shares for which the Warrants shall be exercisable, including,
without limitation, the right to vote in respect of any matter upon which the
holders of Class B Common Stock may vote or the right to receive dividends or
other distributions and shall not be entitled to receive any notice of any
proceedings of the Company.
3.6 PRIVATE PLACEMENT NUMBER; CUSIP NUMBER. The Company covenants
and agrees to maintain a private placement number in respect of the Warrants
and on or before the earlier of (i) the date of the first offer for sale of
Class A Common Stock pursuant to an effective registration statement filed by
the Company under the Securities Act or (ii) thirty (30) days after the first
exercise of a Warrant (or as soon thereafter as practicable), CUSIP numbers in
respect of each of the Class A Common Stock and the Class B Common Stock, in
each case, from the CUSIP Service Bureau of Standard & Poor's, a division of
McGraw-Hill, Inc.
3.7 RIGHT OF ACTION. All rights of action in respect of the
Warrants are vested in the respective registered holders of the Warrant
Certificates, and any registered holder of any Warrant Certificate, without the
consent of the holder of any other Warrant Certificate, may, in its own behalf
and for its own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Company to enforce, or otherwise act in
respect of, its right to exercise the Warrants evidenced by such Warrant
Certificate in the manner provided in such Warrant Certificate and in this
Agreement.
6
<PAGE> 10
3.8 SURVIVAL. The agreements of the Company contained in this
Section 3 shall survive the exercise of and the expiration of the Warrants.
4. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES; FRACTIONAL
SHARES.
4.1 MECHANICAL ADJUSTMENTS. The number of shares of Class B
Common Stock purchasable upon the exercise of each Warrant, and the Purchase
Price, shall be subject to adjustment as follows:
(A) STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. In the
event that the Company shall:
(i) pay a dividend in shares of Additional
Common Stock or make a distribution in shares of Additional
Common Stock;
(ii) reclassify by subdivision its outstanding
shares of Common Stock into a greater number of shares; or
(iii) reclassify by combination its outstanding
shares of Common Stock into a smaller number of shares;
then, and in each such case, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision or combination shall be adjusted to that price determined
by multiplying the Purchase Price in effect immediately prior to such
event by the quotient of:
(A) the total number of outstanding shares of Common
Stock immediately prior to such event; divided by
(B) the total number of outstanding shares of Common
Stock immediately after such event.
An adjustment made pursuant to this Section 4.1(a) shall become
effective on the effective date of such event.
(B) DISTRIBUTIONS OF PROPERTY. In the event that the Company
shall distribute to holders of shares of Common Stock (including,
without limitation, any such distribution made in connection with a
consolidation or merger in which the Company is the continuing
corporation) shares of stock other than Common Stock or evidences of
its indebtedness or assets, or Rights (excluding those referred to in
Section 4.1(c) hereof), then in each case the Purchase Price in effect
after the record date in respect of which such stock, indebtedness,
assets or Rights were issued shall be adjusted by multiplying the
Purchase Price in effect immediately prior to such record date by the
quotient of:
(i) the difference of:
7
<PAGE> 11
(A) the Reference Price on such record date;
minus
(B) the quotient of (I) the then fair value
(as determined in good faith and on a reasonable
basis by the Board of Directors, whose determination,
if so made, shall be conclusive) of the shares of
stock or assets or evidences of indebtedness so
distributed or of such Rights, divided by (II) the
number of shares of Common Stock outstanding on the
record date;
divided by
(ii) the Reference Price on such record date.
Such adjustment shall be made whenever any such distribution is made,
and shall become effective on the date of such distribution.
(C) ISSUANCES OF ADDITIONAL COMMON STOCK AND OTHER SECURITIES.
In the event that the Company shall issue or sell shares of Additional
Common Stock or Rights (excluding Excluded Securities) at a
Consideration Per Share lower than the Reference Price in effect on the
date of such issuance or sale, or if the Company shall amend the
provisions of any Rights such as to reduce the Consideration Per Share
applicable thereto, then the Purchase Price in effect immediately after
such event shall be adjusted by multiplying the Purchase Price in
effect immediately prior to such event by the quotient of:
(i) the sum of:
(A) the number of shares of Common Stock
outstanding immediately prior to such event; plus
(B) the quotient of (I) the Aggregate
Consideration Receivable, divided by (II) the
Reference Price, in each case immediately prior to
such event;
divided by
(ii) the sum of:
(A) the number of shares of Common Stock
outstanding immediately prior to such event; plus
(B) the number of shares of Additional
Common Stock so issued or sold (or then issuable
pursuant to such Rights).
8
<PAGE> 12
In the event that the Company shall issue and sell shares of Common
Stock or Rights for a consideration consisting, in whole or in part, of
Property (including, without limitation, a Security) other than cash or
its equivalent, then in determining the "Aggregate Consideration
Receivable," the Board of Directors shall determine, in good faith and
on a reasonable basis, the fair value of such Property, and such
determination, if so made, shall be binding upon all holders of
Warrants.
(D) CONSOLIDATION; MERGER; SALE; RECLASSIFICATION. In the
event that there shall be:
(i) any consolidation of the Company with, or merger
of the Company with or into, another corporation (other than a
merger in which the Company is the surviving corporation and
that does not result in any reclassification or change of
shares of Common Stock outstanding immediately prior to such
merger);
(ii) any sale or conveyance to another corporation of
the Property of the Company substantially as an entirety; or
(iii) any reclassification of the Common Stock that
results in the issuance of other Securities of the Company;
then, in each such case, lawful provision shall be made as a part of
the terms of such transaction so that the holders of Warrants shall
thereafter have the right to purchase the number and kind of shares of
stock, other Securities, cash, Property and rights receivable upon such
consolidation, merger, sale, conveyance or reclassification by a holder
of such number of shares of Common Stock as the holder of a Warrant
would have had the right to acquire upon the exercise of such Warrant
immediately prior to such consolidation, merger, sale or conveyance, at
the Purchase Price then in effect.
(E) DE MINIMIS CHANGES IN PURCHASE PRICE. No adjustment in the
Purchase Price shall be required unless such adjustment would require
an increase or decrease of at least one percent (1%) in the Purchase
Price; provided that any adjustments that, at the time of the
calculation thereof, are less than one percent (1%) of the Purchase
Price at such time and by reason of this Section 4.1(e) are not
required to be made at such time shall be carried forward and added to
any subsequent adjustment or adjustments for purposes of determining
whether such subsequent adjustment or adjustments, as so supplemented,
exceed the one percent (1%) amount set forth in this Section 4.1(e)
and, if any such subsequent adjustment, as so supplemented or
otherwise, should exceed such one percent (1%) amount, all adjustments
deferred prior thereto and not previously made shall then be made. In
any case, all such adjustments being carried forward pursuant to this
Section 4.1(e) shall be given effect upon the exercise of any Warrants
by any holder thereof for purposes of determining the Purchase Price
thereof. All calculations shall be made to the nearest ten-thousandth
of a dollar ($0.0001).
9
<PAGE> 13
(F) ADJUSTMENT OF NUMBER OF SHARES ISSUABLE PURSUANT TO
WARRANTS. Upon each adjustment of the Purchase Price as a result of the
calculations made in this Section 4.1, each Warrant outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that
number of shares of Class B Common Stock (calculated to the nearest
one-hundredth (.01)) obtained by multiplying the number of shares of
Class B Common Stock covered by such Warrant immediately prior to such
adjustment by the quotient of:
(i) the Purchase Price in effect immediately prior to
such adjustment,
divided by
(ii) the Purchase Price in effect immediately after
such adjustment.
All Warrants originally issued by the Company hereunder shall,
subsequent to any adjustment made to the Purchase Price hereunder,
evidence the right to purchase, at the adjusted Purchase Price, the
number of shares of Class B Common Stock determined to be purchasable
from time to time hereunder upon exercise of such Warrants, all subject
to further adjustment as provided herein. Each such adjustment shall be
valid and binding upon the Company and the holders of Warrants
irrespective of whether the Warrant Certificates theretofore and
thereafter issued express the Purchase Price per share of Class B
Common Stock and the number of shares of Common Stock that were
expressed upon the initial Warrant Certificates issued hereunder.
(G) MISCELLANEOUS.
(i) Adjustments shall be made pursuant to this
Section 4.1 successively whenever any of the events referred
to in Section 4.1(a) through Section 4.1(d), inclusive, hereof
shall occur.
(ii) If any Warrant shall be exercised subsequent to
the record date for any of the events referred to in this
Section 4.1, but prior to the effective date thereof,
appropriate adjustments shall be made immediately after such
effective date so that the holder of such Warrant on such
record date shall have received, in the aggregate, the kind
and number of shares of Class B Common Stock or other
Securities or Property that it would have owned or been
entitled to receive on such effective date had such Warrant
been exercised prior to such record date.
(iii) Shares of Common Stock owned by or held for the
account of the Company or any Subsidiary shall not, for
purposes of the adjustments set forth in this Section 4.1, be
deemed outstanding.
(H) EXPIRATION OF RIGHTS. Upon the expiration of any Rights
with respect to which an adjustment was required to be made pursuant to
Section 4.1, without the full exercise thereof, the Purchase Price and
the number of shares of Class B Common Stock purchasable upon the
exercise of each Warrant shall, upon such expiration, be readjusted and
shall thereafter be the Purchase Price and the number of shares of
Class B Common
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Stock as would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if:
(i) the only shares of Common Stock issuable under
such Rights were the shares of Common Stock, if any, actually
issued or sold upon the exercise of such Rights; and
(ii) such shares of Common Stock, if any, were issued
or sold for the consideration actually received by the Company
upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or
grant of all of such Rights, whether or not exercised;
provided that no such readjustment shall have the effect of
increasing the Purchase Price by an amount in excess of the
amount of the reduction initially made in respect of the
issuance, sale, or grant of such Rights.
(I) OTHER SECURITIES. In the event that at any time, as a
result of an adjustment made pursuant to this Section 4.1, each holder
of Warrants shall become entitled to purchase any Securities of the
Company other than shares of Class B Common Stock, the number or amount
of such other Securities so purchasable and the Purchase Price of such
Securities shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions
contained in Section 4.1(a) through Section 4.1(d), inclusive, hereof,
and all other relevant provisions of this Section 4.1 that are
applicable to shares of Class B Common Stock shall be applicable to
such other Securities.
(J) NOTICE OF ADJUSTMENT. Whenever the number of shares of
Class B Common Stock issuable upon the exercise of Warrants is adjusted
or the Purchase Price in respect thereof is adjusted, as herein
provided, the Company shall promptly give to each holder of Warrants
notice of such adjustment or adjustments and shall promptly deliver to
each holder of Warrants a certificate of the Company's chief financial
officer setting forth:
(i) the number of shares of Class B Common Stock
issuable upon the exercise of each Warrant and the Purchase
Price of such shares after such adjustment;
(ii) a brief statement of the facts requiring such
adjustment; and
(iii) the computation by which such adjustment was
made.
So long as any Warrant is outstanding, the Company shall, upon the
written request of the Required Holders, deliver to each holder of
Warrants a certificate of the independent certified public accountants
of the Company setting forth:
(A) the number of shares of Class B Common Stock
issuable upon the exercise of each Warrant and the Purchase
Price of such shares as of the end of such fiscal year;
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(B) a brief statement of the facts requiring each
adjustment required to be made in such fiscal year; and
(C) the computation by which each such adjustment was
made;
provided, that the required Holders may not make more than one (1) such
request in any twelve (12) month period.
(K) NOTICE OF CERTAIN EVENTS. Whenever the Company shall
publicly announce the authorization of any Notice Event, the Company
shall, not less than thirty (30) days prior to the record date with
respect to such event (or, if no record date for the same shall be
fixed, not less than thirty (30) days prior to the occurrence of such
Notice Event), give to each holder of Warrants, written notice of such
event setting forth any change in the number of shares of Class B
Common Stock the Company estimates will be issuable upon the exercise
of such holder's Warrants, the estimated Purchase Price of such shares
after any adjustment required to be made hereunder and a brief
statement of the facts requiring such adjustment and the computation by
which the Company expects such adjustment will be made. Notwithstanding
the foregoing, no failure of the Company to give any such notice shall
affect the validity of the action taken unless such failure was in bad
faith.
4.2 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares of Class B Common Stock upon the exercise of any Warrant. Upon
the exercise of any Warrant, there shall be paid to the holder thereof, in lieu
of any fractional share of Class B Common Stock resulting therefrom, an amount
of cash (computed to the nearest whole cent) equal to the product of:
(a) the fractional amount of such share; times
(b) the Market Price, as determined on the trading day
immediately prior to the date of exercise of such Warrant.
4.3 ADDITIONAL AGREEMENTS OF THE COMPANY. The Company covenants
and agrees that:
(a) The Company shall not, by amendment to its certificate of
incorporation, as in effect on the date hereof, or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
liquidation, issuance or sale of Securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but
shall at all times in good faith assist in the carrying out of all the
provisions of this Section 4 and in the taking of all such actions as
may be reasonably necessary or appropriate in order to protect the
rights of the holders of the Warrant Certificates against dilution or
other impairment.
(b) Before taking any action that would result in an
adjustment to the then current Purchase Price to a price that would be
below the then current par value of Class B Common Stock issuable upon
exercise of any Warrant, the Company will take or cause to be taken any
and all necessary corporate or other action that may be necessary in
order
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that the Company may validly and legally issue fully paid and
nonassessable shares of Class B Common Stock upon payment of such
Purchase Price as so adjusted.
5. INTERPRETATION OF THIS AGREEMENT.
5.1 CERTAIN DEFINED TERMS. For the purpose of this Agreement, the
following terms shall have the meanings specified with respect thereto below:
ADDITIONAL COMMON STOCK -- means Common Stock of the Company, including
treasury shares, issued after the Closing Date, except Class B Common Stock
issued upon the exercise of any one or more Warrants and Class A Common Stock
issued upon the conversion of any Class B Common Stock.
AFFILIATE -- means, at any time, a Person (other than a Subsidiary or a
Purchaser or an affiliate of a Purchaser):
(a) that directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with, the Company;
(b) that beneficially owns or holds five percent (5%) or more
of any class of the Voting Stock; or
(c) five percent (5%) or more of the Voting Stock (or in the
case of a Person that is not a corporation, five percent (5%) or more
of the equity interest) of which is beneficially owned or held by the
Company or a Subsidiary;
at such time.
As used in this definition,
Control -- means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
AGGREGATE CONSIDERATION RECEIVABLE -- means, in the case of a sale of
shares of Additional Common Stock, the aggregate amount paid to the Company in
connection therewith and, in the case of an issuance or sale of Rights, or any
amendment thereto, the sum of:
(a) the aggregate amount paid to the Company for such Rights;
plus
(b) the aggregate consideration or premiums stated in such
Rights payable for the shares of Additional Common Stock covered
thereby;
in each case without deduction for any fees, expenses or underwriters'
discounts.
AGREEMENT, THIS -- and references thereto shall mean this Agreement as
it may from time to time be amended or supplemented.
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BOARD OF DIRECTORS -- means the board of directors of the Company or
any committee thereof that, in the instance, shall have the lawful power to
exercise the power and authority of such board of directors.
BUSINESS DAY -- means a day other than a Saturday, a Sunday or a day on
which banks in the State of Connecticut are required or permitted by law (other
than a general banking moratorium or holiday for a period exceeding four (4)
consecutive days) to be closed.
CMP -- shall have the meaning specified in the introductory paragraph
hereof.
CALCULATION AGENT -- means a firm of independent certified public
accountants of recognized national standing appointed by the Board of Directors
and reasonably acceptable to the Required Warrantholders.
CLASS A COMMON STOCK -- means the Class A Common Stock, par value $.01
per share, of the Company.
CLASS B COMMON STOCK -- means and includes:
(a) the Class B Common Stock, par value $.01 per share, of the Company;
and
(b) any other Securities of the Company or any other Person that the
holders of the Class B Common Stock at any time shall have received, in
lieu of or in addition to Class B Common Stock, or that at any time
shall have been issued in exchange for or in replacement of Class B
Common Stock or such additional Securities.
CLOSING DATE -- shall mean the "Closing Date" as defined in the Note
Purchase Agreement.
CLOSING PRICE -- means, per share of Common Stock, on any date
specified herein:
(i) the last sale price, regular way, on such date or, if no
such sale takes place on such date, the average of the closing bid and
asked prices on such date, in each case as officially reported on the
principal national securities exchange on which the Class A Common
Stock is then listed or admitted to trading; and
(ii) if the Class A Common Stock is not then listed or
admitted to trading on any national securities exchange, but is
designated as a national market system security by the National
Association of Securities Dealers, Inc., the last trading price of the
Class A Common Stock on such date, or if there shall have been no
trading on such date or if the Class A Common Stock is not so
designated, the average of the reported closing bid and asked prices on
such date as shown by the NASDAQ.
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COMMON STOCK -- the common stock of the Company (including, without
limitation, the Class A Common Stock and the Class B Common Stock) and any other
equity securities of the Company which are not limited to a fixed sum or a fixed
percentage of par value in respect of participation in dividends and
distributions in liquidation.
COMPANY -- shall have the meaning specified in the introductory
paragraph hereof.
COMPETITOR -- means, at any time, any Person that is engaged at such
time in a principal line of business which is substantially the same as, or
substantially similar to, any of the businesses in which the Company and the
Subsidiaries were engaged in on the Closing Date. Notwithstanding the foregoing,
"Competitor" shall not include any of the Purchasers, or (A) any (1) subsidiary
or affiliate of any Purchaser, (2) insurance company, (3) bank or savings and
loan association, (4) investment company (collectively, the "Institutional
Investors"), the primary businesses of which are any one or more of insurance,
the investment of funds as principal or on behalf of third parties, or the
providing of other financial services and (B) any broker, dealer or similar
intermediary that has acquired the Warrants for resale to Institutional
Investors.
CONNECTICUT GENERAL -- shall have the meaning specified in the
introductory paragraph hereof.
CONSIDERATION PER SHARE -- means, with respect to shares of Common
Stock or Rights, the quotient of:
(a) the Aggregate Consideration Receivable in respect of such
shares of Common Stock or such Rights; divided by
(b) the total number of such shares of Common Stock or, in the
case of Rights, the total number of shares of Common Stock covered by
such Rights.
EXCLUDED SECURITIES -- means and includes:
(a) shares of Common Stock or Rights issued in any of the
transactions described in Section 4.1(a), Section 4.1(b), Section
4.1(c) or Section 4.1(d) hereof, and in respect of which an adjustment
has been made pursuant to such Section; and
(b) shares of Class B Common Stock issuable upon exercise of
the Warrants and shares of Class A Common Stock issued upon conversion
of the Class B Common Stock;
(c) shares of Common Stock or Rights issued pursuant to a
Permitted Management Issuance.
EXPIRATION DATE -- means, with respect to any Warrant, June 30, 2005.
FAIR VALUE -- means, with respect to any share of Common Stock, the
quotient of:
(a) the sum of
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(i) the fair salable value of the Company, as a going
concern, giving effect to all Property thereof and subject to
all liabilities thereof, that would be realized in an
arm's-length sale between an informed and willing buyer and an
informed and willing seller, under no compulsion to buy or
sell, respectively, as of a date that is within fifteen (15)
days of the date as of which the determination is to be made,
determined by the Valuation Agent, such determination to be
made without regard to any absence of a liquid or ready market
for such Common Stock; plus
(ii) the aggregate exercise or conversion price of
all Rights in existence and remaining unexercised on such
date;
divided by
(b) the total number of shares of Common Stock outstanding at
such time on a fully diluted basis.
INITIAL PURCHASE PRICE -- means $0.01 per share.
INSTITUTIONAL INVESTOR -- means the Purchasers, any affiliate of any of
the Purchasers, and any holder of a Warrant Certificate that is an "accredited
investor" as defined in section 2(15) of the Securities Act.
LIEN -- means any mortgage, pledge, security interest, encumbrance,
lien (statutory or otherwise) or charge of any kind (including any agreement to
give any of the foregoing (but excluding negative pledge clauses in agreements
related to the borrowing of money), any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction (but excluding informational filings made in respect of
leases)) or any other type of preferential arrangement for the purpose, or
having the effect, of protecting a creditor against loss or securing the payment
or performance of an obligation. The term "Lien" includes encumbrances with
respect to stock, including, without limitation, stockholder agreements, voting
trust agreements, buy-back agreements and all similar arrangements.
MANAGEMENT EMPLOYEES - means the directors and senior management
employees of the Corporation or any Subsidiary.
MANAGEMENT STOCKHOLDER -- means Ronald E. Weinberg, Norman C. Harbert
and Byron S. Krantz.
MARKET PRICE -- means, per share of Common Stock, as of any date of
determination, the arithmetic mean of the daily Closing Prices for the twenty
(20) consecutive trading days before such date of determination of the Class A
Common Stock; provided that if the Common Stock is not then listed or admitted
to trading on any national securities exchange or quoted in the over-the-counter
market, then "Market Price" means the greater of:
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<PAGE> 20
(a) the book value of one share of Common Stock, as determined
in accordance with generally accepted accounting principles by the
Calculation Agent, as of the date of determination; and
(b) the Fair Value of one share of Common Stock, as of the
date of determination.
NASDAQ -- means the National Association of Securities Dealers
Automated Quotation System.
NOTE PURCHASE AGREEMENT -- shall have the meaning specified in Recital
C of this Agreement.
NOTICE EVENT -- means any of the following:
(a) any event that would require an adjustment in the Purchase
Price pursuant to Section 4.1 hereof; or
(b) any distribution of Property in respect of Common Stock.
PERMITTED MANAGEMENT ISSUANCES - means the issuance by the Company
after the Closing Date of Common Stock or Rights to Management Employees
pursuant to, and in accordance with, the provisions of a stock option plan
approved by the Board of Directors and consented to by a majority of the holders
of Company Securities; however, that the aggregate number of shares of Issuable
Shares so issued or sold shall not exceed at any time Eighty-Eight Thousand
Forty-Seven (88,047) shares of Common Stock (as such number may be
proportionately adjusted to reflect any stock dividend or split or
reclassification, by subdivision, combination or otherwise, of the Common Stock.
PERSON -- means an individual, partnership, corporation, limited
liability company, joint venture, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
PROPERTY -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
PURCHASE PRICE -- means, prior to any adjustment pursuant to Section
4.1 of this Agreement, the Initial Purchase Price and thereafter, the Initial
Purchase Price as adjusted and readjusted from time to time (in each case,
rounded to the nearest whole cent).
PURCHASERS -- shall have the meaning specified in the introductory
paragraph hereof.
REFERENCE PRICE -- means, per share of Common Stock, as of any date of
determination, the greater of the Market Price as of such date and the Purchase
Price on such date.
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REQUIRED WARRANTHOLDERS -- means, at any time, the holders of at least
fifty-one percent (51%) of all Warrants outstanding (excluding any Warrants
directly or indirectly held by the Company, any Subsidiary or any Affiliate) at
such time, and which must include the Purchasers if, at such time, they hold
their entire original investment in the Warrants on the books of the Company.
RIGHT -- means and includes:
(a) any warrant (including, without limitation, any Warrant)
or any option (including, without limitation, employee stock options)
to acquire Common Stock;
(b) any right issued to holders of the Common Stock, or any
class thereof, permitting the holders thereof to subscribe to shares of
Additional Common Stock (pursuant to a rights offering or otherwise);
(c) any right to acquire Common Stock pursuant to the
provisions of any Security convertible or exchangeable into Common
Stock; and
(d) any similar right permitting the holder thereof to
subscribe for or purchase shares of Common Stock.
SECURITIES ACT -- means the Securities Act of 1933, as amended.
SECURITY -- shall have the meaning specified in section 2(1) of the
Securities Act.
SHAREHOLDERS' AGREEMENT -- means the Shareholders' Agreement, dated as
of the date hereof, among the Company, the Purchasers and the Management
Stockholders.
SUBORDINATED NOTES -- shall have the meaning specified in Recital C of
this Agreement.
SUBSIDIARY -- means, as to any Person, any corporation in which such
Person or one or more Subsidiaries of such Person or such Person and one or more
Subsidiaries of such Person owns sufficient voting securities to enable it or
them (as a group) ordinarily, in the absence of contingencies, to elect a
majority of the directors (or Persons performing similar functions) of such
corporation; the term "Subsidiary," as used herein without reference to any
Person, shall mean a Subsidiary of the Company.
TRANSFEREE -- means any transferee registered on the books of the
Company of all or any part of any Warrant Certificate issued to the Purchasers
under this Agreement.
VALUATION AGENT -- means a firm of independent certified public
accountants, an investment banking firm or appraisal firm (which firm shall own
no Securities of, and shall not be an Affiliate, Subsidiary or a related Person
of, the Company) of recognized national standing retained by the Company and
reasonably acceptable to the Required Warrantholders.
VOTING STOCK -- means, with respect to any corporation, any shares of
stock of such corporation whose holders are entitled under ordinary
circumstances to vote for the election of
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directors of such corporation (irrespective of whether at the time any stock of
any other class or classes shall have or might have voting power by reason of
the happening of any contingency).
WARRANT -- shall have the meaning specified in Recital B hereof.
WARRANT CERTIFICATE -- shall have the meaning specified in Section 1.1
hereof.
5.2 DESCRIPTIVE HEADINGS. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
5.3 GOVERNING LAW. THIS AGREEMENT AND THE WARRANT CERTIFICATES
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE
PARTIES SHALL BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT.
6. MISCELLANEOUS.
6.1 EXPENSES. Except as provided in Section 3.3 hereof, the
Company agrees to pay, and save the Purchasers and any other holder of Warrant
Certificates harmless against liability for the payment of, all out-of-pocket
expenses (including, without limitation, attorney's fees and disbursements)
arising in connection with the transactions herein contemplated, including,
without limitation:
(a) the cost, if any, of complying with Section 3.6 hereof;
(b) any subsequent proposed modification of, or proposed
consent requested or initiated by or on behalf of the Company under,
this Agreement, the Warrant Certificates or the Warrants, whether or
not such proposed modification shall be effected or proposed consent
granted (including, without limitation, all document production and
duplication charges and the fees and expenses of one special counsel
engaged by the holders of Warrant Certificates in connection
therewith); and
(c) the enforcement of (or determination of whether or how to
enforce) any rights under this Agreement, the Warrant Certificates or
the Warrants or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with this Agreement
or the transactions contemplated hereby or by reason of the Purchasers'
or any Transferee's having acquired any Warrant Certificate, including,
without limitation, the fees and disbursements of one special counsel
engaged by the Purchasers or any other holders of Warrant Certificates
and incurred by such holders and the costs and expenses incurred in any
bankruptcy case involving the Company or any Subsidiary.
The obligations of the Company under this Section 6.1 shall survive the transfer
of any Warrant Certificate or portion thereof or interest therein by the
Purchasers or any Transferee and the exercise or expiration of any Warrant.
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6.2 AMENDMENT AND WAIVER. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with and only with the
written consent of the Company and:
(a) in the case of Section 1 through Section 6, inclusive,
hereof (other than this Section 6.2), the written consent of the
Required Warrantholders; and
(b) in the case of this Section 6.2, the written consent of
all holders of Warrants then outstanding;
provided, however, that:
(i) no such amendment or waiver of any of the provisions of
this Agreement pertaining to the Purchase Price or the number or kind
of shares of Common Stock that may be purchased upon exercise of each
Warrant; and
(ii) no change hastening the occurrence of the Expiration
Date;
shall be effective as to the holder of any Warrant unless consented to in
writing by such holder.
6.3 WARRANTS SUBJECT TO SHAREHOLDERS' AGREEMENT. The holders of
the Warrants and the Company are subject in all respects to the terms of the
Shareholders' Agreement, the terms and provisions of which are incorporated
herein, mutatis mutandis, as if set forth fully herein. By its acceptance of a
Warrant, each holder of Warrants agrees to be bound by the provisions of the
Shareholders' Agreement to the extent applicable.
6.4 NO RIGHTS OR LIABILITIES AS STOCKHOLDER. Nothing contained in
this Agreement shall be construed as conferring upon the holder of any Warrant
any rights as a stockholder of the Company or as imposing any obligation on
such holder to purchase any securities or as imposing any liabilities on such
holder as a stockholder of the Company, whether such obligation or liabilities
are asserted by the Company or by creditors of the Company.
6.5 DIRECTLY OR INDIRECTLY. Where any provision in this Agreement
refers to any action to be taken by any Person, or that such Person is
prohibited from taking, such provision shall be applicable whether such action
is taken directly or indirectly by such Person, including actions taken by or on
behalf of any partnership in which such Person is a general partner.
6.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein and in the Note Purchase
Agreement in connection herewith shall survive the execution and delivery of
this Agreement and the Warrant Certificates, the transfer by the Purchasers of
any Warrant Certificate or portion thereof or interest therein and the exercise
or expiration of any Warrant, and may be relied upon by the Purchasers or
Transferee, regardless of any investigation made at any time by or on behalf of
the Purchasers or Transferee. Subject to the preceding sentence, this Agreement
and the Warrant Certificates embody the entire agreement and understanding
between the Purchasers and the Company, and supersede all prior agreements and
understandings, relating to the subject matter hereof.
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6.7 SUCCESSORS AND ASSIGNS. All covenants and other agreements
in this Agreement contained by or on behalf of any of the parties hereto shall
bind and inure to the benefit of the respective successors and assigns of the
parties hereto (including, without limitation, any Transferee) whether so
expressed or not.
6.8 NOTICES. All communications hereunder or under the
Subordinated Notes shall be in writing, shall be delivered by nationwide
overnight courier, or facsimile transmission (confirmed by delivery by
nationwide overnight courier sent on the day of the sending of such facsimile
transmission), and
(a) if to Connecticut General or CMP, addressed to it at:
CIG & CO.
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford CT 06152-2307
Attention: Private Securities Division S-307
with a copy to
Chase Manhattan Bank, N.A.
Private Placement Servicing
P.O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: (212) 552-3107/1005
or at such other address as Connecticut General or CMP, as the case may
be, shall have specified to the Company in writing;
(b) if to any other holder of any Warrant Certificate,
addressed to such other holder at such address as such other holder
shall have specified to the Company in writing or, if any such other
holder shall not have so specified an address to the Company, then
addressed to such other holder in care of the last holder of such
Warrant Certificate that shall have so specified an address to the
Company; and
(c) if to the Company, addressed to it at:
The Hawk Group of Companies, Inc.
200 Public Square
Cleveland, Ohio 44114-2301
Attention: Ronald E. Weinberg
TEL: 216-861-4540
FAX: 216-861-4546
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or at such other address as the Company shall have specified to the
holder of each Warrant Certificate in writing; provided that any such
communication to the Company may also, at the option of the holder of
any Warrant Certificate, be delivered by any other means either to the
Company at its address specified above or to any officer of the
Company.
Any communication addressed and delivered as herein provided shall be deemed to
be received when actually delivered to the address of the addressee (whether or
not delivery is accepted) or received by the telecopy machine of the recipient.
Any communication not so addressed and delivered shall be ineffective.
6.9 SATISFACTION REQUIREMENT. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Purchasers or to any holder or
holders of Warrant Certificates, the determination of such satisfaction shall
be made by the Purchasers, holder or holders, as the case may be, in the sole
and exclusive judgment (exercised in good faith) of the Person or Persons
making such determination.
6.10 SEVERABILITY. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
6.11 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original but all of which together
shall constitute one instrument.
6.12 JURISDICTION; JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR CONNECTICUT COURT IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER DOCUMENTS AND INSTRUMENTS
CONTEMPLATED HEREBY AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT. NONE OF THE PARTIES HERETO SHALL SEEK A JURY
TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR OTHER LITIGATION PROCEDURE
BASED UPON OR ARISING OUT OF OR OTHERWISE RELATED TO THIS AGREEMENT OR ANY OF
THE WARRANTS AND EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO ANY SUCH JURY TRIAL AND ANY RIGHT
EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO
VENUE TO THE EXTENT ANY SUCH PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS
SECTION 6.12.
6.13 EXPIRATION. All Warrants that have not been exercised or
purchased in accordance with the provisions of this Agreement shall expire and
all rights of holders of such Warrants shall terminate and cease on the
Expiration Date. The Company agrees to notify each holder of Warrants, not less
than ninety (90) days but not more than one hundred fifty (150) days, prior to
the Expiration Date, in writing, of the Expiration Date and that, on the
Expiration Date, all Warrants
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remaining unexercised shall expire and all rights of holders of such Warrants
shall terminate and cease.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; NEXT PAGE IS A SIGNATURE PAGE.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed and delivered by one of its duly authorized
officers or representatives.
THE HAWK GROUP OF COMPANIES, INC.
By: /s/ Ronald E. Weinberg
---------------------------------------
Name: Ronald E. Weinberg
Title: Vice Chairman of the Board
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By CIGNA Investments, Inc.
By: /s/ Claire M. Porter
---------------------------------------
Name: Claire M. Porter
Title: Vice President
CIGNA MEZZANINE PARTNERS III, L.P.
