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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 7, 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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COLLINS & AIKMAN FLOORCOVERINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 2273 58-2151061
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
311 SMITH INDUSTRIAL BOULEVARD
DALTON, GEORGIA 30722
(706) 259-9711
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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EDGAR M. BRIDGER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COLLINS & AIKMAN FLOORCOVERINGS, INC.
311 SMITH INDUSTRIAL BOULEVARD
DALTON, GEORGIA 30722
(706) 259-2034
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE OF PROCESS)
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COPY TO:
LESLIE A. GRANDIS, ESQ.
MCGUIRE, WOODS, BATTLE & BOOTHE, L.L.P.
ONE JAMES CENTER
901 EAST CARY STREET
RICHMOND, VIRGINIA 23219
(804) 775-4322
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
If any of 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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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
10% Senior Subordinated
Notes due 2007........ $100,000,000 100% $100,000,000 $30,303
</TABLE>
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(1) Estimated pursuant to Rule 457(f) solely for purposes of calculating the
registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 7, 1997
PROSPECTUS
OFFER TO EXCHANGE
SERIES B 10% SENIOR SUBORDINATED NOTES DUE 2007 ("EXCHANGE NOTES")
FOR ALL OUTSTANDING
10% SENIOR SUBORDINATED NOTES DUE 2007 ("INITIAL NOTES")
OF
[LOGO]
COLLINS & AIKMAN
FLOORCOVERINGS, INC.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED
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Collins & Aikman Floorcoverings, Inc. a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the
"Letter of Transmittal") which together with the Prospectus constitute the
"Exchange Offer," to exchange up to an aggregate principal amount of
$100,000,000 of its Series B 10% Senior Subordinated Notes Due 2007 (the
"Exchange Notes") for up to an aggregate principal amount of $100,000,000 of
its outstanding 10% Senior Subordinated Notes Due 2007 (the "Initial Notes").
The terms of the Exchange Notes are identical in all material respects to those
of the Initial Notes, except for certain transfer restrictions and registration
rights relating to the Initial Notes. The Exchange Notes will be issued
pursuant to, and entitled to the benefits of, the Indenture (as defined)
governing the Initial Notes. The Exchange Notes and the Initial Notes are
sometimes referred to collectively as the "Notes."
The Exchange Notes will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Debt (as
defined) of the Company. The Exchange Notes will rank pari passu in right of
payment with all other senior subordinated indebtedness of the Company and will
rank senior to all other subordinated indebtedness of the Company. The
Indenture permits the Company to incur additional indebtedness including Senior
Debt, subject to certain limitations. As of January 25, 1997, pro forma for the
Transactions (as defined), the Company had approximately $57.0 million of
Senior Debt outstanding (exclusive of unused commitments of approximately $28.0
million).
The Exchange Notes will bear interest from February 6, 1997, the date of
issuance of the Initial Notes that are tendered in exchange for the Exchange
Notes (or the most recent Interest Payment Date (as defined) to which interest
on such Notes has been paid), at the rate of 10% per annum and will be payable
semi-annually in arrears on each January 15 and July 15, commencing on July 15,
1997.
(Continued on Next Page)
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SEE "RISK FACTORS", WHICH BEGINS AT PAGE 14, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is , 1997.
<PAGE>
(Continued from Cover)
The Company will accept for exchange any and all Initial Notes which are
properly tendered in the Exchange Offer prior to 5:00 p.m., New York City
time, on , 1997, unless extended by the Company in its sole discretion (the
"Expiration Date"). Tenders of Initial Notes may be withdrawn at any time
prior to 5:00 p.m., New York City time, on the Expiration Date. In the event
the Company terminates the Exchange Offer and does not accept for exchange any
Initial Notes with respect to the Exchange Offer, the Company will promptly
return the Initial Notes to the holders thereof. The Exchange Offer is not
conditioned upon any minimum principal amount of Initial Notes being tendered
for exchange, but is otherwise subject to certain customary conditions. The
Initial Notes may be tendered only in integral multiples of $1,000.
The Initial Notes were originally issued and sold on February 6, 1997 in a
transaction not registered under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance upon the exemptions provided in Rule 144A and
Regulation D under 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.
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement
dated February 6, 1997 (the "Registration Rights Agreement") between the
Company and BT Securities Corporation (the "Initial Purchaser"), with respect
to the sale of the Initial Notes. Based on interpretations by the staff of the
Securities and Exchange Commission (the "Commission"), the Exchange Notes
issued pursuant to the Exchange Offer in exchange for Initial Notes may be
offered for resale, resold and otherwise transferred by respective holders
thereof (other than any such holder which is an "affiliate" of the Company
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 the Exchange Notes are acquired in the ordinary course of
such holder's business and such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes and is not engaged in
and does not intend to engage in a distribution of the 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
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 the Exchange Notes received in exchange for Initial Notes if
such Exchange Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Company has agreed that,
for a period of 180 days after the Expiration Date, it will make this
Prospectus available to any Participating Broker-Dealer (as defined) for use
in connection with any such resale. See "Plan of Distribution."
There has not previously been any public market for the Initial Notes. The
Company does not intend to list the Exchange Notes on any securities exchange
or to seek approval for quotation through any automated quotation system.
There can be no assurance that an active market for the Exchange Notes will
develop.
The Company will not receive any proceeds from the Exchange Offer; however,
pursuant to the Registration Rights Agreement, the Company will pay the
expenses incident to the Exchange Offer.
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AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement on Form
S-4 (the "Registration Statement") under the Securities Act, with respect to
the Exchange Notes. This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain items of which are contained in schedules and
exhibits to the Registration Statement as permitted by the rules and
regulations of the Commission. 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. Items of information omitted from this Prospectus but contained in
the Registration Statement may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following regional offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New
York 10048. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, D.C. 20549 at prescribed rates. In addition, the Commission
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission.
As a result of this offering, the Company will become subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In the event that the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company has agreed that, so long as any Notes remain outstanding, it
will file with the Commission and distribute to holders of the Initial Notes
or the Exchange Notes, as applicable, copies of the financial information that
would have been contained in such annual reports and quarterly reports,
including management's discussion and analysis of financial condition and
results of operations, that would have been required to be filed with the
Commission pursuant to the Exchange Act. See "Description of the Notes--
Certain Covenants--Reports to Holders."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Market data used throughout this Prospectus were obtained from
internal Company data and various industry sources. Management believes that
the information obtained from such sources is reliable; however, the accuracy
and completeness of such information is not guaranteed. The Company has not
independently verified this market data. Similarly, internal Company data,
while believed by the Company to be reliable, have not been verified by any
independent sources. Except as otherwise indicated, the data referenced herein
refer to the United States market. References herein to years or fiscal years
mean, as to the Company, the fiscal year ended in January of the following
year.
THE COMPANY
The Company is the leading manufacturer of vinyl-backed commercial
floorcovering in the United States, with the number one market position in six-
foot roll carpet and the number three market position in modular carpet tile.
The Company markets its products to a wide variety of commercial end-markets,
including corporate office space, retail stores and education, health care and
government facilities. The Company differentiates itself through (i) superior
product features such as durability, long-term appearance retention and its
patented Powerbond RS "peel and stick" installation system, (ii) exceptional
customer-focused services, including the Company's Source One program, which
offers customers a complete turn-key package of floorcovering supply and
installation for single-site and multiple-site projects, (iii) leading design
capability and (iv) environmental leadership, including an advanced recycling
program which converts plant scrap and reclaimed post-consumer, vinyl-backed
carpeting into backing for certain of its carpet products and other commercial
uses, such as industrial block flooring. In the fiscal year ended January 25,
1997, the Company generated net sales and pro forma EBITDA of $136.1 million
and $27.3 million, respectively.
The U.S. commercial carpet market, which is comprised of the specified and
non-specified segments, is estimated by management to have generated sales of
approximately $3.1 billion in 1995, having grown at a compound annual growth
rate ("CAGR") of approximately 4.4% since 1990. The specified commercial
market, which represents approximately $1.8 billion of the total U.S.
commercial carpet market, is differentiated from the non-specified market, in
that products are specified by architects, designers and owners rather than
being purchased off the shelf. While competition in the non-specified market is
based largely on price, the key differentiating factors in the specified market
are product durability, appearance retention, product design and service, as
well as price.
Within the specified commercial market, the Company competes in the six-foot
roll and modular carpet tile segments, which combined accounted for an
estimated $510 million of industry sales in 1995. The Company's focus on these
niche products provides a competitive advantage as these products tend to have
proprietary specifications and generally cannot be produced on standard
broadloom carpet manufacturing equipment utilized by the majority of
manufacturers in the carpet industry. Management believes the exceptional
performance and unique installation characteristics of the Company's products
provide a superior long-term investment for end-users relative to both
broadloom carpet, which requires more frequent replacement and higher
maintenance costs, and hard surface flooring products, which lack the
aesthetics and comfort under foot of carpet. The Company believes it has a
reputation for outstanding product quality and innovative, problem-solving
products. As a result, the Company historically has been able to achieve sales
growth in excess of that in the general commercial carpet industry. The
Company's net sales have grown, without the benefit of acquisitions, from $75.3
million in 1991 to $136.1 million in 1996, representing a CAGR of 12.6%.
The Company has successfully reduced manufacturing costs without sacrificing
the Company's proprietary product qualities. Further, the Company's commitment
to employee involvement in the manufacturing process and quality training
programs throughout the organization have led to significant reductions in
scrap rates and non-conformance costs as well as improved product quality.
These factors have contributed to the improvement
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in the Company's EBITDA margins from 13.0% in 1991 to 20.0% (on a pro forma
basis) in 1996. During this time, EBITDA grew from $9.8 million to $27.3
million (on a pro forma basis), representing a CAGR of 22.7%.
The Company believes that the diversity of its end-markets provides
significant stability to its revenue base. The Company's focus on market
segments which are characterized by high renovation rates, as opposed to new
construction, reduces its exposure to economic fluctuations. Historically,
renovation activity has been significantly less cyclical than new construction.
Management estimates that approximately 75% of the Company's sales are related
to renovation projects, and approximately 25% are attributable to new
construction. As a result, sales of the Company's products have increased
steadily despite the volatility in new commercial construction since 1990.
COMPETITIVE STRENGTHS
The Company's market leadership and strong financial performance are
attributable to a number of factors including the following:
SUPERIOR PRODUCT TECHNOLOGY
The Company has demonstrated an ability to develop value-added products that
differentiate it from its competition. The Company's proprietary vinyl cushion
backing technology, Powerbond(R), which uses a closed-cell construction that is
impermeable to moisture, exhibits demonstrably superior durability, seamability
and cleaning characteristics, and provides comfort under foot, thereby
combining the best attributes of both hard surface and carpet floorcoverings.
Powerbond(R) was enhanced in 1988 with the patented Powerbond RS system, which
employs a "peel and stick" dry adhesive for installation. Management believes
the RS system substantially reduces total installation costs and eliminates the
fumes associated with wet adhesives generally used in conventional carpet
installation. Management believes that the combination of the Powerbond(R) and
RS systems provides it with a distinct competitive advantage in the
marketplace.
LEADING POSITIONS IN NICHE PRODUCTS
In 1967, the Company pioneered vinyl-backed flooring systems (which includes
six-foot roll and modular carpet tile) in the U.S. commercial carpet industry
as an alternative to hard surface flooring and broadloom carpet. The Company is
the leader in the vinyl-backed commercial carpet industry, with approximately
22% of the 1995 U.S. market. The Company has the number one position in the
fast-growing six-foot roll segment of the specified U.S. commercial carpet
market, with an estimated 1995 market share of approximately 36%, which the
Company believes is three times the size of its nearest competitor. Within the
modular carpet tile market, the Company has the number three position with an
estimated market share of approximately 12%. Management believes that the six-
foot roll market will continue to grow significantly faster than the commercial
carpet industry as a whole. Management expects to maintain its leading position
in the six-foot roll market and believes its innovative products in the modular
carpet tile segment will result in increased market share. The Company's long
history of superior product performance and design capability provide it with a
competitive advantage and a loyal customer base for recurring sales.
UNIQUE MARKETING SEGMENTATION
The Company has implemented a segmented marketing strategy which targets the
Company's sales and marketing efforts to the specific needs of each end-market
within a given geographic area. Management believes that each end-market
(corporate office space, retail stores and education, health care and
government facilities) has distinct product, service, performance, aesthetics,
distribution and budgetary requirements. The segmentation strategy requires
each account manager to develop an expertise in a specific end-market,
resulting in greater
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customer-focused service, comprehensive market coverage and increased sales
productivity over time. The size of the Company's sales organization has nearly
doubled since the implementation of the segmentation strategy in 1993 from 45
to 82 account managers. Management expects to benefit from this investment
because, historically, the productivity of the sales force has increased
significantly with experience. This market-specific focus differentiates the
Company from its competitors which generally have a geographically-assigned
sales organization wherein the account managers are responsible for all end-use
markets.
LEADING RECYCLING CAPABILITY
The Company has developed a proprietary technology for recycling vinyl carpet
scrap and post-consumer, vinyl-backed floorcovering reclaimed from installation
sites. This unique capability eliminates the need for landfill disposal or
incineration of these waste products. Through this technology, the Company
produces backing for new carpet and other value-added commercial products, such
as industrial block flooring. The Company is leading the industry in recycling
initiatives at a time when many end-users, including government agencies and
professional designers, increasingly prefer and/or require products with
recycled content.
FLEXIBLE DISTRIBUTION
The Company has developed a flexible three-channeled distribution system
which focuses on the needs of the end-user. Customers have the flexibility to
purchase the Company's products directly from the Company, through the
Company's unique Source One program or through independent dealers. These
programs allow the Company's sales and marketing personnel to (i) establish
relationships within specific market segments, (ii) continually improve and
customize product characteristics for specific applications and (iii) maximize
total value delivered to customers. Although the majority of industry sales
have traditionally been through local dealers, management believes its emphasis
on flexible distribution and direct marketing provide the Company more
influence in the specification process, thus affording it a distinct
competitive advantage. The Company will continue to market its products to
floorcovering specifiers and end-users through programs which emphasize one-on-
one contact between its account managers and key decision-makers.
EXPERIENCED MANAGEMENT TEAM AND SIGNIFICANT EMPLOYEE INVOLVEMENT
The Company has an experienced and successful management team with an average
of 20 years of experience in the floorcovering industry and an average of over
10 years of experience with the Company. This management team has instituted
programs which have increased net sales and EBITDA at CAGRs of 12.6% and 22.7%,
respectively, between 1991 and 1996. Additionally, management has promoted
company-wide employee involvement in every phase of the manufacturing and
selling process, which has resulted in the implementation of over 3,500
suggestions from both hourly and salaried associates regarding the Company's
operations. Manufacturing employees are cross-trained in several functions and
have access to ongoing internal training programs as well as external
educational programs.
OPERATING STRATEGY
The Company has grown sales and EBITDA through a focused marketing and sales
strategy combined with cost management programs. Set forth below are the
components of the Company's operating strategy:
SPECIFIED COMMERCIAL MARKET FOCUS
The Company will continue to focus on niche segments of the specified
commercial market where sales are driven primarily by distinctive product
features and performance characteristics rather than price. The Company's
products are manufactured in response to customer orders rather than mass
produced for inventory. The specified market tends to be more driven by total
product value including performance, durability, aesthetics,
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customer-focused services and ease of maintenance and installation when
compared with more price-sensitive, non-specified segments of the commercial
carpet industry. Management believes that the Company has a significant
opportunity to convert users of traditional broadloom carpet and hard surface
flooring to its niche vinyl-backed floorcovering product. The specified
commercial broadloom market and the commercial hard surface flooring markets
represented approximately $1.3 billion and $1.6 billion, respectively, of sales
in 1995.
DIVERSIFIED END-MARKETS
The Company's sales and marketing strategy focuses on diversified end-markets
(corporate office space, retail stores and education, health care and
government facilities) in order to maximize its sales opportunities and to
continue to minimize the effects of cyclicality in the carpet industry. During
the most recent downturn in commercial construction between 1990 and 1993, in
which new construction declined at a compounded rate of approximately 4% per
annum, net sales of the Company's six-foot and tile products grew at a CAGR of
5.6%. New construction spending in the education, health care and government
sectors (which sectors accounted for over 60% of the Company's 1995 and 1996
domestic carpet sales) steadily increased each year between 1990 and 1995,
while new construction in the corporate office space, retail stores and lodging
segments has been cyclical over the same period.
PRODUCT INNOVATION
Management believes the Company has developed a substantial competitive
advantage within its niche market segments through the continuous development
of products desired by end-users. The Company's Powerbond RS technology
provides customers with enhanced durability and performance, and low cost
installation and maintenance. Under the recently launched Infinity Initiative
program, management believes that the Company is the only manufacturer to
recycle reclaimed post-consumer, vinyl-backed floorcovering into backing for
commercial carpet products. Capitalizing on Powerbond(R)'s unique seam welding
capabilities, the Company's Imaginations program offers the design flexibility
to create customized, dramatic visual effects. The Company's recently
introduced Jhane Barnes collection combines the internationally-known
designer's signature style with the industry's first computer-aided design
capability that will enable architects and designers to customize pattern
configurations for printed modular carpet tile. The Company intends to continue
developing innovative, value-added products which contribute to the Company's
growth in revenues and profitability.
COST REDUCTION
The Company will seek to reduce costs by monitoring and controlling its
manufacturing and administrative expenses. The Company continually tracks its
cost of non-conformance ("CONC"), which includes price discounts, product
returns and allowances. From 1991 to 1996, the Company reduced CONC by
approximately 18%, while net sales grew by approximately 81%. Supplementing its
efforts to reduce CONC, the Company has implemented an aggressive cost
improvement program, which targets specific initiatives to achieve cost
reductions throughout the organization. During fiscal 1996, the Company
realized $1.2 million in cost savings, which on an annualized basis represents
approximately $2 million in cost savings. For fiscal 1997, the Company has
targeted an additional $2 million in annualized cost reductions. In addition,
the Company has completed a $13 million manufacturing modernization program
which management believes, in conjunction with the Company's extensive employee
training, will result in continued material yield and labor productivity
improvements.
STRATEGIC ALLIANCES AND ACQUISITIONS
The commercial carpet industry remains highly fragmented, with many
specialized manufacturers serving numerous market segments. The Company intends
to pursue domestic and international alliances and acquisitions that would add
new product lines, enhance penetration of end-markets or allow entry into new
geographic markets.
4
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EQUITY SPONSORS
Quad-C, Inc. ("Quad-C") is a private investment firm based in
Charlottesville, Virginia focused on the leveraged acquisition of companies in
partnership with management. Quad-C was founded in 1990 by its Managing
Partner, Terrence D. Daniels, former Vice Chairman and director of W.R. Grace &
Co. While at W.R. Grace & Co., Mr. Daniels was responsible for the Specialty
Chemical, Health Care, Natural Resource, Restaurant, Retail and Corporate
Technical groups, which consisted of more than 100 individual businesses in
over 40 countries. Quad-C has completed fifteen private investments in a
variety of industries including manufacturing, restaurants, media, financial
institutions and health care. Among its portfolio investments, Quad-C currently
has eight private companies held through several affiliated partnerships.
Paribas Principal Partners ("Paribas") is the U.S. private equity group of
Groupe Paribas, which was founded in 1872. Groupe Paribas, headquartered in
Paris, is a global merchant bank with approximately 25,000 employees worldwide.
Through its direct equity investment arm, Paribas Affaires Industrielles,
Groupe Paribas has been making global investments for over 100 years and
currently has a private equity portfolio exceeding $6.5 billion invested in
over 250 companies primarily in Europe, North America and Asia. Paribas has
investments in approximately 30 companies in the U.S.
THE ACQUISITION
Pursuant to an agreement dated as of December 9, 1996 (the "Acquisition
Agreement"), entered into among CAF Holdings, Inc. ("Holdings"), a corporation
organized on behalf of affiliates of Quad-C and Paribas, CAF Acquisition
Corporation ("CAF"), a wholly-owned subsidiary of Holdings, the Company,
Collins & Aikman Products Co. ("C&A Products") and Collins & Aikman Floor
Coverings Group, Inc. ("Seller"), CAF agreed to acquire from Seller all of the
outstanding capital stock of the Company for a total purchase price of $197.0
million (including $27.0 million in consideration for a tradename license
agreement), subject to adjustment based upon the Company's level of net working
capital on the closing date of the Acquisition (the "Closing Date"). On the
Closing Date, February 6, 1997, CAF paid Seller $195.6 million based upon the
parties' preliminary estimate of net working capital. The purchase price may be
subject to further adjustment upon final determination of the net working
capital as of the Closing Date. Financing for the Acquisition was provided by
(i) $57.0 million of borrowings (the "Bank Financing") under an $85.0 million
senior secured credit facility (the "Credit Agreement") among the Company,
Holdings, certain lenders and Bankers Trust Company, as agent, (ii) $51.0
million of capital invested by affiliates of Quad-C, Paribas, management and
certain other investors in Holdings (the "Equity Financing") and (iii) the
proceeds of the offering of the Initial Notes (the "Initial Offering"). The
Acquisition, the Initial Offering, the Equity Financing and the Bank Financing
are collectively referred to herein as the "Transactions." See "The
Acquisition."
In connection with the Acquisition, Holdings and Collins & Aikman Corporation
made an election under Section 338(h)(10) of the Internal Revenue Code (the
"Code"), which had the effect of treating the Acquisition as a purchase of
assets for federal income tax purposes. As a result of the Section 338(h)(10)
election, the Company's tax basis in its assets was increased to the respective
fair market values of such assets. The newly allocated basis is amortizable for
tax purposes over the respective useful lives of the assets in accordance with
the provisions of the Code. The balance of the purchase price was allocated to
goodwill and other intangibles (including rights under a tradename license
agreement (the "Tradename License Agreement")), which is amortizable for tax
purposes over fifteen years.
Holdings is a Virginia corporation. The principal executive office of
Holdings is located at 230 East High Street, Charlottesville, Virginia 22902
and its telephone number is (804) 979-9122. The Company is a Delaware
corporation. The principal office of the Company is located at 311 Smith
Industrial Boulevard, Dalton, Georgia 30722 and its telephone number is (706)
259-9711.
5
<PAGE>
THE INITIAL OFFERING
The Initial Notes........... The Initial Notes were sold by the Company on
February 6, 1997 to the Initial Purchaser
pursuant to a Purchase Agreement, dated January
29, 1997 (the "Purchase Agreement"). The Initial
Purchaser subsequently resold the Initial Notes
to qualified institutional buyers pursuant to
Rule 144A under the Securities Act.
Registration Rights Pursuant to the Purchase Agreement, the Company
Agreement.................. and the Initial Purchaser entered into a
Registration Rights Agreement, dated as of
February 6, 1997 (the "Registration Rights
Agreement"), which grants the holders of the
Initial Notes certain exchange and registration
rights. The Exchange Offer is intended to satisfy
such exchange rights which terminate upon the
consummation of the Exchange Offer.
THE EXCHANGE OFFER
The Exchange Notes.......... The forms and terms of the Exchange Notes are
identical in all material respects to the terms
of the Initial Notes for which they may be
exchanged pursuant to the Exchange Offer, except
for certain transfer restrictions and
registration rights relating to the Initial Notes
and except for certain penalty interest
provisions relating to the Initial Notes
described below under "--Terms of the Exchange
Notes."
The Exchange Offer.......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Initial Notes. As of
the date hereof, $100,000,000 aggregate principal
amount of Initial Notes are outstanding. The
Company will issue the Exchange Notes to holders
on or promptly after the Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Initial Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than any
such holder which is an "affiliate" of the
Company 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 that such
holder does not intend to participate and has no
arrangement or understanding with any person to
participate in the distribution of such Exchange
Notes. Each holder accepting the Exchange Offer
is required to represent to the Company in the
Letter of Transmittal that, among other things,
the Exchange Notes will be acquired by the holder
in the ordinary course of business and the holder
does not intend to
6
<PAGE>
participate and has no arrangement or
understanding with any person to participate in
the distribution of such Exchange Notes.
Each Participating Broker-Dealer (as defined)
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 states that by so
acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to
time, may be used by a broker-dealer in
connection with resale of Exchange Notes received
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. The Company has agreed that,
for a period of 180 days after the Expiration
Date, it will make this Prospectus available to
any Participating Broker-Dealer for use in
connection with any such resale; provided that
the Company has no obligation to amend or
supplement this Prospectus unless it has received
written notice from a Participating Broker-Dealer
of its prospectus delivery requirements under the
Securities Act within five business days
following consummation of the Exchange Offer. See
"Plan of Distribution."
Any holder who tenders in the Exchange Offer with
the intention to participate, or for the purpose
of participating, in a distribution of the
Exchange Notes could not rely on the position of
the staff of the Commission enunciated in no-
action letters and, in the absence of an
exemption therefrom, must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
resale transaction. Failure to comply with such
requirements in such instance may result in such
holder incurring liability under the Securities
Act for which the holder is not indemnified by
the Company.
Interest on the Exchange The Exchange Notes will bear interest at the rate
Notes...................... of 10% per annum from February 6, 1997, the date
of issuance of the Initial Notes that are
tendered in exchange for the Exchange Notes (or
the most recent Interest Payment Date to which
interest on such Notes has been paid).
Accordingly, holders of Initial Notes that are
accepted for exchange will not receive interest
on the Initial Notes that is accrued but unpaid
at the time of tender, but such interest will be
payable on the first Interest Payment Date after
the Expiration Date. Interest on the Exchange
Notes will be payable semi-annually in arrears on
each January 15 and July 15, commencing July 15,
1997.
Expiration Date; Withdrawal
of Tender.................. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1997, or such later date
and time to which it is extended
7
<PAGE>
by the Company (the "Expiration Date"). The
tender of Initial Notes pursuant to the Exchange
Offer may be withdrawn at any time prior to the
Expiration Date. The Expiration Date will not in
any event be extended to a date later than ,
1997. Any Initial Notes not accepted for exchange
for any reason will be returned without expense
to the tendering holder thereof as promptly as
practicable after the expiration or termination
of the Exchange Offer.
Certain Conditions to the
Note Exchange Offer........ The Exchange Offer is subject to certain
customary conditions, which may be waived by the
Company. See "The Exchange Offer--Certain
Conditions to the Exchange Offer."
Procedures for Tendering Each holder of Initial Notes wishing to accept
Initial Notes.............. the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Initial Notes
and any other required documentation to the
Exchange Agent (as defined) at the address set
forth herein. By executing the Letter of
Transmittal, each holder will represent to the
Company that, among other things, (i) any
Exchange Notes to be received by it will be
acquired in the ordinary course of its business,
(ii) it has no arrangement or understanding with
any person to participate in the distribution of
the Exchange Notes and (iii) it is not an
"affiliate," as defined in Rule 405 of the
Securities Act, of the Company or, if it is an
affiliate, it will comply with the registration
and prospectus delivery requirements of the
Securities Act to the extent applicable.
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Initial Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Initial Notes in
the Exchange Offer should contact such registered
holder and promptly instruct such registered
holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering his Initial Notes,
either make appropriate arrangements to register
ownership of the Initial Notes in such owner's
name or obtain a properly completed bond power
from the registered holder. The transfer of
registered ownership may take considerable time
and may not be able to be completed prior to the
Expiration Date.
Guaranteed Delivery Holders of Notes who wish to tender their Initial
Procedure.................. Notes and whose Initial Notes are not immediately
available or who cannot deliver their Initial
Notes, the Letter of Transmittal or any other
documents required by the Letter of Transmittal
to the Exchange Agent, prior to the Expiration
Date, must tender their Initial Notes according
to
8
<PAGE>
the guaranteed delivery procedures set forth in
"The Exchange Offer--Guaranteed Delivery
Procedures."
Registration Requirements... The Company has agreed to use its best efforts to
consummate by August 5, 1997, the registered
Exchange Offer pursuant to which holders of the
Initial Notes will be offered an opportunity to
exchange their Initial Notes for the Exchange
Notes which will be issued without legends
restricting the transfer thereof. In the event
that applicable interpretations of the staff of
the Commission do not permit the Company to
effect the Exchange Offer or in certain other
circumstances, the Company has agreed to file a
Shelf Registration Statement covering resales of
the Initial Notes and to use its best efforts to
cause such Shelf Registration Statement to be
declared effective under the Securities Act and,
subject to certain exceptions, keep such Shelf
Registration Statement effective until three
years after the original issuance of the Initial
Notes.
Certain Federal Income Tax
Considerations............. For a discussion of certain federal income tax
considerations relating to the exchange of the
Exchange Notes for the Initial Notes, see
"Certain U.S. Federal Income Tax Considerations."
Use of Proceeds............. There will be no cash proceeds to the Company
from the exchange of Notes pursuant to the
Exchange Offer.
Consequences of Exchanging
Initial Notes.............. As a result of the making of this Exchange Offer,
the Company will have fulfilled certain of its
obligations under the Registration Rights
Agreement, and holders of Initial Notes who do
not tender their Notes will generally not have
any further registration rights under the
Registration Rights Agreement or otherwise. Such
holders will continue to hold the untendered
Initial Notes and will be entitled to all the
rights and subject to all the limitations
applicable thereto under the Indentures, except
to the extent such rights or limitations, by
their terms, terminate or cease to have further
effectiveness as a result of the Exchange Offer.
All untendered Initial Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, if any Initial Notes are tendered
and accepted in the Exchange Offer, the trading
market for the untendered Initial Notes could be
adversely affected.
Exchange Agent.............. IBJ Schroder Bank & Trust Company is the Exchange
Agent. The address and telephone number of the
Exchange Agent are set forth in "The Exchange
Offer--Exchange Agent."
TERMS OF THE EXCHANGE NOTES
General..................... The form and terms of the Exchange Notes are the
same as the form and terms of the Initial Notes
(which they replace) except that (i) the Exchange
Notes bear a Series B designation, (ii) the
Exchange
9
<PAGE>
Notes have been registered under the Securities
Act and, therefore, will not bear legends
restricting the transfer thereof, and (iii) the
holders of Exchange Notes will not be entitled to
certain rights under the Registration Rights
Agreement, including the provisions providing for
an increase in the interest rate on the Initial
Notes in certain circumstances relating to the
timing of the Exchange Offer, which rights will
terminate when the Exchange Offer is consummated.
See "The Exchange Offer--Consequences of Failure
to Exchange." 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 Notes."
Issuer...................... Collins & Aikman Floorcoverings, Inc.
Maturity Date............... January 15, 2007.
Interest Rate and Payment The Notes will bear interest at a rate of 10% per
Dates....................... annum. Interest on the Notes will accrue from the
date of original issuance (the "Issue Date") and
will be payable semi-annually on each January 15
and July 15, commencing July 15, 1997.
Ranking..................... The Notes will be unsecured obligations of the
Company and will be subordinated in right of
payment to all existing and future Senior Debt
(as defined) of the Company. The Notes will rank
pari passu with any present and future senior
subordinated indebtedness of the Company and will
rank senior to all other subordinated
indebtedness of the Company. As of January 25,
1997, pro forma for the Transactions, the Company
had approximately $57.0 million of Senior Debt
outstanding (exclusive of unused commitments of
approximately $28.0 million).
Optional Redemption......... The Notes will be redeemable, in whole or in
part, at the option of the Company on or after
January 15, 2002, at the redemption prices set
forth herein, plus accrued interest to the date
of redemption. In addition, prior to January 15,
2000, the Company, at its option, may redeem up
to 35% of the aggregate principal amount of the
Notes originally issued with the net cash
proceeds of one or more Public Equity Offerings
at the redemption price set forth herein, plus
accrued interest to the date of redemption;
provided that at least 65% of the aggregate
principal amount of Notes originally issued
remains outstanding immediately after any such
redemption.
Change of Control........... Upon a Change of Control, the Company will be
obligated to make an offer to repurchase all
outstanding Notes at a price equal to 101% of the
principal amount thereof plus accrued interest to
the date of repurchase.
Certain Covenants........... The Indenture governing the Notes (the
"Indenture") contains certain covenants that
limit the ability of the Company and its
subsidiary to, among other things, incur
additional indebtedness, pay dividends or make
certain other restricted payments, consummate
10
<PAGE>
certain asset sales, enter into certain
transactions with affiliates, incur indebtedness
that is subordinate in right of payment to any
Senior Debt and senior in right of payment to the
Notes, incur liens, impose restrictions on the
ability of a subsidiary to pay dividends or make
certain payments to the Company and its
subsidiary, merge or consolidate with any other
person or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all
of the assets of the Company.
For additional information regarding the Notes, see "Description of the
Notes."
RISK FACTORS
See "Risk Factors," which begins at page 14, for a discussion of certain
factors that should be considered by participants in the Exchange Offer.
11
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
The following presents summary historical financial information of the
Company. The information in this table should be read in conjunction with
"Selected Consolidated Financial Data," "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated
Financial Statements and the notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
JANUARY 30, JANUARY 29, JANUARY 28, JANUARY 27, JANUARY 25,
1993(A) 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............... $88,598 $95,590 $108,039 $122,169 $136,124
Cost of goods sold...... 53,518 55,065 62,527 73,615 81,715
------- ------- -------- -------- --------
Gross profit............ 35,080 40,525 45,512 48,554 54,409
Selling, general and
administrative
expenses(b)............ 21,708 25,478 23,733 27,364 28,971
Corporate general and
administrative
allocated costs(c)..... 1,044 1,046 1,069 1,591 1,531
Operating income........ 12,254 10,347(d) 20,710 19,599 23,907
Loss on sale of accounts
receivable(e).......... -- -- 1,261 3,269 3,489
Interest expense........ 35 -- -- -- --
Income before income
taxes.................. 12,219 10,347 19,449 16,330 20,418
Net income.............. 7,592 5,220 11,799 10,015 12,513
OTHER DATA:
EBITDA(f)............... $14,878 $20,646 $ 23,247 $ 23,371 $ 27,118
Depreciation and
amortization........... 2,582 2,398 2,237 2,154 2,201
Capital expenditures.... 1,420 2,147 1,823 4,290 7,897
</TABLE>
<TABLE>
<CAPTION>
AT
JANUARY 25,
1997
-----------
<S> <C>
BALANCE SHEET DATA:
Working capital(g).................................................. $ 6,485
Total assets(g)..................................................... 39,614
Long-term debt, including current maturities........................ --
Stockholder's equity(g)............................................. 21,620
</TABLE>
- --------
(a) The fiscal period ended January 30, 1993 included 53 weeks.
(b) Amounts include costs incurred by the Company relating to certain matters
retained by the Seller totaling $42,000 in fiscal 1992, $4,302,000 in
fiscal 1993, $300,000 in fiscal 1994, $1,618,000 in fiscal 1995 and
$1,010,000 in fiscal 1996. The above amounts represent costs, including
customer remediation, legal expenses, travel expenses and claim
settlements, incurred by the Company in connection with certain claims and
litigation that either are being retained by C&A Products pursuant to the
Acquisition Agreement or were incurred by the Company in anticipation of
the sale of the Company.
(c) Amounts relate to services provided by C&A Products and include tax,
treasury, risk management, employee benefits, legal, data processing,
application of cash receipts and other general corporate services. The
costs of the services provided by C&A Products were allocated to the
Company based upon a combination of estimated use and the relative sales of
the Company's business to the total consolidated operations of C&A
Products. In the opinion of management, the method of allocating these
costs is believed to be reasonable. However, the costs of these services
charged to the Company are not necessarily indicative of the costs that
would have been incurred if the Company had performed these functions. See
"Unaudited Pro Forma Financial Data" for management's estimate of the cost
of these services subsequent to the Acquisition.
(d) At October 30, 1993, Collins & Aikman Corporation wrote off all goodwill
related to its December 1988 acquisition of C&A Products based upon its
assessment that the asset was impaired. The write-off of $2.6 million that
was reported during the year ended January 29, 1994 represented the
Company's allocated portion of the goodwill. In addition, prior to the
Closing Date certain of the Company's employees participated in Collins &
Aikman Corporation's stock option plans which provide for the award of
options on Collins & Aikman Corporation common shares to employees,
exercisable over ten-year periods. Pursuant to such stock option plans,
Collins & Aikman Corporation granted certain employees of the Company stock
options with exercise prices below the then estimated fair value in
recognition of their prior service and recorded management equity plan
expense of $1.0 million. Such charges have been deducted in determining
operating income for the fiscal year ended January 29, 1994.
(e) Effective July 13, 1994, C&A Products entered into a Receivables Sale
Agreement with Carcorp, a wholly-owned, bankruptcy-remote subsidiary of C&A
Products. The accounts receivable were purchased by Carcorp at the face
amount of the accounts receivable less a defined discount. Upon closing of
the Acquisition, the Company was terminated as a seller under the
Receivables Sale Agreement. Management does not anticipate selling its
accounts receivable in the future and as a result, does not expect to incur
any losses related to third-party discounts associated with such sales.
(f) EBITDA represents earnings before deductions for interest expense, loss on
sale of accounts receivable, income tax expense, depreciation,
amortization, non-recurring charges related to the write-off of goodwill
and the management equity plan expense (see note (d) above) and the costs
incurred in connection with certain matters retained by the Seller (see
note (b) above). The Company understands that certain investors believe
EBITDA reflects a company's ability to satisfy principal and interest
obligations with respect to its indebtedness and to utilize cash for other
purposes. EBITDA does not represent and should not be considered as an
alternative to net income or cash flow from operations as determined by
generally accepted accounting principles.
(g) For periods after July 13, 1994, amounts exclude all domestic trade
accounts receivable sold by the Company pursuant to the Receivables Sale
Agreement referred to in note (e) above.
12
<PAGE>
SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA
The following presents summary unaudited pro forma financial data of the
Company, giving effect to the Transactions as if they had occurred on January
28, 1996. The summary unaudited pro forma financial data does not purport to
represent what the Company's results of operations actually would have been if
the Transactions had occurred as of the date indicated or what such results
will be for any future periods. The information in this table should be read in
conjunction with "Unaudited Pro Forma Financial Data," "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and the
notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR
ENDED
JANUARY 25, 1997
----------------
(DOLLARS IN
THOUSANDS)
<S> <C>
OPERATING DATA:
Net sales...................................................... $136,124
Cost of goods sold............................................. 83,235
--------
Gross profit................................................... 52,889
Selling, general and administrative expenses................... 31,809
Corporate general and administrative allocated costs........... 1,393
--------
Operating income............................................... 19,687
Interest expense............................................... 16,001
--------
Income before income taxes..................................... 3,686
Income tax expense............................................. 1,430
--------
Net income..................................................... $ 2,256
========
OTHER DATA:
EBITDA......................................................... $ 27,256
Cash interest expense.......................................... 14,861
Depreciation and amortization.................................. 8,709
Capital expenditures........................................... 7,897
Ratio of EBITDA to cash interest expense....................... 1.8x
Ratio of total long-term debt to EBITDA........................ 5.8x
<CAPTION>
AT
JANUARY 25, 1997
----------------
BALANCE SHEET DATA:
<S> <C>
Working capital................................................ $ 22,827
Total assets................................................... 222,679
Long-term debt, including current maturities................... 157,000
Stockholder's equity........................................... 51,000
</TABLE>
13
<PAGE>
RISK FACTORS
Holders of Initial Notes should carefully consider the following factors in
addition to the other information set forth in this Prospectus in connection
with the Exchange Offer.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
In connection with the Acquisition, the Company incurred a significant
amount of indebtedness. At January 25, 1997, the Company's indebtedness would
have been $157.0 million (exclusive of $28.0 million of available borrowings
under its Revolving Credit Facility) and its stockholder's equity would have
been $51.0 million, in each case on a pro forma basis after giving effect to
the Transactions. In addition, subject to the restrictions in the Credit
Agreement and the Indenture, the Company may incur additional senior or other
indebtedness from time to time to finance acquisitions or capital expenditures
or for other general corporate purposes. For the year ended January 25, 1997,
on a pro forma basis after giving effect to the Transactions as if they had
occurred on January 28, 1996, the Company's ratio of earnings to fixed charges
would have been 1.2 to 1.0.
The level of the Company's indebtedness could have important consequences to
holders of the Notes, including: (i) a substantial portion of the Company's
cash flow from operations must be dedicated to debt service and will not be
available for other purposes; (ii) the Company's future ability to obtain
additional debt financing for working capital, capital expenditures or
acquisitions may be limited; (iii) the Company's level of indebtedness could
limit its flexibility in reacting to changes in the industry and general
economic conditions; (iv) certain of the Company's borrowings (including but
not limited to the $85.0 million Credit Agreement) will be at variable rates
of interest, which could cause the Company to be vulnerable to increases in
interest rates; and (v) all of the indebtedness incurred in connection with
the Credit Agreement will become due prior to the time the principal payments
on the Notes will become due. Certain of the Company's competitors currently
operate on a less leveraged basis and have significantly greater operating and
financing flexibility than the Company.
The Company's ability to pay interest on the Notes and to satisfy its other
debt obligations will depend upon its future operating performance, which will
be affected by prevailing economic conditions and financial, business and
other factors, certain of which are beyond its control. The Company
anticipates that its operating cash flow, together with available borrowings
under the Credit Agreement, will be sufficient to meet its operating expenses,
capital expenditure requirements, working capital needs and to service its
debt requirements as they become due. However, if the Company is unable to
service its indebtedness, it will be forced to adopt an alternative strategy
that may include actions such as reducing or delaying capital expenditures,
selling assets, restructuring or refinancing its indebtedness or seeking
additional equity capital. There can be no assurance that any of these
strategies could be effected on satisfactory terms, if at all. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
SUBORDINATION OF NOTES; ASSET ENCUMBRANCE
The Notes are subordinated in right of payment to all existing and future
Senior Debt of the Company. In the event of bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Debt has been paid in full,
and there may not be sufficient assets remaining to pay amounts due on any or
all of the Notes then outstanding. In addition, under certain circumstances,
no payments may be made with respect to principal of or interest on the Notes
if a default exists with respect to Senior Debt. In addition, indebtedness
outstanding under the Credit Agreement is secured by substantially all of the
assets of the Company and its subsidiary. On a pro forma basis, after giving
effect to the Transactions, Senior Debt of the Company at January 25, 1997
would have been $57.0 million (exclusive of unused commitments of $28.0
million). Additional Senior Debt may be incurred by the Company from time to
time subject to certain restrictions contained in the Credit Agreement and the
Indenture. See "Description of Credit Agreement" and "Description of the
Notes."
14
<PAGE>
RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS
The Credit Agreement prohibits the Company from prepaying its indebtedness
(including the Notes), other than indebtedness incurred under the Credit
Agreement. The Credit Agreement also requires the Company to maintain
specified financial ratios and satisfy certain financial condition tests. The
Company's ability to meet those financial ratios and tests can be affected by
events beyond its control, and there can be no assurance that the Company will
meet those tests. A breach of any of these covenants could result in a default
under the Credit Agreement and/or the Indenture. In the event of an event of
default under the Credit Agreement, the lenders thereunder could elect to
declare all amounts outstanding under the Credit Agreement, together with
accrued interest, to be immediately due and payable. If the Company were
unable to repay those amounts, the lenders could proceed against the
collateral granted to them to secure that indebtedness. If the Credit
Agreement indebtedness were to be accelerated, there can be no assurance that
the assets of the Company would be sufficient to repay in full that
indebtedness and the other indebtedness of the Company, including the Notes.
See "Description of Credit Agreement."
CONTROL OF THE COMPANY
Quad-C and Paribas and their respective affiliates, through their ownership
of substantially all of the voting stock of Holdings, effectively control the
Company and have the power to elect all directors of the Company, approve all
amendments to the Company's Certificate of Incorporation and effect
fundamental corporate transactions such as mergers and asset sales. Terrence
D. Daniels, President of Quad-C, effectively controls Quad-C and its
affiliates and therefore effectively controls the Company. See "Ownership of
Capital Stock."
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success is largely dependent upon the
abilities and experience of its senior management team, which has an average
of 20 years of experience in the floorcovering industry and over 10 years of
experience with the Company. The loss of the services of one or more of these
senior executives could adversely affect the Company's results of operations.
See "Management."
RELIANCE ON PETROLEUM-BASED RAW MATERIALS; RELIANCE ON PRINCIPAL SUPPLIER
Petroleum-based products, including both nylon and vinyl, comprise the
predominant portion of the cost of raw materials used by the Company in
manufacturing. While the Company generally attempts to match cost increases
with corresponding price increases, large increases in the cost of such
petroleum-based raw materials could adversely affect the Company if the
Company were unable to pass these increased costs through to customers. E. I.
DuPont de Nemours and Company ("DuPont") currently supplies all of the
Company's requirements for nylon yarn, the principal raw material used in the
Company's floorcovering products. While the Company believes that there are
adequate alternative sources of supply from which it could fulfill its nylon
yarn requirements, the unanticipated termination of the supply arrangement
with DuPont or a prolonged interruption in shipments from DuPont could have a
material adverse effect on the Company.
CYCLICAL NATURE OF INDUSTRY
Sales of the Company's principal products are related to the construction
and renovation of commercial buildings. Such activity is cyclical and can be
affected by the strength of the general economy, prevailing interest rates and
other factors that could lead to cost control measures and reduced spending by
businesses and other users of commercial space. Although new construction
tends to be more cyclical than renovation and currently the majority of the
Company's sales are generated from the renovation sector, a downturn in either
sector could impact the overall demand for commercial floorcovering products,
which could adversely affect the Company's results of operations.
15
<PAGE>
COMPETITION
The commercial floorcoverings industry is highly competitive. The Company
competes with other carpet manufacturers and manufacturers of vinyl and other
types of floorcovering. While no competitor focuses solely on the same
products as the Company, a number of domestic and foreign competitors
manufacture six-foot roll goods and modular carpet tile as one segment of
their business. Certain of these competitors have greater financial resources
than the Company. See "Business--Competition."
Historically, the vast majority of the commercial carpet industry's sales
has been through independent carpet dealers. Recently, two of the Company's
competitors and DuPont, the Company's principal raw material supplier,
initiated a strategy of purchasing or forming alliances with selected carpet
dealers primarily in large metropolitan markets. No assurance can be given as
to the effect, if any, the foregoing will have on the industry in general or
on the Company's results of operations in particular.
NEW STAND-ALONE COMPANY
Prior to the Transactions, the Company had been a member of a consolidated
group of companies and had not operated as a stand-alone company. C&A Products
historically provided a number of administrative and other services to the
Company. In addition, the Company participated in certain C&A Products
benefits and insurance programs. After the Transactions, the Company initially
is relying upon C&A Products under the Management Services Agreement described
in "The Acquisition" and "Certain Transactions" for certain services, such as
data processing, health care and employee benefits administration, treasury
and tax functions, and engineering for up to one year, and traffic services
for up to two years, following consummation of the Transactions. Prior to the
termination of the Management Services Agreement, the Company will need to
provide or procure these services independently. No assurance can be given as
to the impact, if any, of these changes on the Company's results of
operations.
CHANGE OF CONTROL
A Change of Control (as defined) could require the Company to refinance
substantial amounts of indebtedness. Upon the occurrence of a Change of
Control, the holders of the Notes would be entitled to require the Company to
purchase the Notes at a purchase price equal to 101% of the principal amount
of such Notes, plus accrued and unpaid interest, if any, to the date of
purchase. However, the Credit Agreement prohibits the purchase of the Notes by
the Company, unless and until such time as the indebtedness under the Credit
Agreement is repaid in full. In the event of a Change of Control, there can be
no assurance that the Company would have assets sufficient to satisfy all of
its obligations under the Credit Agreement and the Notes. See "Description of
Credit Agreement" and "Description of the Notes--Change of Control."
FRAUDULENT CONVEYANCE
If a court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy or the Company as a debtor-in-
possession, were to find under relevant federal and state fraudulent
conveyance statutes that the Company did not receive fair consideration or
reasonably equivalent value for incurring certain of the indebtedness,
including the Notes, incurred by the Company in connection with the
Acquisition, and that, at the time of such incurrence, the Company (i) was
insolvent, (ii) was rendered insolvent by reason of such incurrence or grant,
(iii) was engaged in a business or transaction for which the assets remaining
with the Company constituted unreasonably small capital or (iv) intended to
incur, or believed that it would incur, debts beyond its ability to pay such
debts as they matured, such court, subject to applicable statutes of
limitation, could void the Company's obligations under the Notes, subordinate
the Notes to obligations of the Company that do not otherwise constitute
Senior Debt or take other action detrimental to the holders of the Notes.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction being applied. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than all that company's property at a fair valuation, or if the
present fair salable value
16
<PAGE>
of that company's assets is less than the amount that will be required to pay
its probable liability on its existing debts as they become absolute and
matured. Moreover, regardless of solvency, a court could void an incurrence of
indebtedness, including the Notes, if it determined that such transaction was
made with intent to hinder, delay or defraud creditors, or a court could
subordinate the indebtedness, including the Notes, to the claims of all
existing and future creditors on similar grounds.
There can be no assurance as to what standard a court would apply in order
to determine whether the Company was "insolvent" upon consummation of the
Acquisition or the sale of the Notes or that, regardless of the method of
valuation, a court would not determine that the Company was insolvent upon
consummation of the Acquisition or sale of the Notes.
Additionally, under federal bankruptcy or applicable state insolvency law,
if a bankruptcy or insolvency were initiated by or against the Company within
90 days after any payment by the Company with respect to the Notes, or if the
Company anticipated becoming insolvent at the time of such payment, all or a
portion of the payment could be avoided as a preferential transfer and the
recipient of such payment could be required to return such payment.
ABSENCE OF PUBLIC MARKET
The Initial Notes were issued to, and the Company believes are currently
owned by, a relatively small number of beneficial owners. Prior to the
Exchange Offer, there has not been any public market for the Initial Notes.
The Initial Notes have not been registered under the Securities Act and will
be subject to restrictions on transferability to the extent that they are not
exchanged for Exchange Notes by holders who are entitled to participate in
this Exchange Offer. The Exchange Notes will constitute a new issue of
securities with no established trading market. The Company does not intend to
list the Exchange Notes on any national securities exchange or seek approval
for quotation on the National Association of Securities Dealers Automated
Quotation System. No assurance can be given that an active public or other
market will develop for the Exchange Notes or as to the liquidity of the
trading market for the Exchange Notes. If a trading market does not develop or
is not maintained, holders of the Exchange Notes may experience difficulty in
reselling the Exchange Notes or may be unable to sell them at all. If a market
for the Exchange Notes develops, any such market may be discontinued at any
time. If a public trading market develops for the Exchange Notes, future
trading prices of such securities will depend on many factors including, among
other things, prevailing interest rates, the Company's results of operations
and the market for similar securities. Depending on prevailing interest rates,
the market for similar securities and other factors, including the financial
condition of the Company, the Exchange Notes may trade at a discount from
their principal amount. Historically, the market for securities similar to the
Exchange Notes, including non-investment grade debt, has been subject to
disruptions that have caused substantial volatility in the prices of such
securities. There can be no assurance that any market for the Exchange Notes,
if such market develops, will not be subject to similar disruptions.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as
handling and disposal practices for solid and hazardous wastes, and (ii)
impose liability for response costs and certain damages resulting from past
and current spills, disposals or other releases of hazardous materials
(together, "Environmental Laws"). The Company believes that it currently
conducts its operations, and in the past has operated its business, in
compliance in all material respects with applicable Environmental Laws. The
Company's operations may result in noncompliance with or liability for cleanup
pursuant to Environmental Laws. However, the Company believes that any past or
future noncompliance or liability under current Environmental Laws would not
have a material adverse effect on its results of operations and financial
condition. Environmental Laws have changed rapidly in recent years, and the
Company may be subject to more stringent Environmental Laws in the future.
There can be no assurance that more stringent Environmental Laws could not
have a material adverse effect on the Company's results of operations. See
"Business--Environmental Initiatives."
17
<PAGE>
THE ACQUISITION
Pursuant to the Acquisition Agreement, CAF purchased all of the issued and
outstanding capital stock of the Company on February 6, 1997. The purchase
price of $197.0 million (including $27.0 million in consideration of the
Tradename License Agreement) is subject to a purchase price adjustment based
upon the level of net working capital on the Closing Date. At the date of
closing, the preliminary estimated adjustment was a $1.4 million reduction in
the purchase price, resulting in a payment to the Seller on that date of
$195.6 million. The purchase price may be subject to further adjustment upon
final determination of the net working capital balance as of the Closing Date.
In connection with the Acquisition, Holdings and Collins & Aikman
Corporation made an election under Section 338(h)(10) of the Code, which had
the effect of treating the Acquisition as a purchase of assets for federal
income tax purposes. As a result of the Section 338(h)(10) election, the
Company's tax basis in its assets was increased to the respective fair market
values of such assets. The newly allocated basis is amortizable for tax
purposes over the respective useful lives of the assets, in accordance with
the provisions of the Code. The balance of the purchase price was allocated to
goodwill and other intangibles (including rights under the Tradename License
Agreement), which is amortizable for tax purposes over fifteen years.
In connection with the Acquisition, the Company entered into the Tradename
License Agreement with C&A Products, pursuant to which C&A Products granted to
the Company a perpetual, exclusive, fully-paid, royalty-free license to use
the name "Collins & Aikman" in connection with the business of designing,
manufacturing and marketing carpet or other floorcoverings for installation in
buildings or other structures and other products currently manufactured and
distributed by the Company (the "Floorcoverings Business"). The term of the
license will continue indefinitely, subject to termination by C&A Products for
breach by the Company of its covenants under the Tradename License Agreement
or if the Company is acquired by a competitor of C&A Products.
In connection with the Acquisition, C&A Products and its parent corporation,
Collins & Aikman Corporation, entered into a Non-Competition Agreement with
Holdings and the Company pursuant to which they agreed not to compete with the
Company in the Floorcoverings Business anywhere in the world for a period of
seven years from the Closing Date (provided that the Non-Competition Agreement
does not restrict Collins & Aikman Corporation or C&A Products after the
second anniversary of the Closing Date from acquiring an entity that is
engaged in the Floorcoverings Business) and not to use, or allow the use of,
the name Collins & Aikman or the initials "C&A" in the Floorcoverings Business
at any time after the Closing Date. In addition, under the Non-Competition
Agreement, Collins & Aikman Corporation and C&A Products have agreed for a
period of five years after the Closing Date not to solicit or attempt to hire
certain employees of the Company.
To facilitate the transition of the Company from its position as a member of
a consolidated group of companies to a stand-alone entity, the Company entered
into a Management Services Agreement pursuant to which C&A Products agreed to
provide, at the Company's request, certain categories of services, such as
data processing, health care and employee benefit administration, treasury and
tax functions, and engineering and traffic services. The maximum aggregate
annual payments (other than for traffic services) under the Management
Services Agreement are expected to be approximately $324,000. The Company paid
C&A Products approximately $1.5 million for services (other than traffic
services) and certain other allocations in 1996. Management estimates that its
costs of providing these services independently will approximate $1.5 million
on an annual basis. Other than traffic services, which C&A Products has agreed
to provide for up to two years following the Closing Date, C&A Products'
obligation to provide services terminates one year after the Closing Date.
18
<PAGE>
USE OF PROCEEDS OF THE EXCHANGE NOTES
This Exchange Offer is intended to satisfy certain obligations of the
Company under the Registration Rights Agreement. The Company will not receive
any proceeds from the issuance of the Exchange Notes offered hereby. In
consideration for issuing the Exchange Notes as contemplated in this
Prospectus, the Company will receive, in exchange, Initial Notes in like
principal amount. The form and terms of the Exchange Notes are identical in
all material respects to the form and terms of the Initial Notes, except as
otherwise described herein under "The Exchange Offer--Terms of the Exchange
Offer." The Initial Notes surrendered in exchange for the Exchange Notes will
be retired and cancelled and cannot be reissued. Accordingly, issuance of the
Exchange Notes will not result in any increase in the outstanding debt of the
Company.
19
<PAGE>
PRO FORMA CAPITALIZATION
The following table sets forth the unaudited capitalization of the Company
on a pro forma basis giving effect to the Transactions as if they had occurred
on January 25, 1997. This table should be read in conjunction with the
"Selected Consolidated Financial Data," and "Unaudited Pro Forma Financial
Data" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
JANUARY 25, 1997
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Indebtedness:
Revolving credit facility(a)........................ $ 2,000
Term loan(a)........................................ 55,000
Initial Notes....................................... 100,000
--------
Total indebtedness................................ 157,000
Stockholder's equity.................................. 51,000
--------
Total capitalization.............................. $208,000
========
</TABLE>
- --------
(a) Reflects borrowings under the Credit Agreement necessary to consummate the
Transactions. The total availability under the revolving credit facility
is $30.0 million. See "Unaudited Pro Forma Financial Data" and
"Description of Credit Agreement."
20
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Balance Sheet as of January
25, 1997 was prepared as if the Transactions had occurred on such date. The
following Unaudited Pro Forma Consolidated Statement of Operations gives
effect to the Transactions as if they had occurred on January 28, 1996. The
Unaudited Pro Forma Consolidated Statement of Operations does not purport to
represent what the Company's results of operations actually would have been if
the Transactions had occurred as of such date or what such results will be for
any future periods.
The Unaudited Pro Forma Consolidated Balance Sheet reflects the preliminary
allocation of the purchase price for the Acquisition to the Company's tangible
and intangible assets and liabilities. The final allocation of such purchase
price, and the resulting depreciation and amortization expense in the
accompanying Unaudited Pro Forma Consolidated Statement of Operations, will
differ from the preliminary estimates due to the final allocation being based
on: (a) actual closing date amounts of assets and liabilities and (b) final
appraised values of property, plant and equipment and other assets.
The unaudited pro forma financial data are based on the historical
financial statements of the Company and the assumptions and adjustments
described in the accompanying notes. The Company believes that such
assumptions are reasonable. The unaudited pro forma financial data should be
read in conjunction with the Consolidated Financial Statements of the Company
and the accompanying notes thereto appearing elsewhere in this Prospectus.
21
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JANUARY 25, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OFFERING ACQUISITION
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash..................... $ 144 $200,700 (a) $(198,700)(b) $ 2,144
Accounts receivable,
net..................... 1,577 17,311 (c) 18,888
Inventories.............. 16,172 16,172
Deferred tax assets...... 1,433 (1,310)(c) 123
Prepaid expenses and
other................... 488 488
------- --------
Total current assets... 19,814 37,815
Property, plant and
equipment, net............ 19,521 17,583 (c) 37,104
Deferred tax assets........ 259 523 (c) 782
Goodwill and intangibles... -- 139,658 (c) 139,658
Other assets............... 20 20
Deferred financing costs... -- 7,300 (d) 7,300
------- --------
Total assets........... $39,614 $222,679
======= ========
LIABILITIES AND
STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable......... $ 8,659 $ 8,659
Accrued expenses......... 4,670 $ (1,341)(e) 3,329
Current portion of senior
credit facility......... -- $ 3,000 (a) 3,000
------- --------
Total current
liabilities........... 13,329 14,988
Noncurrent liabilities,
including post-retirement
benefit obligation........ 4,665 (1,974) (f) 2,691
Senior credit facility..... -- 54,000 (a) 54,000
Notes...................... -- 100,000 (a) 100,000
------- --------
Total liabilities...... 17,994 171,679
------- --------
Stockholder's Equity:
Common stock............. -- --
Additional paid-in-
capital................. 7,821 51,000 (a) (7,821)(g) 51,000
Retained earnings........ 22,528 (22,528)(g) --
Investment and advances
to Collins & Aikman
Products Co............. (8,574) 8,574 (g) --
Foreign currency
translation adjustment.. 222 (222)(g) --
Pension equity
adjustment.............. (377) 377 (c) --
------- --------
Total stockholder's
equity................ 21,620 51,000
------- --------
Total liabilities and
stockholder's equity.. $39,614 $222,679
======= ========
</TABLE>
See accompanying notes.
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
The Pro Forma Consolidated Balance Sheet reflects the Transactions as if they
had occurred as of January 25, 1997 (actual amounts may differ from amounts
estimated below).
(a) Reflects the issuance of the Notes, the Equity Financing and the Bank
Financing:
<TABLE>
<S> <C>
Issuance of the Notes.......................................... $100,000
Equity Financing............................................... 51,000
Senior credit facility:
Current portion.............................................. 3,000
Long-term portion............................................ 54,000
Issuance-related fees and expenses............................. (7,300)
--------
$200,700
========
</TABLE>
(b) Represents the following cash payments related to the Acquisition:
<TABLE>
<S> <C>
Purchase price................................................ $(197,000)
Preliminary purchase price adjustment......................... 1,400
Acquisition expenses.......................................... (3,100)
---------
$(198,700)
=========
</TABLE>
(c) The Acquisition will be accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations." The
purchase price is being allocated first to the tangible and identifiable
intangible assets and liabilities of the Company based upon preliminary
estimates of their fair market values, with the remainder allocated to goodwill
as follows:
<TABLE>
<S> <C>
Purchase price, net of preliminary purchase price adjustment.. $195,600
Acquisition expenses.......................................... 3,100
Reinstatement of amounts of accounts receivable previously
sold......................................................... (17,311)
Book value of net assets acquired............................. (21,997)
Adjustment to book value of net assets acquired
for liabilities retained by Seller in Acquisition:
Medical and product and general liability................... (611)
Current employee payroll and benefit liabilities............ (781)
Long-term employee benefit liabilities...................... (1,096)
Elimination of pension equity adjustment.................... 377
--------
Increase in basis............................................. $157,281
========
Allocation of increase in basis:
Increase to fair value of property, plant and equipment..... $ 17,583
Increase in goodwill and intangibles........................ 139,658
Changes in deferred tax balances:
Current deferred tax assets............................... (1,310)
Noncurrent deferred tax assets............................ 523
Adjustments to liabilities for post-retirement costs........ 827
--------
$157,281
========
</TABLE>
(d) Reflects the deferred financing costs related to the Offering of the
Notes and the Bank Financing.
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(CONTINUED)
(DOLLARS IN THOUSANDS)
(e) Reflects liabilities retained by Seller in the Acquisition:
<TABLE>
<S> <C>
Medical liability............................................... $ (560)
Current employee payroll and benefit liabilities................ (781)
-------
$(1,341)
=======
(f) Reflects the following:
Product and general liability retained by Seller................ $ (51)
Adjustments to liabilities for post-retirement costs............ (827)
Long-term employee benefit liabilities retained by
Seller in the Acquisition..................................... (1,096)
-------
$(1,974)
=======
</TABLE>
(g) Reflects the elimination of historical equity balances.
24
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 25, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OFFERING ACQUISITION
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales.................... $136,124 $136,124
Cost of goods sold........... 81,715 $ 1,520 (a) 83,235
-------- --------
Gross profit................. 54,409 52,889
Selling, general and
administrative expenses..... 28,971 2,838 (b) 31,809
Corporate general and
administrative allocated
costs....................... 1,531 (138)(c) 1,393
-------- --------
Operating income............. 23,907 19,687
Interest expense............. -- $16,001 (d) 16,001
Loss on sale of accounts
receivable.................. 3,489 (3,489)(e) --
-------- --------
Income before income taxes... 20,418 3,686
Income tax expense........... 7,905 (6,192)(f) (283)(f) 1,430
-------- --------
Net income................... $ 12,513 $ 2,256
======== ========
OTHER DATA:
EBITDA....................... $ 27,118 $ 27,256
Depreciation and
amortization................ 2,201 8,709
Ratio of earnings to fixed
charges..................... 6.4x 1.2x
</TABLE>
See accompanying notes.
25
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
The Pro Forma Consolidated Statement of Operations reflects the Transactions
as if they had occurred on January 28, 1996.
(a) Reflects additional depreciation on the increase to fair value of
property, plant and equipment.
(b) Reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 25, 1997
----------------
<S> <C>
Elimination of expenses for matters retained by Seller....... $(1,010)
Additional amortization of goodwill and intangibles.......... 3,491
Additional depreciation on the increase to fair value of
property, plant and equipment............................... 357
-------
$ 2,838
=======
</TABLE>
(c) Reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 25, 1997
----------------
<S> <C>
Estimated reduction in cost of performing functions previously
performed
by Seller's corporate office................................. $(488)
Sponsor's consulting fees to be incurred...................... 350
-----
$(138)
=====
</TABLE>
(d) Reflects the following:
<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 25, 1997
----------------
<S> <C>
Interest expense on the Notes.................................. $10,000
Interest expense on the senior credit facility at 8.15%........ 4,646
Unused commitment fees and agency fees......................... 215
-------
Total cash interest expense................................... 14,861
Amortization of deferred financing costs....................... 1,140
-------
Total interest expense........................................ $16,001
=======
</TABLE>
A change of 1/4% in the interest rate on the senior credit facility would
have an impact on pro forma interest expense of $143 for the year ended
January 25, 1997.
(e) Reflects the elimination of the loss on sale of accounts receivable.
(f) Reflects the net additional income tax benefit as a result of the
Transactions, at the effective rate of 38.7% for the year ended January 25,
1997.
26
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following data is qualified in its entirety by the consolidated
financial statements of the Company and other information contained elsewhere
in this Prospectus. The financial data as of January 27, 1996 and January 25,
1997, and for the three years ended January 25, 1997, have been derived from
the audited financial statements of the Company contained elsewhere in this
Prospectus. The financial data as of and for the years ended January 30, 1993
and January 29, 1994 have been derived from the unaudited financial statements
of the Company. The historical consolidated financial statements of the
Company contained in this Prospectus are presented as if the Company were a
separate entity for all periods presented. The following financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------
JANUARY 30, JANUARY 29, JANUARY 28, JANUARY 27, JANUARY 25,
1993(A) 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............... $88,598 $95,590 $108,039 $122,169 $136,124
Cost of goods sold...... 53,518 55,065 62,527 73,615 81,715
------- ------- -------- -------- --------
Gross profit............ 35,080 40,525 45,512 48,554 54,409
Selling, general and
administrative
expenses(b)............ 21,708 25,478 23,733 27,364 28,971
Corporate general and
administrative
allocated costs(c)..... 1,044 1,046 1,069 1,591 1,531
Goodwill amortization
and write-off(d)....... 74 2,645 -- -- --
Management equity plan
expense(e)............. -- 1,009 -- -- --
------- ------- -------- -------- --------
Operating income........ 12,254 10,347 20,710 19,599 23,907
Loss on sale of accounts
receivable(f).......... -- -- 1,261 3,269 3,489
Interest expense........ 35 -- -- -- --
------- ------- -------- -------- --------
Income before income
taxes.................. 12,219 10,347 19,449 16,330 20,418
Income tax expense...... 4,627 5,127 7,650 6,315 7,905
------- ------- -------- -------- --------
Net income.............. $ 7,592 $ 5,220 $ 11,799 $ 10,015 $ 12,513
======= ======= ======== ======== ========
OTHER DATA:
EBITDA(g)............... $14,878 $20,646 $ 23,247 $ 23,371 $ 27,118
Capital expenditures.... 1,420 2,147 1,823 4,290 7,897
Depreciation and
amortization........... 2,582 2,398 2,237 2,154 2,201
Ratio of earnings to
fixed charges(h)....... 81.1x 80.4x 14.7x 5.7x 6.4x
BALANCE SHEET DATA (END
OF PERIOD):
Working capital(i)...... $13,682 $14,512 $ 3,268 $ 3,805 $ 6,485
Total assets(i)......... 40,433 41,160 27,312 31,231 39,614
Long-term debt,
including current
portion................ 315 -- -- -- --
Stockholder's
equity(i).............. 26,911 23,012 10,801 13,655 21,620
</TABLE>
- --------
(a) The fiscal period ended January 30, 1993 included 53 weeks.
(b) Amounts include costs incurred by the Company relating to certain matters
retained by the Seller totaling $42,000 in fiscal 1992, $4,302,000 in
fiscal 1993, $300,000 in fiscal 1994, $1,618,000 in fiscal 1995 and
$1,010,000 in fiscal 1996. The above amounts represent all costs,
including customer remediation, legal expenses, travel expenses and claim
settlements, incurred by the Company in connection with certain claims and
litigation that either are being retained by C&A Products pursuant to the
Acquisition Agreement or were incurred by the Company in anticipation of
the sale of the Company.
(c) Amounts relate to services provided by C&A Products and include tax,
treasury, risk management, employee benefits, legal, data processing,
application of cash receipts and other general corporate services. The
costs of the services provided by C&A Products were allocated to the
Company based upon a combination of estimated use and the relative sales
of the Company's business to the total consolidated operations of C&A
Products. In the opinion of management, the method of allocating these
costs is believed to be reasonable. However, the costs of these services
charged to the Company are not necessarily indicative of the costs that
would have been incurred if the Company had performed these functions. See
"Unaudited
27
<PAGE>
Pro Forma Financial Data" for management's estimates of the cost of these
services subsequent to the Acquisition.
(d) At October 30, 1993, Collins & Aikman Corporation wrote off all goodwill
related to its December 1988 acquisition of C&A Products based upon its
assessment that the asset was impaired. The write-off reported for the
year ended January 29, 1994 represented the Company's allocated portion of
the goodwill.
(e) Certain of the Company's employees participated in Collins & Aikman
Corporation's stock option plans which provide for the award of options on
Collins & Aikman Corporation common shares to employees, exercisable over
ten-year periods. Pursuant to such stock option plans, Collins & Aikman
Corporation granted certain employees of the Company stock options with
exercise prices below the then estimated fair value in recognition of
their prior service.
(f) Effective July 13, 1994, C&A Products entered into a Receivables Sale
Agreement with Carcorp, a wholly-owned, bankruptcy-remote subsidiary of
C&A Products. The accounts receivable were purchased by Carcorp at the
face amount of the accounts receivable less a defined discount. Upon
closing of the Acquisition, the Company was terminated as a seller under
the Receivables Sale Agreement. Management does not anticipate selling its
accounts receivable in the future and as a result, does not expect to
incur any losses related to third-party discounts associated with such
sales.
(g) EBITDA represents earnings before deductions for interest expense, loss on
sale of accounts receivable, income tax expense, depreciation,
amortization, non-recurring charges related to the write-off of goodwill
(see note (d) above), the management equity plan expense (see note (e)
above) and the costs incurred in connection with certain matters retained
by the Seller (see note (b) above). The Company understands that certain
investors believe EBITDA reflects a company's ability to satisfy principal
and interest obligations with respect to its indebtedness and to utilize
cash for other purposes. EBITDA does not represent and should not be
considered as an alternative to net income or cash flow from operations as
determined by generally accepted accounting principles.
(h) For purposes of this calculation, earnings are defined as income before
income taxes plus fixed charges. Fixed charges consist of interest expense
on all indebtedness, loss on sale of receivables and the interest portion
of operating lease rental expense.
(i) For periods after July 13, 1994, amounts exclude all domestic trade
accounts receivable sold by the Company pursuant to the Receivables Sale
Agreement referred to in note (f) above.
28
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is the leading U.S. manufacturer of six-foot roll carpet and the
third largest manufacturer of modular carpet tiles within the specified
commercial carpet market. The Company markets its products directly to the
end-user utilizing its national sales force and other distribution channels.
The Company's products are marketed to a wide variety of commercial end-
markets, including corporate office space, retail stores and education, health
care and government facilities. The Company believes that the diversity of its
target markets softens the impact of economic downturns.
Prior to 1990, the Company manufactured conventional twelve-foot broadloom
carpet in addition to its six- foot roll goods and modular carpet tile. The
Company discontinued its broadloom product offerings in 1992, which allowed
management to focus on its vinyl-backed roll and tile products where the
Company enjoys a more advantageous market position.
At the end of 1993, management implemented a focused sales strategy, which
assigns Company account managers to one or two specific end-markets (corporate
office space, retail stores and health care, education and government
facilities) within a geographic area. This segmentation strategy allows the
account managers to best service the unique product and design needs of the
end-user. Also in late 1992, the Company established the Source One program,
which offers customers a complete turn-key package of product supply and
project management for single- and multiple-site requirements. Through Source
One, the customer has one point of contact and one source of responsibility
for product procurement and installation.
The Company has significantly increased net sales and earnings since 1993.
Management believes these improvements resulted from a number of factors,
including strengthened customer relationships, the segmentation strategy,
various cost reduction programs, efficiency enhancements, reduction in the
number of yarn suppliers and product re-engineering. The benefits of the
Company's segmentation strategy are most evident in the education and health
care markets where 10 specialists have been assigned since 1994. In addition,
as part of the segmentation strategy, the Company targeted a new market,
retail stores. The Company's sales have grown rapidly in this segment and
management believes this to be an attractive target market which is indicative
of the opportunities it can realize through Source One.
During 1994 and 1995, the Company operated at close to capacity in its
tufting and finishing operations. To prepare for future growth and to
alleviate periodic capacity constraints, the Company began a $13 million
expansion and modernization program. The program included the replacement of
two-thirds of its tufting machines, the replacement of all warping equipment,
the completion of a 60,000 square foot addition to its finishing plant and the
installation of a second vinyl production line. The expansion and
modernization program is substantially complete. Management believes that as a
result of the program, production capacity will be sufficient to allow for
growth for the foreseeable future.
Primary raw materials, including yarn, primary backing and various coater
materials, represent the single largest component of costs. Yarn comprises
about one-third of the carpet's cost structure and in excess of 50% of total
raw material costs. See "Risk Factors--Reliance on Petroleum-Based Raw
Materials; Reliance on Principal Supplier." Raw material costs per square yard
decreased each year from 1990 through 1994, at a cumulative 12.9%, primarily
as a result of the elimination of multiple yarn suppliers and a change in the
mix in the Company's product line. However, during 1995, raw material costs
per square yard increased by approximately 7% primarily due to product mix,
including more complex styles and general vendor price increases related to
primary backing and coater materials. Raw material costs per square yard
increased at less than 1% during 1996. Historically, the Company has been able
to pass on yarn price increases in the ordinary course of business in response
to published increases by major yarn suppliers.
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RESULTS OF OPERATIONS
The following table sets forth certain operating results as a percentage of
net sales for the periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
(PERCENTAGE OF NET SALES)
<S> <C> <C> <C> <C> <C>
Net sales......................... 100.0% 100.0% 100.0%
Cost of goods sold................ 57.9 60.3 60.0
----- ----- -----
Gross profit...................... 42.1 39.7 40.0
Selling, general and
administrative expenses.......... 22.0 22.4 21.3
Corporate general and
administrative allocated costs... 1.0 1.3 1.1
----- ----- -----
Operating income.................. 19.2 16.0 17.6
Loss on sale of accounts
receivable....................... 1.2 2.7 2.6
----- ----- -----
Income before income taxes........ 18.0 13.4 15.0
Income tax expense................ 7.1 5.2 5.8
----- ----- -----
Net income........................ 10.9% 8.2% 9.2%
===== ===== =====
EBITDA margin..................... 21.5% 19.1% 19.9%
===== ===== =====
</TABLE>
FISCAL YEAR ENDED JANUARY 25, 1997 ("FISCAL 1996")
COMPARED WITH FISCAL YEAR ENDED JANUARY 27, 1996 ("FISCAL 1995")
Net sales. Net sales represent gross sales less product returns, customer
allowances and various customer discounts, all generated in the ordinary
course of business. Sales are comprised of six-foot roll goods, modular carpet
tile and other products, including adhesives and walk-off mats. The Company's
net sales increased to $136.1 million in fiscal 1996, an increase of $14.0
million or 11.4% over fiscal 1995. The increase in net sales in fiscal 1996
was due to strength in most of the Company's end-markets. Total volume
increased 12.8%. The Company experienced strong volume increases in six-foot
roll goods and other product categories. The increase in six-foot roll sales
was due to continued strong volume growth in the education and health care
markets, offset by a minor decrease in average selling price per square yard.
Tile sales in fiscal 1996 were up slightly, a result of a slight increase in
unit pricing offset by a slight decrease in volume. The Company achieved this
level of growth in net sales despite the fact that net sales (and net income)
declined in January 1997 versus January 1996. Management believes that the
decrease in net sales in January was due to the timing of certain shipments of
the Company's products, as evidenced by a significant increase in backlog as
of January 25, 1997 versus January 27, 1996. This is further evidenced by the
increase in net sales of over 15% in February and March of 1997 versus the
same period in 1996.
Gross profit. The Company's gross profit increased to $54.4 million in
fiscal 1996, an increase of $5.9 million or 12.1% over fiscal 1995. Gross
margin increased to 40.0% in fiscal 1996 from 39.7% in fiscal 1995. The
increase in gross profit and gross margin were the result of increased sales
and manufacturing efficiencies associated with higher volumes, offset by a
$0.5 million inventory write-off booked in January 1997 resulting from the
year-end physical inventory. Gross margin improved in fiscal 1996 in both the
six-foot roll and modular carpet tile categories.
Selling, general and administrative ("SG&A") expenses. The Company's SG&A
expenses increased to $29.0 million in fiscal 1996, an increase of $1.6
million or 5.9% over fiscal 1995. As a percentage of sales, SG&A expenses
decreased to 21.3% during fiscal 1996 from 22.4% in fiscal 1995. Excluding
expenses related to certain matters retained by the Seller of $1.0 million in
fiscal 1996 and $1.6 million in fiscal 1995, SG&A expenses would have been
$28.0 million in fiscal 1996, an increase of $2.2 million or 8.6% over fiscal
1995. See Note (b) to "Selected Consolidated Financial Data." As a percentage
of sales, SG&A expenses (excluding expenses relating to the matters retained
by the Seller) decreased to 20.5% during fiscal 1996 from 21.1% in fiscal
1995. SG&A expenses (excluding expenses relating to the matters retained by
the Seller) increased due to
30
<PAGE>
(i) personnel additions to handle growth under the Company's segmentation
marketing strategy and (ii) higher sales commissions due to the increase in
sales. The Company's expenses relating to the matters retained by the Seller
decreased to $1.0 million in fiscal 1996, a decrease of $0.6 million from
fiscal 1995. These costs relate to the settlement of a patent dispute and
three matters for which C&A Products has agreed to indemnify the Company. See
"Business--Litigation."
Corporate general and administrative allocated costs. Corporate general and
administrative allocated costs include costs associated with services provided
by C&A Products. Services provided include tax, treasury, risk management,
employee benefits administration, legal, data processing, application of cash
receipts and other general corporate services. The Company has the option to
continue receiving certain of these services from C&A Products under a
Management Services Agreement, generally for up to a one-year period.
Allocated costs in fiscal 1996 were slightly lower than comparable charges in
fiscal 1995. As a percentage of sales, the allocated costs decreased to 1.1%
during fiscal 1996 from 1.3% in fiscal 1995.
Loss on sale of accounts receivable. Effective July 13, 1994, C&A Products
entered into a Receivables Sale Agreement with Carcorp, a wholly-owned,
bankruptcy-remote subsidiary of C&A Products. Under the terms of the
Receivables Sale Agreement, Carcorp purchased on a revolving basis, without
recourse, virtually all trade accounts receivable generated by C&A Products
and its subsidiaries, including the Company. The accounts receivable were
purchased by Carcorp at the face amount of the accounts receivable less a
defined discount. Upon closing of the Acquisition, the Company was terminated
as a seller under the Receivables Sale Agreement and as a result will no
longer incur a loss on the sale of its accounts receivable related thereto.
Loss on sale of accounts receivable increased to $3.5 million in fiscal 1996,
an increase of $0.2 million or 6.7% over fiscal 1995. The increase in net
sales resulted in a higher level of accounts receivable which, in turn, led to
greater sales of accounts receivable to Carcorp.
Net income. The Company's net income of $12.5 million in fiscal 1996 was
$2.5 million or 24.9% higher than the $10.0 million in fiscal 1995. The
increase was a result of the factors described above, offset by $1.6 million
in higher taxes from the increase in pretax earnings. The Company's effective
tax rate was 38.7% in both fiscal 1996 and fiscal 1995.
EBITDA. The Company's EBITDA of $27.1 million in fiscal 1996 was $3.7
million or 16.0% higher than the $23.4 million in fiscal 1995. As a percentage
of sales, EBITDA increased to 19.9% in fiscal 1996 from 19.1% in fiscal 1995.
The increase in EBITDA and the increase in EBITDA margin was the combined
result of the factors described above.
