As filed with the Securities and Exchange Commission on May 12, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ANCHOR ADVANCED PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 3089 04-3084238
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
ANCHOR HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Delaware 3089 62-1427775
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
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1111 Northshore Drive, Suite N-600
Knoxville, TN 37919-4048
(423) 450-5300
(Address, including zip code, and telephone number, including
area code of Registrant's principal executive offices)
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FRANCIS H. OLMSTEAD, JR.,
Chairman, President and Chief Executive Officer
Anchor Advanced Products, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, TN 37919-4048
(423) 450-5300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies of all communications to:
Francis J. Feeney, Jr., Esq.
Hutchins, Wheeler & Dittmar
A Professional Corporation
101 Federal Street
Boston, Massachusetts 02110
(617) 951-6600
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Approximate date of commencement of the proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
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. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Amount of
Securities to Be Registered Registered per Note Offering Price Registration Fee
- -----------------------------------------------------------------------------------------------------------------
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11 3/4% Series B Senior Notes
due 2004 .................. $100,000,000 $1,000 $100,000,000 $30,303
Guarantee of 11 3/4% Series B
Senior Notes due 2004 ...... $100,000,000 (1) (1) (1)
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(1) No additional consideration will be paid by the purchasers of the Senior
Notes for the Guarantee. Pursuant to Rule 457(n), no separate fee is payable
in respect of the Guarantee.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until it shall file a further
amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities
Act of 1933 or until this Registration Statement shall become effective on such
date as the Commission, acting pursuant to said Section 8(a), may determine.
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SUBJECT TO COMPLETION, DATED MAY __, 1997
PROSPECTUS
[ANCHOR LOGO]
$100,000,000
Anchor Advanced Products, Inc.
Offer to Exchange $1,000 in principal amount of
11 3/4% Series B Senior Notes due 2004
for each $1,000 in principal amount of outstanding
11 3/4% Senior Notes due 2004
Anchor Advanced Products, Inc. (the "Issuer") hereby offers to exchange
(the "Exchange Offer") up to $100,000,000 in aggregate principal amount of its
11 3/4% Series B Senior Notes due 2004 (the "Exchange Notes") for $100,000,000
in aggregate principal amount of its outstanding 11 3/4% Senior Notes due 2004
(the "Initial Notes"; and together with the Exchange Notes, the "Notes").
The terms of the Exchange Notes are identical in all respects (including
principal amount, interest rate and maturity) to the terms of the Initial Notes
for which they may be exchanged pursuant to this offer, except that the Exchange
Notes are freely transferable by holders thereof (except as provided in the next
paragraph below) and are issued without any covenant upon the Issuer regarding
registration. The Exchange Notes will be issued under the same indenture
governing the Initial Notes. For a complete description of the terms of the
Exchange Notes, see "Description of the Exchange Notes." There will be no cash
proceeds to the Issuer from this offer. The Initial Notes are, and the Exchange
Notes will be, unconditionally guaranteed (the "Note Guarantee") on a senior
basis by Anchor Holdings, Inc. ("Holdings").
The Initial Notes were originally issued and sold on April 2, 1997 (the
"Issue Date"), in a transaction (the "Initial Offering") not registered under
the Securities Act of 1933, as amended (the "Securities Act"), in reliance upon
the exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Initial 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.
Based upon the interpretations by the Staff of the Securities and Exchange
Commission (the "Commission") issued to third parties, the Issuer believes that
the Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial
Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than any holder which is an "affiliate" of the Issuer 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 holders'
business and such holders have no arrangement with any person to participate in
the distribution of such Exchange Notes. Each broker-dealer that receives
Exchange Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal (as defined herein) 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 Initial Notes where such Exchange Notes were acquired
by such broker-dealer as a result of market-making activities or other trading
activities. The Issuer has agreed that, for a period of one year after the date
on which the Registration Statement (as defined herein) is declared effective by
the Commission, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
The Initial Notes and the Exchange Notes constitute issues of securities
with no established trading market. Any Initial Notes not tendered and accepted
in the Exchange Offer will remain outstanding. To the extent that Initial Notes
are tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered and tendered but unaccepted Initial Notes could be adversely
affected. Following consummation of the Exchange Offer, the holders of the
Initial Notes will continue to be subject to the existing restrictions on
transfer thereof and the Issuer will have no further obligation to such holders
to provide for the registration under the Securities Act of the Initial Notes
held by them. No assurance can be given as to the liquidity of the trading
market for either the Initial Notes or the Exchange Notes.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 p.m., New York City time, on , 1997, unless extended
(the "Expiration Date"). The date of acceptance for exchange for the Initial
Notes (the "Exchange Date") will be the first business day following the
Expiration Date. Initial Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration Date; otherwise such tenders are
irrevocable.
Interest on the Exchange Notes shall accrue from April 2, 1997 or from the
last April 1 or October 1 (each an "Interest Payment Date") on which interest
was paid on the Initial Notes so surrendered.
See "Risk Factors" beginning on page 11 for a description of certain
factors that should be considered by participants 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.
The date of this Prospectus is , 1997
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.
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AVAILABLE INFORMATION
The Issuer has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the Exchange Notes being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission and to which reference is
hereby made. Statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
For further information with respect to the Issuer and the Notes, reference
is made to such Registration Statement. A copy of the Registration Statement can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W. Washington,
D.C. 20549, and at the Regional Offices of the Commission at 7 World Trade
Center, 13th Floor, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained from the public reference facilities of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such site is http://www.sec.gov.
The Issuer intends, and is required by the terms of the Indenture dated as
of April 2, 1997 (the "Indenture") between the Issuer, Holdings' and Fleet
National Bank, as trustee, under which the Notes are issued, to furnish the
holders of the Notes with annual reports containing financial statements audited
by its independent certified public accountants and with quarterly reports
containing unaudited financial statements for each of the first three quarters
of each fiscal year.
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE EXCHANGE OFFER COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE ISSUER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, THE EXCHANGE NOTES IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE ISSUER SINCE THE DATE HEREOF.
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Until , 1997, all dealers effecting transactions in the registered
securities, whether or not participating in this distribution, may be required
to deliver a prospectus. This is in addition to the obligation of dealers to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
i
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, references
in this Prospectus to the "Issuer" mean Anchor Advanced Products, Inc., a
Delaware corporation, references to "Holdings" mean Anchor Holdings, Inc., a
Delaware corporation, and references to "Anchor" or the"Company" mean the
consolidated business operations of Holdings and its subsidiaries (including
those of Mid-State Plastics, Inc. ("Mid-State") prior to its acquisition by
Anchor). The Issuer is a wholly-owned subsidiary of Holdings.
THE COMPANY
Anchor is a leading designer, manufacturer and packager of precision molded
plastic products for a wide range of dental, cosmetic, medical, computer and
consumer applications. The Company believes it is one of the world's largest
manufacturers of toothbrushes and a leading U.S. manufacturer of cosmetics
packaging. For the year ended December 31, 1996, the Company had net sales of
$156.9 million, EBITDA of $23.6 million and net income of $3.6 million, making
it one of the largest independent plastic injection molders in North America.
Anchor began operations in 1941 as a manufacturer of cosmetic brushes for
Maybelline and, in 1958, began producing Pepsodent(R) toothbrushes for Lever
Brothers Company, Inc. The Company was acquired in 1990 by affiliates of the
Thomas H. Lee Company and management. Since 1990, management has developed and
implemented a variety of strategic initiatives in order to enhance the Company's
long-term growth, profitability and competitiveness, including:
[bullet] Capitalizing on its manufacturing and technical expertise and
reputation for quality and service to grow its dental business,
including introducing the Crest(R) line of toothbrushes for
Procter & Gamble in 1992.
[bullet] Consolidating its cosmetics operations in an expanded maquiladora
manufacturing facility in Matamoros, Mexico, resulting in
significant operating efficiencies and cost savings.
[bullet] Diversifying its markets and customer base through product line
expansion and the 1994 acquisition of Mid-State, a leading
injection-molder in the medical device and computer component
markets.
As a result of these strategic initiatives, from 1991 to 1996, Anchor
increased net sales and EBITDA at compounded annual growth rates of 15.9% and
13.2%, respectively.
For the year ended December 31, 1996, approximately 90% of the Company's
net sales were generated in five markets: dental, cosmetics, medical device,
computer component and point of purchase ("POP") displays. In the dental market
(approximately 36% of net sales in 1996), the Company designs, manufactures and
packages toothbrushes for Colgate-Palmolive, Procter & Gamble,
Chesebrough-Ponds, and SmithKline Beecham, under such well-known brand names as
Crest(R), Colgate(R) and Pepsodent. In 1996, Anchor manufactured over 184
million toothbrushes and, management believes, had the leading domestic
toothbrush production market share, estimated at approximately 27%. In the
cosmetics market (approximately 26% of net sales in 1996), Anchor manufactures a
comprehensive line of stock and custom mascara, lipstick and nail applicators
for L'Oreal, Maybelline, Mary Kay and Estee Lauder, under such well-known brand
names as Great Lash(R) and Clinique. Management estimates that Anchor had a
leading 1996 market share in several of its cosmetics product lines. In the
medical device market (approximately 12% of net sales in 1996), Anchor produces
intravenous equipment and blood infusion devices for Abbott and Baxter, among
others. In the computer component market (approximately 8% of net sales in
1996), Anchor produces bezels, battery pack cases and expansion bases for Compaq
and IBM. In 1995, leveraging its strengths in the cosmetics market, the Company
began manufacturing POP displays for Maybelline, which market accounted for
approximately 7% of net sales in 1996. The remaining 11% of net sales in 1996
was generated from the manufacture of a variety of other molded plastic
components including closures for shampoo bottles, insulating battery cases,
interior and exterior parts for power tools, and flat panel lights.
Competitive Strengths
The Company's customers are primarily large, branded consumer product
companies. Outsourcing allows Anchor's customers to optimize internal resources
and focus on their core competencies. Specifically, management believes that
customers prefer Anchor because of the following competitive strengths:
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Quality Focus. The Company believes it is a leader in plastic injection
molding and service quality. The Company has received numerous quality service
and preferred supplier awards from its customers, including Colgate-Palmolive,
Procter & Gamble, 3M, Abbott and IBM. Furthermore, the Company has manufactured
over one billion toothbrushes for Colgate-Palmolive and Procter & Gamble to date
without a single shipment return for manufacturing or quality defects. A major
reason for the Company's achievements is the Quality Improvement System ("QIS")
initiative instituted by management since the acquisition of the Company in
1990.
Design Capabilities. Anchor has dedicated design professionals who work
with customers to meet changing market needs. For example, the Company worked
closely with Procter & Gamble to produce the Crest Complete(R) line of
toothbrushes in 1992, which uses a newly developed proprietary fusion technology
as an alternative to the conventional staple-set technology.
Broad Manufacturing Resources. With its flexible, high capacity production
facilities, Anchor is able to meet customer demands quickly and efficiently,
producing customized products with little lead time. Anchor provides its
customers with a broad range of manufacturing services, including injection
molding, bristling, decoration and packaging. Anchor's broad customer base and
high production volumes enable it to achieve economies of scale and to maintain
in inventory a wide selection of resins and other raw materials.
Capital Investment Programs. Anchor's customers are attracted to the
Company because of its state-of-the-art manufacturing facilities. From 1991
through 1996, Anchor has spent approximately $40.4 million on capital
investment, in large part to accommodate new product lines by building
facilities dedicated to specific products or customers. Such programs include an
expanded facility in Morristown, Tennessee for POP display production, a
facility in Round Rock, Texas for the production of computer components and the
consolidation of cosmetics production facilities in Matamoros, Mexico.
Superior Customer Service. Anchor strives to provide a high level of
customer service which management believes exceeds the service provided by
competing injection molders or its customers' in-house manufacturing operations.
The Company uses its manufacturing resources, such as computerized ordering
systems, just-in-time production and flexible manufacturing processes, to
provide its customers with a rapid turnaround time on orders and seeks to be
responsive to any changes submitted by its customers.
As a result of these competitive strengths, Anchor enjoys a large customer
base of national consumer product companies. Each of the Company's five largest
customers in 1996 (Colgate-Palmolive, Maybelline, Procter & Gamble, Abbott and
IBM) have been customers of the Company for an average of approximately 25
years. The Company's emphasis on customer partnerships and its long standing
relationships with its largest customers serve to create barriers to entry in
its served markets.
Business Strategy
Anchor's overall business strategy is to increase revenues and
profitability by pursuing the following specific strategies:
Maintain Leadership in Dental and Cosmetics Markets. The Company has
established leading market positions in the dental and cosmetics markets as a
result of its low cost manufacturing capabilities, high quality design and
excellent customer service. The Company seeks to maintain this position by
continuing to lower costs and improve the quality of its products while working
with its customers to develop innovative new products for its markets.
Develop New Products and Customers. The Company seeks to grow by producing
custom plastic products for new customers in existing markets and by entering
new markets. Examples of new markets entered by the Company in the last few
years are POP displays, disposable surgical equipment and computer components.
Where appropriate, the Company may build new facilities which enhance its
ability to provide new products such as the Company's new facility in Round
Rock, Texas. As a result of these efforts, in the future, the Company intends to
expand its sales in the medical device, computer component and POP display
markets.
Lower Costs. The Company believes that it is a low cost producer for many
of its products and that it will continue to improve productivity through its
on-going program of upgrading equipment and facilities and investing in
automation and robotics. Through its highly-trained work force, its streamlined
Mexican production facility, and
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its QIS program, management plans to improve asset utilization, increase
manufacturing productivity and reduce overhead.
Acquisitions. The Company intends to seek strategic acquisition
opportunities as the highly fragmented plastics industry continues its recent
trend toward consolidation. The Company intends to identify acquisition
opportunities similar to its 1994 acquisition of Mid-State, which offered the
Company an opportunity to broaden its customer base and expand its manufacturing
into higher growth markets. Potential markets for acquisitions include the
medical device, computer component and telecommunications equipment markets.
Expansion into International Markets. As a result of the international
expansion of the Company's customers, Anchor is seeking to expand its
international capabilities, particularly by adding manufacturing capabilities in
China and Europe.
Anchor's executive offices are located at 1111 Northshore Drive, Suite
N-600, Knoxville, Tennessee 37919, telephone number (423) 450-5300.
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THE EXCHANGE OFFER
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The Exchange Offer ........................... The Issuer is offering to exchange (the "Exchange Offer") up
to $100.0 million aggregate principal amount of 11 3/4%
Series B Senior Notes due 2004 (the "Exchange Notes") for
$100.0 million aggregate principal amount of its outstanding
11 3/4% Senior Notes due 2004 (the "Initial Notes"; and
together with the Exchange Notes, the "Notes"). The terms
of the Exchange Notes are substantially identical in all
respects (including principal amount, interest rate and
maturity) to the terms of the Initial Notes for which they may
be exchanged pursuant to the Exchange Offer, except that the
Exchange Notes are freely transferable by holders thereof
(except as provided herein--see "The Exchange Offer--
Terms of the Exchange" and "--Terms and Conditions of the
Letter of Transmittal") and are not subject to any covenant
regarding registration under the Securities Act. The Initial
Notes are, and the Exchange Notes will be, unconditionally
guaranteed (the "Note Guarantee") on a senior basis by
Holdings.
Interest Payments ........................... Interest on the Exchange Notes shall accrue from April 2,
1997 or from the last Interest Payment Date on which interest
was paid on the Initial Notes so surrendered.
Minimum Condition ........................... The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of the Initial 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.
Exchange Date .............................. The date of acceptance for exchange of the Initial Notes will
be the first business day following the Expiration Date.
Condition of the Exchange Offer ............ The obligation of the Issuer to consummate the Exchange
Offer is subject to certain conditions. See "The Exchange
Offer--Conditions to the Exchange Offer." The Issuer
reserves 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 ........................... Tenders may be withdrawn at any time prior to the Exchange
Date. Otherwise, all tenders are irrevocable. Any Initial
Notes not accepted for any reason will be returned without
expense to the tendering holders thereof as promptly as
practicable after the expiration or termination of the
Exchange Offer.
Procedures for Tendering Initial Notes ...... See "The Exchange Offer--How to Tender."
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Federal Income Tax The exchange of Initial Notes for Exchange Notes should be
Consequences ........................... treated as a "non-event" for Federal income tax purposes. See
"Income Tax Considerations."
Effects on Holders of Initial Notes ...... As a result of the making of, and upon acceptance for
exchange of all validly tendered Initial Notes pursuant to the
terms of, this Exchange Offer, the Issuer will have fulfilled
a covenant contained in the terms of the Initial Notes and the
Registration Rights Agreement (the "Registration Rights
Agreement") dated April 2, 1997 between the Issuer,
Holdings and Donaldson, Lufkin & Jenrette Securities
Corporation, CIBC Wood Gundy Securities Corp. and
NationsBanc Capital Markets, Inc. (collectively, the "Initial
Purchasers") and, accordingly, there will be no increase in the
interest rate on the Initial Notes pursuant to the terms of the
Registration Rights Agreement, the Initial Notes or the
Indenture. The holders of the Initial Notes will have no
further registration rights under the Registration Rights
Agreement with respect to the Initial Notes. Holders of the
Initial Notes who do not tender their Notes in the Exchange
Offer will continue to hold such Initial Notes and their rights
under such Initial Notes will not be altered, except for any
such rights under the Registration Rights Agreement, which
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 Initial Notes pursuant to, the Exchange
Offer. All untendered and tendered but unaccepted Initial
Notes will continue to be subject to the restrictions on
transfer provided for in the Initial Notes and in the Indenture.
To the extent that Initial Notes are tendered and accepted in
the Exchange Offer, the trading marked for untendered Initial
Notes could be adversely affected.
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Terms of the Exchange Notes
The Exchange Offer applies to $100,000,000 aggregate principal amount of
the Initial Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Initial Notes except as noted above and except that the
Exchange Notes have been registered under the Securities Act and, therefore,
will not bear legends restricting the transfer thereof. The Exchange Notes will
evidence the same debt as the Initial Notes and will be entitled to the benefits
of the Indenture. See "Description of the Exchange Notes."
Terms capitalized below have the meanings ascribed to them in "Description
of the Exchange Notes."
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Notes Offered ........................... $100.0 million in aggregate principal amount of Issuer's
11 3/4% Series B Senior Notes due 2004.
Maturity Date ........................... April 1, 2004.
Interest Payment Dates .................. April 1 and October 1 of each year, commencing October 1,
1997.
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Optional Redemption ...... The Exchange Notes will be redeemable at the option of the
Issuer, in whole or in part, at any time on or after April 1, 2001
in cash at the redemption prices set forth herein, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon
to the date of redemption. In addition, at any time prior to
April 1, 2000, the Issuer may on any one or more occasions
redeem up to 35% of the initially outstanding aggregate
principal amount of Exchange Notes at a redemption price
equal to 110.75% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net proceeds of one
or more Public Equity Offerings; provided that, in each case,
at least 65% of the initially outstanding aggregate principal
amount of Notes remains outstanding immediately after the
occurrence of any such redemption. See "Description of the
Notes--Optional Redemption."
Change of Control ......... Upon the occurrence of a Change of Control, each holder of
Exchange Notes will have the right to require the Issuer to
repurchase all or any part of such holder's Exchange Notes
at an offer price in cash equal to 101% of the aggregate
principal amount thereof, plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of
purchase. See "Description of Notes--Repurchase at the
Option of Holders--Change of Control." There can be no
assurance that, in the event of of Change of Control, the
Issuer would have sufficient funds to purchase all Notes
tendered. See "Risk Factors--Limitations on Ability to
Make Change of Control Payment."
Note Guarantee ............ The Exchange Notes will be guaranteed on a senior basis (the
"Note Guarantee") by Holdings (the "Guarantor"). The
Exchange Note Guarantee will be an unconditional
obligation of the Guarantor.
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Ranking ............... The Exchange Notes will be general unsecured obligations of
the Issuer, will rank senior in right of payment to all
subordinated indebtedness of the Issuer and pari passu in right
of payment to all existing and future senior indebtedness of the
Issuer, including indebtedness under the Issuer's $15.0 million
New Credit Facility. The Note Guarantee will be a general
unsecured obligation of Holdings, will rank senior in right of
payment to all subordinated indebtedness of Holdings and pari
passu in right of payment to all existing and future senior
indebtedness of Holdings. The Exchange Notes will be
effectively subordinated to the secured indebtedness of the
Issuer, including borrowings under the New Credit Facility,
which borrowings are secured by certain accounts receivable
and inventory of the Issuer and the Exchange Note Guarantee
will be effectively subordinated to the secured indebtedness of
Holdings. As of March 29, 1997, on a pro forma basis after
giving effect to the sale of the Initial Notes and the application
of the net proceeds therefrom, the Notes would have been
effectively subordinated to $1.5 million of secured indebtedness
of the Issuer and there was no indebtedness of Holdings.
Certain Covenants ...... The Indenture contains certain covenants that will limit,
among other things, the ability of the Issuer to: (1) pay
dividends, redeem capital stock or make certain other
restricted payments or investments, (ii) incur additional
indebtedness or issue preferred equity interests, (iii) merge,
consolidate or sell all or substantially all of its assets, (iv)
create liens on assets and (v) enter into certain transactions
with affiliates or related persons. See "Description of the
Notes--Certain Covenants."
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Use of Proceeds ...... There will not be any proceeds from the Exchange Offer. The
net proceeds to the Issuer from the sale of the Initial Notes
was $96.6 million (after deducting discounts, commissions,
fees and expenses thereof) and were used: (i) to prepay in full
$51.5 million in borrowings under the Revolving Credit and
Term Loan Agreement (as defined), including all accrued
interest and fees payable upon such prepayment, (ii) to pay
$22.3 million to redeem $9.0 million aggregate principal
amount of 11.67% Senior Subordinated Notes and $12.0
million aggregate principal amount of 17.55% Junior
Subordinated Notes, each due April 30, 2000 and payable to
ML- Lee Acquisition Fund II, L.P. and ML-Lee Acquisition
Fund (Retirement Accounts) II, L.P., including all accrued
interest and premiums payable upon such redemption, and
(iii) to pay $22.8 million of a $24.4 million dividend on the
Issuer's common stock (the "Issuer Dividend"). To pay the
remaining portion of the Issuer Dividend, the Issuer
borrowed approximately $1.5 million under the New Credit
Facility. All of the Issuer's common stock is owned by
Holdings. Holdings used the $24.4 million from the Issuer
Dividend, together with $5.1 million of proceeds from the
exercise of warrants and options to purchase Holdings
common stock, to pay a $29.5 million dividend on its capital
stock (the "Holdings Dividend").
</TABLE>
For a discussion of certain factors which should be considered by
prospective investors in connection with an investment in the Notes, see "Risk
Factors" on page 11.
8
<PAGE>
SUMMARY FINANCIAL DATA
The following table sets forth summary historical financial data of the
Company for the five years ended December 31, 1996, for the thirteen weeks ended
March 30, 1996 and March 29, 1997, and summary pro forma financial data for the
year ended December 31, 1996. The summary financial data for the years ended
December 31, 1994, 1995 and 1996 were derived from the audited consolidated
financial statements of the Company included elsewhere in this Prospectus. The
financial data include information with respect to Mid-State following its
acquisition on July 29, 1994. The summary financial data for the years ended
December 31, 1992 and 1993 are derived from audited consolidated historical
financial statements of the Company not included herein. The information
presented for the thirteen weeks ended March 30, 1996 and March 29, 1997 has
been derived from the unaudited consolidated financial statements of the Company
included elsewhere in this Prospectus. Such unaudited consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth herein. Results for the thirteen weeks ended March 29,
1997 are not necessarily indicative of the results to be expected for the year
ended December 31, 1997. The following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of the Company,
including accompanying notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year ended December 31, 13 Weeks Ended
----------------------------------------------------------- ------------------------
March 30, March 29,
1992 1993 1994 1995 1996 1996 1997
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ..................... $ 101,537 $ 118,047 $ 118,267 $149,366 $156,858 $39,414 $41,546
Gross profit .................. 17,861 20,778 18,208 24,338 27,637 7,740 6,893
Selling, general and
administrative ................ 7,377 9,096 7,634 9,409 11,358 2,915 2,615
Amortization .................. 1,089 577 1,712 1,662 1,530 343 343
-------- -------- -------- --------- --------- -------- --------
Operating income ............... 9,395 11,105 8,862 13,267 14,749 4,483 3,935
Other (Income) expense ......... (752) (110) (739) 974 408 112 26
Net Interest expense ............ 5,910 5,385 5,984 8,616 8,124 1,986 2,072
Income taxes .................. 385 1,606 1,507 1,239 2,591 1,000 779
Extraordinary item (1) ......... 0 0 334 0 0 0 0
-------- -------- -------- --------- --------- -------- --------
Net income ..................... $ 3,852 $ 4,224 $ 1,776 $ 2,438 $ 3,626 $ 1,385 $ 1,058
======== ======== ======== ========= ========= ======== ========
Other Data:
EBITDA (2) ..................... $ 16,636 $ 17,881 $ 18,439 $ 21,742 $ 23,627 $ 6,711 $ 6,238
Depreciation and amortization (3) 6,489 6,666 8,838 9,449 9,286 2,340 2,329
Capital expenditures ............ 6,776 6,729 5,724 6,932 8,028 2,484 1,973
</TABLE>
Pro Forma Data (4):
Cash interest expense, net ................................ $12,028
Ratio of EBITDA to cash interest expense, net .............. 2.0x
Ratio of net debt to EBITDA ................................ 4.3x
At December 31, 1996
-----------------------
Pro
Actual Forma(4)
Balance Sheet Data:
Working capital ........................ $ 27,463 $ 34,280
Total assets ........................... 116,691 120,342
Net debt (5) ........................... 71,875 102,060
Net stockholders' equity (deficit) ...... 20,817 (4,900)
- -----------------
(1) Represents loss in 1994 on extinguishment of debt net of tax.
(2) EBITDA represents net income plus depreciation and amortization, income
taxes, net interest expense and extraordinary items. While EBITDA should not
be construed as a substitute for income from operations, net
9
<PAGE>
income or cash flows from operating activities in analyzing the Company's
operating performance, financial position or cash flows, the Company has
included EBITDA because it is commonly used by certain investors and
analysts to analyze and compare companies on the basis of operating
performance, leverage and liquidity and to determine a company's ability to
service debt.
(3) Reflects depreciation and amortization less the amortization of certain loan
fees, which are included in net interest expense. See Note 5 to the notes to
the historical consolidated financial statements of the Company included
elsewhere in this Prospectus.
(4) Gives effect to the sale of the Initial Notes and the application of the net
proceeds therefrom.
(5) Net debt includes long-term debt plus current portion of long-term debt less
cash.
10
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors in
addition to other information included in this Prospectus before making an
investment in the Notes. This Prospectus contains forward-looking statements
concerning the Company's operations, economic performance and financial
condition, including, in particular, the likelihood of the Company's success in
developing and expanding its business. These statements are based upon a number
of assumptions and estimates that are inherently subject to significant
uncertainties and contingencies, many of which are beyond the control of the
Company, and reflect future business decisions that are subject to change. Some
of these assumptions inevitably will not materialize, and unanticipated events
will occur that will affect the Company's results.
Substantial Leverage
The Company is, highly leveraged. After giving pro forma effect to the sale
of the Initial Notes and the application of the net proceeds therefrom, as of
March 29, 1997, the Issuer's total indebtedness outstanding was $103.2 million
and the Issuer's stockholders' deficit was $3.8 million.
The Issuer's high degree of leverage could have important consequences to
the holders of the Notes, including the following: (i) the Issuer's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions or general corporate purposes may be impaired in the future; (ii) a
substantial portion of the Issuer's cash flow from operations will be required
for the payment of principal and interest on its indebtedness, thereby reducing
the funds available to the Company for its operations and other purposes; (iii)
the covenants and other restrictions contained in the Indenture, the New Credit
Facility and other obligations of the Company will limit the Company's ability
to borrow additional funds or dispose of assets; (iv) because of debt service
requirements, funds available for capital expenditures will be limited; (v) the
Company may be substantially more leveraged than certain of its competitors,
which may place the Company at a competitive disadvantage; and (vi) the
Company's substantial degree of leverage may hinder its ability to adjust
rapidly to changing market conditions and could make it more vulnerable in the
event of a downturn in general economic conditions or its business. In addition,
all borrowings by the Issuer under the New Credit Facility will be at variable
rates of interest, which exposes the Issuer to the risk of increased interest
rates. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Description of the Notes" and "Description of Certain
Indebtedness."
The Issuer will be required to pay principal on the Notes at maturity in
2004. The Issuer's ability to make scheduled principal payments, or to refinance
its obligations, with respect to its indebtedness, and to pay interest thereon,
will depend on its financial and operating performance, which, in turn, is
subject to prevailing economic conditions and to certain financial, business and
other factors beyond its control. If the Company's cash flow and capital
resources are insufficient to fund its debt service obligations, the Company may
be forced to reduce or delay planned capital expenditures, sell assets, obtain
additional equity capital or refinance or restructure its debt. There can be no
assurance that the Company's cash flow and capital resources will be sufficient
for payment of its indebtedness in the future. If the Issuer is not able to
satisfy its debt service obligations, it could default on its indebtedness,
including the Initial Notes, the Exchange Notes and the New Credit Facility,
which would entitle the holders of such indebtedness to accelerate the maturity
thereof. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Description of
Certain Indebtedness."
11
<PAGE>
Customer Concentration
A significant portion of the Company's net sales to date has been derived
from a limited number of customers. The Company's three largest customers in
1996, Colgate-Palmolive, Maybelline and Procter & Gamble, each accounted for
greater than 10% of the Company's net sales in 1996 and in the aggregate
accounted for approximately 53% of the Company's 1996 net sales. The Company
expects that it will continue to be dependent upon a limited number of customers
for a significant portion of its revenues in future periods. As a result of this
customer concentration, the Company's business, operating results and financial
condition could be materially adversely affected by the failure of anticipated
orders to materialize, by deferrals or cancellations of orders or by its largest
customers increasing their in-house production of the Company's products or
selecting other manufacturers from whom to buy products. In addition, there can
be no assurance that revenues from customers that have accounted for significant
revenues in past periods, individually or as a group, will continue or, if
continued, will reach or exceed historic levels in any future period. The
Company's operating results may in the future be subject to substantial
period-to-period fluctuations as a consequence of such customer concentration.
See "--Status of Key Customer Contracts" and "Business--Customers."
Competition
The markets in which the Company operates are highly competitive. The
Company competes with a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies, on the basis of price,
service, quality and the ability to supply products to customers in a timely
manner. Some of these competitors have, and new competitors may have, greater
financial and other resources than the Company. Competitive pressures or other
factors, including the vertical integration by certain of the Company's major
customers of manufacturing processes traditionally outsourced to the Company,
could cause the Company to lose market share or could result in a significant
price erosion with respect to the Company's products, either of which would have
a material adverse effect on the Company's results of operations. Furthermore,
the Company's customers operate in highly competitive markets. To the extent the
Company's major customers lose market share in their respective markets, the
Company's results of operations and financial condition could be materially and
adversely affected. See "Business--Competition."
Status of Key Customer Contracts
The Company has supply contracts with three of its largest customers,
Colgate-Palmolive, Procter & Gamble and Abbott. The Company's current contract
with Colgate-Palmolive, which extends through June 30, 1999, provides that
Colgate-Palmolive, one of the Company's largest customers, will self-manufacture
substantially all of one of the three product lines historically provided to it
by the Company. The Company anticipates the full effect of such
self-manufacturing will result in a decline of approximately $11 million in
annual net sales by the Company to Colgate-Palmolive by 1998. No assurance can
be given that the Company's contract with Colgate-Palmolive will be renewed upon
expiration or that any renewal of such contract will be on terms as favorable to
the Company as the current contract or that Colgate-Palmolive will not begin the
self-manufacturing of other of the Company's product lines manufactured for
Colgate-Palmolive.
The Company's current contract with Procter & Gamble, another of the
Company's largest customers, extends through December 31, 1997. Procter & Gamble
has advised the Company that it is considering self-manufacture of the products
historically provided to it by the Company. The Company is currently negotiating
the renewal of such contract and anticipates that even if a contract renewal is
successfully negotiated, any such renewal will be on terms significantly less
favorable to the Company than the current contract. No assurance can be given
that the Company's contract with Procter & Gamble will be renewed upon
expiration. If the contract is not renewed, it would have a material and adverse
effect on the results of operations of the Company. For fiscal 1996, Procter &
Gamble accounted for $16.2 million, or 10.3%, of the Company's net sales and
$3.4 million, or 12.3%, of the Company's gross profit.
The Company's contract with Abbott for the manufacture of medical devices
at the Round Rock, Texas facility extends through the year 2000, with Abbott
having the option to renew such contract for additional one year terms. No
assurance can be given that the Company's contract with Abbott will be renewed
upon expiration or that any renewal of such contract will be on terms as
favorable to the Company as the current contract. See "--Customer
Concentration."
12
<PAGE>
Dependence on Suppliers
The major raw materials used in the manufacturing of the Company's products
are various plastic resins and nylon. Most of the raw materials used in the
Company's products are available from multiple sources. However, several raw
materials used in the Company's products are currently obtained from single
sources. An extended interruption in the supply of any of the raw materials or a
reduction in their quality would have a material adverse effect on the Company's
operating results. There can be no assurance that severe shortages of raw
materials will not occur in the future that could increase the cost or delay the
shipment of the Company's products and have a material adverse effect on the
Company's operating results. Significant increases in the prices of these raw
materials could also have a material adverse effect on the Company's operating
results because the Company may not be able to adjust product pricing to reflect
the increases in raw materials costs. See "Business--Suppliers."
Dependence on Key Personnel
The success of the Company depends in large part on the Company's senior
management and its ability to attract and retain other highly qualified
management personnel. The Company faces competition for such personnel from
other companies and other organizations. There can be no assurance that the
Company will be successful in hiring or retaining key personnel. See
"Management."
Environmental Regulation, Possible Changes and Related Matters
The Company and its operations are subject to comprehensive and frequently
changing federal, state and local environmental and occupational health and
safety laws and regulations, including laws and regulations governing emissions
of air pollutants, discharges of waste and storm water, and the disposal of
hazardous wastes. The Company is also subject to liability for the investigation
and remediation of environmental contamination (including contamination caused
by other parties) at properties that it owns or operates and at other properties
where the Company or its predecessors have arranged for the disposal of
hazardous substances. As a result, the Company is involved from time to time in
administrative and judicial proceedings and inquiries relating to environmental
matters. The Company believes there are currently no pending investigations at
the Company's plants and sites relating to environmental matters, other than
certain matters for which it is being defended and indemnified by Philips
Electronics North American Corporation, its former parent. However, there can be
no assurance that the Company will not be involved in any other such proceeding
in the future and that the aggregate amount of future clean up costs and other
environmental liabilities will not be material.
Federal, state and local governments could enact laws or regulations
concerning environmental matters that increase the cost of producing, or
otherwise adversely affect the demand for, plastic products. The Company cannot
predict the environmental liabilities that may result from legislation or
regulations adopted in the future nor can the Company predict how existing or
future laws or regulations will be administered or interpreted or what
environmental conditions may be found to exist. Enactment of more stringent laws
or regulations or more strict interpretation of existing laws and regulations
could require additional expenditures by the Company, some of which could be
material. The Company does not have insurance coverage for environmental
liabilities other than in Mexico and does not anticipate obtaining such coverage
in the future.
Controlling Stockholder
Holdings owns all of the Issuer's outstanding capital stock. Affiliates of
the Thomas H. Lee Company and investment partnerships for which affiliates of
the Thomas H. Lee Company serve as investment advisers (collectively, "THL") own
approximately 85% of the outstanding shares of the common stock of Holdings,
such common stock being the only class of voting capital stock of Holdings. As a
result, THL has the indirect ability to elect the Board of Directors of the
Issuer, to approve or disapprove of other matters requiring stockholder approval
and to effectively control the affairs and policies of the Issuer. Circumstances
may occur in which the interests of THL, as an indirect equity holder of the
Issuer, could be in conflict with the interests of the holders of the Notes.
Restrictive Debt Covenants
The Indenture and the New Credit Facility contain certain restrictive
covenants which do or will affect, and in many respects significantly limit or
prohibit, among other things, the ability of the Issuer to incur indebtedness,
make prepayments of certain indebtedness, pay dividends, make investments,
engage in transactions with stockholders and affiliates, create liens, sell
assets and engage in mergers and consolidations. The New Credit Facility also
requires the
13
<PAGE>
Issuer to meet certain financial ratios and tests. These covenants may
significantly limit the operating and financial flexibility of the Issuer and
may limit its ability to respond to changes in its business or competitive
activities. The ability of the Issuer to comply with such provisions may be
affected by events beyond its control. The breach of any of these covenants
could result in a default under the New Credit Facility. In the event of any
such default, depending on the actions taken by the lenders thereunder (the
"Lenders"), the Issuer could be prohibited from making any payments of principal
or interest on the Notes. In addition, the Lenders could elect to declare any
amounts borrowed under the New Credit Facility, together with accrued interest,
to be due and payable. If the Issuer were unable to repay such borrowings, the
Lenders could proceed against their collateral. If the indebtedness under the
New Credit Facility were to be accelerated, there can be no assurance that the
assets of the Issuer would be sufficient to repay such indebtedness and the
Notes in full. See "Description of Certain Indebtedness."
Asset Encumbrances
The Issuer's obligations under the New Credit Facility are secured by liens
on the Issuer's accounts receivable and inventory. The Notes will be unsecured
and, therefore, do not have the benefit of such collateral. If an event of
default occurs under the New Credit Facility, the Lenders will have a prior
right to such collateral and may foreclose upon such collateral to the exclusion
of the holders of the Notes, notwithstanding the existence of an event of
default with respect to the Notes. Accordingly, in such event, such collateral
would first be used to repay in full amounts outstanding under the New Credit
Facility and there can be no assurance that there would be sufficient assets
remaining to satisfy in full the claims of holders of the Notes.
Limited Ability of Guarantor to Perform Under Note Guarantee
Holdings is a holding company without significant assets other than its
equity interests in its subsidiaries. The Issuer is Holdings' principal
operating subsidiary, and Holdings is principally dependent upon the declaration
by the Issuer of dividends to pay its obligations. Under the terms of the
Indenture and the New Credit Facility, the Issuer will be significantly
restricted from declaring dividends to Holdings. Accordingly, Holdings' ability
to make payments in the event it is required to perform under its Note Guarantee
will be severely limited.
Limitations on Ability to Make Change of Control Payment
The Indenture requires the Issuer, in the event of a Change of Control, to
make an offer to purchase the Notes at 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of repurchase. Certain
events involving a Change of Control may be an event of default under the New
Credit Facility or other indebtedness of the Issuer that may be incurred in the
future. Moreover, the exercise by the holders of the Notes of their right to
require the Issuer to purchase the Notes may cause a default under the New
Credit Facility or such other indebtedness even if the Change of Control does
not constitute an event of default. Finally, there can be no assurance that the
Company will have the financial resources necessary to repurchase the Notes upon
a Change of Control. See "Description of the Notes--Repurchase at the Option of
Holders--Change of Control."
Risk of Fraudulent Transfer Liability
Management of the Issuer and Holdings believe that the indebtedness
represented by the Notes and Note Guarantee is being incurred for proper
purposes and in good faith, and that, based on present forecasts, asset
valuations and other financial information, the Issuer and Holdings, after the
sale of the Notes and the application of the net proceeds therefrom, are
solvent, will have sufficient capital for carrying on their businesses and will
be able to pay their debts as they mature. See "Use of Proceeds."
Notwithstanding management's belief, if a court of competent jurisdiction in a
suit by an unpaid creditor or a representative of creditors (such as a trustee
in bankruptcy or a debtor in possession) were to find that the Issuer or
Holdings did not receive fair consideration or reasonably equivalent value for
issuing the Notes or Note Guarantee and, at the time of the incurrence of
indebtedness represented by the Notes or Note Guarantee, the Company or Holdings
was insolvent, was rendered insolvent by reason of such incurrence, was engaged
in a business or transaction for which its remaining assets constituted
unreasonably small capital, intended to incur, or believed that it would incur,
debts beyond its ability to pay as such debts matured, or intended to hinder,
delay or defraud its creditors, such court could avoid such indebtedness or such
court could subordinate such indebtedness to other existing and future
indebtedness of the Issuer or Holdings. The measure of insolvency for purposes
of the foregoing will vary depending upon the law of the relevant jurisdiction.
Generally, however, a company would be considered insolvent for purposes of the
14
<PAGE>
foregoing if the sum of the company's debts is greater than all the company's
property at a fair valuation, or if the present fair saleable value of the
company's assets is less than the amount that will be required by the Company to
pay its probable liability on its existing debts as they become absolute and
matured.
Lack of Public Market
There is no existing market for the Exchange Notes and there can be no
assurances as to the liquidity of any markets that may develop for the Exchange
Notes, the ability of holders of the Exchange Notes to sell their Exchange
Notes, or the price at which holders would be able to sell their Exchange Notes.
Future trading prices of the Exchange Notes will depend on many factors,
including, among other things, prevailing interest rates, Anchor's operating
results and the market for similar securities. The Initial Purchasers have
advised the Issuer that they currently intend to make a market in the Exchange
Notes offered hereby. However, the Initial Purchasers are not obligated to do so
and any market making may be discontinued at any time without notice. The Issuer
does not intend to apply for listing of the Exchange Notes offered hereby on any
securities exchange or through the National Association of Securities Dealers
Automated Quotation System.
Consequences of Failure to Exchange
Holders of Initial Notes who do not exchange their Initial Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of Initial Notes set forth in the legend thereon as a
consequence of the issuance of the Initial Notes pursuant to an exemption from,
or in a transaction not subject to, the registration requirements of the
Securities Act. In general, the Initial 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 Issuer does not anticipate registering the Initial Notes under the
Securities Act. Holders of the Initial Notes who do not tender their Notes in
the Exchange Offer will continue to hold such Initial Notes and their rights
under such Initial Notes will not be altered, except for any such rights under
the Registration Rights Agreement, which 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 Initial Notes pursuant to, the Exchange Offer.
15
<PAGE>
THE EXCHANGE OFFER
Purpose of the Exchange Offer
The Initial Notes were originally issued and sold on April 2, 1997. Such
sales were 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 Initial Notes, the Issuer agreed to file with the Commission a
registration statement relating to an exchange offer (the "Exchange Offer
Registration Statement") pursuant to which the Exchange Notes would be offered
in exchange for Initial Notes tendered at the option of the holders thereof or,
if applicable interpretations of the staff of the Commission did not permit the
Issuer to effect such an exchange offer, the Issuer agreed, at its cost, to file
a shelf registration statement covering resales of the Initial Notes (the
"Resale Registration Statement") and to have such Resale Registration Statement
declared effective and kept effective for a period of two years from the
effective date thereof. In the event that (i) the Issuer fails to file the
Exchange Offer Registration Statement, (ii) the Exchange Offer Registration
Statement is not declared effective by the Commission, or (iii) the Exchange
Offer is not consummated or the Resale Registration Statement is not declared
effective by the Commission, in each case within specified time periods, the
interest rate borne by the Initial Notes shall increase, which interest will
accrue and be payable in cash until completion of such filing, declaration of
effectiveness or completion of such exchange. See "Exchange Offer; Registration
Rights."
The sole purpose of the Exchange Offer is to fulfill obligations of the
Issuer with respect to the foregoing agreement. Following the consummation of
the Exchange Offer, the Issuer does not currently anticipate registering any
untendered Initial Notes under the Securities Act and will not be obligated to
do so.
Accounting Treatment
The Exchange Notes will be recorded at the carrying value of the Initial
Notes that are exchanged. Therefore no gain or loss will be recorded in Anchor's
financial statement as a result of the transaction.
Terms of the Exchange
The Issuer hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Initial Notes. The terms of the Exchange Notes are identical in all respects to
the terms of the Initial 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 and the holders of the Exchange Notes (as well
as remaining holders of any Initial Notes) will not be entitled to registration
rights under the Registration Rights Agreement. See "Registration Rights
Agreement." The Exchange Notes will evidence the same debt as the Initial 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 Initial Notes being tendered for exchange.
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Issuer believes that the Exchange
Notes issued pursuant to the Exchange Offer in exchange for Initial Notes may be
offered for sale, resold and otherwise transferred by any holder of such
Exchange Notes (other than any such holder which is an "affiliate" of the Issuer
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 and such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes. Any holder who
tenders in the Exchange Offer for the purpose of participating in a distribution
of the Exchange Notes cannot rely on such interpretations by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each broker-dealer that receives Exchange Notes for its own account
in exchange for Initial Notes, where such Initial 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."
Interest on the Exchange Notes shall accrue from April 2, 1997 or from the
last Interest Payment Date on which interest was paid on the Initial Notes so
surrendered.
16
<PAGE>
Tendering holders of the Initial Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions on the Letter of
Transmittal, transfer taxes with respect to the exchange of the Initial Notes
pursuant to 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
the Issuer, in its sole discretion, extends 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 the Issuer, shall
expire. The Issuer reserves the right to extend the Exchange Offer at any time
and from time to time by giving oral or written notice to Fleet National Bank
(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 New Service. During any extension of the Exchange Offer, all Initial
Notes previously tendered pursuant to the Exchange Offer will remain subject to
the Exchange Offer.
The Exchange Date will be the first business day following the Expiration
Date. The Issuer expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Initial Notes if either of the events set
forth below under "Conditions to the Exchange Offer" shall have occurred and
shall not have been waived by the Issuer and (ii) amend the terms of the
Exchange Offer in any manner which, in its good faith judgment, is advantageous
to the holders of the Initial Notes, whether before or after any tender of the
Initial Notes. If any such termination or amendment occurs, the Issuer will
notify the Exchange Agent and will either issue a press release or give oral or
written notice to the holders of the Initial Notes as promptly as practicable.
Unless the Issuer terminates the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date, the Issuer will exchange the Exchange Notes
for the Initial Notes on the Exchange Date.
How to Tender
The tender to the Issuer of Initial Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Issuer in accordance with the terms and subject to the conditions
set forth herein and in the Letter of Transmittal.
A holder of an Initial Note may tender the same by (i) 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 Initial Notes being tendered and any required
signature guarantees, to the Exchange Agent at its address set forth on the back
cover of this Prospectus on or prior to the Expiration Date, (ii) complying with
the procedure for book entry transfer described below or (iii) complying with
the guaranteed delivery procedures described below.
If tendered Initial 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 Initial Notes are to be reissued) in the
name of the registered holder (which term, for the purpose described herein,
shall include any participant in The Depository Trust Company ("DTC") (also
referred to as a book-entry transfer facility) whose name appears on a security
listing as the owner of the Initial Notes), the signature of such signer need
not be guaranteed. In any other case, the tendered Initial Notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to the Issuer 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 or correspondent in the United
States, or by a member firm of a 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 Initial
Notes not exchanged are to be delivered to an address other than that of the
registered holder appearing on the note register for the Initial Notes, the
signature in the Letter of Transmittal must be guaranteed by an Eligible
Institution.
The method of delivery of Initial 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.
The Exchange Agent and DTC have confirmed that any financial institution
that is a participant in DTC's system (a "Participant") may utilize DTC's
Automated Tender Offer Program ("ATOP") to tender Initial Notes.
17
<PAGE>
The Exchange Agent will request that DTC establish an account with respect
to the Initial Notes for purposes of the Exchange Offer within two business days
after the date of this Prospectus. Any Participant may make book-entry delivery
of Initial Notes by causing DTC to transfer such Initial Notes into the Exchange
Agent's account in accordance with DTC's ATOP procedures for transfer. However,
the exchange for the Initial Notes so tendered will only be made after timely
confirmation (a "Book-Entry Confirmation") of such book-entry transfer of
Initial Notes into the Exchange Agent's account, and timely receipt by the
Exchange Agent of an Agent's Message (as such term is defined in the next
sentence) and any other documents required by the Letter of Transmittal. The
term "Agent's Message" means a message, transmitted by DTC and received by the
Exchange Agent and forming part of a Book-Entry Confirmation, which states that
DTC has received an express acknowledgment from a Participant tendering Initial
Notes which are the subject of such Book-Entry Confirmation that such
Participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Issuer may enforce such agreement against such
Participant.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Initial 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 back cover hereof on or prior to the Expiration Date a
letter, telegram or facsimile transmission from an Eligible Institution setting
forth the name and address of the tendering holder, the names in which the
Initial Notes are registered and, if possible, the certificate numbers of the
Initial 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 Initial Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Initial 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 Initial 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), the Issuer
may, at its option, reject the tender. Copies of a Notice of Guaranteed Delivery
which 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 (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Initial Notes is received by the Exchange Agent, (ii) a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer facility is received by the Exchange
Agent, or (iii) 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
Initial 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 Initial Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Initial Notes will be
determined by the Issuer, whose determination will be final and binding. The
Issuer reserves the absolute right to reject any or all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of the counsel
of the Issuer, be unlawful. The Issuer also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularity in the
tender of any Initial Notes. None of the Issuer, the Exchange Agent or 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.
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 Initial Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Initial Notes to the Issuer and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's Agent and
attorney-in-fact to cause the Initial Notes to be assigned, transferred and
exchanged. The Transferor represents and
18
<PAGE>
warrants that it has full power and authority to tender, exchange, assign and
transfer the Initial Notes and to acquire Exchange Notes issuable upon the
exchange of such tendered Initial Notes, and that, when the same are accepted
for exchange, the Issuer will acquire good and unencumbered title to the
tendered Initial 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 Issuer to be necessary or desirable to complete the exchange, assignment
and transfer of tendered Initial Notes or transfer ownership of such Initial
Notes on the account books maintained by a book-entry transfer facility. The
Transferor further agrees that acceptance of any tendered Initial Notes by the
Issuer and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Issuer of its obligations under the Registration
Rights Agreement and that the Issuer shall have no further obligations or
liabilities thereunder. 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.
By tendering Initial Notes, the Transferor certifies that it is not an
"affiliate" of the Issuer 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.
Withdrawal Rights
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal 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 back cover of this Prospectus.
Any such notice of withdrawal must specify the person named in the Letter of
Transmittal as having tendered Initial Notes to be withdrawn, the certificate
numbers of Initial Notes to be withdrawn, the principal amount of Initial Notes
to be withdrawn, a statement that such holder is withdrawing his election to
have such Initial Notes exchanged, and the name of the registered holder of such
Initial 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 Issuer
that the person withdrawing the tender has succeeded to the beneficial ownership
of the Initial Notes being withdrawn. The Exchange Agent will return the
properly withdrawn Initial Notes promptly following receipt of notice of
withdrawal. If Initial Notes have been tendered pursuant to the procedures 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 Initial 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 the Issuer, and such
determination will be final and binding on all parties.
Acceptance of Note for Exchange; Delivery of Exchange Notes
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance of Initial Notes validly tendered and not withdrawn and issuance of
the Exchange Notes will be made on the Exchange Date. For the purpose of the
Exchange Offer, the Issuer shall be deemed to have accepted for exchange validly
tendered Initial Notes when, as and if the Issuer has given oral or written
notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Initial
Notes for the purpose of receiving Exchange Notes from the Issuer and causing
the Initial 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 Initial Notes will be made by the Exchange
Agent promptly after acceptance of the tendered Initial Notes. Initial Notes not
accepted for exchange by the Issuer will be returned without expense to the
tendering holders promptly following the Expiration Date or, if the Issuer
terminates 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, the Issuer will not be required to issue Exchange Notes
in respect of any properly tendered Initial Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public
19
<PAGE>
announcement communicated, unless otherwise required by applicable law or
regulation, by making a release to the Dow Jones News Service) or, at its
option, modify or otherwise amend the Exchange Offer, if there shall be
threatened, instituted or pending any action or proceeding before, or any
injunction, order or decree shall have been issued by, any court or governmental
agency or other governmental regulatory or administrative agency or commission,
(i) seeking to restrain or prohibit the making or consummation of the Exchange
Offer or any other transaction contemplated by the Exchange Offer, or assessing
or seeking any damages as a result thereof or (ii) resulting in a material delay
in the ability of the Issuer to accept for exchange or exchange some or all of
the Initial Notes pursuant to the Exchange Offer, or any statute, rule,
regulation, order or injunction shall be sought, proposed, introduced, enacted,
promulgated or deemed applicable to the Exchange Offer or any of the
transactions contemplated by the Exchange Offer by any government or
governmental authority, agency or court, domestic or foreign, that in the
reasonable judgment of the Issuer, might directly or indirectly result in any of
the consequences referred to in clauses (i) or (ii) above or, in the reasonable
judgment of the Issuer, might result in the holders of Exchange Notes having
obligations with respect to resales and transfers of Exchange Notes which are
greater than those described in the interpretations of the Commission referred
to on the cover page of this Prospectus, or would otherwise make it inadvisable
to proceed with the Exchange Offer.
In addition, the Issuer will not accept for exchange any Initial Notes
tendered and no Exchange Notes will be issued in exchange for any such Initial
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part of qualification of the Indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act").
The Issuer expressly reserves the right to terminate the Exchange Offer and
not accept for exchange any Initial Notes upon the occurrence of either of the
foregoing conditions (which represent all of the material conditions to the
acceptance by the Issuer of properly tendered Initial Notes). In addition, the
Issuer may amend the Exchange Offer at any time prior to the Expiration Date if
either of the conditions set forth above occur. Moreover, regardless of which of
such conditions has occurred, the Issuer may amend the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to holders of the
Initial Notes.
The foregoing conditions are for the sole benefit of the Issuer and may be
waived by the Issuer, in whole or in part, if, in its reasonable judgment, such
waiver is not advantageous to holders of the Initial Notes. Any determination
made by the Issuer concerning an event, development or circumstance described or
referred to above will be final and binding on all parties.
Exchange Agent
Fleet National Bank 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 back cover of this Prospectus.
Delivery to an address other than as set forth herein, or transmissions of
instructions via facsimile or telex number other than the ones set forth herein,
will not constitute a valid delivery.
Solicitation of Tenders; Expenses
The Issuer has 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 this Exchange Offer. The Issuer
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. The Issuer 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 Prospectus and related documents
to the beneficial owners of the Initial Notes and in handling or forwarding
tenders for their customers.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Issuer. 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 Issuer since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Initial Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Issuer may, at its
discretion, take such action as it may deem necessary to make
20
<PAGE>
the Exchange Offer in any such jurisdiction and extend the Exchange Offer to
holders of Initial Notes in such jurisdiction. In any jurisdiction the
securities laws or blue sky laws of which require the Exchange Offer to be made
by a licensed broker or dealer, the Exchange Offer is being made on behalf of
the Issuer by one or more registered brokers or dealers which are licensed under
the laws of such jurisdiction.
Other
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Initial Notes are urged to
consult their financial and tax advisors in making their own decisions on what
action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Initial Notes pursuant to the terms of this Exchange Offer, the
Issuer will have fulfilled a covenant contained in the terms of the Initial
Notes, the Indenture and the Registration Rights Agreement. Holders of the
Initial Notes who do not tender the certificates in the Exchange Offer will
continue to hold such certificates and their rights under such Initial Notes
will not be altered, except for any such rights under the Registration Rights
Agreement, which by their terms terminate or cease to have further effect as a
result of the making of this Exchange Offer. See "Description of the Initial
Notes." All untendered Initial Notes will continue to be subject to the
restrictions on transfer set forth in the Indenture. To the extent that Initial
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered Initial Notes could be adversely affected.
The Issuer may in the future seek to acquire untendered Initial Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Issuer has no present plan to acquire any Initial Notes
which are not tendered in the Exchange Offer or to file a registration statement
to permit resales of any Initial Notes which are not tendered pursuant to the
Exchange Offer.
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<PAGE>
CAPITALIZATION
The following table sets forth the actual capitalization of Anchor at March
29, 1997 and the capitalization of Anchor at such date, as adjusted to give pro
forma effect to the sale of the Initial Notes and the application of the net
proceeds therefrom. This table should be read in conjunction with the historical
consolidated financial statements of the Company, including the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
At March 29, 1997
---------------------------
Actual Pro Forma
(in thousands)
<S> <C> <C>
Cash ...................................................... $ 108 $ 155
======= ========
Current Portion of long-term debt ........................ 6,361 361
======= ========
Long-term debt (excluding current maturities):
Bank Credit Agreement
Revolving Credit Facility .............................. 14,014 0
Term Loans ............................................. 28,750 0
New Credit Agreement .................................... 0 1,543(1)
% Senior Notes due 2004 .................................. 0 100,000
11.925% Senior Subordinated Notes due 2000 ............... 9,000 0
17.755% Junior Subordinated Notes due 2000 ............... 12,000 0
Connecticut Development Authority Notes .................. 605 605
Other long-term debt (Capital Leases) ..................... 666 666
------- --------
Total long-term debt ................................. 65,035 102,814
Stockholders' Equity:
Common Stock (2) .......................................... 10 10
Additional Paid-in Capital (net of Treasury Stock) ...... 10,240 0
Additional Pension Liability ........................... (568) (568)
Retained Earnings ....................................... 12,203 (3,198)
------- --------
Treasury Stock at Cost ................................. (10) (10)
Total Stockholders' Equity (deficit) .................. 21,875 (3,756)
------- --------
Total Capitalization ................................. $86,910 $ 99,058
======= ========
</TABLE>
- ------------
(1) As of March 29, 1997, and after giving pro forma effect to the sale of the
Initial Notes and the application of the net proceeds therefrom, the Company
had $13.5 million of availability under the New Credit Facility. See
"Description of Certain Indebtedness."
(2) Does not include an aggregate of 533,300 shares of Common Stock issuable in
connection with warrants and options to purchase Common Stock of Holdings at
such date.
22
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected historical financial data of the
Company for the five years ended December 31, 1996, for the thirteen weeks ended
March 30, 1996 and March 29, 1997, and selected pro forma financial data for the
year ended December 31, 1996. The selected financial data for the years ended
December 31, 1994, 1995 and 1996 were derived from the audited consolidated
financial statements of the Company included elsewhere in this Prospectus. The
financial data include information with respect to Mid-State following its
acquisition on July 29, 1994. The selected financial data for the years ended
December 31, 1992 and 1993 are derived from audited consolidated historical
financial statements of the Company not included herein. The information
presented for the thirteen weeks ended March 30, 1996 and March 29, 1997 has
been derived from the unaudited consolidated financial statements of the Company
included elsewhere in this Prospectus. Such unaudited consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth herein. Results for the thirteen weeks ended March 29,
1997 are not necessarily indicative of the results to be expected for the year
ended December 31, 1997. The following table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical consolidated financial statements of the Company,
including accompanying notes thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year ended December 31, 13 Weeks Ended
----------------------------------------------------------- ------------------------
March 30, March 29,
1992 1993 1994 1995 1996 1996 1997
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales ..................... $ 101,537 $ 118,047 $ 118,267 $149,366 $156,858 $39,414 $41,546
Gross profit .................. 17,861 20,778 18,208 24,338 27,637 7,740 6,893
Selling, general and
administrative ................. 7,377 9,096 7,634 9,409 11,358 2,915 2,615
Amortization .................. 1,089 577 1,712 1,662 1,530 343 343
-------- -------- -------- -------- -------- -------- --------
Operating income ............... 9,395 11,105 8,862 13,267 14,749 4,483 3,935
Other (Income) expense ......... (752) (110) (739) 974 408 112 26
Net Interest expense ............ 5,910 5,385 5,984 8,616 8,124 1,986 2,072
Income taxes .................. 385 1,606 1,507 1,239 2,591 1,000 779
Extraordinary item (1) ......... 0 0 334 0 0 0 0
-------- -------- -------- -------- -------- -------- --------
Net income ..................... $ 3,852 $ 4,224 $ 1,776 $ 2,438 $ 3,626 $ 1,385 $ 1,058
======== ======== ======== ======== ======== ======== ========
Other Data:
EBITDA (2) ..................... $ 16,636 $ 17,881 $ 18,439 $ 21,742 $ 23,627 $ 6,711 $ 6,238
Depreciation and amortization (3) 6,489 6,666 8,838 9,449 9,286 2,340 2,329
Capital expenditures ............ 6,776 6,729 5,724 6,932 8,028 2,484 1,973
</TABLE>
Pro Forma Data (4):
Cash interest expense, net ................................ $12,028
Ratio of EBITDA to cash interest expense, net .............. 2.0x
Ratio of net debt to EBITDA ................................ 4.3x
At December 31, 1996
-----------------------
Pro
Actual Forma(4)
Balance Sheet Data:
Working capital ........................ $ 27,463 $ 34,280
Total assets ........................... 116,691 120,342
Net debt (5) ........................... 71,875 102,060
Net stockholders' equity (deficit) ...... 20,817 (4,900)
- ------------------
(1) Represents loss in 1994 on extinguishment of debt net of tax.
(2) EBITDA represents net income plus depreciation and amortization, income
taxes, net interest expense and extraordinary items. While EBITDA should not
be construed as a substitute for income from operations, net income or cash
flows from operating activities in analyzing the Company's operating
performance, financial
23
<PAGE>
position or cash flows, the Company has included EBITDA because it is
commonly used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage and liquidity and
to determine a company's ability to service debt.
(3) Reflects depreciation and amortization less the amortization of certain loan
fees, which are included in net interest expense. See Note 5 to the notes to
the historical consolidated financial statements of the Company included
elsewhere in this Prospectus.
(4) Gives effect to the sale of the Initial Notes and the application of the net
proceeds therefrom.
(5) Net debt includes long-term debt plus current portion of long-term debt less
cash.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Anchor is a leading designer, manufacturer and packager of precision molded
plastic products for a wide range of dental, cosmetic, medical, computer and
consumer applications. The Company is one of the world's largest manufacturers
of toothbrushes and is a leading U.S. manufacturer of cosmetics packaging. For
the year ended December 31, 1996, the Company had net sales of $156.9 million,
EBITDA of $23.6 million and net income of $3.6 million, making it one of the
largest independent plastic injection molders in North America.
Approximately 41% of the Company's 1996 net sales were made under supply
contracts with three of its largest customers, Colgate-Palmolive, Procter &
Gamble and Abbott. The remaining terms of each of such contracts are up to 3
years, excluding options to renew. Typically, contracts are renewed or replaced
by new contracts prior to expiration. The terms of the contracts vary, including
any minimum purchasing requirements and the customers' ability to cancel, but in
each case the Company passes through to its customers raw material price
increases and decreases. See "Risk Factors--Status of Key Customer Contracts."
Anchor's principal materials are plastic resins, nylon and packaging
materials. During periods of limited supply, Anchor has typically been able to
procure sufficient quantities of plastic resins, nylon and packaging materials
to satisfy all of its customers' needs. Anchor's gross profit is substantially
unaffected by fluctuations in plastic resin and nylon prices because the Company
historically has been successful in passing through increases in those prices to
its customers by means of corresponding changes in product pricing.
Anchor began operations in 1941 as a manufacturer of cosmetic brushes for
Maybelline and, in 1958, began producing Pepsodent toothbrushes for Lever
Brothers Company, Inc. The Company was acquired in 1990 by affiliates of the
Thomas H. Lee Company and management. Since the 1990 acquisition, the Company
has pursued a growth strategy designed to increase sales while diversifying its
revenue base. In pursuit of this strategy, Anchor acquired Mid-State in 1994,
which served to expand the Company's business into the medical device and
computer component markets.
In 1993 and 1994, Anchor invested in expanded operations in Matamoros,
Mexico, where the Company ultimately relocated much of its cosmetics packaging
operations. As the Matamoros facility came on line in 1995 and 1996, Anchor
began experiencing efficiency gains in its cosmetics segment while freeing-up
domestic capacity for other uses. This increased domestic capacity allowed the
Company to convert some of its U.S. production to its newest major product line,
POP displays, which contributed significantly to increased net sales in 1996.
Also in 1996, Anchor invested in a new Round Rock, Texas, facility for the
production of computer components for Compaq, which will generate a full year of
revenues in 1997.
Certain of the Company's operating data for fiscal years 1994, 1995, and
1996, for the thirteen weeks ended March 30, 1996 and March 29, 1997 are set
forth below as percentages of net sales:
<TABLE>
<CAPTION>
Year Ended December 31, 13 Weeks Ended
--------------------------------- --------------------------
March 30, March 29,
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Net sales ................................. 100.0% 100.0% 100% 100% 100%
Gross profit . ........................... 15.4 16.3 17.6 19.6 16.6
Selling, general and administrative ...... 6.5 6.3 7.2 7.4 6.3
Amortization .............................. 1.4 1.1 1.0 0.9 0.8
----- ----- ----- ----- -----
Operating income ........................ 7.5 8.9 9.4 11.3 9.5
Other (income) expense .................. (0.6) 0.7 0.3 0.3 0.1
Net interest expense ..................... 5.1 5.8 5.2 5.0 5.0
Income taxes .............................. 1.3 0.8 1.7 2.5 1.9
Extraordinary item ........................ 0.3 -- -- -- --
----- ----- ----- ----- -----
Net income .............................. 1.5% 1.6% 2.3% 3.5% 2.5%
===== ===== ===== ===== =====
</TABLE>
25
<PAGE>
Results of Operations
13 Weeks Ended March 29, 1997 ("Interim 97")
Compared to 13 Weeks Ended March 30, 1996 ("Interim 96")
Net Sales. Net sales increased by $2.1 million, or 5.3%, to $41.5 million
for Interim 97 from $39.4 million for Interim 96, due to an increase in
Maybelline POP Display sales, and the addition of Compaq sales in the computer
market.
Gross Profit. Gross profit decreased by $.8 million, or 10.4%, to $6.9
million for Interim 97 from $7.7 million for Interim 96, due to the addition of
lower gross margin Compaq sales and inefficiencies related to the start-up of
the manufacturing facility for Compaq in Round Rock, Texas.
Selling, General and Administrative. SG&A expenses decreased by $.3
million, or 10.3%, to $2.6 million for Interim 97 from $2.9 million for Interim
96.
Amortization. Goodwill amortization remained unchanged at $.3 million for
Interim 97.
Operating Income. Operating income decreased by $.5, or 11.1%, to $3.9
million for Interim 97 from $4.5 million for Interim 96 for the reasons listed
above.
Other Expense. Other expense decreased by $.1 million for Interim 97 from
$.1 million for Interim 96. The other expense in 1996 was from excess capacity
charges that did not reoccur in 1997.
Net Interest Expense. Net interest expense increased by $.1 million, or
5.0%, to $2.1 million for Interim 97 from $2.0 million for Interim 96 due to
slight increase in borrowing levels that were based on prime rates rather than
LIBOR.
Income Taxes. Income taxes decreased by $.2 million, or 20.0%, to $.8
million for Interim 97 from $1.0 million for Interim 96 as a result of decreased
operating income.
Net Income. Net income decreased by $.3 million, or 21.4%, to $1.1 million
for Interim 97 from $1.4 million for Interim 96 as a result of the above
factors.
EBDITA. EBDITA decreased by $.5 million, or 7.5%, to $6.2 million for
Interim 97 from $6.7 million for Interim 96 as a result of the above factors.
Fiscal 1996 versus Fiscal 1995
Net Sales. Net sales increased by $7.5 million, or 5.0%, to $156.9 million
for fiscal year 1996 from $149.4 million for fiscal year 1995, principally as a
result of inclusion of the first full year of POP display sales and an increase
in computer component sales. This increase was partially offset by a decrease in
unit sales in the dental market.
Gross Profit. Gross profit increased by $3.3 million, or 13.6%, to $27.6
million for fiscal year 1996 from $24.3 million for fiscal year 1995,
principally as a result of increased net sales in the POP display and computer
component markets as well as higher gross margins. This increase was partially
offset by a decline in gross profit in the dental market. Gross margin increased
to 17.6% for fiscal year 1996 from 16.3% in fiscal year 1995 due to the
realization of a full year of efficiency gains in the Matamoros, Mexico
manufacturing facility partially offset by inefficiencies related to the
start-up of the manufacturing facility in Round Rock, Texas.
Selling, General and Administrative. SG&A expenses increased by $2.0
million, or 20.7%, to $11.4 million for fiscal year 1996 from $9.4 million for
fiscal year 1995, principally as a result of professional expenses incurred in
connection with the formation of a possible joint venture in China and costs
associated with a management information systems upgrade.
Amortization. Amortization expense decreased by $0.2 million, or 7.9%, to
$1.5 million for fiscal year 1996 from $1.7 million for fiscal year 1995,
principally as a result of the expiration of certain amortized fees and expenses
incurred in the 1990 acquisition of the Company.
Operating Income. Operating income increased by $1.4 million, or 11.2%, to
$14.7 million for fiscal year 1996 from $13.3 million for fiscal year 1995.
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Other Expense. Other expense decreased by $0.6 million, or 58.1%, to $0.4
million for fiscal year 1996 from $1.0 million for fiscal year 1995, principally
as a result of relocation expenses in 1995 which were not repeated in 1996.
Net Interest Expense. Net interest expense decreased by $0.5 million, or
5.7%, to $8.1 million for fiscal year 1996 from $8.6 million for fiscal year
1995, principally as a result of a $5.0 million pay down on the Term Loan
Agreement and greater use of LIBOR rates under such agreement.
Income Taxes. Income tax expense increased by $1.4 million, or 109.1%, to
$2.6 million for fiscal year 1996 from $1.2 million for fiscal year 1995.
Net Income. Net income increased by $1.2 million, or 48.7%, to $3.6 million
for fiscal year 1996 from $2.4 million for fiscal year 1995 as a result of the
above factors.
EBITDA. EBITDA increased by $1.9 million, or 8.7%, to $23.6 million for
fiscal year 1996 from $21.7 million for fiscal year 1995 as a result of the
above factors.
Fiscal 1995 versus Fiscal 1994
Net Sales. Net sales increased by $31.1 million, or 26.3%, to $149.4
million for fiscal year 1995 from $118.3 million for fiscal year 1994,
principally as a result of increased net sales primarily due to the inclusion of
a full year of Mid-State operations in fiscal year 1995 versus the inclusion of
five months of Mid-State operations in fiscal year 1994. The increase in net
sales also reflects the introduction of the POP display product line and
increased sales of computer components and other consumer products.
Gross Profit. Gross profit increased by $6.1 million, or 33.7%, to $24.3
million for fiscal year 1995 from $18.2 million for fiscal year 1994,
principally as a result of the inclusion of a full year of Mid-State operations
in fiscal year 1995 and higher gross margins. Gross margin increased to 16.3%
for fiscal year 1995 from 15.4% for fiscal year 1994 substantially due to
Anchor's realization of the benefits in the second half of 1995 of its cosmetics
manufacturing consolidation into Matamoros, Mexico.
Selling, General and Administrative. SG&A expenses increased by $1.8
million, or 23.7%, to $9.4 million for fiscal year 1995 from $7.6 million for
fiscal year 1994, principally as a result of the inclusion of a full year of
Mid-State SG&A expenses and increased selling costs for the new POP display
product line.
Amortization. Amortization expense remained unchanged at $1.7 million for
fiscal year 1995 as compared to fiscal year 1994.
Operating Income. Operating income increased by $4.4 million, or 49.7%, to
$13.3 million for fiscal year 1995 from $8.9 million for fiscal year 1994.
Other (Income) Expense. Other (income) expense increased by $1.7 million to
$1.0 million for fiscal year 1995 from ($0.7) million in other income for fiscal
year 1994 principally as a result of relocation expenses incurred in 1995.
Net Interest Expense. Net interest expense increased by $2.6 million, or
43.9%, to $8.6 million for fiscal year 1995 from $6.0 million for fiscal year
1994, principally as a result of the inclusion of a full year of interest
expense paid in connection with the 1994 acquisition of Mid-State.
Income Taxes. Income tax expense decreased by $0.3 million, or 17.8%, to
$1.2 million for fiscal year 1995 from $1.5 million for fiscal year 1994.
Net Income. Net income increased by $0.7 million, or 37.3%, to $2.4 million
for fiscal year 1995 from $1.8 million for fiscal year 1994 as a result of the
above factors.
EBITDA. EBITDA income increased by $3.3 million, or 17.9%, to $21.7 million
for fiscal year 1995 from $18.4 million for fiscal year 1994 as a result of the
above factors.
Liquidity and Capital Resources
Historical
Historically, the Company has funded its business with cash generated from
operations and borrowings under its Revolving Credit and Term Loan Agreement,
with Bank of Boston as agent (the "Revolving Credit and Term Loan Agreement"),
with long-term borrowings used to finance the Company's acquisition of
Mid-State. In 1994,
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1995 and 1996, the Company generated cash from operating activities of $6.9
million, $8.8 million, and $13.1 million, respectively. The Company's capital
expenditures for 1994, 1995 and 1996 were $5.7 million, $6.9 million and $8.0
million, respectively, principally for additions to the Company's manufacturing
capacity. Also in 1994, the Company expended $27.4 million for its acquisition
of Mid-State. In 1994, net borrowings increased $28.0 million principally to
fund the Mid-State acquisition. In 1995 and 1996 net borrowings were reduced by
$3.3 million and $4.3 million, respectively. In 1995, the Company made
approximately $0.6 million of capital expenditures at its Waterbury facility to
comply with environmental regulations.
Following Sale of the Initial Notes
After consummation of the sale of the Initial Notes and the application of
net proceeds therefrom, the Company's liquidity requirements consist primarily
of working capital needs and capital expenditures, required payments of
principal and interest on any borrowings under the New Credit Facility and
required payments of interest on the Notes and principal at maturity. The
Company estimates that its capital expenditures in 1997 will total $7 million,
of which approximately $2.5 million will be used to maintain existing
operations.
The New Credit Facility provides for revolving loans to, and the issuance
of letters of credit on behalf of, the Company, in an aggregate amount not to
exceed $15.0 million, $13.5 million of which was available at March 29, 1997
after giving pro forma effect to the sale of the Initial Notes. The New Credit
Facility will mature in 2003 and contains covenants customary for working
capital financings, including, without limitation, maximum leverage and interest
coverage ratios and minimum net worth requirements; restrictions on capital
expenditures, incurrence of additional indebtedness, dividends and redemptions;
and restrictions on mergers, acquisitions and sales of assets. See "Description
of Certain Indebtedness."
The Issuer believes that cash flows from operating activities and its
ability to borrow under the New Credit Facility will be adequate to meet the
Issuer's debt service obligations, working capital needs and planned capital
expenditures at least through December 31, 1997.
The Indenture places significant restrictions on the Issuer's ability to
incur additional indebtedness, to make certain payments, investments, loans and
guarantees and to sell or otherwise dispose of a substantial portion of its
assets to, or merge or consolidate with, another entity. See "Description of the
Notes--Certain Covenants."
Inflation and Changing Prices
Anchor's sales and costs are subject to inflation and price fluctuations.
However, because changes in the cost of plastic resins and nylon, Anchor's
principal raw materials, are generally passed through to customers, such changes
historically have not, and in the future are not expected to have, a material
effect on Anchor's gross profit.
Impact of New Accounting Standards
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share," which changes
the calculations used for earnings per share (EPS) and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of the
diluted EPS computation. The effect of the standard on quarterly consolidated
financial statements would be to result in $1.36 and $1.04 of basic EPS for the
quarters ended March 30, 1996 and March 29, 1997. The standard would have no
effect on the diluted EPS. The Statement is effective for financial statements
issued for periods ending after December 15, 1997; earlier application is not
permitted.
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BUSINESS
General
Anchor is a leading designer, manufacturer and packager of precision molded
plastic products for a wide range of dental, cosmetic, medical, computer and
consumer applications. The Company believes it is one of the world's largest
manufacturers of toothbrushes and a leading U.S. manufacturer of cosmetics
packaging. For the year ended December 31, 1996, the Company had net sales of
$156.9 million, EBITDA of $23.6 million and net income of $3.6 million, making
it one of the largest independent plastic injection molders in North America.
Anchor began operations in 1941 as a manufacturer of cosmetic brushes for
Maybelline and, in 1958, began producing Pepsodent toothbrushes for Lever
Brothers Company, Inc. The Company was acquired in 1990 by affiliates of the
Thomas H. Lee Company and management. Since 1990, management has developed and
implemented a variety of strategic initiatives in order to enhance the Company's
long-term growth, profitability and competitiveness, including:
[bullet] Capitalizing on its manufacturing and technical expertise and
reputation for quality and service to grow its dental business,
including introducing the Crest(R) line of toothbrushes for Procter
& Gamble in 1992.
[bullet] Consolidating its cosmetics operations in an expanded maquiladora
manufacturing facility in Matamoros, Mexico, resulting in
significant operating efficiencies and cost savings.
[bullet] Diversifying its markets and customer base through product line
expansion and the 1994 acquisition of Mid- State, a leading
injection-molder in the medical device and computer component
markets.
As a result of these strategic initiatives, from 1991 to 1996, Anchor
increased net sales and EBITDA at compounded annual growth rates of 15.9% and
13.2%, respectively.
For the year ended December 31, 1996, approximately 90% of the Company's
net sales were generated in five markets: dental, cosmetics, medical device,
computer component and POP displays. In the dental market (approximately 36% of
net sales in 1996), the Company designs, manufactures and packages toothbrushes
for Colgate-Palmolive, Procter & Gamble, Chesebrough-Ponds, and SmithKline
Beecham, under such well-known brand names as Crest(R), Colgate(R) and
Pepsodent. In 1996, Anchor manufactured over 184 million toothbrushes and,
management believes, had the leading domestic toothbrush production market
share, estimated at approximately 27%. In the cosmetics market (approximately
26% of net sales in 1996), Anchor manufactures a comprehensive line of stock and
custom mascara, lipstick and nail applicators for L'Oreal, Maybelline, Mary Kay
and Estee Lauder, under such well-known brand names as Great Lash(R) and
Clinique. Management estimates that Anchor had a leading 1996 market share in
several of its cosmetics product lines. In the medical device market
(approximately 12% of net sales in 1996), Anchor produces intravenous equipment
and blood infusion devices for Abbott and Baxter, among others. In the computer
component market (approximately 8% of net sales in 1996), Anchor produces
bezels, battery pack cases and expansion bases for Compaq and IBM. In 1995,
leveraging its strengths in the cosmetics market, the Company began
manufacturing POP displays for Maybelline, which market accounted for
approximately 7% of net sales in 1996. The remaining 11% of net sales in 1996
was generated from the manufacture of a variety of other molded plastic
components including closures for shampoo bottles, insulating battery cases,
interior and exterior parts for power tools, and flat panel lights.
Competitive Strengths
The Company's customers are primarily large, branded consumer product
companies. Outsourcing allows Anchor's customers to optimize internal resources
and focus on their core competencies. Specifically, management believes that
customers prefer Anchor because of the following competitive strengths:
Quality Focus. The Company believes it is a leader in plastic injection
molding and service quality. The Company has received numerous quality service
and preferred supplier awards from its customers, including Colgate-Palmolive,
Procter & Gamble, 3M, Abbott and IBM. Furthermore, the Company has manufactured
over one billion toothbrushes for Colgate-Palmolive and Procter & Gamble to date
without a single shipment return for manufacturing or quality defects. A major
reason for the Company's achievements is QIS initiative instituted by management
since the acquisition of the Company in 1990.
Design Capabilities. Anchor has dedicated design professionals who work
with customers to meet changing market needs. For example, the Company worked
closely with Procter & Gamble to produce the Crest Complete(R)
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line of toothbrushes in 1992, which uses a newly developed, proprietary fusion
technology as an alternative to the conventional staple-set technology.
Broad Manufacturing Resources. With its flexible, high capacity production
facilities, Anchor is able to meet customer demands quickly and efficiently,
producing customized products with little lead time. Anchor provides its
customers with a broad range of manufacturing services, including injection
molding, bristling, decoration and packaging. Anchor's broad customer base and
high production volumes enable it to achieve economies of scale and to maintain
in inventory a wide selection of resins and other raw materials.
Capital Investment Programs. Anchor's customers are attracted to the
Company because of its state-of-the-art manufacturing facilities. Since 1991,
Anchor has spent approximately $39.4 million on capital investment, in large
part to accommodate new product lines by building facilities dedicated to
specific products or customers. Such programs include an expanded facility in
Morristown, Tennessee for POP display production, a facility in Round Rock,
Texas for the production of computer components and the consolidation of
cosmetics production facilities in Matamoros, Mexico.
Superior Customer Service. Anchor strives to provide a high level of
customer service which management believes exceeds the service provided by
competing injection molders or its customers' in-house manufacturing operations.
The Company uses its manufacturing resources, such as computerized ordering
systems, just-in-time production and flexible manufacturing processes, to
provide its customers with a rapid turnaround time on orders and seeks to be
responsive to any changes submitted by its customers.
As a result of these competitive strengths, Anchor enjoys a large customer
base of national consumer product companies. Each of the Company's five largest
customers in 1996 (Colgate-Palmolive, Maybelline, Procter & Gamble, Abbott and
IBM) have been customers of the Company for an average of approximately 25
years. The Company's emphasis on customer partnerships and its long standing
relationships with its largest customers serve to create barriers to entry in
its served markets.
Business Strategy
Anchor's overall business strategy is to increase revenues and
profitability by pursuing the following specific strategies:
Maintain Leadership in Dental and Cosmetics Markets. The Company has
established leading market positions in the dental and cosmetics markets as a
result of its low cost manufacturing capabilities, high quality design and
excellent customer service. The Company seeks to maintain this position by
continuing to lower costs and improve the quality of its products while working
with its customers to develop innovative new products for its markets.
Develop New Products and Customers. The Company seeks to grow by producing
custom plastic products for new customers in existing markets and by entering
new markets. Examples of new markets entered by the Company in the last few
years are POP displays, disposable surgical equipment and computer components.
Where appropriate, the Company may build new facilities which enhance its
ability to provide new products such as the Company's new facility in Round
Rock, Texas. As a result of these efforts, in the future, the Company intends to
expand its sales in the medical device, computer component and POP display
markets.
Lower Costs. The Company believes that it is a low cost producer for many
of its products and that it will continue to improve productivity through its
on-going program of upgrading equipment and facilities and investing in
automation and robotics. Through its highly trained work force, its streamlined
Mexican production facility, and its QIS program, management plans to improve
asset utilization, increase manufacturing productivity and reduce overhead.
Acquisitions. The Company intends to seek strategic acquisition
opportunities as the highly fragmented plastics industry continues its recent
trend toward consolidation. The Company intends to identify acquisition
opportunities similar to its 1994 acquisition of Mid-State which offered the
Company an opportunity to broaden its customer base and expand its manufacturing
into higher growth markets. Potential markets for acquisitions include the
medical device, computer component and telecommunications equipment markets.
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Expansion into International Markets. As a result of the international
expansion of the Company's customers, Anchor is seeking to expand its
international capabilities, particularly by adding manufacturing capabilities in
China and Europe.
Industry Overview
The $100 billion plastic manufacturing industry encompasses a wide variety
of products and applications. Demand for plastics continues to be stimulated by
the use of plastic as an alternative to metals, paper and glass in a variety of
applications including packaging, durable goods and personal care products.
Anchor competes in the packaging and consumer markets, which are a large portion
of the total demand for plastics and tend to be fairly resistant to the effects
of economic cycles.
Plastics are formed into consumable products by various types of processing
methods. The main processing methods are injection molding, blow molding,
thermoforming and extrusion molding. The injection molding industry is
predominantly comprised of numerous small, independent injection molding
operations. Management estimates that plastic injection molding industry
revenues were approximately $16.5 billion in 1995. The capabilities of these
vendors are as widely varied as their end markets. The list of end uses of
injection molded plastic products includes housewares, packaging, automotive,
electrical, power tools and toys. Most vendors tend to be narrowly focused,
typically serving a regional customer base and a limited number of industries.
Furthermore, the industry-wide trend toward OEM consolidation of suppliers has
placed a financial strain on injection molders that are not capable of investing
in the necessary technology and capacity expansions required by large customers.
Injection molders have historically competed for business on the basis of
price, quality and service. Given the competitive nature of the market, it is
difficult to differentiate on the basis of price. Customers are increasingly
seeking suppliers that can deliver rapid production schedule changes, just in
time supply and electronic data interchange. These trends require suppliers to
make significant investments in management information systems, manufacturing
capabilities, design and engineering support. Anchor believes that its
investment in these capabilities provide a competitive advantage over smaller
injection molders that cannot afford the investment.
The combination of increasingly complex applications for plastic molded
parts, the limited number of qualified molders and many OEM customers' seeking
to reduce costs through outsourcing have resulted in the creation of
partnerships between plastic injection molders and OEMs. These partnerships
enable suppliers and manufacturers to focus on long-range strategy and often
result in faster product development, increased design flexibility, lower costs
and improved quality. Given that suppliers in these partnerships are involved in
many decisions that impact costs as well as prevent production complications,
partnerships also enable molders to better preserve attractive margins while
continuing to meet customer expectations. The Company's full service
capabilities have enabled it to develop close relationships with industry
leaders seeking relationships with a limited number of high-quality suppliers.
Markets and Products
Anchor designs, manufactures and packages precision molded plastic products
for dental, cosmetics, medical device, computer component, POP display and
consumer product markets. The Company's broad line of products include: (i)
toothbrushes and electric toothbrush heads; (ii) custom mascara packages, nail
applicators, compacts, and lipstick containers; (iii) molded medical devices and
surgical scrub brushes; (iv) personal computer components; (v) POP displays; and
(vi) other consumer products, such as shampoo bottle closures and flat panel
lights.
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The following table sets forth the percentage of net sales for 1995 and 1996 for
each of the Company's markets:
Percentage of Company
Net Sales
Fiscal Year Ended
December 31,
----------------------
Product Type 1995 1996
Dental .................. 44.5% 35.8%
Cosmetics ............... 25.8 25.7
Medical Device ......... 13.0 12.5
Computer Component ...... 3.6 7.8
POP Display ............ 1.4 7.1
Other ..................... 11.7 11.1
----- -----
Total .................. 100.0% 100.0%
===== =====
Dental Market
Anchor is a leading independent designer, manufacturer and packager of
toothbrushes in the U.S. with an estimated market share of approximately 27% of
all toothbrush manufacturing. Management estimates that the domestic market for
toothbrushes was 676 million units in 1996. Management believes that increases
in industry sales will be generated by greater consumer awareness of the oral
hygiene benefits of more frequent toothbrush replacement, along with product
innovation and increased use of licensed logos and characters. Competition among
the major oral care companies has led to rapid product innovation in the
toothbrush market. Toothbrush marketers have been able to grow market share and
increase sales through aggressive new product introductions which clean teeth
more efficiently and are more ergonomic. Recent new product innovations include
angled bristles, various head sizes, new bristle patterns, and angled and two
component toothbrush handles.
The Company designs and manufactures toothbrushes for Colgate-Palmolive,
Procter & Gamble, Chesebrough-Ponds, and SmithKline Beecham, under such
well-known brand names as Crest(R), Colgate(R), Pepsodent(R) and
Flexosaurus(R). In all, the Company manufactures more than 450 different
varieties of toothbrushes in 142 different colors. Furthermore, the Company
serves all major segments of the toothbrush market, producing super premium,
premium and value toothbrushes for its customers. Anchor also manufactures
electric toothbrush heads for Teledyne Water Pik, a division of Teledyne
Industries, Inc.
Anchor's position as a leading contract manufacturer of toothbrushes
requires it to produce toothbrushes to varying consumer specifications. As a
result, Anchor has the capability to respond with speed and flexibility to
customers' requirements for large or small quantities of new or improved
products. Anchor has a long history of working with its customers on product
innovations. When Procter & Gamble was launching its Crest line of toothbrushes,
Anchor collaborated with Procter & Gamble to jointly engineer their unique
bristling technology. Anchor has recently collaborated with SmithKline Beecham
in connection with its launch of the Flexosaurus toothbrush. In addition to
product design and development expertise, Anchor has packaging and full
finishing capabilities.
Anchor's supply contracts with Colgate-Palmolive and Procter & Gamble
extend through June 30, 1999 and December 31, 1997, respectively, subject to
one-year extensions. See "Risk Factors--Status of Key Customer Contracts."
Cosmetics Market
Anchor serves the eye and lip preparation and nail polish segments of the
domestic cosmetics market. Management estimates that, in 1996, eye make-up, lip
make-up and nail care products made up approximately 24% ($662 million), 22%
($611 million), and 11% ($318 million), respectively, of the total U.S.
cosmetics market, which management estimates was $2.8 billion in 1996. The
market is largely driven by a few major trends, including the continually
shifting trends of cosmetics shading and coloring, the growing importance of
skin care products and growth in the number of older consumers, a
disproportionately large segment of the market.
Anchor serves the cosmetics industry in five major product categories:
mascara, nail applicators, compacts, closures and lipstick containers. Anchor
manufacturers more than 220 different mascara packages and 19 different lipstick
containers. Anchor enjoys substantial business with the leading cosmetics
companies, including Estee
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Lauder, L'Oreal, Maybelline, Mary Kay, Revlon, Amway and Aveda, producing
products marketed under the brand names Great Lash(R) and Clinique, among
others. The Company expects to continue as a major cosmetics packaging supplier
to these customers while expanding its customer base through product
innovations, such as its new, patented lipstick mechanism, Smooth Move(R),
and improvement in nail applicators.
Anchor's key competitive advantages in the cosmetics industry are its
manufacturing expertise and vertical integration. Anchor's commercial strength
is derived from its ability to design products and molds, manufacture molds
in-house and produce high quality molded products using injection and blow
molding processes. Anchor then adds value through its expertise in metal
forming, mascara brush manufacture, high speed assembly and a wide range of high
quality decoration techniques.
Medical Device Market
Anchor manufacturers products for the U.S. medical device market. Plastics
are becoming more widely used in medical devices as the medical field realizes
the value of reduced breakage, the ability to manufacture extremely consistent
parts in a cost effective manner and the infection control benefits of
disposable products. The Company believes that the medical device market offers
attractive growth opportunities.
Anchor manufactures various plastic medical devices, including blood
filtration devices, angiographic syringes, intravenous equipment, in-vitro
diagnostic kits, medical scrub brushes and cardiotomy reservoirs. In addition,
in 1989, after fifteen years as a preferred Abbott supplier, the Company entered
into a ten-year contract to build, own and operate a dedicated medical molding
operation in Round Rock, Texas for Abbott's Hospital Products Division. Also, in
1994, the Company began producing parts for disposable plastic surgical saws to
be distributed by Pfizer. Anchor's other major customers in this market are
Baxter and 3M.
Computer Component Market
Anchor is a manufacturer of plastic computer components in the U.S. The
Company believes that this market offers attractive growth opportunities due to
growth in the personal computer market, particularly with respect to laptop
computers.
Anchor manufactures standard and custom casings for computers for various
hardware vendors. In 1996, Anchor opened a facility in Round Rock, Texas
dedicated to the production of bezels, battery pack cases and expansion bases
for Compaq. In addition to Compaq, Anchor produces bezels and other computer
components for IBM. Anchor's success in developing its expanded Compaq
relationship is evidence of its ability to service the most dynamic and fastest
growing users of injection molded plastic products.
Point of Purchase Display Market
In 1995, Anchor, leveraging its relationship with Maybelline, entered into
an agreement with Maybelline to produce POP displays. The total U.S. POP display
market, as defined by the Point of Purchasing Advertising Institute, is
estimated to be approximately $12.0 billion, of which management estimates that
approximately $1.3 billion is associated with the health and beauty aid segment
of the POP display market. POP displays are comprised of a base unit, which
contains modules, shelving, racks and countertop fixtures used to present
cosmetics products at retail. The displays are molded, assembled, decorated,
packaged and delivered directly to Maybelline's customers from Anchor's expanded
Morristown, Tennessee facility. In addition to realizing revenue from sales of
the base unit, Anchor receives replacement orders for additional modules as its
customer changes its product presentation.
Consumer and Other Markets
Anchor manufactures a variety of other molded plastic components, including
shampoo bottle closures, insulating battery cases and interior and exterior
parts for power tools. Anchor's other customers include Austin Innovation, Inc.
(marketers of the Lime Light flat panel light), Seaquist and Lydall.
Customers
Anchor operates in the dental market primarily through relationships with
some of the world's largest oral care product companies, including
Colgate-Palmolive Company ("Colgate-Palmolive"), The Proctor & Gamble
Manufacturing Company ("Procter & Gamble"), Chesebrough-Ponds U.S.A. Company
("Chesebrough Ponds") and SmithKline Beecham Consumer Health Care, L.P.
("SmithKline Beecham"). Anchor also enjoys substantial
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business with several of the leading cosmetics companies including Amway
Corporation ("Amway"), Estee Lauder Companies ("Estee Lauder"), Maybelline, Inc.
("Maybelline"), a wholly-owned subsidiary of Cosmair, Inc., which is in turn a
wholly-owned subsidiary of L'Oreal Group ("L'Oreal"), and Mary Kay Cosmetics,
Inc. ("Mary Kay"). Anchor supplies its products to a broad group of well-known
medical, computer and consumer companies, including Abbott Laboratories
("Abbott"), Baxter Healthcare ("Baxter"), Aastrom Biosciences, Inc. ("Aastrom"),
3M Company ("3M"), Pfizer, Inc. ("Pfizer"), Compaq Computer Corporation
("Compaq"), IBM Corporation ("IBM"), Austin Innovation, Inc., Seaquist Closures,
a division of Aptargroup, Inc. ("Seaquist"), and Lydall Central, Inc.
("Lydall"). See "Risk Factors--Customer Concentration."
Marketing and Sales
The Company serves its customers primarily through its direct field sales
force which includes 12 account managers and a number of market specific
commissioned sales agents. Several of the Company's largest customers are
serviced by a dedicated sales agent. Skilled customer service representatives
are located in each of the Company's facilities to maintain daily contact while
supporting the efforts of the salesforce. The sales effort is overseen by
divisional sales/marketing executives.
Manufacturing Operations
Primary Manufacturing
The Company manufactures many of its products using the plastic injection
molding process. The process begins when plastic resin, in the form of small
pellets, is fed into an injection molding machine. The injection molding machine
then melts the plastic resin and injects it into a multi-cavity steel mold,
forcing the plastic resin to take the final shape of the product. At the end of
each molding cycle (5 to 25 seconds), the plastic parts are ejected from the
mold into automated handling systems from which they are either packed for
shipping or further processed.
Anchor's overall manufacturing philosophy is to be customer focused,
particularly by providing the lowest total delivered cost for the products it
manufactures. Each of the Company's plants is managed by a dedicated team
responsible for the profitability of the facility and each plant has complete
tooling maintenance capabilities. The Company has historically made, and intends
to continue to make, significant capital investments in plant and equipment.
In addition to its plastics manufacturing, the Company manufactures
aluminum and brass components for mascara, lipstick and nail enamel packages.
This process converts strips of raw material into progressively formed, close
tolerance components. All of these components are then decorated and or
assembled to other metal or plastic components. The Company has 21 metal forming
presses in its metal stamping facility in Waterbury, Connecticut.
Secondary and Value Added Processes
The Company offers value added processes which include a wide range of
assembly, decoration and packaging services. The Company bristles toothbrushes
(using staple-set and fusion technologies), molds toothbrush handles and
provides finished packaging for virtually all molded articles. The Company
provides a full range of promotional assembly services. The Company provides
comprehensive fulfillment services for POP displays and molds product, assembles
and packages components in class 100,000 clean rooms for its medical device
market customers, alleviating the need for subsequent sterilization of such
components.
Product Development and Mold Design
The Company has a staff of engineers who use three-dimensional, computer
aided design technology to design and develop new products and prepare mold
drawings. Anchor has the ability to electronically exchange files and interface
directly with its major customers. This enables the engineers to expedite the
product development process. Engineers use in-house prototype services, which
utilize a wide range of equipment to produce prototypes and sample parts. The
Company can simulate the molding environment by running unit-cavity prototype
molds in injection molding machines dedicated to research and development of new
products. Production molds are then designed and built in-house, by one of
Anchor's two mold building facilities, or by an external shop.
Quality Assurance
Each plant uses Anchor's QIS, which includes extensive involvement of
employees to increase productivity and continually improve product quality.
Anchor has 181 employee teams working on quality and productivity projects, with
over 60% of all employees actively engaged in these teams. This teamwork
approach to problem-
34
<PAGE>
solving increases employee participation and provides necessary training at all
levels. Tools such as statistical process control and design of experiments are
utilized extensively.
Systems
Anchor uses an IBM AS/400 computer equipped with MAPICS XA software in all
of its facilities. This fully integrated business software system provides
support for all divisions and is the platform for the comprehensive materials
requirement planning process strategy that the Company employs. MAPICS XA also
provides financial and operational reports by plant and product line. This
accounting and control system is easily expandable to add new features and/or
locations as the Company grows.
Raw Materials
The major raw materials used in the manufacturing of the Company's products
are various plastic resins, nylon and packaging materials. Most of the raw
materials used in the Company's products are available from multiple sources.
However, several raw materials used in the Company's products are currently
obtained from single sources. Certain of the Company's contracts provide for raw
material price increases to be absorbed by these customers and the Company seeks
to pass through any increases in the cost of raw materials to its other
customers. See "Risk Factors--Dependence on Suppliers."
Competition
The markets in which the Company operates are highly competitive. The
Company competes with a significant number of companies of varying sizes,
including divisions or subsidiaries of larger companies, on the basis of price,
service, quality and the ability to supply products to customers in a timely
manner. Some of these competitors have, and new competitors may have, greater
financial and other resources than the Company. Competitive pressures or other
factors, including the vertical integration by certain of the Company's major
customers of manufacturing processes traditionally outsourced to the Company,
could cause the Company to lose market share or could result in a significant
price erosion with respect to the Company's products, either of which would have
a material adverse effect on the Company's results of operations. Furthermore,
the Company's customers operate in highly competitive markets. To the extent the
Company's major customers lose market share in their respective markets, the
Company's results of operations and financial condition could be materially and
adversely affected. See "Risk Factors--Competition."
In addition to facing competition from its customers, Anchor faces
competition from a number of independent injection molding manufacturers.
Anchor's major competitor in the dental market is Schiffer. Some of Anchor's
major competitors in the cosmetics market, such as Risdon Corporation and
Henlopen Manufacturing Co., Inc. compete across product lines, while most of its
competitors focus on an individual segment of the market. Anchor's primary
competitors in the medical devices market are Nypro Inc., Tech Group Inc. and
Tredegar Molded Products Co. Anchor's primary competitors in the computer
components market are Mack Molding Co. Inc., SPM Inc. and Beach Mold & Tool Inc.
Many of these competitors in the medical device and computer component markets
also compete with Anchor in the consumer and other markets. The POP display
market is served by a number of large suppliers. This market requires a wide
range of services, and the suppliers in the industry are able to perform these
services with varying degrees of self-sufficiency. The leaders include P.O.P.
Mechtronics, ADC American Display and The Niven Marketing Group.
Properties
The Company, headquartered in Knoxville, Tennessee, operates a total of
nine manufacturing facilities in five locations and two mold technology centers
throughout the United States and Mexico as detailed in the following table:
35
<PAGE>
Location Use Square Feet Leased/Owned
Elk Grove, IL Mold making 10,000 Leased
Harlingen, TX Warehouse 45,000 Leased
Knoxville, TN Administrative 12,000 Leased
Matamoros, Mexico Manufacturing 118,000 Owned
Morristown, TN Plant "B" Manufacturing 180,000 Owned
Morristown, TN Plant "C" Manufacturing 120,000 Owned
Morristown, TN Warehouse 90,000 Leased
Round Rock, TX Manufacturing 71,300 Owned
Sanford, NC Mold making 12,500 Owned
Seagrove, NC Manufacturing 6,000 Owned
Seagrove, NC Manufacturing 43,600 Owned
Seagrove, NC Manufacturing 40,000 Owned
Seagrove, NC Manufacturing 43,600 Owned
Seagrove, NC Warehouse 31,700 Leased
Waterbury, CT Manufacturing 120,000 Owned
None of the above leases expires prior to April 30, 1998.
Environmental Matters
The Company and its operations are subject to comprehensive and frequently
changing federal, state and local environmental and occupational health and
safety laws and regulations, including laws and regulations governing emissions
of air pollutants, discharges of waste and storm water, and the disposal of
hazardous wastes. The Company is also subject to liability for the investigation
and remediation of environmental contamination (including contamination caused
by other parties) at properties that it owns or operates and at other properties
where the Company or its predecessors have arranged for the disposal of
hazardous substances. As a result, the Company is involved from time to time in
administrative and judicial proceedings and inquiries relating to environmental
matters. The Company believes there are currently no pending investigations at
the Company's plants and sites relating to environmental matters, other than
certain matters for which it is being defended and indemnified by Philips
Electronics North American Corporation, its former parent. However, there can be
no assurance that the Company will not be involved in any other such proceeding
in the future and that the aggregate amount of future clean up costs and other
environmental liabilities will not be material.
Federal, state and local governments could enact laws or regulations
concerning environmental matters that increase the cost of producing, or
otherwise adversely affect the demand for, plastic products. The Company cannot
predict the environmental liabilities that may result from legislation or
regulations adopted in the future nor can the Company predict how existing or
future laws or regulations will be administered or interpreted or what
environmental conditions may be found to exist. Enactment of more stringent laws
or regulations or more strict interpretation of existing laws and regulations
could require additional expenditures by the Company, some of which could be
material. The Company does not have insurance coverage for environmental
liabilities other than in Mexico and does not anticipate obtaining such coverage
in the future.
Legal Proceedings
The Company is party to lawsuits and administrative proceedings that arise
in the ordinary course of its business. Although the final results in all such
lawsuits and proceedings cannot be predicted, the Company currently believes
that their ultimate resolution, after taking into account the liabilities
accrued with respect to such matters, will not have a material adverse effect on
the Company's financial condition or results of operations.
36
<PAGE>
MANAGEMENT
Directors and Executive Officers of the Company
Anchor Holdings, Inc. ("Holdings") owns all of the capital stock of the
Issuer. The following table sets forth certain information regarding each of the
Directors and executive officers of the Issuer and Holdings.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Francis H. Olmstead, Jr. ...... 58 Chairman, President and Chief Executive Officer of
Holdings and the Issuer
Robert T. Parkey ............... 60 Director and Executive Vice President of Holdings
and the Company and General Manager of Anchor
Brush Division of the Issuer
Jack C. Lail (1) ............... 64 Director and Executive Vice President of Holdings
and the Issuer
Geoffrey A. deRohan ............ 40 Director and Executive Vice President of Holdings
and the Issuer and General Manager of Anchor
Cosmetics and Mid-State Plastics Divisions of the
Issuer
Joseph M. Viglione ............ 53 Senior Vice President, Human Resources and Total
Quality of Holdings and the Issuer
Phyllis C. Best ............... 50 Senior Vice President, Finance and Controller of
Holdings and the Issuer
Claude J. Kyker ............... 54 Senior Vice President, Treasury/Logistics of
Holdings and the Issuer
Thomas R. Shepherd ............ 66 Director of Holdings and the Issuer
Scott A. Schoen ............... 38 Director of Holdings and the Issuer
Terrence M. Mullen ............ 30 Director of Holdings and the Issuer
</TABLE>
- --------------
(1) Pursuant to the terms of Mr. Lail's employment agreement, Mr. Lail will
terminate his employment with the Company on or prior to July 28, 1997.
Francis H. Olmstead, Jr. has been Chairman, President and Chief Executive
Officer of Holdings and the Issuer since 1990. Prior to joining Anchor, Mr.
Olmstead was Executive Vice President, Industrial/Commercial Division of Philips
Lighting. He joined North American Philips Corporation in 1984 after having
served as Vice President and General Manager, Electrical Products Division for
Corning Glass.
Robert T. Parkey has been a Director and Executive Vice President of
Holdings and the Issuer and General Manager of Anchor Brush Division of the
Issuer since 1992 and was Senior Vice President of Holdings and the Issuer from
1990 to 1992. Mr. Parkey joined the Company in 1975 and was promoted to Vice
President, Healthcare Division in 1978. Prior to joining Anchor, he was Vice
President, Sales Manager with Husky Industries, a division of Husky Oil Company.
Jack C. Lail has been a Director and Executive Vice President of Holdings
and the Issuer since 1994 and was President of Mid-State from 1971 to 1994.
Geoffrey A. deRohan has been a Director of Holdings and the Issuer and
General Manager of the Mid-State Plastics Division of the Issuer since 1996 and
Executive Vice President of Holdings and the Issuer and General Manager of the
Anchor Cosmetics Division of the Issuer since 1995. Prior to joining Anchor, Mr.
deRohan served as Vice President and General Manager of Wheaton Injection
Molding, President of Wheaton Plastic Products, and Vice President of
Development Health Care Market at Wheaton, Inc. from 1986 to 1995.
Joseph M. Viglione has been Senior Vice President, Human Resources and
Total Quality of Holdings and the Issuer since 1992 and was Vice President,
Employee Relations from 1982 to 1992.
Phyllis C. Best has been Senior Vice President, Finance and Controller of
Holdings and the Issuer since 1995 and Vice President and Controller of Holdings
and the Issuer since 1990.
Claude J. Kyker has been Senior Vice President, Treasury/Logistics of
Holdings and the Issuer since 1992 and was Vice President, Finance and
Controller from 1990 to 1992.
37
<PAGE>
Thomas R. Shepherd has been a Director of Holdings and the Issuer since
1990. Mr. Shepherd has been a Managing Director of and been engaged as a
consultant to the Thomas H. Lee Company since 1986. Mr. Shepherd also serves as
Executive Vice President of Thomas H. Lee Advisors I and an officer of various
other Thomas H. Lee Company affiliates. Mr. Shepherd is a director of General
Nutrition Companies, Inc. and various private corporations.
Scott A. Schoen has been a Director of Holdings and the Issuer since 1990.
Mr. Schoen has been a Managing Director of the Thomas H. Lee Company since 1991.
Mr. Schoen also serves as Vice President of Thomas H. Lee Advisors I and Thomas
H. Lee Advisors II. Mr. Schoen is a director of First Alert, Inc., Health o
meter Products, Inc., LaSalle Re Holdings, Rayovac Corporation and various
private corporations.
Terrence M. Mullen has been a Director of Holdings and the Issuer since
1996. Mr. Mullen is currently an Associate of the Thomas H. Lee Company and had
worked at such firm from 1992 to 1994 before rejoining it in 1996.
Messrs. Schoen, Shepherd, and Mullen serve on the Board of Directors as the
representatives of Thomas H. Lee Company, an affiliate of Thomas H. Lee Equity
Partners, L.P., ML-Lee Acquisition Fund II, L.P. and ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P.
Committees of the Board of Directors
The Board of Directors has established a Compensation Committee currently
consisting of Messrs. Olmstead, Shepherd and Schoen. The Compensation Committee
makes recommendations concerning the salaries and incentive compensation of
employees of and consultants to Anchor, and oversees and administers the
Company's stock option plans.
The Board of Directors has established an Audit Committee currently
consisting of Messrs. Schoen and Mullen. The Audit Committee is responsible for
reviewing the results and scope of audits and other services provided by the
Company's independent auditors.
Compensation of Directors
Members of the Board of Directors of the Company receive no annual fees but
are reimbursed for reasonable out-of-pocket expenses incurred in their capacity
as directors.
Compensation Committee Interlocks and Insider Participation
Messrs. Olmstead, Shepherd and Schoen served as members of the Compensation
Committee during fiscal year 1996. Mr. Olmstead was an executive officer of
Holdings and the Issuer during fiscal year 1996. Messrs. Shepherd and Schoen
were employees of Thomas H. Lee Company and were not officers or employees of
the Company or any of its subsidiaries during fiscal year 1996. See "Certain
Transactions."
Limitation of Liability; Indemnification of Directors and Officers
The Certificates of Incorporation of Holdings and the Issuer limit the
personal liability of directors to the corporations. The By-laws of Holdings and
the Issuer provide that the corporations shall indemnify directors and officers
of the corporations to the full extent permitted by the Delaware General
Corporation Law.
Executive Compensation
The following table sets forth all compensation awarded to, earned by or
paid to the Company's Chairman, President and Chief Executive Officer during
1996 and each of the Company's four most highly compensated executive officers
(other than the Chairman, President and Chief Executive Officer) for 1996.
38
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------------------
Other Annual All Other
Name and Principal Positions Year Salary Bonus ($) Compensation ($)(1) Compensation ($)(2)
<S> <C> <C> <C> <C> <C>
Francis H. Olmstead, Jr.
Chairman, President and
Chief Executive Officer 1996 $250,000 $130,000 $ 77,336 $11,451(6)
John J. Nugent
Executive Vice President (3) 1996 192,000 79,600 50,240 7,104
Robert T. Parkey
Executive Vice President 1996 161,000 71,300 94,987 12,898
Geoffrey A. deRohan
Executive Vice President 1996 149,999 68,400 18,994(4) 1,818(7)
Jack C. Lail
Executive Vice President 1996 139,903 48,700 932(5) 0
</TABLE>
- --------------
(1) Amounts shown include Company reimbursements of taxes paid by the Named
Executive Officers shown above, which were as follows: Mr. Olmstead,
$36,448; Mr. Nugent, $23,540; Mr. Parkey, $44,287; Mr. deRohan, $7,794; and
Mr. Lail, $19,695. Amounts shown also include Company contributions to
annuities for each of the Named Executive Officers shown above (except
Messrs. deRohan and Lail), which were as follows: Mr. Olmstead, $23,000; Mr.
Nugent, $16,500; and Mr. Parkey, $39,000.
(2) Amounts include contributions to the Company's medical plan for the Named
Executive Officers above (except for Messrs. deRohan and Lail), which were
as follows: Mr. Olmstead, $7,465; Mr. Nugent, $7,104; and Mr. Parkey,
$12,123.
(3) Mr. Nugent terminated his employment with the Company on May 2, 1997.
(4) Includes $11,200 paid by the Company for the lease of an automobile to Mr.
deRohan.
(5) Consists of $932 charged to Mr. Lail as income due to his personal use of a
Company owned automobile.
(6) Includes $3,986 reimbursed by the Company for personal financial planning
services.
(7) Includes $1,818 reimbursed by the Company for personal financial planning
services.
Option Grants and Exercises
The following table discloses the grants of stock options during fiscal 1996
to the Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
Potential realizable
value at assumed
annual rates of stock
price appreciation for
Individual Option Grants option term (1)
------------------------------------------------------------------- -----------------------
Number of Percent of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees price Expiration
Name Granted (#) in Fiscal Year (per share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Geoffrey A. deRohan ...... 10,000 100% $30.00 4/1/2006 $188,668 $478,123
</TABLE>
- ------------
(1) These values are based on assumed rates of appreciation only. Actual gains,
if any, on shares acquired on option exercises are dependent on the future
performance of Holdings' Common Stock.
39
<PAGE>
1996 YEAR END OPTION VALUES (1)
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised Options In-the-Money Options
at 1996 Year End at 1996 Year End (2)
--------------------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Francis H. Olmstead, Jr. ...... 40,000 0 $740,000 $0
John J. Nugent (3) ............ 28,200 0 521,700 0
Robert T. Parkey ............... 28,400 0 525,400 0
Geoffrey A. deRohan ............ 0 10,000 0 0
Jack C. Lail .................. 0 6,250 0 0
</TABLE>
- --------------
(1) No options were exercised by any of the Named Executive Officers in fiscal
1996. All such outstanding stock options other than those held by Messrs.
deRohan and Lail were exercised upon consummation of the Initial Offering.
None of Holdings' capital stock is publicly traded. Market value of the
options was calculated on the basis of the fair market value of the
underlying securities at December 31, 1996 of $28.00 per share as determined
by Holdings' Board of Directors minus the aggregate option exercise prices.
(2) The exercise price of all such options, except for those held by Messrs.
deRohan and Lail, is $9.50 per share. Mr. deRohan's options are exercisable
at $30.00 per share and Mr. Lail's options are exercisable at $41.30 per
share.
(3) Mr. Nugent terminated his employment with the Company on May 2, 1997.
Management Stock Option Plans
1990 Time Accelerated Restricted Stock Option Plan
On October 29, 1990, Holdings adopted the 1990 Time Accelerated Restricted
Stock Option Plan, as amended effective April 1, 1996 (the "1990 Plan"). A
maximum of 163,300 shares of Holdings common stock, $.01 par value per share
("Holdings Common Stock"), may be issued pursuant to the 1990 Plan upon the
exercise of options. Under the 1990 Plan, non-qualified stock options may be
granted to members of senior management of Holdings and its subsidiaries. As of
December 31, 1996, options to purchase 163,300 shares of Holdings Common Stock
at exercise prices of $9.50-$30.00 per share have been granted.
The 1990 Plan is administered by the Board of Directors of Holdings or a
Committee consisting of three or more directors. Subject to provisions of the
1990 Plan, the Board of Directors of Holdings has the authority to select
optionees and determine the terms of the options granted, including (i) the
number of shares subject to such option, (ii) when the option becomes
exercisable and (iii) the exercise price of the option; provided, however, that
no Option may have a term in excess of ten years and six months from the date of
grant.
The terms and conditions of an Option grant are set forth in a related
option agreement (the "Option Agreement"). An Option is not transferable by the
optionee except by will or by the laws of descent and distribution. Options
granted under the 1990 Plan will terminate upon the earliest to occur of (a) the
date ten years and six months after the date of the grant of the Option, (b) 30
days following an optionee's voluntary termination or termination for Cause (as
defined in the Shareholders' Agreement) of employment with Holdings or any of
its subsidiaries or (c) 180 days following an optionee's termination of
employment without Cause or due to death or Disability (as defined in the
Shareholders' Agreement) of the optionee. Payment of the Option exercise price
may only be made in cash or by bank cashier's check or check.
1995 Time Accelerated Restricted Stock Option Plan
On June 11, 1996, Holdings adopted the 1995 Time Accelerated Restricted
Stock Option Plan (the "1995 Plan"). A maximum of 25,000 shares of Holdings
Common Stock may be issued pursuant to the 1995 Plan upon the exercise of
options. Under the 1995 Plan, non-qualified stock options may be granted to
members of senior management of the Company and its subsidiaries who were
formerly employed by Mid-State and who, at the time of adoption of the 1995
Plan, were employed in the Company's Mid-State Plastics Division. As of December
31, 1996, options to purchase 25,000 shares of Holdings Common Stock at an
exercise price of $41.30 per share have been granted.
The 1995 Plan is administered by the Board of Directors of Holdings or a
Committee consisting of three or more directors. Subject to provisions of the
1995 Plan, the Board of Directors of Holdings has the authority to select
40
<PAGE>
optionees and determine the terms of the options granted, including (i) the
number of shares subject to such option, (ii) when the option becomes
exercisable and (iii) the exercise price of the option; provided, however, that
no Option may have a term in excess of ten years and six months from the date of
grant.
The terms and conditions of an Option grant are set forth in a related
option agreement (the "Option Agreement"). An Option is not transferable by the
optionee except by will or by the laws of descent and distribution. Options
granted under the 1995 Plan will terminate upon the earliest to occur of (a) the
date ten years and six months after the date of the grant of the Option, (b) 30
days following an optionee's voluntary termination or termination for Cause (as
defined in the Shareholders' Agreement) of employment with Holdings or any of
its subsidiaries or (c) 180 days following an optionee's termination of
employment without Cause or due to death or Disability (as defined in the
Shareholders' Agreement) of the optionee. Payment of the Option exercise price
may only be made in cash or by bank cashier's check or check.
Employment Agreements
The Company has entered into employment agreements, effective as of April
1, 1996 (the "Agreements"), with each of Francis H. Olmstead, Jr., Robert T.
Parkey, Geoffrey A. deRohan, Joseph M. Viglione, Claude J. Kyker and Phyllis C.
Best (each an "Employee"; collectively, the "Employees").
The initial employment terms, the base salaries and maximum bonus amounts
(as a percentage of base salary) are set forth below:
<TABLE>
<CAPTION>
Maximum
Employee Initial Term Base Salary Bonus(1)
<S> <C> <C> <C>
Francis H. Olmstead, Jr . ...... 12/31/98 $250,000 55.0%
Robert T. Parkey ............... 12/31/98 $161,000 40.0%
Geoffrey A. deRohan ............ 12/31/98 $145,000 40.0%
Joseph M. Viglione ............ 12/31/97 $106,200 28.5%
Claude J. Kyker ............... 12/31/97 $ 98,200 28.5%
Phyllis C. Best ............... 12/31/97 $ 93,400 25.0%
</TABLE>
- ------------
(1) The bonus will be computed on the Company's financial and other results and
the overall performance of the Employee as determined in the sole discretion
of the Board of Directors. The bonus will be paid, if at all, in the year
following the year in which it is earned.
Upon a termination of employment due to death or disability of the
Employee, the Employee, or his estate, as the case may be, shall be entitled to
one year's base salary plus the amount of the last full-year bonus, pro-rated to
the effective date of termination. Upon a termination of employment by the
Employee for Cause (as defined in the Agreements) or termination by the Company
without Cause, the Employee shall be entitled to an amount equal to base salary
and bonus (the amount of the last full-year bonus), both computed to the end of
the term. Upon a termination of employment by the Employee without Cause or
termination by the Company with Cause, the Company may pay, at its sole
discretion, one-half of one year's base salary as consideration for a one-year
non-competition agreement with the Employee. Upon a termination of employment
due to expiration of the term of employment, the Company may pay, at its sole
discretion, one year's base salary as consideration for a one-year
non-competition agreement with the Employee. All severance payments pursuant to
this paragraph will be paid in quarterly installments. Further, if the Employee
obtains other employment during the period in which the Company is obligated to
make severance payments, the Company's obligation to make such payments will be
reduced by an amount equal to 75% of the total earnings such Employee makes from
such other employment.
Lail Employment Agreement
On July 29, 1994, upon the acquisition of Mid-State, the Company and Jack
C. Lail entered into an employment agreement whereby Mr. Lail would serve as
Executive Vice President of the Company for an annual salary of $125,000 per
year through July 28, 1997. Moreover, the agreement provides for a maximum bonus
of 40% of Mr. Lail's base salary upon the Company's attainment of certain
financial goals. Upon termination of Mr. Lail's employment for other than
disability or Cause (as set forth in the agreement), Mr. Lail shall be entitled
to receive a lump sum payment in the amount of all remaining cash payments over
the term of the agreement. Also, in such event, Mr. Lail will be entitled to
rights and benefits, as of the date of termination, under any employee benefits
maintained by the Company in which Mr. Lail participated.
41
<PAGE>
Bonus Agreement
In addition to all other compensation and benefits payable to Francis H.
Olmstead, the Issuer has agreed to pay him an amount not to exceed $390,000 in
the event of a sale of all or substantially all of the assets of the Issuer or
sale of capital stock of Holdings on or before July 1, 1997.
Supplemental Executive Retirement Benefits Agreements
Each of the executive officers of the Company is party to a Supplemental
Executive Retirement Benefits Agreement (the "SERB Agreements") with the
Company. Under these agreements, such executive officers are, upon retirement
(as defined in the SERB Agreement), entitled to a life-time monthly retirement
benefit calculated based upon years of service and average salary as set forth
in the table below. The SERB Agreements also provide for spousal survival
benefit options. Lastly, in the event of the sale of substantially all the
assets of the Company or a change of control, each executive officer is entitled
to a lump sum payment in an amount equal to the actuarial equivalent of the
executive officer's normal retirement benefit unless the successor entity or
resulting controlling entity expressly assumes the obligations under the SERB
Agreement.
Years of Service
-------------------------------------------------------------
Remuneration 15 20 25 30 35
$125,000 $20,625 $ 27,500 $ 34,375 $ 41,250 $ 48,125
150,000 24,750 33,000 41,250 49,500 57,750
175,000 28,875 38,500 48,125 57,750 67,375
200,000 33,000 44,000 55,000 66,000 77,000
250,000 41,250 55,000 68,750 82,500 96,250
300,000 49,500 66,000 82,500 99,000 115,500
400,000 66,000 88,000 110,000 132,000 154,000
450,000 74,250 99,000 123,750 148,500 173,250
500,000 82,500 110,000 137,500 165,000 192,500
(1) The compensation covered by this plan is the average of the employee's
highest five years, selected from the last ten calendar years, of earnings,
which are defined under this plan as the total cash compensation paid to
the employee during a calendar year includible in the employee's gross
income under the Internal Revenue Code, excluding any expense
reimbursements, deferred compensation payments, lump sum severance
payments, stock options, or any distributions from any long-term incentive
plan, or any long-term key employee compensation program.
(2) The credited years of service under this plan for each of the Named
Executive Officers is as follows: Mr. Olmstead, 12; Mr. Nugent, 32; Mr.
Parkey, 10; Mr. deRohan, 1; and Mr. Lail, 2.
(3) The monthly retirement benefit is the higher of (i) the product of (a) the
employee's highest five years of earnings; (b) years of credited service
under the plan; and (c) 1.1% and (ii) the sum of (a) the product of (1) the
employee's highest five years of earnings; (2) years of credited service
under the plan; and (3) 1.0%; and (b) the product of (1) the amount by
which the employee's highest five years of earnings exceeds the Average
Social Security Taxable Wage Base; (2) years of credited service under the
plan; and (3) 0.6%. For purposes of this plan, the "Average Social Security
Taxable Wage Base" is the average of the maximum limitation of wages
subject to social security tax for the preceding 35 calendar years.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
Holdings owns all of the outstanding capital stock of the Company. The
following sets forth certain information regarding the beneficial ownership of
Holdings' common stock, $.01 par value per share (the "Common Stock"), by (i)
all stockholders of Holdings who own more than 5% of any class of such voting
securities; (ii) each director who is a stockholder; (iii) certain executive
officers; and (iv) all directors and executive officers as a group, as
determined in accordance with Rule 13(d) under the Securities Exchange Act of
1934.
<TABLE>
<CAPTION>
Number of Shares Percentage of
of Common Stock Outstanding Shares of
Name and Address of Beneficial Owner Beneficially Owned (1) Common Stock (1)
<S> <C> <C>
Thomas H. Lee Equity Partners, L.P. (2) .................. 568,185 36.6%
ML-Lee Acquisition Fund II, L.P. (3) ..................... 410,677 26.5
ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. (3) . 219,323 14.1
Thomas H. Lee (4) . ....................................... 91,130 5.9
Francis H. Olmstead, Jr. (5) .............................. 57,263 3.7
Robert T. Parkey (5) ....................................... 37,242 2.4
Jack C. Lail (5) .......................................... 9,685 **
John J. Nugent ............................................. 44,411 2.9
Joseph M. Viglione (5) .................................... 21,244 1.4
Phyllis C. Best (5) ....................................... 7,316 **
Claude J. Kyker (5) ....................................... 18,984 1.2
Thomas R. Shepherd (6) .................................... 5,893 **
Scott A. Schoen (7) ....................................... 5,864 **
All directors and executive officers of Holdings
as a group (11 persons) ................................. 232,231 15.0%
</TABLE>
- ------------------
** Represents less than 1%.
(1) For purposes of the computation of percentages of Holdings presented in
this table, a holder is deemed to beneficially own all shares which may be
acquired by such holder upon exercise of options held by such holder, which
options are exercisable within 60 days. Such shares which may be acquired
by such holder (but no shares which may be acquired by any other holder
upon exercise of options held by such other holder) are deemed to be
outstanding.
(2) Each of (i) THL Equity Advisors Limited Partnership, (ii) THL Equity Trust,
(iii) Thomas H. Lee as trustee of THL Equity Trust, (iv) Thomas R. Shepherd
as trustee of THL Equity Trust, and (v) Scott A. Schoen, as an officer of
THL Equity Trust, may be deemed to be the beneficial owner of 568,185
shares held by the Thomas H. Lee Equity Partners (the "Lee Fund"). Such
entities and Messrs. Lee, Shepherd and Schoen disclaim beneficial ownership
of such shares. The foregoing entities and Messrs. Shepherd and Schoen
maintain their principal business address c/o Thomas H. Lee Company, 75
State Street, Boston, MA 02109.
(3) Includes warrants by each of ML-Lee Acquisition Fund II, L.P. and ML-Lee
Acquisition Fund (Retirement Accounts II, L.P.) (collectively, the "ML-Lee
Funds") to purchase 247,710 and 132,290 shares of Common Stock,
respectively. Each of (i) Thomas H. Lee Advisors II, L.P. ("Advisors II"),
the investment advisor of each of ML-Lee Funds, (ii) T.H. Lee Mezzanine II
("Mezzanine II"), a general partner of Advisors II, (iii) Thomas H. Lee, as
trustee of Mezzanine II and an individual general partner of each of the
ML-Lee Funds, (iv) Thomas R. Shepherd, as trustee of Mezzanine II, and (v)
Scott A. Schoen, as an officer of Mezzanine II, may be deemed to be the
beneficial owners of 630,000 shares held, in the aggregate, by the ML-Lee
Funds. Each of Advisors II, Mezzanine II, Mr. Lee, Mr. Shepherd and Mr.
Schoen disclaim ownership of such shares. Each of Advisors II and Mezzanine
II maintains their principal business address c/o Thomas H. Lee Company, 75
State Street, Boston, MA 02109. The ML-Lee Funds maintain principal
business addresses c/o Merrill Lynch, 225 Liberty Street, World Financial
Center, South Tower -- 23rd Floor, New York, New York 10080-6123.
(4) Represents 65,711 shares which may be deemed to be beneficially owned by
State Street Bank and Trust Company of Connecticut, N.A., as trustee of the
1989 Thomas H. Lee Nominee Trust (the "Lee Trust") and 25,419 shares held
of record by Thomas H. Lee Company ("THL Co."). State Street Bank and Trust
Company
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of Connecticut, N.A. disclaims beneficial ownership of the Lee Trust shares.
Does not include 1,198,185 shares which may be deemed to be beneficially
owned by Mr. Lee as a result of his relationships with the Lee Fund and the
ML-Lee Funds. Mr. Lee disclaims beneficial ownership of such shares. Mr. Lee
maintains his principal business address c/o Thomas H. Lee Company, 75 State
Street, Boston, MA 02109.
(5) The address of this shareholder is c/o Anchor Advanced Products, Inc., 1111
Northshore Drive, Suite N-600, Knoxville, Tennessee 37919.
(6) Includes options to purchase 3,003 shares from THL Co. Does not include
1,198,185 shares which may be deemed to be beneficially owned by Mr.
Shepherd as a result of his relationship with the Lee Fund and the ML-Lee
Funds. Mr. Shepherd disclaims beneficial ownership of such shares.
(7) Includes options to purchase 3,003 shares from THL Co. Does not include
1,198,185 shares which may be deemed to be beneficially owned by Mr. Schoen
as a result of his relationship with the Lee Fund and the ML-Lee Funds.
Mr. Schoen disclaims beneficial ownership of such shares.
Dividends to Holdings' Stockholders
The following table sets forth (i) the aggregate amounts invested by the
listed entities, directors and principal executive officers of the Company in
the capital stock of Holdings (assuming the exercise by such entities of all
warrants held by them and the exercise by such officers of all vested,
in-the-money options) and (ii) the aggregate amount paid by Holdings to the
listed entities, directors and officers in connection with the Holdings Dividend
upon the consummation of the sale of the Initial Notes and the payment by the
Company to Holdings of the Issuer Dividend.
<TABLE>
<CAPTION>
Name of Beneficial Owner Total Investment Aggregate Dividend
<S> <C> <C>
Thomas H. Lee Equity Partners, L.P. ........................ $5,397,758 $10,806,879
ML-Lee Acquisition Fund II, L.P. ........................... 3,901,432 7,811,077
ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. ...... 2,083,568 4,171,523
Thomas H. Lee ................................................ 865,737 1,733,296
Francis H. Olmstead, Jr. .................................... 544,000 1,089,142
Robert T. Parkey ............................................. 353,800 708,343
Jack C. Lail ................................................ 400,000 184,213
John J. Nugent ............................................. 421,900 844,697
Joseph M. Viglione .......................................... 201,820 404,061
Phyllis C. Best ............................................. 69,500 139,150
Claude J. Kyker ............................................. 180,350 361,076
Thomas R. Shepherd .......................................... 27,451 54,959
Scott A. Schoen ............................................. 27,181 54,419
</TABLE>
44
<PAGE>
CERTAIN TRANSACTIONS
Management Agreement
The Company and Thomas H. Lee Company entered into an agreement dated April
30, 1990 (the "Management Agreement"), pursuant to which Thomas H. Lee Company
received a financial advisory fee of $420,000 in connection with structuring,
negotiating and arranging the financing necessary to fund the 1990 acquisition
of the Company by THL and management. In addition, pursuant to the Management
Agreement, Thomas H. Lee Company received $180,000 per year for five years
beginning August 30, 1990 for management and other consulting services provided
to the Company. After the initial five-year term, the Management Agreement is
automatically renewable on an annual basis unless either party serves notice of
termination at least 90 days prior to the renewal date. The Company believes
that the terms of this agreement are comparable to those that would have been
obtained from unaffiliated sources.
Stock Purchase Warrants
In connection with THL's acquisition of the Company in 1990, the ML-Lee
Funds were issued warrants (the "Warrants") to purchase 380,000 shares of Common
Stock. The Warrants were exercisable in whole or in part at any time prior to
April 30, 2000 at an exercise price of $9.50 per share. The Warrants were
exercised in full upon consummation of the Initial Offering.
Shareholders' Agreement
Holdings entered into a Shareholders' Agreement (the "Shareholders'
Agreement") with THL, certain of the named executive officers and certain other
management shareholders of Holdings (collectively, the "Management Investors")
in connection with the 1990 acquisition of the Company. Pursuant to the
Shareholders' Agreement, as amended and restated on July 29, 1994, the
shareholders party thereto are required to vote their shares of Common Stock to
elect a Board of Directors of Holdings consisting of certain directors
designated by THL and certain management directors. THL also must approve any
merger, consolidation, liquidation, sale of all or substantially all of
Holdings' assets, redemption of capital stock or amendment to Holdings'
Certificate of Incorporation or by-laws. The Shareholders' Agreement provides
for rights of first refusal, take along rights and preemptive rights for THL.
Certain of the Management Investors have come along rights and are subject to
redemption of their shares of Holdings capital stock in the event of a
termination of employment with Holdings and its subsidiaries. The Shareholders'
Agreement also grants THL the right to require Holdings to effect the
registration of shares of Common Stock it holds for sale to the public, subject
to certain conditions and limitations. In addition, under the terms of the
Shareholders' Agreement, if Holdings proposes to register any of its equity
securities under the Securities Act of 1933, as amended, the shareholders party
thereto are entitled to notice of such registration and are entitled to include
their shares for registration, subject to certain conditions and limitations.
All fees, costs and expenses of any registration effected on behalf of such
shareholders under the Shareholders' Agreement (other than underwriting
discounts and commissions) will be paid by Holdings.
Lease from Related Party
From time to time, the Company leases warehouse space from Jack C. Lail, a
Director and Executive Vice President of the Issuer and Holdings, near its
facilities in Seagrove, North Carolina. Anchor paid a total of $67,800 for such
warehouse space in 1996.
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<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
New Credit Facility
General. On April 2, 1997, the Issuer entered into a credit facility (the
"New Credit Facility") with NationsBank, N.A., as Agent, NationsBank Capital
Markets, Inc. and various lender parties thereto (the "Lenders"). The New Credit
Facility provides for revolving loans to the Company in an aggregate amount not
to exceed $15.0 million, with a $5.0 million sublimit for the issuance of
standby and commercial letters of credit. All indebtedness of the Issuer under
the New Credit Facility is guaranteed by Holdings (the "Guarantor").
Availability. Borrowings under the New Credit Facility are subject to a
borrowing base equal to the sum of (a) 80% of "eligible receivables" and (b) 50%
of "eligible inventory" (as such terms are defined in the New Credit Facility).
Security. The New Credit Facility is secured by a first priority perfected
lien on all existing and hereafter acquired accounts receivable and inventory of
the Company and the Guarantors.
Maturity. The New Credit Facility will mature on the sixth anniversary
thereof.
Interest Rate. The New Credit Facility bears interest at a rate equal to
LIBOR plus 2.0% or the Alternative Base Rate (defined as the higher of (i) the
NationsBank prime rate and (ii) the federal funds rate plus 0.5%) plus 1.0%.
Covenants. The New Credit Facility contains covenants customary for working
capital financings, including, without limitation: (i) maximum leverage and
interest coverage ratios and minimum net worth; (ii) restrictions on capital
expenditures, incurrence of additional indebtedness, dividends and redemptions;
and (iii) restrictions of mergers, acquisitions and sales of assets.
Events of Default. The New Credit Facility contains events of default
customary for working capital financings, including an event of default upon a
"change of control" of Holdings or the Company.
Connecticut Notes and Grant
The Company has issued a series of notes (the "Connecticut Notes") to the
Connecticut Development Authority in the aggregate principal amount of $605,000.
Each note has a maturity of six years and bears interest at a rate of 5% per
annum. The Company has also received a grant of $1,000,000 from the State of
Connecticut, Department of Economic Development. The grant is subject to certain
requirements, among other things, that the Company: (i) retain operations in
Connecticut for no less than 10 years and (ii) fund at least 50% of the entire
project. Failure to meet these conditions would require immediate repayment of
all amounts advanced to the Company ($1,000,000 as of December 31, 1996) and
further, such failure would constitute an event of default under the Connecticut
Notes.
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<PAGE>
DESCRIPTION OF THE EXCHANGE NOTES
The Notes (including the Exchange Notes offered hereby) will be issued
pursuant to the terms of an indenture dated as of April 2, 1997 (the
"Indenture") between the Issuer, Holdings and Fleet National Bank, as trustee
(the "Trustee"). The Indenture will be subject to and governed by the provisions
of the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The
following summary of the material provisions of the Indenture does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
the provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act. For definitions of certain capitalized terms used in the
following summary, see "--Certain Definitions."
General
The Notes will be general unsecured obligations of the Issuer and will rank
pari passu in right of payment with all current and future unsecured senior
Indebtedness of the Issuer. However, the Issuer and its Subsidiaries are parties
to the New Credit Facility and all borrowings under the New Credit Facility are
secured by a first priority Lien on certain accounts receivable and inventory of
the Issuer and, accordingly, will rank prior to the Notes with respect to such
assets. The Note Guarantee will be a general unsecured obligation of the
Guarantor, will rank senior in right of payment to all subordinated indebtedness
of the Guarantor, if any, and pari passu in right of payment to all existing and
future senior Indebtedness of the Guarantor, if any. As of March 29, 1997, on a
pro forma basis after giving effect to the sale of the Initial Notes and the
application of the net proceeds therefrom, the Notes would have been effectively
subordinated to $1.5 million of secured Indebtedness of the Issuer and there was
no secured Indebtedness of the Guarantor. The Indenture will permit additional
borrowings under the New Credit Facility in the future.
Principal, Maturity and Interest
The Notes will be limited in aggregate principal amount to $100.0 million
and will mature on April 1, 2004. Interest on the Notes will accrue at the rate
of 11 3/4% per annum and will be payable semi-annually in arrears on April 1 and
October 1, commencing on October 1, 1997, to Holders of record on the
immediately preceding March 15 and September 15. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the date of original issuance. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Principal, premium and Liquidated Damages, if any, and interest on the Notes
will be payable at the office or agency of the Issuer maintained for such
purpose within the City and State of New York or, at the option of the Issuer,
payment of interest may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
provided that all payments of principal, premium and Liquidated Damages, if any,
and interest with respect to Notes the Holders of which have given wire transfer
instructions to the Issuer will be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
Until otherwise designated by the Issuer, the Issuer's office or agency in New
York will be the office of the Trustee maintained for such purpose. The Notes
will be issued in denominations of $1,000 and integral multiples thereof.
Optional Redemption
The Notes will not be redeemable at the Issuer's option prior to April 1,
2001. Thereafter, the Notes will be subject to redemption at any time at the
option of the Issuer, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages,
if any, thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on April 1 of the years indicated below:
Year Percentage
2001 ........................ 105.875%
2002 ........................ 102.938
2003 and thereafter . ...... 100.000%
Notwithstanding the foregoing, at any time prior to April 1, 2000, the
Issuer may on any one or more occasions redeem up to 35% of the aggregate
principal amount of Notes originally issued in the Offering at a redemption
price of 110.75% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the redemption date, with
the net cash proceeds of one or more Public Equity Offerings; provided
47
<PAGE>
that at least 65% of the original aggregate principal amount of Notes remains
outstanding immediately after the occurrence of each such redemption; and
provided, further, that each such redemption shall occur within 90 days of the
date of the closing of such Public Equity Offering.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, selection of
Notes for redemption will be made by the Trustee 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, by
lot or by such method as the Trustee shall deem fair and appropriate; provided
that no Notes of $1,000 or less shall be redeemed in part. Notices of 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 Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note. Notes called
for redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
Mandatory Redemption
Except as set forth below under "Repurchase at the Option of Holders," the
Issuer is not required to make mandatory redemption or sinking fund payments
with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Issuer to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within 30 calendar days following any Change of
Control, the Issuer will mail a notice to each Holder stating: (i) that the
Change of Control Offer is being made pursuant to the covenant entitled "Change
of Control" and that all Notes tendered will be accepted for payment; (ii) the
purchase price and the purchase date, which will be no earlier than 30 calendar
days nor later than 60 calendar days from the date such notice is mailed (the
"Change of Control Payment Date"); (iii) that any Note not tendered will
continue to accrue interest; (iv) that, unless the Issuer defaults in the
payment of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest after the
Change of Control Payment Date; (v) that Holders electing to have any Notes
purchased pursuant to a Change of Control Offer will be required to surrender
the Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; (vi) that Holders will be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing such Holder's election to have such
Notes purchased; and (vii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof. The Issuer will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Issuer will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Issuer. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee
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<PAGE>
will promptly authenticate and mail (or cause to be transferred by book entry)
to each Holder a new Note equal in principal amount to any unpurchased portion
of the Notes surrendered, if any; provided that each such new Note will be in a
principal amount of $1,000 or an integral multiple thereof. The Issuer will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that the Issuer
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction. Finally, the Issuer's ability to pay cash to the Holders of
Notes upon a repurchase may be limited by the Issuer's then existing financial
resources. See "Risk Factors--Limitations on Ability to Make Change of Control
Payment."
The Issuer will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Issuer and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) (a)
any transaction (including a merger or consolidation) the result of which is
that any "person" or "group" (each within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Principals, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of all Capital Stock
of the Issuer, the Guarantor or a successor entity normally entitled to vote in
the election of directors, managers or trustees, as applicable, calculated on a
fully diluted basis, and (b) as a result of the consummation of such
transaction, any "person" or "group" (each as defined above) becomes the
"beneficial owner" (as defined above), directly or indirectly, of more of the
voting stock of the Issuer or the Guarantor than is at the time "beneficially
owned" (as defined above) by the Principals, or (ii) the first day on which a
majority of the members of the Board of Directors are not Continuing Directors,
or (iii) the sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the assets of the Issuer and its Subsidiaries
taken as a whole or the Guarantor and its Subsidiaries taken as a whole, in each
case, to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties. For purposes of this
definition, any transfer of an Equity Interest of an entity that was formed for
the purpose of acquiring voting stock of the Issuer or the Guarantor shall be
deemed to be a transfer of such percentage of such voting stock as corresponds
to the percentage of the equity of such entity that has been so transferred.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Issuer and its Subsidiaries taken as a whole or the
Guarantor and its Subsidiaries taken as a whole. Although there is a developing
body of case law interpreting the phrase "substantially all," there is no
precise established definition of the phrase under applicable law. Accordingly,
the ability of a Holder of Notes to require the Issuer to repurchase such Notes
as a result of a sale, lease, transfer, conveyance or other disposition of less
than all of the assets of the Issuer and its Subsidiaries taken as a whole or
the Guarantor and its Subsidiaries taken as a whole to another Person or group
may be uncertain.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors who (i) was a member of such Board of Directors on the
date of the Indenture or (ii) was nominated for election or elected to such
Board of Directors with the approval of a majority of the Continuing Directors
who were members of such Board of Directors at the time of such nomination or
election.
"Principals" means Thomas H. Lee Equity Partners, L.P., THL Equity Advisors
Limited Partnership, THL Equity Trust, ML-Lee Acquisition Fund II, L.P., ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P., Thomas H. Lee Company, and any
Affiliates of Thomas H. Lee Company and Francis H. Olmstead, Jr.
"Related Party" with respect to any Principal means (i) any controlling
stockholder, 80% (or more) owned Subsidiary, or spouse or immediate family
member (in the case of an individual) of such Principal or (ii) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
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<PAGE>
Asset Sales
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Issuer
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee with respect to any Asset Sale involving in excess of
$1.0 million) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor received by the
Issuer or such Restricted Subsidiary is in the form of cash or Cash Equivalents;
provided that the amount of (x) any liabilities (as shown on the Issuer's or
such Restricted Subsidiary's most recent balance sheet), of the Issuer or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Notes or any guarantee thereof) that are
assumed by the transferee of any such assets pursuant to a customary novation
agreement that releases the Issuer or such Restricted Subsidiary from further
liability and (y) any securities, notes or other obligations received by the
Issuer or any such Restricted Subsidiary from such transferee that are
immediately converted by the Issuer or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuer or its Restricted Subsidiary, as the case may be, may apply such Net
Proceeds from such Asset Sale to permanently reduce Indebtedness under the New
Credit Facility in accordance with its terms, if applicable, or to the extent
not required to be applied thereunder, may, at its option, apply such Net
Proceeds to repayment of Indebtedness of a Restricted Subsidiary (in the case of
Net Proceeds from an Asset Sale effected by a Restricted Subsidiary) or to an
investment in a Restricted Subsidiary or in another business or capital
expenditure or other long-term/tangible assets, in each case, in the same or a
similar line of business as the Issuer or any of its Restricted Subsidiaries
were engaged in on the date of the Indenture or in businesses reasonably related
thereto. Pending the final application of any such Net Proceeds, the Issuer may
temporarily reduce Indebtedness under the New Credit Facility or otherwise
invest such Net Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as provided
in the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0 million,
the Issuer will be required to make an offer to all Holders of Notes (an "Asset
Sale Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages, if any, thereon to the date of purchase, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
Note Guarantee
The Issuer's payment obligations under the Notes will be guaranteed by the
Guarantor.