By CIGNA Investments, Inc. (as Agent)
By: /s/ Claire M. Porter
---------------------------------------
Name: Claire M. Porter
Title: Vice President
[WARRANT AGREEMENT of THE HAWK GROUP OF COMPANIES, INC.]
<PAGE> 28
ATTACHMENT A
[FORM OF WARRANT CERTIFICATE]
THE ENCUMBERING, TRANSFER OR OTHER DISPOSITION OF THE SECURITIES EVIDENCED BY
THIS CERTIFICATE IS RESTRICTED UNDER THE TERMS OF THAT CERTAIN SHAREHOLDERS'
AGREEMENT DATED AS OF JUNE 30, 1995, AS MAY BE AMENDED FROM TIME TO TIME, THE
PROVISIONS OF WHICH ARE HEREIN INCORPORATED BY REFERENCE. SUCH SHAREHOLDERS'
AGREEMENT PROVIDES, AMONG OTHER THINGS, THAT THIS SECURITY MAY NOT BE SOLD OR
TRANSFERRED TO ANY PERSON WHO HAS NOT EXPRESSLY ASSUMED THE OBLIGATIONS OF SUCH
AGREEMENT AND CONTAINS, AMONG OTHER PROVISIONS, PROVISIONS WHICH COULD LIMIT THE
TRANSFER OF THIS SECURITY. A COPY OF THIS AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICE OF THE COMPANY. UPON THE WRITTEN REQUEST OF THE HOLDER HEREOF, THE
COMPANY SHALL FURNISH A COPY OF SUCH AGREEMENT, WITHOUT CHARGE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
A TRANSACTION REGISTERED UNDER SUCH ACT OR PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT.
WARRANT CERTIFICATE
THE HAWK GROUP OF COMPANIES, INC.
No. WR-__ [_________] Warrants
Date: ___________ PPN: 42009# 11 7
This Warrant Certificate certifies that _____________ or registered
assigns, is the registered holder of __________ (_______) Warrants. Each Warrant
entitles the owner thereof to purchase at any time on or prior to 5:00 p.m.
Eastern Time on June 30, 2005 (the "Expiration Date"), one (1) fully paid and
nonassessable share of Class B Common Stock of THE HAWK GROUP OF COMPANIES, INC.
(together with its successors and assigns, the "Company"), a Delaware
corporation, at a Purchase Price of one cent ($.01) upon presentation and
surrender of this Warrant Certificate with a form of election to purchase duly
executed and delivery to the Company of the payment of the Purchase Price in the
manner set forth in the Warrant Agreement. The number of shares of Class B
Common Stock that may be purchased upon exercise of each Warrant and the
Purchase Price are the number and the Purchase Price as of the date hereof, and
are subject to adjustment as referred to below.
The Warrants are issued pursuant to the Warrant Agreement (as it may
from time to time be amended or supplemented, the "Warrant Agreement"), dated as
of June 30, 1995, among the Company and the Purchasers (as defined therein), and
are subject to all of the terms, provisions and conditions thereof, which
Warrant Agreement is hereby incorporated herein by reference and made a part
hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, obligations, duties and immunities of the Company and
the holders of the Warrant
Attachment A-1
<PAGE> 29
Certificates. Capitalized terms used, but not defined, herein have the
respective meanings ascribed to them in the Warrant Agreement.
As provided in the Warrant Agreement, the Purchase Price and the number
of shares of Class B Common Stock that may be purchased upon the exercise of the
Warrants evidenced by this Warrant Certificate are, upon the happening of
certain events, subject to modification and adjustment. As further set forth in,
and subject to, the Warrant Agreement, the expiration date of this Warrant
Certificate is 5:00 p.m. Eastern Time on June 30, 2005.
This Warrant Certificate shall be exercisable, at the election of the
holder, either as an entirety or in part from time to time. If this Warrant
Certificate shall be exercised in part, the holder shall be entitled to receive,
upon surrender hereof, another Warrant Certificate or Warrant Certificates for
the number of Warrants not exercised. This Warrant Certificate, with or without
other Warrant Certificates, upon surrender in the manner set forth in the
Warrant Agreement, may be exchanged for another Warrant Certificate or Warrant
Certificates of like tenor evidencing Warrants entitling the holder to purchase
a like aggregate number of shares of Class B Common Stock as the Warrants
evidenced by the Warrant Certificate or Warrant Certificates surrendered shall
have entitled such holder to purchase.
Except as expressly set forth in the Warrant Agreement, no holder of
this Warrant Certificate shall be entitled to vote or receive dividends or be
deemed for any purpose the holder of shares of Class B Common Stock or of any
other Securities of the Company that may at any time be issued upon the exercise
hereof, nor shall anything contained in the Warrant Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
holder of a share of Class B Common Stock in the Company or any right to vote
upon any matter submitted to holders of shares of Class B Common Stock at any
meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of Securities,
change of par value, consolidation, merger, conveyance, or otherwise) or, except
as provided in the Warrant Agreement, to receive notice of meetings, or to
receive dividends or subscription rights, or otherwise, until the Warrant or
Warrants evidenced by this Warrant Certificate shall have been exercised as
provided in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE COMPANY AND THE HOLDER HEREOF SHALL BE GOVERNED BY,
THE INTERNAL LAWS OF THE STATE OF CONNECTICUT.
WITNESS the signature of a proper officer of the Company as of the date
first above written.
THE HAWK GROUP OF COMPANIES, INC.
By:
------------------------------------
Name:
Title:
Attachment A-2
<PAGE> 30
[FORM OF ASSIGNMENT]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO TRANSFER THE WARRANT CERTIFICATE)
FOR VALUE RECEIVED, _______________________________________ hereby
sells, assigns and transfers unto
- -----------------------------------------------------------------------------
(Please print name and address of transferee.)
the accompanying Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint:
- -------------------------------------------------------------------------------
attorney, to transfer the accompanying Warrant Certificate on the books of the
Company, with full power of substitution.
Dated: ____________________, ________.
[HOLDER]
By
-------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the accompanying Warrant Certificate or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.
Attachment A-3
<PAGE> 31
[FORM OF ELECTION TO PURCHASE]
(TO BE EXECUTED BY THE REGISTERED HOLDER IF
SUCH HOLDER DESIRES TO EXERCISE THE WARRANT CERTIFICATE)
To THE HAWK GROUP OF COMPANIES, INC.:
The undersigned hereby irrevocably elects to exercise
_____________________________ Warrants represented by the accompanying Warrant
Certificate to purchase the shares of Class B Common Stock issuable upon the
exercise of such Warrants and requests that certificates for such shares be
issued in the name of:
- -------------------------------------------------------------------------------
(Please print name and address.)
- -----------------------------------------------------------------------------
(Please insert social security or other identifying number.)
If such number of Warrants shall not be all the Warrants evidenced by the
accompanying Warrant Certificate, a new Warrant Certificate for the balance
remaining of such Warrants shall be registered in the name of and delivered to:
- ------------------------------------------------------------------------------
(Please print name and address.)
- -----------------------------------------------------------------------------
(Please insert social security or other identifying number.)
Dated: , .
------------------ ------
[HOLDER]
By
----------------------------------
NOTICE
The signature to the foregoing Election to Purchase must correspond to
the name as written upon the face of the accompanying Warrant Certificate or any
prior assignment thereof in every particular, without alteration or enlargement
or any change whatsoever.
Attachment A-4
<PAGE> 1
EXHIBIT 10.26
FORM OF
SUBORDINATED GUARANTEE AGREEMENT
THIS SUBORDINATED GUARANTEE AGREEMENT, dated as of June 30, 1995 (as
amended or restated from time to time, this "GUARANTEE AGREEMENT"), by FRICTION
PRODUCTS CO., an Ohio corporation (together with its successors and assigns, the
"GUARANTOR"), in favor of each of the Noteholders (as such term is hereinafter
defined).
1. PRELIMINARY STATEMENT.
1.1 The Hawk Group of Companies, Inc. (together with its
successors and assigns, the "COMPANY"), a Delaware corporation, has authorized
the issuance of its 12% Senior Subordinated Notes due June 30, 2005 (as may be
amended or restated from time to time, the "SUBORDINATED NOTES"), in the
aggregate principal amount of Thirty Million Dollars ($30,000,000) pursuant to
the separate Senior Subordinated Note and Warrant Purchase Agreements
(collectively, as may be amended or restated from time to time, the "NOTE
PURCHASE AGREEMENT"), each dated as of June 30, 1995, between the Company and
each of the purchasers listed on Annex 1 thereto (individually, a "PURCHASER,"
and collectively, the "PURCHASERS").
1.2 In order to induce the Purchasers to purchase the Subordinated
Notes, the Company has agreed, pursuant to the Note Purchase Agreement, that
certain Subsidiaries (including the Guarantor) will be required to guaranty
unconditionally all of the obligations of the Company under and in respect of
the Subordinated Notes and the Note Purchase Agreement pursuant to the terms and
provisions hereof.
1.3 All acts and proceedings required of the Guarantor by the
certificate or articles of incorporation, as the case may be, the bylaws of the
Guarantor and by law necessary to constitute this Guarantee Agreement a valid
and binding agreement for the uses and purposes set forth herein in accordance
with its terms have been done and taken, and the execution and delivery hereof
has been in all respects duly authorized.
1.4 The Guarantor and the Company are operated as part of one
consolidated business entity and are directly dependent upon each other for and
in connection with their respective business activities and their respective
financial resources. The Guarantor will receive direct and indirect economic,
financial and other benefits from the indebtedness incurred under the Note
Purchase Agreement and the Subordinated Notes by the Company and the incurrence
of such indebtedness is in the best interests of the Guarantor. The Purchasers
have agreed with the Company to purchase the Subordinated Notes based on the
consolidated financial condition of the Company and its Subsidiaries, including,
but not limited to, the Guarantor.
2. GUARANTEE AND OTHER RIGHTS AND UNDERTAKINGS
2.1 GUARANTIED OBLIGATIONS.
The Guarantor, in consideration of the execution and delivery of the
Note Purchase Agreement and the purchase of the Subordinated Notes by the
Purchasers, subject to Section 6
<PAGE> 2
hereto, hereby irrevocably, unconditionally and absolutely guarantees, on a
continuing basis, to each Noteholder, as and for the Guarantor's own debt, until
final and indefeasible payment has been made:
(a) the due and punctual payment by the Company of the
principal of, and interest, and Prepayment Compensation (if any) on,
the Subordinated Notes at any time outstanding and the due and punctual
payment of all other amounts payable, and all other indebtedness owing,
by the Company to the Noteholders under the Note Purchase Agreement and
the Subordinated Notes, in each case when and as the same shall become
due and payable, whether at maturity, pursuant to mandatory or optional
prepayment, by acceleration or otherwise, all in accordance with the
terms and provisions hereof and thereof; it being the intent of the
Guarantor that the guaranty set forth herein shall be a continuing
guaranty of payment and not a guaranty of collection; and
(b) the punctual and faithful performance, keeping,
observance, and fulfillment by the Company of all duties, agreements,
covenants and obligations of the Company contained in the Note Purchase
Agreement and the Subordinated Notes.
All of the obligations set forth in subsection (a) and subsection (b) of this
Section 2.1 are referred to herein as the "GUARANTIED OBLIGATIONS" and the
guaranty thereof contained herein is referred to herein as the "UNCONDITIONAL
GUARANTEE"). The Unconditional Guarantee is a primary, original and immediate
obligation of the Guarantor and is an absolute, unconditional, continuing and
irrevocable guaranty of payment and performance and shall remain in full force
and effect until the full, final and indefeasible payment of the Guarantied
Obligations.
2.2 PERFORMANCE UNDER THE NOTE PURCHASE AGREEMENT.
In the event the Company fails to pay, perform, keep, observe, or
fulfill any Guarantied Obligation in the manner provided in the Subordinated
Notes or in the Note Purchase Agreement, the Guarantor shall, subject to Section
6 hereof, cause forthwith to be paid the moneys, or to be performed, kept,
observed, or fulfilled each of such obligations, in respect of which such
failure has occurred in accordance with the terms and provisions of the Note
Purchase Agreement and the Subordinated Notes. In furtherance of the foregoing,
if an Event of Default shall exist, all of the Guarantied Obligations shall, in
the manner and subject to the limitations provided in the Note Purchase
Agreement for the acceleration of the Subordinated Notes and subject to Section
6 hereof, forthwith become due and payable without notice, regardless of whether
the acceleration of the Subordinated Notes shall be stayed, enjoined, delayed or
otherwise prevented.
2.3 RELEASES.
The Guarantor consents and agrees that, without notice to or by the
Guarantor and without impairing, releasing, abating, deferring, suspending,
reducing, terminating or otherwise affecting the obligations of the Guarantor
hereunder, each Noteholder, in the manner provided herein, by action or
inaction, may:
2 Guarantee Agreement
<PAGE> 3
(a) compromise or settle, renew or extend the period of
duration or the time for the payment, or discharge the performance of,
or may refuse to, or otherwise not, enforce, or may, by action or
inaction, release all or any one or more parties to, any one or more of
the Subordinated Notes, the Note Purchase Agreement, any other
Guarantee Agreement or agreement or instrument related thereto or
hereto;
(b) subject to the provisions of the Note Purchase Agreement,
assign, sell or transfer, or otherwise dispose of, any one or more of
the Subordinated Notes;
(c) grant waivers, extensions, consents and other indulgences
to the Company or any other guarantor in respect of any one or more of
the Subordinated Notes, the Note Purchase Agreement, any other
Guarantee Agreement or any agreement or instrument related thereto or
hereto;
(d) amend, modify or supplement in any manner and at any time
(or from time to time) any one or more of the Subordinated Notes, the
Note Purchase Agreement, any other Guarantee Agreement or any agreement
or instrument related hereto;
(e) release or substitute any one or more of the endorsers or
guarantors of the Guarantied Obligations whether parties hereto or not;
and
(f) sell, exchange, release, surrender or enforce, by action
or inaction, any Property at any time pledged or granted as security in
respect of the Guarantied Obligations, whether so pledged or granted by
the Company, the Guarantor or another guarantor of the Company's
obligations under the Note Purchase Agreement, the Subordinated Notes,
any other Guarantee Agreement or any agreement or instrument related
hereto.
2.4 WAIVERS.
To the fullest extent permitted by law, the Guarantor does hereby
waive:
(a) any notice of
(i) acceptance of the Unconditional Guarantee;
(ii) any purchase of the Subordinated Notes under the
Note Purchase Agreement, or the creation, existence or
acquisition of any of the Guarantied Obligations, or the
amount of the Guarantied Obligations, subject to the
Guarantor's right to make inquiry of each Noteholder to
ascertain the amount of the Guarantied Obligations owing to
such Noteholder at any reasonable time;
(iii) any transfer of Subordinated Notes from one
holder to another;
3 Guarantee Agreement
<PAGE> 4
(iv) any adverse change in the financial condition of
the Company or any other fact that might increase, expand or
affect the Guarantor's risk hereunder;
(v) presentment for payment, demand, protest, and
notice thereof as to the Subordinated Notes or any other
instrument;
(vi) any Default or Event of Default; and
(vii) any kind or nature whatsoever to which the
Guarantor might otherwise be entitled (except if such notice
or demand is specifically otherwise required to be given to
such Guarantor pursuant to the terms of this Guarantee
Agreement);
(b) the right by statute or otherwise to require any
Noteholder to institute suit against the Company or any other guarantor
or to exhaust the rights and remedies of any Noteholder against the
Company or any other guarantor, the Guarantor being bound to the
payment of each and all Guarantied Obligations, whether now existing or
hereafter accruing, as fully as if such Guarantied Obligations were
directly owing to the Noteholders by the Guarantor;
(c) the benefit of any stay (except in connection with a
pending appeal), valuation, appraisal, redemption or extension law now
or at any time hereafter in force which, but for this waiver, might be
applicable to any sale of Property of the Guarantor made under any
judgment, order or decree based on this Guarantee Agreement, and the
Guarantor covenants that it will not at any time insist upon or plead,
or in any manner claim or take the benefit or advantage of such law;
(d) any defense or objection to the absolute, primary,
continuing nature, or the validity, enforceability or amount, of the
Unconditional Guarantee, including, without limitation, any defense
based on (and the primary, continuing nature, and the validity,
enforceability and amount, of the Unconditional Guarantee shall be
unaffected by), any of the following:
(i) any change in future conditions;
(ii) any change of law;
(iii) any invalidity or irregularity with respect to
the issuance or assumption of any obligations (including,
without limitation, the Note Purchase Agreement, the
Subordinated Notes or any agreement or instrument related
hereto) by the Company or any other Person;
(iv) the execution and delivery of any agreement at
any time hereafter (including, without limitation, the Note
Purchase Agreement, the Subordinated Notes or any agreement or
instrument related hereto) by the Company or any other Person;
Guarantee Agreement
4
<PAGE> 5
(v) the genuineness, validity, regularity or
enforceability of any of the Guarantied Obligations;
(vi) any default, failure or delay, willful or
otherwise, in the performance of any obligations by the
Company or the Guarantor;
(vii) any creditors' rights, bankruptcy, receivership
or other insolvency proceeding of the Company or the
Guarantor, or sequestration or seizure of any Property of the
Company or the Guarantor, or any merger, consolidation,
reorganization, dissolution, liquidation or winding up or
change in corporate constitution or corporate identity or loss
of corporate identity of the Company or the Guarantor;
(viii) any disability or other defense of the Company
or the Guarantor to payment and performance of all Guarantied
Obligations other than the defense that the Guarantied
Obligations shall have been fully and finally performed and
indefeasibly paid;
(ix) the cessation from any cause whatsoever of the
liability of the Company or the Guarantor in respect of the
Guarantied Obligations, and any other defense that the
Guarantor may otherwise have against the Company or any
Noteholder;
(x) impossibility or illegality of performance on the
part of the Company or the Guarantor under the Note Purchase
Agreement, the Subordinated Notes or this Guarantee Agreement;
(xi) any change of the circumstances of the Company,
the Guarantor or any other Person, whether or not foreseen or
foreseeable, whether or not imputable to the Company or the
Guarantor, including, without limitation, impossibility of
performance through fire, explosion, accident, labor
disturbance, floods, droughts, embargoes, wars (whether or not
declared), civil commotions, acts of God or the public enemy,
delays or failure of suppliers or carriers, inability to
obtain materials, economic or political conditions, or any
other causes affecting performance, or any other force
majeure, whether or not beyond the control of the Company or
the Guarantor and whether or not of the kind hereinbefore
specified;
(xii) any attachment, claim, demand, charge, Lien,
order, process, encumbrance or any other happening or event or
reason, similar or dissimilar to the foregoing, or any
withholding or diminution at the source, by reason of any
taxes, assessments, expenses, indebtedness, obligations or
liabilities of any character, foreseen or unforeseen, and
whether or not valid, incurred by or against any Person, or
any claims, demands, charges, Liens or encumbrances of any
nature, foreseen or unforeseen, incurred by any Person, or
against any sums payable under the Note
Guarantee Agreement
5
<PAGE> 6
Purchase Agreement or the Subordinated Notes or any agreement
or instrument related hereto so that such sums would be
rendered inadequate or would be unavailable to make the
payment as herein provided;
(xiii) any change in the ownership of the equity
securities of the Company, the Guarantor or any other Person
liable in respect of the Subordinated Notes; or
(xiv) any other action, happening, event or reason
whatsoever that shall delay, interfere with, hinder or
prevent, or in any way adversely affect, the performance by
the Company or the Guarantor of any of its obligations under
the Note Purchase Agreement, the Subordinated Notes or this
Guarantee Agreement.
2.5 CERTAIN WAIVERS OF SUBROGATION, REIMBURSEMENT AND INDEMNITY.
The Guarantor hereby acknowledges and agrees that the Guarantor shall
not have any right of subrogation, reimbursement, or indemnity whatsoever in
respect of the Guarantied Obligations, and no right of recourse to or with
respect to any assets or Property of the Company.
2.6 INVALIDATED PAYMENTS.
The Guarantor further agrees that, to the extent the Company makes a
payment or payments to any Noteholder, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required, for any of the foregoing reasons or for any other reason,
to be repaid or paid over to a custodian, trustee, receiver or any other party
or officer under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, fraudulent conveyance, dissolution or liquidation law of
any jurisdiction, state or federal law, or any common law or equitable cause,
then to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if said payment had not been made and each Guarantor shall be primarily
liable for such obligation.
2.7 MARSHALING.
The Guarantor consents and agrees that each Noteholder, and each Person
acting for the benefit of each Noteholder, shall be under no obligation to
marshal any assets in favor of the Guarantor or against or in payment of any or
all of the Guarantied Obligations.
2.8 SUBORDINATION.
In the event that, for any reason whatsoever, the Company or a Person
obligated in respect of the Guarantied Obligations pursuant to another Guarantee
Agreement, is now or hereafter becomes indebted to the Guarantor in any manner
(an "AFFILIATE OBLIGATION"), the Guarantor agrees that the amount of such
Affiliate Obligation, interest thereon, and all other amounts due with respect
thereto, shall, at all times during the existence of a Default or an Event of
Default, be subordinate as to time of payment and in all other respects to all
the Guarantied Obligations, and that the
Guarantee Agreement
6
<PAGE> 7
Guarantor shall not be entitled to enforce or receive payment thereof until all
sums then due and owing to the Noteholders in respect of the Guarantied
Obligations shall have been paid in full, except that the Guarantor may enforce
any obligations in respect of any such Affiliate Obligation owing to the
Guarantor from the Company or such indebted Person so long as all proceeds in
respect of any recovery from such enforcement shall be held by the Guarantor in
trust, subject to the provisions of Section 6, for the benefit of the
Noteholders. If any other payment, other than pursuant to the immediately
preceding sentence, shall have been made to the Guarantor by the Company or such
indebted Person on any such Affiliate Obligation during any time that a Default
or an Event of Default exists and there are Guarantied Obligations outstanding,
the Guarantor shall hold in trust, subject to the provisions of Section 6, all
such payments for the benefit of the Noteholders.
2.9 SETOFF, COUNTERCLAIM OR OTHER DEDUCTIONS.
Except as otherwise required by law, each payment by the Guarantor
shall be made without setoff, counterclaim or other deduction.
2.10 ELECTION BY GUARANTOR TO PERFORM OBLIGATIONS.
Any election by the Guarantor to pay or otherwise perform any of the
obligations of the Company under the Subordinated Notes, the Note Purchase
Agreement or any agreement or instrument related hereto shall not release the
Company, the Guarantor or any other guarantor from such obligations or any of
such Person's other obligations under the Subordinated Notes, the Note Purchase
Agreement or any agreement or instrument related hereto.
2.11 NO ELECTION OF REMEDIES BY NOTEHOLDERS.
Each Noteholder shall, individually or collectively, have the right to
seek recourse against the Guarantor to the fullest extent provided for herein
(subject to the limitations set forth in Section 6) for such Guarantor's
obligations under this Guarantee Agreement in respect of the Guarantied
Obligations. No election to proceed in one form of action or proceeding, or
against any party, or on any obligation, shall constitute a waiver of such
Noteholder's right to proceed in any other form of action or proceeding or
against other parties unless such Noteholder has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing, no
action or proceeding by any Noteholder against the Company or the Guarantor
under any document or instrument evidencing obligations of the Company or the
Guarantor to such Noteholder shall serve to diminish the liability of the
Guarantor under this Guarantee Agreement, except to the extent that such
Noteholder finally and unconditionally shall have realized payment by such
action or proceeding.
2.12 SEPARATE ACTION; OTHER ENFORCEMENT RIGHTS.
Subject to Section 6, each of the rights and remedies granted under
this Guarantee Agreement may be exercised by the holders of at least sixty-six
and two-thirds percent (66-2/3%) in principal amount of the Subordinated Notes
then outstanding (exclusive of Subordinated Notes then owned by any one or more
of the Company, any Subsidiary or any Affiliate). Subject to Section 6, each of
Guarantee Agreement
7
<PAGE> 8
such Noteholders, acting together, may proceed to protect and enforce the
Unconditional Guarantee by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement contained herein or in execution or aid of any power herein granted or
for the recovery of judgment for the obligations hereby guarantied or for the
enforcement of any other proper, legal or equitable remedy available under
applicable law. Notwithstanding the foregoing, during the existence of an Event
of Default described in Section 9.1(a) or Section 9.1(b) of the Note Purchase
Agreement, and irrespective of whether the Subordinated Notes then outstanding
shall have been declared to be due and payable pursuant to Section 9.2(a)(ii) of
the Note Purchase Agreement, subject to Section 6, any Purchaser who is a holder
of Subordinated Notes at such time, or any holder or holders of at least
twenty-five percent (25%) in principal amount of the Subordinated Notes at the
time outstanding (exclusive of Subordinated Notes then owned by any one or more
of the Company, any Subsidiary or any Affiliate), who or which Purchaser or
holder shall have not consented to any waiver with respect to such Event of
Default, may exercise each of the rights and remedies granted to the Noteholders
under this Guaranty Agreement.
2.13 DELAY OR OMISSION; NO WAIVER.
No course of dealing on the part of any Noteholder and no delay or
failure on the part of any such Person to exercise any right hereunder shall
impair such right or operate as a waiver of such right or otherwise prejudice
such Person's rights, powers and remedies hereunder. Every right and remedy
given by the Unconditional Guarantee or by law to any Noteholder may, subject to
Section 6, be exercised from time to time and as often as may be deemed
expedient by such Person.
2.14 RESTORATION OF RIGHTS AND REMEDIES.
If any Noteholder shall have instituted any proceeding to enforce any
right or remedy under the Unconditional Guarantee or under any Subordinated Note
held by such Noteholder, and such proceeding shall have been dismissed,
discontinued or abandoned for any reason, or shall have been determined
adversely to such Noteholder, then and in every such case each such Noteholder,
the Company and the Guarantor shall, except as may be limited or affected by any
determination (including, without limitation, any determination in connection
with any such dismissal) in such proceeding, be restored severally and
respectively to its respective former position hereunder and thereunder, and
thereafter, subject as aforesaid, the rights and remedies of such Noteholders
shall continue as though no such proceeding had been instituted.
2.15 CUMULATIVE REMEDIES.
No remedy under this Guarantee Agreement, the Note Purchase Agreement
or the Subordinated Notes 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 pursuant to this Guarantee Agreement, the Note Purchase Agreement
or the Subordinated Notes.
Guarantee Agreement
8
<PAGE> 9
2.16 LIMITATION ON GUARANTIED OBLIGATIONS.
It is the intention of the Guarantor and each Noteholder that the
maximum amount of the obligations of the Guarantor hereunder shall be equal to,
but not in excess of, the amount equal to the lesser of
(a) the amount of the Guaranteed Obligations, and
(b) the greater of
(i) the amount of the value received by the Guarantor
as a result of the transactions contemplated hereby,
(ii) the amount of the proceeds of the sale of the
Subordinated Notes received by the Guarantor, and
(iii) the maximum amount permitted by applicable law.
With respect to the foregoing determination of the "maximum amount permitted by
applicable law," but only to the extent the obligations of the Guarantor
hereunder would be avoidable under applicable law if they were not limited to
"the maximum amount permitted by applicable law," such obligations shall be
limited to the maximum amount that, after giving effect to the incurrence
thereof and after taking in consideration the value of any rights of
subrogation, reimbursement, contribution and similar rights the Guarantor may
have, would not render the Guarantor insolvent or unable to pay its debts
(within the meaning of Title 11 of the United States Code or as defined in the
analogous applicable law) as they mature or leave the Guarantor with an
unreasonably small capital. The need for any such limitation shall be
determined, and any such needed limitation shall be effective, at the time or
times that the Guarantor is deemed, under applicable law, to incur obligations
hereunder. Any such limitation shall be apportioned amongst the Guarantied
Obligations owed to the Noteholders pro rata. This Section 2.17 is intended
solely to preserve the rights of each Noteholder hereunder to the maximum extent
permitted by applicable law, and neither the Guarantor nor any other Person
shall have any rights under this Section 2.17 that it would not otherwise have
under applicable law. For the purposes of this Section 2.17, "insolvency",
"unreasonably small capital" and "inability to pay debts (as so defined) as they
mature" shall be determined in accordance with applicable law.
3. INTERPRETATION OF THIS GUARANTEE AGREEMENT
3.1 TERMS DEFINED.
As used in this Guarantee Agreement, the capitalized terms have the
meaning specified in the Note Purchase Agreement unless otherwise specified
below or set forth in the section of this Guarantee Agreement referred to
immediately following such term (such definitions, unless
Guarantee Agreement
9
<PAGE> 10
otherwise expressly provided, to be equally applicable to both the singular and
plural forms of the terms defined):
AFFILIATE OBLIGATION -- Section 2.8
COMPANY -- Section 1.1.
GUARANTEE AGREEMENT, THIS -- has the meaning assigned to such term in
the first paragraph hereof.
GUARANTIED OBLIGATIONS -- Section 2.1.
GUARANTOR -- has the meaning assigned to such term in the first
paragraph hereof.
NOTE PURCHASE AGREEMENT -- Section 1.1.
NOTEHOLDER -- means, at any time, each Person that is the holder of any
Subordinated Note at such time.
PURCHASERS -- Section 1.1.
REQUIRED HOLDERS -- means, at any time, the holders of greater than
fifty percent (50%) in principal amount of the Subordinated Notes at the time
outstanding (exclusive of Subordinated Notes then owned by any one or more of
the Company, any Subsidiary, any Affiliate and any officer or director of any
thereof).
SUBSIDIARY SENIOR GUARANTEE -- means any guaranty agreement executed by
the Guarantor or any other guarantor with respect to an Acceptable Credit
Facility.
SUBORDINATED NOTES -- Section 1.1.
UNCONDITIONAL GUARANTEE -- Section 2.1.
3.2 SECTION HEADINGS AND CONSTRUCTION.
(a) SECTION HEADINGS, ETC. The titles of the Sections appear
as a matter of convenience only, do not constitute a part hereof and
shall not affect the construction hereof. The words "herein," "hereof,"
"hereunder" and "hereto" refer to this Guarantee Agreement as a whole
and not to any particular Section or other subdivision.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
Guarantee Agreement
10
<PAGE> 11
4. WARRANTIES AND REPRESENTATIONS
The Guarantor represents and warrants to the Purchasers, as of the date
of effectiveness hereof, as follows:
4.1 GENERALLY.
(a) The Guarantor is fully aware of the financial condition of
the Company. The Guarantor delivers this guaranty based solely upon its
own independent investigation and in no part upon any representation or
statement of any one or more of any Noteholder with respect thereto.
The Guarantor is in a position to obtain, and hereby assumes full
responsibility for obtaining, any additional information concerning the
financial condition of the Company as the Guarantor may deem material
to its obligations hereunder, and the Guarantor is not relying upon,
nor expecting, any Noteholder to furnish it any information concerning
the financial condition of the Company.
(b) As of the date of the execution and delivery of this
Guarantee Agreement, there are no presently pending material court or
administrative proceedings or undischarged judgments against the
Guarantor; and no tax liens have been filed or threatened against the
Guarantor, nor is the Guarantor in default or claimed default under any
agreement for borrowed money.
(c) The Guarantor is a corporation duly organized and validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Guarantor has the corporate power to own its
properties and carry on its business as it is now being conducted. The
Guarantor has the valid authority and the corporate power to enter into
and perform, and has taken all necessary action to authorize the entry
into, and the performance and delivery of, this Guarantee Agreement and
the transactions contemplated hereby.
(d) This Guarantee Agreement has been duly authorized by all
necessary action on the part of the Guarantor, has been duly executed
and delivered by duly authorized officers of the Guarantor, and
constitutes a legal, valid and binding obligation of the Guarantor,
except, in each case:
(i) as such enforceability may be limited by
applicable bankruptcy, reorganization, arrangement, fraudulent
conveyance, insolvency, moratorium, or other similar laws
affecting the enforceability of creditors' rights generally;
(ii) as such enforceability may be subject to the
availability of equitable remedies; and
(iii) that certain rights to indemnity and
contribution may be limited by applicable law.
Guarantee Agreement
11
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(e) The entry into and performance of this Guarantee Agreement
and the transactions contemplated hereby do not and will not conflict
with any applicable law or regulation or official or judicial order,
conflict with the charter, bylaws or other organizational documents of
the Guarantor, conflict with any agreement or document to which the
Guarantor is a party or that is binding upon it or any of its
Properties, or result in the creation or imposition of any Lien on any
of its Properties pursuant to the provisions of any agreement or
document.
(f) Neither the legal nature of the Guarantor, nor any of its
businesses and Properties, nor any relationship between or among the
Guarantor or any other Person, nor any circumstance in connection with
the execution or delivery of this Guarantee Agreement, is such as to
require any authorization, consent, approval, license, registration,
notarization, exemption or other action by or notice to or filing with
any court or administrative or governmental body or agency in
connection with the execution and delivery of this Guarantee Agreement
or the fulfillment of and compliance with the terms and provisions
hereof.