FISCAL YEAR ENDED JANUARY 27, 1996 ("FISCAL 1995")COMPARED WITH FISCAL YEAR
ENDED JANUARY 28, 1995 ("FISCAL 1994")
Net sales. The Company's net sales increased to $122.2 million in fiscal
1995, an increase of $14.1 million or 13.1% over fiscal 1994. The increase in
net sales in fiscal 1995 was due to growth in all of the Company's end-
markets, with the exception of corporate office space. Volume increased 15.0%
across all product lines. The Company experienced significant sales growth in
the six-foot roll, modular carpet tile and other product categories. The
increase in six-foot roll sales was due to strong sales in the education,
health care and retail store
markets. The increase in modular carpet tile sales in fiscal 1995 was a result
of strong volume growth in the government and, to a lesser extent, the
international market. Volume increases in all categories were slightly offset
by minor decreases in average selling price per square yard.
Gross profit. The Company's gross profit increased to $48.6 million in
fiscal 1995, an increase of $3.0 million or 6.7% over fiscal 1994. Gross
margin decreased to 39.7% in fiscal 1995 from 42.1% in fiscal 1994. Gross
profit increased due to higher sales volumes and manufacturing efficiencies.
As a percentage of sales, however, gross profit declined due to an increase in
raw material costs and a change in the Company's sales mix. The cost of yarn
per square yard increased in fiscal 1995 primarily due to the production of
more complex styles. In addition, the cost of primary backing and coater
materials increased due to general vendor price increases which were not
passed on to the customer. Excluding raw materials, manufacturing costs per
square yard decreased by approximately 7.3% in fiscal 1995 versus fiscal 1994,
which was a result of volume increases and the Company's ongoing focus on
manufacturing cost reductions.
31
<PAGE>
SG&A expenses. SG&A expenses increased to $27.4 million in fiscal 1995, an
increase of $3.6 million or 15.3% over fiscal 1994. As a percentage of sales,
SG&A expenses increased to 22.4% in fiscal 1995 from 22.0% in fiscal 1994.
Excluding expenses relating to the matters retained by the Seller of $1.6
million in fiscal 1995 and $0.3 million in fiscal 1994, SG&A expenses
increased to $25.7 million in fiscal 1995, an increase of $2.3 million or 9.9%
over fiscal 1994. As a percentage of sales, SG&A expenses (excluding expenses
relating to the matters retained by the Seller) decreased to 21.1% in fiscal
1995 from 21.7% in fiscal 1994. The increase in SG&A expenses was a result of
higher sales, increased Source One staffing, additional sample expense, new
product introductions and higher travel and entertainment expenses due to the
expansion of the sales force during implementation of the Company's
segmentation marketing strategy.
Corporate general and administrative allocated costs. The Company's
allocated costs increased to $1.6 million in fiscal 1995, an increase of $0.5
million over fiscal 1994. The increase is primarily related to increased
overhead levels at the parent company which resulted in a higher allocation of
costs to the Company.
Loss on sale of accounts receivable. Loss on sale of accounts receivable
increased to $3.3 million in fiscal 1995, an increase of $2.0 million or
159.2% over fiscal 1994. Fiscal 1995 was the first full year under the
Receivables Sale Agreement with Carcorp. Fiscal 1994 includes only 28 weeks
under the Carcorp agreement.
Net Income. The Company's net income of $10.0 million in fiscal 1995 was
$1.8 million or 15.1% lower than the $11.8 million in fiscal 1994. The
decrease was the result of the increases in legal expenses, corporate general
and allocated costs and loss on sale of accounts receivable, offset by the
higher gross profit discussed above. The Company's effective tax rate of 38.7%
in fiscal 1995 was 0.6 percentage points lower than the 39.3% effective tax
rate in fiscal 1994.
EBITDA. The Company's EBITDA of $23.4 million in fiscal 1995 was $0.1
million or 0.5% higher than the $23.2 million in EBITDA in fiscal 1994. As a
percentage of sales, EBITDA decreased to 19.1% from 21.5%. The increase in
EBITDA and the decrease in EBITDA margin was the combined result of the
factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs have historically been for operating
expenses, working capital and capital expenditures. The Company has financed
its cash requirements primarily through internally-generated cash flow and
inter-company advances from C&A Products.
Net cash provided by operating activities in fiscal 1996 was $12.4 million
as compared with $11.7 million in fiscal 1995, primarily as a result of the
$2.5 million increase in net income, offset by a relatively larger increase in
working capital, particularly inventory, in 1996 versus 1995.
Net cash provided by operating activities in fiscal 1995 decreased to $11.7
million from $24.9 million in fiscal 1994. This decrease resulted primarily
from the increase in cash flow from a reduction in accounts receivable
included in fiscal 1994 results due to the Company's sale of accounts
receivable to Carcorp described in Note 7 to the Consolidated Financial
Statements. As fiscal 1994 was the Company's first year of participation in
this program, the large decrease in accounts receivable resulted in an
increase of approximately $12.6 million in net cash from operating activities
in fiscal 1994. Excluding this initial cash flow benefit, cash provided by
operating activities decreased from $12.3 million in fiscal 1994 to $11.7
million in fiscal 1995 due to a decrease in net income of $1.8 million offset
by certain other items.
The Company invested $1.8 million, $4.3 million and $7.9 million in capital
expenditures during fiscal 1994, 1995 and 1996, respectively. The Company
anticipates spending approximately $4.0 million to $5.0 million on capital
expenditures in each of fiscal 1997 and fiscal 1998. Increases in capital
expenditures in fiscal 1995 and fiscal 1996 reflect the expansion and
modernization program discussed above.
32
<PAGE>
The Company incurred significant indebtedness in connection with the
Acquisition. At January 25, 1997, pro forma for the Transactions, the Company
would have had approximately $157.0 million of indebtedness outstanding,
consisting of $100.0 million of Notes, $55.0 million in term loan borrowings
and approximately $2.0 million in revolving credit borrowings under the Credit
Agreement, with no other debt or capital lease obligations. In addition, on a
pro forma basis, the Company had approximately $28.0 million in availability
under the revolving credit portion of the Credit Agreement and $2.1 million of
cash. The term loan portion of the Credit Agreement will mature on June 30,
2002 and will require annual principal payments (payable in quarterly
installments) totaling $3.0 million in 1997, $5.0 million in 1998, $9.0
million in 1999, $15.0 million in each of 2000 and 2001 and $8.0 million in
2002. The revolving credit portion of the Credit Agreement will mature on June
30, 2002 and may be repaid and reborrowed from time to time. For a description
of the Credit Agreement, see "Description of Credit Agreement." No principal
payments are required on the Notes prior to their scheduled maturity.
The Company's ability to make scheduled payments of principal of, or to pay
interest on, or to refinance its indebtedness (including the Notes), depends
on its future performance, which, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors
beyond its control. Based upon the current level of operations and anticipated
growth, management of the Company believes that cash flow from operations,
together with available borrowings under the Credit Agreement, will be
adequate to meet the Company's anticipated future requirements for capital
expenditures and debt service. There can be no assurance that the Company's
business will generate sufficient cash flow from operations or that future
borrowings will be available in an amount sufficient to enable the Company to
service its indebtedness, including the Notes, or to make necessary capital
expenditures.
EFFECTS OF THE ACQUISITION
Following the Acquisition, the Company, in accordance with the purchase
accounting rules under generally accepted accounting principles, adjusted to
fair value the Company's assets and liabilities. On a pro forma basis, such
adjustments would have resulted in incremental depreciation and amortization
(excluding amortization of deferred financing fees) estimated to be $5.4
million in fiscal 1996, which would have the effect of increasing cost of
sales and SG&A expenses. The Company will also adjust to fair value certain
elements of inventory, which will reduce gross profit in the year of the
Acquisition by the amount of the step-up in inventory. In addition, as part of
the Acquisition, the Company incurred additional debt, which would have
resulted in a net increase in cash interest expense in the amount of $14.9
million in fiscal 1996 on a pro forma basis. On a stand-alone basis, the
Company estimates that it will incur approximately $1.5 million annually in
additional general and administrative expenses, which includes an annual
consulting fee payable to Quad-C of $350,000. These costs will replace the
corporate general and administrative allocated costs previously allocated to
it by C&A Products, which totalled $1.5 million in fiscal 1996. In addition,
the Company has ceased to be a seller under the C&A Products Receivables Sale
Agreement and thus will no longer incur losses on the sale of accounts
receivable related thereto. See "Unaudited Pro Forma Financial Data." The
purchase price allocation reflected in the pro forma financial data is based
on preliminary estimates. The actual purchase accounting adjustments will
finally be determined following the Acquisition and may vary from the amounts
reflected in the "Unaudited Pro Forma Financial Data" included elsewhere
herein.
EFFECTS OF INFLATION
The impact of inflation on the Company's operations has not been significant
in recent years. However, there can be no assurance that a high rate of
inflation in the future would not have an adverse effect on the Company's
operating results.
SEASONALITY
The Company experiences seasonal fluctuations, with generally lower sales
and gross profit in the first quarter of the fiscal year and higher sales and
gross profit in the second quarter of the fiscal year. The seasonality of
sales and profitability is primarily a result of disproportionately higher
education segment sales during the summer months while schools generally are
closed and floorcovering can be installed.
33
<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
Pursuant to the Registration Rights Agreement by and among the Company and
the Initial Purchaser, the Company has agreed (i) to file a registration
statement with respect to an offer to exchange the Initial Notes for senior
debt securities of the Company with terms substantially identical to the
Initial Notes (except that the Exchange Notes will not contain terms with
respect to transfer restrictions) within 60 days after the date of original
issuance of the Initial Notes and (ii) to use best efforts to cause such
registration statement to become effective under the Securities Act within 120
days after such issue date. In the event that applicable law or
interpretations of the staff of the Commission do not permit the Company to
file the registration statement containing this Prospectus or to effect the
Exchange Offer, or if certain holders of the Initial Notes notify the Company
that they are not permitted to participate in, or would not receive freely
tradeable Exchange Notes pursuant to, the Exchange Offer, the Company will use
its best efforts to cause to become effective the Shelf Registration Statement
with respect to the resale of the Initial Notes and to keep the Shelf
Registration Statement effective until three years after the original issuance
of the Initial Notes. The interest rate on the Initial Notes is subject to
increase under certain circumstances if the Company is not in compliance with
its obligations under the Registration Rights Agreement. See "Initial Notes
Registration Rights."
Each holder of the Initial Notes who wishes to exchange such Initial Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
it has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes and (iii) it is not an "affiliate," as
defined in Rule 405 of the Securities Act, of the Company or, if it is an
affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable. See "Initial
Notes Registration Rights."
RESALE OF EXCHANGE NOTES
Based on interpretations by the staff of the Commission set forth in no-
action letters issued to third parties, the Company believes that, except as
described below, Exchange Notes issued pursuant to the Exchange Offer in
exchange for Initial Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than a holder which is an "affiliate"
of the Company 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 does not intend to
participate and 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 with the intention or for the purpose of participating
in a distribution of the Exchange Notes cannot rely on such interpretation by
the staff of the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Unless an exemption from registration is
otherwise available, any such resale transaction should be covered by an
effective registration statement containing the selling security holders
information required by Item 507 of Regulation S-K under the Securities Act.
This Prospectus may be used for an offer to resell, resale or other retransfer
of Exchange Notes only as specifically set forth herein. 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."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept for exchange any and
all Initial Notes properly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date. The Company will issue $1,000
principal amount of
34
<PAGE>
Exchange Notes in exchange for each $1,000 principal amount of outstanding
Initial Notes surrendered pursuant to the Exchange Offer. Initial Notes may be
tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes will be the same as the form and
terms of the Initial Notes except the Exchange Notes will be registered under
the Securities Act and hence will not bear legends restricting the transfer
thereof. The Exchange Notes will evidence the same debt as the Initial Notes.
The Exchange Notes will be issued under and entitled to the benefits of the
Indenture, which also authorized the issuance of the Initial Notes, such that
both series will be treated as a single class of debt securities under the
Indenture.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange.
As of the date of this Prospectus, $100 million aggregate principal amount
of the Initial Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is being sent to all registered holders of Initial
Notes. There will be no fixed record date for determining registered holders
of Initial Notes entitled to participate in the Exchange Offer.
The Company intends to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Initial Notes which are not tendered for exchange in
the Exchange Offer will remain outstanding and continue to accrue interest and
will be entitled to the rights and benefits such holders have under the
Indenture and the Registration Rights Agreement.
The Company shall be deemed to have accepted for exchange properly tendered
Notes when, as and if the Company shall have given oral or written notice
thereof to the Exchange Agent and complied with the provisions of Section 2 of
the Registration Rights Agreement. The Exchange Agent will act as agent for
the tendering holders for the purposes of receiving the Exchange Notes from
the Company. The Company expressly reserves the right to amend or terminate
the Exchange Offer, and not to accept for exchange any Initial Notes not
theretofore accepted for exchange, upon the occurrence of any of the
conditions specified below under "--Certain Conditions to the Exchange Offer."
Holders who tender Initial Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Initial
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date," shall mean 5:00 p.m., New York City time on ,
1997, unless the Company, in its sole discretion, extends the Exchange Offer,
in which case the term "Expiration Date" shall mean the latest date and time
to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders of Initial Notes an announcement thereof, each prior to
9:00 a.m., New York City time, on the next business day after the then
effective Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting for exchange any Initial Notes, to extend the Exchange Offer or to
terminate the Exchange Offer if any of the conditions set forth below under
"--Certain Conditions of the Exchange Offer" shall not have been satisfied, by
giving oral or written notice of such delay, extension or termination to the
Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders of Initial Notes. If the Exchange Offer is amended in a
manner determined by the Company to constitute a material change, the Company
will promptly disclose such amendment by means of a prospectus supplement that
will be distributed to the registered holders,
35
<PAGE>
and the Company will extend the Exchange Offer, depending upon the significance
of the amendment and the manner of disclosure to the registered holders, if the
Exchange Offer would otherwise expire during such period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at the rate of 10% per annum from
February 6, 1997, the date of issuance of the Initial Notes that are tendered
in exchange for the Exchange Notes (or the most recent Interest Payment Date
(as defined) to which interest on such Notes has been paid). Accordingly,
Holders of Initial Notes that are accepted for exchange will not receive
interest on the Initial Notes that is accrued but unpaid at the time of tender,
but such interest will be payable on the first Interest Payment Date after the
Expiration Date. Interest on the Exchange Notes will be payable semi-annually
in arrears on each January 15 and July 15, commencing July 15, 1997.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not be
required to accept for exchange, or exchange any Exchange Notes for, any
Initial Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of any Initial Notes for exchange, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the Company's sole judgment, might materially impair the ability
of the Company to proceed with the Exchange Offer; or
(b) any law, statute, rule or regulation is proposed, adopted or enacted,
or any existing law, statute, rule or regulation is interpreted by the
staff of the Commission, which, in the Company's sole judgment, might
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(c) any governmental approval has not been obtained, which approval the
Company shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offer as contemplated hereby.
The Company expressly reserves the right, at any time or from time to time,
to extend the period of time during which the Exchange Offer is open, and
thereby delay acceptance for exchange of any Initial Notes, by giving oral or
written notice of such extension to the holders thereof. During any such
extensions, all Initial Notes previously tendered will remain subject to the
Exchange Offer and may be accepted for exchange by the Company. Any Initial
Notes not accepted for exchange for any reason will be returned without expense
to the tendering holder thereof as promptly as practicable after the expiration
or termination of the Exchange Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Initial Notes not theretofore
accepted for exchange, upon the occurrence of any of the conditions of the
Exchange Offer specified above. The Company will give oral or written notice of
any extension, amendment, non-acceptance or termination to the holders of the
Initial Notes as promptly as practicable, such notice in the case of any
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any
time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may
be asserted at any time and from time to time.
In addition, the Company 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 or the qualification of the Indenture under the Trust Indenture Act of
1939 (the "TIA").
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PROCEDURES FOR TENDERING
Only a holder of Initial Notes may tender such Initial Notes in the Exchange
Offer. To tender in the Exchange Offer, a holder must complete, sign and date
the Letter of Transmittal, or facsimile thereof, have the signature thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile to the Exchange Agent
prior to 5:00 p.m., New York City time, on the Expiration Date. In addition,
either (i) Initial Notes must be received by the Exchange Agent along with the
Letter of Transmittal, or (ii) a timely confirmation of book-entry transfer (a
"Book-Entry Confirmation") of such Initial Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below must be received by the Exchange Agent prior to the
Expiration Date, or (iii) the holder must comply with the guaranteed delivery
procedures described below. To be tendered effectively, the Letter of
Transmittal and other required documents must be received by the Exchange
Agent at the address set forth below under "--Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY OF INITIAL NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NO LETTER OF TRANSMITTAL OR INITIAL NOTES SHOULD BE SENT TO THE COMPANY.
HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST
COMPANIES OR OTHER NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Initial Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder of Initial Notes to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender on such owner's own behalf,
such owner must, prior to completing and executing the Letter of Transmittal
and delivering such owner's Initial Notes, either make appropriate
arrangements to register ownership of the Initial Notes in such owner's name
or obtain a properly completed bond power from the registered holder of
Initial Notes. The transfer of registered ownership may take considerable time
and may not be able to be completed prior to the Expiration Date.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below, as the case be, must be guaranteed by an Eligible Institution (as
defined below) unless the Initial Notes tendered pursuant thereto are tendered
(i) by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantor must be a member
firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc., a commercial bank or trust company
having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange
Act which is a member of one of the recognized signature guarantee programs
identified in the Letter of Transmittal (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Initial Notes listed therein, such Initial Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Initial
Notes with the signature thereon guaranteed by an Eligible Institution.
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If the Letter of Transmittal or any Initial Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Initial Notes and withdrawal of tendered
Initial Notes will be determined by the Company in its sole discretion, which
determination will be final and binding. The Company reserves the absolute
right to reject any and all Initial Notes not properly tendered or any Initial
Notes the Company's acceptance of which would, in the opinion of counsel for
the Company, be unlawful. The Company also reserves the right to waive any
defects, irregularities or conditions of tender as to particular Initial
Notes. The Company's interpretation of the terms and conditions of the
Exchange Offer (including the instructions in the Letter of Transmittal) will
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Initial Notes must be cured
within such time as the Company shall determine. Although the Company intends
to notify holders of defects or irregularities with respect to tenders of
Initial Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Initial Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Initial Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holder, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In all cases, issuance of Exchange Notes for Initial Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of Notes or a timely Book-Entry Confirmation of
such Initial Notes into the Exchange Agent's account at the Book-Entry
Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Initial Notes
are not accepted for exchange for any reason set forth in the terms and
conditions of the Exchange Offer or if Initial Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted
or non-exchanged Initial Notes will be returned without expense to the
tendering holder thereof (or, in the case of Initial Notes tendered by book-
entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described below, such
non-exchanged Notes will be credited to an account maintained with such Book-
Entry Transfer Facility) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Initial Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Initial Notes by causing the
Book-Entry Transfer Facility to transfer such Initial Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the Book-
Entry Transfer Facility, the Letter of Transmittal or facsimile thereof, with
any required signature guarantees and any other required documents, must, in
any case, be transmitted to and received by the Exchange Agent at the address
set forth below under "--Exchange Agent" on or prior to the Expiration Date
or, if the guaranteed delivery procedures described below are to be complied
with, within the time period provided under such procedures. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Exchange Agent.
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GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Initial Notes and (i) whose Initial Notes
are not immediately available or (ii) who cannot deliver their Initial Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Dates, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the registered number(s)
of such Initial Notes and the principal amount of Initial Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
three (3) New York Stock Exchange trading days after the Expiration Date,
the Letter of Transmittal (or facsimile thereof) together with the Initial
Notes or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as all tendered Notes in proper form for
transfer or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within three (3) New York Stock Exchange trading days after
the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Initial Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"--Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Initial Notes to be withdrawn, identify the Initial
Notes to be withdrawn (including the principal amount of such Initial Notes),
and (where certificates for Initial Notes have been transmitted) specify the
name in which such Initial Notes were registered, if different from that of
the withdrawing holder. If certificates for Initial Notes have been delivered
or otherwise identified to the Exchange Agent, then, prior to the release of
such certificates the withdrawing holder must also submit the serial numbers
of the particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless such
holder is an Eligible Institution. If Initial Notes have been tendered
pursuant to the procedure for book-entry transfer described above, any notice
of withdrawal must specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn Initial Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Initial Notes so withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the Exchange Offer.
Any Initial Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost
to such holder (or, in the case of Initial Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Initial
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility for the Initial Notes) as soon as practicable after withdrawal,
rejection of tender or termination of the Exchange Offer. Properly withdrawn
Initial Notes may be retendered by following one of the procedures described
under "--Procedures for Tendering" above at any time on or prior to the
Expiration Date.
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EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent of
the Exchange Offer. Questions and request for assistance, request for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notice of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
For Information by Telephone:
(212) 858-2103
By Registered or By Facsimile Transmission By Hand or Overnight
Certified Mail: (for Eligible Institutions only): Delivery Service:
P.O. Box 84 (212) 858-2611 One State Street New
Bowling Green Station York, New York 10004
New York, New York (Facsimile Confirmation): Attn: Securities
10274-0084 (212) 858-2103 Processing Window,
Attn: Reorganization Subcellar One (SC-1)
Operations Department
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to broker-dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include registration fees, fees and
expenses of the Exchange Agent and Trustee, accounting and legal fees and
printing costs, and related fees and expenses.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Notes pursuant to the Exchange Offer. If, however, certificates
representing Initial Notes for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any
person other than the registered holder of Notes tendered, or if tendered
Notes are registered in the name of any person other than the person signing
the Letter of Transmittal, or if a transfer tax is imposed for any reason
other than the exchange of Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
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 such Initial Notes, as set forth (i) in the
legend thereon as a consequence of the issuance of the Initial Notes pursuant
to the exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws and
(ii) otherwise set forth under "Transfer Restrictions" in the Offering
Memorandum dated January 29, 1997 distributed in connection with the Initial
Offering. 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 Company does not currently anticipate that it will
register the Initial Notes under the Securities Act. Based on interpretations
by the staff of the Commission, Exchange Notes issued pursuant to the Exchange
Offer may be offered for resale, resold or otherwise transferred by holders
thereof (other than any such holder which is an "affiliate" of the Company
within the meaning of Rule 405
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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 or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer. Any holder who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes (i) could not rely on
the applicable interpretations of the staff of the Commission and (ii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction. In addition,
to comply with the securities laws of certain jurisdictions, if applicable,
the Exchange Notes may not be offered or sold unless they have been registered
or such securities laws have been complied with. The Company has agreed,
pursuant to the Registration Rights Agreement and subject to certain specified
limitations therein, to register or qualify the Exchange Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Exchange Notes reasonably requests in writing.
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BUSINESS
GENERAL
The Company is the leading manufacturer of vinyl-backed commercial
floorcovering in the United States, with the number one market position in
six-foot roll carpet and the number three market position in modular carpet
tile. The Company markets its products to a wide variety of commercial end-
markets, including corporate office space, retail stores and education, health
care and government facilities. The Company differentiates itself through (i)
superior product features such as durability, long-term appearance retention
and its patented Powerbond RS "peel and stick" installation system, (ii)
exceptional customer-focused services, including the Company's Source One
program, which offers customers a complete turn-key package of floorcovering
supply and installation for single-site and multiple-site projects, (iii)
leading design capability and (iv) environmental leadership, including an
advanced recycling program which converts plant scrap and reclaimed post-
consumer, vinyl-backed carpeting into backing for certain of its carpet
products and other commercial uses, such as industrial block flooring. In the
fiscal year ended January 25, 1997, the Company generated net sales and pro
forma EBITDA of $136.1 million and $27.3 million, respectively.
The U.S. commercial carpet market, which is comprised of the specified and
non-specified segments, is estimated by management to have generated sales of
approximately $3.1 billion in 1995, having grown at a CAGR of approximately
4.4% since 1990. The specified commercial market, which represents
approximately $1.8 billion of the total U.S. commercial carpet market, is
differentiated from the non-specified market, in that products are specified
by architects, designers and owners rather than being purchased off the shelf.
While competition in the non-specified market is based largely on price, the
key differentiating factors in the specified market are product durability,
appearance retention, product design and service, as well as price.
Within the specified commercial market, the Company competes in the six-foot
roll and modular carpet tile segments, which combined accounted for an
estimated $510 million of industry sales in 1995. The Company's focus on these
niche products provides a competitive advantage as these products tend to have
proprietary specifications and generally cannot be produced on standard
broadloom carpet manufacturing equipment utilized by the majority of
manufacturers in the carpet industry. Management believes the exceptional
performance and unique installation characteristics of the Company's products
provide a superior long-term investment for end-users relative to both
broadloom carpet, which requires more frequent replacement and higher
maintenance costs, and hard surface flooring products, which lack the
aesthetics and comfort under foot of carpet. The Company believes it has a
reputation for outstanding product quality and innovative, problem-solving
products. As a result, the Company historically has been able to achieve sales
growth in excess of that in the general commercial carpet industry. The
Company's net sales have grown, without the benefit of acquisitions, from
$75.3 million in 1991 to $136.1 million in 1996, representing a CAGR of 12.6%.
The Company has successfully reduced manufacturing costs without sacrificing
the Company's proprietary product qualities. Further, the Company's commitment
to employee involvement in the manufacturing process and quality training
programs throughout the organization have led to significant reductions in
scrap rates and non-conformance costs as well as improved product quality.
These factors have contributed to the improvement in the Company's EBITDA
margins from 13.0% in 1991 to 20.0% (on a pro forma basis) in 1996. During
this time, EBITDA grew from $9.8 million to $27.3 million (on a pro forma
basis), representing a CAGR of 22.7%.
The Company believes that the diversity of its end-markets provides
significant stability to its revenue base. The Company's focus on market
segments which are characterized by high renovation rates, as opposed to new
construction, reduces its exposure to economic fluctuations. Historically,
renovation activity has been significantly less cyclical than new
construction. Management estimates that approximately 75% of the Company's
sales are related to renovation projects, and approximately 25% are
attributable to new construction. As a result, sales of the Company's products
have increased steadily despite the volatility in new commercial construction
since 1990.
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OPERATING STRATEGY
The Company has grown sales and EBITDA through a focused marketing and sales
strategy combined with cost management programs. Set forth below are the
components of the Company's operating strategy:
SPECIFIED COMMERCIAL MARKET FOCUS
The Company will continue to focus on niche segments of the specified
commercial market where sales are driven primarily by distinctive product
features and performance characteristics rather than price. The Company's
products are manufactured in response to customer orders rather than mass
produced for inventory. The specified market tends to be more driven by total
product value including performance, durability, aesthetics, customer-focused
services and ease of maintenance and installation when compared with more
price-sensitive, non-specified segments of the commercial carpet industry.
Management believes that the Company has a significant opportunity to convert
users of traditional broadloom carpet and hard surface flooring to its niche
vinyl-backed floorcovering product. The specified commercial broadloom market
and the commercial hard surface flooring markets represented approximately $1.3
billion and $1.6 billion, respectively, of sales in 1995.
DIVERSIFIED END-MARKETS
The Company's sales and marketing strategy focuses on diversified end-markets
(corporate office space, retail stores and education, health care and
government facilities) in order to maximize its sales opportunities and to
continue to minimize the effects of cyclicality in the carpet industry. During
the most recent downturn in commercial construction between 1990 and 1993, in
which new construction declined at a compounded rate of approximately 4% per
annum, net sales of the Company's six-foot and tile products grew at a CAGR of
5.6%. New construction spending in the education, health care and government
sectors (which sectors accounted for over 60% of the Company's 1995 and 1996
domestic carpet sales) steadily increased each year between 1990 and 1995,
while new construction in the corporate office space, retail stores and lodging
segments has been cyclical over the same period.
PRODUCT INNOVATION
Management believes the Company has developed a substantial competitive
advantage within its niche market segments through the continuous development
of products desired by end-users. The Company's Powerbond RS technology
provides customers with enhanced durability and performance, and low cost
installation and maintenance. Under the recently launched Infinity Initiative
program, management believes that the Company is the only manufacturer to
recycle reclaimed post-consumer, vinyl-backed floorcovering into backing for
commercial carpet products. Capitalizing on Powerbond(R)'s unique seam welding
capabilities, the Company's Imaginations program offers the design flexibility
to create customized, dramatic visual effects. The Company's recently
introduced Jhane Barnes collection combines the internationally-known
designer's signature style with the industry's first computer-aided design
capability that will enable architects and designers to customize pattern
configurations for printed modular carpet tile. The Company intends to continue
developing innovative, value-added products which contribute to the Company's
growth in revenues and profitability.
COST REDUCTION
The Company will seek to reduce costs by monitoring and controlling its
manufacturing and administrative expenses. The Company continually tracks its
cost of non-conformance ("CONC"), which includes price discounts, product
returns and allowances. From 1991 to 1996, the Company reduced CONC by
approximately 18%, while net sales grew by approximately 81%. Supplementing its
efforts to reduce CONC, the Company has implemented an aggressive cost
improvement program, which targets specific initiatives to achieve cost
reductions throughout the organization. During 1996, the Company realized $1.2
million in cost savings, which on an annualized basis represents approximately
$2 million in cost savings. For fiscal 1997, the Company has targeted an
additional $2 million in annualized cost reductions. In addition, the Company
has completed a $13
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million manufacturing modernization program which management believes, in
conjunction with the Company's extensive employee training, will result in
continued material yield and labor productivity improvements.
STRATEGIC ALLIANCES AND ACQUISITIONS
The commercial carpet industry remains highly fragmented, with many
specialized manufacturers serving numerous market segments. The Company intends
to pursue domestic and international alliances and acquisitions that would add
new product lines, enhance penetration of end-markets or allow entry into new
geographic markets.
INDUSTRY OVERVIEW
The domestic floorcoverings industry is comprised of several product types
designed for both commercial and residential end-uses. Management believes
total 1995 sales in the U.S. floorcovering industry approximated $14.5 billion.
Total sales within the floorcovering market can be segmented into several
categories: (i) carpet and area rugs, which accounted for 68.3% or $9.9 billion
of sales, (ii) resilient sheet, tile and rubber products, which accounted for
15.9% or $2.3 billion of sales, (iii) ceramic floor and wall tile products,
which accounted for 9.0% or $1.3 billion of sales, and (iv) hardwood flooring
products, which accounted for 6.6% or $951.3 million of sales.
Of the $9.9 billion of domestic carpet sales in 1995, management believes
that 68.7% or $6.8 billion of sales were made to the residential sector and
31.3% or $3.1 billion of sales were made to commercial end-users. Commercial
carpet is manufactured in two basic forms, roll products and modular carpet
tile. Roll carpet products are manufactured in one of two principal types:
conventional twelve-foot broadloom carpet or six-foot roll carpet.
The general commercial carpet market can be further divided into two segments
related to their distribution characteristics: the estimated $1.3 billion non-
specified commercial segment and the estimated $1.8 billion specified
commercial segment. The $1.3 billion non-specified segment of the commercial
market is characterized by off the shelf sales with product selection
determined primarily by price, style and availability within the dealer
network. Non-specified sales tend to be smaller one-time transactions for
commodity products, which are purchased through independent dealers. The $1.8
billion specified segment of the commercial carpet market is characterized by
demanding, high traffic product applications and unique specifications
typically written by facility owners, professional architects or designers. As
a result, end-users in this segment tend to be more sophisticated and quality-
conscious in the product selection process, and therefore require more
extensive service and responsiveness from the supplier. Management estimates
that broadloom, six-foot roll goods and modular carpet tile accounted for
approximately $1.3 billion, $210 million and $300 million, respectively, of
1995 specified commercial carpet market sales.
Historically, six-foot roll goods were primarily used in the education and
health care markets. These products in recent years have been accepted in new
market segments such as corporate office space, where handling and transport of
twelve-foot broadloom is not always practical or feasible, and retail stores
and public spaces (such as airports) where comfort under foot and durability
are important criteria.
Modular carpet tile is offered in a variety of sizes to accommodate the full
range of domestic and international requirements. Because of its flexibility
within open office landscape systems, the primary uses of modular carpet tile
are for the corporate office space and government markets. Office systems are
often reconfigured to react to ever-changing office dynamics. For example,
modular carpet tile is particularly well-suited to the use of raised floor
systems in which continual access to underfloor power systems is required.
Tiles are simply removed to reveal the access panel and replaced when work is
completed. Broadloom carpet cannot withstand this activity as it must be cut
open and cannot adequately be repaired.
In general, the domestic carpet industry can be characterized as a cyclical
business with revenues directly related to swings in the economic cycle, and
specifically, to the economic vitality of both residential and
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commercial new construction. During the 1991 economic recession, the domestic
carpet industry declined by approximately 8%. During the recent period of
economic expansion, the domestic carpet industry grew at a CAGR of
approximately 6% from 1991 to 1995. Despite the cyclicality of the domestic
carpet industry, the CAGR for the period from 1990 to 1995 was approximately
3%.
The Company estimates that from 1991 to 1995, sales in the six-foot roll
goods segment grew at a CAGR of approximately 34% and sales in the modular
carpet tile segment declined at a CAGR of approximately 4%. Management
believes that the growth in six-foot comes largely at the expense of broadloom
carpet and hard surface floors. Management believes that the decline in the
sales of modular carpet tile since 1991 is partially due to the contraction of
the corporate office space market. The Company believes that within the
commercial floorcovering market, the demand for six-foot roll goods and
modular carpet tile will increase (i) as more end-users recognize the
advantages of vinyl-backed products, including durability and design
flexibility, and (ii) as corporate office demand continues to recover.
SALES, MARKETING AND DISTRIBUTION
Sales. In 1993, the Company implemented a highly focused sales and marketing
strategy, under which each account manager targets specific market segments
within a particular geographic area. Prior to that time, the Company's account
managers, as is typical in the floorcovering industry, were assigned as
generalists covering all end-markets within a particular geographic area.
Management believes that this generalist strategy results in limited market
coverage, inadequate customer and product expertise within the sales force and
lower levels of customer service. The Company believes that each market
segment (corporate office space, retail stores and education, health care and
government facilities) has specific product, service, performance, aesthetics,
distribution and budgetary requirements and that purchasing decisions are
unique to each segment. The Company's segmentation strategy allows the account
managers to develop specific expertise in a particular market segment, which
management believes results in higher customer service levels and more
comprehensive market coverage and increased sales productivity over time.
The majority of the Company's sales are specified by the facility owner,
whose purchasing decision frequently is influenced by interior designers and
architects. Since each market has distinct performance, design and
installation requirements, the Company's account managers focus on educating
the facility owners and their design professionals on (i) the technical
specifications and proprietary advantages of its products, (ii) the Company's
unique design capabilities for specific market segments, (iii) the Company's
dedication to responsive delivery of customer service and (iv) the Company's
environmental initiatives. Management believes this end market-oriented
strategy has resulted in an improvement in service and greater sales.
Management implemented the segmentation strategy to achieve comprehensive
market coverage of the nation's leading markets. The Company has eight
domestic sales offices, each directed by a regional manager. The size of the
Company's sales organization has nearly doubled since the implementation of
the segmentation strategy in 1993 from 45 account managers and 7 regional
managers to 82 account managers and 10 regional managers currently.
Historically, the productivity of the sales force has increased significantly
with experience. During 1995, the Company's account managers with four or more
years of experience produced an average of approximately 80% more in sales
than did the Company's account managers with three or fewer years of
experience. Management believes this increased sales productivity is the
result of (i) increased awareness of individual market requirements, (ii)
improved product knowledge, (iii) enhanced customer service and (iv) increased
customer trust and reliance. The Company believes that a maturing sales force,
coupled with low employee turnover, will lead to increased sales productivity.
Marketing. As part of the segmentation strategy, each market segment has a
dedicated in-house marketing director responsible for the identification of
market opportunities, communications and program implementation. Marketing
personnel provide account managers with important market information,
including demographic profiles, competitive analyses, and merchandising
support in the form of brochures, advertising and videos. The marketing group
also provides specific input into product development for each market segment.
The Company
45
<PAGE>
recently hired a three-person, in-house design team dedicated to developing
new, innovative designs for each of the Company's primary end-markets:
Corporate Office Space. The corporate office space market involves project-
oriented work and/or multi-site purchasing agreements. Management has focused
on projects where the Company tends to excel on the basis of product
performance, customer service and lower life cycle cost rather than pricing.
As part of its strategy to increase penetration of this market, the Company
recently implemented a national accounts program that targets the country's
largest corporations.
Education. The education market has been a primary focus for the Company
since the development of Powerbond(R) in 1967. Powerbond(R)'s long-term
appearance retention characteristics have been the principal factor behind the
Company's success in this segment. Customers in the education segment tend to
be particularly sensitive to durability, longevity and ongoing maintenance
costs. Historically, the Company has focused on the kindergarten through
twelfth grade market. Powerbond(R) in many of these installations has been in
use for more than 20 years. The Company aggressively uses this track record in
its marketing to potential customers.
Health Care. Powerbond RS is particularly well-suited to the health care
market because of its moisture impermeability and quick, safe installation.
Powerbond RS, which is installed without wet adhesives, facilitates use
immediately following installation, a critical concern within the health care
market. With the growth and consolidation of national health care
organizations, the Company's Source One program, providing project management
services and single source responsibility, is well-suited to serve this
market. The Company has sales agreements with three of the nation's largest
health care organizations.
Government. The Company sells to federal, state and local governments. The
Company is a supplier to the federal government's purchasing arm, the General
Services Administration, which establishes product categories and related
minimum product specifications for various budget levels and aesthetic
requirements. State and local governments purchase floorcovering products
independently through contracts with approved suppliers. The Company is
currently an approved supplier to several states and municipalities.
Management believes that its success in the government market is due in part
to the Company's environmental initiatives, including both the Powerbond RS
"peel and stick" backing system, and its recently-introduced recycled content
product offerings.
Retail Stores. Retail store planning is the Company's newest market segment
with a focus on major retail chains which have the potential for large,
nationwide volumes. A significant portion of these sales flow directly through
the Company's Source One program. The Company's "on time every time"
installation commitments and Powerbond RS' ease of installation are critical
to meet short construction schedules and to minimize business interruption and
loss of revenues in the retail sector.
International Markets. The Company established its first international sales
office in 1989 in the United Kingdom and currently distributes throughout
South East Asia, China, Korea, Taiwan and North and South America. In 1996,
the Company was awarded the primary contract for the Kuala Lumpur City Centre
in Malaysia (upon its completion, the tallest building in the world). While
sales to international customers constituted less than 10% of the Company's
revenues during 1996, management believes the international market represents
an opportunity for incremental sales growth. The Company plans to add
distributors and dedicated sales personnel in international markets.
Distribution. The Company's products are sold and distributed through three
primary channels: direct to end-user, Source One and through dealers. Although
a majority of the Company's invoicing is through dealers, the Company's
primary marketing efforts are focused on the end-user and professional
designers and architects who create specifications for its products. The
Company operates with a flexible distribution philosophy to meet the needs of
the customer. These channels are outlined below:
Direct. Direct distribution allows end-users to purchase floorcovering
directly from the Company. The Company's account managers work directly with
the customer to educate and make recommendations for the
46
<PAGE>
selection and specification of the right product for the particular
application. The customer is responsible for project management and
installation.
Source One. Introduced in late 1992, the Company's in-house project
management department provides the first single-source coordination and turn-
key project management service offered by a floorcovering manufacturer. The
department was established to provide a "one phone call," "single-source"
project management service to meet the specific needs of the Company's
customer base. The service includes facility measurement, project
coordination, order entry, delivery and installation of a wide range of
interior finishes, including the Company's products. Installation is provided
by approximately 900 Company-certified installers throughout the nation.
Dealer. The carpet industry traditionally has sold products to customers
through local dealers, who typically broker products from manufacturers and
subcontract installation through local installers. Many of the Company's
customers request that the product be delivered through a local dealer who
provides a range of project management services, including carpet removal,
staging and installation.
PRODUCTS AND PRODUCT FEATURES
The Company's products are available in a wide variety of textures,
densities, colors and patterns designed to meet both the performance and
aesthetic requirements of a broad spectrum of commercial end-users. The
product offerings are available in both six-foot roll and modular carpet tile,
which enables the Company to market an integrated system of product solutions
to address the specific requirements of end-users. Each of these products
offers distinctive characteristics for use and application. Management
believes that the ability to offer both systematically is a distinct
competitive advantage since each product provides unique features and benefits
as follows:
Products
Six-Foot Roll Goods. The Company is the leading U.S. manufacturer of six-
foot roll products, which provide performance advantages over twelve-foot
broadloom and hard surface flooring. All of the Company's six-foot products
utilize the proprietary Powerbond(R) backing technology which it pioneered in
1967. Management believes this cushion system and the patented RS technology
enhancement give the Company a sustainable competitive advantage. In addition
to superior performance characteristics, the six-foot roll product provides
handling and transport advantages over twelve-foot rolls as well as cost
advantages over modular carpet tiles. Sales of six-foot roll goods increased
at a CAGR of approximately 17% from 1991 to 1996. Management estimates the
Company's 1995 market share at approximately 36% of the specified commercial
segment's $210 million domestic market for six-foot roll goods.
Modular Carpet Tile. The Company was the first manufacturer in the U.S. to
introduce vinyl-backed modular carpet tile technology in 1969 and today is the
third largest domestic producer. The Company recently introduced a tile
product utilizing the Powerbond(R) cushion technology, which provides the end-
user with improved durability and an extended life cycle as compared to
competitive non-cushioned tile products. The Company's sales of modular carpet
tile have increased at a CAGR of approximately 7% from 1991 to 1996.
Management estimates the Company's 1995 market share at approximately 12% of
the specified commercial segment's $300 million domestic market for modular
carpet tile. The Company's modular carpet tile system is specifically
engineered to have a monolithic appearance on the floor and is marketed as the
most seamless tile in the industry. It is often difficult to discern whether
an installation is tile or roll goods because of the product's unique
seamability. The Company's modular carpet tile products are offered in a
variety of sizes to accommodate a range of domestic and international
requirements.
Product Features
Powerbond(R). In 1967, the Company introduced Powerbond(R), the industry's
first cushioned vinyl backing system. This closed-cell backing technology is
moisture impermeable, exhibits superior durability, seamability
47
<PAGE>
and cleaning characteristics, and provides comfort under foot, thereby
combining the best attributes of both hard surface and carpet floorcoverings.
Powerbond(R) eliminates problems associated with traditional broadloom carpet,
including delamination (separation of carpet backing), zippering and
unraveling. In addition, these products are installed using chemically-welded
seams rather than conventional glued seams to provide a homogeneous,
impermeable moisture barrier (particularly important to health care
facilities), so that fluid spills and soil are isolated at the surface where
they can easily be removed. Other Powerbond(R) features include its ease of
repair, long-term appearance retention, a 50% to 100% longer life cycle than
conventional broadloom and 15 to 20 year non-prorated warranties against
delamination, edge ravel, zippering, loss of cushion resiliency and
watermarking. The incidence of warranty claims has been rare and several of
the Company's customers have had Powerbond(R) in use for over 20 years.
Powerbond RS. In 1988, the Company introduced its RS technology, a patented
pre-applied "peel and stick" adhesive system for both six-foot roll products
and modular carpet tile. The RS technology enables products to be bonded to a
surface without the use of wet adhesives thus minimizing disruption to end-
users during the installation process. Conventional installations with wet
adhesives normally require significant downtime for the adhesive to cure prior
to installation. The RS technology also addresses carpet-related indoor air
quality concerns by eliminating the fumes typically associated with wet
adhesives. The RS technology is widely accepted by customers as a value-added
feature since minimizing or eliminating operational downtime is critical in
many end-markets such as health care and government facilities and retail
stores. The Company's patent on the RS technology expires in 2008.
Infinity Initiative. In order to address increasing environmental concerns
regarding solid waste disposal, sustainable design and resource utilization,
the Company recently introduced a closed-loop recycling program in which plant
scrap and reclaimed post-consumer, vinyl-backed floorcovering material is
recycled into the backing for its carpet tile or converted into other value-
added products. The Company is the only floorcovering manufacturer to have a
fully-operational commercial recycling program of this type. Management
believes that offering a proprietary product with recycled content will give
it a competitive advantage, particularly in the government and corporate
office space markets, as well as with architects and designers.
Imaginations. Capitalizing on the unique seam welding capabilities of
Powerbond(R), the Company's Imaginations program offers substantial design
flexibility to create dramatic inlaid visual effects with the Company's six-
foot roll products. This capability has been particularly successful within
the education segment where the Company has created maps, geometric shapes and
a learning circle used for teaching the alphabet, counting, colors and telling
time. The Company has also developed custom designs for the retail market
segment, such as college logos for campus book stores.
Symtex. The Company's Symtex technology, developed in 1986, uses micro-
shearing to replicate the plush appearance of cut pile carpet (which is
constructed from a collection of yarn columns rather than loops) with loop
construction. Symtex eliminates the problems typically associated with cut
pile carpet such as crushing, watermarking, pilling (shedding), fuzzing and
shading.
ENVIRONMENTAL INITIATIVES
The Company is committed to environmental initiatives throughout the
organization, which include vendor sourcing, product design, manufacturing and
recycling. As a result, the Company is a leader in environmental solutions,
and has received numerous awards for environmental stewardship. This
leadership began with the introduction of Powerbond RS in 1988, which
eliminates conventional wet adhesives and related volatile organic compound
fumes which have been associated with indoor air quality problems.
The Company is the first floorcovering manufacturer to implement a fully-
operational, commercial recycling program. Under the Infinity Initiative
program, the Company recycles reclaimed post-consumer, vinyl-backed carpet
products into backing for certain of its carpet products and other uses, such
as industrial block flooring. Management believes that the recycling
capability provides the Company a significant competitive advantage in
48
<PAGE>
the market, and will also reduce manufacturing costs. With a focus on
recycling, the Company was able to reduce its landfill use by approximately
72% between 1990 and 1996.
PRODUCT DEVELOPMENT AND DESIGN
Leadership in product development and design is important in the commercial
floorcovering marketplace as designers and customers seek up-to-date product
aesthetics. Management believes that the ability of its creative and technical
professionals to consistently introduce new designs and styles, coupled with
the technical strength of the Company's products, provides it with a key
competitive advantage. The Company develops specific products tailored to the
requirements of different market segments, unlike many of its competitors
which manufacture standard products that serve a wide cross-section of
markets. This process begins with feedback from leading designers and
customers in each segment relating to product features such as color, texture
and pattern. This process is vital as the product/styling needs may be very
different for each segment. The Company's Product Development Group is highly
integrated with its sales organization and customer base, which increases the
effectiveness of the product development process.
In the development of each new style, the Company implements a process of
quality assurance called "fabric adoption." Through this process, the Company
evaluates each style and color for seamability, color mix, overall aesthetics
and manufacturing feasibility. This process increases customer satisfaction
and lowers off-quality costs. The Company offers 52 standard styles in
approximately 1,000 colors and has been recognized for its design leadership
by many outside organizations, including the Institute for Business Designers
(IBD), the American Society of Interior Designers (ASID), the International
Interior Design Association (IIDA) and DuPont's Annual Design Award.
Approximately 30% of the Company's sales involve custom colors or designs
which require accurate interpretation of customer needs and timely conversion
into a sample fabric. The Company has dedicated sample equipment which
facilitates quick turnaround of custom design requests, and management
believes that its custom design capability is a competitive advantage,
particularly in the corporate office market.
The Company's recently introduced Jhane Barnes collection combines the
internationally-known designer's signature style with the industry's first
interactive design tool allowing designers to individually customize pattern
configurations for printed modular carpet tile. It is expected that Jhane
Barnes will enhance the Company's visibility in the corporate design
community.
COMPETITION
The commercial floorcovering industry is highly competitive. The Company
competes with other manufacturers of vinyl-backed carpet, as well as
manufacturers of twelve-foot broadloom carpet and other types of commercial
floorcovering. Although the industry recently has experienced consolidation, a
large number of manufacturers remain. Management believes that the Company is
the largest manufacturer of six-foot roll goods in the U.S., with a market
share over three times that of its nearest competitor, and is the third
largest manufacturer of modular carpet tile in the U.S. While no company
focuses solely on the same products as the Company, a number of the Company's
domestic and foreign competitors manufacture six-foot roll goods and modular
carpet tile as one segment of their business. Certain of these competitors
have greater financial resources than the Company.
The Company believes the principal competitive factors in its primary
floorcovering markets are performance, durability, service, style and price.
In the specified commercial market, six-foot roll goods and modular carpet
tile compete with various floorcoverings, of which broadloom carpet has the
largest market share. The performance, durability, customer service, and ease
of installation and maintenance of the Company's six-foot roll goods and
modular carpet tile are its principal competitive advantages.
Some of the Company's major competitors have significantly higher commercial
carpet sales than the Company since broadloom carpet products comprise the
majority of their sales. The market for commercial
49
<PAGE>
broadloom products is substantially larger than the commercial vinyl-backed
carpet market in which the Company specializes. In addition, unlike some
larger industry participants, the Company has not made any acquisitions.
Historically, the vast majority of the commercial carpet industry's sales
has been through independent carpet dealers. Recently, two of the Company's
competitors and DuPont, the Company's principal raw material supplier, each
initiated a strategy of purchasing or forming alliances with selected carpet
dealers primarily in large metropolitan markets. See "Risk Factors--
Competition."
MANUFACTURING AND FACILITIES
The Company owns manufacturing facilities in Dalton, Georgia, located
approximately 70 miles north of Atlanta. These facilities consist of (i) a
yarn processing plant with carpet dyeing capabilities, (ii) a carpet tufting
plant, (iii) a carpet finishing and tile cutting plant (which includes
printing and recycling operations) and (iv) a customer service center and
distribution warehouse. The Company is geographically well-positioned to
attract and maintain an experienced workforce and a knowledgeable supplier
base with several of the carpet industry's major manufacturers located in the
Dalton and greater Atlanta area. In addition to the four Dalton facilities,
the Company leases eight sales and service facilities and one warehouse in the
U.S. and one sales and service facility in the U.K.
The Company has completed a $13 million expansion and modernization program,
including (i) the replacement of two-thirds of all existing tufting equipment
with new high speed machines, (ii) the replacement of all warping equipment,
(iii) the installation of a second vinyl production line, which doubled the
Company's finishing capacity and (iv) a 60,000 square foot building expansion
of the finishing plant. Management believes its manufacturing capacity is
sufficient to meet the Company's requirements for the foreseeable future.
Management believes that employee involvement is a significant factor in the
Company's increased profitability. Management initiated a Company-wide system
of measuring and improving manufacturing quality in 1989. This system includes
extensive training, the establishment of quality checkpoints during the
manufacturing process and the formation of quality leadership and improvement
teams. Various quality measurements are taken each month and displayed
graphically in each plant so that employees can track progress; results are
reviewed each month in planning meetings involving all employees. An employee
suggestion system called Opportunity For Involvement was implemented in 1991
to provide a vehicle for suggestions related to product quality, employee
safety, manufacturing costs and workplace environment. Since the program's
inception, over 4,200 suggestions have been received with over 3,500
suggestions implemented.
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<PAGE>
The following table summarizes the Company's manufacturing, distribution and
sales facilities:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION OPERATION OWNED/LEASED SQUARE FEET
- -------- --------- ------------ -----------
<S> <C> <C> <C>
Dalton, Georgia........... Distribution Warehouse Owned 133,200
Sales Service Office
Finance and Administration
Dalton, Georgia........... Yarn Plant Owned 161,500
Carpet Dyeing
Dalton, Georgia........... Tufting Owned 110,000
Corporate Offices
Dalton, Georgia........... Six-Foot Finishing Owned 187,400
Tile Finishing
Tile Printing
Recycling
Dalton, Georgia........... Warehouse Leased 46,200
Atlanta, Georgia.......... Sales / Showroom Leased 1,815
Chicago, Illinois......... Sales / Showroom Leased 5,498
Dallas, Texas............. Sales / Showroom Leased 1,960
Denver, Colorado.......... Sales / Showroom Leased 1,318
Fairfax, Virginia......... Sales / Showroom Leased 1,783
Newport Beach, Sales / Showroom Leased 1,600
California...............
New York, New York........ Sales / Showroom Leased 5,000
San Francisco, Sales / Showroom Leased 140
California...............
Milton Keynes, United Sales / Showroom Leased 5,500
Kingdom..................
</TABLE>
BACKLOG
The Company's backlog was $14.8 million at January 25, 1997, as compared to
$9.3 million at January 27, 1996. The Company believes that all of these
orders will be shipped in fiscal 1997.
RAW MATERIALS
The manufacturing of carpet involves the purchasing or manufacturing of
yarn, which comprises about one-third of the carpet's typical cost structure
and in excess of 50% of total raw material costs. The Company uses DuPont 6,6
continuous filament yarn for all of its products. Yarn is either purchased
directly from DuPont to be processed through the yarn and dye plant in Dalton
or from outside yarn processors who process DuPont yarn prior to delivery.
Approximately 50% of the Company's yarn requirements are processed in-house.
Other significant raw materials used by the Company in its manufacturing
process include coater materials, such as vinyl resins, and primary backing.
See "Risk Factors--Reliance on Petroleum-Based Raw Materials; Reliance on
Principal Supplier."
The Company has never experienced a problem sourcing nylon, processed yarn
or any other raw material used in the manufacture of carpet from its suppliers
and does not anticipate any difficulties in sourcing these raw materials in
the future.
PATENTS AND TRADEMARKS
The Company owns numerous patents in the United States including its
Powerbond RS patent which expires in 2008. The Company considers its know-how
and technology more important to its current business than patents and,
accordingly, believes that expiration of existing patents or nonissuance of
patents under pending applications would not have a material adverse effect on
its operations. However, the Company maintains an active patent and trade
secret program in order to protect its proprietary technology, know-how and
trade secrets. The Company also owns numerous registered trademarks in the
United States, including Powerbond(R).
51
<PAGE>
EMPLOYEES
At January 25, 1997, the Company had a total of 715 employees of which 441
were hourly and 274 salaried. The Company has experienced no work stoppages
and believes that its employee relations are good. All of the Company's
employees are non-union. Management is not aware of any discussions or
attempts to organize the workforce within any of the Company's facilities.
The Company has made a significant investment in its employees. In addition
to ongoing quality training seminars, the Company also offers General
Equivalency Diploma (GED) tutoring and a college tuition refund program.
Management believes the Company's employee turnover and absentee rates are low
compared to its competitors. Benchmarking surveys of quality performance and
monthly meetings of employees to share manufacturing initiatives and ideas are
reflective of a motivated workforce and a unique partnership culture within
the Company. A 1994 survey completed by Scarlett & Associates awarded the
Company the "High Morale Work Group" award for attaining the highest morale
index among the 150 companies or divisions surveyed across 1,000 different
textile and textile-related work sites.
LITIGATION
The Company from time to time is subject to claims and suits arising in the
ordinary course of business, including workers' compensation and product
liability claims which may or may not be covered by insurance. It is the
opinion of management that the various asserted claims and litigation in which
the Company is currently involved will not have a material adverse effect on
its financial position.
The Company is a party in several cases involving the use by the Company of
a plasticizer purchased by the Company for use in the manufacture of vinyl
backing for carpet tiles between 1990 and 1993 and claims for personal injury
allegedly resulting from the use of a floorcovering product which the Company
ceased to sell after April 1996. The Company also is a party to an arbitration
proceeding brought by a former sales agent who alleges that he was wrongfully
terminated. Pursuant to the Acquisition Agreement, the Seller and C&A Products
indemnified the Company against liabilities in connection with the proceedings
described in the preceding sentences of this paragraph, assumed the defense of
such litigation and retained the rights to all recoveries relating thereto.
52
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each director
or executive officer of the Company. The directors of the Company are also the
directors of Holdings. Each director of the Company will hold office until the
next annual meeting of shareholders of the Company or until his successor has
been elected and qualified. Officers of the Company are elected by the Board
of Directors of the Company and serve at the discretion of the Board of
Directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ---- --- ---------
<S> <C> <C>
Edgar M. Bridger........... 45 President, Chief Executive Officer and Director
Lee H. Schilling........... 55 Senior Vice President of Marketing & Sales
Darrel V. McCay............ 36 Chief Financial Officer
Jeffrey Raabe.............. 35 Vice President of Sales
Wallace J. Hammel.......... 50 Vice President of Manufacturing
Henry L. Millsaps, Jr...... 41 Vice President of Human Resources
Terrence D. Daniels........ 53 Chairman of the Board
Gary A. Binning............ 36 Director
Stephen M. Burns........... 35 Director
Stephen Eisenstein......... 35 Director
J. Hunter Reichert......... 30 Director
R. Ted Weschler............ 35 Director
</TABLE>
Edgar M. (Mac) Bridger, President, Chief Executive Officer and Director,
joined the Company in 1987 as the Midwest District Manager. Prior to being
appointed President and Chief Executive Officer in December 1993, he served as
the Company's Vice President of Sales and as National Sales Manager.
Lee H. Schilling, Senior Vice President of Marketing & Sales, joined the
Company in 1985 as National Sales Manager. In 1987, he was promoted to Vice
President of Marketing & Sales, and in December 1993 he was promoted to his
present position.
Darrel V. McCay, Chief Financial Officer, joined the Company in March 1989
as Division Controller and became Vice President of Administration & Control
in August 1994. Mr. McCay was appointed Chief Financial Officer following the
Acquisition.
Jeffrey Raabe, Vice President of Sales, joined the Company in 1990 as a
Contract Specialist in Atlanta, Georgia. Prior to being promoted to his
present position with the Company in February 1996, he served as the Southeast
District Sales Manager and Director of North American Sales.
Wallace J. Hammel, Vice President of Manufacturing, joined the Company in
March 1983 as Finishing Manager. Mr. Hammel served as Director of Customer
Service and Claims from July 1991 through April 1994 when he assumed his
present position.
Henry L. Millsaps, Jr., Vice President of Human Resources, joined the
Company in 1980. Mr. Millsaps was Human Resource Director from March 1988
until 1995, when he was promoted to his present position.
Terrence D. Daniels, Chairman of the Board, has served as a director and as
Chairman of the Board of Holdings since 1996 and became the Chairman of the
Board of Directors of the Company upon consummation of the Acquisition. Since
1990, Mr. Daniels has been President of Quad-C. During 1989 and prior thereto,
Mr. Daniels was a Vice Chairman and director of W.R. Grace & Co. with
responsibility for the Specialty Chemical, Health Care, Natural Resource,
Restaurant, Retail and Corporate Technical groups. Mr. Daniels is also a
director of DSG International Ltd., Eskimo Pie Corporation, IGI, Inc.,
Stimsonite Corporation and several privately-held corporations.
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<PAGE>
Gary A. Binning, Director, has served as a director and as a Vice President
of Holdings since 1996 and became a director of the Company upon consummation
of the Acquisition. Since 1992, Mr. Binning has been employed by Banque
Paribas where he is currently a Partner with Paribas Principal Partners and an
officer and director of Paribas Principal Inc. Mr. Binning is also a director
of several privately-held corporations.
Stephen M. Burns, Director, has served as a director of Holdings since 1996
and became a director of the Company upon consummation of the Acquisition.
Since 1994, Mr. Burns has been a Vice President of Quad-C. Prior to joining
Quad-C, Mr. Burns was a Vice President of Paribas North America and Banque
Paribas. Mr. Burns is also a director of several privately-held corporations.
Stephen Eisenstein, Director, became a director of the Company following the
Acquisition. Since 1990, Mr. Eisenstein has been employed by Banque Paribas
where he is currently a Partner with Paribas Principal Partners and an officer
and director of Paribas Principal Inc. Mr. Eisenstein is also a director of
several privately-held corporations.
J. Hunter Reichert, Director, became a director of the Company following the
Acquisition. Since 1994, Mr. Reichert has been a Staff Vice President of Quad-
C. Prior to joining Quad-C, Mr. Reichert was an Associate with RFE Investment
Partners. Mr. Reichert is also a director of a privately-held corporation.
R. Ted Weschler, Director, became a director of the Company following the
Acquisition. Since 1990, Mr. Weschler has been Vice President, Secretary and
Treasurer of Quad-C. Mr. Weschler is also a director of WSFS Financial
Corporation, Wireless Cable of Atlanta, Inc. and several privately-held
corporations.
DIRECTOR COMPENSATION
The Company pays no additional remuneration to its employees or to
executives of Quad-C or Paribas for serving as directors. There are no family
relationships among any of the directors or executive officers.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of the Company's Chief Executive Officer and each of the other four most
highly compensated executive officers during the fiscal year ended January 25,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION($) LONG-TERM COMPENSATION
---------------------- --------------------------
OTHER ANNUAL STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A) COMPENSATION(B) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- ----------- --------------------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Edgar M. Bridger........ 1996 $ 190,000 $ 73,200 -- 25,000(c) $6,462(d)
President and Chief
Executive Officer
Lee H. Schilling........ 1996 $ 137,084 $ 27,160 -- -- $3,905(e)
Senior Vice President
of
Marketing & Sales
Jeffrey Raabe........... 1996 $ 108,000 $ 20,952 -- -- $3,250(f)
Vice President of
Sales
Wallace J. Hammel....... 1996 $ 100,250 $ 19,788 -- -- $3,385(g)
Vice President of
Manufacturing
Darrel V. McCay......... 1996 $ 85,000 $ 16,490 -- -- $2,297(h)
Vice President of
Administration &
Control
</TABLE>
54
<PAGE>
- --------
(a) In connection with the Acquisition, in February 1997, Collins & Aikman
Products Co., the Company's parent prior to the Acquisition, paid bonuses
conditioned upon the sale of the Company in the approximate amounts of
$287,500, $147,500, $118,750, $108,750 and $118,750 to Messrs. Bridger,
Schilling, Raabe, Hammel and McCay, respectively, and may pay additional
bonuses to such officers based upon the finally determined purchase price
after final determination of the net working capital as of the Closing
Date.
(b) Less than the lesser of (i) 10% of total annual salary and bonus and (ii)
$50,000.
(c) Shares of Collins & Aikman Corporation, the Company's parent prior to the
Acquisition. The options, which had an exercise price of $7.00 per share,
were exercised by Mr. Brider on February 11, 1997 when the Collins &
Aikman Corporation Common Stock had a market value of $7.625 per share,
resulting in a gain of $15,625.
(d) Reflects $5,550 profit sharing plan contributions and $912 premiums for
life insurance made on Mr. Bridger's behalf.
(e) Reflects $3,395 profit sharing plan contributions and $510 premiums for
life insurance made on Mr. Schilling's behalf.
(f) Reflects $2,835 profit sharing plan contributions and $415 premiums for
life insurance made on Mr. Raabe's behalf.
(g) Reflects $2,468 profit sharing plan and $554 401(k) plan contributions
and $362 premiums for life insurance made on Mr. Hammel's behalf.
(h) Reflects $2,051 profit sharing plan contributions and $246 premiums for
life insurance made on Mr. McCay's behalf.
MANAGEMENT STOCK INCENTIVE PLAN
Following consummation of the Acquisition, Holdings adopted a stock option
plan under which grants have been and will be made to certain members of
management and other employees of the Company of options to purchase an
aggregate of between 504,396 and 728,571 Common Shares of Holdings,
representing between 9.0% and 12.5% of the Common Shares which were
outstanding at the time of the Acquisition on a fully-diluted basis. The
exercise price will be $1.00 per share. Vesting of the options will be subject
(i) to the Company's achieving its five-year EBITDA target, (ii) to the
principal investors in Holdings achieving a specified internal rate of return
upon sale of the Company or a public offering of Common Shares, or (iii) in
any event, options for 504,396 Common Shares will vest on the ninth
anniversary of the grant.
No options were granted by Holdings during the fiscal year ended January 25,
1997. The following table sets forth certain information concerning share
options granted by Holdings on February 24, 1997 to the officers named in the
Summary Compensation Table above:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF SHARE
NUMBER OF TOTAL OPTIONS PRICE APPRECIATION FOR
SHARES GRANTED TO OPTION TERM(A)
UNDERLYING EMPLOYEES IN ----------------------
NAME OPTIONS GRANTED FISCAL YEAR EXERCISE PRICE EXPIRATION DATE 5 PERCENT 10 PERCENT
---- --------------- ------------- -------------- --------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Edgar M. Bridger........ 205,020(b) 33.5% $1.00 1/31/08 $ 145,634 $ 379,926
Lee H. Schilling........ 97,920(b) 16.0% $1.00 1/31/08 $ 69,556 $ 181,457
Jeffrey Raabe........... 88,740(b) 14.5% $1.00 1/31/08 $ 63,036 $ 164,446
Wallace J. Hammel....... 88,740(b) 14.5% $1.00 1/31/08 $ 63,036 $ 164,446
Darrel V. McCay......... 88,740(b) 14.5% $1.00 1/31/08 $ 63,036 $ 164,446
</TABLE>
- --------
(a) Amounts represent hypothetical gains that could be achieved if exercised
at end of the option term. The dollar amounts under these columns assume
5% and 10% compounded annual appreciation in the Common Shares from the
date the respective options were granted. These calculations and assumed
realizable values are required to be disclosed under Securities and
Exchange Commission rules and, therefore, are not intended to forecast
possible future appreciation of Holdings' Common Shares or amounts that
may be ultimately realized upon exercise.
55
<PAGE>
(b) Options with respect to 150,198 shares, 71,736 shares, 65,011 shares,
65,011 shares and 65,011 shares, respectively, vest January 31, 2006, or
earlier in the event certain EBITDA or internal rate of return targets are
achieved. The balance of the options vest only if certain higher EBITDA or
internal rate of return targets are achieved.
COLLINS & AIKMAN CORPORATION PLANS
Prior to the Acquisition, the Company was an indirect wholly-owned subsidiary
of Collins & Aikman Corporation ("C&A Corporation") and the Company's employees
participated in certain compensation plans sponsored by C&A Corporation.
C&A Corporation Plan. Provided certain eligibility requirements were met, at
the end of each calendar month, pay credits were applied to a participant's
account under the Collins & Aikman Corporation Employees' Pension Account Plan
(the "C&A Corporation Plan") based on the participant's length of credited
service and compensation (as defined) during that month. For participants aged
50 or older, the monthly pay credit was based on either credited service and
compensation or age and compensation, whichever resulted in the higher amount.
The following chart sets forth how pay credits were determined under the C&A
Corporation Plan:
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPENSATION
USED TO DETERMINE PAY
CREDITS
-----------------------------
ELIGIBILITY REQUIREMENTS UP TO
------------------------------------------- 1/3
YEARS OF OF OVER 1/3
CREDITED THE S.S. OF THE S.S.
SERVICE AGE WAGE BASE WAGE BASE
------------ OR ------------ --------- -----------
<S> <C> <C> <C> <C>
less than 10 less than 50 2.5% 4.5%
10 - 14 50 - 54 3.0% 5.5%
15 - 19 55 - 59 4.0% 6.5%
20 - 24 60 - 64 5.0% 8.0%
25 or more 65 or more 6.0% 10.0%
</TABLE>
The dollar amounts that resulted from these percentages were added together
and the total was the pay credit for the month.
In addition, interest credits were applied each month to the account balance.
Participants made no contributions to the C&A Corporation Plan. Employer
contributions were 100% vested after five years of service or at age 65,
whichever was earlier, and might have vested under certain other circumstances
as set forth in the C&A Corporation Plan. The estimated annual benefits payable
upon retirement at normal retirement age under the C&A Corporation Plan for
Messrs. Bridger, Schilling, Raabe, Hammel and McCay are $56,541, $82,126,
$38,246, $39,684 and $24,598, respectively. Participants in the C&A Corporation
Plan have the option, however, of receiving the value of their vested account
in a lump sum following termination of employment.
C&A Corporation Excess Plan. The Excess Benefit Plan of Collins & Aikman
Corporation (the "C&A Corporation Excess Plan") worked in conjunction with the
C&A Corporation Plan and provided to the employee any benefit which the C&A
Corporation Plan would have provided but for certain legal limitations under
the Employee Retirement Income Security Act of 1974 and Internal Revenue
Service Regulations. The pay credits and interest credits were determined as
described with respect to the C&A Corporation Plan as if no legal limitations
existed, and then this plan provided any benefit which was in excess of the
benefit provided under the C&A Corporation Plan. The estimated annual benefits
payable upon retirement at normal retirement age under the C&A Corporation
Excess Plan for Messrs. Bridger, Schilling and Raabe were $17,486, $4,302 and
$246, respectively. Messrs. Hammel and McCay were not participants in this
plan.
C&A Corporation Stock Options. Shown below is information with respect to the
year-end value of unexercised options to purchase C&A Corporation Common Stock
granted to the Named Executive Officers and held by them as of January 25,
1997. The value of the in-the-money options is based on the difference between
the exercise price of such options and the closing price of the C&A Corporation
Common Stock on the New York Stock Exchange on January 24, 1997 (the last
trading day of the fiscal year ended January 25, 1997), which was $7.625.
56
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE-
SHARES OPTIONS AT FY-END(#) MONEY OPTIONS AT FY-END($)
ACQUIRED ON VALUE ------------------------- ----------------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Edgar M. Bridger........ -- -- 92,298 -- $ 260,253 --
34,851 (a)
Lee H. Schilling........ -- -- 22,246 -- $ 80,864 --
Jeffrey Raabe........... -- -- 10,000 -- (a) --
Wallace J. Hammel....... -- -- 15,000 -- (a) --
Darrel V. McCay......... -- -- 8,000 -- (a) --
</TABLE>
- --------
(a) Options were not in-the-money at fiscal year-end because the exercise
price of such options exceeded the closing price of the Common Stock on
January 24, 1997 (the last trading day of the fiscal year).
57
<PAGE>
OWNERSHIP OF CAPITAL STOCK
Following the Transactions, the Company became a wholly-owned subsidiary of
Holdings. Holdings' authorized capital stock consists of 50 million common
shares, no par value (the "Common Shares"), and 5 million preferred shares, no
par value, including 2 million Series A Preferred Shares (the "Preferred
Shares"). Holdings has outstanding 5,100,000 Common Shares and 459,000
Preferred Shares. The table below sets forth certain information regarding
equity ownership of Holdings following the Transactions by (i) each person or
entity who beneficially owns 5% or more of the Common Shares or Preferred
Shares, (ii) each director or executive officer of Holdings who owns Common
Shares or Preferred Shares and (iii) all directors and executive officers of
Holdings as a group. There is no established public trading market for the
securities of Holdings.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF NUMBER OF PERCENTAGE OF
COMMON COMMON PREFERRED PREFERRED
NAME SHARES SHARES SHARES SHARES
- ---- --------- ------------- --------- -------------
<S> <C> <C> <C> <C>
Quad-C Partners II, L.P.(a).... 190,000 3.73% 17,100 3.73%
Quad-C Partners III, L.P.(a)... 360,000 7.06 32,400 7.06
Quad-C Partners IV, L.P.(a).... 2,295,000 45.00 206,550 45.00
Paribas Principal Inc.(b)...... 2,000,000 39.22 180,000 39.22
Edgar M. Bridger............... 30,000 .59 2,700 .59
Lee H. Schilling............... 17,500 .34 1,575 .34
Jeffrey Raabe.................. 12,500 .25 1,125 .25
Wallace J. Hammel.............. 12,500 .25 1,125 .25
Darrel V. McCay................ 10,000 .20 900 .20
Henry L. Millsaps, Jr.......... 8,000 .16 720 .16
Terrence D. Daniels(a)(c)...... 2,915,000 57.16 262,350 57.16
Gary A. Binning(b)(d).......... 2,000,000 39.22 180,000 39.22
Stephen M. Burns............... 15,000 .29 1,350 .29
Stephen Eisenstein(b)(d)....... 2,000,000 39.22 180,000 39.22
J. Hunter Reichert............. 4,000 .08 360 .08
R. Ted Weschler................ 15,000 .29 1,350 .29
All directors and executive
officers as a group
(12 persons) (c)(d)........... 5,039,500 98.81 453,555 98.81
</TABLE>
- --------
(a) The address of Quad-C Partners II, L.P., Quad-C Partners III, L.P., Quad-
C Partners IV, L.P., and Mr. Daniels is 230 East High Street,
Charlottesville, Virginia 22902.
(b) The address of Paribas Principal Inc. and Messrs. Binning and Eisenstein
is 787 Seventh Avenue, New York, New York 10019.
(c) Includes 2,845,000 Common Shares and 256,050 Preferred Shares held by
Quad-C Partners II, L.P., Quad-C Partners III, L.P. and Quad-C Partners
IV, L.P., as to which shares Mr. Daniels disclaims beneficial ownership
except to the extent of his interests in such partnerships, and 20,000
Common Shares and 1,800 Preferred Shares held by children of Mr. Daniels,
as to which shares Mr. Daniels disclaims beneficial ownership.
(d) Represents the Common Shares and Preferred Shares held by Paribas
Principal Inc., as to which shares Messrs. Binning and Eisenstein disclaim
beneficial ownership.
Preferred Shares
The Preferred Shares provide for the payment of dividends, if, when and as
declared by the Board of Directors of Holdings at the rate of $10.00 per share
per annum. Unpaid dividends will cumulate but will not compound. The Preferred
Shares have a liquidation value of $100.00 per share and are redeemable at the
option of Holdings at any time and from time to time at $100.00 per share plus
unpaid dividends. There is no sinking fund or other provision requiring the
mandatory redemption of the Preferred Shares, and the Preferred Shares are not
redeemable at the option of the holders thereof.
58
<PAGE>
Shareholders Agreement
Quad-C, Paribas and the other shareholders of Holdings entered into a
shareholders agreement effective as of February 6, 1997 which provides for,
among other things, the matters described below. Subject to certain
requirements, each shareholder will vote the Common Shares held by it so as to
elect to the Board of Directors of Holdings four designees of Quad-C (the
"Quad-C Directors"), two designees of Paribas (the "Paribas Directors"), and
the chief executive officer of the Company. Although most action by the Board
of Directors requires only the vote of a majority of the directors, certain
significant corporate actions require the approval of a majority of the Quad-C
Directors and at least one Paribas Director.
Under the shareholders agreement, subject to certain exceptions, transfers
of Holdings' Common Shares and Holdings' Preferred Shares are subject to
rights of first refusal in favor of the Company and the other shareholders. In
addition, the other shareholders are entitled to require the transferee of
shares from Quad-C or Paribas to purchase a certain percentage of the shares
held by such shareholder, and, subject to certain limitations, each
shareholder is obligated to transfer all of its shares to a third party to
whom the holders of a majority of the outstanding Common Shares wish to sell
their shares.
The shareholders agreement will terminate, with certain limitations, upon
the earlier of a transfer of control of Holdings to a third party or a
qualified public offering (as defined therein) of Common Shares.
59
<PAGE>
CERTAIN TRANSACTIONS
Quad-C. In connection with the Transactions, Holdings paid Quad-C a fee of
$1.5 million, plus out-of-pocket expenses, for, among other things, its
services in analyzing and negotiating the Acquisition and for analyzing,
arranging and negotiating the financing for the Acquisition. In addition,
Holdings entered into an agreement with Quad-C pursuant to which Holdings
retained Quad-C to render consulting services to it regarding the Company, its
financial and business affairs, its relationship with its lenders and
securityholders, and the operation and expansion of its business. The
agreement provides for payment to Quad-C of an annual fee of $350,000, payable
quarterly and reimbursement of out-of-pocket expenses. The agreement will
expire in 1999, but will be automatically renewed for successive one-year
terms unless either party provides written notice of termination 60 days prior
to the scheduled renewal date.
C&A Products. The Company, together with other subsidiaries of C&A Products,
was a guarantor of certain indebtedness of C&A Products. C&A Products has
pledged the stock of its significant subsidiaries, which included the Company,
as security for debt of C&A Products. Prior to the Closing Date, the Company
had also pledged a portion of the stock and intercompany balances of its
foreign subsidiary as additional security for these borrowings. This guarantee
by the Company and such liens were released in connection with the closing of
the Acquisition.
The Company, together with C&A Products and its other subsidiaries,
participated in benefits, risk management and other corporate-wide programs.
The Company's allocated costs relating to such programs are reflected in the
financial statements. C&A Products performs certain services in connection
with these programs and other corporate administrative functions, including
tax, treasury, risk management, employee benefits administration, legal, data
processing, application of cash receipts and other general corporate services.
Costs allocated to the Company for these services totaled $1.1 million, $1.6
million and $1.5 million for fiscal 1994, fiscal 1995 and fiscal 1996,
respectively. C&A Products will continue to provide certain of such services
for up to one year after the closing of the Acquisition for aggregate annual
payments, based upon the services requested by the Company, of up to $324,000.
See "The Acquisition."
The Company utilizes certain showroom facilities and services at C&A
Products' New York office. The Company is allocated a portion of the cost for
these facilities based upon the actual facilities and services utilized. Costs
for these facilities and services totaled $94,000, $103,000 and $171,000 in
fiscal 1994, fiscal 1995 and fiscal 1996, respectively. In connection with the
closing of the Acquisition, the Company entered into a license with C&A
Products to continue the use of the facilities for a term of ten years for a
monthly rent of $14,265. The license is terminable by the Company upon 90
days' notice, or after the third anniversary of the closing of the
Acquisition, upon 90 days' notice by C&A Products.
60
<PAGE>
DESCRIPTION OF CREDIT AGREEMENT
The Company entered into the Credit Agreement with various lending
institutions and Bankers Trust Company, as agent, which provides for senior
secured credit facilities consisting of (a) a term loan facility (the "Term
Loan Facility") in the amount of $55.0 million and (b) a revolving credit
facility (the "Revolving Credit Facility") in the amount of $30.0 million
which includes a letter of credit sublimit of $8.0 million.
Loans under the Term Loan Facility ("Term Loans") and $2.0 million under the
Revolving Credit Facility were borrowed to finance the Acquisition. The Term
Loans will amortize quarterly until June 30, 2002, the final maturity date.
Amounts repaid or prepaid in respect of the Term Loans may not be reborrowed.
Loans under the Revolving Credit Facility will mature on June 30, 2002 and may
be repaid and reborrowed prior to the final maturity date. The Company will be
required to pay the lenders under the Credit Agreement a commitment fee of 1/2
of 1% per annum, payable on a quarterly basis, on the daily average unused
portion of the Aggregate Unutilized Commitment (as defined in the Credit
Agreement). The Company will also be required to pay the lenders participating
in the Revolving Credit Facility letter of credit fees equal to 2.50% per
annum on the daily stated amount of each outstanding letter of credit and to
each lender issuing a letter of credit a facing fee of 1/4 of 1% on the daily
stated amount of such letter of credit and its customary administrative
charges in connection with the issuance of such letter of credit.
The obligations of the Company under the Credit Agreement have been
unconditionally and irrevocably guaranteed by Holdings. In addition, the
obligations of the Company under the Credit Agreement have been secured by a
first priority perfected security interest in (a) all the capital stock and
the tangible and intangible assets of the Company and (b) 65% of the capital
stock of, or equity interests in, each foreign subsidiary of the Company. Upon
the request of the Administrative Agent, any domestic subsidiary of the
Company formed in the future that has material assets will also be required to
issue a guarantee of the obligations of the Company under the Credit Agreement
which will be secured by a first priority security interest in substantially
all personal property of such subsidiary, and, upon the request of the
Administrative Agent, the Company will be required to pledge the issued and
outstanding capital stock of such subsidiary owned by the Company or any of
its subsidiaries or up to 65% of the issued and outstanding capital stock of
any foreign subsidiary owned by the Company or any of its subsidiaries that
has material assets to secure indebtedness under the Credit Agreement.
At the Company's option, the interest rates per annum applicable to amounts
outstanding under the Credit Agreement will be either (a) an adjusted rate
based on the Eurodollar Rate (as defined in the Credit Agreement) plus 2.50%
or (b) Base Rate (as defined in the Credit Agreement) plus 1.50%.
The Credit Agreement requires the Company to meet certain financial tests,
including minimum levels of consolidated EBITDA (as defined in the Credit
Agreement), minimum interest coverage and maximum leverage ratios. The Credit
Agreement also contains covenants which, among other things, limit the
incurrence of additional indebtedness, dividends, transactions with
affiliates, asset sales, acquisitions, mergers, prepayments of other
indebtedness, liens and encumbrances and other matters customarily restricted
in loan agreements.
The Credit Agreement contains customary events of default, including payment
defaults, breach of representations and warranties, covenant defaults, cross-
defaults, certain events of bankruptcy and insolvency, ERISA, judgment
defaults, failure of any guaranty or security agreement supporting the
Company's obligations under the Credit Agreement to be in full force and
effect and a change of control of Holdings or the Company.