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person), another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes and the Indenture; (ii) immediately after giving effect
to such transaction, no Default or Event of Default exists; (iii) such
Guarantor, or any Person formed by or surviving any such consolidation or
merger, would have Consolidated Net Worth (immediately after giving effect to
such transaction), equal to or greater than the Consolidated Net Worth of such
Guarantor immediately preceding the transaction; and (iv) the Issuer would be
permitted by virtue of the Issuer's pro forma Fixed Charge Coverage Ratio,
immediately after giving effect to such transaction, to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the covenant described above under the caption "--Incurrence of
Indebtedness and Issuance of Preferred Stock."
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation
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or otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Guarantor) will be released and relieved of any obligations
under its Note Guarantee; provided that the Net Proceeds of such sale or other
disposition are applied in accordance with the applicable provisions of the
Indenture. See "--Repurchase at Option of Holders--Asset Sales."
Certain Covenants
Restricted Payments
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Issuer's or
any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Issuer) or to the direct or indirect holders of the Issuer's or any of its
Restricted Subsidiaries' Equity Interests in their capacity as such (other than
dividends or distributions payable in Equity Interests (other than Disqualified
Stock) of the Issuer or such Restricted Subsidiary or dividends or distributions
payable to the Issuer or any Wholly Owned Restricted Subsidiary of the Issuer);
(ii) purchase, redeem or otherwise acquire or retire for value any Equity
Interests of the Issuer or any Restricted Subsidiary or other Affiliate of the
Issuer (other than any such Equity Interests owned by the Issuer or any Wholly
Owned Restricted Subsidiary of the Issuer); (iii) make any principal payment on
or with respect to, or purchase, redeem, defease or otherwise acquire or retire
for value prior to a scheduled mandatory sinking fund payment date or final
maturity date any Indebtedness that is pari passu with or subordinated to the
Notes or the Note Guarantee (other than Notes or the Note Guarantee); or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence thereof;
(b) the Issuer would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "--Incurrence of Indebtedness and Issuance of
Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Issuer and its Restricted Subsidiaries
after the date of the Indenture (excluding Restricted Payments permitted by
clause (ii) of the next succeeding paragraph), is less than the sum of (i)
50% of the Consolidated Net Income of the Guarantor for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Guarantor's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(ii) 100% of the aggregate net cash proceeds received by the Issuer from the
issue or sale since the date of the Indenture of Equity Interests of the
Issuer (other than Disqualified Stock) or of Disqualified Stock or debt
securities of the Issuer that have been converted into such Equity Interests
(other than Equity Interests (or Disqualified Stock or convertible debt
securities) sold to a Restricted Subsidiary of the Issuer and other than
Disqualified Stock or convertible debt securities that have been converted
into Disqualified Stock), plus (iii) to the extent that any Restricted
Investment that was made after the date of the Indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of (A) the cash return of
capital with respect to such Restricted Investment (less the cost of
disposition, if any) and (B) the initial amount of such Restricted
Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
or distribution within 60 days after the date of declaration thereof, if at said
date of declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of the Issuer in exchange for, or out of the
net cash proceeds of the substantially concurrent sale (other than to a
Restricted Subsidiary of the Issuer) of, other Equity Interests of the Issuer
(other than any Disqualified Stock); provided that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition shall be excluded from clause (c) (ii) of the
preceding paragraph; (iii)
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the defeasance, redemption, repurchase or other acquisition of pari passu or
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (iv) the purchase, redemption or other
acquisition prior to the stated maturity thereof of Indebtedness that is
subordinated to the Notes in exchange for or out of the net cash proceeds of a
substantially concurrent issue and sale (other than to the Issuer or any of its
Restricted Subsidiaries) of new Indebtedness; provided that (x) the principal
amount of such new Indebtedness shall not exceed the principal amount of
Indebtedness so refinanced (plus the amount of such reasonable expenses incurred
in connection therewith), (y) such new 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, and (z) the new Indebtedness
shall be subordinate in right of payment to the Notes; (v) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Issuer held by any member of the Issuer's (or any of its Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement or in connection with the termination of
employment of any employees or management of the Issuer or its Restricted
Subsidiaries; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $2.0 million in
the aggregate plus the aggregate cash proceeds received by the Issuer after the
date of the Indenture from any reissuance of Equity Interests by the Issuer to
members of management of the Issuer and its Restricted Subsidiaries and no
Default or Event of Default shall have occurred and be continuing immediately
after any such transaction; (vi) Investments received by the Issuer and its
Restricted Subsidiaries as non-cash consideration from Asset Sales to the extent
permitted by the covenant described under the caption "--Repurchase at the
Option of Holders--Asset Sales;" (vii) a Restricted Payment to Holdings for the
purpose of paying a one-time dividend on the Common Stock of Holdings from the
proceeds of the Offering in an amount not to exceed $30.0 million; and (viii)
the repurchase of Notes pursuant to a Change of Control Offer or an Asset Sale
Offer.
The amount of all Restricted Payments (other than cash or Cash Equivalents)
shall be the fair market value (evidenced by a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee) on the
date of the Restricted Payment of the asset(s) proposed to be transferred or
issued by the Issuer or such Restricted Subsidiary, as the case may be, pursuant
to the Restricted Payment. Not later than the date of making any Restricted
Payment, the Issuer shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by the covenant "Restricted Payments" were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Issuer will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that the Issuer may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock if: the Fixed Charge Coverage Ratio for the Guarantor's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred or such Disqualified Stock is issued would have been at least 2.0 to
1, determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period. In addition, the Indenture will also provide that the
Issuer will not incur any Indebtedness that is contractually subordinated to any
other Indebtedness of the Issuer unless such Indebtedness is also contractually
subordinated to the Notes on substantially identical terms; provided, however,
that no Indebtedness of the Issuer shall be deemed to be contractually
subordinated to any other Indebtedness of the Issuer solely by virtue of being
unsecured.
The foregoing provisions will not apply to:
(i) the incurrence by the Issuer of Indebtedness under the New Credit
Facility;
(ii) Guarantees of the Indebtedness under the New Credit Facility required
by the New Credit Facility and Guarantees permitted under or required by the
Indenture;
(iii) the incurrence by the Issuer and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Issuer of Indebtedness represented by the Notes
and the Indenture and the incurrence by Restricted Subsidiaries of Guarantees
required or permitted to be incurred under the Indenture;
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(v) the incurrence by the Issuer or any of its Restricted Subsidiaries of
Capital Lease Obligations, mortgage financings or purchase money obligations, in
each case incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or equipment
used in the business of the Issuer or such Subsidiary, in an aggregate principal
amount not to exceed $5.0 million at any time outstanding;
(vi) the incurrence by the Issuer or any of its Restricted Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new Subsidiary;
provided that such Indebtedness was incurred by the prior owner of such assets
or such Subsidiary prior to such acquisition by the Issuer or one of its
Restricted Subsidiaries and was not incurred in connection with, or in
contemplation of, such acquisition by the Issuer or one of it Restricted
Subsidiaries; and provided further that the principal amount (or accreted value,
as applicable) of such Indebtedness, together with any other outstanding
Indebtedness incurred pursuant to this clause (vi), does not exceed $5.0
million;
(vii) the incurrence by the Issuer or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which
are used to refund, refinance or replace Indebtedness that was permitted by the
Indenture to be incurred;
(viii) the incurrence by the Issuer or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Issuer and any of its Wholly
Owned Restricted Subsidiaries; provided, however, that (i) if the Issuer is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Issuer or a Wholly
Owned Restricted Subsidiary and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Issuer or a Wholly Owned
Restricted Subsidiary shall be deemed, in each case, to constitute an incurrence
of such Indebtedness by the Issuer or such Restricted Subsidiary, as the case
may be;
(ix) the incurrence by the Issuer or any of its Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of New Credit Facility or this Indenture to be
outstanding; and
(x) the Guarantee by the Issuer or any of the Guarantors of Indebtedness of
the Issuer or a Subsidiary of the Issuer that was permitted to be incurred by
another provision of this covenant.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Issuer shall, in
its sole discretion, classify such item of Indebtedness in any manner that
complies with this covenant and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant.
Liens
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or any
income or profits therefrom or assign or convey any right to receive income
therefrom, except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to: (i)(a) pay dividends or make any
other distributions to the Issuer or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Issuer or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Issuer or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Issuer or any of its Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (a) Existing
Indebtedness as in effect on the date of the Indenture, (b) the New Credit
Facility as in effect as of the date of the Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive
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with respect to such dividend and other payment restrictions than those
contained in the New Credit Facility as in effect on the date of the Indenture,
(c) the Indenture, the Notes and the Note Guarantee, (d) applicable law, (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Issuer 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), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred; (f) by reason of customary
non-assignment provisions in leases entered into in the ordinary course of
business and consistent with past practices, (g) purchase money obligations or
Capital Lease Obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, (h) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those contained in the
agreements governing the Indebtedness being refinanced, (i) customary
restrictions imposed on the transfer of copyrighted or patented materials and
customary provisions in agreements that restrict the assignees of such
agreements or any rights thereunder or (j) restrictions with respect to a
Subsidiary of the Issuer imposed pursuant to a binding agreement which has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Subsidiary.
Merger, Consolidation, or Sale of Assets
The Indenture provides that the Issuer may not consolidate or merge with or
into (whether or not the Issuer is the surviving corporation), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person
unless (i) the Issuer is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Issuer) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Issuer) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Issuer under the Notes and the Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) the Issuer or the entity or Person formed by or surviving any
such consolidation or merger (if other than the Issuer), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Issuer immediately
preceding the transaction and (B) will, at the time of such transaction and
after giving pro forma effect thereto as if such transaction had occurred at the
beginning of the applicable four-quarter period, be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of the covenant described above under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock."
Transactions with Affiliates
The Indenture provides that the Issuer will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to or enter into any other
transaction with, or for the benefit of, any Affiliate of the Issuer (each of
the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Issuer or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction by the Issuer or such Restricted Subsidiary with an unrelated Person
and (ii) the Issuer delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing; provided that (w) any employment agreement entered
into by the Issuer or any of its Restricted Subsidiaries in the ordinary course
of business and consistent with the past practice of the Issuer or such
Restricted Subsidiary, (x) transactions between or among the Issuer and/or its
Restricted Subsidiaries, (y) investment banking and management fees in an
aggregate amount no greater than $180,000 per
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annum plus reimbursement of expenses to be paid by the Issuer to Thomas H. Lee
Company, and (z) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "--Restricted Payments," in each
case, shall not be deemed Affiliate Transactions.
Limitation on Issuances and Sales of Capital Stock of Wholly Owned Restricted
Subsidiaries
The Indenture provides that the Issuer (i) will not, and will not permit
any Wholly Owned Restricted Subsidiary of the Issuer to, transfer, convey, sell,
lease or otherwise dispose of any Capital Stock of any Wholly Owned Restricted
Subsidiary of the Issuer to any Person (other than the Issuer or a Wholly Owned
Restricted Subsidiary of the Issuer), unless (a) such transfer, conveyance,
sale, lease or other disposition is of all the Capital Stock of such Wholly
Owned Restricted Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with the
covenant described above under the caption "--Asset Sales," and (ii) will not
permit any Wholly Owned Restricted Subsidiary of the Issuer to issue any of its
Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Issuer or a Wholly Owned Restricted Subsidiary of the Issuer.
Limitations on Guarantees of Company Indebtedness by Restricted Subsidiaries
The Indenture provides that in the event that any Restricted Subsidiary,
directly or indirectly, guarantees any Indebtedness of the Issuer other than the
Notes or the New Credit Facility (the "Other Indebtedness"), the Issuer shall
cause such Restricted Subsidiary to deliver to the Trustee a supplemental
indenture pursuant to which such Restricted Subsidiary shall concurrently
guarantee the Issuer's Obligations under the Indenture and the Notes to the same
extent that such Restricted Subsidiary guaranteed the Issuer's Obligations under
the Other Indebtedness (including waiver of subrogation, if any) and such
Additional Guarantee shall be on the same terms and subject to the same
conditions as the initial Guarantee given by Holding under the Indenture. Each
Additional Guarantee shall by its terms provide that the Additional Guarantor
making such Additional Guarantee will be automatically and unconditionally
released and discharged from its obligations under such Additional Guarantee
upon the release or discharge of the guarantee of the Other Indebtedness that
resulted in the creation of such Additional Guarantee, except a discharge or
release by, or as a result of, any payment under the guarantee of such Other
Indebtedness by such Additional Guarantor.
Additional Guarantees
The Indenture provides that (i) if the Issuer or any of its Restricted
Subsidiaries shall, after the date of the Indenture, transfer or cause to be
transferred, including by way of any Investment, in one or a series of
transactions (whether or not related), any assets, businesses, divisions, real
property or equipment having an aggregate fair market value (as determined in
good faith by the Board of Directors) in excess of $1.0 million to any
Restricted Subsidiary that is not a Guarantor, (ii) if the Issuer or any of its
Restricted Subsidiaries shall acquire another Restricted Subsidiary having total
assets with a fair market value (as determined in good faith by the Board of
Directors) in excess of $1.0 million, or (iii) if any Restricted Subsidiary
shall incur Acquired Debt, then the Issuer shall, at the time of such transfer,
acquisition or incurrence, (i) cause such transferee, acquired Restricted
Subsidiary or Restricted Subsidiary incurring Acquired Debt (if not then a
Guarantor) to execute a Note Guarantee of the Obligations of the Issuer
hereunder in the form set forth in the Indenture and (ii) deliver to the Trustee
an Opinion of Counsel, in form reasonably satisfactory to the Trustee, that such
Guarantee is a valid, binding and enforceable obligation of such transferee,
acquired Restricted Subsidiary or Restricted Subsidiary incurring Acquired Debt,
subject to customary exceptions for bankruptcy and equitable principles.
Notwithstanding the foregoing, the Issuer or any of its Restricted Subsidiaries
may make a Restricted Investment in any Wholly Owned Restricted Subsidiary of
the Issuer without compliance with this covenant provided that such Restricted
Investment is permitted by the covenant described under the caption, "Restricted
Payments."
Reports
The Indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission (the "Commission"), so
long as any Notes are outstanding, the Issuer and, if required, the Guarantor
will furnish to the Holders of Notes (i) 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 Issuer and/or the Guarantor 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 Issuer's and/or the Guarantor's
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certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Issuer and/or the
Guarantor were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Issuer will file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
Events of Default and Remedies
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of the principal of or premium, if any,
on the Notes; (iii) failure by the Issuer to comply with the provisions
described under the captions "--Change of Control," "--Asset Sales,"
"--Restricted Payments" or "--Incurrence of Indebtedness and Issuance of
Preferred Stock," (iv) failure by the Issuer or the Guarantor for 60 days after
notice to comply with any of its other agreements in the Indenture, the Notes or
the Note Guarantee; (v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Issuer or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Issuer or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of the Indenture, if such (a) default results in the
acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness, and (b) the principal amount of any such Indebtedness that
has been accelerated or not paid at maturity, when added to the aggregate
principal amount of all other Indebtedness that has been accelerated or not paid
at maturity, exceeds $5.0 million; (vi) failure by the Issuer or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) certain events of bankruptcy or insolvency with respect to the
Issuer or any of its Restricted Subsidiaries; and (viii) except as permitted by
the Indenture, any Note Guarantee issued by a Guarantor shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to be in full force and effect or any Guarantor or any Person acting on behalf
of any Guarantor shall deny or disaffirm its obligations under its Note
Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Issuer or any Restricted
Subsidiary that is a Significant Subsidiary, the principal of, and premium and
Liquidated Damages, if any, and any accrued and unpaid interest on all
outstanding Notes will become due and payable without further action or notice.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture. In the event of a declaration of acceleration of the
Notes because an Event of Default has occurred and is continuing as a result of
the acceleration of any Indebtedness described in clause (v) of the preceding
paragraph, the declaration of acceleration of the Notes shall be automatically
annulled if the holders of any Indebtedness described in clause (v) have
rescinded the declaration of acceleration in respect of such Indebtedness within
30 days of the date of such declaration and if (a) the annulment of the
acceleration of the Notes would not conflict with any judgment or decree of a
court of competent jurisdiction, and (b) all existing Events of Default, except
nonpayment of principal or interest on the Notes that became due solely because
of the acceleration of the Notes, have been cured or waived.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Issuer with the
intention of avoiding payment of the premium that the Issuer would have had to
pay if the Issuer then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to April 1, 2001
by reason of any willful action (or inaction) taken (or not taken) by or on
behalf of the Issuer with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
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
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, premium, if any, or interest on the Notes.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold
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from Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The Issuer is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuer 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
No director, officer, employee, incorporator or stockholder of the Issuer,
as such, shall have any liability for any obligations of the Issuer or any
Guarantor under the Notes, the Note Guarantee or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes
and the Note Guarantees. Such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the Commission that such
a waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Issuer may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
on such Notes when such payments are due from the trust referred to below, (ii)
the Issuer's obligations with respect to the Notes concerning issuing temporary
Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the
maintenance of an office or agency for payment and money for security payments
held in trust, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuer's obligations in connection therewith and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Issuer may, at its
option and at any time, elect to have the obligations of the Issuer released
with respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described under
"Events of Default" will no longer constitute an Event of Default with respect
to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i)
the Issuer must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, cash in U.S. dollars, non-callable Cash
Equivalents, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the outstanding Notes
on the stated maturity or on the applicable redemption date, as the case may be,
and the Issuer must specify whether the Notes are being defeased to maturity or
to a particular redemption date; (ii) in the case of Legal Defeasance, the
Issuer shall have delivered to the Trustee an opinion of counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Issuer has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of the Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred; (iii) in the
case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an
opinion of counsel in the United States reasonably acceptable to the Trustee
confirming that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same amounts, in the
same manner and at the same times as would have been the case if such Covenant
Defeasance had not occurred; (iv) no Default or Event of Default shall have
occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Issuer or any of its
Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is
bound; (vi) the Issuer must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy,
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insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Issuer must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Issuer with the intent of
preferring the Holders of Notes over the other creditors of the Issuer with the
intent of defeating, hindering, delaying or defrauding creditors of the Issuer
or others; and (viii) the Issuer must deliver to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuer may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuer is not required to transfer or exchange any Note selected
for redemption. Also, the Issuer is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including
consents obtained in connection with a tender offer or exchange offer for
Notes), and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including consents
obtained in connection with a tender offer or exchange offer for Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of 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 the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of 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 the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption " Repurchase at the Option of Holders") (viii) except pursuant to the
Indenture, release any Guarantor from its obligations under its Note Guarantee,
or change any Note Guarantee in any manner that would adversely affect the
Holders, or (ix) make any change in the foregoing amendment and waiver
provisions.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Issuer and the Trustee may amend or supplement the Indenture or the Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Issuer's or the Guarantor's obligations to Holders of Notes in the case
of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the Holders of Notes (including providing for
additional Note Guarantees pursuant to the covenant entitled "Additional
Guarantees") or that does not adversely affect the legal rights under the
Indenture of any such Holder, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuer, the Guarantor or any Affiliate of the
Issuer or the Guarantor, to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.
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The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
Additional Information
Anyone who receives this Prospectus may obtain a copy of the Indenture
without charge by writing to Anchor Advanced Products, Inc., 1111 Northshore
Drive, Suite N-600, Knoxville, Tennessee 37919, Attention: Secretary.
Book-Entry, Delivery and Form
All of the Exchange Notes to be resold as set forth herein will initially
be issued in the form of one or more Global Notes (the "Global Notes"). The
Global Notes will be deposited on the date of the closing of the sale of the
Exchange Notes offered hereby (the "Closing Date") with, or on behalf of, the
Depositary and registered in the name of Cede & Co., as nominee of the
Depositary (such nominee being referred to herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only thorough the Depositary's
Participants or the Depositary's Indirect Participants.
The Issuer expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Notes and (ii) ownership of the Exchange
Notes evidenced by the Global Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depositary (with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer Exchange Notes evidenced by the
Global Note will be limited to such extent.
So long as the Global Note Holder is the registered owner of any Exchange
Notes, the Global Note Holder will be considered the sole Holder under the
Indenture of any Notes evidenced by the Global Notes. Beneficial owners of
Exchange Notes evidenced by the Global Notes will not be considered the owners
or Holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Issuer nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Exchange
Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Exchange Notes registered in the name of the
Global Note Holder on the applicable record date will be payable by the Trustee
to or at the direction of the Global Note Holder in its capacity as the
registered Holder under the Indenture. Under the terms of the Indenture, the
Issuer and the Trustee may treat the persons in whose names Exchange Notes,
including the Global Notes, are registered as the owners thereof for the purpose
of receiving such payments. Consequently, neither the Issuer nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of Exchange Notes (including principal, premium, if any,
interest and Liquidated Damages, if any). The Issuer believes, however, that it
is currently the policy of the Depositary to immediately credit the accounts of
the relevant Participants with such payments, in amounts proportionate to
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their respective holdings of beneficial interests in the relevant security as
shown on the records of the Depositary. Payments by the Depositary's
Participants and the Depositary's Indirect Participants to the beneficial owners
of Exchange Notes will be governed by standing instructions and customary
practice and will be the responsibility of the Depositary's Participants or the
Depositary's Indirect Participants.
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 Securities. Upon any
such issuance, the Trustee is required to register such Certificated Securities
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 (i) the Issuer notifies the
Trustee in writing that the Depositary is no longer willing or able to act as a
depositary and the Issuer is unable to locate a qualified successor within 90
days or (ii) the Issuer, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Exchange Notes in the form of Certificated
Securities under the Indenture, then, upon surrender by the Global Note Holder
of its Global Notes, Exchange Notes in such form will be issued to each person
that the Global Note Holder and the Depositary identify as being the beneficial
owner of the related Notes.
Neither the Issuer nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Exchange Notes and the Issuer and the Trustee may conclusively rely on, and will
be protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture requires that payments in respect of the Exchange Notes
represented by the Global Note (including principal, premium, if any, interest
and Liquidated Damages, if any) be made in immediately available funds. With
respect to Certificated Securities, however, the Issuer will make all payments
of principal, premium, if any, interest and Liquidated Damages, if any, by
mailing a check to each Holder's registered address. Secondary trading in
long-term notes and debentures of corporate issuers is generally settled in
clearing-house or next-day funds. The Issuer expects that secondary trading in
the Certificated Securities will also be settled in immediately available funds.
Certain Definitions
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Guarantee" means any guarantee of the Issuer's obligations
under the Indenture and the Notes issued after the Issue Date as described in
"--Certain Covenants--Limitations on Guarantees of Company Indebtedness by
Restricted Subsidiaries" and "--Certain Covenants--Additional Guarantees."
"Additional Guarantor" means any Subsidiary of the Issuer that guarantees
the Issuer's obligations under the Indenture and the Notes issued after the
Issue Date as described in "--Certain Covenants--Limitations on Guarantees of
Company Indebtedness by Restricted Subsidiaries" and "--Certain
Covenants--Additional Guarantees."
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
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"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Issuer and
its Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "--Change of Control" and/or the
provisions described above under the caption "--Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant), and (ii) the
issue or sale by the Issuer or any of its Restricted Subsidiaries of Equity
Interests of any of the Issuer's Subsidiaries, in the case of either clause (i)
or (ii), whether in a single transaction or a series of related transactions (a)
that have a fair market value in excess of $1.0 million or (b) for net proceeds
in excess of $1.0 million. Notwithstanding the foregoing: (i) a transfer of
assets by the Issuer to a Wholly Owned Restricted Subsidiary or by a Wholly
Owned Restricted Subsidiary to the Issuer or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Issuer or to another Wholly Owned Restricted Subsidiary, and
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "--Restricted Payments" will not be deemed to be Asset Sales.
"Business Day" means any day that is not a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months and
overnight bank deposits, in each case with any domestic commercial bank having
capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of
"B" or better, (iv) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above and (v) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Corporation, a division of the McGraw-Hill Companies, Inc., and in each case
maturing within six months after the date of acquisition.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior period
and deferred finance charges) and other non-cash charges of such Person and its
Restricted Subsidiaries for such period (excluding any such non-cash charges to
the extent that it represents an accrual of or reserve for cash charges in
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any future period or amortization of a prepaid cash charges that was paid in a
prior period) to the extent that such depreciation, amortization and other
non-cash charges were deducted in computing such Consolidated Net Income.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash charges of, a
Subsidiary of the referent Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended to the Issuer
by such Subsidiary without prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Restricted Subsidiary
that is accounted for by the equity method of accounting shall be included only
to the extent of the amount of dividends or distributions paid in cash to the
Issuer or any of its Wholly Owned Restricted Subsidiaries, (ii) the Net Income
of any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary
shall be excluded to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, 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 Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Restricted Subsidiary of such
Person, (y) all investments as of such date in unconsolidated Restricted
Subsidiaries and in Persons that are not Restricted Subsidiaries (except, in
each case, Permitted Investments), and (z) all unamortized debt discount and
expense and unamortized deferred charges as of such date, all of the foregoing
determined in accordance with GAAP.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means 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 redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Existing Indebtedness" means up to $1.8 million in aggregate principal
amount of Indebtedness of the Issuer and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of the
Indenture, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments
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associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Issuer, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
Issuer or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but prior to the date on which the
event for which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated
giving pro forma effect to such incurrence, assumption, Guarantee or redemption
of Indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period. In addition, for purposes of making the computation referred to above,
(i) acquisitions that have been made by the Issuer or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation Date
shall be deemed to have occurred on the first day of the four-quarter reference
period and Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (iii) of the proviso set forth in the definition
of Consolidated Net Income, and (ii) the Consolidated Cash Flow attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, and
(iii) the Fixed Charges attributable to discontinued operations, as determined
in accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Guarantor" means Anchor Holdings, Inc., a Delaware corporation, and each
Subsidiary of the Issuer, if any, that executes a Note Guarantee in accordance
with the covenants described under the captions "--Certain Covenants--
Limitations on Guarantees of Company Indebtedness by Restricted Subsidiaries"
and "--Certain Covenants--Additional Guarantees," and their successors and
assigns.
"Hedging 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.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness (other than letters of credit and
Hedging Obligations) would appear as a liability upon a balance sheet
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of such Person prepared in accordance with GAAP, as well as all indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
indebtedness is assumed by such Person) and, to the extent not otherwise
included, the Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be (i) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (ii) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Issuer for consideration consisting of common equity securities of the
Issuer shall not be deemed to be an Investment. If the Issuer or any Restricted
Subsidiary of the Issuer sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of the Issuer such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of the Issuer, the Issuer 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 Equity Interests of such Restricted Subsidiary not sold or disposed
of in an amount determined as provided in the final paragraph of the covenant
described above under the caption "--Restricted Payments."
"Legal Holiday" means a Saturday, a Sunday or a day on which commercial
banks in the City of New York or at a place of payment are authorized or
required by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
"Lien" means, 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 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 the additional amounts (if any) payable by the
Issuer in the event of a Registration Default under, and as defined in, the
Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the Issuer or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Indebtedness under the New Credit Facility) secured by a Lien on the
asset or assets that were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets established in
accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, dated as of
April 2, 1997, by and among the Issuer and NationsBank, N.A., providing for up
to $15.0 million of revolving credit borrowings, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither the Issuer
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuer or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed on behalf of the Issuer
by two Officers of the Issuer, one of whom must be the principal executive
officer, the principal financial officer, the treasurer, or the principal
accounting officer of the Issuer, that meets the requirements of the Indenture.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of the Indenture. The
counsel may be an employee of or counsel to the Issuer (or any Guarantor, if
applicable), any Subsidiary of the Issuer or the Trustee.
"Permitted Investments" means (a) any Investment in the Issuer or in a
Wholly Owned Restricted Subsidiary of the Issuer that is engaged in the same or
a similar line of business as the Issuer and its Restricted Subsidiaries were
engaged in on the date of the Indenture; (b) any Investment in Cash Equivalents;
(c) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in a
Person, if as a result of such Investment (i) such Person becomes a Wholly Owned
Restricted Subsidiary of the Issuer that is engaged in the same or a similar
line of business as the Issuer and its Subsidiaries were engaged in on the date
of the Indenture or (ii) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or a Wholly Owned Restricted Subsidiary of the
Issuer that is engaged in the same or a similar line of business as the Issuer
and its Restricted Subsidiaries were engaged in on the date of the Indenture;
(d) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the Option
of Holders--Asset Sales"; (e) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Issuer;
and (f) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (e) that are at the time outstanding, not to exceed
$5.0 million.
"Permitted Liens" means
(i) any Lien existing on property of the Issuer or any Subsidiary on the
date of the Indenture securing Indebtedness outstanding on such date;
(ii) any Lien securing obligations under the New Credit Facility and any
Guarantee thereof, which obligations or Guarantee are permitted by the terms
of the Indenture to be incurred and outstanding;
(iii) Liens for taxes, fees, assessments or other governmental charges
which are not delinquent or remain payable without penalty, or which are
being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP are being maintained;
(iv) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other similar Liens arising in the ordinary course of business
which are not delinquent or which are being contested in good faith and by
appropriate proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;
(v) Liens (other than any Lien imposed by ERISA) consisting of pledges or
deposits required in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other social security
legislation;
(vi) Liens on property of the Issuer or any Subsidiary securing (a) the
non-delinquent performance of bids, trade contracts (other than for borrowed
money), leases and statutory obligations, (b) surety bonds (excluding appeal
bonds and bonds posted in connection with court proceedings or judgments) and
(c) other
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non-delinquent obligations of a like nature, including pledges or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security
legislation, in each case, incurred in the ordinary course of business;
(vii) Liens consisting of judgment or judicial attachment Liens and Liens
securing contingent obligations on appeal bonds and other bonds posted in
connection with court proceedings or judgments; provided that the enforcement
of such Liens is effectively stayed and all such Liens in the aggregate at
any time outstanding for the Issuer and its Subsidiaries do not exceed $3.0
million;
(viii) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or
interfere with the ordinary conduct of the businesses of the Issuer and its
Subsidiaries taken as a whole;
(ix) purchase money security interests on any property acquired by the
Issuer or any Subsidiary in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any part
of the cost of acquiring such property; provided that (a) any such Lien
attaches to such property concurrently with or within 90 days after the
acquisition thereof, (b) such Lien attaches solely to the property so
acquired in such transaction, (c) the principal amount of the Indebtedness
secured thereby does not exceed 100% of the cost of such property and (d) the
principal amount of the Indebtedness secured by all such purchase money
security interests shall not at any time exceed $5.0 million;
(x) Liens securing obligations in respect of Capital Lease Obligations on
assets subject to such leases, provided that such Capital Lease Obligations
are otherwise permitted hereunder;
(xi) Liens arising solely by virtue of any statutory or common law
provision relating to bankers' liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (a) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Issuer in excess of those set forth by regulations promulgated
by the Federal Reserve Board, and (b) such deposit account is not intended by
the Issuer or any Subsidiary to provide collateral to the depository
institution;
(xii) Liens in favor of the Issuer or any Wholly Owned Restricted
Subsidiary;
(xiii) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary or such Person is merged into or consolidated
with the Issuer or any Restricted Subsidiary of the Issuer; provided 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 the Person
merged into or consolidated with the Issuer;
(xiv) Liens on property existing at the time of acquisition thereof by the
Issuer or any Restricted Subsidiary of the Issuer; provided that such Liens
were in existence prior to the contemplation of such acquisition;
(xv) extensions, renewals and replacements of Liens referred to in clauses
(i) through (xiv) above; provided that any such extension, renewal or
replacement Lien is limited to the property or assets covered by the Lien
extended, renewed or replaced and does not secure any Indebtedness in
addition to that secured immediately prior to such extension, renewal or
replacement; and
(xvi) Liens securing other Indebtedness of the Issuer and its Subsidiaries
not expressly permitted by clauses (i) through (xv) above; provided that the
aggregate amount of the Indebtedness secured by Liens permitted pursuant to
this clause (xvi) does not exceed $3.0 million in the aggregate.
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"Permitted Refinancing Indebtedness" means any Indebtedness of the Issuer
or any of its Subsidiaries issued in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Issuer or any of its Restricted Subsidiaries; provided that:
(i) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Senior Notes on terms at least
as favorable to the Holders of Senior Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Issuer or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Public Equity Offering" means a public offering of Equity Interests (other
than Disqualified Stock) of (i) the Issuer or (ii) Anchor Holdings, Inc. to the
extent the net proceeds thereof are contributed to the Issuer as a capital
contribution to capital stock.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means Anchor Advanced Products Foreign Sales Corp.
and Cepillos de Matamoros and any Subsidiary of Holdings or any subsidiary of
the Issuer, in each case, that is not an Unrestricted Subsidiary.
"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 Act, as such Regulation is in effect on the date hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution,
but only to the extent that such Subsidiary: (a) has no Indebtedness other than
Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or
understanding with the Issuer or any Restricted Subsidiary of the Issuer unless
the terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Issuer or such Restricted Subsidiary of the Issuer than
those that might be obtained at the time from Persons who are not Affiliates of
the Issuer; (c) is a Person with respect to which neither the Issuer nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interest or (y) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results; and (d) has not guaranteed or otherwise directly or
indirectly provided credit support for any Indebtedness of the Issuer or any of
its Restricted Subsidiaries. Any such designation by the Board of Directors
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
conditions and was permitted by the covenant described under the caption
"--Certain Covenants--Restricted Payments." If, at any time, any Unrestricted
Subsidiary would fail to meet the foregoing requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Issuer as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," the Issuer shall be in default of
such covenant). The Board of Directors of Issuer may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Issuer any outstanding Indebtedness of such
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Unrestricted Subsidiary and such designation shall only be permitted if (i) such
Indebtedness is permitted under the covenant described under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," and (ii) no Default or Event of Default would be in existence following
such designation.
"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 payments of
principal, including payment at final maturity, in respect thereof, by (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 principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such
Person.
DESCRIPTION OF THE INITIAL NOTES
The terms of the Initial Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Exchange Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the Initial Notes are not freely transferable by holders thereof and
were issued subject to certain covenants regarding registration as provided
therein and in the Registration Rights Agreement (which covenants will terminate
and be of no further force or effect upon completion of this Exchange Offer).
See "Registration Rights Agreement."
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EXCHANGE OFFER; REGISTRATION RIGHTS
The Issuer, Holdings and the Initial Purchasers have entered into the
Registration Rights Agreement dated as of April 2, 1997. Pursuant to the
Registration Rights Agreement, the Issuer has agreed to file with the Commission
the Exchange Offer Registration Statement on the appropriate form under the
Securities Act with respect to the Exchange Notes. Upon the effectiveness of the
Exchange Offer Registration Statement, the Issuer will offer to the Holders of
Transfer Restricted Securities pursuant to the Exchange Offer who are able to
make certain representations the opportunity to exchange their Transfer
Restricted Securities for Exchange Notes. If (i) the Issuer is not required to
file the Exchange Offer Registration Statement or permitted to consummate the
Exchange Offer because the Exchange Offer is not permitted by applicable law or
Commission policy or (ii) any Holder of Transfer Restricted Securities notifies
the Issuer within the specified time period that (A) it is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales or (C)
that it is a broker-dealer and owns Initial Notes acquired directly from the
Issuer or an affiliate of the Issuer, the Issuer will file with the Commission a
Shelf Registration Statement to cover resales of the Initial Notes by the
Holders thereof who satisfy certain conditions relating to the provision of
information in connection with the Shelf Registration Statement. For purposes of
the foregoing, "Transfer Restricted Securities" means each Initial Note until
(i) the date on which such Initial Note has been exchanged by a person other
than a broker-dealer for an Exchange Note in the Exchange Offer, (ii) following
the exchange by a broker-dealer in the Exchange Offer of an Initial Note for an
Exchange Note, the date on which such Exchange Note is sold to a purchaser who
receives from such broker-dealer on or prior to the date of such sale a copy of
the prospectus contained in the Exchange Offer Registration Statement, (iii) the
date on which such Initial Note has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (iv) the date on which such Initial Note is distributed to the
public pursuant to Rule 144 under the Act.
The Registration Rights Agreement provides that (i) the Issuer will file an
Exchange Offer Registration Statement with the Commission on or prior to 45 days
after the Closing Date, (ii) the Issuer will use its reasonable best efforts to
have the Exchange Offer Registration Statement declared effective by the
Commission on or prior to 135 days after the Closing Date, (iii) unless the
Exchange Offer would not be permitted by applicable law or Commission policy,
the Issuer will commence the Exchange Offer and use its reasonable best efforts
to issue on or prior to 30 business days after the date on which the Exchange
Offer Registration Statement was declared effective by the Commission, Exchange
Notes in exchange for all Initial Notes tendered prior thereto in the Exchange
Offer and (iv) if obligated to file the Shelf Registration Statement, the Issuer
will use its reasonable best efforts to file the Shelf Registration Statement
with the Commission on or prior to 60 days after such filing obligation arises
and to cause the Shelf Registration to be declared effective by the Commission
on or prior to 165 days after the Closing Date. If (a) the Issuer fails to file
any of the Registration Statements required by the Registration Rights Agreement
on or before the date specified for such filing, (b) any of such Registration
Statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), or (c) the
Issuer fails to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement, or (d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then the Issuer will pay Liquidated Damages to each Holder of Transfer
Restricted Securities, with respect to the first 90-day period immediately
following the occurrence of such Registration Default in an amount equal to $.05
per week per $1,000 principal amount of Initial Notes constituting Transfer
Restricted Securities held by such Holder. The amount of the Liquidated Damages
will increase by an additional $.05 per week per $1,000 principal amount
constituting Transfer Restricted Securities with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $.50 per week per $1,000 principal amount of
Initial Notes constituting Transfer Restricted Securities. All accrued
Liquidated Damages will be paid by the Issuer on each Damages Payment Date to
the Global Note Holder by wire transfer of immediately available funds or by
federal funds check and to Holders of Certificated Securities by mailing checks
to their registered addresses. Following the cure of all Registration Defaults,
the accrual of Liquidated Damages will cease.
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Holders of Initial Notes will be required to make certain representations
to the Issuer (as described in the Registration Rights Agreement) in order to
participate in the Exchange Offer and will be required to deliver information to
be used in 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 Initial Notes
included in the Shelf Registration Statement and benefit from the provisions
regarding Liquidated Damages set forth above.
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INCOME TAX CONSIDERATIONS
Holders of the Notes should consult their own tax advisors with respect to
their particular circumstances and with respect to the effects of state, local
or foreign tax laws to which they may be subject.
Anchor believes, based upon the opinion of its counsel, Hutchins, Wheeler &
Dittmar, A Professional Corporation, that the following summary fairly describes
the material United States federal income tax consequences expected to apply to
the exchange of Initial Notes for Exchange Notes and the ownership and
disposition of Exchange Notes under currently applicable law. The discussion
does not cover all aspects of federal taxation that may be relevant to, or the
actual tax effect that any of the matters described herein will have on,
particular holders, and does not address state, local, foreign or other tax
laws. Further, the federal income tax treatment of a holder of the Initial Notes
and the Exchange Notes may vary depending on the holder's particular situation.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, taxpayers subject to the alternative
minimum tax and foreign persons) may be subject to special rules not discussed
below. The description assumes that holders of the Initial Notes and the
Exchange Notes will hold the Initial Notes and the Exchange Notes as "capital
assets" (generally, property held for investment purposes) within the meaning of
Section 1221 of the Code.
The Exchange
An exchange of Initial Notes for Exchange Notes will be treated as a
"non-event" for federal income tax purposes because the Exchange Notes will not
be considered to differ materially in kind or extent from the Initial Notes. As
a result, no federal income tax consequences will result to holders exchanging
Initial Notes for Exchange Notes.
The Exchange Notes
Interest Payments on the Exchange Notes. The Initial Notes were not issued
with original issue discount. The stated interest on the Initial Notes and
Exchange Notes should be considered to be "qualified stated interest" and,
therefore, will be includible in a holder's gross income (except to the extent
attributable to accrued interest at the time of purchase) as ordinary income for
federal income tax purposes in accordance with a holder's tax method of
accounting.
Tax Basis. A holder's adjusted tax basis (determined by taking into account
accrued interest at the time of purchase) in an Exchange Note received in
exchange for an Initial Note will equal the cost of the Initial Note to such
holder, increased by the amounts of market discount previously included in
income by the holder and reduced by any principal payments received by such
holder with respect to the Exchange Notes and by amortized bond premium. A
holder's adjusted tax basis in an Exchange Note purchased by such holder will be
equal to the price paid for such an Exchange Note (determined by taking into
account accrued interest at the time of purchase), increased by market discount
previously included in income by the holder and reduced by any principal
payments received by such holder with respect to an Exchange Note and by
amortized bond premium. See "Market Discount and Bond Premium" below.
Sale, Exchange or Retirement. Upon the sale, exchange or retirement of an
Exchange Note, a holder will recognize taxable gain or loss, if any, equal to
the difference between the amount realized on the sale, exchange or retirement
and such holder's adjusted tax basis in such Exchange Note. Such gain or loss
will be a capital gain or loss (except to the extent of any accrued market
discount), and will be a long-term capital gain or loss if the Exchange Note has
been held for more than one year at the time of such sale, exchange or
retirement.
Market Discount and Bond Premium. Holders should be aware that the market
discount provisions of the Code may affect the Exchange Notes. These rules
generally provide that a holder who purchases Exchange Notes for an amount which
is less than their principal amount will be considered to have purchased the
Exchange Notes at a "market discount" equal to the amount of such difference.
Such holder will be required to treat any gain realized upon the disposition of
the Exchange Note as interest income to the extent of the market discount that
is treated as having accrued during the period that such holder held such
Exchange Note, unless an election is made to include such market discount in
income on a current basis. A holder of an Exchange Note who acquires the
Exchange Note at a market discount and who does not elect to include market
discount in income on a current basis may also be required to defer the
deduction of a portion of the interest on any indebtedness incurred or continued
to purchase or carry the Exchange Note until the holder disposes of such
Exchange Note in a taxable transaction.
71
<PAGE>
If a holder's tax basis in an Exchange Note immediately after acquisition
exceeds the stated redemption price at maturity of such Exchange Note, such
holder may be eligible to elect to deduct such excess as amortizable bond
premium pursuant to Section 171 of the Code.
Purchasers of the Exchange Notes should consult their own tax advisors as
to the application to such purchasers of the market discount and bond premium
rules.
HOLDERS OF THE INITIAL NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF ACQUIRING, OWNING OR
DISPOSING OF THE INITIAL NOTES AND THE EXCHANGE NOTES, INCLUDING THE APPLICATION
OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND POSSIBLE FUTURE CHANGES IN
SUCH FEDERAL TAX LAWS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
issued by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Initial Notes where such Notes were acquired as a result of
market-making activities or other trading activities. The Issuer has agreed that
for a period of one year after the date on which the Registration Statement is
declared effective by the Commission, it will make this Prospectus, as amended
or supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until 1997, all dealers effecting transactions
in the Exchange Notes may be required to deliver a prospectus.
The Issuer will not receive any 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 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 and/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 and any profit on any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of one year after the date on which the Registration Statement
is declared effective by the Commission, the Issuer will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any broker-dealer that requests such documents in the Letter of
Transmittal. The Issuer has 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 Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
72
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes offered hereby
will be passed upon for the Company by Hutchins, Wheeler & Dittmar, A
Professional Corporation, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of Anchor Holdings, Inc. and its
subsidiaries as of December 31, 1995 and 1996 and for each of the three years in
the period ended December 31, 1996 included in this Prospectus have been
included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The Statement of Income and Statement of Cash Flows for the eleven months
ended July 29, 1994 of Mid-State Plastics, Inc., included in this Prospectus
have been audited by Cherry, Bekaert & Holland, L.L.P., independent accountants,
as stated in their report appearing herein and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
73
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
------
<S> <C>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Report of Independent Accountants ...................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and March 29, 1997 ......... F-3
Consolidated Statements of Income for the Three Years Ended December 31, 1996 and
for the thirteen weeks ended March 30, 1996 and March 29, 1997 ......................... F-4
Consolidated Statements of Stockholders' Equity for the Three Years Ended December 31,
1996 and for the thirteen weeks ended March 30, 1996 and March 29, 1997 ................ F-5
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1996
and for the thirteen weeks ended March 30, 1996 and March 29, 1997 ................... F-6
Notes to Consolidated Financial Statements ............................................. F-7
MID-STATE PLASTICS, INC.
Report of Independent Certified Public Accountants .................................... F-18
Statement of Income for the eleven months ended July 29, 1994 ........................ F-19
Statement of Cash Flows for the eleven months ended July 29, 1994 ..................... F-20
Notes to Statements of Income and Cash Flows for the eleven months ended July 29, 1994 .. F-21
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
Anchor Holdings, Inc.
We have audited the accompanying consolidated balance sheets of Anchor
Holdings, Inc. and Subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1996. 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 Anchor
Holdings, Inc. and Subsidiaries as of December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Knoxville, Tennessee COOPERS & LYBRAND L.L.P.
January 31, 1997
F-2
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except per share data)
<TABLE>
<CAPTION>
December 31, March 29,
---------------------- ---------
1995 1996 1997
--------- --------- --------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ......................................................... $ 784 $ 1,578 $ 108
Accounts receivable, less allowance for doubtful accounts,
allowances, and returns of $1,063 in 1995 and $1,050 in 1996 21,758 21,400 25,157
Inventories ................................................ 20,938 20,411 21,598
Prepaid expenses and other assets ........................... 313 1,626 619
Refundable federal income taxes .............................. 416 448 130
Deferred income taxes ....................................... 1,886 2,023 1,729
--------- --------- --------
Total current assets ....................................... 46,095 47,486 49,341
Property, plant, and equipment, net ........................... 52,589 52,723 52,701
Goodwill, net ................................................ 11,222 10,395 10,189
Other assets, net ............................................. 6,623 6,087 6,010
--------- --------- --------
$ 116,529 $ 116,691 $ 118,241
========= ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt ........................ $ 5,000 $ 6,000 $ 6,000
Current maturities of obligations under capital leases ...... 376 480 361
Cash Float ................................................ -- -- 2,808
Accounts payable ............................................. 8,683 6,120 6,127
Other accrued expenses and current liabilities ............... 5,630 7,423 6,986
--------- --------- --------
Total current liabilities ................................. 19,689 20,023 22,282
Long-term debt, less current maturities ..................... 49,490 44,702 42,764
Related party long-term debt ................................. 21,000 21,000 21,000
Accrued pension liability .................................... 4,347 4,957 5,179
Deferred income taxes ....................................... 2,473 2,906 2,878
Other long-term liabilities ................................. 2,267 2,286 2,263
--------- --------- --------
Total liabilities .......................................... 99,266 95,874 96,366
--------- --------- --------
Commitments and contingencies (Notes 6, 7, 8, 10, 11 and 13)
Stockholders' equity:
Common stock--par value $.01 per share; authorized
2,000,000 shares; shares issued 1,018,160 ................. 10 10 10
Additional paid-in capital ................................. 10,240 10,240 10,240
Retained earnings .......................................... 7,519 11,145 12,203
Additional pension liability, net of tax of $304 in 1995 and
$348 in 1996 ............................................... (496) (568) (568)
Treasury stock at cost ....................................... (10) (10) (10)
--------- --------- --------
Total stockholders' equity ................................. 17,263 20,817 21,875
--------- --------- --------
$ 116,529 $ 116,691 $ 118,241
========= ========= ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended
December 31, March 30, March 29,
----------------------------------- --------- ---------
1994 1995 1996 1996 1997
--------- -------- -------- ------- -------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net sales ............................................. $ 118,267 $149,366 $156,858 $39,414 $41,546
Cost of goods sold .................................... 100,059 125,028 129,221 31,673 34,653
--------- -------- -------- ------- -------
Gross profit .......................................... 18,208 24,338 27,637 7,741 6,893
Amortization expense .................................... 1,712 1,662 1,530 343 343
Selling, general and administrative expense ............ 7,634 9,409 11,358 2,915 2,615
--------- -------- -------- ------- -------
Operating income ....................................... 8,862 13,267 14,749 4,483 3,935
--------- -------- -------- ------- -------
Other income (expense):
Gain (loss) on disposal of fixed assets ............... (41) 23 (123) (1) (9)
Interest expense, net ................................. (2,831) (5,463) (4,931) (1,188) (1,271)
Interest expense, related party ........................ (3,153) (3,153) (3,193) (798) (801)
Other, net ............................................. 780 (997) (285) (111) (17)
--------- -------- -------- ------- -------
Total other expense, net .............................. (5,245) (9,590) (8,532) (2,098) (2,098)
--------- -------- -------- ------- -------
Income before income taxes and extraordinary item ...... 3,617 3,677 6,217 2,385 1,837
Provision for income taxes .............................. 1,507 1,239 2,591 1,000 779
--------- -------- -------- ------- -------
Income before extraordinary item ........................ 2,110 2,438 3,626 1,385 1,058
Extraordinary item--loss on early extinguishment of
debt, net of tax of $172................................ 334 -- -- -- --
--------- -------- -------- ------- -------
Net income .......................................... $ 1,776 $ 2,438 $ 3,626 $ 1,385 $ 1,058
========= ======== ======== ======= =======
Earnings per common and common equivalent share:
Income before extraordinary item ..................... $1.70 $1.85 $2.58 $ .98 $ .75
Extraordinary item .................................... .25 -- -- -- --
----- ----- ----- ----- -----
Net income .......................................... $1.45 $1.85 $2.58 $ .98 $ .75
===== ===== ===== ===== =====
Weighted average common and common equivalent
shares outstanding ................................... 1,348 1,348 1,406 1,418 1,419
===== ===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the years ended December 31, 1994, 1995 and 1996 (in thousands)
<TABLE>
<CAPTION>
Common Stock
---------------- Additional Additional
Shares Paid-in Retained Treasury Pension
Issued Amount Capital Earnings Stock Liability Total
------ ------ ---------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1993 ......... 1,000 $10 $ 9,490 $ 3,305 $ -- $ (331) $ 12,474
Net income ........................ -- -- -- 1,776 -- -- 1,776
Issuance of common stock ......... 18 -- 750 -- -- -- 750
Additional pension liability ...... -- -- -- -- -- (69) (69)
----- ---- -------- ------- ------ ------- --------
Balances, December 31, 1994 ......... 1,018 10 10,240 5,081 -- (400) 14,931
Net income ........................ -- -- -- 2,438 -- -- 2,438
Additional pension liability ...... -- -- -- -- -- (96) (96)
Treasury stock acquired,
242.13 shares ..................... -- -- -- -- (10) -- (10)
----- ---- -------- ------- ------ ------- --------
Balances, December 31, 1995 ......... 1,018 10 10,240 7,519 (10) (496) 17,263
Net income ........................ -- -- -- 3,626 -- -- 3,626
Additional pension liability ...... -- -- -- -- -- (72) (72)
----- ---- -------- ------- ------ ------- --------
Balances, December 31, 1996 ......... 1,018 $10 $ 10,240 $11,145 $ (10) $ (568) $ 20,817
===== ==== ======== ======= ====== ======= ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-5
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (in thousands)
<TABLE>
<CAPTION>
Year Ended Thirteen Weeks Ended
----------------------------------- ------------------------
December 31, March 30, March 29,
1994 1995 1996 1996 1997
--------- ----------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income .......................................... $ 1,776 $ 2,438 $ 3,626 $ 1,385 $ 1,058
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Deferred income taxes .............................. 881 60 296 74 266
Depreciation and amortization ........................ 9,466 9,768 9,605 2,340 2,329
Provision for doubtful accounts ..................... 126 356 20 2 --
Provision for inventory obsolescence ............... (88) 450 (266) 316 87
(Gain) loss from disposal of fixed assets ............ 41 (23) 123 1 9
Changes in assets and liabilities, net of effects of
purchase of business (Note 2):
Accounts receivable ................................. (3,024) (1,361) 337 (693) (3,757)
Inventories ....................................... 1,647 (3,909) 794 (2,364) (1,274)
Prepaid and other assets ........................... (1,525) (1,634) (1,798) (256) 947
Refundable federal income taxes ..................... (161) 154 (32) 342 318
Accounts payable, accrued expense and
other liabilities .................................. (2,264) 2,523 371 (2,980) (208)
-------- -------- -------- ------- -------
Net cash provided (used) by operating activities .. 6,875 8,822 13,076 (1,833) (225)
-------- -------- -------- ------- -------
Cash flows from investing activities:
Purchase of property, plant and equipment ............ (5,724) (6,932) (8,028) (2,484) (1,973)
Purchase of net assets of business .................. (27,394) -- -- --
Proceeds from sale of fixed assets .................. 79 479 14 --
-------- -------- -------- ------- -------
Net cash used in investing activities ............ (33,039) (6,453) (8,014) (2,484) (1,973)
-------- -------- -------- ------- -------
Cash flows from financing activities:
Checks written in excess of bank balances ............ (399) -- -- 2,219 2,808
Borrowings on long-term debt ........................ 61,935 9,886 8,647 4,460 --
Principal payments on long-term debt .................. (33,629) (12,569) (12,435) (2,855) (1,938)
Principal payments on capital lease obligations ...... (279) (588) (480) (187) (142)
Sale of common stock ................................. 750 -- -- -- --
Payments of debt issue costs ........................ (1,596) -- -- -- --
Proceeds from other long-term liabilities ............ 62 1,016 -- -- --
Shares acquired in treasury ........................... -- (10) -- -- --
-------- -------- -------- ------- -------
Net cash provided by (used in) financing
activities ........................................ 26,844 (2,265) (4,268) 3,637 728
-------- -------- -------- ------- -------
Net increase (decrease) in cash ...................... 680 104 794 (680) (1,470)
Cash at beginning of period ........................... -- 680 784 784 1,578
-------- -------- -------- ------- -------
Cash at end of period ................................. $ 680 $ 784 $ 1,578 $ 104 $ 108
======== ======== ======== ======= =======
Supplemental cash flow information:
Income taxes paid .................................... $1,492 $1,243 $1,945 $ -- $ --
Interest paid ....................................... $5,284 $8,172 $7,799 $1,906 $1,993
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
F-6
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(in thousands except for per share data)
Anchor Holdings, Inc. (the "Company") was incorporated March 9, 1990, under
the laws of the State of Delaware. The Company's subsidiaries manufacture and
sell: brushes used in medical and dental applications; plastic and metal
packaging for the cosmetics industry; and molded plastics products, including
assembly of plastic parts and construction of molds used in the injection
molding business. Substantially all sales are made on credit without collateral.
The Company manufactures dental products in the Morristown, Tennessee facility
and cosmetics products in three facilities: Matamoros, Mexico; Morristown,
Tennessee; and Waterbury, Connecticut. The majority of the cosmetics goods are
produced in the Matamoros facility. Molded plastics products are produced in
four separate plants in Seagrove, North Carolina as well as in a facility in
Round Rock, Texas. In addition to the manufacturing facilities, the Company
operates mold technology centers in Elk Grove, Illinois and Sanford, North
Carolina.
1. Summary of Significant Accounting Policies:
The significant accounting policies followed by the Company and its
subsidiaries in the presentation of their consolidated financial statements
are summarized below:
Principles of Consolidation--The financial statements include the accounts of
Anchor Holdings, Inc. the parent holding company, its wholly owned
subsidiaries Anchor Advanced Products Foreign Sales Corporation and Anchor
Advanced Products, Inc., and its Mexican subsidiary, Cepillos de Matamoros,
S.A. de C.V. All significant intercompany balances and transactions have been
eliminated in consolidation.
Cash and Cash Equivalents--The Company considers investments with a maturity
90 days or less to be cash equivalents.
Inventories--Inventories are stated at the lower of cost or market. Cost is
determined using standard costs which approximate the first-in, first-out
method. Valuation allowances are provided for valuation adjustments related
to carrying costs in excess of estimated market value and potential
obsolescence.
Property, Plant, Equipment, and Depreciation--Property, plant, and equipment
are recorded at cost. Assets under capital leases are stated at the present
value of minimum lease payments at the inception of the lease. Depreciation
and amortization are provided on the straight-line basis over the estimated
useful lives (5 to 30 years) of the various properties.
Intangible Assets and Amortization--Intangible assets represent goodwill,
organizational expenses, loan costs, and costs allocated to noncompete
agreements arising principally from the acquisition of the Company in 1990
and the acquisition of the assets of Mid-State Plastics, Inc. in 1994. These
assets are amortized on a straight-line basis over their estimated useful
lives ranging between two and fifteen years.
Pension Plans--Pension costs for defined benefit plans are determined in
accordance with Statement of Financial Accounting Standard No. 87, and
include current costs plus the amortization of transition assets over a
period of 21 years. The Company funds pension costs in accordance with the
plans and legal requirements. The Company also has a defined contribution
savings plan for all domestic employees for which it matches one-half of
employee contributions up to six percent of employee compensation.
Income Taxes--Deferred tax liabilities and assets are determined based on the
difference between the financial statements and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
Earnings Per Share--Earnings per share is based on the weighted average
number of shares of common stock and common stock equivalents outstanding
during the period. Common stock equivalents are considered to be the warrants
and options outstanding.
Reclassifications--Reclassifications have been made to certain previously
reported 1994 and 1995 amounts in order to conform with the current year's
presentations.
Significant Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates
of the financial statements
F-7
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
1. Summary of Significant Accounting Policies (Continued):
and the reported amounts of revenues and expenses during the reporting
periods. Significant estimates of the Company include the allowance for
doubtful accounts, inventory obsolescence reserves and certain self-insured
retained risks. Actual results could differ from these estimates.
Impairment of Long-Lived Assets--In March 1995, the FASB issued Statement of
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, which (i) requires that
long-lived assets to be held and used be reviewed for impairment whenever
events or circumstances indicate that the carrying value of an asset may not
be recoverable, (ii) requires that long-lived assets to be disposed of be
reported at the lower of the carrying amount or the fair value less costs to
sell, and (iii) provides guidelines and procedures for measuring impairment
losses that are different from previously existing guidelines and procedures.
The Company adopted the provisions of Statement 121 in 1996; the adoption did
not have a material effect on the Company's financial position, results of
operations or cash flows.
2. Acquisition of Mid-State Plastics, Inc.:
On July 29, 1994, the Company purchased substantially all of the operating
assets and assumed certain obligations of Mid-State Plastics, Inc. for a
total price of approximately $27,400. The funds used to acquire Mid-State
Plastics, Inc. were provided by the proceeds of long-term borrowings. The
acquisition was accounted for under the purchase method and, accordingly, the
operating results of Mid-State Plastics, Inc. have been included in the
consolidated operating results since the date of acquisition. The purchase
price, including the acquisition costs, was allocated to the net assets
acquired based on estimated fair values at the date of acquisition as
follows:
Notes and accounts receivable ......... $ 3,470
Inventory .............................. 3,196
Prepaid expenses and other assets ...... 263
Property, plant and equipment ......... 12,110
Supply contract ........................ 1,000
Noncompete agreement .................. 250
Goodwill .............................. 12,094
Liabilities assumed ..................... (4,983)
--------
$ 27,400
========
3. Inventories:
Inventories at December 31, 1995 and 1996, consists of:
1995 1996
------- -------
Raw materials .................. $10,281 $ 9,508
Work in process ............... 7,368 6,254
Finished goods .................. 4,860 5,954
------- -------
22,509 21,716
Less valuation allowances ...... 1,571 1,305
------- -------
$20,938 $20,411
======= =======
F-8
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
4. Property, Plant, and Equipment:
Property, plant, and equipment at December 31, 1995 and 1996, consists of:
1995 1996
-------- -------
Land .............................................. $ 1,256 $ 1,254
Buildings and improvements ......................... 15,256 17,019
Machinery and equipment ............................ 64,343 70,383
Furniture and fixtures ............................ 3,362 3,331
Leasehold improvements ............................ 1,320 938
Vehicles ........................................... 130 140
-------- -------
85,667 93,066
Less accumulated depreciation and amortization .... 33,724 40,737
-------- -------
51,943 52,329
Construction in progress ......................... 646 394
-------- -------
$ 52,589 $52,723
======== =======
Depreciation and amortization of property, plant and equipment was $7,126,
$7,787 and $7,756 for the years ended December 31, 1994, 1995 and 1996,
respectively.
5. Intangible and Other Assets:
Intangible and other assets at December 31, 1995 and 1996, consist of:
Estimated
Useful Lives 1995 1996
------------ ------- -------
Intangible assets:
Grant fees ...................... 3 years $ 87 $ 87
Organizational expenses .......... 5-10 years 1,539 1,539
Loan costs ...................... 5 years 1,596 1,596
Noncompete agreement ............. 3-5 years 1,250 1,250
Supply contract ................... 65 months 1,000 1,000
Acquisition costs ................ 5 years 1,043 1,043
Goodwill ......................... 15 years 12,392 12,392
Intangible pension asset .......... 37 years 2,004 2,004
------- -------
20,911 20,911
Less accumulated amortization .... 4,702 6,551
------- -------
Other assets:
Cash value of life insurance .... 1,616 2,105
Other assets ...................... 20 17
------- -------
$17,845 $16,482
======= =======
Amortization expense related to intangibles totaled $1,712, $1,662 and $1,530
for the years ended December 31, 1994, 1995 and 1996, respectively. The 1994
amortization includes a write off of $495 of loan costs associated with the
debt that was refinanced (see Note 6). Amortization of loan fees that were
charged to interest expense totaled $133, $319 and $319 for the years ended
December 31, 1994, 1995 and 1996, respectively.
The intangible pension asset represents prior service cost related to the
supplemental executive retirement plan and relates to the unrecognized net
obligation at the date of initial application as described in Note 8.
F-9
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
6. Long-Term Debt:
Long-term debt at December 31, 1995 and 1996, consists of:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Borrowings under revolving credit agreement; floating rates (a) ... $14,740 $15,952
Term note; floating rates (b) ....................................... 39,750 34,750
Senior subordinated notes, due April 30, 2000 (c) .................. 9,000 9,000
Junior subordinated notes due April 30, 2000 (c) .................. 12,000 12,000
------- -------
75,490 71,702
Less current maturities ............................................. 5,000 6,000
------- -------
$70,490 $65,702
======= =======
</TABLE>
a. This revolving credit agreement provides a number of options for variable
rate borrowings subject to potential limitations based on percentages of
inventories, receivables and outstanding letters of credit. The rate at
December 31, 1996 was 8.125% on $12,000 of the balance, and 9.5% on the
remaining portion. The agreement expires July 29, 1999, at which time all
borrowings are due.
b. This term note is payable in semiannual installments ranging from $500 to
$3,000, plus interest under a number of variable rate options through July
29, 1999. The rate at December 31, 1996 was 8.125%.
c. This senior and junior subordinated debt is payable to certain
stockholders. The senior subordinated notes have a cash coupon payable
quarterly in arrears. In the event the minimum quarterly fixed charge
coverage ratio is not met for any reporting period through April 2000, the
cash interest payable will be paid in the form of deferred interest notes
to the extent necessary to bring the Company back in compliance with the
minimum quarterly fixed charge coverage ratio. All interest payments
through 1996 have been paid currently in cash.
The various debt agreements contain restrictions on, among other things,
capital expenditures, payment of cash dividends, liens on assets, acquisition
or sale of subsidiaries, issuance of additional debt, purchases of
investments, and so-called "junior" payments. In addition, the agreements
contain covenants which, among other things, require the Company to maintain
certain financial ratios including minimum net worth, interest coverage
ratio, fixed charge ratio, and leverage ratio. The Company was in compliance
with these covenants at December 31, 1996. The agreements are collateralized
by all of the Company's assets as well as the stock of the Company and its
subsidiaries.
In connection with the acquisition described in Note 2, the Company
refinanced the revolving credit agreement and the term note. The net effect
of the transaction resulted in an extraordinary pre-tax loss of $505, which
is reflected in the accompanying 1994 statement of operations.
The aggregate maturities of long-term debt for each of the five years
subsequent to December 31, 1995, and in the aggregate thereafter, are as
follows:
Year Amount
---- ------
1997 ...... $ 6,000
1998 ...... 7,000
1999 ...... 37,702
2000 ...... 21,000
-------
$71,702
=======
7. Leases:
The Company leases a warehouse, land, and certain equipment under capital
leases that expire on various dates through December 2000. The net book value
of buildings, land, and equipment recorded under capital leases at December
31, 1995 and 1996, was $1,774 and $1,036, respectively. Amortization of
assets held under capital leases is included with depreciation expense.
F-10
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
7. Leases (Continued):
The Company also has a noncancelable operating lease for two facilities which
requires the Company to pay all executory costs such as maintenance, taxes,
and insurance.
Future minimum lease payments under noncancelable operating leases with
initial or remaining lease terms in excess of one year and the present value
of future minimum capital lease payments as of December 31, 1996, are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Year Ending December 31: Leases Leases
------- --------
<S> <C> <C>
1997 ............................................................ $ 555 $316
1998 ............................................................ 508 279
1999 ............................................................ 269 199
2000 ............................................................ 108 115
Thereafter ...................................................... -- 57
------ ----
Total minimum lease payments .................................... 1,440 $966
====== ====
Less amounts representing interest
(at rates ranging from 10% to 11.7%) .............................. 240
Final month paid in advance .................................... 54
------
Present value of net minimum capital lease payments ............ 1,146
Less current maturities of obligations under capital leases ...... 480
------
Obligations under capital leases excluding current installments $ 666
======
</TABLE>
Total rent expense for operating leases for the years ended December 31,
1994, 1995 and 1996, was $743, $1,201 and $1,779, respectively.
8. Employee Benefit Plans:
The Company sponsors pension plans covering substantially all domestic
employees. Plans covering domestic salaried employees provide benefits that
are based on an employee's years of service and compensation during the
five-year period prior to retirement. The plan covering domestic hourly
employees provides benefits of stated amounts based on an employee's years of
service. Annually, the Company contributes to the plans covering domestic
employees such amounts which are actuarially determined to provide the plans
with sufficient assets to meet future benefit payment requirements. Foreign
executives and employees are covered by fully funded programs as legally
required.
The following table sets forth the funded status of the Company's domestic
defined benefit pension plans and related amounts recognized in the Company's
consolidated balance sheets at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------------------ ------------------
Salary Hourly Salary Hourly
------ ------ ------ ------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Benefit obligations:
Vested ....................................... $ 945 $1,605 $ 987 $1,901
Nonvested .................................... 101 34 58 41
------ ------ ------ ------
Accumulated benefit obligation ............... $1,046 $1,639 $1,045 $1,942
====== ====== ====== ======
</TABLE>
F-11
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
8. Employee Benefit Plans (Continued):
<TABLE>
<CAPTION>
1995 1996
------------------- --------------------
Salary Hourly Salary Hourly
------ ------ ------ ------
<S> <C> <C> <C> <C>
Projected benefit obligation for service
rendered to date ........................... $ 1,622 $ 1,639 $ 1,756 $ 1,942
Plan assets at estimated fair value ...... 1,186 1,348 1,419 1,732
------- ------- ------- --------
Excess of projected benefit obligation over
plan assets .............................. (436) (291) (337) (210)
Unrecognized transition amount ............ 518 7 488 7
Unrecognized prior service cost ............ -- 116 -- 110
Unrecognized net (gain) loss ............... (288) 800 (523) 916
Unrecognized net obligation ............... -- (923) -- (1,033)
------- ------- ------- --------
Accrued (prepaid) pension cost ......... $ (206) $ (291) $ (372) $ 210
======= ======= ======= ========
</TABLE>
Plan assets consist of cash and temporary investments.
Net pension cost for the years ended December 31, 1994, 1995 and 1996,
included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
------------------ ------------------ ------------------
Salary Hourly Salary Hourly Salary Hourly
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Service cost--benefits earned during the period . $ 185 $ 173 $ 184 $ 168 $ 199 $ 182
Interest cost on projected benefit obligation ...... 95 92 106 109 130 131
Estimated/actual return on plan assets ............ (87) (86) (87) (111) (158) 14
Net amortization and deferral ..................... 23 31 22 38 84 (99)
----- ----- ----- ------ ------ -----
Net pension cost .................................... $ 216 $ 210 $ 225 $ 204 $ 255 $ 228
===== ===== ===== ====== ====== =====
</TABLE>
Assumptions used in accounting for the pension plans as of December 31, 1994,
1995 and 1996, were:
<TABLE>
<CAPTION>
1994 1995 1996
------------------ ------------------ ------------------
Salary Hourly Salary Hourly Salary Hourly
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Discount rate .................................... 8.0% 8.0% 8.0% 8.0% 8.0% 8.0%
Rate of increase in compensation levels ......... 5.0% N/A 4.0% N/A 3.9% N/A
Expected long-term rate of return on assets ...... 9.0% 9.0% 8.0% 9.0% 8.0% 9.0%
</TABLE>
In 1991, the Company entered into agreements with certain key executive
officers, providing for supplemental payments upon retirement, disability, or
death. The Company purchased life insurance policies to fund the liability
under these agreements, which also provide death benefits to the Company. The
following table sets forth the status of the supplemental executive
retirement plan (SERP) and related amounts recognized in the Company's
consolidated balance sheets at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligation--nonvested ... $ 3,547 $ 4,263
========= =========
Projected benefit obligation for services rendered to date ... $ 6,037 $ 7,401
Plan assets ................................................ -- --
--------- ---------
Excess of projected benefit obligations over plan assets ... (6,037) (7,401)
Unrecognized transition amount .............................. 4,228 4,746
Unrecognized net obligation at date of initial application ... (1,738) (1,608)
--------- ---------
Accrued pension cost ....................................... $ (3,547) $ (4,263)
========= =========
</TABLE>
F-12
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
8. Employee Benefit Plans (Continued):
The Company intends to fund the plan through Company-owned life insurance,
which has a cash value of $2,105 at December 31, 1996; however, the insurance
policies are not considered plan assets.
Net pension cost for the SERP for the years ended December 31, 1994, 1995 and
1996, consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits earned during the period ...... $ (21) $221 $431
Interest cost on projected benefit obligations ...... 184 246 284
Net amortization .................................... 213 131 130
------ ---- ----
$ 376 $598 $845
======= ==== ====
</TABLE>
The Company also sponsors defined contribution savings plans for
substantially all domestic employees. Contributions for the years ended
December 31, 1994, 1995 and 1996, approximated $325, $456 and $492,
respectively.
Pension costs for the foreign subsidiary amounted to approximately $530, $582
and $654 for the years ended December 31, 1994, 1995 and 1996, respectively.
9. Income Taxes:
The provision for income taxes for the years ended December 31, 1994, 1995
and 1996, consisted of the following:
1994 1995 1996
------ ------ ------
Federal tax:
Current .................. $ 515 $ 939 $2,065
Deferred .................. 846 57 197
State:
Current .................. 37 32 52
Deferred .................. 35 3 99
Foreign (Mexico) tax ...... 74 208 178
------ ------ ------
$1,507 $1,239 $2,591
====== ====== ======
Income tax expense varies from the amount computed by applying the federal
corporate income tax rate of 34% to income before income taxes as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ------- ------
<S> <C> <C> <C>
Computed "expected" income tax expense ..................... $1,229 $ 1,250 $2,144
Increase (decrease) in income taxes resulting from: ......
Foreign sales corporation income ........................ -- (190) (99)
State income taxes, net of federal tax effect ............ 48 23 99
Nondeductible portion of meals and entertainment ......... 101 69 48
Foreign income taxes .................................... 74 208 178
Write off charitable contribution deferred asset ......... -- -- 75
Other, net ................................................ 55 (121) 146
------ ------- ------
Actual income tax provision .............................. $1,507 $ 1,239 $2,591
====== ======= ======
</TABLE>
F-13
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
9. Income Taxes (Continued):
The components of the net deferred income tax assets and liabilities as of
December 31, 1995 and 1996, are as follows:
<TABLE>
<CAPTION>
1995 1996
----------------------- ----------------------
Current Noncurrent Current Noncurrent
------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Deferred tax assets:
Estimate for doubtful accounts and returns ...... $ 351 $ -- $ 404 $ --
Inventory allowances ........................... 40 -- 667 --
Accrued expenses ................................. 614 -- 860 --
Additional pension liability ..................... 304 218 -- 834
Contributions carryforward ..................... -- 220 -- --
Net operating loss carryforward .................. 577 -- 46 --
Alternative minimum tax credits .................. -- 2,911 -- 1,332
Other .......................................... -- 298 46 495
------ --------- ------ ---------
Total deferred tax assets ..................... 1,886 3,647 2,023 2,661
------ --------- ------ ---------
Deferred tax liabilities:
Property, plant and equipment .................. -- 5,945 -- 5,567
Other .......................................... -- 175 -- --
------ --------- ------ ---------
Total deferred tax liabilities .................. -- 6,120 -- 5,567
------ --------- ------ ---------
Net deferred tax asset (liability) ............ $1,886 $ (2,473) $2,023 $ (2,906)
====== ========= ====== =========
</TABLE>
Net operating loss carryforwards utilized in 1996 were approximately $293.
Net operating loss carryforwards utilized in 1995, for federal income tax
purposes and financial statement purposes amounted to approximately $2,482.
The Company has available at December 31, 1996, $-0- of federal net operating
loss carryforwards. Net operating losses of approximately $1,466 remain to be
carried forward to offset future state taxable income. Approximately $1,332
of alternative minimum tax credits may be carried forward indefinitely. The
amount of unrecognized deferred tax liability for temporary differences
related to investments in foreign subsidiaries that are essentially permanent
in duration were $1,496 and $1,430 for the years ending December 31, 1995 and
1996, respectively.
10. Employee Stock Options, Warrants, and Incentives:
On October 29, 1990, the Company adopted the 1990 Time Accelerated Restricted
Stock Option Plan, as amended effective April 1, 1996 (the "1990 Plan"). A
maximum of 163.3 thousand shares of the Company's common stock may be issued
pursuant to the 1990 Plan upon the exercise of options. Under the 1990 Plan,
nonqualified stock options may be granted to members of senior management of
the Company and its subsidiaries. As of December 31, 1996, options to
purchase 163.3 thousand shares of the Company's common stock at exercise
prices of $9.50--$30.00 per share have been granted.
On June 11, 1996, the Company adopted the 1995 Time Accelerated Restricted
Stock Option Plan (the "1995 Plan"). A maximum of twenty-five thousand shares
of the Company's common stock may be issued pursuant to the 1995 Plan upon
the exercise of options. Under the 1995 Plan, nonqualified stock options may
be granted to members of senior management of the Company and its
subsidiaries who were formerly employed by Mid- State and who, at the time of
adoption of the 1995 Plan, were employed in the Company's Mid-State Plastics
Division. As of December 31, 1996, options to purchase twenty-five thousand
shares of the Company's common stock at exercise prices of $41.30 per share
have been granted.
Both plans are administered by the Board of Directors of the Company or a
Committee consisting of three or more directors. Subject to the provisions of
each Plan, the Board of Directors of the Company has the authority to select
optionees and determine the terms of the options granted, including (i) the
number of shares subject to such option, (ii) when the option becomes
exercisable and (iii) the exercise price of the option; provided, however,
that no option may have a term in excess of ten years and six months from the
date of grant.
F-14
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
10. Employee Stock Options, Warrants, and Incentives (Continued):
The terms and conditions of an option grant are set forth in a related option
agreement. An option is not transferable by the optionee except by will or by
the laws of descent and distribution. Options granted under either plan will
terminate upon the earliest to occur of (a) ten years and six months have
elapsed since the date of the grant of the option, (b) 30 days following an
optionee's voluntary termination or termination for cause of employment with
the Company or any of its subsidiaries, or (c) 180 days following an
optionee's termination of employment without cause or due to death or
disability of the optionee.
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, Accounting for Stock Based Compensation ("SFAS 123"). As
permitted by SFAS 123, the Company has chosen to apply APB Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25") and related
interpretations in accounting for its Plans. The adoption of this standard
had no impact on the financial statements as all options granted were
compensatory options. No compensation expense is recognized for the granting
of options during 1996. Had compensation cost for the Company's Plans been
determined based on the fair value at the grant dates for awards under the
Plans consistent with the method of SFAS 123, the Company's net income and
net income per share would have been reduced to the pro forma amounts of
$2,431 and $1.84, respectively, for 1995 and $3,599 and $2.54, respectively,
for 1996. The fair value of each option grant is estimated using the Minimum
Value Method with the following assumptions used for grants in 1995 and 1996,
risk-free interest rates of 6.04% and 6.46%, respectively; and expected lives
of 10 years.
A summary of the status of the Company's 1990 Plan as of December 31, 1994,
1995 and 1996, and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1994 1995 1996
------------------------ -------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Shares Exercise Price Shares Exercise Price Shares Exercise Price
------ -------------- -------- ---------------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of
year ......................... 153 $9.50 153 $9.50 153 $9.50
Granted ........................ -- 10 $30.00
Exercised ..................... -- -- --
Forfeited ..................... -- -- --
----- ----- ------
Outstanding, end of year ...... 153 $9.50 153 $9.50 163 $10.76
===== ===== ======
Options exercisable at
year-end ................... -- 153 153
Fair value of options granted . -- $ -- $11.96
===== ===== ======
</TABLE>
A summary of the status of the Company's 1995 Plan as of December 31, 1995
and 1996, and changes during the years ending on those dates is presented
below:
<TABLE>
<CAPTION>
1995 1996
-------------------------- --------------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
------ -------------- ------ --------------
<S> <C> <C> <C> <C>
Outstanding, beginning of year ......... -- $ -- 25 $41.30
Granted .............................. 25 41.30 -- --
Exercised .............................. -- -- -- --
Forfeited .............................. -- -- -- --
------
Outstanding, end of year ............... 25 $41.30 25 $41.30
------ ====
Options exercisable at year-end ...... -- --
====== ====
Fair value of options granted ......... $5.03 --
====== ====
</TABLE>
F-15
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
10. Employee Stock Options, Warrants, and Incentives (Continued):
The following table summarizes information about the Plan's stock options at
December 31, 1996:
<TABLE>
<CAPTION>
Number Weighted-Average Weighted Number
Range of Outstanding Remaining Average Exercisable
Exercise Price at 12/31/96 Contractual Life Exercise Price at 12/31/96
- ----------------- -------------- ------------------- ----------------- -------------
<S> <C> <C> <C> <C>
$ 9.50 153 4 years $ 9.50 153
$30.00 10 10 $30.00 --
$41.30 25 9 $41.30 --
----- ----
188 153
===== ====
</TABLE>
The Company has issued to the ML-Lee Funds warrants to purchase 380 thousand
shares of common stock exercisable at $9.50 per share. As of December 31,
1996, no warrants had been exercised, although all of the warrants are
vested. Affiliates of the ML-Lee Funds comprise the majority holders of the
Company's common stock.
The Company had a long-term incentive compensation plan whereby certain
management employees received bonuses due to the achievement of certain
performance targets met through 1994. The bonuses totaling $2,500 were paid
in March 1995.
11. Customer Supply Agreements:
On January 11, 1991, the Company entered into an agreement with a major
customer to supply product at certain agreed-upon levels through December
1992, with an option for the customer to extend the contract for three
additional one year periods. The customer has extended the agreement through
June 30, 1999. The agreement guarantees certain gross margin percentages in
varying amounts over the term of the agreement based upon variable labor,
material and overhead costs. The agreement is cancelable by the customer;
however, if such cancellation occurs, the customer agrees to absorb a portion
of the Company's capital investment associated with the agreement in
decreasing amounts over the term of the contract. The Company is currently in
negotiation with the customer for an extension of the agreement.
On July 1, 1993, the Company entered into an agreement with another major
customer to supply product at certain agreed-upon levels through December
1997, with an option for the customer to extend the contract for three
additional one year periods. The agreement guarantees certain gross margin
percentages in varying amounts over the term of the agreement based upon
variable labor, material and overhead costs. The agreement is cancelable by
the customer; however, if such cancellation occurs, the customer agrees to
absorb a portion of the Company's capital investment associated with the
agreement in decreasing amounts over the term of the contract.
In connection with the purchase of Mid-State Plastics, Inc., discussed in
Note 2, the Company assumed a contract with a customer to maintain a
manufacturing facility in Texas for the production of injection molded
plastic parts. The customer has the exclusive right, unless otherwise agreed,
to purchase the manufacturing capacity of the facility. The agreement is
effective until July 2000, with the customer having the right to renew on a
yearly basis. The customer guarantees the Company 80% of capacity and if not
utilized, reimburses the Company based on a predetermined rate. In the event
that production exceeds the guarantee, the Company owes the customer an
amount computed at one-half the predetermined rate.
12. Business and Credit Concentrations:
The Company's sales are generally made on account without collateral.
Repayment terms vary based on certain conditions. The Company maintains
reserves which management believes are adequate to provide for potential
credit losses. The majority of the Company's customer base spans the United
States.
The Company had two customers which individually had accounts receivable
balances in excess of 10% of the total accounts receivable balance at
December 31, 1995 and 1996, respectively. Management believes the total
accounts receivable due from these customers, which was approximately $7,600
and $6,748 at December 31,
F-16
<PAGE>
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(in thousands except for per share data)
12. Business and Credit Concentrations (Continued):
1995 and 1996, respectively, is fully collectible. The respective percentage
for each customer with sales in excess of 10% of the years ended December 31,
1994, 1995 and 1996, was as follows:
1994 1995 1996
------- ------- ------
Customer A ...... 32% 29% 24%
Customer B ...... 13% 14% 19%
Customer C ...... 19% 13% 10%
13. Contingencies:
The Company is subject to claims, normally employment related, in the
ordinary course of business. Management does not believe the resolution of
any such claims will result in a material adverse effect on the future
financial condition, results of operations or cash flows of the Company.
14. Fair Value of Financial Instruments:
The following methods and assumptions were used by the Company in estimating
the fair values of its financial instruments:
Current Asset and Liabilities--The carrying value of the Company's cash,
accounts receivable, accounts payable and accrued expenses approximate fair
value because of the short maturity of these instruments.
Long-Term Debt and Bank Credit Agreement--The fair value of the Company's
borrowings under term notes and revolving credit agreements was estimated
based upon current rates offered to the Company for debt of the same
remaining maturity. The fair value of such debt approximates carrying value
at December 31, 1996.
The Company estimates that the fair values of its junior and senior
subordinated notes at December 31, 1996 is approximately $22,199, compared to
their carrying value of $21,000. In making such assessments, the Company
utilized quoted market prices and discounted cash flow analysis as
appropriate.
15. Related Party Transactions:
Transactions involving related parties not otherwise disclosed herein are as
follows:
Management fees of $180 each year have been paid to Thomas H. Lee Company
during 1994, 1995 and 1996, respectively, for management and other consulting
services provided to the Company. Affiliates of the Thomas H. Lee Company
comprise the majority holders of the Company's common stock.
The Company leases warehouse space (near its facilities in Seagrove, North
Carolina) from an individual that is an officer, director and shareholder.
The lease terms are month-to-month, and rent paid under the lease totaled $68
in 1996.
16. Information about the Company's Operations in Different Geographic Areas:
The Company has significant operations in Mexico as well as the United
States. The operations in Mexico do not involve sales to unaffiliated
customers. All sales for the Mexican subsidiary are to the U.S. Company and
are marked up based on a contract price, which at December 31, 1996 was 7.4%.
These sales were $6,081, $6,418, and $6,081, respectively, for the years
ending December 31, 1994, 1995 and 1996 and were eliminated in consolidation.
Identifiable assets in Mexico were $15,876 and $14,823, respectively, at
December 31, 1995 and 1996. These amounts include intercompany
receivables/payables of $547 and $835, which were eliminated in
consolidation.
F-17
<PAGE>
The Company had sales to customers in foreign countries of $13,919, $11,249
and $13,143 for the years ending December 31, 1994, 1995 and 1996.
17. Quarterly Information (Unaudited)
The quarterly consolidated financial statements include the accounts of Anchor
Holdings, Inc. and its wholly-owned subsidiaries (the Company). All significant
intercompany balances and transactions have been eliminated in consolidation.
The quarterly consolidated financial statements have been prepared, without
audit, in accordance with generally accepted accounting principles, pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the quarterly consolidated financial statements include
all adjustments which are necessary for a fair presentation of the financial
position and results of operations for the interim periods presented; such
adjustments being of a normal recurring nature. Certain information and
footnote disclosures have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these quarterly consolidated financial
statements and notes thereto be read in conjunction with the consolidated
financial statements and notes thereto included for the year ended December 31,
1996. Results of operations in interim periods are not necessarily indicative
of results to be expected for a full year.
The components of inventory for the quarter ended March 29, 1997 are as
follows:
Raw materials .................. $10,732
Work in process ............... 5,622
Finished goods .................. 6,636
--------
22,990
Less valuation allowances ...... 1,392
--------
$21,598
========
The income tax expense for the quarters ended March 30, 1996 and March 29, 1997
varies from the amount of expense computed by applying the federal corporate
income tax rate of 34% to net income before taxes due to comparable items
reflected in the years ended December 31, 1995 and 1996 footnote.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share," which changes the
calculations used for earnings per share (EPS) and makes them comparable to
international EPS standards. It replaces the presentation of primary EPS with a
presentation of basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities with complex
capital structures and requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and denominator of
the diluted EPS computation. The effect of the standard on quarterly
consolidated financial statements would be to result in $1.36 and $1.04 of
basic EPS for the quarters ended March 30, 1996 and March 29, 1997. The
standard would have no effect on the diluted EPS. The Statement is effective
for financial statements issued for periods ending after December 15, 1997;
earlier application is not permitted.
On April 2, 1997, Anchor Advanced Products, Inc. (the Issuer) issued
$100,000,000 of 11-3/4% Senior Notes due 2004. The net proceeds to the Issuer
from the sale of the Initial Notes was $96.6 million (after deducting
discounts, commissions, fees and expenses thereof) and were used: (i) to prepay
in full $51.5 million in borrowings under the Revolving Credit and Term Loan
Agreement, including all accrued interest and fees payable upon such
prepayment, (ii) to pay $22.3 million to redeem $9.0 million aggregate
principal amount of Senior Subordinated Notes and $12.0 million aggregate
principal amount of Junior Subordinated Notes, each due April 30, 2000 and
payable to ML-Lee Acquisition Fund II, L.P. and ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P., including all accrued interest and premiums
payable upon such redemption, and (iii) to pay $22.8 million of a $24.4 million
dividend on the Issuer's common stock. To pay the remaining portion of the
dividend, the Issuer borrowed approximately $1.5 million under the New Credit
Facility. All of the Issuer's common stock is owned by Anchor Holdings, Inc.
(the Company). The Company used the $24.4 million from the Issuer dividend,
together with $5.1 million of proceeds from the exercise of warrants and
options to purchase the Company's common stock, to pay a $29.5 million dividend
on its capital stock.
F-18
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Mid-State Plastics, Inc.
Seagrove, North Carolina
We have audited the accompanying statements of income and cash flows for
the eleven months ended July 29, 1994 of Mid-State Plastics, Inc. 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 results of operations and cash flows of Mid-State
Plastics, Inc. for the eleven months ended July 29, 1994 in conformity with
generally accepted accounting principles.
As described in notes to the financial statements, substantially all
operating assets were sold and liabilities assumed as of the close of business
on July 29, 1994. These financial statements are prepared immediately prior to
the sale of business.
Asheboro, North Carolina Cherry, Bekaert & Holland, L.L.P.
September 23, 1994
F-19
<PAGE>
MID-STATE PLASTICS, INC.
STATEMENT OF INCOME
Eleven Months Ended July 29, 1994
Net sales ................................................ $ 32,451,097
Cost of sales ............................................. 27,680,910
------------
Gross profit ............................................. 4,770,187
Selling, general and administrative expenses ............ 2,423,038
------------
Operating income .......................................... 2,347,149
------------
Other income (deductions)
Interest expense ....................................... (793,759)
Interest income ....................................... 34,145
Gain on disposal of property, plant and equipment ...... 17,945
Share of loss of nonconsolidated joint ventures ......... (23,446)
Gain on disposal of nonconsolidated joint venture ...... 31,687
Other -- net .......................................... 74,087
------------
Other deductions -- net ................................. (659,341)
------------
Net income before income tax .............................. 1,687,808
Income tax expense ....................................... 31,244
------------
Net income ................................................ $ 1,656,564
============
See notes to financial statements.
F-20
<PAGE>
MID-STATE PLASTICS, INC.
STATEMENT OF CASH FLOWS
Eleven Months Ended July 29, 1994
<TABLE>
<S> <C>
Cash flows from operating activities
Net earnings ..................................................................... $ 1,656,564
Adjustments to reconcile net earnings to net cash provided by operating activities
Depreciation .................................................................. 1,528,024
Increase in accrued retirement benefits ....................................... 167,644
Gain on disposal of property, plant and equipment .............................. (17,945)
Gain on disposal of nonconsolidated joint venture .............................. (31,687)
Share of loss of nonconsolidated joint ventures ................................. 23,446
Amortization of loan costs ...................................................... 4,928
(Increase) decrease in other assets ............................................. 75,912
Changes in operating assets and liabilities
(Increase) in accounts receivable ............................................. (74,629)
(Increase) in inventory ...................................................... (1,348,353)
(Increase) in prepaid expenses ................................................ (99,813)
Increase in accounts payable and accrued expenses .............................. 799,250
-----------
Net cash provided by operating activities .................................... 2,683,341
-----------
Cash flows from investing activities
Purchase of property, plant and equipment ....................................... (2,291,568)
Proceeds from sale of equipment ................................................... 9,750
Proceeds from sale of joint venture ............................................. 300,000
Collections on advances to nonconsolidated joint ventures ........................ 22,768
Increase in cash surrender value of officers life insurance ..................... (306,370)
-----------
Net cash used in investing activities .......................................... (2,265,420)
-----------
Cash flows from financing activities
Principal payments under capital lease obligation .............................. (553,407)
Principal payments on long-term debt ............................................. (656,779)
Cash distributions ............................................................... (927,129)
Net borrowings from (payments on) revolving line of credit ........................ 1,378,813
Loan from stockholder ............................................................ 500,000
Borrowings against life insurance policies ....................................... 116,534
-----------
Net cash used in financing activities .......................................... (141,968)
-----------
Net increase in cash and cash equivalents .......................................... 275,953
Cash and cash equivalents at beginning of period .................................... 89,030
-----------
Cash and cash equivalents at end of period .......................................... $ 364,983
===========
Supplemental cash flow information
Interest paid ..................................................................... $ 763,760
Income taxes paid ............................................................... 27,244
</TABLE>
See notes to financial statements.
F-21
<PAGE>
MID-STATE PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS
July 29, 1994
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
The Company is in the business of manufacturing molded plastic products,
assembling plastic parts and constructing molds used in the injection molding
business. The molding and assembly operations are located in Seagrove, North
Carolina and Round Rock, Texas. The mold construction operation is located in
Sanford, North Carolina.
Approximately 50% of the Company's sales are to the medical industry.
Customers of the Company are not concentrated in any one geographic area but are
located throughout the United States and abroad. The Company has three
significant customers which accounted for 35%, 12% and 10% of sales in 1994.
Trade accounts receivable from three customers represent 17%, 16% and 13% of
total accounts receivable at July 29, 1994. No other customers accounted for 10%
or more of the Company's sales or receivables.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value). Certain components of finished goods are stated at
standard costs which are determined on a moving average basis.
Accounts receivable
The allowance for doubtful accounts is based on evaluation of periodic
aging of the accounts. Accounts are charged off against the reserve when deemed
uncollectible.
Property, plant and equipment
Depreciation and amortization is calculated on the straight-line method
over the estimated useful lives of the respective assets.
Capitalized leases
Capitalized leases are recorded at the lesser of the net present value of
the minimum lease payments or the fair value of the asset over the lease term.
The buildings and certain machinery recorded under the capital leases are being
amortized over the lease terms.
Loan costs
Loan costs are being amortized over 60 months.
Cash and cash equivalents
For purposes of reporting cash flows, the Company considers all short term
investments with a maturity of three months or less to be cash equivalents.
NOTE 2--SALE OF BUSINESS
On July 29, 1994, the Company sold substantially all of its operating
assets and had its accounts payable, accrued expenses and capital equipment
lease obligations assumed by Anchor Advanced Products, Inc. for a total price of
approximately $26.7 million. The net effect of this transaction after the
related closing expenses is a gain on sale of approximately $13.2 million.
The Company sold all its assets except for cash, cash surrender value of
life insurance policies, and advances to nonconsolidated joint ventures. The
capitalized leased buildings were sold in a separate transaction with the owners
(see Note 9). The Company changed its name to L & D Plastics, Inc. effective
July 29, 1994.
F-22
<PAGE>
MID-STATE PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
July 29, 1994
NOTE 3--NONCONSOLIDATED JOINT VENTURES
The Company has 33% ownership in Pamlico Technical Molding, Inc. which was
organized in 1988 and is engaged in the manufacture of molded plastic products.
The Company accounts for this investment on the equity method.
The Company sold its 31% ownership interest in Wade Precision Plastics,
Inc. for $300,000, thereby realizing a gain of $31,687 during the period ended
July 29, 1994.
Retained earnings of the Company includes undistributed earnings (loss) of
the remaining joint venture of $(272,557) at July 29, 1994 and $(20,798) for the
two joint ventures at August 28, 1993. Condensed financial information shown
below is on a delayed basis due to unavailability of information.
Condensed financial information pertaining to Pamlico Technical Molding,
Inc. is as follows:
Unaudited
---------
1993
----
Net current assets (liabilities) ......... $ (437,479)
Property, plant and equipment--net ...... 868,374
Other assets, less long-term debt ...... (964,082)
------------
Net assets (liabilities) ............... $ (533,187)
============
Net sales .............................. $ 5,162,224
============
Net loss ................................. $ (71,049)
============
NOTE 4--LONG-TERM DEBT
Long-term debt at July 29, 1994 consists of the following:
<TABLE>
<S> <C>
Bank note with interest at 11/4% above prime rate, due in 59 monthly installments of
$40,678 beginning September 1990 and the final installment of the then remaining
balance due August 1995, plus interest due monthly from the date of the loan ...... $1,128,814
Note payable to stockholder with interest due monthly at 2% above prime rate and
subordinated to above bank note which restricts principal repayments upon the
Company meeting certain financial projections ....................................... 1,250,000
----------
2,378,814
Less current portion ............................................................... 488,136
----------
$1,890,678
==========
</TABLE>
The bank note indicated above is collateralized by a continuing security
interest in all receivables, inventories, machinery, fixtures and equipment, and
general intangibles and the personal guarantee of the majority stockholders. The
security interest gives the lender a continuing lien on all of the collateral
and the proceeds and products thereof, and any replacements, additions, or
substitutions, and the proceeds of insurance covering the collateral. Certain
life insurance policies with an approximate face amount of $3,981,312 and net
cash surrender value of $694,166 have been pledged as collateral on the bank
loan acquired in 1990.
F-23
<PAGE>
MID-STATE PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
July 29, 1994
NOTE 4--LONG-TERM DEBT (Continued)
The aggregate maturities of long-term debt are as follows:
Year Amount
- --------------- -----------
1995 ...... $ 488,136
1996 ...... 890,678
1997 ...... 250,000
1998 ...... 250,000
1999 ...... 250,000
2000 ...... 250,000
----------
$2,378,814
==========
The loan agreements pursuant to which the bank note was issued contain
certain covenants. Among others, the agreements have restrictions regarding the
incurring of indebtedness, limiting capital expenditures, limiting expenditures
under lease obligations and limiting the payment of cash dividends. The Company
is also required to maintain a minimum current ratio of .85 to 1.00, maintain a
ratio of net income before taxes and interest to interest expense and current
maturities of at least 1.5 to 1.0 and not permit the ratio of total indebtedness
to tangible net worth to be greater than 2.5 to 1.0. At July 29, 1994 the
Company was in compliance with the various restrictions or had obtained waivers
from the lender where noncompliance existed. The bank and stockholder notes were
satisfied in full at closing of the sale of business described in Note 2.
NOTE 5--REVOLVING CREDIT NOTE
The Company entered into a loan agreement in 1990 with a financial
institution to borrow funds on a revolving credit basis. Subsequent amendments
have increased the limit to $4,000,000 based on amounts up to the sum of 85% of
eligible accounts receivable and 45% of eligible inventory. The advances based
on inventories cannot exceed $1,300,000. At July 29, 1994, the Company had
borrowed $2,569,238 against accounts receivable of $3,505,706 and inventories of
$3,195,562. The revolving credit loan was satisfied in full at closing of the
sale described in Note 2.
NOTE 6--INCOME TAXES
The Company elected S corporation status for the tax year beginning January
1, 1988. As a result of this election, the Company files its tax return on a
calendar year basis, and its federal and North Carolina taxable income is
allocated to shareholders based on their percentage of ownership. Taxable income
apportioned to Texas is assessed a tax computed on current year earned surplus.
NOTE 7--LEASES
The Company leases real estate and certain machinery used in its
operations, certain of which are capital leases. Included in property, plant and
equipment are the following amounts applicable to capital leases:
Buildings ........................... $2,900,000
Machinery and equipment ............ 3,221,452
----------
6,121,452
Less accumulated amortization ...... 2,226,160
----------
$3,895,292
==========
F-24
<PAGE>
MID-STATE PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
July 29, 1994
NOTE 7--LEASES (Continued)
Obligations under capital leases at July 29, 1994 are summarized as
follows:
Current portion ......... $ 631,893
Non-current portion ...... 3,724,340
----------
$4,356,233
==========
Future minimum payments under capital leases are as follows:
Year ending
August
-----------
1995 .......................................... $1,041,107
1996 .......................................... 847,610
1997 .......................................... 780,791
1998 .......................................... 2,021,670
1999 .......................................... 686,794
2000 and thereafter ........................... 211,342
----------
5,589,314
Less amount representing interest ............ 1,233,081
----------
Present value of minimum lease payments ...... $4,356,233
==========
Rental expense under operating leases amounted to $43,731 in 1994,
substantially all of which was paid to a stockholder (Note 9).
NOTE 8--RETIREMENT PLANS
The Company has a noncontributory retirement plan for its officers and key
employees. The Plan is designed so that benefits will be funded primarily from
the proceeds of life insurance policies owned by the Company covering the Plan
participants. The Plan provides monthly benefits upon death or retirement based
on a percentage of their average final three year's salary, subject to a maximum
salary stated in their respective agreements, for a period of 15 years. Vesting
of benefits begins at 10% per year after five years of service until 100% is
reached after 15 years of service. Participants reaching age 60 while employed
by the Company become 100% vested regardless of their years of service.
The Company adopted Statement of Financial Accounting Standard (SFAS) No.
106 for the year ended August 24, 1991. The effect of this accounting standard
is to recognize the projected benefit obligation over the employees' years of
service until they reach the date where full eligibility of benefits is
obtained. The net cash surrender value of life insurance policies owned by the
Company are not considered plan assets for the purpose of SFAS No. 106 since
they have not been segregated and restricted in a trust.
The following table sets forth the plan's funded status reconciled with the
amount shown in the Company's balance sheet at July 29, 1994:
Accumulated retirement benefit obligation
Fully eligible active plan participants ...... $663,356
Fully eligible former plan participants ...... 122,693
Other active plan participants ............... 195,722
--------
Accrued retirement benefits .................. $981,771
========
F-25
<PAGE>
MID-STATE PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
July 29, 1994
NOTE 8--RETIREMENT PLANS (Continued)
Net periodic retirement benefit cost for 1994 included the following
components:
Service cost--benefits attributed to service during the period .... $102,514
Interest cost of accumulated retirement benefits ................... 65,130
--------
Net periodic retirement benefit costs ............................ $167,644
========
The discount rate used in determining the accumulated retirement benefit
obligation was 8%. The rate of compensation increase used to determine
employees' full eligibility dates was 5%.
The Company adopted a 401(k) retirement plan for its employees effective
January 1, 1987. The plan provides that the Company will contribute 50% of the
amount of each participants salary reduction contribution up to a maximum of 6%
of compensation. Benefits and plan expenses charged to operations were $158,649
in 1994.
NOTE 9--RELATED PARTY ACTIVITIES
The Company's Sanford, North Carolina manufacturing facility is under an
operating lease with a partnership in which the Company's President and 26%
stockholder has a substantial ownership interest. The joint venture in which the
Company owns a 33% interest leases its building from another partnership owned
partly by the Company's President.
The Company's manufacturing facilities in Seagrove, North Carolina and
Round Rock, Texas are being leased from a partnership consisting of the
Company's two majority stockholders. The leases are accounted for as capital
leases and the buildings ($2,900,000) are being amortized over periods of
fifteen and ten years respectively (Note 7). Two of the buildings were
originally owned by the Company and sold to the partnership in 1986. The gain
from sale of the buildings is being amortized over the original lease period.
All of the buildings occupied by the Company were included as an additional
part of the purchase transacted by Anchor Advanced Products, Inc. on July 29,
1994 (Note 2).
The Company has a note receivable from its 33% owned joint venture with a
balance of $453,801 at July 29, 1994 requiring monthly interest payments through
August 1994. Beginning September 1994, payments are required in 60 equal
installments of principal plus interest at prime rate plus 11/2%. Interest
earned on this note was $32,517 in 1994. The Company holds a perfected security
interest in all of the debtor's inventory, machinery and equipment. The
Company's president also had an unsecured note receivable of approximately
$100,000 from this joint venture Company.
Purchases of the Company include approximately $27,000 in 1994 from its
joint venture companies. Sales of the Company include approximately $81,300 in
1994 to its joint venture companies.
Interest incurred on the note payable to stockholder (Note 4) was $67,842
in 1994.
NOTE 10--CONTINGENT LIABILITIES
The Company has guaranteed a note issued by a partnership owned partly by
the Company's president. The loan is collateralized by the manufacturing
facilities being leased to the Company's joint venture company. The amount of
this guaranty at July 29, 1994 is $205,000 on a loan with a balance of
approximately $324,000.
F-26
<PAGE>
MID-STATE PLASTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
July 29, 1994
NOTE 11--COMMITMENTS
The Company signed an agreement on December 5, 1989 with a major customer
of their medical products division to establish a manufacturing facility in
Texas for the production of injection molded plastic parts. The Company began
production in July 1990 with the customer having the exclusive right, unless
otherwise agreed, to purchase the manufacturing capacity of the facility. The
agreement is effective until July 2000, with the customer having the right to
renew on a year to year basis. The customer guarantees the Company 80% of
capacity and if not utilized, reimburses the Company based on a predetermined
rate. In the event that production exceeds the guarantee, the Company owes the
customer an amount computed at one-half the predetermined rate.
During the period ended July 29, 1994, the Company entered into agreements
for construction of a peak load utility generation plant. The Company has
incurred approximately $900,000 on the project and expects the total to be
approximately $1,000,000. Management further estimates the plant will generate
approximately a $250,000 reduction in power costs annually.
At July 29, 1994 the Company had entered into agreements to purchase an
injection molding machine costing $325,000. Subsequent to the period ended July
29, 1994, the Company ordered an injection molding machine costing $250,000.
The above commitments were assumed by Anchor Advanced Products, Inc. on
July 29, 1994.
NOTE 12--OTHER MATTERS
In December 1990 the Company adopted a Key Executive Phantom Stock
Agreement for use in issuing phantom stock incentive compensation awards to the
Company's key executives. The board of directors has authorized the issuance of
10,000 phantom shares under the agreement. These shares may be redeemed upon
retirement or termination of the employee at a price equal to the book value of
the Company per share as of the Company's immediately preceding fiscal year end
minus the book value per share at the immediately preceding fiscal year end of
the date issued. In the event the Company is sold by either the sale of its
stock or sale of substantially all of its assets, the Board's unwritten intent
is to redeem the phantom shares at a price per share comparable to the amount
paid to the Company's shareholders. Accordingly, with the sale by the Company of
substantially all of its assets on July 29, 1994, the Board paid $1,582,000 to
the participants in the Phantom Stock Plan after the balance sheet date.
The Company entered into an agreement dated November 1992 with an
investment banking firm. The agreement states that the investment banking firm
will serve as the exclusive financial advisor of the Company with respect to any
financing, refinancing and/or restructuring of any of the Company's existing
senior debt and any arrangement of equity capital or subordinated debt. The
Company paid a fee of approximately $525,000 to the investment banking firm in
connection with the sale of its assets described in Note 2.
F-27
<PAGE>
================================================================================
No dealer, salesperson, or other person has been authorized to give any
information or to make any representations in connection with this Offering
other than those contained in this Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or the Initial Purchasers. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, nor does it constitute an offer to sell or the
solicitation of an offer to buy such securities in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making such
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 sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as of
any time subsequent to its date.
------------------------------
TABLE OF CONTENTS
Page
Summary ................................. 1
Risk Factors .............................. 11
The Exchange Offer ........................ 16
Capitalization ........................... 22
Selected Financial Data .................. 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations .............................. 25
Business ................................. 29
Management .............................. 37
Principal Stockholders .................. 43
Certain Transactions ..................... 45
Description of Certain Indebtedness ...... 46
Description of the Exchange Notes ......... 47
Description of the Initial Notes ......... 68
Exchange Offer; Registration Rights ...... 69
Income Tax Considerations ............... 71
Plan of Distribution ..................... 72
Legal Matters ........................... 73
Experts ................................. 73
Index to Financial Statements ............ F-1
$100,000,000
[ANCHOR LOGO]
Anchor Advanced
Products, Inc.
11 3/4% Series B Senior Notes
due 2004
----------
PROSPECTUS
----------
, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors And Officers
Section 145 of the General Corporation Law of the State of Delaware provides
as follows:
(a) A corporation may 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, 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 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 interest of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which 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, had reasonable cause
to believe that his conduct was unlawful.
(b) A corporation may 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 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, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit 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 except that no indemnification
shall be made in respect to any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made (1)
by a majority vote of the board of directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) if there
are no such directors, or, if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by other employees and agents may be so paid upon
such terms and conditions, if any, as the board of directors deems
appropriate.
II-1
<PAGE>
(f) The indemnification and advancement of expenses provided by, or granted
pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this section, references to the corporation shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
(i) For purposes of this section, references to other enterprises shall
include employee benefit plans; references to fines shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to serving at the request of the corporation shall include any
service as a director, officer, employee, or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner not opposed to the best interests of the corporation as referred to in
this section.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this section shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Article 10 of the By-laws of the Issuer provides as follows:
ARTICLE 10
INDEMNIFICATION
Section 10.1 Third Party Actions. 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 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, officer, employee or agent of
another corporation, partnership, joint venture, trust 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, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or
upon plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which
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, had
reasonable cause to believe that his conduct was unlawful.
II-2
<PAGE>
Section 10.2 Derivative Actions. 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 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, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit 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 except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
Section 10.3 Expenses. To the extent that a Director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and
10.2, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
Section 10.4 Authorization. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the Director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in Sections
10.1 and 10.2. Such determination shall be made (a) by the Board of Directors
by a majority vote of a quorum consisting of Directors who were not parties
to such action, suit or proceeding, or (b) if such a quorum is not
obtainable, or, even if obtainable a quorum of disinterested Directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
Section 10.5 Advance Payment of Expenses. Expenses incurred by an officer
or Director in defending a civil or criminal action, suit or proceeding may
be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of such officer
or Director to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Corporation as authorized in
this Article 10. Such expenses incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
Section 10.6 Non-Exclusiveness. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 10.7 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such, whether or not the Corporation would
have the power to indemnify him against such liability under the provisions
of this Article 10.
Section 10.8 Constituent Corporations. The Corporation shall have power to
indemnify any person who is or was a director, officer, employee or agent of
a constituent corporation absorbed in a consolidation or merger with this
Corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, in the same manner as
hereinabove provided for any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the
full extent provided by law, to indemnify any person for any act or
II-3
<PAGE>
omission of such person against all loss, cost, damage and expense (including
attorney's fees) if such person is determined (in the manner prescribed in
Section 10.4 hereof) to have acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interest of the
Corporation.
Article X of the Certificate of Incorporation of the Issuer provides in
relevant part as follows:
No director shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability; provided,
however, that, to the extent provided by applicable law, this provision shall
not eliminate the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of Delaware, or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of
this provision shall apply to or have any effect on the liability or alleged
liability of any director for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
The Company may purchase a Directors and Officers Liability Insurance
Policy for certain losses arising from certain claims and charges, including
claims and charges under the Securities Act, which may be made against such
persons while acting in their capacities as directors and officers of the
Company.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits.
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of Anchor Advanced Products, Inc.
3.2 By-Laws of Anchor Advanced Products, Inc.
3.3 Restated Certificate of Incorporation of Anchor Holdings, Inc.
3.4 By-Laws of Anchor Holdings, Inc.
4.1 Form of Note (included in Exhibit 4.2 hereto)
4.2 Indenture dated as of April 2, 1997 between Anchor Advanced Products, Inc., Anchor
Holdings, Inc. and Fleet National Bank, as Trustee
*5.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding legality
of securities being registered.
*8.1 Opinion of Hutchins, Wheeler & Dittmar, A Professional Corporation regarding tax
matters.
10.1 Anchor Holdings, Inc. Amended and Restated Shareholders Agreement dated July 29, 1994
10.2 Form of Employment Agreement
10.3 Form of Supplemental Executive Retirement Benefit Agreement and Side Letter
10.4 Exit Bonus Agreement between Anchor Holdings, Inc. and Francis H. Olmstead, Jr.
10.5 Management Agreement between Thomas H. Lee Company, Anchor Acquisition Corp. ,
Anchor Brush Company and Anchor Cosmetics Company dated as of April 30, 1990
+10.6 Agreement by and between Abbott Laboratories and Mid-State Plastics, Inc., dated as of
December 5, 1989, as supplemented by letters dated August 5, 1994, September 11, 1995,
September 19, 1995 and March 5, 1997.
+10.7 Memorandum of Agreement by and between The Procter & Gamble Manufacturing
Company and Anchor Advanced Products, Inc. dated as of December 16, 1995.
+10.8 Letter Agreement by and between Anchor Advanced Products, Inc. and Colgate-
Palmolive Company, dated as of July 12, 1996.
10.9 Form of Connecticut Development Authority Note
10.10 Purchase Agreement by and between Anchor Advanced Products, Inc., Anchor Holdings,
Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, CIBC Wood Gundy
Securities Corp. and NationsBanc Capital Markets, Inc. dated as of March 26, 1997.
10.11 Registration Rights Agreement by and between Anchor Advanced Products, Inc.,
Anchor Holdings, Inc. and Donaldson, Lufkin & Jenrette Securities Corporation, CIBC
Wood Gundy Securities Corp. and NationsBanc Capital Markets, Inc. dated as of
April 2, 1997.
II-4
<PAGE>
10.12 Credit Agreement by and between Anchor Advanced Products, Inc., Anchor Holdings,
Inc. and NationsBank, N.A. dated as of April 2, 1997.
11.1 Statement re Computation of Per Share Earnings
21.1 List of subsidiaries of Anchor Holdings, Inc.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Cherry, Bekaert & Holland, L.L.P.
*23.3 Consent of Hutchins, Wheeler & Dittmar, A Professional Corporation (included in
Exhibit 5.1)
24.1 Powers of Attorney (Contained on the signature page to this Registration Statement)
25.1 Statement on Form T-1 of the eligibility of the Trustee
27.1 Financial Data Schedule
99.1 Letter of Transmittal
99.2 Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement between Anchor Advanced Products, Inc., Anchor
Holdings, Inc. and Fleet National Bank
</TABLE>
+ Portions of this Exhibit have been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
* This Exhibit shall be supplied in a future amendment to this Registration
Statement.
(b) Financial Statement Schedules.
S-1 Independent Auditors' Report on Financial Statement Schedule
S-2 Schedule I--Valuation and Qualifying Accounts
Schedules other than those listed above have been omitted since the
information is not applicable, not required or is included in the
financial statements or notes thereto.
Item 22. Undertakings.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 20 above or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes 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
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.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Knoxville, State of
Tennessee, on the 12th day of May, 1997.
ANCHOR ADVANCED PRODUCTS, INC.
By: /s/ Francis H. Olmstead, Jr.
----------------------------------
Francis H. Olmstead, Jr.
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Francis H. Olmstead, Jr. and Phyllis C. Best and
each of them, with the power to act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------- ---------------------------------------- --------------
<S> <C> <C>
/s/ Francis H. Olmstead, Jr. Chairman, President and Chief May 12, 1997
---------------------------- Executive Officer (Principal Executive
Francis H. Olmstead, Jr. Officer)
/s/ Robert T. Parkey Executive Vice President and Director May 12, 1997
----------------------------
Robert T. Parkey
/s/ Jack C. Lail Executive Vice President and Director May 12, 1997
----------------------------
Jack C. Lail
/s/ Geoffrey A. deRohan Executive Vice President and Director May 12, 1997
----------------------------
Geoffrey A. deRohan
/s/ Phyllis C. Best Senior Vice President, Finance and May 12, 1997
---------------------------- Controller (Principal Financial and
Phyllis C. Best Accounting Officer)
/s/ Scott A. Schoen Director May 12, 1997
-----------------------------
Scott A. Schoen
/s/ Thomas R. Shepherd Director May 12, 1997
-----------------------------
Thomas R. Shepherd
/s/ Terrence M. Mullen Director May 12, 1997
-----------------------------
Terrence M. Mullen
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Knoxville, State of
Tennessee, on the 12th day of May, 1997.
ANCHOR HOLDINGS, INC.
By: /s/ Francis H. Olmstead, Jr.
----------------------------------
Francis H. Olmstead, Jr.
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Francis H. Olmstead, Jr. and Phyllis C. Best and
each of them, with the power to act without the other, his or her true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her or in his or her name, place and stead, in any
and all capacities to sign any and all amendments or post-effective amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------- ---------------------------------------- --------------
<S> <C> <C>
/s/ Francis H. Olmstead, Jr. Chairman, President and Chief May 12, 1997
--------------------------- Executive Officer (Principal Executive
Francis H. Olmstead, Jr. Officer)
/s/ Robert T. Parkey Executive Vice President and Director May 12, 1997
-------------------------
Robert T. Parkey
/s/ Jack C. Lail Executive Vice President and Director May 12, 1997
-------------------------
Jack C. Lail
/s/ Geoffrey A. deRohan Executive Vice President and Director May 12, 1997
-------------------------
Geoffrey A. deRohan
/s/ Phyllis C. Best Senior Vice President, Finance and May 12, 1997
-------------------------- Controller (Principal Financial and
Phyllis C. Best Accounting Officer)
/s/ Scott A. Schoen Director May 12, 1997
-------------------------
Scott A. Schoen
/s/ Thomas R. Shepherd Director May 12, 1997
-------------------------
Thomas R. Shepherd
/s/ Terrence M. Mullen Director May 12, 1997
-------------------------
Terrence M. Mullen
</TABLE>
II-7
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
Our report on the consolidated financial statements of Anchor Holdings, Inc. and
Subsidiaries as of December 31, 1995 and 1996 and for each of the three years in
the period ended December 31, 1996 is included on page F-2 of this Form S-4
Registration Statement. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule listed
in the index on page II-5 of this Form S-4 Registration Statement.
In our opinion, the financial statements schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
January 31, 1997
S-1
<PAGE>
Schedule I
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Balance at Charged to Charge to Balance at
Description beginning of period expense other account Deductions end of period
- ------------------------------------------- ---------------------- ------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
1994:
Allowance for bad debts ............... $ 508 $ 126 $ -- $ 131 $ 503
Allowance for returns and allowances ... 144 -- 1,464 1,347 261
Reserve for self insurance risk ......... 923 2,504 -- 2,436 991
Reserve for inventory obsolescence ...... 1,211 88 -- 78 1,221
------- ------- ------- ------- -------
$2,786 $2,719 $1,464 $3,993 $2,976
======= ======= ======= ======= =======
1995:
Allowance for bad debts ............... $ 503 $ 11 $ 411 $ 162 $ 763
Allowance for returns .................. 261 -- 2,008 1,969 300
Reserve for self insurance risk ......... 991 2,146 -- 2,451 686
Reserve for inventory obsolescence ...... 1,221 450 -- 100 1,571
------- ------- ------- ------- -------
$2,976 $2,607 $2,419 $4,682 $3,320
======= ======= ======= ======= =======
1996:
Allowance for bad debts ............... $ 763 $ 340 $ -- $ 197 $ 906
Allowance for returns .................. 300 -- 2,488 2,644 144
Reserve for self insurance risk ......... 686 4,732 -- 4,075 1,343
Reserve for inventory obsolescence ...... 1,571 678 -- 944 1,305
------- ------- ------- ------- -------
$3,320 $5,750 $2,488 $7,860 $3,698
======= ======= ======= ======= =======
</TABLE>
S-2
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
ANCHOR ADVANCED PRODUCTS, INC.
-------------------------------------
ANCHOR ADVANCED PRODUCTS, INC., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Anchor Advanced Products, Inc. The
name of the corporation as originally incorporated was Anchor Cosmetics Company.
The date of filing of its original Certificate of Incorporation with the
Secretary of State was April 16, 1990.
2. This Restated Certificate of Incorporation restates and integrates
and further amends the Certificate of Incorporation by deleting in its entirety
Paragraph Seventh thereof and renumbering the Paragraphs to reflect such
deletion.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended and restated in its entirety hereby
to read as herein set forth in full:
FIRST: The name of this Corporation shall be Anchor Advanced Products,
Inc.
SECOND: Its registered office in the State of Delaware is to be located
at 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.
THIRD: The purpose or purposes of the Corporation shall be: To engage
in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which this Corporation is
authorized to issue is: 3,000, with a par value of $.01 per
share.
FIFTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
<PAGE>
A. The Board of Directors of the Corporation is expressly
authorized to adopt, amend, or repeal the By-Laws of the
corporation.
B. Elections of directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within
or without the State of Delaware as the By-Laws of the
Corporation may provide or as may be designated from time to
time by the Board of Directors of the Corporation.
SIXTH: The Corporation hereby elects in this Certificate of
Incorporation not to be governed by Section 203 of the General
Corporation Law of Delaware.
SEVENTH: Except as stated in Article EIGHTH of this Certificate of
Incorporation, the Corporation reserves the right to amend or
repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon a stockholder herein are
granted subject to this reservation.
EIGHTH: No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty
as a director notwithstanding any provision of law imposing such
liability; provided, however, that, to the extent provided by
applicable law, this provision shall not eliminate the liability
of a director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section
174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply
to or have any effect on the liability or alleged liability of
any director for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
2
<PAGE>
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors and by unanimous written consent of the stockholders in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Anchor Advanced Products, Inc. has caused this
Certificate to be signed by Francis H. Olmstead, Jr., its President, and
attested by John J. Nugent, its Secretary, this 31st day of October, 1994.
ANCHOR ADVANCED PRODUCTS, INC.
By: /s/ Francis H. Olmstead, Jr.,
-----------------------------
President
ATTEST:
/s/ John J. Nugent
- ----------------------------
Secretary
3
EXHIBIT 3.2
BY-LAWS
OF
ANCHOR ADVANCED PRODUCTS, INC.
------------------------------
<PAGE>
ANCHOR ADVANCED PRODUCTS, INC.
------------------------------
BY-LAWS
-------
ARTICLE 1
---------
CERTIFICATE OF INCORPORATION
----------------------------
Section 1.1 Contents. The name, location of principal office and purposes
of the Corporation shall be as set forth in its Certificate of Incorporation.
These By-Laws, the powers of the Corporation and of its Directors and
stockholders, and all matters concerning the conduct and regulation of the
business of the Corporation shall be subject to such provisions in regard
thereto, if any, as are set forth in said Certificate of Incorporation. The
Certificate of Incorporation is hereby made a part of these By-Laws.
Section 1.2 Certificate in Effect. All references in these By-Laws to the
Certificate of Incorporation shall be construed to mean the Certificate of
Incorporation of the Corporation as from time to time amended, including (unless
the context shall otherwise require) all certificates and any agreement of
consolidation or merger filed pursuant to the Delaware General Corporation Law,
as amended.
ARTICLE 2
---------
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1 Place. All meetings of the stockholders may be held at such
place either within or without the State of Delaware as shall be designated from
time to time by the Board
<PAGE>
of Directors, the Chairman of the Board of Directors or the President and stated
in the notice of the meeting or in any duly executed waiver of notice thereof.
Section 2.2 Annua1 Meeting. Annual meetings of stockholders, shall be held
on the second Tuesday of April in each year, if not a legal holiday, and, if a
legal holiday, then on the next secular day following, at 10:00 A.M., or at such
other date and time as shall be designated from time to time by the Board of
Directors, the Chairman of the Board of Directors or the President and stated in
the notice of the meeting. If such annual meeting has not been held on the day
herein provided therefor, a special meeting of the stockholders in lieu of the
annual meeting may be held, and any business transacted or elections held at
such special meeting shall have the same effect as if transacted or held at the
annual meeting, and in such case all references in these By-Laws, except in this
Section 2.2, to the annual meeting of the stockholders shall be deemed to refer
to such special meeting.
Section 2.3 Special Meetings. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President, the Chairman of
the Board, or by the Board of Directors and shall be called by the President or
Secretary at the request in writing of a majority of the
-2-
<PAGE>
Directors then in office, or at the request in writing of stockholders owning a
majority in amount of the entire stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting, which need not be the exclusive purposes for which the meeting
is called.
Section 2.4 Notice of Meetings. A written notice of all meetings of
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the special meeting is
called, shall be given to each stockholder entitled to vote at such meeting.
Except as otherwise provided by law, such notice shall be given not less than
ten nor more than sixty days before the date of the meeting. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
Section 2.5 Affidavit of Notice. An affidavit of the Secretary or an
Assistant Secretary or the transfer agent of the Corporation that notice of a
stockholders meeting has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
Section 2.6 Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction
-3-
<PAGE>
of business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or represented by
proxy at any meeting of the stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, except as hereinafter provided, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might 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 adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 2.7 Voting Requirements. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of any
applicable statute or of the Certificate of Incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
-4-
<PAGE>
Section 2.8 Proxies and Voting. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period. Persons holding stock in a fiduciary capacity shall be entitled
to vote the shares so held, and persons whose stock is pledged shall be entitled
to vote the pledged shares, unless in the transfer by the pledgor on the books
of the Corporation he shall have expressly empowered the pledgee to vote said
shares, in which case only the pledgee, or his proxy, may represent and vote
such shares. Shares of the capital stock of the Corporation owned by the
Corporation shall not be voted, directly or indirectly.
Section 2.9 Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation or any action which may be
taken at any annual or special meeting of such 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, shall be 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
-5-
<PAGE>
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Section 2.10 Stockholder List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, 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 shall 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 shall 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 shall 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. The original or duplicate stock ledger shall be the only evidence as to
who are the stockholders entitled to examine such list, the stock ledger or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
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Section 2.11 Record Date. 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 of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
If no record date is fixed by the Board of Directors:
(a) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall 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.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing
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without a meeting, when no prior action by the Board of Directors is necessary,
shall be the day on which the first written consent is expressed.
(c) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
ARTICLE 3
---------
DIRECTORS
---------
Section 3.1 Number; Election and Term of Office. There shall be a Board of
Directors of the Corporation consisting of not less than one member, the number
of members to be determined by resolution of the Board of Directors or by the
stockholders at the annual or any special meeting, unless the Certificate of
Incorporation fixed the number of Directors, in which case a change in the
number of Directors shall be made only by amendment of the Certificate. Subject
to any limitation which may be contained within the Certificate of
Incorporation, the number of the Board of Directors may be increased at any time
by vote of a majority of the Directors then in office. The Directors shall be
elected at the annual meeting of the stockholders, except as provided in
paragraph (c) of Section 8.1, and each Director elected shall hold office until
his successor is elected and qualified or until his earlier resignation or
removal. Directors need not be stockholders.
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Section 3.2 Duties. The business of the Corporation shall be managed by or
under the direction of its Board of Directors which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation or by these By-Laws directed or required
to be exercised or done by the stockholders.
Section 3.3 Compensation. Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix the compensation of Directors. The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as Directors. No such payment shall preclude any Director from serving
the Corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 3.4 Reliance on Books. A member of the Board of Directors or a
member of any committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account or reports made to the Corporation by any of its officers, or
by an independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any committee, or in relying in
good faith upon other records of the Corporation.
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ARTICLE 4
---------
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 4.1 P1ace. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 4.2 Annual Meeting. The first meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders or any special meeting held in lieu thereof, and no notice of such
meeting shall be necessary to the newly elected Directors in order legally to
constitute the meeting.
Section 4.3 Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board.
Section 4.4 Special Meetings. Special meetings of the Board may be called
by the President on two days' notice to each Director either personally or by
mail or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
Directors unless the Board consists of only one Director, in which case special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of the sole Director.
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Section 4.5 Quorum. At all meetings of the Board a majority of the
Directors then in office shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 4.6 Action Without Meeting. 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 of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 4.7 Telephone Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by
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means of which all persons participating in the meeting can hear each other, and
such participation in a meeting shall constitute presence in person at the
meeting.
ARTICLES
--------
COMMITTEES OF DIRECTORS
-----------------------
Section 5.1 Designation.
(a) The Board of Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
one or more 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.
(b) In the absence or disqualification of a member of a committee, the
member or members thereof 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 of Directors to act at the meeting in the place of
any such absent or disqualified member.
(c) Any such committee, to the extent provided in the resolution of
the Board of Directors designating the committee, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it;
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but no such committee shall have the power or authority in reference to amending
the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the By-Laws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 5.2 Records of Meetings. Each committee shall keep regular minutes
of its meetings and report the same to the Board of Directors when required.
ARTICLE 6
---------
NOTICES
-------
Section 6.1 Method of Giving Notice. Whenever, under any provision of the
law or of the Certificate of Incorporation or of these By-Laws, notice is
required to be given to any Director or stockholder, such notice shall be given
in writing by the Secretary or the person or persons calling the meeting by
leaving such notice with such Director or stockholder at his
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residence or usual place of business or by mailing it addressed to such Director
or stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
Directors may also be given by telegram.
Section 6.2 Waiver. Whenever any notice is required to be given under any
provision of law or of the Certificate of Incorporation or of these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the 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.
ARTICLE 7
---------
OFFICERS
--------
Section 7.1 In General. The officers of the Corporation shall be chosen by
the Board of Directors and shall include a President, a Secretary and a
Treasurer. The Board of Directors may also choose a Chairman of the Board, one
or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any
number of offices may be held by the same
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person, unless the Certificate of Incorporation or these By-Laws otherwise
provide.
Section 7.2 Election of President, Secretary and Treasurer. The Board of
Directors at is first meeting after each annual meeting of stockholders shall
choose a President, a Secretary and a Treasurer.
Section 7.3 Election of Other Officers. The Board of Directors may appoint
such other officers and agents as it shall deem appropriate who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 7.4 Salaries. The salaries of all officers and agents of the
Corporation may be fixed by the Board of Directors.
Section 7.5 Term of Office. The officers of the Corporation shall hold
office until their successors are chosen and qualify or until their earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time in the manner specified in Section 8.2.
Section 7.6 Duties of President and Chairman of the Board. The President
shall be the chief executive officer of the Corporation, shall preside at all
meetings of the stockholders and, if he is a Director, at all meetings of the
Board of Directors if there shall be no Chairman of the Board or in the absence
of the Chairman of the Board, shall have
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general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The President shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. The Chairman of the
Board, if any, shall make his counsel available to the other officers of the
Corporation, shall be authorized to sign stock certificates on behalf of the
Corporation, shall preside at all meetings of the Directors at which he is
present, and, in the absence of the President at all meetings of the
stockholders, and shall have such other duties and powers as may from time to
time be conferred upon him by the Directors.
Section 7.7 Duties of Vice President. In the absence of the President or in
the event of his inability or refusal to act, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated by the Directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President not otherwise
conferred upon the Chairman of the Board, if any, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President. The
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Vice-Presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
Section 7.8 Duties of Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, except as otherwise provided in these By-Laws, and shall perform such
other duties as may be prescribed by the Board of, Directors or President, under
whose supervision he shall be. He shall have charge of the stock ledger (which
may, however, be kept by any transfer agent or agents of the Corporation under
his direction) and of the corporate seal of the Corporation.
Section 7.9 Duties of Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
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Section 7.10 Duties of Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the President and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all of his transactions as Treasurer and of the financial condition of the
Corporation. If required by the Board of Directors, he shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of this office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the Corporation.
Section 7.11 Duties of Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors
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(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE 6
---------
RESIGNATIONS, REMOVALS AND VACANCIES
------------------------------------
Section 8.1 Directors.
(a) Resignations. Any Director may resign at any time by giving
written notice to the Board of Directors or the President or the Secretary. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
(b) Removals. Subject to any provisions of the Certificate of
Incorporation, the holders of stock entitled to vote for the election of
Directors may, at any meeting called for the purpose, by vote of a majority of
the shares of such stock outstanding, remove any Director or the entire Board of
Directors with or without cause and fill any vacancies thereby created. This
Section 8.1(b) may not be altered, amended or repealed except by the holders of
a majority of the shares of stock issued and outstanding and entitled to vote
for the election of the Directors.
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(c) Vacancies. Vacancies occurring in the office of Director and newly
created Directorships resulting from any increase in the authorized number of
Directors shall be filled by a majority of the Directors then in office, though
less than a quorum, unless previously filled by the stockholders entitled to
vote for the election of Directors, and the Directors so chosen shall hold
office subject to the By-Laws until the next annual election and until their
successors are duly elected and qualify or until their earlier resignation or
removal. If there are no Directors in office, then an election of Directors may
be held in the manner provided by statute.
Section 8.2 Officers.
Any officer may resign at any time by giving written notice to the Board of
Directors or the President or the Secretary. Such resignation shall take effect
at the time specified therein; and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. The
Board of Directors may, at any meeting called for the purpose, by vote of a
majority of their entire number, remove from office any officer of the
Corporation or any member of a committee, with or without cause. Any vacancy
occurring in the office of President, Secretary or Treasurer shall be filled by
the Board of Directors and the officers so chosen shall hold office subject to
the By-Laws for the unexpired term in respect of which the vacancy occurred and
until their
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successors shall be elected and qualify or until their earlier resignation or
removal.
ARTICLE 9
---------
CERTIFICATE OF STOCK
--------------------
Section 9.1 Issuance of Stock. The Directors may, at any time and from time
to time, if all of the shares of capital stock which the Corporation is
authorized by its Certificate of Incorporation to issue have not been issued,
subscribed for, or otherwise committed to be issued, issue or take subscriptions
for additional shares of its capital stock up to the amount authorized in its
Certificate of Incorporation. Such stock shall be issued and the consideration
paid therefor in the manner prescribed by law.
Section 9.2 Right to Certificate; Form. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a
Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation; provided that the Directors may provide by one or
more resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertified shares. Certificates may be issued for
partly paid shares and in such case upon the face or back of the certificates
issued to represent any such partly paid
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shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Section 9.3 Facsimile Signature. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have 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 9.4 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
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Section 9.5 Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 9.6 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE 10
----------
INDEMNIFICATION
---------------
Section 10.1 Third Party Actions. 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 he is or was a
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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 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, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which 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, had
reasonable cause to believe that his conduct was unlawful.
Section 10.2 Derivative Actions. 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 he is or was a
Director, officer, employee or agent of the Corporation, or is
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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 him in connection with the defense or settlement of such
action or suit 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 except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section 10.3 Expenses. To the extent that a Director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
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Section 10.4 Authorization. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.1 and 10.2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
Section 10.5 Advance Payment of Expenses. Expenses incurred by an officer
or Director in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of such officer or Director to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article 10. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
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Section 10.6 Non-Exclusiveness. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 10.7 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 10.
Section 10.8 Constituent Corporations. The Corporation shall have power to
indemnify any person who is or was a director, officer, employee or agent of a
constituent corporation absorbed in a consolidation or merger with this
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Corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.
ARTICLE 11
----------
EXECUTION OF PAPERS
-------------------
Except as otherwise provided in these By-Laws or as the Board of Directors
may generally or in particular cases otherwise determine, all deeds, leases,
transfers, contracts, bonds, notes, checks, drafts and other instruments
authorized to be executed on behalf of the Corporation shall be executed by the
President or the Treasurer.
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ARTICLE 12
----------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE 13
----------
SEAL
----
The Corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE 14
----------
OFFICES
-------
In addition to its principal office, the Corporation may have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE 15
----------
AMENDMENTS
----------
Except as otherwise provided herein, these By-Laws may be altered, amended
or repealed or new By-Laws may be adopted by the stockholders or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors, or at any special meeting of the stockholders or of the
Board of Directors if notice of such
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alteration, amendment, repeal or adoption of new By-Laws is contained in the
notice of such special meeting, or by the written consent of a majority in
interest of the outstanding voting stock of the Corporation or by the unanimous
written consent of the Directors. If the power to adopt, amend or repeal by-laws
is conferred upon the Board of Directors by the Certificate of Incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal by-laws.
EXHIBIT 3.3
RESTATED CERTIFICATE OF INCORPORATION
OF
ANCHOR HOLDINGS, INC.
-------------------------------------
ANCHOR HOLDINGS, INC., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. The name of the corporation is Anchor Holdings, Inc. The name of
the corporation as originally incorporated was Anchor Acquisition Corp. The date
of filing of its original Certificate of Incorporation with the Secretary of
State was March 12, 1990.
2. This Restated Certificate of Incorporation restates and integrates
and further amends the Certificate of Incorporation by deleting in its entirety
Paragraph Seventh thereof and renumbering the Paragraphs to reflect such
deletion.
3. The text of the Certificate of Incorporation as amended or
supplemented heretofore is further amended and restated in its entirety hereby
to read as herein set forth in full:
FIRST: The name of this Corporation shall be Anchor Holdings, Inc.
SECOND: Its registered office in the State of Delaware is to be
located at 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.
THIRD: The purpose or purposes of the Corporation shall be: To engage
in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH: The total number of shares of stock which this Corporation is
authorized to issue is: two million (2,000,000) with a par value
of $.01 per share.
FIFTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
<PAGE>
A. The Board of Directors of the Corporation is expressly authorized
to adopt, amend, or repeal the By-Laws of the corporation.
B. Elections of directors need not be by written ballot unless the
By-Laws of the Corporation shall so provide.
C. The books of the Corporation may be kept at such place within or
without the State of Delaware as the By-Laws of the Corporation
may provide or as may be designated from time to time by the
Board of Directors of the Corporation.
SIXTH: The Corporation hereby elects in this Certificate of
Incorporation not to be governed by Section 203 of the General
Corporation Law of Delaware.
SEVENTH: Except as stated in Article EIGHTH of this Certificate of
Incorporation, the Corporation reserves the right to amend or
repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon a stockholder herein are
granted subject to this reservation.
EIGHTH: No director shall be personally liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary
duty as a director notwithstanding any provision of law imposing
such liability; provided, however, that, to the extent provided
by applicable law, this provision shall not eliminate the
liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this provision shall apply
to or have any effect on the liability or alleged liability of
any director for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
2
<PAGE>
4. This Restated Certificate of Incorporation was duly adopted by the
Board of Directors and by unanimous written consent of the stockholders in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Anchor Holdings, Inc. has caused this Certificate
to be signed by Francis H. Olmstead, Jr., its President, and attested by
John J. Nugent, its Secretary, this 31st day of October, 1994.
ANCHOR HOLDINGS, INC.
By: /s/ Francis H. Olmstead, Jr.
----------------------------
President
ATTEST:
/s/ John J. Nugent
- ------------------------------
Secretary
EXHIBIT 3.4
BY-LAWS
OF
ANCHOR HOLDINGS, INC.
---------------------
<PAGE>
BY-LAWS
OF
ANCHOR HOLDINGS, INC.
---------------------
(A Delaware Corporation)
Article 1. Certificate of Incorporation 1
Section 1.1 Contents 1
Section 1.2 Certificate in Effect 1
Article 2. Meetings of Stockholders 1
Section 2.1 Place 1
Section 2.2 Annual Meeting 2
Section 2.3 Special Meetings 2
Section 2.4 Notice of Meetings 3
Section 2.5 Affidavit of Notice 3
Section 2.6 Quorum 3
Section 2.7 Voting Requirements 4
Section 2.8 Proxies and Voting 5
Section 2.9 Action Without Meeting 5
( Section 2.10 Stockholder List 6
Section 2.11 Record Date 7
Article 3. Directors 8
Section 3.1 Number; Election and Term of Office 8
Section 3.2 Duties 9
Section 3.3 Compensation 9
Section 3.4 Reliance on Books 9
Article 4. Meetings of the Board of Directors 10
Section 4.1 Place 10
Section 4.2 Annual Meeting 10
Section 4.3 Regular Meetings 10
Section 4.4 Special Meetings 10
Section 4.5 Quorum 11
Section 4.6 Action Without Meeting 11
Section 4.7 Telephone Meetings 11
Article 5. Committees of Directors 12
Section 5.1 Designation 12
Section 5.2 Records of Meetings 13
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<PAGE>
Article 6. Notices 13
Section 6.1 Method of Giving Notice 13
Section 6.2 Waiver 14
Article 7. Officers 14
Section 7.1 In General 14
Section 7.2 Election of President,
Secretary and Treasurer 15
Section 7.3 Election of Other Officers 15
Section 7.4 Salaries 15
Section 7.5 Term of Office 15
Section 7.6 Duties of President and Chairman
of the Board 15
Section 7.7 Duties of Vice President 16
Section 7.8 Duties of Secretary 17
Section 7.9 Duties of Assistant Secretary 17
Section 7.10 Duties of Treasurer 18
Section 7.11 Duties of Assistant Treasurer 19
Article 8. Resignations, Removals and Vacancies 19
Section 8.1 Directors 19
Section 8.2 Officers 20
Article 9. Certificate of Stock 21
Section 9.1 Issuance of Stock 21
Section 9.2 Right to Certificate; Form 21
Section 9.3 Facsimile Signature 22
Section 9.4 Lost Certificates 22
Section 9.5 Transfer of Stock 23
Section 9.6 Registered Stockholders 23
Article 10. Indemnification 23
Section 10.1 Third Party Actions 23
Section 10.2 Derivative Actions 25
Section 10.3 Expenses 26
Section 10.4 Authorization 26
Section 10.5 Advance Payment of Expenses 26
Section 10.6 Non-Exclusiveness 27
Section 10.7 Insurance 27
Section 10.8 Constituent Corporations 28
Section 10.9 Additional Indemnification 28
Article 11. Execution of Papers 29
Article 12. Fiscal Year 29
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<PAGE>
Article 13. Seal 29
Article 14. Offices 29
Article 15. Amendments 29
-iii-
<PAGE>
ANCHOR HOLDINGS, INC.
---------------------
BY-LAWS
-------
ARTICLE 1
---------
CERTIFICATE OF INCORPORATION
----------------------------
Section 1.1 Contents. The name, location of principal office and purposes
of the Corporation shall be as set forth in its Certificate of Incorporation.
These By-Laws, the powers of the Corporation and of its Directors and
stockholders, and all matters concerning the conduct and regulation of the
business of the Corporation shall be subject to such provisions in regard
thereto, if any, as are set forth in said Certificate of Incorporation. The
Certificate of Incorporation is hereby made a part of these By-Laws.
Section 1.2 Certificate in Effect. All references in these By-Laws to the
Certificate of Incorporation shall be construed to mean the Certificate of
Incorporation of the Corporation as from time to time amended, including (unless
the context shall otherwise require) all certificates and any agreement of
consolidation or merger filed pursuant to the Delaware General Corporation Law,
as amended.
ARTICLE 2
---------
MEETINGS OF STOCKHOLDERS
------------------------
Section 2.1 P1ace. All meetings of the stockholders may be held at such
place either within or without the State of Delaware as shall be designated from
time to time by the Board
<PAGE>
of Directors, the Chairman of the Board of Directors or the President and stated
in the notice of the meeting or in any duly executed waiver of notice thereof.
Section 2.2 Annual Meeting. Annual meetings of stockholders, shall be held
on the second Tuesday of April in each year, if not a legal holiday, and, if a
legal holiday, then on the next secular day following, at 10:00 A.M., or at such
other date and time as shall be designated from time to time by the Board of
Directors, the Chairman of the Board of Directors or the President and stated in
the notice of the meeting. If such annual meeting has not been held on the day
herein provided therefor, a special meeting of the stockholders in lieu of the
annual meeting may be held, and any business transacted or elections held at
such special meeting shall have the same effect as if transacted or held at the
annual meeting, and in such case all references in these By-Laws, except in this
Section 2.2, to the annual meeting of the stockholders shall be deemed to refer
to such special meeting.
Section 2.3 Special Meetings. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President, the Chairman of
the Board, or by the Board of Directors and shall be called by the President or
Secretary at the request in writing of a majority of the
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<PAGE>
Directors then in office, or at the request in writing of stockholders owning a
majority in amount of the entire stock of the Corporation issued and outstanding
and entitled to vote. Such request shall state the purpose or purposes of the
proposed meeting, which need not be the exclusive purposes for which the meeting
is called.
Section 2.4 Notice of Meetings. A written notice of all meetings of
stockholders stating the place, date and hour of the meeting and, in the case of
a special meeting, the purpose or purposes for which the special meeting is
called, shall be given to each stockholder entitled to vote at such meeting.
Except as otherwise provided by law, such notice shall be given not less than
ten nor more than sixty days before the date of the meeting. Business transacted
at any special meeting of stockholders shall be limited to the purposes stated
in the notice.