4.2 NATURE OF BUSINESS OF COMPANY AND SUBSIDIARIES.
The Company and the Guarantor are, and will be, as to financing and
capital raising activities, operated as part of one consolidated business entity
and the Guarantor is directly or indirectly dependent upon the Company for and
in connection with its business activities and its financial resources. The
Guarantor understands that the Company agreed to cause the Guarantor to provide
this Agreement, to sell the Subordinated Notes and to enter into the related
transactions based on the consolidated financial position of the Company and the
Subsidiaries, and the Guarantor further understands that the Purchasers are
relying on the consolidated financial condition of the Company and the
Subsidiaries in purchasing the Subordinated Notes.
5. GENERAL COVENANTS
The Guarantor covenants and agrees that on and after the date hereof
and so long as any of the Guarantied Obligations shall be outstanding:
5.1 UNDERTAKINGS IN NOTE PURCHASE AGREEMENT.
The Guarantor will comply with each of the undertakings of the Company
in the Note Purchase Agreement in respect of which the Company undertakes to
cause the Guarantor (in its capacity as a Guarantor and as a Subsidiary) to
comply with such undertakings, as if such undertakings (as they apply to the
Guarantor) were set forth at length herein as the undertakings of the Guarantor.
Guarantee Agreement
12
<PAGE> 13
5.2 PAYMENT OF SUBORDINATED NOTES AND MAINTENANCE OF OFFICES.
The Guarantor will punctually pay, or cause to be paid, all of the
Guarantied Obligations when due in accordance with the terms hereof, and subject
to the limitations set forth in Section 6, and all other payment obligations
required of it hereunder and will maintain an office at its address set forth in
Section 7.3 where notices, presentations and demands in respect of this
Guarantee Agreement may be made upon it. Such office will be maintained at such
address until such time as the Guarantor shall notify the Noteholders of any
change of location of such office.
5.3 FURTHER ASSURANCES.
The Guarantor will cooperate with the Noteholders and execute such
further instruments and documents as the Required Holders shall reasonably
request to carry out, to the reasonable satisfaction of the Required Holders,
the transactions contemplated by this Guarantee Agreement and the other
Financing Documents.
6. SUBORDINATION
The Guaranteed Obligations are subordinate and junior in right of
payment to the Subsidiary Senior Guarantee and the Senior Debt to the extent
that the Subordinated Notes are subordinate and junior to the Senior Debt as
provided in Section 10 of the Note Purchase Agreement, and as if the provisions
of Section 10 of the Note Purchase Agreement, together with the definitions set
forth in Section 11 of the Note Purchase Agreement of the terms used in such
Section 10, were set forth herein mutatis mutandis, and as if the term
"Company," as used therein, related to the Guarantor; the term "Senior Debt," as
used therein, related to each of the Subsidiary Senior Guarantee and the Senior
Debt; and the term "Subordinated Debt," as used therein, related to this
Guarantee Agreement. Upon the sale or other transfer or disposition (by merger
or otherwise) of the capital stock of the Guarantor (so long as such sale, other
transfer or disposition is permitted or in accordance with the terms of the Note
Purchase Agreement), then this Guarantee Agreement shall automatically terminate
and the Guarantor shall be deemed automatically and unconditionally released and
discharged from all obligations under this Guarantee Agreement without any
further action required on the part of any Noteholder; provided that in such
event any cash proceeds of the sale or other disposition of such capital stock
remaining after payment in full of the Senior Debt shall be applied to the
Subordinated Notes in accordance with their terms and the terms of the Note
Purchase Agreement. The Noteholders shall deliver appropriate instruments
evidencing such release upon receipt of a request of the Guarantor or the
holders of the Senior Debt.
7. MISCELLANEOUS
7.1 SUCCESSORS AND ASSIGNS.
(a) Whenever the Guarantor or any of the parties to the Note
Purchase Agreement is referred to, such reference shall be deemed to
include the successors and assigns of such party, and all the
covenants, promises and agreements contained in this Guarantee
Guarantee Agreement
13
<PAGE> 14
Agreement by or on behalf of the Guarantor shall bind the successors
and assigns of the Guarantor and shall inure to the benefit of each of
the Noteholders from time to time whether so expressed or not and
whether or not an assignment of the rights hereunder shall have been
delivered in connection with any assignment or other transfer of
Subordinated Notes.
(b) In connection with the transfer of the Subordinated Notes
by any Noteholder in accordance with the requirements of the Note
Purchase Agreement, the Guarantor agrees to provide an executed copy of
this Guarantee Agreement to the new Noteholder or Noteholders of such
Subordinated Notes, provided that no additional obligations of the
Guarantor shall thereby be created but rather that the existing
obligations of the Guarantor shall be more particularly stated in
respect of one or more future Noteholders that are the subject of this
Guarantee Agreement.
7.2 PARTIAL INVALIDITY.
The unenforceability or invalidity of any provision or provisions
hereof shall not render any other provision or provisions contained herein
unenforceable or invalid.
7.3 COMMUNICATIONS.
(A) METHOD; ADDRESS. All communications hereunder shall be in
writing, shall be delivered in the manner required by the Note Purchase
Agreement, and shall be addressed, if to the Guarantor, at the address
set forth on Annex 1 hereto, and if to any of the Noteholders:
(A) if such Noteholder is a Purchaser, at the address
set forth on Annex 1 to the Note Purchaser Agreement for such
Purchaser, and further including any parties referred to on
such Annex 1 which are required to receive notices in addition
to such Purchaser; and
(B) if such Noteholder is not a Purchaser, at the
address set forth in the register for the registration and
transfer of Subordinated Notes maintained pursuant to Section
6.1 of the Note Purchase Agreement for such Noteholder;
or to any such party at such other address as such party may designate
by notice duly given in accordance with this Section 7.3.
(B) WHEN GIVEN. Any communication addressed and delivered as
herein provided shall be deemed to be received when actually delivered
to the address of the addressee (whether or not delivery is accepted)
or received by the telecopy machine of the recipient. Any communication
not so addressed and delivered shall be ineffective.
7.4 GOVERNING LAW.
Guarantee Agreement
14
<PAGE> 15
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, INTERNAL CONNECTICUT LAW.
7.5 EFFECTIVE DATE.
This Guarantee Agreement shall be effective as of the date first
written above.
7.6 BENEFITS OF GUARANTEE AGREEMENT RESTRICTED TO NOTEHOLDERS.
Nothing express or implied in this Guarantee Agreement is intended or
shall be construed to give to any Person other than the Guarantor and the
Noteholders any legal or equitable right, remedy or claim under or in respect
hereof or any covenant, condition or provision therein or herein contained; and
all such covenants, conditions and provisions are and shall be held to be for
the sole and exclusive benefit of the Guarantor and the Noteholders.
7.7 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein or made in writing
by the Guarantor in connection herewith shall survive the execution and delivery
hereof.
7.8 EXPENSES.
(a) The Guarantor shall pay when billed the reasonable costs
and expenses (including reasonable attorneys' fees) incurred by the
Noteholders in connection with the consideration, negotiation,
preparation or execution of any amendments, waivers, consents,
standstill agreements and other similar agreements with respect hereto
(whether or not any such amendments, waivers, consents, standstill
agreements or other similar agreements are executed).
(b) At any time when either of the Company or the Guarantor
and the Noteholders are conducting restructuring or workout
negotiations in respect hereof, or a Default or Event of Default
exists, the Guarantor shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees and the reasonable fees
of professional advisors) incurred by the Noteholders in connection
with the assessment, analysis or enforcement of any rights or remedies
that are or may be available to the Noteholders.
(c) If the Guarantor shall fail to pay when due any principal
of, or Prepayment Compensation Amount or interest on, any Subordinated
Note, the Guarantor shall pay to each holder of Subordinated Notes, to
the extent permitted by law, such amounts as shall be sufficient to
cover the costs and expenses, including but not limited to reasonable
attorneys' fees, incurred by such holder in collecting any sums due on
such Subordinated Notes.
Guarantee Agreement
15
<PAGE> 16
7.9 AMENDMENT.
This Guarantee Agreement may be amended only in a writing executed by
the Guarantor and the Required Holders.
7.10 SURVIVAL.
So long as the Guarantied Obligations and all payment obligations of
the Guarantor hereunder shall not have been fully and finally performed and
indefeasibly paid, the obligations of the Guarantor hereunder shall survive the
transfer and payment of any Subordinated Note.
7.11 ENTIRE AGREEMENT.
This Guarantee Agreement constitutes the final written expression of
all of the terms hereof and is a complete and exclusive statement of those
terms.
7.12 DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two or more duplicate originals hereof may be signed by the parties,
each of which shall be an original but all of which together shall constitute
one and the same instrument. This Guarantee Agreement may be executed in one or
more counterparts and shall be effective when at least one counterpart shall
have been executed by each party hereto, and each set of counterparts that,
collectively, show execution by each party hereto shall constitute one duplicate
original.
[Remainder of page intentionally blank. Next page is signature page.]
Guarantee Agreement
16
<PAGE> 17
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee Agreement
to be executed on its behalf by a duly authorized officer of the Guarantor.
[NAME OF GUARANTOR]
By
------------------------------
Name:
Title:
By
------------------------------
Name:
Title:
[SUBORDINATED GUARANTEE AGREEMENT of _____________________]
<PAGE> 18
ANNEX 1
Address of Guarantor
_____________________
c/o The Hawk Group of Companies, Inc.
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114-2301
Guarantee Agreement
<PAGE> 1
EXHIBIT 10.27
FORM OF
FIRST AMENDMENT TO SUBORDINATED GUARANTEE AGREEMENT
This First Amendment dated as of November 27, 1996 (the or this "First
Amendment") to the Subordinated Guarantee Agreement dated as of June 30, 1995,
is between that certain subsidiary of The Hawk Group of Companies, Inc., a
Delaware corporation, now known as Hawk Corporation (the "Company"), which
subsidiary is a signatory hereto (the "Subsidary"), and each of the institutions
which is a signatory to this First Amendment (collectively, the "Noteholders").
RECITALS:
A. The Company has heretofore entered into separate and several Senior
Subordinated Note and Warrant Purchase Agreements, each dated as of June 30,
1995 (collectively, the "Note and Warrant Purchase Agreement"), with each of the
purchasers identified on Annex I thereto. The Company has heretofore issued
$30,000,000 of its 12% Senior Subordinated Notes due June 30, 2005 (the "Notes")
and 316,970 Warrants to Purchase Class B Common Stock of the Company (the
"Warrants") pursuant to the Note and Warrant Purchase Agreement. The Noteholders
are the holders of 100% of the outstanding principal amount of the Notes.
B. The Subsidiary has heretofore entered into that certain Subordinated
Guarantee Agreement dated as of June 30, 1995 (the "Subordinated Guarantee") for
the benefit of each of the purchasers identified on Annex I to the Note and
Warrant Purchase Agreement in order to guarantee unconditionally all of the
obligations of the Company under and in respect of the Notes and the Note and
Warrant Purchase Agreement pursuant to the terms thereof.
C. The Subsidiary and the Noteholders now desire to amend the
Subordinated Guarantee in the respects, but only in the respects, hereinafter
set forth.
D. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Subordinated Guarantee and the Note and Warrant Purchase
Agreement unless herein defined or the context shall otherwise require.
E. All requirements of law have been fully complied with, and all other
acts and things necessary to make this First Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this First Amendment set forth in
Section 3.1 hereof, and in consideration of good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Subsidiary and the
Noteholders hereby agree as follows:
<PAGE> 2
SECTION 1. AMENDMENTS.
1.1. The definition of "Subsidiary Senior Guarantee" in Section 3.1 of
the Subordinated Guarantee shall be and hereby is amended by deletion of the
phrase "an Acceptable Credit Facility" in the second line thereof, and
replacement of such phrase with "any Senior Debt".
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1. To induce the Noteholders to execute and deliver this First
Amendment, the Subsidiary represents and warrants (which representations and
warranties shall survive the execution and delivery of this First Amendment) to
the Noteholders that:
(a) this First Amendment has been duly authorized, executed
and delivered by it and this First Amendment constitutes the legal,
valid and binding obligation, contract and agreement of the Subsidiary
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Subordinated Guarantee, as amended by this First
Amendment, constitutes the legal, valid and binding obligation,
contract and agreement of the Subsidiary enforceable against it in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights
generally;
(c) the execution, delivery and performance by the Subsidiary
of this First Amendment (i) has been duly authorized by all requisite
corporate action, and, if required, shareholder action, (ii) does not
require the consent or approval of any governmental or regulatory body
or agency, and (iii) will not (A) violate (1) any provision of law,
statute, rule or regulation or its certificate of incorporation or
bylaws, (2) any order of any court or any rule, regulation or order of
any other agency or government binding upon it, or (3) any provision of
any material indenture, agreement or other instrument to which it is a
party or by which its properties or assets are or may be bound, or (B)
result in a breach or constitute (alone or with due notice or lapse of
time or both) a default under any indenture, agreement or other
instrument referred to in clause (iii)(A)(3) of this Section 2.1(c);
and
(d) as of the date hereof and after giving effect to this
First Amendment, no Default or Event of Default has occurred or is
continuing.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
3.1. This First Amendment shall not become effective until, and shall
become effective when, each and every one of the following conditions shall have
been satisfied:
(a) executed counterparts of this First Amendment, duly
executed by the Subsidiary and the holders of at least 51% of the
outstanding principal amount of the Notes shall have been delivered to
the Noteholders;
2
<PAGE> 3
(b) the Noteholders shall have received evidence satisfactory
to them that the Company has duly authorized the execution, delivery
and performance of the First Amendment to Note and Warrant Purchase
Agreement, dated as of November 27, 1996, and that such First Amendment
to Note and Warrant Purchase Agreement has been duly executed and
delivered by the Company; and
(c) the representations and warranties of the Subsidiary set
forth in Section 2 hereof are true and correct on and with respect to
the date hereof.
Upon receipt of all of the foregoing, this First Amendment shall become
effective.
SECTION 4. MISCELLANEOUS.
4.1. This First Amendment shall be construed in connection with and as
part of the Subordinated Guarantee, and except as modified and expressly amended
by this First Amendment, all terms, conditions and covenants contained in the
Subordinated Guarantee are hereby ratified and shall be and remain in full force
and effect.
4.2. Any and all notices, requests, certificates and other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Subordinated Guarantee without making specific reference to
this First Amendment but nevertheless all such references shall include this
First Amendment unless the context otherwise requires.
4.3. The descriptive headings of the various Sections or parts of this
First Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
4.4. This First Amendment shall be governed by and construed in
accordance with internal Connecticut law.
[Remainder of page intentionally blank.]
3
<PAGE> 4
4.5. The execution hereof by you shall constitute a contract between us
for the uses and purposes hereinabove set forth, and this First Amendment may be
executed in any number of counterparts, each executed counterpart constituting
an original, but all together only one agreement.
-------------------------
By:_________________________
Name:
Title:
Accepted and Agreed to:
CIGNA MEZZANINE PARTNERS III, L.P.
By CIGNA Investments, Inc. (Agent)
By:_________________________
Name:
Title:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By CIGNA Investments, Inc.
By:_________________________
Name:
Title:
4
<PAGE> 1
EXHIBIT 10.28
FORM OF
SUBORDINATED GUARANTEE AGREEMENT
THIS SUBORDINATED GUARANTEE AGREEMENT, dated as of November 27, 1996
(as amended or restated from time to time, this "GUARANTEE AGREEMENT"), by
_______________, a Delaware corporation (together with its successors and
assigns, the "GUARANTOR"), in favor of each of the Noteholders (as such term is
hereinafter defined).
1. PRELIMINARY STATEMENT.
1.1. On June 30, 1995, The Hawk Group of Companies, Inc., now known as
Hawk Corporation (together with its successors and assigns, the "COMPANY"), a
Delaware corporation, issued its 12% Senior Subordinated Notes due June 30, 2005
(as may be amended or restated from time to time, the "SUBORDINATED NOTES"), in
the aggregate principal amount of Thirty Million Dollars ($30,000,000) pursuant
to the separate Senior Subordinated Note and Warrant Purchase Agreements
(collectively, as may be amended or restated from time to time, the "NOTE
PURCHASE AGREEMENT"), each dated as of June 30, 1995, between the Company and
each of the purchasers listed on Annex 1 thereto (individually, a "PURCHASER,"
and collectively, the "PURCHASERS").
1.2. In order to induce the Purchasers to purchase the Subordinated
Notes, the Company agreed, pursuant to the Note Purchase Agreement, that certain
Persons which become Subsidiaries after the Closing Date (including the
Guarantor) will be required to guaranty unconditionally all of the obligations
of the Company under and in respect of the Subordinated Notes and the Note
Purchase Agreement pursuant to the terms and provisions hereof.
1.3. All acts and proceedings required of the Guarantor by the
certificate or articles of incorporation, as the case may be, the bylaws of
the Guarantor and by law necessary to constitute this Guarantee Agreement a
valid and binding agreement for the uses and purposes set forth herein in
accordance with its terms have been done and taken, and the execution and
delivery hereof has been in all respects duly authorized.
1.4. The Guarantor and the Company are operated as part of one
consolidated business entity and are directly dependent upon each other for and
in connection with their respective business activities and their respective
financial resources. The Guarantor will receive direct and indirect economic,
financial and other benefits from the indebtedness incurred under the Note
Purchase Agreement and the Subordinated Notes by the Company and the incurrence
of such indebtedness is in the best interests of the Guarantor. The Purchasers
have agreed with the Company to purchase the Subordinated Notes based on the
consolidated financial condition of the Company and its Subsidiaries, including,
but not limited to, the Guarantor.
<PAGE> 2
2. GUARANTEE AND OTHER RIGHTS AND UNDERTAKINGS
2.1. GUARANTIED OBLIGATIONS.
The Guarantor, in consideration of the execution and delivery of the
Note Purchase Agreement and the purchase of the Subordinated Notes by the
Purchasers, subject to Section 6 hereto, hereby irrevocably, unconditionally and
absolutely guarantees, on a continuing basis, to each Noteholder, as and for the
Guarantor's own debt, until final and indefeasible payment has been made:
(a) the due and punctual payment by the Company of the
principal of, and interest, and Prepayment Compensation (if any) on,
the Subordinated Notes at any time outstanding and the due and punctual
payment of all other amounts payable, and all other indebtedness owing,
by the Company to the Noteholders under the Note Purchase Agreement and
the Subordinated Notes, in each case when and as the same shall become
due and payable, whether at maturity, pursuant to mandatory or optional
prepayment, by acceleration or otherwise, all in accordance with the
terms and provisions hereof and thereof; it being the intent of the
Guarantor that the guaranty set forth herein shall be a continuing
guaranty of payment and not a guaranty of collection; and
(b) the punctual and faithful performance, keeping,
observance, and fulfillment by the Company of all duties, agreements,
covenants and obligations of the Company contained in the Note Purchase
Agreement and the Subordinated Notes.
All of the obligations set forth in subsection (a) and subsection (b) of this
Section 2.1 are referred to herein as the "GUARANTIED OBLIGATIONS" and the
guaranty thereof contained herein is referred to herein as the "UNCONDITIONAL
GUARANTEE"). The Unconditional Guarantee is a primary, original and immediate
obligation of the Guarantor and is an absolute, unconditional, continuing and
irrevocable guaranty of payment and performance and shall remain in full force
and effect until the full, final and indefeasible payment of the Guarantied
Obligations.
2.2. PERFORMANCE UNDER THE NOTE PURCHASE AGREEMENT.
In the event the Company fails to pay, perform, keep, observe, or
fulfill any Guarantied Obligation in the manner provided in the Subordinated
Notes or in the Note Purchase Agreement, the Guarantor shall, subject to Section
6 hereof, cause forthwith to be paid the moneys, or to be performed, kept,
observed, or fulfilled each of such obligations, in respect of which such
failure has occurred in accordance with the terms and provisions of the Note
Purchase Agreement and the Subordinated Notes. In furtherance of the foregoing,
if an Event of Default shall exist, all of the Guarantied Obligations shall, in
the manner and subject to the limitations provided in the Note Purchase
Agreement for the acceleration of the Subordinated Notes and subject to Section
6 hereof, forthwith become due and payable without notice, regardless of whether
the acceleration of the Subordinated Notes shall be stayed, enjoined, delayed or
otherwise prevented.
Guarantee Agreement
2
<PAGE> 3
2.3. RELEASES.
The Guarantor consents and agrees that, without notice to or by the
Guarantor and without impairing, releasing, abating, deferring, suspending,
reducing, terminating or otherwise affecting the obligations of the Guarantor
hereunder, each Noteholder, in the manner provided herein, by action or
inaction, may:
(a) compromise or settle, renew or extend the period of
duration or the time for the payment, or discharge the performance of,
or may refuse to, or otherwise not, enforce, or may, by action or
inaction, release all or any one or more parties to, any one or more of
the Subordinated Notes, the Note Purchase Agreement, any other
Guarantee Agreement or agreement or instrument related thereto or
hereto;
(b) subject to the provisions of the Note Purchase Agreement,
assign, sell or transfer, or otherwise dispose of, any one or more of
the Subordinated Notes;
(c) grant waivers, extensions, consents and other indulgences
to the Company or any other guarantor in respect of any one
or more of the Subordinated Notes, the Note Purchase Agreement, any
other Guarantee Agreement or any agreement or instrument related
thereto or hereto;
(d) amend, modify or supplement in any manner and at any time
(or from time to time) any one or more of the Subordinated Notes, the
Note Purchase Agreement, any other Guarantee Agreement or any agreement
or instrument related hereto;
(e) release or substitute any one or more of the endorsers or
guarantors of the Guarantied Obligations whether parties hereto or not;
and
(f) sell, exchange, release, surrender or enforce, by action
or inaction, any Property at any time pledged or granted as security in
respect of the Guarantied Obligations, whether so pledged or granted by
the Company, the Guarantor or another guarantor of the Company's
obligations under the Note Purchase Agreement, the Subordinated Notes,
any other Guarantee Agreement or any agreement or instrument related
hereto.
2.4. WAIVERS.
To the fullest extent permitted by law, the Guarantor does hereby
waive:
(a) any notice of
(i) acceptance of the Unconditional Guarantee;
(ii) any purchase of the Subordinated Notes under
the Note Purchase Agreement, or the creation, existence or
acquisition of any of the Guarantied
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Obligations, or the amount of the Guarantied Obligations,
subject to the Guarantor's right to make inquiry of each
Noteholder to ascertain the amount of the Guarantied
Obligations owing to such Noteholder at any reasonable time;
(iii) any transfer of Subordinated Notes from one
holder to another;
(iv) any adverse change in the financial
condition of the Company or any other fact that might
increase, expand or affect the Guarantor's risk hereunder;
(v) presentment for payment, demand, protest,
and notice thereof as to the Subordinated Notes or any other
instrument;
(vi) any Default or Event of Default; and
(vii) any kind or nature whatsoever to which the
Guarantor might otherwise be entitled (except if such notice
or demand is specifically otherwise required to be given to
such Guarantor pursuant to the terms of this Guarantee
Agreement);
(b) the right by statute or otherwise to require any
Noteholder to institute suit against the Company or any other guarantor
or to exhaust the rights and remedies of any Noteholder against the
Company or any other guarantor, the Guarantor being bound to the
payment of each and all Guarantied Obligations, whether now existing or
hereafter accruing, as fully as if such Guarantied Obligations were
directly owing to the Noteholders by the Guarantor;
(c) the benefit of any stay (except in connection with a
pending appeal), valuation, appraisal, redemption or extension law now
or at any time hereafter in force which, but for this waiver, might be
applicable to any sale of Property of the Guarantor made under any
judgment, order or decree based on this Guarantee Agreement, and the
Guarantor covenants that it will not at any time insist upon or plead,
or in any manner claim or take the benefit or advantage of such law;
(d) any defense or objection to the absolute, primary,
continuing nature, or the validity, enforceability or amount, of the
Unconditional Guarantee, including, without limitation, any defense
based on (and the primary, continuing nature, and the validity,
enforceability and amount, of the Unconditional Guarantee shall be
unaffected by), any of the following:
(i) any change in future conditions;
(ii) any change of law;
(iii) any invalidity or irregularity with respect
to the issuance or assumption of any obligations (including,
without limitation, the Note Purchase
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Agreement, the Subordinated Notes or any agreement or
instrument related hereto) by the Company or any other Person;
(iv) the execution and delivery of any agreement
at any time hereafter (including, without limitation, the Note
Purchase Agreement, the Subordinated Notes or any agreement or
instrument related hereto) by the Company or any other Person;
(v) the genuineness, validity, regularity or
enforceability of any of the Guarantied Obligations;
(vi) any default, failure or delay, willful or
otherwise, in the performance of any obligations by the
Company or the Guarantor;
(vii) any creditors' rights, bankruptcy,
receivership or other insolvency proceeding of the Company or
the Guarantor, or sequestration or seizure of any Property of
the Company or the Guarantor, or any merger, consolidation,
reorganization, dissolution, liquidation or winding up or
change in corporate constitution or corporate identity or loss
of corporate identity of the Company or the Guarantor;
(viii) any disability or other defense of the
Company or the Guarantor to payment and performance of all
Guarantied Obligations other than the defense that the
Guarantied Obligations shall have been fully and finally
performed and indefeasibly paid;
(ix) the cessation from any cause whatsoever of
the liability of the Company or the Guarantor in respect of
the Guarantied Obligations, and any other defense that the
Guarantor may otherwise have against the Company or any
Noteholder;
(x) impossibility or illegality of performance
on the part of the Company or the Guarantor under the Note
Purchase Agreement, the Subordinated Notes or this Guarantee
Agreement;
(xi) any change of the circumstances of the
Company, the Guarantor or any other Person, whether or not
foreseen or foreseeable, whether or not imputable to the
Company or the Guarantor, including, without limitation,
impossibility of performance through fire, explosion,
accident, labor disturbance, floods, droughts, embargoes, wars
(whether or not declared), civil commotions, acts of God or
the public enemy, delays or failure of suppliers or carriers,
inability to obtain materials, economic or political
conditions, or any other causes affecting performance, or any
other force majeure, whether or not beyond the control of the
Company or the Guarantor and whether or not of the kind
hereinbefore specified;
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(xii) any attachment, claim, demand, charge,
Lien, order, process, encumbrance or any other happening or
event or reason, similar or dissimilar to the foregoing, or
any withholding or diminution at the source, by reason of any
taxes, assessments, expenses, indebtedness, obligations or
liabilities of any character, foreseen or unforeseen, and
whether or not valid, incurred by or against any Person, or
any claims, demands, charges, Liens or encumbrances of any
nature, foreseen or unforeseen, incurred by any Person, or
against any sums payable under the Note Purchase Agreement or
the Subordinated Notes or any agreement or instrument related
hereto so that such sums would be rendered inadequate or would
be unavailable to make the payment as herein provided;
(xiii) any change in the ownership of the equity
securities of the Company, the Guarantor or any other Person
liable in respect of the Subordinated Notes; or
(xiv) any other action, happening, event or
reason whatsoever that shall delay, interfere with, hinder or
prevent, or in any way adversely affect, the performance by
the Company or the Guarantor of any of its obligations under
the Note Purchase Agreement, the Subordinated Notes or this
Guarantee Agreement.
2.5. CERTAIN WAIVERS OF SUBROGATION, REIMBURSEMENT AND INDEMNITY.
The Guarantor hereby acknowledges and agrees that the Guarantor shall
not have any right of subrogation, reimbursement, or indemnity whatsoever in
respect of the Guarantied Obligations, and no right of recourse to or with
respect to any assets or Property of the Company.
2.6. INVALIDATED PAYMENTS.
The Guarantor further agrees that, to the extent the Company makes a
payment or payments to any Noteholder, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required, for any of the foregoing reasons or for any other reason,
to be repaid or paid over to a custodian, trustee, receiver or any other party
or officer under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, fraudulent conveyance, dissolution or liquidation law of
any jurisdiction, state or federal law, or any common law or equitable cause,
then to the extent of such payment or repayment, the obligation or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if said payment had not been made and each Guarantor shall be primarily
liable for such obligation.
2.7. MARSHALING.
The Guarantor consents and agrees that each Noteholder, and each Person
acting for the benefit of each Noteholder, shall be under no obligation to
marshal any assets in favor of the Guarantor or against or in payment of any or
all of the Guarantied Obligations.
2.8. SUBORDINATION.
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In the event that, for any reason whatsoever, the Company or a Person
obligated in respect of the Guarantied Obligations pursuant to another Guarantee
Agreement, is now or hereafter becomes indebted to the Guarantor in any manner
(an "AFFILIATE OBLIGATION"), the Guarantor agrees that the amount of such
Affiliate Obligation, interest thereon, and all other amounts due with respect
thereto, shall, at all times during the existence of a Default or an Event of
Default, be subordinate as to time of payment and in all other respects to all
the Guarantied Obligations, and that the Guarantor shall not be entitled to
enforce or receive payment thereof until all sums then due and owing to the
Noteholders in respect of the Guarantied Obligations shall have been paid in
full, except that the Guarantor may enforce any obligations in respect of any
such Affiliate Obligation owing to the Guarantor from the Company or such
indebted Person so long as all proceeds in respect of any recovery from such
enforcement shall be held by the Guarantor in trust, subject to the provisions
of Section 6, for the benefit of the Noteholders. If any other payment, other
than pursuant to the immediately preceding sentence, shall have been made to the
Guarantor by the Company or such indebted Person on any such Affiliate
Obligation during any time that a Default or an Event of Default exists and
there are Guarantied Obligations outstanding, the Guarantor shall hold in trust,
subject to the provisions of Section 6, all such payments for the benefit of the
Noteholders.
2.9. SETOFF, COUNTERCLAIM OR OTHER DEDUCTIONS.
Except as otherwise required by law, each payment by the Guarantor
shall be made without setoff, counterclaim or other deduction.
2.10. ELECTION BY GUARANTOR TO PERFORM OBLIGATIONS.
Any election by the Guarantor to pay or otherwise perform any of the
obligations of the Company under the Subordinated Notes, the Note Purchase
Agreement or any agreement or instrument related hereto shall not release the
Company, the Guarantor or any other guarantor from such obligations or any of
such Person's other obligations under the Subordinated Notes, the Note Purchase
Agreement or any agreement or instrument related hereto.
2.11. NO ELECTION OF REMEDIES BY NOTEHOLDERS.
Each Noteholder shall, individually or collectively, have the right to
seek recourse against the Guarantor to the fullest extent provided for herein
(subject to the limitations set forth in Section 6) for such Guarantor's
obligations under this Guarantee Agreement in respect of the Guarantied
Obligations. No election to proceed in one form of action or proceeding, or
against any party, or on any obligation, shall constitute a waiver of such
Noteholder's right to proceed in any other form of action or proceeding or
against other parties unless such Noteholder has expressly waived such right in
writing. Specifically, but without limiting the generality of the foregoing, no
action or proceeding by any Noteholder against the Company or the Guarantor
under any document or instrument evidencing obligations of the Company or the
Guarantor to such Noteholder shall serve to diminish the liability of the
Guarantor under this Guarantee Agreement, except to the extent that such
Noteholder finally and unconditionally shall have realized payment by such
action or proceeding.
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2.12. SEPARATE ACTION; OTHER ENFORCEMENT RIGHTS.
Subject to Section 6, each of the rights and remedies granted under
this Guarantee Agreement may be exercised by the holders of at least sixty-six
and two-thirds percent (66-2/3%) in principal amount of the Subordinated Notes
then outstanding (exclusive of Subordinated Notes then owned by any one or more
of the Company, any Subsidiary or any Affiliate). Subject to Section 6, each of
such Noteholders, acting together, may proceed to protect and enforce the
Unconditional Guarantee by suit or suits or proceedings in equity, at law or in
bankruptcy, and whether for the specific performance of any covenant or
agreement contained herein or in execution or aid of any power herein granted or
for the recovery of judgment for the obligations hereby guarantied or for the
enforcement of any other proper, legal or equitable remedy available under
applicable law. Notwithstanding the foregoing, during the existence of an Event
of Default described in Section 9.1(a) or Section 9.1(b) of the Note Purchase
Agreement, and irrespective of whether the Subordinated Notes then outstanding
shall have been declared to be due and payable pursuant to Section 9.2(a)(ii) of
the Note Purchase Agreement, subject to Section 6, any Purchaser who is a holder
of Subordinated Notes at such time, or any holder or holders of at least
twenty-five percent (25%) in principal amount of the Subordinated Notes at the
time outstanding (exclusive of Subordinated Notes then owned by any one or more
of the Company, any Subsidiary or any Affiliate), who or which Purchaser or
holder shall have not consented to any waiver with respect to such Event of
Default, may exercise each of the rights and remedies granted to the Noteholders
under this Guaranty Agreement.
2.13. DELAY OR OMISSION; NO WAIVER.
No course of dealing on the part of any Noteholder and no delay or
failure on the part of any such Person to exercise any right hereunder shall
impair such right or operate as a waiver of such right or otherwise prejudice
such Person's rights, powers and remedies hereunder. Every right and remedy
given by the Unconditional Guarantee or by law to any Noteholder may, subject to
Section 6, be exercised from time to time and as often as may be deemed
expedient by such Person.