61
<PAGE>
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued, and the Initial Notes were issued, under
an Indenture dated as of February 6, 1997 (the "Indenture") among the Company
and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). For
purposes of the following summary, the Initial Notes and the Exchange Notes
are collectively referred to as the "Notes." The terms and conditions 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 (the
"TIA") as in effect on the date of the Indenture. The following statements are
summaries of the provisions of the Notes and the Indenture and do not purport
to be complete. Such summaries make use of certain terms defined in the
Indenture and are qualified in their entirety by express reference to the
Indenture. A copy of the Indenture is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.
The Notes will be unsecured obligations of the Company, ranking subordinate
in right of payment to all Senior Debt of the Company.
The Notes will be issued in fully registered form only, without coupons, in
denominations of $1,000 and integral multiples thereof. Initially, the Trustee
will act as Paying Agent and Registrar for the Notes. The Notes may be
presented for registration or transfer and exchange at the offices of the
Registrar, which initially will be the Trustee's corporate trust office. The
Company may change any Paying Agent and Registrar without notice to holders of
the Notes (the "Holders"). The Company will pay principal (and premium, if
any) on the Notes at the Trustee's corporate trust office in New York, New
York. At the Company's option, interest may be paid at the Trustee's corporate
trust office or by check mailed to the registered address of Holders. Any
Initial Notes that remain outstanding after the completion of the Exchange
Offer, together with the Exchange Notes issued in connection with the Exchange
Offer, will be treated as a single class of securities under the Indenture.
See "The Exchange Offer" and "Initial Notes Registration Rights."
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $100 million and will
mature on January 15, 2007. Interest on the Notes will accrue at the rate of
10% per annum and will be payable semiannually in cash on each January 15 and
July 15, commencing on July 15, 1997, to the persons who are registered
Holders at the close of business on the January 1 and July 1 immediately
preceding the applicable 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 and including the date of issuance.
The Notes are not entitled to the benefit of any mandatory sinking fund.
REDEMPTION
Optional Redemption. The Notes will be redeemable, at the Company's option,
in whole at any time or in part from time to time, on and after January 15,
2002, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof)
if redeemed during the twelve-month period commencing on January 15 of the
year set forth below, plus, in each case, accrued and unpaid interest thereon,
if any, to the date of redemption:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................... 105.000%
2003........................................................... 103.333%
2004........................................................... 101.667%
2005 and thereafter............................................ 100.000%
</TABLE>
Optional Redemption upon Public Equity Offerings. At any time, or from time
to time, on or prior to January 15, 2000, the Company may, at its option, use
the net cash proceeds of one or more Public Equity
62
<PAGE>
Offerings (as defined below) to redeem up to 35% of the aggregate principal
amount of Notes originally issued at a redemption price equal to 110% of the
principal amount thereof plus accrued and unpaid interest thereon, if any, to
the date of redemption; provided that at least 65% of the principal amount of
Notes originally issued remains outstanding immediately after any such
redemption. In order to effect the foregoing redemption with the proceeds of
any Public Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Public Equity Offering.
As used in the preceding paragraph, "Public Equity Offering" means an
underwritten public offering of Qualified Capital Stock of Holdings or the
Company pursuant to a registration statement filed with the Commission in
accordance with the Securities Act; provided that, in the event of a Public
Equity Offering by Holdings, Holdings contributes to the capital of the
Company the portion of the net cash proceeds of such Public Equity Offering
necessary to pay the aggregate redemption price (plus accrued interest to the
redemption date) of the Notes to be redeemed pursuant to the preceding
paragraph.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are to be redeemed at any time,
selection of such Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities
exchange, if any, on which such Notes are listed or, if such Notes are not
then listed on a national securities exchange, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate; provided,
however, that no Notes of a principal amount of $1,000 or less shall be
redeemed in part; provided, further, that if a partial redemption is made with
the proceeds of a Public Equity Offering, selection of the Notes or portions
thereof for redemption shall be made by the Trustee only on a pro rata basis
or on as nearly a pro rata basis as is practicable (subject to DTC
procedures), unless such method is otherwise prohibited. Notice 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. 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 a principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note. On and after the redemption date,
interest will cease to accrue on Notes or portions thereof called for
redemption as long as the Company has deposited with the Paying Agent funds in
satisfaction of the applicable redemption price pursuant to the Indenture.
SUBORDINATION
The payment of all Obligations on the Notes is subordinated in right of
payment to the prior payment in full in cash or Cash Equivalents of all
Obligations on Senior Debt. Upon any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any liquidation, dissolution, winding up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly
provided for to the satisfaction of the holders of Senior Debt, before any
payment or distribution of any kind or character is made on account of any
Obligations on the Notes, or for the acquisition of any of the Notes for cash
or property or otherwise. If any default occurs and is continuing in the
payment when due, whether at maturity, upon any redemption, by declaration or
otherwise, of any principal of, interest on, unpaid drawings for letters of
credit issued in respect of, or regularly accruing fees with respect to, any
Senior Debt, no payment of any kind or character shall be made by or on behalf
of the Company or any other Person on its or their behalf with respect to any
Obligations on the Notes or to acquire any of the Notes for cash or property
or otherwise.
In addition, if any other event of default occurs and is continuing with
respect to any Designated Senior Debt, as such event of default is defined in
the instrument creating or evidencing such Designated Senior Debt, permitting
the holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives written notice of the event of default
63
<PAGE>
to the Trustee (a "Default Notice"), then, unless and until all events of
default have been cured or waived or have ceased to exist or the Trustee
receives notice from the Representative for the respective issue of Designated
Senior Debt terminating the Blockage Period (as defined below), during the 180
days after the delivery of such Default Notice (the "Blockage Period"),
neither the Company nor any other Person on its behalf shall (x) make any
payment of any kind or character with respect to any Obligations on the Notes
or (y) acquire any of the Notes for cash or property or otherwise.
Notwithstanding anything herein to the contrary, in no event will a Blockage
Period extend beyond 180 days from the date the payment on the Notes was due
and only one such Blockage Period may be commenced within any 360 consecutive
days. No event of default which existed or was continuing on the date of the
commencement of any Blockage Period with respect to the Designated Senior Debt
shall be, or be made, the basis for commencement of a second Blockage Period
by the Representative of such Designated Senior Debt whether or not within a
period of 360 consecutive days, unless such event of default shall have been
cured or waived for a period of not less than 90 consecutive days (it being
acknowledged that any subsequent action, or any breach of any financial
covenants for a period commencing after the date of commencement of such
Blockage Period that, in either case, would give rise to an event of default
pursuant to any provisions under which an event of default previously existed
or was continuing shall constitute a new event of default for this purpose).
By reason of such subordination, in the event of the insolvency of the
Company, creditors of the Company who are not holders of Senior Debt,
including the Holders of the Notes, may recover less, ratably, than holders of
Senior Debt.
As of January 25, 1997, on a pro forma basis after giving effect to the
Transactions, the Company would have had approximately $57.0 million of Senior
Debt outstanding.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of a Change of Control, each
Holder will have the right to require that the Company purchase all or a
portion of such Holder's Notes pursuant to the offer described below (the
"Change of Control Offer"), at a purchase price equal to 101% of the principal
amount thereof plus accrued interest to the date of purchase.
The Indenture provides that, prior to the mailing of the notice referred to
below, but in any event within 30 days following any Change of Control, the
Company covenants to (i) repay in full and terminate all commitments under
Indebtedness under the Credit Agreement and all other Senior Debt the terms of
which require repayment upon a Change of Control or offer to repay in full and
terminate all commitments under all Indebtedness under the Credit Agreement
and all other such Senior Debt and to repay the Indebtedness owed to each
lender which has accepted such offer or (ii) obtain the requisite consents
under the Credit Agreement and all other Senior Debt to permit the repurchase
of the Notes as provided below. The Company shall first comply with the
covenant in the immediately preceding sentence before it shall be required to
repurchase Notes pursuant to the provisions described below. The Company's
failure to comply with the immediately preceding sentence shall constitute an
Event of Default described in clause (iii) and not in clause (ii) under
"Events of Default" below.
Within 30 days following the date upon which the Change of Control occurred,
the Company must send, by first class mail, a notice to each Holder, with a
copy to the Trustee, which notice shall govern the terms of the Change of
Control Offer. Such notice shall state, among other things, the purchase date,
which must be no earlier than 30 days nor later than 45 days from the date
such notice is mailed, other than as may be required by law (the "Change of
Control Payment Date"). Holders electing to have a Note purchased pursuant to
a Change of Control Offer will be required to surrender the Note, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third business day prior to the Change of Control
Payment Date.
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If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the Change of Control
purchase price for all the Notes that might be delivered by Holders seeking to
accept the Change of Control Offer. In the event the Company is required to
purchase outstanding Notes pursuant to a Change of Control Offer, the Company
expects that it would seek third party financing to the extent it does not
have available funds to meet its purchase obligations. However, there can be
no assurance that the Company would be able to obtain such financing.
Neither the Board of Directors of the Company nor the Trustee may waive the
covenant relating to a Holder's right to redemption upon a Change of Control.
Restrictions in the Indenture described herein on the ability of the Company
and its Restricted Subsidiaries to incur additional Indebtedness, to grant
Liens on its property, to make Restricted Payments and to make Asset Sales may
also make more difficult or discourage a takeover of the Company, whether
favored or opposed by the management of the Company. Consummation of any such
transaction in certain circumstances may require redemption or repurchase of
the Notes, and there can be no assurance that the Company or the acquiring
party will have sufficient financial resources to effect such redemption or
repurchase. Such restrictions and the restrictions on transactions with
Affiliates may, in certain circumstances, make more difficult or discourage
any leveraged buyout of the Company or any of its Subsidiaries by the
management of the Company. While such restrictions cover a wide variety of
arrangements which have traditionally been used to effect highly leveraged
transactions, the Indenture may not afford the Holders of Notes protection in
all circumstances from the adverse aspects of a highly leveraged transaction,
reorganization, restructuring, merger or similar transaction.
The Company 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 Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
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 Company repurchase the Notes in the event of a takeover,
recapitalization or similar transaction.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Incurrence of Additional Indebtedness. The Company will not,
and will not permit any of its Restricted Subsidiaries to, directly or
indirectly, create, incur, assume, guarantee, acquire, become liable,
contingently or otherwise, with respect to, or otherwise become responsible
for payment of (collectively, "incur") any Indebtedness (other than Permitted
Indebtedness); provided, however, that if no Default or Event of Default shall
have occurred and be continuing at the time of or as a consequence of the
incurrence of any such Indebtedness, the Company may incur Indebtedness
(including, without limitation, Acquired Indebtedness) and Restricted
Subsidiaries of the Company may incur Acquired Indebtedness, in each case if
on the date of the incurrence of such Indebtedness, after giving effect to the
incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than 2.0 to 1.0.
Limitation on Restricted Payments. The Company will not, and will not cause
or permit any of its Restricted Subsidiaries to, directly or indirectly, (a)
declare or pay any dividend or make any distribution (other than dividends or
distributions payable in Qualified Capital Stock of the Company) on or in
respect of shares of the Company's Capital Stock to holders of such Capital
Stock, (b) purchase, redeem or otherwise acquire or retire for value any
Capital Stock of the Company or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock, (c) make any principal
payment on, purchase, defease, redeem, prepay, decrease or otherwise acquire
or retire for value, prior to any scheduled final maturity, scheduled
repayment or
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scheduled sinking fund payment, any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes or (d) make any
Investment (other than Permitted Investments) (each of the foregoing actions
set forth in clauses (a), (b) (c) and (d) being referred to as a "Restricted
Payment"), if at the time of such Restricted Payment or immediately after
giving effect thereto, (i) a Default or an Event of Default shall have
occurred and be continuing or (ii) the Company is not able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with the "Limitation on Incurrence of Additional Indebtedness"
covenant or (iii) the aggregate amount of Restricted Payments (including such
proposed Restricted Payment) made subsequent to the Issue Date (the amount
expended for such purposes, if other than in cash, being the fair market value
of such property as determined reasonably and in good faith by the Board of
Directors of the Company) shall exceed the sum of: (w) 50% of the cumulative
Consolidated Net Income (or if cumulative Consolidated Net Income shall be a
loss, minus 100% of such loss) of the Company earned subsequent to the Issue
Date and on or prior to the date the Restricted Payment occurs (the "Reference
Date") (treating such period as a single accounting period); plus (x) 100% of
the aggregate net cash proceeds received by the Company from any Person (other
than a Subsidiary of the Company) from the issuance and sale subsequent to the
Issue Date and on or prior to the Reference Date of Qualified Capital Stock of
the Company; plus (y) without duplication of any amounts included in clause
(iii)(x) above, 100% of the aggregate net cash proceeds of any equity
contribution received by the Company from a holder of the Company's Capital
Stock; plus (z) without duplication, the sum of (1) the aggregate amount
returned in cash on or with respect to Investments (other than Permitted
Investments) made subsequent to the Issue Date whether through interest
payments, principal payments, dividends or other distributions or payments,
(2) the net cash proceeds received by the Company or any Restricted Subsidiary
from the disposition of all or any portion of such Investments (other than to
a Subsidiary of the Company) and (3) upon redesignation of an Unrestricted
Subsidiary as a Restricted Subsidiary, the fair market value of such
Subsidiary; provided, however, that with respect to all Investments made in
any Unrestricted Subsidiary or joint venture, the sum of clauses (1), (2) and
(3) above with respect to such Investment shall not exceed the aggregate
amount of all such Investments made subsequent to the Issue Date in such
Unrestricted Subsidiary or joint venture.
Notwithstanding the foregoing, the provisions set forth in the immediately
preceding paragraph do not prohibit: (1) the payment of any dividend within 60
days after the date of declaration of such dividend if the dividend would have
been permitted on the date of declaration; (2) the acquisition of any shares
of Capital Stock of the Company, either (i) solely in exchange for shares of
Qualified Capital Stock of the Company or (ii) through the application of net
proceeds of a substantially concurrent sale for cash (other than to a
Subsidiary of the Company) of shares of Qualified Capital Stock of the
Company; (3) if no Default or Event of Default shall have occurred and be
continuing, the acquisition of any Indebtedness of the Company that is
subordinate or junior in right of payment to the Notes either (i) solely in
exchange for shares of Qualified Capital Stock of the Company, or (ii) through
the application of net proceeds of a substantially concurrent sale for cash
(other than to a Subsidiary of the Company) of (A) shares of Qualified Capital
Stock of the Company or (B) Refinancing Indebtedness; (4) so long as no
Default or Event of Default shall have occurred and be continuing, payments
for the purpose of and in an amount equal to the amount required to permit
Holdings to redeem or repurchase Common Stock of Holdings or options in
respect thereof from employees or officers of Holdings or any of its
Subsidiaries or their estates or authorized representatives upon the death,
disability or termination of employment of such employees or officers in an
aggregate amount not to exceed $3.0 million; (5) the making of distributions,
loans or advances in an amount not to exceed $250,000 per annum sufficient to
permit Holdings to pay the ordinary operating expenses of Holdings related to
Holdings' ownership of Capital Stock of the Company (other than to the
Principals or their Related Parties); and (6) the payment of any amounts
pursuant to the Tax Allocation Agreement. In determining the aggregate amount
of Restricted Payments made subsequent to the Issue Date in accordance with
clause (iii) of the immediately preceding paragraph, amounts expended pursuant
to clauses (1), (2) and (4) shall be included in such calculation and amounts
expended pursuant to clauses (3), (5) and (6) shall be excluded from such
calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an officers' certificate stating that such Restricted
Payment complies with the Indenture and setting forth in
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reasonable detail the basis upon which the required calculations were
computed, which calculations may be based upon the Company's latest available
internal quarterly financial statements.
Limitation on Asset Sales. The Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the
Company or the applicable Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the fair market
value of the assets sold or otherwise disposed of (as determined in good faith
by the Company's Board of Directors), (ii) at least 75% of the consideration
received by the Company or the Restricted Subsidiary, as the case may be, from
such Asset Sale shall be in the form of cash or Cash Equivalents (provided
that the amount of any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet) of the Company or any such
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes) that are assumed by the transferee of any such
assets shall be deemed to be cash for purposes of this provision) and is
received at the time of such disposition; and (iii) upon the consummation of
an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to
apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of
receipt thereof either (A) to prepay any Senior Debt and, in the case of any
Senior Debt under any revolving credit facility, effect a permanent reduction
in the availability under such revolving credit facility, (B) to make an
investment in properties and assets that replace the properties and assets
that were the subject of such Asset Sale or in properties and assets that will
be used in the business of the Company and its Restricted Subsidiaries as
existing on the Issue Date or in businesses the same, similar or reasonably
related thereto ("Replacement Assets"), or (C) a combination of prepayment and
investment permitted by the foregoing clauses (iii)(A) and (iii)(B). Subject
to the last sentence of this paragraph, on the 361st day after an Asset Sale
or such earlier date, if any, as the Board of Directors of the Company or of
such Restricted Subsidiary determines not to apply the Net Cash Proceeds
relating to such Asset Sale as set forth in clause (iii)(A), (iii)(B) or
(iii)(C) of the next preceding sentence (each, a "Net Proceeds Offer Trigger
Date"), such aggregate amount of Net Cash Proceeds which have not been applied
on or before such Net Proceeds Offer Trigger Date as permitted in clauses
(iii)(A), (iii)(B) and (iii)(C) of the next preceding sentence (each a "Net
Proceeds Offer Amount") shall be applied by the Company or such Restricted
Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date
(the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days
following the applicable Net Proceeds Offer Trigger Date, from all Holders on
a pro rata basis, that amount of Notes equal to the Net Proceeds Offer Amount
at a price equal to 100% of the principal amount of the Notes to be purchased,
plus accrued and unpaid interest thereon, if any, to the date of purchase;
provided, however, that if at any time any non-cash consideration received by
the Company or any Restricted Subsidiary of the Company, as the case may be,
in connection with any Asset Sale is converted into or sold or otherwise
disposed of for cash (other than interest received with respect to any such
non-cash consideration), then such conversion or disposition shall be deemed
to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall
be applied in accordance with this covenant. The Company may defer the Net
Proceeds Offer until there is an aggregate unutilized Net Proceeds Offer
Amount equal to or in excess of $5.0 million resulting from one or more Asset
Sales (at which time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as required
pursuant to this paragraph).
In the event of the transfer of substantially all (but not all) of the
property and assets of the Company and its Restricted Subsidiaries as an
entirety to a Person in a transaction permitted under "--Merger, Consolidation
and Sale of Assets," the successor corporation shall be deemed to have sold
the properties and assets of the Company and its Restricted Subsidiaries not
so transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such properties and assets
of the Company or its Restricted Subsidiaries deemed to be sold shall be
deemed to be Net Cash Proceeds for purposes of this covenant.
Each Net Proceeds Offer will be mailed to the record Holders as shown on the
register of Holders within 25 days following the Net Proceeds Offer Trigger
Date, with a copy to the Trustee, and shall comply with the procedures set
forth in the Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in integral
multiples of $1,000 in exchange for cash. To the extent Holders
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properly tender Notes in an amount exceeding the Net Proceeds Offer Amount,
Notes of tendering Holders will be purchased on a pro rata basis (based on
amounts tendered). To the extent that the aggregate amount of the Notes
tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer
Amount, the Company may use such excess Net Proceeds Offer Amount for general
corporate purposes or for any other purpose not prohibited by the Indenture.
Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount
shall be reset at zero. A Net Proceeds Offer shall remain open for a period of
20 business days or such longer period as may be required by law.
The Company 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 Notes pursuant to a Net Proceeds Offer. To the extent that the
provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Asset Sale" provisions of the Indenture by
virtue thereof.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries. The Company will not, and will not cause or permit any of its
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause
or permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital Stock; (b) make
loans or advances or to pay any Indebtedness or other obligation owed to the
Company or any other Restricted Subsidiary of the Company; or (c) transfer any
of its property or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions existing under or by
reason of: (1) applicable law; (2) the Indenture; (3) customary non-assignment
provisions of any contract or lease governing a leasehold or ownership
interest of any Restricted Subsidiary of the Company; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other
than the Person or the properties or assets of the Person so acquired; (5)
agreements existing on the Issue Date (including, without limitation, the
Credit Agreement) to the extent and in the manner such agreements are in
effect on the Issue Date; or (6) an agreement governing Indebtedness incurred
to Refinance the Indebtedness issued, assumed or incurred pursuant to an
agreement referred to in clause (2), (4) or (5) above; provided, however, that
the provisions relating to such encumbrance or restriction contained in any
such Indebtedness are no less favorable to the Company in any material respect
as determined by the Board of Directors of the Company in their reasonable and
good faith judgment than the provisions relating to such encumbrance or
restriction contained in agreements referred to in such clause (2), (4) or
(5).
Limitation on Preferred Stock of Restricted Subsidiaries. The Company will
not permit any of its Restricted Subsidiaries to issue any Preferred Stock
(other than to the Company or to a Wholly Owned Restricted Subsidiary of the
Company) or permit any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company) to own any Preferred Stock of any
Restricted Subsidiary of the Company.
Limitation on Liens. The Company will not, and will not cause or permit any
of its Restricted Subsidiaries to, directly or indirectly, create, incur,
assume or permit or suffer to exist any Liens of any kind against or upon any
property or assets of the Company or any of its Restricted Subsidiaries
whether owned on the Issue Date or acquired after the Issue Date, or any
proceeds therefrom, or assign or otherwise convey any right to receive income
or profits therefrom unless (i) in the case of Liens securing Indebtedness
that is expressly subordinate or junior in right of payment to the Notes, the
Notes are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Liens and (ii) in all other cases, the Notes are
equally and ratably secured, except for (A) Liens existing as of the Issue
Date to the extent and in the manner such Liens are in effect on the Issue
Date; (B) Liens securing Senior Debt and Liens on assets of Restricted
Subsidiaries securing guarantees of Senior Debt; (C) Liens securing the Notes;
(D) Liens of the Company or a Wholly Owned Restricted Subsidiary of the
Company on assets of any Restricted Subsidiary of the Company; (E) Liens
securing Refinancing Indebtedness which is incurred to Refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture
and which has been incurred in accordance with the provisions of the
Indenture; provided, however, that such Liens (A) are no less favorable to the
Holders and are not more favorable to the lienholders with respect to such
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Liens than the Liens in respect of the Indebtedness being Refinanced and (B)
do not extend to or cover any property or assets of the Company or any of its
Restricted Subsidiaries not securing the Indebtedness so Refinanced; and (F)
Permitted Liens.
Prohibition on Incurrence of Senior Subordinated Debt. The Company will not
incur or suffer to exist Indebtedness that is senior in right of payment to
the Notes and subordinate in right of payment to any other Indebtedness of the
Company.
Merger, Consolidation and Sale of Assets. The Company will not, in a single
transaction or series of related transactions, consolidate or merge with or
into any Person, or sell, assign, transfer, lease, convey or otherwise dispose
of (or cause or permit any Restricted Subsidiary of the Company to sell,
assign, transfer, lease, convey or otherwise dispose of) all or substantially
all of the Company's assets (determined on a consolidated basis for the
Company and its Restricted Subsidiaries) whether as an entirety or
substantially as an entirety to any Person unless: (i) either (1) the Company
shall be the surviving or continuing corporation or (2) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or the Person which acquires by sale, assignment, transfer, lease,
conveyance or other disposition the properties and assets of the Company and
its Restricted Subsidiaries substantially as an entirety (the "Surviving
Entity") (x) shall be a corporation organized and validly existing under the
laws of the United States or any State thereof or the District of Columbia and
(y) shall expressly assume, by supplemental indenture (in form and substance
reasonably satisfactory to the Trustee), executed and delivered to the
Trustee, the due and punctual payment of the principal of and premium, if any,
and interest on all of the Notes and the performance of every covenant of the
Notes, the Indenture and, if applicable, the Registration Rights Agreement on
the part of the Company to be performed or observed; (ii) immediately after
giving effect to such transaction and the assumption contemplated by clause
(i)(2)(y) above (including giving effect to any Indebtedness and Acquired
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction), the Company or such Surviving Entity, as the
case may be, shall be able to incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) pursuant to the "--Limitation on
Incurrence of Additional Indebtedness" covenant; (iii) immediately before and
immediately after giving effect to such transaction and the assumption
contemplated by clause (i)(2)(y) above (including, without limitation, giving
effect to any Indebtedness and Acquired Indebtedness incurred or anticipated
to be incurred and any Lien granted in connection with or in respect of the
transaction), no Default or Event of Default shall have occurred or be
continuing; and (iv) the Company or the Surviving Entity, as the case may be,
shall have delivered 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, if a supplemental
indenture is required in connection with such transaction, such supplemental
indenture comply with the applicable provisions of the Indenture and that all
conditions precedent in the Indenture relating to such transaction have been
satisfied.
Notwithstanding the foregoing, the merger of the Company with an Affiliate
incorporated solely for the purpose of reincorporating the Company in another
jurisdiction is permitted.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of the Company the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of the Company in
accordance with the foregoing, in which the Company is not the continuing
corporation, the successor Person formed by such consolidation or into which
the Company is merged or to which such conveyance, lease or transfer is made
shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under the Indenture and the Notes with the same effect
as if such surviving entity had been named as such.
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Limitations on Transactions with Affiliates. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates (each an "Affiliate Transaction"), other
than (x) Affiliate Transactions permitted under paragraph (b) below and (y)
Affiliate Transactions on terms that are no less favorable than those that
might reasonably have been obtained in a comparable transaction at such time
on an arm's-length basis from a Person that is not an Affiliate of the Company
or such Restricted Subsidiary. All Affiliate Transactions (and each series of
related Affiliate Transactions which are similar or part of a common plan)
involving aggregate payments or other property with a fair market value in
excess of $250,000 shall be approved by the Board of Directors of the Company
or such Restricted Subsidiary, as the case may be, such approval to be
evidenced by a Board Resolution stating that such Board of Directors has
determined that such transaction complies with the foregoing provisions. If
the Company or any Restricted Subsidiary of the Company enters into an
Affiliate Transaction (or a series of related Affiliate Transactions related
to a common plan) that involves an aggregate fair market value or payments to
an Affiliate, as the case may be, of more than $2.5 million, the Company or
such Restricted Subsidiary, as the case may be, shall, prior to the
consummation thereof, obtain a favorable opinion as to the fairness of such
transaction or series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial point of view,
from an Independent Financial Advisor and file the same with the Trustee.
(b) The restrictions set forth in clause (a) shall not apply to (i)
reasonable fees, compensation and out-of-pocket expenses paid to and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any Restricted Subsidiary of the Company as determined in good
faith by the Company's Board of Directors or senior management; (ii)
transactions between or among the Company and any of its Restricted
Subsidiaries or exclusively between or among such Restricted Subsidiaries,
provided that such transactions are not otherwise prohibited by the Indenture;
(iii) any agreement as in effect as of the Issue Date or any amendment thereto
or any transaction contemplated thereby (including pursuant to any amendment
thereto) in any replacement agreement thereto so long as any such amendment or
replacement agreement is not more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue Date;
(iv) any Paribas Related Party acting as a lender under the Credit Agreement
or purchasing or holding any Notes; and (v) Restricted Payments and Permitted
Investments permitted by the Indenture.
Limitation of Guarantees by Restricted Subsidiaries. The Company will not
permit any of its domestic Restricted Subsidiaries, directly or indirectly, by
way of the pledge of any intercompany note or otherwise, to assume, guarantee
or in any other manner become liable with respect to any Indebtedness of the
Company or any other Restricted Subsidiary (other than (A) Indebtedness and
other obligations under the Credit Agreement, (B) Permitted Indebtedness of a
Restricted Subsidiary, (C) Senior Debt that is incurred in reliance on clause
(xiv) of the definition of "Permitted Indebtedness" and that is secured, (D)
Indebtedness under Currency Agreements incurred in reliance on clause (v) of
the definition of Permitted Indebtedness, or (E) Interest Swap Obligations
incurred in reliance on clause (iv) of the definition of Permitted
Indebtedness), unless, in any such case (a) such Restricted Subsidiary
executes and delivers a supplemental indenture to the Indenture, providing a
guarantee of payment of the Notes by such Restricted Subsidiary (the
"Guarantee") and (b) (x) if any such assumption, guarantee or other liability
of such Restricted Subsidiary is provided in respect of Senior Debt, the
guarantee or other instrument provided by such Restricted Subsidiary in
respect of such Senior Debt may be superior to the Guarantee pursuant to
subordination provisions no less favorable to the Holders of the Notes than
those contained in the Indenture and (y) if such assumption, guarantee or
other liability of such Restricted Subsidiary is provided in respect of
Indebtedness that is expressly subordinated to the Notes, the guarantee or
other instrument provided by such Restricted Subsidiary in respect of such
subordinated Indebtedness shall be subordinated to the Guarantee pursuant to
subordination provisions no less favorable to the Holders of the Notes than
those contained in the Indenture.
Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary
of the Notes shall provide by its terms that it shall be automatically and
unconditionally released and discharged, without any further action
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required on the part of the Trustee or any Holder, upon: (i) the unconditional
release of such Restricted Subsidiary from its liability in respect of the
Indebtedness in connection with which such Guarantee was executed and
delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company of all of the Company's Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary; provided that
(a) such sale or disposition of such Capital Stock or assets is otherwise in
compliance with the terms of the Indenture and (b) such assumption, guarantee
or other liability of such Restricted Subsidiary has been released by the
holders of the other Indebtedness so guaranteed.
Conduct of Business. The Company and its Restricted Subsidiaries will not
engage in any businesses which are not the same, similar or reasonably related
to the businesses in which the Company and its Restricted Subsidiaries are
engaged on the Issue Date.
Reports to Holders. The Indenture provides that so long as the Notes are
outstanding the Company will deliver to the Trustee within 15 days after the
filing of the same with the Commission, copies of the quarterly and annual
reports and of the information, documents and other reports, if any, which the
Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. The Indenture further provides that,
notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, so long as the Notes
are outstanding the Company will file with the Commission, to the extent
permitted, and provide the Trustee and Holders with such annual reports and
such information, documents and other reports specified in Sections 13 and
15(d) of the Exchange Act. The Company will also comply with the other
provisions of TIA (S) 314(a).
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) the failure to pay interest on any Notes when the same becomes due
and payable and the default continues for a period of 30 days (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(ii) the failure to pay the principal on any Notes, when such principal
becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered
pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or
not such payment shall be prohibited by the subordination provisions of the
Indenture);
(iii) a default in the observance or performance of any other covenant or
agreement contained in the Indenture which default continues for a period
of 30 days after the Company receives written notice specifying the default
(and demanding that such default be remedied) from the Trustee or the
Holders of at least 25% of the outstanding principal amount of the Notes;
(iv) the failure to pay at final stated maturity (giving effect to any
applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness for borrowed money of the Company or any Restricted
Subsidiary of the Company and such failure continues for a period of 20
days or more, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise
cured within 20 days of receipt by the Company or such Restricted
Subsidiary of notice of any such acceleration) if the aggregate principal
amount of such Indebtedness, together with the principal amount of any
other such Indebtedness in default for failure to pay principal at final
maturity or which has been accelerated, in each case with respect to which
the 20-day period described above has passed, aggregates $5.0 million or
more at any time;
(v) one or more judgments for the payment of money in an aggregate amount
in excess of $5.0 million shall have been rendered against the Company or
any of its Restricted Subsidiaries and such judgments remain undischarged,
unpaid or unstayed for a period of 60 days after such judgment or judgments
become final and non-appealable; and
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(vi) certain events of bankruptcy affecting the Company or any of its
Significant Subsidiaries.
If an Event of Default (other than an Event of Default specified in clause
(vi) above with respect to the Company) shall occur and be continuing, the
Trustee or the Holders of at least 25% in principal amount of outstanding
Notes may declare the principal of and accrued interest on all the Notes to be
due and payable by notice in writing to the Company and the Trustee specifying
the respective Event of Default and that it is a "notice of acceleration" (the
"Acceleration Notice"), and the same (i) shall become immediately due and
payable or (ii) if there are any amounts outstanding under the Credit
Agreement, shall become immediately due and payable upon the first to occur of
an acceleration under the Credit Agreement or 5 business days after receipt by
the Company and the Representative under the Credit Agreement of such
Acceleration Notice but only if such Event of Default is then continuing. If
an Event of Default specified in clause (vi) above with respect to the Company
occurs and is continuing, then all unpaid principal of and premium, if any,
and accrued and unpaid interest on all of the outstanding Notes shall ipso
facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
The Indenture provides that, at any time after a declaration of acceleration
with respect to the Notes as described in the preceding paragraph, the Holders
of a majority in principal amount of the Notes may, on behalf of the Holders
of all of the Notes, rescind and cancel such declaration and its consequences
(i) if the rescission would not conflict with any judgment or decree, (ii) if
all existing Events of Default have been cured or waived except nonpayment of
principal or interest that has become due solely because of the acceleration,
(iii) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid, (iv) if the
Company has paid the Trustee its reasonable compensation and reimbursed the
Trustee for its expenses, disbursements and advances and (v) in the event of
the cure or waiver of an Event of Default of the type described in clause (vi)
of the description above of Events of Default, the Trustee shall have received
an officers' certificate and an opinion of counsel that such Event of Default
has been cured or waived. No such rescission shall affect any subsequent
Default or impair any right consequent thereto.
The Holders of a majority in principal amount of the Notes may waive any
existing Default or Event of Default under the Indenture, and its
consequences, except a default in the payment of the principal of or interest
on any Notes.
Holders of the Notes may not enforce the Indenture or the Notes except as
provided in the Indenture and under the TIA. Subject to the provisions of the
Indenture relating to the duties of the Trustee, the Trustee is under no
obligation to exercise any of its rights or powers under the Indenture at the
request, order or direction of any of the Holders, unless such Holders have
offered to the Trustee reasonable indemnity. Subject to all provisions of the
Indenture and applicable law, the Holders of a majority in aggregate principal
amount of the then outstanding Notes have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee.
Under the Indenture, the Company is required to provide an officers'
certificate to the Trustee promptly upon any such officer obtaining knowledge
of any Default or Event of Default (provided that such officers shall provide
such certification at least annually whether or not they know of any Default
or Event of Default) that has occurred and, if applicable, describe such
Default or Event of Default and the status thereof.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee or stockholder of the Company, as such, shall
have any liability for any obligations of the Company under the Notes or the
Indenture or for any claim based on, in respect of, or by reason of, such
obligations 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.
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LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance"). Such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire indebtedness represented by the
outstanding Notes, except for (i) the rights of Holders to receive payments in
respect of the principal of, premium, if any, and interest on the Notes when
such payments are due, (ii) the Company'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
payments, (iii) the rights, powers, trust, duties and immunities of the
Trustee and the Company's obligations in connection therewith and (iv) the
Legal Defeasance provisions of the Indenture. In addition, the Company may, at
its option and at any time, elect to have the obligations of the Company
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, reorganization 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
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders, cash in U.S. dollars, non-callable U.S. government
obligations, or a combination thereof, in such amounts as will be sufficient,
in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and interest on the
Notes on the stated date for payment thereof or on the applicable redemption
date, as the case may be; (ii) in the case of Legal Defeasance, the Company
shall have delivered to the Trustee an opinion of counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company 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 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 Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to the Trustee confirming
that the Holders 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 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 shall not result in a breach or violation of, or
constitute a default under the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an officers' certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders
over any other creditors of the Company or with the intent of defeating,
hindering, delaying or defrauding any other creditors of the Company or
others; (vii) the Company 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; (viii) the Company shall have delivered to
the Trustee an opinion of counsel to the effect that (A) the trust funds will
not be subject to any rights of holders of Senior Debt, including, without
limitation, those arising under the Indenture and (B) assuming no intervening
bankruptcy of the Company between the date of deposit and the 91st day
following the deposit and that no Holder is an insider of the Company, after
the 91st day following the deposit, the trust funds will not be subject to the
effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally; and (ix) certain other customary
conditions precedent are satisfied.
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SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) as to all outstanding Notes
when: (i) either (a) all the Notes theretofore authenticated and delivered
(except lost, stolen or destroyed Notes which have been replaced or paid and
Notes for whose payment money has theretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the
Company or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and the Company has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together
with irrevocable instructions from the Company directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may
be; (ii) the Company has paid all other sums payable under the Indenture by
the Company; and (iii) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent
under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
MODIFICATION OF THE INDENTURE
From time to time, the Company and the Trustee, without the consent of the
Holders, may amend the Indenture for certain specified purposes, including
curing ambiguities, defects or inconsistencies, so long as such change does
not, in the opinion of the Trustee, adversely affect the rights of any of the
Holders in any material respect. In formulating its opinion on such matters,
the Trustee will be entitled to rely on such evidence as it deems appropriate,
including, without limitation, solely on an opinion of counsel. Other
modifications and amendments of the Indenture may be made with the consent of
the Holders of a majority in principal amount of the then outstanding Notes
issued under the Indenture, except that, without the consent of each Holder
affected thereby, no amendment may: (i) reduce the amount of Notes whose
Holders must consent to an amendment; (ii) reduce the rate of or change or
have the effect of changing the time for payment of interest, including
defaulted interest, on any Notes; (iii) reduce the principal of or change or
have the effect of changing the fixed maturity of any Notes, or change the
date on which any Notes may be subject to redemption or repurchase, or reduce
the redemption or repurchase price therefor; (iv) make any Notes payable in
money other than that stated in the Notes; (v) make any change in provisions
of the Indenture protecting the right of each Holder to receive payment of
principal of and interest on such Note on or after the due date thereof or to
bring suit to enforce such payment, or permitting Holders of a majority in
principal amount of Notes to waive Defaults or Events of Default (other than
Defaults or Events of Default with respect to the payment of principal of, or
interest on, the Notes); (vi) amend, change or modify in any material respect
the obligation of the Company to make and consummate a Change of Control Offer
in the event of a Change of Control or make and consummate a Net Proceeds
Offer with respect to any Asset Sale that has been consummated or modify any
of the provisions or definitions with respect thereto after a Change of
Control has occurred or the subject Asset Sale has been consummated; or (vii)
modify or change any provision of the Indenture or the related definitions
affecting the subordination or ranking of the Notes in a manner which
adversely affects the Holders in any material respect.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York but without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set
forth in the Indenture. During the existence of an Event of Default, the
Trustee will exercise such rights and powers vested in it by the Indenture,
and use the same degree
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of care and skill in its exercise as a prudent person would exercise or use
under the circumstances in the conduct of his own affairs.
The Indenture and the provisions of the TIA contain certain limitations on
the rights of the Trustee, should it become a creditor of the Company, to
obtain payments of claims in certain cases or to realize on certain property
received in respect of any such claim as security or otherwise. Subject to the
TIA, the Trustee will be permitted to engage in other transactions; provided
that if the Trustee acquires any conflicting interest as described in the TIA,
it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person or any of its
Subsidiaries existing at the time such Person becomes a Restricted Subsidiary
of the Company or at the time it merges or consolidates with the Company or
any of its Restricted Subsidiaries or assumed in connection with the
acquisition of assets from such Person and in each case not incurred by such
Person in connection with, or in anticipation or contemplation of, such Person
becoming a Restricted Subsidiary of the Company or such acquisition, merger or
consolidation.
"Affiliate" means, with respect to any specified Person, any other Person
who directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative of the
foregoing.
"Asset Acquisition" means (a) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or any Restricted
Subsidiary of the Company, or shall be merged with or into the Company or any
Restricted Subsidiary of the Company, or (b) the acquisition by the Company or
any Restricted Subsidiary of the Company of the assets of any Person (other
than a Restricted Subsidiary of the Company) which constitute all or
substantially all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
transfer, lease (other than operating leases entered into in the ordinary
course of business), assignment or other transfer for value by the Company or
any of its Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly Owned Restricted
Subsidiary of the Company of (a) any Capital Stock of any Restricted
Subsidiary of the Company; or (b) any other property or assets of the Company
or any Restricted Subsidiary of the Company other than in the ordinary course
of business; provided, however, that Asset Sales shall not include (i) a
transaction or series of related transactions for which the Company or its
Restricted Subsidiaries receive aggregate consideration of less than $500,000
and (ii) the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of the Company as permitted under "Merger,
Consolidation and Sale of Assets."
"Board of Directors" means, as to any Person, the board of directors of such
Person or any duly authorized committee thereof.
"Board Resolution" means, with respect to any Person, a copy of a resolution
certified by the Secretary or an Assistant Secretary of such Person to have
been duly adopted by the Board of Directors of such Person and to be in full
force and effect on the date of such certification, and delivered to the
Trustee.
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"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations or other equivalents (however
designated and whether or not voting) of corporate stock, including each class
of Common Stock and Preferred Stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof maturing within one year from the date of acquisition
thereof and, at the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Service ("S&P") or Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1 from
Moody's; (iv) certificates of deposit or bankers' acceptances maturing within
one year from the date of acquisition thereof issued by any bank organized
under the laws of the United States of America or any state thereof or the
District of Columbia or any U.S. branch of a foreign bank having at the date
of acquisition thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (i) above
entered into with any bank meeting the qualifications specified in clause (iv)
above; and (vi) investments in money market funds which invest substantially
all their assets in securities of the types described in clauses (i) through
(v) above.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company or Holdings to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof (whether or not otherwise in compliance with the provisions of the
Indenture) other than to one or both of the Principals or their respective
Related Parties; (ii) the approval by the holders of Capital Stock of the
Company or Holdings, as the case may be, of any plan or proposal for the
liquidation or dissolution of the Company or Holdings, as the case may be
(whether or not otherwise in compliance with the provisions of the Indenture);
(iii) any Person or Group (other than one or both of the Principals or their
respective Related Parties) shall become the owner, directly or indirectly,
beneficially or of record, of shares representing more than 40% of the
aggregate ordinary voting power represented by the issued and outstanding
Capital Stock (the "Voting Stock") of the Company or Holdings and the
Principals and their respective Related Parties beneficially own, directly or
indirectly, in the aggregate a lesser percentage of the Voting Stock of the
Company or Holdings, as the case may be, than such other Person or Group; or
(iv) the replacement of a majority of the Board of Directors of the Company or
Holdings over a two-year period from the directors who constituted the Board
of Directors of the Company or Holdings, as the case may be, at the beginning
of such period, and such replacement shall not have been approved by a vote of
at least a majority of the Board of Directors of the Company or Holdings, as
the case may be, then still in office who either were members of such Board of
Directors at the beginning of such period or whose election as a member of
such Board of Directors was previously so approved or who were nominated by,
or designees of, either of the Principals or their respective Related Parties.
"Common Stock" of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether
voting or non-voting) of such Person's common stock, whether outstanding on
the Issue Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
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"Consolidated EBITDA" means, with respect to any Person, for any period, the
sum (without duplication) of (i) Consolidated Net Income and (ii) to the
extent Consolidated Net Income has been reduced thereby, (A) all income taxes
of such Person and its Restricted Subsidiaries paid or accrued in accordance
with GAAP for such period, (B) Consolidated Interest Expense and (C)
Consolidated Non-cash Charges less any non-cash items increasing Consolidated
Net Income for such period, all as determined on a consolidated basis for such
Person and its Restricted Subsidiaries in accordance with GAAP.
"Consolidated Fixed Charge Coverage Ratio" means, with respect to any
Person, the ratio of Consolidated EBITDA of such Person during the four full
fiscal quarters (the "Four Quarter Period") ending on or prior to the date of
the transaction giving rise to the need to calculate the Consolidated Fixed
Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges
of such Person for the Four Quarter Period. In addition to and without
limitation of the foregoing, for purposes of this definition, "Consolidated
EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation to (i) the
incurrence or repayment of any Indebtedness of such Person or any of its
Restricted Subsidiaries (and the application of the proceeds thereof) giving
rise to the need to make such calculation and any incurrence or repayment of
other Indebtedness (and the application of the proceeds thereof), other than
the incurrence or repayment of Indebtedness in the ordinary course of business
for working capital purposes pursuant to working capital facilities, occurring
during the Four Quarter Period or at any time subsequent to the last day of
the Four Quarter Period and on or prior to the Transaction Date, as if such
incurrence or repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Four Quarter Period and
(ii) any Asset Sales or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of such Person or one of its Restricted Subsidiaries (including any Person who
becomes a Restricted Subsidiary as a result of the Asset Acquisition)
incurring, assuming or otherwise being liable for Acquired Indebtedness and
also including any Consolidated EBITDA (including any pro forma expense and
cost reductions calculated on a basis consistent with Regulation S-X under the
Securities Act) attributable to the assets which are the subject of the Asset
Acquisition or Asset Sale during the Four Quarter Period) occurring during the
Four Quarter Period or at any time subsequent to the last day of the Four
Quarter Period and on or prior to the Transaction Date, as if such Asset Sale
or Asset Acquisition (including the incurrence, assumption or liability for
any such Acquired Indebtedness) occurred on the first day of the Four Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating
"Consolidated Fixed Charges" for purposes of determining the denominator (but
not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1)
interest on outstanding Indebtedness determined on a fluctuating basis as of
the Transaction Date and which will continue to be so determined thereafter
shall be deemed to have accrued at a fixed rate per annum equal to the rate of
interest on such Indebtedness in effect on the Transaction Date and (2)
notwithstanding clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by agreements
relating to Interest Swap Obligations, shall be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (i) Consolidated Interest Expense
(excluding amortization or write-off of deferred financing costs), plus (ii)
the product of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in Qualified Capital
Stock) paid or accrued during such period times (y) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
effective consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, with respect to any Person for any
period, the sum of, without duplication: (i) the aggregate of the interest
expense of such Person and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, including, without
limitation, (a) any amortization of debt discount and amortization or write-
off of deferred financing costs, (b) the net costs under Interest Swap
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Obligations, (c) all capitalized interest and (d) the interest portion of any
deferred payment obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such
Person and its Restricted Subsidiaries during such period as determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate net income (or loss) of such Person and its Restricted
Subsidiaries for such period on a consolidated basis, determined in accordance
with GAAP; provided that there shall be excluded therefrom (a) after-tax gains
or losses from Asset Sales (without regard to the $500,000 limitation set
forth in the definition thereof) or abandonments or reserves relating thereto,
(b) after-tax items classified as extraordinary or nonrecurring gains, (c) the
net income of any Person acquired in a "pooling of interests" transaction
accrued prior to the date it becomes a Restricted Subsidiary of the referent
Person or is merged or consolidated with the referent Person or any Restricted
Subsidiary of the referent Person, (d) the net income (but not loss) of any
Restricted Subsidiary of the referent Person to the extent that the
declaration of dividends or similar distributions by that Restricted
Subsidiary of that income is restricted by a contract, operation of law or
otherwise, (e) the net income of any Person, other than a Wholly Owned
Restricted Subsidiary of the referent Person, except to the extent of cash
dividends or distributions paid to the referent Person or to a Wholly Owned
Restricted Subsidiary of the referent Person by such Person, (f) any
restoration to income of any contingency reserve, except to the extent that
provision for such reserve was made out of Consolidated Net Income accrued at
any time following the Issue Date, (g) income or loss attributable to
discontinued operations (including, without limitation, operations disposed of
during such period whether or not such operations were classified as
discontinued), and (h) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation, merger
or transfer of assets. Notwithstanding the foregoing, "Consolidated Net
Income" shall be calculated without giving effect to (i) the amortization of
any premiums, fees or expenses incurred in connection with the Acquisition and
related financings and (ii) the amortization or depreciation of any amounts
required or permitted by Accounting Principles Board Opinion Nos. 16
(including non-cash write-ups and non-cash charges relating to inventory and
fixed assets, in each case arising in connection with the Acquisition) and 17
(including non-cash charges relating to intangibles and goodwill arising in
connection with the Acquisition).
"Consolidated Non-cash Charges" means, with respect to any Person, for any
period, the aggregate depreciation, amortization and other non-cash expenses
of such Person and its Restricted Subsidiaries reducing Consolidated Net
Income of such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP (excluding any such
charge which requires an accrual of or a reserve for cash charges for any
future period).
"Credit Agreement" means the Credit Agreement dated as of the Issue Date,
among Holdings, the Company, the lenders party thereto in their capacities as
lenders thereunder and Bankers Trust Company, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including,
without limitation, increasing the amount of available borrowings thereunder
(provided that such increase in borrowings is permitted by the "Limitation on
Incurrence of Additional Indebtedness" covenant above) or adding Restricted
Subsidiaries of the Company as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor
or replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any Restricted Subsidiary of the Company against fluctuations in
currency values.
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"Default" means an event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Debt" means (i) Indebtedness under or in respect of the
Credit Agreement and (ii) any other Indebtedness constituting Senior Debt
which, at the time of determination, has an aggregate principal amount of at
least $25 million and is specifically designated in the instrument evidencing
such Senior Debt as "Designated Senior Debt" by the Company.
"Disqualified Capital Stock" means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
or is redeemable at the sole option of the holder thereof on or prior to the
final maturity date of the Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, or any
successor statute or statutes thereto.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of
the Board of Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles set forth 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 may be approved by a significant segment of the accounting
profession of the United States, which are in effect as of the Issue Date.
"Indebtedness" means with respect to any Person, without duplication, (i)
all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar
instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all
obligations of such Person issued or assumed as the deferred purchase price of
property, all conditional sale obligations and all Obligations under any title
retention agreement (but excluding trade accounts payable and other accrued
liabilities arising in the ordinary course of business that are not overdue by
90 days or more or are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted), (v) all obligations
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (vi) guarantees and other contingent
obligations in respect of Indebtedness referred to in clauses (i) through (v)
above and clause (viii) below, (vii) all obligations of any other Person of
the type referred to in clauses (i) through (vi) which are secured by any lien
on any property or asset of such Person, the amount of such obligation being
deemed to be the lesser of the fair market value of such property or asset or
the amount of the obligation so secured, (viii) all obligations under currency
agreements and interest swap agreements of such Person and (ix) all
Disqualified Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its maximum
fixed repurchase price, but excluding accrued dividends, if any. For purposes
hereof, the "maximum fixed repurchase price" of any Disqualified Capital Stock
which does not have a fixed repurchase price shall be calculated in accordance
with the terms of such Disqualified Capital Stock as if such Disqualified
Capital Stock were purchased on any date on which Indebtedness shall be
required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Disqualified Capital
Stock, such fair market value shall be determined reasonably and in good faith
by the Board of Directors of the issuer of such Disqualified Capital Stock.
"Independent Financial Advisor" means a firm (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in the Company and (ii) which, in the
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judgment of the Board of Directors of the Company, is otherwise independent
and qualified to perform the task for which it is to be engaged.
"Interest Swap Obligations" means the obligations of any Person pursuant to
any arrangement with any other Person, whereby, directly or indirectly, such
Person is entitled to receive from time to time periodic payments calculated
by applying either a floating or a fixed rate of interest on a stated notional
amount in exchange for periodic payments made by such other Person calculated
by applying a fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Investment" means, with respect to any Person, any direct or indirect loan
or other extension of credit (including, without limitation, a guarantee) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition by such Person of any Capital Stock,
bonds, notes, debentures or other securities or evidences of Indebtedness
issued by, any Person. "Investment" shall exclude extensions of trade credit
by the Company and its Restricted Subsidiaries on commercially reasonable
terms in accordance with normal trade practices of the Company or such
Restricted Subsidiary, as the case may be. For the purposes of the "Limitation
on Restricted Payments" covenant, (i) "Investment" shall include and be valued
at the fair market value of the net assets of any Restricted Subsidiary at the
time that such Restricted Subsidiary is designated an Unrestricted Subsidiary
and shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) the amount of any Investment shall be the
original cost of such Investment plus the cost of all additional Investments
by the Company or any of its Restricted Subsidiaries, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs
with respect to such Investment, reduced by the payment of dividends or
distributions in connection with such Investment or any other amounts received
in respect of such Investment; provided that no such payment of dividends or
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of dividends or distributions or receipt of any
such amounts would be included in Consolidated Net Income. If the Company or
any Restricted Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, the Company no
longer owns, directly or indirectly, 100% of the outstanding Common Stock of
such Restricted Subsidiary, the Company shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Restricted Subsidiary not sold or
disposed of.
"Issue Date" means the date of original issuance of the Notes.
"Lien" means any lien, mortgage, deed of trust, pledge, security interest,
charge or encumbrance of any kind (including any conditional sale or other
title retention agreement, any lease in the nature thereof and any agreement
to give any security interest).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in
the form of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of cash or Cash Equivalents
(other than the portion of any such deferred payment constituting interest)
received by the Company or any of its Restricted Subsidiaries from such Asset
Sale net of (a) reasonable out-of-pocket expenses and fees relating to such
Asset Sale (including, without limitation, legal, accounting and investment
banking fees and sales commissions), (b) taxes paid or payable after taking
into account any reduction in consolidated tax liability due to available tax
credits or deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with such Asset Sale
and (d) appropriate amounts to be provided by the Company or any Restricted
Subsidiary, as the case may be, as a reserve, in accordance with GAAP, against
any liabilities associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset Sale.
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"Obligations" means all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, damages and other
liabilities payable under the documentation governing any Indebtedness.
"Paribas Related Party" means Paribas Principal Inc. and any of its
Affiliates.
"Permitted Indebtedness" means, without duplication, each of the following:
(i) Indebtedness under the Notes and the Indenture;
(ii) Indebtedness incurred pursuant to the Credit Agreement in an
aggregate principal amount at any time outstanding not to exceed $85
million (A) less the amount of all mandatory principal payments actually
made by the Company in respect of term loans thereunder (excluding any such
payments to the extent refinanced at the time of payment under a replaced
Credit Agreement) and (B) in the case of a revolving credit facility,
reduced by any required permanent repayments (which are accompanied by a
corresponding permanent commitment reduction) thereunder;
(iii) other Indebtedness of the Company and its Restricted Subsidiaries
outstanding on the Issue Date reduced by the amount of any scheduled
amortization payments or mandatory prepayments when actually paid or
permanent reductions thereon;
(iv) Interest Swap Obligations of the Company covering Indebtedness of
the Company or any of its Restricted Subsidiaries and Interest Swap
Obligations of any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided, however, that such
Interest Swap Obligations are entered into to protect the Company and its
Restricted Subsidiaries from fluctuations in interest rates on Indebtedness
incurred in accordance with the Indenture to the extent the notional
principal amount of such Interest Swap Obligation does not exceed the
principal amount of the Indebtedness to which such Interest Swap Obligation
relates;
(v) Indebtedness under Currency Agreements; provided that in the case of
Currency Agreements which relate to Indebtedness, such Currency Agreements
do not increase the Indebtedness of the Company and its Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Wholly Owned Restricted Subsidiary of the Company
to the Company or to a Wholly Owned Restricted Subsidiary of the Company
for so long as such Indebtedness is held by the Company or a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien held
by a Person other than the Company or a Wholly Owned Restricted Subsidiary
of the Company; provided that if as of any date any Person other than the
Company or a Wholly Owned Restricted Subsidiary of the Company owns or
holds any such Indebtedness or holds a Lien in respect of such
Indebtedness, such date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such Indebtedness;
(vii) Indebtedness of the Company to a Wholly Owned Restricted Subsidiary
of the Company for so long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of the Company, in each case subject to no Lien;
provided that (a) any Indebtedness of the Company to any Wholly Owned
Restricted Subsidiary of the Company is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the
Indenture and the Notes and (b) if as of any date any Person other than a
Wholly Owned Restricted Subsidiary of the Company owns or holds any such
Indebtedness or any Person holds a Lien in respect of such Indebtedness,
such date shall be deemed the incurrence of Indebtedness not constituting
Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring by a bank or other
financial institution of a check, draft or similar instrument inadvertently
(except in the case of daylight overdrafts) drawn against insufficient
funds in the ordinary course of business; provided, however, that such
Indebtedness is extinguished within five business days of incurrence;
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(ix) Indebtedness of the Company or any of its Restricted Subsidiaries
represented by letters of credit for the account of the Company or such
Restricted Subsidiary, as the case may be, in order to provide security for
workers' compensation claims, payment obligations in connection with self-
insurance, performance bonds, surety bonds or similar requirements in the
ordinary course of business;
(x) Capitalized Lease Obligations and Purchase Money Indebtedness of the
Company and its Restricted Subsidiaries incurred in the ordinary course of
business not to exceed $5.0 million at any one time outstanding;
(xi) Indebtedness of foreign Restricted Subsidiaries of the Company not
to exceed $10.0 million at any one time outstanding; provided that at the
time of any incurrence of such Indebtedness by any such foreign Restricted
Subsidiary of the Company, the Company could have incurred such
Indebtedness in accordance with the Consolidated Fixed Charge Coverage
Ratio test of the "Limitation on Incurrence of Additional Indebtedness"
covenant;
(xii) Refinancing Indebtedness;
(xiii) guarantees by the Company and its Wholly Owned Restricted
Subsidiaries of each other's Indebtedness: provided that such Indebtedness
is permitted to be incurred under the Indenture, including, with respect to
guarantees by Wholly Owned Restricted Subsidiaries of the Company, the
"Limitation of Guarantees by Restricted Subsidiaries" covenant; and
(xiv) additional Indebtedness of the Company and its Restricted
Subsidiaries in an aggregate principal amount not to exceed $15.0 million
at any one time outstanding (which amount may, but need not, be incurred in
whole or in part under the Credit Agreement).
"Permitted Investments" means: (i) Investments by the Company or any
Restricted Subsidiary of the Company in any Person that is or will become
immediately after such Investment a Wholly Owned Restricted Subsidiary of the
Company or that will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company, provided that such Wholly Owned
Restricted Subsidiary is not restricted from making dividends or similar
distributions by contract, operation of law or otherwise; (ii) Investments in
the Company by any Restricted Subsidiary of the Company; provided that any
Indebtedness evidencing such Investment is unsecured and subordinated,
pursuant to a written agreement, to the Company's obligations under the Notes
and the Indenture; (iii) Investments in cash and Cash Equivalents; (iv) loans
and advances to employees and officers of the Company and its Restricted
Subsidiaries in the ordinary course of business for bona fide business
purposes not in excess of $1.0 million at any one time outstanding; (v)
Currency Agreements and Interest Swap Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and
otherwise in compliance with the Indenture; (vi) additional Investments not to
exceed $5.0 million at any one time outstanding; (vii) Investments in
securities of trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of
such trade creditors or customers; (viii) Investments made by the Company or
its Restricted Subsidiaries as a result of consideration received in
connection with an Asset Sale made in compliance with the "Limitation on Asset
Sales" covenant; and (ix) guarantees permitted by the "Limitation of
Guarantees by Restricted Subsidiaries" covenant.
"Permitted Liens" means the following types of Liens:
(i) Liens for taxes, assessments or governmental charges or claims either
(a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries
shall have set aside on its books such reserves as may be required pursuant
to GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserve or other appropriate
provision, if any, as shall be required by GAAP shall have been made in
respect thereof;
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(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal proceedings which
may have been duly initiated for the review of such judgment shall not have
been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary conduct of the business of the Company
or any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any Capitalized Lease
Obligation; provided that such Liens do not extend to any property or
assets which is not leased property subject to such Capitalized Lease
Obligation;
(vii) Liens securing Capitalized Lease Obligations and Purchase Money
Indebtedness permitted under clause (x) of the definition of "Permitted
Indebtedness"; provided, however, that in the case of Purchase Money
Indebtedness (A) the Indebtedness shall not exceed the cost of such
property or assets being acquired or constructed and shall not be secured
by any property or assets of the Company or any Restricted Subsidiary of
the Company other than the property and assets being acquired or
constructed and (B) the Lien securing such Indebtedness shall be created
within 90 days of such acquisition or construction;
(viii) Liens upon specific items of inventory or other goods and proceeds
of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to
such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual, or warranty requirements of the Company
or any of its Restricted Subsidiaries, including rights of offset and set-
off;
(xi) Liens securing Interest Swap Obligations which Interest Swap
Obligations relate to Indebtedness that is otherwise permitted under the
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements; and
(xiii) Liens securing Acquired Indebtedness incurred in accordance with
the "Limitation on Incurrence of Additional Indebtedness" covenant;
provided that (A) such Liens secured such Acquired Indebtedness at the time
of and prior to the incurrence of such Acquired Indebtedness by the Company
or a Restricted Subsidiary of the Company and were not granted in
connection with, or in anticipation of, the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the
Company or of any of its Restricted Subsidiaries other than the property or
assets that secured the Acquired Indebtedness prior to the time such
Indebtedness became Acquired Indebtedness of the Company or a Restricted
Subsidiary of the Company and are no more favorable to the lienholders than
those securing the Acquired Indebtedness prior to the incurrence of such
Acquired Indebtedness by the Company or a Restricted Subsidiary of the
Company.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
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"Preferred Stock" of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
"Principals" means Quad-C, Inc. and Paribas Principal Inc.
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property.
"Quad-C Related Party" means Quad-C, Inc. and any of its Affiliates.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Capital Stock.
"Refinance" means, in respect of any security or Indebtedness, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinancing" shall have
correlative meanings.
"Refinancing Indebtedness" means any Refinancing by the Company or any
Restricted Subsidiary of the Company of Indebtedness incurred in accordance
with the "Limitation on Incurrence of Additional Indebtedness" covenant (other
than pursuant to clauses (ii), (iv), (v), (vi), (vii), (viii), (ix), (x),
(xi), (xiii) or (xiv) of the definition of Permitted Indebtedness), in each
case that does not (1) result in an increase in the aggregate principal amount
of Indebtedness of such Person as of the date of such proposed Refinancing
(plus the amount of any premium required to be paid under the terms of the
instrument governing such Indebtedness and plus the amount of reasonable
expenses incurred by the Company in connection with such Refinancing) or (2)
create Indebtedness with (A) a Weighted Average Life to Maturity that is less
than the Weighted Average Life to Maturity of the Indebtedness being
Refinanced or (B) a final maturity earlier than the final maturity of the
Indebtedness being Refinanced; provided that (x) if such Indebtedness being
Refinanced is Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and (y) if such Indebtedness being
Refinanced is subordinate or junior to the Notes, then such Refinancing
Indebtedness shall be subordinate to the Notes at least to the same extent and
in the same manner as the Indebtedness being Refinanced.
"Related Party" means, with respect to Quad-C, Inc., any Quad-C Related
Party, and with respect to Paribas Principal Inc., any Paribas Related Party.
"Representative" means the indenture trustee or other trustee, agent or
representative in respect of any Designated Senior Debt; provided that if, and
for so long as, any Designated Senior Debt lacks such a representative, then
the Representative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal amount of such
Designated Senior Debt in respect of any Designated Senior Debt.
"Restricted Subsidiary" of any Person means any Subsidiary of such Person
which at the time of determination is not an Unrestricted Subsidiary.
"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 the Company or a Restricted Subsidiary of any property, whether
owned by the Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the Company or
such Restricted Subsidiary 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.
"Senior Debt" means the principal of, premium, if any, and interest
(including any interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case
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of any particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Debt" shall also include the
principal of, premium, if any, interest (including any interest accruing
subsequent to the filing of a petition of bankruptcy at the rate provided for
in the documentation with respect thereto, whether or not such interest is an
allowed claim under applicable law) on, and all other amounts owing in respect
of, (x) all monetary obligations (including guarantees thereof) of every
nature of the Company under the Credit Agreement, including, without
limitation, obligations to pay principal and interest, reimbursement
obligations under letters of credit, fees, expenses and indemnities, (y) all
Interest Swap Obligations (including guarantees thereof) and (z) all
obligations (including guarantees thereof) under Currency Agreements, in each
case whether outstanding on the Issue Date or thereafter incurred.
Notwithstanding the foregoing, "Senior Debt" shall not include (i) any
Indebtedness of the Company to a Subsidiary of the Company, (ii) Indebtedness
to, or guaranteed on behalf of, any shareholder, director, officer or employee
of the Company or any Subsidiary of the Company (including, without
limitation, amounts owed for compensation), (iii) Indebtedness to trade
creditors and other amounts incurred in connection with obtaining goods,
materials or services, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other taxes owed or
owing by the Company, (vi) that portion of any Indebtedness incurred in
violation of the Indenture provisions set forth under "Limitation on
Incurrence of Additional Indebtedness" (but, as to any such obligation, no
such violation shall be deemed to exist for purposes of this clause (vi) if
the holder(s) of such obligation or their representative and the Trustee shall
have received an officers' certificate of the Company to the effect that the
incurrence of such Indebtedness does not (or, in the case of revolving credit
indebtedness, that the incurrence of the entire committed amount thereof at
the date on which the initial borrowing thereunder is made would not) violate
such provisions of the Indenture) and (vii) any Indebtedness which is, by its
express terms, subordinated in right of payment to any other Indebtedness of
the Company.
"Significant Subsidiary" shall have the meaning set forth in Rule 1.02(w) of
Regulation S-X under the Securities Act.
"Subsidiary," with respect to any Person, means (i) any corporation of which
the outstanding Capital Stock having at least a majority of the votes entitled
to be cast in the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such Person or (ii) any other
Person of which at least a majority of the voting interest under ordinary
circumstances is at the time, directly or indirectly, owned by such Person.
"Tax Allocation Agreement" means the tax allocation agreement between the
Company and Holdings as in effect on the Issue Date.
"Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such
Person that at the time of determination shall be or continue to be designated
an Unrestricted Subsidiary by the Board of Directors of such Person in the
manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors of the Company may designate any Subsidiary (including
any newly acquired or newly formed Subsidiary) to be an Unrestricted
Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds
any Lien on any property of, the Company or any other Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided that (x) the Company certifies to the Trustee that such designation
complies with the "Limitation on Restricted Payments" covenant and (y) each
Subsidiary to be so designated and each of its Subsidiaries has not at the
time of designation, and does not thereafter, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable with respect to
any Indebtedness pursuant to which the lender has recourse to any of the
assets of the Company or any of its Restricted Subsidiaries. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if (x) immediately after giving effect to such
designation, the Company is able to incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) in compliance with the
"Limitation on Incurrence of Additional Indebtedness" covenant and (y)
immediately before and immediately after giving effect to such designation, no
Default or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors of the Company shall be evidenced to the
Trustee by promptly filing with the Trustee a copy
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of the Board Resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the foregoing
provisions.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each then remaining
installment, sinking fund, serial maturity or other required payment of
principal, including payment at final maturity, in respect thereof, by (ii)
the number of years (calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person means any Restricted
Subsidiary of such Person of which all the outstanding voting securities
(other than in the case of a foreign Restricted Subsidiary, directors'
qualifying shares or an immaterial amount of shares required to be owned by
other Persons pursuant to applicable law) are owned by such Person or any
Wholly Owned Restricted Subsidiary of such Person.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the Exchange Notes initially will be issued in
one or more global certificates in definitive, fully registered form (each a
"Global Note"). Upon issuance, each Global Note will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York ("DTC") and
registered in the name of a nominee of DTC.
If a holder tendering Initial Notes so requests, such holder's Exchange
Notes will be issued as described below under "Certificated Securities" in
registered form without coupons (each a "Certificated Security").
Global Notes. The Company expects that pursuant to procedures established by
DTC (i) upon the issuance of a Global Note, DTC or its custodian will credit,
on its internal system, the principal amount of Exchange Notes of the
individual beneficial interests represented by such Global Note to the
respective accounts of persons who have accounts with such depositary and (ii)
ownership of beneficial interests in the Global Note will be shown on, and the
transfer of such ownership will be effected only through, records maintained
by DTC or its nominee (with respect to interests of participants) and the
records of participants (with respect to interests of persons other than
participants). Ownership of beneficial interests in the Global Note will be
limited to persons who have accounts with DTC ("participants") or persons who
hold interests through participants.
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Note for
all purposes under the Indenture. No beneficial owner of an interest in the
Global Note will be able to transfer that interest except in accordance with
DTC's procedures, in addition to those provided for under the Indenture with
respect to the Notes.
Payments of the principal of, premium (if any), and interest (including
Additional Interest) on any Exchange Note represented by a Global Note will be
made to DTC or its nominee, as the case may be, as the registered owner
thereof. None of the Company, the Trustee or any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the Global Note
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest (including Additional Interest) on
any Exchange Note represented by a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global Note as shown on the records
of DTC or its nominee. The Company also expects that payments by participants
to owners of beneficial interests in the Global Note held through such
participants will be governed by standing instructions and customary practice,
as is now the case with securities held for the
86
<PAGE>
accounts of customers registered in the names of nominees for such customers.
Such payments will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same-day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Notes to persons in
states which require physical delivery of the Notes, or to pledge such
securities, such holder must transfer its interest in the Global Note, in
accordance with the normal procedures of DTC and with the procedures set forth
in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes (including the presentation of Notes for exchange
as described below) only at the direction of one or more participants to whose
account the DTC interests in the Global Note are credited and only in respect
of such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). DTC was created to hold securities for its participants
and facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly
("indirect participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Note among participants of DTC, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
Certificated Securities. If DTC is at any time unwilling or unable to
continue as a depositary for the Global Note and a successor depositary is not
appointed by the Company within 90 days, Certificated Securities will be
issued in exchange for the Global Note.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any participant or indirect participant in identifying the beneficial owners
of the related Exchange Notes and each such person may conclusively rely on,
and shall be protected in relying on, instructions from DTC for all purposes
(including with respect to registration and delivery, and the respective
principal amounts, of the Exchange Notes to be issued).
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<PAGE>
INITIAL NOTES REGISTRATION RIGHTS
Pursuant to the Registration Rights Agreement, the Company has agreed that
it will (i) at its cost, for the benefit of the Holders of the Initial Notes,
within 60 days after the Issue Date, file a registration statement on an
appropriate registration form (the "Exchange Offer Registration Statement")
with respect to a registered offer (the "Exchange Offer") to exchange the
Initial Notes for the Exchange Notes and (ii) use its best efforts to cause
the Exchange Offer Registration Statement to be declared effective under the
Securities Act within 120 days after the Issue Date. The Company will keep the
Exchange Offer open for not less than 20 business days (or longer if required
by applicable law) after the date notice of the Exchange Offer is mailed to
the Holders of the Initial Notes.
Under existing interpretations of the Commission contained in several no-
action letters to third parties, the Exchange Notes will be freely
transferable by holders thereof (other than affiliates of the Company) after
the Exchange Offer without further registration under the Securities Act;
provided, that each Holder that wishes to exchange its Initial Notes for
Exchange Notes will be required to represent (i) that any Exchange Notes to be
received by it will be acquired in the ordinary course of its business, (ii)
that at the time of the commencement of the Exchange Offer it has no
arrangement or understanding with any person to participate in the
distribution (within the meaning of Securities Act) of the Exchange Notes in
violation of the Securities Act, (iii) that it is not an "affiliate" (as
defined in Rule 405 promulgated under the Securities Act) of the Company, (iv)
if such Holder is not a broker-dealer, that it is not engaged in, and does not
intend to engage in, the distribution of Exchange Notes and (v) if such Holder
is a broker-dealer (a "Participating Broker-Dealer") that will receive
Exchange Notes for its own account in exchange for Notes that were acquired as
a result of market-making or other trading activities, that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The
Commission has taken the position that Participating Broker-Dealers may
fulfill their prospectus delivery requirements with respect to the Exchange
Notes (other than a resale of an unsold allotment from the original sale of
the Notes) with the prospectus contained in the Exchange Offer Registration
Statement. The Company will agree to make available, for a period of 180 days
after consummation of the Exchange Offer, a prospectus meeting the
requirements of the Securities Act for use by Participating Broker-Dealers and
other persons, if any, with similar prospectus delivery requirements for use
in connection with any resale of Exchange Notes.
If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the Commission, the Company is not permitted
to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within
180 days of the Issue Date, (iii) in certain circumstances, certain holders of
unregistered Exchange Notes so request, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange
Notes on the date of the exchange that may be sold without restriction under
state and federal securities laws (other than due solely to the status of such
Holder as an affiliate of the Company within the meaning of the Securities
Act), then in each case, the Company will (x) promptly deliver to the Holders
and the Trustee written notice thereof and (y) at its sole expense, (a) as
promptly as practicable, file a shelf registration statement covering resales
of the Notes (the "Shelf Registration Statement"), (b) use its best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act and (c) use its best efforts to keep effective the Shelf
Registration Statement until the earlier of three years after the Issue Date
or such time as all of the applicable Notes have been sold thereunder. The
Company will, in the event that a Shelf Registration Statement is filed,
provide to each Holder copies of the prospectus that is a part of the Shelf
Registration Statement, notify each such Holder when the Shelf Registration
Statement for the Notes has become effective and take certain other actions as
are required to permit unrestricted resales of the Notes. A Holder that sells
Notes pursuant to the Shelf Registration Statement will be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement that are
applicable to such a Holder (including certain indemnification rights and
obligations).
88
<PAGE>
If (a) the Company 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 are not declared effective by
the Commission on or prior to the date specified for such effectiveness (the
"Effectiveness Target Date"), (c) the Company fails to consummate the Exchange
Offer within 20 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, subject to certain exceptions, ceases to be effective or
usable in connection with the Exchange Offer or resales of Transfer Restricted
Notes, as the case may be, 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 interest rate on Transfer
Restricted Notes will increase ("Additional Interest"), with respect to the
first 90-day period immediately following the occurrence of such Registration
Default by 0.5% per annum and will increase by an additional 0.5% per annum
with respect to each subsequent 90-day period until such Registration Default
has been cured, up to a maximum amount of 1.0% per annum. Following the cure
of all Registration Defaults, the accrual of Additional Interest will cease
and the interest rate will revert to the original rate.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part.
89
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material anticipated federal income tax
consequences of the issuance of Exchange Notes and the Exchange Offer is based
upon the provisions of the Internal Revenue Code of 1986, as amended, the
final, temporary and proposed regulations promulgated thereunder, and
administrative rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. The following summary is not binding on the Internal Revenue
Service ("IRS") and there can be no assurance that the IRS will take a similar
view with respect to the tax consequences described below. No ruling has been
or will be requested by the Company from the IRS on any tax matters relating
to the Exchange Notes or the Exchange Offer. This discussion is for general
information only and does not purport to address all of the possible federal
income tax consequences or any state, local or foreign tax consequences of the
acquisition, ownership and disposition of the Initial Notes, the Exchange
Notes or the Exchange Offer. It is limited to investors who will hold the
Initial Notes and the Exchange Notes as capital assets and does not address
the federal income tax consequences that may be relevant to particular
investors in light of their unique circumstances or to certain types of
investors (such as dealers in securities, insurance companies, financial
institutions, foreign corporations, partnerships, trusts, nonresident
individuals, and tax-exempt entities) who may be subject to special treatment
under federal income tax laws. PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR
DISPOSITION OF EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING
THE U.S. FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR
SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR INTERNATIONAL TAXING JURISDICTION.
INDEBTEDNESS
The Initial Notes and the Exchange Notes should be treated as indebtedness
of the Company. In the unlikely event the Initial Notes or the Exchange Notes
were treated as equity, the amount treated as a distribution on any such
Initial Note or Exchange Note would first be taxable to the holder as dividend
income to the extent of the Company's current and accumulated earnings and
profits, and would next be treated as a return of capital to the extent of the
holder's tax basis in the Initial Notes or Exchange Notes, with any remaining
amount treated as a gain from the sale of an Initial Note or an Exchange Note.
In addition, in the event of equity treatment, amounts received in retirement
of an Initial Note or an Exchange Note might in certain circumstances be
treated as a dividend, and the Company could not deduct amounts paid as
interest on such Initial Notes or Exchange Notes. The remainder of this
discussion assumes that the Initial Notes and the Exchange Notes will
constitute indebtedness.
EXCHANGE OFFER
The exchange of the Initial Notes for Exchange Notes pursuant to the
Exchange Offer should not be treated as an "exchange" because the Exchange
Notes should not be considered to differ materially in kind or extent from the
Initial Notes. Rather, the Exchange Notes received by a holder of the Initial
Notes should be treated as a continuation of the Initial Notes in the hands of
such holder. As a result, there should be no federal income tax consequences
to holders exchanging the Initial Notes for the Exchange Notes pursuant to the
Exchange Offer, and the holding period of Exchange Notes in the hands of a
holder should include the holding period of the Initial Notes exchanged for
such Exchange Notes.
INTEREST
A holder of an Initial Note or an Exchange Note will be required to report
stated interest on the Initial Note and the Exchange Note as interest income
in accordance with the holder's method of accounting for tax purposes. Because
the Initial Notes were issued at par there is no original issue discount
pursuant to the de minimis exception to the "original issue discount" rules.
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<PAGE>
TAX BASIS IN INITIAL NOTES AND EXCHANGE NOTES
A holder's tax basis in an Initial Note will generally be the holder's
purchase price for the Initial Note. If a holder of an Initial Note exchanges
the Initial Note for an Exchange Note pursuant to the Exchange Offer, the tax
basis of the Exchange Note immediately after such exchange should equal the
holder's tax basis in the Initial Note immediately prior to the exchange.
DISPOSITION OF INITIAL NOTES OR EXCHANGE NOTES
The sale, exchange, redemption or other disposition of an Initial Note or an
Exchange Note, except in the case of an exchange pursuant to the Exchange
Offer (see the above discussion), generally will be a taxable event. A holder
generally will recognize gain or loss equal to the difference between (i) the
amount of cash plus the fair market value of any property received upon such
sale, exchange, redemption or other taxable disposition of the Initial Note or
the Exchange Note (except to the extent attributable to accrued interest) and
(ii) the holder's adjusted tax basis in such debt instrument. Such gain or
loss will be capital gain or loss, and will be long term if the Initial Notes
or the Exchange Notes have been held for more than one year at the time of the
sale or other disposition.
PURCHASERS OF INITIAL NOTES AT OTHER THAN ORIGINAL ISSUANCE PRICE
The foregoing does not discuss special rules which may affect the treatment
of purchasers that acquired Initial Notes other than at par, including those
provisions of the Internal Revenue Code relating to the treatment of "market
discount," and "amortizable bond premium." Any such purchaser should consult
its tax advisor as to the consequences to it of the acquisition, ownership and
disposition of Initial Notes.
BACKUP WITHHOLDING
Unless a holder provides its correct taxpayer identification number
(employer identification number or social security number) to the Company and
certifies that such number is correct, generally under the federal income tax
backup withholding rules, 31% of (1) the interest paid on the Initial Notes
and the Exchange Notes, and (2) proceeds of sale of the Initial Notes and the
Exchange Notes, must be withheld and remitted to the United States Treasury.
Therefore, each holder should complete and sign the Substitute Form W-9
included with the Letter of Transmittal so as to provide the information and
certification necessary to avoid backup withholding. However, certain holders
(including, among others, certain foreign individuals) are not subject to
these backup withholding and reporting requirements. For a foreign individual
holder to qualify as an exempt foreign recipient, that holder must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt foreign status. Such statements can be obtained from the Company. For
further information concerning backup withholding and instructions for
completing the Substitute Form W-9 (including how to obtain a taxpayer
identification number if you do not have one and how to complete the
Substitute Form W-9 if the Initial Notes are held in more than one name),
contact the Company's Secretary, 311 Smith Industrial Boulevard, Dalton,
Georgia 30722 or telephone number (706) 259-9711.
Backup withholding is not an additional federal income tax. Rather, the
federal income tax liability of a person subject to backup withholding will be
reduced by the amount of tax withheld. If backup withholding results in an
overpayment of taxes, a refund may be obtained from the IRS.
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<PAGE>
PLAN OF DISTRIBUTION
Based on interpretations by the staff of the Commission (the "Staff") set
forth in no-action letters issued to third parties, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Initial Notes may be offered for resale, resold and otherwise transferred by
holders thereof (other than any holder which is (i) an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act, (ii) a
broker-dealer who acquired Notes directly from the Company or (iii) broker-
dealers who acquired Notes as a result of market-making or other trading
activities) 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
are not engaged in, and do not intend to engage in, and have no arrangement or
understanding with any person to participate in, a distribution of such
Exchange Notes; provided that broker-dealers ("Participating Broker-Dealers")
receiving Exchange Notes in the Exchange Offer will be subject to a prospectus
delivery requirement with respect to resales of such Exchange Notes. To date,
the Staff has taken the position that Participating Broker-Dealers may fulfill
their prospectus delivery requirements with respect to transactions involving
an exchange of securities such as the exchange pursuant to the Exchange Offer
(other than a resale of an unsold allotment from the sale of the Initial Notes
to the Initial Purchaser) with the Prospectus, contained in the Exchange Offer
Registration Statement. Pursuant to the Registration Rights Agreement, the
Company has agreed to permit Participating Broker-Dealers and other persons,
if any, subject to similar prospectus delivery requirements to use this
Prospectus in connection with the resale of such Exchange Notes. The Company
has agreed that, for a period of 180 days after the Expiration Date, it will
make this Prospectus, and any amendment or supplement to this Prospectus,
available to any broker-dealer that requests such documents in the Letter of
Transmittal.