Section 2.5 Affidavit of Notice. An affidavit of the Secretary or an
Assistant Secretary or the transfer agent of the Corporation that notice of a
stockholders meeting has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
Section 2.6 Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction
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<PAGE>
of business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum shall not be present or represented by
proxy at any meeting of the stockholders, the stockholders entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting from time to time, without notice other than announcement at the
meeting, except as hereinafter provided, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might 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 adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
Section 2.7 Voting Requirements. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of any
applicable statute or of the Certificate of Incorporation, a different vote is
required in which case such express provision shall govern and control the
decision of such question.
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<PAGE>
Section 2.8 Proxies and Voting. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period. Persons holding stock in a fiduciary capacity shall be entitled
to vote the shares so held, and persons whose stock is pledged shall be entitled
to vote the pledged shares, unless in the transfer by the pledgor on the books
of the Corporation he shall have expressly empowered the pledgee to vote said
shares, in which case only the pledgee, or his proxy, may represent and vote
such shares. Shares of the capital stock of the Corporation owned by the
Corporation shall not be voted, directly or indirectly.
Section 2.9 Action Without Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders of the Corporation or any action which may be
taken at any annual or special meeting of such 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, shall be 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
-5-
<PAGE>
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
Section 2.10 Stockholder List. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, 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 shall 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 shall 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 shall 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. The original or duplicate stock ledger shall be the only evidence as to
who are the stockholders entitled to examine such list, the stock ledger or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
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<PAGE>
Section 2.11 Record Date. 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 of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
If no record date is fixed by the Board of Directors:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall 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.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing
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<PAGE>
without a meeting, when no prior action by the Board of Directors is necessary,
shall be the day on which the first written consent is expressed.
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
ARTICLE 3
---------
DIRECTORS
---------
Section 3.1 Number; Election and Term of Office. There shall be a Board of
Directors of the Corporation consisting of not less than one member, the number
of members to be determined by resolution of the Board of Directors or by the
stockholders at the annual or any special meeting, unless the Certificate of
Incorporation fixed the number of Directors, in which case a change in the
number of Directors shall be made only by amendment of the Certificate. Subject
to any limitation which may be contained within the Certificate of
Incorporation, the number of the Board of Directors may be increased at any time
by vote of a majority of the Directors then in office. The Directors shall be
elected at the annual meeting of the stockholders, except as provided in
paragraph (c) of Section 8.1, and each Director elected shall hold office until
his successor is elected and qualified or until his earlier resignation or
removal. Directors need not be stockholders.
-8-
<PAGE>
Section 3.2 Duties. The business of the Corporation shall be managed by or
under the direction of its Board of Directors which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Certificate of Incorporation or by these By-Laws directed or required
to be exercised or done by the stockholders.
Section 3.3 Compensation. Unless otherwise restricted by the Certificate
of Incorporation or these By-Laws, the Board of Directors shall have the
authority to fix the compensation of Directors. The Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as Directors. No such payment shall preclude any Director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 3.4 Reliance on Books. A member of the Board of Directors or a
member of any committee designated by the Board of Directors shall, in the
performance of his duties, be fully protected in relying in good faith upon the
books of account or reports made to the Corporation by any of its officers, or
by an independent certified public accountant, or by an appraiser selected with
reasonable care by the Board of Directors or by any committee, or in relying in
good faith upon other records of the Corporation.
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<PAGE>
ARTICLE 4
---------
MEETINGS OF THE BOARD OF DIRECTORS
----------------------------------
Section 4.1 Place. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 4.2 Annual Meeting. The first meeting of each newly elected Board
of Directors shall be held immediately following the annual meeting of
stockholders or any special meeting held in lieu thereof, and no notice of such
meeting shall be necessary to the newly elected Directors in order legally to
constitute the meeting.
Section 4.3 Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as shall from time to
time be determined by the Board.
Section 4.4 Special Meetings. Special meetings of the Board may be called
by the President on two days' notice to each Director either personally or by
mail or by telegram; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
Directors unless the Board consists of only one Director, in which case special
meetings shall be called by the President or Secretary in like manner and on
like notice on the written request of the sole Director.
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<PAGE>
Section 4.5 Quorum. At all meetings of the Board a majority of the
Directors then in office shall constitute a quorum for the transaction of
business and the act of a majority of the Directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the Directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 4.6 Action Without Meeting. 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 of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 4.7 Telephone Meetings. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any committee, by means
of conference telephone or similar communications equipment by
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<PAGE>
means of which all persons participating in the meeting can hear each other, and
such participation in a meeting shall constitute presence in person at the
meeting.
ARTICLE 5
---------
COMMITTEES OF DIRECTORS
-----------------------
Section 5.1 Designation.
(a) The Board of Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
one or more 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.
(b) In the absence or disqualification of a member of a committee,
the member or members thereof 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 of Directors to act at the meeting in the place of
any such absent or disqualified member.
(c) Any such committee, to the extent provided in the resolution of
the Board of Directors designating the committee, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it;
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<PAGE>
but no such committee shall have the power or authority in reference to amending
the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the By-Laws of the Corporation; and, unless the
resolution or the Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend or to
authorize the issuance of stock Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 5.2 Records of Meetings. Each committee shall keep regular minutes
of its meetings and report the same to the Board of Directors when required.
ARTICLE 6
---------
NOTICES
-------
Section 6.1 Method of Giving Notice. Whenever, under any provision of the
law or of the Certificate of Incorporation or of these By-Laws, notice is
required to be given to any Director or stockholder, such notice shall be given
in writing by the Secretary or the person or persons calling the meeting by
leaving such notice with such Director or stockholder at his
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<PAGE>
residence or usual place of business or by mailing it addressed to such Director
or stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
Directors may also be given by telegram.
Section 6.2 Waiver. Whenever any notice is required to be given under any
provision of law or of the Certificate of Incorporation or of these By-Laws, a
waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the 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.
ARTICLE 7
---------
OFFICERS
--------
Section 7.1 In General. The officers of the Corporation shall be chosen by
the Board of Directors and shall include a President, a Secretary and a
Treasurer. The Board of Directors may also choose a Chairman of the Board, one
or more Vice-Presidents, Assistant Secretaries and Assistant Treasurers. Any
number of offices may be held by the same
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<PAGE>
person, unless the Certificate of Incorporation or these By-Laws otherwise
provide.
Section 7.2 Election of President, Secretary and Treasurer. The Board of
Directors at its first meeting after each annual meeting of stockholders shall
choose a President, a Secretary and a Treasurer.
Section 7.3 Election of Other Officers. The Board of Directors may appoint
such other officers and agents as it shall deem appropriate who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 7.4 Salaries. The salaries of all officers and agents of the
Corporation may be fixed by the Board of Directors.
Section 7.5 Term of Office. The officers of the Corporation shall hold
office until their successors are chosen and qualify or until their earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time in the manner specified in Section 8.2.
Section 7.6 Duties of President and Chairman of the Board. The President
shall be the chief executive officer of the Corporation, shall preside at all
meetings of the stockholders and, if he is a Director, at all meetings of the
Board of Directors if there shall be no Chairman of the Board or in the absence
of the Chairman of the Board, shall have
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<PAGE>
general and active management of the business of the Corporation and shall see
that all orders and resolutions of the Board of Directors are carried into
effect. The President shall execute bonds, mortgages and other contracts
requiring a seal, under the seal of the Corporation, except where required or
permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board of
Directors to some other officer or agent of the Corporation. The Chairman of the
Board, if any, shall make his counsel available to the other officers of the
Corporation, shall be authorized to sign stock certificates on behalf of the
Corporation, shall preside at all meetings of the Directors at which he is
present, and, in the absence of the President at all meetings of the
stockholders, and shall have such other duties and powers as may from time to
time be conferred upon him by the Directors.
Section 7.7 Duties of Vice President. In the absence of the President or
in the event of his inability or refusal to act, the Vice-President (or in the
event there be more than one Vice-President, the Vice-Presidents in the order
designated by the Directors, or in the absence of any designation, then in the
order of their election) shall perform the duties of the President not otherwise
conferred upon the Chairman of the Board, if any, and when so acting, shall have
all the powers of and be subject to all the restrictions upon the President. The
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<PAGE>
Vice-Presidents shall perform such other duties and have such other powers as
the Board of Directors may from time to time prescribe.
Section 7.8 Duties of Secretary. The Secretary shall attend all meetings
of the Board of Directors and all meetings of the stockholders and record all
the proceedings of the meetings of the Corporation and of the Board of Directors
in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, except as otherwise provided in these By-Laws, and shall perform such
other duties as may be prescribed by the Board of Directors or President, under
whose supervision he shall be. He shall have charge of the stock ledger (which
may, however, be kept by any transfer agent or agents of the Corporation under
his direction) and of the corporate seal of the Corporation.
Section 7.9 Duties of Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
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<PAGE>
Section 7.10 Duties of Treasurer. The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors taking proper vouchers for such disbursements,
and shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all of his
transactions as Treasurer and of the financial condition of the Corporation. If
required by the Board of Directors, he shall give the Corporation a bond in such
sum and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of this office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Section 7.11 Duties of Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors
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<PAGE>
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
ARTICLE 8
---------
RESIGNATIONS, REMOVALS AND VACANCIES
------------------------------------
Section 8.1 Directors.
(a) Resignations. Any Director may resign at any time by giving written
notice to the Board of Directors or the President or the Secretary. Such
resignation shall take effect at the time specified therein; and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
(b) Removals. Subject to any provisions of the Certificate of
Incorporation, the holders of stock entitled to vote for the election of
Directors may, at any meeting called for the purpose, by vote of a majority of
the shares of such stock outstanding, remove any Director or the entire Board of
Directors with or without cause and fill any vacancies thereby created. This
Section 8.1(b) may not be altered, amended or repealed except by the holders of
a majority of the shares of stock issued and outstanding and entitled to vote
for the election of the Directors.
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(c) Vacancies. Vacancies occurring in the office of Director and newly
created Directorships resulting from any increase in the authorized number of
Directors shall be filled by a majority of the Directors then in office, though
less than a quorum, unless previously filled by the stockholders entitled to
vote for the election of Directors, and the Directors so chosen shall hold
office subject to the By-Laws until the next annual election and until their
successors are duly elected and qualify or until their earlier resignation or
removal. If there are no Directors in office, then an election of Directors may
be held in the manner provided by statute.
Section 8.2 Officers.
Any officer may resign at any time by giving written notice to the Board
of Directors or the President or the Secretary. Such resignation shall take
effect at the time specified therein; and unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
The Board of Directors may, at any meeting called for the purpose, by vote of a
majority of their entire number, remove from office any officer of the
Corporation or any member of a committee, with or without cause. Any vacancy
occurring in the office of President, Secretary or Treasurer shall be filled by
the Board of Directors and the officers so chosen shall hold office subject to
the By-Laws for the unexpired term in respect of which the vacancy occurred and
until their
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successors shall be elected and qualify or until their earlier resignation or
removal.
ARTICLE 9
---------
CERTIFICATE OF STOCK
--------------------
Section 9.1 Issuance of Stock. The Directors may at any time and from time
to time, if all of the shares of capital stock which the Corporation is
authorized by its Certificate of Incorporation to issue have not been issued,
subscribed for, or otherwise committed to be issued, issue or take subscriptions
for additional shares of its capital stock up to the amount authorized in its
Certificate of Incorporation. Such stock shall be issued and the consideration
paid therefor in the manner prescribed by law.
Section 9.2 Right to Certificate; Form. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board, the President or a
Vice-President and the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary of the Corporation, certifying the number of shares owned
by him in the Corporation; provided that the Directors may provide by one or
more resolutions that some or all of any or all classes or series of the
Corporation's stock shall be uncertified shares. Certificates may be issued for
partly paid shares and in such case upon the face or back of the certificates
issued to represent any such partly paid
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shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Section 9.3 Facsimile Signature. Any of or all the signatures on the
certificate may be facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have 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 9.4 Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
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Section 9.5 Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 9.6 Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE 10
----------
INDEMNIFICATION
---------------
Section 10.1 Third Party Actions. 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 he is or was a
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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 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, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which 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, had
reasonable cause to believe that his conduct was unlawful.
Section 10.2 Derivative Actions. 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 he is
or was a Director, officer, employee or agent of the Corporation, or is
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<PAGE>
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 him in connection with the defense or settlement of such
action or suit 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 except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
Section l0.3 Expenses. To the extent that a Director, officer, employee or
agent of the Corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in Sections 10.1 and 10.2,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
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Section 10.4 Authorization. Any indemnification under Sections 10.1 and
10.2 (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
Director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in Sections 10.1 and 10.2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of Directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested Directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
Section 10.5 Advance Payment of Expenses. Expenses incurred by an officer
or Director in defending a civil or criminal action, suit or proceeding may be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of such officer or Director to repay
such amount unless it shall ultimately be determined that he is entitled to be
indemnified by the Corporation as authorized in this Article 10. Such expenses
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board of Directors deems appropriate.
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<PAGE>
Section 10.6 Non-Exclusiveness. The indemnification provided by this
Article 10 shall not be deemed exclusive of any other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 10.7 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a Director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 10.
Section 10.8 Constituent Corporations. The Corporation shall have power to
indemnify any person who is or was a director, officer, employee or agent of a
constituent corporation absorbed in a consolidation or merger with this
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<PAGE>
Corporation or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, in the same manner as hereinabove
provided for any person who is or was a Director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
Section 10.9 Additional Indemnification. In addition to the foregoing
provisions of this Article 10, the Corporation shall have the power, to the full
extent provided by law, to indemnify any person for any act or omission of such
person against all loss, cost, damage and expense (including attorney's fees) if
such person is determined (in the manner prescribed in Section 10.4 hereof) to
have acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interest of the Corporation.
ARTICLE 11
----------
EXECUTION OF PAPERS
-------------------
Except as otherwise provided in these By-Laws or as the Board of Directors
may generally or in particular cases otherwise determine, all deeds, leases
transfers, contracts, bonds, notes, checks, drafts and other instruments
authorized to be executed on behalf of the Corporation shall be executed by the
President or the Treasurer.
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ARTICLE 12
----------
FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE 13
----------
SEAL
----
The Corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware". The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE 14
----------
OFFICES
-------
In addition to its principal office, the Corporation may have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE 15
----------
AMENDMENTS
----------
Except as otherwise provided herein, these By-Laws may be altered, amended
or repealed or new By-Laws may be adopted by the stockholders or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the stockholders or of
the Board of Directors, or at any special meeting of the stockholders or of the
Board of Directors if notice of such
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<PAGE>
alteration, amendment, repeal or adoption of new By-Laws is contained in the
notice of such special meeting, or by the written consent of a majority in
interest of the outstanding voting stock of the Corporation or by the unanimous
written consent of the Directors. If the power to adopt, amend or repeal by-laws
is conferred upon the Board of Directors by the Certificate of Incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal by-laws.
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EXHIBIT 4.2
Execution Copy
================================================================================
ANCHOR ADVANCED PRODUCTS, INC.
Issuer
ANCHOR HOLDINGS, INC.
Guarantor
11 3/4% SENIOR NOTES DUE 2004
-----------------
INDENTURE
Dated as of April 2, 1997
-----------------
-----------------
Fleet National Bank
-----------------
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1)................................................... 7.10
(a)(2)................................................... 7.10
(a)(3) .................................................. N.A.
(a)(4)................................................... N.A.
(a)(5)................................................... 7.10
(b) ..................................................... 7.10
(c) ..................................................... N.A.
311 (a) ..................................................... 7.11
(b) ..................................................... 7.11
(c) ..................................................... N.A.
312 (a)...................................................... 2.05
313 (a) ..................................................... 7.06
(b)(1) .................................................. N.A.
(b)(2) .................................................. 7.07
(c) ..................................................... 7.06
(d)...................................................... 7.06
314 (a) ..................................................... 4.03
(b) ..................................................... N.A.
(c)(3) .................................................. N.A.
(d)...................................................... N.A.
(f)...................................................... N.A.
315 (a)...................................................... 7.01
(b)...................................................... 7.05
(c) .................................................... 7.01
(d)...................................................... 7.01
(e)...................................................... 6.11
316 (a)(last sentence) ...................................... 2.09
(a)(1)(A)................................................ 6.05
(a)(1)(B) ............................................... 6.04
(a)(2) .................................................. N.A.
(b) ..................................................... 6.07
(c) ..................................................... 2.12
317 (a)(1) .................................................. 6.08
(a)(2)................................................... 6.09
(b) ..................................................... 2.04
318 (b)...................................................... N.A.
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions....................................................... 1
Section 1.02. Other Definitions................................................. 13
Section 1.03. Incorporation by Reference of Trust Indenture Act................. 14
Section 1.04. Rules of Construction............................................. 14
Section 1.05. Business Day Certificate.......................................... 15
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating................................................... 15
Section 2.02. Execution and Authentication...................................... 15
Section 2.03. Registrar and Paying Agent........................................ 16
Section 2.04. Paying Agent to Hold Money in Trust............................... 16
Section 2.05. Holder Lists...................................................... 17
Section 2.06. Transfer and Exchange............................................. 17
Section 2.07. Replacement Notes................................................. 22
Section 2.08. Outstanding Notes................................................. 22
Section 2.09. Treasury Notes.................................................... 22
Section 2.10. Temporary Notes................................................... 23
Section 2.11. Cancellation...................................................... 23
Section 2.12. Defaulted Interest................................................ 23
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee................................................ 23
Section 3.02. Selection of Notes to Be Redeemed................................. 24
Section 3.03. Notice of Redemption.............................................. 24
Section 3.04. Effect of Notice of Redemption.................................... 25
Section 3.05. Deposit of Redemption Price....................................... 25
Section 3.06. Notes Redeemed in Part............................................ 25
Section 3.07. Optional Redemption............................................... 25
Section 3.08. Mandatory Redemption.............................................. 26
Section 3.09. Offer to Purchase by Application of Excess Proceeds............... 26
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.................................................. 28
Section 4.02. Maintenance of Office or Agency................................... 28
Section 4.03. Reports........................................................... 29
Section 4.04. Compliance Certificate............................................ 29
Section 4.05. Taxes............................................................. 30
Section 4.06. Stay, Extension and Usury Laws.................................... 30
Section 4.07. Restricted Payments............................................... 30
Section 4.08. Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries........................................... 32
i
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<S> <C> <C>
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred
Stock............................................................. 33
Section 4.10. Asset Sales....................................................... 34
Section 4.11. Transactions with Affiliates...................................... 35
Section 4.12. Liens............................................................. 36
Section 4.13. Corporate Existence............................................... 36
Section 4.14. Offer to Repurchase Upon Change of Control........................ 36
Section 4.15. Limitations on Guarantees of Issuer Indebtedness by
Restricted Subsidiaries........................................... 37
Section 4.16. Additional Guarantees............................................. 38
Section 4.17. Limitations on Issuances and Sales of Capital Stock of
Wholly Owned Restricted Subsidiaries.............................. 38
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.......................... 38
Section 5.02. Successor Corporation Substituted................................. 39
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................................. 39
Section 6.02. Acceleration...................................................... 41
Section 6.03. Other Remedies.................................................... 42
Section 6.04. Waiver of Past Defaults........................................... 42
Section 6.05. Control by Majority............................................... 42
Section 6.06. Limitation on Suits............................................... 42
Section 6.07. Rights of Holders of Notes to Receive Payment..................... 43
Section 6.08. Collection Suit by Trustee........................................ 43
Section 6.09. Trustee May File Proofs of Claim.................................. 43
Section 6.10. Priorities........................................................ 44
Section 6.11. Undertaking for Costs............................................. 44
Section 6.12. Restoration of Rights and Remedies................................ 44
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee................................................. 45
Section 7.02. Rights of Trustee................................................. 46
Section 7.03. Individual Rights of Trustee...................................... 47
Section 7.04. Trustee's Disclaimer.............................................. 47
Section 7.05. Notice of Defaults................................................ 47
Section 7.06. Reports by Trustee to Holders of the Notes........................ 47
Section 7.07. Compensation and Indemnity........................................ 48
Section 7.08. Replacement of Trustee............................................ 48
Section 7.09. Successor Trustee by Merger, etc.................................. 49
Section 7.10. Eligibility; Disqualification..................................... 49
Section 7.11. Preferential Collection of Claims Against Issuer.................. 50
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance........................................................ 50
ii
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<S> <C> <C>
Section 8.02. Legal Defeasance and Discharge.................................... 50
Section 8.03. Covenant Defeasance............................................... 50
Section 8.04. Conditions to Legal or Covenant Defeasance........................ 51
Section 8.05. Deposited Money and Cash Equivalents to be Held in
Trust; Other Miscellaneous Provisions............................. 52
Section 8.06. Repayment to Issuer............................................... 53
Section 8.07. Reinstatement..................................................... 53
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes............................... 53
Section 9.02. With Consent of Holders of Notes.................................. 54
Section 9.03. Compliance with Trust Indenture Act............................... 55
Section 9.04. Revocation and Effect of Consents................................. 55
Section 9.05. Notation on or Exchange of Notes.................................. 56
Section 9.06. Trustee to Sign Amendments, etc................................... 56
ARTICLE 10
NOTE GUARANTEE
Section 10.01. Note Guarantee.................................................... 56
Section 10.02. Guarantors May Consolidate, Etc. on Certain Terms................. 58
Section 10.03. Releases Following Sale of Assets................................. 58
Section 10.04. Limitation of Guarantor's Liability............................... 58
ARTICLE 11
MISCELLANEOUS
Section 11.01. Trust Indenture Act Controls...................................... 59
Section 11.02. Notices........................................................... 59
Section 11.03. Communication by Holders of Notes with Other
Holders of Notes.................................................. 60
Section 11.04. Certificate and Opinion as to Conditions Precedent................ 60
Section 11.05. Statements Required in Certificate or Opinion..................... 61
Section 11.06. Rules by Trustee and Agents....................................... 61
Section 11.07. No Personal Liability of Directors, Officers,
Employees and Stockholders........................................ 61
Section 11.08. Governing Law..................................................... 61
Section 11.09. No Adverse Interpretation of Other Agreements..................... 61
Section 11.10. Successors........................................................ 62
Section 11.11. Severability...................................................... 62
Section 11.12. Counterpart Originals............................................. 62
Section 11.13. Table of Contents, Headings, etc.................................. 62
Section 11.14. Further Instruments and Acts...................................... 62
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit A-1 FORM OF NOTATION ON NOTE RELATING TO
GUARANTEE
Exhibit B CERTIFICATE OF TRANSFEROR
</TABLE>
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INDENTURE dated as of April 2, 1997 among Anchor Advanced Products,
Inc., a Delaware corporation (the "Issuer"), Anchor Holdings, Inc., a Delaware
corporation ("Holdings") and Fleet National Bank, as trustee (the "Trustee").
The Issuer, Holdings, and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders (as
defined below) of the 11 3/4% Senior Notes due 2004 (the "Senior Notes") and the
11 3/4% Senior Notes to be issued in exchange for the Senior Notes (the "New
Senior Notes" and, together with the Senior Notes, the "Notes") issued by the
Issuer:
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Guarantee" means any guarantee of the Issuer's
obligations under this Indenture and the Notes issued after the Issue Date as
provided for in Sections 4.15 and 4.16 hereof.
"Additional Guarantor" means any Subsidiary of the Issuer that
guarantees the Issuer's obligations under this Indenture and the Notes issued
after the Issue Date as provided for in Sections 4.15 and 4.16 hereof.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the voting securities of a Person shall
be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Issuer and its Subsidiaries taken as a whole will be governed by Sections 4.14
and/or 5.01 hereof and not Section 4.10 hereof), and (ii) the issue or sale by
the Issuer or any of its Restricted Subsidiaries of Equity Interests of any of
the Issuer's Subsidiaries, in the case of either clause (i) or (ii), whether in
a single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing: (i) a transfer of assets by the Issuer
to a Wholly Owned
<PAGE>
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Issuer
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Issuer or to another
Wholly Owned Restricted Subsidiary, and (iii) a Restricted Payment that is
permitted by Section 4.07 hereof will not be deemed to be Asset Sales.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Issuer, or
any authorized committee of the Board of Directors.
"Board Resolution" means a duly adopted resolution of the Board of
Directors in full force and effect at the time of determination and certified as
such by the Secretary or an Assistant Secretary of the Issuer.
"Business Day" means any day that is not a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Keefe Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above and (v) commercial paper having
the highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation, a division of the McGraw-Hill Companies, Inc., and in each
case maturing within six months after the date of acquisition.
"Change of Control" means the occurrence of any of the following: (i)
(a) any transaction (including a merger or consolidation) the result of which is
that any "person" or "group" (each within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than the Principals, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of more than 50% of the total voting power of all Capital Stock
of the Issuer, the Guarantor or a successor entity normally entitled to vote in
the election of directors, managers or trustees, as applicable, calculated on
2
<PAGE>
a fully diluted basis, and (b) as a result of the consummation of such
transaction, any "person" or "group" (each as defined above) becomes the
"beneficial owner" (as defined above), directly or indirectly, of more of the
voting stock of the Issuer or the Guarantor than is at the time "beneficially
owned" (as defined above) by the Principals, or (ii) the first day on which a
majority of the members of the Board of Directors are not Continuing Directors,
or (iii) the sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related transactions,
of all or substantially all of the assets of the Issuer and its Subsidiaries
taken as a whole or the Guarantor and its Subsidiaries taken as a whole, in each
case, to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties. For purposes of this
definition, any transfer of an Equity Interest of an entity that was formed for
the purpose of acquiring voting stock of the Issuer or the Guarantor shall be
deemed to be a transfer of such percentage of such voting stock as corresponds
to the percentage of the equity of such entity that has been so transferred.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Restricted Subsidiaries
for such period, to the extent that such provision for taxes was included in
computing such Consolidated Net Income, plus (iii) consolidated interest expense
of such Person and its Restricted Subsidiaries for such period, whether paid or
accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), to the extent that any such expense
was deducted in computing such Consolidated Net Income, plus (iv) depreciation,
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior period
and deferred finance charges) and other non-cash charges of such Person and its
Restricted Subsidiaries for such period (excluding any such non-cash charges to
the extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash charges that was paid in a prior
period) to the extent that such depreciation, amortization and other non-cash
charges were deducted in computing such Consolidated Net Income. Notwithstanding
the foregoing, the provision for taxes on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a Subsidiary of the
referent Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to the Issuer by such
Subsidiary without prior governmental approval (that has not been obtained), and
without direct or indirect restriction pursuant to the terms of its charter and
all agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Restricted
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Subsidiary that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the Issuer or any of its Wholly Owned Restricted Subsidiaries, (ii) the
Net Income of any Restricted Subsidiary that is not a Wholly Owned Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, 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
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends unless such
dividends may be declared and paid only out of net earnings in respect of the
year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the date of this Indenture
in the book value of any asset owned by such Person or a consolidated Restricted
Subsidiary of such Person, (y) all investments as of such date in unconsolidated
Restricted Subsidiaries and in Persons that are not Restricted Subsidiaries
(except, in each case, Permitted Investments), and (z) all unamortized debt
discount and expense and unamortized deferred charges as of such date, all of
the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of Directors
on the date of this Indenture or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 11.02 hereof or such other address as to which
the Trustee may give notice to the Issuer.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Definitive Notes" means Notes that are in the form of the Notes
attached hereto as Exhibit A, that do not include the information called for by
footnotes 1 and 2 thereof.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
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"Disqualified Stock" means 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 redeemable at
the option of the Holder thereof, in whole or in part, on or prior to the date
that is 91 days after the date on which the Notes mature.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Offer" means the offer that may be made by the Issuer
pursuant to the Registration Rights Agreement to exchange Senior Notes for New
Senior Notes.
"Existing Indebtedness" means up to $1.8 million in aggregate
principal amount of Indebtedness of the Issuer and its Subsidiaries (other than
Indebtedness under the New Credit Facility) in existence on the date of this
Indenture, until such amounts are repaid.
"Financing Lease" means any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance with
GAAP to be capitalized on a balance sheet of the lessee.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Issuer, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the Issuer or any of its Restricted Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
preferred stock subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated but
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prior to the date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge
Coverage Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Issuer or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession.
"Global Note" means a Note that contains the paragraph referred to in
footnote 1 and the additional schedule referred to in footnote 2 to the form of
the Note attached hereto as Exhibit A.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, letters of
credit and reimbursement agreements in respect thereof), of all or any part of
any Indebtedness.
"Guarantor" means Anchor Holdings, Inc., a Delaware corporation, and
each Subsidiary of the Issuer, if any, that executes an Additional Guarantee in
accordance with Sections 4.15 and 4.16 hereof and their successors and assigns.
"Hedging 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.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any
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property or representing any Hedging Obligations, except any such balance that
constitutes an accrued expense or trade payable, if and to the extent any of the
foregoing indebtedness (other than letters of credit and Hedging Obligations)
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, as well as all indebtedness of others secured by a Lien on
any asset of such Person (whether or not such indebtedness is assumed by such
Person) and, to the extent not otherwise included, the Guarantee by such Person
of any indebtedness of any other Person. The amount of any Indebtedness
outstanding as of any date shall be (i) the accreted value thereof, in the case
of any Indebtedness that does not require current payments of interest, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP;
provided that an acquisition of assets, Equity Interests or other securities by
the Issuer for consideration consisting of common equity securities of the
Issuer shall not be deemed to be an Investment. If the Issuer or any Restricted
Subsidiary of the Issuer sells or otherwise disposes of any Equity Interests of
any direct or indirect Restricted Subsidiary of the Issuer such that, after
giving effect to any such sale or disposition, such Person is no longer a
Restricted Subsidiary of the Issuer, the Issuer 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 Equity Interests of such Restricted Subsidiary not sold or disposed
of in an amount determined as provided in Section 4.07 hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which
commercial banks in the City of New York, Hartford, Connecticut or at a place of
payment are authorized or required by law, regulation or executive order to
remain closed. If a payment date is a Legal Holiday at a place of payment,
payment may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
"Lien" means, 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 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 the additional amounts (if any) payable by
the Issuer in the event of a Registration Default under, and as defined in,
Section 5 of the Registration Rights Agreement.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain
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(but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Subsidiaries
or the extinguishment of any Indebtedness of such Person or any of its
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Issuer or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Indebtedness under the New Credit
Facility) secured by a Lien on the asset or assets that were the subject of such
Asset Sale and any reserve for adjustment in respect of the sale price of such
asset or assets established in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, dated as
of the closing of the Offering, by and among the Issuer and NationsBank, N.A.,
providing for up to $15.0 million of revolving credit borrowings, including any
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Issuer nor any of its Restricted Subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Issuer or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity.
"Note Guarantee" means the guarantee given by Holdings pursuant to
Article 10 hereof, including a notation in the Notes substantially in the form
attached hereto as Exhibit A-1.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary, any Assistant Secretary or any Vice-President of such
Person.
"Officers' Certificate" means a certificate signed on behalf of the
Issuer by two Officers of the Issuer, one of whom must be the principal
executive officer, the principal financial officer, the treasurer, or the
principal accounting officer of the Issuer, that meets the requirements of this
Indenture.
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"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of this
Indenture. The counsel may be an employee of or counsel to the Issuer (or any
Guarantor, if applicable), any Subsidiary of the Issuer or the Trustee.
"Permitted Investments" means (a) any Investment in the Issuer or in
a Wholly Owned Restricted Subsidiary of the Issuer that is engaged in the same
or a similar line of business as the Issuer and its Restricted Subsidiaries were
engaged in on the date of the Indenture; (b) any Investment in Cash Equivalents;
(c) any Investment by the Issuer or any Restricted Subsidiary of the Issuer in a
Person, if as a result of such Investment (i) such Person becomes a Wholly Owned
Restricted Subsidiary of the Issuer that is engaged in the same or a similar
line of business as the Issuer and its Subsidiaries were engaged in on the date
of this Indenture or (ii) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or a Wholly Owned Restricted Subsidiary of the
Issuer that is engaged in the same or a similar line of business as the Issuer
and its Restricted Subsidiaries were engaged in on the date of this Indenture;
(d) any Restricted Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.10 hereof; (e) any acquisition of assets solely in exchange for
the issuance of Equity Interests (other than Disqualified Stock) of the Issuer;
and (f) other Investments in any Person having an aggregate fair market value
(measured on the date each such Investment was made and without giving effect to
subsequent changes in value), when taken together with all other Investments
made pursuant to this clause (e) that are at the time outstanding, not to exceed
$5.0 million.
"Permitted Liens" means
(i) any Lien existing on property of the Issuer or any Subsidiary on
the date of this Indenture securing Indebtedness outstanding on such date;
(ii) any Lien securing obligations under the New Credit Facility and
any Guarantee thereof, which obligations or Guarantee are permitted by the terms
of this Indenture to be incurred and outstanding;
(iii) Liens for taxes, fees, assessments or other governmental
charges which are not delinquent or remain payable without penalty, or which are
being contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP are being maintained;
(iv) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other similar Liens arising in the ordinary course
of business which are not delinquent or which are being contested in good faith
and by appropriate proceedings, which proceedings have the effect of preventing
the forfeiture or sale of the property subject thereto;
(v) Liens (other than any Lien imposed by ERISA) consisting of
pledges or deposits required in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other social security
legislation;
(vi) Liens on property of the Issuer or any Subsidiary securing (a)
the non-delinquent performance of bids, trade contracts (other than for borrowed
money), leases and statutory obligations, (b) surety bonds (excluding appeal
bonds and bonds posted in connection with court proceedings or
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judgments) and (c) other non-delinquent obligations of a like nature, including
pledges or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social security
legislation, in each case, incurred in the ordinary course of business;
(vii) Liens consisting of judgment or judicial attachment Liens and
Liens securing contingent obligations on appeal bonds and other bonds posted in
connection with court proceedings or judgments; provided that the enforcement of
such Liens is effectively stayed and all such Liens in the aggregate at any time
outstanding for the Issuer and its Subsidiaries do not exceed $3.0 million;
(viii) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of the businesses of the Issuer and its Subsidiaries
taken as a whole;
(ix) purchase money security interests on any property acquired by
the Issuer or any Subsidiary in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any part of
the cost of acquiring such property; provided that (a) any such Lien attaches to
such property concurrently with or within 90 days after the acquisition thereof,
(b) such Lien attaches solely to the property so acquired in such transaction,
(c) the principal amount of the Indebtedness secured thereby does not exceed
100% of the cost of such property and (d) the principal amount of the
Indebtedness secured by all such purchase money security interests shall not at
any time exceed $5.0 million;
(x) Liens securing obligations in respect of Capital Lease
Obligations on assets subject to such leases, provided that such Capital Lease
Obligations are otherwise permitted hereunder;
(xi) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of setoff or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; provided that (a) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against
access by the Issuer in excess of those set forth by regulations promulgated by
the Federal Reserve Board, and (b) such deposit account is not intended by the
Issuer or any Subsidiary to provide collateral to the depository institution;
(xii) Liens in favor of the Issuer or any Wholly Owned Restricted
Subsidiary;
(xiii) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary or such Person is merged into or consolidated
with the Issuer or any Restricted Subsidiary of the Issuer; provided 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 the Person
merged into or consolidated with the Issuer;
(xiv) Liens on property existing at the time of acquisition thereof
by the Issuer or any Restricted Subsidiary of the Issuer; provided that such
Liens were in existence prior to the contemplation of such acquisition;
(xv) extensions, renewals and replacements of Liens referred to in
clauses (i) through (xiv) above; provided that any such extension, renewal or
replacement Lien is limited to the property or assets
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covered by the Lien extended, renewed or replaced and does not secure any
Indebtedness in addition to that secured immediately prior to such extension,
renewal or replacement;
(xvi) Liens securing Indebtedness permitted by Section 4.09 hereof
and
(xvii) Liens securing other Indebtedness of the Issuer and its
Subsidiaries not expressly permitted by clauses (i) through (xvi) above;
provided that the aggregate amount of the Indebtedness secured by Liens
permitted pursuant to this clause (xvii) does not exceed $3.0 million in the
aggregate.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Issuer or any of its Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Issuer or any of its Restricted Subsidiaries; provided that:
(i) the principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses incurred in connection therewith); (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Senior Notes on terms at least
as favorable to the Holders of Senior Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by
the Issuer or by the Restricted Subsidiary who is the obligor on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Principals" means Thomas H. Lee Equity Partners, L.P., THL Equity
Advisors Limited Partnership, THL Equity Trust, ML-Lee Acquisition Fund II,
L.P., ML-Lee Acquisition Fund (Retirement Accounts) II, L.P., Thomas H. Lee
Company, and any Affiliates of Thomas H. Lee Company and Francis H. Olmstead,
Jr.
"Public Equity Offering" means a public offering of Equity Interests
(other than Disqualified Stock) of (i) the Issuer or (ii) Anchor Holdings, Inc.
to the extent the net proceeds thereof are contributed to the Issuer as a
capital contribution to capital stock.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of April 2, 1997, by and among the Issuer, Holdings and the
other parties named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Related Party" with respect to any Principal means (i) any
controlling stockholder, 80% (or more) owned Subsidiary, or spouse or immediate
family member (in the case of an individual) of such Principal or (ii) any
trust, corporation, partnership or other entity, the beneficiaries,
stockholders,
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partners, owners or Persons beneficially holding an 80% or more controlling
interest of which consist of such Principal and/or such other Persons referred
to in the immediately preceding clause (i).
"Representative" means, for purposes of Articles 6 and 10, the Bank
Agent or other agent or representative for any Senior Debt or Designated Senior
Debt or, with respect to any Guarantor, for any Senior Debt of such Guarantor.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his or her knowledge of and familiarity with the particular subject.
"Restricted Investment" means any Investment other than a Permitted
Investment.
"Restricted Subsidiary" means Anchor Advanced Products Foreign Sales
Corp. and Cepillos de Matamoros and any Subsidiary of Holdings or any subsidiary
of the Issuer, in each case, that is not an Unrestricted Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended.
"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 Act, as such Regulation is in effect on the date
hereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA, provided that in the event the Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" means, to the extent required by
any such amendment, the Trust Indenture Act of 1939, as so amended.
"Transfer Restricted Securities" means securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Subsidiary" means any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary:
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(a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any
agreement, contract, arrangement or understanding with the Issuer or any
Restricted Subsidiary of the Issuer unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Issuer or
such Restricted Subsidiary of the Issuer than those that might be obtained at
the time from Persons who are not Affiliates of the Issuer; (c) is a Person with
respect to which neither the Issuer nor any of its Restricted Subsidiaries has
any direct or indirect obligation (x) to subscribe for additional Equity
Interest or (y) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; and (d)
has not guaranteed or otherwise directly or indirectly provided credit support
for any Indebtedness of the Issuer or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Issuer as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 4.09 hereof, the Issuer
shall be in default of such covenant). The Board of Directors of the Issuer may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Issuer of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof and
(ii) no Default or Event of Default would be in existence following such
designation.
"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 payments of
principal, including payment at final maturity, in respect thereof, by (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 principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Subsidiaries of such
Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"................................ 4.11
"Asset Sale Offer"..................................... 3.09
"Benefitted Party"..................................... 10.01
"Change of Control Offer".............................. 4.14
"Change of Control Payment"............................ 4.14
"Change of Control Payment Date"....................... 4.14
"Covenant Defeasance".................................. 8.03
"Custodian"............................................ 6.01
"Event of Default"..................................... 6.01
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"Excess Proceeds"...................................... 4.10
"incur"................................................ 4.09
"Legal Defeasance" .................................... 8.02
"Offer Amount"......................................... 3.09
"Offer Period"......................................... 3.09
"Paying Agent"......................................... 2.03
"Purchase Date"........................................ 3.09
"Registrar"............................................ 2.03
"Restricted Payments".................................. 4.07
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and the Note Guarantees;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
"obligor" on the Notes means the Issuer and any successor obligor
upon the Notes or any Guarantor.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule under
the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
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(6) references to sections of or rules under the Securities Act shall
be deemed to include substitute, replacement of successor sections or
rules adopted by the Commission from time to time.
SECTION 1.05. BUSINESS DAY CERTIFICATE.
On the date of execution and delivery of this Indenture (with respect
to the remainder of calendar year 1997) and thereafter, within 15 days prior to
the end of each calendar year while this Indenture remains in effect (with
respect to the succeeding calendar years), the Issuer shall deliver to the
Trustee an Officers' Certificate specifying the days on which banking
institutions in the City of New York are authorized or obligated by law to
close.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto. The Note Guarantee shall be
substantially in the form of Exhibit A-1, the terms of which are incorporated in
and made part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. Each Note shall be
dated the date of its authentication. The Notes shall be in denominations of
$1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Issuer, Holdings and
the Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
Notes issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the text referred to in footnotes 1 and 2
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without including the text referred to in
footnotes 1 and 2 thereto). Each Global Note shall represent such of the
outstanding Notes as shall be specified therein and each shall provide that it
shall represent the aggregate amount of outstanding Notes from time to time
endorsed thereon and that the aggregate amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the amount of outstanding Notes
represented thereby shall be made by the Trustee, at the direction of the
Trustee, in accordance with instructions given by the Holder thereof as required
by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Issuer by manual or
facsimile signature. The Issuer's seal shall be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
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A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuer signed by an
Officer of the Issuer, authenticate Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Notes. The aggregate principal
amount of Notes outstanding at any time may not exceed such amount except as
provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Issuer to authenticate Notes. 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 agent. An
authenticating agent has the same rights as an Agent to deal with the Issuer or
an Affiliate of the Issuer.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuer shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuer may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuer may change any
Paying Agent or Registrar without notice to any Holder. The Issuer shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuer fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Issuer or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Issuer initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Issuer initially appoints the Trustee to act as the Registrar and
Paying Agent with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuer shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Issuer or any Guarantor in making
any such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Issuer at any time
may require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Issuer or a
Subsidiary) shall have no further liability for the money. If the Issuer or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Issuer or a
Guarantor, the Trustee shall serve as Paying Agent for the Notes.
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SECTION 2.05. HOLDER 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
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Issuer and/or the Guarantor shall furnish to the Trustee
at least seven Business Days before each interest payment date and at such other
times as the Trustee may request in writing, a list in such form and as of such
date as the Trustee may reasonably require of the names and addresses of the
Holders of Notes and the Issuer and the Guarantor shall otherwise comply with
TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Notes. When Definitive Notes
are presented by a Holder to the Registrar with a request:
(x) to register the transfer of the Definitive Notes; or
(y) to exchange such Definitive Notes for an equal principal
amount of Definitive Notes of other authorized denominations,
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met; provided, however, that the
Definitive Notes presented or surrendered for register of transfer or exchange:
(i) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the
Registrar duly executed by such Holder or by his or
her attorney, duly authorized in writing; and
(ii) in the case of a Definitive Note that is a Transfer
Restricted Security, such request shall be
accompanied by the following additional information
and documents, as applicable:
(A) if such Transfer Restricted Security is being
delivered to the Registrar by a Holder for
registration in the name of such Holder, without
transfer, a certification to that effect from
such Holder (in substantially the form of
Exhibit B hereto); or
(B) if such Transfer Restricted Security is being
transferred to a "qualified institutional buyer"
(as defined in Rule 144A under the Securities
Act) in accordance with Rule 144A under the
Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Rule
904 under the Securities Act or pursuant to an
effective registration statement under the
Securities Act, a certification to that effect
from such Holder (in substantially the form of
Exhibit B hereto); or
(C) if such Transfer Restricted Security is being
transferred in reliance on another exemption
from the registration requirements of the
Securities Act,
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a certification to that effect from such Holder
(in substantially the form of Exhibit B hereto)
and an Opinion of Counsel from such Holder or
the transferee reasonably acceptable to the
Issuer and to the Registrar to the effect that
such transfer is in compliance with the
Securities Act.
(b) Transfer of a Definitive Note for a Beneficial Interest in a
Global Note. A Definitive Note may not be exchanged for a beneficial interest in
a Global Note except upon satisfaction of the requirements set forth below. Upon
receipt by the Trustee of a Definitive Note, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Trustee,
together with:
(i) if such Definitive Note is a Transfer Restricted Security, a
certification from the Holder thereof (in substantially the form
of Exhibit B hereto) to the effect that such Definitive Note is
being transferred by such Holder to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Note is a Transfer Restricted
Security, written instructions from the Holder thereof directing
the Trustee to make, an endorsement on the Global Note to
reflect an increase in the aggregate principal amount of the
Notes represented by the Global Note,
in which case the Trustee shall cancel such Definitive Note in accordance with
Section 2.11 hereof and cause the aggregate principal amount of Notes
represented by the Global Note to be increased accordingly. If no Global Notes
are then outstanding, the Issuer shall issue and, upon receipt of an
authentication order in accordance with Section 2.02 hereof, the Trustee shall
authenticate a new Global Note in the appropriate principal amount.
(c) Transfer and Exchange of Beneficial Interests in a Global Note.
The registration of transfer and exchange of beneficial interests in a Global
Note shall be effected through the Depositary, in accordance with this Indenture
and the procedures of the Depositary therefor, which shall include restrictions
on transfer comparable to those set forth herein to the extent required by the
Securities Act. The Trustee shall have no responsibility or liability for any
acts or omissions of the Depositary taken pursuant to this Section 2.06(c).
(d) Transfer of a Global Note for a Definitive Note.
(i) The Holder of a Global Note may upon request exchange any
such Global Note or portion thereof for a Definitive Note.
Upon receipt by the Trustee of written instructions or
such other form of instructions as is customary for the
Depositary, from the Depositary or its nominee on behalf
of any Person having a beneficial interest in a Global
Note, and, in the case of a Transfer Restricted Security,
the following additional information and documents (all of
which may be submitted by facsimile):
(A) if such beneficial interest is being transferred
to the Person designated by the Depositary as
being the beneficial owner, a certification to
that effect from such Person (in substantially
the form of Exhibit B hereto); or
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(B) if such beneficial interest is being transferred
to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities
Act or pursuant to an exemption from
registration in accordance with Rule 144 or Rule
904 under the Securities Act or pursuant to an
effective registration statement under the
Securities Act, a certification to that effect
from the transferor (in substantially the form
of Exhibit B hereto); or
(C) if such beneficial interest is being transferred
in reliance on another exemption from the
registration requirements of the Securities Act,
a certification to that effect from the
transferor (in substantially the form of Exhibit
B hereto) and an Opinion of Counsel from the
transferee or transferor reasonably acceptable
to the Issuer and to the Trustee to the effect
that such transfer is in compliance with the
Securities Act,
in which case the Trustee shall cause the aggregate
principal amount of Global Notes to be reduced accordingly
and, following such reduction, the Issuer shall execute
and the Trustee shall authenticate and deliver to the
transferee a Definitive Note in the appropriate principal
amount.
(ii) Definitive Notes issued in exchange for a beneficial
interest in a Global Note pursuant to this Section 2.06(d)
shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions
from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes
are so registered.
(e) Restrictions on Transfer and Exchange of Global Notes.
Notwithstanding any other provision of this Indenture (other than the provisions
set forth in subsection (f) of this Section 2.06), a Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary or by the Depositary or any such nominee to a successor Depositary or
a nominee of such successor Depositary.
(f) Authentication of Definitive Notes in Absence of Depositary. If
at any time:
(i) the Depositary for the Notes notifies the Issuer that the
Depositary is unwilling or unable to continue as
Depositary for the Global Notes and a successor Depositary
for the Global Notes is not appointed by the Issuer within
90 days after delivery of such notice; or
(ii) the Issuer, at its sole discretion, notifies the Trustee
in writing that it elects to cause the issuance of
Definitive Notes under this Indenture,
then the Issuer shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.02 hereof, authenticate and
deliver, Definitive Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(g) Legend.
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(i) Except as permitted by the following paragraphs (ii) and
(iii), each Note certificate evidencing Global Notes and
Definitive Notes (and all Notes issued in exchange
therefor or substitution thereof) shall bear legends in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY
NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO
A FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Transfer Restricted
Security (including any Transfer Restricted Security
represented by a Global Note) pursuant to Rule 144 under
the Securities Act or pursuant to an effective
registration statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that
is a Definitive Note, the Registrar shall permit the
Holder thereof to exchange such Transfer Restricted
Security for a Definitive Note that does not bear the
legend set forth in (i) above and rescind any
restriction on the transfer of such Transfer
Restricted Security; and
(B) in the case of any Transfer Restricted Security
represented by a Global Note, such Transfer
Restricted Security shall not be required to bear the
legend set forth in (i) above, but shall continue to
be subject to the provisions of Section 2.06(c)
hereof; provided, however, that with respect to any
request for an exchange of a Transfer Restricted
Security that is represented by a Global Note for a
Definitive Note that does not bear the legend set
forth in (i) above, which
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request is made in reliance upon Rule 144, the Holder
thereof shall certify in writing to the Registrar
that such request is being made pursuant to Rule 144
(such certification to be substantially in the form
of Exhibit B hereto).
(iii) Notwithstanding the foregoing, upon consummation of the
Exchange Offer, the Issuer shall issue and, upon receipt
of an authentication order in accordance with Section 2.02
hereof, the Trustee shall authenticate New Notes in
exchange for Notes accepted for exchange in the Exchange
Offer, which New Notes shall not bear the legend set forth
in (i) above, and the Registrar shall rescind any
restriction on the transfer of such Notes.
(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges,
the Issuer shall execute and the Trustee shall
authenticate Definitive Notes and Global Notes at the
Registrar's request.
(ii) No service charge shall be made to a Holder for any
registration of transfer or exchange, but the Issuer
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
exchange or transfer pursuant to Sections 3.07, 4.10,
4.14 and 9.05 hereto).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for
redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part.
(iv) All Definitive Notes and Global Notes issued upon any
registration of transfer or exchange of Definitive
Notes or Global Notes shall be the valid obligations
of the Issuer, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the
Definitive Notes or Global Notes surrendered upon
such registration of transfer or exchange.
(v) Neither the Issuer nor the Registrar shall be
required:
(A) to issue, to register the transfer of or to
exchange Notes during a period beginning at the
opening of business 15 days before the day of
any selection of Notes for redemption under
Section 3.02 hereof and ending at the close of
business on the day of selection; or
(B) to register the transfer of or to exchange any
Note so selected for redemption in whole or in
part, except the unredeemed portion of any Note
being redeemed in part; or
(C) to register the transfer of or to exchange a
Note between a record date and the next
succeeding interest payment date.
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(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the
Issuer may deem and treat the Person in whose name
any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of
principal of, interest and Liquidated Damages, if
any, on such Note, and neither the Trustee, any Agent
nor the Issuer shall be affected by notice to the
contrary.
(vii)The Trustee shall authenticate Definitive Notes and
Global Notes in accordance with the provisions of
Section 2.02 hereof.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the Issuer
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Issuer shall issue and the Trustee, upon the written
order of the Issuer signed by two Officers of the Issuer, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Issuer, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of the Trustee and the Issuer to protect the Issuer,
the Trustee, any Agent and any authenticating agent from any loss that any of
them may suffer if a Note is replaced. The Issuer may charge for its expenses,
including the fees and expenses of the Trustee in replacing a Note.
Every replacement Note is an additional obligation of the Issuer and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Issuer or an Affiliate of the
Issuer holds the Note.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Issuer, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes or any
fraction owned by the Issuer, any Guarantor or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with
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the Issuer, shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes that a Responsible Officer of the
Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Issuer may prepare
and the Trustee shall authenticate temporary Notes upon a written order of the
Issuer signed by an Officer of the Issuer. Temporary Notes shall be
substantially in the form of definitive Notes but may have variations that the
Issuer considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Issuer shall prepare
and the Trustee shall authenticate definitive Notes in exchange for temporary
Notes. Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION.
The Issuer at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
cancelled Notes (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all cancelled Notes shall be delivered
to the Issuer. The Issuer may not issue new Notes to replace Notes that it has
paid or that have been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuer defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Issuer 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. The Issuer shall fix or cause to be fixed each
such special record date and payment date, provided that no such special record
date shall be less than 10 days prior to the related payment date for such
defaulted interest. At least 15 days before the special record date, the Issuer
(or, upon the written request of the Issuer, the Trustee in the name and at the
expense of the Issuer) shall mail or cause to be mailed to Holders a notice that
states the special record date, the related payment date and the amount of such
interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Issuer elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which
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the redemption shall occur, (ii) the redemption date, (iii) the principal amount
of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders of the Notes 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, by lot or in accordance with any other method the Trustee
considers fair and appropriate provided that no Notes of $1,000 or less shall be
redeemed in part. In the event of partial redemption by lot, the particular
Notes to be redeemed shall be selected, unless otherwise provided herein, not
less than 30 nor more than 60 days prior to the redemption date by the Trustee
from the outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Issuer 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 and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Issuer shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption date
upon surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Issuer defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
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(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuer's request, the Trustee shall give the notice of
redemption in the Issuer's name and at its expense; provided, however, that the
Issuer shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Issuer shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on the
redemption date. The Trustee or the Paying Agent shall promptly return to the
Issuer any money deposited with the Trustee or the Paying Agent by the Issuer in
excess of the amounts necessary to pay the redemption price of, accrued interest
and Liquidated Damages, if any, on all Notes to be redeemed.
If the Issuer complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Issuer to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Issuer shall
issue and, upon the Issuer's written request, the Trustee shall authenticate for
the Holder at the expense of the Issuer a new Note equal in principal amount to
the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the
Issuer shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to April 1, 2001. Thereafter, the Issuer shall have the option to
redeem the Notes, in whole or in part, at the redemption prices (expressed as
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percentages of principal amount) set forth below plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
Year Percentage
---- ----------
2001........................................................ 105.875%
2002 ....................................................... 102.938
2003 and thereafter ........................................ 100.00%
(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time prior to April 1, 2000, the Issuer may on any one or more
occasions redeem up to 35% of the aggregate principal amount of the Notes
originally issued in the Offering equity securities of the Issuer, at a
redemption price equal to 110.75% of the principal amount of such Notes, plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of redemption with the net cash proceeds of one or more Public Equity Offerings;
provided that at least 65% of the original aggregate principal amount of the
Notes originally issued remains outstanding immediately after the occurrence of
each such redemption and that such redemption occurs within 90 days of the date
of the closing of such Public Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Sections 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
Except as set forth under Sections 4.10 and 4.14 hereof, the Issuer
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Issuer shall
be required to commence an offer to all Holders to purchase Notes (an "Asset
Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Issuer shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no additional interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
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Upon the commencement of an Asset Sale Offer, the Issuer shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue
to accrue interest;
(d) that, unless the Issuer defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer may only elect to have all of such Note purchased and may not
elect to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Issuer, a Depositary, if appointed by
the Issuer, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuer, the Depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his or her election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuer shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuer so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuer shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Issuer in accordance
with the terms of this Section 3.09. The Issuer, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after
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the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Issuer for purchase, and the Issuer shall promptly issue a new Note, and the
Trustee, upon written request from the Issuer shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Issuer to the Holder thereof. The Issuer
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made subject to Sections 3.05
and 3.06 hereof. The Issuer shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of the Notes in connection with an Asset Sale Offer.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Issuer shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Issuer or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Issuer in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Issuer shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Issuer shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuer shall maintain in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Issuer in respect of the Notes and this Indenture may be
served. The Issuer shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuer shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Issuer may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time
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rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Issuer of its obligation to maintain
an office or agency in the Borough of Manhattan, The City of New York for such
purposes. The Issuer shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Issuer hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Issuer in accordance with Section
2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Issuer and, if required,
the Guarantor shall furnish to the Holders (i) 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 Issuer and/or the Guarantor 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 Issuer's and/or the Guarantor's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on Form 8-K if the Issuer and/or the
Guarantor were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Issuer shall file a
copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to all securities analysts and prospective investors upon
request. The Issuer and any Guarantor shall at all times comply with TIA ss.
314(a).
(b) For so long as any Transfer Restricted Securities remain
outstanding, the Issuer and each Guarantor shall furnish to all Holders and
prospective purchasers of the Notes designated by the Holders of Transfer
Restricted Securities, promptly upon their request, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Issuer and each Guarantor shall deliver to the Trustee,
within 90 days after the end of each fiscal year of the Issuer, an Officers'
Certificate stating that a review of the activities of the Issuer and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Issuer has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Issuer has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Issuer is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of, interest or Liquidated Damages, if any,
on the Notes is prohibited or if such event has occurred, a description of the
event and what action the Issuer is taking or proposes to take with respect
thereto.
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(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Issuer's independent public accountants (who shall be a
firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Issuer has violated any
provisions of Article 4 or Article hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Issuer shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Issuer is taking or proposes to take with respect
thereto.
SECTION 4.05. TAXES.
The Issuer shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Issuer covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Issuer's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Issuer) or
to the direct or indirect holders of the Issuer's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Issuer or such Restricted Subsidiary or dividends or distributions payable
to the Issuer or any Wholly Owned Restricted Subsidiary of the Issuer); (ii)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
of the Issuer or any Restricted Subsidiary or other Affiliate of the Issuer
(other than any such Equity Interests owned by the Issuer or any Wholly Owned
Restricted Subsidiary of the Issuer); (iii) make any principal payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire for
value prior to a scheduled mandatory sinking fund payment date or final maturity
date any Indebtedness that is pari passu with or subordinated to the Notes or
the Note Guarantee (other than Notes
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or the Note Guarantee); or (iv) make any Restricted Investment (all such
payments and other actions set forth in clauses (i) through (iv) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Issuer would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Issuer and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted by
clause (ii) of the next succeeding paragraph), is less than the sum of (i) 50%
of the Consolidated Net Income of the Guarantor for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of this Indenture to the end of the Guarantor's most recently
ended fiscal quarter for which internal financial statements are available at
the time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (ii) 100% of the
aggregate net cash proceeds received by the Issuer from the issue or sale since
the date of this Indenture of Equity Interests of the Issuer (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the Issuer
that have been converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible debt securities) sold to a Restricted
Subsidiary of the Issuer and other than Disqualified Stock or convertible debt
securities that have been converted into Disqualified Stock), plus (iii) to the
extent that any Restricted Investment that was made after the date of this
Indenture is sold for cash or otherwise liquidated or repaid for cash, the
lesser of (A) the cash return of capital with respect to such Restricted
Investment (less the cost of disposition, if any) and (B) the initial amount of
such Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of any
dividend or distribution within 60 days after the date of declaration thereof,
if at said date of declaration such payment would have complied with the
provisions of the Indenture; (ii) the redemption, repurchase, retirement,
defeasance or other acquisition of any Equity Interests of the Issuer in
exchange for, or out of the net cash proceeds of the substantially concurrent
sale (other than to a Restricted Subsidiary of the Issuer) of, other Equity
Interests of the Issuer (other than any Disqualified Stock); provided that the
amount of any such net cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be excluded from
clause (c) (ii) of the preceding paragraph; (iii) the defeasance, redemption,
repurchase or other acquisition of pari passu or subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(iv) the purchase, redemption or other acquisition prior to the stated maturity
thereof of Indebtedness that is subordinated to the Notes in exchange for or out
of the net cash proceeds of a substantially concurrent issue and sale (other
than to the Issuer or any of its Restricted Subsidiaries) of new Indebtedness;
provided that (x) the principal amount of such new Indebtedness shall not exceed
the principal amount of Indebtedness so refinanced (plus the amount of such
reasonable expenses incurred in connection therewith), (y) such new 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, and (z)
the new Indebtedness shall be
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subordinate in right of payment to the Notes; (v) the repurchase, redemption or
other acquisition or retirement for value of any Equity Interests of the Issuer
held by any member of the Issuer's (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement or in connection with the termination of employment of any
employees or management of the Issuer or its Restricted Subsidiaries; provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $2.0 million in the aggregate plus the
aggregate cash proceeds received by the Issuer after the date of this Indenture
from any reissuance of Equity Interests by the Issuer to members of management
of the Issuer and its Restricted Subsidiaries and no Default or Event of Default
shall have occurred and be continuing immediately after any such transaction;
(vi) Investments received by the Issuer and its Restricted Subsidiaries as
non-cash consideration from Asset Sales to the extent permitted by Section 4.10
hereof; (vii) a Restricted Payment to Holdings for the purpose of paying a
one-time dividend on the Common Stock of Holdings from the proceeds of the
Offering in an amount not to exceed $30.0 million; and (viii) the repurchase of
Notes pursuant to a Change of Control Offer or an Asset Sale Offer.
The amount of all Restricted Payments (other than cash or Cash
Equivalents) shall be the fair market value (evidenced by a resolution of the
Board of Directors set forth in an Officers' Certificate delivered to the
Trustee) on the date of the Restricted Payment of the asset(s) proposed to be
transferred or issued by the Issuer or such Restricted Subsidiary, as the case
may be, pursuant to the Restricted Payment. Not later than the date of making
any Restricted Payment, the Issuer shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
the Indenture.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to: (i)(a) pay dividends or make any other distributions
to the Issuer or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Issuer or any of its Restricted
Subsidiaries, (ii) make loans or advances to the Issuer or any of its Restricted
Subsidiaries or (iii) transfer any of its properties or assets to the Issuer or
any of its Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of (a) Existing Indebtedness as in effect on the
date of the Indenture, (b) the New Credit Facility as in effect as of the date
of this Indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more restrictive
with respect to such dividend and other payment restrictions than those
contained in the New Credit Facility as in effect on the date of this Indenture,
(c) this Indenture, the Notes and the Note Guarantee, (d) applicable law, (e)
any instrument governing Indebtedness or Capital Stock of a Person acquired by
the Issuer 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), which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired, provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Indenture to be incurred; (f) by reason of
customary non-assignment provisions in leases entered into in the ordinary
course of business and consistent with
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past practices, (g) purchase money obligations or Capital Lease Obligations for
property acquired in the ordinary course of business that impose restrictions of
the nature described in clause (iii) above on the property so acquired, (h)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive than those contained in the agreements governing the Indebtedness
being refinanced, (i) customary restrictions imposed on the transfer of
copyrighted or patented materials and customary provisions in agreements that
restrict the assignees of such agreements or any rights thereunder or (j)
restrictions with respect to a Subsidiary of the Issuer imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Subsidiary.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Issuer shall not issue any Disqualified Stock and shall not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that the Issuer may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock if: the Fixed Charge Coverage Ratio
for the Guarantor's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period. In
addition, the Issuer shall not incur any Indebtedness that is contractually
subordinated to any other Indebtedness of the Issuer unless such Indebtedness is
also contractually subordinated to the Notes on substantially identical terms;
provided, however, that no Indebtedness of the Issuer shall be deemed to be
contractually subordinated to any other Indebtedness of the Issuer solely by
virtue of being unsecured.
The foregoing provisions shall not apply to:
(i) the incurrence by the Issuer of Indebtedness under the New Credit
Facility;
(ii) Guarantees of the Indebtedness under the New Credit Facility
required by the New Credit Facility and Guarantees permitted under or required
by this Indenture;
(iii) the incurrence by the Issuer and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Issuer of Indebtedness represented by the
Notes and this Indenture and the incurrence by Restricted Subsidiaries of
Guarantees required or permitted to be incurred under this Indenture;
(v) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Capital Lease Obligations, mortgage financings or purchase money
obligations, in each case incurred for the purpose of financing all or any part
of the purchase price or cost of construction or improvement of property, plant
or equipment used in the business of the Issuer or such Subsidiary, in an
aggregate principal amount not to exceed $5.0 million at any time outstanding;
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(vi) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets or a
new Subsidiary; provided that such Indebtedness was incurred by the prior owner
of such assets or such Subsidiary prior to such acquisition by the Issuer or one
of its Restricted Subsidiaries and was not incurred in connection with, or in
contemplation of, such acquisition by the Issuer or one of it Restricted
Subsidiaries; and provided further that the principal amount (or accreted value,
as applicable) of such Indebtedness, together with any other outstanding
Indebtedness incurred pursuant to this clause (vi), does not exceed $5.0
million;
(vii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness that was
permitted by this Indenture to be incurred;
(viii) the incurrence by the Issuer or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Issuer and any of
its Wholly Owned Restricted Subsidiaries; provided, however, that (i) if the
Issuer is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Notes and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person other
than the Issuer or a Wholly Owned Restricted Subsidiary and (B) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Issuer or a Wholly Owned Restricted Subsidiary shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Issuer or such Restricted
Subsidiary, as the case may be;
(ix) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of fixing
or hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of New Credit Facility or this Indenture to be
outstanding; and
(x) the Guarantee by the Issuer or any of the Guarantors of
Indebtedness of the Issuer or a Subsidiary of the Issuer that was permitted to
be incurred by another provision of this section hereof.
For purposes of determining compliance with this Section 4.09, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories described in clauses (i) through (x) above or is entitled to be
incurred pursuant to the first paragraph of this section hereof, the Issuer
shall, in its sole discretion, classify such item of Indebtedness in any manner
that complies with this section hereof and such item of Indebtedness shall be
treated as having been incurred pursuant to only one of such clauses or pursuant
to the first paragraph hereof. Accrual of interest, the accretion of accreted
value and the payment of interest in the form of additional Indebtedness shall
not be deemed to be an incurrence of Indebtedness for purposes of this covenant.
SECTION 4.10. ASSET SALES.
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Issuer (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee with respect to any Asset Sale involving in excess of
$1.0 million) of the assets or Equity Interests issued or sold or otherwise
disposed of and (ii) at least 75% of the consideration therefor received by the
Issuer or such Restricted
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Subsidiary is in the form of cash or Cash Equivalents; provided that the amount
of (x) any liabilities (as shown on the Issuer's or such Restricted Subsidiary's
most recent balance sheet), of the Issuer or any Restricted Subsidiary (other
than contingent liabilities and liabilities that are by their terms subordinated
to the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Issuer
or such Restricted Subsidiary from further liability and (y) any securities,
notes or other obligations received by the Issuer or any such Restricted
Subsidiary from such transferee that are immediately converted by the Issuer or
such Restricted Subsidiary into cash (to the extent of the cash received), shall
be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Issuer or its Restricted Subsidiary, as the case may be, may apply
such Net Proceeds from such Asset Sale to permanently reduce Indebtedness under
the New Credit Facility in accordance with its terms, if applicable, or to the
extent not required to be applied thereunder, may, at its option, apply such Net
Proceeds to repayment of Indebtedness of a Restricted Subsidiary (in the case of
Net Proceeds from an Asset Sale effected by a Restricted Subsidiary) or to an
investment in a Restricted Subsidiary or in another business or capital
expenditure or other long-term/tangible assets, in each case, in the same or a
similar line of business as the Issuer or any of its Restricted Subsidiaries
were engaged in on the date of this Indenture or in businesses reasonably
related thereto. Pending the final application of any such Net Proceeds, the
Issuer may temporarily reduce Indebtedness under the New Credit Facility or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph shall be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $5.0
million, the Issuer shall be required to make an offer to all Holders of Notes
(an "Asset Sale Offer") to purchase the maximum principal amount of Notes that
may be purchased out of the Excess Proceeds, at an offer price in cash in an
amount equal to 100% of the principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase, in
accordance with the procedures set forth in this Indenture. To the extent that
the aggregate amount of Notes tendered pursuant to an Asset Sale Offer is less
than the Excess Proceeds, the Issuer may use any remaining Excess Proceeds for
general corporate purposes. If the aggregate principal amount of Notes
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to or enter into any other
transaction with, or for the benefit of, any Affiliate of the Issuer (each of
the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate
Transaction is on terms that are no less favorable to the Issuer or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction by the Issuer or such Restricted Subsidiary with an unrelated Person
and (ii) the Issuer delivers to the Trustee (a) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (i) above and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of Directors
and (b) with respect to any Affiliate Transaction or series of related
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Affiliate Transactions involving aggregate consideration in excess of $5.0
million, an opinion as to the fairness to the Holders of such Affiliate
Transaction from a financial point of view issued by an accounting, appraisal or
investment banking firm of national standing; provided that (w) any employment
agreement entered into by the Issuer or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Issuer or such Restricted Subsidiary, (x) transactions between or among the
Issuer and/or its Restricted Subsidiaries, (y) investment banking and management
fees in an aggregate amount no greater than $180,000 per annum plus
reimbursement of expenses to be paid by the Issuer to Thomas H. Lee Company, and
(z) Restricted Payments that are permitted by Section 4.07 hereof, in each case,
shall not be deemed Affiliate Transactions.
SECTION 4.12. LIENS.
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Issuer shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Issuer or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Issuer and its Restricted Subsidiaries; provided, however,
that the Issuer shall not be required to preserve any such right, license or
franchise, or the corporate, partnership or other existence of any of its
Restricted Subsidiaries, if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Issuer and its Restricted Subsidiaries, taken as a whole, and that the loss
thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Issuer to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described below (the "Change of Control Offer") at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages, if any, thereon to the date of purchase (the
"Change of Control Payment"). Within 30 calendar days following any Change of
Control, the Issuer will mail a notice to each Holder stating: (i) that the
Change of Control Offer is being made pursuant to the covenant entitled "Change
of Control" and that all Notes tendered will be accepted for payment; (ii) the
purchase price and the purchase date, which will be no earlier than 30 calendar
days nor later than 60 calendar days from the date such notice is mailed (the
"Change of Control Payment Date"); (iii) that any Note not tendered will
continue to accrue interest; (iv) that, unless the Issuer defaults in the
payment of the Change of Control Payment, all Notes accepted for payment
pursuant to the Change of Control Offer will cease to accrue interest after
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the Change of Control Payment Date; (v) that Holders electing to have any Notes
purchased pursuant to a Change of Control Offer will be required to surrender
the Notes, with the form entitled "Option of Holder to Elect Purchase" on the
reverse of the Notes completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date; (vi) that Holders will be entitled to
withdraw their election if the Paying Agent receives, not later than the close
of business on the second Business Day preceding the Change of Control Payment
Date, a telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing such Holder's election to have such
Notes purchased; and (vii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof. The Issuer will
comply with the requirements of Rule 14e-1 under the Exchange Act and any other
securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the Notes as a
result of a Change of Control.
On the Change of Control Payment Date, the Issuer will, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Issuer. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Issuer will publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
SECTION 4.15. LIMITATIONS ON GUARANTEES OF ISSUER INDEBTEDNESS BY RESTRICTED
SUBSIDIARIES.
In the event that any Restricted Subsidiary, directly or indirectly,
guarantees any Indebtedness of the Issuer other than the Notes or the New Credit
Facility (the "Other Indebtedness"), the Issuer shall cause such Restricted
Subsidiary to deliver to the Trustee a supplemental indenture pursuant to which
such Restricted Subsidiary shall concurrently guarantee the Issuer's Obligations
under this Indenture and the Notes to the same extent that such Restricted
Subsidiary guaranteed the Issuer's Obligations under the Other Indebtedness
(including waiver of subrogation, if any) and such Additional Guarantee shall be
on the terms and subject to the same conditions as the initial Guarantee given
by Holding under this Indenture. Each Additional Guarantee shall by its terms
provide that the Additional Guarantor making such Additional Guarantee will be
automatically and unconditionally released and discharged from its obligations
under such Additional Guarantee upon the release or discharge of the guarantee
of the Other Indebtedness that resulted in the creation of such Additional
Guarantee, except a discharge or release by, or as a result of, any payment
under the guarantee of such Other Indebtedness by such Additional Guarantor.
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SECTION 4.16. ADDITIONAL GUARANTEES.
If (i) the Issuer or any of its Restricted Subsidiaries shall, after
the date of this Indenture, transfer or cause to be transferred, including by
way of any Investment, in one or a series of transactions (whether or not
related), any assets, businesses, divisions, real property or equipment having
an aggregate fair market value (as determined in good faith by the Board of
Directors) in excess of $1.0 million to any Restricted Subsidiary that is not a
Guarantor, (ii) the Issuer or any of its Restricted Subsidiaries shall acquire
another Restricted Subsidiary having total assets with a fair market value (as
determined in good faith by the Board of Directors) in excess of $1.0 million,
or (iii) any Restricted Subsidiary shall incur Acquired Debt, then the Issuer
shall, at the time of such transfer, acquisition or incurrence, (i) cause such
transferee, acquired Restricted Subsidiary or Restricted Subsidiary incurring
Acquired Debt (if not then a Guarantor) to execute a Note Guarantee of the
Obligations of the Issuer hereunder in the form set forth in this Indenture and
(ii) deliver to the Trustee an Opinion of Counsel, in form reasonably
satisfactory to the Trustee, that such Guarantee is a valid, binding and
enforceable obligation of such transferee, acquired Restricted Subsidiary or
Restricted Subsidiary incurring Acquired Debt, subject to customary exceptions
for bankruptcy and equitable principles. Notwithstanding the foregoing, the
Issuer or any of its Restricted Subsidiaries may make a Restricted Investment in
any Wholly Owned Restricted Subsidiary of the Issuer without compliance with
this Section 4.16 provided that such Restricted Investment is permitted by
Section 4.07.
SECTION 4.17. LIMITATIONS ON ISSUANCES AND SALES OF CAPITAL STOCK OF WHOLLY
OWNED RESTRICTED SUBSIDIARIES.
The Issuer (i) shall not, and shall not permit any Wholly Owned
Restricted Subsidiary of the Issuer to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock of any Wholly Owned Restricted Subsidiary
of the Issuer to any Person (other than the Issuer or a Wholly Owned Restricted
Subsidiary of the Issuer), unless (a) such transfer, conveyance, sale, lease or
other disposition is of all the Capital Stock of such Wholly Owned Restricted
Subsidiary and (b) the cash Net Proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with Section 4.10 and (ii)
will not permit any Wholly Owned Restricted Subsidiary of the Issuer to issue
any of its Equity Interests (other than, if necessary, shares of its Capital
Stock constituting directors' qualifying shares) to any Person other than to the
Issuer or a Wholly Owned Restricted Subsidiary of the Issuer.
ARTICLE 5
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Issuer shall not consolidate or merge with or into (whether or
not the Issuer is the surviving corporation), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless (i) the
Issuer is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Issuer) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any
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such consolidation or merger (if other than the Issuer) or the entity or Person
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made assumes all the obligations of the Issuer under the Notes
and this Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Trustee; (iii) immediately after such transaction no Default
or Event of Default exists; and (iv) the Issuer or the entity or Person formed
by or surviving any such consolidation or merger (if other than the Issuer), or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Issuer
immediately preceding the transaction and (B) will, at the time of such
transaction and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in the first paragraph of Section 4.09 hereof.
In connection with any consolidation or merger, or any sale,
assignment, transfer, lease, conveyance, or other disposition of all or
substantially all of the assets of the Issuer in accordance with this Section
5.01, the Issuer shall deliver, or cause to be delivered, to the Trustee, in
form reasonably satisfactory to the Trustee, an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
assignment, transfer, lease, conveyance, or other disposition and any
supplemental indenture in respect thereto comply with this Article 5 and that
all conditions precedent herein provided for relating to such transaction have
been complied with.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Issuer in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Issuer is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Issuer" shall refer instead to
the successor corporation and not to the Issuer), and may exercise every right
and power of the Issuer under this Indenture with the same effect as if such
successor Person had been named as the Issuer herein; provided, however, that
the predecessor Issuer shall not be relieved from the obligation to pay the
principal of, interest and Liquidated Damages, if any, on the Notes except in
the case of a sale of all of the Issuer's assets that meets the requirements of
Section 5.01 hereof.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an Event of Default:
(1) default for 30 days in the payment when due of interest on the
Notes;
(2) default in payment when due of the principal of or premium, if
any, on the Notes;
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(3) failure by the Issuer to comply with Sections 4.07, 4.09, 4.10 or
4.14;
(4) failure by the Issuer or the Guarantor for 60 days after notice
to comply with any of its other agreements in this Indenture, the Notes or the
Note Guarantee;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Issuer or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Issuer or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, if such (a) default results in the
acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness, and (b) the principal amount of any such Indebtedness that
has been accelerated or not paid at maturity, when added to the aggregate
principal amount of all other Indebtedness that has been accelerated or not paid
at maturity, exceeds $5.0 million;
(6) failure by the Issuer or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(7) the Issuer or any of its Restricted Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in
an involuntary case,
(c) consents to the appointment of a Custodian of it or for all
or substantially all of its property,
(d) makes a general assignment for the benefit of its creditors,
or
(e) generally is not paying its debts as they become due; or
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Issuer or any Restricted
Subsidiary in an involuntary case,
(b) appoints a Custodian of the Issuer or any Restricted
Subsidiary or for all or substantially all of the property of the
Issuer or any Restricted Subsidiary, or
(c) orders the liquidation of the Issuer or any Restricted
Subsidiary,
and the order or decree remains unstayed and in effect for 60 consecutive days;
and
(9) except as permitted by this Indenture, any Note Guarantee issued
by a Guarantor shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in
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full force and effect or any Guarantor or any Person acting on behalf of any
Guarantor shall deny or disaffirm its obligations under its Note Guarantee.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
In the case of any Event of Default pursuant to the provisions of
this Section 6.01 occurring by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Issuer with the intention of avoiding
payment of the premium that the Issuer would have had to pay if the Issuer then
had elected to redeem the Notes pursuant to Section 3.07 hereof, an equivalent
premium shall also become and be immediately due and payable to the extent
permitted by law upon acceleration of the Notes, anything in this Indenture or
in the Notes to the contrary notwithstanding. If an Event of Default occurs
prior to the April 1, 2001 by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Issuer with the intention of avoiding the
prohibition on redemption of the Notes prior to such date pursuant to Section
3.07 hereof, then the premium payable for purposes of this paragraph for each of
the years beginning on April 1 of the years set forth below shall be as set
forth in the following table expressed as a percentage of the amount that would
otherwise be due but for the provisions of this sentence, plus accrued interest,
if any, to the date of payment:
Year Percentage
---- ----------
1997 ........................................... 111.750%
1998 ........................................... 110.281%
1999 ........................................... 108.812%
2000 ........................................... 107.343%
SECTION 6.02. ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Notwithstanding the
foregoing, in the case of an Event of Default specified in clauses (7) and (8)
of Section 6.01, with respect to the Issuer or any Restricted Subsidiary that is
a Significant Subsidiary, the principal of, and premium and Liquidated Damages,
if any, and any accrued and unpaid interest on all outstanding Notes will become
due and payable without further action or notice. Holders of the Notes may not
enforce this Indenture or the Notes except as provided in this Indenture. In the
event of a declaration of acceleration of the Notes because an Event of Default
has occurred and is continuing as a result of the acceleration of any
Indebtedness described in clause (5) of Section 6.01 hereof, the declaration of
acceleration of the Notes shall be automatically annulled if the holders of any
Indebtedness described in clause (5) have rescinded the declaration of
acceleration in respect of such Indebtedness within 30 days of the date of such
declaration and if (a) the annulment of the acceleration of the Notes would not
conflict with any judgment or decree of a court of competent jurisdiction, and
(b) all existing Events of Default, except nonpayment of principal or interest
on the Notes that became due solely because of the acceleration of the Notes,
have been cured or waived.
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SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes 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, and any recovery
or judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of Notes. A delay or
omission by the Trustee or any Holder of a Note 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. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, (i) the Trustee may refuse to follow any direction
that conflicts with law or this Indenture that the Trustee determines may be
unduly prejudicial to the rights of other Holders of Notes or that may involve
the Trustee in personal liability, and (ii) the Trustee may take any other
action deemed proper by the Trustee which is not inconsistent with such
direction. The Trustee may withhold from Holders of the Notes notice of any
Continuing Default or Event of Default (except a Default or Event of Default
relating to the payment of principal or interest) if it determines that
withholding notice is in their interest. Notwithstanding any provision to the
contrary in this Indenture, the Trustee shall not be obligated to take any
action with respect to the provisions of the last paragraph of Section 6.01
unless directed to do so pursuant to this Section 6.05.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this Indenture
or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
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(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the provision of
indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01 occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Issuer or any Guarantor for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest 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 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to 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,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Issuer
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding 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, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof out of the estate in
any such proceeding, shall be denied for any reason,
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payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties that
the Holders may be entitled to receive in such proceeding whether in liquidation
or under any plan of reorganization or arrangement or otherwise. 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, 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 pursuant to this Article, it shall
pay out the money in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(premium, if any) or interest, upon presentation of the Notes and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium and Liquidated Damages, if any, and
interest, respectively; and
Third: to the Issuer or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes 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 a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.06 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder of Notes has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Issuer, the
Trustee and the Holders shall, subject to any determination in such proceeding,
be restored
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severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Holders shall continue as though
no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If 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, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.06 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
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(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuer. Money
held in trust by the Trustee need not be segregated from other funds except to
the extent required by law.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protections to the Trustee shall be
subject to the provisions of this Article 7 and to the provisions of the TIA.
SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely 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 require
an Officers' Certificate or an Opinion of Counsel or both. 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. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(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 it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Issuer or any Guarantor shall be
sufficient if signed by an Officer of the Issuer or such Guarantor.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders pursuant to the provisions of this Indenture, including,
without limitation, the provisions of Section 6.06 hereof, unless such Holders
shall have offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in compliance with
such request or direction.
(g) The Trustee shall not be charged with knowledge of any Default or
Event of Default under Sections 6.01(3), 6.01(5), 6.01(6), 6.01(7), 6.01(8) or
6.01(9) hereof and the Trustee shall not be charged with knowledge of the
existence of any Liquidated Damages unless either (i) a Responsible Officer
shall have actual knowledge thereof, or (ii) the Trustee shall have received
notice thereof in accordance with Section 11.02 hereof from the Issuer or any
Holder of Notes.
(h) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, 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
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determine to make such further inquiry or investigation, it shall be entitled to
examine the books, records and premises of the Issuer or the Guarantor,
personally or by agent or attorney.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuer or any
Guarantor or any Affiliate of the Issuer or any Guarantor with the same rights
it would have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest within the meaning of Section 3.10(b) of the
TIA it must eliminate such conflict within 90 days, apply to the Commission for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes or any money
paid to the Issuer or upon the Issuer's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to a Responsible Officer, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs. Except
in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice if
and so long as a committee of its Responsible Officers in good faith determines
that withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each December 31 beginning with the December 31
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders of the Notes a brief report
dated as of such reporting date that complies with TIA ss. 313(a) (but if no
event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Trustee also
shall comply with TIA ss. 313(b)(2). The Trustee shall also transmit by mail all
reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Issuer and filed with the Commission and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Issuer shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
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SECTION 7.07. COMPENSATION AND INDEMNITY.
The Issuer shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Issuer shall indemnify the Trustee against any and all losses,
liabilities or expenses incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Indenture, including the
costs and expenses of enforcing this Indenture against the Issuer or any
Guarantor (including this Section 7.07) and defending itself against any claim
(whether asserted by the Issuer or any Guarantor or any Holder or any other
Person) or liability in connection with the exercise or performance of any of
its powers or duties hereunder, except to the extent any such loss, liability or
expense may be attributable to its negligence or bad faith. The Trustee shall
notify the Issuer promptly of any claim for which it may seek indemnity. Failure
by the Trustee to so notify the Issuer shall not relieve the Issuer of its
obligations hereunder. The Issuer shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Issuer
shall pay the reasonable fees and expenses of such counsel. The Issuer need not
pay for any settlement made without its consent, which consent shall not be
unreasonably withheld.
The obligations of the Issuer under this Section 7.07 shall survive
the resignation or removal of the Trustee and the satisfaction and discharge of
this Indenture.
To secure the Issuer's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the resignation or removal
of the Trustee and the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(8) or (9) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Issuer. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Issuer in writing. The Issuer may
remove the Trustee if:
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(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuer shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuer.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer, or the
Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has
been a Holder of a Note for at least six months, fails to comply with Section
7.10, such Holder of a Note may petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon, 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. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Issuer's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
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This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST ISSUER.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Issuer may, at the option of its Board of Directors evidenced by
a Board Resolution, at any time, elect to have either Section 8.02 or 8.03
hereof be applied to all outstanding Notes upon compliance with the conditions
set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Issuer's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Issuer shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Issuer shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Issuer, shall execute proper instruments acknowledging
the same), except for the following provisions which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive solely from the trust fund described in Section
8.04 hereof, and as more fully set forth in such Section, payments in respect of
the principal of, premium, if any, and interest on such Notes when such payments
are due, (b) the Issuer's obligations with respect to such Notes under Article 2
and Section 4.02 hereof, (c) the rights, powers, trusts, duties and immunities
of the Trustee hereunder and the Issuer's obligations in connection therewith
and (d) this Article 8. Subject to compliance with this Article 8, the Issuer
may exercise its option under this Section 8.02 notwithstanding the prior
exercise of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Issuer's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Issuer shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.14, 4.15, 4.16 and 4.17 hereof with respect to the
outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration
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or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Notes, the Issuer may omit to comply with and shall
have no liability in respect of any term, condition or limitation set forth in
any such covenant, whether directly or indirectly, by reason of any reference
elsewhere herein to any such covenant or by reason of any reference in any such
covenant to any other provision herein or in any other document and such
omission to comply shall not constitute a Default or an Event of Default under
Section 6.01 hereof, but, except as specified above, the remainder of this
Indenture and such Notes shall be unaffected thereby. In addition, upon the
Issuer's exercise under Section 8.01 hereof of the option applicable to this
Section 8.03 hereof, subject to the satisfaction of the conditions set forth in
Section 8.04 hereof, Sections 6.01(3), (5) through 6.01(8) hereof shall not
constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either Section
8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuer must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders, cash in United States
dollars, non-callable Cash Equivalents, or a combination thereof, in
such amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium and Liquidated Damages, if any, and interest on
the outstanding Notes on the stated date for payment thereof or on
the applicable redemption date, as the case may be and the Issuer
must specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(b) in the case of an election under Section 8.02 hereof,
the Issuer shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that (A) the Issuer has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of
this Indenture, there has been a change in the applicable federal
income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof,
the Issuer shall have delivered to the Trustee an Opinion of Counsel
in the United States reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such
Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and
be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the incurrence of
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Indebtedness all or a portion of the proceeds of which will be used
to defease the Notes pursuant to this Article 8 concurrently with
such incurrence) or insofar as Sections 6.01(7) or 6.01(8) hereof is
concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under,
any material agreement or instrument (other than this Indenture) to
which the Issuer or any of its Restricted Subsidiaries is a party or
by which the Issuer or any of its Restricted Subsidiaries is bound;
(f) the Issuer shall have delivered to the Trustee an
Opinion of Counsel to the effect that 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;
(g) the Issuer shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by the
Issuer with the intent of preferring the Holders over any other
creditors of the Issuer or with the intent of defeating, hindering,
delaying or defrauding any other creditors of the Issuer; and
(h) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that
all conditions precedent provided for or relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND CASH EQUIVALENTS TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Cash
Equivalents (including the proceeds thereof) deposited with the Trustee (or
other qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including the Issuer acting as Paying Agent) as the
Trustee may determine, to the Holders of such Notes of all sums due and to
become due thereon in respect of principal, premium, if any, and interest, but
such money need not be segregated from other funds except to the extent required
by law.
The Issuer shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable Cash
Equivalents deposited pursuant to Section 8.04 hereof 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 the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuer from time to time upon the request of
the Issuer any money or non-callable Cash Equivalents held by it as provided in
Section 8.04 hereof which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
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SECTION 8.06. REPAYMENT TO ISSUER.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Issuer, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Issuer on its request or (if then held by the Issuer) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Issuer for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and all
liability of the Issuer as trustee thereof, shall thereupon cease; provided,
however, that the Trustee or such Paying Agent, before being required to make
any such repayment, may at the expense of the Issuer cause to be published once,
in the New York Times and The Wall Street Journal (national edition), notice
that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such notification or
publication, any unclaimed balance of such money then remaining will be repaid
to the Issuer.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Cash Equivalents in accordance with Section 8.02 or 8.03
hereof, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuer's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Issuer makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Issuer shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Issuer and the
Trustee may amend or supplement this Indenture or the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(c) to provide for the assumption of the Issuer's or the Guarantor's
obligations to the Holders of Notes in the case of a merger or
consolidation pursuant to Articles 5 and 10 hereof, respectively;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes (including providing for additional
Note Guarantees pursuant to Article 10 hereof) or that does not
adversely affect the legal rights hereunder of any Holder of Notes; or
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(e) to comply with requirements of the Commission in order to effect
or maintain the qualification of this Indenture under the TIA.
Upon the request of the Issuer accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental indenture, and
upon receipt by the Trustee of the documents described in Section 7.02 hereof,
the Trustee shall join with the Issuer in the execution of any amended or
supplemental indenture authorized or permitted by the terms of this Indenture
and to make any further appropriate agreements and stipulations that may be
therein contained, but the Trustee shall not be obligated to enter into such
amended or supplemental indenture that affects its own rights, duties or
immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Issuer, the
Guarantors and the Trustee may amend or supplement this Indenture and the Notes
may be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding (including consents
obtained in connection with a tender offer or exchange offer for the Notes),
and, subject to Sections 6.04 and 6.07 hereof, any existing Default or Event of
Default (other than a Default or Event of Default in the payment of the
principal of, premium, if any, interest or Liquidated Damages, if any, on the
Notes, except a payment default resulting from an acceleration that has been
rescinded) or compliance with any provision of this Indenture or the Notes may
be waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for the Notes).
Upon the request of the Issuer accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 7.02 hereof, the Trustee shall join with the
Issuer in the execution of such amended or supplemental indenture unless such
amended or supplemental indenture affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise, in which case the Trustee may in
its discretion, but shall not be obligated to, enter into such amended or
supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Issuer shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuer to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes then
outstanding may waive compliance in a particular instance by the Issuer with any
provision of this Indenture or the Notes. However, without the consent of each
Holder affected, an amendment or waiver may not (with respect to any Notes held
by a non-consenting Holder):
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(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter or waive any of the provisions with respect to the redemption
of the Notes in a manner adverse to the Holders other than provisions
found in Section 4.10 or 4.14;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the then outstanding Notes and a waiver of
the payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than
a payment required by Sections 4.10 and 4.14);
(h) except pursuant to Sections 4.15 or 4.16, release any Guarantor
from its obligations under its Guarantee, or change any Note Guarantee
in any manner that would adversely affect the Holders; or
(i) make any change in Section 6.04 or 6.07 hereof or in the
foregoing amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in a amended or supplemental indenture that complies with the TIA as
then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder of a Note 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. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuer in
exchange for all Notes may issue and the Trustee shall authenticate new Notes
that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Issuer may not sign an amendment or supplemental indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01) shall be
fully protected in relying upon, in addition to the documents required by
Section 11.04, an Officer's Certificate and an Opinion of Counsel stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
NOTE GUARANTEE
SECTION 10.01. NOTE GUARANTEE.
Each Guarantor and each Restricted Subsidiary of the Issuer which in
accordance with Section 4.16 hereof is required to guarantee the obligations of
the Issuer under the Notes, upon execution of a counterpart of this Indenture,
hereby jointly and severally unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee irrespective of the validity or
enforceability of this Indenture, the Notes or the obligations of the Issuer
under this Indenture or the Notes, that: (i) the principal of, premium (if any)
and interest and Liquidated Damages, if any, on the Notes will be paid in full
when due, whether at the maturity or interest payment date, by acceleration,
call for redemption or otherwise, and interest on the overdue principal of,
interest or Liquidated Damages, if any, on the Notes and all other obligations
of the Issuer to the Holders or the Trustee under this Indenture or the Notes
will be promptly paid in full or performed, all in accordance with the terms of
this Indenture and the Notes; and (ii) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, they will be
paid in full when due or performed in accordance with the terms of the extension
or renewal, whether at maturity, by acceleration or otherwise. Failing payment
when due of any amount so guaranteed for whatever reason, each Guarantor will be
obligated to pay the same whether or not such failure to pay has become an Event
of Default which could cause acceleration pursuant to Section 6.02 hereof. Each
Guarantor agrees that this is a guarantee of payment not a guarantee of
collection.
Each Guarantor hereby agrees that its obligations with regard to this
Note Guarantee shall be joint and several, unconditional, irrespective of the
validity or enforceability of the Notes or the obligations of the Issuer under
this Indenture, the absence of any action to enforce the same, the recovery
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of any judgment against the Issuer or any other obligor with respect to this
Indenture, the Notes or the obligations of the Issuer under this Indenture or
the Notes, any action to enforce the same or any other circumstances (other than
complete performance) which might otherwise constitute a legal or equitable
discharge or defense of a Guarantor. Each Guarantor further, to the extent
permitted by law, waives and relinquishes all claims, rights and remedies
accorded by applicable law to guarantors and agrees not to assert or take
advantage of any such claims, rights or remedies, including but not limited to:
(a) any right to require the Trustee, the Holders or the Issuer (each, a
"Benefitted Party") to proceed against the Issuer or any other Person or to
proceed against or exhaust any security held by a Benefitted Party at any time
or to pursue any other remedy in any Benefitted Party's power before proceeding
against such Guarantor; (b) the defense of the statute of limitations in any
action hereunder or in any action for the collection of any Indebtedness or the
performance of any obligation hereby guaranteed; (c) any defense that may arise
by reason of the incapacity, lack of authority, death or disability of any other
Person or the failure of a Benefitted Party to file or enforce a claim against
the estate (in administration, bankruptcy or any other proceeding) of any other
Person; (d) demand, protest and notice of any kind including but not limited to
notice of the existence, creation or incurring of any new or additional
Indebtedness or obligation or of any action or non-action on the part of such
Guarantor, the Issuer, any Benefitted Party, any creditor of such Guarantor, the
Issuer or on the part of any other Person whomsoever in connection with any
Indebtedness or obligations hereby guaranteed; (e) any defense based upon an
election of remedies by a Benefitted Party, including but not limited to an
election to proceed against such Guarantor for reimbursement; (f) any defense
based upon any statute or rule of law which provides that the obligation of a
surety must be neither larger in amount nor in other respects more burdensome
than that of the principal; (g) any defense arising because of a Benefitted
Party's election, in any proceeding instituted under Bankruptcy Law, of the
application of 11 U.S.C. Section 1111(b)(2); or (h) any defense based on any
borrowing or grant of a security interest under 11 U.S.C. Section 364. Each
Guarantor hereby covenants that its Note Guarantee will not be discharged except
by complete performance of the obligations contained in its Note Guarantee and
this Indenture.
If any Holder or the Trustee is required by any court or otherwise to
return to either the Issuer or any Guarantor, or any Custodian acting in
relation to either the Issuer or such Guarantor, any amount paid by the Issuer
or such Guarantor to the Trustee or such Holder, the applicable Note Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect. Each Guarantor agrees that it will not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby.
Each Guarantor further agrees that, as between such Guarantor, on the
one hand, and the Holders and the Trustee, on the other hand, (i) the maturity
of the Obligations guaranteed hereby may be accelerated as provided in Section
6.02 hereof for the purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration as to the Issuer or
any other obligor on the Notes of the Obligations guaranteed hereby, and (ii) in
the event of any declaration of acceleration of those Obligations as provided in
Section 6.02 hereof, those Obligations (whether or not due and payable) will
forthwith become due and payable by such Guarantor for the purpose of this Note
Guarantee.
To evidence its Note Guarantee, each Guarantor hereby agrees that a
notation of such Guarantee substantially in the form of Exhibit A-1 hereto shall
be endorsed by an officer of such Guarantor on each Note authenticated and
delivered by the Trustee and that this Indenture shall be executed on behalf of
such Guarantor by its President or one of its Vice Presidents and attested to by
an Officer.
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SECTION 10.02. GUARANTORS MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person), another corporation, Person or
entity whether or not affiliated with such Guarantor unless (i) subject to the
provisions of the following paragraph, the Person formed by or surviving any
such consolidation or merger (if other than such Guarantor) assumes all the
obligations of such Guarantor pursuant to a supplemental indenture in form and
substance reasonably satisfactory to the Trustee, under the Notes and this
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default exists; (iii) such Guarantor, or any Person formed by or
surviving any such consolidation or merger, would have Consolidated Net Worth
(immediately after giving effect to such transaction), equal to or greater than
the Consolidated Net Worth of such Guarantor immediately preceding the
transaction; and (iv) the Issuer would be permitted by virtue of the Issuer's
pro forma Fixed Charge Coverage Ratio, immediately after giving effect to such
transaction, to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in Section 4.09 hereof.
SECTION 10.03. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of such a merger,
consolidation or otherwise, of all of the capital stock of such Guarantor) or
the corporation acquiring the property (in the event of a sale or other
disposition of all of the assets of such Guarantor) shall be released and
relieved of any obligations under its Note Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of this Indenture.
SECTION 10.04. LIMITATION OF GUARANTOR'S LIABILITY.
Each Guarantor and by its acceptance hereof, each beneficiary hereof,
hereby confirm that it is its intention that the Note Guarantee of such
Guarantor not constitute a fraudulent transfer or conveyance for purposes of the
Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law to the extent applicable to any
Guarantee. To effectuate the foregoing intention, each such person hereby
irrevocably agrees that the obligation of such Guarantor under its Note
Guarantee under this Article 10 shall be limited to the maximum amount as will,
after giving effect to such maximum amount and all other (contingent or
otherwise) liabilities of such Guarantor that are relevant under such laws, and
after giving effect to any collections from, rights to receive contribution from
or payments made by or on behalf of any other Guarantor in respect of the
obligations of such other Guarantor under this Article 10, result in the
obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent conveyance. Each beneficiary under the Note Guarantees, by
accepting the benefits hereof, confirms its intention that, in the event of a
bankruptcy, reorganization or other similar proceeding of the Issuer or any
Guarantor in which concurrent claims are made upon such Guarantor hereunder, to
the extent such claims will not be fully satisfied, each such claimant with a
valid claim against the Issuer shall be entitled to a ratable share of all
payments by such Guarantor in respect of such concurrent claims.
ARTICLE 11
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MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss.318(c), the imposed duties shall control.
SECTION 11.02. NOTICES.
Any notice or communication by the Issuer, a Guarantor or the Trustee
to the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guarantying next day delivery, to the
others' address:
If to the Issuer:
Anchor Advanced Products, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, TN 37919-4048
Attention: Francis Olmstead, Jr.
Telecopier No.: (423) 450-5379
With a copy to:
Thomas H. Lee Company
75 State Street, Suite 2600
Boston, MA 02119
Attention: Scott A. Schoen
Telecopier No.: (617) 227-3514
If to a Guarantor:
c/o Anchor Holdings, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, TN 37919-4048
Attention: Francis Olmstead, Jr.
Telecopier No.: (423) 450-5379
If to the Trustee:
Fleet National Bank
777 Main Street
Hartford, CT 06115
Telecopier No.: (860) 986-7920
Attention: Corporate Trust Department
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The Issuer, the Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guarantying next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guarantying next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
Failure 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
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuer mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Issuer, any
Guarantor, the Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuer and/or any Guarantor to
the Trustee to take any action under this Indenture, the Issuer and/or such
Guarantor, as the case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for in
this Indenture relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of such
counsel, all such conditions precedent and covenants have been
satisfied.
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SECTION 11.05. 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 a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and 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 or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee, incorporator
or stockholder of the Issuer, as such, shall have any liability for any
obligations of the Issuer or any Guarantor under the Notes, the Note Guarantee
or this Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Note Guarantees. Such waiver may
not be effective to waive liabilities under the federal securities laws and it
is the view of the Commission that such a waiver is against public policy.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan
or debt agreement of the Issuer or its Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture or the Note Guarantees.
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SECTION 11.10. SUCCESSORS.
All agreements of the Issuer in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
SECTION 11.14. FURTHER INSTRUMENTS AND ACTS.
Upon request of the Trustee, the Issuer will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.
[Signatures on following page]
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IN WITNESS WHEREOF, each of ANCHOR ADVANCED PRODUCTS, INC. and ANCHOR
HOLDINGS, INC., has caused this Indenture to be signed in its corporate name and
acknowledged by one of its duly authorized officers; and FLEET NATIONAL BANK has
caused this Indenture to be signed and acknowledged by one of its duly
authorized signatories, and its seal to be affixed hereunto or impressed hereon,
duly attested, as of the day and year first above written.
SIGNATURES
Dated as of April 2, 1997 ANCHOR ADVANCED PRODUCTS, INC.
By: /s/ Francis H. Olmstead, Jr.
-------------------------------
Name: Francis H. Olmstead, Jr.
Title: CEO and President
Attest:
/s/ Isabelle Talleyrand
- -----------------------
Isabelle Talleyrand
Dated as of April 2, 1997 ANCHOR HOLDINGS, INC.
By: /s/ Francis H. Olmstead, Jr.
-------------------------------
Name: Francis H. Olmstead, Jr.
Title: CEO and President
Attest:
- ------------------------
Dated as of April 2, 1997 FLEET NATIONAL BANK
By: /s/
-------------------------------
Name:
Title: Vice President
<PAGE>
================================================================================
EXHIBIT A
(Face of Note)
11 3/4% Senior Notes due 2004
No. $________
ANCHOR ADVANCED PRODUCTS, INC.
promises to pay to
or registered assigns,
the principal sum of
Dollars on April 1, 2004.
Interest Payment Dates: April 1, and October 1
Record Dates: March 15, and September 15
Dated: _______________ __, _____
ANCHOR ADVANCED PRODUCTS, INC.
By:______________________________
Name:
Title:
By:______________________________
Name:
Title:
(SEAL)
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
Trustee's Certificate of Authentication
FLEET NATIONAL BANK,
as Trustee, certifies that this is one of the
Notes referred to in the Indenture.
By:__________________________________
Name:
Title:
================================================================================
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(Back of Note)
11 3/4% Senior Notes due 2004
[Unless and until it is exchanged in whole or in part for Notes in
definitive form, this Note may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company (55 Water Street, New York, New York) ("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 may be requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or such other entity as may be 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.](1)
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY
(1) (a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY
SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
- -----------------
(1) This Paragraph should be included only if the Note is issued in global form.
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1. INTEREST. Anchor Advanced Products, Inc. a Delaware corporation (the
"Issuer"), promises to pay interest on the principal amount of this Note at 11
3/4% per annum from April 2, 1997 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Issuer will pay interest and Liquidated Damages
semi-annually on April 1 and October 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance; provided that if there is no existing Default in the payment
of interest, and if this Note is authenticated between a record date referred to
on the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; provided, further, that
the first Interest Payment Date shall be October 1, 1997. The Issuer shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; it
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Issuer will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on the Record Date set
forth on the face hereof next preceding the Interest Payment Date, even if such
Notes are cancelled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with respect
to defaulted interest. The Notes will be payable as to principal, premium,
interest and Liquidated Damages, if any, at the office or agency of the Issuer
maintained for such purpose within or without the City and State of New York,
or, at the option of the Issuer, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders at their addresses set forth in
the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages, if any, on, all Global Notes and all
other Notes the Holders of which shall have provided wire transfer instructions
to the Paying Agent on or prior to the applicable Record Date. Such payment
shall be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Fleet National Bank, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Issuer
may change any Paying Agent or Registrar without notice to any Holder. The
Issuer or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Issuer issued the Notes under an Indenture dated as
of April 2, 1997 ("Indenture") between the Issuer, Anchor Holdings, Inc.
("Holdings") and the Trustee. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. The Notes are unsecured obligations of
the Issuer limited to $100.0 million in aggregate principal amount.
5. OPTIONAL REDEMPTION.
The Notes will not be redeemable at the Issuer's option prior
to April 1, 2001. Thereafter, the Notes will be subject to redemption at the
option of the Issuer, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of
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principal amount) set forth below plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the applicable redemption date, if
redeemed during the twelve-month period beginning on April 1 of the years
indicated below:
Year Percentage
2001 . . . . . . . . . . . . . . . . . . . . . . 105.875
2002 . . . . . . . . . . . . . . . . . . . . . . 102.938
2003 and thereafter. . . . . . . . . . . . . . . 100.00%
Notwithstanding the foregoing, at any time prior to April 1, 2000, the
Issuer may redeem up to 35% of the initial principal amount of the Notes
originally issued with the net cash proceeds of one or more Public Equity
Offerings, at a redemption price of 110.75% of the principal amount of such
Notes, plus accrued and unpaid interest and Liquidated Damages, if any, to the
date of redemption; provided, that at least 65% of the principal amount of Notes
originally issued remain outstanding immediately after the occurrence of any
such redemption and that such redemption occurs within 90 days following the
closing of any such Public Equity Offering.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Issuer shall not be
required to make mandatory redemption or sinking fund payments with respect to
the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuer shall be required to
make an offer (a "Change of Control Offer") to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of each Holder's Notes at a purchase
price equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest and Liquidated Damages, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Issuer shall mail a notice to each Holder setting forth the procedures
governing the Change of Control Offer as required by the Indenture.
(b) If the Issuer or a Restricted Subsidiary consummates any Asset
Sales, within five days of each date on which the aggregate amount of Excess
Proceeds exceeds $5.0 million, the Issuer shall commence an offer to all Holders
of Notes (an "Asset Sale Offer") pursuant to Section 3.09 of the Indenture to
purchase the maximum principal amount of Notes that may be purchased out of the
Excess Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated
Damages, if any, to the date fixed for the closing of such offer, in accordance
with the procedures set forth in the Indenture. To the extent that the aggregate
amount of Notes tendered pursuant to an Asset Sale Offer is less than the Excess
Proceeds, the Issuer may use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of Notes surrendered by Holders
thereof exceeds the amount of Excess Proceeds, the Trustee shall select the
Notes to be purchased on a pro rata basis. Holders of Notes that are the subject
of an offer to purchase will receive an Asset Sale Offer from the Issuer prior
to any related purchase date and may elect to have such Notes purchased by
completing the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Notes.
8. 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
whose Notes are to be redeemed at its registered
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address. Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuer need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuer need
not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the then outstanding
Notes, and any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes. Without the consent
of any Holder of a Note, the Indenture or the Notes may be amended or
supplemented to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of the Issuer's or the Guarantor's obligations to
Holders of the Notes in case of a merger or consolidation, to make any change
that would provide any additional rights or benefits to the Holders of the Notes
(including providing for additional Note Guarantees pursuant to Section 4.16) or
that does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with the requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Each of the following constitutes an Event
of Default: (i) default for 30 days in the payment when due of interest on the
Notes; (ii) default in payment when due of the principal of or premium, if any,
on the Notes; (iii) failure by the Issuer to comply with Sections 4.07, 4.09,
4.10 and 4.14 (iv) failure by the Issuer or the Guarantor for 60 days after
notice to comply with any of its other agreements in this Indenture, the Notes
or the Note Guarantee; (v) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Issuer or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Issuer or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date of this Indenture, if such (a) default results in the
acceleration of such Indebtedness prior to its express maturity or shall
constitute a default in the payment of such Indebtedness at final maturity of
such Indebtedness, and (b) the principal amount of any such Indebtedness that
has been accelerated or not paid at maturity, when added to the aggregate
principal amount of all other Indebtedness that has been accelerated or not paid
at maturity, exceeds $5.0 million; (vi) failure by the Issuer or any of its
Restricted Subsidiaries to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
days; (vii) certain events of bankruptcy or insolvency with respect to the
Issuer or any of its Restricted Subsidiaries; and (viii) except as permitted by
this Indenture, any Note Guarantee issued by a Guarantor shall be held in any
judicial proceeding to be unenforceable or invalid or shall cease for any reason
to
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<PAGE>
be in full force and effect or any Guarantor or any Person acting on behalf of
any Guarantor shall deny or disaffirm its obligations under its Note Guarantee.
If any Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately. Notwithstanding the foregoing, in
the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Issuer or any Restricted Subsidiary that is a
Significant Subsidiary, the principal of, and premium and Liquidated Damages, if
any, and any accrued and unpaid interest on all outstanding Notes will become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. The Trustee
may withhold from Holders of the Notes notice of any continuing Default or Event
of Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. 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 the Indenture except a continuing Default or Event of Default in the
payment of the principal of, Liquidated Damages, if any, or interest on the
Notes. The Issuer is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuer 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.
13. GUARANTEES. Payment of principal of, Liquidated Damages, if any,
and interest (including interest on overdue principal, Liquidated Damages, if
any, and interest, if lawful) on the Notes is guaranteed on an unsecured, senior
basis by the Guarantors pursuant to Article 10 of the Indenture. Each Holder of
a Note, by accepting the same, agrees to be bound by such provisions, authorizes
and directs the Trustee, on behalf of such Holder, to take such action as may be
necessary or appropriate to effectuate such subordination and appoints the
Trustee to act as such Holder's attorney-in-fact for such purpose.
14. TRUSTEE DEALINGS WITH ISSUER. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Issuer, any Guarantor or their Affiliates, and may otherwise deal with
the Issuer or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Issuer, as such, shall not have any
liability for any obligations of the Issuer under the Notes, the Note Guarantee
or the Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder 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 Note Guarantees. Such waiver
may not be effective to waive liabilities under the federal securities laws and
it is the view of the Commission that such a waiver is against public policy.
16. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
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18. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transferred Restricted Securities shall have all the rights set forth in the
Registration Rights Agreement dated as of April 2, 1997, between the Issuer and
the parties named on the signature pages thereof (the "Registration Rights
Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuer has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Issuer will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Anchor Advanced Products, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, TN 37919-4048
Attention: President
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<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and
transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
--------------------------------------------------------
to transfer this Note on the books of the Issuer. The agent may substitute
another to act for him.
Date:
------------------------------
Your Signature:
----------------------------------------------
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuer
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
$
----------------
Date: Your Signature:
---------------------- -------------------------------
(Sign exactly as your name appears
on the Note)
Tax Identification No.:
-----------------------
Signature Guarantee.
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<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE NOTE(2)
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
<CAPTION>
Principal Amount of this Signature of
Amount of decrease in Amount of increase in Global Note authorized officer of
Principal Amount of Principal Amount of following such decrease Trustee or Note
Date of Exchange this Global Note this Global Note (or increase) Custodian
- ---------------------- ----------------------- ------------------------ ------------------------ ----------------------
<S> <C> <C> <C> <C>
</TABLE>
- ----------------------
(2) This should be included only if the Note is issued in global form.
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<PAGE>
EXHIBIT A-1
FORM OF NOTATION ON NOTE
RELATING TO GUARANTEE
The Guarantor set forth below and each Subsidiary of the Issuer which
in accordance with Section 4.16 of the Indenture is required to guarantee the
obligations of the Issuer under the Notes upon execution of a counterpart of the
Indenture or a supplemental Indenture, has jointly and severally unconditionally
guaranteed (i) the due and punctual payment of the principal of, interest and
Liquidated Damages, if any, on the Notes, whether at the maturity or interest
payment date, by acceleration, call for redemption or otherwise, and of interest
on the overdue principal of, interest and Liquidated Damages, if any, on the
Notes and all other obligations of the Issuer to the Holders or the Trustee
under the Indenture or the Notes 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 maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Holder and to the Trustee
pursuant to this Note Guarantee and the Indenture are as expressly set forth in
Article 10 of the Indenture and in such other provisions of the Indenture as are
applicable to Guarantors, and reference is hereby made to such Indenture for the
precise terms of this Note Guarantee. The terms of Article 10 of the Indenture
and such other provisions of the Indenture as are applicable to Guarantors are
incorporated herein by reference.
This is a continuing guarantee and shall remain in full force and
effect and shall be binding upon each Guarantor and its successors and assigns
until full and final payment of all of the Issuer's obligations under the Notes
and the Indenture and shall inure 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 herein
conferred upon that party shall automatically extend to and be vested in such
transferee or assignee, all subject to the terms and conditions hereof. This is
a guarantee of payment and not a guarantee of collection.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
ANCHOR HOLDINGS, INC.
By:
------------------------------------
Name:
Title:
A1-1
<PAGE>
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER OF
NOTES
Re: 11 3/4% Senior Notes due 2004 of Anchor Advanced Products, Inc.
This Certificate relates to $_____ principal amount of Notes held in
* ________ book-entry or *_______ definitive form by ________________ (the
"Transferor").
The Transferor*:
[ ] has requested the Trustee by written order to deliver in exchange
for its beneficial interest in the Global Note held by the Depositary a Note or
Notes in definitive, registered form of authorized denominations in an aggregate
principal amount equal to its beneficial interest in such Global Note (or the
portion thereof indicated above); or
[ ] has requested the Trustee by written order to exchange or
register the transfer of a Note or Notes.
In connection with such request and in respect of each such Note, the
Transferor does hereby certify that Transferor is familiar with the Indenture
relating to the above captioned Notes and as provided in Section 2.06 of such
Indenture, the transfer of this Note does not require registration under the
Securities Act (as defined below) because:*
[ ] Such Note is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture).
[ ] Such Note is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act of 1933, as amended
(the "Securities Act")) in reliance on Rule 144A (in satisfaction of Section
2.06(a)(ii)(B), Section 2.06(b)(i) or Section 2.06(d)(i) (B) of the Indenture)
or pursuant to an exemption from registration in accordance with Rule 904 under
the Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture.)
- ---------------
*Check applicable box.
<PAGE>
[ ] Such Note is being transferred in accordance with Rule 144 under
the Securities Act, or pursuant to an effective registration statement under the
Securities Act (in satisfaction of Section 2.06(a)(ii)(B) or Section
2.06(d)(i)(B) of the Indenture).
[ ] Such Note is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Securities Act,
other than Rule 144A, 144 or Rule 904 under the Securities Act. An Opinion of
Counsel to the effect that such transfer does not require registration under the
Securities Act accompanies this Certificate (in satisfaction of Section
2.06(a)(ii)(C) or Section 2.06(d)(i)(C) of the Indenture).
-----------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------
Date:
--------------------------------
B-2
EXHIBIT 10.1
ANCHOR HOLDINGS, INC.
AMENDED AND RESTATED
SHAREHOLDERS' AGREEMENT
July 29, 1994
<PAGE>
ANCHOR HOLDINGS, INC.
AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
TABLE OF CONTENTS
Preamble Page
- -------- ----
ARTICLE I Definitions ............................................... 2
Acquisition .............................................. 2
1933 Act ................................................. 2
1934 Act ................................................. 2
Affiliate ................................................ 2
Anchor Advanced Products ................................. 2
Associate ................................................ 2
Book Value ............................................... 3
Call Event ............................................... 3
Call Group ............................................... 3
Call Notice .............................................. 3
Call Option .............................................. 3
Call Price ............................................... 3
Call Securities .......................................... 3
Cause .................................................... 3
Certificate of Incorporation ............................. 4
Common Stock ............................................. 4
The Company .............................................. 4
Designated Employees ..................................... 4
Disability ............................................... 4
Equity Fund Nominee ...................................... 4
Equity Fund Investor ..................................... 4
Fair Market Value ........................................ 4
Fund II .................................................. 5
Fund Agreements .......................................... 5
Fund Nominees ............................................ 5
Funds .................................................... 5
Holder ................................................... 5
Initiating Investor ...................................... 5
Institutional Investors .................................. 5
Institutional Offeree .................................... 5
Institutional Offered Shares ............................. 5
Institutional Offer Price ................................ 5
Institutional Transfer Option Period ..................... 5
Institutional Transfer Notice ............................ 5
Investment Price I ....................................... 5
Investment Price II ...................................... 6
Lee Investors ............................................ 6
Lee Representative ....................................... 6
Management Representative ................................ 6
Management Investors ..................................... 6
Management Offered Shares ................................ 6
Management Offeree ....................................... 6
Management Offer Price ................................... 6
Management Transfer Notice ............................... 6
Management Transfer Option Period ........................ 6
-i-
<PAGE>
Preamble Page
- -------- ----
Mid-State ................................................ 6
Mid-State Acquisition .................................... 6
Mid-State Investors ...................................... 6
NAPC ..................................................... 6
New Securities ........................................... 7
Offered Warrants ......................................... 7
Participation Securities ................................. 7
Participation Notice ..................................... 7
Participating Offeree .................................... 7
Permitted Transfer ....................................... 7
Permitted Transferee ..................................... 8
Person ................................................... 8
Public Float Date ........................................ 8
Public Offering .......................................... 8
Purchase Agreement ....................................... 8
Registrable Securities ................................... 8
Retirement Fund .......................................... 9
Sale Request ............................................. 9
Schedule ................................................. 9
SEC ...................................................... 9
Selling Investors ........................................ 9
Stock .................................................... 9
Shareholder .............................................. 9
Stock Options ............................................ 9
Stock Option Plan ........................................ 9
Subsidiary ............................................... 9
Third Party .............................................. 10
Thomas H. Lee Company .................................... 10
Thomas H. Lee Equity Partners, L.P. ...................... 10
THL Management Agreement ................................. 10
Transfer ................................................. 10
Warrant .................................................. 10
Warrant Offeree .......................................... 10
Warrant Offer Price ...................................... 10
Warrant Transfer Option Period ........................... 10
Warrant Transfer Notice .................................. 10
ARTICLE II Covenants and Conditions
Section 2.1 Restrictions on Transfers by the
Management Investors;
Right of First Refusal ................................... 11
Section 2.2 Restrictions on Transfer by the
Institutional Investors;
Right of First Refusal .................................. 13
Section 2.3 Come Along ............................................... 17
Section 2.4 Take Along ............................................... 18
Section 2.5 Call by the Company, ..................................... 20
Section 2.6 Preemptive Rights ........................................ 22
Section 2.7 Corporate Governance ..................................... 24
Section 2.8 Legends .................................................. 26
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Preamble Page
- -------- ----
ARTICLE III Registration Rights ...................................... 26
Section 3.1 General .................................................. 26
Section 3.2 Demand Registration Initiated by
Institutional Investors .................................. 26
Section 3.3 Piggyback Registration ................................... 27
Section 3.4 Obligations of the Company ............................... 28
Section 3.5 Furnish Information ...................................... 30
Section 3.6 Expenses of Registration ................................. 30
Section 3.7 Underwriting Requirements ................................ 30
Section 3.8 Indemnification .......................................... 30
Section 3.9 Reports Under The 1934 Act ............................... 33
Section 3.10 No Inconsistent Agreements ............................... 34
Section 3.11 Stock Split .............................................. 34
Section 3.12 Timing Limitations ....................................... 35
Section 3.13 Termination .............................................. 35
ARTICLE IV Miscellaneous
Section 4.1 Remedies ................................................. 35
Section 4.2 Entire Agreement; Amendment .............................. 36
Section 4.3 Severability ............................................. 36
Section 4.4 Investor Representatives ................................. 36
Section 4.5 Notices .................................................. 38
Section 4.6 Binding Effect; Assignment ............................... 39
Section 4.7 Governing Law ............................................ 39
Section 4.8 Termination .............................................. 39
Section 4.9 Recapitalizations, Exchanges, Etc ........................ 39
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AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT
This AMENDED AND RESTATED SHAREHOLDERS' AGREEMENT (this "Agreement") is
entered into as of the 29th day of July, 1994, by and among Anchor Holdings,
Inc., a Delaware corporation (the "Company"), the Mid-State Investors so
indicated on the signature page hereof (the "Mid-State Investors"), the
management Investors so indicated on the signature page hereof (together with
the Mid-State Investors, the "Management Investors"), Thomas H. Lee Equity
Partners, L.P. ("Equity Partners"), State Street Bank & Trust Company of
Connecticut, N.A. (not personally but as successor Trustee for the 1989 Thomas
H. Lee Nominee Trust) (the "Trustee"), the individual Investors affiliated with
Thomas H. Lee Company so indicated on the signature page hereof (the "Lee
Investors") (Equity Partners, the Trustee and the Lee Investors, together with
their Permitted Transferees, the "Equity Fund Investor"), ML-Lee Acquisition
Fund II, L.P., a Delaware limited partnership ("Fund II"), and ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P., a Delaware limited partnership
("Retirement Fund" and, collectively with Fund II, and the Retirement Fund, the
"Funds"). The Equity Fund Investor and the Funds are sometimes individually and
collectively referred to herein as the "Institutional Investors." The Management
Investors, the Equity Fund Investor and the Funds are sometimes herein
collectively referred to as the "Investors," or singularly as an "Investor."
WHEREAS, the Company is the successor to Anchor Acquisition Corp., a
Delaware corporation ("Anchor Acquisition"), which was formed for the purpose of
acquiring (the "Acquisition") through its subsidiaries, Anchor Brush Company and
Anchor Cosmetics Company (collectively, the "Acquisition Subsidiaries"), all of
the assets and certain liabilities and obligations of Anchor Advanced Products,
a division of North American Philips Corporation, a Delaware corporation
("NAPC"), pursuant to an Asset Purchase and Sale Agreement, dated as of March
21, 1990, by and between the Company and NAPC (the "Purchase Agreement"); and
WHEREAS, the Investors have (either at the time of the Acquisition or
simultaneously with the execution and delivery of this Agreement) subscribed for
and purchased or otherwise acquired the number of shares of Stock or Warrants
(hereinafter defined) of the Company (as successor to Anchor Acquisition) set
forth opposite the name of each Investor in the Schedule of Investors to be
maintained by the Company; and
WHEREAS, the Company's wholly-owned subsidiary, Anchor Advanced Products,
Inc., a Delaware corporation ("Anchor Advanced Products"), has purchased (the
"Mid-State Acquisition") substantially all of the assets and the business of
Mid-State Plastics, Inc., a North Carolina corporation ("Mid-State"), and in
connection therewith certain former executives of Mid-State have acquired
shares of Stock of the Company and are Investors hereunder; and
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WHEREAS all the Investors desire to enter into this Shareholders' Agreement
for the purpose of properly reflecting the corporate structure that has
developed following the Acquisition and regulating certain aspects of the
Investors' relationships with regard to the Company and its subsidiaries (each a
"Subsidiary" and collectively, the "Subsidiaries"):
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement, and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement, intending to be legally bound,
mutually agree as follows:
ARTICLE I
Definitions
For the purposes of this Agreement, the following terms shall be defined as
follows:
Acquisition. "Acquisition" shall have the meaning set forth in the second
paragraph of this Agreement.
1933 Act. The "1933 Act" shall mean the Securities Act of 1933, as amended.
1934 Act. The "1934 Act" shall mean the Securities Exchange Act Of 1934.
Affiliate. An "Affiliate" of a specified person, corporation or other
entity shall mean a person, corporation or other entity which, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, the corporation or other entity specified. For
purposes of this Agreement, the Funds, the Equity Fund Investor and Thomas H.
Lee Equity Partners, L.P. shall not be deemed to be "Affiliates" of each other.
Anchor Advanced Products. "Anchor Advanced Products" shall mean Anchor
Advanced Products, Inc., a Delaware corporation and wholly-owned subsidiary of
the Company.
Associate. "Associate" shall mean, when used to indicate a relationship
with any Person, (a) any corporation or organization of which such Person is an
officer or partner or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities, (b) any trust or other
estate in which such Person has a substantial beneficial interest or as to which
such Person serves as a trustee or in a similar fiduciary capacity and (c) any
relative of such Person who has the same home as such Person, is a parent,
spouse, in-law, child or
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grandchild of such Person, or the spouse of any of them, or is a director or
officer of the Company or its Subsidiary. Neither the Company nor its Subsidiary
shall be deemed an Associate of any Investor.
Book Value. "Book Value" shall mean, with respect to the valuation of
shares of Stock or Stock Options to be repurchased from a Management Investor or
his Permitted Transferees pursuant to Section 2.5, (i) the consolidated
stockholders' equity of the Company, excluding amounts attributable to shares of
the Company's capital stock other than its Common Stock, as of the last day of
the month immediately preceding the applicable termination date referenced in
Section 2.5, determined in accordance with generally accepted accounting
principles applied on a basis consistent with any prior periods plus the
aggregate exerclse price of all Options and Warrants exercisable as of such
date, divided by (ii) the number of shares of Common Stock outstanding and the
number of shares of Common Stock issuable upon the exercise of vested Stock
Options and exercisable Warrants as of such date.
Call Event. "Call Event" shall have the meaning set forth in Section 2.5(a)
hereof.
Call Group. "Call Group" shall have the meaning set forth in Section 2.5(a)
hereof.
Call Notice. "Call Notice" shall have the meaning set forth in Section
2.5(a) hereof.
Call Option. "Call Option" shall have the meaning set forth in Section
2.5(a) hereof.
Call Price. "Call Price" shall have the meaning set forth in Section 2.5(b)
hereof.
Call Securities. "Call Securities" shall have the meaning set forth in
Section 2.5(a) hereof.
Cause. "Cause" used in connection with the termination of a Management
Investor shall mean a termination of employment of such Management Investor by
the Company or any Subsidiary due to (a) the willful and continued failure by
such Management Investor to follow lawful directives of the Company's Board of
Directors and to devote his full time and best efforts to the Company and its
Subsidiaries (other than any failure resulting from an illness or other similar
incapacity or disability) for 10 days after a written demand for performance is
delivered to such Management Investor on behalf of the company's Board of
Directors which specifically identifies the manner in which it is alleged that
such Management Investor has not followed such directives or devoted such time
and efforts, (b) a felony conviction of such
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Management Investor or (c) the commission by such Management Investor of an act
of fraud or embezzlement against the Company or any Subsidiary, as determined in
each case in good faith by the Company's Board of Directors.
Certificate of Incorporation. "Certificate of Incorporation" shall mean the
Company's Certificate of Incorporation on the date hereof, as the same may be
hereafter amended.
Common Stock. "Common Stock" shall mean the Company's common stock, $.01
par value per share, that the Company may be authorized to issue from time to
time.
The Company. The "Company" shall mean Anchor Holdings, Inc., a Delaware
corporation.
Designated Employees. "Designated Employees" shall have the meaning set
forth in Section 2.5(d).
Disability. "Disability" used in connection with termination of employment
of a Management Investor shall mean the inability of such Management Investor
for a period of 180 consecutive days to perform such Management Investor's
duties to the Company or any of its Subsidiaries, as the case may be, because of
serious physical disability or other incapacity as determined by an
independent medical doctor selected by the Company's Board of Directors.
Equity Fund Nominee. "Equity Fund Nominee" shall have the meaning set forth
in Section 2.7(a).
Equity Fund Investor. "Equity Fund Investor" shall have the meaning set
forth in the first paragraph of this Agreement.
Fair Market Value. "Fair Market Value" shall mean with respect to the
valuation of shares of Stock or Stock options to be repurchased from a
Management Investor and his Permitted Transferees pursuant to Section 2.5 the
price per share equal to five (5) times the Company's consolidated earnings per
share before interest and taxes, but excluding for this purpose the Thomas H.
Lee Company consulting fee and management fee (as defined in the THL Management
Agreement), charges to income that occur as a result of the Acquisition and the
Mid-State Acquisition (including charges that relate to the amortization of good
will and transactional costs incurred by the Company in connection with the
transactions contemplated by the Purchase Agreement and the Mid-State
Acquisition), and depreciation and all as reflected in the Company's most
recently available consolidated financial statements reflecting the Company's
consolidated per share income for the immediately preceding twelve month period
as certified by an officer of the Company,
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less indebtedness per share for borrowed money (including indebtedness in
respect of the Company's capitalized lease (obligations), all as certified by an
officer of the Company as of the applicable termination date referenced in
Section 2.5.
Fund II. "Fund II" shall have the meaning set forth in the first paragraph
of this Agreement.
Fund Agreements. "Fund Agreements" shall collectively mean the Senior
Subordinated Note Purchase Agreement and the Junior Subordinated Note Purchase
Agreement, each dated as of April 30, 1990, as amended by First Amendment to
Subordinated Note Agreements dated the date hereof between the Company and the
Funds.
Fund Nominees. "Fund Nominees" shall have the meaning specified in Section
2.7(a).
Funds. The "Funds" shall have the meaning set forth in the first paragraph
of this Agreement.
Holder. "Holder" shall have the meaning specified in Section 3.1 of this
Agreement.
Initiating Investor. "Initiating Investor" shall have the meaning specified
in Section 2.3.
Institutional Investors. "Institutional Investors" shall have the meaning
set forth in the first paragraph of this Agreement.
Institutional Offeree. "Institutional Offeree" shall have the meaning
specified in Section 2.2(a)(i).
Institutional Offered Shares. "Institutional Offered Shares" shall have the
meaning specified in Section 2.2(a)(i).
Institutional Offer Price. "Institutional Offer Price" shall have the
meaning specified in Section 2.2(a)(i).
Institutional Transfer Option Period. "Institutional Transfer Option
Period" shall have the meaning specified in Section 2.2(a) (ii).
Institutional Transfer Notice. "Institutional Transfer Notice" shall have
the meaning specified in Section 2.2.
Investment Price I. "Investment Price I" shall mean an amount per share of
Stock equal to the price per share paid for such Stock by a Management Investor
pursuant to the Management Stock Subscription Agreement, dated as of April 30,
1990, subject
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to appropriate adjustment to reflect any stock dividend, stock split or similar
form of recapitalization.
Investment Price II. "Investment Price II" shall mean an amount per share
of Stock equal to the price per share paid for such Stock by a Mid-State
Investor pursuant to his Stock Purchase Agreement dated the date hereof.
Lee Investors. "Lee Investors" shall have the meaning specified in the
first paragraph of this Agreement.
Lee Representative. "Lee Representative" shall have the meaning specified
in Section 4.4(b).
Management Representative. "Management Representative" shall have the
meaning specified in Section 4.4(a).
Management Investors. "Management Investors" shall have the meaning set
forth in the first paragraph of this Agreement and shall include all employees
of the Company who become parties to this Agreement subsequent to the date
hereof by signing a counterpart signature page hereto agreeing to be bound by
the terms of this Agreement as Management Investors.
Management Offered Shares. "Management Offered Shares" shall have the
meaning specified in Section 2.1(a)(i).
Management Offeree. "Management Offeree" shall have the meaning specified
in Section 2.1(a)(ii).
Management Offer Price. "Management Offer Price" shall have the meaning
specified in Section 2.1(a)(i).
Management Transfer Notice. "Management Transfer Notice shall have the
meaning specified in Section 2.1(a)(i).
Management Transfer Option Period. "Management Transfer Option Period"
shall have the meaning specified in Section 2(a)(ii).
Mid-State. "Mid-State" shall have the meaning specified in the fourth
paragraph of this Agreement.
Mid-State Acquisition. "Mid-State Acquisition" shall have the meaning
specified in the fourth paragraph of this Agreement.
Mid-State Investors. "Mid-State Investors" shall have the meaning specified
in the first paragraph of this Agreement.
NAPC. "NAPC" shall have the meaning specified in the second paragraph of
this Agreement.
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New Securities. "New Securities" shall have the meaning specified in
Section 2.6(c).
Offered Warrants. "Offered Warrants" shall have the meaning specified in
Section 2.2(b)(i).
Participation Securities. "Participation Securities" shall have the meaning
specified in 2.3(a).
Participation Notice. "Participation Notice" shall have the meaning
specified in Section 2.3(a).
Participating Offerree. "participating Offeree" shall have the meaning
specified in Section 2.3(a).
Permitted Transfer. A "Permitted Transfer" shall mean:
(a) a Transfer of Stock between any Investor who is a natural person and
such Investor's spouse or children, or a trust for the benefit of such
Investor, or such Investor's spouse or children, provided that with
respect to any Transfer to such a trust, the Investor retains, as
trustee or by some other means, the sole authority to vote such Stock;
(b) a Transfer of Stock between any Investor who is a natural person and
such Investor's guardian or conservator and, upon the death of such
Investor, such investor's executor, administrator and heirs;
(c) a Transfer by the Equity Fund Investor to an Equity Fund Nominee, any
of the Funds or Thomas H. Lee Equity Partners, L.P. and/or the
partners, officers, employees or consultants of the Equity Fund
Investor or of the Thomas H. Lee Company or to a partnership or
partnerships (or other entity for collective investment, such as a
fund) controlled by, controlling or under common control with the
Equity Fund Investor;
(d) a Transfer by any of the Funds to any of the other Funds or to the
Equity Fund Investor or to its Permitted Transferees; and
(e) a Transfer of Stock by an Institutional Investor or any of its
transferees by way of a pledge to a bank or recognized financial
institution;
No Permitted Transfer shall be effective unless and until the transferee of the
Stock so transferred executes and delivers to the Company an executed
counterpart of this Agreement and agrees to be bound hereunder in the same
manner and to the same extent as the Investor from whom the Stock was
transferred, except that
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a good faith pledgee shall not be required to so agree until foreclosure on the
pledge. From and after the date on which a Permitted Transfer becomes effective,
the Permitted Transferee of the Stock so transferred shall have the same rights,
and shall be bound by the same obligations, under this Agreement as the
transferor of such Stock.
Permitted Transferee. A "Permitted Transferee" shall mean any person or
entity who shall have acquired and who shall hold Stock pursuant to a Permitted
Transfer described in Article I hereof.
Person. "Person" means an individual, corporation, partnership, trust, or
unincorporated association, or a government or any agency or political
subdivision thereof.
Public Float Date. "Public Float Date" shall mean the date on which shares
of Common Stack shall have been sold pursuant to one or more Public Offerings in
which the aggregate gross proceeds to the company of such shares equal or exceed
$15 million.
Public Offering. A "Public Offering" shall mean the completion of a sale of
Common Stock pursuant to a registration statement which has become effective
under the 1933 Act, excluding registration statements on Form S-4, S-8 or
similar limited purpose forms.
Purchase Agreement. "Purchase Agreement" shall have the meaning set forth
in the second paragraph of this Agreement.
Registrable Securities. "Registrable Securities" shall mean (i) all shares
of Common Stock held by any party hereto as of the date hereof, (ii) all shares
of Common Stock held by any party hereto issued upon the exercise of Stock
Options or Warrants, (iii) all shares of Common Stock issuable upon the exercise
of Warrants, to the extent then exercisable, (iv) all shares of Common Stock
purchased by Institutional Investors pursuant to Sections 2.1 and 2.2, and (v)
any other common equity securities of the Company issued in exchange for, upon a
reclassification of, or in a distribution with respect to, such Common Stock. As
to any particular Registrable Securities, such securities shall cease to be
Registrable Securities when (a) a registration statement (other than a
registration statement on Form S-8) with respect to the sale of such securities
shall have become effective under the 1933 Act and such securities shall have
been disposed of in accordance with such registration statement, (b) a
registration statement on Form S-8 with respect to such securities shall have
become effective under the 1933 Act, (c) such securities shall have been sold
under Rule 144 (or any successor provision) under the '933 Act, (d) such
securities shall have been otherwise transferred and new certificates for
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them not bearing a legend restricting further transfer shall have been delivered
by the Company or (e) such securities shall have been issued and then ceased to
be outstanding.
Retirement Fund. "Retirement Fund" shall have the meaning specified in the
first paragraph of this Agreement.
Sale Request. "Sale Request" shall have the meaning specified in Section
2.4(a).
Schedule. "Schedule" shall refer to the Schedule of Investors to be
maintained by the Company.
SEC. "SEC" shall mean the Securities and Exchange Commission.
Selling Investors. "Selling Investors" shall have the meaning specified in
Section 2.4(a).
Stock. "Stock" shall mean all (i) shares of Common Stock held by Investors
as of the original date of this Agreement, (ii) shares of Common Stock
subsequently held by Permitted Transferees who acquire them in one or mare
Permitted Transfers, (iii) shares of Common Stock held by Investors or Permitted
Transferees who acquire them pursuant to Sections 2.1, 2.2, 2.5 or 2.6, (iv)
shares of Common Stock subsequently issued by the Company upon exercise of Stock
Options or Warrants, and (v) securities of the Company or any of its
Subsidiaries issued in exchange for, upon reclassification of, or as a
distribution in respect of, any of the foregoing.
Shareholder. "Shareholder" shall mean any party hereto other than the
Company.
Stock Options. "Stock Options" shall mean options granted to Management
Investors to purchase shares of Stock under the terms of the Stock Option Plan.
Stock Option Plan. "Stock Option Plan" shall mean the Time Accelerated
Restricted Stock Option Plan to be adopted by the Company during 1990 covering
employees of the Company and its Subsidiaries.
Subsidiary. "Subsidiary" with respect to any corporation (the "parent")
shall mean any corporation, firm, association or trust of which such parent, at
the time in respect of which such term is used, (i) owns directly or indirectly
more than fifty percent (50%) of the equity or beneficial interest, on a
consolidated basis, and (ii) owns directly or controls with power to vote,
indirectly through one or more subsidiaries, shares of capital stock or
beneficial interest having the power to cast at least a majority of the votes
entitled to be cast for the
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election of directors, trustees, managers or other officials having powers
analogous to those of directors of a corporation. Unless otherwise specifically
indicated, when used herein the terms Subsidiary and Subsidiaries shall refer to
a direct or indirect Subsidiary or Subsidiaries of the Company. The term
"Subsidiary", when used herein with respect to the Company, shall include the
"Acquisition Subsidiaries".
Third Party. "Third Party" means any person other than the Investors and
their Permitted Transferees.
Thomas H. Lee Company. "Thomas H. Lee Company" shall mean the Thomas H. Lee
Company, a Massachusetts sole proprietorship with a principal place of business
at 75 State Street, Boston, Massachusetts 02109.
Thomas H. Lee Equity Partners. "Thomas H. Lee Equity Partners, L.P." shall
mean Thomas H. Lee Equity Partners, L.P., a Delaware limited partnership.
THL Management Agreement. "THL Management Agreement" shall mean that
certain Management Agreement dated as of April 30, 1990 by and between Anchor
Advanced Products and the Thomas H. Lee Company.
Transfer. "Transfer" shall mean to transfer, sell, assign, pledge,
hypothecate, give, create a security interest in or lien on, place in trust
(voting or otherwise), assign or in any other way encumber or dispose of,
directly or indirectly and whether or not by operation of law or for value, any
Stock.
Warrant. "Warrant" shall mean the warrants to purchase Common Stock issued
by the Company to the Funds on the date of the Acquisition.
Warrant Offeree. "Warrant Offeree" shall have the meaning specified in
Section 2.2(b)(i).
Warrant Offer Price. "Warrant Offer Price" shall have the meaning specified
in Section 2.2(b)(i).
Warrant Transfer Option Period. "Warrant Transfer Option Period" shall have
the meaning specified in Section 2.2(b)(i).
Warrant Transfer Notice. "Warrant Transfer Notice" shall have the meaning
specified in Section 2.2(b)(i).
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ARTICLE II
Covenants and Conditions
2.1 Restrictions on Transfers by the Management Investors; Right of First
Refusal.
(a) Each Management Investor and his Permitted Transferees may
Transfer all or any part of the shares of Stock then owned by any of them
to a Third Party (subject to compliance with the 1933 Act and the so-called
"blue sky" laws of the several states) only on the following terms and
conditions:
(i) If a Management Investor (or any Permitted Transferee
thereof) desires to Transfer Stock to a Third Party, such Management
Investor shall give notice of such offer to each of the Institutional
Investors and to the Company. Such notice (the Management Transfer
Notice") shall state the terms and conditions of such offer including
the name of the prospective purchaser, the proposed purchase price per
share of such Stock, including a description of any proposed non-cash
consideration (the "Management Offer Price"), payment terms, the type
of disposition and the number of such shares to be transferred
("Management Offered Shares")
(ii) For a period of thirty (30) days after receipt of the
Management Transfer Notice (the "Management Transfer Option Period"),
the Institutional Investors and their Permitted Transferees
(individually, a "Management Offeree", and collectively, the
"Management Offerees") may, by notice in writing to the Management
Investor or Permitted Transferee delivering such Management Transfer
Notice, elect in writing to purchase all, but not less than all, of
the Management Offered Shares at the Management Offer Price. The right
to purchase such Management Offered Shares shall be allocated to the
Management Offerees pro rata (based on the number of shares of Stock
owned or subject to exercisable Warrants held by each of them
(together with each of their Permitted Transferees) in relation to the
total number of such shares of Stock owned or subject to exercisable
Warrants held by all of them), provided, that if any Management
Offeree does not elect to purchase the number of Management Offered
Shares which such Management Offeree may purchase pursuant to this
Section 2.1, then the other Management Offerees may elect to purchase
the remaining Management Offered Shares pro rata 25 set forth above.
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(iii) If the Management Offerees do not elect to purchase all of
the Management Offered Shares, they shall have the right to elect to
purchase any portion thereof, provided the Company agrees to purchase
the remaining Management Offered Shares at the Management Offer Price.
If the Management Offerees elect to purchase some, but not all, of the
Management offered Shares, then, within the Management Transfer Option
Period, the Management Offerees shall promptly (but in any case prior
to the expiration of the Management Transfer option Period) notify the
Company of the number of Management Offered Shares which the
Management Offerees intend to purchase. The Company may then, by
notice in writing to the selling Management Investor or respective
Permitted Transferee thereof, as the case may be, and to the
Management Offerees, elect to purchase all, but not less than all, of
the remaining Management Offered Shares at the Management Offer Price.
(iv) If the Management Offerees and/or the Company do not elect
to purchase all of the Management Offered Shares, or if the Management
Offerees and/or the Company fail to purchase all of the Management
Offered Shares in accordance with Section 2.1(a)(v), all but not less
than all of the Management Offered Shares may be Transferred, but only
in accordance with Section 2.1(a)(vi) and the terms of the Management
Transfer Notice, including the transferee named therein, within six
(6) months after expiration of the Management Transfer Option Period,
after which, if the Management Offered Shares have not been
Transferred, all restrictions contained herein shall again be in full
force and effect.
(v) The closing of the purchase of any Management Offered Shares
pursuant to Section 2.1(a)(ii) or 2.1(a)(iii) hereof shall take place
at the principal office of the Company on the tenth (1Oth) business
day after the expiration of the Management Transfer Option Period. At
such closing, each purchaser of Management Offered Shares shall
deliver to the Selling Management Investor or respective Permitted
Transferee thereof, as the case may be, against delivery of
certificates duly endorsed and stock powers representing the Offered
Shares being acquired by such purchaser, a certified or bank cashier's
check or checks (if the Offer Price is all cash) or such other
consideration in an amount equal to the product of the Management
Offered Shares being purchased by such purchaser and the Management
Offer Price. All of the foregoing deliveries will be
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deemed to be made simultaneously and none shall be deemed completed
until all have been completed.