2.14. RESTORATION OF RIGHTS AND REMEDIES.
If any Noteholder shall have instituted any proceeding to enforce any
right or remedy under the Unconditional Guarantee or under any Subordinated Note
held by such Noteholder, and such proceeding shall have been dismissed,
discontinued or abandoned for any reason, or shall have been determined
adversely to such Noteholder, then and in every such case each such Noteholder,
the Company and the Guarantor shall, except as may be limited or affected by any
determination (including, without limitation, any determination in connection
with any such dismissal) in such proceeding, be restored severally and
respectively to its respective former position hereunder and thereunder, and
thereafter, subject as aforesaid, the rights and remedies of such Noteholders
shall continue as though no such proceeding had been instituted.
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2.15. CUMULATIVE REMEDIES.
No remedy under this Guarantee Agreement, the Note Purchase Agreement
or the Subordinated Notes 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 pursuant to this Guarantee Agreement, the Note Purchase Agreement
or the Subordinated Notes.
2.16. LIMITATION ON GUARANTIED OBLIGATIONS.
It is the intention of the Guarantor and each Noteholder that the
maximum amount of the obligations of the Guarantor hereunder shall be equal to,
but not in excess of, the amount equal to the lesser of
(a) the amount of the Guaranteed Obligations, and
(b) the greater of
(i) the amount of the value received by the
Guarantor as a result of the transactions contemplated
hereby,
(ii) the amount of the proceeds of the sale
of the Subordinated Notes received by the Guarantor, and
(iii) the maximum amount permitted by applicable
law.
With respect to the foregoing determination of the "maximum amount permitted
by applicable law," but only to the extent the obligations of the Guarantor
hereunder would be avoidable under applicable law if they were not limited to
"the maximum amount permitted by applicable law," such obligations shall be
limited to the maximum amount that, after giving effect to the incurrence
thereof and after taking in consideration the value of any rights of
subrogation, reimbursement, contribution and similar rights the Guarantor may
have, would not render the Guarantor insolvent or unable to pay its debts
(within the meaning of Title 11 of the United States Code or as defined in the
analogous applicable law) as they mature or leave the Guarantor with an
unreasonably small capital. The need for any such limitation shall be
determined, and any such needed limitation shall be effective, at the time or
times that the Guarantor is deemed, under applicable law, to incur obligations
hereunder. Any such limitation shall be apportioned amongst the Guarantied
Obligations owed to the Noteholders pro rata. This Section 2.17 is intended
solely to preserve the rights of each Noteholder hereunder to the maximum
extent permitted by applicable law, and neither the Guarantor nor any other
Person shall have any rights under this Section 2.17 that it would not
otherwise have under applicable law. For the purposes of this Section 2.17,
"insolvency", "unreasonably small capital" and "inability to pay debts (as so
defined) as they mature" shall be determined in accordance with applicable law.
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3. INTERPRETATION OF THIS GUARANTEE AGREEMENT
3.1. TERMS DEFINED.
As used in this Guarantee Agreement, the capitalized terms have the
meaning specified in the Note Purchase Agreement unless otherwise specified
below or set forth in the section of this Guarantee Agreement referred to
immediately following such term (such definitions, unless otherwise expressly
provided, to be equally applicable to both the singular and plural forms of the
terms defined):
AFFILIATE OBLIGATION -- Section 2.8
COMPANY -- Section 1.1
GUARANTEE AGREEMENT, THIS -- has the meaning assigned to such term in
the first paragraph hereof.
GUARANTIED OBLIGATIONS -- Section 2.1.
GUARANTOR -- has the meaning assigned to such term in the first
paragraph hereof.
NOTE PURCHASE AGREEMENT -- Section 1.1.
NOTEHOLDER -- means, at any time, each Person that is the holder of any
Subordinated Note at such time.
PURCHASERS -- Section 1.1.
REQUIRED HOLDERS -- means, at any time, the holders of greater than
fifty percent (50%) in principal amount of the Subordinated Notes at the time
outstanding (exclusive of Subordinated Notes then owned by any one or more of
the Company, any Subsidiary, any Affiliate and any officer or director of any
thereof).
SUBSIDIARY SENIOR GUARANTEE -- means any guaranty agreement executed by
the Guarantor or any other guarantor with respect to Senior Debt.
SUBORDINATED NOTES -- Section 1.1.
UNCONDITIONAL GUARANTEE -- Section 2.1.
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3.2. SECTION HEADINGS AND CONSTRUCTION.
(a) SECTION HEADINGS, ETC. The titles of the Sections appear
as a matter of convenience only, do not constitute a part hereof and
shall not affect the construction hereof. The words "herein," "hereof,"
"hereunder" and "hereto" refer to this Guarantee Agreement as a whole
and not to any particular Section or other subdivision.
(b) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
4. WARRANTIES AND REPRESENTATIONS
The Guarantor represents and warrants to the Purchasers, as of the date
of effectiveness hereof, as follows:
4.1. GENERALLY.
(a) The Guarantor is fully aware of the financial condition
of the Company. The Guarantor delivers this guaranty based solely upon
its own independent investigation and in no part upon any
representation or statement of any one or more of any Noteholder with
respect thereto. The Guarantor is in a position to obtain, and hereby
assumes full responsibility for obtaining, any additional information
concerning the financial condition of the Company as the Guarantor may
deem material to its obligations hereunder, and the Guarantor is not
relying upon, nor expecting, any Noteholder to furnish it any
information concerning the financial condition of the Company.
(b) As of the date of the execution and delivery of this
Guarantee Agreement, there are no presently pending material court or
administrative proceedings or undischarged judgments against the
Guarantor; and no tax liens have been filed or threatened against the
Guarantor, nor is the Guarantor in default or claimed default under any
agreement for borrowed money.
(c) The Guarantor is a corporation duly organized and
validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Guarantor has the corporate power to
own its properties and carry on its business as it is now being
conducted. The Guarantor has the valid authority and the corporate
power to enter into and perform, and has taken all necessary action to
authorize the entry into, and the performance and delivery of, this
Guarantee Agreement and the transactions contemplated hereby.
(d) This Guarantee Agreement has been duly authorized by
all necessary action on the part of the Guarantor, has been duly
executed and delivered by duly authorized
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officers of the Guarantor, and constitutes a legal, valid and binding
obligation of the Guarantor, except, in each case:
(i) as such enforceability may be limited by
applicable bankruptcy, reorganization, arrangement, fraudulent
conveyance, insolvency, moratorium, or other similar laws
affecting the enforceability of creditors' rights generally;
(ii) as such enforceability may be subject to the
availability of equitable remedies; and
(iii) that certain rights to indemnity and
contribution may be limited by applicable law.
(e) The entry into and performance of this Guarantee
Agreement and the transactions contemplated hereby do not and will not
conflict with any applicable law or regulation or official or judicial
order, conflict with the charter, bylaws or other organizational
documents of the Guarantor, conflict with any agreement or document to
which the Guarantor is a party or that is binding upon it or any of its
Properties, or result in the creation or imposition of any Lien on any
of its Properties pursuant to the provisions of any agreement or
document.
(f) Neither the legal nature of the Guarantor, nor any
of its businesses and Properties, nor any relationship between or among
the Guarantor or any other Person, nor any circumstance in connection
with the execution or delivery of this Guarantee Agreement, is such as
to require any authorization, consent, approval, license, registration,
notarization, exemption or other action by or notice to or filing with
any court or administrative or governmental body or agency in
connection with the execution and delivery of this Guarantee Agreement
or the fulfillment of and compliance with the terms and provisions
hereof.
4.2. NATURE OF BUSINESS OF COMPANY AND SUBSIDIARIES.
The Company and the Guarantor are, and will be, as to financing and
capital raising activities, operated as part of one consolidated business entity
and the Guarantor is directly or indirectly dependent upon the Company for and
in connection with its business activities and its financial resources. The
Guarantor understands that the Company agreed to cause the Guarantor to provide
this Agreement, to sell the Subordinated Notes and to enter into the related
transactions based on the consolidated financial position of the Company and the
Subsidiaries, and the Guarantor further understands that the Purchasers are
relying on the consolidated financial condition of the Company and the
Subsidiaries in purchasing the Subordinated Notes.
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5. GENERAL COVENANTS
The Guarantor covenants and agrees that on and after the date hereof
and so long as any of the Guarantied Obligations shall be outstanding:
5.1. UNDERTAKINGS IN NOTE PURCHASE AGREEMENT.
The Guarantor will comply with each of the undertakings of the Company
in the Note Purchase Agreement in respect of which the Company undertakes to
cause the Guarantor (in its capacity as a Guarantor and as a Subsidiary) to
comply with such undertakings, as if such undertakings (as they apply to the
Guarantor) were set forth at length herein as the undertakings of the Guarantor.
5.2. PAYMENT OF SUBORDINATED NOTES AND MAINTENANCE OF OFFICES.
The Guarantor will punctually pay, or cause to be paid, all of the
Guarantied Obligations when due in accordance with the terms hereof, and subject
to the limitations set forth in Section 6, and all other payment obligations
required of it hereunder and will maintain an office at its address set forth in
Section 7.3 where notices, presentations and demands in respect of this
Guarantee Agreement may be made upon it. Such office will be maintained at
such address until such time as the Guarantor shall notify the Noteholders of
any change of location of such office.
5.3. FURTHER ASSURANCES.
The Guarantor will cooperate with the Noteholders and execute such
further instruments and documents as the Required Holders shall reasonably
request to carry out, to the reasonable satisfaction of the Required Holders,
the transactions contemplated by this Guarantee Agreement and the other
Financing Documents.
6. SUBORDINATION
The Guaranteed Obligations are subordinate and junior in right of
payment to the Subsidiary Senior Guarantee and the Senior Debt to the extent
that the Subordinated Notes are subordinate and junior to the Senior Debt as
provided in Section 10 of the Note Purchase Agreement, and as if the provisions
of Section 10 of the Note Purchase Agreement, together with the definitions set
forth in Section 11 of the Note Purchase Agreement of the terms used in such
Section 10, were set forth herein mutatis mutandis, and as if the term
"Company," as used therein, related to the Guarantor; the term "Senior Debt," as
used therein, related to each of the Subsidiary Senior Guarantee and the Senior
Debt; and the term "Subordinated Debt," as used therein, related to this
Guarantee Agreement. Upon the sale or other transfer or disposition (by merger
or otherwise) of the capital stock of the Guarantor (so long as such sale, other
transfer or disposition is permitted or in accordance with the terms of the Note
Purchase Agreement), then this Guarantee Agreement shall automatically terminate
and the Guarantor shall be deemed automatically and unconditionally released and
discharged from all obligations under this Guarantee Agreement without any
further
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action required on the part of any Noteholder; provided that in such event any
cash proceeds of the sale or other disposition of such capital stock remaining
after payment in full of the Senior Debt shall be applied to the Subordinated
Notes in accordance with their terms and the terms of the Note Purchase
Agreement. The Noteholders shall deliver appropriate instruments evidencing such
release upon receipt of a request of the Guarantor or the holders of the Senior
Debt.
7. MISCELLANEOUS
7.1. SUCCESSORS AND ASSIGNS.
(a) Whenever the Guarantor or any of the parties to the
Note Purchase Agreement is referred to, such reference shall be deemed
to include the successors and assigns of such party, and all the
covenants, promises and agreements contained in this Guarantee
Agreement by or on behalf of the Guarantor shall bind the successors
and assigns of the Guarantor and shall inure to the benefit of each of
the Noteholders from time to time whether so expressed or not and
whether or not an assignment of the rights hereunder shall have been
delivered in connection with any assignment or other transfer of
Subordinated Notes.
(b) In connection with the transfer of the Subordinated
Notes by any Noteholder in accordance with the requirements of the Note
Purchase Agreement, the Guarantor agrees to provide an executed copy of
this Guarantee Agreement to the new Noteholder or Noteholders of such
Subordinated Notes, provided that no additional obligations of the
Guarantor shall thereby be created but rather that the existing
obligations of the Guarantor shall be more particularly stated in
respect of one or more future Noteholders that are the subject of this
Guarantee Agreement.
7.2. PARTIAL INVALIDITY.
The unenforceability or invalidity of any provision or provisions
hereof shall not render any other provision or provisions contained herein
unenforceable or invalid.
7.3. COMMUNICATIONS.
(a) METHOD; ADDRESS. All communications hereunder shall be
in writing, shall be delivered in the manner required by the Note
Purchase Agreement, and shall be addressed, if to the Guarantor, at the
address set forth on Annex 1 hereto, and if to any of the Noteholders:
(A) if such Noteholder is a Purchaser, at the address
set forth on Annex 1 to the Note Purchaser Agreement for such
Purchaser, and further including any parties referred to on
such Annex 1 which are required to receive notices in addition
to such Purchaser; and
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(B) if such Noteholder is not a Purchaser, at the
address set forth in the register for the registration and transfer of
Subordinated Notes maintained pursuant to Section 6.1 of the Note
Purchase Agreement for such Noteholder;
or to any such party at such other address as such party may designate
by notice duly given in accordance with this Section 7.3.
(b) WHEN GIVEN. Any communication addressed and
delivered as herein provided shall be deemed to be received when
actually delivered to the address of the addressee (whether or not
delivery is accepted) or received by the telecopy machine of the
recipient. Any communication not so addressed and delivered shall be
ineffective.
7.4. GOVERNING LAW.
THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, INTERNAL CONNECTICUT LAW.
7.5. EFFECTIVE DATE.
This Guarantee Agreement shall be effective as of the date first
written above.
7.6. BENEFITS OF GUARANTEE AGREEMENT RESTRICTED TO NOTEHOLDERS.
Nothing express or implied in this Guarantee Agreement is intended or
shall be construed to give to any Person other than the Guarantor and the
Noteholders any legal or equitable right, remedy or claim under or in respect
hereof or any covenant, condition or provision therein or herein contained; and
all such covenants, conditions and provisions are and shall be held to be for
the sole and exclusive benefit of the Guarantor and the Noteholders.
7.7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein or made in writing
by the Guarantor in connection herewith shall survive the execution and delivery
hereof.
7.8. EXPENSES.
(a) The Guarantor shall pay when billed the reasonable
costs and expenses (including reasonable attorneys' fees) incurred by
the Noteholders in connection with the consideration, negotiation,
preparation or execution of any amendments, waivers, consents,
standstill agreements and other similar agreements with respect hereto
(whether or not any such amendments, waivers, consents, standstill
agreements or other similar agreements are executed).
Guarantee Agreement
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(b) At any time when either of the Company or the Guarantor
and the Noteholders are conducting restructuring or workout
negotiations in respect hereof, or a Default or Event of Default
exists, the Guarantor shall pay when billed the reasonable costs and
expenses (including reasonable attorneys' fees and the reasonable fees
of professional advisors) incurred by the Noteholders in connection
with the assessment, analysis or enforcement of any rights or remedies
that are or may be available to the Noteholders.
(c) If the Guarantor shall fail to pay when due any
principal of, or Prepayment Compensation Amount or interest on, any
Subordinated Note, the Guarantor shall pay to each holder of
Subordinated Notes, to the extent permitted by law, such amounts as
shall be sufficient to cover the costs and expenses, including but not
limited to reasonable attorneys' fees, incurred by such holder in
collecting any sums due on such Subordinated Notes.
7.9. AMENDMENT.
This Guarantee Agreement may be amended only in a writing executed by
the Guarantor and the Required Holders.
7.10. SURVIVAL.
So long as the Guarantied Obligations and all payment obligations of
the Guarantor hereunder shall not have been fully and finally performed and
indefeasibly paid, the obligations of the Guarantor hereunder shall survive the
transfer and payment of any Subordinated Note.
7.11. ENTIRE AGREEMENT.
This Guarantee Agreement constitutes the final written expression of
all of the terms hereof and is a complete and exclusive statement of those
terms.
7.12. DUPLICATE ORIGINALS, EXECUTION IN COUNTERPART.
Two or more duplicate originals hereof may be signed by the parties,
each of which shall be an original but all of which together shall constitute
one and the same instrument. This Guarantee Agreement may be executed in one or
more counterparts and shall be effective when at least one counterpart shall
have been executed by each party hereto, and each set of counterparts that,
collectively, show execution by each party hereto shall constitute one duplicate
original.
[Remainder of page intentionally blank. Next page is signature page.]
Guarantee Agreement
16
<PAGE> 17
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee Agreement
to be executed on its behalf by a duly authorized officer of the Guarantor.
---------------------------------
By_______________________________
Name: Thomas A. Gilbride
Title: Vice President
[SUBORDINATED GUARANTEE AGREEMENT of _______________.]
Guarantee Agreement
<PAGE> 18
ANNEX 1
Address of Guarantor
- -------------------
c/o Hawk Corporation
200 Public Square
Suite 29-2500
Cleveland, Ohio 44114-2301
Guarantee Agreement
<PAGE> 1
Exhibit 12.1
Hawk Corporation
Computation of Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Historical
............................................................
(Dollars in Thousands)
Year Ended December 31,
------------------------------------------------------------
1991 1992 1993 1994 1995
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pre-tax income (loss) from continuing
operations, including preferred stock dividend
requirement ($887) $760 $2,689 $3,836 $2,285
Less: capitalized interest 0 0 0 0 0
------------------------------------------------------------
(887) 760 2,689 3,836 2,285
Fixed Charges:
Interest expense 3,530 2,903 2,654 3,267 7,323
Amortization of deferred financing costs 124 125 125 144 539
Estimated interest portion of rentals 31 17 17 26 215
Preferred stock dividend requirement 453 453 453 507 562
------------------------------------------------------------
Total fixed charges 4,138 3,498 3,249 3,944 8,639
------------------------------------------------------------
Earnings used in ratio computation $3,251 $4,258 $5,938 $7,780 $10,924
============================================================
Ratio of Earnings to Fixed Charges 1.22 1.83 1.97 1.26
<CAPTION>
Historical Pro Forma
......................... .....................................
Pro Forma
(Dollars in Thousands) Nine Months Ended Pro Forma Nine Months
September 30, Year Ended Ended
------------------------ December 31, September 30,
1995 1996 1995 (a) 1996 (a)
------------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Pre-tax income (loss) from continuing
operations, including preferred stock dividend
requirement $2,372 ($830) $8,621 ($561)
Less: capitalized interest 0 0 0 0
------------------------ ----------------- -----------------
2,372 (830) 8,621 (561)
Fixed Charges:
Interest expense 4,432 7,321 14,050 10,108
Amortization of deferred financing costs 399 420 897 654
Estimated interest portion of rentals 130 81 268 81
Preferred stock dividend requirement 421 424 562 424
------------------------ ----------------- -----------------
Total fixed charges 5,382 8,246 15,778 11,267
------------------------ ----------------- -----------------
Earnings used in ratio computation $7,754 $7,416 $24,398 $10,706
======================== ================= =================
Ratio of Earnings to Fixed Charges 1.44 1.55
<FN>
(a) To give effect to the increase in interest expense, amortization of
deferred finance costs and interest portion of rentals due to the
following: (i) the SKW and Hutchinson acquisitions, (ii) the sale of the
Notes, and (iii) the completion of the other components of the
Transactions.
(b) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items and accounting changes, interest
expense, amortization of deferred financing costs, taxes and a portion of
rent expense representative of interest, by the sum of interest expense,
amortization of deferred financing costs, a portion of rent expense
representative of interest and preferred stock dividend requirements. The
ratio of earnings to fixed charges is not meaningful for periods that
result in a deficit. For the year ended December 31, 1991 and the nine
months ended September 30, 1996, the deficit of earnings to fixed charges
was $887 and $830, respectively. On a pro forma basis, the deficit of
earnings to fixed charges was $561 for the nine months ended September 30,
1996.
</TABLE>
<PAGE> 1
EXHIBIT 16.1
December 20, 1996
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments in Item 14 of Form S-4 of Hawk
Corporation dated December 20, 1996.
Yours truly,
DELOITTE & TOUCHE LLP
<PAGE> 1
<TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<CAPTION>
Jurisdiction of Percent of
Parent Subsidiaries Organization Ownership
- ------ ------------ ------------ ---------
<S> <C> <C> <C>
Hawk Corporation Friction Products Co. Ohio 100%
Logan Metal Stampings, Inc. Ohio 100%
Helsel, Inc. Delaware 100%
S.K. Wellman Holdings, Inc. Delaware 100%
Hutchinson Products Corporation Delaware 100%
Friction Products Co. Hawk Brake, Inc. Ohio 100%
S.K. Wellman S.K. Wellman Corp. Delaware 100%
Holdings, Inc. Wellman Friction Products
U.K. Corp. Delaware 100%
S.K. Wellman S.p.A. Italy 5%
S.K. Wellman Corp. The S.K. Wellman Company
of Canada Limited Canada 100%
S.K. Wellman S.p.A. Italy 95%
</TABLE>
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the consolidated financial statements of Hawk Corporation
dated October 1, 1996 (except for Note M, as to which the date is November 27,
1996), in the Registration Statement (Form S-4 No. 333-XXXXX) and related
Prospectus of Hawk Corporation for the registration of $100,000,000 in Senior
Notes due 2003.
/s/ Ernst & Young LLP
Cleveland, Ohio
December 18, 1996
<PAGE> 2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the consolidated financial statements of S.K. Wellman
Limited Inc. and Subsidiaries dated September 26, 1996 in the Registration
Statement (Form S-4 No. 333-XXXXX) and related Prospectus of Hawk Corporation
for the registration of $100,000,000 in Senior Notes due 2003.
/s/ Ernst & Young LLP
Cleveland, Ohio
December 18, 1996
<PAGE> 3
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report on the financial statements of Helsel, Inc. dated February 3,
1995 in the Registration Statement (Form S-4 No. 333-XXXXX) and related
Prospectus of Hawk Corporation for the registration of $100,000,000 in Senior
Notes due 2003.
/s/ Ernst & Young LLP
Cleveland, Ohio
December 18, 1996
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Hawk Corporation on
Form S-4 of our report dated March 14, 1995 (April 10, 1995 as to Note 10)
relating to the financial statements of The Hawk Group of Companies, Inc.
(which expresses an unqualified opinion and includes an explanatory paragraph
relating to a change in method of accounting for income taxes effective January
1, 1993 to conform with Statement of Financial Accounting Standard No. 109)
appearing in the Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Cleveland, Ohio
December 18, 1996
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 of our
report dated February 2, 1996, on our audit of the financial statements of
Houghton Acquisition Corporation d/b/a Hutchinson Foundry Products Company. We
also consent to the reference to our firm under the caption "Experts".
/s/ Coopers & Lybrand L.L.P.
St. Louis, Missouri
December 18, 1996
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION UNDER THE TRUST INDENTURE ACT
OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
BANK ONE TRUST COMPANY, N.A.
NOT APPLICABLE 31-0838515
(State of Incorporation (I.R.S. Employer
if not a national bank) Identification No.)
100 EAST BROAD STREET, COLUMBUS, OHIO 43215
(Address of trustee's principal executive offices) (Zip Code)
TED KRAVITS
C/O BANK ONE TRUST COMPANY, NA
100 EAST BROAD STREET
COLUMBUS, OHIO 43215
(614) 248-2566
(Name, address and telephone number of agent for service)
HAWK CORPORATION
(Exact name of obligor as specified in its charter)
DELAWARE 34-1608156
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
200 PUBLIC SQUARE, SUITE 30-5000
CLEVELAND, OHIO 44114
(Address of principal executive offices) (Zip Code)
HAWK CORPORATION $100,000,000
SERIES B 10 1/4% SENIOR NOTES DUE 2003
(Title of the Indenture securities)
<PAGE> 2
GENERAL
1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY
TO WHICH IT IS SUBJECT.
Comptroller of the Currency, Washington, D.C.
Federal Reserve Bank of Cleveland, Cleveland, Ohio
Federal Deposit Insurance Corporation, Washington, D.C.
The Board of Governors of the Federal Reserve System,
Washington, D.C.
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee.
16. LIST OF EXHIBITS
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF
ELIGIBILITY AND QUALIFICATION. (EXHIBITS IDENTIFIED IN PARENTHESES, ON
FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS
EXHIBITS HERETO.)
Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect.
Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business.
Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers.
Exhibit 4 - A copy of the Bylaws of the trustee as now in effect.
<PAGE> 3
Exhibit 5 - Not applicable.
Exhibit 6 - The consent of the trustee required by Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Exhibit 7 - A copy of the Report of Condition of the trustee as of the close of
business on September 30, 1996, published pursuant to the requirements of the
Comptroller of the Company.
Exhibit 8 - Not applicable.
Exhibit 9 - Not applicable.
Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One Trust Company, NA, a national banking association
organized under the National Banking Act, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in Columbus, Ohio, on December 9, 1996.
Bank One Trust Company, NA
By: /s/ Ted Kravits
--------------------------------
Ted Kravits
Authorized Signer
<PAGE> 4
EXHIBIT 1
BANK ONE TRUST COMPANY, NA
CERTIFICATION OF ARTICLES OF ASSOCIATION AND RESOLUTIONS
--------------------------------------------------------
CONCERNING NAME CHANGE
----------------------
I, Jessica K. Ditullio, an Assistant Secretary of Bank One Trust Company, NA,
Columbus, Ohio (formerly known as Bank One Ohio Trust Company, NA, formerly
known as Bank One Trust Company, NA, formerly known as First Trust Company of
Ohio, NA), hereby certify that attached hereto is a true, correct and complete
copy of the Articles of Association of First Trust Company of Ohio, NA, and that
said Articles of Association are still in full force and effect and have not
been amended or repealed as of the date of the execution of this Certificate,
except as to amendments to the FIRST ARTICLE thereof dated September 19, 1979,
November 20, 1990, and February 1, 1995, which amendments changed the name of
First Trust Company of Ohio, NA to Bank One Trust Company, NA, Bank One Ohio
Trust Company, NA, and finally Bank One Trust Company, NA.
BANK ONE TRUST COMPANY, NA
By /s/ Jessica K. Ditullio
------------------------------------
Jessica K. Ditullio
Assistant Secretary
Dated at Columbus, Ohio this
11th day of December, 1996
<PAGE> 5
CERTIFICATION OF RESOLUTIONS
----------------------------
CONCERNING NAME CHANGE
----------------------
The undersigned hereby certifies that he is the Secretary of Bank One Ohio Trust
Company, N.A., and that at a Board of Directors meeting held on November 20,
1990, at which a quorum was present and acting throughout, the following
resolution was duly adopted and is still in full force and effect:
RESOLVED, That effective January 1, 1991, the First Paragraph of the
Articles of Association of BANK ONE TRUST COMPANY, NA be, and they
hereby are, amended to read as follows:
"FIRST. The title of this Association shall be BANK ONE OHIO
TRUST COMPANY, NATIONAL ASSOCIATION."
BE IT FURTHER RESOLVED, that C. Thomas Rice or his designee is hereby
authorized to execute such documents or take such other actions as
shall be necessary to carry out the terms of this resolution,
including, without limitation, submitting this proposed amendment to
the sole shareholder of BANK ONE TRUST COMPANY, N.A. for its approval.
The undersigned further certifies that at a Special Meeting of Shareholders held
on November 20, 1990 immediately following the above-mentioned meeting of the
Board of Directors, the following resolution was adopted by the sole shareholder
of the Trust Company, which resolution is still in full force and effect:
RESOLVED, That effective January 1, 1991, the First Paragraph of the
Articles of Association of BANK ONE TRUST COMPANY, NA be, and they
hereby are, amended to read as follows:
"FIRST. The title of this Association shall be BANK ONE OHIO
TRUST COMPANY, NATIONAL ASSOCIATION."
Signed this 6th day of May, 1993.
Bank One Ohio Trust Company, N.A.
By: /s/ Donald G. Charles
-------------------------------------
Donald G. Charles, Secretary
<PAGE> 6
CERTIFICATION OF RESOLUTIONS
----------------------------
CONCERNING NAME CHANGE
----------------------
The undersigned hereby certifies that he is the Secretary of Bank One Ohio Trust
Company, N.A., and that at a Board of Directors meeting held on September 19,
1979, at which a quorum was present and acting throughout, the following
resolution was duly adopted:
RESOLVED, That the Board of Directors hereby declares it advisable
that the name of First Trust Company of Ohio, N.A. (Company) be
changed to Bank One Trust Company, N.A. and that the FIRST Article of
the Articles of Association of the Company be amended to read as
follows:
"FIRST. The title of this Association shall be Bank One
Trust Company, N.A."
BE IT FURTHER RESOLVED, That said corporate name change shall be
submitted for consideration and approval by the shareholders of the
Company at a Special Meeting of Shareholders to be held at the Main
Office of the Company on September 19, 1979 at 1:00 P.M.; that the
record date for the determination of these shareholders entitled to
notice of and to vote at said meeting shall be the close of business
on September 5, 1979; and that notice of said meeting shall be given
to the shareholders of the Company by the President.
The undersigned further certifies that at a Special Meeting of Shareholders held
on September 19, 1979 at 1:00 p.m., the following resolution was approved by all
shareholders of the Trust Company:
RESOLVED, That effective upon the date specified in an appropriate
certificate of approval to be issued by the Comptroller of the
Currency, the title of this bank be changed to "Bank One Trust
Company, N.A." and Article First of the Articles of Association of the
bank be amended to read as follows:
FIRST. The title of this Association shall be "Bank One
Trust Company, N.A."
BE IT FURTHER RESOLVED that the Cashier/Secretary of this Association be and he
is hereby authorized and directed to file with the Office of the Comptroller of
the Currency a certified copy of the foregoing amendment.
Signed this 6th day of May, 1993.
Bank One Ohio Trust Company, N.A.
:
By: /s/ Donald G. Charles
-----------------------------------
Donald G. Charles, Secretary
<PAGE> 7
CERTIFICATION OF ARTICLES OF ASSOCIATION
----------------------------------------
The undersigned hereby certifies that he is the Secretary of Bank One Ohio Trust
Company, N.A. (f/k/a Bank One Trust Company, N.A., f/k/a First Trust Company of
Ohio, N.A.), and that attached hereto is a true, correct and complete copy of
the Articles of Association of First Trust Company of Ohio, N.A., which Articles
of Association are still in full force and effect, except as to certain changes
to the name of the Association accomplished by amending the FIRST Article
thereof, which amendments were approved by resolutions of the Board of Directors
and the Shareholders of the Association on September 19, 1979 and November 20,
1990. Said amendments have resulted in the title of the Association now being
Bank One Ohio Trust Company, N.A.
Signed this 6th day of May, 1993.
Bank One Ohio Trust Company, N.A.
By: /s/ Donald G. Charles
----------------------------------
Donald G. Charles, Secretary
<PAGE> 8
FIRST TRUST COMPANY OF OHIO, NATIONAL ASSOCIATION
CHARTER NO.
ARTICLES OF ASSOCIATION
For the purpose of organizing an Association to carry on the business of
banking under the laws of the United States, the undersigned do enter into
the following Articles of Association:
FIRST: The title of this Association shall be First Trust
Company of Ohio, National Association.
SECOND. The main office of the Association shall be in the City of
Columbus, County of Franklin, State of Ohio, The general business of the
Association shall be conducted at its main office and its branches.
THIRD. The Board of Directors of this Association shall consist of not
less than five nor more than twenty-five shareholders, the exact number of
Directors within such minimum and maximum limits to be fixed and determined from
time-to-time by resolution of a majority of the full Board of Directors or by
resolution of the shareholders at any annual or special meeting thereof. Unless
otherwise provided by the laws of the United States, any vacancy in the Board of
Directors for any reason, including an increase in the number thereof, may be
filled by action of the Board of Directors.
FOURTH. The annual meeting of the shareholders for the election of
Directors and the transaction of whatever other business may be brought before
said meeting shall be held at the main office or such other place as the Board
of Directors may designate, on the day of each year specified therefor in the
By-Laws, but if no election is he]d on that day, it may be held on any
subsequent. day according to the provisions of law; and all elections shall be
held according to
<PAGE> 9
such lawful regulations as may be prescribed by the Board of
Directors.
FIFTH. The authorized amount of capital stock of this Association shall
be eighty thousand shares of common stock of the par value of ten dollars
($10.00) each; but said capital stock may be increased or decreased from
time-to-time, in accordance with the provisions of the laws of the United
States.
No holder of shares of the capital stock of any class of the Association
shall have any pre-emptive or preferential right of subscription to any shares
of any class of stock of this Association, whether now or hereafter authorized
or to any obligations convertible into stock of this Association, issued or
sold, nor any right.of subscription to any thereof other than such, if any, as
the Board of Directors, in its discretion, may from time-to-time determine and
at such price as the Board of Directors may from time-to-time fix.
The Association, at any time and from time-to-time, may authorize and
issue debt obligations, whether or not Subordinated, without the approval of the
shareholders.
SIXTH. The Board of Directors shall appoint one of its members President
of this Association, who shall be Chairman of the Board, unless the Board
appoints another director to be the Chairman. The Board of Directors shall have
the power to appoint one or more Vice Presidents; and to appoint a Cashier and
such other officers and employees as may be required to transact the business of
this Association.
The Board of Directors shall have the power to define the duties of the
officers and employees of the Association; to fix the salaries to be paid to
them; to dismiss them; to require bonds from them and to fix the penalty
thereof; to regulate the manner in which any increase of the capital of the
Association shall be made; to manage and administer the business and affairs of
the Association; to make all By-Laws that it may be lawful for them to make; and
generally to do and perform all acts that it may be legal for a Board of
Directors to do and perform.