Each holder of the Initial Notes who wishes to exchange its Initial Notes
for Exchange Notes in the Exchange Offer will be required to make certain
representations to the Company as set forth in "The Exchange Offer--Purpose
and Effect of the Exchange Offer." In addition, each holder who is a broker-
dealer and who receives Exchange Notes for its own account in exchange for
Initial Notes that were acquired by it as a result of market-making activities
or other trading activities, will be required to acknowledge that it will
deliver a prospectus in connection with any resale by it of such Exchange
Notes.
The Company 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 prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from
any such broker-dealer 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 a prospectus, 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.
The Company has agreed to pay all expenses incidental to the Exchange Offer
other than commissions and concessions of any brokers or dealers and will
indemnify holders of the Initial Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act, as set
forth in the Registration Rights Agreement.
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<PAGE>
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by McGuire, Woods, Battle & Boothe, L.L.P., Richmond, Virginia. Members of
McGuire, Woods, Battle & Boothe, L.L.P. beneficially own approximately 13,812
Common Shares and 1,243 Preferred Shares of Holdings.
EXPERTS
The consolidated financial statements of the Company as of January 27, 1996
and January 25, 1997 and for each of the three years in the period ended
January 25, 1997 included in this Prospectus and elsewhere in the Registration
Statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
93
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
As of January 27, 1996 and January 25, 1997, and for each of the three years
in the period ended January 25, 1997:
<TABLE>
<S> <C>
Report of Independent Public Accountants................................. F-2
Consolidated Statements of Operations.................................... F-3
Consolidated Balance Sheets.............................................. F-4
Consolidated Statements of Cash Flows.................................... F-5
Consolidated Statements of Stockholder's Equity.......................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Collins & Aikman Floor Coverings, Inc.:
We have audited the accompanying consolidated balance sheets of COLLINS &
AIKMAN FLOOR COVERINGS, INC. (a Delaware corporation) AND SUBSIDIARY as of
January 27, 1996 and January 25, 1997 and the related consolidated statements
of operations, stockholder's equity, and cash flows for each of the three
years in the period ended January 25, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Collins & Aikman Floor
Coverings, Inc. and subsidiary as of January 27, 1996 and January 25, 1997 and
the results of their operations and their cash flows for each of the three
years in the period ended January 25, 1997 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Atlanta, Georgia
March 14, 1997
F-2
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JANUARY 28, 1995,
JANUARY 27, 1996, AND JANUARY 25, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net sales................................. $108,039 $122,169 $136,124
-------- -------- --------
Cost of goods sold........................ 62,527 73,615 81,715
Selling, general and administrative
expenses................................. 23,733 27,364 28,971
Corporate general and administrative
allocated costs.......................... 1,069 1,591 1,531
-------- -------- --------
87,329 102,570 112,217
-------- -------- --------
Operating income.......................... 20,710 19,599 23,907
-------- -------- --------
Loss on sale of accounts receivable....... 1,261 3,269 3,489
-------- -------- --------
Income before income taxes................ 19,449 16,330 20,418
Income tax expense........................ 7,650 6,315 7,905
-------- -------- --------
Net income................................ $ 11,799 $ 10,015 $ 12,513
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-3
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JANUARY 27, 1996 AND JANUARY 25, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 27, JANUARY 25,
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
Current Assets:
Cash................................................. $ 133 $ 144
Accounts receivable, net of allowance of $88 and $15
in fiscal 1995 and fiscal 1996, respectively........ 2,247 1,577
Inventories.......................................... 12,265 16,172
Deferred tax assets.................................. 1,864 1,433
Prepaid expenses and other........................... 199 488
------- -------
Total current assets............................... 16,708 19,814
Property, plant, and equipment, net.................... 14,131 19,521
Deferred tax assets.................................... 379 259
Other assets........................................... 13 20
------- -------
$31,231 $39,614
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable..................................... $ 6,956 $ 8,659
Accrued expenses..................................... 5,947 4,670
------- -------
Total current liabilities.......................... 12,903 13,329
------- -------
Other liabilities, including postretirement benefit
obligation............................................ 4,673 4,665
------- -------
Commitments and contingencies
Stockholder's Equity:
Common stock ($.01 par value per share, 1,000 shares
authorized, issued and outstanding in fiscal 1995
and fiscal 1996).................................... -- --
Paid-in capital...................................... 7,821 7,821
Retained earnings.................................... 10,015 22,528
Investment and advances to Collins & Aikman Products
Company............................................. (4,066) (8,574)
Foreign currency translation adjustment.............. 182 222
Pension equity adjustment............................ (297) (377)
------- -------
13,655 21,620
------- -------
$31,231 $39,614
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 28, 1995,
JANUARY 27, 1996, AND JANUARY 25, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income................................ $ 11,799 $10,015 $12,513
-------- ------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and leasehold
amortization........................... 2,237 2,154 2,201
Decrease (increase) in accounts
receivable............................. 11,770 (414) 670
Decrease (increase) in inventories...... 71 (1,857) (3,907)
(Decrease) increase in accounts
payable................................ (23) 2,196 1,703
Other, net.............................. (942) (350) (805)
-------- ------- -------
Total adjustments....................... 13,113 1,729 (138)
-------- ------- -------
Net cash provided by operating
activities........................... 24,912 11,744 12,375
-------- ------- -------
INVESTING ACTIVITIES:
Additions to property, plant and
equipment................................ (1,823) (4,290) (7,897)
Proceeds from sale leaseback arrangement.. 866 -- --
Other, net................................ (15) 20 41
-------- ------- -------
Net cash used in investing
activities........................... (972) (4,270) (7,856)
-------- ------- -------
FINANCING ACTIVITIES:
Net transactions with Collins & Aikman
Products Company......................... (23,959) (7,347) (4,508)
-------- ------- -------
NET CHANGE IN CASH........................ (19) 127 11
CASH, beginning of year................... 25 6 133
-------- ------- -------
CASH, end of year......................... $ 6 $ 133 $ 144
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED JANUARY 28, 1995,
JANUARY 27, 1996, AND JANUARY 25, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
INVESTMENTS AND FOREIGN
ADVANCES FROM (TO) CURRENCY PENSION
COMMON PAID-IN RETAINED COLLINS & AIKMAN TRANSLATION EQUITY
STOCK CAPITAL EARNINGS PRODUCTS COMPANY ADJUSTMENTS ADJUSTMENT TOTAL
------ ------- -------- ------------------ ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 29,
1994................... $ -- $ -- $ -- $ 23,262 $ 9 $(259) $ 23,012
Net income.............. -- -- -- 11,799 -- -- 11,799
Foreign currency
translation
adjustment............. -- -- -- -- 1 -- 1
Pension equity
adjustment............. -- -- -- -- -- (52) (52)
Net transactions with
Collins & Aikman
Products Company....... -- -- -- (23,959) -- -- (23,959)
------ ------ ------- -------- ---- ----- --------
BALANCE, JANUARY 28,
1995................... -- -- -- 11,102 10 (311) 10,801
Reclassification of
capital related to the
incorporation of the
Company................ -- 7,821 -- (7,821) -- -- --
Net income.............. -- -- 10,015 -- -- -- 10,015
Foreign currency
translation
adjustment............. -- -- -- -- 172 -- 172
Pension equity
adjustment............. -- -- -- -- -- 14 14
Net transactions with
Collins & Aikman
Products Company....... -- -- -- (7,347) -- -- (7,347)
------ ------ ------- -------- ---- ----- --------
BALANCE, JANUARY 27,
1996................... -- 7,821 10,015 (4,066) 182 (297) 13,655
Net income.............. -- -- 12,513 -- -- -- 12,513
Foreign currency
translation
adjustment............. -- -- -- -- 40 -- 40
Pension equity
adjustment............. -- -- -- -- -- (80) (80)
Net transactions with
Collins & Aikman
Products Company....... -- -- -- (4,508) -- -- (4,508)
------ ------ ------- -------- ---- ----- --------
BALANCE, JANUARY 25,
1997................... $ -- $7,821 $22,528 $ (8,574) $222 $(377) $ 21,620
====== ====== ======= ======== ==== ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Collins & Aikman Floor Coverings, Inc. (a Delaware corporation incorporated
on January 29, 1995), together with its subsidiary Collins & Aikman United
Kingdom Limited (collectively referred to as the "Company"), is a leading
manufacturer of floorcoverings for the specified commercial sectors of the
floorcoverings market. Prior to its incorporation on January 29, 1995, the
business of the Company was conducted principally as a division of Collins &
Aikman Products Company ("C&A Products"), a wholly-owned subsidiary of Collins
& Aikman Corporation ("C&A Corporation"). At January 25, 1997, the Company was
an indirect subsidiary of C&A Products.
Effective December 9, 1996, C&A Products entered into a definitive agreement
to sell the Company to an entity sponsored by Quad-C., Inc. ("Quad-C"), a
Virginia merchant banking firm, and Paribas Principal Partners ("Paribas"),
the U.S. private equity group of Groupe Paribas. The purchase price of $197
million, including $27 million in consideration for a trade name license
agreement, is subject to adjustment based on the Company's level of net
working capital on the closing date of the sale (see Note 13).
2. BASIS OF PRESENTATION
At January 27, 1996, Collins & Aikman Floor Coverings, Inc. and Collins &
Aikman United Kingdom Limited were separate indirect subsidiaries of C&A
Products. In addition, Collins & Aikman United Kingdom Limited owned 100% of
the outstanding shares of Imperial Wallcoverings Limited, a company operating
as part of another C&A Corporation business segment. In preparation for the
sale of the Company, on August 3, 1996, C&A Products contributed its ownership
in Collins & Aikman United Kingdom Limited to Collins & Aikman Floor
Coverings, Inc., making Collins & Aikman United Kingdom Limited a wholly owned
subsidiary. In addition, effective December 5, 1996, another C&A Products
subsidiary purchased Imperial Wallcoverings Limited from Collins & Aikman
United Kingdom Limited at its net book value. For financial reporting
purposes, these transfers between related entities have been treated in a
manner similar to a pooling of interests. Accordingly, the results of Collins
& Aikman Floor Coverings, Inc. and its subsidiary have been consolidated and
treated as a single reporting entity for all periods presented, and the
results of Imperial Wallcoverings Limited have been excluded for all periods
presented.
As discussed in Note 1, prior to January 29, 1995, the business of the
Company was conducted principally as a division of C&A Products. At the date
of incorporation, $10 of the $11.1 million in investments and advances from
C&A Products was allocated to common stock and $7.8 million was allocated to
other paid-in capital. Subsequent to the incorporation of the Company,
transfers of operating funds between C&A Products and the Company have
continued on a noninterest-bearing basis, with the net amounts of these
transfers reflected in investments and advances from (to) C&A Products in the
accompanying consolidated financial statements. The net balance in investments
and advances to C&A Products at January 25, 1997 of $8.6 million is classified
as a component of stockholder's equity in the accompanying consolidated
balance sheet due to the intent to forgive any net balance in investments and
advances to or from C&A Products upon the sale of the Company by C&A Products.
As indicated above, the accompanying consolidated financial statements
present the financial position, results of operations, and cash flows of the
Company as if it were a separate entity for all periods presented. In
accordance with Staff Accounting Bulletin No. 54 of the Securities and
Exchange Commission, C&A Products' investment in the Company is reflected in
the consolidated financial statements of the Company. The accompanying
consolidated financial statements reflect the allocation of the purchase price
in excess of the net assets acquired on the same basis as in consolidation
with C&A Corporation. In addition, the debt of C&A Products has not been
allocated to the Company, and accordingly, interest expense incurred by C&A
Products is not reflected in the accompanying consolidated financial
statements. Interest has not been computed on the intercompany balances.
F-7
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
C&A Products performs certain services and incurs certain costs for the
Company. Services provided include tax, treasury, risk management, employee
benefits, legal, data processing, application of cash receipts, and other
general corporate services. The costs of these services provided by C&A
Products have been allocated to the Company based on a combination of
estimated use and the relative sales of the Company's business to the total
consolidated operations of C&A Products. Corporate costs of C&A Products
totaling $1.1 million, $1.6 million and $1.6 million have been allocated to
the Company for fiscal 1994, fiscal 1995, and fiscal 1996, respectively. In
the opinion of management, the method of allocating these costs is reasonable.
However, the costs of services charged to the Company are not necessarily
indicative of the costs that would have been incurred if the Company had
performed these functions. Subsequent to the sale, the Company will perform
these functions using its own resources or purchased services, including
services purchased from C&A Products during a transition period.
C&A Products administers its self-insurance programs on a corporatewide
basis and charges its individual participating subsidiaries and divisions
based on estimated claims and loss experience. Costs charged by C&A Products
to the Company for product, automotive and general liability, workers'
compensation, employee group health claims, and insurance amounted to
approximately $1.8 million, $1.7 million, and $1.7 million in fiscal 1994,
fiscal 1995, and fiscal 1996, respectively. The accompanying consolidated
balance sheets include accruals for product, automotive, general liability,
workers' compensation, and employee group health claims.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements include
the accounts of Collins & Aikman Floor Coverings, Inc. and Collins & Aikman
United Kingdom Limited. All significant intercompany items have been
eliminated in consolidation.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Fiscal Year--The fiscal year of the Company ends on the last Saturday of
January. Fiscal 1994, fiscal 1995, and fiscal 1996 were 52-week years which
ended on January 28, 1995, January 27, 1996, and January 25, 1997,
respectively.
Foreign Currency--Foreign currency activity is reported in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency
Translation." SFAS No. 52 generally provides that the assets and liabilities
of foreign operations be translated at the current exchange rates as of the
end of the accounting period and that revenues and expenses be translated
using average exchange rates. The resulting translation adjustments arising
from foreign currency translations are accumulated as a separate component of
stockholder's equity. Translation adjustments resulted in increases in equity
of approximately $1,000 in fiscal 1994, $172,000 in fiscal 1995, and $40,000
in fiscal 1996.
Gains and losses resulting from foreign currency transactions are recognized
in income. Recorded balances that are denominated in a currency other than the
Company's functional currency are adjusted to reflect the exchange rate at the
balance sheet date.
Revenue Recognition--Revenue is recognized when title is transferred.
Financial Instruments--Financial instruments which potentially subject the
Company to concentrations of credit risk consist primarily of trade accounts
receivable. Because of the short maturity of these instruments, carrying value
approximates fair value.
F-8
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reliance on Principal Supplier--One supplier currently supplies all of the
Company's requirements for nylon yarn, the principal raw material used in the
Company's floorcovering products. While the Company believes that there are
adequate alternative sources of supply from which it could fulfill its nylon
yarn requirements, the unanticipated termination of the current supply
arrangement or a prolonged interruption in shipments could have a material
adverse effect on the Company.
Cash and Cash Equivalents--Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three
months or less.
Inventories--Inventories are valued at the lower of cost or market, but not
in excess of net realizable value. Cost is determined primarily on the first-
in, first-out basis.
Property, Plant, and Equipment--Property, plant, and equipment are stated at
cost. Provisions for depreciation are primarily computed on a straight-line
basis over the estimated useful lives of the assets, presently ranging from 3
to 40 years. Leasehold improvements are amortized over the lesser of the lease
term or the estimated useful lives of the improvements.
Long-Lived Assets--In the fourth quarter of fiscal 1995, the Company adopted
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of. The
adoption of SFAS No. 121 did not have a material impact on the Company's
consolidated results or operations.
Advertising Costs--The Company expenses all advertising costs as they are
incurred.
Income Taxes--Although the Company is included in the consolidated federal
income tax return of C&A Corporation, federal, state, and foreign income taxes
are provided on a separate return basis.
4. INVENTORIES
Net inventory balances are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 27, JANUARY 25,
1996 1997
----------- -----------
<S> <C> <C>
Raw materials........................................ $ 5,298 $ 7,376
Work in process...................................... 2,804 2,843
Finished goods....................................... 4,163 5,953
------- -------
$12,265 $16,172
======= =======
</TABLE>
5. PROPERTY, PLANT, AND EQUIPMENT, NET
Property, plant, and equipment, net, are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 27, JANUARY 25,
1996 1997
----------- -----------
<S> <C> <C>
Land and improvements............................... $ 893 $ 902
Buildings........................................... 7,629 7,672
Machinery and equipment............................. 33,915 32,606
Leasehold improvements.............................. 853 853
Construction in progress............................ 1,397 5,710
-------- --------
44,687 47,743
Less accumulated depreciation and amortization...... (30,556) (28,222)
-------- --------
$ 14,131 $ 19,521
======== ========
</TABLE>
F-9
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Depreciation and leasehold amortization of property, plant, and equipment
was $2.2 million for fiscal 1994, fiscal 1995, and fiscal 1996.
6. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 27, JANUARY 25,
1996 1997
----------- -----------
<S> <C> <C>
Payroll and employee benefits........................ $3,589 $3,648
Accrued legal expenses............................... 1,400 210
Customer claims and repairs.......................... 550 550
Other................................................ 408 262
------ ------
$5,947 $4,670
====== ======
</TABLE>
7. RECEIVABLES FACILITY
Effective July 13, 1994, C&A Products and certain other subsidiaries,
including Collins & Aikman Floor Coverings, Inc. (each of the foregoing, a
"Seller"), entered into a Receivables Sale Agreement with Carcorp, Inc.
("Carcorp"), a wholly owned, bankruptcy remote subsidiary of C&A Products (as
amended and restated as of March 30, 1995, the "Receivables Sale Agreement").
Under the terms of the Receivables Sale Agreement, Carcorp purchases on a
revolving basis, without recourse, virtually all trade receivables generated
by the Sellers. Carcorp has sold certain interests in the purchased
receivables to outside parties.
As of January 27, 1996 and January 25, 1997, the face value of the open
accounts receivable of the Company that had been purchased by Carcorp
aggregated to $16.9 million and $17.8 million, respectively.
The receivables are purchased by Carcorp at the face amount of the
receivables less a defined discount. The discount percentage includes a yield
factor, factors for Carcorp's servicing and processing expenses, as well as
other factors, which are subject to variation, based upon the collectibility
and aging of the receivables purchased. In connection with the sale of the
receivables to Carcorp, the Company recorded losses of $1.3 million, $3.3
million and $3.5 million in fiscal 1994, fiscal 1995, and fiscal 1996,
respectively.
C&A Products retains the responsibility of servicing the trade receivables
sold to Carcorp, and it is compensated by Carcorp for its servicing
activities.
In connection with the sale of the Company, the Company was terminated as a
Seller under the Receivables Sale Agreement. Receivables sold by the Company
to Carcorp prior to the termination of the Company as a Seller remained with
Carcorp (see Note 13).
8. LEASE COMMITMENTS
On September 30, 1994, C&A Products entered into a master equipment lease
agreement. Pursuant to the agreement, certain equipment of the Company was
sold and leased back on January 24, 1995. The aggregate net book values of the
equipment totaling $866,000 were removed from the balance sheet. The ten-year
lease term has annual lease payments of approximately $120,000. The lease
covering the Company's equipment has been assigned to the Company by C&A
Products. The Company has a purchase option on the equipment at the end of the
lease term based on the fair market value of the equipment. The Company has
classified this lease as an operating lease.
F-10
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At January 25, 1997, future minimum lease payments under operating leases
are as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDING:
-------------------
<S> <C>
January 1998......................................................... $ 231
January 1999......................................................... 231
January 2000......................................................... 220
January 2001......................................................... 201
January 2002......................................................... 163
Thereafter........................................................... 406
------
$1,452
======
</TABLE>
Rental expense under operating leases was approximately $490,000, $665,000
and $816,000 in fiscal 1994, fiscal 1995, and fiscal 1996, respectively.
9. EMPLOYEE BENEFIT PLANS
Defined Benefit Plan
Substantially all domestic employees of the Company who meet eligibility
requirements, along with eligible employees from certain other affiliated
companies, participate in a defined benefit plan administered by C&A Products.
Plan benefits are generally based on years of service and employees'
compensation during their years of employment. Funding of retirement costs for
this plan complies with the minimum funding requirements specified by the
Employee Retirement Income Security Act of 1974. Assets of the pension plan
are held in a C&A Products master trust which invests primarily in equity and
fixed income securities. Actuarially determined calculations of plan benefits
for the Company as a stand-alone entity are included in the accompanying
consolidated financial statements.
The net periodic pension cost of the Company for fiscal 1994, fiscal 1995,
and fiscal 1996 includes the following components (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Service cost........................... $ 411 $ 407 $ 442
Interest cost on projected benefit
obligation and service cost........... 320 374 343
Actual gain on assets.................. (281) (303) (344)
Net amortization and deferral.......... (3) 1 (1)
----- ----- -----
Net periodic pension cost.............. $ 447 $ 479 $ 440
===== ===== =====
</TABLE>
F-11
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the Company's actuarially determined portion
of the plan's funded status and amounts recognized in the Company's
consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
JANUARY 27, JANUARY 25,
1996 1997
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation........................ $(4,187) $(4,316)
======= =======
Accumulated benefit obligation................... $(4,427) $(4,783)
======= =======
Projected benefit obligation..................... $(4,548) $(4,985)
Plan assets at fair value.......................... 3,723 4,149
------- -------
Projected benefit obligation in excess of plan
assets............................................ (825) (836)
Unrecognized net loss.............................. 944 1,108
Prior service not yet recognized in net periodic
pension cost...................................... (341) (294)
Adjustment required to recognize minimum
liability......................................... (482) (611)
------- -------
Pension liability recognized in the consolidated
balance sheets.................................... $ (704) $ (633)
======= =======
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7.5% at January 27, 1996 and January 25,
1997. The expected rate of increase in future compensation levels is 5.5% and
4.5% in fiscal 1995 and fiscal 1996, respectively, and the expected long-term
rate of return on plan assets was 9% in fiscal 1995 and fiscal 1996. The
provisions of SFAS No. 87, "Employers' Accounting for Pensions," require
companies with any plans that have an unfunded accumulated benefit obligation
to recognize an additional minimum pension liability, an offsetting intangible
pension asset, and, in certain situations, a contra-equity balance. In
accordance with the provisions of SFAS No. 87, the consolidated balance sheets
at January 27, 1996 and January 25, 1997 include an additional minimum pension
liability of $482,000 and $611,000, respectively, and a contra-equity balance,
net of the related tax effect, of $297,000 and $377,000, respectively.
As of February 6, 1997, all participant balances became fully vested and
participants could elect to maintain balances in the current plan, receive a
lump-sum distribution, or roll over balances into a new defined contribution
plan.
Defined Contribution Plans
Certain of the Company's employees who meet eligibility requirements are
included in C&A Products sponsored defined contribution plans. C&A Products'
contributions are based on specified formulas and, for one contribution plan,
are at the discretion of C&A Products, as specified in the plan documents. The
accompanying statements of operations include expenses of approximately
$450,000, $465,000, and $376,000 in fiscal 1994, fiscal 1995 and fiscal 1996,
respectively, for the Company's participation in the plans.
As of February 6, 1997, all participant balances became fully vested and
were rolled over into a new defined contribution plan.
Postretirement Benefit Plans
C&A Products provides life and health coverage for certain of the Company's
retirees under plans currently in effect. Many of the domestic employees may
be eligible for coverage if they reach retirement age while still employed by
the Company. Actuarially determined calculations of plan benefits for the
Company as a stand-alone entity are included in the accompanying consolidated
financial statements.
F-12
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net periodic postretirement benefit cost for the Company's participation
in these plans includes the following components (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Service cost........................... $ 86 $ 69 $ 86
Interest cost on accumulated
postretirement benefit obligation..... 148 148 153
Net amortization....................... (99) (111) (97)
---- ----- ----
Net periodic postretirement benefit
cost.................................. $135 $ 106 $142
==== ===== ====
</TABLE>
The following table sets forth the amount of accumulated postretirement
benefit obligation for the Company's participation in these plans (in
thousands):
<TABLE>
<CAPTION>
JANUARY 27, JANUARY 25,
1996 1997
----------- -----------
<S> <C> <C>
Retirees and beneficiaries......................... $ 448 $ 621
Fully eligible active plan participants............ 873 915
Other active plan participants..................... 887 803
------ ------
Accumulated postretirement benefit obligation...... 2,208 2,339
Unrecognized prior service gain from plan
amendments........................................ 969 931
Unrecognized net loss.............................. (69) (104)
------ ------
Net postretirement benefit obligation.............. $3,108 $3,166
====== ======
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% at January 27, 1996 and January 25,
1997. These plans are unfunded. For measurement purposes, a 12% and 11% annual
rate of increase in the per capita cost of covered health care benefits was
assumed for fiscal 1995 and 1996; the rate was assumed to decrease 1%
percentage point per year to 6% and remain at that level thereafter. The
health care cost trend rate assumption does not have an impact on the
obligation because of the plan amendments discussed below. Effective April 1,
1994, C&A Products amended the postretirement benefit plans which cover
substantially all of the eligible current and retired employees of the
Company. Pursuant to the amendment, obligation for future inflation of health
care costs will be limited to 6% per year through March 31, 1998. Subsequent
to March 1998, the Company's portion of coverage costs will not be adjusted
for inflation in health care costs.
10. INCOME TAXES
Although the Company is included in the consolidated federal income tax
return of C&A Corporation, federal, state, and foreign income taxes are
provided on a separate return basis. C&A Products and its subsidiaries,
including the Company, are parties to a tax sharing agreement with C&A
Corporation which provides for tax-sharing payments to or from C&A
Corporation, calculated in accordance with federal tax regulations, based on
taxable income. C&A Corporation, as appropriate, pays such amounts to the
Internal Revenue Service ("IRS") and/or distributes the amounts to the
companies included in its consolidated income tax return that generated losses
which resulted in reduced payments to the IRS. In fiscal 1995 and fiscal 1996,
the Company received, under the tax-sharing agreement, an additional benefit
of $1.3 million and $5 million, respectively, that has been reported as a
component of net transactions with C&A Products. The tax-sharing arrangement
resulted in an additional charge of $1 million in fiscal 1994 that has been
reported as a component of net transactions with C&A Products.
F-13
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Domestic and foreign components of income (loss) before income taxes are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Domestic................................. $19,613 $16,285 $20,284
Foreign.................................. (164) 45 134
------- ------- -------
$19,449 $16,330 $20,418
======= ======= =======
</TABLE>
Components of the income tax provision for fiscal 1994, fiscal 1995, and
fiscal 1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal................................ $5,955 $4,894 $6,317
State.................................. 934 778 986
------ ------ ------
6,889 5,672 7,303
------ ------ ------
Deferred:
Federal................................ 658 556 521
State.................................. 103 87 81
------ ------ ------
761 643 602
------ ------ ------
Income tax expense....................... $7,650 $6,315 $7,905
====== ====== ======
</TABLE>
Collins & Aikman United Kingdom Limited had sufficient loss carryforwards to
offset taxable income in fiscal 1995 and fiscal 1996. No benefit was recorded
for the operating loss in fiscal 1994. Therefore, no foreign income tax
expense is reflected in the statements of operations.
A reconciliation between income taxes computed at the statutory federal rate
of 35% and the provisions for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JANUARY 28, JANUARY 27, JANUARY 25,
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Amount at statutory federal rate....... $6,807 $5,716 $7,146
State income taxes, net of federal
income tax benefit.................... 674 562 694
Foreign tax more (less) than federal
tax at statutory rate................. 57 (16) (47)
Other.................................. 112 53 112
------ ------ ------
Income tax expense..................... $7,650 $6,315 $7,905
====== ====== ======
</TABLE>
F-14
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of the net deferred tax assets as of January 27, 1996 and
January 25, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 27, JANUARY 25,
1996 1997
----------- -----------
<S> <C> <C>
Deferred tax assets:
Employee benefits..................................... $ 2,770 $ 2,755
Inventory reserves.................................... 514 543
Other liabilities and reserves........................ 907 467
Foreign net operating loss carryforwards.............. 148 91
Valuation allowance................................... (148) (91)
------- -------
Total deferred tax assets........................... 4,191 3,765
------- -------
Deferred tax liabilities:
Property, plant, and equipment........................ (1,948) (2,073)
------- -------
Net deferred tax assets................................. $ 2,243 $ 1,692
======= =======
</TABLE>
The valuation allowance is provided because, in management's assessment, it
was uncertain whether the net deferred tax asset related to the foreign net
operating loss carryforwards would be realized.
11. OTHER RELATED-PARTY TRANSACTIONS
At January 25, 1997, the Company, together with other subsidiaries of C&A
Products, was guarantor of certain indebtedness of C&A Products. In connection
with the sale of the Company, the Company will be released from this pledge.
C&A Products performs certain services and incurs certain costs for the
benefit of the Company. Services provided include tax services, treasury
services, risk management, employee benefit services, legal services, accounts
receivable servicing, and other general corporate services. Costs allocated to
the Company for these services totaled $1.1 million, $1.6 million, and $1.5
million for fiscal 1994, fiscal 1995, and fiscal 1996, respectively.
The Company utilizes certain facilities and services available at C&A
Products' New York office. The Company is allocated a portion of the cost for
these facilities based on the actual facilities and services utilized. Costs
for these facilities and services totaling $94,000, $103,000, and $171,000 in
fiscal 1994, fiscal 1995, and fiscal 1996, respectively, are included in the
accompanying consolidated statements of operations.
Certain of the Company's employees participate in C&A Corporation's stock
option plans, which provide for the award of options on common shares to
employees, exercisable over ten-year periods. Effective January 28, 1994, C&A
Corporation granted certain employees of the Company stock options with
exercise prices below the then-estimated fair value in recognition of their
prior service. In subsequent periods, C&A Corporation granted additional stock
options to certain employees of the Company with exercise prices equal to the
market value at the time of grant. In connection with sale of the Company, all
outstanding options held by employees of the Company automatically vested and
the employees have up to 90 days to exercise any options.
12. COMMITMENTS AND CONTINGENCIES
Environmental
The Company is subject to federal, state, and local laws and regulations
concerning the environment. When it has been possible to reasonably estimate
the Company's liability with respect to environmental matters,
F-15
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
provisions have been made in accordance with generally accepted accounting
principles. At January 25, 1997, management concluded that no environmental
reserves were required. In the opinion of the Company's management, based on
the facts presently known to it, the ultimate outcome of any environmental
matters is not expected to have a material adverse effect on the Company's
consolidated financial position or results of operations.
Litigation
In response to claims of an unpleasant odor from vinyl-backed carpet tiles
at certain customer sites, the Company has reached settlements or necessary
remediation has been performed to satisfy all customer claims made to date.
The Company shared the cost of a majority of the remediation costs with a
third-party vendor under a funding agreement. Provisions for the remediation
costs were recorded by the Company in fiscal 1993. In fiscal 1995, an
additional $1.4 million was provided in connection with a specific customer
site. This amount was paid in settlement of the claim in October 1996.
The Company and this vendor are currently engaged in litigation in which
each side is seeking damages. The Company's claim includes recovery of its
remediation costs and loss of business. Subsequent to the sale of the Company,
C&A Products will retain this litigation, including all costs and recoveries.
At January 25, 1997, there are no amounts relating to these claims included in
the accompanying consolidated balance sheet.
During 1996, the Company agreed to a settlement including payment of
approximately $427,500 in connection with a patent infringement claim related
to the manufacturing of a certain product. This amount is included as a
component of selling, general and administrative expenses in the accompanying
consolidated statement of operations for fiscal 1996.
In 1993, two companies owned by a former sales representative of the
Company's products commenced an arbitration against the Company alleging that
their distributor contracts were wrongfully terminated. This action seeks
damages in excess of $4 million. The Company maintains that the contracts were
not wrongfully terminated, denies liability, and has continued to contest this
matter vigorously. Subsequent to the sale of the Company, C&A Products will
retain this arbitration.
The ultimate outcome of all legal proceedings to which the Company is a
party will not, in the opinion of the Company's management, based on the facts
presently known to it, have a material adverse effect on the Company's
consolidated financial position or results of operations.
Other Commitments
In connection with certain product installation contracts, the Company
issues performance bonds. No liability for these bonds is reflected in the
accompanying consolidated balance sheets because, in management's opinion,
based on the facts presently known to it, all product installation contracts
will be fulfilled in accordance with their terms.
13. SUBSEQUENT EVENTS
As discussed in Note 1, on February 6, 1997, pursuant to the definitive
agreement entered into by C&A Products, the Company, CAF Holdings, Inc.
("Holdings"), a corporation organized on behalf of affiliates of Quad-C and
Paribas, CAF Acquisition Corporation ("CAF"), a wholly owned subsidiary of
Holdings, and Collins & Aikman Floor Coverings Group, Inc. (the "Seller"), CAF
acquired from the Seller all of the outstanding capital stock of the Company
(the "Acquisition"). Simultaneous with the consummation of the Acquisition,
CAF was merged with and into the Company.
F-16
<PAGE>
COLLINS & AIKMAN FLOOR COVERINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At the date of closing, CAF paid the Seller $195.6 million, which represented
the $197.0 million purchase price less the parties' preliminary estimate of net
working capital as of the closing date. Financing for the Acquisition was
provided by (i) borrowings of $57 million under an $85 million senior secured
credit facility among the Company, Holdings, certain lenders, and Bankers Trust
Company, as agent, (ii) proceeds from an offering by the Company of $100
million aggregate principal amount of 10% senior subordinated notes due in
2007, and (iii) capital investments of $51 million by affiliates of Quad-C,
Paribas, management, and certain other investors in Holdings. The Acquisition
will be accounted for as a purchase.
Under the terms of the Acquisition, C&A Products will remit, as collected,
the accounts receivable receipts relating to the Company's open account held by
Carcorp at the date of closing.
F-17
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED
HEREIN, OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THOSE TO WHICH IT RELATES, NOT DOES IT CONSTITUTE AN OFFER TO SELL,
OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON 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 OFFER TO SOLICITATION. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 14
The Acquisition.......................................................... 18
Use of Proceeds of the Exchange Notes.................................... 19
Pro Forma Capitalization................................................. 20
Unaudited Pro Forma Financial Data....................................... 21
Selected Consolidated Financial Data..................................... 27
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 29
The Exchange Offer....................................................... 34
Business................................................................. 42
Management............................................................... 53
Ownership of Capital Stock............................................... 58
Certain Transactions..................................................... 60
Description of Credit Agreement.......................................... 61
Description of the Notes................................................. 62
Initial Notes Registration Rights........................................ 88
Certain U.S. Federal Income Tax Consequences............................. 90
Plan of Distribution..................................................... 92
Legal Matters............................................................ 93
Experts.................................................................. 93
Index to Consolidated Financial Statements............................... F-1
</TABLE>
----------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, 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 SELLING EXCHANGE
NOTES RECEIVED IN EXCHANGE FOR INITIAL NOTES HELD FOR THEIR OWN ACCOUNT.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
--------------
PROSPECTUS
--------------
[LOGO] COLLINS & AIKMAN FLOORCOVERINGS, INC.
COLLINS & AIKMAN
FLOORCOVERINGS, INC.
OFFER TO EXCHANGE SERIES B 10% SENIOR SUBORDINATED
NOTES DUE 2007 ("EXCHANGE NOTES") FOR ALL OUTSTANDING 10% SENIOR SUBORDINATED
NOTES DUE 2007 ("INITIAL NOTES")
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(the "DGCL"), provides that a corporation (in its original certificate of
incorporation or an amendment thereto) may eliminate or limit the personal
liability of a director (or certain persons who, pursuant to the provisions of
the certificate of incorporation, exercise or perform duties conferred or
imposed upon directors by the DGCL) to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that
such provisions shall not eliminate or limit 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 DGCL (providing for liability of directors for unlawful payment of
dividends or unlawful stock purchases or redemptions) or (iv) for any
transaction from which the director derived an improper personal benefit.
Article EIGHTH of the Registrant's Certificate of Incorporation limits the
liability of directors thereof to the extent permitted by Section 102(b)(7) of
the DGCL.
Section 145 of the DGCL provides that a corporation may indemnify its
directors, officers, employees or agents against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by them in connection with any action, suit or proceeding
brought by third parties to which they may be made parties by reason of their
being or having been directors, officers, employees or agents and shall so
indemnify such persons if they acted in good faith and in a manner they
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 their conduct was unlawful. Article XI, Section 1
of the Registrant's Bylaws provides that the Registrant shall indemnify its
officers, directors, employees and agents to the full extent permitted by
Delaware law.
Article XI, Section 1 of the Registrant's Bylaws also provides that the
Registrant shall indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the Board. Article XI, Section 2 of the Registrant's Bylaws
provides that the right to indemnification conferred by Section 1 includes the
right to be paid by the Registrant the expenses incurred in defending any such
proceeding in advance of its final disposition, except that, if the DGCL
requires, the payment of such expenses incurred by an indemnitee in such
capacity in advance of final disposition shall be made only upon delivery to
the Registrant of an undertaking, by or on behalf of such indemnitee, to repay
all amounts so advanced if it is ultimately determined that such indemnitee is
not entitled to be indemnified under Section 2 or otherwise.
Article XI, Section 3 of the Registrant's Bylaws provides that if a claim
under Section 1 or 2 is not paid in full by the Registrant within 60 days
after a written claim has been received by the Registrant, except in the case
of a claim for advancement of expenses which must be paid in 20 days, the
indemnitee may bring suit against the Registrant to recover the unpaid amount
of the claim. The Registrant may maintain insurance to protect itself and any
of its directors, officers, employees or agents against any expense, liability
or loss. By action of the board of directors, the Registrant may extend such
indemnification to employees and agents of the Registrant.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement among CAF Holdings, Inc., CAF Acquisition
Corporation and BT Securities Corporation, dated as of January 29,
1997.
2.1 Acquisition Agreement, by and among Collins & Aikman Products Co.,
Collins & Aikman Floor Coverings Group, Inc., the Registrant, CAF
Holdings, Inc. and CAF Acquisition Corporation, dated as of December
9, 1996, as amended.
3.1 Certificate of Incorporation of the Registrant, as amended to date.
3.2 Bylaws of the Registrant.
4.1 Indenture, dated as of February 6, 1997, by and among CAF Acquisition
Corporation and IBJ Schroder Bank & Trust Company.
4.2 First Supplemental Indenture, dated as of February 6, 1997, by and
among the Registrant and IBJ Schroder Bank & Trust Company.
4.3 Form of Series B 10% Senior Subordinated Note.
4.4 Registration Rights Agreement, dated as of February 6, 1997, by and
between CAF Acquisition Corporation and BT Securities Corporation.
*5.1 Opinion of McGuire, Woods, Battle & Boothe, L.L.P.
10.1 Credit Agreement among CAF Holdings, Inc., CAF Acquisition
Corporation, various lending institutions and Bankers Trust Company,
as Agent, dated as of February 6, 1997.
10.2 Tradename License Agreement, dated as of February 6, 1997, by and
between Collins & Aikman Floor Coverings Group, Inc., CAF Holdings,
Inc. and the Registrant.
10.3 Consulting Services Agreement dated as of February 6, 1997 among CAF
Holdings, Inc., the Registrant and Quad-C, Inc.
10.4 1997 Stock Option Plan and Form of Grant Letter.
10.5 Non-Competition Agreement among CAF Holdings, Inc., the Registrant,
Collins & Aikman Corporation and Collins & Aikman Products Co., dated
as of February 6 1997.
10.6 Tax Sharing Agreement, dated as of February 6, 1997, between CAF
Holdings, Inc. and the Registrant.
12.1 Statements re: computation of ratios.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (contained in
Exhibit 5.1).
*25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of
IBJ Schroder Bank & Trust Company under the Trust Indenture Act of
1939.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal for the 10% Senior Subordinated Notes
due 2007.
</TABLE>
- --------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
II-2
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(c) 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.
(d) That insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling 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.
II-3
<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 DALTON, STATE OF
GEORGIA, ON APRIL 7, 1997.
COLLINS & AIKMAN FLOORCOVERINGS,
INC.
/s/ Edgar M. Bridger
By: _________________________________
EDGAR M. BRIDGER PRESIDENT
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes Terrence D. Daniels, Stephen M. Burns and Edgar M. Bridger,
and each of them, as attorney-in-fact, to sign on such person's behalf,
individually and in each capacity stated below, and to file any amendments,
including post-effective amendments to this Registration Statement.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THEIR
CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE
/s/ Edgar M. Bridger Chief Executive April 7, 1997
- ------------------------------------- Officer and
EDGAR M. BRIDGER Director
/s/ Darrel V. McCay Chief Financial April 7, 1997
- ------------------------------------- Officer (Principal
DARREL V. MCCAY Financial and
Accounting Officer)
/s/ Terrence D. Daniels Director April 7, 1997
- -------------------------------------
TERRENCE D. DANIELS
/s/ Stephen M. Burns Director April 7, 1997
- -------------------------------------
STEPHEN M. BURNS
/s/ Gary A. Binning Director April 7, 1997
- -------------------------------------
GARY A. BINNING
/s/ Stephen Eisenstein Director April 7, 1997
- -------------------------------------
STEPHEN EISENSTEIN
/s/ R. Ted Weschler Director April 7, 1997
- -------------------------------------
R. TED WESCHLER
/s/ J. Hunter Reichert Director April 7, 1997
- -------------------------------------
J. HUNTER REICHERT
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement among CAF Holdings, Inc., CAF Acquisition
Corporation and BT Securities Corporation, dated as of January 29,
1997.
2.1 Acquisition Agreement, by and among Collins & Aikman Products Co.,
Collins & Aikman Floor Coverings Group, Inc., the Registrant, CAF
Holdings, Inc. and CAF Acquisition Corporation, dated as of December
9, 1996, as amended.
3.1 Certificate of Incorporation of the Registrant, as amended to date.
3.2 Bylaws of the Registrant.
4.1 Indenture, dated as of February 6, 1997, by and among CAF Acquisition
Corporation and IBJ Schroder Bank & Trust Company.
4.2 First Supplemental Indenture, dated as of February 6, 1997, by and
among the Registrant and IBJ Schroder Bank & Trust Company.
4.3 Form of Series B 10% Senior Subordinated Note.
4.4 Registration Rights Agreement, dated as of February 6, 1997, by and
between CAF Acquisition Corporation and BT Securities Corporation.
*5.1 Opinion of McGuire, Woods, Battle & Boothe, L.L.P.
10.1 Credit Agreement among CAF Holdings, Inc., CAF Acquisition
Corporation, various lending institutions and Bankers Trust Company,
as Agent, dated as of February 6, 1997.
10.2 Tradename License Agreement, dated as of February 6, 1997, by and
between Collins & Aikman Floor Coverings Group, Inc., CAF Holdings,
Inc. and the Registrant.
10.3 Consulting Services Agreement dated as of February 6, 1997 among CAF
Holdings, Inc., the Registrant and Quad-C, Inc.
10.4 1997 Stock Option Plan and Form of Grant Letter.
10.5 Non-Competition Agreement among CAF Holdings, Inc., the Registrant,
Collins & Aikman Corporation and Collins & Aikman Products Co., dated
as of February 6 1997.
10.6 Tax Sharing Agreement, dated as of February 6, 1997, between CAF
Holdings, Inc. and the Registrant.
12.1 Statements re: computation of ratios.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of McGuire, Woods, Battle & Boothe, L.L.P. (contained in
Exhibit 5.1).
*25.1 Statement of Eligibility and Qualification of Trustee on Form T-1 of
IBJ Schroder Bank & Trust Company under the Trust Indenture Act of
1939.
27.1 Financial Data Schedule.
*99.1 Form of Letter of Transmittal for the 10% Senior Subordinated Notes
due 2007.
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
EXHIBIT 1.1
CAF ACQUISITION CORP.
$100,000,000
10% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
January 29, 1997
BT SECURITIES CORPORATION
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
CAF Holdings, Inc., a Virginia corporation ("Hold-
ings"), and CAF Acquisition Corporation, a Virginia corporation
and a wholly owned subsidiary of Holdings ("CAF," and together
with Holdings, the "Companies"), hereby confirm their agreement
with you (the "Initial Purchaser"), as set forth below.
1. The Securities. Subject to the terms and condi-
tions herein contained, CAF proposes to issue and sell to the
Initial Purchaser $100,000,000 aggregate principal amount of its
10% Senior Subordinated Notes due 2007, Series A (the "Notes").
The Notes are to be issued under an indenture (the "Indenture")
to be dated as of February 6, 1997 by and between CAF and IBJ
Schroder Bank & Trust Company, as Trustee (the "Trustee").
The Notes are being issued and sold in connection with
the acquisition (the "Acquisition") of Collins & Aikman Floor
Coverings, Inc., a Delaware corporation (the "Company"), by CAF
pursuant to an agreement dated as of December 9, 1996 (the
"Acquisition Agreement"), entered into by and among Holdings,
CAF, the Company, Collins & Aikman Products, Co. ("C&A Products")
and Collins & Aikman Floor Coverings Group, Inc. (the "Seller").
Simultaneously with the closing of the sale of the Notes (the
"Offering"), CAF will acquire from the Seller all of the
outstanding capital stock of the Company.
Immediately after the consummation of the Acquisition,
CAF will merge (the "Merger") with and into the Company and the
Company shall change its name to Collins & Aikman Floorcoverings,
Inc. The time of the consummation of the Merger is referred to
herein as the "Effective Time." At the Effective Time, (i) the
Company and the Trustee will enter into a first supplemental
indenture to the Indenture (the "Supplemental Indenture")
providing for the express assumption by the Company (as survivor
of the Merger) of the covenants, agreements and undertakings of
<PAGE>
CAF in the Indenture and under the Notes and (ii) the Company
will execute an agreement in the form attached hereto as Exhibit
A (the "Assumption Agreement") pursuant to which the Company (as
survivor of the Merger) shall expressly assume the obligations of
CAF under this Agreement. References to the Indenture as of or
after the Effective Time will refer to the Indenture as
supplemented by the Supplemental Indenture and references to this
Agreement as of or after the Effective Time will refer to this
Agreement together with the Assumption Agreement.
Financing for the Acquisition will be provided by
(i) $57 million of borrowings under an $85 million Credit
Agreement (the "Credit Agreement") by and among CAF, Holdings,
various lending institutions party thereto and Bankers Trust
Company, as agent (the "Bank Financing"), (ii) $51 million of
capital invested by affiliates of Quad-C, Inc., Paribas Princi-
pal, Inc., management of the Company and certain other investors
in Holdings (the "Equity Financing") and (iii) the proceeds of
the Offering. The Acquisition, the Offering, the Equity
Financing, the Bank Financing and the Merger are collectively
referred to herein as the "Transactions."
The Notes will be offered and sold to the Initial
Purchaser without being registered under the Securities Act of
1933, as amended (the "Act"), in reliance on exemptions
therefrom.
In connection with the sale of the Notes, CAF has
prepared a preliminary offering memorandum dated January 8, 1997
(the "Preliminary Memorandum") and a final offering memorandum
dated the date hereof (the "Final Memorandum"; the Preliminary
Memorandum and the Final Memorandum each herein being referred to
as a "Memorandum"), each setting forth or including descriptions
of the terms of the Notes, the terms of the Offering, the
Acquisition and the transactions contemplated thereby and hereby,
the Company and any material developments relating to the Company
occurring after the date of the most recent historical financial
statements included therein.
The Companies understand that the Initial Purchaser
proposes to make an offering of the Notes only on the terms and
in the manner set forth in the Final Memorandum and Section 8
hereof as soon as the Initial Purchaser deems advisable after
this Agreement has been executed and delivered, to persons in the
United States whom the Initial Purchaser reasonably believes to
be qualified institutional buyers ("Qualified Institutional
Buyers" or "QIBs") as defined in Rule 144A under the Act, as such
rule may be amended from time to time ("Rule 144A"), in
transactions under Rule 144A, to a limited number of other
institutional "accredited investors" ("Accredited Investors") as
defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of
the Act in private sales exempt from registration under the Act,
and outside the United States to certain persons in reliance on
Regulation S under the Act.
<PAGE>
The Initial Purchaser and its direct and indirect
transferees of the Notes will be entitled to the benefits of the
Registration Rights Agreement, substantially in the form attached
hereto as Exhibit B (the "Registration Rights Agreement"), to be
dated the Closing Date (as defined in Section 3 below), pursuant
to which CAF will and, at and as of the Effective Time, the
Company will, agree, among other things, to file a registration
statement (the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") registering the Notes or
the Exchange Notes (as defined in the Registration Rights
Agreement) under the Act.
2. Representations and Warranties of Holdings and
CAF. Holdings and CAF represent and warrant to and agree with
the Initial Purchaser that:
A. Neither the Preliminary Memorandum as of the date
thereof nor the Final Memorandum nor any amendment or supplement
thereto as of the date thereof and at all times subsequent
thereto up to the Closing Date contained or contains any untrue
statement of a material fact or omitted or omits to state a
material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not
misleading, except that the representations and warranties set
forth in this Section 2(a) do not apply to statements or
omissions made in reliance upon and in conformity with informa-
tion relating to the Initial Purchaser furnished to CAF in
writing by the Initial Purchaser expressly for use in the Pre-
liminary Memorandum, the Final Memorandum or any amendment or
supplement thereto.
B. As of the Closing Date and after giving effect to
the Transactions, the Company will have the authorized, issued
and outstanding capitalization set forth in the Final Memorandum;
as of the date hereof and upon consummation of the Transactions,
the only subsidiary of the Company will be Collins & Aikman
United Kingdom Limited (the "Subsidiary"); except as set forth in
the Final Memorandum, all of the outstanding shares of capital
stock of the Company and the Subsidiary have been, and as of the
Closing Date will be, duly authorized and validly issued, are
fully paid and nonassessable and were not issued in violation of
any preemptive or similar rights; except as set forth in the
Final Memorandum, all of the outstanding shares of capital stock
of the Company and the Subsidiary will be free and clear of all
liens, encumbrances, equities and claims or restrictions on
transferability (other than those imposed by the Act and the
securities or "Blue Sky" laws of certain jurisdictions) or
voting; except as set forth in the Final Memorandum, there are no
(i) options, warrants or other rights to purchase, (ii)
agreements or other obligations to issue or (iii) other rights to
convert any obligation into, or exchange any securities for,
shares of capital stock of or ownership interests in the Company
or the Subsidiary outstanding. Except for the Subsidiary, the
<PAGE>
Company does not own, directly or indirectly, any shares of
capital stock or any other equity or long-term debt securities or
have any equity interest in any firm, partnership, joint venture
or other entity.
C. Each of Holdings, CAF and, to the best knowledge of
the Companies after due inquiry, the Company and the Subsidiary
is duly incorporated, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation and has
all requisite corporate power to own its properties and conduct
its business as now conducted and as described in the Final
Memorandum; each of Holdings, CAF and, to the best knowledge of
the Companies after due inquiry, the Company and the Subsidiary
is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions where the ownership or
leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified
would not, individually or in the aggregate, have a material
adverse effect on the general affairs, management, business,
condition (financial or otherwise), prospects or results of
operations of the Company and the Subsidiary, taken as a whole
(any such event, a "Material Adverse Effect").
D. CAF has and, immediately following the Effective
Time, the Company will have all requisite corporate power to
execute, deliver and perform each of its obligations under the
Notes and the Exchange Notes and the Private Exchange Notes (each
as defined in the Registration Rights Agreement). The Notes,
when issued, will be in the form contemplated by the Indenture.
The Notes, the Exchange Notes and the Private Exchange Notes have
each been duly and validly authorized by CAF and, immediately
following the Effective Time, the Company and, when executed by
CAF and the Company, as the case may be, and authenticated by the
Trustee in accordance with the provisions of the Indenture and,
in the case of the Notes, when delivered to and paid for by the
Initial Purchaser in accordance with the terms of this Agreement,
will constitute valid and legally binding obligations of CAF and,
immediately following the Effective Time, the Company, as the
case may be, entitled to the benefits of the Indenture, and
enforceable against CAF and the Company, as the case may be, in
accordance with their terms, except that the enforcement thereof
may be subject to (i) bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally,
and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
E. CAF has and, immediately following the Effective
Time, the Company will have all requisite corporate power and
authority to execute, deliver and perform its obligations under
the Indenture. The Indenture meets the requirements for quali-
fication under the Trust Indenture Act of 1939, as amended (the
"TIA"). The Indenture has been duly and validly authorized by
CAF. The Supplemental Indenture will, immediately following the
<PAGE>
Effective Time, have been duly and validly authorized by the
Company. Assuming the due authorization, execution and delivery
of the Indenture and the Supplemental Indenture by the Trustee,
each of the Indenture and the Supplemental Indenture will
constitute valid and legally binding agreements of CAF and,
immediately following the Effective Time, the Company,
enforceable against CAF and, at and as of the Effective Time, the
Company in accordance with its terms, except that the enforcement
thereof may be subject to (i) bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity and the discretion of the
court before which any proceeding therefor may be brought.
F. CAF has and, immediately following the Effective
Time, the Company will have all requisite corporate power and
authority to execute, deliver and perform its obligations under
the Registration Rights Agreement. The Registration Rights
Agreement has been duly and validly authorized by CAF and,
immediately following the Effective Time, by the Company and,
when executed and delivered by CAF and the Company, will con-
stitute a valid and legally binding agreement of CAF and, imme-
diately following the Effective Time, the Company enforceable
against CAF and, immediately following the Effective Time, the
Company in accordance with its terms, except that (A) the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter
in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B) any
rights to indemnity or contribution thereunder may be limited by
federal and state securities laws and public policy
considerations.
G. CAF has and, at and as of the Effective Time, the
Company will have all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. This
Agreement and the consummation by CAF and the Company of the
transactions contemplated hereby have been duly and validly
authorized by CAF and, at and as of the Effective Time, the
Company. This Agreement has been duly executed and delivered by
CAF.
H. No consent, approval, authorization or order of any
court or governmental agency or body, or third party is required
for the issuance and sale by CAF of the Notes to the Initial
Purchaser or the consummation by CAF and the Company of the other
transactions contemplated hereby, except such as have been
obtained and such as may be required under state securities or
"Blue Sky" laws in connection with the purchase and resale of the
Notes by the Initial Purchaser. None of CAF or Holdings or to
the best knowledge of the Companies after due inquiry, the
Company or the Subsidiary is (i) in violation of its certificate
<PAGE>
or articles of incorporation or bylaws (or similar organizational
documents), (ii) in breach or violation of any statute, judgment,
decree, order, rule or regulation applicable to any of them or
any of their respective properties or assets, except for any such
breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect, or (iii) in breach of
or default under (nor has any event occurred which, with notice
or passage of time or both, would constitute a default under) or
in violation of any of the terms or provisions of any indenture,
mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other
agreement or instrument to which any of them is a party or to
which any of them or their respective properties or assets is
subject (collectively, "Contracts"), except for any such breach,
default, violation or event which would not, individually or in
the aggregate, have a Material Adverse Effect.
I. The execution, delivery and performance by Holdings,
CAF and, immediately following the Effective Time, the Company of
this Agreement, the Indenture and the Registration Rights
Agreement, as the case may be, and the consummation by Holdings,
CAF and, immediately following the Effective Time, the Company of
the transactions contemplated hereby and thereby (including,
without limitation, the issuance and sale of the Notes to the
Initial Purchaser) will not conflict with or constitute or result
in a breach of or a default under (or an event which with notice
or passage of time or both would constitute a default under) or
violation of any of (i) the terms or provisions of any Contract,
except for any such conflict, breach, violation, default or event
which would not, individually or in the aggregate, have a
Material Adverse Effect, (ii) the certificate or articles of
incorporation or bylaws (or similar organizational documents) of
CAF, Holdings, the Company or the Subsidiary, or (iii) (assuming
compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and
warranties of the Initial Purchaser in Section 8 hereof) any
statute, judgment, decree, order, rule or regulation applicable
to CAF, Holdings the Company or the Subsidiary or any of their
respective properties or assets, except for any such conflict,
breach or violation which would not, individually or in the
aggregate, have a Material Adverse Effect.
J. The audited consolidated financial statements of the
Company and the Subsidiary included in the Final Memorandum
present fairly in all material respects the consolidated finan-
cial position, results of operations and cash flows of the Com-
pany and the Subsidiary at the dates and for the periods to which
they relate and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis,
except as otherwise stated therein. The summary and selected
financial and statistical data in the Final Memorandum present
fairly in all material respects the information shown therein
and have been prepared and compiled on a basis consistent with
the audited financial statements included therein, except as
<PAGE>
otherwise stated therein. Arthur Andersen, LLP (the "Independent
Accountants") is an independent public accounting firm within the
meaning of the Act and the rules and regulations promulgated
thereunder.
K. The pro forma financial statements (including the
notes thereto) and the other pro forma financial information
included in the Final Memorandum (i) comply as to form in all
material respects with the applicable requirements of Regulation
S-X promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), (ii) have been prepared in
accordance with the Commission's rules and guidelines with
respect to pro forma financial statements, and (iii) have been
properly computed on the basis described therein. The assump-
tions used in the preparation of the pro forma financial data and
other pro forma financial information included in the Final
Memorandum are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances
referred to therein.
L. There is not pending or, to the best knowledge of
the Companies after due inquiry, threatened any action, suit,
proceeding, inquiry or investigation to which the Companies or,
immediately following the Effective Time, the Company or the
Subsidiary is a party, or to which the property or assets of the
Companies or, immediately following the Effective Time, the
Company or the Subsidiary are subject, before or brought by any
court, arbitrator or governmental agency or body which, if
determined adversely to the Companies or, at and as of the
Effective Time, the Company or the Subsidiary, would, (taking
into account the indemnification required under the Acquisition
Agreement) individually or in the aggregate, have a Material
Adverse Effect or which seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of
the Notes to be sold hereunder or the consummation of the other
transactions described in the Final Memorandum.
M. To the best knowledge of the Companies after due
inquiry, the Company and the Subsidiary possess, and as of the
Effective Time will possess, all licenses, permits, certificates,
consents, orders, approvals and other authorizations from, and
has made all declarations and filings with, all federal, state,
local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, presently
required or necessary to own or lease, as the case may be, and
to operate its respective properties and to carry on its
respective businesses as now or proposed to be conducted as set
forth in the Final Memorandum ("Permits"), except where the
failure to obtain such Permits would not, individually or in the
aggregate, have a Material Adverse Effect; to the best knowledge
of the Companies after due inquiry, at and as of the Effective
Time, each of the Company and the Subsidiary will have fulfilled
and performed all of its respective obligations with respect to
such Permits and no event has occurred which allows, or after
<PAGE>
notice or lapse of time would allow, revocation or termination
thereof or results in any other material impairment of the rights
of the holder of any such Permit; and none of the Companies or to
the best knowledge of the Companies after due inquiry, the
Company or the Subsidiary has received any notice of any
proceeding relating to revocation or modification of any such
Permit, except as described in the Final Memorandum and except
where such revocation or modification would not, individually or
in the aggregate, have a Material Adverse Effect.
N. Since the date of the most recent financial
statements appearing in the Final Memorandum, except as described
therein, (i) none of the Companies, the Company or the Subsidiary
has incurred any liabilities or obligations, direct or
contingent, or entered into or agreed to enter into any
transactions or contracts (written or oral) not in the ordinary
course of business which liabilities, obligations, transactions
or contracts would, individually or in the aggregate, be material
to the general affairs, management, business, condition
(financial or otherwise), prospects or results of operations of
the Company and the Subsidiary, taken as a whole and (ii) there
shall not have been any material change in the capital stock or
long-term indebtedness of CAF, Holdings, the Company or the
Subsidiary.
O. Each of the Companies and, to the best knowledge of
the Companies after due inquiry, the Company and the Subsidiary
has filed all necessary federal, state and foreign income and
franchise tax returns, except where the failure to so file such
returns would not, individually or in the aggregate, have a
Material Adverse Effect, and has paid all taxes shown as due
thereon; and other than tax deficiencies which the Company or the
Subsidiary is contesting in good faith and for which the Company
or the Subsidiary has provided adequate reserves, there is no tax
deficiency that has been asserted against the Company or any of
the Subsidiary that would have, individually or in the aggregate,
a Material Adverse Effect.
P. The statistical and market-related data included in
the Final Memorandum are based on or derived from sources which
the Companies, after due inquiry, believe to be reliable and
accurate.
Q. None of the Companies or, to the best knowledge of
the Companies after due inquiry, the Company, the Subsidiary or
any agent acting on their behalf has taken or will take any
action that might cause this Agreement or the sale of the Notes
to violate Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System, in each case as in effect, or as the
same may hereafter be in effect, on the Closing Date.
R. To the best knowledge of the Companies after due
inquiry, each of the Company and the Subsidiary has and, at and
as of the Effective Time, will have good and marketable title to
<PAGE>
all real property and good title to all personal property
described in the Final Memorandum as being owned by it and good
and marketable title to a leasehold estate in the real and per-
sonal property described in the Final Memorandum as being leased
by it free and clear of all liens, charges, encumbrances or
restrictions, except as described in the Final Memorandum or to
the extent the failure to have such title or the existence of
such liens, charges, encumbrances or restrictions would not,
individually or in the aggregate, have a Material Adverse Effect.
All leases, contracts and agreements to which the Companies are
or, to the best knowledge of the Companies after due inquiry, at
and as of the Effective Time, the Company or the Subsidiary will
be a party or by which any of them is or will be bound are valid
and enforceable against the Companies, the Company or the
Subsidiary, and are valid and enforceable against the other party
or parties thereto and are in full force and effect with only
such exceptions as would not, individually or in the aggregate,
have a Material Adverse Effect. At and as of the Effective Time,
to the best knowledge of the Companies after due inquiry, the
Company and the Subsidiary own or possess adequate licenses or
other rights to use all patents, trademarks, service marks, trade
names, copyrights and know-how necessary to conduct the
businesses now or proposed to be operated by them as described in
the Final Memorandum, and none of the Company or the Subsidiary
has received any notice of infringement of or conflict with (or
knows of any such infringement of or conflict with) asserted
rights of others with respect to any patents, trademarks, service
marks, trade names, copyrights or know-how which, if such
assertion of infringement or conflict were sustained, would have
a Material Adverse Effect.
S. To the best knowledge of the Companies after due
inquiry, there are no legal or governmental proceedings involving
or affecting the Company or the Subsidiary or any of their
respective properties or assets which would be required to be
described in a prospectus pursuant to the Act that are not
described in the Final Memorandum, nor are there any material
contracts or other documents which would be required to be
described in a prospectus pursuant to the Act that are not
described in the Final Memorandum.
i) Except as described in the Final Memorandum or except
as would not, individually or in the aggregate, have a Material
Adverse Effect, to the best knowledge of the Companies after due
inquiry, (A) each of the Company and the Subsidiary, immediately
following the Effective Time, will be in compliance with and not
subject to liability under applicable Environmental Laws (as
defined below), (B) each of the Company and the Subsidiary, at
and as of the Effective Time, will have made all filings and
provided all notices required under any applicable Environmental
Law, and is in compliance with all Permits required under any
applicable Environmental Laws and each of them is in full force
and effect, (C) there is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice of violation,
<PAGE>
investigation, proceeding, notice or demand letter or request for
information pending or threatened against the Company or the
Subsidiary under any Environmental Law, (D) no lien, charge,
encumbrance or restriction will be recorded under any
Environmental Law with respect to any assets, facility or
property owned, operated, leased or controlled by the Company or
the Subsidiary, (E) none of the Companies, the Company or the
Subsidiary has received notice that it has been identified as a
potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980,
as amended ("CERCLA") or any comparable state law, (F) no
property or facility of the Companies, the Company or the
Subsidiary is (i) listed or proposed for listing on the National
Priorities List under CERCLA or is (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, "Environmental Laws"
means the common law and all applicable federal, state and local
laws or regulations, codes, orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder,
relating to pollution or protection of public or employee health
and safety or the environment, including, without limitation,
laws relating to (i) emissions, discharges, releases or
threatened releases of hazardous materials into the environment
(including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, generation, treat-
ment, storage, disposal, transport or handling of hazardous
materials, and (iii) underground and above ground storage tanks
and related piping, and emissions, discharges, releases or
threatened releases therefrom.
T. None of the Companies or, to the best knowledge of
the Companies after due inquiry, the Company or the Subsidiary
has or, immediately following the Effective Time, will have any
liability for any prohibited transaction or funding deficiency or
any complete or partial withdrawal liability with respect to any
pension, profit sharing or other plan which is subject to the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), to which it makes or ever has made a contribution and
in which any employee of it is or has ever been a participant.
With respect to such plans, the Companies or, to the best
knowledge of the Companies, after due inquiry, the Company and
each Subsidiary is or will be, as the case may be, in compliance
in all material respects with all applicable provisions of ERISA.
U. None of the Companies and, to the best knowledge of
the Companies after due inquiry, the Company or the Subsidiary
will be an "investment company" or "promoter" or "principal
underwriter" for an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended, and
<PAGE>
the rules and regulations thereunder.
V. The Notes, the Exchange Notes, the Indenture, the
Registration Rights Agreement, the Acquisition Agreement and this
Agreement will conform in all material respects to the
descriptions thereof in the Final Memorandum.
W. No holder of securities of Holdings, CAF, the
Company or the Subsidiary will be entitled to have such securi-
ties registered under the registration statements required to be
filed by the Company pursuant to the Registration Rights
Agreement other than as expressly permitted thereby.
X. Immediately after the consummation of the Trans-
actions, the fair value and present fair saleable value of the
assets of the Company and the Subsidiary (on a consolidated
basis) will exceed the sum of its stated liabilities and iden-
tified contingent liabilities; the Company and the Subsidiary (on
a consolidated basis) will not, nor will it be, after giving
effect to the execution, delivery and performance of this
Agreement and the consummation of the Transactions, (a) left with
unreasonably small capital with which to carry on its business as
it is proposed to be conducted, (b) unable to pay its debts
(contingent or otherwise) as they mature or (c) otherwise
insolvent.
Y. None of the Companies or, to the best knowledge of
the Companies after due inquiry, the Company, the Subsidiary or
any of their respective Affiliates (as defined in Rule 501(b) of
Regulation D under the Act) has directly, or through any agent,
(i) sold, offered for sale, solicited offers to buy or otherwise
negotiated in respect of, any "security" (as defined in the Act)
which is or could be integrated with the sale of the Notes in a
manner that would require the registration under the Act of the
Notes or (ii) engaged in any form of general solicitation or
general advertising (as those terms are used in Regulation D
under the Act) in connection with the offering of the Notes or in
any manner involving a public offering within the meaning of
Section 4(2) of the Act. Assuming (i) the accuracy of the
representations and warranties of the Initial Purchaser in
Section 8 hereof, (ii) compliance by the Initial Purchaser with
the offering and transfer restrictions described in the Final
Memorandum and (iii) the accuracy of the representations,
warranties and agreements of each of the purchasers to whom the
Initial Purchaser initially resales the Notes in compliance with
Section 8 hereof and, as to any Accredited Investors, as
reflected in Exhibit A to the Final Memorandum, it is not
necessary in connection with the offer, sale and delivery of the
Notes to the Initial Purchaser in the manner contemplated by this
Agreement to register any of the Notes under the Act or to
qualify the Indenture under the TIA.
Z. No securities of the Company are of the same class
(within the meaning of Rule 144A under the Act) as the Notes and
<PAGE>
listed on a national securities exchange registered under
Section 6 of the Exchange Act, or quoted in a U.S. automated
inter-dealer quotation system.
AA. None of the Companies and, to the best knowledge of
the Companies after due inquiry, the Company or the Subsidiary
has taken, nor will any of them take, directly or indirectly, any
action designed to, or that might be reasonably expected to,
cause or result in stabilization or manipulation of the price of
the Notes.
Any certificate signed by any officer of the Company
or the Subsidiary and delivered to the Initial Purchaser or to
counsel for the Initial Purchaser shall be deemed a joint and
several representation and warranty by the Companies, the Company
and the Subsidiary to the Initial Purchaser as to the matters
covered thereby.
3. Purchase, Sale and Delivery of the Notes. On the
basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and condi-
tions herein set forth, CAF agrees to issue and sell to the
Initial Purchaser, and the Initial Purchaser agrees to purchase
from the Company, the Notes at 97% of their principal amount.
One or more certificates in definitive form for the Notes that
the Initial Purchaser has agreed to purchase hereunder, and in
such denomination or denominations and registered in such name or
names as the Initial Purchaser requests upon notice to CAF at
least 36 hours prior to the Closing Date, shall be delivered by
or on behalf of CAF to the Initial Purchaser, against payment by
or on behalf of the Initial Purchaser of the purchase price
therefor by wire transfer (immediately available funds), to such
account or accounts as CAF shall specify prior to the Closing
Date, or by such means as the parties hereto shall agree prior to
the Closing Date. Such delivery of and payment for the Notes
shall be made at the offices of White & Case, 1155 Avenue of the
Americas, New York, New York at 10:00 A.M., New York time, on
February 6, 1997, or at such other place, time or date as the
Initial Purchaser, on the one hand, and CAF, on the other hand,
may agree upon, such time and date of delivery against payment
being herein referred to as the "Closing Date." CAF will make
such certificate or certificates for the Notes available for
checking and packaging by the Initial Purchaser at the offices of
BT Securities Corporation in New York, New York, or at such other
place as BT Securities Corporation may designate, at least 24
hours prior to the Closing Date.
4. Offering by the Initial Purchaser. The Initial
Purchaser proposes to make an offering of the Notes at the price
and upon the terms set forth in the Final Memorandum, as soon as
practicable after this Agreement is entered into and as in the
judgment of the Initial Purchaser is advisable.
5. Covenants of Holdings and CAF. Holdings and CAF
<PAGE>
covenant and agree with the Initial Purchaser that:
A. Holdings and CAF will not and, at and after the
Effective Time, the Company will not amend or supplement the
Final Memorandum or any amendment or supplement thereto of which
the Initial Purchaser shall not previously have been advised and
furnished a copy for a reasonable period of time prior to the
proposed amendment or supplement and as to which the Initial
Purchaser shall not have given its consent. Holdings and CAF
will, and at and after the Effective Time, the Company will,
promptly, upon the reasonable request of the Initial Purchaser or
counsel for the Initial Purchaser, make any amendments or
supplements to the Preliminary Memorandum or the Final Memorandum
that may be necessary or advisable in connection with the resale
of the Notes by the Initial Purchaser.
B. Holdings and CAF will and, at and after the Closing
Date, the Company will cooperate with the Initial Purchaser in
arranging for the qualification of the Notes for offering and
sale under the securities or "Blue Sky" laws of which
jurisdictions as the Initial Purchaser may designate and will
continue such qualifications in effect for as long as may be
necessary to complete the resale of the Notes; provided, however,
that in connection therewith, Holdings, CAF and the Company shall
not be required to qualify as a foreign corporation or to execute
a general consent to service of process in any jurisdiction or
subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
C. If, at any time prior to the completion of the
distribution by the Initial Purchaser of the Notes or the Private
Exchange Notes, any event occurs or information becomes known as
a result of which the Final Memorandum as then amended or
supplemented would include any untrue statement of a material
fact, or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which
they were made, not misleading, or if for any other reason it is
necessary at any time to amend or supplement the Final Memorandum
to comply with applicable law, Holdings and CAF will, and at and
after the Closing Date, the Company will promptly notify the
Initial Purchaser thereof and will prepare, at their own expense,
an amendment or supplement to the Final Memorandum that corrects
such statement or omission or effects such compliance.
D. Holdings and CAF will and, at and after the
Effective Time, the Company will, without charge, provide to the
Initial Purchaser and to counsel for the Initial Purchaser as
many copies of the Preliminary Memorandum and the Final
Memorandum or any amendment or supplement thereto as the Initial
Purchaser may reasonably request.
E. Holdings and CAF will apply the net proceeds from
the sale of the Notes as set forth under "Use of Proceeds" in the
Final Memorandum.
<PAGE>
F. For so long as any of the Notes remain outstanding,
CAF will and, at and after the Closing Date, the Company will
furnish to the Initial Purchaser copies of all reports and other
communications (financial or otherwise) furnished by CAF and, at
and after the Closing Date, the Company to the Trustee or to the
holders of the Notes and, as soon as available, copies of any
reports or financial statements furnished to or filed by the
Company with the Commission or any national securities exchange
on which any class of securities of the Company may be listed.
G. None of Holdings, CAF and, at and after the
Effective Time, the Company or any of their respective affiliates
will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Act)
which could be integrated with the sale of the Notes in a manner
which would require the registration under the Act of the Notes.
H. Holdings and CAF and, at and after the Effective
Time, the Company will not, and will not permit the Subsidiary
to, engage in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the
Act) in connection with the offering of the Notes or in any
manner involving a public offering within the meaning of Section
4(2) of the Act.
I. For so long as any of the Notes remain outstanding,
the Company will make available at its expense, upon request, to
any holder of such Notes and any prospective purchasers thereof
the information specified in Rule 144A(d)(4) under the Act,
unless the Company is then subject to Section 13 or 15(d) of the
Exchange Act.
J. Each of CAF and, at and after the Effective Time,
the Company will use its best efforts to (i) permit the Notes to
be designated PORTAL securities in accordance with the rules and
regulations adopted by the NASD relating to trading in the
Private Offerings, Resales and Trading through Automated Linkages
market (the "Portal Market") and (ii) permit the Notes to be
eligible for clearance and settlement through The Depository
Trust Company.
K. In connection with Notes offered and sold in an
offshore transaction (as defined in Regulation S), CAF and, at
and after the Effective Time, the Company will not register any
transfer of such Notes not made in accordance with the provisions
of Regulation S and will not, except in accordance with the
provisions of Regulation S, if applicable, issue any such Notes
in the form of definitive securities.
6. Expenses. Holdings and CAF agree, jointly and
severally, to pay, and Holdings will cause the Company to pay all
costs and expenses incident to the performance of their
obligations under this Agreement, whether or not the transactions
<PAGE>
contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and
expenses incident to (i) the costs of printing the Preliminary
Memorandum and the Final Memorandum and any amendment or
supplement thereto, and any "Blue Sky" memoranda, (ii) all
arrangements relating to the delivery to the Initial Purchasers
of copies of the foregoing documents, (iii) the fees and dis-
bursements of counsel, the accountants and any other experts or
advisors retained by the Company, (iv) preparation (including
printing), issuance and delivery to the Initial Purchaser of the
Notes, (v) the qualification of the Notes under state securities
and "Blue Sky" laws, including filing fees and fees and
disbursements of counsel for the Initial Purchaser relating
thereto, (vi) expenses in connection with any meetings with
prospective investors in the Notes, (vii) fees and expenses of
the Trustee including fees and expenses of its counsel,
(viii) all expenses and listing fees incurred in connection with
the application for quotation of the Notes on the PORTAL Market
and (ix) any fees charged by investment rating agencies for the
rating of the Notes. If the sale of the Notes provided for
herein is not consummated because any condition to the
obligations of the Initial Purchaser set forth in Section 7
hereof is not satisfied, because this Agreement is terminated or
because of any failure, refusal or inability on the part of
Holdings, CAF or the Company to perform all obligations and
satisfy all conditions on their part to be performed or satisfied
hereunder (other than solely by reason of a default by the
Initial Purchaser of its obligations hereunder after all
conditions hereunder have been satisfied in accordance herewith),
Holdings and CAF agree to promptly reimburse the Initial
Purchaser upon demand for all out-of-pocket expenses (including
fees, disbursements and charges of Cahill Gordon & Reindel,
counsel for the Initial Purchaser) that shall have been incurred
by the Initial Purchaser in connection with the proposed purchase
and sale of the Notes.
7. Conditions of the Initial Purchaser's Obliga-
tions. The obligation of the Initial Purchaser to purchase and
pay for the Notes shall, in its sole discretion, be subject to
the satisfaction or waiver of the following conditions on or
prior to the Closing Date:
A. On the Closing Date, the Initial Purchaser shall
have received the opinion, dated as of the Closing
Date and addressed to the Initial Purchaser, of
McGuire, Woods, Battle & Booth, L.L.P., counsel for
the Company, substantially in the form of Exhibits B-1
and B-2 hereto.
B. On the Closing Date, the Initial Purchaser shall
have received the opinion, in form and substance
satisfactory to the Initial Purchaser, dated as of the
Closing Date and addressed to the Initial Purchaser,
of Cahill Gordon & Reindel, counsel for the Initial
<PAGE>
Purchaser, with respect to certain legal matters
relating to this Agreement and such other related
matters as the Initial Purchaser may reasonably
request. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such
certificates and other documents and information as it
may reasonably request to pass upon such matters.
C. The Initial Purchaser shall have received from the
Independent Accountants a comfort letter or letters
dated the date hereof and the Closing Date, in form
and substance reasonably satisfactory to counsel for
the Initial Purchaser.
D. The representations and warranties of Holdings and
CAF contained in this Agreement shall be true and cor-
rect in all material respects on and as of the date
hereof and on and as of the Closing Date as if made on
and as of the Closing Date; the statements of the
officers of Holdings, CAF and the Company made
pursuant to any certificate delivered in accordance
with the provisions hereof shall be true and correct
on and as of the date made and on and as of the
Closing Date; Holdings, CAF and the Company shall
have performed all covenants and agreements and sat-
isfied all conditions on their part to be performed or
satisfied hereunder at or prior to the Closing Date;
and, except as described in the Final Memorandum
(exclusive of any amendment or supplement thereto
after the date hereof), subsequent to the date of the
most recent financial statements in such Final
Memorandum, there shall have been no event or
development, and no information shall have become
known, that, individually or in the aggregate, has or
would be reasonably likely to have a Material Adverse
Effect.
E. The sale of the Notes hereunder shall not be
enjoined (temporarily or permanently) on the Closing
Date.
F. Subsequent to the date of the most recent financial
statements in the Final Memorandum (exclusive of any
amendment or supplement thereto after the date
hereof), none of Holdings, CAF, the Company or the
Subsidiary shall have sustained any loss or
interference with respect to its business or
properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance,
or from any strike, labor dispute, slow down or work
stoppage or from any legal or governmental proceeding,
order or decree, which loss or interference, individ-
ually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
<PAGE>
G. The Initial Purchaser shall have received a cer-
tificate of CAF, dated the Closing Date, signed on
behalf of CAF by its Chairman of the Board, President
or any Senior Vice President and the Chief Financial
Officer, to the effect that:
1. The representations and warranties of Holdings and CAF contained in this
Agreement are true and correct on and as of the date hereof and on and as of
the Closing Date, and Holdings and CAF have performed all covenants
and agreements and satisfied all conditions on their part to
be performed or satisfied hereunder at or prior to the
Closing Date;
2. At the Closing Date, since the date hereof
or since the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), no event or development has
occurred, and no information has become known, that,
individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect; and
3. The sale of the Notes hereunder has not been
enjoined (temporarily or permanently).
H. On the Closing Date, the Initial Purchaser
shall have received the Registration Rights Agreement
executed by CAF and such agreement shall be in full force
and effect at all times from and after the Closing Date.
I. The Indenture shall have been duly
executed and delivered by CAF and the Trustee, and the Notes
shall have been duly executed and delivered by CAF and duly
authenticated by the Trustee.
J. The Initial Purchaser shall have received
a true and correct copy of the Credit Agreement, dated the
Closing Date, and there shall have been no material amend-
ments, alterations, modifications or waivers of any provi-
sions of the Credit Agreement, and there exists as of the
date hereof and on and as of the Closing Date (after giving
effect to the transactions contemplated by this Agreement
and the application of the proceeds received by CAF from the
sale of the Notes) no condition that would constitute a
Default or an Event of Default (each as defined in the
Credit Agreement) under the Credit Agreement.
K. The Initial Purchaser shall have received
a true and correct copy of the Acquisition Agreement and any
amendments thereto, and there shall have been no material
amendments, alterations, modifications or waivers of any
provisions of the Acquisition Agreement since the date of
this Agreement; all conditions to effect the Acquisition set
forth in the Acquisition Agreement shall have been satisfied
<PAGE>
without waiver.