(vi) Any Transfer of shares of Stock pursuant to this Section 2.1
shall remain subject to the Transfer restrictions of this Agreement
and each intended transferee pursuant to this Section shall execute
and deliver to the Company a counterpart of this Agreement, which
shall evidence such transferee's agreement that the shares intended to
be transferred shall continue to be subject to this Agreement and that
as to such shares the transferee shall be bound by the restrictions of
this Agreement (x) in the case of any transferee other than an
Investor, as if such transferee were an original party hereto,
standing in the position of its transferor, and (y) in the case of an
Investor, as such Investor is bound hereunder.
(vii) If any Management Offeree shall elect to purchase
Management Offered Shares and shall fail to perform its obligation to
close such purchase in accordance with Section 2.1(a)(v), such
Management Offeree thereafter shall not be entitled to exercise any
rights under this Section 2.1.
(b) The provisions of this Section 2.1 shall not apply to a Transfer
of Stock which is (i) a Permitted Transfer, (ii) pursuant to a Public
Offering, (iii) pursuant to Rule 144 of the 1933 Act, (iv) pursuant to
Section 2.3, 2.4 or 2.5 hereof, or (v) made after the first to occur of the
Public Float Date or the tenth (10th) anniversary of the Acquisition.
2.2 Restrictions on Transfer by the Institutional Investors; Right of First
Refusal.
(a) Each Institutional Investor and its Permitted Transferees may
Transfer all or any part of the shares of Stock then owned by any of them
to a Third Party (subject to compliance with the 1933 Act) only on the
following terms and conditions:
(i) If an Institutional Investor (or any Permitted Transferee
thereof) desires to Transfer Stock to a Third Party, such Investor
shall give notice of such offer to each of the other institutional
Investors (individually an "Institutional Offeree" and collectively,
the "Institutional Offerees") and the Company. Such notice (the
"Institutional Transfer Notice") shall state the terms and conditions
of such offer, including the name of the prospective purchaser, the
proposed purchase price per share of such Stock
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including a description of any proposed non-cash consideration (the
"Institutional Offer Price"), payment terms, the type of disposition
and the number of such shares to be transferred ("Institutional
Offered Shares").
(ii) For a period of thirty (30) days after receipt of the
Institutional Transfer Notice (the "Institutional Transfer Option
Period"), the Institutional Offerees may, by notice in writing to the
Institutional Investor or Permitted Transferee delivering such
Institutional Transfer Notice, elect in writing to purchase all, but
not less than all, of the Institutional Offered Shares at the
Institutional Offer Price. The right to purchase such Institutional
Offered Shares shall be allocated to the Institutional Offerees pro
rata (based on the number of shares of Stock owned or subject to
exercisable Warrants held by each of the Institutional Offerees
(together with each of their Permitted Transferees) in relation to the
total number of such shares owned or subject to exercisable Warrants
held by all of them), provided, that if any Institutional Offeree does
not elect to purchase the number of Institutional Offered Shares to
which such Institutional Offeree may purchase pursuant to this Section
2.2(a), then the other Institutional Offerees may elect to purchase
the remaining Institutional Offered Shares pro rata, as set forth
above.
(iii) If the Institutional Offerees do not elect to purchase all
of the Institutional Offered Shares, or if the Institutional Offerees
fail to purchase all of the Institutional Offered Shares in accordance
with Section 2 . 2 (a) (iv), all but not less than all of the
Institutional Offered Shares may be Transferred, but only in
accordance with Section 2.2(a)(v) and the terms of the Institutional
Transfer Notice, including the transferee named therein, within six
(6) months after expiration of the Institutional Transfer Option
Period, after which, if the Institutional Offered Shares have not been
Transferred, all restrictions contained herein shall again be in full
force and effect.
(iv) The closing of the purchase of any Institutional Offered
Shares pursuant to Section 2.2(a)(ii) hereof shall take place at the
principal office of the Company on the tenth (lOth) business day after
the expiration of the Institutional Transfer Option Period. At such
closing, each purchaser of Institutional Offered Shares shall deliver
to the Institutional Investor or respective Permitted
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Transferee thereof, as the case may be, against delivery of
certificates duly endorsed and stock powers representing the
Institutional Offered Shares being acquired by such purchaser, a
certified or bank cashier's check or checks (if the Offer Price is all
cash) or such other consideration in an amount equal to the product of
the Institutional Offered Shares being purchased by such purchaser and
the Institutional Offer Price. All of the foregoing deliveries will be
deemed to be made simultaneously and none shall be deemed completed
until all have been completed.
(v) Any Transfer of shares of Stock pursuant to this Section
2.2(a) shall remain subject to the Transfer restrictions of this
Agreement and each intended transferee pursuant to this Section shall
execute and deliver to the Company a counterpart of this Agreement,
which shall evidence such transferee's agreement that the shares
intended to be transferred shall continue to be subject to this
Agreement and that as to such shares the transferee shall be bound by
the restrictions of this Agreement (x) in the case of any transferee
other than an Investor, as if such transferee were an original party
hereto, standing in the position of its transferor, and (y) in the
case of an Investor, as such Investor is bound hereunder.
(vi) If any Institutional Offeree shall elect to purchase
Institutional Offered Shares and shall to perform its obligation to
close such purchase in accordance with Section 2.2(a)(iv), such
Institutional Offeree thereafter shall not be entitled to exercise any
rights under this Section 2.2.
(vii) The provisions of this Section 2.2(a) shall not apply to a
Transfer of Stock which is (i) a Permitted Transfer, (ii) pursuant to
a Public Offering, (iii) pursuant to Rule 144 of the 1933 Act, (iv)
pursuant to Section 2.3 or 2.4 hereof, or (v) made after the first to
occur of the Public Float Date or the tenth (1Oth) anniversary of the
Acquisition.
(b) Each Institutional Investor and its Permitted Transferees may
Transfer all or any part of the Warrants then owned by any of them to a
Third Party (subject to compliance with the 1933 Act) only on the following
terms and conditions:
(i) If an Institutional Investor (or any Permitted Transferee
thereof) desires to Transfer warrants to a Third Party, such Investor
shall give notice of such offer to each of the other Institutional
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Investors (individually a "Warrant Offeree" and collectively, the
"Warrant Offerees") and the Company. Such notice (the "Warrant
Transfer Notice") shall state the terms and conditions of such offer,
including the name of the prospective purchaser, the proposed purchase
price for the Warrants to be transferred including a description of
any proposed non-cash consideration (the "warrant Offer Price"),
payment terms, the type of disposition and the amount of Warrants to
be transferred ("Offered Warrants").
(ii) For a period of thirty (30) days after receipt of the
Warrant Transfer Notice (the "Warrant Transfer Option Period"), the
Warrant Offerees may, by notice in writing to the Institutional
Investor or Permitted Transferee delivering such Warrant Transfer
Notice, elect in writing to purchase all, but not less than all, of
the Offered Warrants at the Warrant Offer Price. The right to purchase
such Offered Warrants shall be allocated to the Warrant Offerees pro
rata (based on the number of shares of Stock owned or subject to
exercisable Warrants held by each of them (together with each of their
Permitted Transferees) in relation to the total number of such shares
owned or subject to exercisable Warrants held by all of them),
provided, that if any Warrant Offeree does not elect to purchase the
amount of Offered Warrants which such Warrant Offeree may purchase
pursuant to this Section 2.2(b), then the other Warrant Offerees may
elect to purchase the remaining Offered Warrants pro rata, as set
forth above.
(iii) If the Warrant Offerees do not elect to purchase all of the
Offered Warrants, or if the Warrant Offerees fail to purchase all of
the Offered Warrants in accordance with Section 2.2(b)(iv), all but
not less than all of the Offered Warrants may be Transferred, but only
in accordance with Section 2.2(b)(v) and the terms of the Warrant
Transfer Notice, including the transferee named therein, within six
(6) months after expiration of the Warrant Transfer Option Period,
after which, if the Offered Warrants have not been Transferred, all
restrictions contained herein shall again be in full force and effect.
(iv) The closing of the purchase of any Offered Warrants pursuant
to Section 2.2(b)(ii) hereof shall take place at the principal office
of the Company on the tenth (10th) business day after the expiration
of the Warrant Option Period. At such closing, each purchaser of
Offered Warrants shall deliver to the Institutional Investor or
respective Permitted
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Transferee thereof, as the case may be, against delivery of the
Offered Warrants and a duly executed assignment setting forth the
amount of Warrants being acquired by such purchaser, a certified or
bank cashier's check or checks (if the Warrant Offer Price is all
cash) or such other consideration in an amount equal to such
purchaser's pro rata share of the Warrant Offer Price. All of the
foregoing deliveries will be deemed to be made simultaneously and none
shall be deemed completed until all have been completed.
(v) Any Transfer of Warrants pursuant to this Section 2.2(b)
shall remain subject to the Transfer restrictions of this Agreement
and each intended transferee pursuant to this Section shall execute
and deliver to the Company a counterpart of this Agreement, which
shall evidence such transferee's agreement that the Warrants intended
to be transferred shall continue to be subject to this Agreement and
that as to such Warrants the transferee shall be bound by the
restrictions of this Agreement (x) in the case of any transferee other
than an Investor, as if such transferee were an original party hereto,
standing in the position of its transferor, and (y) in the case of an
Investor, as such Investor is bound hereunder.
(vi) If any Warrant Offeree shall elect to purchase Offered
Warrants and shall fail to perform its obligation to close such
purchase in accordance with Section 2.2(b)(iv), such Warrant Offeree
thereafter shall not be entitled to exercise any rights under this
Section 2.2(b).
(vii) The provisions of this Section 2.2(b) shall not apply to a
Transfer of Warrants which is (i) a Permitted Transfer, or (ii) made
after the first to occur of the Public Float Date or the tenth (10th)
anniversary of the Acquisition.
2.3 Come Along. Except as provided in Section 2.3(c) hereof, none of the
Institutional Investors or any of their Permitted Transferees shall Transfer, in
one transaction or a series of related transactions, more than ten percent 10%
of the shares of Stock held by such Institutional Investor to a Third Party who
is not an Institutional Investor without complying with the following terms and
conditions:
(a) The Institutional Investor (the "Initiating Investor") desiring to
Transfer such securities (or whose Permitted Transferee desires to Transfer
such securities) shall give notice of such intended Transfer to each other
Investor ("Participating Offeree") and to the Company. Such
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notice (the "Participation Notice") shall set forth terms and conditions of
such proposed Transfer, including the name of the prospective transferee,
the number of shares of Stock proposed to be transferred by the Initiating
Investor or its Permitted Transferees (the "Participation Securities"), the
purchase price per share proposed to be paid therefor and the payment terms
and type of Transfer to be effectuated. Within fifteen (15) days following
the delivery of the Participation Notice by the Initiating Investor to each
Participating Offeree and to the Company, each Participating Offeree may,
by notice in writing to the Initiating Investor and to the Company, elect
to sell (or cause its Permitted Transferees to sell) such number of shares
of Stock (such number not to exceed the product of the number of
Participation Securities multiplied by a fraction with a numerator equal to
the number of shares of Stock owned or subject to Vested Stock Options or
exercisable Warrants held by such Participating Offeree (or Permitted
Transferee thereof), and a denominator equal to the number of shares of
Stock owned or subject to exercisable Stock Options or Warrants held by all
Investors and their Permitted Transferees), on the same financial terms and
conditions and at the same price to be paid to the Initiating Investor in
respect of its shares of Stock.
(b) At the closing of any proposed Transfer in respect of which a
Participation Notice has been delivered, the Initiating Investor, together
with 211 Participating Offerees electing to sell shares of Stock (together
with Permitted Transferees thereof), shall deliver to the proposed
transferee certificates evidencing the shares of Stock to be sold thereto
duly endorsed with stock powers and shall receive in exchange therefor the
consideration to be paid or delivered by the proposed transferee in respect
of such shares as described in the Participation Notice.
(c) The provisions of this Section 2.3 shall not apply to (i) any
Permitted Transfer, (ii) any Transfer pursuant to a Public Offering or Rule
144 under the 1933 Act, (iii) Transfers pursuant to Section 2.4 hereof, and
(iv) any Transfer completed after the first to occur of the Public Float
Date or the tenth (1Oth) anniversary of the Acquisition.
(d) The Permitted Transferees of the Initiating Investor shall have no
rights under this Section 2.3.
2.4 Take Along.
(a) If, at any time prior to the Public Float Date, the Institutional
Investors or their Permitted Transferees (referred to in this Section 2.4
as the "Selling Investors")
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shall determine to sell or exchange (in a business combination or
otherwise) fifty percent (50%) or more of their aggregate shares of Stock
in a bona fide arms-length-transaction to a Third Party, then, upon the
written request of such Selling investors (the "Sale Request"), each
Investor and his or its Permitted Transferees shall be obligated to, and
shall (i) sell, transfer and deliver, or cause to be sold, transferred and
delivered, to such Third Party, all shares of Stock owned by such Investor
or such Investor's Permitted Transferees at the sale price per share and on
the same terms applicable to the Selling Investors and, upon request, (ii)
consent to the cancellation of exercisable Warrants and Vested Stock
Options for an amount per share subject to such exercisable Warrants and
Vested Stock Options equal to the difference between the aforementioned
price per share and the exercise price of such exercisable warrants and
vested Stock Options, and agree to the cancellation of all warrants and
Stock Options not then exercisable or vested and (iii) if prior to five (5)
years from the date hereof, stockholder approval of the transaction is
required, vote his and his Permitted Transferees' shares of Stock in favor
thereof; provided, that the Management Investors and their Permitted
Transferees shall be entitled (upon notice given) in lieu of selling all of
their shares of Stock pursuant to clause (i) above, and canceling their
Vested Stock options pursuant to clause (ii) above, to sell that percentage
of their shares of Stock and Vested Stock Options that is equal to the
percentage of the aggregate holding of the shares of Stock of the
Institutional Investors that is being sold or exchanged to the Third Party;
provided further, that the Funds and their Permitted Transferees shall be
entitled (upon notice given) in lieu of selling all of their shares of
Stock pursuant to clause (i) above and canceling their exercisable warrants
pursuant to clause (ii) above, to sell that percentage of their shares of
Stock and cancel that percentage of their exercisable Warrants that is
equal to the percentage of the aggregate holding of the shares of Stock of
the Institutional Investors that is being sold or exchanged to the Third
Party.
(b) The provisions of this Section 2.4 shall not apply to (i) any
Transfer pursuant to a Public Offering, (ii) Permitted Transfers, (iii)
Transfers pursuant to Section 2 hereof, or (V) any Transfer completed after
the first to occur of the Public Float Date or the tenth (1Oth) anniversary
of the Acquisition.
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2.5 Call by the Company.
(a) If the employment of any Management Investor by the Company or any
of its Subsidiaries shall terminate (a "Call Event") for any reason, in the
case of any Management Investor (other than a Mid-State Investor), prior to
the earlier of (i) five (5) years after the Acquisition or (ii) the Public
Float Date, and, in the case of a Mid-State Investor, prior to the earlier
of (x) three (3) years after the Mid-State Acquisition or (y) the Public
Float Date, then the Company shall have the right to purchase (the "Call
Option"), by delivery of a written notice (the "Call Notice") to such
terminated Management Investor no later than ninety (90) days after the
date of such Call Event, and such Management Investor and such Management
Investor's Permitted Transferees (the "Call Group") shall be required to
sell any or all of the shares of Stock and vested Stock Options which are
owned by the members of the Call Group on the date of such Call Event
(collectively, the "Call Securities") at a price per share of Stock or
vested Stock Option equal to the Call Price (as defined in Section 2.5(b)
below) applicable to such shares of Stock or vested Stock Options.
(b) For purposes of this Section 2.5, the term "Call Price" shall mean
(i) with respect to shares of Stock,
(aa) in the event of a termination of a Management Investor
without Cause or by virtue of his death or Disability, if such
event occurs prior to the first anniversary of the date of this
Agreement, the greater of the Fair Market Value of such shares of
Stock or, in the case of a Management Investor other than a
Mid-State Investor, Investment Price I, and in the case of a
Mid-State Investor, Investment Price II, and (y) if such event
occurs after the first anniversary of the Mid-State Acquisition,
the Fair Market Value of such shares of Stock; and
(bb) in the event of a termination of a Management Investor
for Cause, in the event of a voluntary termination of any
Management Investor or for any reason other than those expressly
provided in subparagraph (aa) above, the lower of (x) Investment
Price I (in the case of a Management Investor other than a
Mid-State Investor) or Investment Price II (in the case of a
Mid-State Investor) or (y) the Fair Market Value of such shares
of Stock; and
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(ii) with respect to any vested Stock Option, the difference
between (x) the Call Price, as determined in (i) above, payable in
respect of shares of Stock and (y) the exercise price of such Vested
Stock option; provided, that the Call Price calculated pursuant to
this subsection (ii) shall in no event be less than zero (0).
(c) The closing of any purchase of Call Securities by the Company
shall take place at the principal office of the Company on the tenth (1Oth)
business day after the date of the Call Notice. At such closing, the
Company shall deliver to the Call Group, against delivery of certificates
duly endorsed and stock powers representing the Call Securities, and the
execution, in a form reasonably satisfactory to the Company, of an
agreement canceling the Stock Options, a certified or bank cashier's check
or checks payable to the Management Investor and/or the Permitted
Transferees, as the case may be, in an amount equal to the aggregate Call
Price payable in respect of such Call Securities. All of the foregoing
deliveries will be deemed to be made simultaneously and none shall be
deemed completed until all have been completed.
(d) Notwithstanding anything set forth in this Section 2.5 to the
contrary, prior to the exercise by the Company of its Call Option to
purchase Call Securities pursuant to this Section 2.5, one or more new or
existing employees of the Company or any of its Subsidiaries may be
designated in accordance with the provisions of paragraph (e) below,
(individually a "Designated Employee" and collectively, "Designated
Employees") who shall have the right, but not the obligation, to exercise
the Call Option and to acquire, in lieu of the Company, Call Securities
that the Company is entitled to purchase from the Call Group hereunder, for
cash and on the same terms and conditions as set forth in the Agreement
which apply to the repurchase of such Call Securities by the Company
concurrently with any such purchase of Call Securities by any such
Designated Employee who is not a Management Investor, such Designated
Employee shall execute a counterpart of this Agreement whereupon such
Designated Employee shall be deemed a "Management Investor" and shall have
the same rights and be bound by the same obligations as the other
Management Investors hereunder.
(e) Any new or existing employee of the Company or any of its
Subsidiaries who is not also a Management Investor may, in the discretion
of the Company's Board of Directors, be designated as a Designated Employee
for purposes of this Section 2.5. A Management Investor who is an employee
of the Company or any of its Subsidiaries may, with the prior approval of
the Fund Nominee and the Equity Fund Nominee on
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the Company's Board of Directors, be designated a Designated Employee for
purposes of this Section 2.5. If no new or existing employee of the Company
or any of its Subsidiaries is designated as a Designated Employee pursuant
to this paragraph, then the Company may, with the prior approval of its
Board of Directors, be so designated, in which event the Company may elect
to exercise the Call Option and shall hold in escrow for future issuance to
a Designated Employee any Call Securities purchased from the Call Group
upon such exercise.
(f) If neither the Company nor any Designated Employee elects to
exercise the Call Option and repurchase Call Securities pursuant to this
Section 2.5, the Management Investor or his Permitted Transferees shall
continue to hold such Call Securities pursuant to all of the provisions of
this Agreement and other applicable agreements (including, without
limitation, any restrictions on the vesting of Stock Options).
2.6 Preemptive Rights.
(a) Preemptive Right. The Company hereby grants to each Investor and
his or its respective Permitted Transferees so long as he or it shall own
any Stock or, if sooner, until the Company has made a Public Offering, the
right to purchase a pro rata portion of New Securities (as defined in
paragraph (c) below) which the Company, from time to time, proposes to sell
or issue. An Investor's pro rata portion, for purposes of this Section 2.6,
is the ratio of the number of shares of Stock owned or subject to
exercisable warrants or vested Stock Options held by such Investor
(together with each of its Permitted Transferees) to the total number of
shares of Stock owned or subject to exercisable Warrants or Vested Stock
Options held by all of the Investors. Notwithstanding the foregoing, the
Management Investors and the Institutional Investors waive the rights
granted by this Section 2.6(a) in connection with the New Securities issued
to the Mid-State Investor on the date hereof.
(b) Right of Over-Allotment. Each Investor who has a preemptive right
under this Section 2.6 shall have a right of over-allotment such that if
any Investor fails to exercise his or its right hereunder to purchase his
or its pro rata portion of New Securities, the other Investors may purchase
the non-purchasing Investor's portion on a pro rata basis determined on the
basis of the total number of shares of outstanding Stock owned by such
Investor as compared to all Stock owned by all Investors who elect to
purchase an over-allotment share pursuant to this sub-paragraph (b) within
five (5) days from the date such
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non-purchasing Investor fails to exercise his or its right hereunder to
purchase his pro rata share of New Securities.
(c) Definition of New Securities. "New Securities" shall mean any
Common Stock of the Company whether now authorized or not, and rights,
options or warrants to purchase Common Stock, and securities of any type
whatsoever that are or may become convertible into or exchangeable for
Common Stock and any associated debt; provided that the term "New
Securities" does not include (i) Common Stock issued as a stock dividend to
holders of Common Stock or upon any subdivision or combination of shares of
Common Stock; (ii) shares of Common Stock issued upon exercise of Stock
Options or the Warrants; (iii) the reissuance of shares of Stock purchased
by the Company; (iv) preferred stock which is not convertible into Common
Stock: (v) the issuance of securities of the Company pursuant to a Public
Offering; or (vi) the issuance of shares of Common Stock in connection with
(x) a merger or (y) any plan of reorganization adopted in any bankruptcy
reorganization or other arrangement under the laws of any jurisdiction.
(d) Notice from the Company. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Investor who
has a preemptive right under this Section 2.6 written notice of its
intention, describing the type of New Securities and the price and the
terms upon which the Company proposes to issue the same. Each such Investor
shall have twenty (20) days from the date of receipt of any such notice to
agree to purchase his or its pro rata share of such New Securities for the
price and upon the terms specified in the notice by giving written notice
to the Company and stating herein the quantity of New Securities to be
purchased.
(e) Sale by the Company. In the event any Investor who has a
preemptive right under this Section 2.6 fails to exercise in full his or
its preemptive right within said twenty (20) day period and after the
expiration of the five (5) day periods for the exercise of the
over-allotment provisions of this Section 2.6, the Company shall have six
(6) months thereafter to sell the New Securities with respect to which the
preemptive right was not exercised, at a price and upon terms no more
favorable to the purchasers thereof than specified in the Company's notice.
(f) Waiver of Preemptive Right. The provisions of this Section 2.6 may
be waived by a majority in interest of shares of Stock then outstanding,
provided that no Investor may vote its shares of Stock in favor of such a
waiver in connection with the sale or issuance of New Securities to itself
or to an Affiliate or an Associate.
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2.7 Corporate Governance.
(a) Election of Directors. Until the tenth (1Oth) anniversary after
the Acquisition, the Investors shall take all action, including but not
limited to the voting of their shares of Stock, so that the Boards of
Directors of the Company and its Subsidiaries shall include one member
designated by the Equity Fund Investor (the "Equity Fund Nominee") and two
members designated by the Funds (the "Fund Nominees").
(b) Designation of Director Nominees. The Equity Fund Nominee shall be
designated by the vote or consent of a majority in interest of the then
outstanding shares of Stock owned by the Equity Fund Investor. The Fund
Nominees shall be designated by the vote or consent of a majority in
interest of the shares of Stock held by the Funds.
(c) Restrictions on Other Agreements. No Investor shall grant any
proxy or enter into or agree to be bound by any voting trust with respect
to the Stock nor shall any Investor enter into any stockholders agreements
or arrangements of any kind with any person with respect to the Stock
(other than voting trusts, stockholders agreements or arrangements between
an Investor and its Permitted Transferees and other than any provisions set
forth in employment agreements between any Management Investor and the
Company or any of its Subsidiaries, so long as such agreement is approved
by the Board of Directors of the Company) on terms inconsistent with the
provisions of this Agreement (whether or not such agreements and
arrangements are with other Investors or holders of Stock that are not
parties to this Agreement), including but not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of
shares of Stock inconsistent herewith.
(d) Transactions with Affiliates. Prior to the Public Float Date, the
Company shall not, and shall use its best efforts not to permit any of its
Subsidiaries to, enter into any transaction or transactions with any
Investor or any Affiliates or Associates of any Investor (an "Affiliate
Transaction") unless each such transaction is negotiated on an arms length
basis and is no less favorable to the Company than any similar transaction
which could be negotiated with a third party.
(e) Investor Action. Each Investor and Permitted Transferee agrees
that, in his or its capacity as a Shareholder of the Company, such Investor
or Permitted
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Transferee will vote, or grant proxies relating to such shares to vote, all
of his or its shares of Common Stock (i) in favor of any merger,
consolidation, sale or transfer of shares of Stock or any similar
transaction pursuant to Section 2.4 hereof (other than an Affiliate
Transaction) if, and to the extent that, approval of the Company's
Shareholders is required in order to effect such transaction; (ii) in the
same manner as holders of a majority of Stock voting as a single class, to
the extent such Investor or Permitted Transferee has the right, pursuant
only to the General Corporation Law of the State of Delaware, to vote such
shares separately as a single class.
(f) Certain Fundamental Changes. The Company shall not, and shall use
its best efforts not to permit any of its Subsidiaries, if applicable,
without the prior written consent of the Funds and the Equity Fund
Investor, each voting separately as a class, to effect any of the
following:
(i) Merger, consolidation, recapitalization, or liquidation, sale
of all or substantially all of its assets, or redemption of capital
stock (other than as required or permitted pursuant to this Agreement
or the Company's Certificate of Incorporation); or
(ii) Amendment of its Certificate of Incorporation or by-laws
without the approval of a majority in interest of the Equity Fund
Investor and the Funds, each voting separately as a class. In
addition, the Company shall not, and shall use its best efforts not to
permit any of its Subsidiaries to, (w) apply for or consent to the
appointment of a receiver, trustee, custodian or liquidator of any of
its property, (x) admit in writing its inability to pay its debts as
they mature, (y) a general assignment for the benefit of creditors,
(z) file a voluntary petition in bankruptcy, or a petition or an
answer seeking an arrangement with creditors or to take advantage of
any bankruptcy, insolvency, readjustment of debt or liquidation law or
statute, or an answer admitting the material allegations of a petition
filed against it in any proceeding under any such law without the
approval of a majority in interest of the Equity Fund Investor and the
Funds, each voting separately as a class.
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2.8 Legends. Each Investor acknowledges that all certificates evidencing
the Stock shall bear the following legend:
"TRANSFER RESTRICTED
These securities have not been registered under the Securities Act of
1933, as amended, and may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as
to the securities under said Act or an opinion of counsel satisfactory
to the Company and its counsel that such registration is not required.
These securities are subject to the terms and conditions, including
restrictions on transfer, of a Shareholders' Agreement dated as of
July 29, 1994, as amended from time to time, a copy of which is on
file with the Secretary of the Company."
ARTICLE III
Registration Rights
3.1 General. For purposes of Article III: (a) the terms "register,"
"registered" and "registration" refer to a registration effected by preparing
and filing a registration statement in compliance with the 1933 Act and the
declaration or ordering of effectiveness of such registration statement; (b) the
term "Holder" means any Investor, and their respective Permitted Transferees,
holding Registrable Securities; and (c) the shares of Common Stock issuable upon
the exercise of Stock Options and warrants shall be deemed to be outstanding and
held by the holders of such Stock Options and Warrants.
3.2 Demand Registration Initiated by Institutional Investors.
(a) Subject to paragraph (b) hereof, if the Company shall receive a
written request (specifying that it is being made pursuant to this Section
3.2) from the Institutional Investors holding a majority in interest of
Registrable Securities that the Company file a registration statement under
the 1933 Act, or a similar document pursuant to any other statute then in
effect corresponding to the 1933 Act, covering the registration of at least
fifteen percent (15%) of the Registrable Securities, then the Company shall
promptly notify all other Investors of such request and shall use its best
efforts to cause to be registered under the 1933 Act all Registrable
Securities that Investors have
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requested to be registered (within fifteen (15) days of such Company
notice).
(b) If the total amount of Registrable Securities that all Investors
request to be included in such offering exceeds the amount of securities
that an underwriter who is not an Affiliate or Associate of any Investor,
in good faith, reasonably believes compatible with the success of the
offering, then the Company will include in such registration only the
number of securities which, in the opinion of such underwriter, can be
sold, and the Registrable Securities requested to be included by the
Management Investors and their respective Permitted Transferees shall be
reduced or not included to the extent so requested by said underwriter.
(c) A majority in interest of the Equity Fund Investor and the Funds
shall together be entitled to request, and the Company shall be obligated
to effect for such Investors, three (3) registrations of Registrable
Securities pursuant to this Section 3.2.
3.3 Piggyback Registration. If, at any time, the Company determines to
register any of its equity securities for its own account under the 1933 Act in
connection with the public offering of such securities solely for cash on a form
that would also permit the registration of any of the Registrable Securities,
the Company shall, at each such time, promptly give each Holder written notice
of such determination. Upon the written request of any Holder received by the
Company within thirty (30) days after the giving of any such notice by the
Company, the Company shall use its best efforts to cause to be registered under
the 1933 Act all of the Registrable Securities of such Holder or its Permitted
Transferee that each Holder has requested be registered. If the total amount of
Registrable Securities that are to be included by the Company for its own
account and at the request of Holders thereof exceeds the amount of securities
that the underwriters reasonably believe compatible with the success of the
offering, then the Company will include in such registration only the number of
securities which in the opinion of such underwriters can be sold, in the
following order:
(i) first, the equity securities of the Company;
(ii) then the Registrable Securities requested to be included by the
Investors and their respective Permitted Transferees pro rata based on the
number of Registrable Securities owned by each of them which each of them
request be included in such registration; provided, however, that if an
underwriter who is not an
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Affiliate or Associate of any Investor, in good faith, requests for the
success of the offering that the number of Registrable Securities to be
sold by the Management Investors and their respective Permitted Transferees
be apportioned or excluded, such number of Registrable Securities of the
Management Investors and their Permitted Transferees shall be reduced or
not included to the extent so requested by said underwriter.
3.4 Obligations of the Company. Whenever required under Sections 3.2 or 3.3
hereof to use its best efforts to effect the registration of any Registrable
Securities, the Company shall:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective;
(b) as expeditiously as reasonably possible, prepare and file with the
SEC such amendments and supplements to such registration statement and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement;
(c) as expeditiously as reasonably possible furnish to the Holders
such numbers of copies of a prospectus, including a preliminary prospectus,
in conformity with the requirements of the 1933 Act, and such other
documents as they may reasonably request in order to facilitate the
disposition of Registrable Securities owned by them;
(d) as expeditiously as reasonably possible use its best efforts to
register and qualify the securities covered by such registration statement
under such securities or so-called blue sky laws of such jurisdictions as
shall be reasonably appropriate for the distribution of the securities
covered by the registration statement, provided that the Company shall not
be required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any such
jurisdiction, and further provided that (anything in this Agreement to the
contrary notwithstanding with respect to the bearing of expenses) if any
jurisdiction in which the securities shall be qualified shall require that
expenses incurred in connection with the qualification of the securities in
that jurisdiction be paid by selling stockholders, then such expenses shall
be payable by selling stockholders pro rata, to the extent required by such
jurisdiction;
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(e) use its best efforts to cause all Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(f) notify each seller of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the 1933 Act, upon discovery that, or upon
the happening of any event as a result of which, the prospectus included in
such registration statement, 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 in the light of the circumstances under which they were made,
and at the request of any such seller or Holder promptly prepare to 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 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 were made;
(g) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the period
of at least twelve (12) months, but not more than eighteen (18) months,
beginning with the first full calendar month after the effective date of
such registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the 1933 Act, and will furnish to each such
seller at least two (2) business days prior to the filing thereof a copy of
any amendment or supplement to such registration statement or prospectus
and shall not file any thereof to which any such seller shall have
reasonably objected, except to the extent required by law, on the grounds
that such amendment or supplement does not comply in all material respects
with the requirements of the 1933 Act or of the rules or regulations
thereunder;
(h) provide and cause to be maintained a transfer agent and registrar
for all Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such registration
statement; and
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(i) use its best efforts to list all Registrable Securities covered by
such registration statement on any securities exchange on which any of
class of Registrable Securities is then listed.
3.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Article III that the
Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them, and the intended method of disposition of
such securities as the Company shall reasonably request and as shall be required
in connection with the action to be taken by the Company.
3.6 Expenses of Registration. All expenses incurred in connection with a
registration pursuant to Sections 3.2 or 3.3 hereof (excluding underwriters'
discounts and commissions, which shall be borne by the sellers), including
without limitation all registration and qualification fees, printers' and
accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders and
their Permitted Transferees (which counsel shall be selected by the Holders
which together with their Permitted Transferees own a majority of the
Registrable Securities being sold under the applicable registration) shall be
paid by the Company; provided, however, that the Holders, which together with
their Permitted Transferees, own a majority of the Registrable Securities being
sold under the registration may withdraw any request made pursuant to Section
3.2 hereof, in which event such withdrawn request shall be deemed for all
purposes herein not to have been made.
3.7 Underwriting Requirements. Each Holder (together with its Permitted
Transferees) selling Registrable Securities in any registration pursuant to
Sections 3.2 or 3.3 shall, as a condition for inclusion of such Registrable
Securities in such registration execute and deliver an underwriting agreement
acceptable to the Company, in the case of a registration pursuant to Section
3.3, or acceptable to Holders which, together with their Permitted Transferees,
own a majority of the Registrable Securities to be included in such
registration, in the case of a registration pursuant to Section 3.2 and the
underwriters with respect to such registration. Such underwriters shall be
selected (i) by the Company, in the case of a registration pursuant to Section
3.3, or (ii) by a majority in interest of the Registrable Securities to be
included in such registration, in the case of a registration pursuant to Section
3.2.
3.8 Indemnification. In the event any Registrable Securities are included
in a registration statement under this Article III:
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(a) To the fullest extent permitted by law, the Company will indemnify
and hold harmless each Holder (which term, for purposes of this Section
3.8, shall include each Investor, including the Management Investors,
Equity Fund Investor and the Funds and their respective Permitted
Transferees, holding Registrable Securities and shall also include the
directors, officers and employees of the Institutional Investors)
requesting or joining in a registration, any underwriter (as defined in the
1933 Act) for it, and each person, if any, who controls such Holder or such
underwriter within the meaning of the 1933 Act, against any losses, claims,
damages or liabilities, joint or several, to which they may become subject
under the 1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based on any untrue or alleged untrue
statement of any material fact contained in such registration statement
including any preliminary prospectus or final prospectus contained therein
or any amendments or supplements thereto, 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, or arise out of any violation by the Company or any rule or
regulation promulgated under the 1933 Act applicable to the Company and
relating to action or inaction required of the Company in connection with
any such registration, and will reimburse each such Holder, underwriter or
control person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement
contained in this Section 3.8(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable to
anyone for any such loss claim, damage, liability or action to the extent
that it arises out of or is based upon an untrue statement or omission made
in connection with such registration statement, preliminary prospectus,
final prospectus or amendments or supplements thereto in reliance upon and
in conformity with written information furnished expressly for use in
connection with such registration by such Holder, underwriter or control
person. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Holder, underwriter or
control person and shall survive the transfer of such securities by such
Holder.
(b) To the fullest extent permitted by law, each Holder requesting or
joining in a registration will indemnify and hold harmless the Company,
each of its
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directors, each of its officers who has signed the registration statement,
each persons if any, who controls the Company within the meaning of the
1933 Ace, and each agent and any underwriter for the Company and any person
who controls any such agent or underwriter and each other Holder and any
person who controls such Holder (within the meaning of the 1933 Act)
against any losses, claims, damages or liabilities to which the Company or
any such director, officers, control person, agent, underwriter, or other
Holder may become subject, under the 1933 Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto)
arise out of or are based upon an untrue statement of any material fact
contained in such registration statement, including any preliminary
prospectus or final Prospectus contained therein or any amendments or
supplements thereto, or arise out of or are based upon the 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 omission was made in such
registration statement, preliminary or final prospectus, or amendments or
supplements thereto, in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with
such registration; and such Holder will reimburse any legal or other
expenses reasonably incurred by the Company or any such director, officers,
control person, agent, underwriter, or other Holder in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided however, the indemnity obligation of each such Holder
hereunder shall be limited to and shall not exceed the proceeds actually
received by such Holder upon a sale of Registrable Securities pursuant to a
registration statement hereunder; and provided, further that the indemnity
agreement contained in this Section 3.8(b) shall not apply to amounts paid
in settlements effected without the consent of such Holder (which consent
shall not be unreasonably withheld). Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer, Holder, underwriter or control
person and shall survive the transfer of such securities by such Holder.
(c) Any person seeking indemnification under this Section 3.8 will (i)
give prompt notice to the indemnifying party of any claim with respect to
which it seeks indemnification (but the failure to give such notice will
not affect the right to indemnification hereunder, unless the indemnifying
party is materially prejudiced by such failure) and (i) unless in such
indemnified party's reasonable judgment a conflict of interest may exist
between such indemnified and indemnifying parties with respect to
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such claim, permit such indemnifying party, and other indemnifying parties
similarly situated, jointly to assume the defense of such claim with
counsel reasonably satisfactory to the parties. In the event that the
indemnifying parties cannot mutually agree as to the selection of counsel,
each indemnifying party may retain separate counsel to act on its behalf
and at its expense. The indemnified party shall in all events be entitled
to participate in such defense at its expense through its own counsel. If
such defense is not assumed by the indemnifying party, the indemnifying
party will not be subject to any liability for any settlement made without
its consent (but such consent will not be unreasonably withheld). No
indemnifying party will consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect of such claim or litigation. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a
claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect
to such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other
of such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and
expenses of such additional counsel.
(d) If for any reason the foregoing indemnification is unavailable to
any party or insufficient to hold it harmless as and to the extent
contemplated by the preceding paragraphs of this Section 3.8, then each
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative benefits received
by the Company, on the one hand, and the applicable indemnified party, as
the case may be, on the other hand, and also the relative fault of the
Company and any applicable indemnified party, as the case may be, as well
as any other relevant equitable considerations.
3.9 Reports Under The 1934 Act. With a view to making available to the
Holders and their Permitted Transferees the benefits of Rule 144 promulgated
under the 3933 Act and any it other rule or regulation of the SEC that may at
any time permit a Holder to sell securities of the Company to the public without
registration, the Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144, at all
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times subsequent to ninety (90) days after the effective date of the first
registration statement covering an underwritten public offering filed by
the Company;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act; and
(c) furnish to any Holder forthwith upon request a written statement
by the Company that it has complied with the reporting requirements of Rule
144 (at any time after ninety (90) days after the effective date of said
first registration statement filed by the Company), and of the 1933 Act and
the 1934 Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as
may be reasonably requested in availing any Holder of any rule or
regulation of the SEC permitting the selling of any such securities without
registration.
3.10 No Inconsistent Agreements. The Company agrees that it has not entered
into, and will not hereafter enter into, any Agreement with respect to the
registration of its securities that is inconsistent with the rights granted to
the Holders of Registrable Securities in this Agreement without the prior
written consent of a majority in interest of the Holders.
3.11 Stock Split. If, on or after the receipt by the Company of a request
for registration of a public offering pursuant to Section 3.2 hereof, the
proposed managing underwriter or underwriters of such offering reasonably
believes that the number of shares to be registered is less than the minimum
number necessary for the success of such offering, the Company will promptly
prepare and submit to its Board of Directors, use its best efforts to cause to
be adopted by its Board of Directors and Shareholders, and, if so adopted, file
and cause to become effective, an amendment to its Certificate of Incorporation
so as to cause each share of its outstanding Common Stock to be converted into
such number of shares of such Common Stock so that the number of shares of
Registrable Securities to be registered is equal to the minimum number which
such managing underwriter or underwriters reasonably believes is necessary for
the success of such offering. Each Investor, together with his or its Permitted
Transferees, hereby agrees to vote the shares of the Company's Common Stock held
by him or it in favor of adopting such amendment.
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3.12 Timing Limitations.
(a) No request shall be made with respect to any registration pursuant
to Section 3.2 hereof within ninety (90) days immediately following the
effective date of any registration statement filed pursuant to this Article
III; provided, however, that in the case of Section 3.2 hereof the time
period during which any demand described therein may be made shall be
extended by the number of days during which no such demand may be made
pursuant to this paragraph.
(b) If the Company shall furnish to the Holders of Registrable
Securities requesting a registration pursuant to Section 3.2 hereof a
certificate signed by a majority of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company or its
Shareholders for such registration statement to be filed on or before the
date filing would be required and it is therefore advisable to defer the
filing of such registration statement, then the Company shall have the
right to defer the filing of the registration statement for a period of not
more than one hundred fifty (150) days and the demand then made shall not
be counted for purposes of determining the number of registrations pursuant
to Section 3.2 hereof; provided, however, that the Company may not utilize
such right more than once in any twelve (12) month period.
3.13 Termination. The provisions of this Article III, except for the
provisions of Section 3.8 which shall continue, shall expire on the tenth (1Oth)
anniversary date of the Acquisition.
ARTICLE IV
Miscellaneous
4.1 Remedies. The parties to this Agreement acknowledge and agree that the
covenants of the Company and the Investors set forth in this Agreement may be
enforced in equity by a decree requiring specific performance. Without limiting
the foregoing, if any dispute arises concerning the sale or other disposition of
any of the Stock subject to this Agreement, the parties to this agreement agree
that an injunction may be issued restraining the sale or other disposition of
such Stock or rescinding any such sale or other disposition, pending resolution
of such controversy. Such remedies shall be cumulative and non-exclusive and
shall be in addition to any other rights and remedies the parties may have under
this Agreement.
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4.2 Entire Agreement; Amendment. This Agreement sets forth the entire
understanding of the parties, and supersedes all prior agreements, arrangements
and communications, whether oral or written, with respect to the subject matter
hereof. The Schedule may be amended to reflect changes in the composition of the
Investors and changes in stock ownership that may occur from time to time as a
result of Permitted Transfers or Transfers permitted under Article II hereof or
written waivers thereto by a majority in interest of the Management Investors,
the Equity Fund Investor and the Funds, each voting separately as a class.
Amendments to the Schedule reflecting Permitted Transfers or Transfers permitted
under Article 11 hereof shall become effective when the amended Schedule, and a
copy of the Agreement as executed by any new transferee, are filed with the
Company. Amendments to the Schedule reflecting Transfers pursuant to waivers
under Article 11 hereof shall become effective when the waivers and amended
Schedule, as executed by a majority in interest of the Management Investors and
the Equity Fund Investor and the Funds, voting separately as a class, and a copy
of this Agreement as executed by any new transferee, are filed with the Company.
Any other amendment, revision or termination of this Agreement shall require the
prior written consent of each of the Equity Fund Investor and the Funds,
provided, however, that any amendments to Section 2.1, 2.3, 2.4, 2.5, 2.6,
3.2(b), 3.3, 3.8(a), 3.8(b) or 4.2 hereof, insofar as they adversely affect any
Management Investor, shall require the prior written consent of such Management
Investor and in no event shall any amendment impose additional restrictions or
obligations on any Management Investor without the prior written consent of such
Management Investor. Captions appearing in this Agreement are for convenience
only and shall not be deemed to explain, limit or amplify the provisions hereof.
This Agreement may be executed in counterparts, which when taken together shall
constitute one and the same instrument.
4.3 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 the invalid or
unenforceable provision were omitted.
4.4 Investor Representatives.
(a) The Management Representative. Each Management Investor (other
than Jack C. Lail) hereby irrevocably designates and appoints (and pursuant
to Article I, each Permitted Transferee of Stock held by such Investors
will be deemed to have so designated and appointed) Francis H. Olmstead,
Jr. (the "Management Representative") as the representative for each such
person to perform all such acts as are required, authorized, or
contemplated by this Agreement to be performed by any such person and
hereby acknowledges that the Management Representative shall be the
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only person authorized to take any action so required, authorized, or
contemplated by this Agreement by each such person. Each such party further
acknowledges that the foregoing appointment and designation shall be deemed
to be coupled with an interest and shall survive the death or incapacity of
such party. Each such party hereby authorizes (and pursuant to Article I,
each such Permitted Transferee will be deemed to have authorized) the other
parties hereto to disregard any notice or other action taken by such person
pursuant to this Agreement except for the Management Representative. The
other parties hereto are and will be entitled to rely on any action so
taken or any notice given by the Management Representative and entitled and
authorized to give notices only to the Management Representative for any
notice contemplated by this Agreement to be given any such person. In the
event (i) the Management Representative ceases to own Stock, (ii) the
Management Representative ceases to be employed by the Company or any
Subsidiary, or (iii) the Management Representative resigns, a successor to
the Management Representative may be chosen by a majority in interest of
the Stock held by the Management Investors, provided that notice thereof is
given by the new Management Representative to the Company, the Equity Fund
Investor and the Funds.
(b) The Lee Representative. Each person or entity comprising the
Institutional Investors hereby irrevocably designates and appoints (and
each Permitted Transferee of Stock held by, or Third Party receiving Stock
from, such Investor will be deemed to have so designated and appointed)
Thomas H. Lee, with full power of substitution (the "Lee Representative'),
as the representative of each such person to perform all such acts as are
required, authorized, or contemplated by this Agreement to be performed by
any such person and hereby acknowledges that the Lee Representative shall
be the only person authorized to take any action so required, authorized,
or contemplated by this Agreement by each such person. Each such party
further acknowledges that the foregoing appointment and designation shall
be deemed to be coupled with an interest and shall survive the death or
incapacity of such party. Each such party hereby authorizes (and each such
Permitted Transferee will be deemed to have authorized) the other parties
hereto to disregard any notice or other action taken by such person
pursuant to this Agreement except for the Lee Representative. The other
parties hereto are and will be entitled to rely on any action so taken or
any notice given by the Lee Representative and entitled and authorized to
give notices only to the Lee Representative for any notice contemplated by
this Agreement to be given any such person. In the event of the death,
disability or resignation of the Lee Representative, a successor to the Lee
Representative may be
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chosen by a majority in interest of the Common Stock held by the
Institutional Investors, provided that notice thereof is given by the new
Lee Representative to the Company and to the Management Investors.
Notwithstanding anything herein to the contrary, the provisions of this
Section 4.4(b) shall no longer apply with respect to the Funds in the event
that no Affiliate of the Equity Fund Investor continues to act as an
advisor to the Funds.
4.5 Notices. All notices and other communications necessary or contemplated
under this Agreement shall be in writing and shall be delivered in the manner
specified herein or, in the absence of such specification, shall be deemed to
have been duly given when delivered by hand or one day after sending by
overnight delivery service, to the respective addresses of the parties set forth
below:
(a) for notices and communications to the Company:
Anchor Holdings, Inc.
209 East DeSoto Avenue
Morristown, Tennessee 37814
Attn: President
with copies to:
Anchor Holdings, Inc.
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: Scott A. Schoen
with a copy to:
Piliero Goldstein Jenkins & Hall
380 Lexington Avenue
Suite 1105
New York, New York 10168
Attn: Edward J. Goldstein, Esq.
and
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02710
Attn: Harry A. Hanson, III, Esq.
(b) For notices and communications to the Investors, to the respective
addresses set forth in the Schedule.
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with a copy to:
Piliero Goldstein Jenkins & Hall
380 Lexington Avenue
Suite 1105
New York, New York 10168
Attn: Edward J. Goldstein, Esq.
and
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
Attn: Harry A. Hanson, III, Esq.
By notice complying with the foregoing provisions of this Section 4.5, each
party shall have the right to change the mailing address for future notices and
communications to such party.
4.6 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties thereto and to their respective transferees,
successors, assigns, heirs and administrators; provided, however, that the
rights under this Agreement may not be assigned except as expressly provided
herein. No such assignment shall relieve an assignor of its obligations
hereunder.
4.7 Governing Law. This Agreement shall be governed by and construed under
the internal laws of the Commonwealth of Massachusetts without giving effect to
principles of conflicts of laws.
4.8 Termination. Without affecting any other provision of this Agreement
requiring termination of any rights in favor of any Investor, Permitted
Transferee or any other transferee of Stock, this Agreement shall terminate as
to such Investor, Permitted Transferee or other transferee, when, pursuant to
and in accordance with this Agreement, such Investor, Permitted Transferee or
other transferee, as the case may be, no longer owns any shares of Stock (and,
in the case of a Management Investor, Stock Options and, in the case of the
Funds, Warrants); provided, that termination pursuant to this Section 4.8 shall
only occur in respect of an Investor after all Permitted Transferees in respect
thereof also no longer own any shares of Stock. Notwithstanding anything to the
contrary set forth herein, this Agreement shall terminate no later than the
tenth (10th) anniversary of the Acquisition.
4.9 Recapitalizations, Exchanges, Etc. The provisions or thiS Agreement
shall apply, to the full extent set forth herein with respect to shares of
Stock, to any and all shares of capital stock of the Company or any successor or
assign of the Company
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(whether by merger, consolidation, sale of assets or otherwise) which may be
issued in respect of, in exchange for, or in substitution of the shares of
Stock, by reason of a Stock dividend, stock split, stock issuance, reverse stock
split, combination, recapitalization, reclassification, merger, consolidation or
otherwise. Upon the occurrence of any such events, amounts hereunder shall be
appropriately adjusted.
SHAREHOLDERS' AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
ANCHOR HOLDINGS, INC.
By: /s/ Francis H. Olmstead
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(signature)
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(print name)
------------------------
(print title)
EQUITY FUND INVESTOR:
THOMAS H. LEE EQUITY PARTNERS, L.P.
By: /s/ Scott A. Schoen
------------------------
(signature)
------------------------
(print name)
------------------------
(print title)
-40-
<PAGE>
STATE STREET BANK & TRUST COMPANY
OF CONNECTICUT (as successor
to Continental Bank & Trust Company)
By: /s/ V. Glunt
- ----------------------------------
(signature)
V. Glunt
- ----------------------------------
(print name)
Assistant Vice President
- ----------------------------------
(print title)
LEE INVESTORS:
/s/ John W. Childs
- ----------------------------------
John W. Childs
/s/ David V. Harkins
- ----------------------------------
David V. Harkins
/s/ Thomas R. Shephard
- ----------------------------------
Thomas R. Shepherd
/s/ Glenn H. Hutchins
- ----------------------------------
Glenn H. Hutchins
/s/ Scott A. Schoen
- ----------------------------------
Scott A. Schoen
/s/ C. Hunter Boll
- ----------------------------------
C. Hunter Boll
/s/ Steven G. Segal
- ----------------------------------
Steven. G. Segal
/s/ Anthony J. DiNovi
- ----------------------------------
Anthony J. DiNovi
-41-
<PAGE>
STATE STREET BANK & TRUST COMPANY
OF CONNECTICUT (as successor
to Continental Bank & Trust Company)
By:
- ----------------------------------
(signature)
- ----------------------------------
(print name)
(print title)
LEE INVESTORS:
/s/ John W. Childs
- ----------------------------------
John W. Childs
/s/ David V. Harkins
- ----------------------------------
David V. Harkins
/s/ Thomas R. Shephard
- ----------------------------------
Thomas R. Shepherd
/s/ Scott A. Schoen
- ----------------------------------
Scott A. Schoen
/s/ Glenn H. Hutchins
- ----------------------------------
Glenn H. Hutchins
/s/ C. Hunter Boll
- ----------------------------------
C. Hunter Boll
/s/ Steven G. Segal
- ----------------------------------
Steven. G. Segal
/s/ Anthony J. DiNovi
- ----------------------------------
Anthony J. DiNovi
-41-
<PAGE>
/s/ Thomas Hagerty
- ----------------------------------
Thomas M. Hagerty
MANAGEMENT INVESTORS:
/s/ Robert J. Epley
- ----------------------------------
Robert J. Epley
/s/ Lloyd A. Etter
- ----------------------------------
Lloyd A. Etter
/s/ Claude J. Kyker
- ----------------------------------
Claude J. Kyker
/s/ John J. Nugent
- ----------------------------------
John J. Nugent
/s/ Francis H. Olmstead, Jr.
- ----------------------------------
Francis H. Olmstead, Jr.
/s/ Robert T. Parkey
- ----------------------------------
Robert T. Parkey
/s/ Phyllis Best
- ----------------------------------
Phyllis Best
/s/ Joseph M. Viglione
- ----------------------------------
Joseph M. Viglione
MID-STATE INVESTOR:
- ----------------------------------
Jack C. Lail
-42-
<PAGE>
- ----------------------------------
Thomas M. Hagerty
MANAGEMENT INVESTORS:
/s/ Robert J. Epley
- ----------------------------------
Robert J. Epley
/s/ Lloyd A. Etter
- ----------------------------------
Lloyd A. Etter
/s/ Claude J. Kyker
- ----------------------------------
Claude J. Kyker
/s/ John J. Nugent
- ----------------------------------
John J. Nugent
/s/ Francis H. Olmstead, Jr.
- ----------------------------------
Francis H. Olmstead, Jr.
/s/ Robert T. Parkey
- ----------------------------------
Robert T. Parkey
/s/ Phyllis Best
- ----------------------------------
Phyllis Best
/s/ Joseph M. Viglione
- ----------------------------------
Joseph M. Viglione
MID-STATE INVESTOR:
- ----------------------------------
Jack C. Lail
<PAGE>
- ----------------------------------
Thomas M. Hagerty
MANAGEMENT INVESTORS:
- ----------------------------------
Robert J. Epley
- ----------------------------------
Lloyd A. Etter
- ----------------------------------
Claude J. Kyker
- ----------------------------------
John J. Nugent
- ----------------------------------
Francis H. Olmstead, Jr.
- ----------------------------------
Robert T. Parkey
- ----------------------------------
Phyllis Best
- ----------------------------------
Joseph M. Viglione
MID-STATE INVESTOR:
/s/ Jack C. Lail
- ----------------------------------
Jack C. Lail
<PAGE>
/s/ Richard B. Mack
- ----------------------------------
Richard B. Mack
- ----------------------------------
Elizabeth H. Cox
- ----------------------------------
R. Dale Johnson
- ----------------------------------
Charles O. Allen
- ----------------------------------
Carey M. Durham
- ----------------------------------
Dean F. Lail
THE FUNDS:
ML-LEE ACQUISTION FUND II, L.P.
By: MEZZANINE INVESTMENTS II, L.P.
Its Managing General Partner
By: ML MEZZANINE II INC.
Its General Partner
By:
- ----------------------------------
(signature)
- ----------------------------------
(print name)
- ----------------------------------
(print title)
-43-
<PAGE>
- ----------------------------------
Richard B. Mack
- ----------------------------------
Elizabeth H. Cox
/s/ R. Dale Johnson
- ----------------------------------
R. Dale Johnson
- ----------------------------------
Charles O. Allen
- ----------------------------------
Carey M. Durham
- ----------------------------------
Dean F. Lail
THE FUNDS:
ML-LEE ACQUISTION FUND II, L.P.
By: MEZZANINE INVESTMENTS II, L.P.
Its Managing General Partner
By: ML MEZZANINE II INC.
Its General Partner
By:/s/
- ----------------------------------
(signature)
- ----------------------------------
(print name)
- ----------------------------------
(print title)
-43-
<PAGE>
- ----------------------------------
Richard B. Mack
/s/ Elizabeth H. Cox
- ----------------------------------
Elizabeth H. Cox
/s/
- ----------------------------------
R. Dale Johnson
/s/ Charles O. Allen
- ----------------------------------
Charles O. Allen
/s/ Carey M. Durham
- ----------------------------------
Carey M. Durham
/s/ Dean F. Lail
- ----------------------------------
Dean F. Lail
THE FUNDS:
ML-LEE ACQUISTION FUND II, L.P.
By: MEZZANINE INVESTMENTS II, L.P.
Its Managing General Partner
By: ML MEZZANINE II INC.
Its General Partner
By:
- ----------------------------------
(signature)
- ----------------------------------
(print name)
- ----------------------------------
(print title)
-43-
<PAGE>
- ----------------------------------
Richard B. Mack
- ----------------------------------
Elizabeth H. Cox
- ----------------------------------
R. Dale Johnson
- ----------------------------------
Charles O. Allen
- ----------------------------------
Carey M. Durham
- ----------------------------------
Dean F. Lail
THE FUNDS:
ML-LEE ACQUISTION FUND II, L.P.
By: MEZZANINE INVESTMENTS II, L.P.
Its Managing General Partner
By: ML MEZZANINE II INC.
Its General Partner
By: /s/ Joseph Sullivan
- ----------------------------------
(signature)
- ----------------------------------
(print name)
- ----------------------------------
(print title)
-43-
<PAGE>
ML-LEE ACQUISTION FUND II, L.P.
By: MEZZANINE INVESTMENTS II, L.P.
Its Managing General Partner
By: ML MEZZANINE II INC.
Its General Partner
By: /s/ Joseph Sullivan
- ----------------------------------
(signature)
- ----------------------------------
(print name)
- ----------------------------------
(print title)
-44-
<PAGE>
Schedule A
Schedule of Investors
<TABLE>
<CAPTION>
Number of % of
Shares of Common
INSTITUTIONAL Investors Common Stock Stock
<S> <C> <C>
Thomas H. Lee Equity
Partners, L.P. 568,185.02
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: Scott A. Schoen
ML-Lee Acquisition Fund II, L.P. 162,967
c/o Thomas H. Lee Advisors II
75 State Street
Boston, MA 02109
Attn: Scott A. Schoen
ML-Lee Acquisition Fund 87,033
(Retirement Accounts) II, L.P.
c/o Thomas H. Lee Advisors II
75 State Street
Boston, MA 02109
Attn: Scott A. Schoen
State Street Bank & Trust Company 91,130.21
of Connecticut (as successor to
Continental Bank & Trust Company)
750 Main Street
Suite 1114
Hartford, CT. 06103
Attn: Virginia Glunt
John W. Childs 5,012.03
c/o Thomas H. Lee Company
75 State Street
Boston, MA. 02109
Attn: Scott A. Schoen
David V. Harkings 3,659.33
c/o Thomas H. Lee Company
75 State Street
Boston, MA. 02109
Attn: Scott A. Schoen
Thomas R. Shepherd 2,889.55
c/o Thomas H. Lee Company
75 State Street
Boston, MA. 02109
Attn: Scott A. Schoen
Glenn H. Hutchins 3,744.59
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: Scott A. Schoen
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of % of
Shares of Common
INSTITUTIONAL Investors Common Stock Stock
<S> <C> <C>
Scott A. Schoen 2,861.16
c/o Thomas H. Lee Company
75 State Street
Boston, MA. 02109
C. Hunter Boll 2,861.16
c/o Thomas H. Lee Company
75 State Street
Boston, MA. 02109
Attn: Scott A. Schoen
Steven G. Segal 1,144.53
c/o Thomas H. Lee Company
75 State Street
Boston, MA. 02109
Attn: Scott A. Schoen
Anthony J. DiNovi 572.21
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: Scott A. Schoen
Thomas M. Hagerty 572.21
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attn: Scott A. Schoen
MANAGEMENT INVESTOR
Robert J. Epley 5,684
1001 Westmoreland
Knoxville, TN 37919
Lloyd A. Etter 5,684
536 Windridge Lane
Morristown, TN 37814
Claude J. Kyker 5,684
2050 Seven Oaks Drive
Morristown, TN 37814
John J. Nugent 16,211
21 Orchard Drive
Redding, CT 06808
Francis H. Olmstead, Jr. 17,263
7328 Misty Meadow Drive
Knoxville, TN 37919
Robert T. Parkey 8,842
7208 Rotherwood Drive
Knoxville, TN 37919
Phyllis Best 2,316
4320 Shipe Road
Corryton, TN 37721
Joseph M. Viglione 5,684
1005 Castlerock Court
Knoxville, TN 37919
Jack C. Lail 9,685.23
1343 Burney Road
P.O. Box 179
Seagrove, NC 27341
Richard B. Mack 1,525.42
P.O. Box 847
Pinehurst, N.C. 28374
Elizabeth H. Cox 1,815.98
530 Burney Road
Asheboro, N.C. 27203
R. Dale Johnson 1,210.65
2842 Oak Hollow Drive
Asheboro, N.C. 27203
Charles O. Allen 1,210.65
P.O. Box 456
Denton, N.C. 27239
Carey M. Durham 242.13
1102 Rockridge Road
Asheboro, N.C. 27203
Dean F. Lail 2,469.73
P.O. Box 53
Seagrove, N.C. 27341
</TABLE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made effective on the 1st
day of April 1996 (the "Effective Date") by and between Anchor Advanced
Products, Inc., a Delaware corporation with principal offices at 1111 Northshore
Drive, Suite N-600, Knoxville, Tennessee 37919-4048 (the "Employer) and
_________________________________________ , an individual residing at 7328 Misty
Meadow Place, Knoxville, TN 37919 (the "Employee").
In consideration of the mutual agreements set forth below and for other
new, good and valuable consideration given by each party to this Agreement to
the other, the receipt and sufficiency of which are hereby acknowledged, the
Employer agrees to hire the Employee, and the Employee agrees to serve the
Employer, all under the terms and subject to the conditions that follow:
1. Employment and Duties. The scope and duties of the Employee's employment
shall be as follows:
a. The Employee shall serve the Employer on a full-time basis during
the term of this Agreement with the titles of Chairman, President and Chief
Executive Officer. As such, the Employee shall diligently and faithfully
(i) direct, oversee and manage the total business of the Employer as its
principal executive officer, and (ii) perform such other services as are
assigned from time to time by the Employer's board of directors (the
"Board") or are agreed to by the Employee and the Employer. The Employee
shall report to the Board.
b. The Employee shall devote his entire business-day attention and
energies and use his best efforts in his employment with the Employer. The
Employee understands that his position requires frequent air travel, often
with overnight stays for more than one night.
c. The Employee shall be elected Chairman, President and Chief
Executive Officer of the Employer and will serve in such officerships at
the pleasure of the Board.
d. The Employee will accept a directorship of the Employer if, and for
the term, elected.
e. The parties recognize that immediately prior to the Effective Date
the Employee was an employee at will of the Employer and that the execution
and delivery of this Employment Agreement is valuable consideration to the
Employee in support of the provisions of this Agreement including the
provisions of paragraph 6(c), below.
2. Term. The term of this Agreement shall commence on the Effective Date
and shall continue until _______________________ unless earlier terminated as
provided in this Agreement. This Agreement may be extended by written instrument
signed by the parties specifically referring to this Agreement. The initial term
of this Agreement as may be so extended is referred to in this Agreement as the
"Term."
<PAGE>
3. Compensation and Benefits. In consideration for entering into this
Agreement and as full compensation for his services during the Term, the
Employee shall receive the following compensation and benefits:
a. The Employee shall receive a base salary computed at the rate of at
least ______ per calendar year (the "Base Salary"), paid in installments in
accordance with the Employer's normal payment schedule for executive
employees, but not less frequently than bimonthly. The Employee's
performance will be reviewed from time to time during the Term, but at
least annually. Based upon the Employee's performance, the Board may, in
its sole, absolute discretion, increase the Employee's Base Salary.
b. In addition to the Base Salary described above, the Employee shall
be eligible to receive an annual bonus of an amount up to __ percent of the
Employee's Base Salary at the time the bonus is computed (the "Bonus"). The
Bonus will be computed on the Employer's financial and other results and
the overall performance of the Employee as determined in the sole absolute
discretion of the Board. The Bonus shall be paid, if at all, in the year
following the year in which it is earned.
c. In addition to the remuneration set forth in paragraphs 3(a) and
(b), above, the Employee shall be entitled to the following benefits: (i)
four (4) weeks of paid vacation per calendar year, pro rated for part of
any calendar year worked during the Term, to be taken at a time or times to
be mutually agreed by the Employer and the Employee; (ii) participation as
of the Effective Date for the Employee and, at his option, his spouse and
children, in the medical and hospitalization insurance plans (including
their dental and pharmaceutical components) of the Employer, subject to
deductibles, stop losses and Employee contributions to cost as are required
for other executive employees of the Employer, all as are in effect from
time to time during the Term; (iii) participation as of the Effective Date,
at no cost to the Employee, in the Employer's life insurance program, such
insurance to be equal to the Employee's base salary plus, at the Employee's
option, additional amounts of life insurance equal to one or two times such
base salary, as well as participation in the Employer's long-term
disability insurance program, such additional life insurance and long-term
disability insurance being subject to the Employee's contribution to cost
as required for other of the Employer's executive employees, all as are in
effect from time to time during the Term; (iv) participation in the
Employer's Supplemental Executive Retirement Plan ("SERP") in accordance
with the provisions of the form of SERP Agreement attached to this
Agreement as Exhibit A (which the Employer and Employee acknowledge has
been signed by them both in such form); (v) participation in the Anchor
Advanced Products, Inc. Employee Savings Plan, (vi) use of a company-leased
car; (vii) participation in the Anchor Holdings, Inc. Time Accelerated
Restricted Stock Option Plan; (viii) compensation under the November 18,
1994 Supplemental Compensation Agreement (which the Employer and Employee
acknowledge has been signed by them both in such form); (ix) reimbursement
for documented reasonable travel and other expenses incurred in connection
with the Employee's services under this Agreement; (x) reimbursement of
annual dues to Club Le Conte, or other similar private dining
establishment, and to a country club in the Knoxville, Tennessee area; and
(xi) all other benefits hereinafter established and offered generally to
the executive employees of the Employer.
d. The Employer may withhold from compensation or benefits payable to
the Employee under this Agreement all federal, state or local taxes or
other governmental obligations with respect to the Employee or garnishments
that may be required pursuant to law. The Employer
2
<PAGE>
may set off from such compensation or benefits any amount which the
Employee may owe to the Employer in connection with this Agreement or his
Employment.
e. Each and every benefit described in this paragraph 3 shall be
subject to the terms and conditions of the benefit's applicable underlying
plan and or insurance document, if any, each of which is available to the
Employee for inspection at the Employer's principal offices. Employee
hereby acknowledges that prior to the Effective Date he has had access to,
and the opportunity to examine, all of such plans and documents and to
obtain answers to all of his questions with respect thereto. The
implementation of all benefits applicable to the Employee during the Term
are subject to the policies and procedures established and issued by the
Employer from time to time and applicable to its executive employees. The
Employer does not guarantee the adoption or continuation of any particular
employee benefit plan or program.
f. The Employer and Employee acknowledge that all of the benefits
specifically described in paragraph 3(c), above, are currently in effect.
4. Termination of Agreement. Notwithstanding the provisions of paragraph 2,
above, this Agreement shall expire prior to the end of the Term upon the
happening of any of the following termination events ("Termination Events"):
a. Termination by the Employee. Termination by the Employee upon
thirty (30) days' prior written notice to the Employer if the Employer
shall be in material breach of this Agreement or shall require the employee
to perform duties on an ongoing basis that are not consistent with those
described in paragraph 1(a)(i), above.
b. Termination by the Employer. Termination by the Employer (i) upon
thirty (30) days' prior written notice to the Employee if the Employee
shall become mentally or physically disabled such that the Employee is
unable to perform his duties under this Agreement in a material way and
such inability shall continue for a period in excess of one hundred eighty
(180) consecutive days or in excess of two hundred ten (210)
non-consecutive days in any twelve (12)-month period; provided that, upon
such disability, but prior to such termination, the Board shall have the
right to suspend the Employee from his duties under this Agreement but
without loss of compensation or other benefits to the Employee; (ii)
immediately upon written notice to the Employee for "just cause;" or (iii)
without just cause and for no reason (but with compensation as set forth in
paragraph 5(a), below) immediately upon notice to the Employee. For
purposes of this Agreement, the term "just cause" shall mean, (a) the
Employee's commission of any act of fraud or dishonesty with respect to the
Employer or its business, (b) the Employee's conviction of a felony under
the laws of the United States or any state, (c) the Employee's willful or
grossly negligent violation of any applicable federal or state law (or rule
or regulation thereunder) governing the Employer's business, or (d) the
Employee's willful and continued failure to act in accordance with the
proper and lawful direction of the Board or to devote his full time and
best efforts to the Employer (other than any failure resulting from an
illness or other similar incapacity or disability), in either event for 10
days after a written demand for performance is delivered to the Employee on
behalf of the Board which specifically identifies the manner in which it is
alleged that the Employee has not followed such directives or devoted such
time and efforts, as the case may be; and
3
<PAGE>
c. Automatic Termination upon Death. Automatically upon the death of
the Employee.
5. Rights upon Termination.
a. In the event that employment is terminated pursuant to paragraph
4(a), 4(b)(i), 4(b)(iii) or 4(c), above, the Employer and the Employee
recognize and understand that the actual damages to the Employee would be
difficult if not impossible to ascertain. Therefore, in lieu of any other
rights to which the Employee may be entitled, the Employee shall be paid by
Employer, in respect of such termination, as severance pay or as liquidated
damages, or both, but not as a forfeiture, and, except with respect to
termination as a result of the Employee's death, in support of the
Employee's covenants in paragraph 6(c), below, the amount (the "Severance
Amount") described in paragraphs 1 and 9, respectively, of Exhibit B
attached to this Agreement. In the event the employment of the Employee is
terminated (i) by the Employer for "just cause" pursuant to paragraph
4(b)(ii), above, (ii) upon the voluntary resignation of the Employee
without cause or reason, or (iii) as a result solely of the expiration of
the Term, then, at its option, the Employer may elect to pay to the
Employee the Severance Amount described in paragraphs 3(a) and (b),
respectively, of Exhibit B in support of the Employee's covenants in
paragraph 6(c), below. If the Employer elects not to make payment of the
Severance Amount described in the preceding sentence then the Employee
shall not be bound by the covenants set forth in paragraph 6(c)(1), but
only to the extent that such covenants are not duplicative of other legal
duties owed by the Employee to the Employer, including, without limitation,
fiduciary duties and duties of loyalty, or requirements of law applicable
to the Employee. Whether or not the Employer pays the Severance Amount in
paragraph 3 of Exhibit B, the Employee shall be bound by the covenants in
paragraphs 6(c)(2) and (3) to the extent that such covenants are
enforceable under this Agreement or are duplicative of legal duties owed by
the Employee to the Employer, including, without limitation, fiduciary
duties, duties of loyalty, or requirements of law applicable to the
Employee. Nothing in this paragraph 5 shall be deemed to relieve the
Employee of the obligations set forth in paragraph 6(a), below
b. The Severance Amount due pursuant to Exhibit B shall be paid in
quarterly installments in arrears on the first business day of each
calendar quarter following the date of termination until paid in full. If
the Employee is entitled to receive the Severance Amount under this
Agreement, the Employee shall not be required to mitigate the amount of any
payment provided thereby by seeking other employment or otherwise, but if
the Employee does obtain another employment, each one ($1.00) dollar of
base salary (plus bonus to the extent that the Severance Amount includes
Bonus) received from such other source during the period that the Employer
is required to make payment of the Severance Amount shall reduce each one
dollar ($1.00) of such Severance Amount by seventy five ($.75) cents.
c. Other than as expressly set, forth in this paragraph 5, upon
termination of this Agreement, the Employer shall have no further
obligation to the Employee under this Agreement or otherwise, except that,
the Employee (or his estate, as the case may be) shall be entitled to
receive all salary and benefits to which the Employee is entitled up to and
including the effective date of such termination. In addition, after the
termination of the Employee's employment, the Employee's entitlement to
rights and benefits as of the date of such termination under any Employee
benefit plans maintained by the Employer in which the Employee
participates, shall be determined and paid in accordance with such plans.
All amounts, including the Severance Amount to which the Employee may be
due under this paragraph 5, shall be subject to offset or deduction for
4
<PAGE>
amounts which the Employee owes to the Employer or for any loss or damage
the Employer has suffered or may suffer as a result of the Employee's acts
or omissions.
d. Upon termination or earlier expiration of this Agreement, the
Employee will, or in the event of his death his estate will, immediately
return to the Employer all written confidential and proprietary information
referred to in paragraph 6, below, as well as the Company-leased car and
all other property loaned or consigned to the Employee by the Employer.
6. Confidential Information, Intellectual Property and Competition by the
Employee.
a. The provisions set forth the Employee Agreement Relating To
Intellectual Property and Confidentiality (the "IP Agreement") (in the form
of Exhibit C, attached to this Agreement, and which the Employer and the
Employee acknowledge has been signed by them both in such form) are
incorporated herein by this specific reference thereto.
b. The Employee acknowledges that during the course of his prior
employment with the Employer as an executive manager and during his
employment under this Agreement, the Employee has received and will receive
and has had and will have access to the proprietary and confidential
information of the Employer and also has received and had access to and
will receive and have access to detailed client and customer lists and
information relating to the operations and business requirements of those
clients and customers. Accordingly, the Employee is willing to enter into
the covenants described in paragraph 6(c), below, in order to provide the
Employer with what the Employee considers to be reasonable protection for
the Employer's interests.
c. The Employee hereby agrees that, for the greater of the periods
from the date hereof to and until (i) the first anniversary of the date on
which the Employee ceases to be entitled to the payment of Base Salary from
the Employer, or (ii) in the event the Employee is entitled to the
Severance Amount, the date on which the Employee ceases to be entitled to
the payment of all or part of the Severance Amount, the Employee shall not,
directly or indirectly:
(1) enter into or engage in or assist in any way any business
competitive with the business of the Employer as then conducted or
make, sell or distribute Competitive Products either on the Employee's
own account, or as a partner or joint venturer, or as an employee,
agent, consultant or salesman for any individual or other entity, or
as an officer, director, or stockholder of a corporation, or as a
lender, or otherwise, within the United States of America or any
foreign country in which the Employer actually competes or in which
the Employer has adopted plans to compete during the Term; provided
that, the ownership, in the aggregate, of less than l% of the
outstanding shares of capital stock of any corporation with one or
more classes of its capital stock listed on a national securities
exchange or publicly traded in the over-the-counter market shall not,
by itself, constitute a violation of this paragraph 6(c)(1). For
purposes of this paragraph 6(c)(1), the term "Competitive Products"
shall mean any and all products that are the same as, or which are
competitive with, products that were under development, manufactured
or sold by the Employer or any of its subsidiaries during the two-year
period immediately preceding the termination of the Employee's
employment and the six-month period immediately following such
employment.
(2) solicit or induce, or cause any business, firm or corporation
to solicit or induce (i) the employment of, or employ, any of the
present or future employees or agents
5
<PAGE>
of the Employer or any of its subsidiaries, or (ii) business, or
accept business, from customers of the Employer or any of its
subsidiaries, or (iii) customers of the Employer or any of its
subsidiaries to withdraw, curtail or cancel its business with the
Employer or such subsidiary; or
(3) engage in or participate in any business conducted under any
name that shall be the same as or similar to the name "Anchor Advanced
Products, Inc." or any trade name used by the Employer in connection
with its business and operations.
d. The covenants contained in paragraph 6(c), above, are intended to
be separate and severable and enforceable as such.
e. The Employee hereby undertakes that he will immediately notify the
Employer of any offer of employment or any other engagement or arrangement
made to the Employee by any third party or parties which could reasonably
be anticipated to rise to a breach of one or more of the covenants
contained in paragraph 6(c) ("a notifiable offer") and further undertakes
that on receipt of any notifiable offer he will immediately inform the
third party or parties responsible for the notifiable offer to the
existence of those covenants.
f. The panics agree and acknowledge that the duration, scope and
geographic area of the covenant not to compete described in paragraph 6(c),
above, are fair, reasonable and necessary in order to protect the goodwill
and other legitimate interests of the Employer, that adequate consideration
has been provided to the Employee by and under this Agreement for such
obligations, and that such obligations do not prevent the Employee from
earning a livelihood. If, however, for any reason any court (the "Court")
determines under applicable law that the provisions in paragraph 6(c)
pertaining to duration, scope and/or geographic area in relation to
non-competition or competitive products are too broad or otherwise
unreasonable or that the Employee has been prevented unlawfully from
earning a livelihood (together, such provisions being hereinafter referred
to as "Restrictions), such Restrictions shall be interpreted, modified or
rewritten to include the maximum Restrictions as are valid and enforceable
under applicable law; and, if so, the Court is hereby requested and
authorized by the parties hereto to revise the Restrictions to include the
maximum Restrictions allowed under applicable law and the Restrictions as
so revised shall be binding upon the Employee.
g. In the event of breach of any of the Employee's obligations under
the IP Agreement or under paragraph 6(c), above, the Employer shall have
the right to have such obligation specifically enforced by a court of
competent jurisdiction, including, without limitation, the right to entry
of restraining orders and injunctions, whether preliminary, mandatory,
temporary, or permanent, against a violation, threatened or actual, and
whether or not continuing, of such obligation, without the necessity of
showing any particular injury or damage, and without the posting of any
bond or other security, it being acknowledged and agreed that any such
breach or threatened breach would cause immediate and irreparable injury to
the Employer and that money damages alone would not provide an adequate
remedy.
7. Miscellaneous Provisions. This is a contract for unique personal
services. Neither this Agreement nor any right or obligation arising hereunder
may be assigned by the Employee without the prior written consent of the
Employer; and any purported assignment without such consent shall be null and
void. This Agreement shall be binding upon and inure to the benefit of the
respective successors and permitted assigns of the parties. This Agreement,
together with the
6
<PAGE>
documents described in Exhibits A through C hereto, contain the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersede all prior agreements, representations, warranties and understandings,
either oral or written, between the parties with respect thereto. This Agreement
may not be amended or modified except by a writing signed by each of the parties
hereto. The captions set forth in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement. The provisions of this Agreement may be waived only by a written
instrument executed by the party so waiving. All notices required or permitted
under this Agreement shall be in writing and shall be delivered by hand or sent
by first-class, certified mail, postage and fees prepaid, addressed as follows:
(i) If to the Employer: Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attention: Mr. Scott Schoen
Re: Anchor Business
Copy to: Piliero Goldstein Jenkins & Hall, LLP
292 Madison Avenue
New York, NY 10017
Attention: Edward J. Goldstein, Esq.
(ii) If to the Employee: To the address set forth in the first
paragraph of this Agreement
unless and until notice of another or different address shall be given as
provided in this paragraph 7. Notices shall be effective upon delivery if hand
delivered and upon the third day after mailing if sent by certified mail. In the
event any provision of this agreement shall finally be determined to be unlawful
or unenforceable, such provision shall be deemed to be severed from this
Agreement and every other provision of this Agreement shall remain in full force
and effect. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Tennessee without regard to principles of
conflicts of law. The parties hereby irrevocably consent to the exclusive
personal jurisdiction of the federal district court located in the Eastern
District of Tennessee, or if such court lacks subject matter jurisdiction, to
the jurisdiction of the applicable state court of the State of Tennessee located
in the County of Knox, for all purposes in connection with this Agreement or the
Employee's employment hereunder. The parties hereby expressly waive any and all
claims and defenses either may have in respect to any proceeding in such court
based on alleged lack of personal jurisdiction, improper venue or inconvenient
forum, or any similar defense, to the maximum extent permitted by law.
ANCHOR ADVANCED PRODUCTS, INC. (Employer)
By:
--------------------------------------
Director, on behalf of the board
By:
--------------------------------------
Chairman, President and CEO
Date:
--------------------------------------
7
<PAGE>
(Employee)
By:
--------------------------------------
An individual
Date:
------------------------------------
8
<PAGE>
Exhibit B to the
Employment Agreement
by and between
Anchor Advanced Products,
Inc., as Employer, and
as Employee, made
effective
Severance Amount
1. The Severance Amount payable upon termination under paragraphs 4(b)(i)
relating to disability and 4(c) relating To death, shall be equal to ___________
year's Base Salary in effect at the time of such termination and Bonus computed
using the last full-year Bonus, if any, paid to the Employee, pro-rated to the
effective date of termination. The Bonus portion of the Severance Amount shall
be considered earned notwithstanding any right of discretion in the Board not to
grant such bonus.
2. The Severance Amount payable upon termination under paragraphs 4(a)
relating to termination by the Employee for cause and 4(b)(iii) relating to
termination by the Employer without "just cause" shall be an amount equal to
Base Salary and Bonus, both computed to the end of the Term. Bonus shall be
computed using the last full-year Bonus paid to the Employee. The Bonus portion
of the Severance Amount shall be considered earned notwithstanding any right of
discretion in the Board not to grant such bonus.
3. (a) The Severance Amount payable at the option of the Employer upon
termination for just cause under paragraph 4(b)(ii) or upon the voluntary
resignation of the Employee without cause or reason, shall be equal to one half
of one year's Base Salary as in effect for at least three (3) months prior to
such termination. Bonus shall not be considered.
(b) The Severance Amount payable at the option of the Employer upon
expiration of the Term shall equal to one year's Base Salary in effect at the
time of such expiration. Bonus shall not be considered.
4. All paragraph references and all defined terms in initial capital
letters in this Exhibit B refer to paragraphs and definitions, respectively, in
the Employment Agreement.
Agreed:
Employer
----------------
Please initial
Employee
----------------
Please initial
<PAGE>
Exhibit C
to Employment Agreement
EMPLOYEE AGREEMENT RELATING TO
INTELLECTUAL PROPERTY AND CONFIDENTIALITY
THIS AGREEMENT is between Anchor Advanced Products, Inc. ("Anchor") and the
person named below (referred to in this Agreement as "you" or "your").
In consideration of your employment by Anchor, or if you are an employee of
Anchor at the time you sign this Agreement, your continued employment, and your
regular compensation for as long as you remain an employee of Anchor, you
acknowledge, represent and agree to the following:
1. Anchor's Confidential Information.
a. You acknowledge that as a result of your employment by Anchor, you
will gain access to and knowledge of confidential, proprietary and/or
trade secret information of Anchor regarding financial, planning,
manufacturing and customer matters, technological data, methods, and
processes, and/or other proprietary and confidential information, both oral
and written (collectively referred to in this Agreement as "Confidential
Information"). You further acknowledge that all Confidential Information is
the exclusive property of Anchor and that disclosure of Confidential
Information would cause Anchor to suffer serious competitive disadvantage
as well as immediate and irreparable injury and damages. Accordingly, you
will not, either during your employment by Anchor, or at any time
thereafter, use for any purpose (other than for the benefit of Anchor
during your employment) or disclose to any person, firm or entity any
Confidential Information.
b. Without limiting the generality of the foregoing, you will not
download or copy any Confidential Information into any computer or media
not owned by Anchor and permanently located on Anchor's premises unless
authorized by Anchor to do so in writing.
c. Confidential Information does not include any information that is
or becomes generally available to the public, other than as a result of
disclosure by or through you inadvertently or on purpose.
2. Inventions and Other Intellectual Property. The following paragraphs a.
through f. shall apply to works of authorship (which shall be deemed to be
"works for hire"),
<PAGE>
copyrightable material, inventions, improvements and discoveries (whether
patentable or nor), trademarks, trade dress or other intellectual property that
has been or will be made, conceived or generated by you during your employment
by Anchor, whether or not made, conceived or generated within the course of your
employment or wholly or partially on your own time, relating in any way to the
business of Anchor, or resulting directly or indirectly from your employment by
Anchor (collectively referred to as "Intellectual Property". In no event shall
Intellectual Property include any intellectual property that you develop
entirely within your own time without using Anchor's equipment, supplies,
facilities or trade secret information unless such intellectual property either
(1) relates at the time of conception or reduction to practice to Anchor's
business or to Anchor's actual or demonstrable research or development, or (2)
results from any work performed by you for Anchor. Anchor shall have the right
to require disclosure by you in confidence of all intellectual property made,
conceived or generated by you, solely or jointly with others, during your
employment by Anchor, to determine whether or not such intellectual property is
Intellectual Property covered by this Agreement.
a. Ownership of Intellectual Property.
(i) All Intellectual Property (including, without limitation,
works of authorship to which the "works for hire" doctrine is found
inapplicable) and all rights therein, will be and are hereby deemed to
be, assigned and transferred by this Agreement to Anchor, its
successors and assigns. Anchor, its successors and assigns will have
the exclusive right to obtain copyright, patent and/or trademark
registrations or other protection of the Intellectual Property
(including, without limitation, maintaining such Intellectual Property
as trade secrets) in Anchor's own name, or in the names of Anchor's
successors or assigns, as inventor, author and/or owner, and to secure
any renewals and extensions of such protection, throughout the world.
If Anchor chooses to maintain any part or all of the Intellectual
Property as a trade secret, Anchor shall so inform you and you will
maintain such Intellectual Property as Confidential Information in
accordance with paragraph 1, above.
(ii) You hereby acknowledge that you retain no rights whatsoever
with respect to Intellectual Property, including, without limitation,
any rights to reproduce such Intellectual Property, or to make, have
made, use and/or sell products based upon Intellectual Property, or
otherwise to prepare derivatives thereof, or to file patent, copyright
or trademark applications with respect thereto, or to distribute
copies of any Intellectual Property in any manner whatsoever, or to
exhibit, use or display any such Intellectual Property publicly or
otherwise, or to license or assign to any third party the right to do
any of the foregoing.
-2-
<PAGE>
b. Filings and Other Assistance. Without further remuneration (except
for out-of-pocket expenses), you will execute and deliver any document and
give any assistance as may be reasonably requested by Anchor to effect the
ownership rights provided in this Agreement or otherwise to further the
purposes of this paragraph 2.
c. Record keeping and Reporting.
(i) If your employment involves technology or manufacturing, and
you are (or will be) a salaried employee, you will keep a laboratory
or engineering notebook to record your work in connection with
research or development, and you will date and sign entries in each
page of such notebook. Whenever practicable, you will obtain a
witnessing signature by a coemployee to each such entry signed by you.
(ii) You will promptly communicate to the Executive Vice
President-Manufacturing, or person designated by the Executive Vice
President-Manufacturing, all Intellectual Property made, conceived or
generated by you.
d. Protecting Anchor Intellectual Property. You will follow the
policies and procedures of Anchor issued from time to time with respect to
Anchor's Intellectual Property.
e. Return of Anchor Documents. Upon termination of your employment
with Anchor (whether with or without cause or reason) you will immediately
return to Anchor all copies of all written Confidential Information and all
documents relating to or embodying any Intellectual Property, in your
possession or control.
f. Your Intellectual Property. You acknowledge that you have made no
inventions, improvements or discoveries, whether or not patentable, and
have generated no other intellectual property prior to the date of your
employment, except:
(i) None [Employee's Initials _ ] (if none, initial above and
cross out subparagraph (ii) below);
(ii) the inventions, improvements and discoveries or other
intellectual property listed on the attached Exhibit A signed by you
and by an officer of Anchor, a copy of which has been delivered to you
together with this Agreement.
-3-
<PAGE>
3. Specific Relief. In the event of breach by you of any of your
obligations under paragraphs 1 or 2 of this Agreement, Anchor shall have the
right to have such obligation specifically enforced by a court of competent
jurisdiction, including, without limitation, the right to entry of restraining
orders and injunctions, whether preliminary, mandatory, temporary or permanent,
against the violation, threatened or actual, and whether or not continuing, of
such obligation, without the necessity of showing any particular injury or
damage, and without the posting of any bond or other security, it being
acknowledged and agreed that any such breach or threatened breach would cause
immediate and irreparable injury to Anchor and that money damages alone would
not provide an adequate remedy. In the event that Anchor commences legal action
or seeks legal advice to enforce your obligations under paragraphs 1 or 2 of
this Agreement, and is successful therein, you shall be responsible for all
costs related to such action or advice, including, without limitation,
reasonable attorneys' fees.
4. Post-Employment Matters.
a. Survival of Obligations. All of your obligations under this
Agreement that either expressly or by their nature survive the
termination of your employment by Anchor in order for such obligations
to have their intended effect, shall survive such termination.
b. Exit Interview. Upon termination of your employment by Anchor,
you agree to participate in an "exit" interview with representatives
of Anchor on Anchor's premises to discuss Intellectual Property
matters and your continuing obligations under this Agreement.
5. No Other Agreement. You acknowledge and represent that you are under no
obligation to any other person, firm or entity which obligation would preclude,
conflict with or be an impediment to your obligations under this Agreement.
6. Miscellaneous Provisions. Neither this Agreement nor any right or
obligation arising hereunder may be assigned by you without the prior written
consent of Anchor, and any purported assignment without such consent shall be
null and void. This Agreement shall be binding upon and inure to the benefit of
the respective successors and permitted assigns of the parties. This Agreement
contains the entire agreement between the parries hereto with respect to the
subject matter hereof and supersedes all prior agreements, representations,
warranties and understandings, either oral or written, between the parties with
respect thereto. This Agreement may not be amended or modified except by a
writing signed by each of the parties hereto. The captions set forth in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement. The provisions of this
Agreement may be waived only by a written instrument executed by the party so
waiving. In the event any provision of this Agreement shall
-4-
<PAGE>
finally be determined to be unlawful or unenforceable, such provision shall be
deemed to be severed from this Agreement and every other provision of this
Agreement shall remain in full force and effect. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Tennessee without regard to principles of conflicts of law. The parties hereby
irrevocably consent to the exclusive personal jurisdiction of the federal court
located in the Eastern District of Tennessee, or if such court lacks subject
matter jurisdiction, to the jurisdiction of the applicable state court of the
State of Tennessee, located in the County of Knox, for all purposes in
connection with this Agreement. The parties hereby expressly waive any and all
claims and defenses either may have in respect to any proceeding in such court
based on alleged lack of personal jurisdiction, improper venue or inconvenient
forum, or any similar defense, to the maximum extent permitted by law.
ANCHOR ADVANCED PRODUCTS, INC. (Employer) EMPLOYEE
------------------
By: Name
---------------------------------
Francis H. Olmstead, Jr.
President-CEO
------------------
Signature
Date:
-------------------------------
Date
-5-
ANCHOR ADVANCED PRODUCTS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT BENEFITS AGREEMENT
RESTATED AND AMENDED NOVEMBER 25, 1994
This Agreement is made and entered into effective as of January 1, 1993
by and between ANCHOR ADVANCED PRODUCTS, INC. (the "Corporation") and
____________________ ("Executive").
Name of Executive
WHEREAS, in recognition of the Executive's past services to the
Corporation and in order to encourage the continuation of the Executive's
services in the future, the Corporation desires to provide additional
compensation to the Executive upon the Executive's retirement, disability or
death;
NOW, THEREFORE, in consideration of the Executive's continued
performance of services and other good and valuable consideration, the receipt
of which is hereby acknowledged, the Corporation hereby agrees as follows:
1. Definitions. Whenever used in this Agreement, the following words
and phrases shall have the meanings set forth below, unless a different meaning
is plainly required by the context:
(a) "Average Social Security Taxable Wage Base" means the
average (without indexing) of the maximum limitation on wages taken into account
for purposes of computing the Social Security taxes payable with respect to
old-age, survivors and disability insurance under Section 3101(a) of the Code
(as defined below) in effect for each calendar year during the 35-year period
ending with the last day of the calendar year with respect to which such average
is calculated.
(b) "Cause" means (i) the Executive's continuing willful
failure to perform the Executive's duties to the Corporation (other than as a
result of total or partial incapacity due to physical or mental illness), (ii)
gross negligence or malfeasance by the Executive in the performance of the
Executive's duties to the Corporation, or (iii) an act or acts on the
Executive's part constituting a felony under the laws of the United States or
any State thereof which results or was intended to result directly or indirectly
in gain or personal enrichment by the Executive at the expense of the
Corporation; provided, however, if cause for termination is defined in an
employment agreement between the Corporation and the Executive, then the
definition in such agreement shall apply to this Agreement in the place of this
definition.
(c) "Code" means the Internal Revenue Code of 1986, as
amended.
<PAGE>
(d) "Credited Service" means the total of (i) the years of
Benefit Service credited to the Executive under the North American Philips Plan
as of May 1, 1990, and (ii) the Executive's years of continuous service with the
Corporation beginning May 1, 1990 until the Executive's date of termination.
(e) "Early Retirement Date" means the first day of the first
month after the Executive both (i) completes 5 years of Credited Service, and
(ii) attains age 55.
(f) "Earnings" means, with respect to any calendar year, the
total cash compensation paid to the Executive by the Corporation during a
calendar year which is currently includible in the Executive's gross income
under the Code, but excluding any expense reimbursements, deferred compensation
payments, lump sum severance payments, stock options, or any distributions from
any long-term incentive plan, or any long-term key- employee compensation
program. "Earnings" also shall include employer contributions made pursuant to a
salary reduction agreement which are not includible in the gross income of the
Executive under Section 125 or 402(a)(8) of the Code.
(g) "Final Average Earnings" means the average of the
Executive's annual Earnings of the five years, selected from the last ten
calendar years in which the Executive has Credited Service, which produces the
highest annual average. If the Executive's actual period of Credited Service is
less than five years, all years will be used.
(h) "Normal Retirement Benefit" means the benefit determined
in accordance with Section 2 of this Agreement.
(i) "Normal Retirement Date" means the first day of the month
next following the Executive's 65th birthday.
(j) "North American Philips Plan" means the North American
Philips Corporation Pension Plan for Salaried Employees as in effect on May 1,
1990.
(k) "Projected Normal Retirement Benefit" means the Normal
Retirement Benefit, but modified so that (i) the years of Credited Service used
to calculate such benefit take into account the years of Credited Service the
Executive would earn assuming the Executive remains employed by the Corporation
until the Executive's Normal Retirement Date and (ii) the Executive's Final
Average Earnings and Average Social Security Taxable Wage Base used to calculate
such benefit are projected to the Executive's Normal Retirement Date, using the
methods and assumptions used from time to time for such purposes under the
Anchor Advanced Products, Inc. Pension Plan for Salaried Employees. [This term
is not defined in Form C]
2. Normal Retirement Benefit. The Normal Retirement Benefit under this
Agreement shall be an amount payable for the life of the Executive equal to
one-twelfth
- 2 -
<PAGE>
(1/12th) of the amount determined under (a) of this Section 2, as reduced by the
amount described in (b) of this Section 2.
(a) The greater of the amount determined under Formula 1 or
Formula 2, below:
FORMULA 1:
----------
Years of X 1.0% X Final Average
Credited Service Earnings
(to a maximum of 43)
PLUS
Years of X 0.6% X Final Average
Credited Service Earnings Above
(to a maximum of 35) the Average
Social Security
Taxable Wage
Base
FORMULA 2:
----------
Years of X 1.1% X Final Average
Credited Service Earnings
(to a maximum of 43)
(b) The Executive's vested accrued benefit under the North
American Philips Plan and any defined benefit plan maintained by the Corporation
as computed (i) without regard to whether distribution of such benefit has
commenced, (ii) at the time benefits become payable to the Executive under this
Agreement, and (iii) in the form of single life annuity payable in annual
installments in accordance with the assumptions and methods used under such
plan.
3. Payment of Retirement Benefits. Except as otherwise provided in this
Agreement, the Normal Retirement Benefit calculated under Section 2, above,
shall be payable to the Executive following the termination of the Executive's
employment for any reason other than Cause only as follows:
(a) Normal or Postponed Retirement. If the Executive's
employment with the Corporation terminates on or after the Executive's Normal
Retirement Date, a monthly
- 3 -
<PAGE>
amount equal to the Normal Retirement Benefit shall be payable to the Executive
commencing as of the first day of the month next following such termination.
(b) Rule of 85 Early Retirement. If the Executive's employment
with the Corporation terminates on or after the Executive's Early Retirement
Date but before the Executive's Normal Retirement Date, and the sum of the
Executive's attained age plus years of Credited Service totals 85 or more on
such date, a monthly amount equal to the Normal Retirement Benefit shall be
payable to the Executive commencing as of the first day of the month next
following such termination.
(c) Other Termination of Employment. If the Executive's
employment with the Corporation terminates under circumstances which do not
satisfy the conditions for payment of benefits described in (a) or (b) of this
Section 3, and the Executive
(i) voluntarily terminates employment on or after the
Executive's completion of 5 years of Credited Service, or
(ii) is terminated by the Corporation for any reason other
than Cause or death,
then benefits shall be payable under this Agreement to the Executive commencing
as of the first day of the month next following the latest of the Executive's
termination date, Early Retirement Date, or the date on which benefit payments
are scheduled to begin to the Executive under any plan described in Section 2(b)
above. Such benefits shall be payable monthly in an amount equal to the Normal
Retirement Benefit as reduced by 0.5% times the number of months from the date
payments are scheduled to begin until the Executive's Normal Retirement Date.
(d) Spousal Survivor Benefit. In lieu of the payment of the
Normal Retirement Benefit payments provided in Section 3(a) to (c) above and in
lieu of the application of Section 4(b) in its entirety, the Executive may elect
to receive, at the times set forth under Sections 3(a) to (c), above, payments
in accordance with this Section 3(d). An election to receive payments in
accordance with this Section 3(d) must be made in writing no later than the
later of (A) the 60th day preceding the Executive's termination of employment,
or (B) the last day of any shorter notice period of termination provided by the
Corporation. Any payments to be made under this Section 3(d) after the last to
survive of the Executive and the Executive's spouse, will be made, if the
Executive is the last survivor, in the manner set forth in Section 4(c) or, if
the spouse is the last survivor, in monthly payments to the estate of the
spouse. The election under this Section 3 is subject to approval by the
Corporation and is to be in such form as prescribed by the Corporation.
- 4 -
<PAGE>
(i) Form. Under the election described above, the monthly
retirement benefit otherwise payable to the Executive during the Executive's
lifetime will be reduced in accordance with the table set forth in Section
3(d)(iv) below and a percentage of such reduced monthly benefit equal to 50%,
66-2/3%, 75% or 100% (as elected by the Executive and approved by the
Corporation) will be paid after the Executive's death to the surviving spouse of
the Executive for such spouse's lifetime. Payment to the surviving spouse will
begin with the first day of the month next following that in which the
Executive's death occurs. All payments under Section 3(d) will be guaranteed for
a 120-month period commencing with the month such payments begin under the terms
of this Agreement in an amount equal to the monthly amount payable to the last
surviving annuitant.
(ii) Death Before Payment. If the Executive, having
elected with the Corporation's approval the survivor form described in Section
3(d)(i), dies on or after the Executive's Early Retirement Date, and after the
Executive's termination of employment, but before retirement payments under this
Agreement had begun, such payments will be made to the surviving spouse as
though the Executive had begun to receive payments under this Agreement on the
day before the Executive's death.
(iii) Spouse; Death of Spouse. For purposes of this
Section 3(d), the spouse of the Executive will be the spouse to whom the
Executive is lawfully wedded on the earlier of the date of the Executive's death
or the date benefit retirement payments under this Agreement to the Executive
begin. In the event of the simultaneous death of the Executive and the
Executive's spouse, the spouse will be deemed to have survived the Executive. If
such spouse dies:
(A) before the date on which payments are to begin
under this Agreement, the retirement benefit payable to the Executive will be
the same as if no election had been made under this Section, or
(B) after benefit payments begin under this
Agreement, the retirement benefit to the Executive shall continue reduced as if
such death had not occurred, and, upon the Executive's death, except for any
remaining payments to be made under the guaranty of 120 monthly payments in
Section 3(d)(i), above, no further benefits will be paid hereunder.
(iv) Table. The amount of reduced benefit payable under
this Section 3(d) will be determined by multiplying the monthly retirement
benefit payable to the Executive, as though this Section were not applicable, by
the appropriate factor from the following table:
<TABLE>
<S> <C> <C> <C> <C>
Percentage to be continued
to surviving spouse................ 50% 66-2/3% 75% 100%
1. Factor before reflecting
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<PAGE>
adjustment, if any, for
difference in ages............. .9500 .9200 .9000 .8600
2. Adjustment (reduction)
for each full year in excess
of five years that the
surviving spouse is younger
than the Executive............. .0050 .0067 .0075 .0100
3. Adjustment (increase) for
each full year in excess
of five year that the surviving
spouse is older than
the Executive ................. .0050 .0067 .0075 .0100
</TABLE>
[Form B (d) Spousal Survivor Benefit. In lieu of the payment of the Normal
Retirement Benefit payments provided in Section 3(a) to (c) above and in lieu of
the application of Section 4(b) in its entirety, the Executive may elect to
receive, at the times set forth under Sections 3 (a) to (c), above, payments in
accordance with this Section 3(d). An election to receive payments in accordance
with this Section 3(d) must be made in writing no later than the later of (A)
the 60th day preceding the Executive's termination of employment, or (B) the
last day of any shorter notice period of termination provided by the
Corporation. Such election is subject to approval by the Corporation and is to
be in such form as prescribed by the Corporation.
(i) Form. Under the election described above, the monthly
retirement benefit otherwise payable to the Executive during the Executive's
lifetime will be reduced in accordance with the table set forth in Section 3(d)
(iv) below and a percentage of such reduced monthly benefit equal to 50%,
66-2/3%, 75% or 100% (as elected by the Executive and approved by the
Corporation) will be paid after the Executive's death to the surviving spouse of
the Executive for such spouse's lifetime. Payment to the surviving spouse will
begin with the first day of the month next following that in which the
Executive's death occurs.
(ii) Death Before Payment. If the Executive, having
elected with the Corporation's approval the survivor form described in Section
3(d)(i), dies on or after the Executive's Early Retirement Date, and after the
Executive's termination of employment, but before retirement payments under this
Agreement had begun, such payments will be made to the surviving spouse as
though the Executive had begun to receive payments under this Agreement on the
day before the Executive's death.
(iii) Spouse; Death of Spouse. For purposes of this
Section 3(d), the spouse of the Executive will be the spouse to whom the
Executive is lawfully wedded on the
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<PAGE>
earlier of the date of the Executive's death or the date benefit retirement
payments under this Agreement to the Executive begin. If such spouse dies:
(A) before the date on which payments are to begin
under this Agreement, the retirement benefit payable to the Executive will be
the same as if no election had been made under this Section, or
(B) after benefit payments begin under this
Agreement, the retirement benefit to the Executive shall continue reduced as if
such death had not occurred, and, upon the Executive's death, no further
benefits will be paid hereunder.
(iv) Table. The amount of reduced benefit payable under
this Section 3(d) will be determined by multiplying the monthly retirement
benefit payable to the Executive, as though this Section were not applicable, by
the appropriate factor from the following table:
<TABLE>
<S> <C> <C> <C> <C>
Percentage to be continued
to surviving spouse................ 50% 66-2/3% 75% 100%
1. Factor before reflecting
adjustment, if any, for
difference in ages .9500 .9200 .9000 .8600
2. Adjustment (reduction) for
each full year in excess
of five years that the
surviving spouse is younger
than the Executive............... .0050 .0067 .0075 .0100
3. Adjustment (increase) for
each full year in excess
of five year that the
surviving spouse is older
than the Executive............... .0050 .0067 .0075 .0100]
</TABLE>
[Form C (d) Spousal Survivor Benefit. In lieu of the payment of the Normal
Retirement Benefit payments provided in Section 3(a) to (c) above and in lieu of
the application of Section 4(b) in its entirety, the Executive may elect to
receive, at the times set forth under Sections 3(a) to (c), above, payments in
accordance with this Section 3(d). An election to receive payments in accordance
with this Section 3(d) must be made in writing no later than the later of (A)
the 60th day preceding the Executive's termination of employment, or (B) the
last day of any shorter notice period of termination provided by the
Corporation. Such election is
- 7 -
<PAGE>
subject to approval by the Corporation and is to be in such form as prescribed
by the Corporation.
(i) Form. Under the election described above, the monthly
retirement benefit otherwise payable to the Executive during the Executive's
lifetime will be reduced in accordance with the table set forth in Section 3(d)
(iv) below and a percentage of such reduced monthly benefit equal to 50%,
66-2/3%, 75% or 100% (as elected by the Executive and approved by the
Corporation) will be paid after the Executive's death to the surviving spouse of
the Executive for such spouse's lifetime. Payment to the surviving spouse will
begin with the first day of the month next following that in which the
Executive's death occurs.
(ii) Death Before Payment. If the Executive, having
elected with the Corporation's approval the survivor form described in Section
3(d)(i), dies on or after the Executive's Early Retirement Date, and after the
Executive's termination of employment, but before retirement payments under this
Agreement had begun, such payments will be made to the surviving spouse as
though the Executive had begun to receive payments under this Agreement on the
day before the Executive's death.
(iii) Spouse; Death of Spouse. For purposes of this
Section 3(d), the spouse of the Executive will be the spouse to whom the
Executive is lawfully wedded on the earlier of the date of the Executive's death
or the date benefit retirement payments under this Agreement to the Executive
begin. If such spouse dies:
(A) before the date on which payments are to begin
under this Agreement, the retirement benefit payable to the Executive will be
the sameas if no election had been made under this Section, or
(B) after benefit payments begin under this
Agreement, the retirement benefit to the Executive shall continue reduced as if
such death had not occurred, and, upon the Executive's death, no further
benefits will be paid hereunder.
(iv) Table. The amount of reduced benefit payable under
this Section 3(d) will be determined by multiplying the monthly retirement
benefit payable to the Executive, as though this Section were not applicable, by
the appropriate factor from the following table:
<TABLE>
<S> <C> <C> <C> <C>
Percentage to be continued
to surviving spouse........................... 50% 66-2/3% 75% 100%
1. Factor before reflecting
adjustment, if any, for
difference in ages........................ .9500 .9200 .9000 .8600
- 8 -
<PAGE>
<S> <C> <C> <C> <C>
2. Adjustment (reduction)
for each full year in excess
of five years that the
surviving spouse is younger
than the Executive........................ .0050 .0067 .0075 .0100
3. Adjustment (increase) for
each full year in excess
of five year that the surviving
spouse is older than
the Executive ............................ .0050 .0067 .0075 .0100]
</TABLE>
[Form D (d) Spousal Survivor Benefit. In lieu of the payment of the Normal
Retirement Benefit payments provided in Section 3(a) to (c) above and in lieu of
the application of Section 4(b) in its entirety, the Executive may elect to
receive, at the times set forth under Sections 3(a) to (c), above, payments in
accordance with this Section 3(d). An election to receive payments in accordance
with this Section 3(d) must be made in writing no later than the later of (A)
the 60th day preceding the Executive's termination of employment, or (B) the
last day of any shorter notice period of termination provided by the
Corporation. Such election is subject to approval by the Corporation and is to
be in such form as prescribed by the Corporation.
(i) Form. Under the election described above, the monthly
retirement benefit otherwise payable to the Executive during the Executive's
lifetime will be reduced in accordance with the table set forth in Section
3(d)(iv) below and a percentage of such reduced monthly benefit equal to 50%,
66-2/3%, 75% or 100% (as elected by the Executive and approved by the
Corporation) will be paid after the Executive's death to the surviving spouse of
the Executive for such spouse's lifetime. Payment to the surviving spouse will
begin with the first day of the month next following that in which the
Executive's death occurs.
(ii) Death Before Payment. If the Executive, having
elected with the Corporation's approval the survivor form described in Section
3(d)(i), dies on or after the Executive's Early Retirement Date, and after the
Executive's termination of employment, but before retirement payments under this
Agreement had begun, such payments will be made to the surviving spouse as
though the Executive had begun to receive payments under this Agreement on the
day before the Executive's death.
(iii) Spouse; Death of Spouse. For purposes of this
Section 3(d), the spouse of the Executive will be the spouse to whom the
Executive is lawfully wedded on the earlier of the date of the Executive's death
or the date benefit retirement payments under this Agreement to the Executive
begin. If such spouse dies:
- 9 -
<PAGE>
(A) before the date on which payments are to begin
under this Agreement, the retirement benefit payable to the Executive will be
the same as if no election had been made under this Section, or
(B) after benefit payments begin under this
Agreement, the retirement benefit to the Executive shall continue reduced as if
such death had not occurred, and, upon the Executive's death, no further
benefits will be paid hereunder.
(iv) Table. The amount of reduced benefit payable under
this Section 3(d) will be determined by multiplying the monthly retirement
benefit payable to the Executive, as though this Section were not applicable, by
the appropriate factor from the following table:
<TABLE>
<S> <C> <C> <C> <C>
Percentage to be continued
to surviving spouse........................... 50% 66-2/3% 75% 100%
1. Factor before reflecting
adjustment, if any, for
difference in ages....................... .9500 .9200 .9000 .8600
2. Adjustment (reduction)
for each full year in excess
of five years that the
surviving spouse is younger
than the Executive....................... .0050 .0067 .0075 .0100
3. Adjustment (increase) for
each full year in excess
of five year that the surviving
spouse is older than
the Executive ........................... .0050 .0067 .0075 .0100]
</TABLE>
[Form E (d) Spousal Survivor Benefit. In lieu of the payment of the Normal
Retirement Benefit payments provided in Section 3(a) to (c) above and in lieu of
the application of Section 4(b) in its entirety, the Executive may elect to
receive, at the times set forth under Sections 3(a) to (c), above, payments in
accordance with this Section 3(d). An election to receive payments in accordance
with this Section 3(d) must be made in writing no later than the later of (A)
the 60th day preceding the Executive's termination of employment, or (B) the
last day of any shorter notice period of termination provided by the
Corporation. Such election is subject to approval by the Corporation and is to
be in such form as prescribed by the Corporation.
- 10 -
<PAGE>
(i) Form. Under the election described above, the monthly
retirement benefit otherwise payable to the Executive during the Executive's
lifetime will be reduced in accordance with the table set forth in Section
3(d)(iv) below and a percentage of such reduced monthly benefit equal to 50%,
66-2/3%, 75% or 100% (as elected by the Executive and approved by the
Corporation) will be paid after the Executive's death to the surviving spouse of
the Executive for such spouse's lifetime. Payment to the surviving spouse will
begin with the first day of the month next following that in which the
Executive's death occurs.
(ii) Death Before Payment. If the Executive, having
elected with the Corporation's approval the survivor form described in Section
3(d)(i), dies on or after the Executive's Early Retirement Date, and after the
Executive's termination of employment, but before retirement payments under this
Agreement had begun, such payments will be made to the surviving spouse as
though the Executive had begun to receive payments under this Agreement on the
day before the Executive's death.
(iii) Spouse; Death of Spouse. For purposes of this
Section 3(d), the spouse of the Executive will be the spouse to whom the
Executive is lawfully wedded on the earlier of the date of the Executive's death
or the date benefit retirement payments under this Agreement to the Executive
begin. If such spouse dies:
(A) before the date on which payments are to begin
under this Agreement, the retirement benefit payable to the Executive will be
the same as if no election had been made under this Section, or
(B) after benefit payments begin under this
Agreement, the retirement benefit to the Executive shall continue reduced as if
such death had not occurred, and, upon the Executive's death, no further
benefits will be paid hereunder.
(iv) Table. The amount of reduced benefit payable under
this Section 3(d) will be determined by multiplying the monthly retirement
benefit payable to the Executive, as though this Section were not applicable, by
the appropriate factor from the following table:
<TABLE>
<S> <C> <C> <C> <C>
Percentage to be continued
to surviving spouse........................... 50% 66-2/3% 75% 100%
1. Factor before reflecting
adjustment, if any, for
difference in ages........................ .9500 .9200 .9000 .8600
2. Adjustment (reduction)
for each full year in excess
of five years that the
- 11 -
<PAGE>
<S> <C> <C> <C> <C>
Percentage to be continued
surviving spouse is younger
than the Executive........................ .0050 .0067 .0075 .0100
3. Adjustment (increase) for
each full year in excess
of five year that the surviving
spouse is older than
the Executive ............................ .0050 .0067 .0075 .0100]
</TABLE>
4. Death Benefits.
(a) Death Prior to Termination of Employment. If the Executive
dies while employed by the Corporation, a monthly amount equal to the Projected
Normal Retirement Benefit shall be payable to the Executive's designated
beneficiary for a period of 90 months commencing as of the first day of the
first month next following the Executive's death.
(b) Death After Termination of Employment. In the event the
Executive who has attained Early Retirement Date dies after terminating
employment, a monthly amount equal to the Executive's Normal Retirement Benefit
shall be payable to the Executive's designated beneficiary as follows:
(i) if the Executive's death occurs before payment has
begun, payment shall be made for the 120-month period commencing as of the first
day of the first month next following the E executive's death;
(ii) if the Executive's death occurs after payment has
begun but before the end of the 120-month period commencing on the date on which
payment first began, payment shall be made for the remainder of such 120-month
period; or
(iii) if the Executive's death occurs after payment has
begun but after the end of the 120-month period commencing on the date on which
payment first began, the Company shall not be obligated to make any further
payments.
(c) Payment to Designated Beneficiary. In the event that the
Executive does not designate a beneficiary, or if the Executive's designated
beneficiary does not survive the Executive, then the benefits payable under
paragraph (a) or (b) above shall be paid to the Executive's estate in a single
lump sum payment (as determined by using the actuarial methods and assumptions
then in effect under the Anchor Advanced Products, Inc. Pension Plan for
Salaried Employees). In the event that the Executive's designated beneficiary
dies after payment has begun but before the end of the payment period set forth
in paragraph (a) or (b) above, as applicable, then any remaining benefits
payable under this Section 4 shall be payable to such beneficiary's estate.
- 12 -
<PAGE>
(d) Death Prior to Early Retirement Date. In the event the
Executive dies after terminating employment but prior to the Executive's Early
Retirement Date, no payments shall be due under this Agreement and the Company
shall not be obligated to make any payments under this Agreement.
5. Benefits Payable Upon Certain Corporate Events. Notwithstanding any
other provision of this Agreement to the contrary, the Executive shall be
entitled to benefits under this Section 5 if the conditions described in (a) and
(b) below occur:
(a) the merger, reorganization or consolidation of the
Corporation with or into any other corporation or entity; or the Corporation
sells substantially all of its business or assets to any other corporation or
entity; or the exchange of all or substantially all of the assets of the
Corporation for the securities of any other corporation or entity; or the
acquisition by any other corporation or entity of 50% or more of the
Corporation's then outstanding shares of voting stock; and
(b) the successor corporation or other entity described in
(a), above, does not expressly assume in writing the obligations and liabilities
under this Agreement.
In such event, the Executive shall receive an immediate single lump sum payment
in an amount equal to the actuarial equivalent of the Executive's Normal
Retirement Benefit as determined by using the actuarial methods and assumptions
then in effect under the Anchor Advanced Products, Inc. Pension Plan for
Salaried Employees.
6. Withholding Taxes. The Corporation may withhold from any amounts
payable to the Executive under this Agreement all applicable federal, state,
city or other taxes.
7. Miscellaneous Provisions.
(a) Affiliates. For purposes of this Agreement, the term
"Corporation" shall be deemed to include any corporation which is a member of
the same controlled group within the meaning of Section 414(b) of the Code or is
under common control within the meaning of Section 414(c) of such Code with the
Corporation and any other business for which the Executive performs services at
the request of the Corporation.
(b) Right to Terminate Employment. Nothing contained in this
Agreement shall restrict any right which the Corporation may have to terminate
the employment of the Executive at any time, with or without cause.
(c) No Claim Against Assets. Nothing in this Agreement shall
be construed as giving the Executive any claim against any specific assets of
the Corporation or as imposing any trustee relationship upon the Corporation in
respect of the Executive. The Corporation shall not be required to segregate any
of its assets in order to provide for the satisfaction of its
- 13 -
<PAGE>
obligations hereunder, and the Executive's rights under this Agreement shall be
limited to those of an unsecured general creditor of the Corporation.
(d) Mental or Physical Incompetency. If the Executive or any
person entitled to benefits under this Agreement is incompetent by reason of
physical or mental disability, as established by a court of competent
jurisdiction, the Corporation shall cause all payments thereafter becoming due
to such person to be made to such person's legal guardian or representative for
such person's benefit, without responsibility to follow the application of
amounts so paid. Payments made pursuant to this paragraph (d) shall completely
discharge the Corporation.
(e) Notice. All notices, requests, demands and other
communications required or permitted to be given by either party to the other
party by this Agreement shall be in writing and shall be deemed to have been
duly given when delivered personally or received by certified or registered
mail, return receipt requested, postage prepaid, at the address of the other
party, as follows:
To the Corporation:
-------------------
Anchor Advanced Products, Inc.
1111 Northshore Drive, Suite 600
Knoxville, Tennessee 37919-5300
Attention:
To the Executive:
-----------------
At the address indicated under the Executive's signature.
The parties may change the addresses listed above by providing
notice to the other party in accordance with the requirements of this paragraph
(e).
(f) Entire Agreement; Amendment. This Restated and Amended
Supplemental Executive Retirement Benefits Agreement contains the entire
agreements, understandings, warranties and representations by and between the
parties hereto with respect to the benefits described hereunder and supersedes
any and all existing agreements between the Executive and the Corporation
relating to the benefits described hereunder. This Agreement may not be amended,
modified or terminated except by a written agreement signed by both parties.
(g) Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver thereof or deprive
- 14 -
<PAGE>
that party of the right thereafter to insist upon strict adherence to that term
or any other term of this Agreement.
(h) Assignment. Except as otherwise provided in this
Agreement, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, representatives, successors and
assigns. This Agreement shall not be assignable by the Executive, and shall be
assignable by the Corporation only to any financially solvent entity resulting
from the reorganization, merger or consolidation of the Corporation with any
other entity or any entity to or with which the Corporation's business or
substantially all of its business or assets may be sold, exchanged or
transferred. Any assignment made in violation of this paragraph shall be null
and void.
(i) Applicable Law. This Agreement shall at all times be
governed by and construed, interpreted and enforced in accordance with the laws
of the State of Delaware (but without regard to Delaware laws with respect to
choice of laws).
(j) Severability. If any term or provision of this Agreement
or the application hereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby, and each term
and provision of this Agreement shall be valid and enforceable to the fullest
extent permitted by law.
(k) Headings. Section headings are used herein for convenience
of reference only and shall not affect the meaning of any provision of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year set forth below.
ANCHOR ADVANCED PRODUCTS, INC.
By:
-------------------------------
Title:
----------------------------
EXECUTIVE
Printed Name:
---------------------
- 15 -
<PAGE>
Signature:
------------------------
Date:
-----------------------------
Address:
--------------------------
--------------------------
--------------------------
- 16 -
<PAGE>
[Anchor Advanced Products, Inc. Letterhead]
May 7, 1996
Re: Supplemental Executive Retirement Benefits Agreement
Restated and Amended November 25, 1994
----------------------------------------------------
Dear :
With reference to the Supplemental Executive Retirement Benefits
Agreement Restated and Amended November 25, 1994 (the "Agreement") between you
and Anchor Advanced Products, Inc. (the "Corporation"), a copy of which is
attached to this letter, in consideration of the continued performance of your
valuable service to the Corporation and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
Corporation proposes to modify the Agreement as stated in this letter.
For purposes of determining "Credited Service," "attained age" or any
other matter under the Agreement (other than for Sections 1(a) and 2(b) and for
determinations respecting the table in Section 3(d)(iv)), the date of the
cessation of your employment with the Corporation for any reason other than for
Cause will be the later of (1) December 31, 1998,** or (2) the actual date on
which your employment with the Corporation ceases.
The terms used in this letter, signified by capital letters or
quotation marks, shall have the same meanings as given to such terms in the
Agreement. Except as modified by this letter, all of the terms and conditions
of the Agreement shall remain in full force and effect and the Agreement, as so
modified, may be further amended only by a writing between the parties making
specific reference to the Agreement.
If you agree to the above modification of the Agreement, please so
indicate by signing the enclosed copy of this letter in the space provided and
returning the copy to the undersigned.
- ------------------
**December 31, 1998 for Messrs. Olmstead and Parkey;
December 31, 1997 for Messrs. Viglione and Kyker and Ms. Best
<PAGE>
Mr. Scott Schoen*** at the Thomas H. Lee Company, whereupon the Agreement shall
become modified as set forth in this letter.
Very truly yours,
ANCHOR ADVANCED PRODUCTS, INC.
By: ****
-----------------------------------
Scott A. Schoen,
Director, on behalf of its Board of
Directors
By:
---------------------------------------
Francis H. Olmstead, Jr.
Chairman, President and CEO
Modification of Agreement
as set forth in this letter
is agreed to:
By:( )
-------------------------------
Date:
-------------------------------
/cb
Enclosure
- --------------------
*** To be returned to Mr. Olmstead at the Corporation by all recipients except
Mr. Olmstead.
****To be signed by Mr. Schoen only for the letter to be received by Mr.
Olmstead. All others to be signed by Mr. Olmstead only.
[LOGO] Anchor Advanced Products, Inc.
May 7, 1996
Mr. Francis H. Olmstead, Jr.
7328 Misty Meadow Place
Knoxville, TN 37919
Re: Exit Bonus
Dear Fran:
As you know, Anchor Advanced Products, Inc. (the "Company") may soon be
sold through a sale of substantially all of its assets or a sale of the capital
stock of its parent corporation, Anchor Holdings, Inc. ("AHI"). In either event,
in consideration of your diligent efforts in aid of such sale and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, upon the event of such sale, if it occurs on or before July 1,
1997, the corporation will pay to you an exit bonus (the "Bonus") calculated in
accordance with the following formula:
x = (y/12.5 x $265,000) + $125,000
x = Bonus payable
y = amount by which the net cash selling price per share before calculation
of the Bonus exceeds $35.
In no event shall the bonus exceed $390,000.
The selling price per share shall be determined by the Board of Directors of
AHI, shall be the same for all shareholders of the common stock of AHI, and
shall be determined by the Board regardless of whether such sale is of the
capital stock of AHI or the assets of the Company.
This Exit Bonus is in addition to all other compensation and benefits
payable to you by the Company or AHI.
Very truly yours,
ANCHOR ADVANCED PRODUCTS, INC.
By:
-------------------------------------
Scott A. Schoen,
Director, on behalf of its Board of
Directors
By:
Francis H. Olmstead, Jr.
Chairman, President and CEO
1111 Northshore Drive, Suite N-600 Knoxville, Tennessee 37919-4048 (615) 450-
5300
MANAGEMENT AGREEMENT
WITH
THOMAS H. LEE COMPANY
AGREEMENT entered into as of the 30th day of April, 1990, by and among the
Thomas H. Lee Company, a Massachusetts sole proprietorship with a principal
place of business at 75 State Street, Boston, Massachusetts 02109 (the
"Consultant"), Anchor Acquisition Corp., a Delaware corporation (the "Parent"),
and the Parent's subsidiaries, Anchor Brush Company, a Delaware corporation, and
Anchor Cosmetics Company, a Delaware corporation (collectively, the "Acquisition
Subsidiaries"). (The Parent and the Acquisition Subsidiaries are sometimes
referred to hereinafter collectively as the "Companies").
WHEREAS, the Consultant has staff specially skilled in corporate finance,
strategic corporate planning, and other management skills and services; and
WHEREAS, the Parent has been formed for the purpose of acquiring (the
"Acquisition") through the Acquisition Subsidiaries all of the assets and
certain liabilities and obligations of Anchor Advanced Products, a division of
North American Philips Corporation, a Delaware corporation ("NAPC"), pursuant to
that certain Asset Purchase and Sale Agreement, dated as of March 21, 1990, by
and between the Parent and NAPC (the "Purchase Agreement");
WHEREAS, the Parent and certain investors have entered into stock
subscription agreements, dated as of the date hereof, pursuant to which such
investors shall purchase shares of the common stock of the Parent; and
WHEREAS, the Acquisition Subsidiaries have entered into subordinated note
purchase and credit agreements with various senior and subordinated lenders in
order to obtain funds necessary for certain payments which are required to be
made by the Acquisition Subsidiaries in connection with the Acquisition; and ,
WHEREAS, prior to the date hereof, the Consultant has provided substantial
consulting services to the Companies concerning the planning, structuring and
negotiating of the stock subscription agreements, the subordinated note purchase
and credit agreements, the Purchase Agreement and other related documents and
agreements; and
<PAGE>
WHEREAS, upon consummation of the closing of the Acquisition, the Companies
will continue to require the Consultant's special skills and management advisory
services in connection with their general business operations; and
WHEREAS, the Consultant is willing to provide such skills and services to
the Companies.
NOW THEREFORE, in consideration of the mutual promises, the parties hereto,
intending to be legally bound, do hereby agree as follows:
1. Engagement. The Companies hereby engage the Consultant for the Term (as
hereinafter defined) and upon the terms and conditions herein set forth to
provide consulting and management advisory services to the Companies. These
services will be in the field of financial and strategic corporate planning and
such other management areas as the Consultant and the Companies shall mutually
agree. In consideration of the remuneration herein specified, the Consultant
accepts such engagement and agrees to perform the services specified herein.
2. Term. The engagement hereunder shall be for a term commencing on the
date hereof and expiring on the fifth anniversary hereof (the "Term"). Upon
expiration of the Term, this Agreement shall automatically extend for additional
successive periods of one (1) year, unless the Consultant or the Companies shall
give notice to the other at least ninety (90) days prior to the end of the Term
(or any annual extension thereof) indicating that it does not intend to renew
the Agreement. Upon final expiration of the Term (or any annual extension
thereof) all obligations as between the parties shall be without recourse to one
another under this Agreement.
3. Services to be Performed. The Consultant shall devote, substantial time
and efforts to the performance of the consulting and management advisory
services contemplated by this Agreement. However, no precise number of hours is
to be devoted by the Consultant on a weekly or monthly basis. The Consultant may
perform services under this Agreement directly, through its employees or agents,
or with such outside consultants as the Consultant may engage for such purpose.
4. Confidentiality. The Consultant shall maintain secrecy with respect to
all non-public information of the Companies which may come into its possession
as a result of performance of services under this Agreement, and shall be
responsible for its employees, agents and outside consultants engaged hereunder
doing the same.
-2-
<PAGE>
5. Compensation: Expense Reimbursement.
5.1(a) In consideration of the consulting services provided by the
Consultant to the Companies prior to the date hereof in connection with
structuring, negotiating and arranging the financing necessary to fund the
Acquisition pursuant to the Purchase Agreement, the Companies shall pay to the
Consultant a fee of $420,000 which shall be paid in full on the Closing Date (as
defined in the Purchase Agreement).
(b) In consideration of the management advisory services hereunder, the
Consultant's compensation shall be an annual fee of $180,000, which shall be
paid to the Consultant by the Companies in equal monthly installments, to be
paid monthly in advance on the first day of each month, with the first of such
payments to be paid on the Closing Date.
5.2 The Companies shall reimburse the Consultant for all expenses incurred
in connection with management advisory services to be provided by the Consultant
hereunder, as well as for all travel, lodging and similar out-of-pocket costs
reasonably incurred by it in connection with or on account of its performance of
services for the Companies hereunder. Reimbursement shall be made only upon
presentation to the Companies by the Consultant of reasonably itemized
documentation therefor.
6. Notice. All notices hereunder, to be effective, shall be in writing and
shall be mailed by certified mail, postage prepaid as follows:
(i) If to the Consultant:
Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attention: Scott A. Schoen
(ii) If to the Companies:
Anchor Acquisition Corp.
Thomas H. Lee Company
75 State Street
Boston, MA 02109
Attention: Scott A. Schoen,
Vice President
7. Modifications. This Agreement constitutes the entire agreement between
the parties hereto with regard to the
-3-
<PAGE>
subject matter hereof, superseding all prior understandings and agreements
whether written or oral. This Agreement may not be amended or revised except by
a writing signed by the parties.
8. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective successors and assigns, but
may not be assigned by either party without the prior written consent of the
other.
9. Captions. Captions have been inserted solely for the convenience of
reference and in no way define, limit or describe the scope or substance of any
provisions of this Agreement.
10. Severability. The provisions of this Agreement are severable, and the
invalidity of any provision shall not affect the validity of any other
provision.
11. Governing Law. This Agreement shall be construed under and governed by
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as a
sealed instrument as of the date first above written.
ANCHOR ACQUISITION CORP. THOMAS H. LEE COMPANY
By:/s/Scott A. Schoen By:/s/Scott A. Schoen
-------------------------- -------------------------
(signature) (signature)
Scott A. Schoen Scott A. Schoen
-------------------------- -------------------------
(print name) (print name)
Vice President Vice President
-------------------------- -------------------------
(print title) (print title)
ANCHOR BRUSH COMPANY ANCHOR COSMETICS COMPANY
By:/s/Scott A. Schoen By:/s/Scott A. Schoen
-------------------------- -------------------------
(signature) (signature)
Scott A. Schoen Scott A. Schoen
-------------------------- -------------------------
(print name) (print name)
Vice President Vice President
-------------------------- -------------------------
(print title) (print title)
-4-
EXHIBIT 10.6
AGREEMENT
This Agreement is entered into this 5th day of December, 1995, by and
between Mid-State Plastics, Inc., a North Carolina corporation having its
principal place of business at Highway 220 North, Seagrove, North Carolina 27341
("MSP") and Abbott Laboratories, an Illinois corporation having its principal
place of business at One Abbott Park Road, Abbott Park, Illinois 60064-3500
("Abbott").
MSP has the know-how and manufacturing experience required to
manufacture injection molded plastic products for Abbott. The parties have
agreed that MSP will establish a manufacturing facility in Round Rock, Texas to
produce injection molded plastic parts for Abbott and Abbott will purchase the
manufacturing capacity of the facility to meet a portion of Abbott's plastic
product requirements.
In consideration of the premises and the mutual covenants and
agreements herein contained, the parties, intended to be legally bound, agree as
follows:
1. Injection Molding Facility
1.1 Upon the execution of this Agreement, MSP agrees to
construct a "Class 100,000" clean molding facility (as defined in Exhibit A,
attached hereto) to produce for Abbott injection modes plastic parts for medical
use. MSP shall be responsible for the design, construction, financing (including
insurance), staffing and operation of the plant. Unless otherwise agreed to by
Abbott in writing, the plant shall be used exclusively for the manufacture of
injection molded plastic parts for Abbott.
1.2 MSP shall lease for the term of this Agreement real
property and buildings in Round Rock, Texas and shall install such tenant
improvements, including machinery,
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
<PAGE>
equipment and other physical improvements, including machinery, equipment and
other physical assets, as are necessary to fulfill MSP's obligations under
Paragraph 1.1 above. Such real property, buildings, machinery, equipment and
other physical assets, as are necessary to fulfill MSP's obligations under
Paragraph 1.1 above. Such real property, buildings, machinery, equipment and
other assets are hereinafter referred to as the "premises," MSP's lease for the
real property and buildings shall include an option for MSP to purchase the real
estate and buildings at the expiration or termination of this Agreement. Said
lease and option, attached hereto as Exhibit B, shall be reviewed and approved
by Abbott prior to the execution of this Agreement.[*]
MSP shall be responsible for maintenance and repair of the molds. If
any mold is damaged or destroyed as a result of MSP's misuse or negligence, MSP
shall repair or replace such mold at its [*].
1.6 Prior to plant start-up, the plant shall be inspected by the Abbott
Hospital Products Division Quality Assurance Department ("HPDQA"). In addition,
new molding machines shall be inspected and approved by HPDQA prior to the
manufacture by such machines of product for delivery to Abbott. A new molding
machine shall not be deemed to be installed until it receives approval from
HPDQA.
2. Term of Agreement
This Agreement shall be effective as of the date first above
written, and the term of the Agreement shall be a period of ten (10) years
beginning on the first day of the month after the conclusion of the start-up
period. The start-up period shall be that period commencing on the date of
shipment of first product to Abbott by MSP and concluding on the earlier of the
ninetieth day after such commencement of installation of the sixth molding
machine at the MSP plant.
<PAGE>
Abbott may, at its option, renew this Agreement for additional one (1) year
terms by providing MSP with written notice ninety (90) days prior to the
commencement of such additional one (1) year terms.
3. Abbott Purchase Orders
All product manufactured for Abbott under this Agreement shall
be purchased by Abbott pursuant to Abbott's standard purchase order form, the
terms and conditions contained therein, and the provisions of this Agreement. If
the terms and conditions of the Abbott purchase order conflict with the
provisions of this Agreement, the provisions of this Agreement shall control.
4. Products and Prices
[*]
During the term of this Agreement, prices and manufacturing
standards shall be renegotiated annually on a calendar year basis (January 1
through December 31). Prices shall be negotiated by the parties in good faith
and in accordance with the provision of Paragraph 10 below.
4.3 Abbott shall provide to MSP written specifications for
each product. Product specifications may be changed only in writing by an
authorized representative of Abbott.
4.4 Product delivered hereunder shall conform with the product
specifications and shall be manufactured in accordance with current regulations
regarding Good Manufacturing Practices promulgated by the U.S. Food and Drug
Administration (the "FDA").
4.5 Additional products may be added to the Agreement by
mutual agreement by the parties at prices to be negotiated by the parties in
good faith.
<PAGE>
4.6 MSP shall be responsible for purchasing raw materials
necessary to manufacture products hereunder; provided, however, if Abbott can
purchase raw materials at a lower price than MSP, Abbott shall purchase any such
raw materials for delivery to the MSP plant and appropriate price adjustments
shall be made to the MSP plant and appropriate price adjustments shall be made
to recognize raw materials purchased by Abbott. In either event, MSP shall be
responsible for the quality of raw materials.
[*]
4.7 Nothing contained in this Agreement shall preclude or
restrict Abbott from manufacturing injunction molded plastic products at Abbott
facilities or from purchasing such products from other suppliers.
4.8 The parties shall cooperate to develop process
improvements. The cost savings of any such process improvements, whether
developed by MSP or Abbott, shall be fully passed on to Abbott as lower product
prices [*] unless otherwise agreed to by the parties.
5. Product Transfer
MSP shall transfer inventory to Abbott F.O.B. MSP's plant as
soon as practical after manufacture and shall issue an invoice to Abbott upon
such transfer. Risk of loss shall pass to Abbott upon delivery to Abbott at the
MSP plant. Abbott shall pay such invoices net cash thirty (30) days after the
invoice date.
6. Defective Products
If Abbott receives defective products, it may deduct the price
of such, defective products from any payments due MSP. If Abbott does not elect
to make such deductions, it shall
<PAGE>
so notify MSP, and MSP shall, within thirty (30) days after such notice, remit
the price of the defective products to Abbott.
7. Product Scheduling
Before the commencement of each month during the term of this
Agreement, Abbott shall provide MSP with a monthly production schedule (which
Abbott reserves the right to adjust form time to time during the month)
outlining the number of machine press hours to be used by MSP in manufacturing
product for Abbott up to the limits set forth in Paragraph 8 below and the types
of products to be manufactured during those hours. MSP shall manufacture product
for Abbott according to the monthly production schedules, which shall be
adjusted to reflect the number of injection molding machines installed by MSP
and the number of molds provided by Abbott.
8. Machine Availability
For each month during the term of this Agreement after the
start-up period, Abbott shall, pursuant to Paragraph 9.1 below, guarantee
machine press hours to MSP; such hours to be determined in the following manner:
Guaranteed Press Hours = (work days available in month x 24 hours/day) x number
of molding machines installed and operating x 80%.
9. Capacity Utilization
9.1 In the event of a capacity shortfall in which MSP realizes
Earned Production Hours (as defined below) less than Guaranteed Press Hours and
provided that the capacity shortfall was a direct result of 1) Abbott's
inability to provide sufficient unit volume (e.g., product orders), [*]
<PAGE>
The term "Earned Production Hours" shall mean actual units of
product produced times standard machine hours per unit.
The term "Overhead Rate" shall mean the machine hour rate (as
determined in accordance with the provisions of paragraph 10 below) less
manufacturing variable cost (as determined in accordance with MSP's standard
cost accounting procedures).
9.2 In the event of excess capacity utilization in which MSP
realizes Earned Production Hours greater than Guaranteed Press hours, MSP shall
pay to Abbott an amount [*]
9.3 Amounts payable to Abbott shall at Abbott's option be credited
against invoices payable by Abbott to MSP or paid in cash to Abbott within
thirty (30) days after the month such amounts accrue. Amounts payable to MSP
shall be invoiced to Abbott and paid by Abbott net cash thirty (30) days after
the invoice date. The monthly calculations necessary to determine capacity
utilization shall be documented by the parties and retained for at least two
(2) years after the period to which such documentation applies.
10. Sole Payment for Product
With the exception of payments provided for in Paragraph 9
above, the sole payment due MSP from Abbott under this Agreement shall be an
amount per unit of product transferred to Abbott inventory as calculated using
the price list [*] and adjusted annually thereafter starting January 1, 1991,
and each succeeding January 1 during the term of this Agreement. [*]
Machine hour rates shall be reviewed prior to December 31,
1990 and annually thereafter. Any adjustment to machine hour rates shall be by
mutual agreement and shall be implemented at the commencement of a calendar
year. Each party shall conduct negotiations on adjustments in good faith, taking
into consideration the economic impact on the other party. In
<PAGE>
the event that an adjustment cannot be mutually agreed upon prior to December
31, 1990 or the end of any succeeding calendar year, the machine hour rates in
effect during the period immediately preceding shall continue until the rates
are determined pursuant to Paragraph 20 below. Machine hour rates shall be
retroactive for the annual periods to which they apply.
11. Audit
MSP shall keep and maintain books and accounting records
necessary to determine capacity utilization, overhead rates and machine hour
rates and to negotiate and verify prices charged to Abbott. Such books and
accounting records shall be kept in accordance with generally accepted
accounting principles consistently applied. Upon notice to MSP, such books and
records shall be open to inspection and audit by Abbott within a period of two
(2) years after the period to which such records relate. Such audit may, at
Abbott's option, be performed by Abbott accountants or by independent certified
public accountants retained by Abbott. The accountants shall have the right to
examine the books and records kept pursuant to this Agreement and report the
findings of any such examination to Abbott. A copy of any auditing report
provided to Abbott shall be provided concurrently to MSP.
12. Termination may terminate this Agreement, upon thirty (30)
days' written notice to MSP with out payment by Abbott of any damages,
penalties or charges whatsoever, if:
a. Product produced by MSP consistently fails to meet product
specifications for three (3) consecutive months and MSP is
unable to correct deficiencies during that same period unless
such failure shall be due to mold defects not caused in whole
or in part by MSP, or the quality of plastic raw materials
supplied by Abbott's designated supplier.
<PAGE>
b. MSP fails during three (3) consecutive months to meet 90% of
the expected production level for any given month, based on
the monthly production schedules provided by Abbott for that
month, unless such failure shall be due to mold defects not
caused in whole or in part by MSP, the quality of plastic raw
materials supplied by Abbott's designated supplier, or by
force majeure events beyond the control of MSP as described in
Paragraph 21 below.
c. MSP attempts to assign this Agreement or any rights hereunder,
without Abbott's prior written consent; or there is a
fundamental change in the control of MSP which is unacceptable
to Abbott, which approval shall not be unreasonably withheld;
or MSP ceases to function as a going concern; or MSP ceases to
conduct its operation in the normal course of business; or a
receiver for MSP is appointed; or MSP otherwise takes
advantage of any bankruptcy or insolvency law.
13. Termination by MSP or Abbott
Either party may terminate this Agreement upon thirty (30)
days written notice to the other if the other party shall breach a material
provision of this Agreement and shall not cure such breach within a period of
thirty (30) days following written notice of such breach.
14. [*]
14.4 MSP warrants and represents that as of the date of this
Agreement and during the term of this Agreement its lease for the Premises
contains and shall contain an option for MSP to purchase the Premises from the
lessor/owner.
14.5 MSP warrants and represents that it shall faithfully perform
its obligations under the lease for the Premises, including the payment of rent
and other charges, and shall
<PAGE>
comply with all terms and conditions of the lease required of MSP.
[*]
14.6 Prior to conveyance of the Premises to Abbott, MSP shall
obtain from L&D Properties, the lessor and owner of the Premises,
representations and warranties to MSP and Abbott identical to the
representations and warranties of Paragraph 7 of the Real Estate Purchase
Agreement.
14.7 Promptly after MSP conveys title to the Premises to
Abbott, MSP shall provide to Abbott manufacturing know-how and technical
assistance required to manufacture products at the Premises. Such assistance
shall include consultation with Abbott personnel. Such assistance shall include
consultation with Abbott personnel. Abbott shall reimburse MSP for all
reasonable out-of-pocket expenses incurred in rendering such assistance. MSP
hereby grants to Abbott a royalty-free right and license ot practice MSP
know-how in the manufacture of products at the Premises, including the right to
use MSP patents, patent rights, proprietary data, manufacturing processes, trade
secrets, software and other MSP technical and scientific information.
15. MSP shall furnish to Abbott the following detailed
reports:
a. Monthly management reports regarding production
efficiencies detailing by items: units produced,
cycle times, down times (with explanations), scrap
rates (with explanations); and
b. quarterly financial statements, including: income
statement, balance sheet and sources and uses of
funds statement.
<PAGE>
16. Inspection by Abbott and the FDA
16.1 Abbott may at any time and upon prior notice to MSP,
either oral or written, inspect during MSP's regular production hours the MSP
plant includes raw materials, work-in-process, finished goods, and batch
records. In addition, Abbott may perform such other quality assurance
inspections as are deemed necessary by Abbott to insure that product
manufactured by MSP will meet Abbott's requirement.
16.2 MSP will cooperate with the FDA with any plant inspection
requested by the FDA or any other governmental authority.
17. Product Liability Claims
Abbott hereby agrees to hold harmless MSP from any product
liability claims based on the product produced under the terms of this
Agreement, except where liability was due to negligent acts or omissions or
intentionally wrongful acts of MSP, and to reimburse MSP for any reasonable
legal fees or other expenses involved in defending MSP against such claims.