-2-
<PAGE> 10
SEVENTH. The Board of Directors shall have the power to change the
location of the main office to any other place within the limits of the City of
Columbus, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency; and shall have the power to establish or
change the location of any branch or branches of the Association to any other
location, without the approval of the shareholders but subject to the approval
of the Comptroller of the Currency.
EIGHTH. The corporate existence of this Association shall continue until
terminated in accordance with the laws of the United States. The purpose of this
Association shall be to carry on the general business of a commercial bank trust
department and to engage in such activities as are necessary, incident or
related to such business. This Article shall not be amended, or any other
provision added elsewhere in these Articles expanding the powers of the
Association, without the prior approval of the Comptroller of the Currency.
NINTH. The Board of Directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than 25 percent of the stock of
this Association, may call a special meeting of shareholders at any time, Unless
otherwise provided by the laws of the United States, a notice of the time, place
and purpose of every annual and special meeting of the shareholders shall be
given by first-class mail, postage prepaid, mailed at least ten days prior to
the date of such meeting to each shareholder of record at his address as shown
upon the books of this Association.
TENTH. Any person, his heirs, executors, or administrators, may be
indemnified or reimbursed by the Association for reasonable expenses actually
incurred in connection with any action, suit, or proceeding, civil or criminal,
to which he or they shall be made a party by reason of his being or having been
a director, officer, or employee of this Association or of any firm,
corporation, or organization which he served in any such capacity at the request
of the Association; PROVIDED, HOWEVER, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for gross
negligence, willful misconduct or criminal acts in the performance of his duties
to the Association: And, provided further, that no person shall be so
indemnified or reimbursed in relation to any matter in such action, suit, or
proceeding which has been made the subject of a compromise settlement except
with the approval of a court of competent jurisdiction, or the holders of record
of a majority of the outstanding shares of the Association, or
-3-
<PAGE> 11
the Board of Directors, acting by vote of directors not parties to the same or
substantially the same action, suit, or proceeding, constituting a majority of
the whole number of directors. The foregoing right of indemnification or
reimbursement shall not be exclusive of other rights to which such person, his
heirs. executors, or administrators, may be entitled as a matter of law.
The Association may, upon the affirmative vote of a majority of its
Board of Directors, purchase insurance for the purpose of indemnifying its
directors, officers and other employees to the extent that such indemnification
is allowed in the preceding paragraph. Such insurance may, but need not, be for
the benefit of all directors, officers or employees.
ELEVENTH. These Articles of Association may be amended at any regular or
special meeting of the shareholders by the affirmative vote of the holders of a
majority of the stock of this Association, unless the vote of the holders of a
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount.
IN WITNESS WHEREOF, We have hereunto set our hands this 7th day of May,
1973.
/s/ ??? /s/ ???
- -------------------------------- --------------------------------
/s/ ??? /s/ ???
- -------------------------------- --------------------------------
/s/ ???
- --------------------------------
-4-
<PAGE> 12
EXHIBIT 2
The undersigned hereby certifies that the STATE OF OHIO
following certification continues in full
force and effect. [SEAL]
BANK ONE TRUST COMPANY, NA
By: /s/ Ted Kravits
---------------------
Authorized Signer
Date:
--------------------
DIVISION OF BANKS
Certificate of Authority No. N - 120
I, Alison M. Meeks, Superintendent of Banks, do hereby certify that BANK
ONE TRUST COMPANY, NATIONAL ASSOCIATION, Columbus, Franklin County, Ohio, has
complied with all requirements of law relating to trust companies, and is
authorized to transact the business of a trust company and to perform all the
functions granted to such companies by the laws of this state.
Given under my hand and official seal at Columbus, Ohio, this 8th say of
May, A.D. 1995.
/s/ Alison M. Meeks
---------------------------------
[SEAL] Superintendent of Banks
<PAGE> 13
[LOGO] EXHIBIT 3
Comptroller of the Currency
Administrator of National Banks
Washington, D.C. 20219
CERTIFICATE
I, Eugene A. Ludwig, Comptroller of the Currency, do hereby certify
that :
1. The Comptroller of the Currency, pursuant to Revised Statutes 324, et seq.,
as amended, 12 U.S.C. 1, et seq., as amended, has possession, custody and
control of all records pertaining to the chartering, regulation and supervision
of all National Banking Associations.
2. "Bank One Trust Company, National Association", Columbus, Ohio, (Charter No.
16235), is a National Banking Association formed under the laws of the United
States and is authorized thereunder to transact the business of banking and
exercise Fiduciary Powers on the date of this Certificate.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and
caused my seal of office to be affixed to these presents at
the Treasury Department, in the City of Washington and
District of Columbia, this 16th day of February, 1995.
/s/ Eugene A. Ludwig
- ----------------------------
Comptroller of the Currency
The undersigned hereby
certifies that the
foregoing continues
in full force and effect.
Bank One Trust Company, NA
By: /s/ Ted Kravits
-----------------------------
Date:
--------------------------
<PAGE> 14
EXHIBIT 4
BANK ONE TRUST COMPANY, N.A.
BY-LAWS
-------
ARTICLE I
MEETING OF SHAREHOLDERS
-----------------------
SECTION 1.01. ANNUAL MEETING. The regular annual meeting of the shareholders of
the Bank for the election of Directors and for the transaction of such business
as may properly come before the meeting shall be held at its main office, or
other convenient place duly authorized by the Board of Directors, on the same
day upon which any regular or special Board meeting is held from and including
the third Monday of January to, and including, the fourth Monday of February of
each year, or on the next succeeding banking day, if the day fixed falls on a
legal holiday. If from any cause, an election of Directors is not made on the
day fixed for the regular meeting of the shareholders or, in the event of a
legal holiday, on the next succeeding banking day, the Board of Directors shall
order the election to be held on some subsequent day, as soon thereafter as
practicable, according to the provisions of law; and notice thereof shall be
given in the manner herein provided for the annual meeting. Notice of such
annual meeting shall be given by or under the direction of the Secretary, or
such other officer as may be designated by the Chief Executive Officer, by
first-class mail, postage prepaid, to all shareholders of record of the Bank at
their respective addresses as shown upon the books of the Bank mailed not less
than ten days prior to the date fixed for such meeting.
SECTION 1.02. SPECIAL MEETINGS. A special meeting of the shareholders of the
Bank may be called at any time by the Board of Directors or by any three or more
shareholders owning, in the aggregate, not less than ten percent of the stock of
the Bank. Notice of any special meeting of the shareholders called by the Board
of Directors, stating the time, place and purpose of the meeting, shall be given
by or under the direction of the Secretary, or such other officer as is
designated by the Chief Executive Officer, by first-class mail, postage prepaid,
to all shareholders of record of the Bank at their respective addresses as shown
upon the books of the Bank mailed not less than ten days prior to the date fixed
for such meeting.
Any special meeting of shareholders shall be conducted and its
proceedings recorded in the manner prescribed in these By-Laws for annual
meetings of shareholders.
SECTION 1.03. SECRETARY OF MEETING OF SHAREHOLDERS. The Board of Directors may
designate a person to be the secretary of the meeting of shareholders. in the
absence of a presiding officer, as designated by these By-Laws. the Board of
Directors may designate a person to act as the presiding officer. In the event
the Board of Directors fails to designate a person to preside at a meeting of
shareholders and a secretary of such meeting, the shareholders present or
represented shall elect a person to preside and a person to serve as secretary
of the meeting.
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<PAGE> 15
The secretary of the meeting of shareholders shall cause the returns
made by the judges and election and other proceedings to be recorded In the
minute book of the Bank. The presiding officer shall notify the Directors-elect
of their election and to meet forthwith for the organization of the new Board of
Directors. The minutes of the meeting shall be signed by the presiding officer
and the secretary designated for the meeting.
SECTION 1.04. JUDGES OF ELECTION. The Board of Directors may appoint as many as
three shareholders to be judges of the election, who shall hold and conduct the
same, and who shall, after the election has been held, notify, in writing over
their signatures, the secretary of the meeting of shareholders of the result
thereof and the names of the Directors elected; provided, however, that upon
failure for any reason of any judge or judges of election, so appointed by the
Directors, to serve, the presiding officer of the meeting shall appoint other
shareholders or their proxies to fill the vacancies. The judges of election, at
the request of the chairman of the meeting, shall act as tellers of any other
vote by ballot taken at such meeting, and shall notify, in writing over their
signature, the secretary of the Board of Directors of the result thereof.
SECTION 1.05. PROXIES. In all elections of Directors, each shareholder of
record, who is qualified to vote under the provisions of Federal Law, shall have
the right to vote the number of shares of record in his name for as many persons
as there are Directors to be elected, or to cumulate such shares as provided by
Federal Law. In deciding all other questions at meetings of shareholders, each
shareholder shall be entitled to one vote on each share of stock of record in
his name. Shareholders may vote by proxy duly authorized in writing. All proxies
used at the annual meeting shall be secured for that meeting only, or any
adjournment thereof, and shall be dated, and if not dated by the shareholder,
shall be dated as of the date of the receipt thereof. No officer or employee of
this Bank may act as proxy.
SECTION 1.06. QUORUM. Holders of record of a majority of the shares of the
capital stock of the Bank, eligible to be voted, present either in person or by
proxy, shall constitute a quorum for the transaction of business at any meeting
of shareholders, but shareholders present at any meeting and constituting less
than a quorum may, without further notice, adjourn the meeting from time to time
until a quorum is obtained. A majority of the votes cast shall decide every
question or matter submitted to the shareholders at any meeting, unless
otherwise provided by law or by the Articles of Association.
ARTICLE II
DIRECTORS
---------
SECTION 2.01. QUALIFICATIONS. Each Director shall have the qualifications
prescribed by law. No person elected a Director may exercise any of the powers
of his office until he has taken the oath of such office.
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<PAGE> 16
SECTION 2.02. VACANCIES. Directors of the Bank shall hold office for one year
and until their successors are elected and qualified. Any vacancy in the Board
shall be filled by appointment of the remaining Directors, and any Director so
appointed shall hold his place until the next election.
SECTION 2.03. ORGANIZATION MEETING. The Directors elected by the shareholders
shall meet for organization of the new Board at the time and place fixed by the
presiding officer of the annual meeting. If at the time fixed for such meeting
there is no quorum present, the Directors in attendance may adjourn from time to
time until a quorum is obtained. A majority of the number of Directors elected
by the shareholders shall constitute a quorum for the transaction of business.
SECTION 2.04. REGULAR MEETINGS. The regular meetings of the Board of Directors
shall be held in the first month of each calendar quarter at such date, time and
place as the Board may previously designate, or should the Board fall to so
designate, at such date, time and place as the Chairman of the Board or
President may fix. Whenever a quorum is not present, the Directors in attendance
shall adjourn the meeting to a time not later than the date fixed by the By-Laws
for the next succeeding regular meeting of the Board. Members of the Board of
Directors may participate in such meetings through use of conference telephone
or similar communications equipment, so long as all members participating in
such meetings can hear one another.
SECTION 2.05. SPECIAL MEETINGS. Special meetings of the Board of Directors shall
be held at the call of the Chairman of the Board or President, or at the request
of two or more Directors. Any special meeting may be held at such place and at
such time as may De fixed in the call. Written or oral notice shall be given to
each Director not later than the day next preceding the day on which the special
meeting is to be held, which notice may be waived in writing. The presence of a
Director at any meeting of the Board shall be deemed a waiver of notice thereof
by him. Whenever a quorum is not present, the Directors in attendance shall
adjourn the special meeting from day to day until a quorum is obtained. Members
of the Board of Directors may participate in such meetings through use of
conference telephone or similar communications equipment, so long as all members
participating in such meetings can hear one another.
SECTION 2.06. QUORUM. A majority of the Directors shall constitute a quorum at
any meeting, except when otherwise provided by law; but a lesser number may
adjourn any meeting, from time-to-time, and the meeting may be held as
adjourned, without further notice. When, however, less than a quorum as herein
defined, but at least one-third and not less than two of the authorized number
of Directors are present at a meeting of the Directors, business of the Bank may
be transacted and matters before the Board approved or disapproved by the
unanimous vote of the Directors present.
SECTION 2.07. COMPENSATION. Each member of the Board of Directors shall receive
such fees for attendance at Board and Board committee meetings and such fees for
service as a Director, irrespective of meeting attendance, as from time to time
are fixed by resolution of the Board; provided, however, that payment hereunder
shall not be made to a Director for meetings attended
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<PAGE> 17
and/or Board service which are not for the Bank's sole benefit and which are
concurrent and duplicative with meetings attended or Board service for an
affiliate of the Bank for which the Director receives payment; and provided
further that fees hereunder shall not be paid in the case of any Director in the
regular employment of the Bank or of one of its affiliates. Each member of the
Board of Directors, whether or not such Director is in the regular employment of
the Bank or of one of its affiliates, shall be reimbursed for travel expenses
incident to attendance at Board and Board committee meetings.
SECTION 2.08. EXECUTIVE COMMITTEE. There may be a standing committee of the
Board of Directors known as the Executive Committee which shall possess and
exercise, when the Board is not in session, all the powers of the Board that may
lawfully be delegated. The Executive Committee shall consist of at least three
Board members, one of whom shall be the Chairman of the Board or the President
and a majority of whom shall not be officers of the Bank. The other members of
the Executive Committee shall be appointed by the Chairman of the Board or by
the President, with the approval of the Board, and who shall continue as members
of the Executive Committee until their successors are appointed, provided,
however, that any member of the Executive Committee may be removed by the Board
upon a majority vote thereof at any regular or special meeting of the Board. The
Chairman or President shall fill any vacancy in the Executive Committee by the
appointment of another Director, subject to the approval of the Board of
Directors. The Executive Committee shall meet at the call of the Chairman or
President or any two members thereof at such time or times and place as may be
designated. In the event of the absence of any member or members of the
Executive Committee, the presiding member may appoint a member or members of the
Board to fill the place or places of such absent member or members to serve
during such absence. Two members of the Executive Committee, one of whom is not
an officer of the Bank, shall constitute a quorum. Whenever less than a majority
of the Executive Committee is present, matters before the Executive Committee
may be approved or disapproved only with the concurrence of at least one
Director who is not an officer or the Bank. When neither the Chairman of the
Board nor President are present, the Executive Committee shall appoint a
presiding officer. The Executive Committee shall keep a record of its
proceedings and report its proceedings and the action taken by it to the Board
of Directors.
SECTION 2.09. TRUST AUDIT COMMITTEE. There shall be a standing committee of the
Board of Directors known as the Trust Audit Committee consisting of three or
more members of the Board, exclusive of any active officer of the Bank, as are
from time to time appointed thereto by the Board. Two members of the Trust Audit
Committee shall constitute a quorum. Any member of the Trust Audit Committee may
be removed by the Board by a majority vote at any regular or special meeting of
the Board. The Trust Audit Committee shall meet at such times as it may
determine or at the calls of two members thereof. The Trust Audit Committee
shall, at least once during each calendar year and within fifteen months of the
last such audit, or at such other time(s) as may be required by Regulations of
the Comptroller of the Currency, make suitable audits of the Bank or cause
suitable audits to be made by auditors responsible only to the Board of
Directors, and at such time shall ascertain whether the Bank has been
administered in accordance with State and Federal Law, Regulations of the
Comptroller of the Currency and sound fiduciary
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<PAGE> 18
principles. The Trust Audit Committee shall promptly make a full report of such
audits in writing to the Board of Directors of the Bank, together with a
recommendation as to what action, if any, may be necessary to correct any
unsatisfactory condition. A report of the audits together with the action taken
thereon shall be noted in the minutes of the Board of Directors and such report
shall be a part of the records of this Bank.
SECTION 2.10. OTHER COMMITTEES. The Board of Directors may appoint such
special committees from time to time as are in its judgment necessary in the
interest of the Bank.
ARTICLE III
OFFICERS, MANAGEMENT STAFF AND EMPLOYEES
----------------------------------------
SECTION 3.01. OFFICERS AND MANAGEMENT STAFF.
(a) The officers of the Bank shall include a President, Secretary, and
Security Officer and may include a Chairman of the Board, one or more Vice
Presidents (which may include one or more Executive Vice Presidents and/or
Senior Vice Presidents), and one or more Assistant Secretaries. The President
and Chairman of the Board shall be elected by the Board. Each Vice President and
any other officer holding an office equivalent to the office of Vice President
or above shall be appointed in writing by the Chief Executive Officer, which
appointment shall be ratified by the Board at its next succeeding meeting. All
other officers may be elected by the Board or appointed in writing by the Chief
Executive Officer. The salaries of all officers elected by the Board shall be
fixed by the Board. The Board from time to time shall designate one of said
officers to serve as the Bank's Chief Executive Officer. The salaries of all
Vice Presidents and all other officers holding an office equivalent to the
office of Vice President or above shall be ratified by the Board on an annual
basis.
(b) The Chairman of the Board, if any, and the President shall be
elected by the Board from their own number. The President and the Chairman of
the Board shall be re-elected by the Board annually at the organizational
meeting of the Board of Directors following the annual meeting of shareholders.
Such other officers as the Board shall elect from their own number shall hold
office from the date of their election as officers until the organization
meeting of the Board of Directors following the next annual meeting of
shareholders, provided, however, that such officers may be relieved of their
duties at any time by action of the Board in which event all the powers incident
to their office shall immediately terminate. The Chairman of the Board, if any,
or the President shall preside at all meetings of shareholders and meetings of
the Board.
(c) Except as provided in the case of the elected officers who are
members of the Board, all officers, whether elected or appointed, shall hold
office at the pleasure of the Board. Except as otherwise limited by law or these
By-Laws, the Board assigns to the Chief Executive Officer and/or his designees
the authority to appoint and dismiss any elected or appointed
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<PAGE> 19
officer or other member of the Bank's management staff and other employees of
the Bank, as the person in charge of and responsible for any branch office,
department, section, operation, function, assignment or duty in the Bank.
(d) The management staff of the Bank shall include officers elected by
the Board, officers appointed by the Chief Executive Officer, and such other
persons in the employment of the Bank who, pursuant to written appointment and
authorization by a duly authorized officer of the Bank, perform management
functions and have management responsibilities. Any two or more offices may be
held by the same person except that no person shall hold the office of Chairman
of the Board and/or President and at the same time also hold the office of
Secretary.
(e) The Chief Executive Officer of the Bank and any other officer of the
Bank, to the extent that such officer is authorized in writing by the Chief
Executive Officer, may appoint persons other than officers who are in employment
of the Bank to serve in management positions and in connection therewith, the
appointing officer may assign such title, salary, responsibilities and functions
as are deemed appropriate by him, provided, however, that nothing contained
herein shall be construed as placing any limitation on the authority of the
Chief Executive Officer as provided in this and other sections of these By-Laws.
(f) The Chief Executive Officer shall appoint a management committee
known as the Senior Trust Committee consisting of the Chief Executive Officer of
the Bank and at least five other members who shall be capable and experienced
officers of the Bank appointed from time to time by the Chief Executive Officer
and who shall continue as members of the Senior Trust Committee until their
successors are appointed, provided, however, that any member of the Senior Trust
Committee may be removed by the Chief Executive Officer as provided in this and
other sections of these By-Laws. The Chief Executive Officer shall fill any
vacancy in the Senior Trust Committee by the appointment of another capable and
experienced officer of the Bank. The Senior Trust Committee shall meet at such
date, time and place in the State of Ohio as the Chief Executive Officer shall
fix. In the event of the absence of any member or members of the Senior Trust
Committee, the Chief Executive Officer may, in his discretion, appoint another
officer of the Bank to fill the place or places of such absent member or members
to serve during such absence. A majority of the Senior Trust Committee shall
constitute a quorum. The Senior Trust Committee shall carry out the policies of
the Bank, as adopted by the Board of Directors, which shall be formulated and
executed in accordance with State and Federal Law, Regulations of the
Comptroller of the Currency, and sound fiduciary principles. In carrying out the
policies of the Bank, the Senior Trust Committee is hereby authorized to
establish committees and sub-committees whose duties and responsibilities shall
be specifically set forth in the policies of the Bank. Each such committee or
subcommittee shall keep a record of Its proceedings and report such proceedings
and the actions taken thereby to the Senior Trust Committee. The Chief Executive
Officer shall then report such proceedings and the actions taken thereby to the
Board of Directors.
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<PAGE> 20
The Senior Trust Committee or its duly authorized committee or
subcommittee shall, upon acceptance of an account for which the Bank has
investment responsibility and thereafter at least once during each calendar year
and within fifteen months, review all assets held and determine the advisability
of retaining or disposing of such assets. The Senior Trust Committee or its duly
authorized committee or subcommittee shall record the prior acceptance of
fiduciary accounts by those persons, committees, or subcommittees authorized to
accept accounts for the Bank and shall record the closing out of all fiduciary
accounts. Approval of all additions to and withdrawals from the various common
trust funds and making the determinations required with respect to such common
trust funds shall be the responsibility of the Senior Trust Committee or its
duly authorized committees or subcommittees.
SECTION 3.02. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the Bank
shall have general and active management of the business of the Bank, shall see
that all orders and resolutions of the Board of Directors are carried into
effect, and shall do or cause to be done all things necessary or proper to carry
on the business of the Bank in accordance with provisions of applicable law and
regulations. Except as otherwise prescribed or limited by these By-Laws, the
Chief Executive Officer shall have full right, authority and power to control
all personnel, including elected and appointed officers, of the Bank, to employ
or direct the employment of such personnel and officers as he may deem
necessary, including the fixing of salaries and the dismissal of such personnel
and officers at pleasure, and to define and prescribe the duties and
responsibility of all officers or the Bank, subject to such further limitations
and directions as he may from time to time deem proper. The Chief Executive
Officer shall perform all duties incident to his office and such other and
further duties, as may from time to time be required of him by the Board of
Directors or the shareholders. The specification of authority in these By-Laws
wherever and to whomever granted shall not be construed to limit in any manner
the general powers of delegation granted to the Chief Executive Officer in
conducting the business of the Bank. In the absence of the Chief Executive
Officer, such officer as is designated by the Chief Executive Officer shall be
vested with all the powers and perform all the duties of the Chief Executive
Officer as defined by these By-Laws. When designating an officer to serve in his
absence, the Chief Executive Officer shall elect an officer who is a member of
the Board of Directors whenever such officer is available.
SECTION 3.03. POWERS AND DUTIES OF OFFICERS AND MANAGEMENT STAFF. Pursuant to
the fiduciary powers granted to this Bank under the provisions of Federal Law
and Regulations of the Comptroller of the Currency, the Bank shall be operated
in the manner specified herein.
(a) Funds held by the Bank in a fiduciary capacity awaiting investment
or distribution shall not be held uninvested or undistributed any longer than is
reasonable for the proper management of the account and shall be invested in
accordance with the instrument establishing a fiduciary relationship and local
law. Where such instrument does not specify the character or class of
investments to be made and does not vest in the Bank any discretion in the
matter, funds held pursuant to such instrument shall be invested in any
investment in which corporate fiduciaries may invest under local law.
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<PAGE> 21
(b) The investments of each fiduciary account in the Bank shall be kept
separate from the assets of the Bank, and shall be placed in the joint custody
or control of not less than two of the officers or employees of the Bank
designated for that purpose by the Board of Directors.
(c) Property held by the Bank in a fiduciary capacity may be carried in
the name of the Bank in its fiduciary capacity, in the name of the Bank or in
the name of a nominee or nominees.
(d) The Chief Executive Officer, the Chairman of the Board, the
President, and those officers so designated and authorized by the Chief
Executive Officer are authorized for and on behalf of the Bank, and to the
extent permitted by law, to make loans and discounts; to purchase or acquire
drafts, notes, stocks, bonds, and other securities for investment of funds held
by the Bank; to execute and purchase acceptances; to appoint, empower and direct
all necessary agents and attorneys; to sign and give any notice required to be
given; to demand payment and/or to declare due for any default any debt or
obligation due or payable to the Bank upon demand or authorized to be declared
due; to foreclose any mortgages; to exercise any option, privilege or election
to forfeit, terminate, extend or renew any lease; to authorize and direct any
proceedings for the collection of any money or for the enforcement of any right
or obligation; to adjust, settle and compromise all claims of every kind and
description in favor of or against the Bank, and to give receipts, releases and
discharges therefor; to borrow money and in connection therewith to make,
execute and deliver notes, bonds or other evidences of indebtedness; to pledge
or hypothecate any securities or any stocks, bonds, notes or any property real
or personal held or owned by the Bank, or to rediscount any notes or other
obligations held or owned by the Bank, whenever in his judgment it is reasonably
necessary for the operation of the Bank; to employ or direct the employment of
all personnel, including elected and appointed officers, and the dismissal of
them at pleasure; and in furtherance of and in addition to the powers
hereinabove set forth to do all such acts and to take all such proceedings as in
his judgment are necessary and incidental to the operation of the Bank.
Other persons in the employment of the Bank, including but not limited
to officers and other members of the management staff, may be authorized by the
Chief Executive Officer, or by an officer so designated and authorized by the
Chief Executive Officer, to perform the powers set forth above, subject,
however, to such limitations and conditions as are set forth in the
authorization given to such persons.
(e) The Chairman of the Board, President, any officer of the Bank and
such other persons as may be specifically authorized by resolution of the Senior
Trust Committee or the Board of Directors, may vote shares of stock of a
corporation of record on the books of the issuing company in the name of the
Bank or in the name of the Bank as fiduciary, or may grant proxies for the
voting of such stock if the granting of same is permitted by the instrument
under which the Bank is acting in a fiduciary capacity, or by the law applicable
to such fiduciary account. In the case of shares of stock which are held by a
nominee of the Bank, such shares may be voted by such person(s) authorized by
such nominee.
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<PAGE> 22
SECTION 3.04. SECRETARY. The Secretary or such other officers as may be
designated by the Chief Executive Officer shall have supervision and control of
the records of the Bank and, subject to the direction of the Chief Executive
Officer, shall undertake other duties and functions usually performed by a
corporate secretary. Other officers may be designated by the Chief Executive
Officer or the Board of Directors as Assistant Secretary to perform the duties
of the Secretary.
SECTION 3.05. EXECUTION OF DOCUMENTS. The Chief Executive Officer, Chairman of
the Board, President, any officer being a member of the Bank's management staff
who is also a person in charge of and responsible for any department within the
Bank and any other officer of the Bank to the extent such officer is so
designated and authorized by the Chief Executive Officer, the Chairman of the
Board, the President or any other officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
the Bank, are hereby authorized for and on behalf of the Bank to sell, assign,
lease, mortgage, transfer, deliver and convey any real or personal property,
including shares of stock, bonds, notes, certificates of indebtedness (including
the assignment and redemption of registered United States obligations) and all
other forms of intangible property now or hereafter owned by or standing in the
name of the Bank, or its nominee, or held by the Bank as collateral security, or
standing in the name of the Bank, or its nominee, in any fiduciary capacity or
in the name of any principal for whom this Bank may now or hereafter be acting
under a power of attorney or as agent, and to execute and deliver such partial
releases from any discharges or assignments of mortgages and assignments or
surrender of insurance policies, deeds, contracts, assignments or other papers
or documents as may be appropriate in the circumstances now or hereafter held by
the Bank in its own name, in a fiduciary capacity, or owned by any principal for
whom this Bank may now or hereafter be acting under a power of attorney or as
agent; provided, however, that the signature of any such person shall be
attested or signature guaranteed in each case by the Secretary, an Assistant
Secretary, or other officer so authorized by the Chief Executive Officer.
The Chief Executive Officer, Chairman or the Board, President, any
officer being a member of the Bank's management staff who is also a person in
charge of and responsible for any department within the Bank, and any other
officer of the Bank so designated and authorized by the Chief Executive Officer,
Chairman of the Board, President or any officer who is a member of the Bank's
management staff who is in charge of and responsible for any department within
the Bank are hereby authorized for and on behalf of the Bank to execute any
indemnity and fidelity bonds, trust agreements, proxies or other papers or
documents of like or different character necessary, desirable or incidental to
the appointment of the Bank in any fiduciary capacity, or the conduct of its
other banking business; to sign and issue checks, drafts, orders for
the payment of money and certificates of deposit; to sign and endorse bills of
exchange, to sign and countersign foreign and domestic letters of credit, to
receive and receipt for payments of principal, interest, dividends, rents, fees
and payments of every kind and description paid to the Bank, to sign receipts
for money or other property acquired by or entrusted to the Bank, to guarantee
the
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<PAGE> 23
genuineness of signatures on assignments of stocks, bonds or other securities,
to sign certifications of checks, to endorse and deliver checks, drafts,
warrants, bills, notes, certificates of deposit and acceptances in all business
transactions of the Bank; also to foreclose any mortgage, to execute and deliver
receipts for any money or property; also to sign stock certificates for and on
behalf of this Bank as transfer agent or registrar, and to authenticate bonds,
debentures, land or lease trust certificates or other forms of security issued
pursuant to any indenture under which this Bank now or hereafter is acting as
trustee or in any other fiduciary capacity.
Other persons in the employment of the Bank and of its subsidiaries,
including but not limited to officers and other members of the management staff,
may be authorized by the Chief Executive Officer, Chairman of the Board,
President or by an officer so designated by the Chief Executive Officer,
Chairman of the Board, or President to perform the acts and to execute the
documents set forth above, subject, however, to such limitations and conditions
as are contained in the authorization given to such person.
SECTION 3.06. PERFORMANCE BOND. All officers and employees of the Bank shall be
bonded for the honest and faithful performance of their duties for such amount
as may be prescribed by the Board of Directors.
ARTICLE IV
STOCKS AND STOCK CERTIFICATES
-----------------------------
SECTION 4.01. STOCK CERTIFICATES. The shares of stock of the Bank shall be
evidenced by certificates which shall bear the signature of the Chairman of the
Board, the President, or a Vice President (which signature may be engraved,
printed or impressed), and shall be signed manually by the Secretary, or any
other officer appointed by the Chief Executive Officer for that purpose.
In case any such officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such before such
certificate is issued, it may be issued by the Bank with the same effect as if
such officer had not ceased to be such at the time of its issue. Each such
certificate shall bear the corporate seal of the Bank, shall recite on its face
that stock represented thereby is transferable only upon the books of the Bank
properly endorsed and shall recite such other information as is required by law
and deemed appropriate by the Board. The corporate seal may be facsimile
engraved or printed.
SECTION 4.02. STOCK ISSUE AND TRANSFER. The shares of stock of the Bank shall be
transferable only upon the stock transfer books of the Bank and, except as
hereinafter provided, no transfer shall be made or new certificates issued
except upon the surrender for cancellation of the certificate or certificates
previously issued therefor. In the case of the loss, theft, or destruction of
any certificate, a new certificate may be issued in place of such certificate
upon the furnishing of an affidavit setting forth the circumstances of such
loss, theft, or destruction and indemnity satisfactory
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<PAGE> 24
to the Chairman of the Board, the President, or a Vice President. The Board of
Directors, or the Chief Executive Officer, may authorize the issuance of a new
certificate therefor without the furnishing of indemnity. Stock Transfer Books,
in which all transfers of stock shall be recorded, shall be provided.
The stock transfer books may be closed for a reasonable period and under
such conditions as the Board of Directors may at any time determine for any
meeting of shareholders, the payment of dividends or any other lawful purpose.
In lieu of closing the transfer books, the Board may, in its discretion, fix a
record date and hour constituting a reasonable period prior to the day
designated for the holding of any meeting of the shareholders or the day
appointed for the payment of any dividend, or for any other purpose at the time
as of which shareholders entitled to notice of and to vote at any such meeting
or to receive such dividend or to be treated as shareholders for such other
purpose shall be determined, and only shareholders of record at such time shall
be entitled to notice of or to vote at such meeting or to receive such dividends
or to be treated as shareholders for such other purpose.
ARTICLE V
MISCELLANEOUS PROVISIONS
------------------------
SECTION 5.01. SEAL. The seal of the Bank shall be circular in form with "SEAL"
in the center, and the name "BANK ONE TRUST COMPANY, NA" located clockwise
around the upper half of the seal. The seal may be affixed by any officer of the
Bank and such other members of the staff as are specifically authorized by the
Chief Executive Officer.
SECTION 5.02. MINUTE BOOK. The organization papers of this Bank, the Articles of
Association, the returns of judges of elections, the By-Laws and any amendments
thereto, the proceedings of all regular and special meetings of the shareholders
and of the Board of Directors, and reports of the committees of the Board of
Directors shall be recorded in the minute book of the Bank. The minutes of each
such meeting shall be signed by the presiding officer and attested by the
secretary of the meeting.
SECTION 5.03. CORPORATE POWERS. The corporate existence of the Bank shall
continue until terminated in accordance with the laws of the United States. The
purpose of the Bank shall be to carry on the general business of a commercial
bank trust department and to engage in such activities as are necessary,
incident, or related to such business. The Articles of Association of the Bank
shall not be amended, or any other provision added elsewhere in the Articles
expanding the powers of the Bank, without the prior approval of the Comptroller
of the Currency.