L. Holdings, shall have received, and shall
have contributed to CAF as equity, at least $51 million from
the Equity Financing as contemplated by the Final
Memorandum.
M. On the Closing Date, the Initial Purchaser
shall have received an opinion from Valuation Research
Corporation, in form and substance satisfactory to the
Initial Purchaser, regarding the solvency of Holdings, CAF
and, at and as of the Effective Time, Holdings and the
Company immediately after the consummation of the
Acquisition, the relating financings and the other
transactions contemplated hereby and by the Acquisition
Agreement.
N. The Certificate of Merger with respect to
the Merger shall have been filed with the Secretary of State
of Delaware and the Clerk of the State Corporation Commis-
sion of the Commonwealth of Virginia and shall have become
effective.
On or before the Closing Date, the Initial Purchaser
and counsel for the Initial Purchaser shall have received such
further documents, opinions, certificates, letters and schedules
or instruments relating to the business, corporate, legal and
financial affairs of Holdings, CAF, the Company and the
Subsidiary as they shall have heretofore reasonably requested.
All such documents, opinions, certificates, letters,
schedules or instruments delivered pursuant to this Agreement
will comply with the provisions hereof only if they are reason-
ably satisfactory in all material respects to the Initial Pur-
chaser and counsel for the Initial Purchaser. Holdings, CAF and
the Company shall furnish to the Initial Purchaser such conformed
copies of such documents, opinions, certificates, letters,
schedules and instruments in such quantities as the Initial
Purchaser shall reasonably request.
8. Offering of Notes; Restrictions on Transfer. (a)
The Initial Purchaser represents and warrants that it is a QIB.
The Initial Purchaser agrees that (i) it has not and will not
solicit offers for, or offer or sell, the Notes by any form of
general solicitation or general advertising (as those terms are
used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act;
and (ii) it has and will solicit offers for the Notes only from,
and will offer the Notes only to (A) in the case of offers inside
the United States, (x) persons whom the Initial Purchaser
reasonably believes to be QIBs or, if any such person is buying
for one or more institutional accounts for which such person is
acting as fiduciary or agent, only when such person has
represented to the Initial Purchaser that each such account is a
<PAGE>
QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A, and, in each case, in
transactions under Rule 144A or (y) a limited number of other
institutional investors reasonably believed by the Initial
Purchaser to be Accredited Investors that, prior to their
purchase of the Notes, deliver to the Initial Purchaser a letter
containing the representations and agreements set forth in
Appendix A to the Final Memorandum and (B) in the case of offers
outside the United States, to persons other than U.S. persons
("foreign purchasers," which term shall include dealers or other
professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an
estate or trust)); provided, however, that, in the case of this
clause (B), in purchasing such Notes such foreign purchasers are
deemed to have represented and agreed as provided under the
caption "Transfer Restrictions" contained in the Final Memorandum
(or, if the Final Memorandum is not in existence, in the most
recent Memorandum).
(b) The Initial Purchaser represents and warrants
with respect to offers and sales outside the United States that
(i) it has and will comply with all applicable laws and regula-
tions in each jurisdiction in which it acquires, offers, sells or
delivers Notes or has in its possession or distributes any
Memorandum or any such other material, in all cases at its own
expense; (ii) the Notes have not been and will not be offered or
sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S
under the Act or pursuant to an exemption from the registration
requirements of the Act; (iii) it has offered the Notes and will
offer and sell the Notes (A) as part of its distribution at any
time and (B) otherwise until 40 days after the later of the
commencement of the offering and the Closing Date, only in
accordance with Rule 903 of Regulation S and, accordingly, nei-
ther it nor any persons acting on its behalf have engaged or will
engage in any directed selling efforts (within the meaning of
Regulation S) with respect to the Notes, and any such persons
have complied and will comply with the offering restrictions
requirement of Regulation S; (iv) it has (1) not offered or sold
and will not offer or sell in the United Kingdom, by means of any
document, any Securities other than to persons whose ordinary
business it is to buy and sell shares or debentures, whether as a
principal or agent, or in circumstances which do not constitute
an offer to the public within the meaning of the Companies Act
1985, as amended, (2) complied and will comply with all
applicable provisions of the Financial Services Act 1986 with
respect to anything done by it in relation to the Securities in,
from or otherwise involving the United Kingdom, and (3) only
issued or passed on and will only issue and pass on to any
persons in the United Kingdom any document received by it in
connection with the issue of the Securities if that person is of
a kind described in Article 9(3) of the Financial Services Act
1986 (Investment Advertisements) (Exemptions) Order 1988 or is a
person to whom the document may otherwise lawfully be issued or
<PAGE>
passed on; (v) it understands that the Securities have not been
and will not be registered under the Securities and Exchange Law
of Japan, and represents that it has not offered or sold, and
agrees that it will not offer or sell, any Securities, directly
or indirectly in Japan or to or from any resident of Japan except
(i) pursuant to an exemption from the registration requirements
of the Securities and Exchange Law of Japan and (ii) in
compliance with any other applicable requirements of Japanese
law; and (vi) it agrees that, at or prior to confirmation of
sales of the Notes, it will have sent to each distributor, dealer
or person receiving a selling concession, fee or other
remuneration that purchases Notes from it during the restricted
period a confirmation or notice to substantially the following
effect:
"The Securities covered hereby have not been reg-
istered under the United States Securities Act of
1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of
the distribution of the Securities at any time or
(ii) otherwise until 40 days after the later of the
commencement of the offering and the closing date
of the offering, except in either case in
accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used
above have the meaning given to them in Regulation
S."
Terms used in this Section 8 and not defined in this Agreement
have the meanings given to them in Regulation S.
9. Indemnification and Contribution. Holdings and
CAF, jointly and severally, agree to indemnify and hold harmless
the Initial Purchaser, and each person, if any, who controls the
Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims,
damages or liabilities to which the Initial Purchaser or such
controlling person may become subject under the Act, the Exchange
Act or otherwise, insofar as any such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon:
1. any untrue statement or alleged untrue
statement of any material fact contained in any Memorandum
or any amendment or supplement thereto or any application
or other document, or any amendment or supplement thereto,
executed by Holdings, CAF or the Company or based upon
written information furnished by or on behalf of Holdings,
CAF or the Company filed in any jurisdiction in order to
qualify the Notes under the securities or "Blue Sky" laws
thereof or filed with any securities association or secu-
rities exchange (each an "Application"); or
<PAGE>
2. the omission or alleged omission to state, in
any Memorandum or any amendment or supplement thereto or any
Application, a material fact required to be stated therein
or necessary to make the statements therein not misleading,
and will reimburse, as incurred, the Initial Purchaser and each
such controlling person for any reasonable legal or other
expenses incurred by the Initial Purchaser or such controlling
person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such
loss, claim, damage, liability or action; provided, however,
Holdings and CAF will not be liable in any such case to the
extent that any such loss, claim, damage, or liability arises out
of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Memorandum
or any amendment or supplement thereto or any Application in
reliance upon and in conformity with written information
concerning the Initial Purchaser furnished to Holdings and CAF by
the Initial Purchaser specifically for use therein provided,
further, that such indemnity agreement with respect to any untrue
statement or omission or alleged untrue statement or omission in
any Preliminary Memorandum shall not enure to the benefit of the
Initial Purchaser, or such controlling person, if (i) Holdings
and CAF notify the Initial Purchaser in writing of any change to
be made in the Final Memorandum and (ii) the person asserting a
claim giving rise to liability hereunder did not receive a copy
of the Final Memorandum at or prior to the closing of the sale of
the Notes to such person and the untrue statement or omission or
alleged untrue statement or omission contained in such
Preliminary Memorandum was corrected in the Final Memorandum
unless such failure to deliver the Final Memorandum was the
result of noncompliance by Holdings and CAF with Section 5(d).
This indemnity agreement will be in addition to any liability
that Holdings and CAF may otherwise have to the indemnified
parties. Holdings and CAF shall not be liable under this
Section 9 for any settlement of any claim or action effected
without their prior written consent, which shall not be
unreasonably withheld.
B. The Initial Purchaser agrees to indemnify and hold
harmless Holdings and CAF, their respective directors, its
officers and each person, if any, who controls Holdings or CAF
within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities
to which Holdings or CAF or any such director, officer or
controlling person may become subject under the Act, the Exchange
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon (i) any untrue statement or alleged untrue statement
of any material fact contained in any Memorandum or any amendment
or supplement thereto or any Application, or (ii) the omission or
the alleged omission to state therein a material fact required to
be stated in any Memorandum or any amendment or supplement
thereto or any Application, or necessary to make the statements
<PAGE>
therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning such
Initial Purchaser, furnished to Holdings or CAF by the Initial
Purchaser specifically for use therein; and subject to the
limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses incurred by
Holdings or CAF or any such director, officer or controlling
person in connection with investigating or defending against or
appearing as a third party witness in connection with any such
loss, claim, damage, liability or action in respect thereof.
This indemnity agreement will be in addition to any liability
that the Initial Purchaser may otherwise have to the indemnified
parties. The Initial Purchaser shall not be liable under this
Section 9 for any settlement of any claim or action effected
without its consent, which shall not be unreasonably withheld.
Holdings, CAF and the Company shall not, without the prior
written consent of the Initial Purchaser, effect any settlement
or compromise of any pending or threatened proceeding in respect
of which the Initial Purchaser is or could have been a party, or
indemnity could have been sought hereunder by the Initial
Purchaser, unless such settlement (A) includes an unconditional
written release of the Initial Purchaser, in form and substance
reasonably satisfactory to the Initial Purchaser, from all
liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an
admission of fault, culpability or failure to act by or on
behalf of the Initial Purchaser.
C. Promptly after receipt by an indemnified party under
this Section 9 of notice of the commencement of any action for
which such indemnified party is entitled to indemnification under
this Section 9, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party of the
commencement thereof in writing; but the omission to so notify
the indemnifying party (i) will not relieve it from any liability
under paragraph (a) or (b) above unless and to the extent such
failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any
indemnified party other than the indemnification obligation
provided in paragraphs (a) and (b) above. In case any such
action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and,
to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified
party; provided, however, that if (i) the use of counsel chosen
by the indemnifying party to represent the indemnified party
would present such counsel with a conflict of interest, (ii) the
defendants in any such action include both the indemnified party
<PAGE>
and the indemnifying party and the indemnified party shall have
been advised by counsel that there may be one or more legal
defenses available to it and/or other indemnified parties that
are different from or additional to those available to the
indemnifying party, or (iii) the indemnifying party shall not
have employed counsel reasonably satisfactory to the indemnified
party to represent the indemnified party within a reasonable time
after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the
indemnifying party shall not have the right to direct the defense
of such action on behalf of such indemnified party or parties and
such indemnified party or parties shall have the right to select
separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel
appointed to defend such action, the indemnifying party will not
be liable to such indemnified party under this Section 9 for any
legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party
in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in
accordance with the proviso to the immediately preceding sentence
(it being understood, however, that in connection with such
action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar
actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Initial Purchaser
in the case of paragraph (a) of this Section 9 or Holdings and
CAF in the case of paragraph (b) of this Section 9, representing
the indemnified parties under such paragraph (a) or para-
graph (b), as the case may be, who are parties to such action or
actions) or (ii) the indemnifying party has authorized in writing
the employment of counsel for the indemnified party at the
expense of the indemnifying party. After such notice from the
indemnifying party to such indemnified party, the indemnifying
party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party
(which consent shall not be unreasonably withheld), unless such
indemnified party waived in writing its rights under this
Section 9, in which case the indemnified party may effect such a
settlement without such consent.
D. In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 9 is
unavailable to, or insufficient to hold harmless, an indemnified
party in respect of any losses, claims, damages or liabilities
(or actions in respect thereof), each indemnifying party, in
order to provide for just and equitable contribution, shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is
<PAGE>
appropriate to reflect (i) the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified
party on the other from the offering of the Notes or (ii) if the
allocation provided by the foregoing clause (i) is not permitted
by applicable law, not only such relative benefits but also the
relative fault of the indemnifying party or parties on the one
hand and the indemnified party on the other in connection with
the statements or omissions or alleged statements or omissions
that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof). The relative benefits received by
Holdings, CAF and the Company on the one hand and the Initial
Purchaser on the other shall be deemed to be in the same
proportion as the total net proceeds from the Offering (before
deducting expenses) received by CAF bear to the total discounts
and commissions received by the Initial Purchaser. The relative
fault of the parties shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a
material fact relates to information supplied by Holdings, CAF
and the Company on the one hand, or the Initial Purchaser on the
other, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement
or omission or alleged statement or omission, and any other
equitable considerations appropriate in the circumstances. The
parties agree that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita
allocation or by any other method of allocation that does not
take into account the equitable considerations referred to in the
first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), the Initial Purchaser shall not
be obligated to make contributions hereunder that in the
aggregate exceed the total discounts, commissions and other
compensation received by the Initial Purchaser under this
Agreement, less the aggregate amount of any damages that the
Initial Purchaser has otherwise been required to pay by reason of
the untrue or alleged untrue statements or the omissions or
alleged omissions to state a material fact, and 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. For purposes of this paragraph (d), each
person, if any, who controls the Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange
Act shall have the same rights to contribution as the Initial
Purchaser, and each director of Holdings, CAF or the Company,
each officer of Holdings, CAF or the Company and each person, if
any, who controls Holdings, CAF or the Company within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, shall
have the same rights to contribution as Holdings, CAF or the
Company.
10. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other
statements of the Companies and the Company, their officers and
<PAGE>
the Initial Purchaser set forth in this Agreement or made by or
on behalf of them pursuant to this Agreement shall remain in full
force and effect, regardless of (i) any investigation made by or
on behalf of the Companies, the Company, any of their respective
officers or directors, the Initial Purchaser or any controlling
person referred to in Section 9 hereof and (ii) delivery of and
payment for the Notes. The respective agreements, covenants,
indemnities and other statements set forth in Sections 6, 9 and
15 hereof shall remain in full force and effect, regardless of
any termination or cancellation of this Agreement.
11. Termination. This Agreement may be terminated in
the sole discretion of the Initial Purchaser by notice to
Holdings and CAF given prior to the Closing Date in the event
that Holdings, CAF or the Company shall have failed, refused or
been unable to perform all obligations and satisfy all conditions
on its part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Closing Date:
1. any of the Company or the Subsidiary shall
have sustained any loss or interference with respect to its
businesses or properties from fire, flood, hurricane,
accident or other calamity, whether or not covered by
insurance, or from any strike, labor dispute, slow down or
work stoppage or any legal or governmental proceeding, which
loss or interference, in the sole judgment of the Initial
Purchaser, has had or has a Material Adverse Effect, or
there shall have been, in the sole judgment of the Initial
Purchaser, any event or development that, individually or in
the aggregate, has or could be reasonably likely to have a
Material Adverse Effect (including without limitation a
change in control of the Company or the Subsidiary), except
in each case as described in the Final Memorandum (exclusive
of any amendment or supplement thereto);
2. trading in securities of the Company or in
securities generally on the New York Stock Exchange,
American Stock Exchange or the NASDAQ National Market shall
have been suspended or minimum or maximum prices shall have
been established on any such exchange or market;
3. a banking moratorium shall have been declared
by New York or United States authorities;
4. there shall have been (A) an outbreak or
escalation of hostilities between the United States and any
foreign power, or (B) an outbreak or escalation of any other
insurrection or armed conflict involving the United States
or any other national or international calamity or emer-
gency, or (C) any material change in the financial markets
of the United States which, in the case of (A), (B) or (C)
above and in the sole judgment of the Initial Purchaser,
makes it impracticable or inadvisable to proceed with the
offering or the delivery of the Notes as contemplated by the
<PAGE>
Final Memorandum; or
5. any securities of the Company shall have been
downgraded or placed on any "watch list" for possible
downgrading by any nationally recognized statistical rating
organization.
B. Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any other
party except as provided in Section 10 hereof.
12. Information Supplied by the Initial Purchaser.
The statements set forth in the last paragraph on the front cover
page and in the second and third sentences of the third paragraph
under the heading "Private Placement" in the Final Memorandum (to
the extent such statements relate to the Initial Purchaser)
constitute the only information furnished by the Initial
Purchaser to the Company for the purposes of Sections 2(a) and 9
hereof.
13. Notices. All communications hereunder shall be
in writing and, if sent to the Initial Purchaser, shall be mailed
or delivered to BT Securities Corporation, 130 Liberty Street,
New York, New York 10006, Attention: Corporate Finance
Department; if sent to Holdings or CAF, shall be mailed or
delivered to Holdings or CAF at 230 East High Street,
Charlottesville, Virginia 22902, Attention: Stephen M. Burns, or
if sent to the Company, shall be mailed or delivered to the
Company at 311 Smith Industrial Boulevard, Dalton, Georgia 30722,
Attention: President, in either case, with a copy to McGuire,
Woods, Battle & Boothe, L.L.P., 901 E. Cary Street, 1 James
Center, Richmond, VA 23219, Attention: Leslie A. Grandis, Esq.
All such notices and communications shall be deemed to
have been duly given: when delivered by hand, if personally
delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; and one business day after being
timely delivered to a next-day air courier.
14. Successors. This Agreement shall inure to the
benefit of and be binding upon the Initial Purchaser, Holdings,
CAF, the Company and their respective successors and legal
representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in
respect of this Agreement, or any provisions herein contained;
this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of
such persons and for the benefit of no other person except that
(i) the indemnities of the Companies and the Company contained in
Section 9 of this Agreement shall also be for the benefit of any
person or persons who control the Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange
Act and (ii) the indemnities of the Initial Purchaser contained
<PAGE>
in Section 9 of this Agreement shall also be for the benefit of
the directors of the Company, its officers and any person or
persons who control the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act. No purchaser of
Notes from the Initial Purchaser will be deemed a successor
because of such purchase.
15.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION
OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS
THEREOF RELATING TO CONFLICTS OF LAW.
16. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
17.
If the foregoing correctly sets forth our understand-
ing, please indicate your acceptance thereof in the space pro-
vided below for that purpose, whereupon this letter shall con-
stitute a binding agreement among Holdings, CAF and the Initial
Purchaser.
Very truly yours,
CAF HOLDINGS, INC.
By: /s/ Stephen M. Burns
Name:
Title: President
CAF ACQUISITION CORPORATION
By: /s/ Stephen M. Burns
Name:
Title: President
<PAGE>
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT SECURITIES CORPORATION
By: /s/ Julie Persily
__________________________
Name:
Title: Vice President
<PAGE>
EXHIBIT A
ASSUMPTION AGREEMENT
Collins & Aikman Floorcoverings, Inc. (the "Company"), the surviving
corporation of the merger of the Company and CAF Acquisition Corporation
("CAF"), hereby expressly assumes all obligations and liabilities of CAF under
the Purchase Agreement, dated January 29, 1997 (the "Purchase Agreement"), by
and among CAF, CAF Holdings, Inc. and BT Securities Corporation (a copy of which
is attached hereto as Exhibit A).
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute and deliver this Assumption Agreement as of February 6, 1997, which is
the date of the merger.
COLLINS & AIKMAN FLOORCOVERINGS, INC.
By:
Name:
Title:
-19-
<PAGE>
Exhibit 2.1
================================================================================
ACQUISITION AGREEMENT,
dated as of December 9, 1996,
among
COLLINS & AIKMAN PRODUCTS CO.,
COLLINS & AIKMAN FLOOR COVERINGS GROUP, INC.,
COLLINS & AIKMAN FLOOR COVERINGS, INC.,
CAF HOLDINGS, INC.
and
CAF ACQUISITION CORP.
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
(Not a part of the Agreement)
<TABLE>
<S> <C> <C>
I. PURCHASE AND SALE OF SHARES ............................................ 1
1.1. Purchase and Sale of Shares.................................... 1
1.2. Unadjusted Purchase Price...................................... 1
1.3. Purchase Price Adjustment...................................... 3
1.4. Intercompany Obligations....................................... 5
II. REPRESENTATIONS AND WARRANTIES......................................... 5
2.1. Representations and Warranties of Seller....................... 5
2.1.1. Corporate Matters...................................... 5
2.1.2. The Shares............................................. 6
2.1.3. Officers and Directors................................. 7
2.1.4. Authorization and Effect of Agreement.................. 7
2.1.5. No Restrictions........................................ 7
2.1.6. Financial Statements................................... 8
2.1.7. Conduct of the Business Since the Balance Sheet Date... 8
2.1.8. Compliance with Laws................................... 9
2.1.9. Tangible Personal Property; Title to Assets............ 9
2.1.10. Real Property.......................................... 10
2.1.11. Insurance.............................................. 10
2.1.12. Intellectual Property.................................. 10
2.1.13. Litigation; Decrees.................................... 11
2.1.14. Contract Rights........................................ 11
2.1.15. Employee Plans......................................... 12
2.1.16. Taxes.................................................. 14
2.1.17. Environmental Matters.................................. 16
2.1.18. No Undisclosed Liabilities............................. 17
2.1.19. Assets................................................. 17
2.1.20. Affiliate Interests.................................... 17
2.1.21. Brokers................................................ 18
2.1.22. Warranty Claims and Liabilities........................ 18
2.1.23. Labor Matters.......................................... 18
2.1.24. Supplier Relationships................................. 18
2.2. Representations and Warranties of Purchaser.................... 18
2.2.1. Corporate Organization................................. 18
2.2.2. Authorization and Effect of Agreement.................. 18
2.2.3. No Restrictions........................................ 19
2.2.4. Financial Capacity..................................... 19
2.3. Certain Limitations on Representations and Warranties.......... 20
III. COVENANTS............................................................. 20
3.1. Investigation by Purchaser..................................... 20
3.2. Press Releases................................................. 21
3.3. Regulatory Filings............................................. 22
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
3.4. Injunctions.................................................... 22
3.5. Operation of the Business...................................... 23
3.6. Satisfaction of Conditions..................................... 24
3.7. Negotiations With Others....................................... 24
3.8. Certain Additional Covenants................................... 24
3.9. Efforts to Consummate.......................................... 25
3.10. Resignations................................................... 25
IV. THE CLOSING............................................................ 26
4.1. Conditions Precedent to Obligations of Purchaser, Parent and Seller... 26
4.2. Additional Conditions Precedent to Obligations of Purchaser
and Parent.................................................... 26
4.2.1. No Material Misrepresentation or Breach................. 26
4.2.2. Transfer Documents, Etc................................. 26
4.2.3. No Material Adverse Change.............................. 27
4.2.4. No Market Change........................................ 27
4.2.5. Other Documents......................................... 27
4.3. Additional Conditions Precedent to Obligations of Seller........ 27
4.3.1. No Material Misrepresentation or Breach................. 27
4.3.2. Estimated Purchase Price................................ 28
4.3.3. Other Documents......................................... 28
4.4. The Closing..................................................... 28
4.5. Termination..................................................... 28
V. SURVIVAL AND INDEMNIFICATION............................................ 29
5.1. Survival of Representations, Warranties and Covenants........... 29
5.2. Limitations on Liability........................................ 30
5.3. Indemnification................................................. 31
5.4. Defense of Claims............................................... 33
VI. OTHER POST-CLOSING COVENANTS........................................... 35
6.1. Personnel Matters................................................ 35
6.1.1. Employees and Employee Benefit Plans..................... 35
6.1.2. Assumption of Obligations................................ 36
6.1.4. Employment and Plan Amendments or Terminations........... 37
6.1.5. Transitional Matters..................................... 38
6.1.6. Employee Information..................................... 38
6.2. General Post-Closing Matters..................................... 38
6.2.1. Post-Closing Notifications............................... 38
6.2.2. Company Name............................................. 38
6.2.3. Access................................................... 38
6.2.4. Certain Tax Matters...................................... 40
6.2.5. Insurance................................................ 45
6.2.6. Receivables.............................................. 46
6.2.7. Master Contracts, Etc.................................... 46
VII. MISCELLANEOUS PROVISIONS.............................................. 47
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
7.1. Notices......................................................... 47
7.2. Expenses........................................................ 48
7.3. Successors and Assigns.......................................... 49
7.4. Waiver.......................................................... 49
7.5. Entire Agreement................................................ 49
7.6. Amendments, Supplements, Etc.................................... 50
7.7. Rights of the Parties........................................... 50
7.8. Further Assurances.............................................. 50
7.9. Applicable Law; Jurisdiction.................................... 50
7.10. Titles and Headings............................................. 50
7.11. Certain Interpretive Matters and Definitions.................... 50
</TABLE>
iii
<PAGE>
Table of Defined Terms
----------------------
(Not a Part of the Agreement)
<TABLE>
<CAPTION>
Section
-------
<S> <C>
Accountants.............................................................. 1.3(c)
Actual Purchase Price Adjustment Amount.................................. 1.3(a)
Affiliate............................................................... 7.11(a)
Agreement.......................................................... Introduction
Assets................................................................... 3.5(b)
Balance Sheet Date........................................................ 2.1.6
BASF..................................................................... 5.3(e)
BASF Claims.............................................................. 5.3(e)
Business............................................................... Recitals
C&A................................................................ Introduction
C&A Corp.............................................................. 2.1.16(i)
Closing Price............................................................ 1.2(a)
Closing Date Balance Sheet............................................... 1.3(a)
Closing Date............................................................. 4.4(a)
Closing.................................................................. 4.4(a)
Code.................................................................. 2.1.15(b)
Company................................................................ Recitals
Confidentiality Agreement................................................... 7.5
Contracts................................................................ 2.1.14
Direct Claim............................................................. 5.4(c)
Employee Plan......................................................... 2.1.15(a)
Employee.............................................................. 2.1.15(a)
Environment.............................................................. 2.1.17
Environmental Condition.................................................. 2.1.17
Environmental Law........................................................ 2.1.17
ERISA................................................................. 2.1.15(a)
Estimated Purchase Price Adjustment Amount............................... 1.2(b)
Estimated Purchase Price................................................. 1.2(b)
Financial Statements...................................................... 2.1.6
Floorcoverings UK...................................................... Recitals
Floorcoverings US...................................................... Recitals
Form 8023.............................................................. 6.2.4(i)
Former Employee....................................................... 2.1.15(a)
GAAP...................................................................... 2.1.6
Governmental Entity....................................................... 2.1.5
Balance Sheet............................................................. 2.1.6
Historical Financial Statements........................................... 2.1.6
HSR Act................................................................... 2.1.5
Indebtedness............................................................. 1.2(a)
Indemnifiable Losses..................................................... 5.2(a)
Indemnifying Party....................................................... 5.2(a)
Indemnitee............................................................... 5.2(a)
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Indemnity Payment........................................................ 5.2(a)
Insurance................................................................ 6.2.5
Insurance Policies...................................................... 6.1.11
Intellectual Property................................................... 2.1.12
Knowledge of Seller....................................................... 7.11
Last Offer.............................................................. 1.3(c)
Law...................................................................... 2.1.5
Leased Real Property.................................................... 2.1.10
Legal Proceedings....................................................... 2.1.13
Liens................................................................. 2.1.2(a)
Master Contracts......................................................... 6.2.7
Material Adverse Effect............................................... 2.1.1(b)
Maximum APD Liability Amount............................................. 6.2.8
MSA...................................................................... 4.2.4
NCA...................................................................... 4.2.4
Net Working Capital Amount.............................................. 1.2(a)
Non-Prevailing Party.................................................... 1.3(c)
NWC Over/Under Amount................................................... 1.2(a)
Owned Real Property..................................................... 2.1.10
Orders.................................................................. 2.1.13
Parent............................................................ Introduction
Permit................................................................... 2.1.5
Permitted Liens.......................................................... 2.1.9
Post-Closing Affiliates.................................................... 1.4
Post-Closing Covenants.................................................. 5.1(b)
Pre-Closing Tax Period................................................ 6.2.4(b)
Prevailing Party........................................................ 1.3(c)
Products.............................................................. Recitals
Purchase Price.......................................................... 1.2(a)
Purchaser......................................................... Introduction
Purchaser Companies..................................................... 5.2(e)
Push-Down Liabilities................................................... 1.2(a)
Records............................................................... 6.2.3(a)
Retirement Plans......................................................... 6.1.3
Section 338(h)(10) Election........................................... 6.2.4(h)
Seller............................................................ Introduction
Seller Trade Name........................................................ 6.2.2
Shares................................................................ Recitals
Surety Obligations.................................................... 6.2.7(a)
Taxes................................................................ 2.1.16(j)
Tax Returns............................................................. 2.1.16
Tax Ruling........................................................... 2.1.16(d)
Third Party Claim....................................................... 5.2(a)
TNA...................................................................... 4.2.5
Transaction Documents.................................................... 2.1.4
Transfer.............................................................. Recitals
UST's................................................................... 2.1.17
Workpapers.............................................................. 1.3(b)
</TABLE>
v
<PAGE>
ACQUISITION AGREEMENT
---------------------
This Acquisition Agreement (this "Agreement") is made and entered into as
of the 9th day of December, 1996, among Collins & Aikman Products Co., a
Delaware corporation ("C&A"), Collins & Aikman Floor Coverings Group, Inc., a
Delaware corporation ("Seller"), Collins & Aikman Floor Coverings, Inc., a
Delaware corporation ("Floorcoverings US"), CAF Holdings, Inc., a Virginia
corporation ("Parent"), and CAF Acquisition Corporation, a Virginia corporation
("Purchaser").
RECITALS:
--------
A. Floorcoverings US and its subsidiary Collins & Aikman United Kingdom
Limited, a company incorporated in England ("Floorcoverings UK") (together with
Floorcoverings US, the "Company"), are presently engaged in the business (the
"Business") of designing, manufacturing and marketing commercial carpets and
related products ("Products") and performing certain related services;
B. Seller is the record and beneficial owner of all of the issued and
outstanding shares of Common Stock, par value $0.01 per share, of Floorcoverings
US (the "Shares");
C. Seller desires to sell, assign and deliver ("Transfer") to Purchaser,
and Purchaser desires to purchase and accept from Seller, the Shares on the
terms and subject to the conditions set forth in this Agreement; and
D. C&A, as the sole shareholder of Seller, and Parent, as the sole
shareholder of Purchaser, each desire that such transaction be consummated on
such terms and subject to such conditions.
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE OF SHARES
---------------------------
1.1. Purchase and Sale of Shares. On the terms and subject to the
---------------------------
conditions hereof, at the Closing, Seller will Transfer to Purchaser, and
Purchaser will purchase and accept from Seller, the Shares, free and clear of
all Liens, for the Purchase Price.
1.2. Unadjusted Purchase Price. (a) The purchase price for the purchase
-------------------------
and sale of the Shares will be U.S. $197,000,000 (the "Closing Price")
(including $27,000,000 paid in consideration of the execution and delivery of
the TNA), less the amount of any Indebtedness outstanding as of the Closing
(calculated after giving effect to any payments or prepayments of any such
Indebtedness at or immediately prior to or after the
<PAGE>
Closing (provided, however, that nothing in this Section 1.2 will be deemed to
constitute an authorization for the incurrence or maintenance of any such
Indebtedness by the Company)), and increased or decreased, as the case may be,
by the amount by which the Net Working Capital Amount (determined as herein
provided) as of the opening of business on Closing Date exceeds or is less than,
as the case may be, $28,033,000 as such number may be adjusted, however, to
exclude the average of month end balances of all assets and liabilities in
respect of Retained Claims from November 1995 to October 1996) (such amount, the
"NWC Over/Under Amount") (the Closing Price, as so adjusted, being hereafter
referred to as the "Purchase Price"). For purposes of this Agreement, (x)
"Indebtedness" means the principal amount of indebtedness for borrowed money and
capitalized lease obligations that in accordance with GAAP are required to be
reflected as indebtedness on a consolidated balance sheet of the Company, (y)
the term "Net Working Capital Amount" means an amount, calculated in accordance
with the accounting principles set forth in Schedule 1.3(a), equal to (1) the
sum of cash and cash equivalents, accounts receivable, other receivables,
inventory and prepaid and other current assets, less (2) the amount of all
accounts payable, accrued expenses and other current liabilities, all as
determined in accordance with the principles, policies and procedures used in
preparing the Balance Sheet and Schedule 1.3(a), but in all events excluding all
liabilities relating to Taxes to be paid by C&A or Seller, or for which C&A or
Seller is responsible, pursuant to this Agreement, Push Down Liabilities and all
assets and liabilities in respect of Retained Claims and (z) the term "Push
Down" Liabilities" means the categories of liabilities listed as such on
Schedule 1.2(a).
(b) Not less than two business days prior to the Closing Date, Seller and
Purchaser will jointly prepare a consolidated balance sheet which will set forth
their estimates of the Indebtedness and the NWC Over/Under Amount (collectively,
the "Estimated Purchase Price Adjustment Amounts"), determined in accordance
with Section 1.2(a) as if they were the Actual Purchase Price Adjustment
Amounts, but based upon their review of monthly financial information then
available to Seller and Purchaser and their respective inquiries of personnel
responsible for the preparation of financial information relating to the Company
in the ordinary course thereof. If the parties are unable so to agree on the
Estimated Purchase Price Adjustment Amounts, then the amounts thereof as
determined by Seller in good faith will be the Estimated Purchase Price
Adjustment Amounts for all purposes of this Agreement, provided, however, that
nothing herein will limit the relative rights and obligations of the parties
under Section 1.3. The Closing Price will be reduced or increased dollar-for-
dollar, as the case may be (as so adjusted, the "Estimated Purchase Price"), to
reflect the Estimated Purchase Price Adjustment Amounts as calculated on the
basis set forth in the second sentence of Section 1.3(a).
2
<PAGE>
(c) On the Closing Date, Purchaser will pay by wire transfer of immediately
available funds to such account as Seller has theretofore designated an amount
equal to the Estimated Purchase Price.
1.3. Purchase Price Adjustment. (a) In order to determine the Purchase
-------------------------
Price, the Estimated Purchase Price will be (i) increased by the amount, if any,
by which the NWC Over/Under Amount as finally determined in accordance with this
Section 1.3 exceeds the corresponding amount thereof used in determining the
Estimated Purchase Price Adjustment Amounts, (ii) increased by the amount, if
any, by which the Indebtedness used in determining the Estimated Purchase Price
Adjustment Amounts exceeds the amount of Indebtedness as finally determined in
accordance with this Section 1.3, (iii) decreased by the amount, if any, by
which the NWC Over/Under Amount as finally determined in accordance with this
Section 1.3 is less than the corresponding amount thereof used in so determining
the Estimated Purchase Price Adjustment Amounts, and (iv) decreased by the
amount, if any, by which the amount of Indebtedness as finally determined in
accordance with this Section 1.3 exceeds the corresponding amount thereof used
in determining the Estimated Purchase Price Adjustment Amounts. For purposes of
this Agreement, (x) the adjustment referred to in the immediately preceding
sentence will be finally calculated on a net basis and (y) all determinations of
the actual amounts thereof (the "Actual Purchase Price Adjustment Amounts") will
be determined by the amounts thereof required to be shown on a consolidated
balance sheet of the Company prepared in accordance with this Section 1.3 as of
the opening of business on the Closing Date (the "Closing Date Balance Sheet")
on a basis consistent with, and using the same accounting principles, policies,
practices and procedures used in preparing, the Balance Sheet and otherwise in
accordance with the principles set forth in Schedule 1.3(a) and Section 1.2(a).
(b) Within 60 calendar days after the Closing Date, Seller will in good
faith prepare and deliver, or cause to be prepared and delivered, to Purchaser
an unaudited Closing Date Balance Sheet setting forth the Actual Purchase Price
Adjustment Amounts. Seller and its authorized representatives will be entitled
to review, during normal business hours, the books, records and work papers of
the Company to prepare the Closing Date Balance Sheet and to determine the
Actual Purchase Price Adjustment Amounts. Without limiting the generality or
effect of any other provision hereof, Purchaser will (i) provide Seller and its
representatives access, during normal business hours, to the facilities,
personnel and accounting and other records of the Company to the extent
reasonably determined by Seller to be necessary to permit Seller to prepare or
have prepared the Closing Date Balance Sheet and to compute the Actual Purchase
Price Adjustment Amounts as herein provided; provided, however, that Seller will
conduct any such review in a manner that does not unreasonably interfere with
the conduct of the Business by the Company after the Closing, and (ii) take such
actions as may be reasonably requested by Seller
3
<PAGE>
to close, or to assist Seller in closing, as of the opening of business on the
Closing Date, the books and accounting records of the Company and otherwise
reasonably to cooperate with Seller and its representatives in the preparation
of the Closing Date Balance Sheet. Concurrently with the delivery of the
Closing Date Balance Sheet, Seller will use its reasonable efforts to cause
Arthur Andersen L.L.P. to provide Purchaser access to any of such firm's
workpapers, trial balances and similar materials prepared in connection with
such firm's audits or reviews of any of the Financial Statements (the
"Workpapers").
(c) If, within 30 calendar days after the date of Seller's delivery of its
computation of the Actual Purchase Price Adjustment Amounts, Purchaser
determines in good faith that such computations are inaccurate, Purchaser will
give written notice to Seller within such 30 calendar day period (i) setting
forth Purchaser's computation of Actual Purchase Price Adjustment Amounts and
(ii) specifying in reasonable detail Purchaser's basis for its disagreement with
Seller's computations. The failure by Purchaser so to express its disagreement
or provide such specification within such 30 calendar day period will constitute
Purchaser's acceptance of Seller's computation of the Actual Purchase Price
Adjustment Amounts. If Purchaser and Seller are unable to resolve any
disagreement between them within ten calendar days after the giving of notice of
such disagreement, the items in dispute will be referred for determination to
the Charlotte, North Carolina office of KPMG Peat Marwick LLP (the
"Accountants") as promptly as practicable. The Accountants will make a
determination as to each of the items in dispute, which determination will be
(A) in writing, (B) furnished to each of the parties hereto as promptly as
practicable after the items in dispute have been referred to the Accountants,
(C) made in accordance with this Agreement, and (D) conclusive and binding upon
each of the parties hereto. In connection with their determination of the
disputed items, the Accountants will be entitled to rely on the Workpapers and
the Company's or C&A's, as the case may be, books and records, and the fees and
expenses of the Accountants will be shared equally by Purchaser and Seller
(except as provided below). Purchaser and Seller will use reasonable efforts to
cause the Accountants to render their decision as soon as practicable, including
without limitation by promptly complying with all reasonable requests by the
Accountants for information, books, records and similar items. If the
determination of the Accountants represents an outcome more favorable to either
Purchaser or Seller than the midpoint of such parties' last written settlement
offers related to all items in dispute, in the aggregate, submitted to the other
party at least two calendar days before the referral of the matter to the
Accountants (each a "Last Offer"), then the party obtaining such favorable
result will be deemed the "Prevailing Party" and the other party will be deemed
the "Non-Prevailing Party". For purposes hereof, all of the fees and expenses
of the Accountants, will be borne by the Non-Prevailing Party. No party will
disclose to the Accountants,
4
<PAGE>
and the Accountants will not consider for any purpose, any settlement offer
(other than the Last Offer) made by any party.
(d) To the extent that the Actual Purchase Price Adjustment Amounts,
calculated on a net basis, determined as provided in this Section 1.3 is more or
less than the Estimated Net Purchase Price Adjustment Amounts, Seller or
Purchaser, as applicable, will, within ten calendar days after the final
determination of the Actual Purchase Price Adjustment Amounts, calculated on a
net basis, pursuant to this Section 1.3, make payment by wire transfer of
immediately available funds of the amount of such difference, together with
interest thereon from the Closing Date to the date of payment (at a rate equal
to Chase Manhattan Bank's prime rate, as publicly announced and in effect from
time to time during such period, plus 2.0%, calculated on the basis of the
actual number of days elapsed over 365), to such account as has been designated
by Purchaser or Seller, as applicable.
1.4. Intercompany Obligations. Notwithstanding any other provision
------------------------
hereof, any amount paid or accrued by Seller or any of its Affiliates other than
the Company (collectively, "Post-Closing Affiliates") in respect of liabilities
or obligations of the Company of a type that would be shown on a consolidated
balance sheet of the Company as "Accounts Receivable-Intercompany" or "Accounts
Payable-Intercompany" will be settled at or prior to the Closing and will not be
reflected in the Closing Date Balance Sheet. Effective immediately after the
Closing, all intercompany liabilities and obligations owing from Seller or any
Post-Closing Affiliate to the Company or owing from the Company to Seller or any
Post-Closing Affiliate that is not settled as contemplated by the immediately
preceding sentence will be netted against each other and the net balance thereof
will be discharged and deemed forgiven without further action or payment and all
such amounts will be excluded from the determination of the Net Working Capital
Amount or Indebtedness under Sections 1.2 and 1.3. As a result, immediately
following the Closing, there will be no further liability or obligation in
respect of any such matters between Seller or any Post-Closing Affiliate, on the
one hand, and the Company on the other hand, except as expressly provided
herein. Any holder of a note or other evidence of indebtedness deemed settled
pursuant to this Section 1.4 will surrender such note or other evidence of
indebtedness to the obligor thereon.
II. REPRESENTATIONS AND WARRANTIES
------------------------------
2.1. Representations and Warranties of Seller and C&A. Subject to Section
------------------------------------------------
2.3, Seller and C&A, jointly and severally, represent and warrant to Purchaser
as follows:
2.1.1. Corporate Matters. (a) Each of C&A and Seller is a corporation
-----------------
duly organized, validly existing and in good standing under the Law of the State
of Delaware and Seller
5
<PAGE>
has the requisite corporate power to own and hold the Shares. Each of
Floorcoverings US and Floorcoverings UK is a corporation duly organized, validly
existing and in good standing under the Laws of its jurisdiction of
incorporation.
(b) Each of Floorcoverings US and Floorcoverings UK has the requisite
corporate power and authority to own, lease or otherwise hold the assets owned,
leased or otherwise held by it and to carry on its business as presently
conducted, and is duly qualified to conduct business as a foreign corporation in
each jurisdiction listed on Schedule 2.1.1. The jurisdictions listed in
Schedule 2.1.1 constitute all jurisdictions in which Floorcoverings US's or
Floorcoverings UK's ownership, leasing or holding of property or the nature or
conduct of the Business makes qualification to conduct business as a foreign
corporation necessary, except for such jurisdictions in which its failure to be
so qualified, individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect. For purposes of this Agreement, the term
"Material Adverse Effect" means an event, circumstance or occurrence that has a
material adverse effect on the Business or the consolidated financial condition
or results of operations of the Company.
2.1.2. The Shares. (a) Except as set forth on Schedule 2.1.5, Seller
----------
owns free and clear of any mortgages, liens, security interests or other
encumbrances (collectively, "Liens") the number of Shares listed in Schedule
2.1.2, which Shares represent all of the issued and outstanding shares of
capital stock of the Company.
(b) The Shares are duly authorized, validly issued and outstanding, fully
paid and nonassessable. The Shares have not been issued in violation of, and
are not subject to, any preemptive rights, and there are no outstanding
convertible or exchangeable securities, calls, options or similar Contracts
relating to the Shares or that may require the Company to issue to any person or
entity any shares of any of its capital stock. Except as listed or described on
Schedule 2.1.5, there are no voting trust or other Contracts restricting the
voting, dividend rights or disposition of the Shares.
(c) Except as set forth in Schedule 2.1.2(c), Seller owns the Shares
beneficially and of record free and clear of all Liens and at the Closing will
Transfer its entire right, title and interest in and to the Shares to Purchaser.
(d) The Company does not own, beneficially or of record, any stock or other
ownership interests in, or control, any other entity, other than Floorcoverings
UK, all of the issued and outstanding share capital of which is owned by
Floorcoverings US free and clear of all Liens (except as set forth on Schedule
2.1.2(d)); and, except as set forth on Schedule 2.1.2(d), there are no
outstanding convertible or exchangeable securities or agreements giving any
person or entity any right to acquire
6
<PAGE>
shares of capital stock of Floorcoverings UK and no voting trusts or other
Contracts restricting the voting, dividend rights or disposition of shares of
Floorcoverings UK.
2.1.3. Officers and Directors. Schedule 2.1.3 lists all officers and
----------------------
directors of Floorcoverings US and Floorcoverings UK as of the date hereof.
Seller will promptly notify Purchaser of any change in the information set forth
in Schedule 2.1.3 prior to the Closing.
2.1.4. Authorization and Effect of Agreement. Each of C&A and Seller has
-------------------------------------
the requisite corporate power to execute and deliver this Agreement and the
other agreements or instruments referred to herein (collectively, the
"Transaction Documents") and to perform the transactions contemplated hereby to
be performed by it. All necessary corporate action required to be taken under
the Delaware General Corporation Law for the due authorization of the execution
and delivery by each of C&A and Seller of the Transaction Documents to be
executed by either of them and the performance by each of C&A and Seller of the
transactions contemplated thereby to be performed by either of them has been
duly taken by C&A or Seller, as the case may be. The Transaction Documents have
been, or will be, as the case may be, duly executed and delivered by Seller or
C&A, as the case may be, and, assuming the due execution and delivery of the
Transaction Documents by Parent and Purchaser, constitute, or will constitute,
as the case may be, valid and binding obligations of each of C&A and Seller, as
applicable, enforceable in accordance with their terms.
2.1.5. No Restrictions. The execution and delivery of the Transaction
---------------
Documents by C&A and Seller to which they are parties does not, and the
performance by C&A and Seller of the transactions contemplated thereby to be
performed by them will not conflict with, or result in any violation of, or
constitute a default (with or without notice or lapse of time or both) under, or
give rise to a right of termination, cancellation or acceleration of any
obligation or the loss of a benefit under, any provision of the Certificate of
Incorporation or By-laws of Seller or C&A or the Company, or any Contract listed
or described or required to be listed or described on Schedule 2.1.14, or any
permit or approval ("Permit") issued under any domestic, foreign or other
statute, law, ordinance, rule, regulation, judgment, order, injunction, decree
or ruling or common law obligation ("Law") of any domestic, foreign or other
court, government, governmental agency, authority, entity or instrumentality
("Governmental Entity"), other than any such conflicts, violations or defaults
as are listed or described on Schedule 2.1.5 or which, individually or in the
aggregate, could not reasonably be expected to result in a material undisclosed
liability of the Company. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required to
be obtained or made by or with respect to Seller or the Company in connection
with the
7
<PAGE>
execution and delivery of the Transaction Documents by C&A and Seller or the
performance by C&A and Seller of the transactions contemplated thereby to be
performed by them, except (i) for the filing of a premerger notification report
by an Affiliate of Seller under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), if applicable in the circumstances, (ii)
for such of the foregoing as are listed or described on Schedule 2.1.5, and
(iii) for such consents, approvals, orders, authorizations of, or registrations,
declarations or filings with, any Governmental Entity, which, individually or in
the aggregate, if not obtained or made, could not reasonably be expected to
result in a material undisclosed liability of the Company.
2.1.6. Financial Statements. (a) Attached as Schedule 2.1.6(a) are the
--------------------
audited combined balance sheets of the Company as of January 28, 1995 and
January 27, 1996, the related audited combined statements of operations and cash
flows for the fiscal years then ended, accompanied by the accountant's reports
thereon, the unaudited combined balance sheet of the Company as of October 26,
1996 (the "Balance Sheet") and the unaudited combined statements of operations
for the nine month periods ended October 28, 1995 and October 26, 1996,
respectively (collectively, with the related notes, the "Financial Statements").
The Financial Statements present fairly, in all material respects, the
consolidated financial position of the Company as of the dates thereof and the
results of its operations and cash flows for the periods specified in conformity
with United States generally accepted accounting principles, consistently
applied ("GAAP"), except for the Push-Down Liabilities, except as set forth in
Schedule 1.3(a) and except, in the case of the unaudited statements, for normal
year-end adjustments. (For purposes of this Agreement, "Balance Sheet Date"
means October 26, 1996.)
(b) Attached as Schedule 2.1.6(b) are the audited consolidated balance
sheets of the Company as of January 28, 1995 and January 27, 1996, the related
audited consolidated statements of operations and cash flows for the fiscal
years then ended, accompanied by the accountant's reports thereon, the unaudited
consolidated balance sheet of the Company as of October 26, 1996 and the related
unaudited consolidated statements of operations and cash flows for the nine
month period ended October 28, 1995 and October 26, 1996 (collectively, with the
related notes, the "144A Financial Statements"). The 144A Financial Statements
present fairly, in all material respects, the consolidated financial position of
the Company as of the date thereof and the results of its operations and cash
flows for the periods specified in conformity with GAAP, except, in the case of
the unaudited statements, for normal year-end adjustments.
2.1.7. Conduct of the Business Since the Balance Sheet Date. Except as
----------------------------------------------------
listed or described on Schedule 2.1.7, since the Balance Sheet Date, (a) the
Company has conducted the
8
<PAGE>
Business only in the ordinary course, consistent with past practice, (b) the
Company has not taken any action which would have constituted a violation of
Section 3.5 if Section 3.5 had applied since the Balance Sheet Date, and (c)
there has not been any Material Adverse Effect, including any damage,
destruction, loss or abandonment (whether or not covered by insurance) which,
individually or in the aggregate, has or, to the Knowledge of Seller, could
reasonably be expected to have, a Material Adverse Effect, other than, as
applied to the accuracy of this representation in respect of the period between
the date hereof and the Closing Date, changes or effects after the date hereof
that result from general economic conditions or competitive circumstances in the
markets in which the Business is conducted.
2.1.8. Compliance with Laws. Except as listed or described on Schedule
--------------------
2.1.8, the Company is not in violation of any Law applicable to the Company or
the conduct of the Business, or to the Owned Real Property, and has not
committed any such violation since January 1, 1995, other than such violations
which, individually or in the aggregate, could not reasonably be expected to
result in a material undisclosed liability of the Company or give rise to
criminal liability. Since January 1, 1995, neither Seller nor the Company has
received notice of any alleged violation of Law which could reasonably be
expected to either result in a material undisclosed liability of the Company or
give rise to criminal liability. The Company has all Permits (including without
limitation Permits under Environmental Laws) necessary to conduct the Business
substantially as presently conducted and all such Permits are in full force and
effect, except where the failure to have such Permits or the failure of such
Permits to be in full force and effect could not reasonably be expected to have
a Material Adverse Effect.
2.1.9. Tangible Personal Property; Title to Assets. Except (a) with
-------------------------------------------
respect to the Owned Real Property and the Leased Real Property which are the
subject of Section 2.1.10 and (b) as listed or described on Schedule 2.1.9, the
tangible assets owned by the Company as of the date hereof or hereafter
purchased or acquired by the Company are owned by the Company free and clear of
all Liens except for (i) Liens that are listed or described on Schedule 2.1.9,
(ii) mechanics', carriers', workers', repairmen's or other similar Liens arising
or incurred in the ordinary course of business of the Business relating to
liabilities of the Company that are not overdue, (iii) Liens for taxes,
assessments and other similar governmental charges which are not due and payable
or which may thereafter be paid without penalty, and (iv) Liens that arise under
zoning, land use and other similar Laws and other imperfections of title or
encumbrances, if any, which could not be reasonably expected, individually or in
the aggregate, materially to affect the marketability of the property subject
thereto or to impair the continued use of the property subject thereto in the
Business as presently conducted. (The items referred to in clauses (i) through
(iv) of the immediately preceding sentence are hereafter referred to as
"Permitted
9
<PAGE>
Liens".) Since January 1, 1995, the tangible personal property has been
maintained in all material respects in good repair in accordance with C&A's
general maintenance policies.
2.1.10. Real Property. Schedule 2.1.10 lists all real property owned in
-------------
fee by the Company (the "Owned Real Property") or leased by the Company (the
"Leased Real Property"). The Company has good and marketable fee simple title
to the Owned Real Property and valid and subsisting leasehold interests in the
Leased Real Property (subject to the terms of the applicable leases, subleases
and related instruments governing the Company's interests therein, as listed on
Schedule 2.1.10), free and clear of all Liens other than (a) Liens listed or
described on Schedule 2.1.10, (b) Permitted Liens, and (c) easements, covenants,
rights-of-way and other encumbrances or restrictions, whether recorded or
referred to in an applicable lease which could not reasonably be expected to
materially impair the marketability or continued occupancy or use of the
property subject thereto in the Business as presently conducted. The leases and
subleases related to the Leased Real Property are valid and subsisting leases or
subleases which are in full force and effect.
2.1.11. Insurance. Schedule 2.1.11 lists (i) all material policies of
---------
fire, liability and other forms of insurance covering occurrences as of, or
claims made on, the date hereof and maintained by the Company, or by Seller or
any Post-Closing Affiliate to the extent applicable to the Company or the
Business ("Insurance Policies") and (ii) to the knowledge of Seller, all claims
made by the Company or the Seller or any Post-Closing Affiliate with respect to
the Company under any such Insurance Policy from February 1, 1991 to October 31,
1996, and the disposition or status thereof. All premiums due under such
policies have been paid, and none of C&A, Seller or the Company is in default in
any material respect under any provision of any such policy nor has it failed to
give notice or present any material claim thereunder in a timely manner so as to
bar recovery of any valid claim. Neither Seller nor any of its Affiliates has
received any written notice of cancellation or non-renewal of any such insurance
policy or that any such insurance premiums (if such policies are continued by
Seller and its Affiliates) will be increased materially.
2.1.12. Intellectual Property. Schedule 2.1.12 lists or describes all
---------------------
patents and trademarks and all material trade names, service marks and
registered copyrights, and registrations and applications therefor, used or held
for use in the conduct of or otherwise material to the Business as of the date
hereof (the "Intellectual Property"). Except as set forth on Schedule 2.1.12,
the Company owns or has the right to use (as shown on Schedule 2.1.12) all of
the Intellectual Property and neither Seller, any Post-Closing Affiliate nor the
Company has received any written notice (that has not been subsequently
satisfied or withdrawn) of any material conflict with, or assertion that the
Company is or may be infringing, the asserted rights of others in
10
<PAGE>
connection with the use by the Company of any of the Intellectual Property in
the conduct of the Business.
2.1.13. Litigation; Decrees. Except (a) as listed or described on
-------------------
Schedule 2.1.13, there are no lawsuits or administrative or other adjudicative
proceedings ("Legal Proceedings") pending or, to the Knowledge of Seller,
threatened in writing against the Company or any Employee Plan, including
without limitation in respect of Intellectual Property, except for Legal
Proceedings which, if determined adversely, could not reasonably be expected to
have a Material Adverse Effect. To the Knowledge of Seller, the Company is not
in default under the terms of any judgment, order or decree of any Governmental
Entity (collectively, "Orders").
2.1.14. Contract Rights. Except as listed or described on Schedule
---------------
2.1.14, as of the date hereof, the Company is not a party to or bound by any
lease, agreement or other contract or legally binding contractual right or
obligation (collectively, "Contracts") that is of a type described below:
(a) Any employment, severance or consulting Contract with an Employee
or Former Employee that is not terminable at will by the Company (other
than, as to any Employee or Former Employee of Floorcoverings UK, any
Contract for the employment of any such Employee or Former Employee implied
in Law);
(b) Any collective bargaining Contract with any labor union;
(c) Any Contract for capital expenditures or the acquisition or
construction of fixed assets which requires aggregate future payments in
excess of $500,000;
(d) Any Contract relating to cleanup, abatement or other actions
(other than monitoring or reporting in the ordinary course of business) in
connection with environmental liabilities;
(e) Any Contract granting to any person or entity a first-refusal,
first-offer or other right to purchase or acquire any of the Shares or any
other capital stock or other securities of Floorcoverings US or
Floorcoverings UK;
(f) Any license, royalty Contract or other Contract with respect to
Intellectual Property which pursuant to the terms thereof requires future
payments by the Company (other than software, on-line or similar service
Contracts in the ordinary course of business of the Business);
(g) Any indenture, mortgage, loan or credit Contract under which the
Company has borrowed any money or issued any note, bond, indenture or other
evidence of indebtedness for
11
<PAGE>
or guaranteed indebtedness for money borrowed by others or under which any
Person has issued a letter of credit with respect to which the Company has
any liability;
(h) Any Contract with any manufacturer's representative or other sales
agent having a remaining term in excess of one year and which is not
terminable without penalty on 90 calendar days' or less notice;
(i) Any Contract under which the Company is (i) a lessee of real
property, (ii) a lessee of, or holds or uses, any machinery, equipment,
vehicle or other tangible personal property owned by a third person or
entity, (iii) a lessor of real property, or (iv) a lessor of any tangible
personal property owned by the Company, in the case of any of (ii), (iii)
and (iv) which requires annual payments in excess of $100,000;
(j) Any Contract which involves aggregate future payments by or to the
Company in excess of $500,000 other than a purchase or sales order entered
into in the ordinary course of the conduct of the Business;
(k) Any Contract obligating the Company to make any "parachute
payment" (as that term is used in Section 280G of the Code) to any Employee
or any other payment which is contingent upon a change in control of
Floorcoverings US or Floorcoverings UK;
(l) Any Contract which prohibits or restricts the Company from
engaging in the manufacture or sale of any Products; or
(m) Any Surety Obligation within the meaning of Section 6.2.7(a) or
(b) and any Master Contract within the meaning of Section 6.2.7(c).
Except as set forth on Schedule 2.1.14, each Contract listed or described on
Schedule 2.1.14 is a valid and binding obligation of the Company and to the
Knowledge of Seller is a valid and binding obligations of the other party
thereto. Except as set forth on Schedule 2.1.14, to the Knowledge of Seller,
the Company has performed in all material respects the obligations required to
be performed by it through the date hereof under each of such Contracts and the
Company is not (with or without the lapse of time or the giving of notice, or
both) in material breach or default thereunder.
2.1.15. Employee Plans. (a) For purposes of this Agreement, the
--------------
term "Employee Plan" means each employee benefit plan as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and each other material plan, program, agreement or arrangement, whether or not
subject to ERISA, that (i) provides benefits for Employees or
12
<PAGE>
Former Employees and (ii) is maintained by Seller, any Post-Closing Affiliate or
the Company or to which Seller, any Post-Closing Affiliate or the Company
contributes or is obligated to contribute, or under which Seller, any Post-
Closing Affiliate or the Company is liable in respect of Employees or Former
Employees. As used in this Agreement, (A) the term "Employee" means each person
(if any) listed or described as such on Schedule 2.1.15 and each person who is
presently employed by the Company primarily in the conduct of the Business and
(B) the term "Former Employee" means any person formerly so employed by the
Company. The terms "Employee" and "Former Employee" will include, where an
Employee Plan provides benefits for beneficiaries or dependents, the
beneficiaries and dependents of an Employee or Former Employee. Schedule 2.1.15
lists or describes all Employee Plans other than Employee Plans listed or
described on Schedule 2.1.14 or mandated or implied by Law. None of the
Employee Plans is a multiemployer plan within the meaning of Section 3(37) of
ERISA.
(b) With respect to each Employee Plan, Seller has delivered to
Purchaser, to the extent applicable, a true, correct and complete copy of (i)
the plan document for each Employee Plan as currently in effect (or a
description of any Employee Plan for which there is no plan document), including
any agreements entered into in connection with such Employee Plan, (ii) the
three most recent annual reports (Form 5500 Series) filed with the Internal
Revenue Service, (iii) the most recent annual financial report and actuarial
report, and (iv) the most recent summary plan description, together with each
summary of material modifications. Except as set forth on Schedule 2.1.15, each
Employee Plan which is intended to be a "qualified plan" under Section 401(a) of
the Internal Revenue Code of 1986, as amended (the "Code"), is so identified on
Schedule 2.1.15, and the trust (if any) forming a part thereof, has received a
favorable determination from the Internal Revenue Service as to the
qualification under the Code of each such Employee Plan. Seller has delivered
to Purchaser a copy of the most recent determination letter with respect to each
such Employee Plan, and nothing has occurred since the date of such
determination letter that would adversely affect such qualification which is not
identified in Schedule 2.1.15 and cannot be corrected within the remedial
amendment period provided under Section 401(b) of the Code.
(c) Neither Seller, any Post-Closing Affiliate, nor the Company has
engaged in a transaction with respect to any Employee Plan which could subject
any Employee Plan, Purchaser or the Company to a material civil penalty under
ERISA or a material tax under the Code. Each of the Employee Plans has been
operated and administered in all material respects in accordance with applicable
Laws, including without limitation, to the extent applicable, the Code and
ERISA. Neither Seller, any Post-Closing Affiliate nor the Company has incurred,
and no condition exists that could reasonably be expected to cause Seller, any
Post-
13
<PAGE>
Closing Affiliate or the Company to incur any liability under Title IV of ERISA
that could reasonably be expected to result in liability to Purchaser or the
Company. Each Employee Plan that is a group health plan within the meaning of
Section 5000(b)(1) of the Code is in compliance in all material respects with
the provisions of Section 4980B(f) of the Code. There is not any pending or, to
the Knowledge of Seller, threatened material claim by or on behalf of any
Employee Plan, by any Employee or Former Employee covered under any Employee
Plan or otherwise involving any Employee Plan (other than routine claims for
benefits). Except as set forth in Schedule 2.1.15 and Section 6.1.3, neither
the execution and delivery of this Agreement nor the consummation of the
transaction contemplated hereby will (either alone or in conjunction with any
subsequent or related event, including termination of employment) (i) result in
any material payment (including severance, unemployment compensation, golden
parachute or otherwise) under any Employee Plan, (ii) materially increase any
compensation or benefits otherwise payable under any Employee Plan, or (iii)
accelerate any material liability under any Employee Plan.
(d) All contributions required to be made to each Employee Plan under
the terms of such Plan, ERISA or the Code for all periods of time prior to the
Closing Date have been or, as applicable, will by the Closing Date be timely
made or paid in full or, to the extent not required to be made before the
Closing Date, will be fully reflected on the Closing Date Balance Sheet as
either a current liability or a Push Down Liability.
(e) Neither the Seller nor Seller's Affiliates has made any legally
binding commitment to establish any new Employee Plan, to modify any Employee
Plan or to increase benefits or compensation of Employees or Former Employees
(except for normal increases in compensation consistent with past practices or
as disclosed in Schedule 2.1.15), nor has any intention to do so been
communicated by C&A or Seller to Employees or Former Employees.
(f) Except as set forth on Schedule 2.1.15 or in Section 6.1.2, none
of the Seller, any Post-Closing Affiliate or the Company has any liability for
life, health, medical or other welfare benefits to Former Employees, except for
health continuation coverage under Section 4980B(f) of the Code.
2.1.16. Taxes. (a) The Company has timely filed (or has had filed
-----
on its behalf) or caused to be timely filed with the appropriate United States,
state, local and foreign taxing authorities all returns, reports or information
returns or statements relating to Taxes (including amendments thereto)
(collectively, "Tax Returns") required to be filed by it with respect to the
Company on or prior to the Closing Date (taking into account all extensions of
due dates). All such Tax Returns were correct and complete in all material
respects.
14
<PAGE>
(b) The Company has timely paid all Taxes owed with respect to the
Company. No penalties or other charges are due with respect to the late filing
of any Tax Return of the Company required to be filed on or before the Closing
Date (taking into account all extensions of due dates). The Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor or other third party. The unpaid Taxes of the Company will not exceed
the reserves for Taxes (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) that are reflected in
the Closing Date Balance Sheet.
(c) Schedule 2.1.16 sets forth the jurisdictions (other than the
United States) in which the Company files Tax Returns, indicates the Tax Returns
in such states that have been audited and indicates those Tax Returns in such
jurisdictions that currently are the subject of an audit. Except as set forth
on Schedule 2.1.16, there are no waivers or extensions of any applicable statute
of limitations, or agreements to any extension of time for the assessment or
collection of such Taxes with respect to any such Tax Returns, which waivers,
extensions or agreements currently are in effect. Except as set forth on
Schedule 2.1.16, since January 1, 1995, no claim has been made by an authority
in a jurisdiction where the Company does not file Tax Returns that it is or may
be subject to taxation by that jurisdiction and no such claim exists as of the
date hereof.
(d) Except as set forth on Schedule 2.1.16, the Company has not
requested or received a Tax Ruling or entered into a Tax Closing Agreement with
any taxing authority that would have a continuing effect after the Closing Date.
For purposes of the preceding sentence, the term "Tax Ruling" means a written
ruling of a taxing authority relating to Taxes, and the term "Tax Closing
Agreement" means a written Contract with a taxing authority relating to Taxes.
Except as set forth on Schedule 2.1.16, the Company is not a party to any Tax
allocation or sharing Contract.
(e) Except as set forth on Schedule 2.1.16, no action, suit,
proceeding, investigation, audit, claim or assessment is presently pending or,
to the Knowledge of Seller, has been proposed to the Company or Seller or C&A
with regard to any Taxes that relates to the Company for which the Company would
be liable.
(f) Except as set forth on Schedule 2.1.16, the Company is not
required to make any adjustment pursuant to Section 481 of the Code by reason of
a change in accounting method or otherwise.
(g) Except as set forth on Schedule 2.1.16, the Company has not filed
(nor will it file prior to the Closing Date) a consent pursuant to Section
341(f) of the Code or agreed
15
<PAGE>
to have Section 341(f)(2) of the Code apply to any disposition of a "subsection
(f) asset" (as that term is defined in Section 341(f)(4) of the Code) owned by
the Company.
(h) Purchaser will not be required to deduct and withhold any amount
pursuant to Section 1445 of the Code upon the consummation of the transactions
contemplated by this Agreement.
(i) The Company has filed a consolidated federal income tax return
with Seller and Collins & Aikman Corporation, a Delaware corporation ("C&A
Corp."), for each of the Company's taxable years preceding the Company's taxable
year that includes the Closing Date, and the Company will file a consolidated
federal income tax return with Seller and C&A Corp. for the Company's taxable
year that includes the Closing Date. Seller is a member of a consolidated group
that is eligible to make an election under Section 338(h)(10) of the Code (and
any comparable election under state or local law that would be applicable to a
material portion of the taxable income resulting from such election).
(j) For purposes of this Agreement, "Taxes" means all federal, state,
local, foreign and other taxes (including without limitation income, profits,
premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad
valorem, severance, capital levy, production, transfer, withholding, social
security, employment, unemployment compensation, payroll-related and property
taxes, alternative minimum, estimated stamp, value added, windfall profits,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or additional amounts, interest and penalties with
respect thereto. Such term shall also include any "Taxes" as to which the
Company is liable as a successor or transferee or pursuant to a contractual
obligation.
2.1.17. Environmental Matters. Except as listed or described on
---------------------
Schedule 2.1.17, (i) the Company does not have any liability under any
Environmental Law (including without limitation any obligation to remediate any
Environmental Condition whether caused by the Company or a third Person)
applicable to the Owned Real Property or the Leased Real Property, (ii) the
Company is not in violation of any Environmental Law, (iii) there exists no
Environmental Condition with respect to the Owned Real Property or the Leased
Real Property, (iv) there have not been any discharges originating from the
Owned Real Property or the Leased Real Property to the environment or any public
treatment facility except in compliance with applicable Environmental
requirements, and (v) there are not located under any of the Owned Real Property
or the Leased Real Property any underground storage tanks ("UST's"), which
liability, violation, Environmental Condition, discharge or UST's specified in
(i), (ii), (iii), (iv) or (v) could reasonably be expected to have a Material
Adverse Effect. "Environment" means
16
<PAGE>
soil, surface waters, groundwaters, land, surface or subsurface strata, ambient
air or any other environmental medium. "Environmental Condition" means a
condition with respect to the Environment which has resulted, or is reasonably
likely to result, in a material loss, liability, cost or expense to the Company.
"Environmental Law" means any Law for the protection of the Environment,
including without limitation, the Laws listed on Schedule 2.1.17.
2.1.18. No Undisclosed Liabilities. The Company does not have any
--------------------------
liabilities (defined for this purpose as liabilities involving the payment of
money rather than general, contractual or other obligations), whether known or
unknown, absolute, accrued, contingent or otherwise and whether due or to become
due, including any uninsured liabilities, except (i) as and to the extent set
forth in the Balance Sheet or specifically disclosed in the notes thereto, (ii)
liabilities incurred in the ordinary course of business consistent with past
practice and not prohibited by this Agreement, which could not reasonably be
expected to have a Material Adverse Effect, (iii) as set forth in Schedule
2.1.18, (iv) current liabilities reflected in the Closing Date Balance Sheet,
(v) Push-Down Liabilities, and (vi) liabilities relating to Taxes, Retained
Claims and other liabilities for which C&A or Seller is responsible pursuant to
this Agreement. Schedule 1.2(a) sets forth the Assumed Push-Down Liabilities by
category and the amounts thereof as shown on the books of C&A as of October 26,
1996.
2.1.19. Assets. Except as described on Schedule 2.1.19, the Real
------
Property and the personal property that will be owned or leased by the Company
on the Closing Date constitute all of the properties and assets used or held for
use primarily in connection with the Business.
2.1.20. Affiliate Interests. Except as disclosed in Schedule
-------------------
2.1.20, none of C&A, Seller, any Affiliate of C&A or Seller (other than the
Company) or to the Knowledge of C&A any officer or director of the Company, or
any member of their immediate family, (i) has a controlling interest or other
material financial interest (other than a noncontrolling investment in a public
company) in any business entity which competes with the Business, (ii) has any
personal financial interest, direct or indirect, in any property, real or
personal, tangible or intangible, including Intellectual Property, owned or used
by the Company in the Business, or (iii) provides or causes to be provided to,
or receives from, the Company any assets, loans, advances, services or
facilities, provided, however, that the representation and warranty set forth in
clause (i) above, insofar as it relates to Affiliates of Seller or C&A, will
apply only to Affiliates controlled by C&A, Seller or C&A Corp. Except for the
Transaction Documents, the only Contracts between the Company and C&A or any
Affiliate of C&A that will remain in effect after the Closing under which
Purchaser, the Company or any of their Affiliates will have any ongoing
obligation or duty,
17
<PAGE>
are those items (and only with respect to such obligations or duties) which are
identified in Schedule 2.1.20 as remaining in place and having obligations or
duties.
2.1.21. Brokers. No broker, investment banker, financial advisor or
-------
other person (other than The Blackstone Group and Wasserstein, Perella & Co.,
Inc., the fees and expenses of which will be paid by the Seller) is entitled to
any broker's finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement.
2.1.22. Warranty Claims and Liabilities. As of the Closing Date,
-------------------------------
the Company will not have any liability for breach of any express or implied
product warranty arising out of the installation of Products at an individual
location, or arising out of a Product design, manufacturing or process defect or
series of related Product design, manufacturing or process defects, which in
either case could reasonably be expected to have a Material Adverse Effect.
2.1.23. Labor Matters. The Company is not a party to any union
-------------
contract in respect of any Employees. Since January 1, 1995, (a) no organized
work stoppage or other organized labor dispute has been or is pending or, to the
Knowledge of Seller, threatened and (b) no organized effort has been or is
pending or, to the Knowledge of Seller, threatened by any labor union seeking to
represent any group of Employees in the United States.
2.1.24. Supplier Relationships. To the Knowledge of Seller, the
----------------------
Company has access to raw materials and other supplies sufficient to continue to
conduct the Business on a competitive basis and has not experienced any material
supply shortage since January 1, 1995. To the knowledge of Seller, the
transactions contemplated by this Agreement could not reasonably be expected to
have a Material Adverse Effect on the Company's relationship with any supplier
of such raw materials and other supplies taken as a whole.
2.2. Representations and Warranties of Purchaser. Subject to Section 2.3,
-------------------------------------------
each of Purchaser and Parent jointly and severally represents and warrants to
Seller as follows:
2.2.1. Corporate Organization. Each of Purchaser and Parent is a
----------------------
corporation duly organized, validly existing and in good standing under the Laws
of their respective jurisdiction of incorporation and has the requisite
corporate power to own, lease or otherwise hold its properties and assets and to
carry on its business as presently conducted.
2.2.2. Authorization and Effect of Agreement. Each of Parent and
-------------------------------------
Purchaser has the requisite corporate power to execute and deliver this
Agreement and to perform the transactions contemplated hereby to be performed by
it. All
18
<PAGE>
necessary corporate action required to be taken under the Virginia Stock
Corporation Act for the due authorization of the execution and delivery by each
of Parent and Purchaser of this Agreement and the performance by each of Parent
and Purchaser of the transactions contemplated hereby to be performed by each of
them has been duly taken by each of Parent and Purchaser. This Agreement has
been duly executed and delivered by each of Parent and Purchaser and, assuming
the due execution and delivery of this Agreement by Seller and C&A constitutes a
valid and binding obligation of each of Parent and Purchaser, enforceable in
accordance with its terms.
2.2.3. No Restrictions. The execution and delivery of this
---------------
Agreement by each of Parent and Purchaser does not, and the performance by
Parent and Purchaser of the transactions contemplated hereby to be performed by
each of them will not conflict with, or result in any material violation of, or
constitute a material default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit under, any provision of the
charter or bylaws or comparable governing documents of Parent or Purchaser, or
any material Contract or Permit applicable to Purchaser other than any such
conflicts, violations or defaults which, individually or in the aggregate, could
not reasonably be expected to result in a material undisclosed liability of
Parent or Purchaser. No material consent, approval, order or authorization of,
or registration, declaration or filing with, any Governmental Entity is required
to be obtained or made by or with respect to Parent or Purchaser in connection
with the execution and delivery of this Agreement by Parent or Purchaser or the
performance by Parent or Purchaser of the transactions contemplated hereby to be
performed by either of them, except (i) for such of the foregoing as are listed
or described on Schedule 2.2.3 and (ii) for such consents, approvals, orders,
authorizations of, or registrations, declarations or filings with, any
Governmental Entity, which, individually or in the aggregate if not obtained or
made, could not reasonably be expected to result in a material undisclosed
liability of Parent or Purchaser.
2.2.4. Financial Capacity. Parent has obtained commitment letters
------------------
(copies of which have been provided to Seller), subject to certain conditions
set forth therein, for an aggregate of $51 million equity financing, an
aggregate of $85 million senior debt financing and an aggregate of $100 million
bridge subordinated debt financing. Assuming the accuracy of the
representations and warranties of Seller and C&A herein and compliance by Seller
and C&A with their covenants contained herein, Parent believes that the
conditions to the availability of all such financing will be satisfied prior to
the Closing and Parent will use reasonable efforts so to obtain such financing.
2.3. Certain Limitations on Representations and Warranties. (a) Each of
-----------------------------------------------------
the parties is a sophisticated legal entity that was
19
<PAGE>
advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. Accordingly, each of the parties
hereby acknowledges that (i) there are no representations or warranties by or on
behalf of any party hereto or any of its respective Affiliates or
representatives other than those expressly set forth in this Agreement and (ii)
the parties' respective rights, obligations and remedies with respect to this
Agreement and the events giving rise thereto will be solely and exclusively as
set forth in the Transaction Documents and the Confidentiality Agreement.
(b) Any representation and warranty made in this Agreement by Seller
will be deemed for all purposes to be qualified by the disclosures made in any
Schedule specifically referred to in such representation or warranty and by the
information disclosed in any other Schedule if the relevance of such information
to such representation and warranty is reasonably apparent on its face.
References in this Article to matters "primarily" relating to the Business are
to matters which predominantly relate to the Business rather than predominantly
to one of either Seller's or any Post-Closing Affiliate's other businesses or to
the businesses or operations of Seller or any Post-Closing Affiliate generally.
III. COVENANTS
---------
3.1. Investigation by Purchaser. (a) Prior to the Closing, upon reasonable
--------------------------
notice from Parent (on behalf of itself and Purchaser) to Seller given in
accordance with this Agreement, Seller will, and will cause the Company to,
afford to the officers, attorneys, accountants or other authorized
representatives of Purchaser and Parent reasonable access during normal business
hours to the facilities and the books and records of the Company so as to afford
Purchaser and Parent a reasonable opportunity to make, at their sole cost and
expense, such review, examination and investigation of the Company as Purchaser
and Parent may reasonably desire to make, including without limitation a so-
called "Phase I" (i.e., documentary review and walk-through site inspection)
----
preliminary environmental evaluation; provided, however, that no borings or
other so-called "Phase II" environmental examinations will be performed without
Seller's prior written consent, which consent may be given or withheld in
Seller's sole discretion. Purchaser and Parent will be permitted to make
extracts from or to make copies of such books and records as may be reasonably
necessary. Prior to the Closing, Seller will furnish to Parent or Purchaser, or
cause to be furnished to Parent or Purchaser, such financial and operating data
and other information pertaining to the Company as Parent or Purchaser may
reasonably request; provided, however, that nothing in this Agreement will
obligate Seller to take actions that would unreasonably disrupt the normal
course of business of itself, any Post-Closing Affiliate or the Company, violate
the terms of any applicable Law or rules of any national stock exchange
applicable to it or its Affiliates or any Contract to which any of them is a
20
<PAGE>
party or to which any of them or any of their assets are subject (to the extent
described in reasonable detail in response to any request for information
specified above) or grant access to any of their proprietary or confidential
information not related to the Business.
(b) Subject to Section 3.2, whether or not the Closing occurs, Parent and
Purchaser will, and will cause each of their Affiliates to, treat in confidence
all documents, materials and other information (including without limitation
information relating to supply and sales agreements and relationships with third
persons or entities) disclosed by any other party that is not its Affiliate,
whether before, during or after the course of the negotiations leading to the
execution of this Agreement or thereafter, including without limitation in its
investigation of the other parties and in the preparation of agreements,
schedules and other documents relating to the consummation of the transactions
contemplated hereby. Prior to the Closing, and in the event that this Agreement
is terminated, neither Purchaser, Parent nor any of their Affiliates will, and
if the Closing occurs C&A will not and will cause its Affiliates not to,
disclose to any third party any confidential information, except as required by
Law or rules of any national stock exchange or any Governmental Authority
applicable to it or its Affiliates or as Parent or Purchaser determines is
required to be disclosed in connection with the financing described in Section
2.2.4, subject to Seller's right to review and reasonably object to such
disclosure. If this Agreement is terminated, Purchaser, Parent and each of
their Affiliates will return to Seller all originals and copies of all non-
public documents and materials of the type provided for in this Section 3.1
which have been furnished or made available in connection with this Agreement,
and Purchaser and Parent will destroy all notes, analyses, compilations, studies
or other documents which contain or otherwise reflect such information.
3.2. Press Releases. Prior to the Closing, no party will issue or cause
--------------
the publication of any press release or other public announcement with respect
to this Agreement or the transactions contemplated hereby without the prior
consent of Parent (in the case of Seller) or Seller (in the case of Purchaser or
Parent), which consent will not be unreasonably withheld; provided, however,
that nothing herein will prohibit any party from issuing or causing publication
of any such press release or public announcement to the extent that such party
determines such action to be required by Law or the rules of any national stock
exchange applicable to it or its Affiliates, in which event the party making
such determination will, if practicable in the circumstances, use reasonable
efforts to allow the other parties reasonable time to comment on such release or
announcement in advance of its issuance.
3.3. Regulatory Filings. (a) Within two business days after the date
------------------
hereof, Parent will, and Seller will cause the ultimate
21
<PAGE>
parent entity of Seller to, make such filings, if any, as may be required by the
HSR Act with respect to the consummation of the transactions contemplated by
this Agreement. Thereafter, Parent will, and Seller will cause the ultimate
parent entity of Seller to, file or cause to be filed as promptly as practicable
with the United States Federal Trade Commission (the "FTC") and the United
States Department of Justice (the "DOJ") supplemental information, if any, which
may be required or requested by the FTC or the DOJ pursuant to the HSR Act. To
the extent required by Law, Seller will make, or cause any of its Affiliates to
make, such filings and use its reasonable efforts to obtain the governmental
approvals and the other consents (if any) referred to in Section 2.1.5, and
Purchaser and Parent will each make such filings and use their respective
reasonable efforts to obtain the governmental approvals and the other consents
(if any) referred to in Section 2.2.3. All filings referred to in this Section
3.3(a) will comply in all material respects with the requirements of the
respective Laws pursuant to which they are made.