18. Confidential Information
It is recognized that during the course of performance of this
Agreement, the parties may from time to time disclose Confidential Information
to the other. Each party agrees to take all reasonable steps to prevent the
disclosure of Confidential Information received from the other party; provided,
however, no provision of this Agreement shall be construed to preclude
disclosure of Confidential Information as may be inherent in or reasonable
necessary to perform this Agreement. In addition, if Abbott purchases the
Premises [*], Abbott may use Confidential Information received from MSP in
Abbott's operation of the injection molding facility. As used herein, the term
"Confidential Information" shall mean all information disclosed hereunder in
writing and identified as confidential, or if disclosed orally is
<PAGE>
reduced to writing as to its general content within thirty (30) days of oral
disclosure and identified it as being confidential, except any portion thereof
which: 1.) is known to the recipient as evidenced by its written records before
receipt thereof under this Agreement; 2.) is disclosed in good faith to the
recipient after acceptance of this Agreement by a third person lawfully in
possession of such information and not under an obligation of nondisclosure; 3.)
becomes part of the public domain through no fault of the recipient; or 4.) is
developed independently by the recipient without reference to information
disclosed hereunder. The obligations of the parties relating to Confidential
Information shall expire two (2) years after termination of this Agreement.
19. Independent Contractor
MSP is an independent contractor for Abbott. This Agreement
does not constitute MSP as an agent or a legal representative of Abbott for any
purpose whatsoever. MSP is not granted any right or authority to assume or
create any obligation or responsibility, express or implied, on behalf of or in
the name of Abbott or to bind Abbott in any manner or thing whatsoever. Nothing
in this Agreement shall be construed as creating a partnership or joint-venture
between the parties.
20. Alternative Disputes Resolution
20.1 The parties recognize that bona fide disputes as to
certain matters may from time to time arise during the term of this Agreement
which relate to either party's rights or obligations hereunder. In addition,
despite the good faith efforts of the parties disputes may arise during the
negotiation of product prices and machine hour rates. In the event of the
occurrence of such a dispute, either party may, by notice to the other, have
such dispute referred to their respective employees designated below or their
successors; for attempted resolution by good
<PAGE>
faith negotiations within twenty (20) days after such notice is received. Said
designated employees are as follows:
For MSP - President, or his designee
For Abbott - Divisional Vice President, Hospital Products
Manufacturing/Engineering, or his designee
If the designated employees are not able to resolve such
dispute within such twenty (20) day period, either party may invoke the
provisions of Paragraph 20.2 below.
20.2 Any dispute which arises in connection with this Agreement or
any of its provisions shall be resolved by binding alternative dispute
resolution ("ADR") in the manner described in Exhibit G, attached hereto. The
decision of the neutral in any such ADR shall be final and not appealable and
shall be enforceable in any court of competent jurisdiction. No punitive damages
shall be recoverable by either party in any such proceeding.
21. Force Majeure
Any delay in the performance of any of the duties or
obligations of either party hereto shall not be considered a breach of this
Agreement and the time required for performance shall be extended for a period
equal to the period of such delay; provided that such delay has been caused by
or is the result of any acts of God, acts of the public enemy, insurrections,
riots, embargoes, strikes, fires, explosions, floods, or other unforeseeable
causes beyond the control and without the fault or negligence of the party so
affected. The party so affected shall give prompt notice to the other party of
such cause, and shall take whatever reasonable steps are necessary to relieve
the effect of such cause as rapidly as possible. During the time period in which
a force majeure event is in effect, Abbott shall not be required to make the
payments called for under Paragraph 9.1 above. Notwithstanding the foregoing, if
said delay in
<PAGE>
performance shall continue for a period of ninety (90) days or more, then the
party not affected may terminate this Agreement by written to the other and both
parties shall be relieved fro all duties and obligations under this Agreement,
except for those duties or obligations accruing prior to such termination,
including but not limited to, Abbott's option to purchase the Premises.
22. Entire Agreement
This Agreement constitutes the entire Agreement between the
parties concerning the subject matter hereof and supersedes any written or oral
prior agreements with respect thereto. No variation or modification of the terms
of this Agreement nor any waiver of any of the terms or provisions hereof shall
be valid unless in writing and signed by an authorized representative of each
party. Failure by either party to enforce any rights in this Agreement shall not
be construed as a waiver of such rights nor shall a waiver of either party in
one or more instances be construed as constituting a continuing waiver or as a
waiver in other instances.
23. Applicable Law
This Agreement shall be construed, interpreted and governed by
the laws of the State of Texas, exclusive of choice of law rules.
24. Assignment
Neither party shall assign this Agreement nor any part thereof
without the prior written consent of the other party; provided, however, either
party without such consent may assign or sell the same in connection with a
transfer or sale of substantially its entire business to which this Agreement
pertains or in the event of a merger or consolidation with another company. Any
permitted assignee shall assume all obligations of its assignor under this
Agreement. No assignment shall relieve a party of responsibility for the
performance for any accrued obligation which such party then has hereunder.
<PAGE>
25. Notices.
All notices hereunder shall be delivered personally or by
registered or certified mail, postage prepaid, to the following addresses of the
respective parties:
Abbott Laboratories
One Abbott Park Road
Abbott Park, Illinois 60064-3500
Attention: President, Hospital Products Division
With a copy to: General Counsel
Mid-State Plastics, Inc.
Highway 220 North
Seagrove, North Carolina 27341
Attention: President
Notices shall be effective upon receipt if personally delivered or on
the third business day following the date of mailing. A party may change its
address listed above by notice to the other party.
26. Severability
If any part of this Agreement shall be judged invalid, it
shall be considered severable and the remainder of the Agreement shall continue
in full force and effect to the extent practicable.
27. Exhibits
All Exhibits referred to herein shall be deemed to be made a
part hereof and incorporated herein in all respects.
The parties intending to be bound by the terms and conditions
hereof have caused this Agreement to be signed by their duly authorized
representatives on the date first above written.
<PAGE>
Abbott Laboratories Mid-State Plastics, Inc.
By:_______________________________ By:________________________________
Title_____________________________ Title:_____________________________
Date:_____________________________ Date:______________________________
<PAGE>
Exhibit A
"Class 100,00" Clean Molding Facility
A Class 100,000 clean molding facility shall mean a manufacturing facility
suitable for producing plastic parts for medical use which meets and maintains
the following air quality standard: Particles in the air must not exceed 100,00
particles, greater than 0.5 micron, per cubic foot of air.
<PAGE>
Exhibit B
Lease and Option to Purchase Round Rock, Texas Real Estate
<PAGE>
Exhibit C
[*]
<PAGE>
Exhibit D
[*]
<PAGE>
Exhibit E
[*]
<PAGE>
EXHIBIT F
[*]
1. Premises. Seller agrees to sell and Purchaser agrees to
purchase certain real property located in the city of Round Rock, Texas,
together with all improvements, easements, rights and privileges appurtenant
thereto (the "Premises") (a copy of the legal description of the Premises is
attached hereto as Exhibit [*]. At the time this Purchase Agreement becomes
effective, Purchaser shall deposit in an interest bearing account with a
reputable title company acceptable to Purchaser, ten percent (10%) of the
purchase price as determined by the parties in accordance with Paragraph 14 of
the Agreement. The earnest money, together with all accrued interest thereon,
shall be held for the mutual benefit of the parties according to the terms of
this Purchase Agreement, and shall be applied toward the payment of the purchase
price at closing. The balance of the purchase price, plus or minus customary
prorations as set forth in Paragraph 5 hereof, shall be paid to Seller at
closing by wire transfer of funds.
2. Closing. Provided title to the Premises is shown to be good
and marketable and is accepted by Purchaser, closing shall take place at the
offices of the title company issuing the title policy on the premises forty-five
(45) days after Purchaser exercises its option to purchase and gives notice to
Seller of Purchaser's decision to purchase the Premises, as set forth in
Paragraph 14 of the Agreement, or as soon as practicable thereafter ("Closing").
<PAGE>
3. Title. Seller shall deliver to Purchaser, at Seller's
expense, as soon as possible after Seller's exercise of its option to purchase,
but in no event later than twenty-one (21) days prior to Closing, a commitment
for title insurance from a reputable title insurance company acceptable to
Purchaser showing good and marketable title to the Premises and all
appurtenances thereto, free and clear of any liens, encumbrances, title defects,
leases or other adverse interests of any nature whatsoever, except those
recorded covenants, conditions, restrictions, easements, rights of way and roads
of record, which in the reasonable judgment of Purchaser do not impair the use
of the Premises as an industrial site. The title commitment shall contain an
agreement to furnish at Closing an ALTA title insurance policy in the full
amount of the purchase price of the Premises.
Purchaser shall be allowed fifteen (15) days after receipt of
the title commitment to make any objections thereto. If any objections are made,
Purchaser shall do so by sending a written statement to Seller containing such
objections. Seller shall have thirty (30) days from receipt of Purchaser's
objections to cure, remove or insure over any such title defects. If title
cannot be made good and marketable, Purchaser may elect to rescind the Purchase
Agreement or take title as is deliverable without abatement in the purchase
price (except for the payment of fixed or ascertainable liens or encumbrances).
In the event Purchaser elects to rescind this Purchase Agreement shall become
null and void and without any further action of the parties, and the earnest
money, together with any accrued interest thereon, shall be promptly refunded to
Purchaser. Purchaser must make its election within ten (10) days after Seller
has provided Purchaser with written notification of a title defect not
susceptible of being cured, removed or insured over.
4. Survey. At least fifteen (15) days prior to Closing,
Seller, at its expense, shall deliver to Purchaser a current certified survey of
the Premises prepared by a licensed surveyor showing all recorded conditions,
easements, and rights of way and roads (both public and private).
<PAGE>
5. Prorations. Seller shall pay all general real estate taxes
which are or shall become due as of the Closing. General real estate taxes for
the year in which the Closing occurs shall be prorated to the Closing based on
110% of the most recently issued final tax bill on the Premises. All prorations
shall be final, and there shall be no proration agreement. However, Seller shall
pay or credit Purchaser for all special assessments and special taxes pertaining
to the Premises, whether such special assessments or special taxes are due
before or after the Closing.
6. Right to Inspect. During the term of this Purchase
Agreement and until Closing, Purchaser shall have the right to enter upon the
Premises during regular business hours and upon twenty-four prior notice to
Seller for the purpose of conducting any environmental tests deemed appropriate
by the Purchaser in its sole discretion. Purchaser shall indemnify, defend and
hold Seller harmless from any judgment, claim, suit, damage, cost or expense,
including reasonable attorneys fees, resulting from Purchaser's entry upon the
Premises to conduct such tests.
If Purchaser is not satisfied, in its sole discretion, with
the results from any environmental test, Purchaser shall have the right to
rescind this Purchase Agreement upon written notice to SEller not less than five
(5) days prior to Closing, and this Purchase Agreement shall become null and
void without any further action by the parties. In such event, the earnest
money, together with any accrued interest thereon, shall be promptly refunded to
Purchaser.
7. Representation and Warranties. Seller hereby represents and
warrants to Purchaser as follows:
a. Seller has no knowledge and has not received any notice
from any governmental authority to the effect that Seller
has not complied with any applicable governmental law,
ordinance, regulation, statute or rule pertaining to the
Premises;
<PAGE>
b. Seller has full power and authority to enter into this
Purchase Agreement and to perform its obligations
hereunder;
c. There are no pending or threatened litigation,
condemnation, eminent domain or administrative proceedings
against Seller or affecting the Premises, and there are no
claims or facts with respect to Seller which could be the
basis for such actions or proceedings;
d. Seller or any agent or representative on its behalf, has
not deposited and has not permitted any other party to
deposit any Hazardous Materials on the Premises. For
purposes of this Purchase Agreement, Hazardous Materials
shall include, but shall not be limited to, substances
defined as "hazardous substances" or "toxic substances" in
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. SEC. 9601 et.
seq., Hazardous Materials Transportation Act, 49 U.S.C.
Sec. 1801 et. seq., Resource Conservation and Recovery Act,
42 U.S.C. Sec. 6901 et. seq., Toxic Substances Control Act
of 1976, as amended, 15 U.S.C. Sec. 2601 et. seq., Clean
Water Act, 33 U.S.C. Sec. 1251 et seq., as amended, and
Clean Air Act, 42 U.S.C. Sec. 7401 et. seq., and the
regulations adopted and official publications promulgated
pursuant to said laws;
e. Seller or any agent or representative on its behalf, has
not dealt with any broker, agent or finder in connection
with this transaction in any manner that could give rise to
any claim for brokerage commission, finder's fee, or
similar type of compensation by any person or entity;
<PAGE>
f. Seller has good, clear and marketable title to all
machinery, equipment and personalty to be conveyed to
Purchaser hereunder by the Bill of Sale, as described in
Paragraph 8 herein;
g. All of the representations and warranties contained in this
paragraph shall survive Closing.
8. Closing Documents. At closing, Seller shall deliver to
Purchaser a recordable Warranty Deed subject only to real estate taxes for the
year in which the Closing occurs and subsequent years and easements, covenants,
conditions and restrictions of record, along with any other customary closing
documents, including, but not limited to, an Affidavit of Title covering the
general exceptions of title listed in the title policy delivered by Seller to
Purchaser pursuant to Paragraph 3 hereof and a Bill of Sale conveying to
Purchaser all of the machinery, equipment and personalty within the Premises;
and Purchaser shall, upon the delivery of the foregoing instruments, pay to
Seller the balance of the purchase price as determined by the parties in
accordance with Paragraph 14 of the Agreement.
9. Indemnification. Seller shall hereby indemnify, defend and
hold Purchaser harmless from any and all claims, liability, suits, damages,
causes of action, judgment or verdicts against the Purchaser or any expense or
cost (including reasonable attorneys fees or any remedial action undertaken by
Purchaser) incurred by Purchaser resulting from the breach of Seller's
representations and warranties set forth in Paragraph 7 of this Purchase
Agreement, regardless of any investigation performed at any time by or on behalf
of Purchaser or any information Purchaser may have in respect thereof.
10. Default. If Purchaser defaults hereunder and this Purchase
Agreement is terminated as a result thereof without Seller's fault, the earnest
money and any accrued interest thereon shall be forfeited to Seller as
liquidated damages and shall be the sole and exclusive remedy of Seller. If
Seller default hereunder and this Purchase Agreement is terminated as a result
thereof with out Purchaser's fault,
<PAGE>
Purchaser's earnest money and any accrued interest thereon shall be paid
immediately to Purchaser. Except for the above limitation, in addition to any
other rights or remedies available at law or equity, either party may institute
legal action to cure, correct or remedy any default, to recover damages for any
default or to obtain any other remedy consistent with the purpose or to obtain
any other remedy consistent with the purpose of this Purchase Agreement. The
rights and remedies of the parties are cumulative, and the exercise by either
party of one or more of such rights or remedies shall not preclude the exercise
by it, at the same time or at different times, of any other right or remedy for
the same default or any other default by the same party.
11. Damage to Premises. In the event the Premises suffers
partial or substantial damage prior to Closing as a result of an insured
casualty, Purchaser shall have the option, to be exercised at any time prior to
Closing, either to accept title to the Premises in its damaged condition at
Closing, and have Seller transfer to Purchaser all of Seller's interest in and
to any insurance proceeds or rights to collect insurance proceeds with respect
to the damaged Premises, or to terminate the Purchase Agreement, which shall
render the Purchase Agreement null and void, and to promptly receive a refund of
the earnest money, together with any accrued interest thereon.
12. Governing Law. This Purchase Agreement shall be governed
by and construed in accordance with the laws of the State of Texas.
13. Notice. Any notice or communication required or permitted
to be given herein shall be in writing and sent by registered or certified mail,
postage prepaid, return receipt requested or by express mail services or
facsimile machine; shall be mailed to the address listed below or such other
address as each party may from time to time provide; and shall be deemed
effective upon the date of mailing.
If to Seller: Mid-State Plastics, Inc.
<PAGE>
Highway 220 North
Seagrove, North Carolina 27341
With a copy to: Corporate Real Estate Manager
Abbott Laboratories
Department 540
One Abbott Park Road
Abbott Park, Illinois 60064-3500
With a copy to: General Counsel
Abbott Laboratories
Department 364
One Abbott Park Road
Abbott Park, Illinois 60064-3500
14. Survival. The representations, warranties, covenants and
agreements contained herein shall survive the Closing and shall not be merged
into any deed.
15. Captions. The paragraph headings used herein are for
convenience only and are in no way intended to define or limit the substantive
provisions of this Purchase Agreement.
16. Entire Agreement. This Purchase Agreement constitutes the
entire agreement and understanding between the parties hereto with regard to the
subject matter hereof and supersedes all previous agreements and understandings.
This Purchase Agreement may not be amended or modified except in writing signed
by both parties.
17. Binding Effect. This Purchase Agreement shall bind the
parties hereto, their respective beneficiaries, legal representatives, heirs,
successors and assigns.
18. Time of Essence. Time is of the essence of this Purchase
Agreement.
19. Severability. If any provision of this Purchase Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the provisions of this Purchase Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
<PAGE>
20. Assignment. Neither party shall assign, transfer or convey
its rights under this Purchase Agreement without obtaining, in each and every
instance, the prior written consent of the other party.
21. Nonrecordation. Neither party shall record this Purchase
Agreement nor any portion or memorandum of it, without the prior written consent
of the other party.
IN WITNESS WHEREOF, the duly authorized officers of the
respective parties have executed this Purchase Agreement as of the day and year
first above written.
SELLER: PURCHASER:
MID-STATE PLASTICS, INC. ABBOTT LABORATORIES
By:_____________________________ By:_______________________________
Its:____________________________ Its:______________________________
ATTACHMENT OF EXHIBITS
Exhibit A - Legal Description of Premises
Exhibit B - Agreement
<PAGE>
Exhibit G
Alternative Dispute Resolution
The parties agree that any dispute that arises in connection
with this Agreement shall be resolved by binding Alternative Dispute Resolution
(ADR) in the manner described below. It is the intent of the (30) business days
after an ADR is begun.
a. If a party intends to begin an ADR to resolve a dispute,
such party shall provide written notice to the other party
informing the other party of such intention and the issues
to be resolved. Within five (5) business days after the
receipt of such notice, the other party may, by written
notice to the party initiating ADR, add additional issues
to be resolved. Within fifteen (15) business days following
the receipt of the original ADR notice a neutral person
shall be selected by the then President of the Center for
Public Resources ("CPR"), 680 Fifth Ave., New York, New
York 10019. The neutral personal shall be an individual who
shall preside in resolution of any disputes between the
parties. The neutral person selected shall not be an
employee, director or shareholder of either a party or of
an affiliate of either party.
(i) Each party shall have five (5) business days from the
date the neutral person is selected to object in good
faith to the selection of that person. If either arty
makes such an objection, the then President of the CPR
shall, as soon as possible thereafter, select another
neutral
<PAGE>
person under the same conditions set forth above. This
second selection shall be final.
(b) (i) No later than twenty (20) business days after
selection, the neutral person shall hold a hearing to
resolve each of the issues identified by the parties.
(ii) At least fifteen (15) business days prior to the
hearing, each party shall submit to the other party
(the "receiving party") and the neutral person a list
of all documents on which such party intends to rely in
any oral or written presentation to the neutral person
and a list of all witnesses, if any, such party intends
to call at such hearing. Within five (5) business days
after the receiving party makes a request therefor,
which request must be given at least five (5) business
days prior to the hearing, such other party shall
deliver to the receiving party (x) one true and correct
copy of each of the documents on the above-referenced
list requested by such receiving party and (y) a
summary of the anticipated testimony of each of such
party's witnesses. Except as expressly set forth
herein, the neutral person shall not require nor shall
there by any discovery by any means, including
depositions, interrogatories or production of
documents.
(iii) At least five (5) business days prior to the hearing,
each party must submit in writing to the neutral person
and serve on the other party a proposed ruling on each
issue to be resolved. Such writing shall be limited to
representing the proposed rulings, shall contain no
<PAGE>
argument on or analysis of the facts or issues, and
shall be limited to not more than fifty (50) pages.
(iv) Each party shall be entitled to no more than five (5)
hours of hearing to present testimony or documentary
evidence. The testimony of both parties shall be
presented during the same calendar day. Such time
limitation shall include any direct, cross or rebuttal
testimony, but such time limitation shall only be
charged against the party conducting such direct, cross
or rebuttal testimony. It shall be the responsibility
of the neutral person to determine whether the parties
have had the five (5) hours to which they are entitled.
(v) Each party shall have the right to be represented by
counsel. The neutral person shall have the sole
discretion with regard to the admissibility of any
evidence.
(vi) The neutral personal shall rule on each disputed issue
within ten (10) days following the completion of the
testimony of both parties. Such ruling shall adopt in
its entirety the proposed ruling of one of the parties
on each disputed issue.
(vii) ADR shall take place at a location agreed by the
parties or if the parties are unable to agree then as
designated by the neutral person. All costs incurred
for a hearing room shall be shared equally by the
parties.
(viii) The neutral person shall be paid a reasonable fee
plus expenses, which fees and expenses shall be shared
equally by the parties.
<PAGE>
August 5, 1994
Mr. W. Tom Brady
Abbott Laboratories
One Abbott Park Road
Abbott Park, IL 60054
Mr. Francis H. Olmstead, Jr.
Anchor Advanced Products, Inc.
209 E. Desoto Avenue
Morristown, TN 37814
Recognizing that Abbott anticipates a shortfall in demand from the Austin
facility to meet the contractual requirement, and Mid-State has a potential
opportunity to sell molding services in Texas, we mutually agree to amend the
[*]
Abbott Laboratories hereby authorizes Mid-State Plastics to sell the services of
the Round Rock, Texas facility to other companies and change the installed
capacity of the plant, provided that Abbott's requirements for injection molded
plastic parts shall be given first priority at the facility. Mid-State Plastics
will notify Abbott prior to the addition of each new customer and prior to
changes in capacity.
Both parties agree to negotiate annually, at mid-year beginning on or about June
30, 1995, the allocated capacity for the coming calendar year, it being agreed
that Abbott shall have the right to purchase the entire manufacturing capacity
(18 presses) of the Round Rock plant for any such year.
- --------------------------- -----------------------------
Francis H. Olmstead, Jr. W. Tom Brady
President & CEO Division V.P. Hospital Products
Anchor Advanced Products, Inc. Abbott Laboratories
- --------------------------- -----------------------------
Date Date
<PAGE>
DATE: September 11, 1995
TO: Bob Davis
CC: Ron Kirkpatrick
Abbott Laboratories
3900 Howard Lane
Austin, TX 78717
- ------------------------------------------------------------------------------
Dear Bob:
[*]
Sincerely,
Dean F. Lail Richard B. Mack
VP Strategic Planning VP Sales & Marketing
cc: Charles Parker
<PAGE>
[*]
<PAGE>
September 19, 1995
Mr. Dean F. Lail
Mr. Richard B. Mack
Mid-State Plastics
P.O. Box 88
Seagrove, NC 27341
Re: 1996 Prices
-----------
Gentlemen:
We accept your Option 2d as outlined in your September 11, 1995 memo
for 1996 Machine Rate and Pricing (attached).
Summary of Option 2d:
[*]
Sincerely,
Ron Kirkpatrick Bob Davis
Materials Manager Div., VP Mfg. Operations Devices
cc: Nathan Gibson
Jack Lail
John McGuire
Greg Tazalla
[*]
<PAGE>
March 5, 1997
Mr. Jack Lail
Executive Vice President
Mid-State Plastics
Highway 220 North
P.O. Box 88
Seagrove, NC 27341
Dear Jack:
Attached is a signed copy of the contract revisions and modifications agreed to
by Abbott and Mid-State.
I am pleased that we were able to come to this mutually beneficial agreement
which I believe will allow us to work together on continuously improving both of
our operations.
Thanks for your help, that of Dick and Dean, and the entire Mid-State group. We
look forward to continuing this positive relationship.
Bob Davis
Attachment
cc: N. Gibson - Austin
Ron Kirkpatrick - Austin
Greg Tazalla - AP30
Dean Lail - Mid-State
Dick Mack - Mid-State
<PAGE>
ABBOTT/MID-STATE PLASTICS
CONTRACT REVISIONS AND MODIFICATIONS
1. [*]
Machine hour rates will be effective January 1, of each
respective year.
2. [*]
If more than 10% of the commodities produced by Mid-State
Plastics are decertified in any month, there will be no
downtime penalty accruing in that month. The basis for
decertification is quality experience at Abbott.
Decertification will occur when products do not meet Abbott
quality standards as outlined in Abbott specifications.
3. [*]
Mid-State Plastics retains the right to refuse orders that
exceed 85% of available machine press hours.
4. If Abbott supplies a mold to Mid-State Plastics that is unique
as compared to molds used for commodities currently produced
and such unique mold creates additional handling, processing
or other procedures outside the norm, commodities will be
priced at a non- contract rate to be negotiated by both
parties.
5. Abbott will agree to give six (6) months notice to Mid-State
Plastics if its anticipated machine press hour loading
increased more than 10%.
<PAGE>
6. [*]
APPROVED:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
- --------------------- ---- ------------------------ ---- ------------------------ ----
Jack Lail Date Robert E. Davis Date Nathan Gibson Date
Executive Vice President Divisional Vice President, Director, Austin Operations
Mid-States Plastics Hospital Products Mfg. Operations Abbott Laboratories
Abbott Laboratories
</TABLE>
<PAGE>
*
EXHIBIT 10.7
MEMORANDUM OF AGREEMENT
Contract # JWR-90-03
1. BUYER: The Procter & Gamble Manufacturing Company
2. SELLER: Anchor Advanced Products, Inc.
1307 Davis Street
Morristown, TN 37814
3. COMMODITY: Toothbrushes
4. QUANTITY:
Buyer's requirements, including quantities for its affiliate(s)
estimated at [*] units during the period of this agreement.
5. QUALITY:
Toothbrushes are to be produced in accordance with Buyer's applicable
general and individual specifications, including any subsequent additions or
alterations mutually agreeable to Buyer and Seller. In addition, the Seller will
commit resources to continual improvement of systems and quality, statistical
process control, submission of certificates of analysis (CDA's) with each
shipment which includes results of tests to be mutually agreed on by Buyer and
Seller, and a certification of quality (COQ) program to minimize Buyer
inspection of incoming materials. Buyer will provide resources to support
Seller's efforts.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
Page 1 of 15
<PAGE>
6. PERIOD:
7-1-93 through 12-31-97 with option to extend for three (3) additional one
(1) year periods by mutual agreement.
7. PRICE:
[*] 2 pages omitted
Page 2 of 15
<PAGE>
[*]
Page 3 of 15
<PAGE>
[*]
8. PAYMENT TERMS:
Net 30 days after receipt of complete and accurate invoice in Cincinnati.
Buyer agrees that if, upon Seller's submission of properly executed
invoices, actual payment experience as of October 1, 1993 does not reflect the
30 day payment term on 95% of all invoices due for payment during the previous
30 days, Buyer will immediately adjust the payment terms to Net-15 days as
compensation for the payment delay. The adjustment will remain in effect until
such time as buyer is able to pay 95% of all invoices on time. If an on tune
payment history is resumed for 3 months, the Net-30 terms will again apply. If
in the future the late payment problem re-occurs for a period exceeding 60 days,
Seller will be entitled to request an immediate reapplication of the above
procedure.
Page 4 of 15
<PAGE>
9. FREIGHT PAYMENT:
F.O.B., Morristown, TN.; freight will not be prepaid nor invoiced for
Buyer.
10. SHIPMENTS:
From Seller's stock as determined by Buyer.
11. CAPITAL COMMITMENT:
Seller has made a capital investment of [*] to date. This investment has funded
[*]. [*] In the event that Buyer totally ceases to market toothbrushes in the
U.S. at any time between 7-1-93 and 12-31-97, Buyer will be obligated to repay
Seller for [*]. Buyer's obligation will be to pay Seller for [*]
7-1-93 - 12-31-93 [*] excluding installation
1-1-94 - 12-31-94 [*] excluding installation
1-1-94 - 12-31-95 [*] excluding installation
1-1-96 - 12-31-97 [*] excluding installation
Subject to [*] in Paragraph 12, Seller will retain ownership
of the [*]. Seller may not, under any circumstances [*]. The [*] at no charge.
Buyer has no commitment to pay under this section if business is reduced or
discontinued due to taking the business in house, or to another supplier under
Sellers default as defined in Paragraph 25. Buyer shall have no further
obligation as a result of such cancellation.
Page 5 of 15
<PAGE>
12. SELLER/BUYER EQUIPMENT CLAIM:
a. [*]
b. [*]
c. [*]
d. [*]
13. EQUIPMENT OWNERSHIP:
[*]
14. LICENSE AGREEMENT:
[*]
Page 6 of 15
<PAGE>
15. MAINTENANCE EXPENSES:
Seller agrees to provide all normal and generally accepted maintenance and
repair on molds/presses/tufting/packaging equipment without regard to ownership.
Seller agrees to follow manufacturers maintenance recommendations.
__ Repair, Maintenance and Spare Parts Expenses
[*]
16. SECURITY
Buyer will not unreasonably restrict representatives from the Thomas H. Lee
Company or First National Bank of Chicago, Algememe Bank Nederland N.V. or West
L. B. Bank who need to briefly view molding and/or fusion as a part of their
normal oversight responsibility. Seller agrees to provide 5 working days notice
prior to any visit and permit Buyer to accompany the viewing. Seller further
agrees that any bank representative will be required to sign a CDA prior to
visiting the fusion department.
Due to the special nature of the tufting and molding systems and other
activities inside and outside the plant where competition would benefit from
knowledge, Seller commits, to the best of its ability, to maintain security
acceptable to Buyer. In particular, Seller will continue to provide a specially
secure area for all tufting machines and for presses and other
equipment/activities as special circumstances require. Buyer and Seller will
work together to define security systems and Seller will be required to commit
in writing to maintain security as mutually agreed. In no case is a current or
potential customer or other person who might directly or indirectly compromise
security have access to these areas. Only authorized employees, Buyer, and
Buyer's subcontractors (with prior authorization in writing from Buyer) may have
access to these areas.
Page 7 of 15
<PAGE>
Without regard to any mutual agreement or writing, Seller unconditionally agrees
to make every reasonable effort to manage all P&G verbal and written data on a
strict need to know basis with its personnel and with suppliers or any other
person or company.
Seller also agrees to manage employee transfers to minimize security
problems and in all cases to advise P&G prior to the transfer and to have the
employee sign a confidential disclosure agreement.
Sellers failure to maintain security will be considered a default of
contract that could jeopardize volume or duration.
17. OPERATIONS:
a. Six or seven day operation will be provided, if required, to meet sales
demand. Cost premium, if any, will be limited to actual out-of-pocket expenses.
b. Effective with the date of this contract, Anchor agrees to provide the
following space within the plant:
<TABLE>
<CAPTION>
Sq. Ft Sq. Ft.
<S> <C> <C> <C>
1. Currently improved fusion 34,000 Committed for expansion* -0-
2. Currently improved molding 12,000 Committed for expansion* 1,000
3. Currently improved packaging 6,600 Committed for expansion* 6,000
</TABLE>
* through 12/31/97, thereafter space will be committed yearly.
Cost to expand into currently unused space will be limited to the cost of
upfit to standards required for the space.
[*]
18. INVENTORY:
Seller agrees to make shipments on an as required basis using Buyer's
shipping forecasts. Should it be necessary for Seller to hold a limited quantity
of inventory to make Buyer's required shipments, there will be no
Page 8 of 15
<PAGE>
charge to Buyer. Limited is defined as not over one million brushes and for not
over 60 days per year. [*]
19. MATERIAL SUPPLIED BY BUYER:
[*]
20. Material and Labor Savings
Both companies agree that an aggressive mutual savings program will
continue. Savings opportunities will be developed by both companies and in
general the savings will be shared [*] with the exception of molding resin and
nylon market changes where price changes will be passed on as they occur.
Specifically, the following criteria will apply to savings:
When savings are expected to be less than [*]Year, sharing will be [*]
without regard to who had the idea and cost to implement.
When savings are expected to exceed [*] year, sharing will be determined
by mutual discussion prior to beginning the project. Factors that will always be
considered in addition to any other relevant factors are:
--- Who generated the idea
--- Capital/other cost to implement (qualification/equipment changes)
--- Who will fund
--- Personnel cost to implement (trips/staffing changes, etc.)
The general sharing guideline will be to split the savings in proportion to
the financial and personnel investment. Savings recap sheets will be used to
capture key elements, who participated in the review and precisely how the
savings will be split and for how long.
Page 9 of 15
<PAGE>
20. SPECIFICATION CHANGES:
If Buyer desires to make changes in the specifications of any of the
commodity(ies) provided herein during the period of the Agreement, it shall be
Buyer's privilege to do so, and any change in price shall be only the mutually
agreed upon increased or decreased cost of material, labor, and equipment
revisions involved in producing commodity(ies) under the revised specifications.
If Seller is unable to produce the commodity(ies) in accordance with the new
specifications established by Buyer within a reasonable time, but not more than
90 days, and at a price acceptable to both parties, Buyer shall have the option
of purchasing such commodity(ies) from another source and terminating its
obligations under this Agreement for the commodity(ies) involved. Major
specification changes may, at Buyer's option, be subject to a separate inquiry
and/or reallocation of business.
21. WARRANTY:
Seller warrants title and that the Commodity will be manufactured according
to the specifications described in paragraph 5 and will be free from
manufacturing defects and fit for use as a toothbrush. EXCEPT AS EXPRESSLY
PROVIDED WHEREIN, THERE ARE NO OTHER WARRANTIES EXPRESS OR IMPLIED.
22. ROBINSON-PATMAN:
Seller warrants that the prices set forth in this Agreement are valid under
the provisions of the Robinson-Patman (Price Discrimination) Act and all other
pertinent laws, orders and regulations.
23. FAVORED NATIONS:
If, during the life of the Agreement the Seller sells any products or
articles substantially the same as those listed herein at prices, including
applicable freight equalization terms, lower than the prices then effective
under this Agreement, said lower price shall apply on all goods thereafter
shipped under this Agreement during the period of sale at such lower price to
others, provided Seller can legally extend such lower price to Buyer.
Page 10 of 15
<PAGE>
24. MEET OR RELEASE
If at any time during the period of this Agreement Buyer can purchase
commodity of like quality at a price which will result in a delivered cost to
Buyer that is lower than the delivered cost of the material purchased hereunder,
Buyer may notify Seller of such delivered cost and Seller shall have an
opportunity of pricing material hereunder, within a reasonable time, but not
more than 90 days, on such a basis as to result in the same delivered cost to
Buyer. If Seller fails to do so or cannot legally do so, Buyer may purchase from
the supplier of the lower delivered cost material, and any purchase made shall
be held to apply on this Agreement, and the obligation of Buyer and Seller shall
be reduced accordingly.
25. TERMINATION:
a. Should Buyer by reason of product reformulation, process change, package
redesign, production changes, or other business reasons, including but not
limited to competitive activity, safety or health issues, insufficient demand
for Buyer's product, or change in Buyer's ability to produce the product, deem
it necessary to reduce or discontinue its use of the commodity(ies) covered by
this Agreement, Buyer shall have the right to reduce or discontinue Seller's
shipments hereunder provided that any such reduction or discontinuance is in the
same proportion as applied by Buyer to other suppliers, if any, supplying this
material to Buyer, and provided further, that Buyer has given Seller not less
than ninety (90) days' written notice of such reduction or discontinuance for
non-safety or health-related reductions or discountenances.
b. For safety or health-related reductions or discountenances, Paragraph
25A applies except Seller agrees to discontinue production immediately upon
receipt of written notice from Buyer.
c. Buyer may terminate if Seller's acts or omissions would be, but are not
limited to:
1. Failure to maintain security
2. Failure to maintain safety and health standards
3. Failure to provide a reliable work force and supervision of
appropriate quantity and quality
4. Failure to meet Buyer's reasonable requirements for
quantity/quality/timely shipment of product
5. Any other material breach or default hereunder
Page 11 of 15
<PAGE>
d. Either party may provide written notice of breach or default to the
other, specifying the breach or default and granting a period of ten (lO) days
in case of non payment and forty-five (45) days with respect to all other
breaches or defaults to substantially cure the breach or default. The parties
will work cooperatively in order to resolve the problem. In the event of a
failure to cure, the non-defaulting party may terminate without obligation and
may exercise any remedies under the law.
26. FORCE MAJEURE:
Fire, flood, strikes, lockout, epidemic, accident, shortage of customarily
used transportation equipment (or suitable substitutes), or other causes beyond
the reasonable control of the parties, which prevent Seller from delivering or
Buyer from receiving and/or using the commodity(ies) covered by this Agreement,
shall operate to reduce or suspend deliveries during the period required to
remove such cause. In the event of reduced deliveries by Seller under the
provisions of this Paragraph, Seller shall allocate its available supply of
commodity, component raw materials, and related manufacturing facilities among
purchases and Seller's divisions, departments, and affiliates on such basis that
Buyer's percentage reduction will not be greater than the overall percentage
reduction in total quantity of commodity, component raw materials, and related
manufacturing facilities Seller had available for supply. Any deliveries
suspended under this Paragraph shall be canceled without liability, and the
Agreement quantity shall be reduced by the quantities so omitted.
In the event non-availability of raw materials cause Seller to reduce
shipments to Buyer, Seller agrees to give Buyer the option to provide such raw
materials to Seller at a price not to exceed market price. If Buyer provides
such raw materials to Seller at such price, Seller will increase deliveries of
commodity to Buyer by the amount produced with raw materials supplied by Buyer
up to the quantity specified in the Agreement.
27. LABOR LAWS COMPLIANCE:
Whether this Agreement refers to manufactured items or to work, Seller
warrants and agrees that it has complied, and will comply, with (1) Fair Labor
Standards Act as amended, and (2) Social Security and Workman's Compensation
Laws as amended, if work is done on Buyer's premises, and (3)
Page 12 of 15
<PAGE>
all other applicable laws, codes, regulations, rules and orders. Seller agrees
to indemnify Buyer and save Buyer harmless if Seller fails to comply with the
foregoing, and in the evens of such failure Buyer may, in addition, cancel this
Agreement.
28. FEDERAL FOOD, DRUG, AND COSMETIC ACT AND RELATED LAWS COMPLIANCE:
If this Agreement relates to the purchase of any food, drug, cosmetic or
device, or substance the intended use of which results or may reasonable be
expected to result, directly or indirectly, in its becoming a component or
otherwise affecting the characteristics of any food (including any substance
intended for use in producing, manufacturing, packing, processing, preparing,
treating, packaging, transporting, or holding food), Seller hereby guarantees
that the article comprising each shipment or other delivery now or hereafter
made by Seller to Buyer, as of the date of such shipment or delivery, is not
adulterated or misbranded within the meaning of the Federal Food, Drug, and
Cosmetic Act, as amended, or within the meaning of applicable State laws or
Municipal ordinances in which the definitions of adulteration and misbranding
are substantially the same as those contained in the above Act, and not an
article which may not, under the provisions of Section 404 or 505 of the Act, be
introduced into interstate commerce; and, that if any such article is a coal-tar
color or contains a coal-tar color, that said color was manufactured by Seller,
and is from a batch certified in accordance with the applicable regulations
promulgated under the Federal Food, Drug, and Cosmetic Act, as amended, or that
Seller has in its possession a guaranty to the same effect from the manufacturer
of said color.
29. EQUAL EMPLOYMENT OPPORTUNITY:
Some of the material or services covered by this Order is to be used on a
contract with the Federal Government to which the provisions of Section 202 of
Executive Order 11246, Section 402 of the Vietnam Era Veterans Readjustment
Assistance Act of 1974 and Section 503 of the Rehabilitation Act of 1973 apply,
and consequentially, the provisions of Section 202, Section 402 and Section 503
will become binding upon the vendor upon acceptance of the order, if this order
exceeds $10,000 or applies against a contract exceeding $10,000 in one year with
respect to Sections 202 and 402, and $2,500 with respect to Section 503.
Regulations
Page 13 of 15
<PAGE>
under the Executive Order, The Vietnam Era Veterans Readjustment Assistance Act
and the Rehabilitation Act may require Seller to develop an Affirmative Action
Compliance Program, to file an Employee Information Report EEO-1 or other
reports as prescribed, and to certify that its facilities are not segregated on
the basis of race, color, religion, or national origin. (See 41 CFR 60.)*
30. PATENT INFRINGEMENT:
By acceptance of this agreement and in consideration thereof. Seller
warrants and agrees that it will defend any suit that may arise against the
Buyer or any subsidiary or affiliated company thereof for alleged infringement
of any patents relating to any article or articles furnished hereunder, and that
the Seller will indemnify and save harmless the Buyer and any subsidiary or
affiliated company thereof, against any loss, including damages, costs and
expenses, including attorney's fees, which may be incurred by the assertion of
any patent rights by other persons. This clause shall be considered inapplicable
to agreements covering basic raw materials and basic structural material which
are unpatented and unpatentable. Buyer agrees to hold Seller harmless with
respect to liability for infringement of a design patent by reason of making or
furnishing to Buyer hereunder, any article or articles the ornamental appearance
of which was specified by Buyer and not offered by Seller as an option.
31. SELLER OWNERSHIP CHANGE:
Seller agrees that in the event that sale of its business or the segment of
its business used to supply product under this agreement, is considered during
the initial term of this agreement or during any of the 3 optional years, Seller
will consult Buyer in accordance with the August 28,1990 letter from Thomas H.
Lee Company (Attachment II).
32. FDA 483 NOTICE:
Seller agrees to notify Buyer in writing within 5 working days of receipt
of a formal notice or information given to Seller by the FDA which Seller
understands will result in a formal notice.
Page 14 of 15
<PAGE>
Notification is not required if the 483 pertains to a specific operation used
only on a product made for another customer. Any notice relating to general or
specific plant operation where Buyer process would or could be effected requires
that Seller notify Buyer.
33. ION:
Seller agrees to develop and maintain an ION (electronic mail) interface
with Buyer.
34. ENTIRE AGREEMENT:
This Agreement and the CDA's between the parties dated 4/13/89 and 9/25/89
supersede all existing understandings, contracts, memoranda and correspondence
between the Buyer and the Seller which in any way affect the Seller's obligation
to manufacture and sell and the Buyer's obligation to buy the Commodity during
the term. This Agreement many be modified or amended only by a written document
signed by both parties.
35. NOTICES:
All notices relating to said Memorandum of Agreement shall be in writing
and sent by certified mall, overnight or express delivery or facsimile
transmission or delivered in person and shall be deemed delivered upon receipt.
THE PROCTER & GAMBLE MANUFACTURING CO. (Buyer)
By: /s/ T. C. White Date 12/16/93
------------------------------ ---------------------------------
Name T. C. White Title Health Care Product Supply Manager
----------------------------- ----------------------------------
ANCHOR ADVANCED PRODUCTS, INC. (Seller)
By /s/ Robert T. Parkey Date 12/14/93
----------------------------- ---------------------------------
Name Robert T. Parkey Title Exec. Vice President and
----------------------------- ---------------------------------
General Manager -Dental/Medical
Page 15 of 15
<PAGE>
ATTACHMENT II
-------------
Thomas H. Lee Company 75 State Street Boston, Massachusetts 02109 Telephone
617-227-1050 Fax 617-227-3514
August 28, 1990
Mr. James Rauth
Purchasing Manager
Proctor & Gamble
Sharon Woods Technical Center
11511 Reed-Hartman Highway
Cincinnati, OH 45241
Dear Mr. Rauth:
At Bob Parkey's request, I want to follow up on John Child's letter of May
29th. In particular, I would like to elaborate on the manner in which we would
propose to consult with you regarding any future sale of Anchor Advanced
Products. As we discussed, such involvement on the part of key customers is
unusual in our experience. However, in light of the importance of the
relationship between Anchor and Proctor & Gamble, and the proprietary nature of
the product you are developing, we feel strongly that your company's comfort and
confidence regarding a new owner is in the best interest of all parties.
We would suggest the following as a framework for your participation:
a) Proctor & Gamble would be informed, on a confidential basis, when the
Board of Directors of Anchor has made a decision to pursue the sale of
the business;
b) Proctor & Gamble would be provided with a list of all parties who make
formal offers or express strong interest in acquiring Anchor in the
course of any sale process; and
c) At the point in time when the list of likely acquirors has been
narrowed to a reasonably small group, Proctor & Gamble would be
afforded the opportunity to meet with Thomas H. Lee Company and
Anchor's senior management to discuss each of the buyers and express
particular issues and concerns that any of them might raise from
Proctor & Gamble's perspective.
<PAGE>
Letter to James Rauth
August 28, 1990
Page Two
I hope that this framework give you comfort that you will have a full
opportunity to consult with us during a process of sale. Please feel free to
call me or John Childs if you have any questions regarding this approach.
Very truly yours,
/s/ Scott A. Schoen
-------------------
Scott A. Schoen
Vice President
SAS:slu
cc: Robert Parkey
EX-10.8
[LOGO] COLGATE-PALMOLIVE COMPANY 300 Park Avenue
A Delaware Corporation New York, NY 10022-7499
Telephone 212-310-2000
Cable Address PALMOLIVE
June 30, 1996
Mr. Robert Parkey
Executive Vice President
Anchor Advanced Products, Inc.
1307 Davis Street
Morristown, Tennessee
Dear Bob:
We are pleased to enter into an agreement whereby Anchor Advanced Products,
Inc., a Delaware corporation with its principal office at 1111 Northshore Drive,
Knoxville, Tennessee 37919-4048 ("Anchor"), will supply finished toothbrushes to
Colgate-Palmolive Company, a Delaware Corporation with its principal office at
300 Park Avenue, New York, New York 10022 ("Colgate"). This letter and its
Exhibits will constitute our agreement (collectively, the "Agreement").
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the following
meanings:
(a) "Components" - Any or all packaging materials, raw materials and work
in process used in the manufacture of the Products.
(b) "Contract Year" - July 1 through June 30 of any year of the Term.
(c) "Finished Toothbrush" - a Toothbrush packaged in a blister, folding
carton, cellophane overwrap and/or other primary and/or secondary container
specified by Colgate.
(d) "International" - All delivery locations which are not included in the
definition of "US." International Products are differentiated by those sold in
"Emerging" and "Existing" markets as such are defined by Colgate.
(e) "Inventory" - The total quantity of Components purchased by Anchor for
use in the manufacture of the Products.
[*] Indicates information has been omitted and separately filed with the
Securities and Exchange Commission pursuant to an application for an order
declaring confidential treatment thereof.
<PAGE>
(f) [*]
(g) "Products" - Finished Toothbrushes, as defined above, having stock
numbers listed on Exhibits A, B, C, and D hereto, as modified from time to time
by Colgate consistent with the terms of this Agreement.
(h) "Toothbrush" - a Class I medical device for human oral care, comprised
of a handle and bristled head.
(i) "Unit" - one (1) Finished Toothbrush
(j) "US" - The delivery locations of Colgate, its subsidiaries and
affiliates, including Colgate Oral Pharmaceuticals, Inc., located in the United
States, Canada or Puerto Rico.
2. TERM
(a) The term of the Agreement will be for a period of three (3) years
commencing with July 1, 1996 and ending with June 30, 1999 (the "Term") unless
sooner terminated pursuant to the terms hereof.
(b) This Agreement may be renewed by Colgate on the same terms and
conditions as the Term for up to three (3) successive one (1)-year terms (the
"First," "Second" and "Third Option Terms," respectively) upon notice to Anchor
of at least sixty (60) days prior to the expiration of the Term or the preceding
Option Term.
3. VOLUME
(a) Estimated target volumes for the Term will be as follows:
[*]
(b) Colgate shall provide Anchor by the fifteenth day of each month during
the Term with a monthly rolling forecast of the anticipated quantity of each
stock number of Finished Toothbrushes Colgate intends to purchase for the
following six-month period.
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<PAGE>
The quantities given for [*] of such six-month rolling forecast [*]. Quantities
beyond [*] are for planning purposes only. Anchor and Colgate will mutually
agree upon delivery dates.
(c) Colgate will purchase from Anchor [*]. Any adjustments in estimated
target volumes based upon Colgate's then current market shares for each Contract
Year will be confirmed by June 15 of the prior Contract Year. Any variations in
actual volume from the estimated target volumes above will result in an
adjustment to Anchor, based upon its unabsorbed overhead, consistent with the
schedule attached as Exhibit E. Variations in target volumes for Products not
included on Exhibit E will be subject to the mutual agreement of the parties,
taking into consideration the adjustments for volumes set forth on Exhibit E.
The estimated target volumes above and the prices specified herein will apply to
both US and International Products.
4. PRICES
[*]
3
<PAGE>
5. PAYMENT TERMS AND DELIVERY
(a) Payment of invoices for US Products will be net 15 days after the last
day of the previous month, based on the total Units of Products shipped, as
entered by Anchor customer service into the Colgate SAP system, provided
however, that payment terms for Colgate Canada will be net 30 days from date of
invoice, until Colgate Canada implements the SAP system. Payment terms for
International Products will be net 60 days from date of invoice.
(b) Payment for all Products will be forwarded to the following lock box:
Anchor Advanced Products, Inc.
PO Box 3700-96
Boston, MA 02241-0796
(c) Payment for Products made by wire transfer shall be sent in accordance
with the following instructions:
ABA #011-000-390
Credit A/C #550-05283
(d) Delivery of US Products shall be made via trucks in accordance with
Colgate's orders for delivery, F.O.B. Morristown, Tennessee. Delivery of
International Products will be F.O.B. Morristown, Tennessee. Colgate will have
the right to designate a carrier. Risk of loss or damage shall remain with
Anchor until delivery of Products to the carrier. Anchor will cooperate with
Colgate in any claim for loss or damage in transit that Colgate makes against a
carrier. Colgate will designate a carrier for International Products.
6. MATERIALS
(a) Regarding suppliers currently providing Components for the Products,
Colgate and Anchor will maintain existing cooperative sourcing initiatives,
including but not limited to joint negotiations where appropriate, for all
Components, except staple wire. In the event that Colgate and Anchor disagree on
the acceptability of the purchase prices of such Components, the final decision
on the selection of a supplier will be made by Colgate.
(b) Colgate and Anchor will jointly approve all new suppliers and/or
Components based upon consideration of relevant factors, including but not
limited to total cost, service, quality, machinability and uniqueness of
aesthetics or finished Product performance. The benefit of such changes will
accrue in accordance with existing procedures. For example, any and all expenses
incurred by Anchor to evaluate, test and qualify new suppliers/Products will be
borne solely by Colgate, if the benefit is exclusively for Colgate. If the
benefit accrues to Colgate and
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<PAGE>
Anchor, Anchor and Colgate will share any and all expenses equally. Anchor will
not make any Components or supplier substitutions without prior written approval
from Colgate. Anchor agrees to use reasonable efforts to evaluate and qualify
new suppliers or Components recommended by Colgate.
(c) [*]
(d) Colgate and Anchor agree to work cooperatively to maintain the lowest
feasible Inventory of Components. Anchor and Colgate will agree on a maximum
Inventory level for each Component, using sixty (60) days as a guideline, which
agreed upon inventory levels will not be exceeded without Colgate's prior
written approval.
(e) Colgate agrees to provide Anchor with written approval of mutually
agreed upon minimum order quantities for Components. Such minimum order
quantities shall in no event exceed mutually agreed upon maximum Inventory
levels.
(f) Colgate agrees to provide Anchor with not less than 90 days' written
notice of any Product deletions, and not less than 60 days' notice of changes in
Product specifications. Upon receipt of such notification, Anchor will take such
steps as are reasonably necessary to avoid or limit Component or Product
obsolescence due to Product deletions or changes in specifications. Anchor will
notify Colgate in writing of the cost impact on the individual Component price
and the unit price of the Product. Colgate will provide Anchor with written
instructions no later than ten (10) days after receipt of such notification.
(g) Colgate may, from time to time, notify Anchor of a decrease in volume
forecasts which have been previously designated as firm. In such event, Anchor
will use reasonable efforts to revise or cancel orders for Products or
Components.
(h) [*]
5
<PAGE>
[*]
(i) [*]
(j) [*]
7. QUALITY
(a) Quality standards and Product specifications for Finished Toothbrushes
are incorporated herein by reference and are attached as Exhibit F.
6
<PAGE>
(b) Anchor continues to be committed to the goal of meeting Colgate's
quality requirements, [*]. Starting January 1, 1997, Anchor agrees to use
reasonable efforts to meet a goal of [*]. Anchor's reasonable efforts will
include making reasonable capital expenditures, as Anchor determines, where the
results justify the investment.
(c) Anchor will comply with the quality standards and Product
specifications set forth on Exhibit F. Anchor will also comply with the Product
testing protocol set forth on Exhibit G, attached, commencing January 1, 1997.
In addition, effective January l, 1997, Anchor will comply with the requirements
of the Burke Statement on Endrounding, attached as Exhibit H. All changes to
Exhibits F, G and H must be agreed upon by Colgate and Anchor. [*]
(d) Colgate will review standards, specifications and procedures with
Anchor during each Contract Year for the purpose of soliciting Anchor
recommendations for changes which may improve the quality, performance and/or
total cost of the Products, as well as support or improve Anchor operations.
(e) Anchor agrees that its manufacturing facility is and at all times will
be a registered Medical Device Establishment as required by the Federal Food,
Drug and Cosmetics Act, as amended, with respect to the Products.
8. SAMPLES
Anchor will supply to Colgate, free of charge and shipped at Anchor's expense, a
total of 200 cases of Products in each Contract Year, to be specified by Colgate
as needed. For all additional cases of sample Products requested by Colgate but
not entered into the SAP system by Anchor, Anchor will be provided with written,
pre-approved authorizations, classified as EMO's (experimental manufacturing
orders) or MSA's (miscellaneous sample authorizations). Anchor invoices for such
samples will include the Product unit price, Product case price and shipping
charges.
7
<PAGE>
9. KEY PERFORMANCE INDICATORS ("KPIs")
[*]
10. INVESTMENT FUND
Colgate and Anchor will continue the Investment Fund in accordance with current
procedures. Anchor's and Colgate's capital investments will be returned before
savings are shared. Thereafter, Investment Fund savings from Colgate-initiated
material specification changes (not resulting in permanent process changes) will
be [*] Colgate's. All reasonable, actual expenses incurred by Anchor to
evaluate, test, qualify and approve such material specification changes will be
the responsibility of Colgate. Investment Fund savings resulting in permanent
process changes will be shared by Colgate and Anchor equally.
11. EQUIPMENT MAINTENANCE
(a) Colgate and Anchor acknowledge that the molds, bristling setups and
related equipment used in the manufacture of the Products described in Exhibits
A, B, C and D are the sole and exclusive property of Colgate (collectively the
"Colgate Owned Equipment"). For the convenience of Anchor and at no further
expense to Colgate, Anchor will have the right to locate the Colgate Owned
Equipment at the premises of Anchor at 1307 Davis Street or 209 East DeSoto
Drive, Morristown, Tennessee 37814. Except as provided in the preceding
sentence, and except for the sole purpose of performing maintenance, none of the
Colgate Owned
8
<PAGE>
Equipment will be relocated by Anchor without the prior written approval of
Colgate. It is understood that Colgate will have the right to remove the Colgate
Owned Equipment from the premises of Anchor at any time, in its sole discretion,
upon reasonable notice to Anchor, except if such removal will substantially
impede Anchor's performance under this Agreement and Anchor so notifies Colgate.
Upon such notification, Anchor and Colgate agree to develop and execute an
equipment removal plan which will meet the objectives of Colgate and maintain
Anchor's ability to satisfy Colgate's forecasted requirements or change such
requirements of Anchor pursuant to this Agreement. Upon any such removal,
Colgate will pay Anchor its reasonable, actual costs of disassembly and freight
to a location of Colgate's choice. At its sole option, Colgate may within two
(2) years after the termination or expiration of this Agreement request that
Anchor destroy the Colgate Owned Equipment and provide notification of such
destruction. After such two (2) year period, if Colgate has not relocated the
Colgate Owned Equipment, Colgate will be deemed to have abandoned the Colgate
Owned Equipment.
(b) The Colgate Owned Equipment will be maintained, and regular preventive
maintenance will be performed, according to the Colgate Equipment Maintenance
Protocol, which is attached as Exhibit I.
(c) Anchor agrees to conduct day-to-day preventative and operational
maintenance, so that all express conditions relating to preventative and
operational maintenance required by manufacturers' written warranties, if any,
given with the Colgate Owned Equipment are fulfilled so that such warranties
will remain in effect for their stated term; provided that, Anchor has received
a copy of such warranty and that any extraordinary maintenance will be provided
by Anchor at Colgate's expense with Colgate's prior consent, which consent will
not be unreasonably withheld or delayed. Anchor will bill Colgate monthly
(payable net 30 days) for maintenance performed at Colgate's cost pursuant to
this Paragraph 11 (c) .
(d) Anchor acknowledges that the Equipment will be used solely for the
benefit of Colgate to produce Products on behalf of Colgate.
(e) Identification tags supplied by Colgate containing information relating
to the ownership of the Colgate Owned Equipment will be affixed by Anchor. Such
tags will not be removed by Anchor without prior written approval of Colgate.
(f) Anchor agrees that it will not impair the right, title and interest of
Colgate in and to the Colgate Owned Equipment, nor will it allow any lien or
encumbrance to be levied upon the Colgate Owned Equipment. During the term of
this Agreement, and until the Colgate Owned Equipment is removed upon Colgate's
instruction or
9
<PAGE>
abandoned, Colgate will carry and maintain at its cost all-risk property
insurance covering the Colgate Owned Equipment at full replacement cost.
(g) Colgate will have the right, at reasonable times during normal business
hours and upon reasonable notice, to inspect the Colgate Owned Equipment to
ensure that it is being maintained in accordance with Equipment Maintenance
Protocol, and utilized in a manner consistent with the interests of Colgate.
(h) Anchor will not alter or modify the Colgate Owned Equipment without the
prior consent of Colgate. Any such alterations or modification will become the
property of Colgate.
12. CONFIDENTIALITY AND SECURITY
(a) Confidentiality.
(i) Colgate and Anchor agree that each will not disclose to any third
party other than its attorneys or agents or utilize for its own
benefit or that of any third party, proprietary and confidential
information obtained from the other party and designated in
writing as confidential (including formulae, ingredients,
marketing information, manufacturing processes, samples for
testing and storage, records and charts) unless the parties
subsequently enter into contractual arrangements providing for
the use of such information. The term "confidential information"
as used herein will include this Agreement, including all
Exhibits, and all forecasts related hereto, provided that the
provisions of this Paragraph 12(a) shall not apply to any
information:
(l) that is now public knowledge or which hereafter becomes
public knowledge through no fault of the recipient thereof;
or
(2) that is properly provided to the recipient thereof without
restriction by an independent third party; or
(3) that the recipient can show was already lawfully in its
possession at the time of receipt from the disclosing party
hereto; or
(4) that is developed by the recipient thereof in the course of
work by employees of such party or related companies
independent of the other party's confidential information;
or
10
<PAGE>
(5) that is required to be disclosed by court order or by
governmental subpoena or regulation, including, without
limitation, regulations of the Securities and Exchange
Commission; provided, however, that (A) the recipient shall
give prompt written notice of such requirement to the
disclosing party, (B) the recipient shall furnish only that
portion of the confidential information which it is advised
by counsel it is legally required to disclose (the recipient
will consult with the disclosing party regarding the nature
and wording of such disclosure but will not be bound by the
opinion of the disclosing party), and (C) the recipient
shall exercise its best efforts to obtain assurance that
confidential treatment will be afforded such confidential
information as is disclosed, except that in the case of a
public offering, Anchor's obligation to obtain assurance of
confidential treatment shall be limited to seeking such
treatment as might be granted under Rule 406 of the
Securities Act of 1933, as amended; or
(6) that constitutes this Agreement and its Exhibits that is
shown to a party or parties referred to in Section 18(c),
below; provided that Anchor discloses to Colgate in writing
(subject to a written agreement with terms reasonably
acceptable to Colgate not to disclose such identities or use
such information other than for its determination under this
Paragraph 12(a)(i)(6)) at least two (2) business days prior
to disclosure of such information to such party or parties
the identity of such party or parties and Colgate does not
inform Anchor within two (2) business days after receiving
such notice that such party's or parties' business is
materially or directly competitive with any of Colgate's
businesses; and provided further that Anchor makes such
disclosure subject to a confidentiality and non-disclosure
agreement with such party or parties; or
(7) that is a synopsis or redacted copy of this Agreement
comprised of a description of or terms relating to: (a) the
Term; (b) the Products; (c) the materials cost passthrough;
(d) the labor cost passthrough;
11
<PAGE>
(e) the reduced volume impact provisions; (f) the shared
savings provisions; (g) the alternative supplier
provisions; and (h) the parties.
(ii) The obligations of confidentiality and non-disclosure under this
Paragraph 12(a) shall survive for three and one-half (3 1/2)
years from the date of transmission of the confidential
information or the termination of this Agreement, whichever is
later.
(iii) Any and all confidential information in tangible form passed to
one party hereto hereunder shall, on request at the termination
of this Agreement, be immediately returnable to the other party,
but one copy of all such confidential information may be retained
by the receiving party's attorneys to provide a record of
disclosure hereunder.
(iv) Each party hereto shall restrict access to the disclosed
confidential information to the minimum number of its employees
and agents reasonably necessary for proper evaluation and/or use
thereof in the performance of this Agreement.
(b) Security.
(i) As may be requested by Colgate in writing, production and storage
areas for Colgate Products designated by Colgate as "New
Products" or "Classified" will be secured by Anchor by physical
segregation by screening or other similar methods, as approved by
Colgate. Security arrangements will be designated by Anchor,
subject to prior written approval by Colgate not to be
unreasonably withheld. Colgate will reimburse Anchor for the
actual cost of implementing new approved security methods and
arrangements upon the submission of documentation to Colgate.
(ii) Anchor operating personnel will be trained in confidential
procedures reasonably approved by Colgate and access by Anchor
personnel will be restricted to operating personnel dedicated to
working on Colgate production and to appropriate Anchor
management personnel.
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<PAGE>
13. REJECTION AND RETURN
Colgate will have the right to inspect the Product within thirty days after
delivery to determine whether it conforms to the specifications. If any of the
Products supplied hereunder (i) do not conform to the specifications, or (ii)
are defective in material or workmanship ("Defective Products"), then Colgate
will notify Anchor within thirty (30) days after delivery, and, if deemed by
Colgate to be rejectable hereunder, return them to Anchor, at Anchor's expense,
and as the exclusive remedy for such non-conforming Products receive either a
credit or refund of the purchase price paid, or replacement products, all in
accordance with Colgate's direction set forth in the foregoing notice, provided
that Anchor is able to verify the Defective Products.
14. [*]
15. INDEMNIFICATION
(a) Anchor agrees to indemnify and hold Colgate, its subsidiaries and
affiliates, officers, directors, employees and agents harmless from and against
any and all losses, liabilities, damages, actions or claims (including, without
limitation, amounts paid in settlement and reasonable costs of investigation and
reasonable attorneys' fees, resulting from third-party claims for (i) a breach
of its representations under Paragraph 19, below, (ii) bodily injury and
property damage arising out of or resulting from the failure of the Products to
meet the specifications, including the cost of any Product recall because of
such failure, determined to be necessary by Colgate in its sole reasonable
judgment in accordance with customary commercial practices, (iii) loss, injury
or damage incurred by third parties or by Colgate personnel or damage to such
persons' property while on the premises of Anchor, (iv) any act or omission by
Anchor with respect to the Product, (v) any claim that the Products, or the use
or sale of Products, as delivered to Colgate, infringes any patents or other
proprietary rights of a third party, including without limitation, trade
secrets, trademarks and copyrights, and (vi) breach of its representations under
Paragraph l9, below. It is understood that
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<PAGE>
such indemnification by Anchor applies only if any such claim(s) does not arise
out of Colgate's act, omission or wrongful conduct or Anchor's compliance with
Colgate specifications or requirements in connection with Products or their
manufacture.
(b) Colgate agrees to indemnify and hold Anchor, its subsidiaries and
affiliates, officers, directors, employees and agents harmless from and against
any and all losses, liabilities, damages, actions or claims (including, without
limitation, amounts paid in settlement and reasonable costs of investigation and
reasonable attorneys' fees, resulting from third-party claims for (i) damage to
property or person which may be asserted against Colgate or Anchor due to
specifications, including, without limitation, graphics, provided by, or
requirements of Colgate, (ii) trademark and patent infringement or infringement
of other intellectual property of others by specifications provided by or
requirements of Colgate, (iii) matters in connection with a warranty made or
given by Colgate to a third party; and (iv) breach of its representations under
Paragraph 19, below.
(c) The party seeking indemnification ("Indemnitee") shall notify the
indemnifying party ("Indemnitor") within ten (10) business days of receipt of a
claim, demand, suit or action. The Indemnitor shall have the right to provide
counsel of its own choosing and the Indemnitee shall cooperate in providing any
information and assistance reasonably required in defending against the
claim(s). The Indemnitor shall have the sole right and discretion to settle,
compromise, or otherwise dispose of the claim; provided, however, that, at its
own expense, the Indemnitee shall have the right to participate in, but not
control, the defense against the claim and all negotiations for settlement,
compromise, or other disposal of the claim, provided, however, that neither
party shall agree to any settlement of a claim without the consent of the other
party, which consent shall not be unreasonably withheld, and any such settlement
shall contain an unconditional release of the Indemnitee.
(d) Except as expressly provided in Paragraphs 15(a) and (b), above, in no
event will Colgate or Anchor be liable to the other for indirect, special,
incidental, punitive or consequential damages or loss of savings or profits,
under any legal theory, absent a finding of willful misconduct. This limitation
cannot be waived or amended by any person, except pursuant to Paragraph 22(a),
below, and will be effective even if Colgate, Anchor or either of their
respective representatives has been advised of, or might have anticipated, the
possibility of such damages.
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16. INSURANCE
Anchor will, for the Term of this Agreement and any Option Term, have in full
force and effect at its expense comprehensive general liability insurance
including product liability/completed operations, contractual liability and
property damage, naming Colgate as an additional insured thereon (other than
with respect to Anchor's property), said insurance policies having minimum
limits of not less than five million dollars (55,000,000) and all risk property
insurance covering the full value of Anchor's building, machinery, equipment and
work-in-process. Anchor will additionally, for the Term of this Agreement, carry
and maintain in full force and effect workers' compensation insurance to the
statutory limits required by the State of Tennessee and employers' liability,
insurance in limits not less than one million dollars ($1,000,000). Anchor will
furnish Colgate with certificates of said comprehensive general liability,
products liability, contractual liability and property damage insurance naming
Colgate as an additional insured thereon as herein provided, and will provide to
Colgate thirty (30) days' notice prior to written notice of cancellation or
material changes in said insurance policies.
17. ACCOUNTING AND ADMINISTRATION
Anchor will be provided with written approval, which includes but is not limited
to approval by e-mail, prior to commitment of funds for any and all items to be
invoiced to Colgate (other than Products as defined in this Agreement). All
invoices for artwork and/or artwork related changes will be submitted no later
than forty-five (45) days after work has been completed and will be accompanied
by copies of supplier invoices. All invoices for other Anchor services will
include copies of the Colgate spending authorizations and substantiation of
services rendered. Anchor will provide, no later than 15 days after the end of
every calendar quarter, a report on total number of Units of Products (excluding
samples) supplied to Colgate.
18. TERMINATION UPON CERTAIN EVENTS
(a) This Agreement may be terminated by Colgate or Anchor immediately upon
written notice to the other if one or more of the following events occurs:
(i) The other party ceases operations or there in instituted against
it as debtor any proceeding (voluntary or involuntary) in
bankruptcy or for dissolution, liquidation, reorganization,
arrangement or the appointment of a receiver, trustee or judicial
administrator (or the equivalent thereof), or any other
proceeding for the relief of debtors, if, in the case of an
involuntary proceeding, the same will not have been dismissed,
stayed or bonded within ninety (90) days after its institution;
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(ii) The other party makes an assignment for the benefit of, or
arrangement with, its creditors or admits in writing its
inability to pay its debts as they become due;
(iii) If the other party commits a material default in any of the
material terms or obligations of this Agreement (which will not
include failure of Anchor to meet specifications) the
non-defaulting party shall give the defaulting party notice
specifying with particularity the default and the circumstances
surrounding the default. If the defaulting party shall fail to
cure, or, other than with respect to a default in the timely
payment of the purchase price for Products, to take substantial
steps toward curing and diligently proceed to cure the noticed
default within twenty (20) days after receipt of such notice (ten
(10) business days if such default is for the nonpayment of the
purchase price of Products) or, in any event, if the defaulting
party fails to cure such default, other than with respect to a
default in the timely payment of the purchase price for Products,
within sixty (60) days after such notice, the non-defaulting
party shall have the right to terminate this Agreement by giving
the defaulting party further notice at least ten (10) days prior
to the effective date of termination set forth in such further
notice.
(iv) The other party purports to assign its rights and obligations
hereunder in violation of Paragraph 21 hereof.
(b) [*]
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[*]
(c) Upon receiving actual notice of any change or contemplated change in
the beneficial ownership of more than twenty-five (25%) percent of Anchor's
outstanding voting shares, or prior to undertaking a sale of all or
substantially all of its assets (other than changes in ownership resulting from
transfers of such capital stock, or sale of such assets, to, between or among
shareholders of Anchor who are shareholders on the date hereof, or to, between
or among shareholders of Anchor who are shareholders on the date hereof, or to,
between or among persons controlled by, controlling or under common control with
such shareholders), Anchor will promptly notify Colgate in writing of the
identity of the party or parties or potential party or parties to, and other
relevant particulars of, such change of ownership or sale or contemplated change
or sale, as the case may be (subject to a written agreement with terms
reasonably acceptable to Colgate not to disclose such identities or use such
information other than for its determination under this Paragraph 18(c)). If
such change of ownership or sale is made or contemplated to be made to a party
or parties whose business is materially or directly competitive with any of
Colgate's businesses, Colgate must give notice within fifteen (15) business days
after it receives the notice from Anchor if Colgate determines that it will
exercise its right, hereby given, to terminate this Agreement prospectively not
less than ninety (90) days nor more than one hundred eighty (180) days after the
date such change is effected to such party or parties identified by Colgate as
being a material or direct competitor. A public offering of Anchor capital stock
will not be cause of notice by Anchor and will not give rise to any right of
Colgate under this Section 18(c).
(d) Termination of this Agreement as provided above will not relieve either
party of any obligation accruing prior to the effective date of such
termination.
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(e) Colgate's or Anchor's failure to terminate under a provision of
Paragraph 18 of this Agreement will not be deemed a waiver of its respective
rights to terminate in respect thereof or otherwise limit its respective rights
to enforce the obligations of the other party.
19. REPRESENTATIONS
(a) Anchor and Colgate each represents and warrants as follows:
(i) No Conflict. Neither this Agreement nor compliance with the
Agreement's terms and provisions will (i) violate any United
States law, statute, rule or regulation, or any order of any
court or governmental instrumentality, (ii) conflict with, result
in any breach of, constitute a default under, or result in any
lien upon any of its property or assets pursuant to the terms of
any indenture, mortgage, deed of trust, license, franchise,
permit, agreement, patent or other instrument to which it is a
party or by which any of its property or assets is subject, or
(iii) violate its Certificate of Incorporation or By-Laws.
(ii) Approval. Except as expressly required by this Agreement, no
order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by,
any governmental or public body or authority, or any subdivision
thereof, or any other person or entity, is required to authorize,
or is required in connection with (i) the execution, delivery and
performance by it of this Agreement or (ii) the legality,
validity, binding effect or enforceability against it of this
Agreement.
(iii) Legal Compliance. It will comply with all federal, state and
local laws, including, without limitation, the Food, Drug and
Cosmetics Act (the "Act"), rules, executive orders and
regulations applicable to the performance of its obligations
under this Agreement, including, without limitation, the
regulations of the Food and Drug Administration applicable to
Products. The parties acknowledge that the Act requires that no
Product is or will be at the time of delivery adulterated or
misbranded within the meaning of the Act.
18
<PAGE>
(b) Title. Anchor represents and warrants that it will convey good title to
the Products delivered under this Agreement free from, and clear of, any liens
or encumbrances at point of delivery, subject to full payment for such Products.
(c) Colgate's exclusive remedies for breach of Anchor's warranties and
representations in Paragraph 19 with respect to Products shall be as set forth
in Paragraph 13, above, and with respect to third parties, in Paragraph 15(a),
above. Anchor's representations and warranties given in this Agreement are given
only to Colgate and Anchor shall have no obligation for any warranty given by
Colgate with respect to Products. In no event shall Anchor be liable for the
Device Master Record to the extent that Colgate is responsible for the design,
specification or development of Products or for good manufacturing practices to
the extent that they are subject to the direction or control of Colgate.
20. FORCE MAJEURE
(a) Except with respect to the obligation to pay money to a party
hereunder, neither party will be liable for delay or failure in the performance
of this Agreement if such delay or failure arises solely from any one or more of
the following matters: (i) fires, floods, explosions or other catastrophes; (ii)
strikes; (iii) freight embargoes; or (iv) any other similar causes, beyond the
reasonable control of the party concerned; provided that the party claiming the
benefit of this Paragraph 20 gives notice and reasonably full particulars of
such reason to the other party promptly after occurrence of the event relied
upon, and exercises reasonable and persistent diligence to cure such cause and
resume performance. The time for performance by such party shall be so excused
only for as long as is necessary, but not in any event for a period exceeding
three (3) months. After three (3) months, the other party may at any time
thereafter, provided such performance is still excused, terminate this Agreement
immediately upon written notice to the excused party without further liability
hereunder. It is understood and agreed that the settlement of strikes or
lockouts shall be entirely within the discretion of the party having the
difficulty and that the requirement that any reason shall be remedied with all
reasonable dispatch shall not require the settlement of strikes or lockouts by
acceding to demands when such course is inadvisable in the discretion of the
party having the difficulty. When the event operating to excuse performance by
either party shall cease, this Agreement shall continue in full force and effect
until its expiration or earlier termination as provided herein.
(b) In the event of a force majeure, Colgate and Anchor agree to
communicate and cooperate in seeking to avoid or minimize potential interruption
of supply and jointly to develop mutually acceptable contingency plans in the
spirit of this Agreement.
19
<PAGE>
(c) In the event of a force majeure resulting in a partial inability of
Anchor to supply Products to its customers, including supplying the Product to
Colgate, Anchor shall fairly allocate supplies of the Products to Colgate in
proportion to the percent of Colgate business relative to Anchor's total
toothbrush business in a manner not inconsistent with that afforded its best
customers.
21. ASSIGNABILITY
This Agreement is personal to the parties and may not be assigned or transferred
by either party without prior written agreement of the other party; provided,
however, that either party may upon notice assign or transfer the Agreement in
part or in total to any of its subsidiaries or affiliated companies, provided
that the parties, their successors and permitted assignees hereto will remain
liable for performance of all terms and conditions of this Agreement. A transfer
of the capital stock or substantially all of the assets of Anchor or a public
offering and resulting sale of stock shall not be deemed a transfer or
assignment by Anchor for purposes of this Section 21, however, Colgate will have
the right to terminate this Agreement as set forth in Section 18(c) above
22. MISCELLANEOUS
(a) Amendments. This Agreement may be amended or modified only by a written
instrument executed by each party hereto expressly stating that it is an
amendment to the terms of this Agreement. Without limiting the generality of the
foregoing, all sales and purchases of Products contemplated by this Agreement
shall be made solely pursuant to the terms of this Agreement without
consideration of any different or additional terms of any purchase order or
sales acknowledgment or other form of either party and any such additional or
different terms are hereby objected to.
(b) Right to Names. Nothing contained in this Agreement will be construed
as conferring any right to use in advertising, public or other promotional
activities any name, trade name, trademark or other designation (including any
contraction, abbreviation or simulation of any of the foregoing), or, except as
otherwise specifically provided herein patents or other patent rights of either
party to the other.
(c) Counterparts and Headlines. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same agreement. The headings of sections
and paragraphs of this Agreement have been inserted for convenience only, and do
not constitute or modify any of the terms or provisions hereof.
20
<PAGE>
(d) Severability. If any provision(s) of this Agreement is held to be
invalid, the validity of the remaining provisions will not be affected.
(e) Independent Contractors. The status of each of the parties under this
Agreement will be that of independent contractor. Neither party will have the
right to enter into any agreements on behalf of the other nor will it represent
to any person, firm or corporation that it has such right or authority.
23. Arbitration. (a) Subject to sub-paragraphs (b) and (c) below, any
controversy or claim arising out of or relating to the Agreement or the breach,
termination or invalidity thereof (except as to disputes with respect to
indebtedness arising out of the sale of Products), will be settled by
arbitration before three (3) arbitrators in accordance with the rules of the
American Arbitration Association ("AAA") then in effect, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction. Within fifteen (15) days after the commencement of arbitration,
each party shall select one person to act as arbitrator, and the two selected
shall select the third arbitrator within ten (10) days of their appointment. If
the arbitrators selected by the parties are unable or fail to agree upon the
third arbitrator, the third arbitrator shall be selected by the American
Arbitration Association. At least one of the arbitrators selected will be an
attorney actively engaged in the practice of law for at least ten (10) years and
familiar with procurement agreements. Any such arbitration will be conducted in
New York, N.Y. The arbitrators shall apply New York law, regardless of its
choice of law principles. The reasonable expenses of the arbitration shall be
borne equally by the parties. Each party shall bear the cost of its counsel and
other experts.
(b) The arbitrators will have no authority to make any ruling, finding or
award that does not conform to the terms and conditions of this Agreement.
(c) Either party, before or during any arbitration, may apply to a court
having jurisdiction for a temporary restraining order or preliminary injunction
where such relief is necessary to protect its interests pending completion of
the arbitration proceedings. Arbitration will not be required for actions for
recovery of specific property.
(d) Neither party nor the arbitrators may disclose the existence or results
of any arbitration hereunder without the prior written consent of both parties.
21
<PAGE>
(e) Prior to initiation of arbitration or any other form of legal or
equitable proceeding, the aggrieved party will give the other party written
notice in accordance with Section 24. describing the claim and amount as to
which it intends to initiate action.
24. Notices
Any communication to be given pursuant to this Agreement will be presumed to
have been made when delivered to the addressee in person, or, if mailed, when
deposited in the mail, by first class, registered or certified mail, return
receipt requested and postage prepaid, or, if faxed, when faxed by means
confirming receipt addressed as follows:
If to Anchor: Anchor Advanced Products, Inc.
1111 Northshore Drive
Knoxville, Tennessee 37919
Fax (423) 450-5379
with a copy to: Piliero Goldstein Jenkins & Hall
292 Madison Avenue
New York, New York 10017
Attn: Edward J. Goldstein, Esq.
Fax (212) 685-2028
If to Colgate, to the following address, to the attention of Director-Materials
Sourcing:
Colgate-Palmolive Company
300 Park Avenue
New York, N.Y. 10023
Fax (212) 310-2923
with a copy to: Beth McQuillan, Division General Counsel,
Colgate US
Colgate-Palmolive Company
300 Park Avenue
New York, N.Y. 10023
Fax (212) 310-3274
25. GOVERNING LAW
This Agreement will be interpreted in accordance with the laws of the State of
New York as applied to contracts to be performed entirely in the State of New
York.
22
<PAGE>
26. ENTIRE AGREEMENT
The Exhibits to this Agreement are an integral part hereof and are hereby
incorporated by reference. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and THERE ARE NO
AGREEMENTS, UNDERSTANDINGS, REPRESENTATIVES OR WARRANTIES (INCLUDING, WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE), EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT. This
Agreement supersedes all previous communications, representations,
understandings and agreements.
Please sign below to indicate your acceptance of this Agreement together with
its Exhibits.
COLGATE-PALMOLIVE COMPANY
By /s/
-----------------------
Date 7/12/96
---------------------
ANCHOR ADVANCED PRODUCTS, INC.
By /s/Robert T. Parkey
---------------------
Name Robert T. Parkey
-----------------
Tit1e Exec. Vice Pres.
-----------------
Date 7/10/96
-----------------
[*] Exhibits A (57 pages), B (39 pages), C (20 pages), D (42 pages), E (1 page),
F (30 pages), G (2 pages), H (1 page) & I (1 page) have been omitted in their
entirety.
23
EXHIBIT 10.9
FORM OF PROMISSORY NOTE
PROMISSORY NOTE
$_____________________________ , Connecticut
_________________________, 199___
FOR VALUE RECEIVED, ANCHOR ADVANCED PRODUCTS, INC., a Delaware corporation
having an office and place of business at 95 Johnson Street, Waterbury,
Connecticut 06710, Connecticut (the "Maker"), promises to pay to the order of
the CONNECTICUT DEVELOPMENT AUTHORITY, a body politic and corporate,
constituting a public instrumentality and political subdivision of the State of
Connecticut (the "Authority") at its principal office at 845 Brook Street, Rocky
Hill, Connecticut, or at such other place as the Authority may designate in
writing, without notice or offset, the principal sum of
__________________________ and ___/100 ($____________) DOLLARS, together with
interest in arrears thereon from the date hereof at the rate of five percent
(5%) per annum upon the whole of said principal sum remaining from time to time
unpaid. Said principal and interest shall be due and payable in monthly
installments as follows:
Upon the execution of this Note, interest from the date hereof of the
_______ day of _________, 199__, and thereafter, the sum of
_________________________________ AND ______ /100 DOLLARS ($_________), on the
first day of ____________, 199__, and a like sum on the first day of each and
every month thereafter until the entire principal sum with interest in arrears
has been fully paid, except that if not sooner paid, all outstanding principal
plus all accrued interest shall be due and payable on _____________________,
2001. Each monthly installment shall be applied first to the payment of any
other amount due and owning hereunder or under or under the Loan Agreement (as
defined herein), then to late charges, then to accrued and unpaid interest on
this Note and the balance on account of the principal of this Note.
This Note is the [first, second, third, etc.] in a series of Notes made by
the Maker to the order of the Authority in an aggregate principal amount equal
to the lesser of (i) Six Hundred Fifty Thousand and 00/100 ($650,000.00)
Dollars; and (ii) eighty (80%) percent of the cost of the collateral securing
the advances evidenced thereby or so much thereof as shall from time to time
have been advanced by the Authority to the Maker pursuant to the provisions of
the Loan Agreement and remain outstanding, as conclusively evidenced by the
Books and records of the Authority[, the first of such series of Notes being
made by the
<PAGE>
Maker on ____________________ to the order of the Authority in the original
principal amount of $___________________; the second of such series... etc.].
Maker agrees to pay all taxes or duties levied or assessed against
Authority or other holder of this Note on account of this Note, or the loan
agreement pursuant to which this Note is issued (the "Loan Agreement"), or the
security agreement securing the Note (the "Security Agreement"), or upon the
collateral granted under the Security Agreement. Maker further agrees to pay all
costs, expenses and reasonable attorneys' fees incurred by Authority in any
proceeding for the collection of the debt evidenced hereby, or in any action to
enforce its rights in collateral granted under the Security Agreement upon the
happening of a default as provided for in the Security Agreement, or in
protecting or sustaining the lien of the Security Agreement or in any litigation
or controversy arising from or connected with this Note or the Security
Agreement.
There shall be an Event of Default: (i) if Maker defaults for ten (10) days
in making any payment of principal or interest on this Note, in making any
payment of taxes or any municipal assessment, any insurance premiums, any lien
or charge upon any property, real or personal, by which this Note is secured, or
any other payment under this Note, the Loan Agreement or the Security Agreement,
as the same become due, or (ii) if there occurs an event of default under the
Loan Agreement, the Security Agreement, or any other document evidencing,
securing or guarantying the loan evidenced by this Note, or (iii) if an order
for relief is sought by or against Maker or any guarantor under the Federal
Bankruptcy Code or acts amendatory thereof or supplemental thereto or under any
statute either of the United States or any state in connection with insolvency
or reorganization or for the appointment of a receiver or trustee for all or a
portion of Maker's or any guarantor's property, and any such order for relief,
receiver or trustee is not withdrawn, dismissed, discharged, or removed within
sixty (60) days, except for any order sought or consented to by the Maker or any
guarantor, in which case the event of default shall be immediate, or (iv) if an
assignment of Maker's or any guarantor's property is made for the benefit of
creditors, or (v) if Maker or any guarantor declares in writing its inability to
pay debts as they come due, or (vi) if Maker or any guarantor liquidates or
dissolves or is liquidated or dissolved, or (vii) if the United States of
America, the State of Connecticut or any agency or subdivision thereof, imposes
a tax, levy or assessment on or concerning this Note, which Maker cannot
lawfully or does not pay when due. Upon the occurrence of an Event of Default,
the entire principal sum with accrued interest thereon due under this Note
shall, at the option of Authority, become due and payable and
<PAGE>
Authority may proceed to exercise any rights and remedies under this Note, the
Loan Agreement, the Security Agreement law, in equity or otherwise. No failure
to exercise such shall be deemed to be a waiver on the part of Authority right
to exercise the same in the event of any subsequent of default.
Authority may collect a "late charge" not to exceed amount equal to five
percent (5.00%) of any installment interest or principal or both which is not
paid with ten days after the date on which said payment is due. Late charge
shall be separately charged to and collected from Maker and be due upon demand
by Authority.
Maker shall have the right to prepay this Note in who in part upon any
interest payment date, without penalty. An all partial prepayments, after
application, at Author option, to other amounts then due the Authority pursuant
to Note, the Security Agreement or the Loan Agreement, shall credited to unpaid
principal installments in the inverse order their maturity or in such other
manner as Authority reasonably deem proper.
As more fully described in Section 3.19 of the Agreement, this Note is,
under certain circumstances, subject prepayment in full and to payment of a
penalty of five percent of the original principal amount hereof.
Maker and each and every endorser, guarantor, and sure this Note and all
others who may become liable for all or part of this obligation do hereby waive,
to the extent permitted by applicable law, diligence, demand, presentment for
pay protest, notice of protest and notice of non-payment of Note, and do hereby
consent to any number of renewal extensions of the time of payment hereof and of
the time advances under the Loan Agreement or the Security Agreement any, and
agree that any such renewals or extensions may be without notice to any of said
parties and without affect their liability herein and further consent to the
release or part or parts or all of the security for the payment hereof to the
release of any party of parties liable hereon, all without affecting the
liability of the other persons, firms corporations liable for the payment of
this Note.
Upon the occurrence of an Event of Default, at the of the Authority, the
Authority may pay insurance premiums, and assessments, and any and all other
expenses which may reasonable or necessary to protect the property, personal,
securing this Note or to protect or sustain the the Security Agreement. Any such
payment made by the Authority.
<PAGE>
pursuant to said option shall be added to the principal balance due hereunder
and shall bear interest as set forth herein from the date of payment by
Authority and shall be payable on demand with interest from the date of payment
by Authority.
Maker agrees that all expenditures incurred by Authority under this Note
other than principal, and the principal of this Note after maturity, upon an
Event of Default or after a judgment hereon, shall bear interest at the rate of
twelve percent (12.00%) per annum, from the date of demand, default or judgment,
as applicable.
Any notice to Maker provided for in this Note shall be given by mailing
such notice by prepaid, certified mail, return receipt requested, addressed to
1111 Northshore Drive, Knoxville Tennessee 37919-4048, Attention: Chief
Financial Officer, or to such other address as Maker may designate by notice to
the Authority. Any notice to the Authority shall be given by mailing such notice
by prepaid, certified mail, return receipt requested, to the address stated in
the first paragraph of this Note, or to such other person or address as may have
been designated by notice to Maker. Notice shall be deemed given if mailed in
accordance with this paragraph upon receipt or refusal.
MAKER ACKNOWLEDGES THAT THIS NOTE AND THE UNDERLYING TRANSACTIONS GIVING
RISE HERETO CONSTITUTE COMMERCIAL BUSINESS TRANSACTED WITHIN THE STATE OF
CONNECTICUT. IN THE EVENT OF ANY LEGAL ACTION BETWEEN MAKER AND AUTHORITY
HEREUNDER, MAKER HEREBY EXPRESSLY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHTS WITH REGARD TO NOTICE, PRIOR HEARING AND ANY OTHER RIGHTS IT MAY
HAVE UNDER THE CONNECTICUT GENERAL STATUTES, CHAPTER 903a, AS NOW CONSTITUTED OR
HEREAFTER AMENDED, OR OTHER STATUTE OR STATUTES, STATE OR FEDERAL, AFFECTING
PREJUDGMENT REMEDIES, AND AUTHORITY MAY INVOKE ANY PREJUDGMENT REMEDY AVAILABLE
TO IT, INCLUDING, BUT NOT LIMITED TO, GARNISHMENT, ATTACHMENT, FOREIGN
ATTACHMENT AND REPLEVIN, WITH RESPECT TO ANY TANGIBLE OR INTANGIBLE PROPERTY
(WHETHER REAL OR PERSONAL) OF MAKER TO ENFORCE THE PROVISIONS OF THIS NOTE,
WITHOUT GIVING MAKER ANY NOTICE OR OPPORTUNITY FOR A HEARING, TO THE EXTENT
PERMITTED BY APPLICABLE LAW.
The term the "Authority" as used in this Note shall include the Authority
and any subsequent holder or holders hereof.
This Note has been made, executed and delivered in the State of Connecticut
and shall be construed and enforced under and in accordance with the laws of the
State of Connecticut. The execution of this Note and the performance of the
Maker's obligations hereunder shall be deemed to have a Connecticut situs
<PAGE>
and Maker shall be subject to the personal jurisdiction of the courts of the
State of Connecticut with respect to any action the Authority or any subsequent
holder or holders hereof may commence hereunder or thereunder. Accordingly,
Maker hereby specifically and irrevocably consents to the jurisdiction of the
courts of the State of Connecticut with respect to all matters concerning this
Note.
This Note is issued pursuant to the Loan Agreement, and all terms,
conditions and provisions thereof are deemed incorporated herein as if fully set
forth herein.
IN WITNESS WHEREOF, Maker has hereunto set its hand this _______ day of
_______, 199__.
ANCHOR ADVANCED PRODUCTS, INC.
By: ______________________________
John J. Nugent
Its Executive Vice President
Duly Authorized
This Note is secured and by certain
machinery and equipment under a security
agreement by and between Maker and
Holder dated ____________, 1994.
Execution Copy
================================================================================
ANCHOR ADVANCED PRODUCTS, INC.
----------------------------------------
$100,000,000
11 3/4% Senior Notes 2004
----------------------------------------
-------------------
PURCHASE AGREEMENT
DATED AS OF MARCH 26, 1997
-------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
CIBC Wood Gundy Securities Corp.
NationsBanc Capital Markets, Inc.
================================================================================
<PAGE>
ANCHOR ADVANCED PRODUCTS, INC.
$100,000,000 Principal Amount of
11 3/4% Senior Notes due 2004
PURCHASE AGREEMENT
------------------
March 26, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
NATIONSBANC CAPITAL MARKETS, INC.
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Ladies and Gentlemen:
Anchor Advanced Products, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell an aggregate of $100,000,000 in principal amount of
11 3/4% Senior Notes due 2004 (the "Senior Notes") of the Company, to Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ"), CIBC Wood Gundy Securities
Corp. ("CIBC") and NationsBanc Capital Markets, Inc. ("NationsBanc" and,
together with DLJ and CIBC, the "Initial Purchasers") to be issued pursuant to
an indenture (the "Indenture") between the Company and Fleet National Bank, as
trustee (the "Trustee"). The payment of principal of, premium and Liquidated
Damages (as defined in the Indenture), if any, and interest on the Senior Notes
and the Company's new 3/4% Senior Notes due 2004 to be issued in exchange for
the Senior Notes in accordance with the provisions of the Registration Rights
Agreement referred to below (the "New Senior Notes" and, together with the
Senior Notes, the "Notes") will be unconditionally guaranteed on a senior basis
by (i) Anchor Holdings, Inc., ("Holdings") the direct parent of the Company, and
(ii) any subsidiary of the Company formed or acquired after the Closing Date (as
defined below) that executes an additional guarantee in accordance with the
provisions of the Indenture, and their respective successors and assigns
(collectively, the "Guarantors"), pursuant to their guarantees (the
"Guarantees"). The Notes and the Guarantees are hereinafter collectively
referred to as the "Securities." Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Indenture.
1. ISSUANCE OF SECURITIES. The Senior Notes will be offered and sold to
the Initial Purchasers pursuant to an exemption from the registration
requirements under the Securities Act of 1933, as amended (the "Act"). The
Company has prepared a preliminary offering memorandum, dated March 5, 1997 (the
"Preliminary Offering Memorandum") and a final offering memorandum, dated March
, 1997 (the "Offering Memorandum" and, together with the Preliminary Offering
Memorandum, the "Offering Documents"), relating to the Company and the Senior
Notes.
1
<PAGE>
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Act, the Senior Notes
(and all securities issued in exchange therefor or in substitution thereof)
shall bear the following legend:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM
THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE
UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
2. AGREEMENTS TO SELL AND PURCHASE. On the basis of the representations
and warranties contained in, and subject to the terms and conditions of, this
Agreement, (i) the Company agrees to issue and sell the Senior Notes to the
Initial Purchasers, and (ii) each Initial Purchaser agrees, severally and not
jointly, to purchase Senior Notes from the Company in the principal amount set
forth opposite the name of such Initial Purchaser in Schedule I at a price of
97.0% of the principal amount of the Senior Notes (the "Purchase Price").
3. TERMS OF OFFERING. The Initial Purchasers have advised the Company
that the Initial Purchasers will make offers (the "Exempt Resales") of the
Senior Notes purchased by the Initial Purchasers hereunder on the terms set
forth in the Offering Memorandum, as amended or supplemented, solely to (i)
persons (each, a "144A Purchaser") whom the Initial Purchasers reasonably
believe to be "qualified institutional buyers" as defined in Rule 144A under the
Act ("QIBs") and (ii) a limited number of other institutional "accredited
investors," as defined in Rule 501(a) (1), (2), (3) and (7) under the Act, that
make certain representations and agreements to the Company (each, an "Accredited
Institution") (such persons specified in clauses (i) and (ii) being referred to
herein as the "Eligible Purchasers"). The Initial Purchasers will offer the
Senior Notes to Eligible Purchasers initially at a price equal to 100% of the
principal amount thereof. Such price may be changed at any time without notice.
2
<PAGE>
Holders (including subsequent transferees) of the Senior Notes will
have the registration rights set forth in the registration rights agreement (the
"Registration Rights Agreement"), to be dated the Closing Date (as defined
below), in substantially the form of Exhibit A hereto, for so long as such
Senior Notes constitute "Transfer Restricted Securities" (as defined in the
Registration Rights Agreement). Pursuant to the Registration Rights Agreement,
the Company will agree to file with the Securities and Exchange Commission (the
"Commission") under the circumstances set forth therein, (i) a registration
statement under the Act (the "Exchange Offer Registration Statement") relating
to (A) the New Senior Notes to be offered in exchange for the Senior Notes,
(such offer to exchange being referred to as the "Registered Exchange Offer")
and/or (ii) a shelf registration statement pursuant to Rule 415 under the Act
(the "Shelf Registration Statement" and together with the Exchange Offer
Registration Statement, the "Registration Statements") relating to the resale by
certain holders of the Senior Notes, and to use their best efforts to cause such
Registration Statements to be declared effective. This Agreement, the Indenture
and the Registration Rights Agreement are hereinafter referred to collectively
as the "Operative Documents."
4. DELIVERY AND PAYMENT. Delivery to the Initial Purchasers by the
Company of, and payment by the Initial Purchasers for, the Senior Notes shall be
made at 10:00 A.M., New York City time, on March , 1997 (the "Closing Date") at
the offices of Latham & Watkins, 885 Third Avenue, New York, New York 10022 or
such other time or place as the Initial Purchasers and the Company shall
designate.
One or more Senior Notes in definitive form, registered in the name of
Cede & Co., as nominee of the Depository Trust Company ("DTC"), or such other
names as the Initial Purchasers may request upon at least one business day's
notice to the Company, having an aggregate principal amount corresponding to the
aggregate principal amount of Senior Notes sold pursuant to Exempt Resales to
QIBs and to Accredited Institutions (the "Master Note"), shall be delivered by
the Company to the Initial Purchasers, against payment by the Initial Purchasers
of the purchase price thereof by wire transfer of same day funds to the order of
the Company or as the Company may direct. The Master Note in definitive form
shall be made available to the Initial Purchasers for inspection not later than
9:30 A.M. on the business day immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY. The Company agrees with the Initial
Purchasers:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, to confirm such advice in writing,
(i) of receipt of any notification with respect to the issuance by any
state securities commission of any stop order suspending the
qualification or exemption from qualification of any of the Senior
Notes for offering or sale in any jurisdiction designated by the
Initial Purchasers pursuant to Section 5(f), or the initiation of any
proceeding for such purpose by any state securities commission or other
regulatory authority, and (ii) of the happening of any event that makes
any statement of a material fact made in the Offering Documents (or any
amendment or supplement thereto) untrue or that requires the making of
any additions to or changes in the Offering Documents (or any amendment
or supplement thereto) in order to make the statements therein, in the
light of the circumstances in which they are made, not misleading. The
Company shall use its reasonable best efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption
from qualification of the Senior Notes under any state securities or
Blue Sky laws, and, if at any time any state securities
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commission or other regulatory authority shall issue any stop order or
order suspending the qualification or exemption from qualification of
any of the Senior Notes under any state securities or Blue Sky laws,
the Company shall use its reasonable best efforts to obtain the
withdrawal or lifting of such order at the earliest possible time.
(b) Subject to paragraph (e) below, to furnish to the Initial
Purchasers, without charge, as many copies of the Preliminary Offering
Memorandum and the Offering Memorandum, and any amendments or
supplements thereto, as the Initial Purchasers may reasonably request.
The Company consents to the use of the Preliminary Offering Memorandum
and the Offering Memorandum, and any amendments or supplements thereto,
by the Initial Purchasers in connection with Exempt Resales.
(c) Not to amend or supplement the Offering Memorandum,
whether before or after the Closing Date, unless (i) the Initial
Purchasers have been previously advised thereof, and (ii) the Initial
Purchasers have not reasonably objected thereto; and to prepare,
promptly upon the Initial Purchasers' request, any amendment or
supplement to the Offering Memorandum that the Initial Purchasers deem
necessary or advisable in connection with Exempt Resales.
(d) Subject to paragraph (e) below, if, after the date hereof
and prior to the completion of Exempt Resales of the Senior Notes by
the Initial Purchasers, any event shall occur as a result of which it
becomes necessary to amend or supplement the Offering Memorandum to
comply with any law or to make the statements therein, in the light of
the circumstances at the time that the Offering Memorandum is delivered
to an Eligible Purchaser which is a prospective purchaser, not
misleading, to promptly (i) prepare an appropriate amendment or
supplement to the Offering Memorandum so that the statements in the
Offering Memorandum, as so amended or supplemented, will comply with
all applicable laws and will not, in the light of the circumstances at
the time it is so delivered, be misleading, and (ii) furnish each
Initial Purchaser with such number of copies of the Offering
Memorandum, as amended or supplemented, as such Initial Purchaser may
reasonably request.
(e) Prior to the consummation of the Exchange Offer or the
effectiveness of an applicable shelf registration statement if, in the
reasonable judgment of the Initial Purchasers, the Initial Purchasers
or any of their affiliates (as such term is defined in the rules and
regulations under the Act) are required to deliver an Offering
Memorandum in connection with sales of, or market-making activities
with respect to, the Senior Notes, (A) to periodically amend or
supplement the Offering Memorandum so that the information contained in
the Offering Memorandum complies with the requirements of Rule 144A of
the Act, (B) to amend or supplement the Offering Memorandum when
necessary to reflect any material changes in the information provided
therein so that the Offering Memorandum will not contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances existing as of the date the Offering Memorandum is so
delivered, not misleading and (C) to provide the Initial Purchasers
with copies of each such amended or supplemented Offering Memorandum,
as the Initial Purchasers may reasonably request.
Following the consummation of the Exchange Offer or the
effectiveness of an applicable shelf registration statement and for so
long as the Notes are outstanding if, in the reasonable judgment of the
Initial Purchasers, the Initial Purchasers or any of their affiliates
(as such term is defined in the rules and regulations under the Act)
are required to deliver a prospectus in
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connection with sales of, or market-making activities with respect to,
such securities, (A) to periodically amend the applicable registration
statement so that the information contained therein complies with the
requirements of Section 10(a) of the Act, (B) to amend the applicable
registration statement or supplement the related prospectus or the
documents incorporated therein when necessary to reflect any material
changes in the information provided therein so that the registration
statement and the prospectus will not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances existing
as of the date the prospectus is so delivered, not misleading and (C)
to provide the Initial Purchasers with copies of each amendment or
supplement filed and such other documents as the Initial Purchasers may
reasonably request.
The Company hereby expressly acknowledges that the
indemnification and contribution provisions of Section 8 hereof are
specifically applicable and relate to each offering memorandum,
registration statement, prospectus, amendment or supplement referred to
in this Section 5(e).
(f) To (i) cooperate with the Initial Purchasers and counsel
for the Initial Purchasers in connection with the qualification of the
Senior Notes for offer and sale by the Initial Purchasers under the
state securities or Blue Sky laws of such jurisdictions as the Initial
Purchasers may request, (ii) continue such qualification in effect so
long as required for Exempt Resales of the Senior Notes and (iii) file
such consents to service of process or other documents as may be
necessary in order to effect such qualification; provided that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified, or take any action which
would subject it to general service of process in any jurisdiction
where it is not now so subject.
(g) So long as any of the Notes are outstanding and the
Company is subject to Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), to file reports pursuant
to Section 13 or 15(d) of the Exchange Act, and, during the period of
two years following the date of this Agreement, to deliver to the
Initial Purchasers, promptly upon their becoming available, (i) copies
of all current, regular and periodic reports filed by the Company with
any securities exchange or with the Commission or any governmental
authority succeeding to any of the Commission's functions, and (ii)
copies of each report or other publicly available information of the
Company mailed to the holders of Notes and such other publicly
available information concerning the Company and its subsidiaries as
the Initial Purchasers may request.
(h) To use the net proceeds from the sale of the Senior Notes
in the manner specified in the Offering Memorandum (and any amendments
or supplements thereto) under the caption "Use of Proceeds."
(i) Not to voluntarily claim, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders of
the Notes.
(j) Except as otherwise agreed to by the parties hereto, to
pay all costs, expenses, fees and taxes incident to,
(1) the preparation, printing, filing and
distribution under the Act of the Offering Documents
(including financial statements and exhibits) and all
amendments and supplements to any of them,
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<PAGE>
(2) the printing and delivery of the Operative
Documents, the Senior Notes, the preliminary and supplemental
Blue Sky memoranda and all other agreements, memoranda,
correspondence and other documents printed and delivered in
connection herewith and with the Exempt Resales (including in
each case any disbursements of counsel to the Initial
Purchasers relating to such printing and delivery),
(3) the issuance and delivery by the Company of the
Senior Notes,
(4) the registration or qualification of the Senior
Notes for offer and sale under the securities or Blue Sky laws
of the several states (including in each case the reasonable
fees and disbursements of counsel to the Initial Purchasers
relating to such registration or qualification and memoranda
relating thereto),
(5) furnishing such copies of the Preliminary
Offering Memorandum and the Offering Memorandum and all
amendments and supplements thereto as may be requested for use
in connection with the Exempt Resales,
(6) the rating of the Senior Notes by rating
agencies, if any,
(7) the reasonable fees, disbursements and expenses
of the Company's and Guarantors' counsel and accountants,
(8) all expenses and listing fees in connection with
the application for quotation of the Senior Notes in the
National Association of Securities Dealers, Inc. Automated
Quotation System - PORTAL ("Portal"),
(9) all fees and expenses (including reasonable fees
and expenses of counsel) of the Company and the Guarantors in
connection with approval of the Securities by DTC for
"book-entry" transfer, and
(10) the performance by the Company of its other
obligations under this Agreement.
(k) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than a default by the Initial
Purchasers) or if for any reason the Company shall be unable or
unwilling to perform their obligations hereunder, the Company shall,
except as otherwise agreed by the parties hereto, reimburse the Initial
Purchasers for the fees and expenses to be paid or reimbursed pursuant
to Section 5(j) above, and reimburse the Initial Purchasers for all
out-of-pocket expenses (including the reasonable fees and expenses of
counsel to the Initial Purchasers) reasonably incurred by the Initial
Purchasers in connection with the transactions contemplated by this
Agreement.
(l) Prior to the Closing Date, to furnish to the Initial
Purchasers, as soon as they have been prepared by the Company, a copy
of any consolidated financial statements of the Company or Holdings for
any period subsequent to the period covered by the financial statements
appearing in the Offering Memorandum.
(m) Not to distribute prior to the Closing Date any offering
material in connection with the offering and sale of the Senior Notes
other than the Offering Memorandum.
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<PAGE>
(n) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Senior Notes in a manner
that would require the registration under the Act of the sale to the
Initial Purchasers or the Eligible Purchasers of Senior Notes.
(o) For so long as any of the Notes remain outstanding and
during any period in which the Company is not subject to Section 13 or
15(d) of the Exchange Act, to make available to any Eligible Purchaser
or beneficial owner of Notes in connection with any sale thereof and
any prospective purchaser of such Notes from such Eligible Purchaser or
beneficial owner, the information required by Rule 144A(d)(4) under the
Act.
(p) To comply with their agreements in the Registration Rights
Agreement, and all agreements set forth in the representation letters
of the Company to DTC relating to the approval of the Senior Notes by
DTC for "book-entry" transfer.
(q) To cause the Exchange Offer, if available, to be made in
the appropriate form, as contemplated by the Registration Rights
Agreement, to permit registration of the New Senior Notes to be offered
in exchange for the Senior Notes and to comply with all applicable
federal and state securities laws in connection with the Registered
Exchange Offer.
(r) To use its best efforts to effect the inclusion of the
Senior Notes in PORTAL.
(s) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by
the Company prior to the Closing Date and to satisfy all conditions
precedent to the delivery of the Senior Notes.
6. REPRESENTATIONS AND WARRANTIES. Each of the Company and the
Guarantors (as applicable) represents and warrants to each Initial Purchaser
that:
(a) The Offering Documents have been prepared in connection
with the Exempt Resales. The Preliminary Offering Memorandum as of its
date does not, and the Offering Memorandum as of its date does not and
as of the Closing Date will not, and any amendment or supplement
thereto will not, contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading, except that the representations and
warranties contained in this paragraph (a) shall not apply to
statements or omissions in the Offering Documents (or any amendment or
supplement thereto) based upon information relating to the Initial
Purchasers furnished to the Company in writing by the Initial
Purchasers expressly for use therein. No stop order preventing the use
of the any of the Offering Documents, or any amendment or supplement
thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration
requirements of the Securities Act, have been issued.
(b) The Company (i) is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of
incorporation, (ii) has full corporate power and authority to carry on
its respective business as it is currently being conducted and to own,
lease and operate its respective properties, and (iii) is duly
qualified and in good standing as a foreign corporation registered to
do business in each jurisdiction in which the nature of its business or
its ownership
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<PAGE>
or leasing of property requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on
the financial condition, business, property, prospects, net worth or
results of operations of the Company (a "Material Adverse Effect").
(c) Holdings (i) is duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of
incorporation, (ii) has full corporate power and authority to carry on
its respective business as it is currently being conducted and to own,
lease and operate its respective properties, and (iii) is duly
qualified and in good standing as a foreign corporation registered to
do business in each jurisdiction in which the nature of its business or
its ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a Material
Adverse Effect.
(d) All of the outstanding capital stock of the Company and
Holdings has been duly authorized and validly issued, is fully paid and
nonassessable, is not subject to preemptive or similar rights and,
except as described in the Offering Memorandum, there are no
outstanding rights, warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or
other equity interest in the Company or Holdings.
(e) Each of the Company and Holdings has all necessary
corporate power and authority to enter into and perform its respective
obligations under the Operative Documents, the Company has the
necessary corporate power and authority to issue, sell and deliver the
Senior Notes to the Initial Purchasers and Holdings has the necessary
corporate power and authority to issue the Guarantees. At December 31,
1996, on a consolidated basis, after giving pro forma effect to the
issuance and sale of the Senior Notes pursuant thereto, Holdings would
have an authorized and outstanding consolidated capitalization as set
forth in the Offering Memorandum under the caption "Capitalization."
(f) The Company is not (i) in violation of its charter or
bylaws, (ii) in default in any material respect in the performance of
any obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in any other
agreement, indenture or instrument material to the conduct of the
business of the Company, to which the Company is a party or by which it
or its property is bound, or (iii) in violation of any local, state or
federal law, statute, ordinance, rule, regulation, requirement,
judgment or court decree (including, without limitation, environmental
laws, statutes, ordinances, rules, regulations, judgments or court
decrees) applicable to the Company or any of its assets or properties
(whether owned or leased), other than violations or defaults that would
not reasonably be expected to have a Material Adverse Effect. To the
best knowledge of the Company, there exists no condition that, with
notice, the passage of time or otherwise, would constitute a default
under any such document or instrument, except for such defaults that
could not reasonably be expected to have a Material Adverse Effect.
(g) Holdings is not (i) in violation of its charter or bylaws,
(ii) in default in any material respect in the performance of any
obligation, agreement or condition contained in any bond, debenture,
note or any other evidence of indebtedness or in any other agreement,
indenture or instrument material to the conduct of the business of
Holdings, to which Holdings is a party or by which it or its property
is bound, or (iii) in violation of any local, state or federal law,
statute, ordinance, rule, regulation, requirement, judgment or court
decree (including, without limitation, environmental laws, statutes,
ordinances, rules, regulations, judgments or court decrees) applicable
to Holdings or any of its assets or properties (whether owned or
leased), other
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<PAGE>
than violations that would not reasonably be expected to have a
Material Adverse Effect. To the best knowledge of Holdings, there
exists no condition that, with notice, the passage of time or
otherwise, would constitute a default under any such document or
instrument, except for such defaults that could not reasonably be
expected to have a Material Adverse Effect.
(h) None of (i) the execution, delivery or performance by the
Company or Holdings of this Agreement and the other Operative
Documents, (ii) the issuance and sale of the Notes by the Company or
the issuance of the Guarantees by Holdings and (iii) the consummation
by the Company of the transactions described in the Offering Memorandum
under the caption "Use of Proceeds," will conflict with or constitute a
breach of any of the terms or provisions of, or a default under, or
result in the imposition of a lien or encumbrance on any properties of
the Company or Holdings, as the case may be, or an acceleration of
indebtedness pursuant to, (1) the charter or bylaws of the Company or
Holdings, as the case may be, (2) any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which the
Company or Holdings, as the case may be, is a party or by which it or
its property is bound, or (3) any law or administrative regulation
applicable to the Company or Holdings, as the case may be, or any of
its assets or properties, or any judgment, order or decree of any court
or governmental agency or authority entered in any proceeding to which
the Company or Holdings, as the case may be, was or is now a party or
to which it or its properties may be subject. No consent, approval,
authorization or order of, or filing or registration with, any
regulatory body, administrative agency, or other governmental agency
(except as securities or Blue Sky laws of the various states may
require) that has not been made or obtained is required for the
execution, delivery and performance of the Operative Documents and the
valid issuance and sale of the Securities. No consents or waivers from
any person are required to consummate the transactions contemplated by
the Operative Documents or the Offering Documents, other than such
consents and waivers as have been or will be obtained prior to the
Closing Date or, in the case of the Registration Rights Agreement and
the transactions contemplated thereby, will be obtained and made) under
the Act, the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and state securities or Blue Sky laws and regulations.
(i) This Agreement has been duly authorized and validly
executed by each of the Company and Holdings and (assuming the due
execution and delivery thereof by the Initial Purchasers) is a legally
valid and binding obligation of each of the Company and Holdings,
enforceable against each of them in accordance with its terms, except
as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights generally, (ii)
limited by general principles of equity (whether considered in a
proceeding at law or in equity) and (iii) limited by securities laws
prohibiting or limiting the availability of, and public policy against,
indemnification or contribution. The Offering Memorandum contains an
accurate summary, in all material respects, of the terms of this
Agreement.
(j) Each of the Company and Holdings has duly authorized the
Indenture, and when each of the Company and Holdings has duly executed
and delivered it (assuming the due authorization, execution and
delivery thereof by the Trustee), the Indenture will be a legally valid
and binding obligation of each of the Company and the Guarantor,
enforceable against each of them in accordance with its terms, except
as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights generally and
(ii) limited by general principles of equity
9
<PAGE>
(whether considered in a proceeding at law or in equity). The Offering
Memorandum contains an accurate summary, in all material respects, of
the terms of the Indenture.
(k) The Company has duly authorized the Senior Notes and, when
issued 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 hereof, the Senior Notes will conform to the description
thereof in the Offering Memorandum, and will be the legally valid and
binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforceability thereof may
be (i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity).
(l) Holdings has duly authorized the Guarantees and, when
issued 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 hereof, the Guarantees will conform to the description
thereof in the Offering Memorandum, and will be the legally valid and
binding obligations of Holdings, enforceable against Holdings in
accordance with their terms, except as the enforceability thereof may
be (i) subject to applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws in effect which affect the enforcement
of creditors rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in equity).
(m) The Company has duly authorized the New Senior Notes and,
when issued and authenticated in accordance with the terms of the
Registered Exchange Offer and the Indenture, the New Senior Notes will
conform to the description thereof in the applicable Registration
Statement, and will be the legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their
terms, except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors rights
generally and (ii) limited by general principles of equity (whether
considered in a proceeding at law or in equity).
(n) The Registration Rights Agreement has been duly authorized
and validly executed by each of the Company and Holdings and (assuming
the due execution and delivery thereof by the Initial Purchasers) is a
legally valid and binding obligation of each of the Company and
Holdings, enforceable against it in accordance with its terms, except
as the enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights generally, (ii)
limited by general principles of equity (whether considered in a
proceeding at law or in equity) and (iii) limited by securities laws
prohibiting or limiting the availability of, and public policy against,
indemnification or contribution. The Offering Memorandum contains an
accurate summary, in all material respects, of the terms of
Registration Rights Agreement.
(o) There is (i) no action, suit or proceeding before or by
any court, arbitrator or governmental agency, body or official,
domestic or foreign, now pending, threatened, or, to the knowledge of
the Company, contemplated to which the Company or Holdings is or may be
a party or to which the business or property of the Company or Holdings
is or may be subject, (ii) no statute, rule, regulation or order that
has been enacted, adopted or issued by any governmental agency or, to
the best knowledge of the Company, proposed by any governmental body or
(iii)
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no injunction, restraining order or order of any nature issued by a
federal or state court of competent jurisdiction to which the Company
or Holdings is or may be subject that, in the case of clauses (i), (ii)
and (iii) above, (1) is required to be disclosed in the Offering
Memorandum and that is not so disclosed, (2) might have a Material
Adverse Effect or (3) would interfere with or adversely affect the
issuance of the Senior Notes or the Guarantees.
(p) Except as disclosed in the Offering Memorandum, no holder
of any security of the Company or Holdings has any right or, by reason
of the execution by the Company and Holdings of this Agreement or any
other Operative Document or the consummation of the transactions
contemplated hereby or and thereby, have the right to require
registration of any security of the Company or Holdings.
(q) The Company is not involved in any material labor dispute
nor, to the knowledge of the Company, is any material dispute
threatened which, if such dispute were to occur, could have a Material
Adverse Effect.
(r) The Company has not violated any safety or similar law
applicable to its business, nor any federal or state law relating to
discrimination in the hiring, promotion or pay of employees nor any
applicable federal or state wages and hours laws, nor any provisions of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules and regulations promulgated thereunder, except
for such instances of noncompliance that, either singly or in the
aggregate, could not have a Material Adverse Effect.
(s) Except as set forth in the Offering Memorandum, the
Company is in compliance with all applicable existing federal, state,
local and foreign laws and regulations (collectively, "Environmental
Laws") relating to protection of human health or the environment or
imposing liability or standards of conduct concerning any Hazardous
Material (as defined below), except for such instances of noncompliance
that, either singly or in the aggregate, could not have a Material
Adverse Effect. The term "Hazardous Material" means (i) any "hazardous
substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act, as
amended, (iii) any petroleum or petroleum product, (iv) any
polychlorinated biphenyl and (v) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material, waste or substance
regulated under or within the meaning of any other Environmental Law.
Except as set forth in the Offering Memorandum, there is no alleged
liability, or, to the best knowledge and information of the Company,
potential liability (including, without limitation, alleged or
potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) of the Company or any of its
subsidiaries arising out of, based on, or resulting from (1) the
presence or release into the environment of any Hazardous Material at
any location currently or previously owned by the Company or any of its
subsidiaries or at any location currently or previously used or leased
by the Company or any of its subsidiaries, or (2) any violation or
alleged violation of any Environmental Law, except in each case with
respect to clause (1) and (2), alleged or potential liabilities that,
singly or in the aggregate, could not have a Material Adverse Effect.
(t) The Company owns or possesses the patents, patent rights,
licenses, inventions, copyrights, know-how (including trade secrets and
other unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks and
trade names (collectively, "Intellectual Property") presently employed
by it or which are proposed
11
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to be employed by it in connection with the businesses now operated by
it or which are proposed to be operated by it, except where the failure
to own or possess such Intellectual Property could not, either singly
or in the aggregate, have a Material Adverse Effect, and the Company
has not received any notice that its use of any Intellectual Property
allegedly infringes upon, or conflicts with, rights asserted by others,
except for such instances that, singly or in the aggregate, could not
have a Material Adverse Effect if an unfavorable decision, judgment,
ruling or finding is rendered against the Company.
(u) Except as set forth in the Offering Memorandum, all tax
returns required to be filed by the Company in any jurisdiction have
been filed, and all material taxes (including, but not limited to,
withholding taxes, penalties and interest, assessments, fees and other
charges due or claimed to be due from any taxing authority) have been
paid other than those (i) being contested in good faith and for which
adequate reserves have been provided, or (ii) currently payable without
penalty or interest.
(v) Except as set forth in the Offering Memorandum or that,
singly or in the aggregate, could not have a Material Adverse Effect,
(i) the Company has (1) such permits, licenses, franchises and
authorizations of governmental or regulatory authorities ("Permits"),
including, without limitation, under any applicable Environmental Laws,
as are necessary to own, lease and operate its respective properties
and to conduct its business as presently conducted, and (2) fulfilled
and performed all of its material obligations with respect to the
Permits, and (ii) no event has occurred that could allow, or after
notice or lapse of time could allow, revocation or termination of any
Permit or that could result in any other material impairment of the
rights granted to the Company under any Permit, and the Company has no
reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any Permit.
(w) Except as set forth in the Offering Memorandum or that,
singly or in the aggregate, could not have a Material Adverse Effect,
(i) the Company has good and marketable title, free and clear of all
liens, claims, encumbrances and restrictions except liens for taxes not
yet due and payable, to all property and assets described in the
Offering Memorandum as being owned by it, (ii) each lease to which the
Company is a party is valid and binding and no default has occurred or
is continuing thereunder and (iii) the Company enjoys peaceful and
undisturbed possession under all such leases to which it is a party as
lessee.
(x) The Company maintains adequate insurance for its
businesses and the value of its respective properties (including,
without limitation, public liability insurance, third party property
damage insurance and replacement value insurance), and all such
insurance is outstanding and in force as of the date hereof.
(y) The financial statements, together with related notes
forming part of the Offering Documents (and any amendment or supplement
thereto), present fairly the consolidated financial position, results
of operations and changes in financial position of Holdings on the
basis stated in the Offering Documents at the respective dates or for
the respective periods to which they apply, and such financial
statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved, except as disclosed therein
and the other financial and statistical information and data set forth
in the Offering Documents (and any amendment or supplement thereto) is,
in all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of
Holdings. The pro forma financial data are, in all
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material respects, accurately presented and prepared in good faith on
the basis of the assumptions described therein, and such assumptions
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions and circumstances referred to therein.
(z) Each of the Company and Holdings maintains a system of
internal accounting controls sufficient to provide assurance that: (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; and (iii) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action
is taken with respect thereto.
(aa) Subsequent to the dates for which information is given in
the Offering Documents and up to the Closing Date, unless set forth in
the Offering Memorandum or the Company has notified the Initial
Purchasers: (i) neither the Company nor Holdings has incurred any
liabilities or obligations, direct or contingent, which are material,
individually or in the aggregate, to the Company or Holdings, nor
entered into any material transactions not in the ordinary course of
business; (ii) there has not been any decrease in the Company's or
Holdings' capital stock or any increase in long-term indebtedness to
meet working capital requirements or any material increase in
short-term indebtedness of the Company or Holdings or any payment of or
declaration to pay any dividends or any other distribution with respect
to the Company's or Holdings' capital stock; and (iii) there has not
been any event or series of events that would have a Material Adverse
Effect.
(ab) Prior to and after the issuance of the Senior Notes, (i)
the present fair salable value of the assets of the Company exceeded
and will exceed the amount that will be required to be paid on, or in
respect of, the debts and other liabilities (including contingent
liabilities) of the Company as they become absolute and matured, (ii)
the assets of the Company do not constitute and will not constitute
unreasonably small capital to carry out their businesses as conducted
or as proposed to be conducted, and (iii) the Company does not intend
to, or believe that it will, incur debts or other liabilities beyond
its ability to pay such debts and liabilities as they mature. In
computing the amount of such contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in
light of all the facts and circumstances existing at such time,
represents the amount than can reasonably be expected to become an
actual or matured liability.
(ac) Neither the Company nor any agent thereof acting on its
behalf, has taken or will take any action that might cause this
Agreement or the issuance or sale of the Senior Notes to violate
Regulation G (12 C.F.R. Part 207), Regulation T (12 C.F.R. Part 220),
Regulation U (12 C.F.R. Part 221) or Regulation X (12 C.F.R. Part 224)
of the Board of Governors of the Federal Reserve System, in each case
as in effect now or as the same may hereafter be in effect on the
Closing Date.
(ad) Neither the Company nor any of its subsidiaries is an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(ae) Coopers & Lybrand L.L.P. is an independent public
accountant with respect to the Company and Holdings as required by the
Act.
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(af) When the Senior Notes are issued and delivered pursuant
to this Agreement, such Senior Notes will not be of the same class
(within the meaning of Rule 144A under the Act) as securities of the
Company that are listed on a national securities exchange registered
under Section 6 of the Exchange Act or that are quoted in a United
States automated inter-dealer quotation system.
(ag) Assuming (i) that the representations and warranties of
the Initial Purchasers in Section 7 hereof are true, (ii) that the
representations of the Accredited Institutions set forth in the
certificates of such Accredited Institutions in the form set forth in
Annex A to the Offering Memorandum are true, (iii) compliance by the
Initial Purchasers with their covenants set forth in Section 7 hereof,
(iv) that none of the Eligible Purchasers is an affiliate of the
Company and (v) that each of the Eligible Purchasers is a QIB or an
Accredited Institution, the purchase and resale of the Senior Notes
pursuant hereto (including pursuant to the Exempt Resales) is exempt
from the registration requirements of the Act. No form of general
solicitation or general advertising was used by the Company or any of
their representatives (other than the Initial Purchasers, as to whom
the Company makes no representation) in connection with the offer and
sale of the Senior Notes, including, but not limited to, articles,
notices or other communications published in any newspaper, magazine,
or similar medium or broadcast over television or radio, or any seminar
or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as
the Senior Notes have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.
(ah) The execution and delivery of this Agreement, the other
Operative Documents and the sale of the Securities to be purchased by
the Eligible Purchasers will not involve any prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Code
with respect to any employee benefit plan of the Company. The
representation made by the Company in the preceding sentence is made in
reliance upon and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by the Eligible
Purchasers as set forth in the Offering Documents under the Section
entitled "Notice to Investors."
(ai) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Act.
(aj) The Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
7. REPRESENTATIONS, WARRANTIES AND CERTAIN AGREEMENTS OF THE INITIAL
PURCHASERS.
(a) Each Initial Purchaser, severally and not jointly,
represents and warrants to the Company as follows:
(1) Each Initial Purchaser represents and warrants
with respect to itself that such Initial Purchaser is either a
QIB or an Accredited Institution, in either case with such
knowledge and experience in financial and business matters as
are necessary in order to evaluate the merits and risks of an
investment in the Senior Notes.
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(2) Such Initial Purchaser (i) is not acquiring the
Senior Notes with a view to any distribution thereof or with
any present intention of offering or selling any of the Senior
Notes in a transaction that would violate the Act or the
securities laws of any State of the United States or any other
applicable jurisdiction, (ii) will be reoffering and reselling
the Senior Notes only to QIBs in reliance on the exemption
from the registration requirements of the Act provided by Rule
144A and to a limited number of Accredited Institutions that
execute and deliver a letter containing certain
representations and agreements in the form attached as Annex A
to the Offering Memorandum and (iii) has not solicited and,
unless and until the Senior Notes are registered under the
Act, will not solicit any offer to buy or offer to sell the
Senior Notes by means of any form of general solicitation or
general advertising (as such terms are defined in Regulation D
under the Act) or in any manner involving a public offering
within the meaning of the Act.
(3) Each Initial Purchaser also understands that the
Company and, for purposes of the opinions to be delivered to
the Initial Purchasers pursuant to Sections 9(d) and (e)
hereof, counsel to the Company and counsel to the Initial
Purchasers will rely upon the accuracy and truth of the
foregoing representations and the Initial Purchasers hereby
consent to such reliance.
(b) The Initial Purchasers agree that, in connection with the
Exempt Resales, the Initial Purchasers will solicit offers to buy the
Senior Notes only from, and will offer to sell the Senior Notes only
to, the Eligible Purchasers. The Initial Purchasers further agree that
they will offer to sell the Senior Notes only to, and will solicit
offers to buy the Senior Notes only from, persons who in purchasing
such Senior Notes will be deemed to have represented and agreed (1) if
such Eligible Purchaser is a QIB, that they are purchasing the Senior
Notes for their own account or an account with respect to which they
exercise sole investment discretion and that they or such accounts are
QIBs, (2) that such Senior Notes will not have been registered under
the Act and may be resold, pledged or otherwise transferred, only (A)
(I) inside the United States to a person who the seller reasonably
believes is a "qualified institutional buyer" within the meaning of
Rule 144A under the Act in a transaction meeting the requirements of
Rule 144A, (II) in a transaction meeting the requirements of Rule 144
under the Act, (III) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the Act or (IV)
in accordance with another exemption from the registration requirements
of the Act (and based upon an opinion of counsel if the Company so
requests), (B) to the Company or (C) pursuant to an effective
registration statement under the Act, in each case, in accordance with
any applicable securities laws of any State of the United States or any
other applicable jurisdiction, and (3) that the holder will, and each
subsequent holder is required to, notify any purchaser from it of the
security evidenced thereby of the resale restrictions set forth in (2)
above.
8. INDEMNIFICATION.
(a) Each of the Company and Holdings jointly and severally
agrees to indemnify and hold harmless each Initial Purchaser and each
person, if any, who controls any Initial Purchaser within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, from and
against any and all losses, claims, damages, liabilities and judgments
caused by any untrue statement or alleged untrue statement of a
material fact contained in the Offering Documents (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to
state therein a material fact required to be stated
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therein or necessary to make the statements therein in the light of the
circumstances under which they were made, not misleading, except
insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to such Initial
Purchaser furnished in writing to the Company by any Initial Purchaser
expressly for use therein; provided, however, that the indemnification
contained in this paragraph (a) with respect to the Preliminary
Offering Memorandum shall not inure to the benefit of any Initial
Purchaser (or to the benefit of any person controlling such Initial
Purchaser) on account of any such loss, claim, damage, liability or
judgment (i) arising from the sale of the Senior Notes by such Initial
Purchaser to any person if a copy of an Offering Document shall not
have been delivered or sent to such person, at or prior to the written
confirmation of such sale, and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact contained
in an Offering Document was corrected in a subsequent Offering
Document, provided that the Company has delivered such subsequent
Offering Document to the Initial Purchasers in requisite quantity on a
timely basis to permit such delivery or sending or (ii) resulting from
the use by such Initial Purchaser of any offering memorandum,
registration statement or prospectus, or any amendment or supplement
thereto, referred to in Section 5(e) hereof when, under Section 11
hereof, such Initial Purchaser was not permitted to do so; provided
further, however, that the foregoing exceptions in clauses (i) and (ii)
shall not affect the indemnity with respect to any other Initial
Purchaser not otherwise subject to such exceptions.
(b) In case any action shall be brought against any Initial
Purchaser or any person controlling such Initial Purchaser, based upon
any Offering Document or any amendment or supplement thereto and with
respect to which indemnity may be sought against the Company and the
Guarantor, such Initial Purchaser shall promptly notify the Company and
the Guarantor in writing and the Company and the Guarantor shall assume
the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and
expenses. Any Initial Purchaser or any such controlling person shall
have the right to employ separate counsel in any such action and
participate in the defense thereof, but the reasonable fees and
expenses of such counsel shall be at the expense of such Initial
Purchaser or such controlling person unless (i) the employment of such
counsel has been specifically authorized in writing by the Company,
(ii) the Company has failed to assume the defense and employ counsel or
(iii) the named parties to any such action (including any impleaded
parties) include both such Initial Purchaser or such controlling person
and the Company, and such Initial Purchaser or such controlling person
shall have been advised by such counsel that there may be one or more
legal defenses available to it which are different from or additional
to those available to the Company (in which case the Company shall not
have the right to assume the defense of such action on behalf of such
Initial Purchaser or such controlling person, it being understood,
however, that the Company shall not, in connection with any one such
action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) for all
such Initial Purchasers and controlling persons, which firm shall be
designated in writing by DLJ, and that all such fees and expenses shall
be reimbursed as they are incurred). The Company shall not be liable
for any settlement of any such action effected without the written
consent of the Company but if settled with the Company's written
consent, the Company agrees to indemnify and hold harmless any Initial
Purchaser and any such controlling person from and against any loss or
liability by reason of such settlement. Notwithstanding the immediately
preceding sentence, if in any case where the fees and expenses of
counsel are at the expense of the indemnifying party and indemnified
party shall
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have requested the indemnifying party to reimburse the indemnified
party for such fees and expenses of counsel as incurred, such
indemnifying party agrees that it shall be liable for any settlement of
any action effected without its written consent if (i) such settlement
is entered into more than ten business days after the receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying
party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement prior to the date of
such settlement. 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 indemnified party is
or could have been a party and indemnity could have been sought
hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on
claims that are the subject matter of such proceeding.
(c) Each Initial Purchaser agrees, severally and not jointly,
to indemnify and hold harmless the Company, the Guarantors, their
respective directors and officers, and any person controlling them
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (collectively the "Company Indemnified Parties"), to the
same extent as the foregoing indemnity from the Company to each Initial
Purchaser but only with reference to information relating to such
Initial Purchaser furnished in writing by such Initial Purchaser
expressly for use in the Offering Documents. In case any action shall
be brought against any Company Indemnified Party in respect of which
indemnity may be sought against an Initial Purchaser, such Initial
Purchaser shall have the rights and duties given to the Company (except
that if the Company shall have assumed the defense thereof, such
Initial Purchaser shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such
Initial Purchaser), and the Company Indemnified Parties shall have the
rights and duties given to such Initial Purchaser by Section 8(b)
hereof.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and
judgments (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand from the offering of the Senior
Notes or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above
but also the relative fault of the Company and the Initial Purchasers
in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. Except in the case of any indemnity
arising under the last paragraph of Section 5(e) hereof, the relative
benefits received by the Company and the Initial Purchasers shall be
deemed to be in the same proportion as the total net proceeds from the
offering of the Senior Notes (before deducting expenses) received by
the Company, and the total discounts and commissions received by the
Initial Purchasers, bear to the total price to investors of the Senior
Notes, in each case as set forth in the table on the cover page of the
Offering Memorandum. The relative fault of the Company and the Initial
Purchasers shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
the omission to state a material fact relates to information supplied
by the Company or the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
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<PAGE>
The Company and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this paragraph were
determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations
referred to in the immediately preceding paragraph. The losses, claims,
damages, liabilities or judgments of an indemnified party referred to
in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding
the provisions of this Section 8, no Initial Purchaser shall be
required to contribute any amount in excess of the amount by which the
discounts and commissions received by it exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations to contribute
pursuant to this Section 8(d) are several in proportion to the
respective principal amount of Senior Notes purchased by each of the
Initial Purchasers hereunder and not joint.
9. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The several
obligations of the Initial Purchasers to purchase the Senior Notes under this
Agreement are subject to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company and
Holdings contained in this Agreement shall be true and correct on the
date hereof and on the Closing Date, with the same force and effect as
if made on and as of the date hereof and the Closing Date,
respectively. The Company and Holdings shall have performed or complied
with all of the agreements and satisfied all conditions to be
performed, complied with or satisfied by it on or prior to the Closing
Date.
(b) (1) The Offering Memorandum shall have been printed
and copies distributed to the Initial Purchasers not later
than 9:00 A.M., New York City time, on March 28, 1997, or at
such later date and time as the Initial Purchasers may
approve in writing;
(2) no statute, rule, regulation or order shall have
been enacted, adopted or issued by any governmental agency
which would, as of the Closing Date, prevent the issuance of
the Senior Notes;
(3) no injunction, restraining order or order of any
nature by a federal or state court of competent jurisdiction
shall have been issued as of the Closing Date or, to the best
knowledge of the Company, threatened against, the Company
which would prevent the issuance of the Senior Notes; and
(4) at the Closing Date, no stop order preventing the
use of the Offering Documents, or any amendment or supplement
thereto, or suspending the qualification or exemption from
qualification of the Senior Notes for sale in any jurisdiction
designated by the Initial Purchasers pursuant to Section 5(f)
hereof shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before
or, to the knowledge of the Company, be contemplated.
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(c) (1) Since the date of the latest balance sheet
included in the Offering Documents, there shall not have been
any event that had a Material Adverse Effect, or any
development involving a prospective change that could have a
Material Adverse Effect, whether or not arising in the
ordinary course of business;
(2) since the date of the latest balance sheet
included in the Offering Documents, there has not been any
change, or any development involving a prospective change, in
the capital stock or in the long-term debt of the Company or
Holdings from that set forth in the Offering Documents;
(3) the Company and Holdings shall have no material
liability or obligation, direct or contingent, other than
those reflected in the Offering Memorandum;
(4) on the Closing Date, the Initial Purchasers shall
have received certificates dated the Closing Date, signed on
behalf of the Company by a Vice President of the Company,
confirming all matters set forth in Sections 9(a) and (b)
hereof with respect to the Company.
(5) on the Closing Date, the Initial Purchasers shall
have received certificates dated the Closing Date, signed on
behalf of Holdings by a Vice President of Holdings, confirming
all matters set forth in Sections 9(a) and (b) hereof with
respect to Holdings;
(d) The Initial Purchasers shall have received on the Closing
Date an opinion (satisfactory to the Initial Purchasers and counsel to
the Initial Purchasers) dated the Closing Date, of Hutchins, Wheeler &
Dittmar, counsel for the Company and Holdings, with customary
exceptions and assumptions, to the effect that:
(1) Each of the Company and Holdings (A) is a
corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation,
(B) has all requisite corporate power and authority to carry
on its business as it is currently being conducted and to own,
lease and operate its properties, and (C) to the best of such
counsel's knowledge, is duly qualified and is in good standing
as a foreign corporation registered to do business in each
jurisdiction in which the nature of its business or its
ownership or leasing of property requires such qualification,
except where the failure to be so qualified would not have a
Material Adverse Effect;
(2) All of the outstanding capital stock of the
Company has been duly authorized and validly issued and is
fully paid and nonassessable, is not subject to preemptive or
similar rights by virtue of the Company's certificate of
incorporation, bylaws or any agreement known to us to which
the Company is a party and except as described in the Offering
Memorandum, is free and clear of any security interest, claim,
lien or encumbrance;
(3) Except as disclosed in the Offering Memorandum,
there are no outstanding rights, warrants or options to
acquire, or instruments convertible into or exchangeable for,
any shares of capital stock in the Company or Holdings granted
by the Company or Holdings, respectively;
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(4) The Company has all necessary corporate power and
authority to enter into and perform its obligations under the
Operative Documents and to issue, sell and deliver the Senior
Notes to the Initial Purchasers to be sold by the Initial
Purchasers pursuant hereto;
(5) Holdings has all necessary corporate power and
authority to enter into and perform its obligations under the
Operative Documents and to issue and deliver the Guarantees to
the Initial Purchasers;
(6) The Company is not in violation of its charter or
bylaws, and, to the best knowledge of such counsel, the
Company is not in default in the performance of any material
obligation, agreement or condition contained in any bond,
debenture, note or any other evidence of indebtedness or in
any other agreement, indenture or instrument material to the
conduct of the business of the Company, to which the Company
is a party or by which it or its property is bound;
(7) Holdings is not in violation of its charter or
bylaws, and, to the best knowledge of such counsel, Holdings
is not in default in the performance of any obligation,
agreement or condition contained in any bond, debenture, note
or any other evidence of indebtedness or in any other
agreement, indenture or instrument material to the conduct of
the business of Holdings, to which Holdings is a party or by
which it or its property is bound;
(8) None of (i) the execution, delivery or
performance by the Company and Holdings of this Agreement and
the other Operative Documents, (ii) the issuance and sale of
the Notes by the Company and the issuance of the Guarantees by
Holdings and (iii) the consummation by the Company of the
transactions described in the Offering Memorandum under the
caption "Use of Proceeds," will conflict with or constitute a
breach of any of the terms or provisions of, or a default
under, or result in the imposition of a lien or encumbrance on
any properties of the Company or Holdings, as the case may be,
or an acceleration of indebtedness pursuant to, (1) the
charter or bylaws of the Company or Holdings, as the case may
be, (2) any bond, debenture, note, indenture, mortgage, deed
of trust or other agreement or instrument known to such
counsel to which the Company or Holdings, as the case may be,
is a party or by which the Company or Holdings, as the case
may be, or their respective properties are bound, or (3) to
the best of such counsel's knowledge, any law or
administrative regulation applicable to the Company or
Holdings, as the case may be, or their respective assets or
properties, or any judgment, order or decree of any court or
governmental agency or authority entered in any proceeding to
which the Company or Holdings, as the case may be, was or is
now a party or to which the Company or Holdings, as the case
may be, or their respective properties may be subject and
which is known to such counsel;
(9) No consent, approval, authorization or order of,
or filing or registration with, any regulatory body,
administrative agency, or other governmental agency (except as
securities or Blue Sky laws of the various states may require)
which has not been made or obtained is required for the
execution, delivery and performance of the Operative Documents
and the valid issuance and sale of the Securities;
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(10) To the best of such counsel's knowledge, no
consents or waivers from any person are required to consummate
the transactions contemplated by the Operative Documents, the
Preliminary Offering Memorandum or the Offering Memorandum,
other than such consents and waivers as have been or will be
obtained prior to the Closing Date or, in the case of the
Registration Rights Agreement and the transactions
contemplated thereby, will be obtained and made under the Act,
the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act") and state securities or Blue Sky laws and
regulations.
(11) This Agreement has been duly authorized and
validly executed by each of the Company and Holdings and
(assuming the due execution and delivery thereof by the
Initial Purchasers) is a legally valid and binding obligation
of the Company and Holdings, enforceable against each of them
in accordance with its terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights
generally, (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity) and
(iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution.
(12) Each of the Company and Holdings has duly
authorized the Indenture and when each of the Company and
Holdings has duly executed and delivered it (assuming due
authorization, execution and delivery thereof by the Trustee),
the Indenture will be a legally valid and binding obligation
of each of the Company and Holdings, enforceable against each
of them in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors
rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in
equity).
(13) The Company has duly authorized the Senior Notes
and, when issued 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 hereof, the
Senior Notes will conform to the description thereof in the
Offering Memorandum, and will be the legally valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms, except as the enforceability
thereof may be (i) subject to applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors rights
generally and (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity).
(14) Holdings has duly authorized the Guarantees and,
when issued and authenticated in accordance with the terms of
the Indenture and delivered to the Initial Purchasers in
accordance with the terms hereof, the Guarantees will conform
to the description thereof in the Offering Memorandum, and
will be the legally valid and binding obligations of Holdings,
enforceable against Holdings in accordance with their terms,
except as the enforceability thereof may be (i) subject to
applicable bankruptcy, insolvency, moratorium, reorganization
or similar laws in effect which affect the enforcement of
creditors rights generally and (ii) limited by general
principles of equity (whether considered in a proceeding at
law or in equity).
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(15) The Company has duly authorized the New Senior
Notes and, when issued and authenticated in accordance with
the terms of the Registered Exchange Offer and the Indenture,
the New Senior Notes will conform to the description thereof
in the Offering Memorandum, and will be the legally valid and
binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as the
enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors
rights generally and (ii) limited by general principles of
equity (whether considered in a proceeding at law or in
equity).
(16) The Registration Rights Agreement has been duly
authorized and validly executed by each of the Company and
Holdings and (assuming the due execution and delivery thereof
by the Initial Purchasers) is a legally valid and binding
obligation of each of the Company and Holdings, enforceable
against if in accordance with its terms, except as the
enforceability thereof may be (i) subject to applicable
bankruptcy, insolvency, moratorium, reorganization or similar
laws in effect which affect the enforcement of creditors
rights generally, (ii) limited by general principles of equity
(whether considered in a proceeding at law or in equity) and
(iii) limited by securities laws prohibiting or limiting the
availability of, and public policy against, indemnification or
contribution.