SECTION 5.04. AMENDMENT OF BY-LAWS. The By-Laws may be amended, altered or
repealed, at any regular or special meeting of the Board of Directors, by a vote
of a majority of the Directors.
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<PAGE> 25
As amended April 24, 1991 - Section 3.01 (Officers and Management Staff)
Section 3.02 (Chief Executive Officer)
Section 3.03 (Powers and Duties of Officers and
Management Staff)
Section 3.05 (Execution of Documents)
As amended January 27, 1995 - Section 2.04 (Regular Meetings)
Section 2.05 (Special Meetings)
Section 3.01(f) (Officers and Management Staff)
Section 3.03(e) (Powers and Duties of Officers
and Management Staff)
Section 5.01 (Seal)
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<PAGE> 26
EXHIBIT 6
Securities and Exchange Commission
Washington, D.C. 20549
CONSENT
-------
The undersigned, designated to act as Trustee under the Indenture for Hawk
Corporation described in the attached Statement of Eligibility and
Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such authorities
to the Commission upon the request of the Commission.
This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.
Bank One Trust Company, NA
Dated: December 9, 1996
By: /s/ Ted Kravits
--------------------------------
Ted Kravits
Authorized Signer
<PAGE> 27
EXHIBIT 7
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RI-1
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
Consolidated Report of Income
for the period January 1, 1996-September 30, 1996
All Report of Income schedules are to be reported on a calendar year-to-date basis in thousands of dollars.
<CAPTION>
Schedule RI--Income Statement 1280
----
Dollar Amounts in Thousands RIAD Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Interest income: //////////////
a. Interest and fee income on loans(1): //////////////
(l) Real estate loans 4246 0 1.a.(1)
(2) Installment loans 4247 0 1.a.(2)
(3) Credit cards and related plans 4248 0 1.a.(3)
(4) Commercial (time and demand) and all other loans 4249 0 1.a.(4)
b. Income from lease financing receivables: //////////////
(1) Taxable leases 4505 0 1.b.(1)
(2) Tax-exempt leases 4307 0 1.b.(2)
c. Interest income on balances due from depository institutions(2) 4115 736 1.c.
d. Interest and dividend income on securities: //////////////
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations 4027 0 1.d.(1)
(2) Securities issued by states and political subdivisions in the U.S.: //////////////
(a) Taxable securities 4506 0 1.d.(2)(a)
(b) Tax-exempt securities 4507 432 1.d.(2)(b)
(3) Other domestic debt securities 3657 174 1.d.(3)
(4) Foreign debt securities 3658 0 1.d.(4)
(5) Equity securities (including investments in mutual funds) 3659 2 1.e
e. Interest income from trading assets 4069 0 1.e.
f. Interest income on federal funds sold and securities purchased under agreements to resell 4020 6,902 1.f.
g. Total interest income (sum of items 1.a through 1.f) 4107 8,246 1.g.
- ----------
<FN>
(1) See instructions for loan classifications used in this schedule.
(2) Includes interest income on time certificates of deposit not held for trading.
</TABLE>
3
<PAGE> 28
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RI-2
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RI--Continued Year-to-date
------------
Dollar Amounts in Thousands RIAD Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
2. Interest expense: //////////////
a. Interest on deposits: //////////////
(1) Transaction accounts (NOW accounts, ATS accounts, and telephone //////////////
and preauthorized transfer accounts) 4508 0 2.a.(1)
(2) Nontransaction accounts: //////////////
(a) Money market deposit accounts (MMDAs) 4509 1,759 2.a.(2)(a)
(b) Other savings deposits 4511 0 2.a.(2)(b)
(c) Time certificates of deposit of $100,000 or more 4174 0 2.a.(2)(c)
(d) All other time deposits 4512 0 2.a.(2)(d)
b. Expense of federal funds purchased and securities sold under agreements //////////////
to repurchase 4180 78 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading liabilities, //////////////
and other borrowed money 4185 0 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized leases 4072 0 2.d.
e. Interest on subordinated notes and debentures 4200 0 2.e.
f. Total interest expense (sum of items 2.a through 2.e) 4073 1,837 2.f.
3. Net interest income (item 1.g minus 2.f) ////////////// RIAD 4074 6,409 3.
4. Provisions: //////////////
a. Provision for loan and lease losses ////////////// RIAD 4230 0 4.a.
b. Provision for allocated transfer risk ////////////// RIAD 4243 0 4.b.
5. Noninterest income: //////////////
a. Income from fiduciary activities 4070 74,614 5.a.
b. Service charges on deposit accounts 4080 0 5.b.
c. Trading revenue (must equal Schedule RI, sum of Memorandum ////////////// I
items 8.a through 8.d) A220 0 5.c.
d. Other foreign transaction gains (losses) 4076 0 5.d.
e. Not applicable //////////////
f. Other noninterest income: //////////////
(1) Other fee income 5407 7,786 5.f.(1)
(2) All other noninterest income* 5408 142 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) ////////////// RIAD 4079 82,542 5.g.
6. a. Realized gains (losses) on held-to-maturity securities ////////////// RIAD 3521 0 6.a.
b. Realized gains (losses) on available-for-sale securities ////////////// RIAD 3196 79 6.b.
7. Noninterest expense: //////////////
a. Salaries and employee benefits 4135 41,311 7.a.
b. Expenses of premises and fixed assets (net of rental income) //////////////
(excluding salaries and employee benefits and mortgage interest) 4217 5,033 7.b.
c. Other noninterest expense* 4092 32,351 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) ////////////// RIAD 4093 78,695 7.d.
8. Income (loss) before income taxes and extraordinary items and other adjustments //////////////
(item 3 plus or minus items 4.a, 4.b, 5.g, 6.a, 6.b, and 7.d) ////////////// RIAD 4301 10,335 8.
9. Applicable income taxes (on item 8) ////////////// RIAD 4302 3,589 9.
10. Income (loss) before extraordinary items and other adjustments (item 8 minus 9) ////////////// RIAD 4300 6,746 10.
11. Extraordinary items and other adjustments: //////////////
a. Extraordinary items and other adjustments, gross of income taxes* 4310 0 11.a.
b. Applicable income taxes (on items 11.a)* 4315 0 11.b.
c. Extraordinary items and other adjustments, net of income taxes //////////////
(item 11.a minus 11.b) ////////////// RIAD 4320 0 11.c.
12. Net income (loss) (sum of items 10 and 11.c) ////////////// RIAD 4340 6,746 12.
- ----------
<FN>
*Describe on Schedule RI-E--Explanations.
</TABLE>
4
<PAGE> 29
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RI-3
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RI--Continued
I281
----
Year-to-date
------------
Memoranda Dollar Amounts in Thousands RIAD Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interest expense incurred to carry tax-exempt securities, loans, and leases acquired after //////////////
August 7, 1986, that is not deductible for federal income tax purposes 4513 0 M.1.
2. Income from the sale and servicing of mutual funds and annuities (included in //////////////
Schedule RI, item 8) 8431 0 M.2.
3. Not applicable //////////////
4. Number of full-time equivalent employees on payroll at end of current period (round to nearest //// Number
whole number) 4150 922 M.4.
5. Interest and fee income on tax-exempt obligations (other than securities and leases) of states //////////////
and political subdivisions in the U.S. (reportable in Schedule RC-C, part I, item 8) included in //// Mil Thou
Schedule RI, item 1.a above 4504 0 M.5.
6. To be completed by banks with loans to finance agricultural production and other loans to farmers //////////////
(Schedule RC-C, part I, item 3) exceeding five percent of total loans //////////////
Interest and fee income on agricultural loans included in item 1.a above 4251 N/A M.6.
7. If the reporting bank has restated its balance sheet as a result of applying push down //// MM DD YY
accounting this calendar year, report the date of the bank's acquisition 9106 00/00/00 M.7.
8. Trading revenue (from cash instruments and off-balance sheet derivative instruments) //////////////
(sum of Memorandum items 8.a through 8.d must equal Schedule RI, item 5.c): //// Mil Thou
a. Interest rate exposures 8757 0 M.8.a.
b. Foreign exchange exposures 8758 0 M.8.b.
c. Equity security and index exposures 8759 0 M.8.c.
d. Commodity and other exposures 8760 0 M.8.d.
9. Impact on income of off-balance sheet derivatives held for purposes other than trading: //////////////
a. Net increase (decrease) to interest income 8761 0 M.9.a.
b. Net (increase) decrease to interest expense 8762 (17) M.9.b.
c. Other (noninterest) allocations 8763 0 M.9.c.
<CAPTION>
Schedule RI-A--Changes in Equity Capital
Indicate decreases and losses in parentheses. I283
----
Dollar Amounts in Thousands RIAD Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition and Income 3215 18,490 1.
2. Equity capital adjustments from amended Reports of Income, net* 3216 0 2.
3. Amended balance end of previous calendar year (sum of items 1 and 2) 3217 18,490 3.
4. Net income (loss) (must equal Schedule RI, item 12) 4340 6,746 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net 4346 0 5.
6. Changes incident to business combinations, net 4356 0 6.
7. LESS: Cash dividends declared on preferred stock 4470 0 7.
8. LESS: Cash dividends declared on common stock 4460 0 8.
9. Cumulative effect of changes in accounting principles from prior years* (see instructions for //////////////
this schedule) 4411 0 9.
10. Corrections of material accounting errors from prior years* (see instructions for this schedule) . 4412 0 10.
11. Change in net unrealized holding gains (losses) on available-for-sale securities 8433 (92) 11.
12. Other transactions with parent holding company* (not included in items 5, 7, or 8 above) 4415 0 12.
13. Total equity capital end of current period (sum of items 3 through 12) (must equal //////////////
Schedule RC, item 28) 3210 25,144 13.
<FN>
*Describe on Schedule RI-E--Explanations.
</TABLE>
5
<PAGE> 30
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RI-4
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RI-B--Charge-offs and Recoveries and Changes in Allowance
for Loan and Lease Losses
Part I. Charge-offs and Recoveries on Loans and Leases(1) I286
(Column A) (Column B)
Charge-offs Recoveries
Part I excludes charge-offs and recoveries through -----------------------------------
the allocated transfer risk reserve. Calendar year-to-date
-----------------------------------
Dollar Amounts in Thousands RIAD Mil Thou RIAD Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Real estate loans 4256 0 4257 0 1.
2. Installment loans 4258 0 4259 0 2.
3. Credit cards and related plans 4262 0 4263 0 3.
4. Commercial (time and demand) and all other loans 4264 0 4265 0 4.
5. Lease financing receivables 4266 0 4267 0 5.
6. Total (sum of items 1 through 5) 4635 0 14605 0 6.
<CAPTION>
Memoranda Dollar Amounts in Thousands RIAD Mil Thou RIAD Mil Thou
- --------------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
1. Loans to foreign governments and official institutions included in part I, ////////////// //////////////
items 1 through 4 above 4643 0 4627 0 M.1.
2. To be completed by banks with loans to finance agricultural production and ////////////// //////////////
other loans to farmers (Schedule RC-C, part I, item 3) exceeding five percent ////////////// //////////////
of total loans. ////////////// //////////////
Agricultural loans included in part I, items 1 through 4 above 4268 N/A 4269 N/A M.2.
3. Not applicable ////////////// //////////////
4. Loans to finance commercial real estate, construction, and land development ////////////// //////////////
activities (not secured by real estate) included in Schedule RI-B, part I, ////////////// //////////////
items 2 through 4, above 5443 0 5444 0 M.4.
5. Real estate loans (sum of Memorandum items 5.a through 5.e must equal ////////////// //////////////
Schedule RI-B, part I, item 1, above): ////////////// //////////////
a. Construction and land development 5445 0 5446 0 M.5.a.
b. Secured by farmland 5447 0 5446 0 M.5.b.
c. Secured by 1-4 family residential properties: ////////////// //////////////
(1) Revolving, open-end loans secured by 1-4 family residential properties ////////////// //////////////
and extended under lines of credit 5449 0 5450 0 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties 5451 0 5452 0 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties 5453 0 5454 0 M.5.d.
e. Secured by nonfarm nonresidential properties 5455 0 5456 0 M.5.e.
<FN>
(1) See instructions for loan classifications used in this schedule.
</TABLE>
6
<PAGE> 31
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RI-5
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RI-B--Continued
Part II. Changes in Allowance for Loan and Lease Losses
Year-to-date
Dollar Amounts in Thousands RIAD Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
RIAD Mil Thou
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income 3124 10 1.
2. Recoveries (must equal part I, item 6, column B above) 4605 0 2.
3. LESS: Charge-offs (must equal part I, item 6, column A above) 4635 0 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a) 4230 0 4.
5. Adjustments* (see instructions for this schedule) 4815 0 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, item 4.b) 3123 10 6.
<FN>
- ------------
*Describe on Schedule RI-E--Explanations.
</TABLE>
Schedule RI-C--Applicable Income Taxes by Taxing Authority
Schedule RI-C is to be reported with the December Report of Income.
<TABLE>
<CAPTION>
1289
Dollar Amounts in Thousands RIAD Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Federal 4780 N/A 1.
2. State and local 4790 N/A 2.
3. Foreign 4795 N/A 3.
4. Total (sum of items 1 through 3)(must equal sum of Schedule RI, items 9 and 11.b) 4770 N/A 4.
5. Deferred portion of item 4 RIAD 4772 N/A ////////////// 5.
<CAPTION>
Schedule RI-E--Explanations
Schedule RI-E is to be completed each quarter on a calendar year-to-date basis.
Detail all adjustments in Schedule RI-A and RI-B, all extraordinary items and other adjustments in Schedule RI, and all
significant items of other noninterest income and other noninterest expense in Schedule RI. (See instructions for details.)
I295
Year-to-date
Dollar Amounts in Thousands RIAD Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) //////////////
Report amounts that exceed lOX of Schedule RI, item 5.f.(2) //////////////
a. Net gains on other real estate owned 5415 0 1.a.
b. Net gains on sales of loans 5416 0 1.b.
c. Net gains on sales of premises and fixed assets 5417 0 1.c.
Itemize and describe the three largest other amounts that exceed lOX of Schedule RI,
item 5.f.(2): //////////////
d. TEXT 4461 859410 - Other Nonfraud Recovery 4461 141 1.d.
e. TEXT 4462 4462 1.e.
f. TEXT 4463 4463 1.f.
2. Other noninterest expense (from Schedule RI, item 7.c): //////////////
a. Amortization expense of intangible assets 4531 0 2.a.
Report amounts that exceed lOX of Schedule RI, item 7.c: //////////////
b. Net losses on other real estate owned 5418 0 2.b.
c. Net losses on sales of loans 5419 0 2.c.
d. Net losses on sales of premises and fixed assets 5420 0 2.d.
Itemize and describe the three largest other amounts that exceed lOX of Schedule RI, item 7.c: //////////////
e. TEXT 4464 855501 - Trust Accounting 4464 5,138 2.e.
f. TEXT 4467 BOIA MF Fees 4467 3,975 2.f.
g. TEXT 4468 846146 - INTRAHC Inv Adv Fee Exp 4468 3,285 2.g.
</TABLE>
7
<PAGE> 32
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RI-6
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RI-E--Continued
Year-to-date
Dollar Amounts in Thousands RIAD Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3. Extraordinary items and other adjustments (from Schedule RI, item 11.a) and applicable income //////////////
tax effect (from Schedule RI, item 11.b) (itemize and describe all extraordinary items and other //////////////
adjustments): //////////////
a. (1) TEXT 4469 4469 3.a.(1)
(2) Applicable income tax effect RIAD 4486 ////////////// 3.a.(2)
b. (1) TEXT 4487 4487 3.b.(1)
(2) Applicable income tax effect RIAD 4488 ////////////// 3.b.(2)
c. (1) TEXT 4489 4489 3.c.(1)
(2) Applicable income tax effect RIAD 4491 ////////////// 3.c.(2)
4. Equity capital adjustments from amended Reports of Income (from Schedule RI-A, item 2) //////////////
(itemize and describe all adjustments): //////////////
a. TEXT 4492 4492 4.a.
b. TEXT 4493 4493 4.b.
5. Cumulative effect of changes in accounting principles from prior years //////////////
(from Schedule RI-A, item 9) (itemize and describe all changes in accounting principles): //////////////
a. TEXT 4494 I 4494 5.a.
b. TEXT 4495 4495 5.b.
6. Corrections of material accounting errors from prior years (from Schedule RI-A, item 10) //////////////
(itemize and describe all corrections): //////////////
a. TEXT 4496 4496 6.a.
b. TEXT 4497 4497 6.b.
7. Other transactions with parent holding company (from Schedule RI-A, item 12) //////////////
(itemize and describe all such transactions): //////////////
a. TEXT 4498 4498 7.a.
b. TEXT 4499 4499 7.b.
8. Adjustments to allowance for loan and lease losses (from Schedule RI-B, part II, item 5) //////////////
(itemize and describe all adjustments): //////////////
a. TEXT 4521 4521 8.a.
b. TEXT 4522 4522 6.b.
9. Other explanations (the space below is provided for the bank to briefly describe, at its option, I298 I299
any other significant items affecting the Report of Income):
No comment [ ] (RIAD 4769)
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
8
<PAGE> 33
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-1
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for September 30, 1996
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
Schedule RC--Balance Sheet
C200
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS //////////////
1. Cash and balances due from depository institutions (from Schedule RC-A): //////////////
a. Noninterest-bearing balances and currency and coin(1) 0081 15,620 1.a.
b. Interest-bearing balances(2) 0071 0 1.b.
2. Securities: //////////////
a. Held-to-maturity securities (from Schedule RC-B, column A) 1754 2,591 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) 1773 9,964 2.b.
3. Federal funds sold and securities purchased under agreements to resell: //////////////
a. Federal funds sold 0276 267,533 3.a.
b. Securities purchased under agreements to resell 0277 0 3.b.
4. Loans and lease financing receivables: //////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) RCON 2122 26,095 ////////////// 4.a.
b. LESS: Allowance for loan and lease losses RCON 3123 10 ////////////// 4.b.
c. LESS: Allocated transfer risk reserve RCON 3128 0 ////////////// 4.c.
d. Loans and leases, net of unearned income, allowance, and reserve (item 4.a //////////////
minus 4.b and 4.c) 2125 26,085 4.d.
5. Trading assets 3545 0 5.
6. Premises and fixed assets (including capitalized leases) 2145 9,646 6.
7. Other real estate owned (from Schedule RC-M) 2150 0 7.
8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)2130 0 8.
9. Customers' liability to this bank on acceptances outstanding 2155 0 9.
10. Intangible assets (from Schedule RC-M) 2143 0 10.
11. Other assets (from Schedule RC-F) 2160 19,467 11.
12. Total assets (sum of items 1 through 11) 2170 350,906 12.
<FN>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
</TABLE>
9
<PAGE> 34
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-2
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC- -Continued
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES //////////////
13. Deposits: //////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E) 2200 315,770 13.a.
(1) Noninterest-bearing(1) RCON 6631 283,898 ////////////// 13.a.(1)
(2) Interest-bearing RCON 6636 31,872 ////////////// 3.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs //////////////
(1) Noninterest-bearing //////////////
(2) Interest-bearing //////////////
14. Federal funds purchased and securities sold under agreements to repurchase: //////////////
a. Federal funds purchased 0278 0 14.a.
b. Securities sold under agreements to repurchase 0279 0 14.b.
15. a. Demand notes issued to the U.S. Treasury 2840 0 15.a.
b. Trading liabilities 3548 0 15.b.
16. Other borrowed money: //////////////
a. With a remaining maturity of one year or less 2332 0 16.a.
b. With a remaining maturity of more than one year 2333 0 16.b.
17. Mortgage indebtedness and obligations under capitalized leases 2910 0 17.
18. Bank's liability on acceptances executed and outstanding 2920 0 18.
19. Subordinated notes and debentures 3200 0 19.
20. Other liabilities (from Schedule RC-G) 2930 9,992 20.
21. Total liabilities (sum of items 13 through 20) 2948 325,762 21.
//////////////
22. Limited-life preferred stock and related surplus 3282 0 22.
EQUITY CAPITAL //////////////
23. Perpetual preferred stock and related surplus 3838 0 23.
24. Common stock 3230 800 24.
25. Surplus (exclude all surplus related to preferred stock) 3839 1,017 25.
26. a. Undivided profits and capital reserves 3632 23,281 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities 8434 46 26.b.
27. Cumulative foreign currency translation adjustments //////////////
28. Total equity capital (sum of items 23 through 27) 3210 25,144 28.
29. Total liabilities, limited-life preferred stock, equity capital, (sum of items 21,
22, and 28) . 3300 350,906 29.
</TABLE>
<TABLE>
<CAPTION>
Memorandum
<S> <C> <C> <C> <C>
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the Number most comprehensive level of auditing work
performed for the bank by independent external Number
auditors as of any date during 1995 RCON 6724 N/A M.1.
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other ex
with generally accepted auditing standards by a certified ternal auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted audit- auditors
ing standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in accor- 8 = No external audit work
dance with generally accepted auditing standards by a
certified public accounting firm (may be required by state
chartering authority)
<FN>
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
</TABLE>
10
<PAGE> 35
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-3
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-A--Cash and Balances Due From Depository Institutions
Exclude assets held for trading.
C205
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and coin: //////////////
a. Cash items in process of collection and unposted debits 0020 101 1.a.
b. Currency and coin 0080 0 1.b.
2. Balances due from depository institutions in the U.S.: //////////////
a. U.S. branches and agencies of foreign banks 0083 0 2.a.
b. Other commercial banks in the U.S. and other depository institutions in the U.S 0085 7,901 2.b.
3. Balances due from banks in foreign countries and foreign central banks: //////////////
a. Foreign branches of other U.S. banks 0073 0 3.a.
b. Other banks in foreign countries and foreign central banks 0074 0 3.b.
4. Balances due from Federal Reserve Banks 0090 7,618 4.
5. Total (sum of items 1 through 4) (must equal Schedule RC, sum of items 1.a and 1.b) 0010 15,620 5.
<CAPTION>
Memorandum
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Noninterest-bearing balances due from commercial banks in the U.S. (included in
items 2.a //////////////
and 2.b above) 0050 7,901 M.1.
</TABLE>
11
<PAGE> 36
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-4
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-B--Securities
Exclude assets held for trading.
C210
Held-to-maturity Available-for-sale
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Fair Value Amortized Cost Fair Value(1)
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou RCON Mil Thou RCON Mil Thou
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. U.S. Treasury securities 0211 0 0213 0 1286 0 1287 0 1.
2. U.S. Government agency and corporation ///////////// ///////////// ////////////// /////////////
obligations (exclude mortgage-backed securities): ///////////// ///////////// ////////////// /////////////
a. Issued by U.S. Government agencies(2) 1289 0 1290 0 1291 0 1293 0 2.a.
b. Issued by U.S. Government-sponsored ///////////// ///////////// ////////////// /////////////
agencies(3) 1294 0 1295 0 1297 0 1298 0 2.b.
3. Securities issued by states and political ///////////// ///////////// ////////////// /////////////
subdivisions in the U.S.: ///////////// ///////////// ////////////// /////////////
a. General obligations 1676 2,591 1677 2,665 1678 6,575 1679 6,680 3.a.
b. Revenue obligations 1681 0 1686 0 1690 0 1691 0 3.b.
c. Industrial development and similar obligations 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortgage-backed securities (MBS): ///////////// ///////////// ////////////// /////////////
a. Pass-through securities: ///////////// ///////////// ////////////// /////////////
(1) Guaranteed by GNMA 1698 0 1699 0 1701 0 1702 0 4.a.(1)
(2) Issued by FNMA and FHLMC 1703 0 1705 0 1706 0 1707 0 4.a.(2)
(3) Other pass-through securities 1709 0 1710 0 1711 443 1713 444 4.a.(3)
b. Other mortgage-backed securities (include ///////////// ///////////// ////////////// /////////////
CMOs, REMICs, and stripped MBS): ///////////// ///////////// ////////////// /////////////
(1) Issued or guaranteed by FNMA, ///////////// ///////////// ////////////// /////////////
FHLMC, or GNMA 1714 0 1715 0 1716 0 1717 0 4.b.(1)
(2) Collateralized by MBS issued or guaranteed ///////////// ///////////// ////////////// /////////////
by FNMA, FHLMC, or GNMA 1718 0 1719 0 1731 0 1732 0 4.b.(2)
(3) All other mortgage-backed securities 1733 0 1734 0 1735 2,507 1736 2,460 4.b.(3)
5. Other debt securities: ///////////// ///////////// ////////////// /////////////
a. Other domestic debt securities 1737 0 1738 0 1739 291 1741 304 5.a.
b. Foreign debt securities 1742 0 1743 0 1744 0 1746 0 5.b.
6. Equity securities: ///////////// ///////////// ////////////// /////////////
a. Investments in mutual funds ///////////// ///////////// 1747 0 1748 0 6.a.
b. Other equity securities with readily ///////////// ///////////// ////////////// /////////////
determinable fair values ///////////// ///////////// 1749 0 1751 0 6.b.
c. All other equity securities(1) ///////////// ///////////// 1752 76 1753 76 6.c.
7. Total (sum of items 1 through 6) (total of ///////////// ///////////// ////////////// /////////////
column A must equal Schedule RC, item 2.a) ///////////// ///////////// ////////////// /////////////
(total of column D must equal Schedule RC, ///////////// ///////////// ////////////// /////////////
item 2.b) 1754 2,591 1771 2,665 1772 9,892 1773 9,964 7.
- ------------
<FN>
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
(2) Includes Small Business Administration "Guaranteed Loan Pool Certificates,"
U.S. Maritime Administration obligations, and Export-Impart Bank
participation certificates.
(3) Includes obligations (other than mortgage-backed securities) issued by the
Farm Credit System, the Federal Home Loan Bank System, the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association, the
Financing Corporation, Resolution Funding Corporation, the Student Loan
Marketing Association, and the Tennessee Valley Authority.
</TABLE>
12
<PAGE> 37
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-5
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-B--Continued
Memoranda C212
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Pledged securities(1) 0416 11,891 M.1.
2. Maturity and repricing data for debt securities(1),(2),(3) (excluding those
in nonaccrual status): //////////////
a. Fixed rate debt securities with a remaining maturity of: //////////////
(1) Three months or less 0343 660 M.2.a.(1)
(2) Over three months through 12 months 0344 1,526 M.2.a.(2)
(3) Over one year through five years 0345 6,405 M.2.a.(3)
(4) Over five years 0346 984 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a.(1)
through 2.a.(4)) 0347 9,575 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: //////////////
(1) Quarterly or more frequently 4544 2,904 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly 4545 0 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually 4551 0 M.2.b.(3)
(4) Less frequently than every five years 4552 0 M.2.b.(4)
(5) Total floating rate debt securities (sum of Memorandum items 2.b.(1)
through 2.b.(4)) 4553 2,904 M.2.b.(5)
c. Total debt securities (sum of Memorandum items 2.a.(5) and 2.b.(5)) (must equal //////////////
total debt securities from Schedule RC-B, sum of items 1 through 5, columns A and 0393 12,479 M.2.c.
D, minus nonaccrual debt securities included in Schedule RC-N, item 6, column C) //////////////
3. Not applicable
4. Held-to-maturity debt securities restructured and in compliance with modified terms //////////////
(included in Schedule RC-B, items 3 through 5, column A, above) 5365 0 M.4.
5. Not applicable //////////////
6. Floating rate debt securities with a remaining maturity of one year or less(1),(3) //////////////
(included in Memorandum items 2.b.(1) through 2.b.(4) above) 5519 0 M.6.
7. Amortized cost of held-to-maturity securities sold or transferred to available-for-sale or //////////////
trading securities during the calendar year-to-date (report the amortized cost at date of //////////////
sale or transfer) 1778 0 M.7.
8. High-risk mortgage securities (included in the held-to-maturity and available-for-sale //////////////
accounts in Schedule RC-B, item 4.b): //////////////
a. Amortized cost 8780 0 M.8.a.
b. Fair value 8781 0 M.8.b.
9. Structured notes (included in the held-to-maturity and available-for-sale accounts in //////////////
Schedule RC-B, items 2, 3, and 5): //////////////
a. Amortized cost 8752 0 M.9.a.
b. Fair value 8783 0 M.9.b.
<FN>
- -----------
(1) Includes held-to-maturity securities at amortized cost and
available-for-sale securities at fair value.
(2) Exclude equity securities, e.g., investments in mutual funds, Federal
Reserve stock, common stock, and preferred stock.
(3) Memorandum items 2 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
</TABLE>
13
<PAGE> 38
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-6
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-C--Loans and Lease Financing Receivables
Part I. Loans and Leases
Do not deduct the allowance for loan and lease tosses from amounts reported in
this schedule.
Report total loans and leases, net of unearned income. Exclude assets held for trading.
C215
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Loans secured by real estate: //////////////
a. Construction and Land development 1415 0 1.a.
b. Secured by farmland (including farm residential and other improvements) 1420 0 1.b.
c. Secured by 1-4 family residential properties: //////////////
(1) Revolving, open-end loans secured by 1-4 family residential //////////////
properties and extended under Lines of credit 1797 0 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: //////////////
(a) Secured by first liens 5367 0 1.c.(2)(a)
(b) Secured by junior liens 5368 0 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties 1460 0 1.d.
e. Secured by nonfarm nonresidential properties 1480 0 1.e.
2. Loans to depository institutions: //////////////
a. To commercial banks in the U.S.: //////////////
(1) To U.S. branches and agencies of foreign banks 1506 0 2.a.(1)
(2) To other commercial banks in the U.S 1507 0 2.a.(2)
b. To other depository institutions in the U.S 1517 0 2.b.
c. To banks in foreign countries: //////////////
(1) To foreign branches of other U.S. banks 1513 0 2.c.(1)
(2) To other banks in foreign countries 1516 0 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers 1590 0 3.
4. Commercial and industrial loans: //////////////
a. To U.S. addressees (domicile) 1763 0 4.a.
b. To non-U.S. audressees (domicile) 1764 0 4.b.
5. Acceptances of other banks 1755 0 5.
6. Loans to individuals for household, family, and other personal expenditures (i.e., //////////////
consumer loans) (includes purchased paper): //////////////
a. Credit cards and related plans (includes check credit and other revolving
credit plans) 2008 0 6.a.
b. Other (includes single payment, installment, and all student loans) 2011 0 6.b.
7. Loans to foreign governments and official institutions (including foreign central
banks) 2081 0 7.
8. Obligations (other than securities and leases) of states and political subdivisions //////////////
in the U.S. (includes nonrated industrial development obligations) 2107 0 8.
9. Other loans: //////////////
a. Loans for purchasing or carrying securities (secured and unsecured) 1545 0 9.a.
b. All other loans (exclude consumer loans) 1564 26,095 9.b.
10. Lease financing receivables (net of unearned income) 2165 0 10.
11. LESS: Any unearned income on loans reflected in items 1-9 above 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1 through 10 minus //////////////
item 11) (must equal Schedule RC, item 4.a) 2122 26,095 12.
</TABLE>
14
<PAGE> 39
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-7
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-C--Continued
Part I. Continued
Memoranda
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above 1496 0 M.1.
2. Loans(1) and leases restructured and in compliance with modified terms (included in //////////////
Schedule RC-C, part I, above and not reported as past due or nonaccrual in Schedule RC-N, //////////////
Memorandum item 1): //////////////
a. Real estate loans 1617 0 M.2.a.
b. All other loans and all lease financing receivables (exclude loans to individuals for //////////////
household, family, and other personal expenditures) 8691 0 M.2.b.
3. Maturity and repricing data for loans and leases(2) (excluding those in nonaccrual status): //////////////
a. Fixed rate loans and leases with a remaining maturity of: //////////////
(1) Three months or less 0348 26,095 M.3.a.(1)
(2) Over three months through 12 months 0349 0 M.3.a.(2)
(3) Over one year through five years 0356 0 M.3.a.(3)
(4) Over five years 0357 0 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum items 3.a.(1) through 3.a.(4)) 0358 26,095 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: //////////////
(1) Quarterly or more frequently 4554 0 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly 4555 0 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than annually 4561 0 M.3.b.(3)
(4) Less frequently than every five years 4564 0 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) through 3.b.(4)) 4567 0 M.3.b.(5)
c. Total loans and leases (sum of Memorandum items 3.a.(5) and 3.b.(5)) (must equal //////////////
the sum of total loans and leases, net, from Schedule RC-C, part I, item 12,total
nonaccrual loans and leases from Schedule plus unearned income from Schedule RC-C, //////////////
part I, item 11, minus RC-N, sum of items 1 through 5, column C) 1479 26,095 M.3.c.
d. Floating rate loans with a remaining maturity of one year or less (included in Memorandum //////////////
items 3.b.(1) through 3.b.(4) above) A246 0 M.3.d.
4. Loans to finance commercial real estate, construction, and land development activities //////////////
(not secured by real estate) included in Schedule RC-C, part I, items 4 and 9.b, page RC-6(3) 2746 0 M.4.