(b) Without limiting the generality or effect of Section 3.3(a), each of
the parties will (i) use their respective reasonable efforts to comply as
expeditiously as possible with all lawful requests of Governmental Entities for
additional information and documents pursuant to the HSR Act, if applicable,
(ii) not (A) extend any waiting period under the HSR Act or (B) enter into any
agreement with any Governmental Entity not to consummate the transactions
contemplated by this Agreement, except with the prior consent of each of the
other parties hereto, and (iii) cooperate with each other and use reasonable
efforts to cause the lifting or removal of any temporary restraining order,
preliminary injunction or other judicial or administrative order which may be
entered into in connection with the transactions contemplated by this Agreement,
including without limitation the execution, delivery and performance by the
appropriate entity of such divestiture agreements or other actions, as the case
may be, as may be necessary to secure the expiration or termination of the
applicable waiting periods under the HSR Act or the removal, dissolution, stay
or dismissal of any temporary restraining order, preliminary injunction or other
judicial or administrative order which prevents the consummation of the
transactions contemplated hereby or requires as a condition thereto that all or
any part of the Business be held separate and, prior to or after the Closing,
pursue the underlying litigation or administrative proceeding diligently and in
good faith.
3.4. Injunctions. Without limiting the generality or effect of any
-----------
provision of Section 3.3 or Article IV, if any Governmental Entity having
jurisdiction over any party issues or otherwise promulgates any injunction,
decree or similar order prior to the Closing which prohibits the consummation of
the transactions contemplated hereby, the parties will use their respective
reasonable efforts to have such injunction dissolved or otherwise eliminated as
promptly as possible and, prior to or
22
<PAGE>
after the Closing, to pursue the underlying litigation diligently and in good
faith.
3.5. Operation of the Business. Except in connection with or as a result
-------------------------
of any matter listed or described on Schedule 3.5, as expressly contemplated
herein or as otherwise consented to by Parent (on behalf of itself and
Purchaser) in writing, prior to the Closing, Seller will cause the Company to:
(a) Use reasonable efforts to keep the Business intact (including
without limitation relationships with customers, employees, suppliers and
others) and not take or permit to be taken or do or suffer to be done
anything other than in the ordinary course of business of the Business as
presently conducted, and use reasonable efforts to maintain the goodwill
associated with the Business; provided, however, that nothing in this
Agreement or otherwise will prohibit or restrict the Company from (i)
paying or prepaying any indebtedness for borrowed money or any intercompany
obligation, (ii) paying any cash dividend or other distribution of cash or
cash equivalent items, or (iii) repurchasing for cash any capital stock;
(b) Continue existing practices relating to maintenance of the assets
owned, leased or otherwise held by the Company for use in the Business
("Assets") in good repair, ordinary wear and tear excepted, and continue to
make capital expenditures substantially in accordance with budgets
delivered to Purchaser;
(c) Authorize and approve the capital expenditures to be made by the
Company described on Schedule 3.5(c);
(d) Not purchase, sell, lease or dispose of, or enter into any
Contract for the purchase, sale, lease or disposition of, or subject to
Lien, any of the Assets other than (i) Products or (ii) in the ordinary
course of business of the Business;
(e) Not adopt or make any amendment to any Employee Plan or increase
the general rates of compensation of Employees, except (i) as required by
Law or (ii) pursuant to any Contract listed on Schedule 2.1.14;
(f) Not enter into, amend, modify or cancel any Contract listed or
required to be listed on Schedule 2.1.14, except in the ordinary course of
business consistent with past practice;
(g) Not incur indebtedness for borrowed money, or assume, guarantee,
endorse or otherwise become responsible for the obligations of any other
person or entity, or make loans or advances to any person or entity (other
than advances to Employees in the ordinary course of business
23
<PAGE>
consistent with past practice reflected on the Company's books and
records);
(h) Not enter into any joint venture, partnership or similar
arrangement;
(i) Not amend its Certificate of Incorporation or By-Laws;
(j) Not dispose of, permit to lapse or otherwise fail to preserve any
of its Intellectual Property or other similar rights, dispose of or permit
to lapse any material Permit, or dispose of or disclose to any person or
entity other than an authorized representative of Purchaser, any trade
secret (except for such of the foregoing as may occur by operation of Law
or the terms of any of the foregoing); or
(k) Not enter into a Contract to do any of the foregoing (other than
as may be required by Sections 3.5(a), (b) or (c)).
3.6. Satisfaction of Conditions. Without limiting the generality or effect
--------------------------
of any provision of Article IV, prior to the Closing, each of the parties hereto
will use its respective reasonable efforts with due diligence and in good faith
to satisfy promptly all conditions required hereby to be satisfied by such party
in order to expedite the consummation of the transactions contemplated hereby.
3.7. Negotiations With Others. From the date hereof until the termination
------------------------
of this Agreement in accordance with its terms or the Closing, C&A and its
Affiliates will not, and will cause its and their respective officers,
directors, investment bankers, attorneys, accountants and other agents not to:
(i) initiate, solicit (including by way of furnishing information) or accept,
any offer or proposal which constitutes, an Alternative Proposal or (ii) in the
event of an unsolicited Alternative Proposal, engage in substantive discussions
or negotiations, or enter into any Contract, with, or furnish information to,
any Person relating to any Alternative Proposal. All such negotiations prior to
the date hereof have been terminated. For purposes of this Agreement,
"Alternative Proposal" means any proposal or offer from any Person relating to
any acquisition or purchase of all or substantially all of the assets or common
stock of the Company or any merger, consolidation, business combination or
similar transaction involving the Company, other than the transactions
contemplated by this Agreement.
3.8. Certain Additional Covenants. (a) Seller will, and will cause the
----------------------------
management of the Company to, upon reasonable request, meet with Purchaser
during normal business hours at C&A's or the Company's principal executive
offices to discuss the general status of the ongoing operations of the Company,
and
24
<PAGE>
Seller will notify Purchaser (i) of any emergency or change in the normal
conduct of the Business and (ii) of any event, occurrence, fact, condition,
change or effect that constitutes a breach of any representation, warranty or
covenant of C&A or Seller hereunder of which, to the Knowledge of Seller,
Purchaser or Parent does not also have Knowledge (other than any of the
foregoing occurring after the date hereof and not constituting a breach of
Seller's or C&A's covenants in this Agreement); provided, however, that for
purposes of the rights and obligations of the parties, any supplemental or
amended disclosure by Seller will not be deemed to have been disclosed unless so
agreed in writing by Purchaser, or to preclude Purchaser from (i) seeking a
remedy in damages for losses incurred as a result of the omission of such
supplemented or amended disclosure, subject to the limitations set forth in
Section 5.2 or (ii) terminating this Agreement if such supplemented or amended
disclosure causes or reveals the failure of any condition to Purchaser's
obligation to close.
(b) Purchaser will notify Seller prior to the Closing if Purchaser
obtains Knowledge of any breach of any representation, warranty or covenant of
Seller or C&A hereunder of which, to the Knowledge of Purchaser, Seller or C&A
does not also have Knowledge.
(c) C&A and Seller will use reasonable efforts to have Arthur
Andersen, L.L.P. consent to Purchaser's use of the audited financial statements
included in the Financial Statements as may be required by applicable Law in the
disclosure documents relating to Purchaser's contemplated financing.
3.9. Efforts to Consummate. Subject to the terms and conditions herein
---------------------
provided, each of C&A and Seller, on the one hand, and Parent and Purchaser, on
the other hand, will use reasonable efforts to take or cause to be taken, all
actions and to do, or cause to be done, all things necessary to consummate and
make effective the transactions contemplated by this Agreement and to cooperate
with the other in connection with the foregoing. C&A and Seller will, at their
sole expense, cause to be included in the assets and properties of the Company
prior to the Closing all assets, properties, permits, authorizations, rights and
related obligations which are being used or held for use primarily or
exclusively by the Company (whether or not such assets, properties, permits,
authorizations, rights and related obligations are presently owned or held by
the Company), all on terms and conditions, and pursuant to documentation,
reasonably acceptable to Purchaser.
3.10. Resignations. Prior to the Closing, upon Purchaser's specific
------------
request, Seller will cause to resign or to be removed from office such officers
and directors of Floorcoverings US or Floorcoverings UK whose full-time
employment is not in the Business.
25
<PAGE>
IV. THE CLOSING
-----------
4.1. Conditions Precedent to Obligations of Purchaser, Parent and Seller.
-------------------------------------------------------------------
The obligations of each of Purchaser, Parent and Seller under this Agreement to
consummate the transactions contemplated hereby will be subject to the
satisfaction, at or prior to the Closing, of the conditions that there shall not
have been entered a preliminary or permanent injunction, temporary restraining
order or other judicial or administrative order or decree in any jurisdiction,
the effect of which prohibits the Closing. The foregoing conditions may be
waived (i) insofar as it is a condition to the obligations of Purchaser or
Parent, by Parent (without the joinder of Purchaser) at its option and (ii)
insofar as it is a condition to the obligations of Seller, by Seller at its
option.
4.2. Additional Conditions Precedent to Obligations of Purchaser and
---------------------------------------------------------------
Parent. The obligations of Purchaser and Parent under this Agreement to
- ------
consummate the transactions contemplated hereby will be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived at the option of Parent (without the
joinder of Purchaser):
4.2.1. No Material Misrepresentation or Breach. There shall have been
---------------------------------------
no material breach by Seller in the performance of any of the covenants herein
to be performed by it in whole or in part prior to the Closing, and the
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects as of the Closing Date, except for
representations or warranties made as of a specified date, which shall be true
and correct in all material respects as of the specified date, and C&A shall
have delivered to Purchaser a certificate certifying each of the foregoing,
dated the Closing Date and signed by one of its executive officers to the
foregoing effect (it being understood that where any such representation or
warranty already includes a Material Adverse Effect or other materiality
exception, no further materiality exception is to be permitted by this Section);
4.2.2. Transfer Documents, Etc. Seller shall have delivered or caused
-----------------------
to be delivered to Purchaser the certificates representing the Shares, and
certificates representing all shares of capital stock of Floorcoverings UK not
owned by Floorcoverings US, which certificates shall have been duly endorsed for
transfer or accompanied by duly executed stock powers, with (if applicable) any
required tax stamps affixed thereto. In addition, at the Closing, Seller shall
have delivered to Purchaser duly signed resignations, effective immediately
after the Closing, of all officers and directors of Floorcoverings US and
Floorcoverings UK whose full-time employment is not in the Business, or shall
have taken such other action as is necessary
26
<PAGE>
to remove such persons as officers or directors of Floorcoverings US and
Floorcoverings UK after the Closing;
4.2.3. No Material Adverse Change. Since January 27, 1996, nothing
--------------------------
shall have occurred (and the Purchaser or Parent shall have become aware of no
facts or conditions not previously known), including as a result of any Legal
Proceedings commenced after the date hereof (and not disclosed on any Schedule
hereto), which the Purchaser or Parent shall reasonably determine could have a
material adverse effect on the business, property, assets, nature of assets,
liabilities, condition (financial or otherwise), results of operations or
prospects of the Company or the Business, after giving effect to the
transactions contemplated hereby;
4.2.4. No Market Change. (i) Trading in securities generally on the New
----------------
York or American Stock Exchange shall not have been suspended; minimum or
maximum prices shall not have been established on any such exchange; (ii) a
banking moratorium shall not have been declared by New York or United States
authorities; and (iii) there shall not have been (x) an outbreak or escalation
of hostilities between the United States and any foreign power, or (y) an
outbreak or escalation of any other insurrection or armed conflict involving the
United States or any other national or international calamity or emergency, or
(z) any material change in the general financial markets of the United States
which, in each case, in the reasonable judgment of the Parent or Purchaser,
would materially and adversely affect the ability to sell or syndicate loans of
a nature similar to the financing contemplated by Section 2.2.4; and
4.2.5. Other Documents. C&A shall have duly executed and delivered to
---------------
Purchaser a Management Services Agreement in substantially the form of Schedule
4.2.5(a) (the "MSA"), a Tradename Agreement in substantially the form of
Schedule 4.2.5(b) (the "TNA"), a Noncompetition Agreement in substantially the
form of Schedule 4.2.5(c) (the "NCA") and shall have delivered an opinion of
Jones, Day, Reavis & Pogue, counsel to C&A and Seller, substantially to the
effect set forth in Schedule 4.2.5(e).
4.3. Additional Conditions Precedent to Obligations of Seller and C&A.
----------------------------------------------------------------
The obligations of Seller and C&A under this Agreement to consummate the
transactions contemplated hereby will be subject to the satisfaction, at or
prior to the Closing, of all the following conditions, any one or more of which
may be waived at the option of Seller.
4.3.1. No Material Misrepresentation or Breach. There shall have been
---------------------------------------
no material breach by either Purchaser or Parent in the performance of any of
the covenants herein to be performed by either of them in whole or in part prior
to the Closing, and the representations and warranties of Parent and Purchaser
contained in this Agreement shall be true and correct in all
27
<PAGE>
material respects as of the Closing Date, except for representations or
warranties made as of a specified date, which shall be true and correct in all
material respects as of the specified date, and each of Purchaser and Parent
shall have delivered to Seller a certificate certifying each of the foregoing,
dated the Closing Date and signed by one of its executive officers to the
foregoing effect (it being understood that where any such representation or
warranty already includes a Material Adverse Effect or other materiality
exception, no further materiality exception is to be permitted by this Section);
4.3.2. Estimated Purchase Price. Purchaser shall have delivered to
------------------------
Seller in the manner specified in Section 1.2 an amount equal to the Estimated
Purchase Price; and
4.3.3. Other Documents. Purchaser shall have caused the Company to have
---------------
duly executed and delivered to C&A the MSA, the TNA and the NCA and shall have
delivered an opinion of McGuire, Woods, Battle & Boothe, L.L.P., counsel to
Parent and Purchaser, substantially to the effect set forth in Schedule 4.3.3.
4.4. The Closing. (a) Subject to the fulfillment or waiver of the
-----------
conditions precedent specified in Sections 4.1, 4.2 and 4.3, the consummation of
the purchase and sale of the Shares contemplated hereby (the "Closing") will
take place on January 31, 1997 or such other date as provided herein (the
"Closing Date"). The Closing will take place at 10:00 A.M., Eastern Time, at
the offices of Jones, Day, Reavis & Pogue at 599 Lexington Avenue, New York, New
York 10022.
(b) Subject to Section 4.5(b), if the Closing has not occurred by the date
specified in Section 4.4(a), then the Closing Date will be extended to the
earlier of (a) the second business day after the conditions set forth in Section
4.1 have been satisfied and (b) such other date, on or prior to the Drop Dead
Date, to which Parent (on behalf of itself and Purchaser) and Seller mutually
agree.
4.5. Termination. Notwithstanding anything contained in this Agreement to
-----------
the contrary, this Agreement may be terminated at any time prior to the Closing:
(a) By the mutual written consent of Parent (without the joinder of
Purchaser) and Seller;
(b) By either Parent (without the joinder of Purchaser) or Seller if
the Closing shall not have occurred on or before the later of the following
dates (the "Drop Dead Date"): (i) January 31, 1997 and (ii) if Purchaser
certifies that it is continuing to pursue the consummation of the Closing
in good faith, such other date not later than February 17, 1997 as
Purchaser may designate; provided that the failure to consummate the
--------
transactions contemplated
28
<PAGE>
hereby on or before such date did not result from the failure by the party
seeking termination of this Agreement to fulfill any undertaking or
commitment provided for herein that is required to be fulfilled before
Closing; or
(c) By either Parent (without the joinder of Purchaser) or Seller if
there shall have been entered a final, nonappealable order or injunction of
any Governmental Entity restraining or prohibiting the consummation of the
transactions contemplated hereby or any material part thereof.
In the event of the termination of this Agreement under this Section 4.5, each
party hereto will pay all of its own fees and expenses. There will be no
further liability hereunder on the part of any party hereto if this Agreement is
so terminated, except under Section 3.1(b) or by reason of a breach of any
covenant or representation contained in this Agreement, including without
limitation the covenants contained in Sections 3.3, 3.4 and 3.7.
V. SURVIVAL AND INDEMNIFICATION
----------------------------
5.1. Survival of Representations, Warranties and Covenants. (a) Each of the
-----------------------------------------------------
representations and warranties contained in Article II will survive the Closing
and remain in full force and effect until the last day of the fifteenth full
month after the Closing Date, except that (i) the representations and warranties
set forth in Section 2.1.17 will survive the Closing and remain in full force
and effect until the third anniversary of the Closing Date, (ii) the
representation and warranty in Section 2.1.22 will survive the Closing and
remain in full force and effect until the second anniversary of the Closing
Date, and (iii) the representations and warranties set forth in Sections
2.1.1(a), 2.1.2, 2.1.4, 2.1.15, 2.1.16, 2.1.21, 2.2.1 and 2.2.2 will survive the
Closing and remain in full force and effect until the expiration of the statute
of limitations, if any. Any claim for indemnification with respect to any of
such matters which is not asserted by a notice given as herein provided
specifically identifying the particular breach underlying such claim (whether or
not the Indemnifiable Loss has been actually incurred as of the date of such
notice) and the facts and Indemnifiable Loss relating thereto (to the extent
reasonably determinable as of the date of such notice), within such specified
periods of survival may not be pursued and is hereby irrevocably waived.
(b) The covenants contained in Sections 3.1(b), 3.3(b) 3.4 and 3.8(c), in
this Article V and in Articles I, VI and VII (the "Post-Closing Covenants") will
survive the Closing and remain in effect indefinitely unless a specified period
is otherwise set forth in this Agreement (in which event such specified period
will control). All other covenants contained in this Agreement will terminate,
without further action, upon the occurrence of
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the Closing, with the result that any claim for an alleged breach of any such
covenant may not be pursued and is hereby irrevocably waived.
5.2. Limitations on Liability. (a) For purposes of this Agreement, (i)
------------------------
"Indemnity Payment" means any amount of Indemnifiable Losses required to be paid
pursuant to this Agreement, (ii) "Indemnitee" means any person or entity
entitled to indemnification under this Agreement, (iii) "Indemnifying Party"
means any person or entity required to provide indemnification under this
Agreement, (iv) "Indemnifiable Losses" means any and all claims, demands,
actions, suits or proceedings (by any person or entity, including without
limitation any Governmental Entity), settlements and compromises relating
thereto and reasonable attorneys' fees and expenses in connection therewith or
in enforcing the Indemnifying Party's obligations hereunder, losses,
liabilities, costs and expenses, reduced by the amount of insurance proceeds
actually received from any person or entity that is not an Affiliate of the
Indemnitee, and (v) "Third Party Claim" means any claim, demand, action, suit or
proceeding made or brought by any person or entity who or which is not a party
to this Agreement or an Affiliate of a party to this Agreement.
(b) Notwithstanding any other provision in this Agreement or of any
applicable Law:
(i) No Indemnitee will be entitled to indemnification by an
Indemnifying Party under Section 5.3(a)(i) or otherwise in respect of any
breach or alleged breach of any representation or warranty contained in
Sections 2.1.1(b) (second sentence only), 2.1.5 (as applied to filing or
approval requirements under Laws only), 2.1.8, 2.1.17 or 2.1.13 (but with
respect to Section 2.1.13, only as to Legal Proceedings commenced during
the period from the date of this Agreement to and including the Closing
Date and insofar as the Indemnifiable Losses relating to, resulting from or
arising out of such Legal Proceeding relate to, result from or arise out of
non-compliance with any Law (including without limitation any Environmental
Law) and the existence of which proceedings do not constitute a breach of
this Agreement as of the date hereof), unless the aggregate amount of
Indemnifiable Losses incurred by the Indemnitee in respect of any
individual event or occurrence or series of events or occurrences arising
out of a common nucleus of operative facts, giving rise to such
Indemnifiable Losses exceeds $100,000, in which event the Indemnitee will
be entitled to pursue such claim to the full amount of its Indemnifiable
Losses relating thereto.
(ii) No Indemnitee will be entitled to indemnification by an
Indemnifying Party under Section 5.3(a)(i) or 5.3(b)(i) or otherwise in
respect of any breach or alleged breach of any representation or warranty
contained in
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Article II insofar as such representation or warranty is qualified by a
Material Adverse Effect or other materiality exception unless the aggregate
amount of Indemnifiable Losses incurred by the Indemnitee in respect of any
individual event or occurrence or series of related events or occurrences
arising out of a common nucleus of operative facts, giving rise to such
Indemnifiable Losses exceeds $25,000, in which event the Indemnitee will be
entitled to pursue such claim to the full amount of its Indemnifiable
Losses relating thereto. Notwithstanding the foregoing, any claim which
arises out of a matter which is within the scope of the representations and
warranties referred to in Section 5.2(b)(i) is subject to the limitations
set forth in Section 5.2(b)(i) and not in this Section 5.2(b)(ii).
(iii) No Indemnitee will be entitled to indemnification by an
Indemnifying Party under Sections 5.3(a)(i) (except for a claim for breach
of Sections 2.1.1(a), 2.1.2, 2.1.4 or 2.1.21) or Section 5.3(b)(i) unless
and until the aggregate amount of claims which may be asserted for
Indemnifiable Losses under Section 5.3(a)(i) or Section 5.3(b)(i), as the
case may be, exceeds $2,000,000, and then only to the extent of the excess.
(c) Notwithstanding any other provision of this Agreement, the
indemnification obligations of C&A and Seller, collectively, under Section
5.3(a)(i) (except for a claim for breach of Sections 2.1.1(a), 2.1.2 or 2.1.4)
or of Purchaser, Parent and the Company, collectively, under Section 5.3(b)(i)
will not exceed $66.7 million.
(d) As between any Seller and any Seller Affiliate, on the one hand, and
Purchaser, Parent or any Affiliate thereof, on the other hand, the rights and
obligations set forth in this Article V will be the sole and exclusive remedies
for breach of this Agreement.
5.3. Indemnification. (a) Subject to Sections 5.1, 5.2 and 5.4, each of
---------------
C&A and Seller will jointly and severally indemnify, defend and hold harmless
Parent, Purchaser and their respective Affiliates and their respective
directors, officers, partners, shareholders, employees, agents and
representatives (including, without limitation, any predecessor or successor to
any of the foregoing) from and against any and all Indemnifiable Losses relating
to, resulting from or arising out of:
(i) Any breach by C&A or Seller of any of the representations
or warranties of C&A or Seller contained in this Agreement (without giving
effect to any Material Adverse Effect or other materiality limitations
therein or exception thereto other than the Material Adverse Effect or
other materiality limitations or exceptions in Section 2.1.22 and, to the
extent relating to, resulting from or
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arising out of any matter which is the subject of Section 2.1.22, Section
2.1.18);
(ii) Any breach by C&A or Seller of any Post-Closing Covenant
of C&A or Seller contained in this Agreement;
(iii) Any controlled group liability under (A) Title IV of
ERISA, (B) Section 302 of ERISA, (C) Sections 412 and 4971 of the Code, (D)
continuation coverage requirements of Sections 601, et seq. of ERISA and
-------
Section 4980B of the Code, and (E) corresponding or similar provisions of
foreign Laws, other than such liabilities that arise solely out of, or
relate solely to, Employees or Former Employees; and
(iv) The ownership, conduct, condition or Transfer (including
without limitation any Taxes associated therewith, related thereto or
arising therefrom) of the entity previously owned by Floorcoverings UK that
was engaged in the wallcoverings business, or the business conducted by
such entity.
(b) Subject to Sections 5.1, 5.2 and 5.4, each of Purchaser and Parent
will, and, if the Closing occurs, will cause the Company to, jointly and
severally indemnify, defend and hold harmless C&A, Seller and each Post-Closing
Affiliate and their respective directors, officers, partners, shareholders,
employees, agents and representatives (including, without limitation, any
predecessor or successor to any of the foregoing) from and against any and all
Indemnifiable Losses relating to, resulting from or arising out of:
(i) Any breach by Purchaser or Parent of any of the
representations or warranties of Purchaser or Parent contained in this
Agreement (without giving effect to any Material Adverse Effect or other
materiality limitation therein or exception thereto);
(ii) Any breach by Purchaser or Parent of any Post-Closing
Covenant of Purchaser or Parent contained in this Agreement;
(iii) Any Assumed Push-Down Liabilities (provided, however,
that Purchaser and Parent's liability hereunder will not exceed the Maximum
APD Liability Amount).
(c) Certain Litigation. Notwithstanding any other provision of this
------------------
Agreement, C&A and Seller will jointly and severally indemnify, defend and hold
harmless Parent, Purchaser and their respective Affiliates and their respective
directors, officers, partners, shareholders, employees, agents and
representatives (including without limitation any predecessor or successor to
any of the foregoing) from and against, all Indemnifiable Losses relating to,
resulting from or arising out of the claims set forth in Schedule 5.3(c) (the
"Retained
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Claims"). Seller will retain or assume the defense of all Retained Claims,
which shall be treated by all parties hereto as Third Party Claims under Section
5.4, provided that the last two sentences of Section 5.4(b) will not be
applicable to any Retained Claims. Purchaser will cause the Company to deliver
to Seller at the Closing a power of attorney to enable C&A to prosecute, defend,
compromise or settle any Retained Claim in such form as C&A or Seller may
reasonably request, subject to the terms hereof. Without limiting the
generality of Section 5.4(c), Seller will be entitled to any recovery,
settlement, rebate or other payment relating to, resulting from or arising out
of the Retained Claims. Purchaser will, and will cause the Company and its
employees to, cooperate in the defense and prosecution of Third Party Claims, so
long as such cooperation does not unreasonably disrupt or interfere with its
requirements or any of its or its Affiliates' operations or services.
5.4. Defense of Claims. (a) If any Indemnitee receives notice of the
-----------------
assertion or commencement of any Third Party Claim against such Indemnitee with
respect to which an Indemnifying Party is obligated to provide indemnification
under this Agreement, the Indemnitee will give such Indemnifying Party
reasonably prompt written notice thereof, but in any event not later than 30
calendar days after receipt of such written notice of such Third Party Claim.
Such notice by the Indemnitee will describe the Third Party Claim in reasonable
detail, will include copies of all material written evidence thereof and will
indicate the estimated amount, if reasonably practicable, of the Indemnifiable
Loss that has been or may be sustained by the Indemnitee. The Indemnifying
Party will have the right to participate in, or, by giving written notice to the
Indemnitee, to assume, the defense of any Third Party Claim at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel (reasonably
satisfactory to the Indemnitee), and the Indemnitee will cooperate in good faith
in such defense.
(b) If, within ten calendar days after giving notice of a Third Party Claim
to an Indemnifying Party pursuant to Section 5.4(a), an Indemnitee receives
written notice from the Indemnifying Party that the Indemnifying Party has
elected to assume the defense of such Third Party Claim as provided in the last
sentence of Section 5.4(a), the Indemnifying Party will not be liable for any
legal expenses subsequently incurred by the Indemnitee in connection with the
defense thereof; provided, however, that if the Indemnifying Party fails to take
reasonable steps necessary to defend diligently such Third Party Claim within
ten calendar days after receiving written notice from the Indemnitee that the
Indemnitee believes the Indemnifying Party has failed to take such steps or if
the Indemnifying Party has not undertaken fully to indemnify the Indemnitee in
respect of all Indemnifiable Losses relating to the matter, the Indemnitee may
assume its own defense, and the Indemnifying Party will be liable for all
reasonable costs or expenses paid or incurred in connection therewith. Without
the prior written consent of the
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Indemnitee, the Indemnifying Party will not enter into any settlement of any
Third Party Claim which would lead to liability or create any financial or other
obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder, or which provides for injunctive or other
non-monetary relief applicable to the Indemnitee or does not include an
unconditional release of all Indemnified Parties. If a firm offer is made to
settle a Third Party Claim without leading to liability or the creation of a
financial or other obligation on the part of the Indemnitee for which the
Indemnitee is not entitled to indemnification hereunder and the Indemnifying
Party desires to accept and agree to such offer, the Indemnifying Party will
give written notice to the Indemnitee to that effect. If the Indemnitee fails
to consent to such firm offer within ten calendar days after its receipt of such
notice, the Indemnitee may continue to contest or defend such Third Party Claim
and, in such event, the maximum liability of the Indemnifying Party as to such
Third Party Claim will not exceed the amount of such settlement offer.
(c) Any claim by an Indemnitee on account of an Indemnifiable Loss which
does not result from a Third Party Claim (a "Direct Claim") will be asserted by
giving the Indemnifying Party reasonably prompt written notice thereof, but in
any event not later than 30 calendar days after the Indemnitee becomes aware of
such Direct Claim. Such notice by the Indemnitee will describe the Direct Claim
in reasonable detail, will include copies of all material written evidence
thereof and will indicate the estimated amount, if reasonably practicable, of
the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The
Indemnifying Party will have a period of 30 calendar days within which to
respond in writing to such Direct Claim. If the Indemnifying Party does not so
respond within such 30 calendar day period, the Indemnifying Party will be
deemed to have rejected such claim, in which event the Indemnitee will be free
to pursue such remedies as may be available to the Indemnitee on the terms and
subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any specified information
in any notice as provided in Sections 5.4(a), 5.4(b) or 5.4(c) will not affect
the rights or obligations of any party hereunder except and only to the extent
that, as a result of such failure, any party which was entitled to receive such
notice was deprived of its right to recover any payment under its applicable
insurance coverage or was otherwise prejudiced as a result of such failure.
(e) If the amount of any Indemnifiable Loss, at any time subsequent to the
making of an Indemnity Payment to the Indemnitee, is reduced by recovery,
settlement or otherwise under or pursuant to any insurance coverage, or pursuant
to any claim, recovery, settlement, rebate or other payment by or against any
other person or entity, the amount of such reduction, less any
34
<PAGE>
costs, expenses, premiums or taxes incurred in connection therewith, will
promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any
Indemnity Payment the Indemnifying Party will, to the extent of such Indemnity
Payment, be subrogated to all rights of the Indemnitee against any third person
or entity that is not an Affiliate of the Indemnitee in respect of the
Indemnifiable Loss to which the Indemnity Payment relates; provided, however,
that (i) the Indemnifying Party shall then be in compliance with its obligations
under this Agreement in respect of such Indemnifiable Loss and (ii) until the
Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims
of the Indemnifying Party against any such third person or entity on account of
said Indemnity Payment will be subrogated and subordinated in right of payment
to the Indemnitee's rights against such third person or entity. Without
limiting the generality or effect of any other provision hereof, each such
Indemnitee and Indemnifying Party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described subrogation and
subordination rights.
VI. OTHER POST-CLOSING COVENANTS
----------------------------
6.1. Personnel Matters.
-----------------
6.1.1. Employees and Employee Benefit Plans. (a) Purchaser will,
------------------------------------
and will cause the Company to, indemnify C&A and each of its Affiliates for any
Indemnifiable Loss relating to, resulting from or arising out of any change in
employee plan benefits or levels of compensation following the Closing Date from
those existing on the date hereof, or any liability or obligation to any
Employee in the event that Purchaser or the Company terminates the employment of
any person who is an Employee as of the Closing Date. Notwithstanding the
foregoing, in the event that the employment with the Company of any of the
Employees listed on Schedule 6.1.1(a) is terminated by the Company not later
than 90 calendar days after the Closing, Seller will reimburse the Company for
severance payments due to such Employees and made by the Company, provided that
such obligation will not, as to any such Employee, exceed the maximum amount due
to any such Employee pursuant to the terms of any Contract or Employee Plan
applicable thereto as in effect immediately prior to the Closing.
(b) Purchaser agrees that, under any employee benefit plan made available
or established after the Closing, Employees will receive credit for their years
of service with Seller, any Post-Closing Affiliate or the Company prior to the
Closing in determining eligibility and vesting thereunder, and in determining
the amount of benefits under any applicable sick leave, vacation or severance
plan. Purchaser will, or will cause one of its Affiliates to, cover Employees
and Former Employees as of the Closing under a group health plan and waive any
preexisting condition limitations applicable to Employees or Former Employees
under any group health plan made available to
35
<PAGE>
Employees or Former Employees to the extent that an Employee's or Former
Employee's condition would not have operated as a preexisting condition
limitation under any applicable group health plan, and Purchaser will, or will
cause one of its Affiliates to, take all action necessary to ensure that
Employees and Former Employees are given full credit for all co-payments and
deductibles incurred under any group health plan for the plan year that includes
the Closing Date.
6.1.2. Assumption of Obligations. (a) Effective as of the Closing,
-------------------------
Purchaser will, or will cause one of its Affiliates to, assume and be solely
responsible for all liabilities and obligations of any of Seller, each Post-
Closing Affiliate or the Company arising at any time and relating to the
employment or termination of employment of any Employee or Former Employee,
except to the extent that any of such liabilities or obligations are expressly
retained by any Seller or any Post-Closing Affiliate pursuant to this Section
6.1.
(b) Except as provided in Section 6.1.3 and in clause (z) in the next
sentence, effective as of the Closing, Purchaser will, or will cause one of its
Affiliates to, assume and be solely responsible for all liabilities and
obligations of either Seller or any Post-Closing Affiliate with respect to
Employees and Former Employees under any Employee Plan and Seller and each Post-
Closing Affiliate will be relieved of all liabilities and obligations with
respect to such Employee Plans (except for claims for medical or dental, or
accident and sickness benefits that in either case are incurred but not reported
or paid as of the Closing). The liabilities and obligations assumed by
Purchaser and all of its Affiliates pursuant to this Section 6.1.2(b) include
without limitation (i) any liability or obligation relating to (x) short-term
and long-term disability benefits, (y) group medical benefits, and (z) retiree
health and life insurance benefits (but in the case of such retireee benefits
only for the Former Employees identified in Schedule 6.1.2(a) and for Employees
and Former Employees who retire from the Company after July 30, 1996 who are
eligible for such benefits); including in each case any claims for disability,
medical, health and life insurance benefits incurred prior to the Closing (but
excluding claims for medical or dental, or accident and sickness benefits that
in either case are incurred but not reported or paid as of the Closing); and
(ii) any liability or obligation to provide such Employees and Former Employees
and their qualified beneficiaries with continuation coverage (within the meaning
of Section 4980B(f)(2) of the Code) under each Employee Plan that is a group
health plan, and any liability or obligation relating to such coverage,
including without limitation any liability or obligation to provide such
Employees and Former Employees with the notice required under Section
4980B(f)(6) of the Code with respect to qualifying events that occur as a result
of the Transfer of the Assets. Notwithstanding the foregoing, neither Purchaser
nor any of its Affiliates will assume any liabilities or obligations with
respect to Seller's
36
<PAGE>
cafeteria plan arrangement arising out of any failure of Seller to set forth the
terms of such plan in a written plan document.
6.1.3. Retirement Plans. As of the Closing, Seller will cause Employees
----------------
to fully vest in their accrued benefits under the Collins & Aikman Corporation
Employees' Profit Sharing and Personal Savings Plan, the Collins & Aikman
Corporation Salaried Employees' Pension Account Plan and the Collins & Aikman
Corporation Hourly Employees' Pension Account Plan (the "Retirement Plans").
Neither Purchaser nor any of its Affiliates will assume any liabilities or
obligations with respect to the Retirement Plans, which will be retained by
Seller. As soon as practicable after the Closing, to the extent permitted by
Law and the terms of the Retirement Plans, Seller will permit distributions to
Employees of their vested benefits under the Retirement Plans. With respect to
Retirement Plans from which distributions may be made, Purchaser will, or will
cause one of its Affiliates to, take all action necessary to cause one or more
qualified retirement plans maintained by Purchaser or any one of its Affiliates
to accept an eligible rollover distribution (within the meaning of Section
402(f)(2) of the Code) of the amounts distributed from the Retirement Plans to
each Employee who shall become an employee of Purchaser's affiliated group and a
rollover contribution (within the meaning of Section 408(d)(3) of the Code) with
respect to such amounts. To the extent distributions are not permitted under
Law, the Purchaser and Seller will take such mutually agreed upon action with
respect to Employees' plan accounts, whether that be a spin-off, trustee-to-
trustee transfer to a plan maintained by Purchaser or any of its Affiliates, or
retention in the Retirement Plans for eventual distribution pursuant to the
terms of such plan.
6.1.4. Employment and Plan Amendments or Terminations. Except as
----------------------------------------------
provided in Section 6.1.1, no provision of this Section 6.1 will limit
Purchaser's or any of its Affiliates' right and authority to discontinue,
suspend or modify the employment of any Employee or benefits provided to any or
all Employees or Former Employees after the Closing; provided, however, that in
the event of any such discontinuance, suspension or modification Purchaser will,
or will cause one of its Affiliates to, remain liable for all Employee Plan and
other employee benefit liabilities or obligations assumed pursuant to this
Agreement and will indemnify, defend and hold harmless Seller, each Post-Closing
Affiliate and their respective directors, officers, partners, employees, agents
and representatives (including without limitation any predecessor or successor
to any of the foregoing) from and against any and all Indemnifiable Losses they
may suffer or incur as a result thereof. Neither Seller nor any Post-Closing
Affiliate will be liable for any liability or obligation that may arise from the
amendment or termination by Purchaser or any of its Affiliates of any employee
benefit plan assumed, established or continued by Purchaser or any of its
Affiliates under this Section 6.1.
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6.1.5. Transitional Matters. Each of Seller and Purchaser will use
--------------------
its respective reasonable efforts to cooperate to (a) transfer to Purchaser or
any of its Affiliates any insurance and administrative services contracts that
Purchaser wishes to continue with respect to any Employee Plan that Purchaser or
any of its Affiliates is assuming or continuing pursuant to this Agreement and
(b) cause any insurance carrier administering workers' compensation and other
employee benefit liabilities or obligations assumed by Purchaser or any of its
Affiliates to deal directly with Purchaser or such Affiliate.
6.1.6. Employee Information. Each of Seller and Purchaser will
--------------------
provide the other, in a timely manner, any information with respect to any
Employee's or Former Employee's employment with and compensation from Seller,
any Post-Closing Affiliate or Purchaser or any of its Affiliates, as the case
may be, or rights or benefits under any employee benefit plan which the other
party hereto may reasonably request.
6.2. General Post-Closing Matters.
----------------------------
6.2.1. Post-Closing Notifications. Purchaser and Seller will, and
--------------------------
each will cause its respective Affiliates to, comply with any post-Closing
notification or other requirements, to the extent then applicable to such party,
of any antitrust, trade competition, investment, control or other Law of any
Governmental Entity having jurisdiction over the Business.
6.2.2. Company Name. C&A will cause Seller to change its corporate
------------
name after the Closing to delete therefrom the words "Floor Coverings."
6.2.3. Access. (a) On the Closing Date, or as soon thereafter as
------
practicable, and in no event later than 30 calendar days after the Closing Date,
Seller will deliver or cause to be delivered to Purchaser all original
agreements, documents, books, records, including without limitation Employee
records and records relating to obligations of the Company to Employees under
Employee Plans retained or assumed by the Purchaser or the Company hereunder,
and files primarily relating to the Business or the Company (collectively,
"Records") in the possession of Seller or any Post-Closing Affiliate to the
extent not in the possession of the Company or Purchaser, subject to the
following exceptions:
(i) Purchaser recognizes that certain Records may contain only
incidental information relating to the Company or may primarily relate to
the Seller or any Post-Closing Affiliate, or the businesses of the Seller
or any Post-Closing Affiliate other than the Business, and Seller and its
Post-Closing Affiliates may retain such Records and Seller may deliver
appropriately excised copies of such Records;
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<PAGE>
(ii) Seller and each Post-Closing Affiliate may retain any Tax Returns
so long as true and complete copies of the portions thereof relating to the
Business are delivered to Purchaser at or before the Closing or made
available to the Purchaser following the Closing; and
(iii) Seller and each Post-Closing Affiliate may retain privileged
Records and Records relating to the Retained Claims.
After the Closing, each party will, and will cause its Affiliates to, retain all
Records (except those Records referred to in Section 6.2.3(a)(i) and (ii))
required to be retained pursuant to obligations imposed by any applicable Law.
Except as provided in the immediately preceding sentence, each party will, and
will cause its Affiliates to, retain all Records for a period of seven years
after the Closing Date. After the end of such seven-year period, before
disposing, or permitting its Affiliates to dispose, of any such Records, each
party will, and will cause its Affiliates to, give notice to such effect to the
other party and give the other party at its cost and expense an opportunity to
remove and retain all or any part of such Records as the other party may elect.
(b) After the Closing, upon reasonable notice, each party hereto will give,
or cause to be given, to the representatives, employees, counsel and accountants
of the other parties hereto access, during normal business hours, to Records
relating to periods prior to or including the Closing, and will permit such
persons to examine and copy such Records to the extent reasonably requested by
the other party in connection with tax and financial reporting matters
(including, without limitation, any Tax Return relating to state or local real
property transfer or gains taxes), audits, legal proceedings (including without
limitation those pertaining to Retained Claims), governmental investigations and
other business purposes and to make inquiries relating thereto of the relevant
personnel; provided, however, that nothing herein will obligate any party to
take actions that would unreasonably disrupt the normal course of its business,
violate the terms of any contract to which it is a party or to which it or any
of its assets is subject or grant access to any of its proprietary, confidential
or classified information (except to the extent required for purposes of
defending or prosecuting any third party Legal Proceedings). Each party will,
and will cause its respective Affiliates controlled by it to, provide or make
available to the other and the other's respective Affiliates access to employees
of Purchaser and the Company for the purposes of, and with the limitations
described in, the preceding sentence (including without limitation for the
purpose of providing, and preparing to provide, testimony in connection with
third party Legal Proceedings).
6.2.4. Certain Tax Matters. (a) Seller will prepare and file or
-------------------
cause to be prepared and filed all foreign, federal,
39
<PAGE>
state and local Income Tax Returns for the Company required to be filed with the
appropriate foreign, United States, state and local taxing authorities for any
taxable period that ends on or before the Closing Date (each a "Pre-Closing Tax
Period"). Seller will prepare and, if required to do so by applicable Law,
deliver to Purchaser for signing and filing any Income Tax Returns of the
Company with respect to any Pre-Closing Tax Period (including any short period)
that have not been filed prior to the Closing Date. Seller will pay all Taxes
required to be paid with respect to such Tax Returns.
(b) Except as otherwise provided in Section 6.2.4(a) or Section 6.2.4(c),
Purchaser will prepare and file or cause to be prepared and filed all Tax
Returns for the Company that are required to be filed with the appropriate
United States, state, local and foreign taxing authorities for all periods as to
which such Tax Returns are due after the Closing Date (taking into account all
extensions of due dates). Subject to Section 6.2.4(r), Purchaser will pay or
cause to be paid all Taxes required to be paid with respect to such Tax Returns.
(c) With respect to any taxable period that would otherwise include but not
end on the Closing Date, to the extent permissible pursuant to applicable Law,
Seller will, and Purchaser will cause the Company to, (i) take all steps as are
or may be reasonably necessary, including without limitation the filing of
elections or returns with applicable taxing authorities, to cause such period to
end on the Closing Date or (ii) if clause (i) is inapplicable, report the
operations of the Company only for the portion of such period ending on the
Closing Date in a combined, consolidated or unitary Tax Return filed by Seller
or a Post-Closing Affiliate, notwithstanding that such taxable period does not
end on the Closing Date. If clause (ii) applies to a taxable period of the
Company, the portion of such taxable period included in such return filed by
Seller will be treated as a Pre-Closing Tax Period described in Section 6.2.4(a)
and Purchaser will not be responsible for filing such return for such portion of
such year pursuant to Section 6.2.4(b), provided that the foregoing will not
relieve Purchaser of its obligation under Section 6.2.4(b) to file a Tax Return
reporting the operations of the Company for the portion of such taxable period
beginning after the Closing Date.
(d) Purchaser will prepare and deliver, or will cause to be prepared and
delivered, within 60 calendar days of receipt of Seller's request therefor, to
Seller, Seller's standard international, federal and state Tax Return data
gathering packages relating to the Company. Such packages will be prepared on a
basis consistent with the prior year's Tax Returns. In addition to providing
such packages to Seller, Purchaser will promptly provide or cause to be provided
to Seller such other information as Seller may reasonably request in order for
the operations of the Company to be properly reported in such Tax Returns.
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<PAGE>
(e) C&A and Seller will, jointly and severally, indemnify, defend and hold
harmless Purchaser and each Purchaser Affiliate from and against any and all
liability for any taxable period as a result of Treasury Regulation Section
1.1502-6 (or any comparable provision of state, local or foreign law) for Taxes
of any corporation, other than the Company, which is or has been affiliated with
the Seller or C&A Corp.
(f) Purchaser is eligible to and will make a timely and effective election
under Section 338(g) of the Code (and any comparable provision of state or local
law) with respect to the purchase of the Shares hereunder. Both Seller and
Purchaser are eligible to, and Purchaser will make and Seller will cause C&A
Corp. to make, a timely and effective election under Section 338(h)(10) of the
Code (and any comparable provision of state or local law) with respect to such
purchase (the "Section 338(h)(10) Election").
(g) At the Closing, Purchaser will deliver to Seller a completed Internal
Revenue Service Form 8023A, and the required schedules thereto ("Form 8023A"),
providing for the Section 338(h)(10) Election. Provided that the information on
such Form 8023A is, in the reasonable determination of Seller, correct and
complete in all material respects, Seller will, at the Closing, execute and
deliver such Form 8023A to Purchaser. If any changes or supplements are
required to the Form 8023A as a result of information that is first available
after the Closing, Seller and Purchaser will promptly agree upon and make such
changes. Purchaser and Seller (or C&A Corp.) will timely file the Form 8023A,
and any required supplements thereto, and will provide written evidence to the
other that it has done so.
(h) Purchaser and Seller agree that neither of them will take, or permit
their Affiliates to take, any action to modify or revoke the elections contained
in or the content of any Form 8023A without the express written consent of the
other party.
(i) Seller will cause any tax sharing agreements between the Company and
Seller or any other Post-Closing Affiliate to be terminated, effective as of the
Closing Date, to the extent that any such agreement relates to the Company.
(j) Seller will pay and indemnify and hold Purchaser and the Company
harmless from (i) any and all Taxes arising from the Section 338(h)(10) Election
and (ii) any Tax liability, cost, or expense arising out of the failure to pay
such Tax. Seller will also pay any state or local Tax (and indemnify and hold
Purchaser and the Company harmless against any Tax liability, cost, or expense
arising out of any failure to pay such Tax) attributable to any election under
state or local law comparable to the election available under Section 338(g) of
the Code (or which results from the making of an election under Section 338(g)
of the Code) with respect to Purchaser's acquisition of the Company.
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(k) Purchaser and Seller agree to report transactions under this Agreement
consistent with the Section 338(h)(10) Election and will take no position
contrary thereto unless required to do so pursuant to a final determination by
any Taxing authority or judicial proceeding.
(l) Purchaser and Seller agree that the Purchase Price and the liabilities
of the Company (plus other relevant items) will be allocated to the assets of
the Company for purposes of all Tax Returns and other appropriate documents in a
manner consistent with the purchase price allocation to be determined by the
parties on or before the Closing Date (if such determination is agreed to prior
to the Closing Date) and in accordance with Treasury Regulation Section
1.338(h)(10)-1.
(m) On or before the Closing Date, Seller agrees to provide Purchaser and
the Company with all required clearance certificates or similar documents that
may be required by any state, local or other Taxing authority in order, to the
extent allowed, to relieve Purchaser of any obligation to withhold any portion
of the Purchase Price. If necessary to avoid sales or use Taxes, Seller will,
to the extent allowed, provide Purchaser with all appropriate state and local
resale certificates.
(n) Seller will furnish to Purchaser on or before the Closing Date a
certification of Seller's non-foreign status as set forth in Treasury Regulation
Section 1.1445-2(b).
(o) Seller, Purchaser and the Company will reasonably cooperate with each
other in connection with the preparation and filing of all Tax Returns or any
audit examinations for any period, including without limitation the timely
furnishing or making available of records, books of account and any other
information necessary for the preparation of the Tax Returns.
(p) (i) With respect to any Tax Return for a Pre-Closing Tax Period,
Seller and its duly appointed representatives will have the sole right, at its
or their expense, to supervise or otherwise coordinate any examination process
and to negotiate, resolve, settle or contest any asserted Tax deficiencies or
assert and prosecute any claims for refund; notwithstanding the foregoing,
without the express written consent of Purchaser or the Company, which consent
will not be unreasonably withheld or delayed, Seller will not file any amended
Tax Return, settle any Tax claim or assessment, or surrender any right to claim
a refund of Tax, if such action could have the effect of increasing the Tax
liabilities of the Company or Purchaser.
(ii) With respect to any other Tax Return of the Company, Purchaser,
the Company and their duly appointed representatives will have the sole right,
at the expense of Purchaser or the Company, to supervise or otherwise coordinate
any examination process and to negotiate, resolve, settle or contest any
asserted Tax deficiencies or assert and prosecute any
42
<PAGE>
claims for refund; notwithstanding the foregoing, without the express written
consent of Seller, which consent will not be unreasonably withheld or delayed,
neither Purchaser nor the Company will file any amended Tax Return, settle any
Tax claim or assessment, or surrender any right to claim a refund of Tax, if
such action could have the effect of increasing the Tax liabilities of Seller or
any Post-Closing Affiliate.
(iii) Each party hereto will notify the other within 30 calendar days
(unless action is required sooner, then as soon as practicable) of the assertion
of any claim or the commencement of any suit, action, proceeding, investigation
or audit with respect to the operations of the Company that is the subject of
this Section 6.2.4(p), and will provide the other copies (subject to deletion of
nonrelevant information) of all correspondence relating to such contest.
(q) "Income Tax" or "Income Taxes" means all Taxes imposed on, measured by
or which require reference to, net or taxable income (including any income,
franchise, estimated, alternative, minimum, add-on minimum or other Tax imposed
on, measured by or which require reference to, net or taxable income), together
with interest and penalties thereon and estimated payments thereof.
(r) The Seller and C&A will, jointly and severally defend, indemnify and
hold harmless the Parent, Purchaser and the Company and their respective
directors, officers, employees, agents and representatives (including, without
limitation, any predecessor or successor to any of the foregoing) from and
against any breach of a covenant contained in this Section 6.2.4 and against the
following Taxes and, except as otherwise provided in Section 6.2.4(p), against
any loss, damage, liability, or expense, including reasonable fees for attorneys
and consultants, incurred in contesting or otherwise in connection with any such
Taxes and in enforcing their rights under this Section 6.2.4: (i) all Taxes
imposed on the Company with respect to taxable periods ending before or on the
Closing Date and (ii) with respect to taxable periods beginning before the
Closing Date and ending after the Closing Date, Taxes imposed on the Company
that are allocable, pursuant to Section 6.2.4(t), to the portion of such period
ending on the Closing Date.
(s) Purchaser and Parent will, and, if the Closing occurs, will cause the
Company to, jointly and severally indemnify, defend and hold harmless C& A and
Seller and each Post-Closing Affiliate and their respective directors, officers,
partners, employees, agents and representatives (including, without limitation,
any predecessor to any of the foregoing) from and against (i) all Taxes imposed
on the Company with respect to taxable periods beginning after the Closing Date
and, with respect to taxable periods beginning before the Closing Date and
ending after the Closing Date, Taxes imposed on the Company that are allocable,
pursuant to Section 6.2.4(t), to the portion of such period beginning after the
Closing Date, and (ii) any loss,
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<PAGE>
damage, liability, or expense, including reasonable fees for attorneys and
consultants, incurred in contesting or otherwise in connection with any such
Taxes and in enforcing their rights under this Section 6.2.4.
(t) In the case of Taxes that are payable with respect to a taxable period
that begins before the Closing Date and ends after the Closing Date, the portion
of any such Tax that is allocable to the portion of the period ending on the
Closing Date will be:
(i) in the case of Taxes that are either (x) Income Taxes, or (y)
imposed in connection with any sale or other transfer or assignment of
property, real or personal, tangible or intangible (other than conveyances
pursuant to this Agreement, as provided under Section 7.2), deemed equal to
the amount that would be payable if the taxable year ended immediately
prior to the Closing Date (including the taxable years of organizations in
which the Company owns a partnership interest or equity interest) (except
that, solely for purposes of determining the marginal tax rate applicable
to income or receipts during such period in a jurisdiction in which such
tax rate depends upon the level of income or receipts, annualized income or
receipts may be taken into account if appropriate for an equitable sharing
of such Taxes); and
(ii) in the case of Taxes not described in subparagraph (i) that are
imposed on a periodic basis and measured by the level of any item, deemed
to be the amount of such Taxes for the entire period (or, in the case of
such Taxes being determined on an arrears basis, the amount of such Taxes
for the immediately preceding period) multiplied by a fraction the
numerator of which is the number of calendar days in the period ending
immediately prior to the Closing Date and the denominator of which is the
number of calendar days in the entire period.
(u) Any Tax refund (or comparable benefit resulting from a reduction in
Tax liability) for a period ending on or before the Closing Date arising out of
the carryback of a loss or credit incurred by the Company in a taxable period
(or allocable portion thereof) ending after the Closing Date will be the
property of the Purchaser and, if received by the Seller or any Post-Closing
Affiliate, will be paid over promptly to the Purchaser (including any interest
received from or credited thereon by the applicable taxing authority). Any other
Tax refund for a period ending on or before the Closing Date or for the
allocable portion of a period including the Closing Date will be the property of
the Seller. Purchaser will pay or cause the Company to pay to Seller all refunds
or credits of Taxes (including any interest received from or credited thereon by
the applicable taxing authority) received by Purchaser or any of its Affiliates
after the Closing Date and attributable to Taxes paid by Seller, any Post-
Closing Affiliate, or the Company. Such payment will be made to Seller
44
<PAGE>
promptly after receipt of any such refund from, or allowance of such credit by,
the relevant taxing authority. In all other events, any Tax refund will be the
property of the Company and paid to the Company.
(v) For purposes of this Section 6.2.4, Purchaser and Seller will allocate
all income, gain, loss, deductions and credits of the Company properly
attributable to the Closing Date, but not attributable to the Section 338(h)(10)
Election, to the day after the Closing Date for all federal, state, local and
foreign Tax purposes.
6.2.5. Insurance. With respect to any loss, liability or damage
---------
suffered by the Company after the Closing Date relating to, resulting from or
arising out of the conduct of the Business prior to the Closing Date for which
Seller or any Post-Closing Affiliate would be entitled to assert, or cause any
other person or entity to assert, a claim for recovery under any policy of
insurance maintained by Seller or a Post-Closing Affiliate or for the benefit of
Seller or the Company, in respect of the Business, products, employees or the
Company ("Insurance"), at the request of Purchaser, Seller will use its
reasonable efforts to assert, or to assist Purchaser or the Company to assert,
one or more claims under such Insurance covering such loss, liability or damage
if Purchaser or the Company is not itself entitled to assert such claim,
provided that all of Seller's and any Post-Closing Affiliate's out-of-pocket
costs and expenses incurred in connection with the foregoing, including without
limitation any liability, obligation or expense referred to in the last sentence
of this Section 6.2.5, are promptly reimbursed by Purchaser. Seller will be
deemed, solely for the purpose of asserting claims for Insurance pursuant to the
immediately preceding sentence, to have assumed or retained liability for such
loss, liability or damage to the extent of the policy limits of the applicable
policy of Insurance; provided, however, that (a) Purchaser's and Parent's
obligations under Section 5.3(b) will not be affected by the provisions of this
Section 6.2.5 and (b) with respect to any claim made at the request of Purchaser
or the Company by Seller or any Seller Affiliate under any Insurance pursuant to
this Section 6.2.5, each of Purchaser and Parent will jointly and severally
indemnify, defend and hold harmless Seller and each Post-Closing Affiliate and
their respective directors, officers, partners, employees, agents and
representatives (including without limitation any predecessor or successor of
any of the foregoing) from and against any Indemnifiable Loss relating to,
resulting from or arising out of any deductible, policy limit, obligation,
indemnity, reinsurance due to the liquidation or insolvency of the reinsurer,
self-insurance retention, premium adjustments resulting from claims made at the
request of Purchaser or the Company under this Section 6.2.5 or other like
arrangement by which any such entity retains any liability or obligation under
any such policy of Insurance or otherwise.
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<PAGE>
6.2.6. Receivables. As of the Closing, C&A and Seller will
-----------
terminate the participation of the Company in the accounts receivables facility
operated by a finance subsidiary of C&A for C&A and its affiliates and C&A and
Seller will, jointly and severally, indemnify, defend and hold harmless the
Company or Purchaser for any Indemnifiable Loss arising out of the Company's
participation, or termination of participation, in this facility, provided,
however, that the foregoing indemnity obligation will not apply to any loss on
the sale of receivables prior to the Closing Date or the collection (or failure
to collect) the receivables. C&A and Seller hereby agree that all monies
(regardless of any prior discount or loss on sale) collected after the Closing
by Seller or any Post-Closing Affiliate of the Seller with respect to
receivables attributable to the Company will be paid to the Company within three
business days of Seller's or Post-Closing Affiliate's receipt thereof.
6.2.7. Surety Obligations; Master Contracts. (a) From and after the
------------------------------------
Closing, Parent and Purchaser will, and will cause the Company to, use
reasonable efforts to obtain and have issued replacements for any guarantee,
performance bond, letter of credit or other agreement guaranteeing or securing
liabilities and obligations (including without limitation in respect of
operating or other leases and the surety bonds listed on Schedule 2.1.14)
(collectively, "Surety Obligations") relating to the Business or the Company
under which the Seller or any Post-Closing Affiliate has any liability to a
third party and to obtain any amendments, novations, releases, waivers, consents
or approvals necessary to release Seller and each Post-Closing Affiliate party
to such Surety Obligations from all liability thereunder relating to the
Business or the Company, in each case as promptly as practicable. In the event
and for the period that Purchaser and the Company fail to obtain any such
replacement, amendment, novation, release, waiver, consent or approval, without
limiting the generality of Section 5.3(b), Parent and Purchaser will jointly and
severally indemnify, defend, and hold harmless each of Seller and each Post-
Closing Affiliate and their respective Affiliates, directors, officers,
partners, employees, agents and representatives (including without limitation
the predecessors or successors of any of the foregoing) from and against any
Indemnifiable Loss relating to, resulting from or arising out of any such
failure by Purchaser or the Company.
(b) From and after the Closing, C&A will, and will cause Seller
to, use reasonable efforts to obtain and have issued replacements for any Surety
Obligations relating to any business other than the Business or any Post-Closing
Affiliate of C&A under which the Company has any liability to a third party and
to obtain any amendments, novations, releases, waivers, consents or approvals
necessary to release the Company from all liability thereunder relating to any
business other than the Business or any Post-Closing Affiliate of C&A, in each
case as promptly as practicable. In the event and for the period that C&A or
Seller fails to obtain any such replacement, amendment, novation,
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<PAGE>
release, waiver, consent or approval, without limiting the generality of Section
5.3(c), C&A and Seller will jointly and severally indemnify, defend, and hold
harmless the Company and its respective Affiliates, directors, officers,
partners, employees, agents and representatives (including without limitation
the predecessors or successors of any of the foregoing) from and against any
Indemnifiable Loss relating to, resulting from or arising out of any such
failure by C&A or Seller.
(c) To the extent permissible under the terms thereof, C&A will
continue to make available to the Company the equipment listed on Schedule
6.2.7(c) in accordance with the terms of the related contracts listed thereon
(the "Master Contracts"). Purchaser will, and will cause the Company to,
reimburse C&A for the Company's proportionate share of C&A's lease and other
payments required to be made (other than payments attributable to a default by
C&A under a Master Contract unless such default relates to, results from or
arises out of any action or failure to take action by a Company under the
applicable Master Contract) under any such Master Contracts.
6.2.8. Assumed Push-Down Liabilities. Without further action,
-----------------------------
effective as of the Closing, Floorcoverings US will assume the liabilities of
C&A and each of its Post-Closing Affiliates in respect of only the amounts of
all Push-Down Liabilities identified as "Assumed Push-Down Liabilities" on
Schedule 1.2(a) as of the Closing (the "Assumed Push-Down Liabilities"),
provided, however, that the aggregate amount of such Assumed Push-Down
Liabilities as of the opening of business on the Closing Date will not exceed
the "Maximum Amount of Assumed Push-Down Liabilities" as shown on Schedule
1.2(a) (the "Maximum APD Liability Amount").
VII. MISCELLANEOUS PROVISIONS
------------------------
7.1. Notices. All notices and other communications required or permitted
-------
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or by a
nationally recognized overnight courier service or when dispatched during normal
business hours by electronic facsimile transfer (confirmed in writing by mail
simultaneously dispatched) to the appropriate party at the address specified
below:
(a) If to Parent or Purchaser, to:
CAF Holdings, Inc.
230 East High Street
Charlottesville, Virginia 22902
Facsimile No.: (804) 979-1145
Attention: Stephen M. Burns
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<PAGE>
with a copy to:
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
Richmond, Virginia 23219
Facsimile No.: (804) 775-1061
Attention: Leslie A. Grandis
(b) If to Seller, to:
Collins & Aikman Floor Coverings Group, Inc.
701 McCullough Drive
Charlotte, North Carolina 28262
Facsimile No.: (704) 548-2010
Attention: Corporate Counsel
with a copy to:
Collins & Aikman Products Co.
210 Madison Avenue, 6th Floor
New York, New York 10016
Facsimile No.: (212) 578-1269
Attention: Elizabeth R. Philipp, Esq.
Executive Vice President - Law
and
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Facsimile No.: (212) 755-7306
Attention: Robert A. Profusek, Esq.
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
7.2. Expenses. Except as otherwise expressly provided herein, (a) each of
--------
Seller and C&A will pay or cause to be paid all expenses incurred by Seller or
C&A incident to this Agreement and in preparing to consummate and consummating
the transactions provided for herein and (b) each of Parent and Purchaser will
pay any expenses incurred by it incident to this Agreement and in preparing to
consummate and consummating the transactions provided for herein, including
without limitation the fees and expenses of any broker, finder, financial
advisor or similar person engaged by such party.
7.3. Successors and Assigns. (a) Subject to Section 7.3(b), this
----------------------
Agreement will be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns, but will not be
assignable or delegatable by any party without the prior written consent of the
other parties hereto. Notwithstanding the foregoing sentence, Purchaser may
assign this Agreement to any lender to Purchaser or any
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<PAGE>
subsidiary of Purchaser as security for obligations to such lender in respect of
the financing arrangements entered into in connection with the transactions
contemplated hereby and any refinancings, extensions, refundings or renewals
thereof, provided however, that no assignment hereunder shall in any way affect
-------- -------
Purchaser's or the Company's obligations or liabilities under this Agreement.
(b) Nothing in this Agreement is intended to limit Purchaser's ability to
sell or to Transfer the Shares following the Closing Date provided that such
sale or Transfer will not result in a termination of any of Parent's or
Purchaser's covenants, duties, responsibilities, obligations or liabilities
hereunder, including without limitation under Sections 3.1(b) and Articles V and
VI, unless the person or entity acquiring the Shares pursuant to such sale or
Transfer assumes all of such covenants, duties, responsibilities, obligations
and liabilities in a written instrument reasonably satisfactory to Seller.
7.4. Waiver. Either Parent (on behalf of itself and Purchaser) or Seller
------
by written notice to the other may (a) extend the time for performance of any of
the obligations or other actions of the other under this Agreement, (b) waive
any inaccuracies in the representations or warranties of the other contained in
this Agreement, (c) waive compliance with any of the conditions or covenants of
the other contained in this Agreement, or (d) waive or modify performance of any
of the obligations of the other under this Agreement; provided, however, that
neither Parent (on behalf of itself and Purchaser) nor Seller may, without the
prior written consent of the other, make or grant such extension of time, waiver
of inaccuracies or compliance or waiver or modification of performance with
respect to its (or any of its Affiliates') representations, warranties,
conditions or covenants hereunder. Except as provided in the immediately
preceding sentence, no action taken pursuant to this Agreement will be deemed to
constitute a waiver of compliance with any representations, warranties or
covenants contained in this Agreement and will not operate or be construed as a
waiver of any subsequent breach, whether of a similar or dissimilar nature.
7.5. Entire Agreement. This Agreement (including the Schedules hereto)
----------------
supersedes any other agreement, whether written or oral, that may have been made
or entered into by any party or any of their respective Affiliates (or by any
director, officer or representative thereof) prior to the date hereof relating
to the matters contemplated hereby, other than the confidentiality agreement
(the "Confidentiality Agreement"), between Seller or one of its Affiliates and
Parent or one of its Affiliates, which will survive the execution, delivery or
termination of this Agreement and to which Purchaser agrees to be bound as if it
was an original party thereto. This Agreement (together with the Schedules
hereto) constitutes the entire agreement by and among the parties hereto and
there are no agreements or commitments by
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<PAGE>
or among such parties or their Affiliates except as expressly set forth herein.
7.6. Amendments, Supplements, Etc. This Agreement may be amended or
----------------------------
supplemented at any time by additional written agreements as may mutually be
determined by Parent (without the joinder of Purchaser) and Seller to be
necessary, desirable or expedient to further the purposes of this Agreement, or
to clarify the intention of the parties hereto.
7.7. Rights of the Parties. Except as provided in Article V or in Sections
---------------------
6.2.4 and 7.3, nothing expressed or implied in this Agreement is intended or
will be construed to confer upon or give any person or entity other than the
parties hereto and their respective Affiliates any rights or remedies under or
by reason of this Agreement or any transaction contemplated hereby.
7.8. Further Assurances. From time to time, whether at or after the
------------------
Closing as and when requested by either Parent (on behalf of itself and
Purchaser) or C&A on behalf of itself and Seller, the other will execute and
deliver, or cause to be executed and delivered, all such documents and
instruments as may be reasonably necessary or otherwise reasonably requested by
Purchaser or C&A to consummate the transactions contemplated by this Agreement
or otherwise to carry out the intent and purpose of this Agreement and to assure
that the Company holds all of the assets, properties, permits, authorizations,
rights and related obligations used or held for use primarily or exclusively in
the Business, including without limitation the proper filing, registration or
recordation of such documents and instruments.
7.9. Applicable Law; Jurisdiction. This Agreement and the legal relations
----------------------------
among the parties hereto will be governed by and construed in accordance with
the substantive Laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
7.10. Titles and Headings. Titles and headings to Sections herein are
-------------------
inserted for convenience of reference only, and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
7.11. Certain Interpretive Matters and Definitions. (a) Unless the
--------------------------------------------
context otherwise requires, (i) all references to Sections or Schedules are to
Sections or Schedules of or to this Agreement, (ii) each term defined in this
Agreement has the meaning assigned to it, (iii) each accounting term not
otherwise defined in this Agreement has the meaning assigned to it in accordance
with GAAP, (iv) "or" is disjunctive but not necessarily exclusive, (v) words in
the singular include the plural and vice versa, (vi) the terms "subsidiary" and
---- -----
"Affiliate" have the meanings given to those terms in Rule 12b-2 of Regulation
12B under the Securities Exchange Act of 1934, as amended, (vii) all references
to "$" or dollar amounts will be to
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lawful currency of the United States of America, and (viii) "Knowledge of
Seller" means solely to the actual knowledge of the persons listed on Schedule
7.11(a), and (ix) "Knowledge of Purchaser" means solely to the actual Knowledge
of the persons is listed on Schedule 7.11(b).
(b) No provision of this Agreement will be interpreted in favor of, or
against, any of the parties hereto by reason of the extent to which any such
party or its counsel participated in the drafting thereof or by reason of the
extent to which any such provision is inconsistent with any prior draft hereof
or thereof.
(c) Seller's obligations to Employees and other third parties (other than
Parent, Purchaser and the Company) will be deemed closed out for purposes of
calculating any amounts owed by C&A or any of its Affiliates to any such third
party as of the date of the final determination of the Actual Net Working
Capital Amount pursuant to Section 1.3
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
---------------------------
Name: _____________________
Title:_____________________
COLLINS & AIKMAN FLOOR
COVERINGS GROUP, INC.
By: /s/ Neeraj Mital
---------------------------
Name: _____________________
Title:_____________________
COLLINS & AIKMAN
FLOOR COVERINGS, INC.
By: /s/ J. Michael Stepp
---------------------------
Name: _____________________
Title:_____________________
CAF HOLDINGS, INC.
By: /s/ Stephen M. Burns
---------------------------
Name: _____________________
Title:President
_____________________
CAF ACQUISITION CORPORATION
By: /s/ Stephen M. Burns
---------------------------
Name: _____________________
Title:President
_____________________
52
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
COLLINS & AIKMAN FLOORCOVERINGS, INC.
FIRST: The name of the corporation is Collins & Aikman
-----
Floorcoverings, Inc. (sometimes hereinafter referred to as the "Corporation").
SECOND: The address of the Corporation's registered office in the
------
State of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover,
County of Kent. The name of the Corporation's registered agent at such address
is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act
-----
or activity for which corporations may be organized under the Delaware General
Corporation Law.
FOURTH: The total number of shares of stock which the Corporation is
------
authorized to issue is One Thousand (1,000) shares of Common Stock, par value
$.01 per share.
FIFTH: The business and affairs of the corporation shall be managed
-----
by or under the direction of the board of directors, and the directors need not
be elected by ballot unless required by the by-laws of the corporation.
SIXTH: In furtherance and not in limitation of the powers conferred
-----
by the laws of the State of Delaware, the board of directors is expressly
authorized to make, amend and repeal the by-laws.
-1-
<PAGE>
SEVENTH: The Corporation reserves the right to amend, alter or repeal
-------
any provision contained in this Certificate of Incorporation in the manner from
time to time prescribed by the laws of the State of Delaware. All rights herein
conferred are granted subject to this reservation.
EIGHTH: A director of the Corporation shall not be personally liable
------
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (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 Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware General Corporation Law is amended
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of this
provision shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
NINTH: The incorporator is John F. Grossbauer, whose mailing address
-----
is 8320 University Executive Park, Suite 102, Charlotte, North Carolina 28262.
-2-
<PAGE>
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming
a corporation under the laws of the State of Delaware do make, file and record
this Certificate of Incorporation and, accordingly, have hereto set my hand this
24th day of January, 1995.
/s/ John F. Grossbauer
----------------------
John F. Grossbauer
-3-
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COLLINS & AIKMAN FLOORCOVERINGS, INC.
BEFORE RECEIPT OF PAYMENT FOR STOCK
Collins & Aikman Floorcoverings, Inc., a Delaware corporation (the
"Corporation"), does hereby certify:
FIRST: The corporation has not received any payment for any of its
-----
stock.
SECOND: The amendment set forth below to the Corporation's
------
certificate of incorporation was duly adopted by the sole incorporator of the
Corporation in accordance with the provisions of Section 241 of the General
Corporation Law of the State of Delaware, no directors having been named in the
original certificate of incorporation and no directors having yet been elected
and qualified.
Article FIRST shall be amended to read in its entirety as follows:
FIRST: The name of the corporation is Collins & Aikman Floor
-----
Coverings, Inc. (sometimes hereinafter referred to as the
"Corporation").
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Amendment this 25th day of January, 1995.
Collins & Aikman Floorcoverings, Inc.
By: /s/ John F. Grossbauer
----------------------------------
Incorporator
<PAGE>
EXHIBIT 3.2
BY-LAWS
0F
COLLINS & AIKMAN FLOOR COVERINGS, INC
(a Delaware corporation)
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the
-----------------
Corporation in the State of Delaware shall be 32 Loockerman Square, Suite L-100,
City of Dover, County of Kent. The name of the registered agent is The Prentice-
Hail Corporation System, Inc , or such other office or agent as the Board of
Directors shall from time to time select.
SECTION 2. Other Offices. The Corporation may also have offices at
-------------
other places, either within or without the State of Delaware, as the Board of
Directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE II
Meeting of Stockholders
-----------------------
SECTION 1. Annual Meetings. The annual meeting of the stockholders
--------------
for the election of directors and for the transaction of such other business as
may properly come before the meeting shall be held at such place (within or
without the State of Delaware), date and hour as shall be designated in the
notice thereof, except that no annual meeting need be held if all actions,
including the election of directors, required by the General Corporation Law of
the State of Delaware to be taken at a stockholders' annual meeting are taken by
written consent in lieu of a meeting pursuant to Section 9 of this Article II.
SECTION 2. Special Meetings. Special meetings of the stockholders
----------------
for any purpose or purposes may be called by the Board, the Chief Executive
Officer or a stockholder or stockholders holding of record at least 25% of all
shares of the Corporation entitled to vote thereat to be held at such place
(within or without the State of Delaware), date and hour as shall be designated
in the notice thereof.
<PAGE>
SECTION 3. Notice of Meetings. Except as otherwise expressly required
------------------
by law, notice of each meeting of the stockholders shall be given not less than
10 or more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting by mailing such notice, postage prepaid,
directed to each stockholder at the address of such stockholder as appears on
the records of the Corporation. Every such notice shall state the place, date
and hour of the meeting and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Except as provided in the next
immediate sentence or as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken. If the
adjournment is for more than 30 calendar days, or if after the adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given to each stockholder entitled to vote at such adjourned meeting.
A written waiver of notice, signed by a stockholder entitled to
notice, whether signed before or after the time set for a given meeting, shall
be deemed equivalent to notice of such meeting. Attendance of a stockholder in
person or by proxy at a stockholders' meeting shall constitute a waiver of
notice to such stockholder of such meeting, except when such stockholder 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.
SECTION 4. List of Stockholders. It shall be the duty of the
--------------------
Secretary or other officer of the Corporation who shall have charge of its stock
ledger to prepare and make, at least 10 days before every meeting of the
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
10 calendar days prior to the meeting either at a place specified in the notice
of the meeting within the city where the meeting is to be held or, if not so
specified, at the place where the meeting is to be held. Such 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.
SECTION 5. Quorum. At each meeting of the stockholders, except as
------
otherwise expressly required by law, stockholders holding a majority of the
shares of stock of the
2
<PAGE>
Corporation issued, outstanding and entitled to be voted at the meeting shall be
present in person or by proxy in order to constitute a quorum for the
transaction of business. In the absence of a quorum at any such meeting or any
adjournment or adjournments thereof, a majority in voting interest of those
present in person or by proxy and entitled to vote thereat may adjourn such
meeting from time to time until stockholders holding the amount of stock
requisite for a quorum shall be present in person or by proxy. At any such
adjourned meeting at which a quorum may be present, any business may be
transacted that might have been transacted at the meeting as originally called.
SECTION 6. Organization. At each meeting of the stockholders, one of
------------
the following shall act as chairman of the meeting and preside thereat, in the
following order of precedence:
(a) the Chief Executive Officer;
(b) if there is no Chief Executive Officer or if the Chief Executive
Officer shall be absent from such meeting, the President;
(c) if the Chief Executive Officer and the President shall be absent
from such meeting, any other officer or director of the Corporation
designated by the Board to act as chairman of such meeting and to preside
thereat; or
(d) a stockholder of record of the Corporation who shall be chosen
chairman of such meeting by a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat.
The Secretary or, if the Secretary shall be presiding over the meeting or absent
from such meeting, the person whom the chairman of such meeting shall appoint,
shall act as secretary of such meeting and keep the minutes thereof.
SECTION 7. Order of Business. The order of business at each
-----------------
meeting of the stockholders shall be determined by the chairman of such meeting.
SECTION 8. Voting. Each holder of voting stock of the Corporation
------
shall, at each meeting of the stockholders, be entitled to one vote in person or
by proxy for each share of stock of the Corporation held by him and registered
in his name on the books of the Corporation on the date fixed pursuant to the
provisions of Section 4 of Article VIII of these By-laws as the record date for
the determination of stockholders who shall be entitled to receive notice of and
to
3
<PAGE>
vote at such meeting.
At all meetings of the stockholders, all matters, except as otherwise provided
by law or in these By-laws, shall be decided by the vote of a majority of the
votes cast by stockholders present in person or by proxy and entitled to vote
thereat, a quorum being present. Except as otherwise expressly required by law,
the vote at any meeting of the stockholders on any question need not be by
ballot, unless so directed by the chairman of the meeting. On a vote by ballot,
each ballot shall be signed by the stockholder voting, or by his proxy, if there
be such proxy, and shall state the number of shares voted.
SECTION 9. Action by Written Consent. Except as otherwise provided
-------------------------
by law or by the Certificate of Incorporation, any action required or
permitted to be taken at any annual or special meeting of the stockholders may
be taken without a meeting, without prior notice and without a vote if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders of outstanding stock of the Corporation having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares of stock of the Corporation entitled to vote
thereon were present and voted, and delivered to the Corporation in the manner
provided in Section 4 of Article VIII of these By-laws.
ARTICLE III
Board of Directors
------------------
SECTION 1. General Powers. The business and affairs of the
--------------
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 2. Number and Term of Office. The Board of Directors shall
-------------------------
consist of three members, but the number of members constituting the Board of
Directors may be increased or decreased from time to time by resolution adopted
by a majority of the whole Board. Directors need not be stockholders. Each of
the directors of the Corporation shall hold office until his term expires and
until his successor is elected and qualified or until his earlier death or until
his earlier resignation or removal in the manner hereinafter provided.
SECTION 3. Election. At each meeting of the stockholders for the
--------
election of directors at which a quorum is present, the persons receiving the
greatest number of votes, up to the number of directors to be elected, shall be
4
<PAGE>
the directors.
SECTION 4. Resignation, Removal and Vacancies. Any director may resign
----------------------------------
at any time by giving written notice of his resignation to the Board, the Chief
Executive Officer, President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, when accepted by
action of the Board. Except as aforesaid, the acceptance of such resignation
shall not be necessary to make it effective.
A director may be removed, either with or without cause, at any time
by a vote of a majority in voting interest of the stockholders.
Any vacancy or newly created directorship occurring on the Board for
any reason may be filled by a majority of the directors then in office, though
less than a quorum, or by a sole remaining director. The director elected to
fill such vacancy or newly created directorship shall hold office for the
unexpired term in respect of which such vacancy occurred or such newly created
directorship was created.
SECTION 5. Meetings. (a) Annual Meetings. As soon as practicable
-------- ---------------
after each annual election of directors, the Board shall meet for the purpose of
organization and the transaction of other business.
(b) Regular Meetings. Regular meetings of the Board shall be held at
----------------
such times and places as the Board shall from time to time determine.
(c) Special Meetings. Special meetings of the Board shall be held
----------------
whenever called by the Chief Executive Officer or the President or a majority of
the directors at the time in office. Any and all business may be transacted at
a special meeting that may be transacted at a regular meeting of the Board.
(d) Place of Meeting. The Board may hold its meeting at such place
----------------
or places within or without the State of Delaware as the Board may from time to
time by resolution determine or as shall be designated in the respective notices
or waivers of notice thereof.
(e) Notice of Meetings. Notices of regular meetings of the Board or
------------------
of any adjourned meeting need not be given.
Notices of special meetings of the Board, or of any meeting of any
committee of the Board that has not been fixed
5
<PAGE>
in advance as to time and place by such committee, shall be mailed by the
Secretary or an Assistant Secretary to each director or member of such
committee, addressed to him at his residence or usual place of business, so as
to be received at least one calendar day before the day on which such meeting is
to be held, or shall be sent to him by telecopy, cable or other form of recorded
communication or be delivered personally or by telephone not later than one
calendar day before the day on which such meeting is to be held. Such notice
shall include the time and place of such meeting. However, notice of any such
meeting need not be given to any director or member of any committee if such
notice is waived by him in writing or by telecopy, cable or other form of
recorded communication, whether before or after such meeting shall be held, or
if he shall be present at such meeting.
(f) Quorum and Manner of Acting. Except as otherwise provided by
---------------------------
law, the Certificate of Incorporation or these By-laws, one-half of the total
number of directors shall be present in person at any meeting of the Board in
order to constitute a quorum for the transaction of business at such meeting.
In each case the vote of a majority of those directors present at any such
meeting at which a quorum is present shall be necessary for the passage of any
resolution or any act of the Board, except as otherwise expressly required by
law or these By-laws In the absence of a quorum for any such meeting, a
majority of the directors present thereat may adjourn such meeting from time to
time until a quorum shall be present thereat.
(g) Action by Communication Equipment. The directors, or the
---------------------------------
members of any committee of the Board, may participate in a meeting of the
Board, or of such committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation shall constitute presence in
person at such meeting.
(h) Action by Consent. Any action required or permitted to be taken
-----------------
at any meeting of the Board, or of any committee thereof, may be taken without a
meeting if all members of the Board or committee, as the case may be, consent
thereto in writing and such writing is filed with the minutes of the proceedings
of the Board or such committee.
(i) Organization. At each meeting of the Board, the Chief Executive
------------
Officer shall act as chairman of the meeting and preside thereat, or in his
absence, any director chosen by a majority of the directors present thereat.