(17) To the best knowledge of such counsel, there is
(i) no action, suit or proceeding before or by any court,
arbitrator or governmental agency, body or official, domestic
or foreign, now pending or threatened to which the Company or
Holdings is or may be a party or to which the business or
property of the Company or Holdings is or may be subject, (ii)
no statute, rule, regulation or order that has been enacted,
adopted or issued by any governmental agency, or (iii) no
injunction, restraining order or order of any nature by a
federal or state court of competent jurisdiction applicable to
the Company or Holdings or any of its subsidiaries has been
issued that, in the case of clauses (i), (ii) and (iii) above,
(a) is required to be disclosed in the Offering Memorandum and
that is not so disclosed, (b) would interfere with or
adversely affect the issuance of the Senior Notes or the
Guarantees, or (c) might invalidate any provision or the
validity of the Operative Documents, the Senior Notes or the
Guarantees;
(18) To the best knowledge of such counsel, there is
no contract or document concerning the Company of a character
required to be described in the Offering Memorandum that is
not so described;
(19) To the best knowledge of such counsel, no holder
of any security of the Company, except as disclosed in the
Offering Memorandum, has any right to require registration of
any of the Company's securities by virtue of the execution of
the Operative Documents, the issuance and sale of the Senior
Notes by the Company or the transactions contemplated hereby
and thereby, other than such rights as will be waived prior to
the Closing Date;
(20) The statements under the captions "Description
of the Notes" and "Business--Legal Proceedings" in the
Offering Memorandum, insofar as such statements constitute a
summary of legal matters, documents or proceedings referred to
therein, are correct in all material respects;
22
<PAGE>
(21) Neither the Company nor any subsidiary of the
Company is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(22) When the Senior Notes are issued and delivered
pursuant to this Agreement, such Senior Notes will not be of
the same class (within the meaning of Rule 144A under the Act)
as securities of the Company that are listed on a national
securities exchange registered under Section 6 of the Exchange
Act or that are quoted in a United States automated
inter-dealer quotation system;
(23) The Company (or any agent thereof acting on the
behalf of the Company) has not taken, and will not take, any
action that might cause this Agreement or the issuance or sale
of the Notes to violate Regulation G (12 C.F.R. Part 207),
Regulation T (12 C.F.R. Part 220), Regulation U (12 C.F.R.
Part 221) or Regulation X (12 C.F.R. Part 224) of the Board of
Governors of the Federal Reserve System, in each case as in
effect now or as the same may hereafter be in effect on the
Closing Date;
(24) The Indenture is not required to be qualified
under the Trust Indenture Act prior to the first to occur of
(i) the Registered Exchange Offer and (ii) the effectiveness
of the Shelf Registration Statement;
(25) No registration under the Act of the Senior
Notes is required for the sale of the Senior Notes to the
Initial Purchasers as contemplated hereby or for the Exempt
Resales as described in the Offering Memorandum (assuming (i)
that the Eligible Purchasers who buy the Senior Notes in the
Exempt Resales are QIBs or Accredited Institutions, (ii) the
accuracy of, and compliance with, the representations of the
Initial Purchasers and those of the Company contained in
Sections 6 and 7 hereof, (iii) that none of the Eligible
Purchasers is an affiliate of the Company and (iv) the
accuracy of the representations made by each Accredited
Institution who purchases Senior Notes pursuant to an Exempt
Resale as set forth in the letters of representation executed
by such Accredited Institutions in the form of Annex A to the
Offering Memorandum).
(26) Each of the Preliminary Offering Memorandum and
the Offering Memorandum, as of its date, and each amendment or
supplement thereto, as of its date (except for the financial
statements and the notes thereto and schedules and other
financial, statistical and accounting date included therein,
as to which no opinion need be expressed), complied as to form
in all material respects with the requirements of Rule 144A of
the Act.
In addition, such counsel shall state that it has participated
in conferences with representatives of the Company, representatives of
the Company's accountants, the Initial Purchasers' representatives and
counsel for the Initial Purchasers, at which conferences the contents
of the Offering Documents and related matters were discussed, and,
although such counsel has not independently verified and is not passing
upon and assumes no responsibility for the accuracy, completeness or
fairness of the statements contained in the Offering Documents (other
than those that such counsel must opine on pursuant to Section 9(d)(20)
of this Agreement), no facts have come to such counsel's attention
which led it to believe that the Offering Memorandum, on the date
thereof or on the date of such opinion, contained or contains an untrue
statement of a material fact or omitted or omits to state a material
fact necessary to
23
<PAGE>
make the statements contained therein, in the light of the
circumstances under which they were made, not misleading (it being
understood that such counsel need express no view with respect to the
financial statements and data and related notes, the financial
statement schedules and other financial, statistical and accounting
data included in the Offering Documents).
(e) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, of Latham & Watkins, in form
and substance satisfactory to the Initial Purchasers, and the Company
shall have provided Latham & Watkins such papers and information as it
requests to enable it to pass upon the matters contained in such
opinion.
(f) The Initial Purchasers shall have received letters from
Coopers & Lybrand L.L.P., independent public accountants, on the date
hereof and on the Closing Date, in form and substance satisfactory to
the Initial Purchasers, with respect to the financial statements and
certain financial information contained in the Offering Memorandum.
(g) The Company shall have provided the Trustee and the
Initial Purchasers copies the opinion of Murray, Devine & Company
regarding the solvency of the Company and Holdings.
(h) The Company and the Trustee shall have entered into the
Indenture and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(i) The Company and the Initial Purchasers shall have entered
into the Registration Rights Agreement, in the form attached hereto as
Exhibit A, and the Initial Purchasers shall have received counterparts,
conformed as executed, thereof.
(j) The Company shall have entered into the New Credit
Facility and the Initial Purchasers shall have received copies thereof.
(k) The Company shall have fully performed or complied with
any of the agreements herein contained and required to be performed or
complied with by the Company on or prior to the Closing Date.
(l) Latham & Watkins shall have been furnished with such
documents, in addition to those set forth above, as they may reasonably
require for the purpose of enabling them to review or pass upon the
matters referred to in this Section 9 and in order to evidence the
accuracy, completeness or satisfaction in all material respects of any
of the representations, warranties or conditions herein contained.
10. EFFECTIVE DATE OF AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the time that the
Company and the Initial Purchasers execute this Agreement. The Initial
Purchasers may terminate this Agreement at any time prior to the
Closing Date by written notice to the Company if any of the following
has occurred: (i) since the respective dates as of which information is
given in the Offering Documents, any adverse change or development
involving a prospective adverse change which would cause a Material
Adverse Effect on the earnings, affairs, or business prospects of the
Company, whether or not arising in the ordinary course of business,
which would, in the Initial Purchasers' judgment, make it impracticable
to market the Senior Notes on the terms and in the
24
<PAGE>
manner contemplated in the Offering Documents; (ii) any outbreak or
escalation of hostilities or other national or international calamity
or crisis or material change in economic conditions, if the effect of
such outbreak, escalation, calamity, crisis or change on the financial
markets of the United States or elsewhere would, in the Initial
Purchasers' judgment, be material and adverse and make it impracticable
to market the Senior Notes on the terms and in the manner contemplated
in the Offering Documents; (iii) the suspension or material limitation
of trading in securities on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ National Market System or limitation on
prices for securities on any such exchange or National Market Systems;
(iv) the enactment, publication, decree or other promulgation of any
federal or state statute, regulation, rule or order of any court or
other governmental authority which in the Initial Purchasers' opinion
causes or will cause a Material Adverse Effect; (v) the declaration of
a banking moratorium by either federal or New York State authorities;
or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which
in the Initial Purchasers' opinion has a material adverse effect on the
financial markets in the United States.
(b) If on the Closing Date, any of the Initial Purchasers
shall fail or refuse to purchase Senior Notes which it has agreed to
purchase hereunder on such date, and the aggregate principal amount of
such Senior Notes that such defaulting Initial Purchaser agreed but
failed or refused to purchase does not exceed 10% of the total
principal amount of such Senior Notes that all of the Initial
Purchasers are obligated to purchase on such Closing Date, the
non-defaulting Initial Purchasers shall be obligated to purchase the
Senior Notes that such defaulting Initial Purchasers agreed but failed
or refused to purchase on such date. If, on the Closing Date, any of
the Initial Purchasers shall fail or refuse to purchase Senior Notes in
an aggregate principal amount that exceeds 10% of such total principal
amount of the Senior Notes and arrangements satisfactory to the other
Initial Purchasers and the Company for the purchase of such Senior
Notes are not made within 48 hours after such default, this Agreement
shall terminate without liability on the part of the non-defaulting
Initial Purchasers or the Company, except as otherwise provided in this
Section 10. In any such case that does not result in termination of
this Agreement, the Initial Purchasers or the Company may postpone the
Closing Date for not longer than seven days, in order that the required
changes, if any, in the Offering Memorandum or any other documents or
arrangements may be effected. Any action taken under this paragraph
shall not relieve a defaulting Initial Purchaser from liability in
respect of any default by any such Initial Purchaser under this
Agreement.
(c) If this Agreement shall be terminated by the Initial
Purchasers pursuant to clause (i) of paragraph (a) of this Section 10
or because of the failure or refusal on the part of the Company to
comply with the terms or to fulfill any of the conditions of this
Agreement, the Company agrees to reimburse you for all out-of-pocket
expenses (including, without limitation, the reasonable fees and
disbursements of counsel) reasonably incurred by you. Notwithstanding
any termination of this Agreement, the Company shall be liable for all
expenses which it has agreed to pay pursuant to Section 5(j) hereof.
11. AGREEMENT OF THE INITIAL PURCHASERS.
Each Initial Purchaser agrees, severally and not jointly, that, upon
its receipt of any written notice from the Company of the existence of any fact
or the happening of any event that requires the making of any additions to or
changes in any offering memorandum, registration statement or prospectus, or
amendment or supplement thereto, referred to in Section 5(e) hereof in order
that such document will not
25
<PAGE>
contain any untrue statement of a material fact or omission to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances existing as of the date such document was delivered, not
misleading, such Initial Purchaser shall forthwith discontinue disposition of
the applicable Notes pursuant to such document until (i) such Initial Purchaser
receives from the Company copies of an amended or supplemented document that the
Company states in writing may be used by such Initial Purchaser or (ii) such
Initial Purchaser is advised in writing by the Company that the use of such
document may be resumed.
12. MISCELLANEOUS.
(a) Notices given pursuant to any provision of this Agreement
shall be addressed as follows: (i) if to the Company, to Anchor
Advanced Products, Incorporated, 1111 Northshore Drive, Suite N-600,
Knoxville, TN 37919-4048, Attention: President & CEO, (ii) if to the
Initial Purchasers, c/o Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department, and (iii) if to the Initial Purchasers pursuant
to Section 11 hereof, (A) to Donaldson, Lufkin & Jenrette Securities
Corporation, 277 Park Avenue, New York, New York 10172, Attention:
Syndicate Department & Compliance Department, (B) to CIBC Wood Gundy
Securities Corp., 425 Lexington Ave., 3rd Floor, New York, NY 10017,
Attention: Syndicate Department & Compliance Department and (C) to
NationsBanc Capital Markets, Inc., NationsBanc Corporate Center, 7th
Floor, Charlotte, NC 28255, Attention: Syndicate Department &
Compliance Department or in any case to such other address as the
person to be notified may have requested in writing.
(b) The respective indemnities, contribution agreements,
representations, warranties and other statements set forth in or made
pursuant to this Agreement shall remain operative and in full force and
effect, and will survive delivery of and payment for the Senior Notes,
regardless of (i) any investigation, or statement as to the results
thereof, made by or on behalf of any such person, (ii) acceptance of
the Senior Notes and payment for them hereunder and (iii) termination
of this Agreement.
(c) Except as otherwise provided, this Agreement has been and
is made solely for the benefit of and shall be binding upon the
Company, the Guarantor, the Initial Purchasers, any controlling persons
referred to herein and their respective successors and assigns, all as
and to the extent provided in this Agreement, and no other person shall
acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include a purchaser of any of
the Senior Notes from any of the several Initial Purchasers merely
because of such purchase.
(d) This Agreement shall be construed, interpreted and the
rights of the parties determined in accordance with the laws of the
State of New York without reference to its choice of law provisions.
(e) This Agreement may be signed in various counterparts which
together shall constitute one and the same instrument.
* * * *
26
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company, Holdings and the Initial Purchasers.
Very truly yours,
ANCHOR ADVANCED PRODUCTS, INC.
By: /s/ John J. Nugent
-------------------------------
Name: John J. Nugent
Title: EVP & CFO
ANCHOR HOLDINGS, INC.
By: /s/ Robert T. Parkey
-------------------------------
Name: Robert T. Parkey
Title: EVP & Gen. Mgr. Medical/Dental
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
NATIONSBANC CAPITAL MARKETS, INC.
Acting on behalf of
itself, CIBC Wood Gundy Securities Corp.
and Nationsbanc Capital Markets, Inc.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Craig Packer
--------------------------------
Name: Craig Packer
Title: Vice President
27
<PAGE>
SCHEDULE I
PRINCIPAL AMOUNT
OF SENIOR NOTES
INITIAL PURCHASERS TO BE PURCHASED
- ------------------ ---------------
Donaldson, Lufkin & Jenrette
Securities Corporation.................................... XX,000,000
CIBC Wood Gundy Securities Corp.............................. XX,000,000
Nationsbanc Capital Markets, Inc............................. XX,000,000
$XXX,000,000
28
<PAGE>
EXHIBIT A
---------
[Registration Rights Agreement]
[See Exhibit 10.11 to this Registration Statement]
29
Execution Copy
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of April 2, 1997
by and among
Anchor Advanced Products, Inc.
Anchor Holdings, Inc.
and
Donaldson, Lufkin & Jenrette
Securities Corporation
CIBC Wood Gundy Securities Corp.
NationsBanc Capital Markets, Inc.
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and
entered into as of April 2, 1997 by and among Anchor Advanced Products, Inc., a
Delaware corporation (the "Company"), Anchor Holdings, Inc., a Delaware
Corporation ("Holdings"), and Donaldson, Lufkin & Jenrette Securities
Corporation, CIBC Wood Gundy Securities Corp. and NationsBanc Capital Markets,
Inc. (each a "Purchaser" and, collectively, the "Purchasers"), each of whom has
agreed to purchase the Company's 11 3/4% Senior Notes due 2004 (the "Senior
Notes") pursuant to the Purchase Agreement (as defined below). The obligations
of the Company under the Senior Notes and the Company's new 11 3/4% Senior Notes
due 2004 to be issued in exchange for the Senior Notes in accordance with this
agreement (the "New Senior Notes") will be unconditionally guaranteed on a
senior basis by (i) Holdings, the direct parent of the Company, and (ii) any
subsidiary of the Company formed or acquired after the Closing Date (as defined
below) that executes an additional guarantee in accordance with the provisions
of the Indenture (as defined below), and their respective successors and assigns
(collectively, the "Guarantors"), pursuant to their guarantees (the
"Guarantees").
This Agreement is made pursuant to the Purchase Agreement, dated
March 26, 1997 (the "Purchase Agreement"), by and among the Company, Holdings
and the Purchasers. In order to induce the Purchasers to purchase the Senior
Notes, the Company has agreed to provide the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the obligations of the Purchasers set forth in Section 9 of the Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the Exchange
Act.
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: A Registered Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (i) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the New Senior Notes to be issued in the Exchange Offer, (ii) the
maintenance of such Registration Statement continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof, and (iii) the delivery by the Company
to the Registrar under the Indenture of the New Senior Notes in the same
aggregate principal amount as the aggregate principal amount of Senior Notes
that were tendered by Holders thereof pursuant to the Exchange Offer.
Damages Payment Date: With respect to the Senior Notes, each Interest
Payment Date.
Effectiveness Target Date: As defined in Section 5.
1
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act of the
New Senior Notes pursuant to a Registration Statement pursuant to which the
Company offers the Holders of all outstanding Transfer Restricted Securities the
opportunity to exchange all such outstanding Transfer Restricted Securities held
by such Holders for New Senior Notes in an aggregate principal amount equal to
the aggregate principal amount of the Transfer Restricted Securities tendered in
such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Purchasers propose to
sell the Senior Notes to certain "qualified institutional buyers," as such term
is defined in Rule 144A under the Act, and to certain institutional "accredited
investors," as such term is defined in Rule 501(a)(1), (2), (3) and (7) of
Regulation D under the Act ("Accredited Institutions").
Holders: As defined in Section 2(b) hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indenture: The Indenture, dated as of April 2, 1997, among the
Company, Fleet National Bank, as trustee (the "Trustee"), and Holdings, pursuant
to which the Notes and the Guarantee are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the Notes.
Liquidated Damages: As defined in Section 5 hereof.
NASD: National Association of Securities Dealers, Inc.
New Senior Notes: The Company's 11 3/4% New Senior Notes due 2004 to
be issued pursuant to the Indenture in the Exchange Offer.
Notes: The Senior Notes and the New Senior Notes.
Person: An individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political subdivision
thereof.
Prospectus: The prospectus included in a Registration Statement, as
amended or supplemented by any prospectus supplement and by all other amendments
thereto, including post-effective amendments, and all material incorporated by
reference into such Prospectus.
Purchaser: As defined in the preamble hereto.
2
<PAGE>
Record Holder: With respect to any Damages Payment Date relating to
the Senior Notes, each Person who is a Holder of Senior Notes on the record date
with respect to the Interest Payment Date on which such Damages Payment Date
shall occur.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company
relating to (a) an offering of the New Senior Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, which is filed pursuant to the
provisions of this Agreement, in each case, including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb)
as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note until (i) the date on which
such Note has been exchanged by a person other than a broker-dealer for a New
Note in the Exchange Offer, (ii) following the exchange by a broker-dealer in
the Exchange Offer of a Note for a New Note, the date on which such New Note is
sold to a purchaser who receives from such broker-dealer on or prior to the date
of such sale a copy of the prospectus contained in the Exchange Offer
Registration Statement, (iii) the date on which such Note has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iv) the date on which such Note is distributed to the
public pursuant to Rule 144 under the Act.
Underwritten Registration or Underwritten Offering: A registration in
which securities of the Company are sold to an underwriter for reoffering to the
public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to the
benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is deemed to
be a holder of Transfer Restricted Securities (each, a "Holder") whenever such
Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Company and
3
<PAGE>
Holdings shall (i) cause to be filed with the Commission on or prior to 45 days
after the Closing Date, a Registration Statement under the Act relating to the
New Senior Notes and the Exchange Offer, (ii) use their reasonable best efforts
to cause such Registration Statement to become effective on or prior to 135 days
after the Closing Date, (iii) in connection with the foregoing, file (A) all
pre-effective amendments to such Registration Statement as may be necessary in
order to cause such Registration Statement to become effective, (B) if
applicable, a post-effective amendment to such Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings in connection
with the registration and qualification of the New Senior Notes to be made under
the Blue Sky laws of such jurisdictions as are necessary to permit Consummation
of the Exchange Offer, and (iv) upon the effectiveness of such Registration
Statement, commence the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the New Senior Notes to be offered
in exchange for the Transfer Restricted Securities and to permit resales of New
Senior Notes held by Broker-Dealers as contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously and shall keep the Exchange Offer open for a period
of not less than the minimum period required under applicable federal and state
securities laws to Consummate the Exchange Offer; provided, however, that in no
event shall such period be less than 20 business days. The Company shall cause
the Exchange Offer to comply with all applicable federal and state securities
laws. No securities other than the New Senior Notes shall be included in the
Exchange Offer Registration Statement. The Company shall use its reasonable best
efforts to cause the Exchange Offer to be Consummated on or prior to 30 business
days after the Exchange Offer Registration Statement has become effective.
(c) The Company shall indicate in a "Plan of Distribution" section
contained in the Prospectus contained in the Exchange Offer Registration
Statement that any Broker-Dealer who holds Senior Notes that are Transfer
Restricted Securities and that were acquired for its own account as a result of
market-making activities or other trading activities (other than Transfer
Restricted Securities acquired directly from the Company), may exchange such
Senior Notes pursuant to the Exchange Offer; however, such Broker-Dealer may be
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with any
resales of the New Senior Notes received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery by
such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such resales by Broker-Dealers that the
Commission may require in order to permit such resales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of New Senior Notes held by any such Broker-Dealer except to the
extent required by the Commission as a result of a change in policy after the
date of this Agreement.
The Company and Holdings shall use their reasonable best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of New Senior
Notes acquired by Broker-Dealers for their own accounts as a result of
market-making activities or other trading activities, and to ensure that it
conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of one year from the date on which the Exchange Offer Registration
Statement is declared effective.
4
<PAGE>
The Company shall provide sufficient copies of the latest version of
such Prospectus to Broker- Dealers promptly upon request at any time during such
one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company is not required to file an
Exchange Offer Registration Statement or to consummate the Exchange Offer
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a) below have been complied
with) or (ii) if any Holder of Transfer Restricted Securities shall notify the
Company within 20 business days of the Consummation of the Exchange Offer (A)
that such Holder is prohibited by applicable law or Commission policy from
participating in the Exchange Offer, or (B) that such Holder may not resell the
New Senior Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and that the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, or (C) that such Holder is a Broker-Dealer and holds Senior Notes
acquired directly from the Company or one of its affiliates, then the Company
and Holdings shall
(x) cause to be filed a shelf registration statement pursuant to
Rule 415 under the Act, which may be an amendment to the Exchange Offer
Registration Statement (in either event, the "Shelf Registration
Statement") on or prior to the earliest to occur of (1) the 60th day after
the date on which the Company determines that it is not required to file
the Exchange Offer Registration Statement and (2) the 60th day after the
date on which the Company receives notice from a Holder of Transfer
Restricted Securities as contemplated by clause (ii) above, (such earliest
date being the "Shelf Filing Deadline"), which Shelf Registration
Statement shall provide for resales of all Transfer Restricted Securities
the Holders of which shall have provided the information required pursuant
to Section 4(b) hereof; and
(y) use their reasonable best efforts to cause such Shelf
Registration Statement to be declared effective by the Commission on or
prior to 165 days after the Closing Date.
The Company and Holdings shall use their reasonable best efforts to keep such
Shelf Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Senior Notes by the
Holders of Transfer Restricted Securities entitled to the benefit of this
Section 4(a), and to ensure that it conforms with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years following the
Closing Date.
(b) Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 business days after receipt of a request
therefor, such information as the Company may reasonably request for use in
connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such
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Holder shall have used its best efforts to provide all such reasonably requested
information. Each Holder as to which any Shelf Registration Statement 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 Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any of the Registration Statements required by this Agreement
is not filed with the Commission on or prior to the date specified for such
filing in this Agreement, (ii) any of such Registration Statements has not been
declared effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement (the "Effectiveness Target Date"), (iii) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (iv) any Registration Statement required by this Agreement is filed
and declared effective but shall thereafter cease to be effective or fail to be
usable for its intended purpose without being succeeded immediately by a
post-effective amendment to such Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) through (iv), a "Registration Default"), the Company hereby
agrees to pay liquidated damages ("Liquidated Damages") to each Holder of
Transfer Restricted Securities with respect to the first 90-day period
immediately following the occurrence of such Registration Default, in an amount
equal to $.05 per week per $1,000 principal amount of Transfer Restricted
Securities held by such Holder for each week or portion thereof that the
Registration Default continues. The amount of the Liquidated Damages shall
increase by an additional $.05 per week per $1,000 in principal amount of
Transfer Restricted Securities with respect to each subsequent 90-day period
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $.50 per week per $1,000 principal amount of Transfer
Restricted Securities. All accrued Liquidated Damages shall be paid to Record
Holders by the Company by wire transfer of immediately available funds or by
federal funds check on each Damages Payment Date, as provided in the Indenture.
Following the cure of all Registration Defaults relating to any particular
Transfer Restricted Securities, the accrual of Liquidated Damages with respect
to such Transfer Restricted Securities will cease.
All obligations of the Company set forth in the preceding paragraph
that are outstanding with respect to any Transfer Restricted Security at the
time such security ceases to be a Transfer Restricted Security shall survive
until such time as all such obligations with respect to such Transfer Restricted
Security shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company and Holdings shall comply with all of the provisions
of Section 6(c) below, shall use their reasonable best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
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(i) If in the reasonable opinion of counsel to the Company there
is a question as to whether the Exchange Offer is permitted by applicable
law, the Company and Holdings hereby agree to seek a no-action letter or
other favorable decision from the Commission allowing the Company and
Holdings to Consummate an Exchange Offer for such Senior Notes. The
Company and Holdings each hereby agrees to pursue the issuance of such a
decision to the Commission staff level but shall not be required to take
commercially unreasonable action to effect a change of Commission policy.
The Company and Holdings each hereby agrees, however, to (A) participate
in telephonic conferences with the Commission, (B) deliver to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursue a
resolution (which need not be favorable) by the Commission staff of such
submission.
(ii) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder of Transfer
Restricted Securities shall furnish, upon the request of the Company,
prior to the Consummation thereof, a written representation to the Company
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the New Senior Notes to be issued in the
Exchange Offer and (C) it is acquiring the New Senior Notes in its
ordinary course of business. In addition, all such Holders of Transfer
Restricted Securities shall otherwise cooperate in the Company's
preparations for the Exchange Offer. Each Holder hereby acknowledges and
agrees that any Broker-Dealer and any such Holder using the Exchange Offer
to participate in a distribution of the securities to be acquired in the
Exchange Offer (1) could not under Commission policy as in effect on the
date of this Agreement rely on the position of the Commission enunciated
in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
Holdings Corporation (available May 13, 1988), as interpreted in the
Commission's letter to Shearman & Sterling dated July 2, 1993, and similar
no-action letters (including any no-action letter obtained pursuant to
clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction should be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K if the resales are of New Senior Notes obtained by such
Holder in exchange for Senior Notes acquired by such Holder directly from
the Company.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and Holdings shall provide a supplemental letter to
the Commission (A) stating that the Company and Holdings are registering
the Exchange Offer in reliance on the position of the Commission
enunciated in Exxon Capital Holdings Corporation (available May 13, 1988),
Morgan Stanley and Co., Inc. (available June 5, 1991) and, if applicable,
any no-action letter obtained pursuant to clause (i) above and (B)
including a representation that neither the Company nor Holdings has
entered into any arrangement or understanding with any Person to
distribute the New Senior Notes to be received in the Exchange Offer and
that, to the best of the Company's information and belief, each Holder
participating in the Exchange Offer is acquiring the New Senior Notes in
its ordinary course of business and has no arrangement or understanding
with any Person to participate in the distribution of the New Senior Notes
received in the Exchange Offer.
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(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and Holdings shall comply with all the
provisions of Section 6(c) below and shall use their reasonable best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof, and pursuant thereto the Company will prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration Statement
and any Prospectus required by this Agreement to permit the sale or resale of
Transfer Restricted Securities (including, without limitation, any Registration
Statement and the related Prospectus required to permit resales of Senior Notes
by Broker-Dealers), the Company shall:
(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements (including, if required by the Act or any regulation
thereunder, financial statements of Holdings) for the period specified in
Section 3 or 4 of this Agreement, as applicable; upon the occurrence of
any event that would cause any such Registration Statement or the
Prospectus contained therein (A) to contain a material misstatement or
omission or (B) not to be effective and usable for resale of Transfer
Restricted Securities during the period required by this Agreement, the
Company shall file promptly an appropriate amendment to such Registration
Statement, in the case of clause (A), correcting any such misstatement or
omission, and, in the case of either clause (A) or (B), use its reasonable
best efforts to cause such amendment to be declared effective and such
Registration Statement and the related Prospectus to become usable for
their intended purpose(s) as soon as practicable thereafter;
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement effective for the applicable
period set forth in Section 3 or 4 hereof, as applicable, or such shorter
period as will terminate when all Transfer Restricted Securities covered
by such Registration Statement have been sold; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Act, and to comply fully with
the applicable provisions of Rules 424 and 430A under the Act in a timely
manner; and comply with the provisions of the Act with respect to the
disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or
methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
Registration Statement or any post-effective amendment thereto, when the
same has become effective, (B) of any request by the Commission for
amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement under the Act or of the suspension by any
state securities commission of the qualification of the Transfer
Restricted Securities for offering or sale in any jurisdiction, or the
initiation of any proceeding for any of the preceding purposes, (D) of the
existence of any fact or the happening of any event that
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makes any statement of a material fact made in the Registration Statement,
the Prospectus, any amendment or supplement thereto, or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at
any time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order suspending
the qualification or exemption from qualification of the Transfer
Restricted Securities under state securities or Blue Sky laws, the Company
and the Guarantor shall use their best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each of the
underwriter(s), if any, before filing with the Commission, copies of any
Registration Statement or any Prospectus included therein or any
amendments or supplements to any such Registration Statement or Prospectus
(including all documents incorporated by reference after the initial
filing of such Registration Statement), which documents will be subject to
the review of such Holders and underwriter(s), if any, for a period of at
least three business days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which a selling Holder of Transfer
Restricted Securities covered by such Registration Statement or the
underwriter(s), if any, shall reasonably object within three business days
after the receipt thereof. A selling Holder or underwriter, if any, shall
be deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains a material misstatement or omission;
(v) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to the selling Holders and to the
underwriter(s), if any, make the Company's representatives available (and
representatives of Holdings) for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such selling Holders or
underwriter(s), if any, reasonably may request;
(vi) make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition pursuant
to such Registration Statement, and any attorney or accountant retained by
such selling Holders or any of the underwriter(s), all financial and other
records, pertinent corporate documents and properties of the Company and
Holdings and cause the Company's and Holdings' officers, directors and
employees to supply all information reasonably requested by any such
Holder, underwriter, attorney or accountant in connection with such
Registration Statement subsequent to the filing thereof and prior to its
effectiveness;
(vii) if requested by any selling Holders or the underwriter(s),
if any, promptly incorporate in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such selling Holders and underwriter(s), if any, may
reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Transfer Restricted Securities, information with respect to the principal
amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other terms
of the offering of the Transfer Restricted Securities to be sold in such
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<PAGE>
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as practicable after the Company is
notified of the matters to be incorporated in such Prospectus supplement
or post-effective amendment;
(viii) cause the Transfer Restricted Securities covered by the
Registration Statement to be rated with the appropriate rating agencies,
if so requested by the Holders of a majority in aggregate principal amount
of Senior Notes covered thereby or the underwriter(s), if any;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons reasonably may request; the Company and Holdings
hereby consent to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) enter into, and cause Holdings to enter into, such
agreements (including an underwriting agreement), and make, and cause
Holdings to make, such representations and warranties, and take all such
other actions in connection therewith in order to expedite or facilitate
the disposition of the Transfer Restricted Securities pursuant to any
Registration Statement contemplated by this Agreement, all to such extent
as may be requested by any Purchaser or by any Holder of Transfer
Restricted Securities or underwriter in connection with any sale or resale
pursuant to any Registration Statement contemplated by this Agreement; and
whether or not an underwriting agreement is entered into and whether or
not the registration is an Underwritten Registration, the Company and
Holdings shall:
(A) furnish to each Purchaser, each selling Holder and each
underwriter, if any, in such substance and scope as they may request
and as are customarily made by issuers to underwriters in primary
underwritten offerings, upon the date of the Consummation of the
Exchange Offer and, if applicable, the effectiveness of the Shelf
Registration Statement:
(1) a certificate, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, signed by (y) the
President or any Vice President and (z) a principal financial or
accounting officer of each of the Company and Holdings,
confirming, as of the date thereof, the matters set forth in
paragraphs (a) and (b) of Section 9 of the Purchase Agreement
and such other matters as such parties may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company, covering the matters set forth in paragraph (d) of
Section 9 of the Purchase Agreement and such other matters as
such parties may reasonably request, and in any event
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including a statement to the effect that such counsel has
participated in conferences with officers and other
representatives of the Company, representatives of the
independent public accountants for the Company, the Purchasers'
representatives and the Purchasers' counsel in connection with
the preparation of such Registration Statement and the related
Prospectus and have considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as
to materiality to a large extent upon facts provided to such
counsel by officers and other representatives of the Company and
without independent check or verification), no facts came to
such counsel's attention that caused such counsel to believe
that the applicable Registration Statement, at the time such
Registration Statement or any post-effective amendment thereto
became effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation,
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 therein, in light of the circumstances in
which they were made, not misleading, or that the Prospectus
contained in such Registration Statement as of its date and, in
the case of the opinion dated the date of Consummation of the
Exchange Offer, as of the date of Consummation, contained an
untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading. Without limiting the foregoing, such counsel may
state further that such counsel assumes no responsibility for,
and has not independently verified, the accuracy, completeness
or fairness of the financial statements, notes and schedules and
other financial data included in any Registration Statement
contemplated by this Agreement or the related Prospectus; and
(3) a customary comfort letter, dated as of the date of
Consummation of the Exchange Offer or the date of effectiveness
of the Shelf Registration Statement, as the case may be, from
the Company's independent accountants, in the customary form and
covering matters of the type customarily covered in comfort
letters by underwriters in connection with primary underwritten
offerings, and affirming the matters set forth in the comfort
letters delivered pursuant to Section (9)(f) of the Purchase
Agreement, without exception;
(B) set forth in full or incorporate by reference in the
underwriting agreement, if any, the indemnification provisions and
procedures of Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section; and
(C) deliver such other documents and certificates as may be
reasonably requested by such parties to evidence compliance with
clause (A) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company
pursuant to this clause (xi), if any.
If at any time the representations and warranties of the Company and
Holdings contemplated in clause (A)(1) above cease to be true and correct,
the Company or Holdings shall so advise the Purchasers and the
underwriter(s), if any, and each selling Holder promptly and, if requested
by such Persons, shall confirm such advice in writing;
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(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with, and cause Holdings to cooperate with, the
selling Holders, the underwriter(s), if any, and their respective counsel
in connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders or underwriter(s) may request and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Transfer Restricted Securities
covered by the Shelf Registration Statement; provided, however, that
neither the Company nor Holdings shall be required to register or qualify
as a foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in suits or to
taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so
subject;
(xiii) shall issue, upon the request of any Holder of Senior
Notes covered by the Shelf Registration Statement, New Senior Notes,
having an aggregate principal amount equal to the aggregate principal
amount of Senior Notes surrendered to the Company by such Holder in
exchange therefor or being sold by such Holder; such New Senior Notes to
be registered in the name of such Holder or in the name of the
purchaser(s) of such Notes, as the case may be; in return, the Senior
Notes held by such Holder shall be surrendered to the Company for
cancellation;
(xiv) cooperate with, and cause Holdings to cooperate with, the
selling Holders and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and enable
such Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the underwriter(s), if any, may
request at least two business days prior to any sale of Transfer
Restricted Securities made by such underwriter(s);
(xv) use its reasonable best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof or
the underwriter(s), if any, to consummate the disposition of such Transfer
Restricted Securities, subject to the proviso contained in clause (xii)
above;
(xvi) if any fact or event contemplated by clause (c)(iii)(D)
above shall exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue statement
of a material fact or omit to state any material fact necessary to make
the statements therein not misleading;
(xvii) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of the Registration Statement
and provide the Trustee under the Indenture with printed certificates for
the Transfer Restricted Securities which are in a form eligible for
deposit with the Depositary Trust Company;
(xviii) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by
any underwriter (including any "qualified independent underwriter") that
is required to be retained in accordance with the rules and regulations
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of the NASD, and use its reasonable best efforts to cause such
Registration Statement to become effective and approved by such
governmental agencies or authorities as may be necessary to enable the
Holders selling Transfer Restricted Securities to consummate the
disposition of such Transfer Restricted Securities;
(xix) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders, as soon as practicable, a consolidated
earnings statement meeting the requirements of Rule 158 (which need not be
audited) for the twelve-month period (A) commencing at the end of any
fiscal quarter in which Transfer Restricted Securities are sold to
underwriters in a firm or best efforts Underwritten Offering or (B) if not
sold to underwriters in such an offering, beginning with the first month
of the Company's first fiscal quarter commencing after the effective date
of the Registration Statement;
(xx) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement, and, in connection therewith, cooperate, and cause
Holdings to cooperate, with the Trustee and the Holders of Notes to effect
such changes to the Indenture as may be required for such Indenture to be
so qualified in accordance with the terms of the TIA; and execute, and
cause Holdings to execute, and use its best efforts to cause the Trustee
to execute, all documents that 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;
(xxi) cause all Transfer Restricted Securities covered by the
Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by
the Holders of a majority in aggregate principal amount of Senior Notes or
the managing underwriter(s), if any; and
(xxii) provide promptly to each Holder upon request each
document filed with the Commission pursuant to the requirements of Section
13 and Section 15 of the Exchange Act.
(d) Each Holder agrees by acquisition of a Transfer Restricted
Security that, upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 6(c)(iii)(D) hereof, such Holder will
forthwith discontinue disposition of Transfer Restricted Securities pursuant to
the applicable Registration Statement until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6(c)(xvi)
hereof, or until it is advised in writing (the "Advice") by the Company that the
use of the Prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated by reference in the Prospectus. If
so directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section
6(c)(iii)(D) hereof to and including the date when each selling Holder covered
by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof or
shall have received the Advice.
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SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or Holdings' performance
of or compliance with this Agreement will be borne by the Company or Holdings,
regardless of whether a Registration Statement becomes effective, including
without limitation: (i) all registration and filing fees and expenses (including
filings made by any Purchaser or Holder with the NASD (and, if applicable, the
fees and expenses of any "qualified independent underwriter" and its counsel
that may be required by the rules and regulations of the NASD)); (ii) all fees
and expenses of compliance with federal securities and state Blue Sky or
securities laws; (iii) all expenses of printing (including printing certificates
for the New Senior Notes to be issued in the Exchange Offer and printing of
Prospectuses), messenger and delivery services and telephone; (iv) all fees and
disbursements of counsel for the Company, Holdings and, subject to Section 7(b)
below, the Holders of Transfer Restricted Securities; (v) all application and
filing fees in connection with listing New Senior Notes on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company and Holdings (including the expenses of any special audit and
comfort letters required by or incident to such performance); provided, however,
the foregoing shall exclude underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of Notes by a Holder.
The Company will, in any event, bear its and Holdings' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Purchasers and the Holders of Transfer Restricted Securities being tendered in
the Exchange Offer and/or resold pursuant to the "Plan of Distribution"
contained in the Exchange Offer Registration Statement or registered pursuant to
the Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins or
such other counsel as may be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) Each of the Company and Holdings jointly and severally agrees to
indemnify and hold harmless each Holder and each person, if any, who controls
any Holder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act (a "controlling person") and the respective officers, directors,
partners, employees, representatives and agents of any Holder or any controlling
person ("Agents" and, together with all Holders and controlling persons, the
"Indemnified Holders"), from and against any and all losses, claims, damages,
liabilities and judgments caused by any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), 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 light of the circumstances under
which they were made,
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not misleading, except insofar as such losses, claims, damages, liabilities or
judgments are caused by any such untrue statement or omission or alleged untrue
statement or omission based upon information relating to such Holder furnished
in writing to the Company by such Holder expressly for use therein; provided,
however, that the indemnification contained in this paragraph (a) with respect
to any Registration Statement or Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) shall not
inure to the benefit of any Holder (or to the benefit of any controlling person)
on account of any such loss, claim, damage, liability or judgment (i) arising
from the sale of the Senior Notes by such Holder to any person if a copy of the
Registration Statement shall not have been delivered or sent to such person, at
or prior to the written confirmation of such sale, and the untrue statement or
alleged untrue statement or omission or alleged omission of a material fact
contained in the Registration Statement or Prospectus was corrected in the
Registration Statement or Prospectus (as amended or supplemented), provided that
the Company has delivered the Registration Statement or Prospectus (as amended
or supplemented) to the Holders in requisite quantity on a timely basis to
permit such delivery or sending or (ii) resulting from the use by such Holder of
any registration statement or prospectus, or any amendment or supplement thereto
when, under Section 6(d) of this Agreement, such Holder was not permitted to do
so; provided further, however, that the foregoing exceptions in clauses (i) and
(ii) shall not affect the indemnity with respect to any other Holder not
otherwise subject to such exceptions.
In case any action shall be brought against any of the Indemnified
Holders, based upon any Prospectus or any amendment or supplement thereto and
with respect to which indemnity may be sought against the Company and Holdings,
such Indemnified Holder shall promptly notify the Company and Holdings in
writing and the Company and Holdings shall assume the defense thereof, including
the employment of counsel reasonably satisfactory to such Indemnified Holder and
payment of all fees and expenses. Any Indemnified Holder shall have the right to
employ separate counsel in any such action and participate in the defense
thereof, but the reasonable fees and expenses of such counsel shall be at the
expense of such Indemnified Holder unless (i) the employment of such counsel has
been specifically authorized in writing by the Company, (ii) the Company has
failed to assume the defense and employ counsel or (iii) the named parties to
any such action (including any impleaded parties) include both such Indemnified
Holder and the Company, and such Indemnified Holder shall have been advised by
such counsel that there may be one or more legal defenses available to it which
are different from or additional to those available to the Company (in which
case the Company and Holdings shall not have the right to assume the defense of
such action on behalf of such Indemnified Holder, it being understood, however,
that the Company and Holdings shall not, in connection with any one such action
or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all such Indemnified Holders, which firm
shall be designated in writing by the Holders, and that all such fees and
expenses shall be reimbursed as they are incurred). The Company shall not be
liable for any settlement of any such action effected without the written
consent of the Company but if settled with the Company's written consent, the
Company agrees to indemnify and hold harmless any Indemnified Holder from and
against any loss or liability by reason of such settlement. Notwithstanding the
immediately preceding sentence, if in any case where the fees and expenses of
counsel are at the expense of the indemnifying party and the indemnified party
shall have requested the indemnifying party to reimburse the indemnified party
for such fees and expenses of counsel as incurred, such indemnifying party
agrees that it shall be liable for any settlement of any action effected without
its written consent if (i) such settlement is entered into more than ten
business days after the receipt by
15
<PAGE>
such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall have failed to reimburse the indemnified party in accordance with
such request for reimbursement prior to the date of such settlement. 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 indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such proceeding.
(b) Each Holder of Transfer Restricted Securities agrees, severally
and not jointly, to indemnify and hold harmless the Company and Holdings, and
their respective directors, officers, partners, employees, representatives and
agents and any person controlling them within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act (collectively the "Company Indemnified
Parties") to the same extent as the foregoing indemnity from the Company and
Holdings to each Indemnified Holder, but only with reference to information
relating to such Holder furnished in writing by such Holder expressly for use in
any Registration Statement. In case any action shall be brought against any
Company Indemnified Party in respect of which indemnity may be sought against a
Holder of Transfer Restricted Securities, such Holder shall have the rights and
duties given to the Company (except that if the Company shall have assumed the
defense thereof, such Holder shall not be required to do so, but may employ
separate counsel therein and participate in the defense thereof but the fees and
expenses of such counsel shall be at the expense of such Holder), and the
Company Indemnified Parties shall have the rights and duties given to such
Holder by Section 8(a) hereof.
(c) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand and the
Holders on the other hand from their sale of Transfer Restricted Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company and the Holders in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative fault of the Company
and Holdings on the one hand and of the Indemnified Holder on the other 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 Holdings or by
the Indemnified Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and judgments referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 8(a),
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim.
The Company, Holdings and each Holder of Transfer Restricted
Securities agree that it would not be just and equitable if contribution
pursuant to this paragraph were determined by pro rata allocation (even if the
Holders were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in the immediately preceding
16
<PAGE>
paragraph. The losses, claims, damages, liabilities or judgments of an
indemnified party referred to in the immediately preceding paragraph shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, no Holders (and their related Indemnified Holders)
shall be required to contribute, any amount in excess of the amount by which the
total discounts and commissions received by it exceeds the amount of any damages
which such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute pursuant to
this Section 8(c) are several in proportion to the respective principal amount
of Senior Notes held by each of the Holders hereunder and not joint.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding, to make available to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities from such Holder or beneficial owner, the information required by
Rule 144A(d)(4) under the Act in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144A.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in any underwriting arrangements approved by
the Persons entitled hereunder to approve such arrangements and (b) completes
and executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required under the
terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by the Shelf
Registration Statement who desire to do so may sell such Transfer Restricted
Securities in an Underwritten Offering. In any such Underwritten Offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company and Holdings agree that monetary damages
(including the Liquidated Damages contemplated hereby) would not be adequate
compensation for any loss incurred by
17
<PAGE>
reason of a breach by it of the provisions of this Agreement and hereby agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) No Inconsistent Agreements. The Company will not, and will cause
Holdings not to, on or after the date of this Agreement enter into any agreement
with respect to its securities that is inconsistent with the rights granted to
the Holders 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
securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Senior Notes. The Company will not take
any action, or permit any change to occur, with respect to the Senior Notes that
would materially and adversely affect the ability of the Holders to Consummate
any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement may not
be amended, modified or supplemented, and waivers or consents to or departures
from the provisions hereof may not be given unless the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof that relates exclusively to the
rights of Holders whose securities are being tendered pursuant to the Exchange
Offer and that does not affect directly or indirectly the rights of other
Holders whose securities are not being tendered pursuant to such Exchange Offer
may be given by the Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of
the Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Anchor Advanced Products, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, TN 37919-4048
Telecopier No.: (423) 450-5379
Attention: President
With a copy to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Telecopier No.: (617) 951-1295
Attention: James Westra, Esq.
18
<PAGE>
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt acknowledged, if telecopied; and 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 specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and assigns of each of the parties,
including without limitation and without the need for an express assignment,
subsequent Holders of Transfer Restricted Securities; 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 acquired
Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
Anchor Advanced Products, Inc.
By: /s/ Francis H. Olmstead, Jr.
---------------------------------
Name: Francis H. Olmstead, Jr.
Title: CEO and President
Anchor Holdings, Inc.
By: /s/ Francis H. Olmstead, Jr.
---------------------------------
Name: Francis H. Olmstead, Jr.
Title: CEO and President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
NATIONSBANC CAPITAL MARKETS, INC.
Acting on behalf of
itself, CIBC Wood Gundy Securities Corp.
and Nationsbanc Capital Markets, Inc.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Craig Packer
---------------------------------
Name: Craig Packer
Title: Vice President
20
[EXECUTION COPY]
CREDIT AGREEMENT
among
ANCHOR ADVANCED PRODUCTS, INC.,
as Borrower,
and
THE GUARANTORS FROM TIME TO TIME PARTIES HERETO,
as Guarantors,
THE LENDERS IDENTIFIED HEREIN,
and
NATIONSBANK, N.A.,
as Agent
DATED AS OF APRIL 2, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
SECTION 1 DEFINITIONS AND ACCOUNTING TERMS.......................................................................1
1.1 Definitions..........................................................................................1
1.2 Computation of Time Periods and Other Definitional Provisions.......................................23
1.3 Accounting Terms....................................................................................23
SECTION 2 CREDIT FACILITIES ....................................................................................24
2.1 Loans...............................................................................................24
2.2 Letter of Credit Subfacility........................................................................25
2.3 Continuations and Conversions.......................................................................30
2.4 Minimum Amounts.....................................................................................31
2.5 Notes...............................................................................................31
SECTION 3 GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT..........................................31
3.1 Interest............................................................................................31
3.2 Place and Manner of Payments........................................................................32
3.3 Prepayments.........................................................................................32
3.4 Fees................................................................................................33
3.5 Payment in full at Maturity.........................................................................34
3.6 Computations of Interest and Fees...................................................................34
3.7 Pro Rata Treatment..................................................................................35
3.8 Allocation of Payments After Event of Default.......................................................36
3.9 Sharing of Payments.................................................................................37
3.10 Capital Adequacy...................................................................................38
3.11 Inability To Determine Interest Rate...............................................................38
3.12 Illegality.........................................................................................38
3.13 Requirements of Law................................................................................39
3.14 Taxes..............................................................................................40
3.15 Indemnity..........................................................................................42
SECTION 4 GUARANTY .............................................................................................43
4.1 Guaranty of Payment.................................................................................43
4.2 Obligations Unconditional...........................................................................43
4.3 Modifications.......................................................................................44
4.4 Waiver of Rights....................................................................................44
4.5 Reinstatement.......................................................................................45
4.6 Remedies............................................................................................45
4.7 Limitation of Guaranty..............................................................................45
4.8 Rights of Contribution..............................................................................46
SECTION 5 CONDITIONS PRECEDENT..................................................................................46
5.1 Closing Conditions..................................................................................46
i
<PAGE>
<S> <C> <C>
5.2 Conditions to All Extensions of Credit..............................................................50
SECTION 6 REPRESENTATIONS AND WARRANTIES........................................................................51
6.1 Financial Condition.................................................................................51
6.2 No Material Change..................................................................................52
6.3 Organization and Good Standing......................................................................52
6.4 Due Authorization...................................................................................52
6.5 No Conflicts........................................................................................53
6.6 Consents............................................................................................53
6.7 Enforceable Obligations.............................................................................53
6.8 No Default..........................................................................................53
6.9 Ownership...........................................................................................53
6.10 Indebtedness.......................................................................................54
6.11 Litigation.........................................................................................54
6.12 Taxes..............................................................................................54
6.13 Compliance with Law................................................................................54
6.14 ERISA..............................................................................................54
6.15 Subsidiaries.......................................................................................55
6.16 Use of Proceeds; Margin Stock......................................................................56
6.17 Government Regulation..............................................................................56
6.18 Environmental Matters..............................................................................56
6.19 Intellectual Property..............................................................................57
6.20 Solvency...........................................................................................58
6.21 Investments........................................................................................58
6.22 Location of Collateral.............................................................................58
6.23 Disclosure.........................................................................................58
6.24 Licenses, etc......................................................................................58
6.25 No Burdensome Restrictions.........................................................................58
6.26 Labor Matters......................................................................................59
6.27 Nature of Business.................................................................................59
SECTION 7 AFFIRMATIVE COVENANTS.................................................................................59
7.1 Information Covenants...............................................................................59
7.2 Preservation of Existence and Franchises............................................................62
7.3 Books and Records...................................................................................62
7.4 Compliance with Law.................................................................................62
7.5 Payment of Taxes and Other Indebtedness.............................................................62
7.6 Insurance...........................................................................................63
7.7 Maintenance of property.............................................................................63
7.8 Performance of Obligations..........................................................................63
7.9 Collateral..........................................................................................63
7.10 Use of Proceeds....................................................................................64
7.11 Audits/Inspections.................................................................................64
7.12 Financial Covenants................................................................................65
7.13 Additional Credit Parties..........................................................................66
ii
<PAGE>
<S> <C> <C>
SECTION 8 NEGATIVE COVENANTS ...................................................................................66
8.1 Indebtedness........................................................................................67
8.2 Liens...............................................................................................67
8.3 Nature of Business..................................................................................67
8.4 Consolidation and Merger............................................................................68
8.5 Asset Dispositions..................................................................................68
8.6 Investments.........................................................................................69
8.7 Restricted Payments.................................................................................69
8.8 Transactions with Affiliates........................................................................70
8.9 Restrictions on the Parent; Ownership of Subsidiaries...............................................70
8.10 Fiscal Year; Organizational Documents..............................................................70
8.11 Prepayment or Modification of Indebtedness.........................................................71
8.12 Limitations........................................................................................71
8.13 Sale Leasebacks....................................................................................71
8.14 Capital Expenditures...............................................................................72
8.15 No Further Negative Pledges........................................................................72
8.16 Operating Lease Obligations........................................................................72
8.17 Foreign Subsidiaries...............................................................................72
SECTION 9 EVENTS OF DEFAULT ....................................................................................73
9.1 Events of Default...................................................................................73
9.2 Acceleration; Remedies..............................................................................75
SECTION 10 AGENCY PROVISIONS ...................................................................................76
10.1 Appointment........................................................................................76
10.2 Delegation of Duties...............................................................................76
10.3 Exculpatory Provisions.............................................................................77
10.4 Reliance on Communications.........................................................................77
10.5 Notice of Default..................................................................................78
10.6 Non-Reliance on Agent and Other Lenders............................................................78
10.7 Indemnification....................................................................................78
10.8 Agent in Its Individual Capacity...................................................................79
10.9 Successor Agent....................................................................................79
SECTION 11 MISCELLANEOUS .......................................................................................80
11.1 Notices............................................................................................80
11.2 Right of Set-Off...................................................................................80
11.3 Benefit of Agreement...............................................................................80
11.4 To Waiver; Remedies Cumulative.....................................................................83
11.5 Payment of Expenses; Indemnification...............................................................83
11.6 Amendments, Waivers and Consents...................................................................84
11.7 Counterparts.......................................................................................85
11.8 Pleadings..........................................................................................85
11.9 Defaulting Lender..................................................................................85
11.10 Survival of Indemnification and Representations and Warranties....................................85
iii
<PAGE>
<S> <C> <C>
11.11 Governing Law; Venue..............................................................................85
11.12 Waiver of Jury Trial..............................................................................86
11.13 Time..............................................................................................86
11.14 Severability......................................................................................86
11.15 Entirety..........................................................................................87
11.16 Binding Effect....................................................................................87
11.17 Confidentiality...................................................................................87
</TABLE>
SCHEDULES
- ---------
Schedule 1.1A Commitment Percentages
Schedule 1.1B Existing Investments
Schedule 1.1C Existing Liens
Schedule 5.1(d) Form of Opinion of Hutchins, Wheeler & Dittmar
Schedule 6.6 Consents, Approvals and Authorizations
Schedule 6.10 Existing Indebtedness
Schedule 6.11 Litigation
Schedule 6.15 Existing Subsidiaries
Schedule 6.18 Environmental Matters
Schedule 6.19 Intellectual Property
Schedule 6.22(a) Personal Property Locations
Schedule 6.22(b) Chief Executive Offices
Schedule 7.6 Existing Insurance Coverage
Schedule 11.1 Addresses for Notice
EXHIBITS
- --------
Exhibit 2.1 Form of Notice of Borrowing
Exhibit 2.3 Form of Notice of Continuation/Conversion
Exhibit 2.5(a) Form of Note
Exhibit 7.1(c) Form of Officer's Certificate
Exhibit 7.1(d) Form of Borrowing Base Report
Exhibit 7.13 Form of Joinder Agreement
Exhibit 11.3 Form of Assignment Agreement
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of April 2, 1997 (as amended, modified,
restated or supplemented from time to time, the "Credit Agreement"), is by and
among ANCHOR ADVANCED PRODUCTS, INC., a Delaware corporation (the "Borrower"),
the Guarantors (as defined herein), the Lenders (as defined herein) and
NATIONSBANK, N.A., as Agent for the Lenders (in such capacity, the "Agent").
RECITALS
WHEREAS, the Borrower has requested that the Lenders provide a
$15,000,000 revolving credit facility with a sublimit of the $5,000,000 for
letters of credit to the Borrower; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth.
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:
SECTION 1
DEFINITIONS AND ACCOUNTING TERMS
--------------------------------
1.1 Definitions.
As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:
"Additional Credit Party" means each Person that becomes a
Guarantor after the Closing Date, as provided in Section 7.13.
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to
all directors and officers of such Person), controlled by or under
direct or indirect common control with such Person. A Person shall be
deemed to control a corporation if such Person possesses, directly or
indirectly, the power (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of
<PAGE>
such corporation or (ii) to direct or cause direction of the management
and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Agency Services Address" means NationsBank, N.A.,
NC-001-15-04, Independence Center, 15th Floor, 101 North Tryon Street,
Charlotte 28255, Attn: Agency Services, or such other address as may be
identified by written notice from the Agent to the Borrower.
"Agent" shall have the meaning assigned to such term in the
heading hereof, together with any successors or assigns.
"Applicable Percentage" means for the Loans, Standby Letter of
Credit Fee and Commitment Fees, the appropriate applicable percentages
corresponding to the Leverage Ratio in effect as of the most recent
Calculation Date as shown below:
<TABLE>
<CAPTION>
=======================================================================================================================
- -----------------------------------------------------------------------------------------------------------------------
Applicable Applicable
Applicable Applicable Percentage For Percentage For
Percentage For Percentage For Standby Letter Commitment Fees
Pricing Leverage Eurodollar Base Rate of Credit Fee
Level Ratio Loans Loans
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
I greater than or equal 2.25% 1.25% 2.25% 0.50%
to 4.75 to 1.00
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
II less than 4.75 to 2.00% 1.00% 2.00% 0.50%
1.00 but
greater than or equal
to 3.50 to 1.00
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
III less than 3.50 to 1.75% 0.75% 1.75% 0.50%
1.00 but
greater than or equal
to 3.00 to 1.00
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
IV less than 3.00 to 1.00 1.50% 0.50% 1.50% 0.50%
=======================================================================================================================
</TABLE>
The Applicable Percentages shall be determined and adjusted quarterly
on the date (each a "Calculation Date") five Business Days after the
date by which the Borrower is required to provide the officer's
certificate in accordance with the provisions of Section 7.1(c);
provided, however, that (i) the initial Applicable Percentages shall be
based on Pricing Level II until the first Calculation Date to occur
after the Closing Date, and, thereafter, the Applicable Percentages
shall be determined by the Leverage Ratio as of the fiscal quarter end
immediately preceding the applicable Calculation Date; provided
further, however, that, if the Applicable Percentages determined
pursuant to the foregoing terms of this clause (i) as of any
Calculation Date occurring during the period from the Closing Date
until the first Calculation Date to occur subsequent to September 30,
1998 shall be based on Pricing Level III or Pricing Level IV, then the
Applicable Percentages shall be based instead on Pricing Level II until
the next succeeding Calculation Date to occur, and
-2-
<PAGE>
(ii) if the Borrower fails to provide the officer's certificate to the
Agency Services Address as required by Section 7.1(c) on or before the
most recent Calculation Date, the Applicable Percentages from such
Calculation Date shall be based on Pricing Level I until such time as
an appropriate officer's certificate is provided, whereupon the Pricing
Level shall be determined by the Leverage Ratio as of the fiscal
quarter end immediately preceding the applicable Calculation Date.
Except as set forth above, each Applicable Percentage shall be
effective from one Calculation Date until the next Calculation Date.
Any adjustment in the Applicable Percentages shall be applicable to all
existing Loans and Letters of Credit as well as any new Loans made or
Letters of Credit issued.
"Application Period" shall have the meaning assigned to such
term in Section 8.5.
"Asset Disposition" means the disposition of any or all of the
assets (including without limitation the Capital Stock of a Subsidiary)
of any Consolidated Party whether by sale, lease, transfer or
otherwise. The term "Asset Disposition" shall include any "Asset Sale"
under and as defined in the Senior Note Indenture.
"Asset Disposition Prepayment Event" means, with respect to
any Asset Disposition other than an Excluded Asset Disposition, the
failure of the Borrower to apply (or cause to be applied) the Net Cash
Proceeds of such Asset Disposition to the purchase, acquisition or
construction of Eligible Assets during the Application Period for such
Asset Disposition.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from
time to time.
"Bankruptcy Event" means, with respect to any Person, the
occurrence of any of the following with respect to such Person: (i) a
court or governmental agency having jurisdiction in the premises shall
enter a decree or order for relief in respect of such Person in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its property or
ordering the winding up or liquidation of its affairs; or (ii) there
shall be commenced against such Person an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter
in effect, or any case, proceeding or other action for the appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its property or
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make any general assignment for the benefit of creditors; or (iv) such
Person shall be unable to, or shall admit in writing its inability to,
pay its debts generally as they become due.
"Base Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest whole multiple of 1/100 of 1%)
equal to the greater of (a) the Federal Funds Rate in effect on such
day plus 1/2 of 1% or (b) the Prime Rate in effect on such day. If for
any reason the Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable after due
inquiry to ascertain the Federal Funds Rate for any reason, including
the inability or failure of the Agent to obtain sufficient quotations
in accordance with the terms hereof, the Base Rate shall be determined
without regard to clause (a) of the first sentence of this definition
until the circumstances giving rise to such inability no longer exist.
Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such
change in the Prime Rate or the Federal Funds Rate, respectively.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" means the Person identified as such in the heading
hereof, together with any permitted successors and assigns.
"Borrowing Base" means, as of any day, the sum of (a) 80% of
Eligible Receivables, (b) 50% of Eligible Inventory which is not
work-in-process inventory and (c) 25% of Eligible Inventory which is
work-in-process inventory, in each case as set forth in the most recent
Borrowing Base Certificate delivered to the Agent and the Lenders in
accordance with the terms of Section 7.1(d); provided, however, that
subject to the further requirements of clause (vi) of the definition of
"Eligible Receivables" set forth in this Section 1.1, Receivables owing
by an account debtor located outside of the United States shall not at
any time constitute for more than 20% of the Borrowing Base.
"Business Day" means any day other than a Saturday, a Sunday,
a legal holiday or a day on which banking institutions are authorized
or required by law or other governmental action to close in Charlotte,
North Carolina or New York, New York; provided that in the case of
Eurodollar Loans, such day is also a day on which dealings between
banks are carried on in U.S. dollar deposits in the London interbank
market.
"Calculation Date" has the meaning set forth in the definition
of Applicable Percentage.
"Capital Expenditures" means all expenditures of the
Consolidated Parties which, in accordance with GAAP, would be
classified as capital expenditures.
"Capital Lease" means, as applied to any Person, any lease of
any property (whether real, personal or mixed) by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a
capital lease on the balance sheet of that Person.
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"Capital Lease Obligations" means, with respect to any Person
as of any date, the amount of the liability in respect of a capital
lease that would at such time be required to be capitalized on a
balance sheet of such Person as of such date in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation,
capital stock, (ii) in the case of an association or business entity,
any and all shares, interests, participations, rights or other
equivalents (however designated) of capital stock, (iii) in the case of
a partnership, partnership interests (whether general or limited), (iv)
in the case of a limited liability company, membership interests and
(v) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions
of assets of, the issuing Person.
"Cash Equivalents" means (a) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than twelve months from the date of
acquisition, (b) U.S. dollar denominated time deposits and certificates
of deposit of (i) any Lender, (ii) any domestic commercial bank of
recognized standing having capital and surplus in excess of
$500,000,000 or (iii) any bank whose short-term commercial paper rating
from S&P is at least A-1 or the equivalent thereof or from Moody's is
at least P-1 or the equivalent thereof (any such bank being an
"Approved Bank"), in each case with maturities of not more than one
year from the date of acquisition, (c) commercial paper and variable or
fixed rate notes issued by any Approved Bank (or by the parent company
thereof) or any variable rate notes issued by, or guaranteed by, any
domestic corporation rated A-1 (or the equivalent thereof) or better by
S&P or P-1 (or the equivalent thereof) or better by Moody's and
maturing within one year of the date of acquisition, (d) repurchase
agreements with a bank or trust company (including any of the Lenders)
or recognized securities dealer having capital and surplus in excess of
$500,000,000 for direct obligations issued by or fully guaranteed by
the United States of America in which the applicable Credit Party shall
have a perfected first priority security interest (subject to no other
Liens) and having, on the date of purchase thereof, a fair market value
of at least 100% of the amount of the repurchase obligations and (e)
Investments, classified in accordance with GAAP as current assets, in
money market investment programs registered under the Investment
Company Act of 1940, as amended, which are administered by reputable
financial institutions having capital of at least $500,000,000 and the
portfolios of which are limited to Investments of the character
described in the foregoing subdivisions (a) through (d).
"Cash Taxes" means, with respect to any Person for any period,
the aggregate of all taxes of such Person, as determined in accordance
with GAAP, to the extent the same are paid in cash during such period.
"Change of Control" means any of the following events:
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(i) the failure of the Parent to own all of the
Capital Stock of the Borrower;
(ii) during any period of up to 24 consecutive
months, commencing after the Closing Date, individuals who at
the beginning of such 24 month period were directors of the
Parent (together with any new director whose election by the
Parent's Board of Directors or whose nomination for election
by the Parent's shareholders was approved by a vote of at
least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
directors of the Parent then in office;
(iii) at any time prior to an Initial Public
Offering, (a) the failure of the members of the Sponsor Group
to own at least 51%, in the aggregate, of the Capital Stock of
the Parent or (b) a Person or group (as such term is defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) other than the Sponsor Group shall have acquired
beneficial ownership, directly or indirectly, of, or shall
have acquired by contract or otherwise, or shall have entered
into a contract or arrangement that, upon consummation, will
result in its or their acquisition of, control over, 35% or
more of the Capital Stock of the Parent;
(iv) at any time after an Initial Public Offering,
(a) the failure of the Sponsor Group to own, directly or
indirectly, at least 30%, in the aggregate, of the Capital
Stock of the Parent (or, subsequent to a merger or
consolidation between the Parent and the Borrower in
connection with such Initial Public Offering, then of the
continuing or surviving corporation of such merger or
consolidation) or (b) a Person or group (as such term is
defined in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended) other than the Sponsor Group shall have
acquired beneficial ownership, directly or indirectly, of, or
shall have acquired by contract or otherwise, or shall have
entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of,
control over, a greater percentage of the Capital Stock of the
Parent (or in the case of a merger or consolidation between
the Parent and the Borrower in connection with such Initial
Public Offering, then of the continuing or surviving
corporation of such merger or consolidation) than the
percentage of such Capital Stock owned by the Sponsor Group;
or
(v) a "Change of Control" shall occur under and as
defined in the Senior Note Indenture.
As used herein, "beneficial ownership" shall have the meaning provided
in Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934.
"Closing Date" means the date hereof.
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"Code" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto, as interpreted by the rules and
regulations issued thereunder, in each case as in effect from time to
time. References to sections of the Code shall be construed also to
refer to any successor sections.
"Collateral" means all collateral referred to in and covered
by the Collateral Documents.
"Collateral Documents" means the Security Agreements and such
other documents executed and delivered in connection with the
attachment and perfection of the Lenders' security interests in the
Collateral, including without limitation, UCC financing statements and
patent and trademark filings.
"Commitment Fees" means the fees payable to the Lenders
pursuant to Section 3.4(a).
"Commitment Percentage" means, for each Lender, the percentage
identified as its Commitment Percentage on Schedule 1.1A, as such
percentage may be modified in connection with any assignment made in
accordance with the provisions of Section 11.3.
"Commitment" means, with respect to each Lender, the
commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Commitment Percentage of the
Committed Amount, (i) to make Loans in accordance with the provisions
of Section 2.1(a) and (ii) to purchase Participation Interests in
Letters of Credit in accordance with the provisions of Section 2.2(c).
"Committed Amount" means FIFTEEN MILLION DOLLARS ($15,000,000)
or such lesser amount as the Committed Amount may be reduced pursuant
to Section 2.1(d) or Section 3.3(b).
"Consolidated EBITDA" means, for any period, with respect to
the Consolidated Parties on a consolidated basis, the sum of (i)
Consolidated Net Income for such period (excluding the effect of (a)
any extraordinary or other non-recurring gains or losses outside of the
ordinary course of business and (b) any non-recurring charges, non-cash
charges or documented cash charges, in each case deducted in
determining Consolidated Net Income for such period and related to the
issuance of the Senior Notes) plus (ii) an amount which, in the
determination of Consolidated Net Income for such period, has been
deducted for (A) Interest Expense, (B) total Federal, state, foreign or
other income taxes and (C) depreciation and amortization expense and
any other non-cash charges deducted in determining Consolidated Net
Income for such period, all as determined in accordance with GAAP.
"Consolidated Net Income" means, for any period, the net
income after taxes for such period of the Consolidated Parties on a
consolidated basis, as determined in accordance with GAAP.
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"Consolidated Parties" means the Parent and its Subsidiaries,
and "Consolidated Party" means any one of them.
"Consolidated Net Worth" means, at any time, shareholders'
equity or net worth of the Consolidated Parties on a consolidated
basis, as determined in accordance with GAAP.
"Credit Documents" means this Credit Agreement, the Notes, any
Joinder Agreement, the Collateral Documents, the LOC Documents and all
other related agreements and documents issued or delivered hereunder or
thereunder or pursuant hereto or thereto.
"Credit Parties" means the Borrower and the Guarantors, and
"Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (a) all
of the obligations of the Credit Parties to the Lenders (including the
Issuing Lender) and the Agent, whenever arising, under this Credit
Agreement, the Notes, the Collateral Documents or any of the other
Credit Documents to which the Borrower or any other Credit Party is a
party and (b) all Hedging Obligations owing from a Credit Party to any
Lender, or any Affiliate of a Lender.
"Default" means any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Defaulting Lender" means, at any time, any Lender that (a)
has failed to make a Loan or purchase a Participation Interest required
pursuant to the term of this Credit Agreement within one Business Day
of when due, (b) other than as set forth in (a) above, has failed to
pay to the Agent or any Lender an amount owed by such Lender pursuant
to the terms of this Credit Agreement within one Business Day of when
due, unless such amount is subject to a good faith dispute or (c) has
been deemed insolvent or has become subject to a bankruptcy or
insolvency proceeding or with respect to which (or with respect to any
of assets of which) a receiver, trustee or similar official has been
appointed.
"Dollars" and "$" means dollars in lawful currency of the
United States of America.
"Domestic Credit Party" means any one of the Parent, the
Borrower and each of the Guarantors which is a Domestic Subsidiary of
the Borrower.
"Domestic Subsidiary" means, with respect to any Person, any
Subsidiary of such Person which is incorporated or organized under the
laws of any State of the United States or the District of Columbia.
"Eligible Assets" means another business or any substantial
part of another business or other long-term assets, in each case, in,
or used or useful in, the same or a
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similar line of business as the Consolidated Parties were engaged in on
the Closing Date or any reasonable extensions or expansions thereof.
"Eligible Inventory" means, as of any date of determination
and without duplication, the lower of the aggregate book value (based
on a FIFO or a moving average cost valuation, consistently applied) or
fair market value of all raw materials, work-in-process and finished
goods inventory owned by the Borrower less appropriate reserves
determined in accordance with GAAP but excluding in any event (i)
inventory which is (a) not subject to a perfected, first priority Lien
in favor for the Agent to secure the Credit Party Obligations or (b)
subject to any other Lien that is not a Permitted Lien, (ii) inventory
which is not in good condition or fails to meet standards for sale or
use imposed by governmental agencies, departments or divisions having
regulatory authority over such goods, (iii) inventory which is not
useable or salable at prices approximating their cost in the ordinary
course of the business (including without duplication the amount of any
reserves for obsolescence, unsalability or decline in value), (iv)
inventory located outside of the United States other than (subject to
the requirements of Section 7.9(b)) inventory of the Borrower located
for less than 90 days at a manufacturing facility operated by the
Borrower or the Mexican Subsidiary in Mexico, (v) inventory located at
a leased location with respect to which the Agent shall not have
received a landlord's waiver satisfactory to the Agent and (vi)
inventory which is leased or on consignment.
"Eligible Receivables" means, as of any date of determination
and without duplication, the aggregate book value of all accounts
receivable, receivables, and obligations for payment created or arising
from the sale of inventory or the rendering of services in the ordinary
course of business (collectively, the "Receivables"), owned by or owing
to the Borrower, net of allowances and reserves for doubtful or
uncollectible accounts and sales adjustments consistent with the
Borrower's internal policies and in any event in accordance with GAAP,
but excluding in any event (i) any Receivable which is (a) not subject
to a perfected, first priority Lien in favor for the Agent to secure
the Credit Party Obligations or (b) subject to any other Lien that is
not a Permitted Lien, (ii) Receivables which are more than 90 days past
due (net of reserves for bad debts in connection with any such
Receivables), (iii) any Receivable not otherwise excluded by clause
(ii) above if more than 50% of the total Receivables owing from the
applicable account debtor are then excluded by such clause (ii), (iv)
Receivables evidenced by notes, chattel paper or other instruments,
unless such notes, chattel paper or instruments have been delivered to
and are in the possession of the Agent, (v) Receivables owing by an
account debtor which is not solvent or is subject to any bankruptcy or
insolvency proceeding of any kind, (vi) Receivables owing by an account
debtor located outside of the United States unless (a) such account
debtor is, or is a Foreign Subsidiary of, a Person which is
incorporated or organized under the laws of any State of the United
States or the District of Columbia or (b) payment for the goods shipped
is secured by an irrevocable letter of credit in a form and from an
institution acceptable to the Agent, (vii) Receivables which are
contingent or subject to offset, deduction, counterclaim, dispute or
other defense to payment, in each case to the extent of such offset,
deduction, counterclaim, dispute or other defense, (viii) Receivables
for which any direct or indirect Subsidiary or
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any Affiliate of the Borrower is the account debtor and (ix) to the
extent that such Receivables exceed $250,000 in aggregate amount,
Receivables representing a sale to the government of the United States
of America or any subdivision thereof unless the Federal Assignment of
Claims Act has been complied with to the satisfaction of the Agent with
respect to the granting of a security interest in such Receivable, with
or other similar applicable law.
"Environmental Claim" means any investigation, written notice,
violation, written demand, written allegation, action, suit,
injunction, judgment, order, consent decree, penalty, fine, lien,
proceeding, or written claim (whether administrative, judicial, or
private in nature) arising (a) pursuant to, or in connection with, an
actual or alleged violation of, any Environmental Law, (b) in
connection with any Hazardous Material, (c) from any assessment,
abatement, removal, remedial, corrective, or other response action in
connection with an Environmental Law or other order of a Governmental
Authority or (d) from any actual or alleged damage, injury, threat, or
harm to health, safety, natural resources, or the environment.
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants, franchises, licenses, agreements or other governmental
restrictions relating to the environment or to emissions, discharges,
releases or threatened releases of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes into the
environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport,
or handling of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes.
"Equity Issuance" means any issuance by any Consolidated Party
to any Person which is not a Credit Party of (a) shares of its Capital
Stock, (b) any shares of its Capital Stock pursuant to the exercise of
options or warrants or (c) any shares of its Capital Stock pursuant to
the conversion of any debt securities to equity.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute thereto, as interpreted by
the rules and regulations thereunder, all as the same may be in effect
from time to time. References to sections of ERISA shall be construed
also to refer to any successor sections.
"ERISA Affiliate" means an entity which is under common
control with any Consolidated Party within the meaning of Section
4001(a)(14) of ERISA, or is a member of a group which includes any
Consolidated Party and which is treated as a single employer under
Sections 414(b) or (c) of the Code.
"ERISA Event" means (i) with respect to any Plan, the
occurrence of a Reportable Event or the substantial cessation of
operations (within the meaning of Section 4062(e) of ERISA); (ii) the
withdrawal by any Consolidated Party from a Multiple Employer Plan
during a plan year in which it was a substantial employer (as such term
is defined in Section
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4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan;
(iii) the distribution of a notice of intent to terminate or the actual
termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA;
(iv) the institution of proceedings to terminate or the actual
termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any
event or condition which could reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan; (vi) the complete or
partial withdrawal of any Consolidated Party from a Multiemployer Plan;
(vii) the conditions for imposition of a lien under Section 302(f) of
ERISA exist with respect to any Plan; or (vii) the adoption of an
amendment to any Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA.
"Eurodollar Loan" means a Loan bearing interest based at a
rate determined by reference to the Eurodollar Rate.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = Interbank Offered Rate
----------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" means for any day, that
percentage (expressed as a decimal) which is in effect from time to
time under Regulation D of the Board of Governors of the Federal
Reserve System (or any successor), as such regulation may be amended
from time to time or any successor regulation, as the maximum reserve
requirement (including, without limitation, any basic, supplemental,
emergency, special, or marginal reserves) applicable with respect to
Eurocurrency liabilities as that term is defined in Regulation D (or
against any other category of liabilities that includes deposits by
reference to which the interest rate of Eurodollar Loans is
determined), whether or not Lender has any Eurocurrency liabilities
subject to such reserve requirement at that time. Eurodollar Loans
shall be deemed to constitute Eurocurrency liabilities and as such
shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from
time to time to a Lender. The Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurodollar Reserve Percentage.
"Event of Default" has the meaning specified in Section 9.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Excluded Asset Disposition" means (i) any Asset Disposition
consisting of a sale, transfer or other disposition of inventory by a
Consolidated Party in the ordinary course of such Person's business,
(ii) any Asset Disposition by any Consolidated Party to any Credit
Party other than the Parent if (a) the Credit Parties shall cause to be
executed and delivered
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such documents, instruments and certificates as the Agent may request
so as to cause the Credit Parties to be in compliance with the terms of
Section 7.9 after giving effect to such Asset Disposition and (b) after
giving effect such Asset Disposition, no Default or Event of Default
exists, (iii) any Asset Disposition by any Consolidated Party which is
not a Credit Party to any other Consolidated Party which is not a
Credit Party if after giving effect such Asset Disposition, no Default
or Event of Default exists and (iv) other Asset Dispositions provided
that the Net Cash Proceeds of all such Asset Dispositions by all of the
Consolidated Parties during any fiscal year of the Borrower does not
exceed $500,000.
"Executive Officer" of any Person means any of the chief
executive officer, chief operating officer, president, executive vice
president, chief financial officer or treasurer or such Person.
"Exempt Affiliate Transactions" means (a) transactions between
or among the Borrower and/or its wholly-owned Subsidiaries, (b) fees
and compensation paid to and indemnity provided on behalf of directors,
officers or employees of any Consolidated Party in the ordinary course
of business, (c) any employment agreement that is in effect on the
Closing Date and any such agreement entered into by any Consolidated
Party after the Closing Date in the ordinary course of business of such
Consolidated Party, (d) payments by the Consolidated Parties to Thomas
H. Lee Company of (i) management fees of up to $180,000 annually and
(ii) reasonable expenses from time to time of Thomas H. Lee Company and
(e) any Restricted Payment that is not prohibited by Section 8.7
"Extension of Credit" means, as to any Lender, the making of a
Loan or the purchase of a Participation Interest by such Lender.
"Federal Funds Rate" means, for any day, the rate of interest
per annum (rounded upwards, if necessary, to the nearest whole multiple
of 1/100 of 1%) 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 on such day, as published by the
Federal Reserve Bank of New York on the Business Day next succeeding
such day, provided that (A) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions
on the next preceding Business Day and (B) if no such rate is so
published on such next preceding Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to the Agent on such day
on such transactions as determined by the Agent.
"Foreign Subsidiary", of any Person, means any Subsidiary of
such Person which is not a Domestic Subsidiary of such Person.
"Funded Indebtedness" means, with respect to any Person,
without duplication, (a) all Indebtedness of such Person other than
Indebtedness of the types referred to in clause (e), (f), (g), (i), (k)
and (n) of the definition of "Indebtedness" set forth in this Section
1.1, (b) all Indebtedness of another Person of the type referred to in
clause (a) above secured by (or for which the holder of such Funded
Indebtedness has an existing right, contingent or
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otherwise, to be secured by) any Lien on, or payable out of the
proceeds of production from, property owned or acquired by such Person,
whether or not the obligations secured thereby have been assumed,, (c)
all Guaranty Obligations of such Person with respect to Indebtedness of
the type referred to in clause (a) above of another Person and (d)
Indebtedness of the type referred to in clause (a) above of any
partnership or unincorporated joint venture in which such Person is
legally obligated or has a reasonable expectation of being liable with
respect thereto.
"GAAP" means generally accepted accounting principles in the
United States applied on a consistent basis and subject to Section 1.3.
"Governmental Authority" means any Federal, state, local,
provincial or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantor" means each of those Persons identified as a
"Guarantor" on the signature pages hereto, and each Additional Credit
Party which may hereafter execute a Joinder Agreement, together with
their successors and permitted assigns.
"Guaranty Obligations" means, with respect to any Person,
without duplication, any obligations of such Person (other than
endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) guaranteeing or intended to
guarantee any Indebtedness of any other Person in any manner, whether
direct or indirect, and including without limitation any obligation,
whether or not contingent, (i) to purchase any such Indebtedness or any
property constituting security therefor, (ii) to advance or provide
funds or other support for the payment or purchase of any such
Indebtedness or to maintain working capital, solvency or other balance
sheet condition of such other Person (including without limitation keep
well agreements, maintenance agreements, comfort letters or similar
agreements or arrangements) for the benefit of any holder of
Indebtedness of such other Person, (iii) to lease or purchase property,
securities or services primarily for the purpose of assuring the holder
of such Indebtedness, or (iv) to otherwise assure or hold harmless the
holder of such Indebtedness against loss in respect thereof. The amount
of any Guaranty Obligation hereunder shall (subject to any limitations
set forth therein) be deemed to be an amount equal to the outstanding
principal amount (or maximum principal amount, if larger) of the
Indebtedness in respect of which such Guaranty Obligation is made.
"Hazardous Materials" means any substance, material or waste
defined or regulated in or under any Environmental Laws.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person entered into in the ordinary course of
business under interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements and other similar
financial agreements or arrangements designed to protect such Person
against, or manage the exposure of such Person to, fluctuations in
interest rates and entered into in order to manage existing or
anticipated interest rate or exchange rate risks and not for
speculative purposes.
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"Indebtedness" of any Person means, without duplication, (a)
all obligations of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c)
all obligations of such Person under conditional sale or other title
retention agreements relating to property purchased by such Person
(other than customary reservations or retentions of title under
agreements with suppliers entered into in the ordinary course of
business), (d) all obligations of such Person issued or assumed as the
deferred purchase price of property or services purchased by such
Person (other than trade debt incurred in the ordinary course of
business and due within six months of the incurrence thereof) which
would appear as liabilities on a balance sheet of such Person, (e) all
obligations of such Person under take-or-pay or similar arrangements or
under commodities agreements, (f) all Indebtedness of others secured by
(or for which the holder of such Indebtedness has an existing right,
contingent or otherwise, to be secured by) any Lien on, or payable out
of the proceeds of production from, property owned or acquired by such
Person, whether or not the obligations secured thereby have been
assumed, (g) all Guaranty Obligations of such Person, (h) the principal
portion of all obligations of such Person under Capital Leases, (i) all
obligations of such Person under Hedging Agreements, (j) the maximum
amount of all standby letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed),
(k) all preferred Capital Stock issued by such Person and required by
the terms thereof to be redeemed, or for which mandatory sinking fund
payments are due, on or before the Maturity Date, (l) the principal
portion of all obligations of such Person under TROLS and (n) the
Indebtedness of any partnership or unincorporated joint venture in
which such Person is a general partner or a joint venturer. The term
"Indebtedness" shall not include trade payables or accrued expenses, in
either case arising in the ordinary course of business.
"Initial Public Offering" means a public offering of common
equity of the Parent (or in the case of a merger or consolidation
between the Parent and the Borrower in connection with such public
offering, then of the continuing or surviving corporation of such
merger or consolidation).
`
"Interbank Offered Rate" means, for the Interest Period for
each Eurodollar Loan comprising part of the same borrowing (including
conversions, extensions and renewals), a per annum interest rate
(rounded upwards, if necessary, to the nearest whole multiple of 1/100
of 1%) equal to the rate of interest, determined by the Agent on the
basis of the offered rates for deposits in dollars for a period of time
corresponding to such Interest Period (and commencing on the first day
of such Interest Period), appearing on Telerate Page 3750 (or, if, for
any reason, Telerate Page 3750 is not available, the Reuters Screen
LIBO Page) as of approximately 11:00 A.M. (London time) two (2)
Business Days before the first day of such Interest Period. As used
herein, "Telerate Page 3750" means the display designated as page 3750
by Dow Jones Telerate, Inc. (or such other page as may replace such
page on that service for the purpose of displaying the British Bankers
Association London interbank offered rates) and "Reuters Screen LIBO
Page" means the
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display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on that
service for the purpose of displaying London interbank offered rates of
major banks).
"Interest Expense" means, for any period, with respect to the
Consolidated Parties on a consolidated basis, all net interest expense,
including the interest component under Capital Leases, as determined in
accordance with GAAP.
"Interest Coverage Ratio" means, with respect to the
Consolidated Parties on a consolidated basis for the twelve month
period ending on the last day of any fiscal quarter of the Consolidated
Parties, the ratio of (a) Consolidated EBITDA for such period to (b)
Interest Expense for such period.
"Interest Payment Date" means (a) as to Base Rate Loans, the
last Business Day of each fiscal quarter of the Borrower and the
Maturity Date and (b) as to Eurodollar Loans, the last day of each
applicable Interest Period and the Maturity Date and in addition where
the applicable Interest Period for a Eurodollar Loan is greater than
three months, then also the date three months from the beginning of the
Interest Period and each three months thereafter.
"Interest Period" means, as to Eurodollar Loans, a period of
one, two, three or six months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof); provided, however, (a) if any
Interest Period would end on a day which is not a Business Day, such
Interest Period shall be extended to the next succeeding Business Day
(except that where the next succeeding Business Day falls in the next
succeeding calendar month, then on the next preceding Business Day),
(b) no Interest Period shall extend beyond the Maturity Date and (c)
where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the
Interest Period is to end, such Interest Period shall end on the last
Business Day of such calendar month.
"Investment" in any Person means (a) the acquisition (whether
for cash, property, services, assumption of Indebtedness, securities or
otherwise) of assets, shares of Capital Stock, bonds, notes,
debentures, partnership, joint ventures or other ownership interests or
other securities of such other Person or (b) any deposit with, or
advance, loan or other extension of credit to, such Person (other than
deposits made in connection with the purchase of equipment or other
assets in the ordinary course of business) or (c) any other capital
contribution to or investment in such Person, including, without
limitation, any Guaranty Obligation (including any support for a letter
of credit issued on behalf of such Person) incurred for the benefit of
such Person, but excluding any Restricted Payment to such Person.
"Issuing Lender" means NationsBank, N.A.
"Issuing Lender Fees" has the meaning set forth in Section
3.4(b)(iii).
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"Joinder Agreement" means a Joinder Agreement substantially in
the form of Exhibit 7.13, executed and delivered by an Additional
Credit Party in accordance with the provisions of Section 7.13.
"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Person which may become a Lender by
way of assignment in accordance with the terms hereof, together with
their successors and permitted assigns.
"Letter of Credit" means a Letter of Credit issued for the
account of the Borrower or one of its Subsidiaries by the Issuing
Lender pursuant to Section 2.2, as such Letter of Credit may be
amended, modified, extended, renewed or replaced.
"Leverage Ratio" means, with respect to the Consolidated
Parties on a consolidated basis for the twelve month period ending on
the last day of any fiscal quarter of the Borrower, the ratio of (a)
Funded Indebtedness of the Consolidated Parties on a consolidated basis
on the last day of such period to (b) Consolidated EBITDA for such
period.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, security interest, encumbrance, lien (statutory or
otherwise), preference, priority or charge of any kind, including,
without limitation, any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any financing or
similar statement or notice filed under the Uniform Commercial Code as
adopted and in effect in the relevant jurisdiction or other similar
recording or notice statute, and any lease in the nature thereof.
"Loans" means the Loans made to the Borrower pursuant to
Section 2.1 (or a portion of any Loan bearing interest at the Adjusted
Base Rate or the Adjusted Eurodollar Rate), individually or
collectively, as appropriate.
"LOC Documents" means, with respect to any Letter of Credit,
such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in
application or applicable only to such Letter of Credit) governing or
providing for (a) the rights and obligations of the parties concerned
or at risk or (b) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (a) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (b) the aggregate amount of all drawings
under Letters of Credit honored by the Issuing Lender but not
theretofore reimbursed.
"Mandatory Borrowing" has the meaning set forth in Section
2.2(e).
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"Material Adverse Effect" means a material adverse effect on
(a) the operations, financial condition, business or prospects of any
Consolidated Party, (b) the ability of a Credit Party to perform its
respective obligations under this Credit Agreement or any of the other
Credit Documents, or (c) the validity or enforceability of this Credit
Agreement, any of the other Credit Documents, or the rights and
remedies of the Lenders hereunder or thereunder taken as a whole.
"Maturity Date" means March 31, 2003.
"Mexican Subsidiary" means Cepillos de Matamoros, a direct
Subsidiary of the Parent organized and existing under the laws of
Mexico.
"Moody's" means Moody's Investors Service, Inc., or any
successor or assignee of the business of such company in the business
of rating securities.
"Multiemployer Plan" means a Plan which is a multiemployer
plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means a Plan which any Consolidated
Party and at least one employer other than the Consolidated Parties are
contributing sponsors.
"Net Cash Proceeds" means the aggregate cash proceeds
(including, without limitation, cash payments on non-cash consideration
and any cash received upon the sale or other disposition of any
non-cash consideration) received by any Consolidated Party in respect
of any Asset Disposition, net of (a) direct costs (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), (b) taxes paid or payable as a result thereof and (c) any
reserve for adjustment in respect of the sale price of such asset or
assets established in accordance with GAAP; it being understood that
"Net Cash Proceeds" shall include, without limitation, any cash
received upon the sale or other disposition of any non-cash
consideration received by a Consolidated Party in any Asset
Disposition.
"Non-Excluded Taxes" has the meaning set forth in Section
3.14.
"Note" or "Notes" means the promissory notes of the Borrower
in favor of each of the Lenders evidencing the Loans provided pursuant
to Section 2.1, individually or collectively, as appropriate, as such
promissory notes may be amended, modified, supplemented, extended,
renewed or replaced from time to time and as evidenced in the form of
Exhibit 2.5(a).
"Notice of Borrowing" means a request by the Borrower for a
Loan, in the form of Exhibit 2.1.
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"Notice of Continuation/Conversion" means a request by the
Borrower to continue an existing Eurodollar Loan to a new Interest
Period or to convert a Eurodollar Loan to a Base Rate Loan or a Base
Rate Loan to a Eurodollar Loan, in the form of Exhibit 2.3.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Parent" means Anchor Holdings, Inc., a Delaware corporation,
together with any permitted successors and assigns.
"Participation Interest" means a purchase by a Lender of a
participation in Letters of Credit or LOC Obligations as provided in
Section 2.2 or in any Loans as provided in Section 3.9.
"PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any
successor thereto.
"Permitted Investments" means Investments which are (a) cash
or Cash Equivalents, (b) accounts receivable created, acquired or made
in the ordinary course of business and payable or dischargeable in
accordance with customary trade terms or otherwise in the prudent
judgment of a Consolidated Party, (c) inventory, raw materials and
general intangibles (to the extent such general intangible is not a
Capital Expenditure) acquired in the ordinary course of business, (d)
Investments existing as of the Closing Date and set forth in Schedule
1.1B, (e) additional Investments in any Credit Party other than the
Parent, (f) additional Investments in (i) the Mexican Subsidiary, (ii)
Anchor Advanced Products Foreign Sales Corp. and (iii) Subsidiaries of
the Borrower which are not Credit Parties, provided that (A) the
aggregate amount of all Investments in Anchor Advanced Products Foreign
Sales Corp. pursuant to subclause (ii) shall not exceed $2,000,000 at
any time outstanding and (B) the aggregate amount of all Investments
pursuant to this clause (f) shall not exceed $7,500,000 at any time
outstanding, (g) Guaranty Obligations permitted by Section 8.1, (h)
loans to directors, officers, employees, agents, customers or suppliers
in the ordinary course of business for reasonable business expenses,
not to exceed in the aggregate $250,000 at any one time, (i) loans to
shareholders of the Parent to finance the exercise of warrants, options
or other rights to acquire shares of Capital Stock of the Parent in
connection with the Refinancing, provided that, concurrently with the
consummation of the Refinancing, such loans are repaid in full with
amounts withheld from the distribution on the Closing Date to
shareholders of the Parent referred to in Section 5.1(o) and (j)
Investments in dealers and customers received in connection with any
bankruptcy or reorganization of such dealer or customer.
"Permitted Liens" means:
(i) Liens in favor of the Agent on behalf of the
Lenders;
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(ii) Liens (other than Liens created or imposed under
ERISA) for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes being contested in good
faith by appropriate proceedings for which adequate reserves
determined in accordance with GAAP have been established (and
as to which the property subject to any such Lien is not yet
subject to foreclosure, sale or loss on account thereof);
(iii) statutory Liens of landlords and Liens of
carriers, warehousemen, mechanics, materialmen and suppliers
and other Liens imposed by law or pursuant to customary
reservations or retentions of title arising in the ordinary
course of business, provided that such Liens (A) secure only
amounts not yet due and payable or, if due and payable, are
unfiled and no other action has been taken to enforce the
same, (B) have been in existence for less than 90 days or (c)
are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP
have been established (and as to which the property subject to
any such Lien is not yet subject to foreclosure, sale or loss
on account thereof);
(iv) Liens (other than Liens created or imposed under
ERISA) incurred or deposits made by any Consolidated Party in
the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(v) Liens in connection with attachments or judgments
(including judgment or appeal bonds) provided that the
judgments secured shall, within 30 days after the entry
thereof, have been discharged or execution thereof stayed
pending appeal, or shall have been discharged within 30 days
after the expiration of any such stay;
(vi) Liens on property securing purchase money
Indebtedness (including Capital Leases) to the extent
permitted under Section 8.1(c), provided that any such Lien
attaches to such property concurrently with or within 45 days
after the acquisition thereof;
(vii) Liens deemed to exist in connection with
Investments in repurchase agreements permitted under Section
8.6;
(ix) normal and customary rights of setoff upon
deposits of cash in favor of banks or other depository
institutions; and
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(x) Liens existing as of the Closing Date and set
forth on Schedule 1.1C; provided that no such Lien shall at
any time be extended to or cover any property other than the
property subject thereto on the Closing Date.
"Person" means any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or
other enterprise (whether or not incorporated), or any Governmental
Authority.
"Plan" means any employee benefit plan (as defined in Section
3(3) of ERISA) which is covered by ERISA and with respect to which any
Consolidated Party is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" within
the meaning of Section 3(5) of ERISA.
"Prime Rate" means the rate of interest per annum publicly
announced from time to time by the Agent as its prime rate in effect at
its principal office in Charlotte, North Carolina, with each change in
the Prime Rate being effective on the date such change is publicly
announced as effective (it being understood and agreed that the Prime
Rate is a reference rate used by the Agent in determining interest
rates on certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit by the Agent to any
debtor).
"Property" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Real Properties" means each of facilities and properties
owned, leased or operated by any Credit Party.
"Refinancing" has the meaning specified in Section 7.10.
"Register" shall have the meaning given such term in Section
11.3(d).
"Regulation G, T, U, or X" means Regulation G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System
as from time to time in effect and any successor to all or a portion
thereof.
"Reportable Event" means a "reportable event" as defined in
Section 4043(c) of ERISA, other than those events as to which the
notice requirements or penalties for failure to provide notice have
been waived by regulation or administrative action of the PBGC.
"Required Lenders" means, at any time, Lenders (other than
Defaulting Lenders) holding in the aggregate at least 51% of (i) the
Commitments) or (ii) if the Commitments have been terminated, the
outstanding Loans and Participation Interests (including the
Participation Interests of the Issuing Lender in any Letters of Credit
and LOC Obligations).
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"Requirement of Law" means, as to any Person, the articles or
certificate of incorporation and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or
regulation or final, non-appealable determination of an arbitrator or a
court or other Governmental Authority, in each case applicable to or
binding upon such Person or to which any of its material property is
subject.
"Restricted Payment" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class
of Capital Stock of any Consolidated Party, now or hereafter
outstanding, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of Capital Stock of any Consolidated Party,
now or hereafter outstanding or (iii) any payment made to retire, or to
obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of Capital Stock of any
Consolidated Party, now or hereafter outstanding.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or any successor or assignee of the business of such
division in the business of rating securities.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to any Consolidated Party of any property,
whether owned by such Consolidated Party as of the Closing Date or
later acquired, which has been or is to be sold or transferred by such
Consolidated Party to such Person or to any other Person from whom
funds have been or are to be advanced by such Person on the security of
such property.
"Scheduled Funded Indebtedness Payments" means, as of the end
of each fiscal quarter of the Consolidated Parties, for the
Consolidated Parties on a consolidated basis, the sum of all scheduled
payments of principal on Funded Indebtedness for the applicable period
ending on such date (including the principal component of payments due
on Capital Leases during the applicable period ending on such date); it
being understood that Scheduled Funded Indebtedness Payments shall not
include voluntary prepayments or the mandatory prepayments required
pursuant to Section 3.3.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Security Agreement" means any Security Agreement executed and
delivered by a Credit Party in favor of the Agent for the benefit of
the Lenders to secure its obligations under the Credit Documents, as
such may be amended, modified, extended, renewed, restated or replaced
from time to time.
"Senior Note" means any one of the 11-3/4% Senior Notes due
April 1, 2004 in an aggregate original principal amount of
$100,000,000, issued by the Borrower in favor of the
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Senior Noteholders, as such Senior Notes may be restated, extended,
renewed, amended or otherwise modified and in effect from time to time.
"Senior Note Indenture" means that certain Indenture
Agreement, dated as of the Closing Date, by and among the Borrower and
Fleet National Bank, as trustee for the Senior Noteholders, as the same
may be restated, extended, renewed, amended or otherwise modified and
in effect from time to time.
"Senior Note Purchase Agreements" means those certain Purchase
Agreements dated as of the date hereof by and between the Borrower and
each of the initial purchasers of the Senior Notes, as the same may be
restated, extended, renewed, amended or otherwise modified and in
effect from time to time.
"Senior Noteholders" means any one of the holders from time to
time of the Senior Notes.
"Single Employer Plan" means any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan or a Multiple
Employer Plan.
"Solvent" means, with respect to any Person as of a particular
date, that on such date (a) such Person is able to pay its debts and
other liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (b) such Person does not
intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and
liabilities mature in their ordinary course, (c) such Person is not
engaged in a business or a transaction, and is not about to engage in a
business or a transaction, for which such Person's assets would
constitute unreasonably small capital after giving due consideration to
the prevailing practice in the industry in which such Person is engaged
or is to engage, (d) the fair value of the assets of such Person is
greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person and (e) the present
fair salable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured. In computing
the amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount which, in light of all
the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured
liability.
"Sponsor Group" means any of (i) Thomas H. Lee Company or any
officer, employee or material consultant of Thomas H. Lee Company,
Thomas H. Lee Equity Partners, L.P., ML-Lee Acquisition Fund II, L.P.,
ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. or any limited
or general partner, stockholder, officer, employee or material
consultant of any of such entities and (ii) any of the officers,
directors or employees of the Parent or any Subsidiary of the Parent.
"Standby Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.4(b)(i).
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"Subsidiary" means, as to any Person, (a) any corporation more
than 50% of whose stock of any class or classes having by the terms
thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time, any class
or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time owned by
such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such
Person directly or indirectly through Subsidiaries has more than a 50%
equity interest at any time.
"Trade Letter of Credit Fee" shall have the meaning assigned
to such term in Section 3.4(b)(ii).
"TROL" means any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing
product where such transaction is considered borrowed money
indebtedness for tax purposes but is classified as an operating lease
in accordance with GAAP. The term "TROL" shall not include any lease
classified as an operating lease in accordance with GAAP which is not
considered borrowed money indebtedness for tax purposes.
"Unused Committed Amount" means, for any period, the amount by
which (a) the then applicable aggregate Committed Amount exceeds (b)
the daily average sum for such period of the outstanding aggregate
principal amount of all Loans plus the aggregate amount of LOC
Obligations outstanding.
1.2 Computation of Time Periods and Other Definitional Provisions.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each mean "to
but excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All financial statements delivered to the Lenders hereunder shall be
accompanied by a statement from the Borrower that GAAP has not changed since the
most recent financial statements delivered by the Credit Parties to the Lenders
or if GAAP has changed describing such changes in detail and explaining how such
changes affect the financial statements. All calculations made for the purposes
of determining compliance with this Credit Agreement shall (except as otherwise
expressly provided herein) be made by application of GAAP applied on a basis
consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section 7.1 (or, prior to the delivery of the first
financial statements pursuant to Section 7.1,
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consistent with the December 31, 1996 financial statements of the Consolidated
Parties); provided, however, if (a) the Credit Parties shall object to
determining such compliance on such basis at the time of delivery of such
financial statements due to any change in GAAP or the rules promulgated with
respect thereto or (b) the Agent or the Required Lenders shall so object in
writing within 60 days after delivery of such financial statements (or after the
Lenders have been informed of the change in GAAP affecting such financial
statements, if later), then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Credit
Parties to the Lenders as to which no such objection shall have been made.
SECTION 2
CREDIT FACILITIES
-----------------
2.1 Loans.
(a) Loan Commitment. Subject to the terms and conditions set
forth herein, each Lender severally agrees to make revolving loans
(each a "Loan" and collectively the "Loans") to the Borrower, in
Dollars, at any time and from time to time, during the period from and
including the Closing Date to but not including the Maturity Date (or
such earlier date if the Committed Amount has been terminated as
provided herein); provided, however, that the sum of the aggregate
principal amount of outstanding Loans shall not exceed the lesser of
(i) the Committed Amount and (ii) the Borrowing Base; provided,
further, that (i) the sum of the aggregate amount of Loans outstanding
plus the aggregate amount of LOC Obligations outstanding shall not
exceed the Committed Amount and (ii) with respect to each individual
Lender, the Lender's pro rata share of outstanding Loans plus such
Lender's pro rata share of outstanding LOC Obligations shall not exceed
such Lender's Commitment Percentage of the Committed Amount. Subject to
the terms of this Credit Agreement (including Section 3.3), the
Borrower may borrow, repay and reborrow Loans.
(b) Method of Borrowing for Loans. By no later than 11:00 a.m.
(i) on the date of the requested borrowing of Loans that will be Base
Rate Loans or (ii) three Business Days prior to the date of the
requested borrowing of Loans that will be Eurodollar Loans, the
Borrower shall submit a written Notice of Borrowing in the form of
Exhibit 2.1 to the Agent setting forth (A) the amount requested, (B)
whether such Loans shall accrue interest at the Adjusted Base Rate or
the Adjusted Eurodollar Rate, (C) with respect to Loans that will be
Eurodollar Loans, the Interest Period applicable thereto and (D)
certification that the Borrower has complied in all respects with
Section 5.2;
(c) Funding of Loans. Upon receipt of a Notice of Borrowing,
the Agent shall promptly inform the applicable Lenders as to the terms
thereof. Each such Lender shall make its Commitment Percentage of the
requested Loans available to the Agent by 1:00 p.m. on the date
specified in the Notice of Borrowing by deposit, in Dollars, of
immediately available funds at the offices of the Agent at its
principal office in Charlotte, North Carolina or at such other address
as the Agent may designate in writing. The amount of the
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requested Loans will then be made available to the Borrower by the
Agent by crediting the account of the Borrower on the books of such
office of the Agent, to the extent the amount of such Loans are made
available to the Agent.
No Lender shall be responsible for the failure or delay by any
other Lender in its obligation to make Loans hereunder; provided,
however, that the failure of any Lender to fulfill its obligations
hereunder shall not relieve any other Lender of its obligations
hereunder. Unless the Agent shall have been notified by any Lender
prior to the time of any such Loan that such Lender does not intend to
make available to the Agent its portion of the Loans to be made on such
date, the Agent may assume that such Lender has made such amount
available to the Agent on the date of such Loans, and the Agent in
reliance upon such assumption, may (in its sole discretion but without
any obligation to do so) make available to the Borrower a corresponding
amount. If such corresponding amount is not in fact made available to
the Agent, the Agent shall be able to recover such corresponding amount
from such Lender. If such Lender does not pay such corresponding amount
forthwith upon the Agent's demand therefor, the Agent will promptly
notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Agent. The Agent shall also be entitled to
recover from the Lender or the Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to
the date such corresponding amount is recovered by the Agent at a per
annum rate equal to (i) from the Borrower at the applicable rate for
such Loan pursuant to the Notice of Borrowing and (ii) from a Lender at
the Federal Funds Rate.
(d) Reductions of Committed Amount. Upon at least three
Business Days' notice, the Borrower shall have the right to permanently
terminate or reduce the aggregate unused amount of the Committed Amount
at any time or from time to time; provided that (i) each partial
reduction shall be in an aggregate amount at least equal to $500,000
and in integral multiples of $50,000 above such amount and (ii) no
reduction shall be made which would reduce the Committed Amount to an
amount less than the aggregate amount of outstanding Loans plus the
aggregate amount of outstanding LOC Obligations. Any reduction in (or
termination of) the Committed Amount shall be permanent and may not be
reinstated.
2.2 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Issuing Lender may reasonably require, the Issuing Lender shall
from time to time upon request issue, in Dollars, and the Lenders shall
participate in, letters of credit (the "Letters of Credit") for the
account of the Borrower or any of its Subsidiaries, from the Closing
Date until the date five (5) days prior to the Maturity Date, in a form
reasonably acceptable to the Issuing Lender; provided, however, that
(i) the aggregate amount of LOC Obligations shall not at any time
exceed FIVE MILLION DOLLARS ($5,000,000), (ii) the sum of the aggregate
amount of LOC Obligations outstanding plus Loans outstanding shall not
exceed the Committed
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Amount and (iii) with respect to each individual Lender, such Lender's
pro rata share of outstanding Loans plus its pro rata share of
outstanding LOC Obligations shall not exceed such Lender's Commitment
Percentage of the Committed Amount. The issuance and expiry date of
each Letter of Credit shall be a Business Day. No Letter of Credit
shall have an original expiry date more than one year from the date of
issuance, or as extended, shall have an expiry date extending beyond
the date five (5) days prior to the Maturity Date. Each Letter of
Credit shall be either (x) a standby letter of credit issued to support
the obligations (including pension or insurance obligations),
contingent or otherwise, of the Borrower or any of its Subsidiaries, or
(y) a commercial letter of credit in respect of the purchase of goods
or services by the Borrower or any of its Subsidiaries in the ordinary
course of business. Each Letter of Credit shall comply with the related
LOC Documents.
(b) Notice and Reports. The request for the issuance of a
Letter of Credit shall be submitted to the Issuing Lender at least
three Business Days prior to the requested date of issuance. The
Issuing Lender will, at least quarterly and more frequently upon
request, provide to the Agent for dissemination to the Lenders a
detailed report specifying the Letters of Credit which are then issued
and outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein,
among other things, the account party, the beneficiary, the face
amount, and the expiry date as well as any payments or expirations
which may have occurred. The Issuing Lender will further provide to the
Agent, promptly upon request, copies of the Letters of Credit.
(c) Participations. Each Lender, upon issuance of a Letter of
Credit, shall be deemed to have purchased without recourse a risk
participation from the Issuing Lender in such Letter of Credit and the
obligations arising thereunder and any collateral relating thereto, in
each case in an amount equal to its Commitment Percentage of the
obligations under such Letter of Credit, and shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and be obligated to pay to the Issuing Lender therefor and
discharge when due, its Commitment Percentage of the obligations
arising under such Letter of Credit. Without limiting the scope and
nature of each Lender's participation in any Letter of Credit, to the
extent that the Issuing Lender has not been reimbursed as required
hereunder or under any such Letter of Credit, each such Lender shall
pay to the Issuing Lender its Commitment Percentage of such
unreimbursed drawing in same day funds on the day of notification by
the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) hereof. The obligation of each Lender to
so reimburse the Issuing Lender shall be absolute and unconditional and
shall not be affected by the occurrence of a Default, an Event of
Default or any other occurrence or event. Any such reimbursement shall
not relieve or otherwise impair the obligation of the Borrower or any
other Credit Party to reimburse the Issuing Lender under any Letter of
Credit, together with interest as hereinafter provided.
(d) Reimbursement. In the event of any drawing under any
Letter of Credit, the Issuing Lender will promptly notify the Borrower.
Unless the Borrower shall immediately notify the Issuing Lender of its
intent to otherwise reimburse the Issuing Lender, the Borrower shall be
deemed to have requested a Loan at the Adjusted Base Rate in the
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amount of the drawing as provided in subsection (e) hereof, the
proceeds of which will be used to satisfy the reimbursement
obligations. The Borrower shall reimburse the Issuing Lender on the day
of drawing under any Letter of Credit either with the proceeds of a
Loan obtained hereunder or otherwise in same day funds as provided
herein or in the LOC Documents. If the Borrower shall fail to reimburse
the Issuing Lender as provided hereinabove, the unreimbursed amount of
such drawing shall bear interest at a per annum rate equal to the Base
Rate plus the Applicable Percentage for the Base Rate Loans that are
Loans plus two percent (2%). The Borrower's reimbursement obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of (but without waiver of) any rights of set-off,
counterclaim or defense to payment the applicable account party or the
Borrower may claim or have against the Issuing Lender, the Agent, the
Lenders, the beneficiary of the Letter of Credit drawn upon or any
other Person, including without limitation, any defense based on any
failure of the applicable account party, the Borrower or any other
Credit Party to receive consideration or the legality, validity,
regularity or unenforceability of the Letter of Credit. The Issuing
Lender will promptly notify the Lenders of the amount of any
unreimbursed drawing and each Lender shall promptly pay to the Agent
for the account of the Issuing Lender, in Dollars and in immediately
available funds, the amount of such Lender's Commitment Percentage of
such unreimbursed drawing. Such payment shall be made on the day such
notice is received by such Lender from the Issuing Lender if such
notice is received at or before 2:00 p.m., otherwise such payment shall
be made at or before 12:00 Noon on the Business Day next succeeding the
day such notice is received. If such Lender does not pay such amount to
the Issuing Lender in full upon such request, such Lender shall, on
demand, pay to the Agent for the account of the Issuing Lender interest
on the unpaid amount during the period from the date the Lender
received the notice regarding the unreimbursed drawing until such
Lender pays such amount to the Issuing Lender in full at a rate per
annum equal to, if paid within two Business Days of the date of
drawing, the Federal Funds Rate and thereafter at a rate equal to the
Base Rate. Each Lender's obligation to make such payment to the Issuing
Lender, and the right of the Issuing Lender to receive the same, shall
be absolute and unconditional, shall not be affected by any
circumstance whatsoever and without regard to the termination of this
Credit Agreement or the Commitments hereunder, the existence of a
Default or Event of Default or the acceleration of the obligations
hereunder and shall be made without any offset, abatement, withholding
or reduction whatsoever. Simultaneously with the making of each such
payment by a Lender to the Issuing Lender, such Lender shall,
automatically and without any further action on the part of the Issuing
Lender or such Lender, acquire a participation in an amount equal to
such payment (excluding the portion of such payment constituting
interest owing to the Issuing Lender) in the related unreimbursed
drawing portion of the LOC Obligation and in the interest thereon and
in the related LOC Documents, and shall have a claim against the
Borrower and the other Credit Parties with respect thereto.
Notwithstanding anything to the contrary contained in this subsection
(D), the Borrower shall have no obligation to reimburse the Issuing
Lender in respect of any wrongful payment made by the Issuing Lender
under a Letter of Credit solely as a result of acts or omissions
constituting gross negligence or willful misconduct by the Issuing
Lender, as determined by a court of competent jurisdiction.
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(e) Repayment with Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Loan
borrowing to reimburse a drawing under a Letter of Credit, the Agent
shall give notice to the applicable Lenders that a Loan has been
requested or deemed requested in connection with a drawing under a
Letter of Credit, in which case a Loan borrowing comprised solely of
Base Rate Loans (each such borrowing, a "Mandatory Borrowing") shall be
immediately made from all applicable Lenders (without giving effect to
any termination of the Commitments pursuant to Section 9.2) pro rata
based on each Lender's respective Commitment Percentage and the
proceeds thereof shall be paid directly to the Issuing Lender for
application to the respective LOC Obligations. Each such Lender hereby
irrevocably agrees to make such Loans immediately upon any such request
or deemed request on account of each such Mandatory Borrowing in the
amount and in the manner specified in the preceding sentence and on the
same such date notwithstanding (i) the amount of Mandatory Borrowing
may not comply with the minimum amount for borrowings of Loans
otherwise required hereunder, (ii) whether any conditions specified in
Section 5 are then satisfied, (iii) whether a Default or Event of
Default then exists, (iv) failure of any such request or deemed request
for Loans to be made by the time otherwise required hereunder, (v) the
date of such Mandatory Borrowing, or (vi) any reduction in the
Committed Amount or any termination of the Commitments. In the event
that any Mandatory Borrowing cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of
the commencement of a proceeding under the Bankruptcy Code with respect
to the Borrower or any other Credit Party), then each such Lender
hereby agrees that it shall forthwith fund (as of the date the
Mandatory Borrowing would otherwise have occurred, but adjusted for any
payments received from the Borrower on or after such date and prior to
such purchase) its Participation Interest in the outstanding LOC
Obligations; provided further, that in the event any Lender shall fail
to fund its Participation Interest on the day the Mandatory Borrowing
would otherwise have occurred, then the amount of such Lender's
unfunded Participation Interest therein shall bear interest payable to
the Issuing Lender upon demand, at the rate equal to, if paid within
two Business Days of such date, the Federal Funds Rate, and thereafter
at a rate equal to the Base Rate.
(f) Designation of Subsidiaries as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, a Letter of Credit issued hereunder may contain a statement
to the effect that such Letter of Credit is issued for the account of a
Subsidiary of the Borrower; provided that notwithstanding such
statement, the Borrower shall be the actual account party for all
purposes of this Credit Agreement for such Letter of Credit and such
statement shall not affect the Borrower's reimbursement obligations
hereunder with respect to such Letter of Credit.
(g) Modification and Extension. The issuance of any
supplement, modification, amendment, renewal, or extensions to any
Letter of Credit shall, for purposes hereof, be treated in all respects
the same as the issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have
the Letters of Credit be subject to The Uniform Customs and Practice
for Documentary Credits, as
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published as of the date of issue by the International Chamber of
Commerce (Publication No. 500 or the most recent publication, the
"UCP"), in which case the UCP may be incorporated therein and deemed in
all respects to be a part thereof.
(i) Responsibility of Issuing Lender. It is expressly
understood and agreed that the obligations of the Issuing Lender
hereunder to the Lenders are only those expressly set forth in this
Credit Agreement and that the Issuing Lender shall be entitled to
assume that the conditions precedent set forth in Section 5 have been
satisfied unless it shall have acquired actual knowledge that any such
condition precedent has not been satisfied; provided, however, that
nothing set forth in this Section 2.2 shall be deemed to prejudice the
right of any Lender to recover from the Issuing Lender any amounts made
available by such Lender to the Issuing Lender pursuant to this Section
2.2 in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of the
Issuing Lender.
(j) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document, this Credit
Agreement shall govern.
(k) Indemnification of Issuing Lender.
(i) In addition to its other obligations under this
Credit Agreement, the Borrower hereby agrees to protect,
indemnify, pay and save the Issuing Lender harmless from and
against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable
attorneys' fees) that the Issuing Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or (B) the failure of the
Issuing Lender to honor a drawing under a Letter of Credit as
a result of any act or omission, whether rightful or wrongful,
of any present or future Governmental Authority (all such acts
or omissions, herein called "Government Acts").
(ii) As between the Borrower and the Issuing Lender,
the Borrower shall assume all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof. The
Issuing Lender shall not be responsible for: (A) the form,
validity, sufficiency, accuracy, genuineness or legal effect
of any document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (D) any loss or delay in the
transmission or otherwise of any document required in order to
make a drawing under a Letter of Credit or of the proceeds
thereof; and (E) any consequences arising from causes beyond
the control of the Issuing Lender,
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including, without limitation, any Government Acts. None of
the above shall affect, impair, or prevent the vesting of the
Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by the Issuing Lender, under or in
connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put
the Issuing Lender under any resulting liability to the
Borrower or any other Credit Party. It is the intention of the
parties that this Credit Agreement shall be construed and
applied to protect and indemnify the Issuing Lender against
any and all risks involved in the issuance of the Letters of
Credit, all of which risks are hereby assumed by the Borrower,
including, without limitation, any and all risks of the acts
or omissions, whether rightful or wrongful, of any present or
future Government Acts. The Issuing Lender shall not, in any
way, be liable for any failure by the Issuing Lender or anyone
else to pay any drawing under any Letter of Credit as a result
of any Government Acts or any other cause beyond the control
of the Issuing Lender.
(iv) Nothing in this subsection (k) is intended to
limit the reimbursement obligation of the Borrower contained
in this Section 2.2. The obligations of the Borrower under
this subsection (k) shall survive the termination of this
Credit Agreement. No act or omission of any current or prior
beneficiary of a Letter of Credit shall in any way affect or
impair the rights of the Issuing Lender to enforce any right,
power or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (k), the Borrower shall have no
obligation to indemnify the Issuing Lender in respect of any
liability incurred by the Issuing Lender arising solely out of
the gross negligence or willful misconduct of the Issuing
Lender, as determined by a court of competent jurisdiction.
2.3 Continuations and Conversions.
Subject to the terms of Section 5.2, the Borrower shall have the
option, on any Business Day, to continue existing Eurodollar Loans for a
subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or
to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a)
each such continuation or conversion must be requested by the Borrower pursuant
to a written Notice of Continuation/Conversion, in the form of Exhibit 2.3, in
compliance with the terms set forth below, (b) except as provided in Section
3.12, Eurodollar Loans may only be continued or converted into Base Rate Loans
on the last day of the Interest Period applicable hereto, (c) Eurodollar Loans
may not be continued nor may Base Rate Loans be converted into Eurodollar Loans
during the existence and continuation of a Default or Event of Default and (d)
any request to extend a Eurodollar Loan that fails to comply with the terms
hereof or any failure to request an extension of a Eurodollar Loan at the end of
an Interest Period shall constitute a conversion to a Base Rate Loan on the last
day of the applicable Interest Period. Each continuation or conversion must be
requested by the Borrower no later than 11:00 a.m. (i) on the date for a
requested
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conversion of a Eurodollar Loan to a Base Rate Loan or (ii) three Business Days
prior to the date for a requested continuation of a Eurodollar Loan or
conversion of a Base Rate Loan to a Eurodollar Loan, in each case pursuant to a
written Notice of Continuation/Conversion submitted to the Agent which shall set
forth (A) whether the Borrower wishes to continue or convert such Loans and (B)
if the request is to continue a Eurodollar Loan or convert a Base Rate Loan to a
Eurodollar Loan, the Interest Period applicable thereto.
2.4 Minimum Amounts.
Each request for a borrowing, conversion or continuation shall be
subject to the requirements that (a) each Eurodollar Loan shall be in a minimum
amount of $500,000 and in integral multiples of $50,000 in excess thereof, (b)
each Base Rate Loan shall, subject to the terms of Section 2.2(e), be in a
minimum amount of the lesser of $500,000 (and integral multiples of $250,000 in
excess thereof) or the remaining amount available under the Committed Amount and
(c) no more than 5 Eurodollar Loans shall be outstanding hereunder at any one
time. For the purposes of this Section, all Eurodollar Loans with the same
Interest Periods shall be considered as one Eurodollar Loan, but Eurodollar
Loans with different Interest Periods, even if they begin on the same date,
shall be considered as separate Eurodollar Loans.
2.5 Notes.
The Loans made by each Lender shall be evidenced by a duly executed
promissory note of the Borrower to each applicable Lender in the face amount of
its Commitment Percentage of the Committed Amount in substantially the form of
Exhibit 2.5(a).
SECTION 3
GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT
------------------------------------------------------------
3.1 Interest.
(a) Interest Rate. All Base Rate Loans shall accrue interest
at the Adjusted Base Rate and all Eurodollar Loans shall accrue
interest at the Adjusted Eurodollar Rate.
(b) Default Rate of Interest. Upon the occurrence, and during
the continuance, of an Event of Default, the principal of and, to the
extent permitted by law, interest on the Loans and any other amounts
owing (but not timely paid) hereunder or under the other Credit
Documents (including without limitation fees and expenses) shall bear
interest, payable on demand, at a per annum rate equal to 2% plus the
rate which would otherwise be applicable (or if no rate is applicable,
then the Adjusted Base Rate plus two percent (2%) per annum).
(c) Interest Payments. Interest on Loans shall be due and
payable in arrears on each Interest Payment Date. If an Interest
Payment Date falls on a date which is not a
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Business Day, such Interest Payment Date shall be deemed to be the next
succeeding Business Day, except that in the case of Eurodollar Loans
where the next succeeding Business Day falls in the next succeeding
calendar month, then on the next preceding Business Day.
3.2 Place and Manner of Payments.
All payments of principal, interest, fees, expenses and other amounts
to be made by a Credit Party under this Credit Agreement shall be received not
later than 3:00 p.m. on the date when due, in Dollars and in immediately
available funds, by the Agent at its offices at 101 North Tryon Street,
Charlotte, North Carolina 28202. Payments received after such time shall be
deemed to have been received on the next Business Day. The Borrower shall, at
the time it makes any payment under this Credit Agreement, specify to the Agent,
the Loans, Letters of Credit, fees or other amounts payable by the Borrower
hereunder to which such payment is to be applied (and in the event that it fails
to specify, or if such application would be inconsistent with the terms hereof,
the Agent shall, subject to Section 3.7, distribute such payment to the Lenders
in such manner as the Agent may deem appropriate). The Agent will distribute. on
the same day of receipt, such payments to the applicable Lenders if any such
payment is received prior to 2:00 p.m.; otherwise the Agent will distribute such
payment to the applicable Lenders on the next succeeding Business Day. Whenever
any payment hereunder shall be stated to be due on a day which is not a Business
Day, the due date thereof shall be extended to the next succeeding Business Day
(subject to accrual of interest and fees for the period of such extension),
except that in the case of Eurodollar Loans, if the extension would cause the
payment to be made in the next following calendar month, then such payment shall
instead be made on the next preceding Business Day.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time without premium
or penalty; provided, however, that (i) Eurodollar Loans may only be
prepaid on three Business Days' prior written notice to the Agent and
any prepayment of Eurodollar Loans will be subject to Section 3.15 and
(ii) each such partial prepayment of Loans shall be in the minimum
principal amount of $500,000 and integral multiples of $50,000 in
excess thereof. Subject to the foregoing terms, amounts prepaid under
this Section 3.3(a) shall be applied as the Borrower may elect;
provided that if the Borrower fails to specify a voluntary prepayment
then such prepayment shall be applied first to Base Rate Loans and then
to Eurodollar Loans in direct order of Interest Period maturities.
Subject to the terms of Section 5.2, amounts prepaid under this Section
3.3(a) may be reborrowed. All prepayments pursuant to this Section
3.3(a) shall be subject to Section 3.15.
(b) Mandatory Prepayments.
(i) Committed Amount. If at any time the sum of the
aggregate amount of Loans outstanding plus LOC Obligations
outstanding exceeds the Committed Amount, the Borrower shall
immediately prepay the Loans and cash collateralize
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the LOC Obligations, in the manner and in an amount necessary
to be in compliance with Section 2.1 (such prepayment to be
applied as set forth in clause (iii) below). Subject to the
terms of Section 5.2, amounts prepaid under this Section
3.3(b)(i) may be reborrowed.
(ii) Asset Dispositions. Immediately upon the
occurrence of any Asset Disposition Prepayment Event, the
Borrower shall immediately prepay the Loans and cash
collateralize the LOC Obligations (with a corresponding
reduction in the Committed Amount in an amount equal to all
amounts so applied) in an aggregate amount equal to the Net
Cash Proceeds of the related Asset Disposition not applied (or
caused to be applied) by the Borrower during the related
Application Period to the purchase, acquisition or
construction of Eligible Assets as contemplated by the terms
of Section 8.5(v) (such prepayment to be applied as set forth
in clause (iii) below).
(iii) Application of Mandatory Prepayments. All
amounts required to be paid pursuant to this Section 3.3(b)
shall be applied to outstanding Loans and (after all
outstanding Loans have been repaid) to a cash collateral
account in respect of LOC Obligations. Prepayments of Loans
shall be applied first to Base Rate Loans and then to
Eurodollar Loans in direct order of Interest Period
maturities. All prepayments pursuant to this Section 3.3(b)
shall be subject to Section 3.15.
3.4 Fees.
(a) Commitment Fees.
In consideration of the Committed Amount being made available
by the Lenders hereunder, the Borrower agrees to pay to the Agent, for
the pro rata benefit of each applicable Lender (based on each Lender's
Commitment Percentage of the Committed Amount), a per annum fee equal
to the Applicable Percentage of the Unused Committed Amount (the
"Commitment Fees"). The accrued Commitment Fees shall commence to
accrue on the Closing Date and shall be due and payable in arrears on
the last Business Day of each fiscal quarter of the Borrower (as well
as on the Maturity Date and on any date that the Committed Amount is
reduced) for the immediately preceding fiscal quarter (or portion
thereof), beginning with the first of such dates to occur after the
Closing Date.
(b) Letter of Credit Fees.
(i) Standby Letter of Credit Issuance Fee. In
consideration of the issuance of standby Letters of Credit
hereunder, the Borrower promises to pay to the Agent for the
account of each Lender a fee (the "Standby Letter of Credit
Fee") on such Lender's Commitment Percentage of the average
daily maximum amount available to be drawn under each such
standby Letter of Credit computed at a per annum rate for each
day from the date of issuance to the date of expiration equal
to the Applicable Percentage. The Standby Letter of Credit Fee
shall be payable
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quarterly in arrears 15 days after the end of each fiscal
quarter of the Borrower and on the Maturity Date.
(ii) Trade Letter of Credit Drawing Fee. In
consideration of the issuance of trade Letters of Credit
hereunder, the Borrower promises to pay to the Agent for the
account of each Lender a fee (the "Trade Letter of Credit
Fee") of one-eighth of one percent (1/8%) on such Lender's
Commitment Percentage of the amount of each drawing under any
such trade Letter of Credit. The Trade Letter of Credit Fee
will be payable on each date of drawing under a trade Letter
of Credit.
(iii) Issuing Lender Fees. In addition to the Standby
Letter of Credit Fee and the Trade Letter of Credit Fee
payable pursuant to subsections (i) and (ii) above, the
Borrower shall pay to the Issuing Lender for its own account,
without sharing by the other Lenders, the letter of credit
fronting and negotiation fees agreed to by the Borrower and
the Agent from time to time and the customary charges from
time to time to the Issuing Lender for its services in
connection with the issuance, amendment, payment, transfer,
administration, cancellation and conversion of, and drawings
under, such Letters of Credit (collectively, the "Issuing
Lender Fees").
(c) Administrative Fees. The Borrower agrees to pay to the
Agent, for its own account, an annual administrative fee of $15,000,
such fee to be payable in advance on the Closing Date and on each
anniversary date of the Closing Date thereafter, until the termination
of this Credit Agreement.
3.5 Payment in full at Maturity.
On the Maturity Date, the entire outstanding principal balance
of all Loans, together with accrued but unpaid interest and all other
sums owing with respect thereto, shall be due and payable in full,
unless accelerated sooner pursuant to Section 9.
3.6 Computations of Interest and Fees.
(a) Except for Base Rate Loans, in which case interest shall
be computed on the basis of a 365 or 366 day year as the case may be
(unless the Base Rate is determined by reference to the Federal Funds
Rate), all computations of interest and fees hereunder shall be made on
the basis of the actual number of days elapsed over a year of 360 days.
Interest shall accrue from and include the date of borrowing (or
continuation or conversion) but exclude the date of payment.
(b) It is the intent of the Lenders and the Credit Parties to
conform to and contract in strict compliance with applicable usury law
from time to time in effect. All agreements between the Lenders and the
Borrower are hereby limited by the provisions of this paragraph which
shall override and control all such agreements, whether now existing or
hereafter arising and whether written or oral. In no way, nor in any
event or contingency (including but not limited to prepayment or
acceleration of the maturity of any obligation),
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shall the interest taken, reserved, contracted for, charged, or
received under this Credit Agreement, under the Notes or otherwise,
exceed the maximum non-usurious amount permissible under applicable
law. If, from any possible construction of any of the Credit Documents
or any other document, interest would otherwise be payable in excess of
the maximum non-usurious amount, any such construction shall be subject
to the provisions of this paragraph and such documents shall be
automatically reduced to the maximum non-usurious amount permitted
under applicable law, without the necessity of execution of any
amendment or new document. If any Lender shall ever receive anything of
value which is characterized as interest on the Loans under applicable
law and which would, apart from this provision, be in excess of the
maximum lawful amount, an amount equal to the amount which would have
been excessive interest shall, without penalty, be applied to the
reduction of the principal amount owing on the Loans and not to the
payment of interest, or refunded to the Borrower or the other payor
thereof if and to the extent such amount which would have been
excessive exceeds such unpaid principal amount of the Loans. The right
to demand payment of the Loans or any other indebtedness evidenced by
any of the Credit Documents does not include the right to receive any
interest which has not otherwise accrued on the date of such demand,
and the Lenders do not intend to charge or receive any unearned
interest in the event of such demand. All interest paid or agreed to be
paid to the Lenders with respect to the Loans shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term (including any renewal or
extension) of the Loans so that the amount of interest on account of
such indebtedness does not exceed the maximum non-usurious amount
permitted by applicable law.
3.7 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan borrowing (including, without limitation,
each Mandatory Borrowing), each payment or prepayment of principal of
any Loan, each payment of fees (other than the Issuing Lender Fees
retained by the Issuing Lender for its own account and the
Administrative Fees retained by the Agent for its own account), each
reduction of the Committed Amount, and each conversion or continuation
of any Loan, shall (except as otherwise provided in Section 3.3(c)) be
allocated pro rata among the relevant Lenders in accordance with the
respective Commitment Percentages of such Lenders (or, if the
Commitments of such Lenders have expired or been terminated, in
accordance with the respective principal amounts of the outstanding
Loans and Participation Interests of such Lenders); provided that, if
any Lender shall have failed to pay its applicable pro rata share of
any Loan, then any amount to which such Lender would otherwise be
entitled pursuant to this subsection (a) shall instead be payable to
the Agent; provided further, that in the event any amount paid to any
Lender pursuant to this subsection (a) is rescinded or must otherwise
be returned by the Agent, each Lender shall, upon the request of the
Agent, repay to the Agent the amount so paid to such Lender, with
interest for the period commencing on the date such payment is returned
by the Agent until the date the Agent receives such repayment at a rate
per annum equal to, during the period to but excluding the date two
Business Days after such request, the Federal Funds Rate, and
thereafter, the Base Rate plus two percent (2%) per annum; and
(b) Letters of Credit. Each payment of unreimbursed drawings
in respect of LOC Obligations shall be allocated to each Lender pro
rata in accordance with its Commitment Percentage; provided that, if
any Lender shall have failed to pay its applicable pro rata share of
any drawing under any Letter of Credit, then any amount to which such
Lender would otherwise be entitled pursuant to this subsection (b)
shall instead be payable to the Issuing Lender; provided further, that
in the event any amount paid to any Lender pursuant to this subsection
(b) is rescinded or must otherwise be returned by the Issuing Lender,
each Lender shall, upon the request of the Issuing Lender, repay to the
Agent for the account of the Issuing Lender the amount so paid to such
Lender, with interest for the period commencing on the date such
payment is returned by the Issuing Lender until the date the Issuing
Lender receives such repayment at a rate per annum equal to, during the
period
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to but excluding the date two Business Days after such request, the
Federal Funds Rate, and thereafter, the Base Rate plus two percent (2%)
per annum.
3.8 Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement, after
the occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Agent or any Lender on account of amounts
outstanding under any of the Credit Documents or in respect of the Collateral
shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket costs
and expenses (including without limitation reasonable attorneys' fees)
of the Agent in connection with enforcing the rights of the Lenders
under the Credit Documents and any protective advances made by the
Agent with respect to the Collateral under or pursuant to the terms of
the Collateral Documents;
SECOND, to payment of any fees owed to the Agent or the
Issuing Lender;
THIRD, to the payment of all reasonable out-of-pocket costs
and expenses, (including, without limitation, reasonable attorneys'
fees) of each of the Lenders in connection with enforcing its rights
under the Credit Documents;
FOURTH, to the payment of all accrued fees and interest
payable to the Lenders hereunder;
FIFTH, to the payment of the outstanding principal amount of
the Loans, to the payment or cash collateralization of the outstanding
LOC Obligations, and, in the case of any proceeds of Collateral, to the
outstanding principal portion of any Hedging Obligations, pro rata, as
set forth below;
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SIXTH, to all other obligations which shall have become due
and payable under the Credit Documents and not repaid pursuant to
clauses "FIRST" through "FIFTH" above; and
SEVENTH, to the payment of the surplus, if any, to whoever may
be lawfully entitled to receive such surplus.
In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (b) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding Loans, LOC
Obligations and Hedging Obligations held by such Lender bears to the aggregate
then outstanding Loans, LOC Obligations and Hedging Obligations held by all of
the Lenders) of amounts available to be applied pursuant to clauses "THIRD",
"FOURTH," "FIFTH," and "SIXTH" above; and (c) to the extent that any amounts
available for distribution pursuant to clause "FIFTH" above are attributable to
the issued but undrawn amount of an outstanding Letter of Credit, such amounts
shall be held by the Agent in a cash collateral account and applied (x) first,
to reimburse the Issuing Lender from time to time for any drawings under such
Letter of Credit and (y) then, following the expiration of such Letter of
Credit, to all other obligations of the types described in clauses "FIFTH" and
"SIXTH" above in the manner provided in this Section 3.8.
3.9 Sharing of Payments.
The Lenders agree among themselves that, except to the extent otherwise
provided herein, in the event that any Lender shall obtain payment in respect of
any Loan, unreimbursed drawing with respect to any LOC Obligations or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of the Bankruptcy Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, or by
any other means, in excess of its pro rata share of such payment as provided for
in this Credit Agreement, such Lender shall promptly pay in cash or purchase
from the other Lenders a participation in such Loans, LOC Obligations, and other
obligations in such amounts, and make such other adjustments from time to time,
as shall be equitable to the end that all Lenders share such payment in
accordance with their respective ratable shares as provided for in this Credit
Agreement. The Lenders further agree among themselves that if payment to a
Lender obtained by such Lender through the exercise of a right of setoff,
banker's lien, counterclaim or other event as aforesaid shall be rescinded or
must otherwise be restored, each Lender which shall have shared the benefit of
such payment shall, by payment in cash or a repurchase of a participation
theretofore sold, return its share of that benefit (together with its share of
any accrued interest payable with respect thereto) to each Lender whose payment
shall have been rescinded or otherwise restored. The Borrower agrees that any
Lender so purchasing such a participation may, to the fullest extent permitted
by law, exercise all rights of payment, including setoff, banker's lien or
counterclaim, with respect to such participation as fully as if such Lender were
a holder of such Loan, LOC Obligation or other obligation in the amount of such
participation. Except as otherwise expressly provided in this Credit Agreement,
if any Lender or the Agent shall fail to remit to the Agent or any other Lender
an amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Credit Agreement on the date when
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such amount is due, such payments shall be made together with interest thereon
for each date from the date such amount is due until the date such amount is
paid to the Agent or such other Lender at a rate per annum equal to the Federal
Funds Rate. If under any applicable bankruptcy, insolvency or other similar law,
any Lender receives a secured claim in lieu of a setoff to which this Section
3.9 applies, such Lender shall, to the extent practicable, exercise its rights
in respect of such secured claim in a manner consistent with the rights of the
Lenders under this Section 3.9 to share in the benefits of any recovery on such
secured claim.
3.10 Capital Adequacy.
If, after the date hereof, any Lender has determined that the adoption
or the becoming effective of, or any change in, or any change by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof in the interpretation or administration
of, any applicable law, rule or regulation regarding capital adequacy, or
compliance by such Lender, or its parent corporation, 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, has or would have the
effect of reducing the rate of return on such Lender's (or parent corporation's)
capital or assets as a consequence of its commitments or obligations hereunder
to a level below that which such Lender, or its parent corporation, could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Lender's (or parent corporation's) policies with respect to
capital adequacy), then, upon notice from such Lender to the Borrower, the
Borrower shall be obligated to pay to such Lender such additional amount or
amounts as will compensate such Lender for such reduction. This covenant shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
3.11 Inability To Determine Interest Rate.
If prior to the first day of any Interest Period, the Agent shall have
determined (which determination shall be conclusive and binding upon the
Borrower) that, by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for such Interest Period, the Agent shall give telecopy or telephonic notice
thereof to the Borrower and the Lenders as soon as practicable thereafter. If
such notice is given (a) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as Base Rate Loans, (b) any Loans that
were to have been converted on the first day of such Interest Period to or
continued as Eurodollar Loans shall be converted to or continued as Base Rate
Loans and (c) any outstanding Eurodollar Loans shall be converted, on the first
day of such Interest Period, to Base Rate Loans. Until such notice has been
withdrawn by the Agent, no further Eurodollar Loans shall be made or continued
as such, nor shall the Borrower have the right to convert Base Rate Loans to
Eurodollar Loans.
3.12 Illegality.
Notwithstanding any other provision herein, if the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
occurring after the Closing Date
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shall make it unlawful for any Lender to make or maintain Eurodollar Loans as
contemplated by this Credit Agreement, (a) such Lender shall promptly give
written notice of such circumstances to the Borrower and the Agent (which notice
shall be withdrawn whenever such circumstances no longer exist), (b) the
commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert a Base Rate Loan to Eurodollar Loans shall
forthwith be canceled and, until such time as it shall no longer be unlawful for
such Lender to make or maintain Eurodollar Loans, such Lender shall then have a
commitment only to make a Base Rate Loan when a Eurodollar Loan is requested and
(c) such Lender's Loans then outstanding as Eurodollar Loans, if any, shall be
converted automatically to Base Rate Loans on the respective last days or the
then current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is not the last day of the then current Interest Period with respect
thereto, the Borrower shall pay to such Lender such amounts, if any, as may be
required pursuant to Section 3.15.
3.13 Requirements of Law.
If the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof applicable to any Lender, or compliance by
any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority, in each case made
subsequent to the Closing Date (or, if later, the date on which such Lender
becomes a Lender):
(a) shall subject such Lender to any tax of any kind
whatsoever with respect to any Letter of Credit, any Eurodollar Loans
made by it or its obligation to make Eurodollar Loans, or change the
basis of taxation of payments to such Lender in respect thereof (except
for Non-Excluded Taxes covered by Section 3.14 (including Non-Excluded
Taxes imposed solely by reason of any failure of such Lender to comply
with its obligations under Section 3.14(b)) and changes in taxes
measured by or imposed upon the overall net income, or franchise tax
(imposed in lieu of such net income tax), of such Lender or its
applicable lending office, branch, or any affiliate thereof);
(b) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of,
advances, loans or other extensions of credit by, or any other
acquisition of funds by, any office of such Lender which is not
otherwise included in the determination of the Eurodollar Rate
hereunder; or
(c) shall impose on such Lender any other condition (excluding
any tax of any kind whatsoever);
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount which such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, upon notice to the Borrower from such Lender,
through the Agent, in accordance herewith, the Borrower shall be obligated to
promptly pay such
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Lender, upon its demand, any additional amounts necessary to compensate such
Lender for such increased cost or reduced amount receivable, provided that, in
any such case, the Borrower may elect to convert the Eurodollar Loans made by
such Lender hereunder to Base Rate Loans by giving the Agent at least one
Business Day's notice of such election, in which case the Borrower shall
promptly pay to such Lender, upon demand, without duplication, such amounts, if
any, as may be required pursuant to Section 3.15. If any Lender becomes entitled
to claim any additional amounts pursuant to this Section 3.13, it shall provide
prompt notice thereof to the Borrower, through the Agent, certifying (x) that
one of the events described in this Section 3.13 has occurred and describing in
reasonable detail the nature of such event, (y) as to the increased cost or
reduced amount resulting from such event and (z) as to the additional amount
demanded by such Lender and a reasonably detailed explanation of the calculation
thereof. Such a certificate as to any additional amounts payable pursuant to
this Section 3.13 submitted by such Lender, through the Agent, to the Borrower
shall be conclusive and binding on the parties hereto in the absence of manifest
error. This covenant shall survive the termination of this Credit Agreement and
the payment of the Loans and all other amounts payable hereunder.
3.14 Taxes.
(a) Except as provided below in this Section 3.14, all
payments made by the Borrower under this Credit Agreement and any Notes
shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any court, or governmental body, agency or other official,
excluding taxes measured by or imposed upon the overall net income of
any Lender or its applicable lending office, or any branch or affiliate
thereof, and all franchise taxes, branch taxes, taxes on doing business
or taxes on the overall capital or net worth of any Lender or its
applicable lending office, or any branch or affiliate thereof, in each
case imposed in lieu of net income taxes, imposed: (i) by the
jurisdiction under the laws of which such Lender, applicable lending
office, branch or affiliate is organized or is located, or in which its
principal executive office is located, or any nation within which such
jurisdiction is located or any political subdivision thereof; or (ii)
by reason of any connection between the jurisdiction imposing such tax
and such Lender, applicable lending office, branch or affiliate other
than a connection arising solely from such Lender having executed,
delivered or performed its obligations, or received payment under or
enforced, this Credit Agreement or any Notes. If any such non-excluded
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from
any amounts payable to the Agent or any Lender hereunder or under any
Notes, (A) the amounts so payable to the Agent or such Lender shall be
increased to the extent necessary to yield to the Agent or such Lender
(after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in
this Credit Agreement and any Notes, provided, however, that the
Borrower shall be entitled to deduct and withhold any Non-Excluded
Taxes and shall not be required to increase any such amounts payable to
any Lender that is not organized under the laws of the United States of
America or a state thereof if such Lender fails to comply with the
requirements of paragraph (b) of this Section 3.14 whenever any
Non-Excluded Taxes are
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payable by the Borrower, and (B) as promptly as possible thereafter the
Borrower shall send to the Agent for its own account or for the account
of such Lender, as the case may be, a certified copy of an original
official receipt received by the Borrower, if any, showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due
to the appropriate taxing authority or fails to remit to the Agent the
required receipts or other required documentary evidence, the Borrower
shall indemnify the Agent and any Lender for any incremental taxes,
interest or penalties that may become payable by the Agent or any
Lender as a result of any such failure. The agreements in this
subsection shall survive the termination of this Credit Agreement and
the payment of the Loans and all other amounts payable hereunder.