5. Loans and leases held for sale (included in Schedule RC-C, part I, above) 5369 0 M.5.
6. Adjustable rate closed-end loans secured by first liens on 1-4 family residential properties //////////////
(included in Schedule RC-C, part I, item 1.c.(2)(a), page RC-6) 5370 0 M.6.
<FN>
- ------------------
(1) See instructions for loan classifications used in Memorandum item 2.
(2) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(3) Exclude loans secured by real estate that are included in Schedule RC-C,
part I, items 1.a through 1.e.
</TABLE>
15
<PAGE> 40
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-8
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-E--Deposit Liabilities
C225
Nontransaction
Transaction Accounts Accounts
(Column A) (Column B) (Column C)
Total Memo: TotaL Total
transaction demand nontransaction
accounts deposits accounts
(including (included in (including)
total demand column A) MMDAs)
deposits)
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deposits of: /////////////// /////////////// ///////////////
1. Individuals, partnerships, and corporations 2201 231,467 2240 231,467 2346 84,245 1.
2. U.S. Government 2202 0 2280 0 2520 0 2.
3. States and political subdivisions in the U.S 2203 0 2290 0 2530 0 3.
4. Commercial banks in the U.S 2206 0 2310 0 2550 0 4.
5. Other depository institutions in the U.S 2207 0 2312 0 2349 0 5.
6. Banks in foreign countries 2213 0 2320 0 2236 0 6.
7. Foreign governments and official institutions (including /////////////// /////////////// ///////////////
foreign central banks) 2216 0 2300 0 2377 0 7.
8. Certified and official checks 2330 58 2330 58 /////////////// 8.
9. Total (sum of items 1 through 8) (sum of columns A and C /////////////// /////////////// ///////////////
must equal Schedule RC, item 13.a) 2215 231,525 2210 231,525 2385 84,245 9.
<CAPTION>
Memoranda
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Selected components of total deposits (i.e., sum of item 9, columns A and C): ///////////////
a. Total Individual Retirement Accounts (IRAs) and Keogh Plan accounts 6835 0 M.1.a.
b. Total brokered deposits 2365 0 M.1.b.
c. Fully insured brokered deposits (included in Memorandum item 1.b above): ///////////////
(1) Issued in denominations of less than $100,000 2343 0 M.1.c.(1)
(2) Issued either in denominations of $100,000 or in denominations greater than ///////////////
$100,000 and participated out by the broker in shares of $100,000 or less 2344 0 M.1.c.(2)
d. Maturity data for brokered deposits: ///////////////
(1) Brokered deposits issued in denominations of less than $100,000 with a remaining ///////////////
maturity of one year or less (included in Memorandum item 1.c.(1) above) A243 0 M.1.d.(1)
(2) Brokered deposits issued in denominations of $100,000 or more with a remaining ///////////////
maturity of one year or less (included in Memorandum item 1.b above) A244 0 M.1.d.(2)
e. Preferred deposits (uninsured deposits of states and political subdivisions in the U.S ///////////////
reported in item 3 above which are secured or collateralized as required under state law) 5590 0 M.1.e.
2. Components of total nontransaction accounts (sum of Memorandum items 2.a through 2.d ///////////////
must equal item 9, column C, above): ///////////////
a. Savings deposits: ///////////////
(1) Money market deposit accounts (MMDAs) 6810 31,872 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs) D352 52,373 M.2.a.(2)
b. Total time deposits of less than $100,000 6648 0 M.2.b.
c. Time certificates of deposit of $100,000 or more 6645 0 M.2.c.
d. Open-account time deposits of $100,000 or more 6646 0 M.2.d.
3. All NOW accounts (included in column A above) 2398 0 M.3.
4. Not applicable
</TABLE>
16
<PAGE> 41
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-9
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-E--Continued
Memoranda (Continued)
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
5. Maturity and repricing data for time deposits of less than $100,000 (sum of Memorandum //////////////
items 5.a.(1) through 5.b.(3) must equal Memorandum item 2.b above):(1) //////////////
a. Fixed rate time deposits of less than $100,000 with a remaining maturity of: //////////////
(1) Three months or less A225 0 M.5.a.(1)
(2) Over three months through 12 months A226 0 M.5.a.(2)
(3) Over one year A227 0 M.5.a.(3)
b. Floating rate time deposits of less than $100,000 with a repricing frequency of: //////////////
(1) Quarterly or more frequently A228 0 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly A229 0 M.5.b.(2)
(3) Less frequently than annually A230 0 M.5.b.(3)
c. Floating rate time deposits of less than $100,000 with a remaining maturity of one year //////////////
or less (included in Memorandum items 5.b.(1) through 5.b.(3) above) A231 0 M.5.c.
6. Maturity and repricing data for time deposits of $100,000 or more (i.e., time certificates //////////////
of deposit of $100,000 or more and open-account time deposits of $100,000 or more) //////////////
(sum of Memorandum items 6.a.(1) through 6.b.(4) must equal the sum of Memorandum //////////////
items 2.c and 2.d above):(1) I //////////////
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: //////////////
(1) Three months or less A232 0 M.6.a.(1)
(2) Over three months through 12 months A233 0 M.6.a.(2)
(3) Over one year through five years A234 0 M.6.a.(3)
(4) Over five years A235 0 M.6.a.(4)
b. Floating rate time deposits of $100,000 or more with a repricing frequency of: //////////////
(1) Quarterly or more frequently A236 0 M.6.b.(1)
(2) Annually or more frequently, but less frequently than quarterly A237 0 M.6.b.(2)
(3) Every five years or more frequently, but less frequently than annually A238 0 M.6.b.(3)
(4) Less frequently than every five years A239 0 M.6.b.(4)
c. Floating rate time deposits of $100,000 or more with a remaining maturity of one year or //////////////
less (included in Memorandum items 6.b.(1) through 6.b.(4) above) A240 0 M.6.c.
- ------------------
<FN>
(1) Memorandum items 5 and 6 are not applicable to savings banks that must
complete supplemental Schedule RC-J.
</TABLE>
17
<PAGE> 42
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-10
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-F--Other Assets
C230
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Income earned, not collected on loans 2164 0 1.
2. Net deferred tax assets(1) 2148 0 2.
3. Excess residential mortgage servicing fees receivable 5371 0 3.
4. Other (itemize and describe amounts that exceed zsx of this item) 2168 19,467 4.
a. TEXT 3549 182401 - INTERHC Receivable RCDN 3549 9,160 ////////////// 4.a.
b. TEXT 3550 182515 - A/R Trust Fees RCDN 3550 5,764 ////////////// 4.b.
c. TEXT 3551 RCDN 3551 ////////////// 4.c.
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11) 2160 19,467 5.
<CAPTION>
Memorandum
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes 5610 0 M.1.
<CAPTION>
Schedule RC-G--Other Liabilities
C235
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. a. Interest accrued and unpaid on deposits(2) 3645 136 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable) 3646 8,008 1.b.
2. Net deferred tax liabilities(1) 3049 591 2.
3. Minority interest in consolidated subsidiaries 3000 0 3.
4. Other (itemize and describe amounts that exceed zsx of this item) 2938 1,257 4.
a. TEXT 3552 272165 - Other Liabilities RCON 3552 968 ////////////// 4.a.
b. TEXT 3553 RCON 3553 ////////////// 4.b.
c. TEXT 3554 RCDN 3554 ////////////// 4.c.
5. Total (sum of items 1 through 4) Cmust equal Schedule RC, item 20) 2930 9,992 5.
<FN>
(1) See discussion of deferred income taxes in Glossary entry on "income
taxes."
(2) For savings banks, includes "dividends" accrued and unpaid on deposits.
</TABLE>
18
<PAGE> 43
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-11
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-K--Quarterly Averages(1)
C255
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS //////////////
1. Interest-bearing balances due from depository institutions 3381 5,054 1.
2. U.S. Treasury securities and U.S. Government agency and corporation obligations(3) 3382 0 2.
3. Securities issued by states and political subdivisions in the U.S.(3) 3383 9,324 3.
4. a. Other debt securities(3) 3647 3,305 4.a.
b. Equity securities(4) (includes investments in mutual funds and Federal Reserve stock) 3648 76 4.b.
5. Federal funds sold and securities purchased under agreements to resell 3365 185,386 5.
6. Total loans(2): //////////////
a. Real estate loans 3256 0 6.a.
b. Installment Loans 3287 0 6.b.
c. Credit cards and related plans 3288 0 6.c.
d. Commercial (time and demand) and all other loans 3289 30,189 6.d.
7. Trading assets 3401 0 7.
8. Lease financing receivables (net of unearned income) 3484 0 8.
9. Total assets(S) 3368 295,391 9.
LIABILITIES //////////////
10. Interest-bearing transaction accounts (NOW accounts, ATS accounts, and teLephone and //////////////
preauthorized transfer accounts) (exclude demand deposits) 3485 0 10.
11. Nontransaction accounts: //////////////
a. Money market deposit accounts (MMDAs) 3486 44,108 11.a.
b. Other savings deposits 3487 42,549 11.b.
c. Time certificates of deposit of $100,000 or more 3345 0 11.c.
d. All other time deposits 3469 0 11.d.
12. Federal funds purchased and securities sold under agreements to repurchase 3353 650 12.
13. Other borrowed money 3355 0 13.
<CAPTION>
Memorandum
Dollar Amounts in Thousands RCON Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. To be completed by banks with loans to finance agricultural production and other Loans //////////////
to farmers (Schedule RC-C, part I, item 3) exceeding five percent of total loans //////////////
Agricultural loans(2) included in items 6.a through 6.d above 3379 N/A M.1.
<FN>
- ---------------------
(1) For all items, banks have the option of reporting either (1) an average of
daiLy figures for the quarter, or (2) an average of weekly figures (i.e.,
the Wednesday of each week of the quarter).
(2) See instructions for loan classifications used in this schedule.
(3) Quarterly averages for all debt securities should be based on amortized
cost.
(4) Quarterly averages for all equity securities should be based on historical
cost.
(5) The quarterly average for total assets should reflect all debt securities
(not heLd for trading) at amortized cost, equity securities with readily
determinabLe fair values at the lower of cost or fair vaLue, and equity
securities without readily determinable fair values at historical cost.
</TABLE>
19
<PAGE> 44
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-12
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-L--Off-Balance Sheet Items
Please read carefully the instructions for the preparation of Schedule RC-L. Some of the amounts
reported in Schedule RC-L are regarded as volume indicators and not necessarily as measures of risk.
C260
Dollar Amounts in Thousands RCON Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Unused commitments: //////////////////
a. Revolving, open-end lines secured by 1-4 family residential properties, //////////////////
e.g., home equity lines 3814 0 1.a.
b. Credit card lines 3815 0 1.b.
c. Commercial real estate, construction, and land development: //////////////////
(1) Commitments to fund loans secured by real estate 3816 0 1.c.(1)
(2) Commitments to fund loans not secured by real estate 6550 0 1.c.(2)
d. Securities underwriting 3817 0 1.d.
e. Other unused commitments 3818 0 1.e.
RCON Mil Thou
2. Financial standby letters of credit 3819 0 2.
a. Amount of financial standby letters of credit conveyed to others RCON 3820 0 ////////////// 2.a.
3. Performance standby letters of credit 3821 0 3.
a. Amount of performance standby letters of credit conveyed to others RCON 3822 0 ////////////// 3.a.
4. CommerciaL and similar letters of credit 3411 0 4.
5. Participations in acceptances (as described in the instructions) conveyed to others //////////////
by the reporting bank 3428 0 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting //////////////
(nonaccepting) bank 3429 0 6.
7. Securities borrowed 3432 0 7.
8. Securities lent (including customers' securities lent where the customer is indemnified against //////////////
loss by the reporting bank) 3433 32 8.
9. Loans transferred (i.e., sold or swapped) with recourse that have been treated as
sold for //////////////
Call Report purposes: //////////////
a. FNMA and FHLMC residential mortgage loan pools: //////////////
(1) Outstanding principal balance of mortgages transferred as of the report date 3650 0 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date 3651 0 9.a.(2)
b. Private (nongovernment-issued or -guaranteed) residential mortgage loan pools: //////////////
(1) Outstanding principal balance of mortgages transferred as of the report date 3652 0 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date 3653 0 9.b.(2)
c. Farmer Mac agricultural mortgage loan pools: //////////////
(1) Outstanding principal balance of mortgages transferred as of the report date 3654 0 9.c.(1)
(2) Amount of recourse exposure on these mortgages as of the report date 3655 0 9.c.(2)
d. Small business obligations transferred with recourse under Section 208 of the //////////////
Riegle Community Development and Regulatory Improvement Act of 1994: //////////////
(1) Outstanding principal balance of small business obligations transferred as of //////////////
the report date A249 0 9.d.(1)
(2) Amount of retained recourse on these obligations as of the report date A250 0 9.d.(2)
10. When-issued securities: //////////////
a. Gross commitments to purchase 3434 0 10.a.
b. Gross commitments to sell 3435 0 10.b.
11. Spot foreign exchange contracts 8765 0 11.
12. All other off-balance sheet liabilities (exclude off-balance sheet derivatives) (itemize and //////////////
describe each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 3430 0 12.
//////////////
a. TEXT 3555 RCON 3555 ////////////// 12.a.
b. TEXT 3556 RCON 3556 ////////////// 12.b.
c. TEXT 3557 RCON 3557 ////////////// 12.c.
d. TEXT 3558 RCON 3558 ////////////// 12.d.
</TABLE>
20
<PAGE> 45
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-13
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
Schedule RC-L--Continued
Dollar Amounts in Thousands RCON Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
13. All other off-balance sheet assets (exclude off-balance sheet derivatives) (itemize and describe //////////////
each component of this item over 25% of Schedule RC, item 28, "Total equity capital") 5591 0 13.
//////////////
a. TEXT 5592 RCON 5592 ////////////// 13.a.
b. TEXT 5593 RCON 5593 ////////////// 13.b.
c. TEXT 5594 RCON 5594 ////////////// 13.c.
d. TEXT 5595 RCON 5595 ////////////// 13.d.
<CAPTION>
C261
(Column A) (Column B) (Column C) (Column D)
Interest Foreign Equity Commodity
Dollar Amounts in Thousands Rate Exchange Derivative and Other
Off-balance Sheet Derivatives Contracts Contracts Contracts Contracts
Position Indicators RCON Mil Thou RCON Mil Thou RCON Mil Thou RCON Mil Thou
14. Gross amounts (e.g., notional amounts) (for each ///////////// ///////////// ///////////// /////////////
column, sum of items 14.a through 14.e ///////////// ///////////// ///////////// /////////////
must equal sum of items 15, 16.a, and 16.b): ///////////// ///////////// ///////////// /////////////
a. Futures contracts 8693 0 8694 0 8695 0 8696 0 14.a.
b. Forward contracts 8697 0 8698 0 8699 0 8700 0 14.b.
c. Exchange-traded option contracts: ///////////// ///////////// ///////////// /////////////
(1) Written options 8701 0 8702 0 8703 0 8704 0 14.c.(1)
(2) Purchased options 8705 0 8706 0 8707 0 8708 0 14.c.(2)
d. Over-the-counter option contracts: ///////////// ///////////// ///////////// /////////////
(1) Written options 8709 0 8710 0 8711 0 8712 0 14.d.(1)
(2) Purchased options 8713 0 8714 0 8715 0 8716 0 14.d.(2)
e. Swaps 3450 2,900 3826 0 8719 0 8720 0 14.e.
15. Total gross notional amount of derivative ///////////// ///////////// ///////////// /////////////
contracts held for trading A126 0 A127 0 8723 0 8724 0 15.
16. Total gross notional amount of derivative ///////////// ///////////// ///////////// /////////////
contracts held for purposes other than trading: ///////////// ///////////// ///////////// /////////////
a. Contracts marked to market 8725 0 8726 0 8727 0 8728 0 16.a.
b. Contracts not marked to market 8729 2,900 8730 0 8731 0 8732 0 16.b.
17. Gross fair values of derivative contracts: ///////////// ///////////// ///////////// /////////////
a. Contracts held for trading: ///////////// ///////////// ///////////// /////////////
(1) Gross positive fair value 8733 0 8734 0 8735 0 8736 0 17.a.(1)
(2) Gross negative fair value 8737 0 8738 0 8739 0 8740 0 17.a.(2)
b. Contracts held for purposes other than ///////////// ///////////// ///////////// /////////////
trading that are marked to market: ///////////// ///////////// ///////////// /////////////
(1) Gross positive fair value 8741 0 8742 0 8743 0 8744 0 17.b.(1)
(2) Gross negative fair value 8745 0 8746 0 8747 0 8748 0 17.b.(2)
c. Contracts held for purposes other than ///////////// ///////////// ///////////// /////////////
trading that are not marked to market: ///////////// ///////////// ///////////// /////////////
(1) Gross positive fair value 8749 84 8750 0 8751 0 8752 0 17.c.(1)
(2) Gross negative fair value 8753 65 8754 0 8755 0 8756 0 17.c.(2)
<CAPTION>
Memoranda
Dollar Amounts in Thousands RCON Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1.-2. Not applicable //////////////
3. Unused commitments with an original maturity exceeding one year that are reported in //////////////
Schedule RC-L, items 1.a through i.e, above (report only the unused portions of commitments //////////////
that are fee paid or otherwise legally binding) 3833 0 M.3.
a. Participations in commitments with an original maturity exceeding one year //////////////
conveyed to others RCON 3834 0 ////////////// M.3.a.
</TABLE>
21
<PAGE> 46
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-14
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
SCHEDULE RC-M--MEMORANDA _________
| C265 | (-
------------------
Dollar Amounts in Thousands | RCON Mil Thou |
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Extensions of credit by the reporting bank to its executive officers, directors, principal | ////////////// |
shareholders, and their related interests as of the report date: | ////////////// |
a. Aggregate amount of all extensions of credit to all executive officers, directors, principal | ////////////// |
shareholders, and their related interests | 6164 0 | 1.a.
b. Number of executive officers, directors, and principal shareholders to whom the | ////////////// |
amount of all extensions of credit by the reporting bank (including extensions of | ////////////// |
credit to related interests) equals or exceeds the lesser of $500,000 or 5 percent Number | ////////////// |
of total capital as defined for this purpose in agency regulations |RCON 6165| 0 | ////////////// | 1.b.
2. Federal funds sold and securities purchased under agreements to resell with U.S. branches and | ////////////// |
agencies of foreign banks(1) (included in Schedule RC, items 3.a and 3.b) | 3405 0 | 2.
3. Not applicable | ////////////// |
4. Outstanding principal balance of 1-4 family residential mortgage loans serviced for others | ////////////// |
(include both retained servicing and purchased servicing): | //////////////
a. Mortgages serviced under a GNMA contract | 5500 0 | 4.a.
b. Mortgages serviced under a FHLMC contract: | ////////////// |
(1) Serviced with recourse to servicer | 5501 0 | 4.b.(1)
(2) Serviced without recourse to servicer | 5502 0 | 4.b.(2)
c. Mortgages serviced under a FNMA contract: | ////////////// |
(1) Serviced under a regular option contract | 5503 0 | 4.c.(1)
(2) Serviced under a special option contract | 5504 0 | 4.c.(2)
d. Mortgages serviced under other servicing contracts | 5505 0 | 4.d.
5. Not applicable | ////////////// |
6. Intangible assets: | ////////////// |
a. Mortgage servicing rights | 3164 0 | 6.a.
b. Other identifiable intangible assets: | ////////////// |
(1) Purchased credit card relationships | 5506 0 | 6.b.(1)
(2) All other identifiable intangible assets | 5507 0 | 6.b.(2)
c. Goodwill | 3163 0 | 6.c.
d. Total (sum of items 6.a through 6.c)(must equal Schedule RC, item 10) | 2143 0 | 6.d.
e. Amount of intangible assets (included in item 6.b.(2) above) that have been grandfathered or are | ////////////// |
otherwise qualifying for regulatory capital purposes | 6442 0 | 6.e.
7. Mandatory convertible debt, net of common or perpetual preferred stock dedicated to | ////////////// |
redeem the debt | 3295 0 | 7.
------------------
- ----------
<FN>
(1) Do not report federal funds sold and securities purchased under agreements to resell with other commercial banks in the
U.S. in this item.
</TABLE>
22
<PAGE> 47
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-15
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
<CAPTION>
SCHEDULE RC-M--CONTINUED
------------------
Dollar Amounts in Thousands | RCON Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
8. a. Other real estate owned: | ////////////// |
(1) Direct and indirect investments in real estate ventures | 5372 0 | 8.a.(1)
(2) All other real estate owned: | ////////////// |
(a) Construction and land development | 5508 0 | 8.a.(2)(a)
(b) Farmland | 5509 0 | 8.a.(2)(b)
(c) 1-4 family residential properties | 5510 0 | 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties | 5511 0 | 8.a.(2)(d)
(e) Nonfarm nonresidential properties | 5512 0 | 8.a.(2)(e)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7) | 2150 0 | 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: | ////////////// |
(1) Direct and indirect investments in real estate ventures | 5374 0 | 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies | 5375 0 | 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8) | 2130 0 | 8.b.(3)
c. Total assets of unconsolidated subsidiaries and associated companies | 5376 0 | 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, | ////////////// |
item 23, "Perpetual preferred stock and related surplus" | 3778 0 | 9.
10. Mutual fund and annuity sales during the quarter (include proprietary, private label, and third | ////////////// |
party products): | ////////////// |
a. Money market funds | 6441 0 | 10.a.
b. Equity securities funds | 8427 0 | 10.b.
c. Debt securities funds | 8428 0 | 10.c.
d. Other mutual funds | 8429 0 | 10.d.
e. Annuities | 8430 0 | 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a through 10.e above). | 8784 0 | 10.f.
------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
------------------
Memorandum Dollar Amounts in Thousands | RCON Mil Thou |
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Interbank holdings of capital instruments (to be completed for the December report only): | ////////////// |
a. Reciprocal holdings of banking organizations' capital instruments | 3836 N/A | M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments | 3837 N/A | M.1.b.
------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE> 48
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-16
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS(1), LEASES, AND OTHER ASSETS
The FFIEC regards the information reported in all of Memorandum item 1, in items 1
through 7, column A, and in Memorandum items 2 through 4, column A, as
confidential. -----------
C270
-----------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
days and still and still
accruing accruing
------------------------------------------
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou RCON Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Real estate loans 1210 0 1211 0 1212 0 1.
2. Installment loans 1214 0 1215 0 1216 0 2.
3. Credit cards and related plans 1218 0 1219 0 1220 0 3.
4. Commercial (time and demand) and all other loans 1222 0 1223 0 1224 0 4.
5. Lease financing receivables 1226 0 1227 0 1228 0 5.
6. Debt securities and other assets (exclude other real estate ///////////// ///////////// //////////////
owned and other repossessed assets) 3505 0 3506 0 3507 0 6.
===============================================================================================================================
<CAPTION>
Amounts reported in items 1 through 5 above include guaranteed and unguaranteed
portions of past due and nonaccrual loans and leases. Report in item 7 below
certain guaranteed loans and leases that have already been included in the
amounts reported in items 1 through 5.
<S> <C> <C> <C> <C>
------------------------------------------
7. Loans and leases reported in items 1 through 5 above which RCON Mil Thou RCON Mil Thou RCON Mil Thou
are wholly or partially guaranteed by the U.S. Government ------------------------------------------
a. Guaranteed portion of loans and leases included in item 7 5612 0 5613 0 5614 0 7.
above ///////////// ///////////// /////////////
5615 0 5616 0 5617 0 7.a.
------------
Memoranda C273
------------------------------------------
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou RCON Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Restructured loans and leases included in Schedule RC-N, ///////////// ///////////// /////////////
items 1 through 5, above (and not reported in Schedule RC-C, ///////////// ///////////// /////////////
part I, Memorandum item 2) 1658 0 1659 0 1661 0 M.1.
2. To be completed by banks with loans to finance agricultural ///////////// ///////////// /////////////
production and other loans to farmers (Schedule RC-C, part I, ///////////// ///////////// /////////////
item 3) exceeding five percent of total loans: ///////////// ///////////// /////////////
Agricultural Loans included in Schedule RC-N, items 1 ///////////// ///////////// /////////////
through 4, above 1230 N/A 1231 N/A 1232 N/A M.2.
3. Loans to finance commercial real estate, construction, and ///////////// ///////////// /////////////
land development activities (not secured by real estate) ///////////// ///////////// /////////////
included in Schedule RC-N, items 2 through 4, above 5421 0 5422 0 5423 0 M.3.
4. Real estate loans (sum of Memorandum items 4.a through 4.e ///////////// ///////////// /////////////
must equal Schedule RC-N, item 1, above): ///////////// ///////////// /////////////
a. Construction and land development 5424 0 5425 0 5426 0 M.4.a.
b. Secured by farmland 5427 0 5428 0 5429 0 M.4.b.
c. Secured by 1-4 family residential properties: ///////////// ///////////// /////////////
(1) Revolving, open-end loans secured by 1-4 family ///////////// ///////////// /////////////
residential properties and extended under Lines of
credit 5430 0 5431 0 5432 0 M.4.c.(1)
(2) All other loans secured by 1-4 family residentiaL ///////////// ///////////// /////////////
properties 5433 0 5434 0 5435 0 M.4.c.(2)
d. Secured by multifamily (5 or more) residential properties 5436 0 5437 0 5438 0 M.4.d.
e. Secured by nonfarm nonresidential properties 5439 0 5440 0 5441 0 M.4.e.
<FN>
- ---------------
(1) See instructions for loan classifications used in this schedule.
</TABLE>
24
<PAGE> 49
<TABLE>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-17
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS ------
C275 <-
---------------
Dollar Amounts in Thousands RCON Mil Thou
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Unposted debits (see instructions): //////////////
a. Actual amount of all unposted debits 0030 N/A 1.a.
OR //////////////
b. Separate amount of unposted debits: //////////////
(1) Actual amount of unposted debits to demand deposits 0031 0 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1) 0032 0 1.b.(2)
2. Unposted credits (see instructions): //////////////
a. Actual amount of all unposted credits 3510 N/A 2.a.
OR //////////////
b. Separate amount of unposted credits: //////////////
(1) Actual amount of unposted credits to demand deposits 3512 0 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1) 3514 0 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in
total deposits) 3520 0 3.
4. Deposits of consolidated subsidiaries (not included in total deposits): //////////////
a. Demand deposits of consolidated subsidiaries 2211 0 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries 2351 0 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries 5514 0 4.c.
---------------
5. Not applicable
Item 6 is not applicable to state nonmember banks that have not been authorized
by the Federal Reserve to act as pass-through correspondents. ---------------
6. Reserve balances actually passed through to the Federal Reserve by the reporting //////////////
bank on behalf of its respondent depository institutions that are also reflected as //////////////
deposit liabilities of the reporting bank: //////////////
a. Amount reflected in demand deposits (included in Schedule RC-E, item 4 or 5,
column B) 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, //////////////
item 4 or 5, column A or C, but not column B) 2315 0 6.b.
7. Unamortized premiums and discounts on time and savings deposits:(1) //////////////
a. Unamortized premiums 5516 0 7.a.
b. Unamortized discounts 5517 0 7.b.
---------------
- -----------------------------------------------------------------------------------------------------------------------
---------------
8. To be completed by banks with "Oakar deposits." //////////////
Total "Adjusted Attributable Deposits" of all institutions acquired
under Section 5(d)(3) of the Federal Deposit Insurance Act (from most //////////////
recent FDIC Oakar Transaction Worksheet(s)) 5518 N/A 8.
---------------
- -----------------------------------------------------------------------------------------------------------------------
---------------
9. Deposits in lifeline accounts 5596 ///////// 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in
total deposits) 8432 0 10.
---------------
<FN>
- ------------------------
(1) For FDIC insurance assessment purposes, "time and savings deposits"
consists of nontransaction accounts and all transaction accounts other than
demand deposits.
</TABLE>
25
<PAGE> 50
<TABLE>
<CAPTION>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-18
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
SCHEDULE RC-O--CONTINUED ---------------
Dollar Amounts in Thousands RCON Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
11. Adjustments to demand deposits reported in Schedule RC-E for certain reciprocal demand //////////////
balances: //////////////
a. Amount by which demand deposits would be reduced if reciprocal demand balances between //////////////
the reporting bank and savings associations were reported on a net basis rather than a //////////////
gross basis in Schedule RC-E 8785 0 11.a.
b. Amount by which demand deposits would be increased if reciprocal demand balances //////////////
between the reporting bank and U.S. branches and agencies of foreign banks were reported //////////////
on a gross basis rather than a net basis in Schedule RC-E A181 0 11.b.
c. Amount by which demand deposits would be reduced if cash items in process of collection //////////////
were included in the calculation of net reciprocal demand balances between the reporting //////////////
bank and the domestic offices of U.S. banks and savings associations in Schedule RC-E A182 0 11.c.
---------------
<CAPTION>
Memoranda (to be completed each quarter except as noted) ---------------
Dollar Amounts in Thousands RCON Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Total deposits of the bank (sum of Memorandum items 1.a.(1) and 1.b.(1) must equal //////////////
Schedule RC, item 13.a): //////////////
a. Deposit accounts of $100,000 or less: //////////////
(1) Amount of deposit accounts of $100,000 or less 2702 7,117 M.1.a.(1)
(2) Number of deposit accounts of $100,000 or less (to be NUMBER //////////////
completed for the June report only) RCON 3779 N/A ////////////// M.1.a.(2)
b. Deposit accounts of more than $100,000: //////////////
(1) Amount of deposit accounts of more than $100,000 2710 308,653 M.1.b.(1)
NUMBER //////////////
(2) Number of deposit accounts of more than $100,000 RCON 2722 183 ////////////// M.1.b.(2)
---------------
2. Estimated amount of uninsured deposits of the bank:
a. An estimate of your bank's uninsured deposits can be determined by
multiplying the number of deposit accounts of more than $100,000 reported in
Memorandum item 1.b.(2) above by $100,000 and subtracting the result from the
amount of deposit accounts of more than $100,000 reported in Memorandum item
1.b.(1) above.
<CAPTION>
<S> <C> <C> <C> <C>
YES NO
Indicate in the appropriate box at the right whether your bank has a method or procedure -----------------
for determining a better estimate of uninsured deposits than the estimate described above 6861 x M.2.a.
-----------------
b. If the box marked YES has been checked, report the estimate of uninsured deposits RCON Mil Thou
determined by using your bank's method or procedure 5597 N/A M.2.b.
- ---------------------------------------------------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be
directed: C277 <-
</TABLE>
Jeannine Palmer, Controller (614) 248-1171
- --------------------------- --------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
26
<PAGE> 51
<TABLE>
<S> <C> <C>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-19
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
</TABLE>
SCHEDULE RC-R--REGULATORY CAPITAL
This schedule must be completed by all banks as follows: Banks that reported
total assets of $1 billion or more in Schedule RC, item 12, for June 30, 1995,
must complete items 2 through 9 and Memoranda items 1 and 2. Banks with assets
of less than $1 billion must complete items 1 through 3 below or Schedule RC-R
in its entirety, depending on their response to item 1 below.
<TABLE>
<S> <C> <C> <C> <C>
--------------
C280
1. Test for determining the extent to which Schedule RC-R must be completed. --------------
To be completed only by banks with total assets of less than $1 billion. YES NO
Indicate in the appropriate box at the right whether the bank has total --- ----
capital greater than or equal to eight percent of adjusted total assets RCON 6056 //// x 1.
</TABLE>
For purposes of this test, adjusted total assets equals total assets less
cash, U.S. Treasuries, U.S. Government agency obligations, and 80 percent of
U.S. Government-sponsored agency obligations plus the allowance for loan and
Lease losses and selected off-balance sheet items as reported on Schedule RC-L
(see instructions).
If the box marked YES has been checked, then the bank only has to complete
items 2 and 3 below. If the box marked NO has been checked, the bank must
complete the remainder of this schedule.
A NO response to item 1 does not necessarily mean that the bank's actual
risk-based capital ratio is less than eight percent or that the bank is not in
compliance with the risk-based capital guidelines.
- --------------------------------------------------------------
NOTE: All banks are required to complete items 2 and 3 below.
See optional worksheet for items 3.a through 3.f.
- --------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
--------------------------------
(Column A) (Column B)
Subordinated Other
Debt(1) and Limited
Intermediate Life
Term Preferred Capital
Dollar Amounts in Thousands Stock Instruments
- ------------------------------------------------------------------------------------------------------------------------------
2. Suboridnated debt(1) and other limited-life capital instruments (original Weighted RCON Mil Thou RCON Mil Thou
average maturity of at least five years) with a remaining maturity of: --------------------------------
a. One year or less 3780 0 3786 0 2.a.
b. Over one year through two years 3781 0 3787 0 2.b.
c. Over two years through three years 3782 0 3788 0 2.c.
d. Over three years through four years 3783 0 3789 0 2.d.
e. Over four years through five years 3784 0 3790 0 2.e.
f. Over five years 3785 0 3791 0 2.f.