The Secretary or, in case of his absence, any person (who shall be an Assistant
Secretary, if an Assistant Secretary shall be present thereat) whom the chairman
shall appoint, shall act as
6
<PAGE>
secretary of such meeting and keep the minutes thereof.
SECTION 6. Compensation. Directors, as such, shall not receive any
------------
stated salary for their services, but by resolution of the Board may receive a
fixed sum and expenses incurred in performing the functions of director and
member of any committee of the Board. Nothing herein contained shall be
construed so as to preclude any director from serving the Corporation in any
other capacity and receiving compensation therefor.
ARTICLE IV
Committees
----------
SECTION 1. (a) Designation and Membership. The Board may, by
--------------------------
resolution passed by a majority of the whole Board, designate one or more
committees consisting of such number of directors, not less than one, as the
Board shall appoint. 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. Vacancies occurring on any committee for any
reason may be filled by the Board at any time Any member of any committee shall
be subject to removal, with or without cause, at any time by the Board or by a
majority in voting interest of the stockholders.
(b) Functions and Powers. Any such committee, subject to any
--------------------
limitations prescribed by the Board, shall possess and may exercise, during the
intervals between meetings of the Board, all the powers and authority of the
Board 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 that may
require it; provided, however, that no such committee shall have such power or
authority in reference to amending the Certificate of Incorporation of the
Corporation (except that a committee may, to the extent authorized in
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
Corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the Corporation), adopting an agreement of merger or
consolidation under Section 251 or Section 252 of the General Corporation Law
of the State of Delaware, 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
7
<PAGE>
Corporation or a revocation of a dissolution, filling vacancies on the Board,
changing the membership or filling vacancies on any committee of the Board or
amending these Bylaws. No such committee shall have the power and authority to
declare dividends, to authorize the issuance of stock of the Corporation or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of the State of Delaware unless such power and authority
shall be expressly delegated to it by a resolution passed by a majority of the
whole Board.
(c) Meetings, Quorum and Manner of Acting. Each committee shall
--------------------------------------
meet at such times and as often as may be deemed necessary and expedient and at
such places as shall be determined by such committee. A majority of each such
committee shall constitute a quorum, and the vote of a majority of those members
of each such committee present at any meeting thereof at which a quorum is
present shall be necessary for the passage of any resolution or act of such
committee. The Board may designate a chairman for each such committee, who
shall preside at meetings thereof, and a vice chairman, who shall preside at
such meetings in the absence of the chairman.
ARTICLE V
Officers
--------
SECTION 1. Election, Appointment and Term of Office. The officers
-----------------------------------------
of the Corporation shall be a Chief Executive Officer, a President, such number
of Vice Presidents (including Executive, Senior and/or First Vice Presidents) as
the Board may determine from time to time, a Treasurer, one or more Assistant
Treasurers, if any, as the Board may determine, a Secretary and one or more
Assistant Secretaries, if any, as the Board may determine. Any two or more
offices may be held by the same person. Officers need not be stockholders of
the Corporation. The officers may be elected by the Board at its annual
meeting, and each such officer shall hold office until the next annual meeting
of the Board and until his successor is elected or until his earlier death or
until his earlier resignation or removal in the manner hereinafter provided.
The Board may elect or appoint such other officers as it deems
necessary, including one or more Assistant Vice Presidents, Assistant Treasurers
and Assistant Secretaries. Each such off icer shall have such authority and
shall perform such duties as may be provided herein or as the Board may
prescribe.
If additional officers are elected or appointed
8
<PAGE>
during the year, each of them shall hold office until the next annual meeting of
the Board at which officers are regularly elected or appointed and until his
successor is elected or appointed or until his earlier death or until his
earlier resignation or removal in the manner hereinafter provided.
SECTION 2. Resignation, Removal and Vacancies. Any officer may resign
-----------------------------------
at any time by giving written notice to the Chief Executive Officer, the
President or the Secretary of the Corporation, and such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, when accepted by action of the Board.
Except as aforesaid, the acceptance of such resignation shall not be necessary
to make it effective.
All officers and agents elected or appointed by the Board shall be
subject to removal at any time by the Board, with or without cause.
A vacancy in any office may be filled for the unexpired portion of the
term in the same manner as provided for election or appointment to such office.
SECTION 3. Duties and Functions. (a) Chief Executive Officer.
--------------------- -----------------------
The Chief Executive Officer shall be the principal executive officer of the
Corporation, shall preside at all meetings of the Board and of the stockholders
at which he shall be present and shall perform such other duties and exercise
such powers as may from time to time be prescribed by the Board of Directors or
as shall normally be incident to the office of Chief Executive Officer.
(b) President. The President shall be the chief operating officer of
----------
the Corporation and shall perform such duties and exercise such powers as are
incident to the office of President, and shall perform such other duties and
exercise such other powers as may from time to time be prescribed by the Board
or the Chief Executive Officer.
(c) Vice Presidents. Each Vice President shall have such powers and
----------------
duties as shall be prescribed by the Board.
(d) Treasurer. The Treasurer shall have charge and custody of, and be
----------
responsible for, all funds and securities of the Corporation and shall deposit
all such funds to the credit of the Corporation in such banks, trust companies
or other depositories as shall be selected in accordance with the provisions of
these By-laws; he shall disburse the funds of the Corporation as may be ordered
by the Board, making proper vouchers for such disbursements; and, in general, he
shall perform all the duties incident to the office of Treasurer and
9
<PAGE>
such other duties as from time to time may be assigned to him by the Board or
the Chief Executive Officer. To such extent as the Board shall deem proper, the
duties of the Treasurer may be performed by one or more assistants, to be
appointed by the Board.
(e) Secretary. The Secretary shall keep the records of all
----------
meetings of the stockholders and of the Board and committees of the Board. He
shall affix the seal of the Corporation to all instruments requiring the
corporate seal when the same shall have been signed on behalf of the Corporation
by a duly authorized officer. The Secretary shall be the custodian of all
contracts, deeds, documents and all other indicia of title to properties owned
by the Corporation and of its other corporate records and in general shall
perform all duties and have all powers incident to the office of Secretary. To
such extent as the Board shall deem proper, the duties of Secretary may be
performed by one or more assistants, to be appointed by the Board.
(f) Assistant Secretaries and Assistant Treasurers. Each Assistant
-----------------------------------------------
Secretary and each Assistant Treasurer shall perform the duties of and exercise
the powers of the Secretary and the Treasurer, respectively, in the absence of
the Secretary and the Treasurer, respectively.
ARTICLE VI
Contracts, Checks, Drafts,
--------------------------
Bank Accounts, Proxies, etc.
----------------------------
SECTION 1. Execution of Documents. The Chief Executive Officer, the
-----------------------
President, each Vice President or any other officer, employee or agent of the
Corporation designated by the Board, or designated in accordance with corporate
policy as approved by the Board, shall have power to execute and deliver deeds,
leases, contracts, mortgages, bonds, debentures, checks, drafts and other
orders for the payment of money and other documents for an in the name of the
Corporation, and such power may be delegated (including power to redelegate) by
written instrument to other officers, employees or agents of the Corporation.
SECTION 2. Deposits. All funds of the Corporation not otherwise
---------
employed shall be deposited from time to time to the credit of the Corporation
or otherwise in accordance with corporate policy as approved by the Board.
SECTION 3. Proxies in Respect of Stock or Other Securities of Other
--------------------------------------------------------
Corporations. The Chief Executive Officer, the President or any other officer
- -------------
of the Corporation
10
<PAGE>
designated by the Board shall have the authority (a) to appoint from time to
time an agent or agents of the Corporation to exercise in the name and on behalf
of the Corporation the powers and rights which the Corporation may have as the
holder of stock or other securities in any other corporation, (b) to vote or
consent in respect of such stock or securities and (c) to execute or cause to be
executed in the name and on behalf of the Corporation and under its corporate
seal, or otherwise, such written proxies, powers of attorney or other
instruments as he may deem necessary or proper in order that the Corporation may
exercise such powers and rights. The Chief Executive Officer, the President or
any such designated officer may instruct any person or persons appointed as
aforesaid as to the manner of exercising such powers and rights.
ARTICLE VII
Books and Records
-----------------
The books and records of the Corporation may be kept at such places
within or without the State of Delaware as the Board may from time to time
determine.
ARTICLE VIII
Shares and Their Transfer; Fixing Record Date
---------------------------------------------
SECTION 1. Certificate for Stock. Every owner of stock of the
----------------------
Corporation shall be entitled to have a certificate certifying the number of
shares owned by him in the Corporation and designating the class of stock to
which such shares belong, which shall otherwise be in such form as the Board
shall prescribe. Each such certificate shall be signed by, or in the name of
the Corporation by, the Chief Executive Officer, the President or a Vice
President and by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Corporation. In case any officer who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer before such certificate is issued, it may nevertheless be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.
SECTION 2. Record. A record shall be kept of the name of the person,
-------
firm or corporation owning the stock represented by each certificate for stock
of the Corporation issued, the number of shares represented by each such
certificate and the date thereof, and, in the case of cancellation, the date
of cancellation. Except as otherwise
11
<PAGE>
expressly required by law, the person in whose name shares of stock stand on the
books of the Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation.
SECTION 3. Lost, Stolen, Destroyed or Mutilated Certificates. The
--------------------------------------------------
holder of any stock of the Corporation shall immediately notify the Corporation
of any loss, theft, destruction or mutilation of the certificate therefor. The
Corporation may issue a new certificate for stock in the place of any
certificate theretofore issued by it and alleged to have been lost, stolen,
destroyed or mutilated, and the Board or the Chief Executive Officer, the
President or Secretary may, in its or his discretion, require the owner of the
lost, stolen, mutilated or destroyed certificate or his legal representatives to
give the Corporation a bond in such sum, limited or unlimited, in such form and
with such surety or sureties as the Board shall in its discretion determine, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss, theft, mutilation or destruction of any such
certificate or the issuance of any such new certificate.
SECTION 4. Fixing Date for Determination of Stockholders of Record.
--------------------------------------------------------
(a) 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,
the Board may fix a record date, which shall not precede the date upon which the
resolution fixing the record date is adopted by the Board, and which shall not
be more than 60 or less than 10 days before the date of such meeting. If no
record date is fixed by the Board, 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. 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; providing, however, that the Board may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board and which date shall
not be more than 10 days after the date upon which the resolution fixing the
record date is adopted by the Board. If no record date has been fixed by the
Board, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting, when no prior action by the Board
is otherwise required, shall be the
12
<PAGE>
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Corporation by delivery to its
registered office in the State of Delaware, its principal place of business, or
an officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
registered office of the Corporation shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board and prior action by the Board is required, the record date for
determining stockholder entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board adopts the resolution taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for any other lawful purpose, the
Board may fix a record date, which record date shall not precede the date upon
which the resolution fixing the record date is adopted, and which record date
shall be not more than 60 days prior to such action. If no record date is fixed,
the record date for determining stockholders for any such purpose shall be at
the close of business on the day on which the Board adopts the resolution
relating thereto.
ARTICLE IX
Seal
----
The Board shall provide a corporate seal, which shall be in the form
of a circle and shall bear the full name of the Corporation, the words
"Corporate Seal Delaware" and in figures the year of its incorporation.
ARTICLE X
Fiscal Year
-----------
The fiscal year of the Corporation shall end on the last Saturday in
January of each following year, or on such other date as the Board of Directors
shall determine.
13
<PAGE>
ARTICLE XI
Indemnification of Directors and Officers
-----------------------------------------
SECTION 1. Right to Indemnification. Each person who was or is
-------------------------
made a party or is threatened to be made a party to or is otherwise involved in
any 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 or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suf fered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section 3 of this
-------- -------
ARTICLE XI with respect to proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in connection with a proceeding
(or part thereof) initiated by such indemnitee only if such proceeding (or part
thereof) was authorized by the Board of Directors of the Corporation.
SECTION 2. Right to Advancement of Expenses. The right to
---------------------------------
indemnification conferred in Section 1 of this Article XI shall include the
right to be paid by the Corporation the expenses (including attorneys' fees)
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
-------- -------
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further
14
<PAGE>
right to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section 2 or otherwise
The rights to indemnification and to the advancement of expenses conferred in
Sections 1 and 2 of this ARTICLE XI shall be contract rights and such rights
shall continue as to an indeinnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
SECTION 3. Right of Indemnitee to Bring Suit. If a claim under
----------------------------------
Section 1 or 2 of this ARTICLE XI is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation 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 Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the indemnitee shall be entitled to be paid also the
expense of prosecuting or defending such suit. In (i) any suit brought by the
indemnitee to enforce a right to indemnification hereunder (but not in a suit
brought by the indemnitee to enforce a right to an advancement of expenses) it
shall be a defense that, and (ii) in any suit brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified, or to such advancement of expenses, under this
ARTICLE XI or otherwise shall be on the Corporation.
15
<PAGE>
SECTION 4. Non-Exclusivity of Rights. The rights to
-------------------------
indemnification and to the advancement of expenses conferred in this ARTICLE XI
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, the Corporation's Certificate of Incorporation,
By-Laws, agreement, vote of stockholders or disinterested directors or
otherwise.
SECTION 5. Insurance. The Corporation may maintain insurance,
---------
at its expenses, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 6. Indemnification of Employees and Agents of the
-------------------------------------------------
Corporation. The Corporation may, to the extent authorized from time to time
- -----------
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article with respect to the
indemnification and advancement of expenses of directors and officers of
the Corporation.
ARTICLE XII
Amendments
----------
These By-laws may be amended or repealed by the Board at any regular
or special meeting thereof, subject to the power of the holders of a majority of
the outstanding stock of the Corporation entitled to vote in respect thereof, by
their vote at an annual meeting or at any special meeting, to amend or repeal
any By-law.
16
<PAGE>
EXHIBIT 4.1
CAF ACQUISITION CORPORATION,
as Issuer
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
____________________
INDENTURE
Dated as of February 6, 1997
____________________
$100,000,000
10% Senior Subordinated Notes due 2007
and
Series B 10% Senior Subordinated Notes due 2007
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
------- ---------
310(a)(1).............................................. 7.10
(a)(2).............................................. 7.10
(a)(3).............................................. N.A.
(a)(4).............................................. N.A.
(a)(5).............................................. 7.08; 7.10
(b)................................................. 7.08; 7.10;
11.02
(c)................................................. N.A.
311(a)................................................. 7.11
(b)................................................. 7.11
(c)................................................. N.A.
312(a)................................................. 2.05
(b)................................................. 11.03
(c)................................................. 11.03
313(a)................................................. 7.06
(b)(1).............................................. N.A.
(b)(2).............................................. 7.06
(c)................................................. 7.06; 11.02
(d)................................................. 7.06
314(a)................................................. 4.07; 4.08;
11.02
(b)................................................. N.A.
(c)(1).............................................. 11.04
(c)(2).............................................. 11.04
(c)(3).............................................. N.A.
(d)................................................. N.A.
(e)................................................. 11.05
(f)................................................. N.A.
315(a)................................................. 7.01(b)
(b)................................................. 7.05; 11.02
(c)................................................. 7.01(a)
(d)................................................. 7.01(c)
(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)................................................. 9.05
317(a)(1).............................................. 6.08
(a)(2).............................................. 6.09
(b)................................................. 2.04
318(a)................................................. 11.01
(c)................................................. 11.01
______________________
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
Page
----
Section 1.01 Definitions.............................................. 1
Section 1.02 Incorporation by Reference of TIA........................ 27
Section 1.03 Rules of Construction.................................... 28
ARTICLE TWO
THE NOTES
Section 2.01 Form and Dating.......................................... 28
Section 2.02 Execution and Authentication;
Aggregate Principal Amount............................. 30
Section 2.03 Registrar and Paying Agent............................... 31
Section 2.04 Paying Agent To Hold Assets in Trust..................... 32
Section 2.05 Noteholder Lists......................................... 32
Section 2.06 Transfer and Exchange.................................... 32
Section 2.07 Replacement Notes........................................ 33
Section 2.08 Outstanding Notes........................................ 34
Section 2.09 Treasury Notes........................................... 34
Section 2.10 Temporary Notes.......................................... 34
Section 2.11 Cancellation............................................. 35
Section 2.12 Defaulted Interest....................................... 35
Section 2.13 CUSIP Number............................................. 36
Section 2.14 Deposit of Moneys........................................ 36
Section 2.15 Restrictive Legends...................................... 36
Section 2.16 Book-Entry Provisions for Global Security................ 38
Section 2.17 Special Transfer Provisions.............................. 40
ARTICLE THREE
REDEMPTION
Section 3.01 Notices to Trustee.......................................42
Section 3.02 Selection of Notes To Be Redeemed........................42
Section 3.03 Notice of Redemption.....................................43
Section 3.04 Effect of Notice of Redemption...........................44
Section 3.05 Deposit of Redemption Price..............................44
Section 3.06 Notes Redeemed in Part...................................45
-ii-
<PAGE>
ARTICLE FOUR
COVENANTS
Page
----
Section 4.01 Payment of Notes....................................... 45
Section 4.02 Maintenance of Office or Agency........................ 45
Section 4.03 Corporate Existence.................................... 46
Section 4.04 Payment of Taxes and Other Claims...................... 46
Section 4.05 Maintenance of Properties and Insurance................ 46
Section 4.06 Compliance Certificate; Notice of Default.............. 47
Section 4.07 Compliance with Laws................................... 48
Section 4.08 SEC Reports............................................ 48
Section 4.09 Waiver of Stay, Extension or Usury Laws................ 49
Section 4.10 Limitation on Restricted Payments...................... 49
Section 4.11 Limitation on Transactions with Affiliates............. 52
Section 4.12 Limitation on Incurrence of Additional Indebtedness.... 53
Section 4.13 Limitation on Dividend and Other
Payment Restrictions Affecting Subsidiaries.......... 53
Section 4.14 Prohibition on Incurrence of Senior Subordinated Debt.. 54
Section 4.15 Change of Control...................................... 54
Section 4.16 Limitation on Asset Sales.............................. 57
Section 4.17 Limitation on Preferred Stock of Subsidiaries.......... 61
Section 4.18 Limitation on Liens.................................... 61
Section 4.19 Limitation of Guarantees by Restricted Subsidiaries.... 62
Section 4.20 Conduct of Business.................................... 63
ARTICLE FIVE
SUCCESSOR CORPORATION
Section 5.01 Merger, Consolidation and Sale of Assets............... 63
Section 5.02 Successor Corporation Substituted...................... 65
-iii-
<PAGE>
Page
----
ARTICLE SIX
DEFAULT AND REMEDIES
Section 6.01 Events of Default......................................65
Section 6.02 Acceleration...........................................67
Section 6.03 Other Remedies.........................................68
Section 6.04 Waiver of Past Defaults................................68
Section 6.05 Control by Majority....................................69
Section 6.06 Limitation on Suits....................................69
Section 6.07 Rights of Holders To Receive Payment...................70
Section 6.08 Collection Suit by Trustee.............................70
Section 6.09 Trustee May File Proofs of Claim.......................70
Section 6.10 Priorities.............................................71
Section 6.11 Undertaking for Costs..................................71
ARTICLE SEVEN
TRUSTEE
Section 7.01 Duties of Trustee.................................. 72
Section 7.02 Rights of Trustee.................................. 73
Section 7.03 Individual Rights of Trustee....................... 74
Section 7.04 Trustee's Disclaimer............................... 75
Section 7.05 Notice of Default.................................. 75
Section 7.06 Reports by Trustee to Holders...................... 75
Section 7.07 Compensation and Indemnity......................... 76
Section 7.08 Replacement of Trustee............................. 77
Section 7.09 Successor Trustee by Merger, Etc................... 78
Section 7.10 Eligibility; Disqualification...................... 78
Section 7.11 Preferential Collection of Claims Against Company.. 79
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
Section 8.01 Termination of the Company's Obligations........... 79
Section 8.02 Legal Defeasance and Covenant Defeasance........... 81
Section 8.03 Conditions to Legal Defeasance or
Covenant Defeasance.............................. 82
Section 8.04 Application of Trust Money......................... 84
Section 8.05 Repayment to the Company........................... 85
Section 8.06 Reinstatement...................................... 85
-iv-
<PAGE>
Page
----
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.01 Without Consent of Holders......................... 86
Section 9.02 With Consent of Holders............................ 87
Section 9.03 Effect on Senior Debt.............................. 88
Section 9.04 Compliance with TIA................................ 88
Section 9.05 Revocation and Effect of Consents.................. 89
Section 9.06 Notation on or Exchange of Notes................... 89
Section 9.07 Trustee To Sign Amendments, Etc.................... 90
ARTICLE TEN
SUBORDINATION
Section 10.01 Notes Subordinated to Senior Debt.................. 90
Section 10.02 No Payment on Notes in Certain Circumstances....... 91
Section 10.03 Payment Over of Proceeds upon Dissolution, Etc..... 92
Section 10.04 Payments May Be Paid Prior to Dissolution.......... 94
Section 10.05 Subrogation........................................ 94
Section 10.06 Obligations of the Company Unconditional........... 95
Section 10.07 Notice to Trustee.................................. 95
Section 10.08 Reliance on Judicial Order or Certificate of
Liquidating Agent................................ 96
Section 10.09 Trustee's Relation to Senior Debt.................. 96
Section 10.10 Subordination Rights Not Impaired by Acts or
Omissions of the Company or Holders of
Senior Debt...................................... 97
Section 10.11 Noteholders Authorize Trustee To
Effectuate Subordination of Notes................ 97
Section 10.12 This Article Ten Not To Prevent Events of Default.. 98
Section 10.13 Trustee's Compensation Not Prejudiced.............. 98
ARTICLE ELEVEN
MISCELLANEOUS
Section 11.01 TIA Controls....................................... 99
Section 11.02 Notices............................................ 99
-v-
<PAGE>
Page
----
Section 11.03 Communications by Holders with Other Holders....... 100
Section 11.04 Certificate and Opinion as to Conditions Precedent. 100
Section 11.05 Statements Required in Certificate or Opinion...... 101
Section 11.06 Rules by Trustee, Paying Agent, Registrar.......... 101
Section 11.07 Legal Holidays..................................... 101
Section 11.08 Governing Law...................................... 102
Section 11.09 No Adverse Interpretation of Other Agreements...... 102
Section 11.10 No Recourse Against Others......................... 102
Section 11.11 Successors......................................... 102
Section 11.12 Duplicate Originals................................ 102
Section 11.13 Severability....................................... 102
Signatures ................................................... 104
Exhibit A - Form of Initial Note................................... A-1
Exhibit B - Form of Exchange Note.................................. B-1
Exhibit C - Form of Certificate To Be Delivered in
Connection with Transfers to Non-QIB Accredited
Investors............................................ C-1
Exhibit D - Form of Certificate To Be Delivered in
Connection with Transfers Pursuant to Regulation S... D-1
Note: This Table of Contents shall not, for any purpose,
be deemed to be part of the Indenture.
-vi-
<PAGE>
1
INDENTURE, dated as of February 6, 1997, between CAF
Acquisition Corporation, a Virginia corporation (the "Com-
pany"), and IBJ Schroder Bank & Trust Company, a New York bank-
ing corporation, as Trustee (the "Trustee").
The Company has duly authorized the creation of an
issue of 10% Senior Subordinated Notes due 2007 (the "Initial
Notes") and Series B 10% Senior Subordinated Notes due 2007
(the "Exchange Notes," and together with the Initial Notes, the
"Notes") and, to provide therefor, the Company has duly autho-
rized the execution and delivery of this Indenture. All things
necessary to make the Notes, when duly issued and executed by
the Company, and authenticated and delivered hereunder, the
valid obligations of the Company, and to make this Indenture a
valid and binding agreement of the Company, have been done.
Each party hereto agrees as follows for the benefit
of the other party and for the equal and ratable benefit of the
Holders of the Notes.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
-----------
"Acceleration Notice" has the meaning provided in
-------------------
Section 6.02(a).
"Acquired Indebtedness" means Indebtedness of a Per-
---------------------
son or any of its Subsidiaries existing at the time such Person
becomes a Restricted Subsidiary of the Company or at the time
it merges or consolidates with the Company or any of its
Restricted Subsidiaries or assumed in connection with the
acquisition of assets from such Person and in each case not
incurred by such Person in connection with, or in anticipation
or contemplation of, such Person becoming a Restricted Subsid-
iary of the Company or such acquisition, merger or
consolidation.
"Acquisition" means the acquisition of all of the
-----------
capital stock of Collins & Aikman Floor Coverings, Inc. by
Holdings and the Company on the Issue Date.
<PAGE>
2
"Affiliate" means, with respect to any specified Per-
---------
son, any other Person who directly or indirectly through one or
more intermediaries controls, or is controlled by, or is under
common control with, such specified Person. The term "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities,
by contract or otherwise; and the terms "controlling" and "con-
trolled" have meanings correlative of the foregoing.
"Affiliate Transaction" has the meaning provided in
---------------------
Section 4.11.
"Agent" means any Registrar, Paying Agent or co-Reg-
-----
istrar.
"Agent Members" has the meaning provided in
-------------
Section 2.16.
"Asset Acquisition" means (a) an Investment by the
----------------
Company or any Restricted Subsidiary of the Company in any
other Person pursuant to which such Person shall become a
Restricted Subsidiary of the Company or any Restricted Subsid-
iary of the Company or shall be merged with or into the Company
or any Restricted Subsidiary of the Company, or (b) the acqui-
sition by the Company or any Restricted Subsidiary of the Com-
pany of the assets of any Person (other than a Restricted Sub-
sidiary of the Company) which constitute all or substantially
all of the assets of such Person or comprises any division or
line of business of such Person or any other properties or
assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issu-
----------
ance, conveyance, transfer, lease (other than operating leases
entered into in the ordinary course of business), assignment or
other transfer for value by the Company or any of its
Restricted Subsidiaries (including any Sale and Leaseback
Transaction) to any Person other than the Company or a Wholly
Owned Restricted Subsidiary of the Company of (a) any Capital
Stock of any Restricted Subsidiary of the Company or (b) any
other property or assets of the Company or any Restricted Sub-
sidiary of the Company other than in the ordinary course of
business; provided, however, that Asset Sales shall not include
-------- -------
(i) a transaction or series of related transactions for which
the Company or its Restricted Subsidiaries receive aggregate
consideration of less than $500,000 and (ii) the sale, lease,
<PAGE>
3
conveyance, disposition or other transfer of all or substan-
tially all of the assets of the Company as permitted under Sec-
tion 5.01.
"Authenticating Agent" has the meaning provided in
--------------------
Section 2.02.
"Bankruptcy Law" means Title 11, U.S. Code or any
--------------
similar Federal, state or foreign law for the relief of
debtors.
"Blockage Period" has the meaning provided in
---------------
Section 10.02.
"Board of Directors" means, as to any Person, the
------------------
board of directors of such Person or any duly authorized com-
mittee thereof.
"Board Resolution" means, with respect to any Person,
----------------
a copy of a resolution certified by the Secretary or an Assis-
tant Secretary of such Person to have been duly adopted by the
Board of Directors of such Person and to be in full force and
effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means a day that is not a Legal
------------
Holiday.
"Capitalized Lease Obligation" means, as to any Per-
----------------------------
son, the obligations of such Person under a lease that are
required to be classified and accounted for as capital lease
obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capi-
talized amount of such obligations at such date, determined in
accordance with GAAP.
"Capital Stock" means (i) with respect to any Person
-------------
that is a corporation, any and all shares, interests, partici-
pations or other equivalents (however designated and whether or
not voting) of corporate stock, including each class of Common
Stock and Preferred Stock of such Person and (ii) with respect
to any Person that is not a corporation, any and all partner-
ship or other equity interests of such Person.
"Cash Equivalents" means (i) marketable direct obli-
----------------
gations issued by, or unconditionally guaranteed by, the United
States Government or issued by any agency thereof and backed by
<PAGE>
4
the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof;
(ii) marketable direct obligations issued by any state of the
United States of America or any political subdivision of any
such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at
the time of acquisition, having one of the two highest ratings
obtainable from either Standard & Poor's Ratings Service
("S&P") or Moody's Investors Service, Inc. ("Moody's"); (iii)
commercial paper maturing no more than one year from the date
of creation thereof and, at the time of acquisition, having a
rating of at least A-1 from S&P or at least P-1 from Moody's;
(iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by
any bank organized under the laws of the United States of Amer-
ica or any state thereof or the District of Columbia or any
U.S. branch of a foreign bank having at the date of acquisition
thereof combined capital and surplus of not less than
$250,000,000; (v) repurchase obligations with a term of not
more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meet-
ing the qualifications specified in clause (iv) above; and
(vi) investments in money market funds which invest substan-
tially all their assets in securities of the types described in
clauses (i) through (v) above.
"Change of Control" means the occurrence of one or
-----------------
more of the following events: (i) any sale, lease, exchange or
other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of the
Company or Holdings to any Person or group of related Persons
for purposes of Section 13(d) of the Exchange Act (a "Group"),
together with any Affiliates thereof (whether or not otherwise
in compliance with the provisions of this Indenture) other than
to one or both of the Principals or their respective Related
Parties; (ii) the approval by the holders of Capital Stock of
the Company or Holdings, as the case may be, of any plan or
proposal for the liquidation or dissolution of the Company or
Holdings, as the case may be (whether or not otherwise in com-
pliance with the provisions of this Indenture); (iii) any Per-
son or Group (other than one or both of the Principals or their
respective Related Parties) shall become the owner, directly or
indirectly, beneficially or of record, of shares representing
more than 40% of the aggregate ordinary voting power repre-
sented by the issued and outstanding Capital Stock (the "Voting
Stock") of the Company or Holdings and the Principals and their
respective Related Parties beneficially own, directly or
<PAGE>
5
indirectly, in the aggregate a lesser percentage of the Voting
Stock of the Company or Holdings, as the case may be, than such
other Person or Group; or (iv) the replacement of a majority of
the Board of Directors of the Company or Holdings over a
two-year period from the directors who constituted the Board of
Directors of the Company or Holdings, as the case may be, at
the beginning of such period, and such replacement shall not
have been approved by a vote of at least a majority of the
Board of Directors of the Company or Holdings, as the case may
be, then still in office who either were members of such Board
of Directors at the beginning of such period or whose election
as a member of such Board of Directors was previously so
approved or who were nominated by, or designees of, either of
the Principals or their respective Related Parties.
"Change of Control Date" has the meaning provided in
----------------------
Section 4.15.
"Change of Control Offer" has the meaning provided in
-----------------------
Section 4.15.
"Change of Control Payment Date" has the meaning pro-
------------------------------
vided in Section 4.15.
"Common Stock" of any Person means any and all
------------
shares, interests or other participations in, and other equiva-
lents (however designated and whether voting or non-voting) of
such Person's common stock, whether outstanding on the Issue
Date or issued after the Issue Date, and includes, without
limitation, all series and classes of such common stock.
"Company" means the party named as such in this
-------
Indenture until a successor replaces it pursuant to this Inden-
ture and thereafter means such successor.
"Consolidated EBITDA" means, with respect to any Per-
-------------------
son, for any period, the sum (without duplication) of (i) Con-
solidated Net Income and (ii) to the extent Consolidated Net
Income has been reduced thereby, (A) all income taxes of such
Person and its Restricted Subsidiaries paid or accrued in
accordance with GAAP for such period, (B) Consolidated Interest
Expense and (C) Consolidated Non-cash Charges less any non-cash
items increasing Consolidated Net Income for such period, all
as determined on a consolidated basis for such Person and its
Restricted Subsidiaries in accordance with GAAP.
<PAGE>
6
"Consolidated Fixed Charge Coverage Ratio" means,
----------------------------------------
with respect to any Person, the ratio of Consolidated EBITDA of
such Person during the four full fiscal quarters (the "Four
Quarter Period") ending on or prior to the date of the transac-
tion giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (the "Transaction Date") to Consol-
idated Fixed Charges of such Person for the Four Quarter
Period. In addition to and without limitation of the foregoing,
for purposes of this definition, "Consolidated EBITDA" and
"Consolidated Fixed Charges" shall be calculated after giving
effect on a pro forma basis for the period of such calculation
----- -----
to (i) the incurrence or repayment of any Indebtedness of such
Person or any of its Restricted Subsidiaries (and the applica-
tion of the proceeds thereof) giving rise to the need to make
such calculation and any incurrence or repayment of other
Indebtedness (and the application of the proceeds thereof),
other than the incurrence or repayment of Indebtedness in the
ordinary course of business for working capital purposes pursu-
ant to working capital facilities, occurring during the Four
Quarter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as
if such incurrence or repayment, as the case may be (and the
application of the proceeds thereof), occurred on the first day
of the Four Quarter Period and (ii) any Asset Sales or Asset
Acquisitions (including, without limitation, any Asset Acquisi-
tion giving rise to the need to make such calculation as a
result of such Person or one of its Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring, assuming or other-
wise being liable for Acquired Indebtedness and also including
any Consolidated EBITDA (including any pro forma expense and
--- -----
cost reductions calculated on a basis consistent with Regula-
tion S-X under the Securities Act) attributable to the assets
which are the subject of the Asset Acquisition or Asset Sale
during the Four Quarter Period) occurring during the Four Quar-
ter Period or at any time subsequent to the last day of the
Four Quarter Period and on or prior to the Transaction Date, as
if such Asset Sale or Asset Acquisition (including the incur-
rence, assumption or liability for any such Indebtedness or
Acquired Indebtedness) occurred on the first day of the Four
Quarter Period. If such Person or any of its Restricted Subsid-
iaries directly or indirectly guarantees Indebtedness of a
third Person, the preceding sentence shall give effect to the
incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary of such Person had directly incurred
or otherwise assumed such guaranteed Indebtedness. Furthermore,
in calculating "Consolidated Fixed Charges" for purposes of
<PAGE>
7
determining the denominator (but not the numerator) of this
"Consolidated Fixed Charge Coverage Ratio," (1) interest on
outstanding Indebtedness determined on a fluctuating basis as
of the Transaction Date and which will continue to be so deter-
mined thereafter shall be deemed to have accrued at a fixed
rate per annum equal to the rate of interest on such Indebted-
ness in effect on the Transaction Date and (2) notwithstanding
clause (1) above, interest on Indebtedness determined on a
fluctuating basis, to the extent such interest is covered by
agreements relating to Interest Swap Obligations, shall be
deemed to accrue at the rate per annum resulting after giving
effect to the operation of such agreements.
"Consolidated Fixed Charges" means, with respect to
--------------------------
any Person for any period, the sum, without duplication, of
(i) Consolidated Interest Expense (excluding amortization or
write-off of deferred financing costs), plus (ii) the product
of (x) the amount of all dividend payments on any series of
Preferred Stock of such Person (other than dividends paid in
Qualified Capital Stock) paid or accrued during such period
times (y) a fraction, the numerator of which is one and the
denominator of which is one minus the then current effective
consolidated federal, state and local tax rate of such Person,
expressed as a decimal.
"Consolidated Interest Expense" means, with respect
-----------------------------
to any Person for any period, the sum of, without duplication:
(i) the aggregate of the interest expense of such Person and
its Restricted Subsidiaries for such period determined on a
consolidated basis in conformity with GAAP, including, without
limitation, (a) any amortization of debt discount and
amortization or write-off of deferred financing costs, (b) the
net costs under Interest Swap Obligations, (c) all capitalized
interest and (d) the interest portion of any deferred payment
obligation; and (ii) the interest component of Capitalized
Lease Obligations paid, accrued and/or scheduled to be paid or
accrued by such Person and its Restricted Subsidiaries during
such period as determined on a consolidated basis in accordance
with GAAP.
"Consolidated Net Income" means, with respect to any
-----------------------
Person, for any period, the aggregate net income (or loss) of
such Person and its Restricted Subsidiaries for such period on
a consolidated basis, determined in accordance with GAAP; pro-
---
vided that there shall be excluded therefrom (a) after-tax
- -----
gains and losses from Asset Sales (without regard to the
$500,000 limitation set forth in the definition thereof) or
<PAGE>
8
abandonments or reserves relating thereto, (b) after-tax items
classified as extraordinary or nonrecurring gains, (c) the net
income of any Person acquired in a "pooling of interests"
transaction accrued prior to the date it becomes a Restricted
Subsidiary of the referent Person or is merged or consolidated
with the referent Person or any Restricted Subsidiary of the
referent Person, (d) the net income (but not loss) of any
Restricted Subsidiary of the referent Person to the extent that
the declaration of dividends or similar distributions by that
Restricted Subsidiary of that income is restricted by contract,
operation of law or otherwise, (e) the net income of any Per-
son, other than a Wholly-Owned Restricted Subsidiary of the
referent Person, except to the extent of cash dividends or dis-
tributions paid to the referent Person or a Wholly Owned
Restricted Subsidiary of the referent Person by such Person,
(f) any restoration to income of any contingency reserve,
except to the extent that provision for such reserve was made
out of Consolidated Net Income accrued at any time following
the Issue Date, (g) income or loss attributable to discontinued
operations (including, without limitation, operations disposed
of during such period whether or not such operations were clas-
sified as discontinued), and (h) in the case of a successor to
the referent Person by consolidation or merger or as a trans-
feree of the referent Person's assets, any earnings of the suc-
cessor corporation prior to such consolidation, merger or
transfer of assets. Notwithstanding the foregoing, "Consoli-
dated Net Income" shall be calculated without giving effect to
(i) the amortization of any premiums, fees or expenses incurred
in connection with the Acquisition and related financings and
(ii) the amortization or depreciation of any amounts required
or permitted by Accounting Principles Board Opinion Nos. 16
(including non-cash write-ups and non-cash charges relating to
inventory and fixed assets, in each case arising in connection
with the Acquisition) and 17 (including non-cash charges relat-
ing to intangibles and goodwill arising in connection with the
Acquisition).
"Consolidated Non-cash Charges" means, with respect
-----------------------------
to any Person, for any period, the aggregate depreciation,
amortization and other non-cash expenses of such Person and its
Restricted Subsidiaries reducing Consolidated Net Income of
such Person and its Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP
(excluding any such non-cash charge which requires an accrual
of or a reserve for cash charges for any future period).
<PAGE>
9
"Covenant Defeasance" has the meaning provided in
-------------------
Section 8.02.
"Credit Agreement" means the Credit Agreement dated
----------------
as of the Issue Date, among Holdings, the Company, the lenders
party thereto in their capacities as lenders thereunder and
Bankers Trust Company, as agent, together with the related doc-
uments thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agree-
ments may be amended (including any amendment and restatement
thereof), supplemented or otherwise modified from time to time,
including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including, without limi-
tation, increasing the amount of available borrowings thereun-
der (provided that such increase in borrowings is permitted by
--------
Section 4.12) or adding Restricted Subsidiaries of the Company
as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any succes-
sor or replacement agreement and whether by the same or any
other agent, lender or group of lenders.
"Currency Agreement" means any foreign exchange con-
------------------
tract, currency swap agreement or other similar agreement or
arrangement designed to protect the Company or any Restricted
Subsidiary of the Company against fluctuations in currency
values.
"Custodian" means any receiver, trustee, assignee,
---------
liquidator, sequestrator or similar official under any Bank-
ruptcy Law.
"Default" means an event or condition the occurrence
-------
of which is, or with the lapse of time or the giving of notice
or both would be, an Event of Default.
"Default Notice" has the meaning provided in
--------------
Section 10.02.
"Depository" means The Depository Trust Company, its
----------
nominees and successors.
"Designated Senior Debt" means (i) Indebtedness under
----------------------
or in respect of the Credit Agreement and (ii) any other
Indebtedness constituting Senior Debt which, at the time of
determination, has an aggregate principal amount of at least
$25.0 million and is specifically designated in the instrument
<PAGE>
10
evidencing such Senior Debt as "Designated Senior Debt" by the
Company.
"Disqualified Capital Stock" means that portion of
--------------------------
any Capital Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or
is mandatorily redeemable, pursuant to a sinking fund obliga-
tion or otherwise, or is redeemable at the sole option of the
holder thereof on or prior to the final maturity date of the
Notes.
"Event of Default" has the meaning provided in Sec-
----------------
tion 6.01.
"Exchange Act" means the Securities Exchange Act of
------------
1934, as amended, or any successor statute or statutes thereto.
"Exchange Notes" has the meaning provided in the pre-
--------------
amble to this Indenture.
"Exchange Offer" means the registration by the Com-
--------------
pany under the Securities Act pursuant to a registration state-
ment of the offer by the Company to each Holder of the Initial
Notes to exchange all the Initial Notes held by such Holder for
the Exchange Notes in an aggregate principal amount equal to
the aggregate principal amount of the Initial Notes held by
such Holder, all in accordance with the terms and conditions of
the Registration Rights Agreement.
"fair market value" means, with respect to any asset
-----------------
or property, the price which could be negotiated in an
arm's-length, free market transaction, for cash, between a
willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction.
Fair market value shall be determined by the Board of
Directors of the Company acting reasonably and in good faith
and shall be evidenced by a Board Resolution of the Board of
Directors of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles
----
set forth 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 approved by a significant segment of the
<PAGE>
11
accounting profession of the United States, which are in effect
as of the Issue Date.
"Global Note" has the meaning provided in
-----------
Section 2.01.
"Guarantee" has the meaning provided in Section 4.19.
---------
"Holder" or "Noteholder" means the Person in whose
------ ----------
name a Note is registered on the Registrar's books.
"Holdings" means CAF Holdings, Inc., a Virginia cor-
--------
poration, and the parent corporation of the Company.
"incur" has the meaning provided in Section 4.12.
-----
"Indebtedness" means with respect to any Person,
------------
without duplication, (i) all obligations of such Person for
borrowed money, (ii) all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments,
(iii) all Capitalized Lease Obligations of such Person,
(iv) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obli-
gations and all obligations under any title retention agreement
(but excluding trade accounts payable and other accrued liabil-
ities arising in the ordinary course of business that are not
overdue by 90 days or more or are being contested in good faith
by appropriate proceedings promptly instituted and diligently
conducted), (v) all obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar
credit transaction, (vi) guarantees and other contingent obli-
gations in respect of Indebtedness referred to in clauses (i)
through (v) above and clause (viii) below, (vii) all obliga-
tions of any other Person of the type referred to in clauses
(i) through (vi) which are secured by any lien on any property
or asset of such Person, the amount of such obligation being
deemed to be the lesser of the fair market value of such prop-
erty or asset or the amount of the obligation so secured,
(viii) all obligations under currency swap agreements and
interest swap agreements of such Person and (ix) all Disquali-
fied Capital Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Capital Stock
being equal to the greater of its voluntary or involuntary
liquidation preference and its maximum fixed repurchase price,
but excluding accrued dividends, if any. For purposes hereof,
the "maximum fixed repurchase price" of any Disqualified Capi-
tal Stock which does not have a fixed repurchase price shall be
<PAGE>
12
calculated in accordance with the terms of such Disqualified
Capital Stock as if such Disqualified Capital Stock were pur-
chased on any date on which Indebtedness shall be required to
be determined pursuant to this Indenture, and if such price is
based upon, or measured by, the fair market value of such Dis-
qualified Capital Stock, such fair market value shall be deter-
mined reasonably and in good faith by the Board of Directors of
the issuer of such Disqualified Capital Stock.
"Indenture" means this Indenture, as amended or sup-
---------
plemented from time to time in accordance with the terms
hereof.
"Independent Financial Advisor" means a firm (i)
-----------------------------
which does not, and whose directors, officers and employees or
Affiliates do not, have a direct or indirect financial interest
in the Company and (ii) which, in the judgment of the Board of
Directors of the Company, is otherwise independent and quali-
fied to perform the task for which it is to be engaged.
"Initial Notes" has the meaning provided in the pre-
-------------
amble to this Indenture.
"Initial Purchaser" means BT Securities Corporation.
-----------------
"Institutional Accredited Investor" means an institu-
---------------------------------
tion that is an "accredited investor" as that term is defined
in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Interest Payment Date" means the stated maturity of
---------------------
an installment of interest on the Notes.
"Interest Swap Obligations" means the obligations of
-------------------------
any Person, pursuant to any arrangement with any other Person,
whereby, directly or indirectly, such Person is entitled to
receive from time to time periodic payments calculated by
applying either a floating or a fixed rate of interest on a
stated notional amount in exchange for periodic payments made
by such other Person calculated by applying a fixed or a float-
ing rate of interest on the same notional amount and shall
include, without limitation, interest rate swaps, caps, floors,
collars and similar agreements.
"Internal Revenue Code" means the Internal Revenue
---------------------
Code of 1986, as amended to the date hereof and from time to
time hereafter.
<PAGE>
13
"Investment" means, with respect to any Person, any
----------
direct or indirect loan or other extension of credit (includ-
ing, without limitation, a guarantee) or capital contribution
to (by means of any transfer of cash or other property to oth-
ers or any payment for property or services for the account or
use of others), or any purchase or acquisition by such Person
of any Capital Stock, bonds, notes, debentures or other securi-
ties or evidences of Indebtedness issued by, any Person.
"Investment" shall exclude extensions of trade credit by the
Company and its Restricted Subsidiaries on commercially reason-
able terms in accordance with normal trade practices of the
Company or such Restricted Subsidiary, as the case may be. For
the purposes of Section 4.10, (i) "Investment" shall include
and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsid-
iary is designated an Unrestricted Subsidiary and shall exclude
the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the original cost of such Investment plus
the cost of all additional Investments by the Company or any of
its Restricted Subsidiaries, without any adjustments for
increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment, reduced by the pay-
ment of dividends or distributions in connection with such
Investment or any other amounts received in respect of such
Investment; provided that no such payment of dividends or dis-
--------
tributions or receipt of any such other amounts shall reduce
the amount of any Investment if such payment of dividends or
distributions or receipt of any such amounts would be included
in Consolidated Net Income. If the Company or any Restricted
Subsidiary of the Company sells or otherwise disposes of any
Common Stock of any direct or indirect Restricted Subsidiary of
the Company such that, after giving effect to any such sale or
disposition, the Company no longer owns, directly or indi-
rectly, 100% of the outstanding Common Stock of such Restricted
Subsidiary, the Company shall be deemed to have made an Invest-
ment on the date of any such sale or disposition equal to the
fair market value of the Common Stock of such Restricted
Subsidiary not sold or disposed of.
"Issue Date" means the date of original issuance of
----------
the Notes.
"Legal Defeasance" has the meaning provided in Sec-
----------------
tion 8.02.
<PAGE>
14
"Legal Holiday" has the meaning provided in
-------------
Section 11.07.
"Lien" means any lien, mortgage, deed of trust,
----
pledge, security interest, charge or encumbrance of any kind
(including any conditional sale or other title retention agree-
ment, any lease in the nature thereof and any agreement to give
any security interest).
"Maturity Date" means January 15, 2007.
-------------
"Net Cash Proceeds" means, with respect to any Asset
-----------------
Sale, the proceeds in the form of cash or Cash Equivalents
including payments in respect of deferred payment obligations
when received in the form of cash or Cash Equivalents (other
than the portion of any such deferred payment constituting
interest) received by the Company or any of its Restricted
Subsidiaries from such Asset Sale net of (a) reasonable
out-of-pocket expenses and fees relating to such Asset Sale
(including, without limitation, legal, accounting and
investment banking fees and sales commissions), (b) taxes paid
or payable after taking into account any reduction in
consolidated tax liability due to available tax credits or
deductions and any tax sharing arrangements, (c) repayment of
Indebtedness that is required to be repaid in connection with
such Asset Sale and (d) appropriate amounts to be provided by
the Company or any Restricted Subsidiary, as the case may be,
as a reserve, in accordance with GAAP, against any liabilities
associated with such Asset Sale and retained by the Company or
any Restricted Subsidiary, as the case may be, after such Asset
Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale.
"Net Proceeds Offer" has the meaning provided in
------------------
Section 4.16.
"Net Proceeds Offer Payment Date" has the meaning
-------------------------------
provided in Section 4.16.
"Net Proceeds Offer Trigger Date" has the meaning
-------------------------------
provided in Section 4.16.
"Non-U.S. Person" means a person who is not a U.S.
---------------
person, as defined in Regulation S.
<PAGE>
15
"Notes" means the Initial Notes and the Exchange
-----
Notes treated as a single class of securities, as amended or
supplemented from time to time in accordance with the terms
hereof, that are issued pursuant to this Indenture.
"Obligations" means all obligations for principal,
-----------
premium, interest, penalties, fees, indemnifications, reim-
bursements, damages and other liabilities payable under the
documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum
-------------------
dated January 29, 1997, pursuant to which the Initial Notes
were offered, and any supplement thereto.
"Officer" means, with respect to any Person, the
-------
Chairman of the Board, the Chief Executive Officer, the Presi-
dent, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary of such Person, or
any other officer designated by the Board of Directors serving
in a similar capacity.
"Officers' Certificate" means, with respect to any
---------------------
Person, a certificate signed by two Officers or by an Officer
and either an Assistant Treasurer or an Assistant Secretary of
such Person and otherwise complying with the requirements of
Sections 11.04 and 11.05, as they relate to the making of an
Officers' Certificate.
"Offshore Physical Notes" has the meaning provided in
-----------------------
Section 2.01.
"Opinion of Counsel" means a written opinion from
------------------
legal counsel, who may be counsel for the Company, and who is
reasonably acceptable to the Trustee and not rendered by any
employee of the Company or any of its Affiliates or Subsidiar-
ies complying with the requirements of Sections 11.04 and
11.05, as they relate to the giving of an Opinion of Counsel.
"Paribas Related Party" means Paribas Principal Inc.
---------------------
and any of its Affiliates.
"Paying Agent" has the meaning provided in
------------
Section 2.03.
"Permitted Indebtedness" means, without duplication,
----------------------
each of the following:
<PAGE>
16
(i) Indebtedness under the Notes and this
Indenture;
(ii) Indebtedness incurred pursuant to the
Credit Agreement in an aggregate principal amount at any
time outstanding not to exceed $85 million (A) less the
amount of all mandatory principal payments actually made
by the Company in respect of term loans thereunder
(excluding any such payments to the extent refinanced at
the time of payment under a replaced Credit Agreement) and
(B) in the case of a revolving credit facility, reduced by
any required permanent repayments (which are accompanied
by a corresponding permanent commitment reduction)
thereunder;
(iii) other Indebtedness of the Company and
its Restricted Subsidiaries outstanding on the Issue Date
reduced by the amount of any scheduled amortization pay-
ments or mandatory prepayments when actually paid or per-
manent reductions thereon;
(iv) Interest Swap Obligations of the
Company covering Indebtedness of the Company or any of its
Restricted Subsidiaries and Interest Swap Obligations of
any Restricted Subsidiary of the Company covering
Indebtedness of such Restricted Subsidiary; provided,
--------
however, that such Interest Swap Obligations are entered
- -------
into to protect the Company and its Restricted
Subsidiaries from fluctuations in interest rates on
Indebtedness incurred in accordance with this Indenture to
the extent the notional principal amount of such Interest
Swap Obligation does not exceed the principal amount of
the Indebtedness to which such Interest Swap Obligation
relates;
(v) Indebtedness under Currency
Agreements; provided that in the case of Currency
--------
Agreements which relate to Indebtedness, such Currency
Agreements do not increase the Indebtedness of the Company
and its Restricted Subsidiaries outstanding other than as
a result of fluctuations in foreign currency exchange
rates or by reason of fees, indemnities and compensation
payable thereunder;
(vi) Indebtedness of a Wholly Owned
Restricted Subsidiary of the Company to the Company or to
a Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by the Company or a
Wholly Owned Restricted Subsidiary of the Company, in each
case subject to no Lien held by a Person other than the
Company or a Wholly Owned Restricted Subsidiary of the
Company;
<PAGE>
17
provided that if as of any date any Person other
- --------
than the Company or a Wholly Owned Restricted Subsidiary
of the Company owns or holds any such Indebtedness or
holds a Lien in respect of such Indebtedness, such date
shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the issuer of such
Indebtedness;
(vii) Indebtedness of the Company to a
Wholly Owned Restricted Subsidiary of the Company for so
long as such Indebtedness is held by a Wholly Owned
Restricted Subsidiary of the Company, in each case subject
to no Lien; provided that (a) any Indebtedness of the
--------
Company to any Wholly Owned Restricted Subsidiary of the
Company is unsecured and subordinated, pursuant to a
written agreement, to the Company's obligations under this
Indenture and the Notes and (b) if as of any date any
Person other than a Wholly Owned Restricted Subsidiary of
the Company owns or holds any such Indebtedness or any
Person holds a Lien in respect of such Indebtedness, such
date shall be deemed the incurrence of Indebtedness not
constituting Permitted Indebtedness by the Company;
(viii) Indebtedness arising from the honoring
by a bank or other financial institution of a check, draft
or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in
the ordinary course of business; provided, however, that
-------- -------
such Indebtedness is extinguished within five business
days of incurrence;
(ix) Indebtedness of the Company or any of
its Restricted Subsidiaries represented by letters of
credit for the account of the Company or such Restricted
Subsidiary, as the case may be, in order to provide
security for workers' compensation claims, payment
obligations in connection with self-insurance, performance
bonds, surety bonds or similar requirements in the
ordinary course of business;
(x) Capitalized Lease Obligations and
Purchase Money Indebtedness of the Company and its
Restricted Subsidiaries incurred in the ordinary course of
business not to exceed $5.0 million at any one time
outstanding;
(xi) Indebtedness of foreign Restricted
Subsidiaries of the Company not to exceed $10.0 million at
any one time outstanding; provided that at the time of any
--------
incurrence
<PAGE>
18
of such Indebtedness by any such foreign
Restricted Subsidiary of the Company, the Company could
have incurred such Indebtedness in accordance with the
Consolidated Fixed Charge Coverage Ratio test in
Section 4.12;
(xii) Refinancing Indebtedness;
(xiii) guarantees by the Company and its
Wholly Owned Restricted Subsidiaries of each other's
Indebtedness; provided that such Indebtedness is permitted
--------
to be incurred under this Indenture, including, with
respect to guarantees by Wholly Owned Restricted
Subsidiaries of the Company, the provisions of Section
4.19; and
(xiv) additional Indebtedness of the Company
and its Restricted Subsidiaries in an aggregate principal
amount not to exceed $15.0 million at any one time
outstanding (which amount may, but need not, be incurred
in whole or in part under the Credit Agreement).
"Permitted Investments" means: (i) Investments by
---------------------
the Company or any Restricted Subsidiary of the Company in any
Person that is or will become immediately after such Investment
a Wholly Owned Restricted Subsidiary of the Company or that
will merge or consolidate into the Company or a Wholly Owned
Restricted Subsidiary of the Company, provided that such Wholly
--------
Owned Restricted Subsidiary is not restricted from making divi-
dends or similar distributions by contract, operation of law or
otherwise; (ii) Investments in the Company by any Restricted
Subsidiary of this Company; provided that any Indebtedness evi-
--------
dencing such Investment is unsecured and subordinated, pursuant
to a written agreement, to the Company's obligations under the
Notes and this Indenture; (iii) Investments in cash and Cash
Equivalents; (iv) loans and advances to employees and officers
of the Company and its Restricted Subsidiaries in the ordinary
course of business for bona fide business purposes not in
excess of $1.0 million at any one time outstanding; (v) Cur-
rency Agreements and Interest Swap Obligations entered into in
the ordinary course of the Company's or its Restricted Subsid-
iaries' businesses and otherwise in compliance with this Inden-
ture; (vi) additional Investments not to exceed $5.0 million at
any one time outstanding; (vii) Investments in securities of
trade creditors or customers received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or
insolvency of such trade creditors or customers; (viii) Invest-
ments made by the Company or its Restricted Subsidiaries as a
result of consideration received in connection with an Asset
<PAGE>
19
Sale made in compliance with Section 4.16; and (ix) guarantees
permitted by Section 4.19.
"Permitted Liens" means the following types of Liens:
---------------
(i) Liens for taxes, assessments or governmental charges or
claims either (a) not delinquent or (b) contested in good faith by appropriate
proceedings and as to which the Company or its Restricted Subsidiaries shall
have set aside on its books such reserves as may be required pursuant to GAAP;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
in respect thereof;
(iii) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, including any Lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money);
(iv) judgment Liens not giving rise to an Event of Default so
long as such Lien is adequately bonded and any appropriate legal proceedings
which may have been duly initiated for the review of such judgment shall not
have been finally terminated or the period within which such proceedings may be
initiated shall not have expired;
(v) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the Company or
any of its Restricted Subsidiaries;
(vi) any interest or title of a lessor under any
Capitalized Lease Obligation; provided that such Liens do not
--------
<PAGE>
20
extend to any property or assets which is not leased property
subject to such Capitalized Lease Obligation;
(vii) Liens securing Capitalized Lease Obligations and Purchase
Money Indebtedness permitted under clause (x) of the definition of "Permitted
Indebtedness"; provided, however, that in the case of Purchase Money
Indebtedness (A) the Indebtedness shall not exceed the cost of such property or
assets being acquired or constructed and shall not be secured by any property or
assets of the Company or any Restricted Subsidiary of the Company other than the
property and assets being acquired or constructed and (B) the Lien securing such
Indebtedness shall be created within 90 days of such acquisition or
construction;
(viii) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods;
(ix) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof;
(x) Liens encumbering deposits made to secure obligations
arising from statutory, regulatory, contractual, or warranty requirements of the
Company or any of its Restricted Subsidiaries, including rights of offset and
set-off;
(xi) Liens securing Interest Swap Obligations which Interest
Swap Obligations relate to Indebtedness that is otherwise permitted under this
Indenture;
(xii) Liens securing Indebtedness under Currency Agreements; and
(xiii) Liens securing Acquired Indebtedness incurred in
accordance with Section 4.12; provided that (A) such Liens secured such Acquired
Indebtedness at the time of and prior to the incurrence of such Acquired
Indebtedness by the Company or a Restricted Subsidiary of the Company and were
not granted in connection with, or in anticipation of, the incurrence of such
Acquired Indebtedness by the
<PAGE>
21
Company or a Restricted Subsidiary of the Company and (B) such Liens do not
extend to or cover any property or assets of the Company or of any of its
Restricted Subsidiaries other than the property or assets that secured the
Acquired Indebtedness prior to the time such Indebtedness became Acquired
Indebtedness of the Company or a Restricted Subsidiary of the Company and are no
more favorable to the lienholders than those securing the Acquired Indebtedness
prior to the incurrence of such Acquired Indebtedness by the Company or a
Restricted Subsidiary of the Company.
"Person" means an individual, partnership, corpora-
------
tion, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Physical Notes" has the meaning provided in
--------------
Section 2.01.
"Preferred Stock" of any Person means any Capital
---------------
Stock of such Person that has preferential rights to any other
Capital Stock of such Person with respect to dividends or
redemptions or upon liquidation.
"principal" of any Indebtedness (including the Notes)
---------
means the principal amount of such Indebtedness plus the pre-
mium, if any, on such Indebtedness.
"Principals" means Quad-C, Inc. and Paribas Principal
----------
Inc.
"Private Placement Legend" means the legend initially
------------------------
set forth on the Notes in the form set forth in Section 2.15.
"Proceeds Purchase Date" has the meaning provided in
----------------------
Section 4.16.
"pro forma" means, with respect to any calculation
---------
made or required to be made pursuant to the terms of this
Indenture, a calculation in accordance with Article 11 of Regu-
lation S-X under the Securities Act, as determined by the Board
of Directors of the Company.
"Public Equity Offering" means an underwritten public
----------------------
offering of Qualified Capital Stock of Holdings or the Company
pursuant to a registration statement filed with the SEC in
accordance with the Securities Act; provided that, in the event
--------
<PAGE>
22
of a Public Equity Offering by Holdings, Holdings contributes
to the capital of the Company the portion of the net cash pro-
ceeds of such Public Equity Offering necessary to pay the
aggregate redemption price (plus accrued interest to the
redemption date) of the Notes to be redeemed pursuant to
Paragraph 6(b) of the Notes.
"Purchase Money Indebtedness" means Indebtedness of
---------------------------
the Company and its Restricted Subsidiaries incurred in the
normal course of business for the purpose of financing all or
any part of the purchase price, or the cost of installation,
construction or improvement, of property.
"Quad-C Related Party" means Quad-C, Inc. and any of
--------------------
its Affiliates.
"Qualified Capital Stock" means any Capital Stock
-----------------------
that is not Disqualified Capital Stock.
"Qualified Institutional Buyer" or "QIB" shall have
----------------------------- ---
the meaning specified in Rule 144A under the Securities Act.
"Record Date" means the Record Dates specified in the
-----------
Notes, whether or not a Legal Holiday.
"Redemption Date," when used with respect to any Note
---------------
to be redeemed, means the date fixed for such redemption pursu-
ant to this Indenture and the Notes.
"Redemption Price," when used with respect to any
----------------
Note to be redeemed, means the price fixed for such redemption
pursuant to this Indenture and the Notes.
"Reference Date" has the meaning provided in
--------------
Section 4.10.
"Refinance" means, in respect of any security or
---------
Indebtedness, to refinance, extend, renew, refund, repay, pre-
pay, redeem, defease or retire, or to issue a security or
Indebtedness in exchange or replacement for, such security or
Indebtedness in whole or in part. "Refinanced" and "Refinanc-
ing" shall have correlative meanings.
"Refinancing Indebtedness" means any Refinancing by
------------------------
the Company or any Restricted Subsidiary of the Company of
Indebtedness incurred in accordance with Section 4.12 (other
than pursuant to clauses (ii), (iv), (v), (vi), (vii), (viii),
<PAGE>
23
(ix), (x), (xi), (xiii) or (xiv) of the definition of
Permitted Indebtedness), in each case that does not (1) result
in an increase in the aggregate principal amount of
Indebtedness of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing such Indebtedness
and plus the amount of reasonable expenses incurred by the
Company in connection with such Refinancing) or (2) create
Indebtedness with (A) a Weighted Average Life to Maturity that
is less than the Weighted Average Life to Maturity of the
Indebtedness being Refinanced or (B) a final maturity earlier
than the final maturity of the Indebtedness being Refinanced;
provided that (x) if such Indebtedness being Refinanced is
- --------
Indebtedness of the Company, then such Refinancing Indebtedness
shall be Indebtedness solely of the Company and (y) if such
Indebtedness being Refinanced is subordinate or junior to the
Notes, then such Refinancing Indebtedness shall be subordinate
to the Notes at least to the same extent and in the same manner
as the Indebtedness being Refinanced.
"Registrar" has the meaning provided in Section 2.03.
---------
"Registration Rights Agreement" means the Registra-
-----------------------------
tion Rights Agreement dated February 6, 1997 among the Company
and the Initial Purchaser for the benefit of themselves and the
Holders, as the same may be amended or modified from time to
time in accordance with the terms thereof.
"Regulation S" means Regulation S under the Securi-
------------
ties Act.
"Related Party" means, with respect to Quad-C, Inc.,
-------------
any Quad-C Related Party and with respect to Paribas Principal
Inc., any Paribas Related Party.
"Replacement Assets" has the meaning provided in Sec-
------------------
tion 4.16.
"Representative" means the indenture trustee or other
--------------
trustee, agent or representative in respect of any Designated
Senior Debt; provided that if, and for so long as, any Desig-
--------
nated Senior Debt lacks such a representative, then the Repre-
sentative for such Designated Senior Debt shall at all times
constitute the holders of a majority in outstanding principal
amount of such Designated Senior Debt in respect of any Desig-
nated Senior Debt. As of the date first written above, the only
representative in respect of Designated Senior Debt is Bankers
Trust Company, as agent under the Credit Agreement.
<PAGE>
24
"Restricted Payment" has the meaning provided in
------------------
Section 4.10.
"Restricted Security" has the meaning assigned to
-------------------
such term in Rule 144(a)(3) under the Securities Act; provided
--------
that the Trustee shall be entitled to request and conclusively
rely on an Opinion of Counsel with respect to whether any Note
constitutes a Restricted Security.
"Restricted Subsidiary" of any Person means any Sub-
---------------------
sidiary of such Person which at the time of determination is
not an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
---------
"Sale and Leaseback Transaction" means any direct or
------------------------------
indirect arrangement with any Person or to which any such Per-
son is a party, providing for the leasing to the Company or a
Restricted Subsidiary of any property, whether owned by the
Company or any Restricted Subsidiary at the Issue Date or later
acquired, which has been or is to be sold or transferred by the
Company or such Restricted Subsidiary 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.
"SEC" means the Securities and Exchange Commission.
---
"Securities Act" means, the Securities Act of 1933,
--------------
as amended, or any successor statute or statutes thereto.
"Senior Debt" means the principal of, premium, if
-----------
any, and interest (including any interest accruing subsequent
to the filing of a petition of bankruptcy at the rate provided
for in the documentation with respect thereto, whether or not
such interest is an allowed claim under applicable law) on any
Indebtedness of the Company, whether outstanding on the Issue
Date or thereafter created, incurred or assumed, unless, in the
case of any particular Indebtedness, the instrument creating or
evidencing the same or pursuant to which the same is outstand-
ing expressly provides that such Indebtedness shall not be
senior in right of payment to the Notes. Without limiting the
generality of the foregoing, "Senior Debt" shall also include
the principal of, premium, if any, interest (including any
interest accruing subsequent to the filing of a petition of
bankruptcy at the rate provided for in the documentation with
respect thereto, whether or not such interest is an allowed
claim under applicable law) on, and all other amounts owing in
<PAGE>
25
respect of, (x) all monetary obligations (including guarantees
thereof) of every nature of the Company under the Credit Agree-
ment, including, without limitation, obligations to pay princi-
pal and interest, reimbursement obligations under letters of
credit, fees, expenses and indemnities, (y) all Interest Swap
Obligations (including guarantees thereof) and (z) all obliga-
tions (including guarantees thereof) under Currency Agreements,
in each case whether outstanding on the Issue Date or there-
after incurred. Notwithstanding the foregoing, Senior Debt
shall not include (i) any Indebtedness of the Company to a Sub-
sidiary of the Company, (ii) Indebtedness to, or guaranteed on
behalf of, any shareholder, director, officer or employee of
the Company or any Subsidiary of the Company (including, with-
out limitation, amounts owed for compensation),
(iii) Indebtedness to trade creditors and other amounts
incurred in connection with obtaining goods, materials or ser-
vices, (iv) Indebtedness represented by Disqualified Capital
Stock, (v) any liability for federal, state, local or other
taxes owed or owing by the Company, (vi) that portion of any
Indebtedness incurred in violation of the provisions set forth
under Section 4.12 (but, as to any such obligation, no such
violation shall be deemed to exist for purposes of this clause
(vi) if the holder(s) of such obligation or their representa-
tive and the Trustee shall have received an Officers' Certifi-
cate of the Company to the effect that the incurrence of such
Indebtedness does not (or, in the case of revolving credit
Indebtedness, that the incurrence of the entire committed
amount thereof at the date on which the initial borrowing
thereunder is made would not) violate such provisions of this
Indenture) and (vii) any Indebtedness which is, by its express
terms, subordinated in right of payment to any other Indebted-
ness of the Company.
"Significant Subsidiary" shall have the meaning set
----------------------
forth in Rule 1.02(w) of Regulation S-X under the Securities
Act.
"Subsidiary", with respect to any Person, means
----------
(i) any corporation of which the outstanding Capital Stock hav-
ing at least a majority of the votes entitled to be cast in the
election of directors under ordinary circumstances shall at the
time be owned, directly or indirectly, by such Person or
(ii) any other Person of which at least a majority of the vot-
ing interest under ordinary circumstances is at the time,
directly or indirectly, owned by such Person.
<PAGE>
26
"Surviving Entity" has the meaning provided in Sec-
----------------
tion 5.01.
"Tax Allocation Agreement" means the tax allocation
------------------------
agreement between the Company and Holdings as in effect on the
Issue Date.
"TIA" means the Trust Indenture Act of 1939 (15
---
U.S.C. SS 77aaa-77bbbb), as amended, as in effect on the date
of this Indenture, except as otherwise provided in Section
9.04.
"Trust Officer" means any officer of the Trustee
-------------
assigned by the Trustee to administer this Indenture, or in the
case of a successor trustee, an officer assigned to the depart-
ment, division or group performing the corporation trust work
of such successor and assigned to administer this Indenture.
"Trustee" means the party named as such in this
-------
Indenture until a successor replaces it in accordance with the
provisions of this Indenture and thereafter means such
successor.
"Unrestricted Subsidiary" of any Person means (i) any
-----------------------
Subsidiary of such Person that at the time of determination
shall be or continue to be designated an Unrestricted Subsid-
iary by the Board of Directors of such Person in the manner
provided below and (ii) any Subsidiary of an Unrestricted Sub-
sidiary. The Board of Directors of the Company may designate
any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such Sub-
sidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, the Company or any other Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so
designated; provided that (x) the Company certifies to the
--------
Trustee that such designation complies with Section 4.10 and
(y) each Subsidiary to be so designated and each of its Subsid-
iaries has not at the time of designation, and does not there-
after, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable with respect to any
Indebtedness pursuant to which the lender has recourse to any
of the assets of the Company or any of its Restricted Subsid-
iaries. The Board of Directors of the Company may designate
any Unrestricted Subsidiary to be a Restricted Subsidiary only
if (x) immediately after giving effect to such designation, the
Company is able to incur at least $1.00 of additional Indebted-
ness (other than Permitted Indebtedness) in compliance with
<PAGE>
27
Section 4.12 and (y) immediately before and immediately after
giving effect to such designation, no Default or Event of
Default shall have occurred and be continuing. Any such desig-
nation by the Board of Directors shall be evidenced to the
Trustee by promptly filing with the Trustee a copy of the Board
Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obliga-
---------------------------
tions of, and obligations guaranteed by, the United States of
America for the payment of which the full faith and credit of
the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of
-----------------
the United States of America as at the time of payment shall be
legal tender for the payment of public and private debts.
"U.S. Physical Notes" has the meaning provided in
-------------------
Section 2.01.
"Weighted Average Life to Maturity" means, when
---------------------------------
applied to any Indebtedness at any date, the number of years
obtained by dividing (a) the then outstanding aggregate princi-
pal amount of such Indebtedness into (b) the sum of the total
of the products obtained by multiplying (i) the amount of each
then remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final
maturity, in respect thereof, by (ii) the number of years (cal-
culated to the nearest one-twelfth) which will elapse between
such date and the making of such payment.
"Wholly Owned Restricted Subsidiary" of any Person
----------------------------------
means any Restricted Subsidiary of such Person of which all the
outstanding voting securities (other than in the case of a for-
eign Restricted Subsidiary, directors' qualifying shares or an
immaterial amount of shares required to be owned by other Per-
sons pursuant to applicable law) are owned by such Person or
any Wholly Owned Restricted Subsidiary of such Person.
SECTION 1.02. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the
TIA, such provision is incorporated by reference in, and made a
part of, this Indenture. The following TIA terms used in this
Indenture have the following meanings:
<PAGE>
28
"indenture securities" means the Notes.
"indenture security holder" means a Holder or a
Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
"obligor" on the indenture securities means the Com-
pany or any other obligor on the Notes.
All other TIA terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute
or defined by SEC rule and not otherwise defined herein have
the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise
defined has the meaning assigned to it in accordance with
GAAP as in effect on the date hereof;
(3) "or" is not exclusive;
(4) words in the singular include the
plural, and words in the plural include the singular; and
(5) "herein," "hereof" and other words of
similar import refer to this Indenture as a whole and not
to any particular Article, Section or other subdivision.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating.
---------------
The Initial Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A
<PAGE>
29
hereto. The Exchange Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B
hereto. The Notes may have notations, legends or endorsements
required by law, stock exchange rule or depository rule or
usage. The Company and the Trustee shall approve the form of
the Notes and any notation, legend or endorsement on them.
Each Note shall be dated the date of its issuance and shall
show the date of its authentication.
The terms and provisions contained in the Notes,
annexed hereto as Exhibits A and B, shall constitute, and are
hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execu-
tion and delivery of this Indenture, expressly agree to such
terms and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall
be issued initially in the form of one or more permanent global
Notes in registered form, substantially in the form set forth
in Exhibit A (the "Global Note"), deposited with the Trustee,
as custodian for the Depository, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. The
aggregate principal amount of the Global Note may from time to
time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depository, as
hereinafter provided.
Notes offered and sold in offshore transactions in
reliance on Regulation S shall be issued in the form of perma-
nent certificated Notes in registered form in substantially the
form set forth in Exhibit A (the "Offshore Physical Notes").
Notes offered and sold in reliance on any other exemption from
registration under the Securities Act other than as described
in the preceding paragraph shall be issued, and Notes offered
and sold in reliance on Rule 144A may be issued, in the form of
permanent certificated Notes in registered form, in substan-
tially the form set forth in Exhibit A (the "U.S. Physical
Notes"). The Offshore Physical Notes and the U.S. Physical
Notes are sometimes collectively herein referred to as the
"Physical Notes." Physical Notes shall initially be registered
in the name of the Depository or the nominee of such Depository
and be delivered to the Trustee as custodian for such Deposi-
tory. Beneficial owners of Physical Notes, however, may
request registration of such Physical Notes in their names or
the names of their nominees.
<PAGE>
30
SECTION 2.02. Execution and Authentication;
Aggregate Principal Amount.
----------------------------
Two Officers, or an Officer and an Assistant Secre-
tary, shall sign, or one Officer shall sign and one Officer or
an Assistant Secretary (each of whom shall, in each case, have
been duly authorized by all requisite corporate actions) shall
attest to, the Notes for the Company by manual or facsimile
signature. The Company's seal shall also be reproduced on the
Notes.
If an Officer or Assistant Secretary whose signature
is on a Note was an Officer or Assistant Secretary at the time
of such execution but no longer holds that office or position
at the time the Trustee authenticates the Note, the Note shall
nevertheless be valid.
A Note shall not be valid until an authorized signa-
tory of the Trustee manually signs the certificate of authenti-
cation on the Note. The signature shall be conclusive evidence
that the Note has been authenticated under this Indenture.
The Trustee shall authenticate (i) Initial Notes for
original issue in the aggregate principal amount not to exceed
$100,000,000, and (ii) Exchange Notes from time to time for
issue only in exchange for a like principal amount of Initial
Notes, in each case upon written orders of the Company in the
form of an Officers' Certificate. The Officers' Certificate
shall specify the amount of Notes to be authenticated, the date
on which the Notes are to be authenticated and the aggregate
principal amount of Notes outstanding on the date of authenti-
cation, whether the Notes are to be Initial Notes or Exchange
Notes, and shall further specify the amount of such Notes to be
issued as the Global Note, Offshore Physical Notes or U.S.
Physical Notes. The aggregate principal amount of Notes out-
standing at any time may not exceed $100,000,000, except as
provided in Section 2.07.
The Trustee shall not be required to authenticate
Notes if the issuance of such Notes pursuant to this Indenture
will affect the Trustee's own rights, duties or immunities
under the Notes and this Indenture in a manner which is not
reasonably acceptable to the Trustee.
The Trustee may appoint an authenticating agent (the
"Authenticating Agent") reasonably acceptable to the Company to
authenticate Notes. Unless otherwise provided in the
<PAGE>
31
appointment, an Authenticating Agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Inden-
ture to authentication by the Trustee includes authentication
by such Authenticating Agent. An Authenticating Agent has the
same rights as an Agent to deal with the Company and Affiliates
of the Company.
The Notes shall be issuable in fully registered form
only, without coupons, in denominations of $1,000 and any inte-
gral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency (which
shall be located in the Borough of Manhattan in the City of New
York, State of New York) where (a) Notes may be presented or
surrendered for registration of transfer or for exchange ("Reg-
istrar"), (b) Notes may be presented or surrendered for payment
("Paying Agent") and (c) notices and demands to or upon the
Company in respect of the Notes and this Indenture may be
served. The Registrar shall keep a register of the Notes and
of their transfer and exchange. The Company, upon prior writ-
ten notice to the Trustee, may have one or more co-Registrars
and one or more additional paying agents reasonably acceptable
to the Trustee. The term "Paying Agent" includes any addi-
tional Paying Agent. Neither the Company nor any Affiliate of
the Company may act as Paying Agent.
The Company shall enter into an appropriate agency
agreement with any Agent not a party to this Indenture, which
agreement shall incorporate the provisions of the TIA and
implement the provisions of this Indenture that relate to such
Agent. The Company shall notify the Trustee, in advance, of
the name and address of any such Agent. If the Company fails
to maintain a Registrar or Paying Agent, or fails to give the
foregoing notice, the Trustee shall act as such.
The Company initially appoints the Trustee as Regis-
trar, Paying Agent and agent for service of demands and notices
in connection with the Notes, until such time as the Trustee
has resigned or a successor has been appointed. The Paying
Agent or Registrar may resign upon 30 days notice to the
Company.
<PAGE>
32
SECTION 2.04. Paying Agent To Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other
than the Trustee to agree in writing that each Paying Agent
shall hold in trust for the benefit of the Holders or the Trus-
tee all assets held by the Paying Agent for the payment of
principal of, or interest on, the Notes (whether such assets
have been distributed to it by the Company or any other obligor
on the Notes), and the Company and the Paying Agent shall
notify the Trustee of any Default by the Company (or any other
obligor on the Notes) in making any such payment. The Company
at any time may require a Paying Agent to distribute all assets
held by it to the Trustee and account for any assets disbursed
and the Trustee may at any time during the continuance of any
payment Default, upon written request to a Paying Agent,
require such Paying Agent to distribute all assets held by it
to the Trustee and to account for any assets distributed. Upon
distribution to the Trustee of all assets that shall have been
delivered by the Company to the Paying Agent, the Paying Agent
shall have no further liability for such assets.
SECTION 2.05. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of
the names and addresses of the Holders. If the Trustee is not
the Registrar, the Company shall furnish or cause the Registrar
to furnish to the Trustee before each Record Date and at such
other times as the Trustee may request in writing a list as of
such date and in such form as the Trustee may reasonably
require of the names and addresses of the Holders, which list
may be conclusively relied upon by the Trustee.
SECTION 2.06. Transfer and Exchange.
---------------------
Subject to the provisions of Sections 2.16 and 2.17,
when Notes are presented to the Registrar or a co-Registrar
with a request to register the transfer of such Notes or to
exchange such Notes for an equal principal amount of Notes of
other authorized denominations, the Registrar or co-Registrar
shall register the transfer or make the exchange as requested
if its requirements for such transaction are met; provided,
--------
however, that the Notes presented or surrendered for registra-
- -------
tion of transfer or exchange shall be duly endorsed or accompa-
nied by a written instrument of transfer in form satisfactory
to the Company and the Registrar or co-Registrar, duly executed
by the Holder thereof or his attorney duly authorized in
<PAGE>
33
writing. To permit registrations of transfer and exchanges,
the Company shall execute and the Trustee shall authenticate
Notes at the Registrar's or co-Registrar's request. No service
charge shall be made for any registration of transfer or
exchange, but the Company may require payment of a sum suffi-
cient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer
taxes or similar governmental charge payable upon exchanges or
transfers pursuant to Sections 2.10, 3.06, 4.15, 4.16 or 9.06,
in which event the Company shall be responsible for the payment
of such taxes).
The Registrar or co-Registrar shall not be required
to register the transfer of or exchange of any Note (i) during
a period beginning at the opening of business 15 days before
the mailing of a notice of redemption of Notes and ending at
the close of business on the day of such mailing and
(ii) selected for redemption in whole or in part pursuant to
Article Three, except the unredeemed portion of any Note being
redeemed in part.
Any Holder of the Global Note shall, by acceptance of
such Global Note, agree that transfers of beneficial interests
in such Global Notes may be effected only through a book entry
system maintained by the Holder of such Global Note (or its
agent), and that ownership of a beneficial interest in the Note
shall be required to be reflected in a book entry.
SECTION 2.07. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Trustee or
if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Company shall issue and the
Trustee shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Com-
pany, such Holder must provide an affidavit of lost certificate
and an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the
Company, the Trustee or any Agent from any loss which any of
them may suffer if a Note is replaced. The Company may charge
such Holder for its reasonable, out-of-pocket expenses in
replacing a Note, including reasonable fees and expenses of
counsel. Every replacement Note shall constitute an additional
obligation of the Company.
<PAGE>
34
SECTION 2.08. Outstanding Notes.