(b) Each Lender that is not incorporated under the laws of the
United States of America or a state thereof shall:
(i) (A) on or before the date of any payment by the
Borrower under this Credit Agreement or Notes to such Lender,
deliver to the Borrower and the Agent (x) two duly completed
copies of United States Internal Revenue Service Form 1001 or
4224, or successor applicable form, as the case may be,
certifying that it is entitled to receive payments under this
Credit Agreement and any Notes without deduction or
withholding of any United States federal income taxes and (y)
an Internal Revenue Service Form W-8 or W-9, or successor
applicable form, as the case may be, certifying that it is
entitled to an exemption from United States backup withholding
tax;
(B) deliver to the Borrower and the Agent two further
copies of any such form or certification on or before the date
that any such form or certification expires or becomes
obsolete and after the occurrence of any event requiring a
change in the most recent form previously delivered by it to
the Borrower; and
(C) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Borrower or the Agent; or
(ii) in the case of any such Lender that is not a
"bank" within the meaning of Section 881(c)(3)(A) of the
Internal Revenue Code, (A) represent to the Borrower (for the
benefit of the Borrower and the Agent) that it is not a bank
within the meaning of Section 881(c)(3)(A) of the Internal
Revenue Code, (B) agree to furnish to the Borrower, on or
before the date of any payment by the Borrower, with a copy to
the Agent, two accurate and complete original signed copies of
Internal Revenue Service Form W-8, or successor applicable
form certifying to such Lender's legal entitlement at the date
of such certificate to an exemption from U.S. withholding tax
under the provisions of Section 881(c) of the Internal Revenue
Code with respect to payments to be made under this Credit
Agreement and any Notes (and to deliver to the Borrower and
the Agent two further copies of such form on or before the
date it expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recently provided
form and, if necessary,
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obtain any extensions of time reasonably requested by the
Borrower or the Agent for filing and completing such forms),
and (C) agree, to the extent legally entitled to do so, upon
reasonable request by the Borrower, to provide to the Borrower
(for the benefit of the Borrower and the Agent) such other
forms as may be reasonably required in order to establish the
legal entitlement of such Lender to an exemption from
withholding with respect to payments under this Credit
Agreement and any Notes.
Notwithstanding the above, if any change in treaty, law or regulation
has occurred after the date such Person becomes a Lender hereunder
which renders all such forms (including successor forms) inapplicable
or which would prevent such Lender from duly completing and delivering
any such form with respect to it and such Lender so advises the
Borrower and the Agent then such Lender shall be exempt from such
requirements. Each Person that shall become a Lender or a participant
of a Lender pursuant to Section 11.3 shall, upon the effectiveness of
the related transfer, be required to provide all of the forms,
certifications and statements required pursuant to this subsection (b);
provided that in the case of a participant of a Lender, the obligations
of such participant of a Lender pursuant to this subsection (b) shall
be determined as if the participant of a Lender were a Lender except
that such participant of a Lender shall furnish all such required
forms, certifications and statements to the Lender from which the
related participation shall have been purchased.
3.15 Indemnity.
The Borrower promises to indemnify each Lender and to hold each Lender
harmless from any loss or expense which such Lender may sustain or incur (other
than through such Lender's gross negligence or willful misconduct) as a
consequence of (a) default by the Borrower in making a borrowing of, conversion
into or continuation of Eurodollar Loans after the Borrower has given a written
notice requesting the same in accordance with the provisions of this Credit
Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar
Loan after the Borrower has given a written notice thereof in accordance with
the provisions of this Credit Agreement and (c) the making of a prepayment of
Eurodollar Loans on a day which is not the last day of an Interest Period with
respect thereto. Such indemnification may include an amount equal to (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for herein (excluding, however, the Applicable Percentage
included therein, if any) minus (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. The agreements in this Section shall
survive the termination of this Credit Agreement and the payment of the Loans
and all other amounts payable hereunder.
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SECTION 4
GUARANTY
--------
4.1 Guaranty of Payment.
Subject to Section 4.7 below, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Lender, each Affiliate of
Lender that enters into any agreement with a Credit Party giving rise to Hedging
Obligations of such Credit Party and the Agent the prompt payment of the Credit
Party Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise). The Guarantors additionally, jointly
and severally, unconditionally guarantee to each Lender the timely performance
of all other obligations under the Credit Documents and any agreements giving
rise to Hedging Obligations of any Credit Party. This guaranty is a guaranty of
payment and not of collection and is a continuing guaranty and shall apply to
all Credit Party Obligations whenever arising.
4.2 Obligations Unconditional.
The obligations of the Guarantors hereunder are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of the Credit Documents or any agreements giving rise to
Hedging Obligations on the part of any Credit Party, or any other agreement or
instrument referred to therein, to the fullest extent permitted by applicable
law, irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor.
Each Guarantor agrees that this guaranty may be enforced by the Lenders without
the necessity at any time of resorting to or exhausting any other security or
collateral and without the necessity at any time of having recourse to the Notes
or any other of the Credit Documents or any collateral, if any, hereafter
securing the Credit Party Obligations or otherwise and each Guarantor hereby
waives the right to require the Lenders to proceed against the Borrower or any
other Person (including a co-guarantor) or to require the Lenders to pursue any
other remedy or enforce any other right. Each Guarantor further agrees that it
shall have no right of subrogation, indemnity, reimbursement or contribution
against the Borrower or any other Guarantor of the Credit Party Obligations for
amounts paid under this guaranty until such time as the Lenders (and any
Affiliates of Lenders entering into any agreement with any Credit Party giving
rise to Hedging Obligations of such Credit Party) have been paid in full, all
Commitments under the Credit Agreement have been terminated and no Person or
Governmental Authority shall have any right to request any return or
reimbursement of funds from the Lenders in connection with monies received under
the Credit Documents. Each Guarantor further agrees that nothing contained
herein shall prevent the Lenders from suing on the Notes or any of the other
Credit Documents or any agreements giving rise to Hedging Obligations on the
part of any Credit Party or foreclosing its security interest in or Lien on any
collateral, if any, securing the Credit Party Obligations or from exercising any
other rights available to it under this Credit Agreement, the Notes, any other
of the Credit Documents, or any other instrument of security, if any, and the
exercise of any of the aforesaid rights and the completion of any foreclosure
proceedings shall not constitute a discharge of any of any Guarantor's
obligations hereunder; it being the purpose and intent of each Guarantor that
its obligations hereunder shall be
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absolute, independent and unconditional under any and all circumstances. Neither
any Guarantor's obligations under this guaranty nor any remedy for the
enforcement thereof shall be impaired, modified, changed or released in any
manner whatsoever by an impairment, modification, change, release or limitation
of the liability of the Borrower or by reason of the bankruptcy or insolvency of
the Borrower. Each Guarantor waives any and all notice of the creation, renewal,
extension or accrual of any of the Credit Party Obligations and notice of or
proof of reliance of by the Agent or any Lender upon this Guarantee or
acceptance of this Guarantee. The Credit Party Obligations, and any of them,
shall conclusively be deemed to have been created, contracted or incurred, or
renewed, extended, amended or waived, in reliance upon this Guarantee. All
dealings between the Borrower and any of the Guarantors, on the one hand, and
the Agent and the Lenders, on the other hand, likewise shall be conclusively
presumed to have been had or consummated in reliance upon this Guarantee.
4.3 Modifications.
Each Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Credit Party Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) the Lenders shall not have any
obligation to protect, perfect, secure or insure any such security interests,
liens or encumbrances now or hereafter held, if any, for the Credit Party
Obligations or the properties subject thereto; (c) the time or place of payment
of the Credit Party Obligations may be changed or extended, in whole or in part,
to a time certain or otherwise, and may be renewed or accelerated, in whole or
in part; (d) the Borrower and any other party liable for payment under the
Credit Documents may be granted indulgences generally; (e) any of the provisions
of the Notes or any of the other Credit Documents may be modified, amended or
waived; (f) any party (including any co-guarantor) liable for the payment
thereof may be granted indulgences or be released; and (g) any deposit balance
for the credit of the Borrower or any other party liable for the payment of the
Credit Party Obligations or liable upon any security therefor may be released,
in whole or in part, at, before or after the stated, extended or accelerated
maturity of the Credit Party Obligations, all without notice to or further
assent by such Guarantor, which shall remain bound thereon, notwithstanding any
such exchange, compromise, surrender, extension, renewal, acceleration,
modification, indulgence or release.
4.4 Waiver of Rights.
Each Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this guaranty by the Lenders and of
all extensions of credit to the Borrower by the Lenders; (b) presentment and
demand for payment or performance of any of the Credit Party Obligations; (c)
protest and notice of dishonor or of default (except as specifically required in
the Credit Agreement) with respect to the Credit Party Obligations or with
respect to any security therefor; (d) notice of the Lenders obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, lien or
encumbrance, if any, hereafter securing the Credit Party Obligations, or the
Lenders' subordinating, compromising, discharging or releasing such security
interests, liens or encumbrances, if any; (e) all other notices to which such
Guarantor might otherwise be entitled; and (f) demand for payment under this
guaranty. Without limiting the generality of any other provision of this Section
4, each Guarantor hereby specifically waives the
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benefits of N.C. Gen. Stat. Sections 26-7 through 26-9, inclusive. Each
Guarantor further agrees that such Guarantor shall have no right of recourse to
security for the Credit Parties' Obligations, except through the exercise of the
rights of subrogation pursuant to Section 4.2 and through the exercise of rights
of contribution pursuant to Section 4.8.
4.5 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, reasonable fees of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
4.6 Remedies.
The Guarantors agree that, as between the Guarantors, on the one hand,
and the Agent and the Lenders, on the other hand, the Credit Party Obligations
may be declared to be forthwith due and payable as provided in Section 9 (and
shall be deemed to have become automatically due and payable in the
circumstances provided in Section 9) notwithstanding any stay, injunction or
other prohibition preventing such declaration (or preventing such Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or such Credit Party
Obligations being deemed to have become automatically due and payable), such
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors. The Guarantors
acknowledge and agree that their obligations hereunder are secured in accordance
with the terms of the Security Agreements and the other Collateral Documents and
that the Lenders may exercise their remedies thereunder in accordance with the
terms thereof.
4.7 Limitation of Guaranty.
Notwithstanding any provision to the contrary contained herein or in
any of the other Credit Documents, to the extent the obligations of any
Guarantor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal law
relating to fraudulent conveyances or transfers) then the obligations of such
Guarantor hereunder shall be limited to the maximum amount that is permissible
under applicable law (whether federal or state and including, without
limitation, the Bankruptcy Code).
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4.8 Rights of Contribution.
The Guarantors hereby agree, as among themselves, that if any Guarantor
shall become an Excess Funding Guarantor (as defined below), each other
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence hereof), pay to such Excess Funding Guarantor an amount equal to
such Guarantor's Pro Rata Share (as defined below and determined, for this
purpose, without reference to the properties, assets, liabilities and debts of
such Excess Funding Guarantor) of such Excess Payment (as defined below). The
payment obligation of any Guarantor to any Excess Funding Guarantor under this
Section 4.8 shall be subordinate and subject in right of payment to the prior
payment in full of the obligations of such Guarantor under the other provisions
of this Section 4, and such Excess Funding Guarantor shall not exercise any
right or remedy with respect to such excess until payment and satisfaction in
full of all of such obligations. For purposes hereof, (i) "Excess Funding
Guarantor" shall mean, in respect of any obligations arising under the other
provisions of this Section 4 (hereafter, the "Guaranteed Obligations"), a
Guarantor that has paid an amount in excess of its Pro Rata Share of the
Guaranteed Obligations; (ii) "Excess Payment" shall mean, in respect of any
Guaranteed Obligations, the amount paid by an Excess Funding Guarantor in excess
of its Pro Rata Share of such Guaranteed Obligations; and (iii) "Pro Rata
Share", for the purposes of this Section 4.8, shall mean, for any Guarantor, the
ratio (expressed as a percentage) of (a) the amount by which the aggregate
present fair salable value of all of its assets and properties exceeds the
amount of all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder) to (b) the amount by which the
aggregate present fair salable value of all assets and other properties of the
Borrower and all of the Guarantors exceeds the amount of all of the debts and
liabilities (including contingent, subordinated, unmatured, and unliquidated
liabilities, but excluding the obligations of the Borrower and the Guarantors
hereunder) of the Borrower and all of the Guarantors, all as of the Closing Date
(if any Guarantor becomes a party hereto subsequent to the Closing Date, then
for the purposes of this Section 4.8 such subsequent Guarantor shall be deemed
to have been a Guarantor as of the Closing Date and the information pertaining
to, and only pertaining to, such Guarantor as of the date such Guarantor became
a Guarantor shall be deemed true as of the Closing Date Notwithstanding the
foregoing, all rights of contribution against any Guarantor shall terminate from
and after such time, if ever, that such Guarantor shall be relieved of its
obligations pursuant to Section 8.4.
SECTION 5
CONDITIONS PRECEDENT
--------------------
5.1 Closing Conditions.
The obligation of the Lenders to enter into this Credit Agreement and
make the initial Extension of Credit is subject to satisfaction of the following
conditions:
(a) Executed Credit Documents. Receipt by the Agent of duly
executed copies of (i) this Credit Agreement, (ii) the Notes, (iii) the
Collateral Documents and (iv) all other
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Credit Documents, each in form and substance acceptable to the Lenders
in their sole discretion.
(b) Corporate Documents. Receipt by the Agent of the
following:
(i) Charter Documents. Copies of the articles or
certificates of incorporation or other charter documents of
each Credit Party certified to be true and complete as of a
recent date by the appropriate Governmental Authority of the
state or other jurisdiction of its incorporation and certified
by a secretary or assistant secretary of such Credit Party to
be true and correct as of the Closing Date.
(ii) Bylaws. A copy of the bylaws of each Credit
Party certified by a secretary or assistant secretary of such
Credit Party to be true and correct as of the Closing Date.
(iii) Resolutions. Copies of resolutions of the Board
of Directors of each Credit Party approving and adopting the
Credit Documents to which it is a party, the transactions
contemplated therein and authorizing execution and delivery
thereof, certified by a secretary or assistant secretary of
such Credit Party to be true and correct and in force and
effect as of the Closing Date.
(iv) Good Standing. Copies of (A) certificates of
good standing, existence or its equivalent with respect to
each Credit Party certified as of a recent date by the
appropriate Governmental Authorities of the state or other
jurisdiction of incorporation and each other jurisdiction in
which the failure to so qualify and be in good standing would
have a Material Adverse Effect on the business or operations
of a Credit Party in such jurisdiction and (B) to the extent
available, a certificate indicating payment of all corporate
franchise taxes certified as of a recent date by the
appropriate governmental taxing authorities.
(v) Incumbency. An incumbency certificate of each
Credit Party certified by a secretary or assistant secretary
to be true and correct as of the Closing Date.
(c) Personal Property Collateral. Receipt by the Agent of the
following:
(i) searches of Uniform Commercial Code ("UCC")
filings in the jurisdiction of the chief executive office of
each Credit Party and such other jurisdictions where
Collateral is located (as reasonably determined by the Agent),
copies of the financing statements on file in such
jurisdictions and evidence that no Liens exist other than
Permitted Liens;
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Lenders' security interest in the
Collateral;
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(iii) searches of ownership of trademarks in the
appropriate governmental offices and such
patent/trademark/copyright filings as requested by the Agent
in order to perfect the Agent's security interest in the
Collateral; and
(iv) all duly executed consents as are necessary, in
the Agent's sole discretion, to perfect the Lenders' security
interest in the Collateral.
(c) Legal Opinion. Receipt by the Agent of a legal opinion of
Hutchins, Wheeler & Dittmar, counsel for the Credit Parties, dated as
of the Closing Date and substantially in the form of Schedule 5.1(d).
(e) Payoff Letter. Receipt by the Agent of a payoff letter
from The First National Bank of Boston in form and substance
satisfactory to the Agent.
(f) Evidence of Insurance. Receipt by the Agent of copies of
insurance policies or certificates of insurance of the Consolidated
Parties evidencing liability and casualty insurance meeting the
requirements set forth in the Credit Documents, including, but not
limited to, naming the Agent as sole loss payee on behalf of the
Lenders.
(g) Officer's Certificates.
(i) Receipt by the Agent of a certificate or
certificates executed by an Executive Officer of the Borrower
as of the Closing Date stating that (A) each Consolidated
Party is in compliance with all existing financial
obligations, (B) all governmental, shareholder and third party
consents and approvals, if any, with respect to the Credit
Documents and the transactions contemplated thereby have been
obtained, (C) no action, suit, investigation or proceeding is
pending or threatened in any court or before any arbitrator or
governmental instrumentality that purports to affect any
Consolidated Party or any transaction contemplated by the
Credit Documents, if such action, suit, investigation or
proceeding could have or could be reasonably expected to have
a Material Adverse Effect and (D) immediately after giving
effect to this Credit Agreement, the other Credit Documents
and all the transactions contemplated therein to occur on such
date, (1) each of the Credit Parties is Solvent, (2) no
Default or Event of Default exists, (3) all representations
and warranties contained herein and in the other Credit
Documents are true and correct in all material respects, and
(4) the Credit Parties are in compliance with each of the
financial covenants set forth in Section 7.12.
(ii) Receipt by the Agent of a certificate or
certificates executed by an Executive Officer of the Parent as
of the Closing Date stating that (A) the Parent is in
compliance with all existing financial obligations and (B)
immediately after giving effect to this Credit Agreement, the
other Credit Documents and all the transactions contemplated
therein, the Parent is Solvent.
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(h) Government Consent. Receipt by the Agent of evidence that
all governmental, shareholder and material third party consents in
connection with the financings and other transactions contemplated
hereby and the absence of any action being taken by any authority that
could reasonably be likely to restrain, prevent or impose any material
adverse conditions on such financings and other transactions or that
could reasonably be likely to seek or threaten any of the foregoing,
and no law or regulation shall be applicable which in the judgment of
the Agent could reasonably be likely to have such effect.
(i) Litigation. There shall not exist any pending or
threatened action, suit, investigation or proceeding against a
Consolidated Party that would have or would reasonably be expected to
have a Material Adverse Effect.
(j) Material Adverse Effect. There shall not have occurred a
change since December 31, 1996 that has had or could reasonably be
expected to have a Material Adverse Effect.
(k) Senior Notes. (i) The Borrower shall have entered into the
Senior Note Indenture and a Senior Note Purchase Agreement with each of
the Senior Noteholders, (ii) the Borrower shall have executed the
Senior Notes in accordance with the terms of the Senior Note Indenture
and the Senior Note Purchase Agreements and (iii) the Agent shall have
received a copy, certified by an officer of the Borrower as true and
complete, of the Senior Note Indenture, each of the Senior Note
Purchase Agreements and each of the Senior Notes, in each case as
originally executed and delivered, and no amendment or modification
thereof which could have a materially adverse effect on the Lenders and
to which any of the Lenders shall have objected shall have been entered
into on or prior to the Closing Date;
(l) Proceeds of Senior Notes. The Borrower shall have received
proceeds from the sale of the Senior Notes in an aggregate principal
amount of up to $100,000,000.
(m) Solvency Opinion. Receipt by the Agent, with a copy for
each Lender, of an opinion letter from Murray, Devine & Co., addressed
to the Agent and each Lender and dated the Closing Date, as to the
Solvency of the Borrower on a consolidated basis immediately after
giving effect to the Loans to be made and the Letters of Credit, if
any, to be issued on the Closing Date which opinion shall be in form
and substance reasonably acceptable to the Agent.
(n) Availability. After giving effect to the initial Loans
made and Letters of Credit issued hereunder on the Closing Date,
consummation of the Refinancing and the other transactions contemplated
by this Credit Agreement to occur on the Closing Date, there shall be
at least $7,500,000 of availability existing under the Committed
Amount.
(o) Consummation of Refinancing. Receipt by the Agent of
evidence that (i) all Indebtedness of the Consolidated Parties
outstanding immediately prior to giving effect to
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the issuance of the Senior Notes and the initial Extensions of Credit
hereunder (other than Indebtedness set forth in Schedule 6.10) shall
have been repaid in full, (ii) the distribution to all shareholders of
the Parent (including Thomas H. Lee Company and affiliates thereof)
does not exceed $30,000,000 and (iii) the aggregate amount of fees and
expenses paid and payable in connection with the Refinancing does not
exceed $6,000,000.
(p) Credit Agreement Fees and Expenses. Payment by the
Borrower of all fees and expenses owed by it to the Lenders and the
Agent.
(q) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by any
Lender, including, but not limited to, information regarding
litigation, tax, accounting, labor, insurance, pension liabilities
(actual or contingent), real estate leases, material contracts, debt
agreements, property ownership and contingent liabilities of the
Consolidated Parties.
5.2 Conditions to All Extensions of Credit.
In addition to the conditions precedent stated elsewhere herein, the
Lenders shall not be obligated to make, continue or convert Loans nor shall an
Issuing Lender be required to issue or extend a Letter of Credit unless:
(a) Notice. The Borrower shall have delivered (i) in the case
of any new Loan, a Notice of Borrowing, duly executed and completed, by
the time specified in Section 2.1, (ii) in the case of any Letter of
Credit, the Issuing Lender shall have received an appropriate request
for issuance in accordance with the provisions of Section 2.2 and (iii)
in the case of any continuation or conversion of a Loan, a duly
executed and completed Notice of Continuation/Conversion by the time
specified in Section 2.3;
(b) Representations and Warranties. The representations and
warranties made by the Credit Parties in any Credit Document are true
and correct in all material respects at and as if made as of such date
except to the extent they expressly relate to an earlier date;
(c) No Default. No Default or Event of Default shall exist or
be continuing either prior to or after giving effect thereto;
(d) No Bankruptcy Event. No Bankruptcy Event with respect to
any Consolidated Party shall have occurred and remain undismissed,
undischarged or unbonded;
(e) No Material Adverse Effect. No Material Adverse Effect
shall have occurred since December 31, 1996; and
(f) Availability. Immediately after giving effect to the
making of a Loan (and the application of the proceeds thereof) or to
the issuance of a Letter of Credit, as the case
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may be, the sum of the Loans outstanding plus LOC Obligations
outstanding shall not exceed the Committed Amount.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion
and each request for a Letter of Credit shall constitute a representation and
warranty by the Borrower of the correctness of the matters specified in
subsections (b), (c), (d), (e) and (f) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
------------------------------
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 Financial Condition.
(a) The audited consolidated and consolidating balance sheet
of Consolidated Parties as of December 31, 1996 and the audited
consolidated and consolidating statements of earnings and statements of
cash flows for the years ended December 31, 1994 and December 31, 1995
have heretofore been furnished to each Lender. Such financial
statements (including the notes thereto) (i) have been audited by
Coopers & Lybrand L.L.P., (ii) have been prepared in accordance with
GAAP consistently, applied throughout the periods covered thereby and
(iii) present fairly (on the basis disclosed in the footnotes to such
financial statements) the consolidated and consolidating financial
condition, results of operations and cash flows of the Consolidated
Parties as of such date and for such periods. The unaudited interim
balance sheets of the Consolidated Parties as at the end of, and the
related unaudited interim statements of earnings and of cash flows for,
each fiscal month and quarterly period ended after December 31, 1996
and prior to the Closing Date have heretofore been furnished to each
Lender. Such interim financial statements for each such quarterly
period, (i) have been prepared in accordance with GAAP consistently
applied throughout the periods covered thereby and (ii) present fairly
(on the basis disclosed in the footnotes to such financial statements)
the consolidated and consolidating financial condition, results of
operations and cash flows of the Consolidated Parties as of such date
and for such periods. During the period from December 31, 1996 to and
including the Closing Date, there has been no sale, transfer or other
disposition by any Consolidated Party of any material part of the
business or property of the Consolidated Parties, taken as a whole, no
purchase or other acquisition by any Consolidated Party of any business
or property (including any capital stock of any other Person) material
in relation to the consolidated financial condition of the Consolidated
Parties, taken as a whole, no declaration, payment or making or any
dividends or other distributions upon, nor any redemption, retirement,
purchase or other acquisition for value of, any of the Capital Stock of
any Consolidated Party, in each case except as reflected in the
foregoing financial statements or in the notes thereto or as otherwise
disclosed in writing to the Lenders on or prior to the Closing Date.
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(b) The financial statements delivered to the Lenders pursuant
to Section 7.1(a) and (b), (a) have been prepared in accordance with
GAAP (except as may otherwise be permitted under Section 7.1(a) and
(b)) and (b) present fairly (on the basis disclosed in the footnotes to
such financial statements) the consolidated and consolidating (as
applicable) financial condition, results of operations and cash flows
of the Consolidated Parties as of such date and for such periods. Since
December 31, 1996, there has been no sale, transfer or other
disposition by any Consolidated Party of any material part of the
business or property of the Consolidated Parties, taken as a whole, and
no purchase or other acquisition by any of them of any business or
property (including any Capital Stock of any other Person) material in
relation to the consolidated financial condition of the Consolidated
Parties, taken as a whole, in each case, which, is not (x) reflected in
the most recent financial statements delivered to the Lenders pursuant
to Section 7.1 or in the notes thereto or (y) otherwise permitted by
the terms of this Credit Agreement and communicated to the Agent.
(c) The pro forma consolidated balance sheet of the
Consolidated Parties as of the Closing Date has heretofore been
furnished to each Lender. Such pro forma balance sheet is based upon
reasonable assumptions made known to the Lenders and upon information
not know to be incorrect or misleading in any material respect.
6.2 No Material Change.
Since December 31, 1996, there has been no development or event
relating to or affecting a Consolidated Party which has had or would be
reasonably expected to have a Material Adverse Effect.
6.3 Organization and Good Standing.
Each Consolidated Party (a) is a corporation duly incorporated, validly
existing and in good standing under the laws of the State (or other
jurisdiction) of its incorporation, (b) is duly qualified and in good standing
as a foreign corporation and authorized to do business in every jurisdiction
unless the failure to be so qualified, in good standing or authorized would not
have a Material Adverse Effect and (c) has the requisite corporate power and
authority to own its properties and to carry on its business as now conducted
and as proposed to be conducted.
6.4 Due Authorization.
Each Credit Party (a) has the requisite corporate power and authority
to execute, deliver and perform this Credit Agreement and the other Credit
Documents to which it is a party and to incur the obligations herein and therein
provided for and (b) is duly authorized to, and has been authorized by all
necessary corporate action, to execute, deliver and perform this Credit
Agreement and the other Credit Documents to which it is a party.
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6.5 No Conflicts.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws or other organizational or governing documents of such
Person, (b) violate, contravene or materially conflict with any Requirement of
Law or any other law, regulation (including, without limitation, Regulation U or
Regulation X), order, writ, judgment, injunction, decree or permit applicable to
it, (c) violate, contravene or conflict with contractual provisions of, or cause
an event of default under, any indenture, loan agreement, mortgage, deed of
trust, contract or other agreement or instrument to which it is a party or by
which it may be bound, the violation of which would have or might be reasonably
expected to have a Material Adverse Effect, or (d) result in or require the
creation of any Lien (other than those contemplated in or created in connection
with the Credit Documents) upon or with respect to its properties.
6.6 Consents.
Except for consents, approvals and authorizations (a) which have been
obtained or (b) which are listed on Schedule 6.6, no consent, approval,
authorization or order of, or filing, registration or qualification with, any
court or Governmental Authority or third party in respect of any Credit Party is
required in connection with the execution, delivery or performance of this
Credit Agreement or any of the other Credit Documents by such Credit Party.
6.7 Enforceable Obligations.
This Credit Agreement and the other Credit Documents have been duly
executed and delivered and constitute legal, valid and binding obligations of
each Credit Party enforceable against such Credit Party in accordance with their
respective terms, except as may be limited by bankruptcy or insolvency laws or
similar laws affecting creditors' rights generally or by general equitable
principles.
6.8 No Default.
No Consolidated Party is in default in any respect under any contract,
lease, loan agreement, indenture, mortgage, security agreement or other
agreement or obligation to which it is a party or by which any of its properties
is bound which default would have or would be reasonably expected to have a
Material Adverse Effect. No Default or Event of Default has occurred or exists
except as previously disclosed in writing to the Lenders.
6.9 Ownership.
Each Consolidated Party is the owner of, and has good and marketable
title to, all of its respective assets and none of such assets is subject to any
Lien other than Permitted Liens.
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6.10 Indebtedness.
The Consolidated Parties have no Indebtedness except (a) as disclosed
in the financial statements referenced in Section 6.1, (b) as set forth on
Schedule 6.10 and (c) as otherwise permitted by this Credit Agreement.
6.11 Litigation.
Except as disclosed in Schedule 6.11, there are no actions, suits or
legal, equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Credit Party, threatened against any Consolidated Party which
will have or might be reasonably expected to have a Material Adverse Effect.
6.12 Taxes.
Each Consolidated Party has filed, or caused to be filed, all tax
returns (federal, state, local and foreign) required to be filed and paid (a)
all amounts of taxes shown thereon to be due (including interest and penalties)
and (b) all other taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangibles
taxes) owing by it, except for such taxes (i) which are not yet delinquent or
(ii) that are being contested in good faith and by proper proceedings, and
against which adequate reserves are being maintained in accordance with GAAP. No
Credit Party is aware as of the Closing Date of any proposed tax assessments
against it or any other Consolidated Party.
6.13 Compliance with Law.
Each Consolidated Party is in compliance with all Requirements of Law
and all other laws, rules, regulations, orders and decrees (including without
limitation Environmental Laws) applicable to it, or to its properties, unless
such failure to comply would not have or would not be reasonably expected to
have a Material Adverse Effect. No Requirement of Law would be reasonably
expected to cause a Material Adverse Effect.
6.14 ERISA.
Except as would not result or be reasonably expected to result in a
Material Adverse Effect:
(a) During the five-year period prior to the date on which
this representation is made or deemed made: (i) no ERISA Event has
occurred, and, to the best knowledge of the Credit Parties, no event or
condition has occurred or exists as a result of which any ERISA Event
could reasonably be expected to occur, with respect to any Plan; (ii)
no "accumulated funding deficiency," as such term is defined in Section
302 of ERISA and Section 412 of the Code, whether or not waived, has
occurred with respect to any Plan; (iii) each Plan has been maintained,
operated, and funded in compliance with its own terms and in material
compliance with the provisions of ERISA, the Code, and any other
applicable federal or
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state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen
or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all "benefit liabilities"
(as defined in Section 4001(a)(16) of ERISA), whether or not vested,
under each Single Employer Plan, as of the last annual valuation date
prior to the date on which this representation is made or deemed made
(determined, in each case, utilizing the actuarial assumptions used in
such Plan's most recent actuarial valuation report), did not exceed as
of such valuation date the fair market value of the assets of such
Plan, or by more than $250,000 in the aggregate as to all such Plans.
(c) Neither any Consolidated Party nor any ERISA Affiliate has
incurred, or, to the best knowledge of the Credit Parties, could be
reasonably expected to incur, any withdrawal liability under ERISA to
any Multiemployer Plan or Multiple Employer Plan. No Consolidated Party
would become subject to any withdrawal liability under ERISA if any
Consolidated Party or any ERISA Affiliate were to withdraw completely
from all Multiemployer Plans and Multiple Employer Plans as of the
valuation date most closely preceding the date on which this
representation is made or deemed made. Neither any Consolidated Party
nor any ERISA Affiliate has received any notification that any
Multiemployer Plan is in reorganization (within the meaning of Section
4241 of ERISA), is insolvent (within the meaning of Section 4245 of
ERISA), or has been terminated (within the meaning of Title IV of
ERISA), and no Multiemployer Plan is, to the best knowledge of the
Credit Parties, reasonably expected to be in reorganization, insolvent,
or terminated.
(d) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility has occurred with respect to a Plan which has subjected
or may subject any Consolidated Party nor any ERISA Affiliate to any
liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which any Consolidated Party or any ERISA Affiliate has
agreed or is required to indemnify any Person against any such
liability.
(e) Neither any Consolidated Party nor any ERISA Affiliate has
any material liability with respect to "expected post-retirement
benefit obligations" within the meaning of the Financial Accounting
Standards Board Statement 106.
6.15 Subsidiaries.
Set forth on Schedule 6.15 is a complete and accurate list of all
Subsidiaries of each Consolidated Party as of the Closing Date. Information on
Schedule 6.15 includes jurisdiction of incorporation, the number of shares of
each class of Capital Stock outstanding, the number and percentage of
outstanding shares of each class owned (directly or indirectly) by such
Consolidated Party; and the number and effect, if exercised, of all outstanding
options, warrants, rights of conversion or purchase and all other similar rights
with respect thereto. The outstanding Capital Stock of all such Subsidiaries is
validly issued, fully paid and non-assessable and is owned by each
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such Consolidated Party, directly or indirectly, free and clear of all Liens
(other than those arising under or contemplated in connection with the Credit
Documents). Other than as set forth in Schedule 6.15, as of the Closing Date no
Consolidated Party has outstanding any securities convertible into or
exchangeable for its Capital Stock nor does any such Person have outstanding any
rights to subscribe for or to purchase or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to its Capital Stock.
6.16 Use of Proceeds; Margin Stock.
The proceeds of the Loans hereunder will be used solely for the
purposes specified in Section 7.10. None of the proceeds of the Loans will be
used for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation G, Regulation U or Regulation X, or for the purpose of reducing or
retiring any Indebtedness which was originally incurred to purchase or carry
"margin stock" or any "margin security" or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of Regulation
G, T, U, or X. No Consolidated Party owns any "margin stock".
6.17 Government Regulation.
No Consolidated Party is subject to regulation under the Public Utility
Holding Company Act of 1935, the Federal Power Act, the Investment Company Act
of 1940 or the Interstate Commerce Act, each as amended. In addition, No
Consolidated Party is an "investment company" registered or required to be
registered under the Investment Company Act of 1940, as amended, or a "holding
company," or a "Subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "Subsidiary" or a "holding company," within the
meaning of the Public Utility Holding Company Act of 1935, as amended. No
director, executive officer or principal shareholder of any Consolidated Party
is a director, executive officer or principal shareholder of any Lender. For the
purposes hereof the terms "director", "executive officer" and "principal
shareholder" (when used with reference to any Lender) have the respective
meanings assigned thereto in Regulation O issued by the Board of Governors of
the Federal Reserve System.
6.18 Environmental Matters.
Except as set forth on Schedule 6.18 or except as would not have or be
reasonably expected to have a Material Adverse Effect:
(i) Each of the Real Properties and all operations of
any Consolidated Party at the Real Properties are in
compliance with all applicable Environmental Laws, and there
is no violation of any applicable Environmental Law with
respect to the Real Properties or the businesses operated by
any Consolidated Party (the "Businesses"), and there are no
conditions relating to Businesses or Real Properties that
would be reasonably expected to give rise to liability under
any applicable Environmental Laws.
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(ii) None of the Real Properties contains, or, to the
knowledge of the Credit Parties, has previously contained, any
Hazardous Materials at, on or under the Real Properties in
amounts or concentrations that, if released, constitute or
constituted a violation of, or could give rise to liability
under, Environmental Laws.
(iii) No Consolidated Party has received any written
or oral notice of, or inquiry from any Governmental Authority
regarding, any violation, alleged violation, non-compliance,
liability or potential liability regarding Hazardous Materials
or compliance with Environmental Laws with regard to any of
the Real Properties or the Businesses, nor does any Credit
Party have knowledge or reason to believe that any such notice
is being threatened
(iv) Hazardous Materials have not been transported or
disposed of from the Real Properties, or generated, treated,
stored or disposed of at, on or under any of the Real
Properties or any other location, in each case by, or on
behalf or with the permission of, any Consolidated Party in a
manner that would reasonably be expected to give rise to
liability on the part of any Consolidated Party under any
applicable Environmental Law.
(v) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of any
Credit Party, threatened, under any applicable Environmental
Law to which any Consolidated Party is or will be named as a
party, nor are there any consent decrees or other decrees,
consent orders, administrative orders or other orders, or
other administrative or judicial requirements outstanding
under any Environmental Law with respect to any Consolidated
Party, the Real Properties or the Businesses.
(vi) There has been no release or threat of release
of Hazardous Materials at or from the Real Properties, or
arising from or related to the operations (including, without
limitation, disposal) of any Consolidated Party in connection
with the Real Properties or otherwise in connection with the
Businesses.
(vii) No Consolidated Party has assumed any liability
of any Person under any applicable Environmental Law.
6.19 Intellectual Property.
Each Consolidated Party owns, or has the legal right to use, all
trademarks, tradenames, copyrights, technology, know-how and processes (the
"Intellectual property") necessary for each of them to conduct its business as
currently conducted except for those the failure to own or have such legal right
to use would not have or be reasonably expected to have a Material Adverse
Effect. Set forth on Schedule 6.19 is a list of all Intellectual property owned
by each Consolidated Party or that any Consolidated Party has the right to use
as of the Closing Date. Except as provided on Schedule 6.19, no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual property or the validity or effectiveness of any such
Intellectual property, nor
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does any Credit Party know of any such claim, and to the Credit Parties'
knowledge the use of such Intellectual property by any Consolidated Party does
not infringe on the rights of any Person, except for such claims and
infringements that in the aggregate, would not have or be reasonably expected to
have a Material Adverse Effect.
6.20 Solvency.
Each Credit Party is (after consummation of the Refinancing and the
other transactions contemplated by this Credit Agreement to occur on the Closing
Date and at all times thereafter), Solvent.
6.21 Investments.
All Investments of each Consolidated Party are Permitted Investments.
6.22 Location of Collateral.
Set forth on Schedule 6.22(a) is a list of all locations where, as of
the Closing Date, any tangible personal property of a Consolidated Party is
located, including county and state where located. Set forth on Schedule 6.22(b)
is a list of the chief executive office and principal place of business of each
Consolidated Party as of the Closing Date.
6.23 Disclosure.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of any Consolidated Party in connection with the
transactions contemplated hereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading.
6.24 Licenses, etc.
The Consolidated Parties have obtained and hold in full force and
effect, all material franchises, licenses, permits, certificates,
authorizations, qualifications, accreditations, easements, rights of way and
other rights, consents and approvals which are necessary for the operation of
their respective businesses as presently conducted.
6.25 No Burdensome Restrictions.
No Consolidated Party is a party to any agreement or instrument or
subject to any other obligation or any charter or corporate restriction or any
provision of any applicable law, rule or regulation which, individually or in
the aggregate, would have or be reasonably expected to have a Material Adverse
Effect.
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6.26 Labor Matters.
There are no collective bargaining agreements or Multiemployer Plans
covering the employees of a Consolidated Party as of the Closing Date and none
of the Consolidated Parties has suffered any strikes, walkouts, work stoppages
or other material labor difficulty within the last five years.
6.27 Nature of Business.
As of the Closing Date, the Borrower is engaged principally in the
business of designing, manufacturing and packaging molded plastics and metal
products.
SECTION 7
AFFIRMATIVE COVENANTS
---------------------
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest, fees and other obligations hereunder, have been paid in full and
the Commitments and Letters of Credit hereunder shall have terminated:
7.1 Information Covenants.
The Credit Parties will furnish, or cause to be furnished, to the Agent
and each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of each fiscal year
(commencing with the fiscal year ending December 31, 1997) of the
Borrower, a consolidated and consolidating balance sheet and income
statement of the Consolidated Parties, as of the end of such fiscal
year, together with related consolidated and consolidating statements
of operations and retained earnings and of cash flows for such fiscal
year, setting forth in comparative form consolidated figures for the
preceding fiscal year, all such financial information described above
to be in reasonable form and detail and audited (with respect to
consolidated financial statements only) by Coopers & Lybrand L.L.P. (or
other independent certified public accountants of recognized national
standing reasonably acceptable to the Agent), whose opinion shall be to
the effect that such financial statements have been prepared in
accordance with GAAP (except for changes with which such accountants
concur) and shall not be limited as to the scope of the audit or
qualified in any manner.
(b) Quarterly Financial Statements. As soon as available, and
in any event within 45 days after the close of each fiscal quarter
(commencing with the fiscal quarter ending in March, 1997) of the
Borrower (other than the fourth fiscal quarter) a consolidated and
consolidating balance sheet and income statement of the Consolidated
Parties as of the
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end of such fiscal quarter, together with related consolidated and
consolidating statements of operations and retained earnings and of
cash flows for such fiscal quarter in each case setting forth in
comparative form consolidated and consolidating figures for the
corresponding period of the preceding fiscal year, all such financial
information described above to be in reasonable form and detail and
reasonably acceptable to the Agent, and accompanied by a certificate of
an Executive Officer of the Borrower to the effect that such quarterly
financial statements fairly present in all material respects the
financial condition of the Consolidated Parties and have been prepared
in accordance with GAAP (except for the absence of footnotes), subject
to changes resulting from audit and normal year-end audit adjustments.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b) above,
a certificate of an Executive Officer of the Borrower substantially in
the form of Exhibit 7.1(c), (i) demonstrating compliance with the
financial covenants contained in Section 7.12 by calculation thereof as
of the end of each such fiscal period and (ii) stating that no Default
or Event of Default exists, or if any Default or Event of Default does
exist, specifying the nature and extent thereof and what action the
Borrower proposes to take with respect thereto.
(d) Borrowing Base Certificates. As soon as available and in
any event within 20 days (or 30 days in the case of the report for the
twelfth fiscal month) after the end of each fiscal month of the
Borrower, a report on the Borrowing Base, in each case as of the end of
the immediately preceding month, substantially in the form of Exhibit
7.1(d), certified by the chief financial officer of Borrower to be true
and correct as of such date.
(e) Annual Business Plan and Budgets. Within 60 days after the
end of each fiscal year of the Borrower, beginning with the fiscal year
ending December 31, 1997, an annual business plan and budget of the
Consolidated Parties on a consolidated basis containing, among other
things, pro forma financial statements for the next fiscal year.
(f) Compliance With Certain Provisions of the Credit
Agreement. Within 90 days after the end of each fiscal year of the
Borrower, the Borrower shall deliver a certificate, containing
information regarding the amount of all Asset Dispositions that were
made during the prior fiscal year.
(g) Accountant's Certificate. Within the period for delivery
of the annual financial statements provided in Section 7.1(a), a
certificate of the accountants conducting the annual audit stating that
they have reviewed this Credit Agreement and stating further whether,
in the course of their audit, they have become aware of any Default or
Event of Default and, if any such Default or Event of Default exists,
specifying the nature and extent thereof.
(h) Auditor's Reports. Promptly upon receipt thereof, a copy
of any "management letter" submitted by independent accountants to any
Consolidated Party in connection with any annual, interim or special
audit of the books of any Consolidated Party.
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(i) Reports. Promptly upon transmission or receipt thereof,
(a) copies of any filings and registrations with, and reports to or
from, the Securities and Exchange Commission, or any successor agency,
and copies of all financial statements, proxy statements, notices and
reports as any Consolidated Party shall send to its shareholders
generally or to a holder of any Indebtedness owed by any Consolidated
Party in its capacity as such a holder and (b) upon the written request
of the Agent, all reports and written information to and from the
United States Environmental Protection Agency, or any state or local
agency responsible for environmental matters, the United States
Occupational Health and Safety Administration, or any state or local
agency responsible for health and safety matters, or any successor
agencies or authorities concerning environmental, health or safety
matters.
(j) Notices. Upon any Executive Officer of a Credit Party
obtaining knowledge thereof, such Credit Party will give written notice
to the Agent promptly of (a) the occurrence of an event or condition
consisting of a Default or Event of Default, specifying the nature and
existence thereof and what action the Borrower proposes to take with
respect thereto, and (b) the occurrence of any of the following with
respect to any Consolidated Party (i) the pendency or commencement of
any litigation, arbitral or governmental proceeding against any
Consolidated Party which if adversely determined would have or would be
reasonably expected to have a Material Adverse Effect, (ii) the
institution of any proceedings against any Consolidated Party with
respect to, or the receipt of notice by such Person of potential
liability or responsibility for violation, or alleged violation of any
federal, state or local law, rule or regulation, including but not
limited to, Environmental Laws, which violation would have or would be
reasonably expected to have a Material Adverse Effect or (iii) any
notice or determination concerning the imposition of any withdrawal
liability by a Multiemployer Plan against such Person or any ERISA
Affiliate, the determination that a Multiemployer Plan is, or is
expected to be, in reorganization within the meaning of Title IV of
ERISA or the termination of any Plan. Upon its receipt of any notice
pursuant to this Section 7.1(i), the Agent will promptly notify each of
the Lenders.
(k) ERISA. Upon any Executive Officer of a Credit Party
obtaining knowledge thereof, the Borrower will give written notice to
the Agent promptly (and in any event within five Business Days) of: (i)
of any event or condition, including, but not limited to, any
Reportable Event, that constitutes, or might reasonably lead to, an
ERISA Event, (ii) with respect to any Multiemployer Plan, the receipt
of notice as prescribed in ERISA or otherwise of any withdrawal
liability assessed against any Consolidated Party or any ERISA
Affiliate, or of a determination that any Multiemployer Plan is in
reorganization or insolvent (both within the meaning of Title IV of
ERISA); (iii) the failure to make full payment on or before the due
date (including extensions) thereof of all amounts which any
Consolidated Party or any ERISA Affiliate is required to contribute to
each Plan pursuant to its terms and as required to meet the minimum
funding standard set forth in ERISA and the Code with respect thereto;
(iv) any event has occurred or failed to occur with respect to a Single
Employer Plan, Multiemployer Plan or Multiple Employer Plan sponsored,
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maintained or contributed to by an ERISA Affiliate of any Consolidated
Party which would have or would be reasonably expected to have a
Material Adverse Effect or (v) any change in the funding status of any
Plan that could have a Material Adverse Effect, together with a
description of any such event or condition or a copy of any such notice
and a statement by an Executive Officer of the Borrower briefly setting
forth the details regarding such event, condition, or notice, and the
action, if any, which has been or is being taken or is proposed to be
taken by the Consolidated Parties with respect thereto. Promptly upon
request, the Borrower shall furnish the Agent and the Lenders with such
additional information concerning any Plan as may be reasonably
requested, including, but not limited to, copies of each annual
report/return (Form 5500 series), as well as all schedules and
attachments thereto required to be filed with the Department of Labor
and/or the Internal Revenue Service pursuant to ERISA and the Code,
respectively, for each "plan year" (within the meaning of Section 3(39)
of ERISA).
(l) Other Information. With reasonable promptness upon any
such request, such other information regarding the business, properties
or financial condition of the Consolidated Parties as the Agent or the
Required Lenders may reasonably request.
7.2 Preservation of Existence and Franchises.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, do all things necessary to preserve and keep in full force and
effect its existence, rights, franchises and authority, except where the failure
to do so would not have a Material Adverse Effect or except as otherwise
permitted by Section 8.4 or Section 8.5.
7.3 Books and Records.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of GAAP
(including the establishment and maintenance of appropriate reserves).
7.4 Compliance with Law.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, comply with all material laws, rules, regulations and orders,
and all applicable material restrictions imposed by all Governmental
Authorities, applicable to it and its property (including, without limitation,
Environmental Laws).
7.5 Payment of Taxes and Other Indebtedness.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, pay, settle or discharge all taxes, assessments and
governmental charges or levies imposed upon it, or upon its income or profits,
or upon any of its properties, before they shall become delinquent, all lawful
claims (including claims for labor, materials and supplies) which, if unpaid,
might give rise to a Lien upon any of its properties, and except as prohibited
hereunder, all of its other Indebtedness as
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it shall become due; provided, however, that a Consolidated Party shall not be
required to pay any such tax, assessment, charge, levy, claim or Indebtedness
which is being contested in good faith by appropriate proceedings and as to
which adequate reserves therefor have been established in accordance with GAAP,
unless the failure to make any such payment (i) would give rise to an immediate
right to foreclose on a Lien securing such amounts or (ii) would have a Material
Adverse Effect.
7.6 Insurance.
Each of the Credit Parties will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance
(including worker's compensation insurance, liability insurance, casualty
insurance and business interruption insurance) in such amounts, covering such
risks and liabilities and with such deductibles or self-insurance retentions as
are in accordance with normal industry practice. All liability policies shall
have the Agent, on behalf of the Lenders, as an additional insured and all
casualty policies shall have the Agent, on behalf of the Lenders, as loss payee.
The present insurance coverage of the Consolidated Parties is outlined as to
carrier, policy number, expiration date, type and amount on Schedule 7.6.
7.7 Maintenance of property.
Each of the Credit Parties will maintain and preserve its properties
and equipment in good repair, working order and condition, normal wear and tear
excepted.
7.8 Performance of Obligations.
Each of the Consolidated Parties will, and will cause each of its
Subsidiaries to, perform in all respects all of its obligations under the terms
of all agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound unless the failure to
do so will not have or be reasonably expected to have a material adverse effect
on the ability of a Credit Party to perform its obligations under this Credit
Agreement or the other Credit Documents.
7.9 Collateral.
(a) Each Credit Party will, and will cause each of its
Subsidiaries to, cause all of its personal property located in the
United States of the nature and type described in Section 2 of the
Security Agreement to be subject at all times to first priority,
perfected Liens in favor of the Agent pursuant to the terms and
conditions of the Collateral Documents or, with respect to any such
property acquired subsequent to the Closing Date, such other additional
security documents as the Agent shall reasonably request.
(b) Within 60 days after receipt by the Agent and the Lenders
of a Borrowing Base Certificate delivered pursuant to Section 7.1(d)
indicating that inventory of the Borrower located in Mexico constitutes
for more than 7.5% of the Borrowing Base as set forth in such Borrowing
Base Certificate, the Credit Parties will (i) cause all of the
inventory of the Borrower located at such facility to be subject at all
times to a first
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priority, perfected Lien in favor of the Agent to secure the Credit
Party Obligations pursuant to the terms and conditions of the Security
Agreement or such other additional security documents as the Agent
shall reasonably request and (ii) deliver such other documentation as
the Agent may reasonably request in connection with the foregoing,
including, without limitation, waivers and/or consents of third Persons
(including without the Mexican Subsidiary) necessary or desirable to
establish and protect a first priority, perfected Lien in favor of the
Agent (to secure the Credit Party Obligations) in such inventory,
certified resolutions of the Borrower and other authorizing documents
of the Borrower, favorable opinions of special Mexican counsel with
respect to the perfection of the Agent's Liens in such inventory, all
in form, content and scope reasonably satisfactory to the Agent.
(c) If, subsequent to the Closing Date, the Borrower shall
acquire ownership of any trademarks used in connection with any of its
inventory, the Borrower shall promptly notify the Agent of thereof and
shall cause to be taken, at its own expense, such action as requested
by the Agent to ensure that the Agent has a first priority perfected
Lien therein to secure the Credit Party Obligations.
(d) Within 7 days after the Closing Date, the Credit Parties
will cause to be delivered to the Agent a bailment agreement
satisfactory in form and substance to the Agent executed by the
Borrower, The First National Bank of Boston and/or its affiliates, as
appropriate, and the Agent with respect to lockbox accounts maintained
by the Borrower with The First National Bank of Boston and/or its
affiliates, as appropriate.
7.10 Use of Proceeds.
The Credit Parties will use proceeds of the Loans solely (a) to
refinance existing indebtedness of the Borrower existing as the Closing Date and
to finance up to $1.9 million of a distribution of approximately $30 million on
the Closing Date to shareholders of the Parent, including Thomas H. Lee Company
and affiliates thereof (such refinancing and distribution being collectively
referred to as the "Refinancing"), (b) to pay fees and expenses incurred in
connection with this Credit Agreement, (c) to provide for the working capital
needs of the Borrower and its Subsidiaries, (d) to finance Permitted Investments
by the Borrower and its Subsidiaries, (e) to enable the Borrower to make
Restricted Payments to the Parent permitted under Section 8.7(vi) and (f) for
general corporate purposes of the Borrower and its Subsidiaries. The Borrower
will use the Letters of Credit solely for the purposes set forth in Section
2.2(a).
7.11 Audits/Inspections.
(a) Upon reasonable notice and during normal business hours,
each Consolidated Party will, and will cause each of its Subsidiaries
to, permit representatives appointed by the Agent, including, without
limitation, independent accountants, agents, attorneys and appraisers
to visit and inspect such Person's property, including its books and
records, its accounts receivable and inventory, its facilities and its
other business assets, and to make photocopies or photographs thereof
and to write down and record any information
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such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information
provided to the Lenders and to discuss all such matters with the
officers, employees and representatives of the Consolidated Parties.
The Credit Parties agree that the Agent, and its representatives, may
conduct an annual audit of the Collateral, at the expense of the
Borrower.
(b) Without limiting the generality of Section 7.11(a), the
Credit Parties agree that the Agent's examination staff shall be
permitted to conduct, at the expense of the Credit Parties, an annual
field examination of the components of the Borrowing Base of such scope
as shall in each instance be reasonably satisfactory the Agent.
7.12 Financial Covenants.
The Credit Parties hereby agree that:
(a) Interest Coverage Ratio. The Interest Coverage Ratio, as
of the last day of each fiscal quarter of the Consolidated Parties,
shall be greater than or equal to:
(i) for the period from the Closing Date to and
including the next to last day of the fiscal quarter of the
Borrower ending in March, 1998, 1.50 to 1.00;
(ii) for the period from the last day of the fiscal
quarter of the Borrower ending in March, 1998 to and including
the next to last day of the fiscal quarter of the Borrower
ending in March, 1999, 1.60 to 1.00;
(iii) for the period from the last day of the fiscal
quarter of the Borrower ending in March, 1999 to and including
the next to last day of the fiscal quarter of the Borrower
ending in March, 2000, 1.70 to 1.00;
(iv) for the period from the last day of the fiscal
quarter of the Borrower ending in March, 2000 to and including
the next to last day of the fiscal quarter of the Borrower
ending in March, 2001, 1.85 to 1.00; and
(v) for the period from the last day of the fiscal
quarter of the Borrower ending in March, 2001 and at all times
thereafter, 2.00 to 1.00.
(b) Leverage Ratio. The Leverage Ratio, as of the last day of
each fiscal quarter of the Consolidated Parties, shall be less than or
equal to:
(i) for the period from the Closing Date to and
including the next to last day of the fiscal quarter of the
Borrower ending in March, 1998, 5.75 to 1.00;
(ii) for the period from the last day of the fiscal
quarter of the Borrower ending in March, 1998 to and including
the next to last day of the fiscal quarter of the Borrower
ending in March, 1999, 5.25 to 1.00;
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(iii) for the period from the last day of the fiscal
quarter of the Borrower ending in March, 1999 to and including
the next to last day of the fiscal quarter of the Borrower
ending in March, 2000, 5.00 to 1.00;
(iv) for the period from the last day of the fiscal
quarter of the Borrower ending in March, 2000 to and including
the next to last day of the fiscal quarter of the Borrower
ending in March, 2001, 4.50 to 1.00; and
(v) for the period from the last day of the fiscal
quarter of the Borrower ending in March, 2001 and at all times
thereafter, 4.00 to 1.00.
(c) Minimum Net Worth. At all times Consolidated Net Worth
shall be greater than or equal to the sum of ($7,000,000), increased on
a cumulative basis as of the end of each fiscal quarter of the
Borrower, commencing with the fiscal quarter of the Borrower ending in
September, 1997 by an amount equal to 50% of Consolidated Net Income
(to the extent positive) for the fiscal quarter then ended
7.13 Additional Credit Parties.
As soon as practicable and in any event within 30 days after any Person becomes
a direct or indirect Subsidiary of the Parent, the Borrower shall provide the
Agent with written notice thereof setting forth information in reasonable detail
describing all of the assets of such Person and shall (a) if such Person is a
Domestic Subsidiary of the Parent, cause such Person to execute a Joinder
Agreement in substantially the same form as Exhibit 7.13, and deliver such other
documentation as the Agent may reasonably request in connection with the
foregoing, including, without limitation, appropriate UCC-1 financing
statements, environmental reports, landlord's waivers, certified resolutions and
other organizational and authorizing documents of such Person, favorable
opinions of counsel to such Person (which shall cover, among other things, the
legality, validity, binding effect and enforceability of the documentation
referred to above and the perfection of the Agent's liens thereunder) and other
items of the types required to be delivered pursuant to Section 5.1(c), all in
form, content and scope reasonably satisfactory to the Agent.
SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that so long as this
Credit Agreement is in effect and until the Loans and LOC Obligations, together
with interest and fees hereunder, have been paid in full and the Commitments and
Letters of Credit hereunder shall have terminated:
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8.1 Indebtedness.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the
other Credit Documents;
(b) Indebtedness set forth in Schedule 6.10 (and renewals,
refinancings and extensions thereof on terms and conditions no less
favorable to such Person than such existing Indebtedness);
(c) purchase money Indebtedness (including any Capital Lease,
but excluding any Operating Lease which is not a TROL) or TROLS
hereafter incurred by the Borrower to finance the purchase of fixed
assets provided that (i) the total of all such Indebtedness shall not
exceed an aggregate principal amount of $1,000,000 at any one time
outstanding (including any such Indebtedness referred to in subsection
(b) above); (ii) such Indebtedness when incurred shall not exceed the
purchase price of the asset(s) financed; and (iii) no such Indebtedness
shall be refinanced for a principal amount in excess of the principal
balance outstanding thereon at the time of such refinancing;
(d) Hedging Obligations of the Borrower;
(e) intercompany Indebtedness arising out of loans and
advances permitted under Section 8.6;
(f) Indebtedness arising under the Senior Note Indenture, the
Senior Note Purchase Agreements and the Senior Notes (including without
limitation Guaranty Obligations of any Guarantor arising thereunder or
in respect thereof); and
(g) other Indebtedness of the Borrower not otherwise permitted
under this Section 8.1 provided that the aggregate principal amount of
all such Indebtedness does not exceed $2,000,000 at any time
outstanding;
8.2 Liens.
The Credit Parties will not permit any Consolidated Party to contract,
create, incur, assume or permit to exist any Lien with respect to any
Collateral, whether now owned or after acquired, except for Permitted Liens.
8.3 Nature of Business.
The Credit Parties will not permit any Consolidated Party to alter the
character of its business from that conducted as of the Closing Date or engage
in any business other than the business conducted as of the Closing Date.
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8.4 Consolidation and Merger.
Except in connection with an Asset Disposition permitted by the terms
of Section 8.5, the Credit Parties will not permit any Consolidated Party to
enter into any transaction of merger or consolidation or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution); provided that,
notwithstanding the foregoing provisions of this Section 8.4, (a) the Borrower
may merge or consolidate with any of its Subsidiaries provided that (i) the
Borrower shall be the continuing or surviving corporation, (ii) the Credit
Parties shall cause to be executed and delivered such documents, instruments and
certificates as the Agent may request so as to cause the Credit Parties to be in
compliance with the terms of Section 7.9 after giving effect to such transaction
and (iii) after giving effect to such transaction, no Default or Event of
Default would exist, (b) any Credit Party other than the Parent or the Borrower
may merge or consolidate with any other Credit Party other than the Parent or
the Borrower provided that (i) the Credit Parties shall cause to be executed and
delivered such documents, instruments and certificates as the Agent may request
so as to cause the Credit Parties to be in compliance with the terms of Section
7.9 after giving effect to such transaction and (ii) after giving effect to such
transaction, no Default or Event of Default would exist, (c) any Consolidated
Party which is not a Credit Party may be merged or consolidated with or into any
Credit Party other than the Parent provided that (i) such Credit Party shall be
the continuing or surviving corporation, (ii) the Credit Parties shall cause to
be executed and delivered such documents, instruments and certificates as the
Agent may request so as to cause the Credit Parties to be in compliance with the
terms of Section 7.9 after giving effect to such transaction and (iii) after
giving effect to such transaction, no Default or Event of Default would exist,
(d) any Consolidated Party which is not a Credit Party may be merged or
consolidated with or into any other Consolidated Party which is not a Credit
Party provided after giving effect to such transaction, no Default or Event of
Default would exist, (e) the Borrower and the Parent may merge or consolidate
with one another in connection with an Initial Public Offering if (i) the Credit
Parties shall cause to be executed and delivered such documents, instruments and
certificates as the Agent may request so as to cause the Credit Parties to be in
compliance with the terms of Section 7.9 after giving effect to such transaction
and (ii) after giving effect to such transaction, no Default or Event of Default
would exist and (f) any wholly-owned Subsidiary of the Borrower may dissolve,
liquidate or wind up its affairs at any time.
8.5 Asset Dispositions.
The Credit Parties will not permit any Consolidated Party to make any
Asset Disposition (including, without limitation, any Sale and Leaseback
Transaction) other than Excluded Asset Dispositions, unless (i) the
consideration paid in connection therewith is cash or Cash Equivalents, (ii) if
such transaction is a Sale and Leaseback Transaction, such transaction is
permitted by the terms of Section 8.13, (iii) except for the issuance of Capital
Stock by the Parent (or in the case of a merger or consolidation between the
Parent and the Borrower in connection therewith, by the continuing or surviving
corporation of such merger or consolidation) in connection with an Initial
Public Offering permitted by the definition of "Change of Control" set forth in
Section 1.1, such transaction does not involve the sale or other disposition of
a minority equity interest in any Consolidated Party other than the Parent and
(iv) no later than 14 days prior to such Asset
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Disposition, the Agent and the Lenders shall have received a certificate of an
Executive Officer of the Borrower specifying the anticipated or actual date of
such Asset Disposition, briefly describing the assets to be sold or otherwise
disposed of and setting forth the net book value of such assets, the aggregate
consideration and the Net Cash Proceeds to be received for such assets in
connection with such Asset Disposition, and thereafter the Borrower shall,
within the period of 270 days (or such longer period of time as the Required
Lenders shall otherwise agree in writing with respect to the proceeds of a
particular Asset Disposition) following the consummation of such Asset
Disposition (with respect to any such Asset Disposition, the "Application
Period"), apply (or cause to be applied) an amount equal to the Net Cash
Proceeds of such Asset Disposition to (A) the purchase, acquisition or, in the
case of improvements to real property, construction of Eligible Assets or (B) to
the prepayment of the Loans in accordance with the terms of Section 3.3(b)(iii).
Upon a sale of assets or the sale of Capital Stock of a Consolidated
Party permitted by this Section 8.5, the Agent shall (to the extent applicable
and provided that such Consolidated Party (and all of the assets of such
Consolidated Party) is concurrently released from all of its obligations in
respect of the Senior Note Indenture, the Senior Note Purchase Agreements and
the Senior Notes) deliver to the Borrower, upon the Borrower's request and at
the Borrower's expense, such documentation as is reasonably necessary to
evidence the release of the Agent's security interest, if any, in such assets or
Capital Stock, including, without limitation, amendments or terminations of UCC
financing statements, if any, the return of stock certificates, if any, and the
release of such Subsidiary from all of its obligations, if any, under the Credit
Documents.
8.6 Investments.
The Credit Parties will not permit any Consolidated Party to make any
Investments except for Permitted Investments.
8.7 Restricted Payments.
The Credit Parties will not permit any Consolidated Party to directly
or indirectly, declare, order, make or set apart any sum for or pay any
Restricted Payment, except (i) in connection with the Refinancing (a) a dividend
payment of up to $25,000,000 by the Borrower to the Parent and (b) dividend
payments of up to $30,000,000 by the Parent to its shareholders, (ii) to make
dividends payable solely in the same class of Capital Stock of such Person,
(iii) to make dividends or other distributions payable to any Credit Party, (iv)
to redeem Senior Notes in accordance with the terms of Section 3.07(b) of the
Senior Note Indenture in connection with an Initial Public Offering, (v) to
redeem Capital Stock of the Parent held by directors and employees pursuant to
employment arrangements provided that all such Restricted Payments pursuant to
this clause (v) shall not in aggregate amount exceed $1,500,000 in any fiscal
year, (vi) dividends or other distributions by the Borrower to the Parent which
are used by the Parent to make Investments of the type described in clause
(f)(i) of the definition of "Permitted Investments" set forth in Section 1.1 and
(vii) as permitted by Section 8.8 or Section 8.11.
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8.8 Transactions with Affiliates.
The Credit Parties will not permit any Consolidated Party to enter into
or permit to exist any transaction or series of transactions with any officer,
director, shareholder, Subsidiary or Affiliate of such Person other than (i)
Exempt Affiliate Transactions, (ii) advances of working capital to any Credit
Party, (iii) transfers of cash and assets to any Credit Party, (iv) transactions
permitted by Section 8.1(b), Section 8.4, Section 8.5, Section 8.6 or Section
8.7, (v) normal compensation and reimbursement of expenses of officers and
directors and (vi) except as otherwise specifically limited in this Credit
Agreement, other transactions which are entered into in the ordinary course of
such Person's business on terms and conditions substantially as favorable to
such Person as would be obtainable by it in a comparable arms-length transaction
with a Person other than an officer, director, shareholder, Subsidiary or
Affiliate.
8.9 Restrictions on the Parent; Ownership of Subsidiaries.
(a) The Parent shall (i) not hold any assets other than the
Capital Stock of the Borrower and its other direct Subsidiaries, (ii)
not have any liabilities other than (A) the liabilities under the
Credit Documents, (B) tax liabilities in the ordinary course of
business, (C) loans and advances permitted under Section 8.7 and (D)
corporate, administrative and operating expenses in the ordinary course
of business and (iii) not engage in any business other than (A) owning
the Capital Stock of the Borrower and its other direct Subsidiaries and
activities incidental or related thereto, (B) acting as a Guarantor
hereunder and pledging certain of its assets to the Agent, for the
benefit of the Lenders, in connection herewith and (C) acting as a
guarantor in respect of the Indebtedness arising under the Senior Note
Indenture, the Senior Note Purchase Agreements and the Senior Notes and
pledging certain of its assets to the Senior Noteholders in connection
therewith.
(b) The Borrower (i) will not permit any Person (other than
the Borrower or any wholly-owned Subsidiary of the Borrower) to own any
Capital Stock of any Subsidiary of the Borrower, (ii) will not permit
any Subsidiary of the Borrower to issue Capital Stock (except to the
Borrower or to a wholly-owned Subsidiary of the Borrower), (iii) will
not permit create, incur, assume or suffer to exist any Lien thereon,
in each case except (a) directors' qualifying shares, (b) if such
Subsidiary merges with another Subsidiary of the Borrower, (c) if such
Subsidiary ceases to be a Subsidiary of the Borrower (as a result of
the sale of 100% of the Capital Stock of such Subsidiary) or (d)
Permitted Liens and (iv) notwithstanding anything to the contrary
contained in clause (ii) above, will not permit any Subsidiary of the
Borrower to issue any shares of preferred Capital Stock.
8.10 Fiscal Year; Organizational Documents.
The Credit Parties will not permit any Consolidated Party to change its
fiscal year or materially change its articles or certificate of incorporation
without the prior written consent of the Required Lenders.
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8.11 Prepayment or Modification of Indebtedness.
If any Default or Event of Default has occurred and is continuing or
would be directly or indirectly caused as a result thereof, the Credit Parties
will not permit any Consolidated Party to (a) after the issuance thereof, amend
or modify (or permit the amendment or modification of) any of the terms of any
Indebtedness if such amendment or modification would add or change any terms in
a manner adverse to the Lenders, including, but not limited to, shortening the
final maturity or average life to maturity or requiring any payment to be made
sooner than originally scheduled or increasing the interest rate applicable
thereto or changing any subordination provision thereof, or (b) make (or give
any notice with respect thereto) any voluntary or optional payment or any
prepayment or any redemption or any acquisition for value or any defeasance of
(including without limitation, by way of depositing money or securities with the
trustee with respect thereto before due for the purpose of paying when due),
refund, refinance or exchange of any other Indebtedness.
8.12 Limitations.
The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any such Person to (a) pay
dividends or make any other distributions to any Credit Party on its Capital
Stock or with respect to any other interest or participation in, or measured by,
its profits, (b) pay any Indebtedness or other obligation owed to any Credit
Party, (c) make loans or advances to any Credit Party, (d) sell, lease or
transfer any of its properties or assets to any Credit Party, or (e) act as a
Guarantor and pledge its assets pursuant to the Credit Documents or any
renewals, refinancings, exchanges, refundings or extension thereof, except (in
respect of any of the matters referred to in clauses (a)-(d) above) for such
encumbrances or restrictions existing under or by reason of (i) this Credit
Agreement and the other Credit Documents, (ii) the Senior Note Indenture, the
Senior Note Purchase Agreements and the Senior Notes, in each case as in effect
as of the Closing Date, (iii) applicable law or (iv) any document or instrument
governing Indebtedness incurred pursuant to Section 8.1(c), provided that any
such restriction contained therein relates only to the asset or assets
constructed or acquired in connection therewith.
8.13 Sale Leasebacks.
The Credit Parties will not permit any Consolidated Party to, directly
or indirectly, become or remain liable as lessee or as guarantor or other surety
with respect to any lease, whether an Operating Lease or a Capital Lease, of any
property (whether real or personal or mixed), whether now owned or hereafter
acquired, (a) which such Consolidated Party has sold or transferred or is to
sell or transfer to a Person which is not a Consolidated Party or (b) which such
Consolidated Party intends to use for substantially the same purpose as any
other property which has been sold or is to be sold or transferred by such
Consolidated Party to another Person which is not a Consolidated Party in
connection with such lease.
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8.14 Capital Expenditures.
The Credit Party will not permit Capital Expenditures for any fiscal
year of the Borrower to exceed $10,000,000, plus (for any fiscal year other than
fiscal year 1997) the unused portion of permitted Capital Expenditures for the
immediately preceding fiscal year (without giving effect to any carry forward
from a prior fiscal year).
8.15 No Further Negative Pledges.
Except (a) pursuant to this Credit Agreement and the other Credit
Documents, (b) pursuant to the Senior Note Indenture, the Senior Note Purchase
Agreements and the Senior Notes, in each case as in effect as of the Closing
Date, in each case as in effect as of the Closing Date and (c) pursuant to any
document or instrument governing Indebtedness incurred pursuant to Section
8.1(c), provided that any such restriction contained therein relates only to the
asset or assets constructed or acquired in connection therewith, the Credit
Parties will not permit any Consolidated Party to enter into, assume or become
subject to any agreement prohibiting or otherwise restricting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired, or requiring the grant of any security for such obligation
if security is given for some other obligation.
8.16 Operating Lease Obligations.
The Credit Parties will not permit any Consolidated Party to enter
into, assume or permit to exist any obligations for the payment of rental under
Operating Leases which in the aggregate for all such Persons would exceed
$1,500,000 in any fiscal year.
8.17 Foreign Subsidiaries.
(a) None of the Credit Party will create, acquire or permit to
exist any direct or indirect Foreign Subsidiary other than the Mexican
Subsidiary and Anchor Advanced Products Foreign Sales Corp., a direct
Subsidiary of the Borrower organized and existing under the laws of
Barbados.
(b) The Borrower will not maintain any of its inventory in
Mexico at any location other than Matamoros, Mexico unless the Borrower
shall have caused to be executed and delivered such documents,
instruments and certificates, if any, as are required (in the
reasonable determination of the Agent) to ensure that the Credit
Parties are at all times in compliance with the terms of Section
7.9(b).
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SECTION 9
EVENTS OF DEFAULT
-----------------
9.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall:
(i) default in the payment when due of any principal
of any of the Loans or of any reimbursement obligation arising
from drawings under Letters of Credit; or
(ii) default, and such default shall continue for
three or more Business Days, in the payment when due of any
interest on the Loans, or on any reimbursement obligations
arising from drawings under Letters of Credit or of any fees
or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith.
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove untrue
in any material respect on the date as of which it was made or deemed
to have been made.
(c) Covenants. Any Credit Party shall:
(i) default in the due performance or observance of
any term, covenant or agreement contained in Sections 7.2,
7.4, 7.5, 7.6, 7.9, 7.10, 7.12, 7.13 or 8.1 through 8.17,
inclusive; or
(ii) default in the due performance or observance by
it of any term, covenant or agreement (other than those
referred to in subsections (a), (b) or (c)(i) of this Section
9.1) contained in this Credit Agreement and such default shall
continue unremedied for a period of at least 30 days after the
earlier of an Executive Officer of a Credit Party becoming
aware of such default or notice thereof given by the Agent.
(d) Other Credit Documents. (i) Any Consolidated Party shall
default in the due performance or observance of any term, covenant or
agreement in any of the other Credit Documents and such default shall
continue unremedied for a period of at least 30 days after the earlier
of an Executive Officer of a Credit Party becoming aware of such
default or notice thereof given by the Agent, (ii) except pursuant to
the terms thereof, any Credit Document shall fail to be in full force
and effect or any Credit Party shall so assert or (iii) except pursuant
to the terms thereof, any Credit
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Document shall fail to give the Agent and/or the Lenders the security
interests, liens, rights, powers and privileges purported to be created
thereby.
(e) Guaranties. The guaranty hereunder given by any Guarantor
or any provision thereof shall, except pursuant to the terms thereof,
cease to be in full force and effect, or any guarantor thereunder or
any Person acting by or on behalf of such Guarantor shall deny or
disaffirm such Guarantor's obligations under such guaranty.
(f) Bankruptcy Events. Any Bankruptcy Event shall occur with
respect to any Consolidated Party.
(g) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) of one or more of the Consolidated Parties in an aggregate
principal amount in excess of $250,000 (i) a Consolidated Party shall
(A) default in any payment (beyond the applicable grace period with
respect thereto, if any) with respect to any such Indebtedness, or (B)
default (after giving effect to any applicable grace period) in the
observance or performance relating to such Indebtedness or contained in
any instrument or agreement evidencing, securing or relating thereto,
or any other event or condition shall occur or condition exist, the
effect of which default or other event or condition is to cause, or
permit, the holder or holders of such Indebtedness (or trustee or agent
on behalf of such holders) to cause (determined without regard to
whether any notice or lapse of time is required) any such Indebtedness
to become due prior to its stated maturity; or (ii) any such
Indebtedness shall be declared due and payable prior to the stated
maturity thereof.
(h) Judgments. One or more judgments, orders, or decrees shall
be entered against any one or more of the Consolidated Parties
involving a liability of $250,000 or more, in the aggregate, (to the
extent not paid or covered by insurance provided by a carrier who has
acknowledged coverage) and such judgments, orders or decrees (i) are
the subject of any enforcement proceeding commenced by any creditor or
(ii) shall continue unsatisfied, undischarged and unstayed for 30 days
following the last day on which such judgment, order or decree becomes
final and unappealable.
(i) ERISA. Any of the following events or conditions, if such
event or condition would cause or be reasonably expected to cause a
Material Adverse Effect: (1) any "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA and Section 412 of the
Code, whether or not waived, shall exist with respect to any Plan, or
any lien shall arise on the assets of any Consolidated Party or any
ERISA Affiliate in favor of the PBGC or a Plan; (2) an ERISA Event
shall occur with respect to a Single Employer Plan, which is, in the
reasonable opinion of the Agent, likely to result in the termination of
such Plan for purposes of Title IV of ERISA; (3) an ERISA Event shall
occur with respect to a Multiemployer Plan or Multiple Employer Plan,
which is, in the reasonable opinion of the Agent, likely to result in
(i) the termination of such Plan for purposes of Title IV of
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ERISA, or (ii) any Consolidated Party or any ERISA Affiliate incurring
any liability in connection with a withdrawal from, reorganization of
(within the meaning of Section 4241 of ERISA), or insolvency or (within
the meaning of Section 4245 of ERISA) such Plan; (4) any event
occurring or failing to occur with respect to a Single Employer Plan,
Multiemployer or Multiple Employer Plan sponsored, maintained or
contributed to by an ERISA Affiliate of any Consolidated Party; or (5)
any prohibited transaction (within the meaning of Section 406 of ERISA
or Section 4975 of the Code) or breach of fiduciary responsibility
shall occur which may any Consolidated Party or any ERISA Affiliate to
any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
Section 4975 of the Code, or under any agreement or other instrument
pursuant to which any Consolidated Party or any ERISA Affiliate has
agreed or is required to indemnify any Person against any such
liability.
(j) Senior Note Indenture. There shall occur and be continuing
any Event of Default under and as defined in the Senior Note Indenture.
(k) Ownership. There shall occur a Change of Control.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived in writing by the
Required Lenders (or the Lenders as may be required hereunder), the Agent shall,
upon the request and direction of the Required Lenders, by written notice to the
Borrower, take any of the following actions without prejudice to the rights of
the Agent or any Lender to enforce its claims against the Credit Parties, except
as otherwise specifically provided for herein:
(a) Termination of Commitments. Declare the Commitments
terminated whereupon the Commitments shall be immediately terminated.
(b) Acceleration of Loans. Declare the unpaid principal of and
any accrued interest in respect of all Loans, any reimbursement
obligations arising from drawings under Letters of Credit and any and
all other indebtedness or obligations of any and every kind owing by a
Credit Party to any of the Lenders hereunder to be due whereupon the
same shall be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by
the Credit Parties.
(c) Cash Collateral. Direct the Borrower to pay (and the
Borrower agrees that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), it will
immediately pay) to the Agent additional cash, to be held by the Agent,
for the benefit of the Lenders, in a cash collateral account as
additional security for the LOC Obligations in respect of subsequent
drawings under all then outstanding Letters of Credit in an amount
equal to the maximum aggregate amount which may be drawn under all
Letters of Credits then outstanding.
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(d) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents, including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against a Guarantor and
all rights of set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitments shall automatically terminate and all
Loans, all reimbursement obligations under Letters of Credit, all accrued
interest in respect thereof, all accrued and unpaid fees and other indebtedness
or obligations owing to the Lenders hereunder shall immediately become due and
payable without the giving of any notice or other action by the Agent or the
Lenders, which notice or other action is expressly waived by the Credit Parties.
Notwithstanding the fact that enforcement powers reside primarily with the
Agent, each Lender has, to the extent permitted by law, a separate right of
payment and shall be considered a separate "creditor" holding a separate "claim"
within the meaning of Section 101(5) of the Bankruptcy Code or any other
insolvency statute.
SECTION 10
AGENCY PROVISIONS
-----------------
10.1 Appointment.
Each Lender hereby designates and appoints NationsBank, N.A. as Agent
of such Lender to act as specified herein and the other Credit Documents, and
each such Lender hereby authorizes the Agent, as the agent for such Lender, to
take such action on its behalf under the provisions of this Credit Agreement and
the other Credit Documents and to exercise such powers and perform such duties
as are expressly delegated by the terms hereof and of the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere herein and in the other
Credit Documents, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein and therein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Credit Agreement or any of the other Credit Documents, or shall otherwise exist
against the Agent. The provisions of this Section are solely for the benefit of
the Agent and the Lenders and no Consolidated Party shall have any rights as a
third party beneficiary of the provisions hereof. In performing its functions
and duties under this Credit Agreement and the other Credit Documents, the Agent
shall act solely as an agent of the Lenders and does not assume and shall not be
deemed to have assumed any obligation or relationship of agency or trust with or
for any Consolidated Party.
10.2 Delegation of Duties.
The Agent may execute any of its duties hereunder or under the other
Credit Documents by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all
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matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
10.3 Exculpatory Provisions.
Neither the Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates shall be liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection
herewith or in connection with any of the other Credit Documents (except for its
or such Person's own gross negligence or willful misconduct) or responsible in
any manner to any of the Lenders for any recitals, statements, representations
or warranties made by any of the Credit Parties contained herein or in any of
the other Credit Documents or in any certificate, report, document, financial
statement or other written or oral statement referred to or provided for in, or
received by the Agent under or in connection herewith or in connection with the
other Credit Documents, or enforceability or sufficiency therefor of any of the
other Credit Documents, or for any failure of the Borrower to perform its
obligations hereunder or thereunder. The Agent shall not be responsible to any
Lender for the effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Credit Agreement, or any of the other
Credit Documents or for any representations, warranties, recitals or statements
made herein or therein or made by any Credit Party in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Agent to the Lenders or by or on behalf of the Credit
Parties to the Agent or any Lender or be required to ascertain or inquire as to
the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or the use of the Letters of Credit or of the existence or
possible existence of any Default or Event of Default or to inspect the
properties, books or records of the Consolidated Parties. The Agent is not
trustee for the Lenders and owes no fiduciary duty to the Lenders.
10.4 Reliance on Communications.
The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to any of the Credit Parties, independent accountants and
other experts selected by the Agent with reasonable care). The Agent may deem
and treat the Lenders as the owner of its interests hereunder for all purposes
unless a written notice of assignment, negotiation or transfer thereof shall
have been filed with the Agent in accordance with Section 11.3(b). The Agent
shall be fully justified in failing or refusing to take any action under this
Credit Agreement or under any of the other Credit Documents unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder or under any
of the other Credit Documents in accordance with a request of the Required
Lenders (or to the extent specifically provided in Section 11.6, all the
Lenders) and such request
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and any action taken or failure to act pursuant thereto shall be binding upon
all the Lenders (including their successors and assigns).
10.5 Notice of Default.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or a Credit Party referring to the Credit
Document, describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall take such action with respect to such Default or Event of Default as shall
be reasonably directed by the Required Lenders.
10.6 Non-Reliance on Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the Agent or any
affiliate thereof hereinafter taken, including any review of the affairs of any
Consolidated Party, shall be deemed to constitute any representation or warranty
by the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Credit
Parties and made its own decision to make its Loans hereunder and enter into
this Credit Agreement. Each Lender also represents that it will, independently
and without reliance upon the Agent or any other Lender, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Credit Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, assets, operations, property,
financial and other conditions, prospects and creditworthiness of the Credit
Parties. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Agent hereunder, the Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, assets, property, financial or
other conditions, prospects or creditworthiness of the Credit Parties which may
come into the possession of the Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
10.7 Indemnification.
The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Borrower and without limiting the obligation of
the Borrower to do so), ratably according to their respective Commitments (or if
the Commitments have expired or been terminated, in accordance with the
respective principal amounts of outstanding Loans and Participation Interest of
the Lenders), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind whatsoever which may at any time (including without limitation at
any time following payment in
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full of the Credit Party Obligations) be imposed on, incurred by or asserted
against the Agent in its capacity as such in any way relating to or arising out
of this Credit Agreement or the other Credit Documents or any documents
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of the Agent. If any
indemnity furnished to the Agent for any purpose shall, in the opinion of the
Agent, be insufficient or become impaired, the Agent may call for additional
indemnity and cease, or not commence, to do the acts indemnified against until
such additional indemnity is furnished; provided that the Agent shall not be
indemnified for any event caused by its gross negligence or willful misconduct.
The agreements in this Section shall survive the payment of the Credit Party
Obligations and all other amounts payable hereunder and under the other Credit
Documents.
10.8 Agent in Its Individual Capacity.
The Agent and its affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower or any other
Credit Party as though the Agent were not the Agent hereunder. With respect to
the Loans made and Letters of Credit issued and all obligations owing to it, the
Agent shall have the same rights and powers under this Credit Agreement as any
Lender and may exercise the same as though it were not the Agent, and the terms
"Lender" and "Lenders" shall include the Agent in its individual capacity.
10.9 Successor Agent.
The Agent may, at any time, resign upon 20 days written notice to the
Lenders. Upon any such resignation, the Required Lenders shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 45 days
after the notice of resignation, then the retiring Agent shall select a
successor Agent provided such successor is a Lender hereunder or a commercial
bank organized under the laws of the United States of America or of any State
thereof and has a combined capital and surplus of at least $400,000,000. Upon
the acceptance of any appointment as the Agent hereunder by a successor, 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 as the Agent, as
appropriate, under this Credit Agreement and the other Credit Documents and the
provisions of this Section 10.9 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this Credit
Agreement.
-79-
<PAGE>
SECTION 11
MISCELLANEOUS
-------------
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address or telecopy numbers set forth on Schedule
11.1, or at such other address as such party may specify by written notice to
the other parties hereto.
11.2 Right of Set-Off.
In addition to any rights now or hereafter granted under applicable law
or otherwise, and not by way of limitation of any such rights, upon the
occurrence of an Event of Default and the commencement of remedies described in
Section 9.2, each Lender is authorized at any time and from time to time,
without presentment, demand, protest or other notice of any kind (all of which
rights being hereby expressly waived), to set-off and to appropriate and apply
any and all deposits (general or special) and any other indebtedness at any time
held or owing by such Lender (including, without limitation, branches, agencies
or Affiliates of such Lender wherever located) to or for the credit or the
account of any Credit Party against obligations and liabilities of such Credit
Party to the Lenders hereunder, under the Notes, the other Credit Documents or
otherwise, irrespective of whether the Agent or the Lenders shall have made any
demand hereunder and although such obligations, liabilities or claims, or any of
them, may be contingent or unmatured, and any such set-off shall be deemed to
have been made immediately upon the occurrence of an Event of Default even
though such charge is made or entered on the books of such Lender subsequent
thereto. The Credit Parties hereby agree that to the extent permitted by law any
Person purchasing a participation in the Loans and Commitments hereunder
pursuant to Section 11.3(c) or 3.9 may exercise all rights of set-off with
respect to its participation interest as fully as if such Person were a Lender
hereunder.
11.3 Benefit of Agreement.
(a) Generally. This Credit Agreement shall be binding upon and
inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided that no Credit Party may
assign and transfer any of its interests without the prior written
consent of the Lenders; and provided further that the rights of each
Lender to transfer, assign or grant participations in its rights and/or
obligations hereunder shall be limited as set forth below in
subsections (b) and (c) of this Section 11.3. Notwithstanding the above
(including anything set forth in subsections (b) and (c) of this
Section 11.3), nothing herein shall restrict, prevent or prohibit any
Lender from (A) pledging its Loans
-80-
<PAGE>
hereunder to a Federal Reserve Bank in support of borrowings made by
such Lender from such Federal Reserve Bank, or (B) granting assignments
or participations in such Lender's Loans and/or Commitments hereunder
to its parent company and/or to any Affiliate of such Lender or to any
existing Lender or Affiliate thereof.
(b) Assignments. Each Lender may assign all or a portion of
its rights and obligations hereunder, pursuant to an assignment
agreement substantially in the form of Exhibit 11.3, to (i) any Lender,
or any Affiliate or Subsidiary of a Lender, or (ii) any other
commercial bank, financial institution or "accredited investor" (as
defined in Regulation D of the Securities and Exchange Commission)
reasonably acceptable to the Agent and, so long as no Default or Event
of Default has occurred and is continuing, the Borrower; provided that
any such assignment shall (i) unless to a Lender or an Affiliate of a
Lender, be in a minimum aggregate amount of $5,000,000 of the
Commitments and in integral multiples of $1,000,000 above such amount
(or the remaining amount of Commitments held by such Lender) and (ii)
be of a constant, not varying, percentage of all of the assigning
Lender's rights and obligations under the Commitment being assigned.
Any assignment hereunder shall be effective upon satisfaction of the
conditions set forth above and delivery to the Agent of a duly executed
assignment agreement together with a transfer fee of $3,500 payable to
the Agent for its own account. Upon the effectiveness of any such
assignment, the assignee shall become a "Lender" for all purposes of
this Credit Agreement and the other Credit Documents and, to the extent
of such assignment, the assigning Lender shall be relieved of its
obligations hereunder to the extent of the Loans and Commitment
components being assigned. Along such lines the Borrower agrees that
upon notice of any such assignment and surrender of the appropriate
Note or Notes, it will promptly provide to the assigning Lender and to
the assignee separate promissory notes in the amount of their
respective interests substantially in the form of the original Note or
Notes (but with notation thereon that it is given in substitution for
and replacement of the original Note or Notes or any replacement notes
thereof). Notwithstanding the above, a Lender may assign all or a
portion of its Commitments to another Lender without the consent of the
Borrower and without regard to any minimum amount of such assignment.
By executing and delivering an assignment agreement in accordance with
this Section 11.3(b), the assigning Lender thereunder and the assignee
thereunder shall be deemed to confirm to and agree with each other and
the other parties hereto as follows: (i) such assigning Lender warrants
that it is the legal and beneficial owner of the interest being
assigned thereby free and clear of any adverse claim and the assignee
warrants that it is an Eligible Assignee; (ii) except as set forth in
clause (i) above, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Credit
Agreement, any of the other Credit Documents or any other instrument or
document furnished pursuant hereto or thereto, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value
of this Credit Agreement, any of the other Credit Documents or any
other instrument or document furnished pursuant hereto or thereto or
the financial condition of any Credit Party or the performance or
observance by any Credit Party of any of its obligations under this
Credit Agreement, any of the other Credit Documents or any other
instrument or
-81-
<PAGE>
document furnished pursuant hereto or thereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into
such assignment agreement; (iv) such assignee confirms that it has
received a copy of this Credit Agreement, the other Credit Documents
and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into such
assignment agreement; (v) such assignee will independently and without
reliance upon the Agent, such assigning Lender or any other Lender, and
based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
taking action under this Credit Agreement and the other Credit
Documents; (vi) such assignee appoints and authorizes the Agent to take
such action on its behalf and to exercise such powers under this Credit
Agreement or any other Credit Document as are delegated to the Agent by
the terms hereof or thereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it
will perform in accordance with their terms all the obligations which
by the terms of this Credit Agreement and the other Credit Documents
are required to be performed by it as a Lender.
(c) Participations. Each Lender may sell, transfer, grant or
assign participations in all or any part of such Lender's interests and
obligations hereunder; provided that (i) such selling Lender shall
remain a "Lender" for all purposes under this Credit Agreement (such
selling Lender's obligations under the Credit Documents remaining
unchanged) and the participant shall not constitute a Lender hereunder,
(ii) no such participant shall have, or be granted, rights to approve
any amendment or waiver relating to this Credit Agreement or the other
Credit Documents except to the extent any such amendment or waiver
would (A) reduce the principal of or rate of interest on or fees in
respect of any Loans in which the participant is participating or
increase any Commitments with respect thereto, (B) postpone the date
fixed for any payment of principal (including the extension of the
final maturity of any Loan or the date of any mandatory prepayment
pursuant to Section 2.2(d)), interest or fees in which the participant
is participating, or (C) release all or substantially all of the
collateral or guaranties (except as expressly provided in the Credit
Documents) supporting any of the Loans or Commitments in which the
participant is participating and (iii) sub-participations by the
participant (except to an Affiliate, parent company or Affiliate of a
parent company of the participant) shall be prohibited. In the case of
any such participation, the participant shall not have any rights under
this Credit Agreement or the other Credit Documents (the participant's
rights against the selling Lender in respect of such participation to
be those set forth in the participation agreement with such Lender
creating such participation) and all amounts payable by the Borrower
hereunder shall be determined as if such Lender had not sold such
participation; provided, however, that such participant shall be
entitled to receive additional amounts under Section 3.15 to the same
extent that the Lender from which such participant acquired its
participation would be entitled to the benefit of such cost protection
provisions.
(d) Registration. The Agent, acting for this purpose solely on
behalf of the Borrower, shall maintain a register (the "Register") for
the recordation of the names and addresses of the Lenders and the
principal amount of the Loans owing to each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of
manifest
-82-
<PAGE>
error, and the Borrower, the Agent and the Lenders shall treat each
Person whose name is recorded in the Register as the owner of a Loan or
other obligation hereunder for all purposes of this Credit Agreement
and the other Credit Documents, notwithstanding notice to the contrary.
Any assignment of any Loan or other obligation hereunder shall be
effective only upon appropriate entries with respect thereto being made
in the Register. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time
upon reasonable prior notice.
11.4 To Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any Lender in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between any Consolidated Party and the Agent
or any Lender shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and remedies
provided herein are cumulative and not exclusive of any rights or remedies which
the Agent or any Lender would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle any Credit Party to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of the Agent or the Lenders to any other or further action in any
circumstances without notice or demand.
11.5 Payment of Expenses; Indemnification.
The Credit Parties agree to: (a) pay all reasonable out-of-pocket
costs and expenses of (i) the Agent in connection with (A) the negotiation,
preparation, execution and delivery and administration of this Credit Agreement
and the other Credit Documents and the documents and instruments referred to
therein (including, without limitation, the reasonable fees and expenses of
Moore & Van Allen, special counsel to the Agent and the fees and expenses of
counsel for the Agent in connection with collateral issues), and (B) any
amendment, waiver or consent relating hereto and thereto including, but not
limited to, any such amendments, waivers or consents resulting from or related
to any work-out, renegotiation or restructure relating to the performance by the
Credit Parties under this Credit Agreement and (ii) the Agent and the Lenders in
connection with (A) enforcement of the Credit Documents and the documents and
instruments referred to therein, including, without limitation, in connection
with any such enforcement, the reasonable fees and disbursements of counsel for
the Agent and each of the Lenders, and (B) any bankruptcy or insolvency
proceeding of a Credit Party and (b) indemnify the Agent and each Lender, its
officers, directors, employees, representatives and agents from and hold each of
them harmless against any and all losses, liabilities, claims, damages or
expenses incurred by any of them as a result of, or arising out of, or in any
way related to, or by reason of, any investigation, litigation or other
proceeding (whether or not the Agent or any Lender is a party thereto) related
to (i) the entering into and/or performance of any Credit Document or the use of
proceeds of any Loans (including other extensions of credit) hereunder or the
consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason
-83-
<PAGE>
of gross negligence or willful misconduct on the part of the Person to be
indemnified), (ii) any Environmental Claim and (iii) any claims for Non-Excluded
Taxes.
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing and signed by the Required Lenders and the then Credit Parties; provided
that no such amendment, change, waiver, discharge or termination shall without
the consent of each Lender affected thereby,
(a) without the consent of each Lender affected thereby,
(i) extend the Maturity Date,
(ii) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any
post-default increase in interest rates) thereon or fees hereunder,
(iii) reduce or waive the principal amount of any Loan,
(iv) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a waiver of any
Default or Event of Default or mandatory reduction in the Commitments
shall not constitute a change in the terms of any Commitment of any
Lender),
(v) except as the result of or in connection with an Asset
Dissolution permitted by Section 8.5, release all or substantially all
of the Collateral securing the Credit Party Obligations hereunder,
(vi) except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4, release the Borrower or substantially all of the other
Credit Parties from its obligations under the Credit Documents
(provided that the Agent may, without consent from any other Lender,
release any Guarantor that is sold or transferred in conformance with
Section 8.5),
(vii) amend, modify or waive any provision of this Section or
Section 3.4(a), 3.4(b)(i), 3.4(b)(ii), 3.7, 3.8, 3.9, 3.10, 3.11, 3.12,
3.13, 3.14, 3.15, 9.1(a), 11.2, 11.3 or 11.5,
(viii) reduce any percentage specified in, or otherwise
modify, the definition of Required Lenders or
(ix) consent to the assignment or transfer by the Borrower (or
substantially all of the other Credit Parties) of any of its rights and
obligations under (or in respect of) the Credit Documents except as
permitted thereby; and
-84-
<PAGE>
(b) without the consent of the Agent, no provision of the second
paragraph of Section 2.1(c), Section 3.4(c) or Section 10 may be amended;
(c) without the consent of the Issuing Lender, no provision of Section
2.2 or Section 3.4(b)(iii) may be amended.
Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any bankruptcy reorganization plan that affects the
Loans or the Letters of Credit, and each Lender acknowledges that the provisions
of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders may consent to allow a
Credit Party to use cash collateral in the context of a bankruptcy or insolvency
proceeding.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts,
each of which where so executed and delivered shall be an original, but all of
which shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart.
11.8 Pleadings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Defaulting Lender.
Each Lender understands and agrees that if such Lender is a Defaulting
Lender then notwithstanding the provisions of Section 11.6 it shall not be
entitled to vote on any matter requiring the consent of the Required Lenders or
to object to any matter requiring the consent of all the Lenders adversely
affected thereby; provided, however, that all other benefits and obligations
under the Credit Documents shall apply to such Defaulting Lender.
11.10 Survival of Indemnification and Representations and Warranties.
All indemnities set forth herein and all representations and warranties
made herein shall survive the execution and delivery of this Credit Agreement,
the making of the Loans, the issuance of the Letters of Credit and the repayment
of the Loans, LOC Obligations and other obligations and the termination of the
Commitments hereunder.
11.11 Governing Law; Venue.
(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND
THE RIGHTS AND OBLIGATIONS OF THE PARTIES
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<PAGE>
HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH CAROLINA.
Any legal action or proceeding with respect to this Credit Agreement or
any other Credit Document may be brought in the courts of the State of
North Carolina, or of the United States for the Western District of
North Carolina, and, by execution and delivery of this Credit
Agreement, each Credit Party hereby irrevocably accepts for itself and
in respect of its property, generally and unconditionally, the
jurisdiction of such courts. Each Credit Party further irrevocably
consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to it at the
address for notices pursuant to Section 11.1, such service to become
effective 3 days after such mailing. Nothing herein shall affect the
right of a Lender to serve process in any other manner permitted by law
or to commence legal proceedings or to otherwise proceed against a
Credit Party in any other jurisdiction.
(b) Each Credit Party hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Credit Agreement or any other Credit Document brought in the
courts referred to in subsection (a) hereof and hereby further
irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
11.12 Waiver of Jury Trial.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES TO THIS
CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT
AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.13 Time.
All references to time herein shall be references to Eastern Standard
Time or Eastern Daylight time, as the case may be, unless specified otherwise.
11.14 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
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<PAGE>
11.15 Entirety.
This Credit Agreement together with the other Credit Documents
represent the entire agreement of the parties hereto and thereto, and supersede
all prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents or the
transactions contemplated herein and therein.
11.16 Binding Effect.
This Credit Agreement shall become effective at such time when all of
the conditions set forth in Section 5.1 have been satisfied or waived by the
Lenders and it shall have been executed by the Borrower, the Guarantors and the
Agent, and the Agent shall have received copies hereof (telefaxed or otherwise)
which, when taken together, bear the signatures of each Lender, and thereafter
this Credit Agreement shall be binding upon and inure to the benefit of the
Borrower, the Guarantors, the Agent and each Lender and their respective
successors and assigns.
11.17 Confidentiality.
Each Lender agrees that it will use its reasonable best efforts to keep
confidential and to cause any representative designated under Section 7.11 to
keep confidential any non-public information from time to time supplied to it
under any Credit Document; provided, however, that nothing herein shall affect
the disclosure of any such information to (i) the extent such Lender in good
faith believes is required by statute, rule, regulation or judicial process,
(ii) counsel for such Lender or to its accountants, (iii) bank examiners or
auditors or comparable Persons, (iv) any affiliate of such Lender, (v) any other
Lender, or any assignee, transferee or participant, or any potential assignee,
transferee or participant, of all or any portion of any Lender's rights under
this Credit Agreement who is notified of the confidential nature of the
information and agrees to be bound by this provision or provisions reasonably
comparable hereto, or (vi) any other Person in connection with any litigation to
which any one or more of the Lenders is a party; and provided further that no
Lender shall have any obligation under this Section 11.17 to the extent any such
information becomes available on a non-confidential basis from a source other
than a Credit Party or that any information becomes publicly available other
than by a breach of this Section 11.17. Each Lender agrees it will use all
confidential information exclusively for the purpose of evaluating, monitoring,
selling, protecting or enforcing its Loans and other rights under the Credit
Documents. Without affecting any other rights of the Borrower and the Credit
Parties, each Lender acknowledges that the Borrower shall be entitled to seek
the remedies of injunction, specific performance and other equitable relief for
any breach of the provisions of this Section 11.17.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: ANCHOR ADVANCED PRODUCTS, INC.,
- -------- a Delaware corporation
By: /s/ Francis H. Olmstead, Jr.
----------------------------------------
Name: Francis H. Olmstead, Jr.
-------------------------------------
Title: Chief Executive Officer and President
-------------------------------------
GUARANTORS: ANCHOR HOLDINGS, INC.,
- ---------- a Delaware corporation
By: /s/ Francis H. Olmstead, Jr.
-----------------------------------------
Name: Francis H. Olmstead, Jr.
-------------------------------------
Title: Chief Executive Officer and President
-------------------------------------
[Signatures continued]
<PAGE>
Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.
LENDER:
- ------ NATIONSBANK, N.A.,
individually in its capacity as a
Lender and in its capacity as Agent
By: /s/ John E. Ball
--------------------------------
Name: John E. Ball
-----------------------------
Title: Senior Vice President
-----------------------------
<PAGE>
SCHEDULE 1.1A
Commitment Percentages
Loan
Name of Lender Commitment Percentage Loans
- -------------- --------------------- -----
NationsBank, N.A. 100% $15,000,000
TOTAL: 100.00% $15,000,000.00
<PAGE>
SCHEDULE 1.1B
-------------
Existing Investments
--------------------
None.
<PAGE>
SCHEDULE 1.1C
-------------
Existing Liens
--------------
1. See Schedule 6.10.
2. Until May 15, 1997, the Company will continue to maintain a lockbox with The
First National Bank of Boston for certain accounts receivable.
<PAGE>
DRAFT
Schedule 5.1(d)
---------------
Form of Opinion of Hutchins, Wheeler & Dittmar
----------------------------------------------
<PAGE>
DRAFT
Schedule 5.1(e)
---------------
Form of Local Counsel Corporate Opinion
---------------------------------------
<PAGE>
DRAFT
Schedule 5.1(f)
---------------
Form of Local Counsel Corporate Opinion
---------------------------------------
<PAGE>
Schedule 6.6
------------
Consents, Approvals and Authorizations
--------------------------------------
None.
<PAGE>
Schedule 6.10
-------------
Existing Indebtedness
---------------------
1. Connecticut Notes and Grant. The Company has outstanding notes (the
"Connecticut Notes") to the Connecticut Development Authority in the
aggregate principal amount of $541,966.97. Each note has a maturity of six
years and bears interest at a rate of 5% per annum. The Company has also
received a grant of $1,000,000 from the State of Connecticut, Department of
Economic Development. The grant is subject to certain requirements, among
other things, that the Company: (i) retain operations in Connecticut for no
less than 10 years and (ii) fund at least 50% of the entire project.
Failure to meet these conditions would require immediate repayment of all
amounts advanced to the Company ($1,000,000 as of December 31, 1996) and
further, such failure would constitute an event of default under the
Connecticut Notes.
<PAGE>
Schedule 6.11
-------------
Litigation
----------
None.
<PAGE>
Schedule 6.15
-------------
Existing Subsidiaries
---------------------
1. Anchor Advanced Products Foreign Sales Corporation
--------------------------------------------------
Jurisdiction of Incorporation: Barbados
Outstanding Stock: 100 shares of common stock
Percentage of Outstanding Shares held by a Consolidated Party: 100%
2. Cepillos de Matamoros, S.A. de C.V.
-----------------------------------
Jurisdiction of Incorporation: Mexico
Outstanding Stock: 1,000 shares of Series A Stock
444,398 shares of Series B Stock
Percentage of Outstanding Shares held by a Consolidated Party: 100%
<PAGE>
Schedule 6.18
-------------
Environmental Matters
---------------------
None.
<PAGE>
Schedule 6.19
-------------
Intellectual Property
---------------------
1. U.S. Patents for Anchor Advanced Products, Inc.
-----------------------------------------------
<TABLE>
<CAPTION>
Date of Patent Patent Number Assignee/Inventor Claims
- -------------- ------------- ----------------- ------
<S> <C> <C> <C>
3/29/88 4,733,425 Sanderson-McLeod Twisted wire brush made with hollow or
Filed 6/16/86 irregularly shaped filament.
1/13/87 4,635,313 NAP/Frederick Fassler, Brush-making process which securely
Bobby Slaughter, anchors the bristles in an injection
Frank Kigyos molded body without using staples, inserts,
or any other supplementary bristle
retaining members.
12/30/86 4,632,136 Plough, Inc./ Mascara application system.
Filed 11/2/83 Ted Kingsford Container. Mascara. With a twisted
wire brush of 75 to 150 strands per
1/4" (about 15 to 50 bristle strands per
turn). Brush with irregular (twisted)
strands. Arrowhead shaped brush.
5/6/86 4,586,520 Plough, Inc./ Mascara application system with twisted
Filed 11/2/83 David Brittain wire brush with different length bristles
and container/wiper/closure.
9/20/83 4,404,977 Bridgeport Metal Flexible tip with bristles attached.
Filed 9/14/81 Goods
7/28/81 4,280,629 Anchor/Bobby Container for nail polish or the like.
Filed 5/9/80 Slaughter
7/1/75 3,892,248 Plough, Inc./ Tri-Comb.
Filed 5/9/80 Ted Kingsford
6/1/71 3,582,140 Vistron Corporation Twisted wire cleaning brush with
Filed 8/7/69 protected tip.
4/23/63 3,086,820 Anchor/J.G. Nail polish applicator and method of
Filed 9/2/58 Baumgartner making the same.
<PAGE>
Date of Patent Patent Number Assignee/Inventor Claims
- -------------- ------------- ----------------- ------
<S> <C> <C> <C>
In process Application Anchor Monofilament Nylon Dental Floss
053229-0017 Advanced/Kenan
Bible, Edward Sherman,
Lloyd Etter,
Tim Taylor
Filed 9/21/95 08/532/228 Anchor Wax-filled Dental Floss
(pending) Advanced/Kenan
Bible, Edward Sherman,
Lloyd Etter
Filed 9/21/95 08/532/004 Anchor Braided Dental Floss
(pending) Advanced/Kenan
Bible, Edward Sherman,
Lloyd Etter
Filed 9/09/95 08/526/005 Anchor Advanced/ Adjustable Toothbrush
Charles Evans
7/4/95 D360,057 Clark Bow "Smooth Move" package for lipsticks or
Filed 3/14/94 other solid cosmetic products with
improved operating mechanism
Filed 1/12/95 08/489/607 Anchor Advanced/ Grooved staple wire to improve tuft
Pending Manfred Fassler retention in brushes
3/12/91 4,998,779 NAP/Frank Kigyos Apparatus & methodology for producing
Filed 12/26/89 rounded brush tips.
5/22/90 4,927,281 L'Oreal/Gueret Twisted wire brush with mixed filament
Filed 2/10/89 shapes/sizes
12/19/89 4,887,622 L/Oreal/Gueret Twisted wire brush with bristle diameter
Filed 11/30/87 .10 to .25mm (.004"-.010") w/approx.
10-40 bristles per turn. TWB with
varying bristle density. Brush with
hollow or irregularly shaped bristles.
</TABLE>
2. U.S. Trademarks for Anchor Advanced Products, Inc.
--------------------------------------------------
<TABLE>
<CAPTION>
Date of Trademark Registration Number Assignee/Inventor Description
- ----------------- ------------------- ----------------- -----------
<S> <C> <C> <C>
In process Anchor/Clark Bow Smooth Move trademark
Filed 11/20/95
9/20/55 612,523 Anchor Ancodent trademark
Filed 11/17/54
(next renewal date
9/20/2005)
1,114,131 Anchor Anchor design
1,404,994 Anchor Anchor
</TABLE>
3. Foreign Patents and Annuities for Anchor Advanced Products, Inc.
----------------------------------------------------------------
<TABLE>
<CAPTION>
Patent Patent Number & Date of Foreign Patent
Description Description Renewal Country Number Annuity #
- ----------- ----------- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C>
Apparatus & 4,998,779
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 12/28/95 Austrian 0438935 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 02/29/96 Belgian 0438935 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 01/16/96 Swiss P438935.9 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 01/25/96 German P69003523.3 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
<PAGE>
Patent Patent Number & Date of Foreign Patent
Description Description Renewal Country Number Annuity #
- ----------- ----------- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C>
Apparatus & 4,998,779 02/19/96 Danish 0438935 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 01/23/96 Spanish 0438935 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 01/02/96 French 0438935 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 12/11/96 Great Britain 0438935 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 03/05/96 Greek 3009372 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 01/26/96 Italian 0438935 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 03/15/96 Luxembourg 0438935 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
<PAGE>
Patent Patent Number & Date of Foreign Patent
Description Description Renewal Country Number Annuity #
- ----------- ----------- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C>
Apparatus & 4,998,779 12/22/95 Swedish 90403571.4 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 01/19/96 Canada 2072361 6
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Apparatus & 4,998,779 03/19/96 Netherlands 0438935 3
methodology for (ref. #3697-005-25)
producing Base date 12/13/90
rounded brush
tips
Brush with Self- 4,635,313 Japan 240403/84 not
Retaining (ref. #3697-013-25) extended
Bristles
</TABLE>
<PAGE>
Schedule 6.22(a)
----------------
Personal Property Locations
---------------------------
1. Elk Grove, Cook County, IL
2. Harlingen, Cameron County, TX
3. Knoxville, Knox County, TN
4. Matamoros, Mexico
5. Morristown, Hamblin County, TN
6. Round Rock, Williamson County, TX
7. Sanford, Lee County, NC
8. Seagrove, NC
9. Waterbury, New Haven County, CT
<PAGE>
Schedule 6.22(b)
----------------
Chief Executive Offices
-----------------------
1. Anchor Advanced Products, Inc.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919-4048
2. Anchor Advanced Products Foreign Sales Corporation
c/o Weston International Management Limited
The Financial Centre
Bishop's Court Hill
St. Michael, Barbados
3. Cepillos de Matamoros, S.A. de C.V.
Feo. Sarabia y Avenue, Lauro Villar Km. 4
H. Matamoros, Tam. Mexico
<PAGE>
Schedule 7.6
------------
Existing Insurance Coverage
---------------------------
See attached.
<PAGE>
[RISK MANAGEMENT SERVICES, INC. LOGO]
P.O. Box 1379 628 E. Morris Blvd. Morristown, TN 37816-1379
Phone 423-586-2002 Fax 423-586-2316
ANCHOR ADVANCED PRODUCTS, INC.
Property Coverage
-----------------
See Attached List of Locations & Coverage.
General Liability Coverage
--------------------------
See Attached Summary.
Automobile Coverage
-------------------
Policy Provides Comprehensive Automobile Liability.
$1,000,000 Combined Single Limit of Liability
$1,000,000 Uninsured Motorist Protection
$ 5,000 Medical Payments
$ 1,000 Deductible Comp. & Coll. Physical Damage
Hired & Non-Owned Physical Damage $30,000 Maximum
Personal Injury Protection in No Fault States.
Workers Compensation
--------------------
Benefits Per Legislative Statute.
Employers Liability
$500,000 Each Accident
$500,000 Policy Limit
$500,000 Each Employee
Policy Written on a $250,000 Deductible Per Loss.
Maximum Any One Year $2,274,000.
Charges of $785 Per Indemnity and $125 Medical in Addition to Paid Claims.
D&O
$3,000,000.
<PAGE>
Crime Coverage
--------------
Policy Provides Form A Employee Dishonesty $2,000,000 with a $25,000 Deductible.
Fiduciary Liability
-------------------
Policy Provides Trustees and Fiduciary Liability $5,000,000 Per Policy and
Employee Benefits Administration Liability $5,000,000 Per Policy.
Covers:
Anchor Advanced Products Salaried & Hourly Pension Plan
Anchor Advanced Products Employee Savings Plan
Selected Executive Retirement Plan
Anchor Advanced Products Health Insurance Plan
Anchor Advanced Products Dental Plan
Anchor Advanced Products Long Term Disability Plan
Anchor Advanced Products Accidental Death & Dismemberment Plan
Anchor Advanced Products Term Life Plan
Mid-State Plastics Group Health Plan
Mid-State Plastics 401K Retirement Plan
Flood Coverage
--------------
Provides Coverage Per Federal Flood Coverage
Texas Harlington Plant
Limits
------
Building $200,000 $1,000 Deductible
Contents $200,000 $1,000 Deductible
<PAGE>
Umbrella & Liability Coverage
-----------------------------
Policy Provides $25,000,000 Each Occurrence and Aggregate Over Underlying
Liability Coverage.
$100,000 Self Insured Retention - Texas and New York
Excess Liability Coverage
-------------------------
Policy Provides $10,000,000 Each Occurrence and Aggregate Over Umbrella
Coverage.
<PAGE>
[RISK MANAGEMENT SERVICES, INC. LOGO]
P.O. Box 1379 628 E. Morris Blvd. Morristown, TN 37816-1379
Phone 615-586-2002
ANCHOR ADVANCED PRODUCTS, INC.
Mexico
Property Coverage
-----------------
$ 4,678,114 Building
$20,885,824 Contents
$24,500,000 Business Interruption
"All Risk" Coverage - $5,000 Deductible
Flood - 3% Insured Value
Earthquake - 2% Insured Value (10% Co-insurance)
Business Interruption - 5 Days
Comprehensive General Liability
-------------------------------
Premises Liability $1,000,000 Combined Single Limit
Auto in Excess of Primary Policy $100,000
Sudden Pollution $1,000,000 - 20% Deductible
Loading and Unloading
Deductible 10% Claim
Burglary
--------
$20,000 - 10% Deductible of Loss
Money & Securities
------------------
$50,000 - 10% Deductible of Loss
Transit
-------
$200,000 Each Vehicle
5% Deductible of Shipment
20% Theft Deductible
<PAGE>
The terms set forth above are hereby agreed to:
- -------------------------, as Assignor
By:
Name:
Title:
- -------------------------, as Assignee
By:
Name:
Title:
Notice address of Assignee:
{{Assignee}}
__________________________
__________________________
Attn: ____________________
Telephone: (___) ________
Telecopy: (___) ________
CONSENTED TO (IF REQUIRED BY THE TERMS OF SECTION 11.3(b)):
NATIONSBANK, N.A.,
as Agent
By:
Name:
Title:
ANCHOR ADVANCED PRODUCTS, INC.
By:
Name:
Title:
<PAGE>
Automobile
----------
Bodily Injury $50,000 - Per Person $100,000 - Per Accident
Property Damage $100,000 - Per Accident
Medical $5,000 - Per Person $25,000 - Per Accident
Comprehensive 2% Deductible - Minimum $200.00
Collision 5% Deductible - Minimum $400.00
Private Passenger Auto $18,000 Maximum Per Vehicle
Trucks $50,000 Maximum Per Vehicle
Trailer $16,000 Maximum Per Unit
Premium Based on 8 Autos.
Fidelity Coverage
-----------------
Comprehensive Dishonesty, Disappearance and Destruction Policy Form A
$500,000 Agreement I
<PAGE>
ANCHOR ADVANCED PRODUCTS CORPORATION
POLICY TERM January 1, 1997 to January 1, 1998.
FORM IRI Comprehensive All Risk 9/90 Edition.
COVERAGE PARTS Property Damage, Business Interruption
Item 1, and Extra Expense.
ENDORSEMENTS Boiler and Machinery (including
Production Equipment), Earthquake, Flood,
Transit, Replacement Coverage, and Agreed
Amount.
LOCATIONS AND VALUES See Exhibit 1.
LIMITS OF LIABILITY
Policy Limit In no event shall liability for loss under
this policy arising out of one Occurrence
exceed $220,508,000, nor shall liability
exceed any specific sublimit of liability
applying to any insured loss, coverage or
location(s).
All Other Parts (AOP) Liability for loss under this policy arising
Sublimit out of one Occurrence shall not exceed
$220,508,000 unless loss is caused by Fire,
Lightning, Removal, Wind and Hail, Leakage
From Fire Protective Equipment, Explosion,
Smoke, Aircraft and Vehicles, Sonic Shock
Wave, Riot, Civil Commotion and Vandalism,
Motion Material, or Civil or Military
Authority as defined herein in which case
such loss is subject to the Policy Limit
shown above.
$ 50,000,000 Earthquake at all locations
$ 50,000,000 Flood at all locations except Nos. 040,080 &
910.
$ 5,000,000 Flood at Location No. 040.
$ 50,000,000 In the Aggregate at all locations.
$ 300,000 Transit
Policy Amount Boiler and Machinery
$ 1,000,000 "Class I Newly Acquired Property": A
building or group of buildings situated at a
common location including related structures
and the contents of such buildings or
structures which are protected by automatic
sprinklers or other fire suppression systems
which have been designed and installed in
accordance with the National Fire Protection
Association Codes. Such automatic protection
to be provided in all areas which have
combustible construction or combustible
occupancy. No more than 10% of the building
area to be of frame construction. The site
of such property must be situated in an area
which qualifies for a Town Class Code of at
least 8 or its equivalent.
Page 2
<PAGE>
LIMITS OF LIABIITY
(continud)
$ 1,000,000 "Class II Newly Acquired Property". Any
Newly Acquired Property which does not
qualify as a Class I Newly Acquired property.
$ 100,000 Media Replacement at all locations except
Nos. 900 A and 900 B.
$ 40,000 Media Replacement at Location No. 900 A
$ 1,000,000 Media Replacement at Location No. 900 B
$ 100,000 Temporary Removal of Property - 90 Days
The greater of 25% Debris Removal
of loss payable or
$ 5,000,000
$ 25,000 Pollutant cleanup and removal from land or
water confined to described premises
(excluding Newly Acquired Property and
Miscellaneous Uninsured Locations). (Annual
Aggregate Limit)
$ 25,000 Expediting Expenses
$ 100,000 Personal property of the insured at any
exhibition, exposition, fair or trade show
within the United States, Puerto Rico or
Canada.
$ 1,200,000 Extra Expenses at Location No. 040 only.
$ 1,000,000 Miscellaneous Unnamed Locations
$ 1,000,000 Miscellaneous Named Locations
See Exhibit No. 2 Location Limits
DEDUCTIBLES
$ 50,000 Earthquake at all locations
$ 50,000 Flood at all locations except No. 040
$ 100,000 Flood at Location No. 040
$ 5,000 Transit
$ 25,000 Boiler and Machinery
See Exhibit No. 3 Wind
$ 25,000 For each loss otherwise insured against.
Page 3
<PAGE>
COMMERCIAL GENERAL LIABILITY
----------------------------
Limits of Liability
- -------------------
a. General Aggregate Limit $2,000,000
b. Products/Completed Operations -
Aggregate Limit $2,000,000
c. Personal & Advertising Injury Limit $1,000,000
d. Each Occurrence Limit $1,000,000
e. Fire Damage Legal Liability Limit $ 50,000 Any One Fire
f. Medical Expense Limit $ 5,000 Any One Person
Coverages
- ---------
a. Premises/Operations
b. Independent Contractors
c. Products/Completed Operations
d. Personal & Advertising Operations
e. Medical Payments
f. Foreign Products Liability
g. Broad Form Vendors Coverage
Exclusions
- ----------
a. Absolute Pollution
b. Asbestos Exclusion
c. Employment-Related Acts
Foreign General Liability Exclusions
- ------------------------------------
a. Asbestos Exclusion
b. Pollution Exclusion
c. Broad Form Securities
d. Professional Services and Errors & Omissions
e. Aircraft Products and Grounding
f. Excess and Difference in Conditions Provisions
g. Nuclear Energy Liability (Broad Form)
Coverage Form 1993 Occurrence Form
- -------------
Rating Plan $25,000 Deductible (including Bodily Injury, Property
- ----------- Damage, Medical Payments and Allocated Loss Adjustment
Expense)
Anchor Advanced 12/19/96
<PAGE>
SCHEDULE 11.1
Addresses for Notice
Name and Address
- ----------------
Anchor Advanced Products, Inc.
1111 Northshore Drive, Suite N-600 Knoxville,
Tennessee 37919
Attn: Claude Kyker
Senior Vice President,
Treasury & Logistics
Telephone: (423) 450-5353
Facsimile: (423) 450-5379
Anchor Advanced Holdings Co.
1111 Northshore Drive, Suite N-600
Knoxville, Tennessee 37919
Attn: Claude Kyker
Senior Vice President,
Treasury &Logistics
Telephone: (423) 450-5353
Facsimile: (423) 450-5379
NationsBank, N.A.
101 N. Tryon Street, 15th Floor
Charlotte, North Carolina 28202
Attn: Donna Cox
Telephone: (704) 386-8102
Facsimile: (704) 386-8694
<PAGE>
EXHIBIT 2.1
-----------
FORM OF NOTICE OF BORROWING
NationsBank, N.A.,
as Agent for the Lenders
NC-001-15-04
Independence Center, 15th Floor
101 North Tryon Street
Charlotte 28255
Attention: Agency Services
Ladies and Gentlemen:
The undersigned, ANCHOR ADVANCED PRODUCTS, INC. (the "Borrower"),
refers to the Credit Agreement dated as of April 2, 1997 (as amended, modified,
extended or restated from time to time, the "Credit Agreement"), among the
Borrower, the other Credit Parties party thereto, the Lenders party thereto and
NationsBank, N.A., as Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The Borrower hereby gives notice pursuant to Section 2.1(b) of the
Credit Agreement that it requests a Loan advance under the Credit Agreement, and
in connection therewith sets forth below the terms on which such Loan advance is
requested to be made:
(A) Date of Borrowing
(which is a Business Day) ------------------
(B) Principal Amount of
Borrowing ------------------
(C) Interest rate basis ------------------
(D) Interest Period and the
last day thereof ------------------
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d), (e) and (f) of such Section, are true and
correct.
Very truly yours,
ANCHOR ADVANCED PRODUCTS,
INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 2.3
-----------
FORM OF NOTICE OF CONTINUATION/CONVERSION
NationsBank, N.A.,
as Agent for the Lenders
NC-001-15-04
Independence Center, 15th Floor
101 North Tryon Street
Charlotte 28255
Attention: Agency Services
Ladies and Gentlemen:
The undersigned, ANCHOR ADVANCED PRODUCTS, INC. (the "Borrower"), refers
to the Credit Agreement dated as of April 2, 1997 (as amended, modified,
extended or restated from time to time, the "Credit Agreement"), among the
Borrower, the other Credit Parties party thereto, the Lenders party thereto and
NationsBank, N.A., as Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The Borrower hereby gives notice pursuant to Section 2.3 of the
Credit Agreement that it requests a continuation or conversion of a Loan
outstanding under the Credit Agreement, and in connection therewith sets forth
below the terms on which such continuation or conversion is requested to be
made:
(A) Date of Continuation or Conversion
(which is the last day of the
the applicable Interest Period) -----------------
(B) Principal Amount of
Continuation or Conversion -----------------
(C) Interest rate basis -----------------
(D) Interest Period and the
last day thereof -----------------
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d), (e) and (f) of such Section, are true and
correct.
Very truly yours,
ANCHOR ADVANCED PRODUCTS, INC.
By:
Name:
Title:
<PAGE>
EXHIBIT 2.5(a)
--------------
FORM OF NOTE
$15,000,000 April 2, 1997
FOR VALUE RECEIVED, ANCHOR ADVANCED PRODUCTS, INC., a Delaware
corporation (the "Borrower"), hereby promises to pay to the order of
NationsBank, N.A., its successors and permitted assigns (the "Lender"), at the
office of NationsBank, N.A., as Agent (the "Agent"), at Independence Center,
15th Floor, 101 North Tryon Street (or at such other place or places as the
holder hereof may designate in writing to the Borrower pursuant to the terms of
the Credit Agreement), at the times set forth in the Credit Agreement dated as
of the date hereof among the Borrower, the other Credit Parties party thereto,
the Lenders party thereto and the Agent (as it may be amended, modified,
extended or restated from time to time, the "Credit Agreement"; all capitalized
terms not otherwise defined herein shall have the meanings set forth in the
Credit Agreement), but in no event later than the Maturity Date, in Dollars and
in immediately available funds, the principal amount of FIFTEEN MILLION DOLLARS
($15,000,000) or, if less than such principal amount, the aggregate unpaid
principal amount of all Loans made by the Lender to the Borrower pursuant to the
Credit Agreement, and to pay interest from the date hereof on the unpaid
principal amount hereof, in like money, at said office, on the dates and at the
rates provided in the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default,
the balance outstanding hereunder shall bear interest as provided in Section
3.1(b) of the Credit Agreement. Further, in the event the payment of all sums
due hereunder is accelerated under the terms of the Credit Agreement, this Note,
and all other indebtedness of the Borrower to the Lender shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates thereof
shall be endorsed by the holder hereof on Schedule A attached hereto and
incorporated herein by reference, or on a continuation thereof which shall be
attached hereto and made a part hereof; provided, however, that any failure to
endorse such information on such schedule or continuation thereof shall not in
any manner affect the obligation of the Borrower to make payments of principal
and interest in accordance with the terms of this Note.
<PAGE>
This Note and the Loans evidenced hereby may be transferred in whole or
in part only by registration of such transfer on the Register maintained by or
on behalf of the Borrower as provided in Section 11.3(d) of the Credit
Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed by its duly authorized officer as of the day and year first above
written.
ANCHOR ADVANCED PRODUCTS,
INC.
By:
Name:
Title:
<PAGE>
SCHEDULE A TO THE
REVOLVING NOTE
OF ANCHOR ADVANCED PRODUCTS, INC.
DATED APRIL 2, 1997
Unpaid Name of
Type Principal Person
of Interest Payments Balance Making
Date Loan Period Principal Interest of Note Notation
- ---- ---- ------ --------- -------- --------- --------
<PAGE>
EXHIBIT 7.1(c)
--------------
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
For the fiscal quarter ended _________________, ____.
I, ______________________, [Title] of ANCHOR ADVANCED PRODUCTS, INC.
(the "Borrower") hereby certify that, to the best of my knowledge and belief,
with respect to that certain Credit Agreement dated as of April 2, 1997 (as
amended, modified, extended or restated from time to time, the "Credit
Agreement"; all of the defined terms in the Credit Agreement are incorporated
herein by reference) among the Borrower, the other Credit Parties party thereto,
the Lenders party thereto and NationsBank, N.A., as Agent:
a. The company-prepared financial statements which accompany this certificate
are true and correct in all material respects and have been prepared in
accordance with GAAP applied on a consistent basis, subject to changes resulting
from normal year-end audit adjustments.
b. Since ___________ (the date of the last similar certification, or, if none,
the Closing Date) no Default or Event of Default has occurred and is continuing
under the Credit Agreement; and
Delivered herewith are detailed calculations demonstrating compliance by the
Credit Parties with the financial covenants contained in Section 7.12 of the
Credit Agreement as of the end of the fiscal period referred to above.
This ______ day of ___________, ____.
ANCHOR ADVANCED PRODUCTS,
INC.
By:
Name:
Title:
<PAGE>
Attachment to Officer's Certificate
-----------------------------------
Computation of Financial Covenants
<PAGE>
EXHIBIT 7.1(d)
--------------
FORM OF BORROWING BASE REPORT
<PAGE>
EXHIBIT 7.13
------------
FORM OF JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________,
____, is by and between _____________________, a ___________________ (the
"Subsidiary"), and NATIONSBANK, N.A., in its capacity as Agent under that
certain Credit Agreement (as it may be amended, modified, extended or restated
from time to time, the "Credit Agreement"), dated as of April 2, 1997, by and
among Anchor Advanced Products, Inc., a Delaware corporation (the "Borrower"),
the other Credit Parties party thereto, the Lenders party thereto and
NationsBank, N.A., as Agent. All of the defined terms in the Credit Agreement
are incorporated herein by reference.
The Subsidiary is an Additional Credit Party, and, consequently, the
Credit Parties are required by Section 7.13 of the Credit Agreement to cause the
Subsidiary to become a "Guarantor". ---------
Accordingly, the Subsidiary hereby agrees as follows with the Agent, for
the benefit of the Lenders:
1. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Credit Agreement and a "Guarantor" for all purposes of the Credit Agreement, and
shall have all of the obligations of a Guarantor thereunder as if it had
executed the Credit Agreement. The Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Guarantors contained in the Credit Agreement. Without limiting
the generality of the foregoing terms of this paragraph 1, the Subsidiary
hereby, jointly and severally together with the other Guarantors, guarantees to
each Lender and the Agent, as provided in Section 4 of the Credit Agreement, the
prompt payment and performance of the Borrower's Obligations in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration or
otherwise) strictly in accordance with the terms thereof.
2. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Security Agreement and an "Obligor" for all purposes of the Security Agreement,
and shall have all of the obligations of an Obligor thereunder as if it had
executed the Security Agreement. The Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Obligors contained in the Security Agreement. Without limiting
the generality of the foregoing terms of this paragraph 2, the Subsidiary hereby
grants to the Agent, for the benefit of the Lenders, a continuing security
interest in, and a right of set off against, any and all right, title and
interest of the Subsidiary in and to the Collateral (as such term is defined in
Section 2 of the Security Agreement) of the Subsidiary. The Subsidiary hereby
represents and warrants to the Agent that:
<PAGE>
(i) The Subsidiary's chief executive office and chief place of
business are (and for the prior four months have been) located at the
locations set forth in Schedule 1 attached hereto and the Subsidiary
keeps its books and records at such locations.
(ii) The type of Collateral owned by the Subsidiary and the
location of all Collateral owned by the Subsidiary is as shown on
Schedule 2 attached hereto.
(iii) The Subsidiary's legal name is as shown in this Agreement
and the Subsidiary has not changed its name, been party to a merger,
consolidation or other change in structure or used any tradenames
except as set forth in Schedule 3 attached hereto.
3. The address of the Subsidiary for purposes of all notices and other
communications is ____________________, ____________________________, Attention
of ______________ (Facsimile No. ____________).
4. The Subsidiary hereby waives acceptance by the Agent and the Lenders
of the guaranty by the Subsidiary under Section 4 of the Credit Agreement upon
the execution of this Agreement by the Subsidiary.
5. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
6. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of North Carolina.
<PAGE>
IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to
be duly executed by its authorized officers, and the Agent, for the benefit of
the Lenders, has caused the same to be accepted by its authorized officer, as of
the day and year first above written.
[SUBSIDIARY]
By:
Name:
Title:
Acknowledged and accepted:
NATIONSBANK, N.A., as Agent
By:
Name:
Title:
<PAGE>
EXHIBIT 11.3
------------
FORM OF ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE dated as of _______________, ____ is
entered into between ________________ ("Assignor") and ____________________
("Assignee").
Reference is made to the Credit Agreement dated as of April 2, 1997, as
amended and modified from time to time thereafter (the "Credit Agreement") among
Anchor Advanced Products, Inc., the other Credit Parties party thereto, the
Lenders party thereto and NationsBank, N.A., as Agent. Terms defined in the
Credit Agreement are used herein with the same meanings.
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor,
effective as of the Effective Date set forth below, the interests set forth
below (the "Assigned Interest") in the Assignor's rights and obligations under
the Credit Agreement, including, without limitation, the interests set forth
below in the Commitments and outstanding Loans of the Assignor on the effective
date of the assignment designated below (the "Effective Date"), together with
unpaid fees accrued on the assigned Commitments to the Effective Date and unpaid
interest accrued on the assigned Loans to the Effective Date. Each of the
Assignor and the Assignee hereby makes and agrees to be bound by all the
representations, warranties and agreements set forth in Section 11.3(b) of the
Credit Agreement, a copy of which has been received by the Assignee. From and
after the Effective Date (i) the Assignee, if it is not already a Lender under
the Credit Agreement, shall be a party to and be bound by the provisions of the
Credit Agreement and, to the extent of the interests purchased and assumed by
the Assignee under this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent of
the interests sold and assigned by the Assignor under this Assignment and
Acceptance, relinquish its rights and be released from its obligations under the
Credit Agreement.
2. This Assignment and Acceptance shall be governed by and construed in
accordance with the laws of the State of North Carolina.
3. Terms of Assignment
(a) Date of Assignment:
(b) Legal Name of Assignor:
(c) Legal Name of Assignee:
(d) Effective Date of Assignment:
(e) Commitment Percentage Assigned
(expressed as a percentage set forth
to at least 8 decimals) %
<PAGE>
(f) Commitment Percentage of Assignee
after giving effect to this Assignment
and Acceptance as of the Effective
Date (set forth to at least 8 decimals) %
(g) Commitment Percentage of Assignor
after giving effect to this Assignment
and Acceptance as of the Effective
Date (set forth to at least 8 decimals) %
(h) Committed Amount
as of Effective Date $_____________
(i) Dollar Amount of Assignor's
Commitment Percentage as of the
Effective Date (the amount set forth in
(h) multiplied by the percentage
set forth in (g)) $_____________
(j) Dollar Amount of Assignee's
Commitment Percentage as of
the Effective Date (the amount
set forth in (h) multiplied by
the percentage set forth in (f)) $_____________
4. This Assignment and Acceptance shall be effective only upon consent of the
Borrower and the Agent, if applicable, delivery to the Agent of this Assignment
and Acceptance together with the transfer fee payable pursuant to Section
11.3(b) in connection herewith and recordation in the Register pursuant to
Section 11.3(d) of the terms hereof.
5. This Assignment and Acceptance may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Assignment and Acceptance to
produce or account for more than one such counterpart.
[The remainder of this page has been left blank intentionally.]
<PAGE>
The terms set forth above are hereby agreed to:
____________________, as Assignor
By:
Name:
Title:
_____________________, as Assignee
By:
Name:
Title:
Notice address of Assignee:
{{Assignee}}
__________________________
__________________________
Attn: ____________________
Telephone: (___) ________
Telecopy: (___) ________
CONSENTED TO (IF REQUIRED BY THE TERMS OF SECTION 11.3(b)):
NATIONSBANK, N.A.,
as Agent
By:
Name:
Title:
ANCHOR ADVANCED PRODUCTS, INC.
By:
Name:
Title:
Exhibit 11.1
ANCHOR HOLDINGS, INC. AND SUBSIDIARIES
SCHEDULE OF COMPUTATION OF NET EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
------------------------
Year ended December 31, March 30, March 29,
----------------------------- ------------ -----------
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Net income before extraordinary item and
cumulative effect .............................. $3,589 $2,109 $3,626 $1,385 $1,058
Extraordinary item .............................. -- 333 -- -- --
Cumulative effect .............................. 635 -- -- -- --
Interest savings from assumed reduction of debt(1) -- -- 8 -- --
Net Income ....................................... $4,224 $1,776 $3,634 $1,385 $1,058
======= ======= ====== ====== =======
Common shares outstanding ........................ 1,000 1,018 1,018 1,018 1,018
Common equivalent shares issuable upon exercise
of stock options and warrants(1) ............... 369 369 365 400 401
------- ------- ------- ------- ------
Total weighted average shares .................. 1,369 1,387 1,383 1,418 1,419
------- ------- ------- ------- ------
Earnings per common and equivalent share before
extraordinary item and cumulative effect ...... $ 2.62 $ 1.52 $ 2.63 $ 0.98 $0.75
Extraordinary item per common and equivalent
share .......................................... 0.00 0.24 0.00 0.00 0.00
Cumulative effect per common and equivalent share 0.46 0.00 0.00 0.00 0.00
------- ------- ------- ------- ------
Earnings per common and equivalent share ......... $ 3.09 $ 1.76 $ 2.63 $ 0.98 $0.75
======= ======= ======= ======= ======
</TABLE>
Notes:
(1) Amount calculated using the modified treasury stock method and fair market
values.
Exhibit 21.1
List of Subsidiaries of Anchor Holdings, Inc.
Anchor Advanced Products, Inc.
Anchor Advanced Products Foreign Sales Corporation
Cepillos de Matamoros, S.A. de C.V.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-_____) of our report dated January 31, 1997, on our audits of the
consolidated financial statements and financial statement schedules of Anchor
Holdings, Inc. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND L.L.P.
Knoxville, Tennessee
May __, 1997
The Board of Directors
Anchor Advanced Products, Inc.
Knoxville, Tennessee
We consent to the inclusion in this Form S-4 of our report, dated September
23, 1994, on our audit of the financial statements of Mid-State Plastics, Inc.
We also consent to the reference to us under the heading "Experts" in such Form
S-4.
/s/ Cherry, Behaert & Holland, L.L.P.
Asheboro, North Carolina
May 2, 1997
UNITED STATES
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
[ ] CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2)
FLEET NATIONAL BANK
----------------------------------------------------------
(Exact name of trustee as specified in its charter)
Not applicable 06-0850628
---------------------------- ------------------
(State of incorporation if (I.R.S. Employer
not a national bank) Identification No.)
777 Main Street, Hartford, Connecticut 06115
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Patricia Beaudry, 777 Main Street, Hartford, CT (860) 728-2065
------------------------------------------------------------------
(Name, address and telephone number of agent for service)
------------------------------------------------------------------
(Exact name of obligor as specified in its charter)
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
------------------------------------------------------------------
(Title of the indenture securities)
<PAGE>
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject:
The Comptroller of the Currency,
Washington, D.C.
Federal Reserve Bank of Boston
Boston, Massachusetts
Federal Deposit Insurance Corporation
Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers:
The trustee is so authorized.
Item 2. Affiliations with obligor. If the obligor is an affiliate of
the trustee, describe each such affiliation.
None with respect to the trustee; none with respect to Fleet
Financial Group, Inc. and its affiliates (the "affiliates").
Item 16. List of exhibits. List below all exhibits filed as a part of
this statement of eligibility and qualification.
1. A copy of the Articles of Association of the trustee as
now in effect.
2. A copy of the Certificate of Authority of the trustee
to do Business and the Certification of Fiduciary Powers.
3. A copy of the By-laws of the trustee as now in effect.
4. Consent of the trustee required by Section 321(b) of
the Act.
5. A copy of the latest Consolidated Report of Condition
and Income of the trustee, published pursuant to law or the requirements
of its supervising or examining authority.
<PAGE>
NOTES
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base its answer to Item 2, the answer to said
Item is based upon incomplete information. Said Item may, however, be
considered correct unless amended by an amendment to this Form T-1.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, Fleet National Bank, a national banking association organized and
existing under the laws of the United States, has duly caused this statement of
eligibility and qualification to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Hartford, and State of
Connecticut, on the day of , 19 .
---- --------- --
FLEET NATIONAL BANK,
Trustee
By
-------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 1
ARTICLES OF ASSOCIATION
OF
FLEET NATIONAL BANK
FIRST. The title of this Association, which shall carry on the business of
banking under the laws of the United States, shall be "Fleet National Bank."
SECOND. The main office of the Association shall be in Springfield, Hampden
County Commonwealth of Massachusetts. 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 (5) nor more than twenty-five (25) 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 therefore in the
bylaws, but if no election is held 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 such lawful regulations as may be prescribed by the board of
directors.
FIFTH. The authorized amount of capital stock of this Association shall be
eight million five hundred thousand (8,500,000) shares of which three million
five hundred thousand (3,500,000) shares shall be common stock with a
par value of six and 25/100 dollars ($6.25) each, and of which five million
(5,000,000) shares without par value shall be preferred stock. The 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 the Association, whether now or hereafter authorized, or to
any obligations convertible into stock of the 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.
<PAGE>
The board of directors of the Association is authorized, subject to limitations
prescribed by law and the provisions of this Article, to provide for the
issuance from time to time in one or more series of any number of the preferred
shares, and to establish the number of shares be included in each series, and
to fix the designation, relative rights, preferences, qualifications and
limitations of the shares of each such series. The authority of the board of
directors with respect to each series shall include, but not be limited to,
determination of the following:
a. The number of shares constituting that series and the distinctive
designation of that series;
b. The dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and whether they shall be
payable in preference to, or in another relation to, the dividends payable
to any other class or classes or series of stock;
c. Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
d. Whether that series shall have conversion or exchange privileges, and,
if so, the terms and conditions of such conversion or exchange, including
provision for the adjustment of the conversion or exchange rate in such
events as the board of directors shall determine;
e. Whether or not the shares of that series shall be redeemable, and, if so,
the terms and conditions of such redemption, including the manner of
selecting shares for redemption if less than all shares are to be redeemed,
the date or dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
f. Whether that series shall be entitled to the benefit of a sinking fund to
be applied to the purchase or redemption of shares of that series, and, if
so, the terms and amounts of such sinking fund;
g. The right of the shares of that series to the benefit of conditions and
restrictions upon the creation of indebtedness of the Association or any
subsidiary, upon the issue of any additional stock (including additional
shares of such series or of any other series) and upon the payment of
dividends or the making of other distributions on, and the purchase,
redemption or other acquisition by the Association or any subsidiary of
any outstanding stock of the Association;
h. The right of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Association and
whether such rights shall be in preference to, or in another relation to,
the comparable rights of any other class or classes or series of stock; and
i. Any other relative, participating, optional or other special rights,
qualifications, limitations or restrictions of that series.
Shares of any series of preferred stock which have been redeemed (whether
through the operation of a sinking fund or otherwise) or which, if convertible
or exchangeable, have been converted into or exchanged for shares of stock of
any other class or classes shall have the status of authorized and unissued
shares of preferred stock of the same series and may be reissued as a part of
the series of which they were originally a part or may be reclassified and
reissued as part of a new series of preferred stock to be created by resolution
or resolutions of the board of directors or as part of any other series or
preferred stock, all subject to the conditions and the restrictions adopted by
the board of directors providing for the issue of any series of preferred
stock and by the provisions of any applicable law.
Subject to the provisions of any applicable law, or except as otherwise
provided by the resolution or resolutions providing for the issue of any series
of preferred stock, the holders of outstanding shares of common stock shall
exclusively possess voting power for the election of directors and for all
purposes, each holder of record of shares of common stock being entitled to one
vote for each share of common stock standing in his name on the books of the
Association.
Except as otherwise provided by the resolution or resolutions providing for the
issue of any series of preferred stock, after payment shall have been made to
the holders of preferred stock of the full amount of dividends to which they
shall be entitled pursuant to the resolution or resolutions providing for the
issue of any other series of preferred stock, the holders of common stock shall
be entitled, to the exclusion of the holders of preferred stock of any and all
series, to receive such dividends as from time to time may be declared by the
board of directors.
Except as otherwise provided by the resolution or resolutions for the issue
of any series of preferred stock, in the event of any liquidation, dissolution
or winding up of the Association, whether voluntary or involuntary, after
payment shall have been made to the holders of preferred stock of the full
amount to which they shall be entitled pursuant to the resolution or
resolutions providing for the issue of any series of preferred stock the
holders of common stock shall be entitled, to the exclusion of the holders of
preferred stock of any and all series, to share, ratable according to the
number of shares of common stock held by them, in all remaining assets of the
Association available for distribution to its shareholders.
The number of authorized shares of any class may be increased or decreased by
the affirmative vote of the holders of a majority of the stock of the
Association entitled to vote.
<PAGE>
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 secretary 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 bylaws 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.
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 Hartford,
Connecticut, 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.