--------------------------------
//////////////
3. Amounts used in calculating regulatory capital ratios (report amounts //////////////
determined by the bank for its own internal regulatory capital analyses ----------------
consistent with applicable capital standards): RCON Mil Thou
a. Tier 1 capital 8274 25,098 3.a.
b. Tier 2 capital 8275 10 3.b.
c. Total risk-based capital 3792 25,108 3.c.
d. Excess allowance for loan and lease losses A222 0 3.d.
e. Risk-weighted assets (net of all deductions, including excess allowance) A223 114,787 3.e.
f. "Average total assets" (net of all assets deducted from Tier 1 capital)(2) A224 295,391 3.f.
------------------------------
(Column A) (Column B)
Items 4-9 and Memoranda items 1 and 2 are to be completed Assets Credit Equiv
by banks that answered NO to item 1 above and Recorded alent Amount
by banks with total assets of $1 billion or more on the of Off-Balance
Balance Sheet Sheet Items(3)
------------------------------
4. Assets and credit equivalent amounts of off-balance sheet items assigned to RCON Mil Thou RCON Mil Thou
the Zero percent risk category: ////////////// //////////////
a. Assets recorded on the balance sheet: ////////////// //////////////
(1) Securities issued by, other claims on, and claims unconditionally ////////////// //////////////
guaranteed by, the U.S. Government and its agencies and other OECO ////////////// //////////////
central governments 3794 0 ////////////// 4.a.(1)
(2) All other 3795 7,674 ////////////// 4.a.(2)
b. Credit equivalent amount of off-balance sheet items ////////////// 3796 0 4.b.
------------------------------
<FN>
- ------------------
(l) Exclude mandatory convertible debt reported in Schedule RC-M, item 7.
(2) Do not deduct excess allowance for loan and lease losses.
(3) Do not report in column B the risk-weighted amount of assets reported in
column A.
</TABLE>
27
<PAGE> 52
<TABLE>
<S> <C> <C>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-20
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC-R--CONTINUED
---------------------------------
(Column A) (Column B)
Assets Credit Equiv-
Recorded alent Amount
on the of Off-Balance
Balance Sheet Sheet Items(1)
---------------------------------
Dollar Amounts in Thousands RCON Mil Thou RCON Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5. Assets and credit equivalent amounts of off-balance sheet items assigned to the ////////////// //////////////
20 percent risk category: ////////////// //////////////
a. Assets recorded on the balance sheet: ////////////// //////////////
(1) Claims conditionally guaranteed by the U.S. Government and its agencies ////////////// //////////////
and other OECD central governments 3798 0 ////////////// 5.a.(1)
(2) Claims collateralized by securities issued by the U.S. Government and its ////////////// //////////////
agencies and other OECD central governments; by securities issued by ////////////// //////////////
U.S. Government-sponsored agencies; and by cash on deposit 3799 0 ////////////// 5.a.(2)
(3) All other 3800 285,233 ////////////// 5.a.(3)
b. Credit equivalent amount of off-balance sheet items ////////////// 3801 131 5.b.
6. Assets and credit equivalent amounts of off-balance sheet items assigned to the ////////////// //////////////
50 percent risk category: ////////////// //////////////
a. Assets recorded on the balance sheet 3802 446 ////////////// 6.a.
b. Credit equivalent amount of off-balance sheet items ////////////// 3803 0 6.b.
7. Assets and credit equivalent amounts of off-balance sheet items assigned to the ////////////// //////////////
100 percent risk category: ////////////// //////////////
a. Assets recorded on the balance sheet 3804 57,491 ////////////// 7.a.
b. Credit equivalent amount of off-balance sheet items ////////////// 3805 0 7.b.
8. On-balance sheet asset values excluded from the calculation of the risk-based ////////////// //////////////
capital ratio(2) 3806 72 ////////////// 8.
9. Total assets recorded on the balance sheet (sum of items 4.a, 5.a, 6.a,
7.a, and 8, column A) (must equal Schedule RC, item 12 plus items ////////////// //////////////
4.b and 4.c) 3807 350,916 ////////////// 9.
---------------------------------
<CAPTION>
Memoranda --------------
Dollar Amounts in Thousands RCON Mil Thou
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Current credit exposure across all off-balance sheet derivative contracts covered by the //////////////
risk-based capital standards 8764 84 M.1.
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------------
With a remaining maturity of
<S> <C> <C> <C> <C>
---------------------------------------------
(Column A) (Column B) (Column C)
One year Over Over
or less one year five years
through
five years
---------------------------------------------
2. Notional principal amounts of off-balance RCON Mil Thou RCON Mil Thou RCON Mil Thou
sheet derivative contracts:(3) ---------------------------------------------
a. Interest rate contracts 3809 0 8766 2,900 8767 0 M.2.a.
b. Foreign exchange contracts 3812 0 8769 0 8770 0 M.2.b.
c. Gold contracts 8771 0 8772 0 8773 0 M.2.c.
d. Other precious metals contracts 8774 0 8775 0 8776 0 M.2.d.
e. Other commodity contracts 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts AOOO 0 AOO1 0 A002 0 M.2.f.
---------------------------------------------
<FN>
- --------------------
(1) Do not report in column B the risk-weighted amount of assets reported in
column A.
(2) Include the difference between the fair value and the amortized cost of
available-for-sale securities in item 8 and report the amortized cost of
these securities in items 4 through 7 above. Item 8 also includes
on-balance sheet asset values (or portions thereof) of off-balance sheet
interest rate, foreign exchange rate, and commodity contracts and those
contracts (e.g., futures contracts) not subject to risk-based capital.
Exclude from item 8 margin accounts and accrued receivables not included in
the calculation of credit equivalent amounts of off-balance sheet
derivatives as well as any portion of the allowance for loan and lease
losses in excess of the amount that may be included in Tier 2 capital.
(3) Exclude foreign exchange contracts with an original maturity of 14 days or
less and all futures contracts.
28
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
<S> <C>
LegaL Title of Bank: Bank One Trust Company, N.A. CALL Date: 9/30/96 ST-SK: 39-1581 FFIEC 033
Address: 100 East Broad Street Page RC-21
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: 21377
</TABLE>
Optional Narrative Statement Concerning the Amounts
Reported in the Reports of Condition and Income
at close of business on September 30, 1996
Bank One Trust Company, N.A. Columbus, Ohio
- ------------------------------ -------- ----
Legal Title of Bank City State
The management of the reporting bank may, if it wishes, submit a brief narrative
statement on the amounts reported in the Reports of Condition and Income. This
optional statement will be made available to the public, along with the publicly
available data in the Reports of Condition and Income, in response to any
request for individual bank report data. However, the information reported in
column A and in all of Memorandum item 1 of ScheduLe RC-N is regarded as
confidential and will not be released to the public. BANKS CHOOSING TO SUBMIT
THE NARRATIVE STATEMENT SHOULD ENSURE THAT THE STATEMENT DOES NOT CONTAIN THE
NAMES OR OTHER IDENTIFICATIONS OF INDIVIDUAL BANK CUSTOMERS, REFERENCES TO THE
AMOUNTS REPORTED IN THE CONFIDENTIAL ITEMS IN SCHEDULE RC-N, OR ANY OTHER
INFORMATION THAT THEY ARE NOT WILLING TO HAVE MADE PUBLIC OR THAT WOULD
COMPROMISE THE PRIVACY OF THEIR CUSTOMERS. Banks choosing not to make a
statement may check the "No comment" box below and should make no entries of any
kind in the space provided for the narrative statement; i.e., DO NOT enter in
this space such phrases as "No statement," "Not applicable," "N/A," "No
comment," and "None."
The optional statement must be entered on this sheet. The statement should not
exceed 100 words. Further, regardless of the number of words, the statement must
not exceed 750 characters, including punctuation, indentation, and standard
spacing between words and sentences. If any submission should exceed 750
characters, as defined, it will be truncated at 750 characters with no notice to
the submitting bank and the truncated statement will appear as the bank's
statement both on agency computerized records and in computer-file releases to
the public.
All information furnished by the bank in the narrative statement must be
accurate and not misleading. Appropriate efforts shall be taken by the
submitting bank to ensure the statement's accuracy. The statement must be
signed, in the space provided below, by a senior officer of the bank who thereby
attests to its accuracy.
If, subsequent to the original submission, material changes are submitted for
the data reported in the Reports of Condition and Income, the existing narrative
statement will be deleted from the files, and from disclosure; the bank, at its
option, may replace it with a statement, under signature, appropriate to the
amended data.
The optional narrative statement will appear in agency records and in release to
the public exactly as submitted (or amended as described in the preceding
paragraph) by the management of the bank (except for the truncation of
statements exceeding the 750-character limit described above). THE STATEMENT
WILL NOT BE EDITED OR SCREENED IN ANY WAY BY THE SUPERVISORY AGENCIES FOR
ACCURACY OR RELEVANCE. DISCLOSURE OF THE STATEMENT SHALL NOT SIGNIFY THAT ANY
FEDERAL SUPERVISORY AGENCY HAS VERIFIED OR CONFIRMED THE ACCURACY OF THE
INFORMATION CONTAINED THEREIN. A STATEMENT TO THIS EFFECT WILL APPEAR ON ANY
PUBLIC RELEASE OF THE OPTIONAL STATEMENT SUBMITTED BY THE MANAGEMENT OF THE
REPORTING BANK.
- --------------------------------------------------------------------------------
C271 C272
No comment |_| (RCON 6979)
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
-------------------------------------- -----------------
Signature of Executive Officer of Bank Date of Signature
29
<PAGE> 54
<TABLE>
<S> <C>
Legal Title of Bank: Bank One Trust Company, N.A. Call Date: 9/30/96 ST-BK: 39-1581
Address: 100 East Broad Street
City, State Zip: Columbus, OH 43271-0185
FDIC Certificate No.: |2|1|3|7|7|
-----------
THIS PAGE IS TO BE COMPLETED BY ALL BANKS
- -----------------------------------------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BANK | OMB No. For OCC: 1557-0081
| OMB No. For FDIC 3064-0052
| OMB No. For Federal Reserve: 7100-0036
| Expiration Date: 3/31/99
PLACE LABEL HERE |
| SPECIAL REPORT
| (Dollar Amounts in Thousands)
|---------------------------------------------------------------------
| CLOSE OF BUSINESS | FDIC Certificate Number | |
| DATE | | C-700 | {-
| 9/30/96 | 21377 | |
- ------------------------------------------------------------------------------------------------------------------------------------
LOANS TO EXECUTIVE OFFICERS (Complete as of each Call Report Date)
- ------------------------------------------------------------------------------------------------------------------------------------
The following information is required by Public Laws 90-44 and 102-242, but does not constitute a part of the Report of Condition.
With each Report of Condition, these Laws require all banks to furnish a report of all loans or other extensions of credit to their
executive officers made since the date of the previous Report of Condition. Data regarding individual loans or other extensions of
credit are not required. If no such loans or other extensions of credit were made during the period, insert "none" against subitem
(a). (Exclude the first $15,000 of indebtedness of each executive officer under bank credit card plan.) See Sections 215.2 and
215.3 of Title 12 of the Code of Federal Regulations (Federal Reserve Board Regulation 0) for the definitions of "executive
officer" and "extension of credit," respectively. Exclude loans and other extensions of credit to directors and principal
shareholders who are not executive officers.
- ------------------------------------------------------------------------------------------------------------------------------------
----------------------------------
a. Number of loans made to executive officers since the previous Call Report date .......... | RCON 3561 | 0 a.
----------------------------------
b. Total dollar amount of above loans (in thousands of dollars) ............................ | RCON 3562 | 0 b.
----------------------------------
c. Range of interest charged on above loans --------------------------------------------------------------
(example: 9 3/4% = 9.75) ................................... | RCON 7701 | 0.00 | % to | RCON 7702 | 0.00 | % c.
--------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
SIGNATURE AND TITLE OF OFFICER AUTHORIZED TO SIGN REPORT | DATE (Month, Day, Year)
|
|
|
- ------------------------------------------------------------------------------------------------------------------------------------
NAME AND TITLE OF PERSON TO WHOM INQUIRIES MAY BE DIRECTED (TEXT 8903) | AREA CODE/PHONE NUMBER/EXTENSION
| (TEXT 8904)
Don Kimble, Chief Financial Officer | (614) 248-6584
|
- ------------------------------------------------------------------------------------------------------------------------------------
FDIC 8040/53 (6-95)
</TABLE>
30
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JAN-01-1995
<PERIOD-END> DEC-31-1995 SEP-30-1996
<CASH> 771 1,894
<SECURITIES> 0 0
<RECEIVABLES> 17,583 18,767
<ALLOWANCES> 276 252
<INVENTORY> 20,105 20,346
<CURRENT-ASSETS> 41,209 44,104
<PP&E> 48,460 57,602
<DEPRECIATION> 9,000 13,318
<TOTAL-ASSETS> 123,861 129,426
<CURRENT-LIABILITIES> 24,849 24,695
<BONDS> 89,446 95,542
<COMMON> 14 14
0 0
1 1
<OTHER-SE> 375 (845)
<TOTAL-LIABILITY-AND-EQUITY> 123,861 129,426
<SALES> 84,463 93,672
<TOTAL-REVENUES> 84,463 93,672
<CGS> 61,164 69,023
<TOTAL-COSTS> 74,603 86,702
<OTHER-EXPENSES> (130) 55
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,323 7,321
<INCOME-PRETAX> 2,847 (406)
<INCOME-TAX> 1,593 863
<INCOME-CONTINUING> 1,254 (1,269)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,254 (1,269)
<EPS-PRIMARY> .68 (.86)
<EPS-DILUTED> 0 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
FORM OF
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
10 1/4% SENIOR NOTES DUE 2003
IN EXCHANGE FOR NEW
SERIES B 10 1/4% SENIOR NOTES DUE 2003
OF
HAWK CORPORATION
AND
FRICTION PRODUCTS CO., HAWK BRAKE, INC., LOGAN METAL STAMPINGS, INC., S.K.
WELLMAN HOLDINGS, INC., S.K. WELLMAN CORP., WELLMAN FRICTION PRODUCTS
U.K. CORP., HELSEL, INC. AND HUTCHINSON PRODUCTS CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON [_____], 1997, UNLESS EXTENDED (THE "EXPIRATION DATE")
EXCHANGE AGENT:
BANK ONE TRUST COMPANY, NA
<TABLE>
<S> <C>
BY HAND OR OVERNIGHT COURIER: BY REGISTERED OR CERTIFIED MAIL:
BANK ONE TRUST COMPANY, NA BANK ONE TRUST COMPANY, NA
235 WEST SCHROCK ROAD 235 WEST SCHROCK ROAD
WESTERVILLE, OHIO 43081-0184 WESTERVILLE, OHIO 43081-0184
OR OR
BANK ONE TRUST COMPANY, NA BANK ONE TRUST COMPANY, NA
C/O FIRST CHICAGO TRUST C/O FIRST CHICAGO TRUST
COMPANY OF NEW YORK COMPANY OF NEW YORK
ATTENTION: CORPORATE TRUST DEPARTMENT ATTENTION: CORPORATE TRUST DEPARTMENT
14 WALL STREET 14 WALL STREET
8TH FLOOR, WINDOW 2 8TH FLOOR, WINDOW 2
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10005
BY FACSIMILE (FOR ELIGIBLE INSTITUTIONS ONLY): TO CONFIRM RECEIPT ONLY:
614-248-5088 (OH) 212-240-8862 (NY)
OR OR
212-240-8988 (NY) 1-800-346-5152
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER
OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated [_____],
1997 (the "Prospectus") of Hawk Corporation ("Hawk") and its domestic
subsidiaries (together with Hawk, the "Company"), and this Letter of Transmittal
(the "Letter of Transmittal"), which together describe the Company's offer (the
"Exchange Offer") to exchange $1,000 in principal amount of its new Series B 10
1/4% Senior Notes due 2003 (the "Exchange Notes") for each $1,000 in principal
amount of its outstanding 10 1/4% Senior Notes due 2003 (the "Notes"). The terms
of the Exchange Notes are identical in all material respects (including
principal amount, interest rate and maturity) to the terms of the Notes for
which they may be exchanged pursuant to the Exchange Offer, except that the
Exchange Notes will be freely transferable by holders thereof (except as
provided herein or in the Prospectus) and will not subject to any covenant
regarding registration.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
<PAGE> 2
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
Please list below the Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the certificate numbers and principal
amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED HEREWITH
- -------------------------------------------------------------------------------------------------------------------
<CAPTION>
Name(s) and Address(es) of the Principal
Registered Holder(s) as they Appear on the Notes Certificate Aggregate Principal Amount
(Please Print) Numbers(1) Amount of the Notes(1) Tendered(2)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Total
===================================================================================================================
<FN>
(1) Need not be completed by book-entry holders.
(2) Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount
represented by such Notes. See Instruction 2.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used either if certificates of Notes
are to be forwarded herewith or if delivery of notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company, pursuant to the procedures set forth in "The Exchange Offer -- Tender
Procedure" in the Prospectus. Delivery of documents to the book-entry transfer
facility does not constitute delivery to the Exchange Agent.
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other documents required hereby to the Exchange Agent on or
prior to the Expiration Date must tender their Notes according to the guaranteed
delivery procedure set forth in the Prospectus under the caption "The Exchange
Offer -- Tender Procedure."
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ___________________________________________
The Depository Trust Company
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
<PAGE> 3
[ ] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ____________________________________________
Name of Eligible Institution that Guaranteed Delivery ___________________
Date of Execution of Notice of Guaranteed Delivery ______________________
If Delivered by Book-Entry Transfer:
Account Number __________________________________________________________
[ ] CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO A PERSON OTHER THAN THE
PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name ____________________________________________________________________
(Please Print)
Address _________________________________________________________________
(Including Zip Code)
[ ] CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO AN ADDRESS
DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address _________________________________________________________________
(Including Zip Code)
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name ____________________________________________________________________
Address _________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Notes that were acquired as a result
of market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act of 1933, as amended (the "Securities Act").
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, the Company, all right, title and interest
in and to such Notes. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that said Exchange Agent acts as the agent
of the Company in connection with the Exchange Offer) to cause the Notes to be
assigned, transferred and exchanged. The undersigned represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Notes and to acquire Exchange Notes issuable upon the exchange of such
tendered Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Notes, free and clear
of all liens, restrictions, charges and encumbrances and not subject to any
adverse claim. The undersigned also warrants that it will, upon request, execute
and deliver any additional documents deemed by the Exchange Agent or the Company
to be necessary or desirable to complete the exchange, assignment and transfer
of tendered Notes or transfer ownership of such Notes on the account books
maintained by the book-entry transfer facility. The undersigned further agrees
that acceptance of any and all validly tendered Notes by the Company and the
issuance of Exchange Notes in exchange therefor shall constitute performance in
full by the Company of certain of its obligations under the Registration Rights
Agreement (as defined in the Prospectus) and that the Company shall have no
further obligations or liabilities thereunder with respect to any provisions
thereof that by their terms terminate or cease to have further effectiveness as
a result of the making of, and the acceptance for exchange of all validly
tendered Notes pursuant to, the Exchange Offer.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions to the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by the Company), as more particularly set
forth in the Prospectus, the Company may not be required to exchange any of the
Notes tendered hereby and, in such event, the Notes not exchanged will be
returned to the undersigned at the address shown above.
By tendering, each holder of Notes represents that Exchange Notes
acquired in the exchange will be obtained in the ordinary course of each
holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes, that such holder is not
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act, that such holder has no arrangement with any person to
participate in the distribution of the Exchange Notes, and that such holder
(other than a broker-dealer) is not engaged in, and does not intend to engage
in, a distribution of the Exchange Notes. The Company is making the Exchange
Offer in reliance upon an interpretation by the staff of the Securities and
Exchange Commission (the "Commission") set forth in a series of no-action
letters issued to third parties. Based on such interpretation, the Company
believes that Exchange Notes issued pursuant to the Exchange Offer in exchange
for Notes may be offered for resale, resold and otherwise transferred by holders
thereof who make the foregoing representations without compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
the Company has not sought, and does not intend to seek, its own no-action
letter, and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer. Any holder
<PAGE> 5
who is an affiliate of the Company or who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Exchange Notes cannot rely on
such interpretation by the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. The Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of
Exchange Notes received in exchange for Notes where such Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed to make available, for a period of up to 120
days after consummation of the Exchange Offer, copies of the Prospectus, as
amended or supplemented, to any broker-dealer and any other persons, if any,
with similar prospectus delivery requirements, for use in connection with any
resale of Exchange Notes. In the absence of an exemption, each broker-dealer
that received the Notes other than as a result of market-making or other trading
activities must comply with the registration requirements of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Notes may be withdrawn at any time
prior to the Expiration Date in accordance with the terms of the Letter of
Transmittal.
Except as otherwise set forth in this Letter of Transmittal,
certificates for all Exchange Notes delivered in exchange for tendered Notes and
any Notes delivered herewith but not exchanged, and registered in the name of
the undersigned, shall be delivered to the undersigned at the address shown
below the signature of the undersigned.
<PAGE> 6
TENDERING HOLDER(S) SIGN HERE
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
______________________________________________________________________________
______________________________________________________________________________
(Signature(s) of Holder(s)
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Notes. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please set forth the full title of such
person.) See Instruction 3.
Name(s)_______________________________________________________________________
(Please Print)
Capacity (full title) ________________________________________________________
Address ______________________________________________________________________
(Including Zip Code)
Area Code and Telephone No. __________________________________________________
Taxpayer Identification No. __________________________________________________
Dated ________________________________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature _________________________________________________________
Name _________________________________________________________________________
Title ________________________________________________________________________
Address ______________________________________________________________________
Name of Firm _________________________________________________________________
Area Code and Telephone No. __________________________________________________
Dated ________________________________________________________________________
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Notes or confirmation of any
book-entry transfer to the Exchange Agent's or its agent's account at a
book-entry transfer facility of Notes tendered by book-entry transfer, as well
as a properly completed and duly executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth herein on or prior to the Expiration Date (as defined in the Prospectus).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY
DELIVERY.
Holders whose Notes are not immediately available or who cannot deliver
their Notes and all other required documents to the Exchange Agent on or prior
to the Expiration Date or comply with book-entry transfer procedures on a timely
basis must tender their Notes pursuant to the guaranteed delivery procedure set
forth in the Prospectus under "The Exchange Offer -- Tender Procedure." Pursuant
to such procedure: (i) such tender must be made by or through an Eligible
Institution (as defined in the Prospectus); (ii) on or prior to the Expiration
Date, the Exchange Agent must have received from such Eligible Institution a
letter, telex, telegram or facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight courier) setting
forth the name and address of the tendering holder, the names in which such
Notes are registered, and, if possible, the certificate number of the Notes to
be tendered; and (iii) all tendered Notes (or a confirmation of any book-entry
transfer of such Notes into the Exchange Agent's account at a book-entry
transfer facility) as well as this Letter of Transmittal and all other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
within five New York Stock Exchange trading days after the date of execution of
such letter, telex, telegram or facsimile transmission, all as provided in the
Prospectus under the caption "The Exchange Offer -- Tender Procedure."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Notes submitted but not
tendered will be sent to such holder as soon as practicable after the Expiration
Date. All Notes delivered to the Exchange Agent will be deemed to have been
tendered in full unless otherwise clearly indicated.
<PAGE> 8
Tenders of Notes pursuant to the Exchange Offer are irrevocable, except
that the Notes tendered pursuant to the Exchange Offer may be withdrawn at any
time prior to the Expiration Date. To be effective, a written telegraphic, telex
or facsimile transmission notice of withdrawal must be received by the Exchange
Agent by 5:00 P.M., New York City time, on the Expiration Date. Any such notice
of withdrawal must specify the person named in the Letter of Transmittal as
having tendered Notes to be withdrawn, the certificate numbers of the Notes to
be withdrawn, the principal amount of Notes delivered for exchange, a statement
that such holder is withdrawing his or her election to have such Notes
exchanged, and the name of the registered holder of such Notes, and must be
signed by the holder in the same manner as the original signature on the Letter
of Transmittal (including any required signature guarantees) or be accompanied
by evidence satisfactory to the Company that the person withdrawing the tender
has succeeded to the beneficial ownership of the Notes being withdrawn. The
Exchange Agent will return the properly withdrawn Notes promptly following
receipt of notice of withdrawal. If Notes have been tendered pursuant to the
procedure for book-entry transfer, any notice of withdrawal must specify the
name and number of the account at the book-entry transfer facility to be
credited with the withdrawn Notes or otherwise comply with the book-entry
transfer facility's procedures. All questions as to the validity of notice of
withdrawal, including time of receipt, will be determined by the Company, and
such determination will be final and binding on all parties.
Properly withdrawn Notes may be retendered by following the procedures
described herein at any time on or prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of
the Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described here, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Notes) of Notes listed and tendered hereby, no endorsements of
certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of the Notes listed, such Notes must be endorsed or
accompanied by separate written instruments of transfer or exchange in form
satisfactory to the Company and duly executed by the registered holder, in
either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
<PAGE> 9
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Notes are tendered: (i) by a registered
holder of such Notes, for the holder of such Notes; or (ii) for the account of
an Eligible Institution.
4. TRANSFER TAXES.
Holders who tender their Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register Exchange Notes in the name of, or request that Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon. If satisfactory evidence of payment of such
taxes or exception therefrom is not submitted herewith the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive, in its reasonable judgment, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES.
Any holder whose Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated below for further
instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Hawk at 200 Public Square, Suite 30-5000,
Cleveland, Ohio 44114, Attention: Thomas A. Gilbride, Vice President-Finance
(telephone 216-861-3553).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER
WITH CERTIFICATES OF NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE> 10
<TABLE>
PAYER'S NAME: BANK ONE TRUST COMPANY, NA
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE PART 1--PLEASE PROVIDE YOUR TIN IN
THE BOX AT THE RIGHT AND CERTIFY _______________________________________
FORM W-9 BY SIGNING AND DATING BELOW Social Security Number
or
________________________________________
Employer Identification Number
------------------------------------------------------------------------------------------
Department of the Treasury, PART 2--Certification--Under penalties of perjury, I
Internal Revenue Service certify that:
(1) The number shown on this form is my correct taxpayer identification number (or I am
waiting for a number to be issued to me) and
PAYER'S REQUEST FOR (2) I am not subject to backup withholding because: (a) I am exempt from backup
TAXPAYER IDENTIFICATION withholding, or (b) I have not been notified by the Internal Revenue Service (the
NUMBER (TIN) "IRS") that I am subject to backup withholding as a result of a failure to
report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
Certification Instructions--You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because of
underreporting interest or dividends on your tax return. However, if after being
notified by the IRS that you were subject to backup withholding you received another
notification from the IRS that you are no longer subject to backup withholding, do
not cross out such Item (2).
------------------------------------------------------------------------------------
PART 3--
SIGN
HERE -> Signature ____________________________________ Awaiting TIN [ ]
Date ___________________________________, 1997
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACK-UP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU
PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 3 OF SUBSTITUTE FORM W-9:
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER.
I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have
mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or
Social Security Administration Office, or (b) I intend to mail or deliver an application in the near future. I understand that if I
do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld.
Signature _______________________________________________ Date _________________________________________, 1997
</TABLE>
<PAGE> 11
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE
PAYER--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
------------------------------------------------ ------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY NUMBER OF--
------------------------------------------------ ------------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals (joint account) The actual owner of the account or, if combined
funds, the first on the account(1)
3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either
person(1)
4. Custodian account of a minor (Uniform Gift to Minors The minor(2)
Act)
5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1)
6. Account in the name of guardian or committee The ward, minor, or incompetent person(3)
for a designated ward, minor, or incompetent person
7. (a) The usual revocable savings trust The grantor-trustee(1)
(grantor is also trustee)
(b) So-called trust account that is not a legal or The actual owner(1)
valid trust under State law
------------------------------------------------ ------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER IDENTIFICATION NUMBER--
------------------------------------------------ ------------------------------------------------
8. Sole proprietorship The owner(4)
9. A valid trust, estate, or pension trust The legal entity (Do not furnish the identifying number of
the personal representative or trustee unless the legal entity
itself is not designated in the account title.)(5)
10. Corporate account The corporation
11. Association, club, religious, charitable, The organization
educational organization account or other
tax-exempt organization
12. Partnership The partnership
13. A broker or registered nominee The broker or nominee
14. Account with the Department of Agriculture in the The public entity
name of a public entity (such as a State or local
governmental school district, or prison) that
receives agricultural program payments
--------------------
<FN>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number.
(4) Show the name of the owner. You may also enter your business or "doing business as" name. You may use your Social
Security Number or Employer Identification Number.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed.
</TABLE>
<PAGE> 12
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments of
interest and dividends include the following:
- A corporation.
- As organization exempt from tax under section 501(a), or an individual
retirement plan, or a custodial account under Section 403(b)(7).
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or
any political subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government,
or any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A foreign central bank of issue.
- A dealer in securities or commodities required to register in the U.S.
or a possession of the U.S.
- A real estate investment trust.
- An entity registered at all times under the Investment Company Act of
1940.
- A common trust fund operated by a bank under section 584(a).
- A financial institution.
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S.
and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, SIGN AND DATE
THE FORM, AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A, and 6050N.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of the recipient's return. Payers
must be given the numbers whether or not recipients are required to file tax
returns. Payers must generally withhold 31% of taxable interest, dividend, and
certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT
YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE.
<PAGE> 1
EXHIBIT 99.2
FORM OF
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
10 1/4% SENIOR NOTES DUE 2003
IN EXCHANGE FOR NEW
SERIES B 10 1/4% SENIOR NOTES DUE 2003
OF
HAWK CORPORATION
AND
FRICTION PRODUCTS CO., HAWK BRAKE, INC., LOGAN METAL STAMPINGS, INC.,
S.K. WELLMAN HOLDINGS, INC., S.K. WELLMAN CORP.,
WELLMAN FRICTION PRODUCTS U.K. CORP., HELSEL, INC.
AND HUTCHINSON PRODUCTS CORPORATION
Registered holders of outstanding 10 1/4% Senior Notes due 2003 of Hawk
Corporation (the "Notes") who wish to tender their Notes in exchange for a like
principal amount of new Series B 10 1/4% Senior Notes due 2003 of Hawk
Corporation (the "Exchange Notes") and whose Notes are not immediately available
or who cannot deliver their Notes and Letter of Transmittal (and any other
documents required by the Letter of Transmittal) to Bank One Trust Company, NA
(the "Exchange Agent") prior to the Expiration Date, may use this Notice of
Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight delivery) or registered or certified mail to the Exchange Agent. See
"The Exchange Offer -- Tender Procedure" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
BANK ONE TRUST COMPANY, NA
<TABLE>
<S> <C>
BY HAND OR OVERNIGHT COURIER: BY REGISTERED OR CERTIFIED MAIL:
BANK ONE TRUST COMPANY, NA BANK ONE TRUST COMPANY, NA
235 WEST SCHROCK ROAD 235 WEST SCHROCK ROAD
WESTERVILLE, OHIO 43081-0184 WESTERVILLE, OHIO 43081-0184
OR
OR
BANK ONE TRUST COMPANY, NA BANK ONE TRUST COMPANY, NA
C/O FIRST CHICAGO TRUST C/O FIRST CHICAGO TRUST
COMPANY OF NEW YORK COMPANY OF NEW YORK
ATTENTION: CORPORATE TRUST DEPARTMENT ATTENTION: CORPORATE TRUST DEPARTMENT
14 WALL STREET 14 WALL STREET
8TH FLOOR, WINDOW 2 8TH FLOOR, WINDOW 2
NEW YORK, NEW YORK 10005 NEW YORK, NEW YORK 10005
BY FACSIMILE (FOR ELIGIBLE INSTITUTIONS ONLY): TO CONFIRM RECEIPT ONLY:
614-248-5088 (OH) 212-240-8862 (NY)
OR OR
212-240-8988 (NY) 1-800-346-5152
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN ELIGIBLE INSTITUTION (AS DEFINED IN THE PROSPECTUS), SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED ON THE LETTER
OF TRANSMITTAL FOR GUARANTEE OF SIGNATURES.
<PAGE> 2
LADIES AND GENTLEMEN:
The undersigned hereby tenders the principal amount of Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated [_____], 1997 of Hawk Corporation and its domestic subsidiaries (the
"Prospectus"), receipt of which is hereby acknowledged.
<TABLE>
- --------------------------------------------------------------------------------------------------------------
DESCRIPTION OF NOTES TENDERED
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
Name(s) and Address(es) of Registered Holder(s)
as they Appear on the Notes Certificate
(Please Print) Numbers Principal Amount of Notes Tendered
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office, branch,
agency or correspondent in the United States (an "Eligible Institution"), hereby
guarantees to deliver to the Exchange Agent at one of its addresses set forth
above, the certificates representing the Notes, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees, and any other documents required by the
Letter of Transmittal within five New York Stock Exchange, Inc. trading days
after the date of execution of this Notice of Guaranteed Delivery.
<TABLE>
<S> <C>
Name of Firm:___________________________ ____________________________________
(Authorized Signature)
Address:________________________________ Title:______________________________
________________________________________ Name:_______________________________
(Zip Code) (Please type or print)
Area Code and Telephone Number: Date:_______________________________
________________________________________
</TABLE>
NOTE: DO NOT SEND NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