NINTH. The board of directors of this Association, or any three or more
shareholders owning, in the aggregate, not less than ten percent (10%) 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 (10) 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. (a) Right to Indemnification. Each person who was or is made 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 (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director, officer or employee of the Association or is or was
serving at the request of the Association as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, limited
liability company, trust, or other enterprise, including service with respect
to an employee benefit plan, shall be indemnified and held harmless by the
Association to the fullest extent authorized by the law of the state in which
the Association's ultimate parent company is incorporated, except as provided
in subsection (b). The aforesaid indemnity shall protect the indemnified
person against all expense, liability and loss (including attorney's fees,
judgements, fines ERISA excise taxes or penalties, and amounts paid in
settlement) reasonably incurred by such person in connection with such a
proceeding. Such indemnification shall continue as to a person who has ceased
to be a director, officer or employee and shall inure to the benefit of his or
her heirs, executors, and administrators, but shall only cover such person's
period of service with the Association. The Association may, by action of its
Board of Directors, grant rights to indemnification to agents of the
Association and to any director, officer, employee or agent of any of its
subsidiaries with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Restrictions on Indemnification. Notwithstanding the foregoing, (i) no
person shall be indemnified hereunder by the Association against expenses,
penalties, or other payments incurred in an administrative proceeding or action
instituted by a federal bank regulatory agency which proceeding or action
results in a final order assessing civil money penalties against that person,
requiring affirmative action by that person in the form of payments to the
Association, or removing or prohibiting that person from service with the
Association, and any advancement of expenses to that person in that proceeding
must be repaid; and (ii) no person shall be indemnified hereunder by the
Association and no advancement of expenses shall be made to any person
hereunder to the extent such indemnification or advancement of expenses would
violate or conflict with any applicable federal statute now or hereafter in
force or any applicable final regulation or interpretation now or hereafter
adopted by the Office of the Comptroller of the Currency ("OCC") or the Federal
Deposit Insurance Corporation ("FDIC"). The Association shall comply with any
requirements imposed on it by any such statue or regulation in connection with
any indemnification or advancement of expenses hereunder by the Association.
With respect to proceedings to enforce a claimant's rights to indemnification,
the Association shall indemnify any such claimant in connection with such a
proceeding only as provided in subsection (d) hereof.
(c) Advancement of Expenses. The conditional right to indemnification
conferred in this section shall be a contract right and shall include the
right to be paid by the Association the reasonable expenses (including
attorney's fees) incurred in defending a proceeding in advance of its final
disposition (an "advancement of expenses"); provided, however, that an
advancement of expenses shall be made only upon (i) delivery to the Association
of a binding written undertaking by or on behalf of the person receiving the
advancement to repay all amounts so advanced if it is ultimately determined
that such person is not entitled to be indemnified in such proceeding,
including if such proceeding results in a final order assessing civil money
penalties against that person, requiring affirmative action by that person
in the form of payments to the Association, or removing or prohibiting that
person from service with the Association, and (ii) compliance with any other
actions or determinations required by applicable law, regulation or OCC or FDIC
interpretation to be taken or made by the Board of Directors of the Association
<PAGE>
or other persons prior to an advancement of expenses. The Association shall
cease advancing expenses at any time its Board of Directors believes that any
of the prerequisites for advancement of expenses are no longer being met.
(d) Right of Claimant to Bring Suit. If a claim under subsection (a) of the
section is not paid in full by the Association within thirty (30) days after
written claim has been received by the Association, the claimant may at any time
thereafter bring suit against the Association to recover the unpaid amount
of the claim. If successful in whole or in part in any such suit, or in a
suit brought by the Association to recover an advancement of expenses pursuant
to the terms of an undertaking, the claimant shall be entitled to be paid also
the expense of prosecuting or defending such claim. It shall be a defense to
any such action brought by the claimant to enforce a right to indemnification
hereunder (other than an action brought to enforce a claim for an advancement
of expenses where the required undertaking, if any, has been tendered to the
Association) that the claimant has not met any applicable standard for
indemnification under the law of the state in which the Association's ultimate
parent company is incorporated. In any suit brought by the Association to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Association shall be entitled to recover such expenses upon a final
adjudication that the claimant has not met any applicable standard for
indemnification standard for indemnification under the law of the state in
which the Association's ultimate parent company is incorporated.
(e) Non-Exclusivity of Rights. The rights to indemnification and the
advancement of expenses conferred in this section shall not be exclusive of any
other right which any person may have or hereafter acquired under any statute,
agreement, vote of stockholders or disinterested directors or otherwise.
(f) Insurance. The Association may purchase, maintain, and make payment or
reimbursement for reasonable premiums on, insurance to protect itself and any
director, officer, employee or agent of the Association or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Association would have the power to
indemnify such person against such expense, liability or loss under the law of
the state in which the Association's ultimate parent company is incorporated;
provided however, that such insurance shall explicitly exclude insurance
coverage for a final order of a federal bank regulatory agency assessing civil
money penalties against an Association director, officer, employee or agent.
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
greater amount of stock is required by law, and in that case by the vote of the
holders of such greater amount. The notice of any shareholders' meeting at
which an amendment to the articles of association of this Association is to be
considered shall be given as hereinabove set forth.
I hereby certify that the articles of association of this Association, in their
entirety, are listed above in items first through eleventh.
Secretary/Assistant Secretary
- --------------------------------------------------
Dated at , as of .
--------------------------------------- --------------------
Revision of February 15, 1996
<PAGE>
EXHIBIT 2
AMENDED AND RESTATED BY-LAWS OF
FLEET NATIONAL BANK
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The regular annual meeting of the shareholders for
the election of Directors and the transaction of any other business that may
properly come before the meeting shall be held at the Main Office of the
Association, or such other place as the Board of Directors may designate, on
the fourth Thursday of April in each year at 1:15 o'clock in the afternoon
unless some other hour of such day is fixed by the Board of Directors.
If, from any cause, an election of Directors is not made on such day, the Board
of Directors shall order the election to be held on some subsequent day, of
which special notice shall be given in accordance with the provisions of law,
and of these bylaws.
Section 2. Special Meetings. Special meetings of the shareholders may be called
at any time by the Board of Directors, the President, or any shareholders
owning not less than twenty-five percent (25%) of the stock of the Association.
Section 3. Notice of Meetings of Shareholders. Except as otherwise provided
by law, notice of the time and place of annual or special meetings of the
shareholders shall be mailed, postage prepaid, at least ten (10) days before
the date of the meeting to each shareholder of record entitled to vote thereat
at his address as shown upon the books of the Association; but any failure to
mail such notice to any shareholder or any irregularity therein, shall not
affect the validity of such meeting or of any of the proceedings thereat.
Notice of a special meeting shall also state the purpose of the meeting.
Section 4. Quorum; Adjourned Meetings. Unless otherwise provided by law, a
quorum for the transaction of business at every meeting of the shareholders
shall consist of not less than two-fifths (2/5) of the outstanding capital
stock represented in person or by proxy; less than such quorum may adjourn the
meeting to a future time. No notice need be given of an adjourned annual or
special meeting of the shareholders if the adjournment be to a definite place
and time.
Section 5. Votes and Proxies. At every meeting of the shareholders, each
share of the capital stock shall be entitled to one vote except as otherwise
provided by law. A majority of the votes cast shall decide every question
or matter submitted to the shareholder at any meeting, unless otherwise
provided by law or by the Articles of Association or these By-laws. Share-
holders may vote by proxies duly authorized in writing and filed with the
Cashier, but no officer, clerk, teller or bookkeeper of the Association may act
as a proxy.
<PAGE>
Section 6. Nominations to Board of Directors. At any meeting of shareholders
held for the election of Directors, nominations for election to the Board of
Directors may be made, subject to the provisions of this section, by any share-
holder of record of any outstanding class of stock of the Association entitled
to vote for the election of Directors. No person other than those whose names
are stated as proposed nominees in the proxy statement accompanying the notice
of the meeting may be nominated as such meeting unless a shareholder shall have
given to the President of the Association and to the Comptroller of the
Currency, Washington, DC written notice of intention to nominate such other
person mailed by certified mail or delivered not less than fourteen (14) days
nor more than fifty (50) days prior to the meeting of shareholders at which
such nomination is to be made; provided, however, that if less than twenty-one
(21) days' notice of such meeting is given to shareholders, such notice of
intention to nominate shall be mailed by certified mail or delivered to said
President and said Comptroller on or before the seventh day following the day
on which the notice of such meeting was mailed. Such notice of intention to
nominate shall contain the following information to the extent known to the
notifying shareholder: (a) the name and address of each proposed nominee; (b)
the principal occupation of each proposed nominee; (c) the total number of
shares of capital stock of the Association that will be voted for each proposed
nominee; (d) the name and residence address of the notifying shareholder; and
(e) the number of shares of capital stock of the Association owned by the
notifying shareholder. In the event such notice is given, the proposed nominee
may be nominated either by the shareholder giving such notice or by any other
shareholder present at the meeting at which such nomination is to be made.
Such notice may contain the names of more than one proposed nominee, and if
more than one is named, any one or more of those named may be nominated.
Section 7. Action Taken Without a Shareholder Meeting. Any action requiring
shareholder approval or consent may be taken without a meeting and without
notice of such meeting by written consent of the shareholders.
ARTICLE II
DIRECTORS
Section 1. Number. The Board of Directors shall consist of such number of
shareholders, not less than five (5) nor more than twenty-five (25), as from
time to time shall be determined by a majority of the votes to which all of its
shareholders are at the time entitled, or by the Board of Directors as
hereinafter provided.
Section 2. Mandatory Retirement for Directors. No person shall be elected a
director who has attained the age of 68 and no person shall continue to serve
as a director after the date of the first meeting of the stockholders of the
Association held on or after the date on which such person attains the age of
68; provided, however, that any director serving on the Board as of December
15, 1995 who has attained the age of 65 on or prior to such date shall be
permitted to continue to serve as a director until the date of the first
meeting of the stockholders of the Association held on or after the date on
which such person attains the age of 70.
-2-
<PAGE>
Section 3. General Powers. The Board of Directors shall exercise all the
corporate powers of the Association, except as expressly limited by law, and
shall have the control, management, direction and disposition of all its
property and affairs.
Section 4. Annual Meeting. Immediately following a meeting of shareholders
held for the election of Directors, the Cashier shall notify the directors-
elect who may be present of their election and they shall then hold a meeting
at the Main Office of the Association, or such other place as the Board of
Directors may designate, for the purpose of taking their oaths, organizing the
new Board, electing officers and transacting any other business that may come
before such meeting.
Section 5. Regular Meeting. Regular meetings of the Board of Directors shall
be held without notice at the Main Office of the Association, or such other
place as the Board of Directors may designate, at such dates and times as the
Board shall determine. If the day designated for a regular meeting falls on a
legal holiday, the meeting shall be held on the next business day.
Section 6. Special Meetings. A special meeting of the Board of Directors may
be called at anytime upon the written request of the Chairman of the Board, the
President, or of two Directors, stating the purpose of the meeting. Notice of
the time and place shall be given not later than the day before the date of the
meeting, by mailing a notice to each Director at his last known address, by
delivering such notice to him personally, or by telephoning.
Section 7. Quorum; Votes. A majority of the Board of Directors at the time
holding office shall constitute a quorum for the transaction of all business,
except when otherwise provided by law, but less than a quorum may adjourn
a meeting from time to time, and the meeting may be held, as adjourned, without
further notice. If a quorum is present when a vote is taken, the affirmative
vote of a majority of Directors present is the act of the Board of Directors.
Section 8. Action by Directors Without a Meeting. Any action requiring
Director approval or consent may be taken without a meeting and without notice
of such meeting by written consent of all the Directors.
Section 9. Telephonic Participation in Directors' Meetings. A Director or
member of a Committee of the Board of Directors may participate in a meeting of
the Board or of such Committee may participate in a meeting of the Board or of
such Committee by means of a conference telephone or similar communications
equipment enabling all Directors participating in the meeting to hear one
another, and participation in such a meeting shall constitute presence in person
at such a meeting.
Section 10. Vacancies. Vacancies in the Board of Directors may be filled by
the remaining members of the Board at any regular or special meeting of the
Board.
Section 11. Interim Appointments. The Board of Directors shall, if the share-
holders at any meeting for the election of Directors have determined a number
of Directors less than twenty-five (25), have the power, by affirmative vote of
the majority of all the Directors, to increase such number of Directors to not
more than twenty-five (25) and to elect Directors to fill the resulting
vacancies and to serve until the next annual meeting of shareholders or the
next election of Directors; provided, however, that the number of Directors
shall not be so increased by more than two (2) if the number last determined
by shareholders was fifteen (15) or less, or increased by more than four (4) if
the number last determined by shareholders was sixteen (16) or more.
Section 12. Fees. The Board of Directors shall fix the amount and direct the
payment of fees which shall be paid to each Director for attendance at any
meeting of the Board of Directors or of any Committees of the Board.
ARTICLE III
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors shall appoint from its
members an Executive Committee which shall consist of such number of persons as
the Board of Directors shall determine; the Chairman of the Board and the
President shall be members ex-officio of the Executive Committee with full
voting power. The Chairman of the Board or the President may from time to time
appoint from the Board of Directors as temporary additional members of the
Executive Committee, with full voting powers, not more than two members to serve
for such periods as the Chairman of the Board or the President may determine.
The Board of Directors shall designate a member of the Executive Committee to
serve as Chairman thereof. A meeting of the Executive Committee may be called
at any time upon the written request of the Chairman of the Board, the President
or the Chairman of the Executive Committee, stating the purpose of the meeting.
Not less than twenty four hours' notice of said meeting shall be given to each
member of the Committee personally, by telephoning, or by mail. The Chairman of
the Executive Committee or, in his absence, a member of the Committee chosen by
a majority of the members present shall preside at meetings of the Executive
Committee.
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<PAGE>
The Executive Committee shall possess and may exercise all the powers of the
Board when the Board is not in session except such as the Board, only, by law,
is authorized to exercise; it shall keep minutes of its acts and proceedings
and cause same to be presented and reported at every regular meeting and at any
special meeting of the Board including specifically, all its actions relating
to loans and discounts.
All acts done and powers and authority conferred by the Executive Committee,
from time to time, within the scope of its authority, shall be deemed to be,
and may be certified as being, the acts of and under the authority of the
Board.
Section 2. Risk Management Committee. The Board shall appoint from its
members a Risk Management Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Risk
Management Committee to serve as Chairman thereof. It shall be the duty of the
Risk Management Committee to (a) serve as the channel of communication with
management and the Board of Directors of Fleet Financial Group, Inc. to assure
that formal processes supported by management information systems are in place
for the identification, evaluation and management of significant risks inherent
in or associated with lending activities, the loan portfolio, asset-liability
management, the investment portfolio, trust and investment advisory activities,
the sale of nondeposit investment products and new products and services and
such additional activities or functions as the Board may determine from time
to time; (b) assure the formulation and adoption of policies approved by the
Risk Management Committee or Board governing lending activities, management of
the loan portfolio, the maintenance of an adequate allowance for loan and lease
losses, asset-liability management, the investment portfolio, the retail
sale of non-deposit investment products, new products and services and such
additional activities or functions as the Board may determine from time to time
(c) assure that a comprehensive independent loan review program is in place for
the early detection of problem loans and review significant reports of the loan
review department, management's responses to those reports and the risk
attributed to unresolved issues; (d) subject to control of the Board, exercise
general supervision over trust activities, the investment of trust funds, the
disposition of trust investments and the acceptance of new trusts and the terms
of such acceptance, and (e) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 3. Audit Committee. The Board shall appoint from its members and
Audit Committee which shall consist of such number as the Board shall determine
no one of whom shall be an active officer or employee of the Association or
Fleet Financial Group, Inc. or any of its affiliates. In addition, members of
the Audit Committee must not (i) have served as an officer or employee of the
Association or any of its affiliates at any time during the year prior to their
appointment; or (ii) own, control, or have owned or controlled at any time
during the year prior to appointment, ten percent (10%) or more of any
outstanding class of voting securities of the Association. At least two (2)
members of the Audit Committee must have significant executive, professional,
educational or regulatory experience in financial, auditing, accounting,
or banking matters. No member of the Audit Committee may have significant
direct or indirect credit or other relationships with the Association, the
termination of which would materially adversely affect the Association's
financial condition or results of operations.
The Board shall designate a member of the Audit Committee to serve as Chairman
thereof. It shall be the duty of the Audit Committee to (a) cause a continuous
audit and examination to be made on its behalf into the affairs of the
Association and to review the results of such examination; (b) review
significant reports of the internal auditing department, management's responses
to those reports and the risk attributed to unresolved issues; (c) review the
basis for the reports issued under Section 112 of The Federal Deposit Insurance
Corporation Improvement Act of 1991; (d) consider, in consultation with the
independent auditor and an internal auditing executive, the adequacy of the
Association's internal controls, including the resolution of identified material
weakness and reportable conditions; (e) review regulatory communications
received from any federal or state agency with supervisory jurisdiction or
other examining authority and monitor any needed corrective action by
management; (f) ensure that a formal system of internal controls is in place
for maintaining compliance with laws and regulations; (g) cause an audit of the
Trust Department at least once during each calendar year and within 15 months
of the last such audit or, in lieu thereof, adopt a continuous audit system and
report to the Board each calendar year and within 15 months of the previous
report on the performance of such audit function; and (h) perform such
additional duties and exercise such additional powers of the Board as the Board
may determine from time to time.
The Audit Committee may consult with internal counsel and retain its own
outside counsel without approval (prior or otherwise) from the Board or
management and obligate the Association to pay the fees of such counsel.
-4-
<PAGE>
Section 4. Community Affairs Committee. The Board shall appoint from its
members a Community Affairs Committee which shall consist of such number as the
Board shall determine. The Board shall designate a member of the Community
Affairs Committee to serve as Chairman thereof. It shall be the duty of the
Community Affairs Committee to (a) oversee compliance by the Association with
the Community Reinvestment Act of 1977, as amended, and the regulations
promulgated thereunder; and (b) perform such additional duties and exercise such
additional powers of the Board as the Board may determine from time to time.
Section 5. Regular Meetings. Except for the Executive Committee which shall
meet on an ad hoc basis as set forth in Section 1 of this Article, regular
meetings of the Committees of the Board of Directors shall be held, without
notice, at such time and place as the Committee or the Board of Directors may
appoint and as often as the business of the Association may require.
Section 6. Special Meetings. A Special Meeting of any of the Committees of
the Board of Directors may be called upon the written request of the Chairman
of the Board or the President, or of any two members of the respective
Committee, stating the purpose of the meeting. Not less than twenty-four
hours' notice of such special meeting shall be given to each member of the
Committee personally, by telephoning, or by mail.
Section 7. Emergency Meetings. An Emergency Meeting of any of the Committees
of the Board of Directors may be called at the request of the Chairman of the
Board or the President, who shall state that an emergency exists, upon not
less than one hour's notice to each member of the Committee personally or by
telephoning.
Section 8. Action Taken Without a Committee Meeting. Any Committee of the
Board of Directors may take action without a meeting and without notice of such
meeting by resolution assented to in writing by all members of such Committee.
Section 9. Quorum. A majority of a Committee of the Board of Directors shall
constitute a quorum for the transaction of any business at any meeting of such
Committee. If a quorum is not available, the Chairman of the Board or the
President shall have power to make temporary appointments to a Committee of-
members of the Board of Directors, to act in the place and stead of members who
temporarily cannot attend any such meeting; provided, however, that any
temporary appointment to the Audit Committee must meet the requirements for
members of that Committee set forth in Section 3 of this Article.
Section 10. Record. The committees of the Board of Directors shall keep a
record of their respective meetings and proceedings which shall be presented
at the regular meeting of the Board of Directors held in the calendar month
next following the meetings of the Committees. If there is no regular Board
of Directors meeting held in the calendar month next following the meeting of
a Committee, then such Committee's records shall be presented at the next
regular Board of Directors meeting held in a month subsequent to such Committee
meeting.
Section 11. Changes and Vacancies. The Board of Directors shall have power
to change the members of any Committee at any time and to fill vacancies on any
Committee; provided, however, that any newly appointed member of the Audit
Committee must meet the requirements for members of that Committee set forth in
Section 3 of this Article.
Section 12. Other Committees. The Board of Directors may appoint, from time
to time, other committees of one or more persons, for such purposes and with
such powers as the Board may determine.
ARTICLE IV
WAIVER OF NOTICE OF MEETINGS
Section 1. Waiver. Whenever notice is required to be given to any shareholder,
Director, or member of a Committee of the Board of Directors, such notice may
be waived in writing either before or after such meeting by any shareholder,
Director or Committee member respectively, as the case may be, who may be
entitled to such notice; and such notice will be deemed to be waived by
attendance at any such meeting.
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<PAGE>
ARTICLE V
OFFICERS AND AGENTS
Section 1. Officers. The Board shall appoint a Chairman of the Board and a
President, and shall have the power to appoint one or more Executive Vice
Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a
Cashier, a Secretary, an Auditor, a Controller, one or more Trust Officers and-
such other officers as are deemed necessary or desirable for the proper
transaction of business of the Association. The Chairman of the Board and the
President shall be appointed from members of the Board of Directors. Any two
or more offices, except those of President and Cashier, or Secretary, may be
held by the same person. The Board may, from time to time, by resolution
passed by a majority of the entire Board, designate one or more officers of the
Association or of an affiliate or of Fleet Financial Group, Inc. with power to
appoint one or more Vice Presidents and such other officers of the Association
below the level of Vice President as the officer or officers designated in such
resolution deem necessary or desirable for the proper transaction of the
business of the Association.
Section 2. Chairman of the Board. The chairman of the Board shall preside at
all meetings of the Board of Directors. Subject to definition by the Board of
Directors, he shall have general executive powers and such specific powers and
duties as from time to time may be conferred upon or assigned to him by the
Board of Directors.
Section 3. President. The President shall preside at all meetings of the
Board of Directors if there be no Chairman or if the Chairman be absent.
Subject to definition by the Board of Directors, he shall have general
executive powers and such specific powers and duties as from time to time may
be conferred upon or assigned to him by the Board of Directors.
-6-
<PAGE>
Section 4. Cashier and Secretary. The Cashier shall be the Secretary of the
Board and of the Executive Committee, and shall keep accurate minutes of their
meetings and of all meetings of the shareholders. He shall attend to the
giving of all notices required by these By-laws. He shall be custodian of the
corporate seal, records, documents and papers of the Association. He shall
have such powers and perform such duties as pertain by law or regulation to the
office of Cashier, or as are imposed by these By-laws, or as may be delegated
to him from time to time by the Board of Directors, the Chairman of the Board
or the President.
Section 5. Auditor. The Auditor shall be the chief auditing officer of the
Association. He shall continuously examine the affairs of the Association and
from time to time shall report to the Board of Directors. He shall have such
powers and perform such duties as are conferred upon, or assigned to him by
these By-laws, or as may be delegated to him from time to time by the Board
of Directors.
Section 6. Officers Seriatim. The Board of Directors shall designate from
time to time not less than two officers who shall in the absence or disability
of the Chairman or President or both, succeed seriatim to the duties and
responsibilities of the Chairman and President respectively.
Section 7. Clerks and Agents. The Board of Directors may appoint, from time
to time, such clerks, agents and employees as it may deem advisable for the
prompt and orderly transaction of the business of the Association, define
their duties, fix the salaries to be paid them and dismiss them. Subject to
the authority of the Board of Directors, the Chairman of the Board or the
President, or any other officer of the Association authorized by either of them
may appoint and dismiss all or any clerks, agents and employees and prescribe
their duties and the conditions of their employment, and from time to time
fix their compensation.
Section 8. Tenure. The Chairman of the Board of Directors and the President
shall, except in the case of death, resignation, retirement or disqualification
under these By-laws, or unless removed by the affirmative vote of at least two-
thirds of all of the members of the Board of Directors, hold office for the
term of one year or until their respective successors are appointed. Either
of such officers appointed to fill a vacancy occurring in an unexpired term
shall serve for such unexpired term of such vacancy. All other officers,
clerks, agents, attorneys-in-fact and employees of the Association shall hold
office during the pleasure of the Board of Directors or of the officer or
committee appointing them respectively.
ARTICLE VI
TRUST DEPARTMENT
Section 1. General Powers and Duties. All fiduciary powers of the Association
shall be exercised through the Trust Department, subject to such regulations as
the Comptroller of the Currency shall from time to time establish. The Trust
Department shall be to placed under the management and immediate supervision
of an officer or officers appointed by the Board of Directors. The duties of
all officers of the Trust Department shall be to cause the policies and
instructions of the Board and the Risk Management Committee with respect to the
trusts under their supervision to be carried out, and to supervise the due
performance of the trusts and agencies entrusted to the Association and under
their supervision, in accordance with law and in accordance with the terms of
such trusts and agencies.
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<PAGE>
ARTICLE VII
BRANCH OFFICES
Section 1. Establishment. The Board of Directors shall have full power to
establish, to discontinue, or, from time to time, to change the location of any
branch office, subject to such limitations as may be provided by law.
Section 2. Supervision and Control. Subject to the general supervision and
control of the Board of Directors, the affairs of branch offices shall be
under the immediate supervision and control of the President or of such other
officer or officers, employee or employees, or other individuals as the Board
of Directors may from time to time determine, with such powers and duties as
the Board of Directors may confer upon or assign to him or them.
ARTICLE VIII
SIGNATURE POWERS
Section 1. Authorization. The power of officers, employees, agents and
attorneys to sign on behalf of and to affix the seal of the Association shall
be prescribed by the Board of Directors or by the Executive Committee or by
both; provided that the President is authorized to restrict such power of any
officer, employee, agent or attorney to the business of a specific department
or departments, or to a specific branch office or branch offices. Facsimile
signatures may be authorized.
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<PAGE>
ARTICLE IX
STOCK CERTIFICATES AND TRANSFERS
Section 1. Stock Records. The Trust Department shall have custody of the
stock certificate books and stock ledgers of the Association, and shall make
all transfers of stock, issue certificates thereof and disburse dividends
declared thereon.
Section 2. Form of Certificate. Every shareholder shall be entitled to a
certificate conforming to the requirements of law and otherwise in such form
as the Board of Directors may approve. The certificates shall state on the
face thereof that the stock is transferable only on the books of the
Association and shall be signed by such officers as may be prescribed from time
to time by the Board of Directors or Executive Committee. Facsimile signatures
may be authorized.
Section 3. Transfers of Stock. Transfers of stock shall be made only on the
books of the Association by the holder in person, or by attorney duly
authorized in writing, upon surrender of the certificate therefor properly
endorsed, or upon the surrender of such certificate accompanied by a properly
executed written assignment of the same, or a written power of attorney to
sell, assign or transfer the same or the shares represented thereby.
Section 4. Lost Certificate. The Board of Directors or Executive Committee
may order a new certificate to be issued in place of a certificate lost or
destroyed, upon proof of such loss or destruction and upon tender to the
Association by the shareholder, of a bond in such amount and with or without
surety, as may be ordered, indemnifying the Association against all liability,
loss, cost and damage by reason of such loss or destruction and the issuance
of a new certificate.
Section 5. Closing Transfer Books. The Board of Directors may close the
transfer books for a period not exceeding thirty days preceding any regular
or special meeting of the shareholders, or the day designated for the payment
of a dividend or the allotment of rights. In lieu of closing the transfer
books the Board of Directors may fix a day and hour not more than thirty days
prior to the day of holding any meeting of the shareholders, or the day
designated for the payment of a dividend, or the day designated for the
allotment of rights, or the day when any change of conversion or exchange of
capital stock is to go into effect, as the day as of which shareholders
entitled to notice of and to vote at such meetings or entitled to such dividend
or to such allotment of rights or to exercise the rights in respect of any
such change, conversion or exchange of capital stock, shall be determined, and
only such shareholders as shall be shareholders of record on the day and hour
so fixed shall be entitled to notice of and to vote at such meeting or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights, as the case may be.
ARTICLE X
THE CORPORATE SEAL
Section 1. Seal. The following is an impression of the seal of the
Association adopted by the Board of Directors.
ARTICLE XI
BUSINESS HOURS
Section 1. Business Hours. The main office of this Association and each
branch office thereof shall be open for business on such days, and for such
hours as the Chairman, or the President, or any Executive Vice President, or
such other officer as the Board of Directors shall from time to time
designate, may determine as to each office to conform to local custom and
convenience, provided that any one or more of the main and branch offices or
certain departments thereof may be open for such hours as the President, or
such other officer as the Board of Directors shall from time to time designate,
may determine as to each office or department on any legal holiday on which
work is not prohibited by law, and provided further that any one or more of
the main and branch offices or certain departments thereof may be ordered
closed or open on any day for such hours as to each office or department as
the President, or such other officer as the Board of Directors shall from time
to time designate, subject to applicable laws regulations, may determine when
such action may be required by reason of disaster or other emergency condition.
ARTICLE IX
CHANGES IN BY-LAWS
Section 1. Amendments. These By-laws may be amended upon vote of a majority
of the entire Board of Directors at any meeting of the Board, provided ten (10)
day's notice of the proposed amendment has been given to each member of the
Board of Directors. No amendment may be made unless the By-law, as amended, is
consistent with the requirements of law and of the Articles of Association.
These By-laws may also be amended by the Association's shareholders.
A true copy
Attest:
Secretary/Assistant Secretary
- ---------------------------------------
Dated at , as of .
--------------------------------------- ----------------------
Revision of January 11, 1993
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<PAGE>
[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 of all National Banking
Associations.
2. "Fleet National Bank," (Charter No. 1338) 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
[SEAL]
District of Columbia, this 23rd day of
December, 1996.
/s/
----------------------
Comptroller of the Currency
<PAGE>
EXHIBIT 4
CONSENT OF THE TRUSTEE
REQUIRED BY SECTION 321(b)
OF THE TRUST INDENTURE ACT OF 1939
The undersigned, as Trustee under an Indenture to be entered into
between ______________and Fleet National Bank, Trustee, does hereby consent
that, pursuant to Section 321(b) of the Trust Indenture Act of 1939, reports of
examinations with respect to the undersigned by Federal, State, Territorial or
District authorities may be furnished by such authorities to the Securities and
Exchange Commission upon request therefor.
FLEET NATIONAL BANK,
Trustee
By _____________________
Name:
Title:
Dated:
<PAGE>
[FEDERAL FINANCIAL INSTITUTIONS EXAMINATION COUNCIL LETTERHEAD]
- -------------------------------------------------------------------------------
Please refer to page i,
[LOGO] Table of Contents, for 1
the required disclosure
of estimated burden.
- -------------------------------------------------------------------------------
CONSOLIDATED REPORTS OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC AND
FOREIGN OFFICES - FFIEC 031
(961231)
REPORT AT THE CLOSE OF BUSINESS DECEMBER 31, 1996 -----------
(RCRI 9999)
This report is required by law: 12 U.S.C. Section 324 (State member banks); 12
U.S.C. Section 1817 (State nonmember banks); and 12 U.S.C. Section 161
(National banks).
This report form is to be filed by banks with branches and consolidated
subsidiaries in U.S. territories and possessions, Edge or Agreement
subsidiaries, foreign branches, consolidated foreign subsidiaries, or
International Banking Facilities.
- ------------------------------------------------------------------------------
NOTE: The Reports of Condition and Income must be signed by an authorized
officer and the Report of Condition must be attested to by not less than two
directors (trustees) for State nonmember banks and three directors for State
member and National banks.
I, Giro S. DeRosa, Vice President
- -----------------------------------------------------
Name and Title of Officer Authorized to Sign Report
of the named bank do hereby declare that these Reports of Condition and Income
(including the supporting schedules) have been prepared in conformance with
the instructions issued by the appropriate Federal regulatory authority and are
true to the best of my knowledge and belief.
/s/ Giro DeRosa
- ----------------------------------------------
Signature of Officer Authorized to Sign Report
January 23, 1997
- -----------------
Date of Signature
The Reports of Condition and Income are to be prepared in accordance with
Federal regulatory authority instructions. NOTE: These instructions may in
some cases differ from generally accepted accounting principles.
We, the undersigned directors (trustees), attest to the correctness of this
Report of Condition (including the supporting schedules) and declare that it
has been examined by us and to the best of our knowledge and belief has been
prepared in conformance with the instructions issued by the appropriate Federal
regulatory authority and is true and correct.
/s/
- ------------------
Director (Trustee)
/s/
- ------------------
Director (Trustee)
/s/
- -------------------
Director (Trustee)
- -----------------------------------------------------------------------------
FOR BANKS SUBMITTING HARD COPY REPORT FORMS:
STATE MEMBER BANKS: Return the original and one copy to the appropriate Federal
Reserve District Bank.
STATE NONMEMBER BANKS: Return the original only in the special return address
envelope provided. If express mail is used in lieu of the special return
address envelope, return the original only to the FDIC, c/o Quality Data
Systems, 2127 Espey Court, Suite 204, Crofton, MD 21114.
NATIONAL BANKS: Return the original only in the special return address envelope
provided. If express mail is used in lieu of the special return address
envelope, return the original only to the FDIC, c/o Quality Data Systems, 2127
Espey Court, Suite 204, Crofton, MD 21114.
- -------------------------------------------------------------------------------
FDIC Certificate Number [02499] Banks should affix the address label in
----------- this space.
(RCRI 9050)
Fleet National Bank
---------------------------------------
Legal Title of Bank (TEXT 9010)
One Monarch Place
---------------------------------------
City (TEXT 9131)
Springfield, MA 01102
---------------------------------------
State Abbrev. Zip Code
(TEXT 9200) (TEXT 9220)
<PAGE>
FFIEC 031
Consolidated Reports of Condition and Income for a Bank With Page i
Domestic and Foreign Offices 2
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
SIGNATURE PAGE Cover
REPORT OF INCOME
Schedule RI--Income Statement.....................RI-1, 2, 3
Schedule RI-A--Changes in Equity Capital................RI-4
Schedule RI-B--Charge-offs and Recoveries and Changes
in Allowance For Loan and Lease Losses.............RI-4, 5
Schedule RI-C--Applicable Income Taxes by Taxing
Authority.............................................RI-5
Schedule RI-D--Income from International Operations.....RI-6
Schedule RI-E--Explanations..........................RI-7, 8
REPORT OF CONDITION
Schedule RC--Balance Sheet...........................RC-1, 2
Schedule RC-A--Cash and Balances Due from Depository
Institutions..........................................RC-3
Schedule RC-B--Securities.........................RC-3, 4, 5
Schedule RC-C--Loans and Lease Financing
Receivables:
Part I. Loans and Leases..........................RC-6, 7
Part II. Loans to Small Businesses and Small
Farms (included in the forms for June 30
only).........................................RC-7a, 7b
Schedule RC-D--Trading Assets and Liabilities (to
be completed only be selected banks)..................RC-8
Schedule RC-E--Deposit Liabilities..............RC-9, 10, 11
Schedule RC-F--Other Assets............................RC-11
Schedule RC-G--Other Liabilities.......................RC-11
Schedule RC-H--Selected Balance Sheet Items for
Domestic Offices.....................................RC-12
Schedule RC-I--Selected Assets and Liabilities of
IBFs.................................................RC-13
Schedule RC-K--Quarterly Averages......................RC-13
Schedule RC-L--Off-Balance Sheet Items.........RC-14, 15, 16
Schedule RC-M--Memoranda...........................RC-17, 18
Schedule RC-N--Past Due and Nonaccrual Loans,
Leases, and Other Assets.........................RC-19, 20
Schedule RC-O--Other Data for Deposit Insurance
Assessments......................................RC-21, 22
Schedule RC-R--Regulatory Capital..................RC-23, 24
Optional Narrative Statement Concerning the
Amounts Reported in the Reports of Condition
and Income...........................................RC-25
Special Report (TO BE COMPLETED BY ALL BANKS)
Schedule RC-J--Repricing Opportunities (sent only
to and to be completed by savings banks)
DISCLOSURE OF ESTIMATED BURDEN
The estimated average burden associated with this information collection is
32.2 hours per respondent and is estimated to vary from 15 to 230 hours per
response, depending on individual circumstances. Burden estimates include the
time for reviewing instructions, gathering and maintaining data in the
required form, and completing the information collection, but exclude the time
for compiling and maintaining business records in the normal course of a
respondent's activities. Comments concerning the accuracy of this burden
estimate and suggestions for reducing this burden should be directed to the
Office of Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503, and to one of the following:
Secretary
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
Legislative and Regulatory Analysis Division
Office of the Comptroller of the Currency
Washington, D.C. 20219
Assistant Executive Secretary
Federal Deposit Insurance Corporation
Washington, D.C. 20429
For Information or assistance, National and State nonmember banks should
contact the FDIC's Call Reports Analysis Unit, 550 17th Street, NW, Washington,
D.C. 20429, toll free on (800) 688-FDIC(3342), Monday through Friday between
8:00 a.m. and 5:00 p.m., Eastern time. State member banks should contact their
Federal Reserve District Bank.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
CONSOLIDATED REPORT OF INCOME
FOR THE PERIOD JANUARY 1, 1996-DECEMBER 31, 1996
ALL REPORT OF INCOME SCHEDULES ARE TO BE REPORTED ON A CALENDAR YEAR-TO-DATE BASIS IN THOUSANDS OF DOLLARS.
SCHEDULE RI--INCOME STATEMENT
I480 <-
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income: //////////////////
a. Interest and fee income on loans: //////////////////
(1) In domestic offices: //////////////////
(a) Loans secured by real estate................................................. 4011 1,092,992 1.a.(1)(a)
(b) Loans to depository institutions............................................. 4019 1,482 1.a.(1)(b)
(c) Loans to finance agricultural production and other loans to farmers.......... 4024 501 1.a.(1)(c)
(d) Commercial and industrial loans.............................................. 4012 1,132,500 1.a.(1)(d)
(e) Acceptances of other banks................................................... 4026 264 1.a.(1)(e)
(f) Loans to individuals for household, family, and other personal expeditures: //////////////////
(1) Credit cards and related plans............................................ 4054 16,485 1.a.(1)(f)(1)
(2) Other.................................................................... 4055 189,926 1.a.(1)(f)(2)
(g) Loans to foreign governments and official institutions....................... 4056 0 1.a.(1)(g)
(h) Obligations (other than securities and leases) of states and political //////////////////
subdivisions in the U.S.: //////////////////
(1) Taxable obligations...................................................... 4503 0 1.a.(1)(h)(1)
(2) Tax-exempt obligations................................................... 4504 10,381 1.a.(1)(h)(2)
(i) All other loans in domestic offices.......................................... 4058 147,087 1.a.(1)(i)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................... 4059 4,161 1.a.(2)
b. Income from lease financing receivables: //////////////////
(1) Taxable leases................................................................... 4505 152,848 1.b.(1)
(2) Tax-exempt leases................................................................ 4307 1,511 1.b.(2)
c. Interest income on balances due from depository instituions: (1) //////////////////
(1) In domestic offices.............................................................. 4105 1,644 1.c.(1)
(2) In foreign offices, Edge and Agreement subsidiaries, and IBFs.................... 4106 142 1.c.(2)
d. Interest and dividend income on securities: //////////////////
(1) U.S. Treasury securities and U.S. Government agency and corporation obligations.. 4027 422,212 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 6,495 1.d.(2)(b)
(3) Other domestic debt securities................................................... 3657 12,976 1.d.(3)
(4) Foreign debt securities.......................................................... 3658 6,621 1.d.(4)
(5) Equity securities (including investments in mutual funds)........................ 3659 17,504 1.d.(5)
e. Interest income from trading assets.................................................. 4069 479 1.e.
------------------
</TABLE>
- ----------
(1) Includes interest income on time certificates of deposit not held for
trading.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI--CONTINUED
Dollar Amounts in Thousands Year-to-date
RIAD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income (continued)
f. Interest income on federal funds sold and securities purchased under //////////////////
agreements to resell in domestic offices of the bank and of its Edge //////////////////
and Agreement subsidiaries, and in IBFs ............................. 4020 25,839 1.f.
g. Total interest income (sum of items 1.a through 1.f) ................ 4107 3,244,050 1.g.
2. Interest expense: //////////////////
a. Interest on deposits: //////////////////
(1) Interest on deposits in domestic offices: //////////////////
(a) Transaction accounts (NOW accounts, ATS accounts, and //////////////////
telephone and preauthorized transfer accounts) .............. 4508 13,070 2.a.(1)(a)
(b) Nontransaction accounts: //////////////////
(1) Money market deposit accounts (MMDAs) ................... 4509 257,330 2.a.(1)(b)(1)
(2) Other savings deposits .................................. 4511 48,169 2.a.(1)(b)(2)
(3) Time certificates of deposit of $100,000 or more ........ 4174 170,575 2.a.(1)(b)(3)
(4) All other time deposits ................................. 4512 403,831 2.a.(1)(b)(4)
(2) Interest on deposits in foreign offices, Edge and Agreement //////////////////
subsidiaries, and IBFs .......................................... 4172 100,766 2.a.(2)
b. Expense of federal funds purchased and securities sold under //////////////////
agreements to repurchase in domestic offices of the bank and of its //////////////////
Edge and Agreement subsidiaries, and in IBFs ........................ 4180 282,599 2.b.
c. Interest on demand notes issued to the U.S. Treasury, trading //////////////////
liabilities, and other borrowed money ............................... 4185 161,582 2.c.
d. Interest on mortgage indebtedness and obligations under capitalized //////////////////
leases .............................................................. 4072 859 2.d.
e. Interest on subordinated notes and debentures ....................... 4200 69,434 2.e.
f. Total interest expense (sum of items 2.a through 2.e) ............... 4073 1,508,215 2.f.
3. Net interest income (item 1.g minus 2.f) .............................. ////////////////// RIAD 4074 1,735,835 3.
4. Provisions: //////////////////
a. Provision for loan and lease losses ................................. ////////////////// RIAD 4230 (6,834) 4.a.
b. Provision for allocated transfer risk ............................... ////////////////// RIAD 4243 0 4.b.
5. Noninterest income: //////////////////
a. Income from fiduciary activities .................................... 4070 295,272 5.a.
b. Service charges on deposit accounts in domestic offices ............. 4080 222,313 5.b.
c. TRADING REVENUE (MUST EQUAL SCHEDULE RI, SUM OF MEMORANDUM //////////////////
ITEMS 8.a THROUGH 8.d) .............................................. A220 25,253 5.c.
d. Other foreign transaction gains (losses) ............................ 4076 346 5.d.
e. Not applicable //////////////////
f. Other noninterest income: //////////////////
(1) Other fee income ................................................ 5407 797,631 5.f.(1)
(2) All other noninterest income* ................................... 5408 350,869 5.f.(2)
g. Total noninterest income (sum of items 5.a through 5.f) ............. ////////////////// RIAD 4079 1,691,684 5.g.
6. a. Realized gains (losses) on held-to-maturity securities .............. ////////////////// RIAD 3521 52 6.a.
b. Realized gains (losses) on available-for-sale securities ............ ////////////////// RIAD 3196 12,071 6.b.
7. Noninterest expense: //////////////////
a. Salaries and employee benefits ...................................... 4135 645,873 7.a.
b. Expenses of premises and fixed assets (net of rental income) //////////////////
(excluding salaries and employee benefits and mortgage interest ..... 4217 211,199 7.b.
c. Other noninterest expense* .......................................... 4092 1,243,839 7.c.
d. Total noninterest expense (sum of items 7.a through 7.c) ............ ////////////////// RIAD 4093 2,100,911 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 1,345,565 8.
9. Applicable income taxes (on item 8) .................................... ////////////////// RIAD 4302 548,252 9.
10. Income (loss) before extraordinary items and other adjustments (item 8 //////////////////
minus 9) ............................................................... ////////////////// RIAD 4300 797,313 10.
- ------------
*Describe on Schedule RI-E--Explanations.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI--CONTINUED
Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
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 item 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 797,313 12.
----------------------------------------------------
</TABLE>
<TABLE>
I481 <-
------------
Memoranda Year-to-date
------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <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 2,891 M.1.
2. Income from the sale and servicing of mutual funds and annuities in domestic offices //////////////////
(included in Schedule RI, item 8)............................................................ 8431 46,475 M.2.
3.-4. Not applicable //////////////////
5. Number of full-time equivalent employees on payroll at end of current period (round to //// Number
nearest whole number)........................................................................ 4150 12,425 M.5.
6. Not applicable //////////////////
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): //// Bil Mil Thou
a. Interest rate exposures.................................................................. 8757 5,738 M.8.a.
b. Foreign exchange exposures............................................................... 8758 19,515 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 2,698 M.9.a.
b. Net (increase) decrease to interest expense.............................................. 8762 (4,902) M.9.b.
c. Other (noninterest) allocations.......................................................... 8763 12 M.9.c.
10. CREDIT LOSSES ON OFF-BALANCE SHEET DERIVATIVES (SEE INSTRUCTIONS)............................ A251 0 M.10.
</TABLE>
- -----------------
*Describe on Schedule RI-E--Explanations.
5
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI-A--CHANGES IN EQUITY CAPITAL
Indicate decreases and losses in parentheses.
I483 <-
-----------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total equity capital originally reported in the December 31, 1995, Reports of Condition //////////////////
and Income............................................................................... 3215 1,342,473 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 1,342,473 3.
4. Net income (loss) (must equal Schedule RI, item 12)...................................... 4340 797,313 4.
5. Sale, conversion, acquisition, or retirement of capital stock, net....................... 4346 0 5.
6. Changes incident to business combinations, net........................................... 4356 4,161,079 6.
7. LESS: Cash dividends declared on preferred stock......................................... 4470 11,688 7.
8. LESS: Cash dividends declared on common stock............................................ 4460 761,473 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 (4,870) 11.
12. Foreign currency translation adjustments................................................. 4414 0 12.
13. Other transactions with parent holding company* (not included in items 5,7, or 8 above).. 4415 (1,003,722) 13.
14. Total equity capital end of current period (sum of items 3 through 13) (must equal //////////////////
Schedule RC, item 28).................................................................... 3210 4,519,112 14.
-------------------
</TABLE>
- ---------------
*Describe on Schedule RI-E--Explanations.
<TABLE>
<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
PART I EXCLUDES CHARGE-OFFS AND RECOVERIES THROUGH
THE ALLOCATED TRANSFER RISK RESERVE.
I486 <-
--------
(Column A) (Column B)
Charge-offs Recoveries
----------------------------------------
Calendar year-to-date
----------------------------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou RIAD Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Loans secured by real estate: ////////////////// //////////////////
a. To U.S. addressees (domicile)................................... 4651 65,946 4661 16,055 1.a.
b. To non-U.S. addressees (domicile)............................... 4652 0 4662 0 1.b.
2. Loans to depository institutions and acceptances of other banks: ////////////////// //////////////////
a. To U.S. banks and other U.S. depository institutions............ 4653 0 4663 0 2.a.
b. To foreign banks................................................ 4654 0 4664 0 2.b.
3. Loans to finance agricultural production and other loans to farmers. 4655 69 4665 105 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile)................................... 4645 73,869 4617 43,048 4.a.
b. To non-U.S. addressees (domicile)............................... 4646 0 4618 102 4.b.
5. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures: ////////////////// //////////////////
a. Credit cards and related plans.................................. 4656 2,356 4666 1,468 5.a.
b. Other (includes single payment, installment, and all student
loans).............................................................. 4657 29,089 4667 5,303 5.b.
6. Loans to foreign governments and official institutions.............. 4643 0 4627 0 6.
7. All other loans..................................................... 4644 5,253 4628 965 7.
8. Lease financing receivables: ////////////////// //////////////////
a. Of U.S. addressees (domicile)................................... 4658 12,926 4668 4,622 8.a.
b. Of non-U.S. addressees (domicile)............................... 4659 0 4669 0 8.b.
9. Total (sum of items 1 through 8).................................... 4635 189,508 4605 71,668 9.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RI-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI-B--CONTINUED
PART I. CONTINUED
(Column A) (Column B)
Charge-offs Recoveries
-------------------------------------
Calendar-year-to-date
-------------------------------------
Memoranda
Dollar Amounts in Thousands RIAD BIL MIL THOU RIAD BIL MIL THOU
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1-3. 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 4 and 7, above.......................... 5409 714 5410 1,374 M.4.
5. Loans secured by real estate in domestic offices (included in ////////////////// //////////////////
Schedule RI-B, part I, item 1, above): ////////////////// //////////////////
a. Construction and land development................................. 3582 266 3583 337 M.5.a.
b. Secured by farmland............................................... 3584 145 3585 304 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................. 5411 4,428 5412 619 M.5.c.(1)
(2) All other loans secured by 1-4 family residential properties.. 5413 31,124 5414 3,602 M.5.c.(2)
d. Secured by multifamily (5 or more) residential properties.......... 3588 5,579 3589 590 M.5.d.
e. Secured by nonfarm nonresidential properties...................... 3590 24,404 3591 10,603 M.5.e.
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PART II. CHANGES IN ALLOWANCE FOR LOAN AND LEASE LOSSES
Dollar Amounts in Thousands RIAD BIL MIL THOU
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Balance originally reported in the December 31, 1995, Reports of Condition and Income....... 3124 266,943 1.
2. Recoveries (must equal part I, item 9, column B above)...................................... 4605 71,668 2.
3. LESS: Charge-offs (must equal part I, item 9, column A above)................................ 4635 189,508 3.
4. Provision for loan and lease losses (must equal Schedule RI, item 4.a)...................... 4230 (6,834) 4.
5. Adjustments* (see instructions for this schedule)........................................... 4815 634,542 5.
6. Balance end of current period (sum of items 1 through 5) (must equal Schedule RC, //////////////////
item 4.b)................................................................................... 3123 776,811 6.
------------------
- ------------
*Describe on Schedule RI-E--Explanations.
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RI-C--APPLICABLE INCOME TAXES BY TAXING AUTHORITY
SCHEDULE RI-C IS TO BE REPORTED WITH THE DECEMBER REPORT OF INCOME.
I489
-----------------
Dollar Amounts in Thousands RIAD BIL MIL THOU
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Federal................................................................................... 4780 461,184 1.
2. State and local........................................................................... 4790 87,068 2.
3. Foreign................................................................................... 4795 0 3.
4. Total (sum of items 1 through 3) (must equal sum of Schedule RI, items 9 and 11.b)........ 4770 548,252 4.
5. Deferred portion of item 4............................................ RIAD 4772 274,648 ////////////////// 5.
------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI-D--INCOME FROM INTERNATIONAL OPERATIONS
FOR ALL BANKS WITH FOREIGN OFFICES, EDGE OR AGREEMENT SUBSIDIARIES, OR IBFs WHERE INTERNATIONAL OPERATIONS ACCOUNT FOR MORE THAN
10 PERCENT OF TOTAL REVENUES, TOTAL ASSETS, OR NET INCOME.
PART I. ESTIMATED INCOME FROM INTERNATIONAL OPERATIONS
I492
-------------------
Year-to-date
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income and expense booked at foreign offices, Edge and Agreement subsidiaries, //////////////////
and IBFs //////////////////
a. Interest income booked............................................................... 4837 N/A 1.a.
b. Interest expense booked.............................................................. 4038 N/A 1.b.
c. Net interest income booked at foreign offices, Edge and Agreement subsidiaries, and //////////////////
IBFs (item 1.a minus 1.b)............................................................ 4839 N/A 1.c.
2. Adjustments for booking location of international operations: //////////////////
a. Net interest income attributable to international operations booked at domestic //////////////////
offices.............................................................................. 4840 N/A 2.a.
b. Net interest income attributable to domestic business booked at foreign offices...... 4841 N/A 2.b.
c. Net booking location adjustment (item 2.a minus 2.b)................................. 4842 N/A 2.c.
3. Noninterest income and expense attributable to international operations: //////////////////
a. Noninterest income attributable to international operations.......................... 4097 N/A 3.a.
b. Provision for loan and lease losses attributable to international operations......... 4235 N/A 3.b.
c. Other noninterest expense attributable to international operations................... 4239 N/A 3.c.
d. Net noninterest income (expense) attributable to international operations (item 3.a //////////////////
minus 3.b and 3.c).................................................................. 4843 N/A 3.d.
4. Estimated pretax income attributable to international operations before capital //////////////////
allocation adjustment (sum of items 1.c, 2.c, and 3.d)................................. 4844 N/A 4.
5. Adjustment to pretax income for internal allocations to international operations to //////////////////
reflect the effects of equity capital on overall bank funding costs.................... 4845 N/A 5.
6. Estimated pretax income attributable to international operations after //////////////////
capital allocation adjustment (sum of items 4 and 5)................................... 4846 N/A 6.
7. Income taxes attributable to income from international operations as estimated in //////////////////
item 6................................................................................. 4797 N/A 7.
8. Estimated net income attributable to international operations (item 6 minus 7)......... 4341 N/A 8.
</TABLE>
<TABLE>
<CAPTION>
memoranda Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Intracompany interest income included in item 1.a above................................ 4847 N/A M.1.
2. Intracompany interest expense included in item 1.b above............................... 4848 N/A M.2.
</TABLE>
PART II. SUPPLEMENTARY DETAILS ON INCOME FROM INTERNATIONAL OPERATIONS REQUIRED
BY THE DEPARTMENTS OF COMMERCE AND TREASURY FOR PURPOSES OF THE U.S.
INTERNATIONAL ACCOUNTS AND THE U.S. NATIONAL INCOME AND PRODUCT ACCOUNTS
<TABLE>
<CAPTION>
Year-to-date
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Interest income booked at IBFs......................................................... 4849 N/A 1.
2. Interest expense booked at IBFs........................................................ 4850 N/A 2.
3. Noninterest income attributable to international operations booked at domestic //////////////////
offices (excluding IBFs): //////////////////
a. Gains (losses) and extraordinary items.............................................. 5491 N/A 3.a.
b. Fees and other noninterest income................................................... 5492 N/A 3.b.
4. Provision for loan and lease losses attributable to international operations booked at //////////////////
domestic offices (excluding IBFs)...................................................... 4852 N/A 4.
5. Other noninterest expense attributable to international operations booked at domestic //////////////////
offices (excluding IBFs)............................................................... 4853 N/A 5.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI-E--EXPLANATIONS
SCHEDULE RI-E IS TO BE COMPLETED EACH QUARTER ON A CALENDER 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.)
I495 <-
-------------------
Year-to-date
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. All other noninterest income (from Schedule RI, item 5.f.(2)) //////////////////
Report amounts that exceed 10% 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 10% of Schedule RI, //////////////////
item 5.f.(2): //////////////////
d. TEXT 4461 INCOME ON MORTGAGES HELD FOR RESALE 4461 147,813 1.d.
e. TEXT 4462 GAIN FROM BRANCH DIVESTITURES 4462 77,976 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 278,276 2.a.
Report amounts that exceed 10% 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 10% of Schedule RI, //////////////////
item 7.c: //////////////////
e. TEXT 4464 INTERCOMPANY CORPORATE SUPPORT FUNCTION CHARGES 4464 296,172 2.e.
f. TEXT 4467 INTERCOMPANY DATA PROCESSING & PROGRAMMING CHARGES 4467 315,897 2.f.
g. TEXT 4468 4468 2.g.
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 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.
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RI-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI-E--CONTINUED
-------------------
Year-to-date
-------------------
Dollar Amounts in Thousands RIAD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7. Other transactions with parent holding company (from Schedule RI-A, item 13) //////////////////
(itemize and describe all such transactions): //////////////////
a. TEXT 4498 FLEET NATIONAL BANK SURPLUS DISTRIBUTION TO FFG .......................... 4498 (1,003,722) 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 12/31/95 ENDING BALANCE OF POOLED ENTITIES ............................... 4521 636,497 8.a.
b. TEXT 4522 DIVESTED ALLOWANCE RELATED TO SOLD LOANS ................................. 4522 (1,955) 8.b.
9. Other explanations (the space below is provided for the bank to briefly describe, at its -------------------
option, any other significant items affecting the Report of Income): I498 | I499 <-
No comment [X] (RIAD 4769) -------------------
Other explanations (please type or print clearly):
(TEXT 4769)
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-1
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR DECEMBER 31, 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
C400
------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 3,923,408 1.a.
b. Interest-bearing balances(2) ..................................................... 0071 68,691 1.b.
2. Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A) ....................... 1754 261,390 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) ..................... 1773 4,958,338 2.b.
3. Federal funds sold and securities purchased under agreements to resell in domestic //////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: //////////////////
a. Federal funds sold .............................................................. 0276 25,709 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) RCFD 2122 31,260,436 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses ................... RCFD 3123 776,811 ////////////////// 4.b.
c. LESS: Allocated transfer risk reserve ....................... RCFD 3128 0 ////////////////// 4.c.
d. Loans and leases, net of unearned income, //////////////////
allowance, and reserve (item 4.a minus 4.b and 4.c) .............................. 2125 30,483,625 4.d.
5. Trading assets (from Schedule RC-D) ................................................. 3545 73,333 5.
6. Premises and fixed assets (including capitalized leases) ............................ 2145 536,686 6.
7. Other real estate owned (from Schedule RC-M) ........................................ 2145 18,911 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 6,380 9.
10. Intangible assets (from Schedule RC-M) .............................................. 2143 2,316,633 10.
11. Other assets (from Schedule RC-F) ................................................... 2160 3,907,689 11.
12. Total assets (sum of items 1 through 11) ............................................ 2170 46,580,793 12.
------------------
</TABLE>
- ------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
11
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-2
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC--CONTINUED
-----------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
LIABILITIES ///////////////////////
13. Deposits: ///////////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, ///////////////////////
part I) ........................................................................... RCON 2200 32,792,158 13.a.
(1) Noninterest-bearing(1) .............................. RCON 6631 10,359,674 /////////////////////// 13.a.(1)
(2) Interest-bearing .................................... RCON 6636 22,432,484 /////////////////////// 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from ///////////////////////
Schedule RC-E, part II ............................................................ RCFN 2200 2,414,427 13.b.
(1) Noninterest-bearing ................................. RCFN 6631 51,133 /////////////////////// 13.b.(1)
(2) Interest-bearing .................................... RCFN 6636 2,363,294 /////////////////////// 13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase in domestic ///////////////////////
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: ///////////////////////
a. Federal funds purchased ........................................................... RCFD 0278 2,999,129 14.a.
b. Securities sold under agreements to repurchase .................................... RCFD 0279 119,013 14.b.
15. a. Demand notes issued to the U.S. Treasury .......................................... RCON 2840 2,393 15.a.
b. Trading liabilities (from Schedule RC-D) .......................................... RCFD 3548 60,855 15.b.
16. Other borrowed money: ///////////////////////
a. WITH A REMAINING MATURITY OF ONE YEAR OR LESS ..................................... RCFD 2332 304,551 16.a.
b. WITH A REMAINING MATURITY OF MORE THAN ONE YEAR ................................... RCFD 2333 631,435 16.b.
17. Mortgage indebtedness and obligations under capitalized leases ....................... RCFD 2910 11,267 17.
18. Bank's liability on acceptances executed and outstanding ............................. RCFD 2920 6,380 18.
19. Subordinated notes and debentures .................................................... RCFD 3200 1,213,219 19.
20. Other liabilities (from Schedule RC-G) ............................................... RCFD 2930 1,506,854 20.
21. Total liabilities (sum of items 13 through 20) ....................................... RCFD 2948 42,061,681 21.
///////////////////////
22. Limited-life preferred stock and related surplus ..................................... RCFD 3282 0 22.
EQUITY CAPITAL ///////////////////////
23. Perpetual preferred stock and related surplus ........................................ RCFD 3838 125,000 23.
24. Common stock ......................................................................... RCFD 3230 19,487 24.
25. Surplus (exclude all surplus related to preferred stock) ............................. RCFD 3839 2,551,927 25.
26. a. Undivided profits and capital reserves ............................................ RCFD 3632 1,813,664 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ............ RCFD 8434 9,034 26.b.
27. Cumulative foreign currency translation adjustments .................................. RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27) .................................... RCFD 3210 4,519,112 28.
29. Total liabilities, limited-life preferred stock, and equity capital ///////////////////////
(sum of items 21, 22, and 28)......................................................... RCFD 3300 46,580,793 29.
Memorandum
TO BE REPORTED ONLY WITH THE MARCH REPORT OF CONDITION.
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external ---------------------
auditors as of any date during 1995 .................................................. RCFD 6724 N/A M.1.
---------------------
</TABLE>
1 - Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 - Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 - Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 - Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 - Review of the bank's financial statements by external auditors
6 - Compilation of the bank's financial statements by external auditors
7 - Other audit procedures (excluding tax preparation work)
8 - No external audit work
- ------------
(1) Includes total demand deposits and noninterest-bearing time and
savings deposits.
12
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-3
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-A--CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Exclude assets held for trading.
--------
C405 <-
--------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
--------------------------------------
Dollar Amounts in Thousands RCFD BIL MIL THOU RCFD BIL MIL THOU
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Cash items in process of collection, unposted debits, and currency and ////////////////// //////////////////
coin ................................................................... 0022 3,548,380 ////////////////// 1.
a. Cash items in process of collection and unposted debits.............. ////////////////// 0020 2,693,954 1.a.
b. Currency and coin ................................................... ////////////////// 0080 854,426 1.b.
2. Balances due from depository institutions in the U.S.................... ////////////////// 0082 87,601 2.
a. U.S. branches and agencies of foreign banks (including their IBFs)... 0083 0 ////////////////// 2.a.
b. Other commercial banks in the U.S. and other depository ////////////////// //////////////////
institutions in the U.S. (including their IBFs)...................... 0085 87,676 ////////////////// 2.b.
3. Balances due from banks in foreign countries and foreign central banks.. ////////////////// 0070 12,440 3.
a. Foreign branches of other U.S. banks................................. 0073 208 ////////////////// 3.a.
b. Other banks in foreign countries and foreign central banks........... 0074 12,491 ////////////////// 3.b.
4. Balances due from Federal Reserve Banks................................. 0090 343,344 0090 343,344 4.
5. Total (sum of items 1 through 4) (total of column A must equal ////////////////// //////////////////
Schedule RC, sum of items 1.a and 1.b).................................. 0010 3,992,099 0010 3,991,765 5.
--------------------------------------
-----------------
Memorandum Dollar Amounts in Thousands RCON BIL MIL THOU
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Non interest-bearing balances due from commercial banks in the U.S. (included in item 2, //////////////////
column B above) ............................................................................ 0050 71,678 M.1.
------------------
SCHEDULE RC-B--SECURITIES
Exclude assets held for trading.
--------
C410 <-
------------------------------------------------------------------------------
Held-to-maturity Available-for-sale
------------------------------------------------------------------------------
(Column A) (Column B) (Column C) (Column D)
Amortized Cost Amortized Cost Amortized Cost Amortized Cost
------------------------------------------------------------------------------
Dollar Amounts in Thousands RCFD BIL MIL THOU RCFD BIL MIL THOU RCFD BIL MIL THOU RCFD BIL MIL THOU
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. U.S. Treasury securities......... 0211 250 0213 250 1286 715,535 1287 718,580 1.
2. U.S. Government agency ////////////////// ////////////////// ////////////////// //////////////////
and corporation obligations ////////////////// ////////////////// ////////////////// //////////////////
(exclude mortgage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities): ////////////////// ////////////////// ////////////////// //////////////////
a. Issued by U.S. Govern- ////////////////// ////////////////// ////////////////// //////////////////
ment 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 500 1298 500 2.b.
------------------------------------------------------------------------------
- ------------
(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-Import 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>
13
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-4
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-B--Continued
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 RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
3. Securities issued by states ////////////////// ////////////////// ////////////////// //////////////////
and political subdivisions in the ////////////////// ////////////////// ////////////////// //////////////////
U.S.: ////////////////// ////////////////// ////////////////// //////////////////
a. General obligations........... 1676 151,418 1677 151,394 1678 0 1679 0 3.a.
b. Revenue obligations........... 1681 12,415 1686 12,419 1690 0 1691 0 3.b.
c. Industrial development ////////////////// ////////////////// ////////////////// //////////////////
and similar obligations....... 1694 0 1695 0 1696 0 1697 0 3.c.
4. Mortage-backed ////////////////// ////////////////// ////////////////// //////////////////
securities (MBS): ////////////////// ////////////////// ////////////////// //////////////////
a. Pass-through securities ////////////////// ////////////////// ////////////////// //////////////////
(1) Guaranteed by ////////////////// ////////////////// ////////////////// //////////////////
GNMA..................... 1698 0 1699 0 1701 792,519 1702 790,901 4.a.(1)
(2) Issued by FNMA ////////////////// ////////////////// ////////////////// //////////////////
and FHLMC................ 1703 0 1705 0 1706 3,163,278 1707 3,176,341 4.a.(2)
(3) Other pass-through ////////////////// ////////////////// ////////////////// //////////////////
securities............... 1709 0 1710 0 1711 1 1713 1 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 453 1736 453 4.b.(3)
5. Other debt securities: ////////////////// ////////////////// ////////////////// //////////////////
a. Other domestic debt ////////////////// ////////////////// ////////////////// //////////////////
securities................... 1737 0 1738 0 1739 629 1741 621 5.a.
b. Foreign debt ////////////////// ////////////////// ////////////////// //////////////////
securities................... 1742 97,307 1743 87,332 1744 0 1746 0 5.b.
6. Equity securities: ////////////////// ////////////////// ////////////////// //////////////////
a. Investments in mutual ////////////////// ////////////////// ////////////////// //////////////////
funds........................ ////////////////// ////////////////// 1747 52,843 1748 52,843 6.a.
b. Other equity securities ////////////////// ////////////////// ////////////////// //////////////////
with readily determinable ////////////////// ////////////////// ////////////////// //////////////////
fair values.................. ////////////////// ////////////////// 1749 0 1751 0 6.b.
c. All other equity ////////////////// ////////////////// ////////////////// //////////////////
securities(1)................ ////////////////// ////////////////// 1752 218,098 1753 218,098 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 261,390 1771 251,395 1772 4,943,856 1773 4,958,338 7.
----------------------------------------------------------------------------------
</TABLE>
- -----------
(1) Includes equity securities without readily determinable fair values at
historical cost in item 6.c, column D.
14
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-5
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-B--CONTINUED
--------
C412 <-
------------------
Memoranda Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Pledged securities(2).......................................................................... 0416 2,436,831 M.1.
2. Maturity and repricing data for debt securities(2), (3), (4) (excluding those in //////////////////
nonaccrual status): //////////////////
a. Fixed rate debt securities with a remaining maturity of: //////////////////
(1) Three months or less.................................................................... 0343 44,985 M.2.a.(1)
(2) Over three months through 12 months..................................................... 0344 105,214 M.2.a.(2)
(3) Over one year through five years........................................................ 0345 1,418,544 M.2.a.(3)
(4) Over five years ........................................................................ 0346 2,274,468 M.2.a.(4)
(5) Total fixed rate debt securities (sum of Memorandum items 2.a(1) through 2.a.(4)........ 0347 3,843,211 M.2.a.(5)
b. Floating rate debt securities with a repricing frequency of: //////////////////
(1) Quarterly or more frequently............................................................ 4544 302,855 M.2.b.(1)
(2) Annually or more frequently, but less frequently than quarterly......................... 4545 802,642 M.2.b.(2)
(3) Every five years or more frequently, but less frequently than annually.................. 4551 79 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 1,105,576 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 D, minus //////////////////
nonaccrual debt securities included in Schedule RC-N, item 9, column C)..................... 0393 4,948,787 M.2.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(2), (4) (included in //////////////////
Memorandum items 2.b.(1) through 2.b.(4) above)................................................. 5519 4,000 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)................................................................................... //////////////////
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 account in //////////////////
Schedule RC-B, items 2, 3, and 5): //////////////////
a. Amortized cost.............................................................................. 8782 0 M.9.a.
b. Fair value.................................................................................. 8783 0 M.9.b.
- ----------------
(2) Includes held-to-maturity securities at amortized cost and available-for-sale securities at fair value.
(3) Exclude equity securities, e.g., investments in mutual funds, Federal Reserve stock, common stock, and preferred stock.
(4) Memorandum items 2 and 6 are not applicable to savings banks that must complete supplemental Schedule RC-J.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-6
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-C--LOANS AND LEASE FINANCING RECEIVABLES
PART I. LOANS AND LEASES
Do not deduct the allowance for loan and lease losses from amounts ------------
reported in this schedule. Report total loans and leases, net of unearned C415 <-
income. Exclude assets held for trading. --------------------------------------
(Column A) (Column B)
Consolidated Domestic
Bank Offices
--------------------------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RFCD Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Loans secured by real estate............................................ 1410 11,606,306 ////////////////// 1.
a. Construction and land development.................................... ////////////////// 1415 599,823 1.a.
b. Secured by farmland (including farm residential and other ////////////////// //////////////////
improvements)........................................................ ////////////////// 1420 1,990 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 1,906,776 1.c.(1)
(2) All other loans secured by 1-4 family residential properties: ////////////////// //////////////////
(a) Secured by first liens....................................... ////////////////// 5367 4,239,378 1.c.(2)(a)
(b) Secured by junior liens...................................... ////////////////// 5368 616,562 1.c.(2)(b)
d. Secured by multifamily (5 or more) residential properties............ ////////////////// 1460 473,710 1.d.
e. Secured by nonfarm nonresidential properties......................... ////////////////// 1480 3,768,067 1.e.
2. Loans to depository institutions: ////////////////// //////////////////
a. To commercial banks in the U.S. ..................................... ////////////////// 1505 76,227 2.a.
(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 76,227 ////////////////// 2.a.(2)
b. To other depository institutions in the U.S. ........................ 1517 13,345 1517 13,345 2.b.
c. To banks in foreign countries........................................ ////////////////// 1510 928 2.c.
(1) To foreign branches of other U.S. banks.......................... 1513 160 ////////////////// 2.c.(1)
(2) To other banks in foreign countries.............................. 1516 768 ////////////////// 2.c.(2)
3. Loans to finance agricultural production and other loans to farmers..... 1590 4,351 1590 4,351 3.
4. Commercial and industrial loans: ////////////////// //////////////////
a. To U.S. addressees (domicile)........................................ 1763 12,626,132 1763 12,574,435 4.a.
b. To non-U.S. addressees (domicile).................................... 1764 78,513 1764 31,092 4.b.
5. Acceptances of other banks: ////////////////// //////////////////
a. Of U.S. banks........................................................ 1756 0 1756 0 5.a.
b. Of foreign banks..................................................... 1757 0 1757 0 5.b.
6. Loans to individuals for household, family, and other personal ////////////////// //////////////////
expenditures (i.e., consumer loans) (includes purchased paper).......... ////////////////// 1975 2,101,041 6.
a. Credit cards and related plans (includes check credit and other ////////////////// //////////////////
revolving credit plans).............................................. 2008 94,750 ////////////////// 6.a.
b. Other (includes single payment, installment, and all student loans).. 2011 2,006,291 ////////////////// 6.b.
7. Loans to foreign governments and official institutions (including ////////////////// //////////////////
foreign central banks).................................................. 2081 0 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 149,176 2107 149,176 8.
9. Other loans ............................................................ 1563 2,018,484 ////////////////// 9.
a. Loans for purchasing or carrying securities (secured and unsecured).. ////////////////// 1545 179,603 9.a.
b. All other loans (exclude consumer loans)............................. ////////////////// 1564 1,838,881 9.b.
10. Lease financing receivables (net of unearned income).................... ////////////////// 2165 2,585,933 10.
a. Of U.S. addressees (domicile) ....................................... 2182 2,585,933 ////////////////// 10.a.
b. Of non-U.S. addressees (domicile).................................... 2183 0 ////////////////// 10.b.
11. LESS: Any unearned income on loans reflected in items 1-9 above......... 2123 0 2123 0 11.
12. Total loans and leases, net of unearned income (sum of items 1 ////////////////// //////////////////
through 10 minus item 11) (total of column A must equal ////////////////// //////////////////
Schedule RC, item 4.a) ................................................. 2122 31,260,436 2122 31,161,318 12.
--------------------------------------
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-7
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-C--CONTINUED
PART I. CONTINUED
(Column A) (Column B)
Consolidated Domestic
Bank Offices
Memoranda ------------------ ------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. Commercial paper included in Schedule RC-C, part I, above........................ 1496 0 1496 0 M.1.
2. Loans 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. Loans secured by real estate: ////////////////// //////////////////
(1) To U.S. addressees (domicile)............................................. 1687 1,681 M.2.a.(1)
(2) To non-U.S. addressees (domicile)......................................... 1689 0 M.2.a.(2)
b. All other loans and lease financing receivable (exclude loans to //////////////////
individuals for household, family, and other personal expenditures)........... 8691 0 M.2.b.
c. Commercial and industrial loans to and lease financing receivables //////////////////
of non-U.S. addressees (domicile) included in Memorandum item 2.b //////////////////
above......................................................................... 8692 0 M.2.c.
3. Maturity and repricing data for loans and leases(1) (excluding those in //////////////////
nonaccrual status): //////////////////
a. Fixed rate loans with a remaining maturity of: //////////////////
(1) Three months or less...................................................... 0348 690,294 M.3.a.(1)
(2) Over three months through 12 months....................................... 0349 566,523 M.3.a.(2)
(3) Over one year through five years.......................................... 0356 2,658,468 M.3.a.(3)
(4) Over five years........................................................... 0357 5,501,645 M.3.a.(4)
(5) Total fixed rate loans and leases (sum of Memorandum //////////////////
items 3.a.(1) through 3.a.(4))............................................ 0358 9,416,930 M.3.a.(5)
b. Floating rate loans with a repricing frequency of: //////////////////
(1) Quarterly or more frequently.............................................. 4554 17,235,629 M.3.b.(1)
(2) Annually or more frequently, but less frequently than quarterly........... 4555 3,186,865 M.3.b.(2)
(3) Every five years or more frequently, but less frequently than //////////////////
annually.................................................................. 4561 977,978 M.3.b.(3)
(4) Less frequently than every five years..................................... 4564 129,282 M.3.b.(4)
(5) Total floating rate loans (sum of Memorandum items 3.b.(1) //////////////////
through 3.b.(4)........................................................... 4567 21,529,754 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, plus unearned income from //////////////////
Schedule RC-C, part I, item 11, minus total nonaccrual loans and //////////////////
leases from Schedule RC-N, sum of items 1 through 8, column C)................ 1479 30,946,684 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, column A, page RC-6(2)..................... 2746 335,734 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), ////////////////// RCON Bil Mil Thou
column B, page RC-6)............................................................. ////////////////// 5370 1,841,822 M.6.
</TABLE>
(1) Memorandum item 3 is not applicable to savings banks that must complete
supplemental Schedule RC-J.
(2) Exclude loans secured by real estate that are included in RC-C, part I,
item 1, column A.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-8
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-D--TRADING ASSETS AND LIABILITIES
Schedule RC-D is to be completed only by banks with $1 billion or more in total assets or with $2 billion or more in par/notional
amount of off-balance sheet derivative contracts (as reported in Schedule RC-L, items 14.a through 14.e, columns A through D).
---------
C420 <-
----------------------
Dollar Amounts in Thousands //////// Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS //////////////////////
1. U.S. Treasury securities in domestic offices............................................. RCON 3531 0 1.
2. U.S. Government agency and corporation obligations in domestic offices (exclude mortgage- //////////////////////
backed securities)....................................................................... RCON 3532 0 2.
3. Securities issued by states and political subdivisions in the U.S. in domestic offices... RCON 3533 0 3.
4. Mortgage-backed securities (MBS) in domestic offices: //////////////////////
a. Pass-through securities issued or guaranteed by FNMA, FHLMC, or GNMA.................. RCON 3534 0 4.a.
b. Other mortgage-backed securities issued or guaranteed by FNMA, FHLMC, or GNMA //////////////////////
(include CMOs, REMICs, and stripped MBS).............................................. RCON 3535 0 4.b.
c. All other mortgage-backed securities.................................................. RCON 3536 0 4.c.
5. Other debt securities in domestic offices................................................ RCON 3537 0 5.
6. Certificates of deposit in domestic offices.............................................. RCON 3538 0 6.
7. Commercial paper in domestic offices..................................................... RCON 3539 0 7.
8. Bankers acceptances in domestic offices.................................................. RCON 3540 0 8.
9. Other trading assets in domestic offices................................................. RCON 3541 0 9.
10. Trading assets in foreign offices........................................................ RCFN 3542 0 10.
11. Revaluation gains on interest rate, foreign exchange rate, and other commodity and equity //////////////////////
contracts: //////////////////////
a. In domestic offices................................................................... RCON 3543 64,043 11.a.
b. In foreign offices.................................................................... RCFN 3544 9,290 11.b.
12. Total trading assets (sum of items 1 through 11) (must equal Schedule RC, item 5)........ RCFD 3545 73,333 12.
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES //////// Bil Mil Thou
----------------------
<S> <C> <C> <C>
13. Liability for short positions............................................................ RFCD 3546 0 13.
14. Revaluation losses on interest rate, foreign exchange rate, and other commodity and //////////////////////
equity contracts......................................................................... RFCD 3547 60,855 14.
15. Total trading liabilities (sum of items 13 and 14) (must equal Schedule RC, item 15.b)... RCFD 3548 60,855 15.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-9
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-E--DEPOSIT LIABILITIES
PART I. DEPOSITS IN DOMESTIC OFFICES
--------------
C425
--------------
Nontransaction
Transactions Accounts Accounts
---------------------------------------------------------------
(Column A) (Column B) (Column C)
Total transaction Memo: Total Total
accounts (including demand deposits nontransaction
total demand (included in accounts
deposits) column A) (including MMDAs)
----------------------------------------------------------------
Dollar Amounts in Thousands RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Deposits of: ////////////////// ////////////////// //////////////////
1. Individuals, partnerships, and corporations..... 2201 8,925,633 2240 8,417,538 2346 21,118,482 1.
2. U.S. Government................................. 2202 170,644 2280 170,617 2520 5,680 2.
3. States and political subdivisions in the U.S.... 2203 531,934 2290 508,362 2530 777,806 3.
4. Commercial banks in the U.S..................... 2206 836,406 2310 836,406 2550 397 4.
5. Other depository institutions in the U.S........ 2207 223,383 2312 223,383 2349 2,868 5.
6. Banks in foreign countries...................... 2213 23,850 2320 23,850 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 175,075 2330 175,075 ////////////////// 8.
9. Total (sum of items 1 through 8) (sum of columns ////////////////// ////////////////// //////////////////
A and C must equal Schedule RC, item 13.a....... 2215 10,886,925 2210 10,355,231 2385 21,905,233 9.
----------------------------------------------------------------
</TABLE>
Memoranda
<TABLE>
Dollar Amounts in Thousands RCON Bil Mil Thou
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <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 2,607,397 M.1.a.
b. Total brokered deposits................................................................ 2365 1,415,235 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 2,240 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 1,412,995 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 20 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 584,547 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 346,573 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 10,252,364 M.2.a.(1)
(2) Other savings deposits (excludes MMDAs).......................................... 0352 2,397,861 M.2.a.(2)
b. Total time deposits of less than $100,000.............................................. 6648 6,781,917 M.2.b.
c. Time certificates of deposit of $100,000 or more....................................... 6645 2,473,091 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 531,694 M.3.
4. Not applicable
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-10
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-E--CONTINUED
PART I. CONTINUED
Memoranda (continued)
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <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 1,722,551 M.5.a.(1)
(2) Over three months through 12 months ............................................... A226 3,024,143 M.5.a.(2)
(3) Over one year ..................................................................... A227 1,975,207 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 60,016 M.5.b.(1)
(2) Annually or more frequently, but less frequently than quarterly ................... A229 0 M.5.b.(2)
(3) Les 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 39,531 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) //////////////////
a. Fixed rate time deposits of $100,000 or more with a remaining maturity of: //////////////////
(1) Three months or less .............................................................. A232 720,549 M.6.a.(1)
(2) Over three months through 12 months ............................................... A233 695,947 M.6.a.(2)
(3) Over one year through five years .................................................. A234 1,014,722 M.6.a.(3)
(4) Over five years ................................................................... A235 8,868 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 33,005 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 1,896 M.6.c.
------------------
</TABLE>
- ------------
(1) Memorandum items 5 and 6 are not applicable to savings banks that
must complete supplemental Schedule RC-J.
20
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-11
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-E--CONTINUED
PART II. DEPOSITS IN FOREIGN OFFICES (INCLUDING EDGE AND
AGREEMENT SUBSIDIARIES AND IBFS)
------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deposits of: //////////////////
1. Individuals, partnerships, and corporations.......................................... 2621 2,410,097 1.
2. U.S. banks (including IBFs and foreign branches of U.S. banks)....................... 2623 0 2.
3. Foreign banks (including U.S. branches and agencies of foreign banks, including
their IBFs).......................................................................... 2625 0 3.
4. Foreign governments and official institutions (including foreign central banks)...... 2650 0 4.
5. Certified and official checks........................................................ 2330 0 5.
6. All other deposits................................................................... 2668 4,330 6.
7. Total (sum of items 1 through 6) (must equal Schedule RC, item 13.b)................. 2200 2,414,427 7.
</TABLE>
<TABLE>
<CAPTION>
------------------
Memorandum Dollar Amounts in Thousands RCFN Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. TIME DEPOSITS WITH A REMAINING MATURITY OF ONE YEAR OR LESS (INCLUDED IN PART II, //////////////////
ITEM 7 ABOVE)........................................................................ A245 2,414,425 M.1.
</TABLE>
SCHEDULE RC-F--OTHER ASSETS
<TABLE>
<CAPTION>
---------
C430
-----------------------
Dollar Amounts in Thousands ////////// Bil Mil Thou
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Income earned, not collected on loans................................................ RCFD 2164 243,319 1.
2. Net deferred tax assets (1).......................................................... RCFD 2148 0 2.
3. Excess residential mortgage servicing fees receivable................................ RCFD 5371 173,148 3.
4. Other (itemize and describe amounts that exceed 25% of this item).................... RCFD 2168 3,491,222 4.
--------- --------------------
a. TEXT 3549 MORTGAGE HELD FOR RESALE RCFD 3549 1,517,133 /////////////////////// 4.a.
-------------------------------------------------------------
b. TEXT 3550 RCFD 3550 /////////////////////// 4.b.
-------------------------------------------------------------
c. TEXT 3551 RCFD 3551 /////////////////////// 4.c.
-------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 11)................... RCFD 2160 3,907,689 5.
-----------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------
Memorandum Dollar Amounts in Thousands //////////// Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Deferred tax assets disallowed for regulatory capital purposes.................. RFCD 5610 0 M.1.
</TABLE>
SCHEDULE RC-G--OTHER LIABILITIES
<TABLE>
<CAPTION>
-----------
C435
------------------------
Dollar Amounts in thousands ////////// Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. a. Interest accrued and unpaid on deposits in domestic offices (2).................... RCON 3645 50,636 1.a.
b. Other expenses accrued and unpaid (includes accrued income taxes payable)......... RCFD 3646 509,357 1.b.
2. Net deferred tax liabilities(1)....................................................... RCFD 3049 434,426 2.
3. Minority interest in consolidated subsidiaries........................................ RCFD 3000 0 3.
4. Other (itemize and describe amounts that exceed 25% of this item)..................... RCFD 2938 512,435 4.
---------
a. TEXT 3552 RCFD 3552 /////////////////////// 4.a.
-------------------------------------------------------------
b. TEXT 3553 RCFD 3553 /////////////////////// 4.b.
-------------------------------------------------------------
c. TEXT 3554 RCFD 3554 /////////////////////// 4.c.
-------------------------------------------------------------
5. Total (sum of items 1 through 4) (must equal Schedule RC, item 20).................... RCFD 2930 1,506,854 5.
</TABLE>
- ----------------
(1) See discussion of deferred income taxes in Glossary entry on "income taxes."
(2) For savings banks, include "dividends" accrued and unpaid on deposits.
21
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE Page RC-12
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
---------------
SCHEDULE RC-H--SELECTED BALANCE SHEET ITEMS FOR DOMESTIC OFFICES
C440
------------------
Domestic Offices
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Customers' liability to this bank on acceptances outstanding......................... 2155 6,380 1.
2. Bank's liability on acceptances executed and outstanding............................. 2920 6,380 2.
3. Federal funds sold and securities purchased under agreements to resell............... 1350 25,709 3.
4. Federal funds purchased and securities sold under agreements to repurchase........... 2800 3,118,142 4.
5. Other borrowed money................................................................. 3190 935,986 5.
EITHER //////////////////
6. Net due from own foreign offices, Edge and Agreement subsidiaries, and IBFs.......... 2163 N/A 6.
OR //////////////////
7. Net due to own foreign offices, Edge and Agreement subsidiaries, and IBFs............ 2941 2,311,663 7.
8. Total assets (excludes net due from foreign offices, Edge and Agreement subsidiaries, //////////////////
and IBFs)............................................................................ 2192 46,468,505 8.
9. Total liabilities (excludes net due to foreign offices, Edge and Agreement //////////////////
subsidiaries, and IBFs).............................................................. 3129 39,637,730 9.
ITEMS 10-17 INCLUDE HELD-TO-MATURITY AND AVAILABLE-FOR-SALE SECURITIES IN DOMESTIC OFFICES.
</TABLE>
<TABLE>
<CAPTION>
------------------
RCON Bil Mil Thou
------------------
<S> <C> <C> <C>
10. U.S. Treasury securities............................................................. 1779 718,830 10.
11. U.S. Government agency and corporation obligations (exclude mortgage-backed //////////////////
securities).......................................................................... 1785 500 11.
12. Securities issued by states and political subdivisions in the U.S.................... 1786 163,833 12.
13. Mortgage-backed securities (MBS): //////////////////
a. Pass-through securities: //////////////////
(1) Issued or guaranteed by FNMA, FHLMC, OR GNMA................................ 1787 3,967,242 13.a.(1)
(2) Other pass-through securities............................................... 1869 1 13.a.(2)
b. Other mortgage-backed securities (include CMOs, REMICs, and stripped MBS): //////////////////
(1) Issued or guaranteed by FNMA, FHLMC, or GNMA................................ 1877 0 13.b.(1)
(2) All other mortgage-backed securities........................................ 2253 453 13.b.(2)
14. Other domestic debt securities....................................................... 3159 621 14.
15. Foreign debt securities.............................................................. 3160 97,307 15.
16. Equity securities: //////////////////
a. Investments in mutual funds...................................................... 3161 52,843 16.a.
b. Other equity securities with readily determinable fair values.................... 3162 0 16.b.
c. All other equity securities...................................................... 3169 218,098 16.c.
17. Total held-to-maturity and available-for-sale securities (sum of items 10 through 16) 3170 5,219,728 17.
</TABLE>
Memorandum (to be completed only by banks with IBFs and other "foreign" offices)
<TABLE>
<CAPTION>
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EITHER //////////////////
1. Net due from the IBF of the domestic offices of the reporting bank................... 3051 0 M.1.
OR //////////////////
2. Net due to the IBF of the domestic offices of the reporting bank..................... 3059 N/A M.2.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-13
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-I--SELECTED ASSETS AND LIABILITIES OF IBFs
C445
------------------
Dollar Amounts in Thousands RCFN Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total IBF assets of the consolidated bank (component of Schedule RC, item 12)........ 2133 0 1.
2. Total IBF loans and lease financing receivables (component of Schedule RC-C, part I, //////////////////
item 12, column A)................................................................... 2076 0 2.
3. IBF commercial and industrial loans (component of Schedule RC-C, part I, //////////////////
item 4, column A).................................................................... 2077 0 3.
4. Total IBF liabilities (component of Schedule RC, item 21)............................ 2898 0 4.
5. IBF deposit liabilities due to banks, including other IBFs (component of Schedule //////////////////
RC-E, part II, items 2 and 3)........................................................ 2379 0 5.
6. Other IBF deposit liabilities (component of Schedule RC-E, part II, //////////////////
items 1,4,5, and 6................................................................... 2381 0 6.
</TABLE>
<TABLE>
<CAPTION>
SCHEDULE RC-K--QUARTERLY AVERAGES (1)
C455
------------------
Dollar Amounts in Thousands ///////// Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------
ASSETS ///////////////////////
<S> <C> <C> <C>
1. Interest-bearing balances due from depository institutions...................... RCFD 3381 28,972 1.
2. U.S. Treasury securities and U.S. Government agency and corporation
obligations (2)................................................................. RCFD 3382 5,849,801 2.
3. Securities issued by states and political subdivisions in the U.S. (2).......... RCFD 3383 171,480 3.
4. a. Other debt securities (2)................................................... RCFD 3647 98,635 4.a.
b. Equity securities (3) (includes investments in mutual funds and Federal ///////////////////////
Reserve stock).................................................................. RCFD 3648 290,211 4.b.
5. Federal funds sold and securities purchased under agreements to resell in ///////////////////////
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in ///////////////////////
IBFs............................................................................ RCFD 3365 34,073 5.
6. Loans:
a. Loans in domestic offices:
(1) Total loans............................................................ RCON 3360 28,772,871 6.a.(1)
(2) Loans secured by real estate........................................... RCON 3385 11,782,561 6.a.(2)
(3) Loans to finance agricultural production and other loans to ///////////////////////
farmers................................................................ RCON 3386 4,568 6.a.(3)
(4) Commercial and industrial loans........................................ RCON 3387 12,208,378 6.a.(4)
(5) Loans to individuals for household, family, and other personal ///////////////////////
expenditures........................................................... RCON 3388 2,106,517 6.a.(5)
b. Total loans in foreign offices, Edge and Agreement subsidiaries, and IBFs... RCFN 3360 93,116 6.b.
7. Trading assets.................................................................. RCFD 3401 70,398 7.
8. Lease financing receivables (net of unearned income)............................ RCFD 3484 2,414,362 8.
9. Total assets(4)................................................................. RCFD 3368 47,043,625 9.
LIABILITIES
10. Interest-bearing transaction accounts in domestic offices (NOW accounts, ATS ///////////////////////
accounts, and telephone and preauthorized transfer accounts) (exclude demand ///////////////////////
deposits)....................................................................... RCON 3485 554,831 10.
11. Nontransaction accounts in domestic offices: ///////////////////////
a. Money market deposit accounts (MMDAs)....................................... RCON 3486 10,212,141 11.a.
b. Other savings deposits...................................................... RCON 3487 2,477,260 11.b.
c. Time certificates of deposit of $100,000 or more............................ RCON 3345 2,533,067 11.c.
d. All other time deposits..................................................... RCON 3469 6,982,619 11.d.
12. Interest-bearing deposits in foreign offices, Edge and Agreement subsidiaries, ///////////////////////
and IBFs........................................................................ RCFN 3404 2,117,139 12.
13. Federal funds purchased and securities sold under agreements to repurchase in ///////////////////////
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in ///////////////////////
IBFs............................................................................ RCFD 3353 4,817,518 13.
14. Other borrowed money............................................................ RCFD 3355 985,125 14.
- ---------------
(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) Quarterly averages for all debt securities should be based on amortized cost.
(3) Quarterly averages for all equity securities should be based on historical cost.
(4) 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>
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-14
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
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.
C460
Dollar Amounts in Thousands RCFD BIL MIL THOU
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Unused commitments: //////////////////
a. Revolving, open-end lines secured by 1-4 family residential properties, e.g., home equity //////////////////
lines....................................................................................... 3814 2,159,101 1.a.
b. Credit card lines........................................................................... 3815 37,038 1.b.
c. Commercial real estate, construction, and land development: //////////////////
(1) Commitments to fund loans secured by real estate........................................ 3816 538,163 1.c.(1)
(2) Commitments to fund loans not secured by real estate.................................... 6550 513,346 1.c.(2)
d. Securities underwriting..................................................................... 3817 0 1.d.
e. Other unused commitments.................................................................... 3818 20,572,462 1.e.
2. Financial standby letters of credit and foreign office guarantees.............................. 3819 2,322,445 2.
--------------------
a. Amount of financial standby letters of credit conveyed to others RCFD 3820 89,650 ////////////////// 2.a.
--------------------
3. Performance standby letters of credit and foreign office guarantees............................ 3821 179,230 3.
--------------------
a. Amount of performance standby letters of credit conveyed to others RCFD 3822 6,004 ////////////////// 3.a.
--------------------
4. Commercial and similar letters of credit....................................................... 3411 137,503 4.
5. Participations in acceptances (as described in the instructions) conveyed to others by the //////////////////
reporting bank................................................................................. 3428 112 5.
6. Participations in acceptances (as described in the instructions) acquired by the reporting //////////////////
(nonaccepting) bank............................................................................ 3429 12,837 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 965,792 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 or the report date............ 3650 298,423 9.a.(1)
(2) Amount of recourse exposure on these mortgages as of the report date.................... 3651 298,423 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 289,942 9.b.(1)
(2) Amount of recourse exposure on these mortgages as of the report date.................... 3653 289,942 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 487,442 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 ........................................................ RCFD 3555 ////////////////// 12.a.
b. TEXT 3556 ........................................................ RCFD 3556 ////////////////// 12.b.
c. TEXT 3557 ........................................................ RCFD 3557 ////////////////// 12.c.
d. TEXT 3558 ........................................................ RCFD 3558 ////////////////// 12.d.
---------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-15
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-L--CONTINUED
Dollar Amounts in Thousands RCFD Bil 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 RCFD 5592 ////////////////// 13.a.
b. TEXT 5593 RCFD 5593 ////////////////// 13.b.
c. TEXT 5594 RCFD 5594 ////////////////// 13.c.
d. TEXT 5595 RCFD 5595 ////////////////// 13.d.
--------------------------------------------------------------------------------------------------------------
C461 <-
----------------- ----------------- ----------------- ------------------
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
- ---------------------------------------- Contracts Contracts Contracts Other Contracts
Off-balance Sheet Derivatives ----------------- ----------------- ----------------- ------------------
Position Indicators Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou Tril Bil Mil Thou
---------------------------------------- ----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> C> <C>
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 ................ 0 0 0 39,037 14.a
----------------- ----------------- ----------------- -----------------
RCFD 8693 RCFD 8694 RCFD 8695 RCFD 8696
----------------- ----------------- ----------------- -----------------
b. Forward contracts ................ 2,684,800 2,284,466 0 45,604 14.b
----------------- ----------------- ----------------- -----------------
RCFD 8697 RCFD 8698 RCFD 8699 RCFD 8700
----------------- ----------------- ----------------- -----------------
c. Exchange-traded option contracts: ///////////////// ///////////////// ///////////////// /////////////////
----------------- ----------------- ----------------- -----------------
(1) Written options .............. 225,000 0 0 0 14.c.(1)
----------------- ----------------- ----------------- -----------------
RCFD 8701 RCFD 8702 RCFD 8703 RCFD 8704
----------------- ----------------- ----------------- -----------------
(2) Purchased options ............ 1,276,400 0 0 1,245 14.c.(2)
----------------- ----------------- ----------------- -----------------
RCFD 8705 RCFD 8706 RCFD 8707 RCFD 8708
----------------- ----------------- ----------------- -----------------
d. Over-the-counter option contracts: ///////////////// ///////////////// ///////////////// /////////////////
----------------- ----------------- ----------------- -----------------
(1) Written options .............. 5,051,792 5,200 0 0 14.d.(1)
----------------- ----------------- ----------------- -----------------
RCFD 8709 RCFD 8710 RCFD 8711 RCFD 8712
----------------- ----------------- ----------------- -----------------
(2) Purchased options ............ 19,427,829 5,200 0 0 14.d.(2)
----------------- ----------------- ----------------- -----------------
RCFD 8713 RCFD 8714 RCFD 8715 RCFD 8716
----------------- ----------------- ----------------- -----------------
e. Swaps ............................ 24,549,614 0 0 0 14.e
----------------- ----------------- ----------------- -----------------
RCFD 3450 RCFD 3826 RCFD 8719 RCFD 8720
----------------- ----------------- ----------------- -----------------
15. Total gross notional amount of ///////////////// ///////////////// ///////////////// /////////////////
derivative contracts held for trading. 5,289,505 2,294,866 0 l,245 15
----------------- ----------------- ----------------- -----------------
RCFD A126 RCFD A127 RCFD 8723 RCFD 8724
----------------- ----------------- ----------------- -----------------
l6. Total gross notional amount of ///////////////// ///////////////// ///////////////// /////////////////
derivative contracts held for ///////////////// ///////////////// ///////////////// /////////////////
purposes other than trading: ///////////////// ///////////////// ///////////////// /////////////////
----------------- ----------------- ----------------- -----------------
a. Contracts marked to market ...... 4,239,800 0 0 39,037 16.a.
----------------- ----------------- ----------------- -----------------
RCFD 8725 RCFD 8726 RCFD 8727 RCFD 8728
----------------- ----------------- ----------------- -----------------
b. Contracts not marked to market .. 43,686,130 0 0 45,604 16.b.
----------------- ----------------- ----------------- -----------------
RCFD 8729 RCFD 8730 RCFD 8731 RCFD 8732
----------------- ----------------- ----------------- -----------------
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-16
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-L--CONTINUED
(Column A) (Column B) (Column C) (Column D)
Dollar Amounts in Thousands Interest Rate Foreign Exchange Equity Derivative Commodity and
Off-balance Sheet Derivatives Contracts Contracts Contracts Other Contracts
Position Indicators ------------------ ------------------ ------------------ ------------------
RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
17. Gross fair values of ////////////////// ////////////////// ////////////////// //////////////////
derivative contracts: ////////////////// ////////////////// ////////////////// //////////////////
a. Contracts held for ////////////////// ////////////////// ////////////////// //////////////////
trading: ////////////////// ////////////////// ////////////////// //////////////////
(1) Gross positive ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8733 31,626 8734 41,468 8736 0 8736 59 17.a.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8737 22,099 8738 38,756 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 2,258 8742 0 8743 0 8744 1,698 17.b.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8745 1,417 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 165,643 8750 0 8751 0 8752 169 17.c.(1)
(2) Gross negative ////////////////// ////////////////// ////////////////// //////////////////
fair value................ 8737 76,308 8754 0 8755 0 8756 0 17.c.(2)
---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda Dollar Amounts in Thousands RFCD Bil 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 1.e, above (report only the unused portions of commitments //////////////////
that are fee paid or otherwise legally binding).................................................. 3833 18,552,873 M.3.
a. Participations in commitments with an original maturity //////////////////
exceeding one year to be conveyed to others......................... RCFD 3834 | 1,789,549 ////////////////// M.3.a.
4. To be completed only by banks with $1 billion or more in total assets: //////////////////
Standby letters of credit and foreign office guarantees (both financial and performance) issued //////////////////
to non-U.S. addresses (domicile) included in Schedule RC-L, items 2 and 3, above................. 3377 360,019 M.4.
5. Installment loans to individuals for household, family, and other personal expenditures that //////////////////
have been securitized and sold without recourse (with servicing retained), amounts outstanding //////////////////
by type of loan: //////////////////
a. Loans to purchase private passenger automobiles (TO BE COMPLETED FOR THE //////////////////
SEPTEMBER REPORT ONLY)........................................................................ 2741 N/A M.5.a.
b. Credit cards and related plans (TO BE COMPLETED QUARTERLY).................................... 2742 0 M.5.b.
c. All other consumer installment credit (including mobile home loans)(TO BE COMPLETED FOR THE //////////////////
SEPTEMBER REPORT ONLY)........................................................................ 2743 N/A M.5.c.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-17
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-M--MEMORANDA
--------
C465 <-
------------------
Dollar Amounts in Thousands RFCD Bil Mil Thou
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <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 552,349 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. RFCD 6165 | 20 ////////////////// 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 25,732,152 4.a.
b. Mortgages services under a FHLMC contract: //////////////////
(1) Serviced with recourse to servicer......................................................... 5501 48,720 4.b.(1)
(2) Serviced without recourse to servicer...................................................... 5502 34,857,978 4.b.(2)
c. Mortgages serviced under a FNMA contract: //////////////////
(1) Serviced under a regular option contract................................................... 5503 249,703 4.c.(1)
(2) Serviced under a special option contract................................................... 5504 41,105,444 4.c.(2)
d. Mortgages serviced under other servicing contracts............................................. 5505 11,267,486 4.d.
5. To be completed only by banks with $1 billion or more in total assets: //////////////////
Customers' liability to this bank on acceptances outstanding (sum of items 5.a and 5.b must //////////////////
equal Schedule RC, item 9): //////////////////
a. U.S. addresses (domicile)...................................................................... 2103 6,244 5.a.
b. Non-U.S. addresses (domicile).................................................................. 2104 136 5.b.
6. Intangible assets: //////////////////
a. Mortgage servicing rights...................................................................... 3164 1,563,176 6.a.
b. Other identifiable intangible assets //////////////////
(1) Purchased credit card relationships........................................................ 5506 0 6.b.(1)
(2) All other identifiable intangible assets................................................... 5507 105,984 6.b.(2)
c. Goodwill....................................................................................... 3163 647,473 6.c.
d. Total (sum of items 6.a through 6.c) (must equal Schedule RC, item 10)......................... 2143 2,316,633 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 75,000 7.
</TABLE>
- -----------------
(1) Do not report federal funds sold and securities purchased under agreements
to resell with other commercial banks in the U.S. in this time.
27
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-18
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-M--CONTINUED
------------------
Dollar Amounts in Thousands BIL MIL THOU
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
8. a. Other real estate owned: /////////////////////////
(1) Direct and indirect investments in real estate ventures......................... RCFD 5372 0 8.a.(1)
(2) All other real estate owned: /////////////////////////
(a) Construction and land development in domestic offices........................ RCON 5508 332 8.a.(2)(a)
(b) Farmland in domestic offices................................................. RCON 5509 0 8.a.(2)(b)
(c) 1-4 family residential properties in domestic offices........................ RCON 5510 9,789 8.a.(2)(c)
(d) Multifamily (5 or more) residential properties in domestic offices........... RCON 5511 347 8.a.(2)(d)
(e) Nonfarm nonresidential properties in domestic offices........................ RCON 5512 8,443 8.a.(2)(e)
(f) In foreign offices........................................................... RCFN 5513 0 8.a.(2)(f)
(3) Total (sum of items 8.a.(1) and 8.a.(2)) (must equal Schedule RC, item 7)........ RCFD 2150 18,911 8.a.(3)
b. Investments in unconsolidated subsidiaries and associated companies: /////////////////////////
(1) Direct and indirect investments in real estate ventures.......................... RCFD 5374 0 8.b.(1)
(2) All other investments in unconsolidated subsidiaries and associated companies.... RCFD 5375 0 8.b.(2)
(3) Total (sum of items 8.b.(1) and 8.b.(2)) (must equal Schedule RC, item 8)........ RCFD 2130 0 8.b.(3)
c. TOTAL ASSETS of unconsolidated subsidiaries and associated companies................. RCFD 5376 0 8.c.
9. Noncumulative perpetual preferred stock and related surplus included in Schedule RC, /////////////////////////
item 23, "Perpetual preferred stock and related surplus"................................ RCFD 3778 125,000 9.
10. Mutual fund and annuity sales in domestic offices during the quarter (include /////////////////////////
proprietary, private label, and third party products): /////////////////////////
a. Money market funds................................................................... RCON 6441 204,326 10.a.
b. Equity securities funds.............................................................. RCON 8427 116,418 10.b.
c. Debt securities funds................................................................ RCON 8428 12,837 10.c.
d. Other mutual funds................................................................... RCON 8429 0 10.d.
e. Annuities............................................................................ RCON 8430 103,868 10.e.
f. Sales of proprietary mutual funds and annuities (included in items 10.a. through /////////////////////////
10.e. above)......................................................................... RCON 8784 302,177 10.f.
-------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Memorandum Dollar Amounts in Thousands RCFD Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Interbank holdings of capital instruments (TO BE COMPLETED FOR THE DECEMBER REPORT ONLY): //////////////////
a. Reciprocal holdings of banking organizations' capital instruments........................... 3836 0 M.1.a.
b. Nonreciprocal holdings of banking organizations' capital instruments........................ 3837 0 M.1.b.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-19
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-N--PAST DUE AND NONACCRUAL LOANS, LEASES,
AND OTHER ASSETS
The FFIEC regards the information reported in
all of Memorandum item 1, in items 1 through 10,
column A, and in Memorandum items 2 through 4,
column A, as confidential.
--------
C470
------------------------------------------------------------
(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 RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Loans secured by real estate: ////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) .................... 1245 1246 65,607 1247 215,496 1.a.
b. To non-U.S. addressees (domicile) ................ 1248 1249 0 1250 0 1.b.
2. Loans to depository institutions and acceptances ////////////////// ////////////////// //////////////////
of other banks: ////////////////// ////////////////// //////////////////
a. To U.S. banks and other U.S. depository ////////////////// ////////////////// //////////////////
institutions ..................................... 5377 5378 0 5379 0 2.a.
b. To foreign banks ................................. 5380 5381 0 5382 0 2.b.
3. Loans to finance agricultural production and ////////////////// ////////////////// //////////////////
other loans to farmers ............................... 1594 1597 0 1583 625 3.
4. Commercial and industrial loans: ////////////////// ////////////////// //////////////////
a. To U.S. addressees (domicile) .................... 1251 1252 12,042 1253 76,393 4.a.
b. To non-U.S. addressees (domicile) ................ 1254 1255 0 1256 0 4.b.
5. Loans to individuals for household, family, and ////////////////// ////////////////// //////////////////
other personal expenditures: ////////////////// ////////////////// //////////////////
a. Credit cards and related plans ................... 5383 5384 1,574 5385 370 5.a.
b. Other (includes single payment, installment, ////////////////// ////////////////// //////////////////
and all student loans) ........................... 5386 5387 24,812 5388 7,184 5.b.
6. Loans to foreign governments and official ////////////////// ////////////////// //////////////////
institutions ......................................... 5389 5390 0 5391 0 6.
7. All other loans ...................................... 5459 5460 11,122 5461 9,921 7.
8. Lease financing receivables: ////////////////// ////////////////// //////////////////
a. Of U.S. addressees (domicile) .................... 1257 1258 21 1259 3,763 8.a
b. Of non-U.S. addressees (domicile) ................ 1271 1272 0 1791 0 8.b.
9. Debt securities and other assets (exclude other ////////////////// ////////////////// //////////////////
real estate owned and other repossessed assets) ...... 3506 3506 0 3507 32,566 9.
- ---------------------------------------------------------------------------------------------------------------------------------
Amounts reported in items 1 through 8 above include guaranteed and unguaranteed portions of past due and nonaccrual loans and
leases. Report in item 10 below certain guaranteed loans and leases that have already been included in the amounts reported in
items 1 through 8.
------------------ ------------------ ------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou RCFD Bil Mil Thou
10. Loans and leases reported in items 1 ------------------------------------------------------------
through 8 above which are wholly or partially ////////////////// ////////////////// //////////////////
guaranteed by the U.S. Government .................... 5612 5613 17,347 5614 14,395 10.
a. Guaranteed portion of loans and leases ////////////////// ////////////////// //////////////////
included in item 10 above ........................ 5615 5616 17,056 5617 11,954 10.a.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-20
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RI-N--CONTINUED
--------
C473
------------------------------------------------------------
(Column A) (Column B) (Column C)
Past due Past due 90 Nonaccrual
30 through 89 days or more
and still and still
accruing accruing
Memoranda ------------------ ------------------ ------------------
Dollar Amounts in Thousands RFCD Bil Mil Thou RFCD Bil Mil Thou RFCD Bil Mil Thou
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1. Restructured loans and leases included in ////////////////// ////////////////// //////////////////
Schedule RC-N, items 1 through 8, above (and not ////////////////// ////////////////// //////////////////
reported in Schedule RC-C, part I, Memorandum ////////////////// ////////////////// //////////////////
item 2)................................................ 1658 1659 1661 M.1.
2. Loans to finance commercial real estate, ////////////////// ////////////////// //////////////////
construction, and land development activities ////////////////// ////////////////// //////////////////
(NOT SECURED BY REAL ESTATE) included in ////////////////// ////////////////// //////////////////
Schedule RC-N, items 4 and 7 above..................... 6558 6559 105 6560 1,919 M.2.
3. Loans secured by real estate in domestic offices RCON Bil Mil Thou RCON Bil Mil Thou RCON Bil Mil Thou
(included in Schedule RC-N, item 1, above): ////////////////// ////////////////// //////////////////
a. Construction and land development................... 2759 2769 0 3492 19,990 M.3.a.
b. Secured by farmland................................. 3493 3494 0 3495 144 M.3.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.................. 5398 5399 5,009 5400 10,700 M.3.c.(1)
(2) All other loans secured by 1-4 residential ////////////////// ////////////////// //////////////////
properties...................................... 5401 5402 49,978 5403 100,900 M.3.c.(2)
d. Secured by multifamily (5 or more) residential ////////////////// ////////////////// //////////////////
properties.......................................... 3499 3500 934 3501 9,456 M.3.d.
e. Secured by nonfarm nonresidential properties........ 3502 3503 9,886 3504 74,306 M.3.e.
</TABLE>
<TABLE>
<CAPTION>
---------------------------------------
(Column A) (Column B)
Past due 30 Past due 90
through 89 days days or more
---------------------------------------
RFCD Bil Mil Thou RFCD Bil Mil Thou
---------------------------------------
<S> <C> <C> <C> <C>
4. Interest rate, foreign exchange rate, and other ////////////////// //////////////////
commodity and equity contracts: ////////////////// //////////////////
a. Book value of amounts carried as assets............. 3522 3528 0 M.4.a.
b. Replacement cost of contracts with a ////////////////// //////////////////
positive replacement cost........................... 3529 3530 0 M.4.b.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-21
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-O--OTHER DATA FOR DEPOSIT INSURANCE ASSESSMENTS
--------
C475 <-
------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Unposted debits (see instructions): //////////////////
a. Actual amount of all unposted debits........................................................ 0030 0 1.a
OR //////////////////
b. Separate amount of unposted debits: //////////////////
(1) Actual amount of unposted debits to demand deposits..................................... 0031 N/A 1.b.(1)
(2) Actual amount of unposted debits to time and savings deposits(1)........................ 0032 N/A 1.b.(2)
2. Unposted credits (see instructions): //////////////////
a. Actual amount of all unposted credits....................................................... 3510 0 2.a.
OR //////////////////
b. Separate amount of unposted credits: //////////////////
(1) Actual amount of unposted credits to demand deposits.................................... 3512 N/A 2.b.(1)
(2) Actual amount of unposted credits to time and savings deposits(1)....................... 3514 N/A 2.b.(2)
3. Uninvested trust funds (cash) held in bank's own trust department (not included in total //////////////////
deposits in domestic offices).................................................................. 3520 142,277 3.
4. Deposits of consolidated subsidiaries in domestic offices and in insured branches in Puerto //////////////////
Rico and U.S. territories and possessions (not included in total deposits): //////////////////
a. Demand deposits of consolidated subsidiaries................................................ 2211 196,951 4.a.
b. Time and savings deposits(1) of consolidated subsidiaries................................... 2351 15,807 4.b.
c. Interest accrued and unpaid on deposits of consolidated subsidiaries........................ 5514 0 4.c.
5. Deposits in insured branches in Puerto Rico and U.S. territories and possessions: //////////////////
a. Demand deposits in insured branches (included in Schedule RC-E, Part II).................... 2229 0 5.a.
b. Time and savings deposits(1) in insured branches (included in Schedule RC-E, Part II)....... 2383 0 5.b.
c. Interest accrued and unpaid on deposits in insured branches //////////////////
(included in Schedule RC-G, item 1.b)....................................................... 5515 0 5.c.
------------------
------------------
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, Part I, item 4 or 5, //////////////////
column B)................................................................................... 2314 0 6.a.
b. Amount reflected in time and savings deposits(1) (included in Schedule RC-E, Part I, //////////////////
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 748 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 1,395,996 8.
------------------
- -----------------------------------------------------------------------------------------------------------------------
------------------
9. Deposits in lifeline accounts.................................................................. 5596 ///////////// 9.
10. Benefit-responsive "Depository Institution Investment Contracts" (included in total //////////////////
deposits in domestic offices).................................................................. 8432 0 10.
- ----------------
(1) For FDIC insurance assessment purposes, "time and savings deposits" consists of nontransaction accounts
and all transaction accounts other than demand deposits.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-22
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
SCHEDULE RC-O--CONTINUED
-------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11. Adjustments to demand deposits in domestic offices reported in Schedule RC-E for //////////////////
certain reciprocal demand balances: //////////////////
a. Amount by which demand deposits will 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.
-------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------
Dollar Amounts in Thousands RCON Bil Mil Thou
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Total deposits in domestic offices 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 18,219,759 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 14,572,399 M.1.b.(1)
Number //////////////////
(2) Number of deposit accounts of more than $100,000 ............. RCON 2772 28,722 ////////////////// M.1.b.(2)
2. Estimated amount of uninsured deposits in domestic offices 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.
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 YES NO
estimate described above.............................................................. 6861 /// X M.2.a.
b. If the box marked YES has been checked, report the estimate of uninsured deposits RCON Bil Mil Thou
determined by using your bank's method or procedure................................. 5597 N/A M.2.b.
</TABLE>
- -------------------------------------------------------------------------------
Person to whom questions about the Reports of Condition and Income should be
directed: C477
PAMELA S. FLYNN, VICE PRESIDENT (401) 278-5194
- ------------------------------- ----------------------
Name and Title (TEXT 8901) Area code/phone number/extension (TEXT 8902)
32
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: ONE MONARCH PLACE PAGE RC-23
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
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.
<S> <C> <C> <C>
---------------
C480
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. Indicate in the YES NO
appropriate box at the right whether the bank has total capital greater than or --------------------------------
equal to eight percent of adjusted total assets............................................ RCFD 6056 //// 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.
<TABLE>
- -------------------------------------------------------------------
NOTE: ALL BANKS ARE REQUIRED TO COMPLETE ITEMS 2 AND 3 BELOW.
SEE OPTIONAL WORKSHEET FOR ITEMS 3.a THROUGH 3.f. -----------------------------------------
- ----------------------------------------------------------------------------- (Column A) (Column B)
Dollar Amounts in Thousands Subordinated Debt(1) Other
- ----------------------------------------------------------------------------- and Intermediate Limited-Life
2. Subordinated debt(1) and other limited-life capital instruments (original Term Preferred Stock Capital Instruments
weighted average maturity of at least five years) with a remaining -----------------------------------------
maturity of: RCFD Bil Mil Thou RCFD Bil Mil Thou
-----------------------------------------
<S> <C> <C> <C> <C> <C>
a. One year or less....................................................... 3780 25,737 3786 0 2.a.
b. Over one year through two years........................................ 3781 737 3787 0 2.b.
c. Over two years through three years..................................... 3782 10,745 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 341,000 3790 0 2.e.
f. Over five years........................................................ 3785 760,000 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):
-------------------------
RCFD Bil Mil Thou
-------------------------
a. TIER 1 CAPITAL................................................................................ 8274 3,756,621 3.a.
b. TIER 2 CAPITAL................................................................................ 8275 1,688,820 3.b.
c. TOTAL RISK-BASED CAPITAL...................................................................... 3792 5,445,441 3.c.
d. EXCESS ALLOWANCE FOR LOAN AND LEASE LOSSES.................................................... A222 200,236 3.d.
e. RISK-WEIGHTED ASSETS (NET OF ALL DEDUCTIONS, INCLUDING EXCESS ALLOWANCE)...................... A223 45,925,732 3.e.
f. "AVERAGE TOTAL ASSETS" (NET OF ALL ASSETS DEDUCTED FROM TIER 1 CAPITAL)(2).................... A224 46,290,168 3.f.
------------------
</TABLE>
<TABLE>
-----------------------------------------
(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)
-----------------------------------------
RCFD Bil Mil Thou RCFD Bil Mil Thou
-----------------------------------------
<S> <C> <C> <C> <C> <C>
4. Assets and credit equivalent amounts of off-balance sheet items
assigned to 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 OECD central governments..................................... 3794 1,519,575 ////////////////// 4.a.(1)
(2) All other.......................................................... 3795 1,316,143 ////////////////// 4.a.(2)
b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3796 1,079,527 4.b
</TABLE>
- -------------
(1) 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.
33
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank : FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address : ONE MONARCH PLACE Page RC-24
City, State Zip: SPRINGFIELD, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
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 RCFD BIL MIL THOU RCFD BIL MIL THOU
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <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 726,530 ////////////////// 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 7,055,416 ////////////////// 5.a.(3)
b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3801 1,058,252 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 5,371,795 ////////////////// 6.a.
b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3803 866,687 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 31,276,374 ////////////////// 7.a.
b. Credit equivalent amount of off-balance sheet items.................... ////////////////// 3805 10,715,771 7.b.
8. On-balance sheet asset values excluded from the calculation of the ////////////////// //////////////////
risk-based capital ratio (2).............................................. 3806 91,771 ////////////////// 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 47,357,604 ////////////////// 9.
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Memoranda ------------------
Dollar Amounts in Thousands RCFD Bil 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 236,389 M.1.
------------------
----------------------------------------------------------------------
With a remaining maturity of
----------------------------------------------------------------------
(Column A) (Column B) (Column C)
One year or less Over one year Over five years
through five years
2. Notional principal amounts of ----------------------------------------------------------------------
off-balance sheet derivative contracts(3): RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou RCFD Tril Bil Mil Thou
----------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
a. Interest rate contracts................ 3809 7,502,891 8766 33,994,382 8767 779,970 M.2.a.
b. Foreign exchange contracts............. 3812 1,366,429 8769 84,993 8770 0 M.2.b.
c. Gold contracts......................... 8771 33,478 8772 0 8773 0 M.2.c.
d. Other precious metals contracts........ 8774 13,371 8775 0 8776 0 M.2.d.
e. Other commodity contracts.............. 8777 0 8778 0 8779 0 M.2.e.
f. Equity derivative contracts............ A000 0 A001 0 A002 0 M.2.f.
----------------------------------------------------------------------
- -----------------
(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.
</TABLE>
34
<PAGE>
<TABLE>
<S> <C> <C>
Legal Title of Bank: FLEET NATIONAL BANK Call Date: 12/31/96 ST-BK: 25-0590 FFIEC 031
Address: One Monarch Place Page RC-25
City, State Zip: Springfield, MA 01102
FDIC Certificate No.: [0][2][4][9][9]
</TABLE>
OPTIONAL NARRATIVE STATEMENT CONCERNING THE AMOUNTS
REPORTED IN THE REPORTS OF CONDITION AND INCOME
at close of business on December 31, 1996
Fleet National Bank Springfield , Massachusetts
- -----------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
No comment [X] (RCON 6979) C471 C472
--- ------------
BANK MANAGEMENT STATEMENT (please type or print clearly):
(TEXT 6980)
/s/ Jan 23, 1997
------------------------ ------------------------
Signature of Executive Date of Signature
Officer of Bank
35
EXHIBIT 99.1
LETTER OF TRANSMITTAL
for
OFFER FOR ALL OUTSTANDING
11 3/4% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
11 3/4% SERIES B SENIOR NOTES DUE 2004
ANCHOR ADVANCED PRODUCTS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON _______________, 1997 (the "EXPIRATION DATE")
UNLESS EXTENDED BY ANCHOR ADVANCED PRODUCTS, INC.
The Exchange Agent
for the Exchange Offer
FLEET NATIONAL BANK
By Registered or Certified Mail: By Overnight Courier:
Fleet National Bank Fleet National Bank
By Hand: By Facsimile:
Fleet National Bank Fleet National Bank
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of instructions via a facsimile transmission to a
number other than set forth above will not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus dated
_________________, 1997 (the "Prospectus") of Anchor Advanced Products, Inc.
(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 l1 3/4% Series B Senior Notes due 2004 (the
"Exchange Notes") for each $1,000 in principal amount of outstanding l1 3/4%
Senior Notes due 2004 (the "Initial Notes"). The terms of the Exchange Notes are
substantially identical in all respects (including principal amount, interest
rate and maturity) to the terms of the Initial Notes for which they may be
exchanged pursuant to the Exchange Offer, except that the Exchange Notes are
freely transferable by holders thereof (except as provided herein or in the
Prospectus) and are issued without any covenant upon the Company 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.
1
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
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.
A holder that is a participant in The Depository Trust Company's system may
utilize The Depository Trust Company's Automated Tender Offer Program to tender
Initial Notes.
List below the Initial 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.
DESCRIPTION OF INITIAL NOTES TENDERED HEREWITH
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Certificate Aggregate Principal Principal Amount
Holder(s) (Please fill in) Number(s) * Amount Represented by Tendered *
Initial Notes
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate amount represented by such Initial Notes. See
Instruction 2.
This Letter of Transmittal is to be used either if certificates of Initial
Notes are to be forwarded herewith or if delivery of Initial 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 -- How To Tender" in the Prospectus. Delivery of documents to a book-entry
transfer facility does not constitute delivery to the Exchange Agent.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Initial Notes
according to the guaranteed procedure set forth in the Prospectus under the
caption "The Exchange Offer -- How To Tender."
2
<PAGE>
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _________________________________________
[ ] The Depository Trust Company
Account Number_________________________________________________________
Transaction Code Number________________________________________________
[ ] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO
A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)___________________________________________
Name of Institution that Guaranteed Delivery___________________________
If Delivered by Book-Entry Transfer:
Account Number_________________________________________________________
Transaction Code Number________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name___________________________________________________________________
Address:_______________________________________________________________
_______________________________________________________________
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Initial Notes. Subject to, and effective upon, the acceptance for
exchange of the Initial 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 Initial Notes. The undersigned hereby
irrevocably constitutes (with full knowledge that said Exchange Agent acts as
the Agent of the Company in connection with the Exchange Offer) to cause the
Initial 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 Initial Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Initial Notes, and that, when the
same are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Initial 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 Initial
Notes or transfer ownership of such Notes on the account books maintained by a
book-entry transfer facility. The undersigned further agrees that acceptance of
any and all validly tendered Initial Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company 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.
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
Initial Notes tendered hereby and, in such event, the Initial Notes not
exchanged will be returned to the undersigned at the address above.
By tendering, each holder of Initial Notes represents that Exchange Notes
acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that such
holder is not an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act of 1933, as amended (the "Act"). 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 Initial Notes it represents that the Initial Notes to be exchanged for
Exchange Notes were acquired as a result of market-making activities or other
trading activities and 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. Any holder of
Initial Notes using the Exchange Offer to participate in a distribution of the
Exchange Notes (i) cannot rely on the position of the staff of the Commission
enunciated in its interpretive letter with respect to Exxon Capital Holdings
Corporation (available May 13, 1988) or similar letters issued to third parties
and (ii) must comply with the registration and prospectus requirements of the
Act in connection with a secondary resale transaction.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
shall be binding upon the heirs, personal representatives, successors and
assigns of the undersigned. Tendered Initial Notes may be withdrawn at any time
prior to the Expiration Date.
Certificates for all Exchange Notes delivered in exchange for tendered
Initial Notes and any Initial 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.
4
<PAGE>
TENDERING HOLDER(S) SIGN HERE
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
Signature of Holder(s)
Dated: _____________________________, 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
certificate(s) of Initial 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._____________________________________________________
GUARANTEE OF SIGNATURE(S)
(If Required - See Instruction 3)
Authorized Signature____________________________________________________________
Name____________________________________________________________________________
Title___________________________________________________________________________
Address_________________________________________________________________________
Name of Firm____________________________________________________________________
Area Code and Telephone No._____________________________________________________
Dated: _____________________________, 1996
5
- --------------------------------------------------------------------------------
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITION OF THE EXCHANGE OFFER
1. Delivery of this Letter of Transmittal and Certificates.
Certificates for all physically delivered Initial Notes or confirmation of
any book-entry transfer to the Exchange Agent's account at a book-entry transfer
facility of Initial 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 deliver of this Letter of Transmittal, the Initial 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 by the Exchange Agent. If such delivery is by mail, it is
suggested that registered mail with return receipt requested, properly insured,
be used.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial 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 may tender their Initial Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer -- How to Tender." 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 or facsimile transmission setting forth the
name and address of the tendering holder, the names in which such Initial Notes
are registered, and, if possible, the certificate numbers of the Initial Notes
to be tendered and a guarantee that within five New York Stock Exchange Trading
days after the date of execution of such letter or facsimile transmission by the
Eligible Institution, the Initial Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer facility), will be delivered by such
Eligible Institution, the Initial Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Initial Notes into the Exchange
Agent's account at the book-entry transfer of such Initial 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 or facsimile
transmission, as all provided in the Prospectus under the caption "The Exchange
Offer -- How to Tender."
No alternative, conditional, regular 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 Initial Notes of exchange.
2. Partial Tenders: Withdrawals.
If less than the entire principal amount of Initial 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 Initial Notes submitted but
not tendered will be sent to such holder as soon as practicable after the
Expiration Date. All Initial Notes, to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
anytime prior to the Expiration Date. For a withdrawal to be effective, a
written or facsimile transmission notice of withdrawal must be timely received
by the Exchange Agent. Any such notice of withdrawal must specify the person
named in the Letter of Transmittal as having tendered Initial Notes to be
withdrawn, the certificate numbers of the Initial Notes to be withdrawn, the
principal
6
<PAGE>
amount of Initial Notes delivered for exchange, a statement that such holder is
withdrawing his or her election to have such Initial Notes exchanged, and the
name of the registered holder of such Initial 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 accepted by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of the Initial Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Initial Notes promptly following
receipt of notice of withdrawal. If Initial 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 Initial Notes or otherwise comply with the
book-entry transfer facility's procedures.
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
Initial Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration or any change
whatsoever.
If any of the Initial 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 Initial 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 Initial 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 Initial Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include a
book-entry transfer facility whose name appears on a security listing as the
owner of the Initial Notes) of Initial 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 Initial Notes listed, such Initial 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 Initial 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
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 Initial Notes are tendered: (i) by a
registered holder of such Initial Notes; or (ii) for the account of an Eligible
Institution.
7
<PAGE>
4. Transfer Taxes.
The Company shall pay all transfer taxes, if any, applicable to the
transfers and exchange of Initial Notes to it or its order pursuant to the
Exchange Offer. If a transfer tax is imposed for any reason other than the
transfer and exchange of Initial Notes to the Company or its order pursuant to
the Exchange Offer, the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by the tendering
holder. 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 Initial Notes listed in this Letter of
Transmittal.
5. Waiver of Conditions.
The Company reserves the absolute right to waive, in whole or in part, any
of the conditions to the Exchange Offer set forth in the Prospectus.
6. Mutilated, Lost, Stolen or Destroyed Initial Notes.
Any holder whose Initial 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 on
the first page of this Letter of Transmittal. 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 the
Company at 1lll Northshore Drive, Suite N-600, Knoxville, Tennessee 37919.
Attention: Phyllis C. Best (telephone: (423) 450-5300).
IMPORTANT: This Letter of Transmittal or a facsimile thereof (together with
certificates of Initial 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.
8
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
for
OFFER FOR ALL OUTSTANDING
11 3/4% SENIOR NOTES DUE 2004
IN EXCHANGE FOR
11 3/4% SERIES B SENIOR NOTES DUE 2004
of
ANCHOR ADVANCED PRODUCTS, INC.
Registered holders of outstanding 11 3/4% Senior Notes due 2004 (the
"Initial Notes") who wish to tender their Initial Notes in exchange for a like
principal amount of 11 3/4% Series B Senior Notes due 2004 (the "Exchange
Notes") and whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes and Letter of Transmittal (and any other documents
required by the Letter of Transmittal) to Fleet National Bank (the "Exchange
Agent") prior to the Expiration Date, may use this Notice of Guaranteed
Delivery. This Notice of Guaranteed Delivery may be delivered by hand or sent by
facsimile transmission or mail to the Exchange Agent, See "The Exchange Offer --
How to Tender" in the Prospectus.
The Exchange Agent
for the Exchange Offer is:
FLEET NATIONAL BANK
By Registered or Certified Mail: By Overnight Courier:
Fleet National Bank Fleet National Bank
By Hand: By Facsimile:
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 under
<PAGE>
the instructions thereto, such signature guarantee must appear in the applicable
space provided on the Letter of Transmittal for Guarantee of Signatures.
Ladies and Gentlemen:
The undersigned hereby tenders the principal amounts of Initial Notes
indicated below, upon the terms and subject to the conditions contained in the
Prospectus dated l997 of Anchor Advanced Products, Inc. (the "Prospectus"),
receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name and address of registered holder as it appears on Certificate number(s) of Initial Principal Amount of Initial
the privately placed 11 3/4% Senior Notes due 2004 Notes transmitted Notes Transmitted
("Initial Notes")
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
THE FOLLOWING MUST BE COMPLETED
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution within the meaning of Rule
17(A)(d)-15 under the Securities Exchange Act of 1934, as amended, hereby
guarantees to deliver to the Exchange Agent at one of its addresses set forth
above, the Initial Notes, together with a properly completed and duly executed
Letter of Transmittal within five New York Stock Exchange, Inc. trading days
after the date of execution of this Notice of Guaranteed Delivery.
Name of Firm:___________________________ ___________________________________
(Authorized Signature)
Address:________________________________ Title:_____________________________
________________________________________ Name:______________________________
(City) (State) (Zip Code)
Area Code and Telephone Number:
Date:__________________________________
NOTE: DO NOT SEND INITIAL NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY,
INITIAL NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
EX-99.3
EXCHANGE AGENT AGREEMENT
Dated as of _______ , 1997
Fleet National Bank
Ladies and Gentlemen:
Pursuant to the provisions of the Offer (the "Exchange Offer") for all of
the outstanding 11 3/4% Senior Notes due 2004 (the "Initial Notes") of Anchor
Advanced Products, Inc., a Delaware corporation (the "Company"), in exchange for
11 3/4% Series B Senior Notes due 2004 (the "Exchange Notes"), all of the
Company's issued and outstanding Initial Notes accepted for tender of exchange
(the "Exchange") prior to 5:00 p.m. New York time on __________, 1997, unless
extended, for the Company's Exchange Notes will be exchanged pursuant to the
terms and conditions of the Exchange Offer. The Exchange Offer is being made
pursuant to a prospectus (the "Prospectus") included in the Company's
registration statement on Form S-4 (File No._______________) (the "Registration
Statement") filed with the Securities and Exchange Commission (the "SEC"). The
term "Expiration Date" shall mean the date on which the Exchange Offer, as it
may be extended, shall expire. Upon receipt and execution of this letter and
confirmation of the arrangements herein set forth, Fleet National Bank will act
as the Exchange Agent for the Exchange (the "Exchange Agent"). A copy of the
Prospectus is attached hereto as Exhibit A.
A copy of the form of the letter of transmittal, including the related
notice of guaranteed delivery (the "Letters of Transmittal"), to be used by the
holders of record of the Initial Notes (the "Holders") to surrender their
Initial Notes in order to receive the Exchange Notes pursuant to the Exchange is
attached hereto as Exhibit B.
The Company hereby appoints you to act as Exchange Agent in connection with
the Exchange. In carrying out your duties as Exchange Agent, you are to act in
accordance with the following:
1. You are to mail the Prospectus and the Letters of Transmittal to all of
the Holders on the day that you are notified in writing by the Company that the
Registration Statement has become effective under the Securities Act of 1933, as
amended, and to make subsequent mailings thereof to persons who become Holders
prior to the Expiration Date as may from time to time be requested by the
Company.
2. You are to examine the Letters of Transmittal and the Initial Notes and
other documents delivered or mailed to you, by or for the Holders, prior to the
Exchange Date, to ascertain whether (i) the Letters of Transmittal are properly
executed and completed in accordance with the instructions set forth therein,
(ii) the Initial Notes are in proper form for transfer and (iii) all other
documents submitted to you are in proper form. In each case where a
<PAGE>
Letter of Transmittal or other document has been improperly executed or
completed or, for any other reason, is not in proper form, or some other
irregularity exists, you are authorized to endeavor to take such action as you
consider appropriate to notify the tenderer of such irregularity and as to the
appropriate means of resolving the same. Determination of questions as to the
proper completion or execution of the Letters of Transmittal, or as to the
proper form for transfer of the Initial Notes or as to any other irregularity in
connection with the submission of Letters of Transmittal and/or Initial Notes
and other documents in connection with the Exchange, shall be made by officers
of the Company evidenced by their written instructions or oral direction
confirmed by facsimile. Any determination made by the Company on such questions
shall be final and binding. As Exchange Agent, you are entitled to rely on any
determination by the Company as described above and shall be fully protected and
indemnified in such reliance.
3. Tender of the Initial Notes may be made only as set forth in the Letter
of Transmittal. Notwithstanding the foregoing, tenders which the Company shall
approve in writing as having been properly tendered shall be considered to be
properly tendered. Letters of Transmittal shall be recorded by you as to the
date and time of receipt and shall be preserved and retained by you. Exchange
Notes are to be issued in exchange for the Initial Notes pursuant to the
Exchange only (i) against deposit with you of the Initial Notes, together with
executed Letters of Transmittal and any other documents required by the Exchange
Offer on each business day from the execution hereof up to the Expiration Date
or (ii) in the event the holder is a participant in the Depository Trust Company
("DTC") system, by the utilization of DTC's Automated Tender Offer Program
("ATOP") and any evidence required by the Exchange Offer on each business day
from the execution hereof up to the Expiration Date.
4. Upon the oral or written request of the Company (with written
confirmation of such oral request thereafter), you will transmit by telephone,
and promptly thereafter confirm in writing to (i) Phyllis C. Best, Senior Vice
President, Finance and Controller (telephone (423) 450-5365) and (ii) Francis J.
Feeney, Jr., Esq., Hutchins, Wheeler & Dittmar, A Professional Corporation,
counsel to the Company (telephone (617) 951-6906) or such other persons as the
Company may reasonably request, the aggregate number of the Initial Notes
tendered to you and the number of the Initial Notes properly tendered that day.
Furthermore, you shall transmit copies of all Agents Messages (as defined in the
Letter of Transmittal) received in connection with ATOP to the aforementioned
persons as they are received. In addition, you will also inform the
aforementioned persons, upon oral request made from time to time (with written
confirmation of such request thereafter) prior to the Expiration Date, of such
information as they or any of them may reasonably request.
5. Upon the terms and subject to the conditions of the Exchange Offer,
delivery of Exchange Notes to be issued in exchange for accepted Initial Notes
will be made by you promptly after acceptance of the tendered Initial Notes.
6. If any Holder shall report to you that his/her failure to surrender
Initial Notes registered in his/her name is due to the loss, misplacement or
destruction of a certificate or
-2-
<PAGE>
certificates, you shall request such Holder (i) to furnish to the Exchange Agent
an affidavit of loss and, if required by the Company, a corporate bond of
indemnity in an amount and evidenced by such certificate or certificates of a
surety, as may be satisfactory to you and the Company, and (ii) to execute and
deliver an agreement to indemnify the Company and you in such form as is
acceptable to you and the Company. The obligees to be named in each such
indemnity bond shall include the Company and you. You shall report to the
Company the names of all Holders who claim that their Initial Notes have been
lost, misplaced or destroyed and the principal amount of such Initial Notes.
7. As soon as practicable after you mail or deliver to an Initial Holder
the Exchange Notes that such Holder may be entitled to receive, you shall
arrange for cancellation of the Initial Notes submitted to you or returned by
DTC in connection with ATOP. Such Notes shall be forwarded to Fleet National
Bank, as trustee (the "Trustee") under the Indenture dated as of April 2, l997
governing the Initial Notes, for cancellation and retirement as you are
instructed by the Company (or a representative designated by the Company).
8. For your services as the Exchange Agent hereunder, the Company shall pay
you in accordance with the schedule of fees attached hereto as Exhibit C. The
Company also will reimburse you for your reasonable out-of-pocket expenses
(including but not limited to counsel fees not previously paid to you as set
forth in Exhibit C) in connection with your services promptly after submission
to the Company of itemized statements.
9. As the Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those specifically
set forth herein or in the Exhibits attached hereto or as may be
subsequently requested in writing of you by the Company and agreed to by
you in writing with respect to the Exchange,
(b) will be regarded as making no representations and having no
responsibilities as to the validity, accuracy, sufficiency, value or
genuineness of any of the Company's Holder record information, any Initial
Notes deposited with you hereunder or any Exchange Notes, any Letters of
Transmittal or other documents prepared by the Company in connection with
the Exchange Offer or any signatures or endorsements other than your own,
and will not be required to and will make no representations as to the
validity, value or genuineness of the Exchange Offer;
(c) shall not be obligated to take any legal action hereunder which
might in your judgment involve any expenses or liability unless you shall
have been furnished with an indemnity reasonably satisfactory to you;
(d) may rely on and shall be fully protected and indemnified as
provided in paragraph l0 hereof in acting in reliance upon any
certificate, instrument, opinion, notice, letter,
- 3 -
<PAGE>
telegram, facsimile or other document or security delivered to you and
reasonably believed by you to be genuine and to have been signed by the
proper party or parties;
(e) may rely on and shall be fully protected and indemnified as
provided in paragraph 10 hereof in acting upon the written or oral
instructions with respect to any matter relating to your acting as Exchange
Agent specifically covered by this Agreement or supplementing or qualifying
any such action of any officer or agent of the Company or such other person
or persons as may be designated or whom you reasonably believe has been
designated by the Company;
(f) may consult with counsel satisfactory to you, including counsel
for the Company, and the opinion or advice of such counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by you hereunder in good faith and in accordance with
the opinion or advice of such counsel;
(g) shall not at any time advise any person as to the wisdom of the
Exchange or as to the market value or decline or appreciation in market
value of any Initial Notes or Exchange Notes; and
(h) shall not be liable for anything which you may do or refrain from
doing in connection with this letter except for your gross negligence,
willful misconduct or bad faith.
10. The Company covenants and agrees to indemnify and hold harmless Fleet
National Bank and its officers, directors, employees, agents and affiliates
(collectively, the "Indemnified Parties" and each an "Indemnified Party") and
hold each Indemnified Party harmless against any loss, liability or reasonable
expense of any nature (including reasonable legal and other fees and expenses)
incurred in connection with the administration of the duties of the Indemnified
Parties hereunder; provided, however, that no Indemnified Party shall be
indemnified against any such loss, liability or expense arising out of such
party's gross negligence or bad faith. In no event shall you be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if you have been advised of
the likelihood of such loss or damage and regardless of the form of action. To
the extent stated below, the Company shall not be liable under this indemnity
with respect to any claim against any Indemnified Party unless the Company shall
be notified by such Indemnified Party by letter, or by cable, telex or
telecopier confirmed by letter, of the written assertion of a claim against such
Indemnified Party, or of any action commenced against such Indemnified Party,
promptly after but in any event within 10 days of the date such Indemnified
Party shall have received any such written assertion of a claim or shall have
been served with a summons, or other legal process, giving information as to the
nature and basis of the claim, but failure so to notify the Company shall not
relieve the Company of any liability which it may have otherwise than on account
of this Agreement or hereunder except such liability which is a direct result of
such Indemnified Party's failure to notify promptly. The Company shall be
entitled to participate at its own expense in the defense against any such claim
or legal action. If such Indemnified
- 4 -
<PAGE>
Party in such notice so directs, the Company shall assume the defense of any
suit brought to enforce any such claim. If such Indemnified Party does not so
direct the Company but elects not to defend any such claim or legal action or if
such Indemnified Party has elected to defend any such claim or legal action but
is not, in the reasonable judgment of the Company, diligently pursuing such
defense, then the Company may elect to assume the defense of any suit brought to
enforce any such claim. In the event the Company assumes the defense, the
Company shall not be liable for any fees and expenses thereafter incurred by
such Indemnified Party's counsel, except for any reasonable fees and expenses of
such Indemnified Party's counsel incurred in representing such Indemnified Party
that are necessary and appropriate as a result of the need to have separate
representation because of a conflict of interest between such Indemnified Party
and the Company. You shall not enter into a settlement or other compromise with
respect to any indemnified loss, liability or expense without the prior written
consent of the Company, which shall not be unreasonably withheld or delayed.
ll. This Agreement and your appointment as the Exchange Agent shall be
construed and enforced in accordance with the laws of the Commonwealth of
Massachusetts and shall inure to the benefit of, and the obligations created
hereby shall be binding upon, the successors and assigns of the parties hereto.
This Agreement may not be modified orally. Any inconsistency between this
Agreement and the Letter of Transmittal, as they may from time to time be
supplemented or amended, shall be resolved in favor of the latter, except with
respect to the duties, liabilities and indemnification of you as Exchange Agent.
* * * *
-5-
<PAGE>
Please acknowledge receipt of this letter and confirm the arrangements
herein provided by signing and returning the enclosed copy.
Very truly yours,
ANCHOR ADVANCED PRODUCTS, INC.
By:_________________________
Name:
Title:
Accepted and Agreed to:
FLEET NATIONAL BANK
Exchange Agent
By:_________________________
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANCHOR
HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1996 AND THE THIRTEEN WEEKS ENDED MARCH 29, 1997 INCLUDED IN
FORM S-4 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001030452
<NAME> Anchor Advanced Products, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 MAR-29-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-29-1997
<EXCHANGE-RATE> 1 1
<CASH> 1,578 108
<SECURITIES> 0 0
<RECEIVABLES> 22,450 26,015
<ALLOWANCES> (1,050) (858)
<INVENTORY> 20,411 21,598
<CURRENT-ASSETS> 47,486 49,341
<PP&E> 93,460 95,416
<DEPRECIATION> (40,737) (42,715)
<TOTAL-ASSETS> 116,691 118,241
<CURRENT-LIABILITIES> 20,023 22,282
<BONDS> 65,702 63,764
0 0
0 0
<COMMON> 10 10
<OTHER-SE> 20,807 21,865
<TOTAL-LIABILITY-AND-EQUITY> 116,691 118,241
<SALES> 156,858 41,546
<TOTAL-REVENUES> 0 0
<CGS> 129,221 34,653
<TOTAL-COSTS> 11,358 2,615
<OTHER-EXPENSES> 1,938 369
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,124 2,072
<INCOME-PRETAX> 6,217 1,837
<INCOME-TAX> 2,591 779
<INCOME-CONTINUING> 3,626 1,058
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,626 1,058
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 2.58 .75
</TABLE>