-----------------
Notes outstanding at any time are all the Notes that
have been authenticated by the Trustee except those cancelled
by it, those delivered to it for cancellation and those
described in this Section as not outstanding. Subject to the
provisions of Section 2.09, a Note does not cease to be out-
standing because the Company or any of its Affiliates holds the
Note.
If a Note is replaced pursuant to Section 2.07 (other
than a mutilated Note surrendered for replacement), it ceases
to be outstanding unless the Trustee receives an Opinion of
Counsel that the replaced Note is held by a bona fide pur-
---- ----
chaser. A mutilated Note ceases to be outstanding upon surren-
der of such Note and replacement thereof pursuant to Section
2.07.
If on a Redemption Date or the Maturity Date the Pay-
ing Agent holds U.S. Legal Tender or U.S. Government Obliga-
tions sufficient to pay all of the principal and interest due
on the Notes payable on that date and is not prohibited from
paying such money to the Holders thereof pursuant to the terms
of this Indenture, then on and after that date such Notes cease
to be outstanding and interest on them ceases to accrue.
SECTION 2.09. Treasury Notes.
--------------
In determining whether the Holders of the required
principal amount of Notes have concurred in any direction,
waiver, consent or notice, Notes owned by the Company or any of
its Affiliates shall be considered as though they are not out-
standing, except that for the purposes of determining whether
the Trustee shall be protected in relying on any such direc-
tion, waiver or consent, only Notes which a Trust Officer of
the Trustee actually knows are so owned shall be so considered.
The Company shall notify the Trustee, in writing, when it or
any of its Affiliates repurchases or otherwise acquires Notes,
of the aggregate principal amount of such Notes so repurchased
or otherwise acquired.
SECTION 2.10. Temporary Notes.
---------------
Until definitive Notes are ready for delivery, the
Company may prepare and the Trustee shall authenticate tempo-
rary Notes upon receipt of a written order of the Company in
the form of an Officers' Certificate. The Officers'
<PAGE>
35
Certificate shall specify the amount of temporary Notes to be
authenticated and the date on which the temporary Notes are to
be authenticated. Temporary Notes shall be substantially in
the form of definitive Notes but may have variations that the
Company considers appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee
shall authenticate upon receipt of a written order of the Com-
pany pursuant to Section 2.02 definitive Notes in exchange for
temporary Notes.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Notes to the
Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee, or at the direc-
tion of the Trustee, the Registrar or the Paying Agent, and no
one else, shall cancel and, at the written direction of the
Company, shall dispose of all Notes surrendered for transfer,
exchange, payment or cancellation. Subject to Section 2.07,
the Company may not issue new Notes to replace Notes that it
has paid or delivered to the Trustee for cancellation. If the
Company shall acquire any of the Notes, such acquisition shall
not operate as a redemption or satisfaction of the Indebtedness
represented by such Notes unless and until the same are surren-
dered to the Trustee for cancellation pursuant to this Section
2.11.
SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults in a payment of interest on
the Notes, it shall pay the defaulted interest, plus (to the
extent lawful) any interest payable on the defaulted interest
to the Persons who are Holders on a subsequent special record
date, which date shall be the fifteenth day next preceding the
date fixed by the Company for the payment of defaulted interest
or the next succeeding Business Day if such date is not a Busi-
ness Day. At least 15 days before the subsequent special
record date, the Company shall mail to each Holder, as of a
recent date selected by the Company, with a copy to the Trus-
tee, a notice that states the subsequent special record date,
the payment date and the amount of defaulted interest, and
interest payable on such defaulted interest, if any, to be
paid.
<PAGE>
36
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Notes may use a "CUSIP"
number, and if so, the Trustee shall use the CUSIP number in
notices of redemption or exchange as a convenience to Holders;
provided that no representation is hereby deemed to be made by
the Trustee as to the correctness or accuracy of the CUSIP num-
ber printed in the notice or on the Notes, and that reliance
may be placed only on the other identification numbers printed
on the Notes. The Company shall promptly notify the Trustee of
any change in the CUSIP number.
SECTION 2.14. Deposit of Moneys.
-----------------
Prior to 11:00 a.m. New York City time on each Inter-
est Payment Date and on the Maturity Date, the Company shall
have deposited with the Paying Agent in immediately available
funds money sufficient to make cash payments, if any, due on
such Interest Payment Date or Maturity Date, as the case may
be, in a timely manner which permits the Paying Agent to remit
payment to the Holders on such Interest Payment Date or Matur-
ity Date, as the case may be.
SECTION 2.15. Restrictive Legends.
-------------------
Each Global Note and Physical Note that constitutes a
Restricted Security shall bear the following legend (the "Pri-
vate Placement Legend") on the face thereof until February 6,
2000, unless otherwise agreed by the Company and the Holder
thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR
FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALI-
FIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITU-
TIONAL "ACCREDITED INVESTOR" (AS DEFINED IN
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURI-
TIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY
IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT
WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE
<PAGE>
37
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COM-
PLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A
U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COM-
PLIANCE WITH RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECU-
RITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURI-
TIES ACT AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY
WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF
THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUS-
TEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANS-
FER IS BEING MADE PURSUANT TO AN EXEMPTION FROM,
OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRA-
TION REQUIREMENTS OF THE SECURITIES ACT. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN
TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
Each Global Note shall also bear the following legend
on the face thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECU-
RITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR
BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY THE
DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY
OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
<PAGE>
38
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRE-
SENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR
TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHO-
RIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGIS-
TERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED
TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMI-
NEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANS-
FERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTION 2.17 OF THE INDENTURE.
SECTION 2.16. Book-Entry Provisions
for Global Security.
---------------------
(a) The Global Note initially shall (i) be regis-
tered in the name of the Depository or the nominee of such
Depository, (ii) be delivered to the Trustee as custodian for
such Depository and (iii) bear legends as set forth in Sec-
tion 2.15.
Members of, or participants in, the Depository
("Agent Members") shall have no rights under this Indenture
with respect to any Global Note held on their behalf by the
Depository, or the Trustee as its custodian, or under the Glo-
bal Note, and the Depository may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the
absolute owner of the Global Note for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy
or other authorization furnished by the Depository or impair,
as between the Depository and its Agent Members, the operation
of customary practices governing the exercise of the rights of
a holder of any Note.
<PAGE>
39
(b) Transfers of the Global Note shall be limited to
transfers in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of benefi-
cial owners in the Global Note may be transferred or exchanged
for Physical Notes in accordance with the rules and procedures
of the Depository and the provisions of Section 2.17. In addi-
tion, Physical Notes shall be transferred to all beneficial
owners in exchange for their beneficial interests in the Global
Note if (i) the Depository notifies the Company that it is
unwilling or unable to continue as Depository for the Global
Note and a successor depositary is not appointed by the Company
within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a
written request from the Depository to issue Physical Notes.
(c) In connection with any transfer or exchange of a
portion of the beneficial interest in the Global Note to bene-
ficial owners pursuant to paragraph (b), the Registrar shall
(if one or more Physical Notes are to be issued) reflect on its
books and records the date and a decrease in the principal
amount of the Global Note in an amount equal to the principal
amount of the beneficial interest in the Global Note to be
transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more Physical Notes of
like tenor and amount.
(d) In connection with the transfer of the entire
Global Note to beneficial owners pursuant to paragraph (b), the
Global Note shall be deemed to be surrendered to the Trustee
for cancellation, and the Company shall execute, and the Trus-
tee shall authenticate and deliver, to each beneficial owner
identified by the Depository in exchange for its beneficial
interest in the Global Note, an equal aggregate principal
amount of Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted
Security delivered in exchange for an interest in the Global
Note pursuant to paragraph (b) or (c) shall, except as other-
wise provided by paragraphs (a)(i)(x) and (c) of Section 2.17,
bear the legend regarding transfer restrictions applicable to
the Physical Notes set forth in Section 2.15.
(f) The Holder of the Global Note may grant proxies
and otherwise authorize any person, including Agent Members and
persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this Inden-
ture or the Notes.
<PAGE>
40
SECTION 2.17. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited
---------------------------------------------
Investors and Non-U.S. Persons. The following provisions shall
- ------------------------------
apply with respect to the registration of any proposed transfer
of a Note constituting a Restricted Security to any Institu-
tional Accredited Investor which is not a QIB or to any
Non-U.S. Person:
(i) the Registrar shall register the transfer
of any Note constituting a Restricted Security,
whether or not such Note bears the Private
Placement Legend, if (x) the requested transfer is
after February 6, 2000 or (y) (1) in the case of a
transfer to an Institutional Accredited Investor
which is not a QIB (excluding Non-U.S. Persons),
the proposed transferee has delivered to the
Registrar a certificate substantially in the form
of Exhibit C hereto or (2) in the case of a
transfer to a Non-U.S. Person, the proposed
transferor has delivered to the Registrar a cer-
tificate substantially in the form of Exhibit D
hereto and such other information that the Trustee
may reasonably request in order to confirm that
such transaction is being made pursuant to an
exemption from or in a transaction not subject to
the registration requirements of the Securities
Act; and
(ii) if the proposed transferor is an Agent
Member holding a beneficial interest in the Global
Note, upon receipt by the Registrar of (x) the
certificate, if any, required by paragraph (i)
above and (y) instructions given in accordance with
the Depository's and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and
records the date and (if the transfer does not involve a trans-
fer of outstanding Physical Notes) a decrease in the principal
amount of the Global Note in an amount equal to the principal
amount of the beneficial interest in the Global Note to be
transferred, and (b) the Company shall execute and the Trustee
shall authenticate and deliver one or more Physical Notes of
like tenor and amount.
(b) Transfers to QIBs. The following provisions
-----------------
shall apply with respect to the registration of any proposed
transfer of a Note constituting a Restricted Security to a QIB
(excluding transfers to Non-U.S. Persons):
<PAGE>
41
(i) the Registrar shall register the transfer
if such transfer is being made by a proposed
transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised
the Company and the Registrar in writing, that the
sale has been made in compliance with the
provisions of Rule 144A to a transferee who has
signed the certification provided for on the form
of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is
purchasing the Note for its own account or an
account with respect to which it exercises sole
investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as
it has requested pursuant to Rule 144A or has
determined not to request such information and that
it is aware that the transferor is relying upon its
foregoing representations in order to claim the
exemption from registration provided by Rule 144A;
and
(ii) if the proposed transferee is an Agent
Member, and the Notes to be transferred consist of
Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon
receipt by the Registrar of instructions given in
accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect
on its books and records the date and an increase
in the principal amount of the Global Note in an
amount equal to the principal amount of the
Physical Notes to be transferred, and the Trustee
shall cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the transfer,
------------------------
exchange or replacement of Notes not bearing the Private Place-
ment Legend, the Registrar shall deliver Notes that do not bear
the Private Placement Legend. Upon the transfer, exchange or
replacement of Notes bearing the Private Placement Legend, the
Registrar shall deliver only Notes that bear the Private Place-
ment Legend unless (i) the circumstance contemplated by para-
graph (a)(i)(x) of this Section 2.17 exist or (ii) there is
delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that
neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provi-
sions of the Securities Act.
<PAGE>
42
(d) General. By its acceptance of any Note
-------
bearing the Private Placement Legend, each Holder of such a Note
acknowledges the restrictions on transfer of such Note set
forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain copies of all letters,
notices and other written communications received pursuant to
Section 2.16 or this Section 2.17. The Company shall have the
right to inspect and make copies of all such letters, notices
or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
------------------
If the Company elects to redeem Notes pursuant to
Paragraph 6 of the Notes, it shall notify the Trustee and the
Paying Agent in writing of the Redemption Date and the princi-
pal amount of the Notes to be redeemed.
The Company shall give each notice provided for in
this Section 3.01 at least 60 days before the Redemption Date
(unless a shorter notice period shall be satisfactory to the
Trustee, as evidenced in a writing signed on behalf of the
Trustee), together with an Officers' Certificate stating that
such redemption shall comply with the conditions contained
herein and in the Notes.
SECTION 3.02 Selection of Notes To Be Redeemed.
---------------------------------
If fewer than all of the Notes are to be redeemed,
selection of the Notes to be redeemed will be made by the Trus-
tee 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 then listed on a national secu-
rities exchange, on a pro rata basis, by lot or in such other
--- ----
fair and reasonable manner chosen at the discretion of the
Trustee; provided, however, that if a partial redemption is
-------- -------
made with the proceeds of a Public Equity Offering, selection
of the Notes or portion thereof for redemption shall be made by
<PAGE>
43
the Trustee only on a pro rata basis, unless such method is
--- ----
otherwise prohibited. The Company shall promptly notify the
Trustee and the Paying Agent in writing of the date of listing
and the name of the securities exchange if and when the Notes
are listed on a principal national securities exchange. The
Trustee shall make the selection from the Notes outstanding and
not previously called for redemption and shall promptly notify
the Company in writing of the Notes selected for redemption
and, in the case of any Note selected for partial redemption,
the principal amount thereof to be redeemed. Notes in
denominations of $1,000 may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 or
any integral multiple thereof) of the principal of Notes that
have denominations larger than $1,000. Provisions of this
Indenture that apply to Notes called for redemption also apply
to portions of Notes called for redemption.
SECTION 3.03. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a
Redemption Date, the Company shall mail or cause to be mailed a
notice of redemption by first class mail, postage prepaid, to
each Holder whose Notes are to be redeemed, with a copy to the
Trustee and any Paying Agent. At the Company's written
request, the Trustee shall give the notice of redemption in the
Company's name and at the Company's expense.
Each notice for redemption shall identify the Notes
to be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued
interest, if any, to be paid;
(3) the name and address of the Paying Agent;
(4) the subparagraph of the Notes pursuant to which
such redemption is being made;
(5) that Notes called for redemption must be
surrendered to the Paying Agent to collect the Redemption Price
plus accrued interest, if any;
(6) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date, and the only remaining
right of the Holders of such Notes is to receive payment of the
Redemption Price plus accrued
<PAGE>
44
interest, if any, upon surrender to the Paying Agent of the
Notes redeemed;
(7) if any Note is being redeemed in part,
the portion of the principal amount of such Note to be
redeemed and that, after the Redemption Date, and upon
surrender of such Note, a new Note or Notes in the
aggregate principal amount equal to the unredeemed portion
thereof will be issued; and
(8) if fewer than all the Notes are to be
redeemed, the identification of the particular Notes (or
portion thereof) to be redeemed, as well as the aggregate
principal amount of Notes to be redeemed and the aggregate
principal amount of Notes to be outstanding after such
partial redemption.
SECTION 3.04. Effect of Notice of Redemption.
-------------------------------
Once notice of redemption is mailed in accordance
with Section 3.03, Notes called for redemption become due and
payable on the Redemption Date and at the Redemption Price plus
accrued interest, if any. Upon surrender to the Trustee or
Paying Agent, such Notes called for redemption shall be paid at
the Redemption Price (which shall include accrued interest
thereon to the Redemption Date), but installments of interest,
the maturity of which is on or prior to the Redemption Date,
shall be payable to Holders of record at the close of business
on the relevant record dates referred to in the Notes.
SECTION 3.05 Deposit of Redemption Price.
---------------------------
On or before 11:00 a.m. New York City time on the
Redemption Date, the Company shall deposit with the Paying
Agent U.S. Legal Tender sufficient to pay the Redemption Price
plus accrued interest, if any, of all Notes to be redeemed on
that date. The Paying Agent shall promptly return to the
Company any U.S. Legal Tender so deposited which is not
required for that purpose, except with respect to monies owed
as obligations to the Trustee pursuant to Article Seven.
If the Company complies with the preceding paragraph,
then, unless the Company defaults in the payment of such
Redemption Price plus accrued interest, if any, interest on the
Notes to be redeemed will cease to accrue on and after the
applicable Redemption Date, whether or not such Notes are pre-
sented for payment.
<PAGE>
45
SECTION 3.06 Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is to be redeemed in
part, the Company shall execute and the Trustee shall authenti-
cate for the Holder a new Note or Notes equal in principal
amount to the unredeemed portion of the Note surrendered.
ARTICLE FOUR
COVENANTS
SECTION 4.01 Payment of Notes.
----------------
The Company shall pay the principal of and interest
on the Notes on the dates and in the manner provided in the
Notes and in this Indenture. An installment of principal of or
interest on the Notes shall be considered paid on the date it
is due if the Trustee or Paying Agent (other than the Company
or an Affiliate of the Company) holds on that date U.S. Legal
Tender designated for and sufficient to pay the installment in
full and is not prohibited from paying such money to the Hold-
ers pursuant to the terms of this Indenture.
The Company shall pay, to the extent such payments
are lawful, interest on overdue principal and on overdue
installments of interest (without regard to any applicable
grace periods) from time to time on demand at the rate borne by
the Notes plus 2% per annum. Interest will be computed on the
basis of a 360-day year comprised of twelve 30-day months.
Notwithstanding anything to the contrary contained in
this Indenture, the Company may, to the extent it is required
to do so by law, deduct or withhold income or other similar
taxes imposed by the United States of America from principal or
interest payments hereunder.
SECTION 4.02 Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency
required under Section 2.03. The Company shall give prior
written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the
Company shall fail to maintain any such required office or
agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands
<PAGE>
46
may be made or served at the address of the Trustee set forth
in Section 11.02.
SECTION 4.03. Corporate Existence.
-------------------
Except as otherwise permitted by Article Five and
Section 4.16, the Company shall do or cause to be done, at its
own cost and expense, all things necessary to preserve and keep
in full force and effect its corporate existence and the corpo-
rate existence of each of its Restricted Subsidiaries in accor-
dance with the respective organizational documents of each such
Restricted Subsidiary and the material rights (charter and
statutory) and franchises of the Company and each such
Restricted Subsidiary.
SECTION 4.04. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be
paid or discharged, before the same shall become delinquent,
(i) all material taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and
additions to taxes) levied or imposed upon it or any of its
Subsidiaries or properties of it or any of its Subsidiaries and
(ii) all lawful claims for labor, materials and supplies that,
if unpaid, might by law become a Lien upon the property of it
or any of its Subsidiaries; provided, however, that the Company
-------- -------
shall not be required to pay or discharge or cause to be paid
or discharged any such tax, assessment, charge or claim whose
amount, applicability or validity is being contested in good
faith by appropriate proceedings properly instituted and dili-
gently conducted for which adequate reserves, to the extent
required under GAAP, have been taken.
SECTION 4.05. Maintenance of Properties
and Insurance.
--------------
(a) The Company shall, and shall cause each of its
Restricted Subsidiaries to, maintain its material properties in
good working order and condition (subject to ordinary wear and
tear) and make all necessary repairs, renewals, replacements,
additions, betterments and improvements thereto and actively
conduct and carry on its business; provided, however, that
-------- -------
nothing in this Section 4.05 shall prevent the Company or any
of its Restricted Subsidiaries from discontinuing the operation
and maintenance of any of its properties, if such discontinu-
ance is, in the good faith judgment of the Board of Directors
of the Company or the Restricted Subsidiary, as the case may
<PAGE>
47
be, desirable in the conduct of their respective businesses and
is not disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be pro-
vided, for itself and each of its Restricted Subsidiaries,
insurance (including appropriate self-insurance) against loss
or damage of the kinds that, in the good faith judgment of the
Board of Directors of the Company, are adequate and appropriate
for the conduct of the business of the Company and such
Restricted Subsidiaries in a prudent manner, with reputable
insurers or with the government of the United States of America
or an agency or instrumentality thereof, in such amounts, with
such deductibles, and by such methods as shall be customary, in
the good faith judgment of the Board of Directors of the Com-
pany, for companies similarly situated in the industry.
SECTION 4.06. Compliance Certificate;
Notice of Default.
------------------
(a) The Company shall deliver to the Trustee, within
90 days after the end of the Company's fiscal year, an Officers'
Certificate stating that a review of its activities and
the activities of its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers
with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing
such certificate, that to the best of such Officer's knowledge
the Company during such preceding fiscal year has kept,
observed, performed and fulfilled each and every such covenant
and no Default or Event of Default occurred during such year
and at the date of such certificate there is no Default or
Event of Default that has occurred and is continuing or, if
such signers do know of such Default or Event of Default, the
certificate shall describe the Default or Event of Default and
its status with particularity. The Officers' Certificate shall
also notify the Trustee should the Company elect to change the
manner in which it fixes its fiscal year end.
(b) The annual financial statements delivered pursu-
ant to Section 4.08 shall be accompanied by a written report of
the Company's independent accountants (who shall be a firm of
established national reputation) that in conducting their audit
of such financial statements nothing has come to their atten-
tion that would lead them to believe that the Company has vio-
lated any provisions of Article Four, Five or Six of this
Indenture insofar as they relate to accounting matters or, if
<PAGE>
48
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) (i) If any Default or Event of Default has
occurred and is continuing or (ii) if any Holder seeks to exer-
cise any remedy hereunder with respect to a claimed Default
under this Indenture or the Notes, the Company shall deliver to
the Trustee, at its address set forth in Section 11.02 hereof,
by registered or certified mail or by telegram, telex or fac-
simile transmission followed by hard copy by registered or cer-
tified mail an Officers' Certificate specifying such event,
notice or other action within five Business Days of its becom-
ing aware of such occurrence.
SECTION 4.07. Compliance with Laws.
--------------------
The Company shall comply, and shall cause each of its
Restricted Subsidiaries to comply, with all applicable stat-
utes, rules, regulations, orders and restrictions of the United
States of America, all states and municipalities thereof, and
of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing,
in respect of the conduct of their respective businesses and
the ownership of their respective properties, except for such
noncompliances as are not in the aggregate reasonably likely to
have a material adverse effect on the financial condition or
results of operations of the Company and its Restricted Subsid-
iaries, taken as a whole.
SECTION 4.08. SEC Reports.
-----------
(a) So long as the Notes are outstanding, the Com-
pany (at its own expense) shall file with the SEC and shall
file with the Trustee within 15 days after it files them with
the SEC copies of the quarterly and annual reports and of the
information, documents, and other reports (or copies of such
portions of any of the foregoing as the SEC may by rules and
regulations prescribe) to be filed pursuant to Section 13 or
15(d) of the Exchange Act (without regard to whether the Com-
pany is subject to the requirements of such Section 13 or 15(d)
of the Exchange Act); provided that prior to the consummation
--------
of the Exchange Offer and the issuance of the Exchange Notes,
the Company (at its own expense) will mail to the Trustee and
Holders in accordance with paragraph (b) of this Section 4.08
<PAGE>
49
substantially the same information that would have been
required by the foregoing documents within 15 days of when any
such document would otherwise have been required to be filed
with the SEC. Upon qualification of this Indenture under the
TIA, the Company shall also comply with the provisions of TIA
314(a).
(b) At the Company's expense, the Company shall
cause an annual report if furnished by it to stockholders gen-
erally and each quarterly or other financial report if fur-
nished by it to stockholders generally to be filed with the
Trustee and mailed to the Holders at their addresses appearing
in the register of Notes maintained by the Registrar at the
time of such mailing or furnishing to stockholders.
(c) The Company shall provide to any Holder any
information reasonably requested by such Holder concerning the
Company (including financial statements) necessary in order to
permit such Holder to sell or transfer Notes in compliance with
Rule 144A under the Securities Act.
SECTION 4.09. Waiver of Stay, Extension
or Usury Laws.
-------------------------
The Company covenants (to the extent that it may law-
fully do so) that it will not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advan-
tage of, any stay or extension law or any usury law or other
law that would prohibit or forgive the Company from paying all
or any portion of the principal of or interest on the Notes as
contemplated herein, wherever enacted, now or at any time here-
after in force, or which may affect the covenants or the per-
formance of this Indenture; and (to the extent that it may law-
fully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hin-
der, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 4.10. Limitation on Restricted Payments.
---------------------------------
The Company shall not, and shall not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly,
(a) declare or pay any dividend or make any distribution (other
than dividends or distributions payable in Qualified Capital
Stock of the Company) on or in respect of shares of the Compa-
ny's Capital Stock to holders of such Capital Stock, (b) pur-
<PAGE>
50
chase, redeem or otherwise acquire or retire for value any Cap-
ital Stock of the Company or any warrants, rights or options to
purchase or acquire shares of any class of such Capital Stock,
(c) make any principal payment on, purchase, defease, redeem,
prepay, decrease or otherwise acquire or retire for value,
prior to any scheduled final maturity, scheduled repayment or
scheduled sinking fund payment, any Indebtedness of the Company
that is subordinate or junior in right of payment to the Notes
or (d) make any Investment (other than Permitted Investments)
(each of the foregoing actions set forth in clauses (a), (b)
(c) and (d) being referred to as a "Restricted Payment"), if at
the time of such Restricted Payment or immediately after giving
effect thereto, (i) a Default or an Event of Default shall have
occurred and be continuing or (ii) the Company is not able to
incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) in compliance with Section 4.12 or
(iii) the aggregate amount of Restricted Payments (including
such proposed Restricted Payment) made subsequent to the Issue
Date (the amount expended for such purposes, if other than in
cash, being the fair market value of such property as deter-
mined reasonably and in good faith by the Board of Directors of
the Company) shall exceed the sum of: (w) 50% of the cumula-
tive Consolidated Net Income (or if cumulative Consolidated Net
Income shall be a loss, minus 100% of such loss) of the Company
earned subsequent to the Issue Date and on or prior to the date
the Restricted Payment occurs (the "Reference Date") (treating
such period as a single accounting period); plus (x) 100% of
the aggregate net cash proceeds received by the Company from
any Person (other than a Subsidiary of the Company) from the
issuance and sale subsequent to the Issue Date and on or prior
to the Reference Date of Qualified Capital Stock of the Com-
pany; plus (y) without duplication of any amounts included in
clause (iii)(x) above, 100% of the aggregate net cash proceeds
of any equity contribution received by the Company from a
holder of the Company's Capital Stock; plus (z) without dupli-
cation, the sum of (1) the aggregate amount returned in cash on
or with respect to Investments (other than Permitted Invest-
ments) made subsequent to the Issue Date whether through inter-
est payments, principal payments, dividends or other distribu-
tions or payments, (2) the net cash proceeds received by the
Company or any Restricted Subsidiary from the disposition of
all or any portion of such Investments (other than to a Subsid-
iary of the Company) and (3) upon redesignation of an Unre-
stricted Subsidiary as a Restricted Subsidiary, the fair market
value of such Subsidiary; provided, however, that with respect
-------- -------
to all Investments made in any Unrestricted Subsidiary or joint
venture, the sum of clauses (1), (2) and (3) above with respect
<PAGE>
51
to such Investment shall not exceed the aggregate amount of
all such Investments made subsequent to the Issue Date in such
Unrestricted Subsidiary or joint venture.
Notwithstanding the foregoing, the provisions set
forth in the immediately preceding paragraph do not prohibit:
(1) the payment of any dividend within 60 days after the date
of declaration of such dividend if the dividend would have been
permitted on the date of declaration; (2) the acquisition of
any shares of Capital Stock of the Company, either (i) solely
in exchange for shares of Qualified Capital Stock of the Com-
pany or (ii) through the application of net proceeds of a sub-
stantially concurrent sale for cash (other than to a Subsidiary
of the Company) of shares of Qualified Capital Stock of the
Company; (3) if no Default or Event of Default shall have
occurred and be continuing, the acquisition of any Indebtedness
of the Company that is subordinate or junior in right of pay-
ment to the Notes either (i) solely in exchange for shares of
Qualified Capital Stock of the Company, or (ii) through the
application of net proceeds of a substantially concurrent sale
for cash (other than to a Subsidiary of the Company) of (A)
shares of Qualified Capital Stock of the Company or (B) Refi-
nancing Indebtedness; (4) so long as no Default or Event of
Default shall have occurred and be continuing, payments for the
purpose of and in an amount equal to the amount required to
permit Holdings to redeem or repurchase Common Stock of Hold-
ings or options in respect thereof from employees or officers
of Holdings or any of its Subsidiaries or their estates or
authorized representatives upon the death, disability or termi-
nation of the employment of such employees or officers in an
aggregate amount not to exceed $3.0 million; (5) the making of
distributions, loans or advances in an amount not to exceed
$250,000 per annum sufficient to permit Holdings to pay the
ordinary operating expenses of Holdings related to Holdings'
ownership of Capital Stock of the Company (other than to the
Principals or their Related Parties); and (6) the payment of
any amounts pursuant to the Tax Allocation Agreement. In
determining the aggregate amount of Restricted Payments made
subsequent to the Issue Date in accordance with clause (iii) of
the immediately preceding paragraph, amounts expended pursuant
to clauses (1), (2) and (4) shall be included in such
calculation and amounts expended pursuant to clauses (3), (5)
and (6) shall be excluded from such calculation.
Not later than the date of making any Restricted Pay-
ment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment complies with
<PAGE>
52
this Indenture and setting forth in reasonable detail the
basis upon which the required calculations were computed, which
calculations may be based upon the Company's latest available
internal quarterly financial statements.
SECTION 4.11. Limitation on Transactions
with Affiliates.
--------------------------
(a) The Company shall not, and shall not permit any
of its Restricted Subsidiaries to, directly or indirectly,
enter into or permit to exist any transaction or series of
related transactions (including, without limitation, the pur-
chase, sale, lease or exchange of any property or the rendering
of any service) with, or for the benefit of, any of its Affili-
ates (each an "Affiliate Transaction"), other than (x) Affili-
ate Transactions permitted under paragraph (b) below and
(y) Affiliate Transactions on terms that are no less favorable
than those that might reasonably have been obtained in a compa-
rable transaction at such time on an arm's-length basis from a
Person that is not an Affiliate of the Company or such
Restricted Subsidiary. All Affiliate Transactions (and each
series of related Affiliate Transactions which are similar or
part of a common plan) involving aggregate payments or other
property with a fair market value in excess of $250,000 shall
be approved by the Board of Directors of the Company or such
Restricted Subsidiary, as the case may be, such approval to be
evidenced by a Board Resolution stating that such Board of
Directors has determined that such transaction complies with
the foregoing provisions. If the Company or any Restricted
Subsidiary of the Company enters into an Affiliate Transaction
(or a series of related Affiliate Transactions related to a
common plan) that involves an aggregate fair market value or
payments to an Affiliate, as the case may be, of more than
$2.5 million, the Company or such Restricted Subsidiary, as the
case may be, shall, prior to the consummation thereof, obtain a
favorable opinion as to the fairness of such transaction or
series of related transactions to the Company or the relevant
Restricted Subsidiary, as the case may be, from a financial
point of view, from an Independent Financial Advisor and file
the same with the Trustee.
(b) The foregoing restrictions shall not apply to
(i) reasonable fees, compensation and out-of-pocket expenses
paid to and indemnity provided on behalf of, officers, direc-
tors, employees or consultants of the Company or any Restricted
Subsidiary of the Company as determined in good faith by the
Company's Board of Directors or senior management; (ii)
<PAGE>
53
transactions between or among the Company and any of its
Restricted Subsidiaries or exclusively between or among such
Restricted Subsidiaries, provided that such transactions are
not otherwise prohibited by this Indenture; (iii) any agreement
as in effect as of the Issue Date or any amendment thereto or
any transaction contemplated thereby (including pursuant to any
amendment thereto) in any replacement agreement thereto so long
as any such amendment or replacement agreement is not more dis-
advantageous to the Holders in any material respect than the
original agreement as in effect on the Issue Date; (iv) any
Paribas Related Party acting as a lender under the Credit
Agreement or purchasing or holding any Notes; and (v)
Restricted Payments and Permitted Investments permitted by this
Indenture.
SECTION 4.12. Limitation on Incurrence
of Additional Indebtedness.
--------------------------
The Company shall not, and shall not permit any of
its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume, guarantee, acquire, become liable, contingently
or otherwise, with respect to, or otherwise become responsible
for payment of (collectively, "incur") any Indebtedness (other
than Permitted Indebtedness); provided, however, that if no
-------- -------
Default or Event of Default shall have occurred and be continu-
ing at the time or as a consequence of the incurrence of any
such Indebtedness, the Company may incur Indebtedness (includ-
ing, without limitation, Acquired Indebtedness) and the
Restricted Subsidiaries of the Company may incur Acquired
Indebtedness, in each case if on the date of the incurrence of
such Indebtedness, after giving effect to the incurrence
thereof, the Consolidated Fixed Charge Coverage Ratio of the
Company is greater than 2.0 to 1.0.
SECTION 4.13. Limitation on Dividend and
Other Payment Restrictions
Affecting Subsidiaries.
--------------------------
The Company shall not, and shall not cause or permit
any of its Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or permit to exist or become effec-
tive any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Company to (a) pay dividends or
make any other distributions on or in respect of its Capital
Stock; (b) make loans or advances or to pay any Indebtedness or
other obligation owed to the Company or any other Restricted
Subsidiary of the Company; or (c) transfer any of its property
<PAGE>
54
or assets to the Company or any other Restricted Subsidiary of
the Company, except for such encumbrances or restrictions
existing under or by reason of: (1) applicable law; (2) this
Indenture; (3) customary non-assignment provisions of any con-
tract or lease governing a leasehold or ownership interest of
any Restricted Subsidiary of the Company; (4) any instrument
governing Acquired Indebtedness, which encumbrance or restric-
tion is not applicable to any Person, or the properties or
assets of any Person, other than the Person or the properties
or assets of the Person so acquired; (5) agreements existing on
the Issue Date (including, without limitation, the Credit
Agreement) to the extent and in the manner such agreements are
in effect on the Issue Date; or (6) an agreement governing
Indebtedness incurred to Refinance the Indebtedness issued,
assumed or incurred pursuant to an agreement referred to in
clause (2), (4) or (5) above; provided, however, that the pro-
-------- -------
visions relating to such encumbrance or restriction contained
in any such Indebtedness are no less favorable to the Company
in any material respect as determined by the Board of Directors
of the Company in their reasonable and good faith judgment than
the provisions relating to such encumbrance or restriction con-
tained in agreements referred to in such clause (2), (4) or
(5).
SECTION 4.14. Prohibition on Incurrence of
Senior Subordinated Debt.
----------------------------
The Company shall not incur or suffer to exist
Indebtedness that is senior in right of payment to the Notes
and subordinate in right of payment to any other Indebtedness
of the Company.
SECTION 4.15. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control, the
Company shall make an offer to purchase all outstanding Notes
pursuant to the offer described in paragraph (b) below (the
"Change of Control Offer") at a purchase price equal to 101% of
the principal amount thereof plus accrued interest, if any, to
the date of purchase. Prior to the mailing of the notice
referred to below, but in any event within 30 days following
any Change of Control, the Company shall (i) repay in full and
terminate all commitments under Indebtedness under the Credit
Agreement and all other Senior Debt the terms of which require
repayment upon a Change of Control or offer to repay in full
and terminate all commitments under all Indebtedness under the
Credit Agreement and all other such Senior Debt and to repay
<PAGE>
55
the Indebtedness owed to each lender which has accepted such
offer or (ii) obtain the requisite consents under the Credit
Agreement and all other Senior Debt to permit the repurchase of
the Notes as provided below. The Company shall first comply
with the covenant in the immediately preceding sentence before
it shall be required to repurchase Notes pursuant to the provi-
sions described in this Section 4.15. The Company's failure to
comply with the immediately preceding sentence shall constitute
an Event of Default under Section 6.01(3) and not under
Section 6.01(2).
(b) Within 30 days following the date upon which the
Change of Control occurred (the "Change of Control Date"), the
Company shall send, by first class mail, a notice to each
Holder, with a copy to the Trustee, which notice shall govern
the terms of the Change of Control Offer. The notice to the
Holders shall contain all instructions and materials necessary
to enable such Holders to tender Notes pursuant to the Change
of Control Offer. Such notice shall state:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.15 and that all Notes tendered and not withdrawn will be accepted
for payment;
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be no earlier than 30 days nor later than 45
days from the date such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making pay-ment therefor, any
Note accepted for payment pursuant to the Change of Control Offer shall cease
to accrue interest after the Change of Control Payment Date;
(5) that Holders electing to have a Note purchased pursuant to a Change
of Control Offer will be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, to the Paying Agent at the address specified in the notice prior
to the close of business on the third Business Day prior to the Change of
Control Payment Date;
<PAGE>
56
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the Change
of Control Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is withdrawing
his election to have such Notes purchased;
(7) that Holders whose Notes are purchased only in part will be issued
new Notes in a principal amount equal to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall
--------
be in an original principal amount of $1,000 or integral multiples thereof;
and
(8) the circumstances and relevant facts regarding such Change
of Control.
On or before the Change of Control Payment Date, the
Company shall (i) accept for payment Notes or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit
with the Paying Agent U.S. Legal Tender sufficient to pay the
purchase price plus accrued interest, if any, of all Notes so
tendered and (iii) deliver to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or
portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to the Holders of Notes so accepted
payment in an amount equal to the purchase price plus accrued
interest, if any, and the Trustee shall promptly authenticate
and mail to such Holders new Notes equal in principal amount to
any unpurchased portion of the Notes surrendered. Any Notes
not so accepted shall be promptly mailed by the Company to the
Holder thereof. For purposes of this Section 4.15, the Trustee
shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes
pursuant to a Change of Control Offer shall be returned by the
Trustee to the Company.
The Company 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 regula-
tions are applicable in connection with the repurchase of Notes
pursuant to a Change of Control Offer. To the extent the pro-
visions of any securities laws or regulations conflict with
this Section 4.15, the Company shall comply with the applicable
<PAGE>
57
securities laws and regulations and shall not be deemed to
have breached its obligations under this Section 4.15 by virtue
thereof.
SECTION 4.16. Limitation on Asset Sales.
-------------------------
(a) The Company shall not, and shall not permit any
of its Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Company or the applicable Restricted Subsidiary,
as the case may be, receives consideration at the time of such
Asset Sale at least equal to the fair market value of the
assets sold or otherwise disposed of (as determined in good
faith by the Company's Board of Directors); (ii) at least 75%
of the consideration received by the Company or the Restricted
Subsidiary, as the case may be, from such Asset Sale shall be
in the form of cash or Cash Equivalents (provided that the
--------
amount of any liabilities (as shown on the Company's or such
Restricted Subsidiary's most recent balance sheet) of the Com-
pany or any such Restricted Subsidiary (other than liabilities
that are by their terms subordinated to the Notes) that are
assumed by the transferee of any such assets shall be deemed to
be cash for the purposes of this provision) and is received at
the time of such disposition; and (iii) upon the consummation
of an Asset Sale, the Company shall apply, or cause such
Restricted Subsidiary to apply, the Net Cash Proceeds relating
to such Asset Sale within 360 days of receipt thereof either
(A) to prepay any Senior Debt and, in the case of any Senior
Debt under any revolving credit facility, effect a permanent
reduction in the availability under such revolving credit
facility, (B) to make an investment in properties and assets
that replace the properties and assets that were the subject of
such Asset Sale or in properties and assets that will be used
in the business of the Company and its Restricted Subsidiaries
as existing on the Issue Date or in businesses the same, simi-
lar or reasonably related thereto ("Replacement Assets"), or
(C) a combination of prepayment and investment permitted by the
foregoing clauses (iii)(A) and (iii)(B). Subject to the last
sentence of this paragraph, on the 361st day after an Asset
Sale or such earlier date, if any, as the Board of Directors of
the Company or of such Restricted Subsidiary determines not to
apply the Net Cash Proceeds relating to such Asset Sale as set
forth in clause (iii)(A), (iii)(B) or (iii)(C) of the next pre-
ceding sentence (each, a "Net Proceeds Offer Trigger Date"),
such aggregate amount of Net Cash Proceeds which have not been
applied on or before such Net Proceeds Offer Trigger Date as
permitted in clauses (iii)(A), (iii)(B) and (iii)(C) of the
next preceding sentence (each a "Net Proceeds Offer Amount")
<PAGE>
58
shall be applied by the Company or such Restricted Subsidiary
to make an offer to purchase (the "Net Proceeds Offer") on a
date (the "Net Proceeds Offer Payment Date") not less than 30
nor more than 45 days following the applicable Net Proceeds
Offer Trigger Date, from all Holders on a pro rata basis, that
amount of Notes equal to the Net Proceeds Offer Amount at a
price equal to 100% of the principal amount of the Notes to be
purchased, plus accrued and unpaid interest thereon, if any, to
the date of purchase; provided, however, that if at any time
-------- -------
any non-cash consideration received by the Company or any
Restricted Subsidiary of the Company, as the case may be, in
connection with any Asset Sale is converted into or sold or
otherwise disposed of for cash (other than interest received
with respect to any such non-cash consideration), then such
conversion or disposition shall be deemed to constitute an
Asset Sale hereunder and the Net Cash Proceeds thereof shall be
applied in accordance with this covenant. The Company may
defer the Net Proceeds Offer until there is an aggregate
unutilized Net Proceeds Offer Amount equal to or in excess of
$5.0 million resulting from one or more Asset Sales (at which
time, the entire unutilized Net Proceeds Offer Amount, and not
just the amount in excess of $5.0 million, shall be applied as
required pursuant to this paragraph).
In the event of the transfer of substantially all
(but not all) of the property and assets of the Company and its
Restricted Subsidiaries as an entirety to a Person in a trans-
action permitted under Section 5.01, the successor corporation
shall be deemed to have sold the properties and assets of the
Company and its Restricted Subsidiaries not so transferred for
purposes of this covenant, and shall comply with the provisions
of this covenant with respect to such deemed sale as if it were
an Asset Sale. In addition, the fair market value of such
properties and assets of the Company or its Restricted Subsid-
iaries deemed to be sold shall be deemed to be Net Cash Pro-
ceeds for purposes of this Section 4.16
Each Net Proceeds Offer will be mailed to the record
Holders as shown on the register of Holders within 25 days fol-
lowing the Net Proceeds Offer Trigger Date, with a copy to the
Trustee, and shall comply with the procedures set forth in this
Indenture. Upon receiving notice of the Net Proceeds Offer,
Holders may elect to tender their Notes in whole or in part in
integral multiples of $1,000 in exchange for cash. To the
extent Holders properly tender Notes in an amount exceeding the
Net Proceeds Offer Amount, Notes of tendering Holders will be
purchased on a pro rata basis (based on amounts tendered). To
--- ----
<PAGE>
59
the extent that the aggregate amount of Notes tendered
pursuant to a Net Proceeds Offer is less than the Net Proceeds
Offer Amount, the Company may use such excess Net Proceeds
Offer Amount for general corporate purposes or for any other
purpose not prohibited by this Indenture. Upon completion of
any such Net Proceeds Offer, the Net Proceeds Offer Amount
shall be reset at zero. A Net Proceeds Offer shall remain open
for a period of 20 business days or such longer period as may
be required by law.
(b) Subject to the deferral of the Net Proceeds
Offer Trigger Date contained in the second paragraph of subsec-
tion (a) above, each notice of a Net Proceeds Offer pursuant to
this Section 4.16 shall be mailed or caused to be mailed, by
first class mail, by the Company not more than 25 days after
the Net Proceeds Offer Trigger Date to all Holders at their
last registered addresses as of a date within 15 days of the
mailing of such notice, 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 Net Pro-
ceeds Offer and shall state the following terms:
(1) that the Net Proceeds Offer is being made pursuant to Section 4.16
and that all Notes tendered will be accepted for payment; provided, however,
-------- -------
that if the aggregate principal amount of Notes tendered in a Net Proceeds
Offer exceeds the aggregate amount of the Net Proceeds Offer, the Company
shall select the Notes to be purchased on a pro rata basis (with such
--- ----
adjustments as may be deemed appropriate by the Company so that only Notes in
denominations of $1,000 or multiples thereof shall be purchased);
(2) the purchase price (including the amount of accrued interest) and
the purchase date (which shall be 20 Business Days from the date of mailing
of notice of such Net Proceeds Offer, or such longer period as required by
law) (the "Proceeds Purchase Date");
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in making payment therefor, any
Note accepted for payment pursuant to the Net Proceeds Offer shall cease to
accrue interest after the Proceeds Purchase Date;
<PAGE>
60
(5) that Holders electing to have a Note purchased pursuant to a Net
Proceeds Offer will be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day prior to the Proceeds Purchase Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than five Business Days prior to the
Proceeds Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes the
Holder delivered for purchase and a statement that such Holder is withdrawing
his election to have such Note purchased; and
(7) that Holders whose Notes are purchased only in part will be issued
new Notes in a principal amount equal to the unpurchased portion of the Notes
surrendered; provided that each Note purchased and each new Note issued shall
be in an original principal amount of $1,000 or integral multiples thereof;
On or before the Proceeds Purchase Date, the Company shall (i) accept
for payment Notes or portions thereof tendered pursuant to the Net Proceeds
Offer which are to be purchased in accordance with item (b)(1) above, (ii)
deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase
price plus accrued interest, if any, of all Notes to be purchased and (iii)
deliver to the Trustee Notes so accepted together with an Officers' Certificate
stating the Notes or portions thereof being purchased by the Company. The Paying
Agent shall promptly mail to the Holders of Notes so accepted payment in an
amount equal to the purchase price plus accrued interest, if any. For purposes
of this Section 4.16, the Trustee shall act as the Paying Agent.
Any amounts remaining after the purchase of Notes pursuant to a Net
Proceeds Offer shall be returned by the Trustee to the Company.
The Company 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 Notes pursuant to a Net Proceeds Offer. To the extent that the
<PAGE>
61
provisions of any securities laws or regulations conflict with this Section
4.16, the Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations under this
Section 4.16 by virtue thereof.
SECTION 4.17 Limitation on Preferred Stock
of Restricted Subsidiaries.
-----------------------------
The Company shall not permit any of its Restricted Subsidiaries to
issue any Preferred Stock (other than to the Company or to a Wholly Owned
Restricted Subsidiary of the Company) or permit any Person (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company) to own any
Preferred Stock of any Restricted Subsidiary of the Company.
SECTION 4.18. Limitation on Liens.
-------------------
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind
against or upon any of its property or assets of the Company or any of its
Restricted Subsidiaries whether owned on the Issue Date or acquired after the
Issue Date, or any proceeds therefrom, or assign or otherwise convey any right
to receive income or profits therefrom unless (i) in the case of Liens securing
Indebtedness that is expressly subordinate or junior in right of payment to the
Notes, the Notes are secured by a Lien on such property, assets or proceeds that
is senior in priority to such Liens and (ii) in all other cases, the Notes are
equally and ratably secured, except for (A) Liens existing as of the Issue Date
to the extent and in the manner such Liens are in effect as of the Issue Date;
(B) Liens securing Senior Debt and Liens on assets of Restricted Subsidiaries
securing guarantees of Senior Debt; (C) Liens securing the Notes; (D) Liens of
the Company or a Wholly Owned Restricted Subsidiary of the Company on assets of
any Restricted Subsidiary of the Company; (E) Liens securing Refinancing
Indebtedness which is incurred to Refinance Indebtedness which has been secured
by a Lien permitted under this Indenture and which has been incurred in
accordance with the provisions of this Indenture; provided, however, that such
-------- -------
Liens (A) are no less favorable to the Holders and are no more favorable to the
lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being Refinanced and (B) do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries not securing the
Indebtedness so Refinanced; and (F) Permitted Liens.
<PAGE>
62
SECTION 4.19. Limitation of Guarantees
by Restricted Subsidiaries.
--------------------------
The Company shall not permit any of its domestic Restricted
Subsidiaries, directly or indirectly, by way of the pledge of any intercompany
note or otherwise, to assume, guarantee or in any other manner become liable
with respect to any Indebtedness of the Company or any other Restricted
Subsidiary (other than (A) Indebtedness and other obligations under the Credit
Agreement, (B) Permitted Indebtedness of a Restricted Subsidiary, (C) Senior
Debt that is incurred in reliance on clause (xiv) of the definition of
"Permitted Indebtedness" and that is secured, (D) Indebtedness under Currency
Agreements incurred in reliance on clause (v) of the definition of Permitted
Indebtedness or (E) Interest Swap Obligations incurred in reliance on clause
(iv) of the definition of Permitted Indebtedness), unless, in any such case (a)
such Restricted Subsidiary executes and delivers a supplemental indenture to
this Indenture, providing a guarantee of payment of the Notes by such Restricted
Subsidiary (the "Guarantee") and (b) (x) if any such assumption, guarantee or
other liability of such Restricted Subsidiary is provided in respect of Senior
Debt, the guarantee or other instrument provided by such Restricted Subsidiary
in respect of such Senior Debt may be superior to the Guarantee pursuant to
subordination provisions no less favorable to the Holders of the Notes than
those contained in this Indenture and (y) if such assumption, guarantee or other
liability of such Restricted Subsidiary is provided in respect of Indebtedness
that is expressly subordinated to the Notes, the guarantee or other instrument
provided by such Restricted Subsidiary in respect of such subordinated
Indebtedness shall be subordinated to the Guarantee pursuant to subordination
provisions no less favorable to the Holders of the Notes than those contained in
this Indenture.
Notwithstanding the foregoing, any such Guarantee of the Notes by a
Restricted Subsidiary of the Company shall provide by its terms that it shall be
automatically and unconditionally released and discharged, without any further
action required on the part of the Trustee or any Holder, upon: (i) the
unconditional release of such Restricted Subsidiary from its liability in
respect of the Indebtedness in connection with which such Guarantee was executed
and delivered pursuant to the preceding paragraph; or (ii) any sale or other
disposition (by merger or otherwise) to any Person which is not a Restricted
Subsidiary of the Company, of all of the Company's Capital Stock in, or all or
substantially all of the assets of,
<PAGE>
63
such Restricted Subsidiary; provided that (a) such sale or disposition of such
Capital Stock or assets is otherwise in compliance with the terms of this
Indenture and (b) such assumption, guarantee or other liability of such
Restricted Subsidiary has been released by the holders of the other Indebtedness
so guaranteed.
SECTION 4.20. Conduct of Business.
-------------------
The Company and its Restricted Subsidiaries will not engage in any
businesses which are not the same, similar or reasonably related to the
businesses in which the Company and its Restricted Subsidiaries are engaged on
the Issue Date.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. Merger, Consolidation
and Sale of Assets.
---------------------
(a) The Company shall not, in a single transaction or a series of
related transactions, consolidate with or merge with or into any Person, or
sell, assign, transfer, lease, convey or otherwise dispose of (or cause or
permit any Restricted Subsidiary of the Company to sell, assign, transfer,
lease, convey or otherwise dispose of) all or substantially all of the Company's
assets (determined on a consolidated basis for the Company and its Restricted
Subsidiaries) to any Person whether as an entirety or substantially as an
entirety unless:
(1) either (A) the Company shall be the surviving or continuing
corporation or (B) the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person which
acquires by sale, assignment, transfer, lease, conveyance or other
disposition the properties and assets of the Company and its Restricted
Subsidiaries substantially as an entirety (the "Surviving Entity") (x) shall
be a corporation organized and validly existing under the laws of the United
States or any State thereof or the District of Columbia and (y) shall
expressly assume, by supplemental indenture (in form and substance reasonably
satisfactory to the Trustee), executed and delivered to the Trustee, the due
and punctual payment of the principal of and premium, if
<PAGE>
64
any, and interest on all of the Notes and the performance of every covenant
of the Notes, this Indenture and, if applicable, the Registration Rights
Agreement on the part of the Company to be performed or observed;
(2) immediately after giving effect to such transaction and the
assumption contemplated by clause (1)(B)(y) above (including giving effect to
any Indebtedness and Acquired Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction), the Company
or such Surviving Entity, as the case may be, shall be able to incur at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) in
compliance with Section 4.12; and
(3) immediately before and immediately after giving effect to such
transaction and the assumption contemplated by clause (1)(B)(y) above
(including, without limitation, giving effect to any Indebtedness and
Acquired Indebtedness incurred or anticipated to be incurred and any Lien
granted in connection with or in respect of the transaction), no Default or
Event of Default shall have occurred and be continuing; and
(4) the Company or the Surviving Entity, as the case may be, shall have
delivered 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, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture
comply with the applicable provisions of this Indenture and that all
conditions precedent in this Indenture relating to such transaction have been
satisfied.
(b) For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties and assets of one or more Restricted
Subsidiaries of the Company, the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Company, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Company.
(c) Notwithstanding the foregoing, (i) the merger of the Company with
and into Collins & Aikman Floorcoverings, Inc. on the Issue Date and (ii) the
merger of the Company with an
<PAGE>
65
Affiliate incorporated solely for the purpose of reincorporating the Company in
another jurisdiction shall be permitted and in the case of (i) above, such
transaction shall not require any Opinion of Counsel.
SECTION 5.02 Successor Corporation Substituted.
---------------------------------
Upon any consolidation, combination or merger or any transfer of
all or substantially all of the assets of the Company in accordance with the
foregoing, in which the Company is not the continuing corporation, the successor
Person formed by such consolidation or into which the Company is merged or to
which such conveyance, lease or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture and the Notes with the same effect as if such surviving entity
had been named as such.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.
-----------------
An "Event of Default" occurs if:
(1) the Company fails to pay interest on any Notes when the same becomes
due and payable and the Default continues for a period of 30 days (whether or
not such payment shall be prohibited by Article Ten of this Indenture); or
(2) the Company fails to pay the principal on any Notes when such
principal becomes due and payable, at maturity, upon redemption or otherwise
(including the failure to make a payment to purchase Notes tendered pursuant
to a Change of Control Offer or a Net Proceeds Offer) (whether or not such
payment shall be prohibited by Article Ten); or
(3) the Company defaults in the observance or performance of any other
covenant or agreement contained in this Indenture and which default
continues for a period of 30 days after the Company receives written
notice specifying the default (and demanding that such default be
<PAGE>
66
remedied) from the Trustee or the Holders of at least 25% of the
outstanding principal amount of the Notes; or
(4) the Company fails to pay at final stated maturity (giving effect to
any applicable grace periods and any extensions thereof) the principal amount
of any Indebtedness for borrowed money of the Company or any Restricted
Subsidiary of the Company, and such failure continues for a period of 20 days
or more, or the acceleration of the final stated maturity of any such
Indebtedness (which acceleration is not rescinded, annulled or otherwise
cured within 20 days of receipt by the Company or such Restricted Subsidiary
of notice of any such acceleration) if the aggregate principal amount of such
Indebtedness, together with the principal amount of any other such
Indebtedness in default for failure to pay principal at final stated maturity
or which has been accelerated, in each case with respect to which the 20-day
period described above has passed, aggregates $5.0 million or more at any
time; or
(5) one or more judgments for the payment of money in an aggregate
amount in excess of $5.0 million shall have been rendered against the Company
or any of its Restricted Subsidiaries and such judgments remain undischarged,
unpaid or unstayed for a period of 60 days after such judgment or judgments
become final and non-appealable; or
(6) the Company or any Significant Subsidiary of the Company (A)
commences a voluntary case or proceeding under any Bankruptcy Law with
respect to itself, (B) consents to the entry of a judgment, decree or order
for relief against it in an involuntary case or proceeding under any
Bankruptcy Law, (C) consents to the appointment of a Custodian of it or for
substantially all of its property, (D) consents to or acquiesces in the
institution of a bankruptcy or an insolvency proceeding against it, (E) makes
a general assignment for the benefit of its creditors, or (F) takes any
corporate action to authorize or effect any of the foregoing; or
(7) a court of competent jurisdiction enters a judgment, decree or order
for relief in respect of the Company or any Significant Subsidiary of the
Company in an involuntary case or proceeding under any Bankruptcy Law, which
shall (A) approve as properly filed a petition seeking
<PAGE>
67
reorganization, arrangement, adjustment or composition in respect of the
Company or any such Significant Subsidiary, (B) appoint a Custodian of the
Company or any such Significant Subsidiary or for substantially all of its
property or (C) order the winding-up or liquidation of its affairs; and such
judgment, decree or order shall remain unstayed and in effect for a period of
60 consecutive days.
SECTION 6.02. Acceleration.
------------
(a) If an Event of Default (other than an Event of Default specified in
Section 6.01(6) or (7) with respect to the Company) occurs and is continuing and
has not been waived pursuant to Section 6.04, then the Trustee or the Holders of
at least 25% in principal amount of outstanding Notes may declare the principal
of and accrued interest on all the Notes to be due and payable by notice in
writing to the Company and the Trustee specifying the respective Event of
Default and that it is a "notice of acceleration" (the "Acceleration Notice"),
and the same (i) shall become immediately due and payable or (ii) if there are
any amounts outstanding under the Credit Agreement, shall become immediately due
and payable upon the first to occur of an acceleration under the Credit
Agreement or 5 business days after receipt by the Company and the Representative
under the Credit Agreement of such Acceleration Notice but only if such Event of
Default is then continuing. Upon any such declaration, but subject to the
immediately preceding sentence, such amount shall be immediately due and
payable.
(b) If an Event of Default specified in Section 6.01(6) or (7) occurs
and is continuing with respect to the Company, all unpaid principal of and
premium, if any, and accrued and unpaid interest on all of the outstanding Notes
shall ipso facto become and be immediately due and payable without any
---- -----
declaration or other act on the part of the Trustee or any Holder.
(c) At any time after a declaration of acceleration with respect to the
Notes in accordance with Section 6.02(a), the Holders of a majority in principal
amount of the Notes may, on behalf of the Holders of all of the Notes, rescind
and cancel such declaration and its consequences (i) if the rescission would not
conflict with any judgment or decree, (ii) if all existing Events of Default
have been cured or waived except nonpayment of principal or interest that has
become due solely because of the acceleration, (iii) to the extent the payment
of
<PAGE>
68
such interest is lawful, interest on overdue installments of interest and
overdue principal, which has become due otherwise than by such declaration of
acceleration, has been paid, (iv) if the Company has paid the Trustee its
reasonable compensation and reimbursed the Trustee for its expenses,
disbursements and advances and (v) in the event of the cure or waiver of an
Event of Default of the type described in Section 6.01(6) or (7), the Trustee
shall have received an Officers' Certificate and an Opinion of Counsel that such
Event of Default has been cured or waived. No such rescission shall affect any
subsequent Default or impair any right consequent thereto. The Holders of a
majority in principal amount of the Notes may waive any existing Default or
Event of Default under this Indenture, and its consequences, except a default in
the payment of the principal of or interest on any Notes.
SECTION 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Notes or to enforce the performance
of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. No remedy is exclusive of any
other remedy. All available remedies are cumulative to the extent permitted by
law.
SECTION 6.04. Waiver of Past Defaults.
-----------------------
Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority
in principal amount of the outstanding Notes by notice to the Trustee may waive
an existing Default or Event of Default and its consequences, except a Default
in the payment of principal of or interest on any Note as specified in clauses
(1) and (2) of Section 6.01. When a Default or Event of Default is waived, it is
cured and ceases.
SECTION 6.05. Control by Majority.
-------------------
Subject to Section 2.09, the Holders of a majority in principal
amount of the outstanding Notes may direct the time,
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69
method and place of conducting any proceeding for any remedy available to the
Trustee or exercising any trust or power conferred on it, including, without
limitation, any remedies provided for in Section 6.03. Subject to Section 7.01,
however, the Trustee may refuse to follow any direction that the Trustee
reasonably believes conflicts with any law or this Indenture, that the Trustee
determines may be unduly prejudicial to the rights of another Holder, or that
may involve the Trustee in personal liability; provided that the Trustee may
--------
take any other action deemed proper by the Trustee which is not inconsistent
with such direction; and provided further that this provision shall not affect
-------- -------
the rights of the Trustee set forth in Section 7.01(d).
SECTION 6.06. Limitation on Suits.
-------------------
A Holder may not pursue any remedy with respect to this Indenture
or the Notes unless:
(1) the Holder gives to the Trustee written notice of a continuing Event
of Default;
(2) Holders of at least 25% in principal amount of the outstanding Notes
make a written request to the Trustee to pursue the remedy;
(3) such Holders offer to the Trustee indemnity in its sole discretion
satisfactory to the Trustee against any loss, liability or expense to be
incurred in compliance with such request;
(4) the Trustee does not comply with the request within 45 days after
receipt of the request and the offer of satisfactory indemnity; and
(5) during such 45-day period the Holders of a majority in principal
amount of the outstanding Notes do not give the Trustee a direction which, in
the opinion of the Trustee, is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
<PAGE>
70
SECTION 6.07. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on a Note, on or
after the respective due dates expressed in such Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal or interest
specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the
Trustee may recover judgment in its own name and as trustee of an express trust
against the Company or any other obligor on the Notes for the whole amount of
principal and accrued interest remaining unpaid, together with interest on
overdue principal and, to the extent that payment of such interest is lawful,
interest on overdue installments of interest at the rate set forth in Section
4.01 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, consultants and counsel.
SECTION 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, taxes,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relating to the Company or any other
obligor upon the Notes, any of their respective creditors or any of their
respective property and shall be entitled and empowered to collect and receive
any monies or other property payable or deliverable on any such claims and to
distribute the same, and any Custodian in any such judicial proceedings is
hereby authorized by each Holder to make such payments to the Trustee and, in
the event that the Trustee shall consent to the making of such payments directly
to the Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, taxes, disbursements and advances of the Trustee, its
agents, consultants and counsel, and any other amounts due the Trustee under
Section 7.07. The Company's payment obligations under this Section 6.09 shall be
secured in accordance with the provisions of Section 7.07
<PAGE>
71
hereunder. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Holder in any such proceeding.
SECTION 6.10. Priorities.
----------
If the Trustee collects any money or property pursuant to this
Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.07;
Second: if the Holders are forced to proceed against the Company directly
without the Trustee, to Holders for their collection costs;
Third: to Holders for amounts due and unpaid on the Notes for principal
and interest, ratably, without preference or priority of any kind, according
to the amounts due and payable on the Notes for principal and interest,
respectively; and
Fourth: to the Company or any other obligor on the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a
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72
Holder pursuant to Section 6.07, or a suit by a Holder or Holders of more than
10% in principal amount of the outstanding Notes.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.
-----------------
(a) If a Default or an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) The Trustee need perform only those duties as are specifically set
forth in this Indenture and no covenants or obligations shall be implied in
this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine whether
or not they conform to the requirements of this Indenture.
(c) Notwithstanding anything to the contrary herein contained, the
Trustee may not be relieved from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it
<PAGE>
73
is proved that the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it takes
or omits to take in good faith in accordance with a direction received by it
pursuant to Section 6.02, 6.04 or 6.05.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(e) Whether or not herein expressly provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), (c) and (d) of this Section 7.01.
(f) The Trustee shall not be liable for interest on any money or assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01:
(a) The Trustee may rely and shall be fully protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, note or other paper or document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult with
counsel and may require an Officers' Certificate, an Opinion of Counsel or
both, which shall conform to Sections 11.04 and 11.05. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel.
<PAGE>
74
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or indirectly or by or through
agents or attorneys and the Trustee shall not be responsible for the
misconduct or negligence of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action that it takes or
omits to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(e) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled, upon reasonable notice to the
Company, to examine the books, records, and premises of the Company,
personally or by agent or attorney and to consult with the officers and
representatives of the Company, including the Company's accountants and
attorneys.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee in its sole discretion against the costs,
expenses and liabilities which may be incurred by it in compliance with such
request, order or direction.
(g) The Trustee shall not be required to give any bond or surety in
respect of the performance of its powers and duties hereunder.
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 Company, any
Subsidiary of the Company, or their respective Affiliates with the same rights
it would have if it
<PAGE>
75
were not Trustee. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11.
SECTION 7.04. Trustee's Disclaimer.
--------------------
The recitals contained herein and in the Notes shall be taken as
statements of the Company and the Trustee assumes no responsibility for their
correctness. The Trustee makes no representation as to the validity or adequacy
of this Indenture or the Notes, and it shall not be accountable for the
Company's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Company in this Indenture or the Notes other than the
Trustee's certificate of authentication.
SECTION 7.05. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Holder notice of the
uncured Default or Event of Default within 90 days after such Default or Event
of Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or interest on, any Note, including an accelerated
payment and the failure to make payment on the Change of Control Payment Date
pursuant to a Change of Control Offer or on the Proceeds Purchase Date pursuant
to a Net Proceeds Offer and, except in the case of a failure to comply with
Article Five hereof, the Trustee may withhold the notice if and so long as its
Board of Directors, the executive committee of its Board of Directors or a
committee of its directors and/or Trust Officers in good faith determines that
withholding the notice is in the interest of the Holders.
SECTION 7.06. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15, the Trustee shall, to the extent
that any of the events described in TIA 313(a) occurred within the previous
twelve months, but not otherwise, mail to each Holder a brief report dated as of
such date that complies with TIA 313(a). The Trustee also shall comply with TIA
313(b), (c) and (d).
A copy of each report at the time of its mailing to Holders shall be
mailed to the Company and filed with the SEC and each stock exchange, if any, on
which the Notes are listed.
<PAGE>
76
The Company shall promptly notify the Trustee if the Notes become
listed on any stock exchange and the Trustee shall comply with TIA (S)313(d).
SECTION 7.07. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable fees and expenses,
including out-of-pocket expenses incurred or made by it in con-nection with the
performance of its duties under this Inden-ture. Such expenses shall include the
reasonable fees and expenses of the Trustee's agents, consultants and counsel.
The Company shall indemnify the Trustee and its agents, employees,
stockholders and directors and officers for, and hold them harmless against, any
loss, liability or expense incurred by them except for such actions to the
extent caused by any negligence, bad faith or willful misconduct on their part,
arising out of or in connection with the administration of this trust including
the reasonable costs and expenses of defending themselves against any claim or
liability in connec-tion with the exercise or performance of any of their
rights, powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim asserted against the Trustee for which it may seek
indemnity. At the Trustee's sole discretion, the Company shall defend the claim
and the Trustee shall cooperate and may participate in the defense; provided
that any settlement of a claim shall be approved in writing by the Trus-tee.
Alternatively, the Trustee may at its option have sepa-rate counsel of its own
choosing and the Company shall pay the reasonable fees and expenses of such
counsel; provided that the Company will not be required to pay such fees and
expenses if it assumes the Trustee's defense and there is no conflict of
interest between the Company and the Trustee in connection with such defense as
reasonably determined by the Trustee. The Company need not pay for any
settlement made without its written consent. The Company need not reimburse any
expense or indemnify against any loss or liability to the extent incurred by the
Trustee through its negligence, bad faith or willful misconduct.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all assets or money held or
collected by the Trustee, in its
<PAGE>
77
capacity as Trustee, except assets or money held in trust to pay principal of or
interest on particular Notes. The Trust-ee's right to receive payment of any
amounts due under this Section 7.07 shall not be subordinate to any other
liability or indebtedness of the Company (even though the Notes may be sub-
ordinate to such other liability or indebtedness).
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6) or (7) occurs, such expenses and the
compensation for such services are intended to constitute expenses of
administration under any Bankruptcy Law; provided, however, that this shall not
-------- -------
affect the Trustee's rights as set forth in the preceding paragraph or Section
6.10.
SECTION 7.08. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the outstand-ing Notes may remove the Trustee by
so notifying the Company and the Trustee and may appoint a successor Trustee.
The Com-pany may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) 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 Company shall notify each Holder of such
event and shall promptly appoint a successor Trustee. Within one year after the
succes-sor Trustee takes office, the Holders of a majority in princi-pal amount
of the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.
A successor Trustee shall deliver a written accep-tance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided in Section 7.07, the res-
ignation or removal of the retiring Trustee shall become effec-tive, and the
successor Trustee shall have all the rights,
<PAGE>
78
powers and duties of the Trustee under this Indenture. A successor Trustee shall
mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.08, the Company's obligations under Section 7.07 shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviv-ing or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee; provided that such
corporation shall be otherwise qualified and eligible under this Article Seven.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the requirement
of TIA (SS)310(a)(1), (2) and (5). The Trustee (or, in the case of a corporation
included in a bank holding company system, the related bank holding company)
shall have a combined capital and surplus of at least $50 million as set forth
in its most recent published annual report of condition. In addition, if the
Trustee is a corporation included in a bank holding company system, the Trustee,
independently of such bank holding company, shall meet the capital requirements
of TIA (S)310(a)(2). The Trustee shall comply with (SS)TIA 310(b); provided,
--------
however, that there shall be excluded from the operation of (SS)TIA 310(b)(1)
- -------
any indenture or indentures under which other securities, or certificates of
interest or participation in other securities, of the Company are
<PAGE>
79
outstanding, if the requirements for such exclusion set forth in (S)TIA
310(b)(1) are met. The provisions of TIA 310 shall apply to the Company, as
obligor of the Notes.
SECTION 7.11. Preferential Collection of
Claims Against Company.
--------------------------
The Trustee shall comply with TIA (S)311(a), excluding any creditor
relationship listed in TIA (S)311(b). A Trustee who has resigned or been removed
shall be subject to TIA (S)311(a) to the extent indicated therein. The
provisions of TIA (S)311 shall apply to the Company, as obligor on the Notes.
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01 Termination of the
Company's Obligations.
---------------------
The Company may terminate its obligations under the Notes and this
Indenture, except those obligations referred to in the penultimate paragraph of
this Section 8.01, if all Notes previously authenticated and delivered (other
than destroyed, lost or stolen Notes which have been replaced or paid or Notes
for whose payment U.S. Legal Tender has theretofore been deposited with the
Trustee or the Paying Agent in trust or segre-gated and held in trust by the
Company and thereafter repaid to the Company, as provided in Section 8.05) have
been delivered to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder, or if:
(a) either (i) pursuant to Article Three, the Company shall have given
notice to the Trustee and mailed a notice of redemption to each Holder of the
redemption of all of the Notes under arrangements satisfactory to the Trustee
for the giving of such notice or (ii) all Notes have otherwise become due and
payable hereunder;
(b) the Company shall have irrevocably deposited or caused to be deposited
with the Trustee or a trustee satisfactory to the Trustee, under the terms of
an irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds in trust solely for the benefit of the Holders for
that purpose, U.S. Legal Tender
<PAGE>
80
in such amount as is sufficient without consideration of reinvestment of such
interest, to pay principal of, premium, if any, and interest on the
outstanding Notes to maturity or redemption; provided that the Trustee shall
--------
have been irrevocably instructed to apply such U.S. Legal Tender to the
payment of said principal, premium, if any, and interest with respect to the
Notes and, provided, further, that from and after the time of deposit, the
-------- -------
money deposited shall not be subject to the rights of holders of Senior Debt
pursuant to the provisions of Article Ten;
(c) no Default or Event of Default with respect to this Indenture or the
Notes shall have occurred and be continuing on the date of such deposit or
shall occur as a result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other instrument
to which the Company is a party or by which it is bound;
(d) the Company shall have paid all other sums payable by it hereunder;
and
(e) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent providing for or relating to the termination of the Company's
obligations under the Notes and this Indenture have been complied with. Such
Opinion of Counsel shall also state that such satisfaction and discharge does
not result in a default under the Credit Agreement (if then in effect) or any
other agreement or instrument then known to such counsel that binds or
affects the Company.
Notwithstanding the foregoing paragraph, the Company's obligations
in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall
survive until the Notes are no longer outstanding pursuant to the last paragraph
of Section 2.08. After the Notes are no longer outstanding, the Company's
obligations in Sections 7.07, 8.05 and 8.06 shall survive.
After such delivery or irrevocable deposit, the Trus-tee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations specified
above.
<PAGE>
81
SECTION 8.02. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Company may, at its option by Board Resolution of the
Board of Directors of the Company, at any time, elect to have either paragraph
(b) or (c) below be applied to all outstanding Notes upon compliance with the
conditions set forth in Section 8.03.
(b) Upon the Company's exercise under paragraph (a)
hereof of the option applicable to this paragraph (b), the Company shall,
subject to the satisfaction of the conditions set forth in Section 8.03, 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 Company 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 8.04 hereof and the other
Sections of this Indenture referred to in (i) and (ii) 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 Company, shall execute proper
instruments acknowledging the same), and Holders of the Notes and any amounts
deposited under Section 8.03 hereof shall cease to be subject to any obliga-
tions to, or the rights of, any holder of Senior Debt under Article Ten or
otherwise, except for the following provisions, which shall survive until
otherwise terminated or discharged hereunder: (i) 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 and interest on such Notes when such payments are due, (ii) the
Company's obligations with respect to such Notes under Article Two and Section
4.02 hereof, (iii) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's obligations in con-nection therewith and
(iv) this Article Eight. Subject to com-pliance with this Article Eight, the
Company may exercise its option under this paragraph (b) notwithstanding the
prior exer-cise of its option under paragraph (c) hereof.
(c) Upon the Company's exercise under paragraph (a) hereof of the
option applicable to this paragraph (c), the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, be released
from its obligations under the covenants contained in Sections 4.10 through 4.20
and
<PAGE>
82
Article Five 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 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) and Holders of the Notes and any amounts deposited under Section 8.03
hereof shall cease to be subject to any obligations to, or the rights of, any
holder of Senior Debt under Article Ten or otherwise. For this purpose, such
Covenant Defeasance means that, with respect to the outstanding Notes, the
Company may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by rea son 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 or Default under Section 6.01(3) hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected thereby. In addition, upon the Company's exercise under paragraph
(a) hereof of the option applicable to this paragraph (c), subject to the
satisfaction of the conditions set forth in Section 8.03 hereof, Sections
6.01(3), 6.01(4) and 6.01(5) shall not constitute Events of Default.
SECTION 8.03. Conditions to Legal Defeasance
or Covenant Defeasance.
------------------------------
The following shall be the conditions to the application of either
Section 8.02(b) or 8.02(c) hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders, U.S. Legal Tender or U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms, will
provide, not later than one day before the due date of any payment on
the Notes, U.S. Legal Tender, or a combination thereof, in such amounts
as will be sufficient, in the opinion of a
<PAGE>
83
nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the Notes on the stated
date for payment thereof or on the applicable redemption date, as the
case may be, of such principal or installment of principal of or
interest on the Notes; provided that the Trustee shall have received an
irrevocable written order from the Company instructing the Trustee to
apply such U.S. Legal Tender or the proceeds of such U.S. Government
Obligations to said payments with respect to the Notes;
(b) in the case of an election under Section 8.02(b) hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the
United States reasonably acceptable to the Trustee confirming that (A)
the Company 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 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 8.02(c) hereof, the
Company 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 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 or event which with notice or
lapse of time or both would become a Default or an Event of Default with
respect to the Notes shall have occurred and be continuing on the date
of such deposit (other than a Default or Event of Default result-ing
from the incurrence of Indebtedness all or a portion of the proceeds of
which will be used to defease the Notes pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(6) and
6.01(7)
<PAGE>
84
hereof are concerned, at any time in the period ending on the
91st day after the date of such deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of or constitute a default under this Indenture or
any other material agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with
the intent of preferring the Holders over any other creditors of the
Company or with the intent of defeating, hindering, delaying or
defrauding any other creditors of the Company or others;
(g) the Company 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; and
(h) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that (i) the trust funds will not be subject to
any rights of any holders of Senior Debt, including, without limitation,
those arising under this Indenture, and (ii) assuming no intervening
bankruptcy or insolvency of the Company between the date of deposit and
the 91st day following the deposit and that no Holder is an insider of
the Company, after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable Bankruptcy Law.
SECTION 8.04. Application of Trust Money.
--------------------------
The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or
U.S. Government Obligations deposited with it pursuant to Article Eight, and
shall apply the deposited U.S. Legal Tender and the money from U.S. Government
Obligations in accordance with this Indenture to the payment of principal of and
interest on the Notes. The Trustee shall be under no obli-gation to invest said
U.S. Legal Tender or U.S. Government Obligations except as it may agree with the
Company.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed
<PAGE>
85
against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant
to Section 8.03 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 Eight to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the Company's
request any U.S. Legal Tender or U. S. Government Obligations held by it as
provided in Section 8.03 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof that would
then be required to be deposited to effect an equivalent Legal Defeasance or
Covenant Defeasance.
SECTION 8.05. Repayment to the Company.
------------------------
Subject to Article Eight, the Trustee and the Paying Agent shall
promptly pay to the Company upon request any excess U.S. Legal Tender or U.S.
Government Obligations held by them at any time and thereupon shall be relieved
from all liability with respect to such money. The Trustee and the Paying Agent
shall pay to the Company upon request any money held by them for the payment of
principal or interest that remains unclaimed for two years; provided that the
--------
Trustee or such Paying Agent, before being required to make any payment, may at
the expense of the Company cause to be published once in a newspaper of general
circulation in the City of New York or mail to each Holder entitled to such
money notice that such money remains unclaimed and that after a date specified
therein which shall be at least 30 days from the date of such publication or
mailing any unclaimed balance of such money then remaining will be repaid to
the Company. After payment to the Company, Holders entitled to such money must
look to the Company for payment as general creditors unless an applicable law
designates another Person.
SECTION 8.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Article Eight by reason
of any legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and
<PAGE>
86
the Notes shall be revived and reinstated as though no deposit had occurred
pursuant to Article Eight until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with Article Eight; provided that if the Company has made any payment
--------
of interest on or principal of any Notes because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Notes to receive such payment from the U.S. Legal Tender or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders.
--------------------------
The Company, when authorized by a Board Resolution, and the Trustee,
together, may amend or supplement this Indenture or the Notes without notice to
or consent of any Holder:
(1) to cure any ambiguity, defect or inconsistency; provided that such
--------
amendment or supplement does not, in the opinion of the Trustee, adversely
affect the rights of any Holder in any material respect;
(2) to comply with Article Five;
(3) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(4) to comply with any requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA;
(5) to make any change that would provide any addi-tional benefit or
rights to the Holders or that does not adversely affect the rights of any
Holder;
(6) to provide for issuance of the Exchange Notes, which will have terms
substantially identical in all material respects to the Initial Notes (except
that the transfer restrictions contained in the Initial Notes will be
modified or eliminated, as appropriate), and which will be
<PAGE>
87
treated together with any outstanding Initial Notes, as a single issue of
securities; or
(7) to make any other change that does not, in the opinion of the
Trustee, adversely affect in any material respect the rights of any Holders
hereunder; provided that the Company has delivered to the Trustee an Opinion
--------
of Counsel stating that such amendment or supplement complies with the
provisions of this Section 9.01.
SECTION 9.02. With Consent of Holders.
-----------------------
Subject to Section 6.07, the Company, when authorized by a Board
Resolution, and the Trustee, together, with the written consent of the Holder or
Holders of at least a majority in aggregate principal amount of the outstanding
Notes, may amend or supplement this Indenture or the Notes, without notice to
any other Holders. Subject to Section 6.07, the Holder or Holders of a majority
in aggregate principal amount of the outstanding Notes may waive compliance by
the Company with any provision of this Indenture or the Notes without notice to
any other Holder. No amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, shall, without the consent of each Holder of each Note
affected thereby:
(1) reduce the amount of Notes whose Holders must consent to an
amendment;
(2) reduce the rate of or change or have the effect of changing the time
for payment of interest, including defaulted interest, on any Notes;
(3) reduce the principal of or change or have the effect of changing the
fixed maturity of any Notes, or change the date on which any Notes may be
subject to redemption or repurchase, or reduce the redemption or repurchase
price therefor;
(4) make any Notes payable in money other than that stated in the Notes;
(5) make any change in provisions of this Indenture protecting the right
of each Holder to receive payment of principal of and interest on such Note
on or after the due date thereof or to bring suit to enforce such payment, or
permitting Holders of a majority in principal amount of
<PAGE>
88
Notes to waive Defaults or Events of Default, other than ones with respect to
the payment of principal of or interest on the Notes;
(6) amend, modify, change or waive any provision of this Section 9.2;
(7) amend, modify or change in any material respect the obligation of
the Company to make or consummate a Change of Control Offer in the event of a
Change of Control or make and consummate a Net Proceeds Offer in respect of
any Asset Sale that has been consummated or modify any of the provisions or
definitions with respect thereto after a Change of Control has occurred or
the subject Asset Sale has been consummated; or
(8) modify Article Ten or the definitions used in Article Ten to
adversely affect the Holders of the Notes in any material respect.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
SECTION 9.03. Effect on Senior Debt.
---------------------
No amendment of this Indenture shall adversely affect the rights of
any holder of Senior Debt under Article Ten of this Indenture, without the
consent of such holder.
SECTION 9.04. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
<PAGE>
89
SECTION 9.05. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note, even if notation of the consent is not made on any
Note. Subject to the following paragraph, any such Holder or subsequent Holder
may revoke the consent as to such Holder's Note or portion of such Note by
notice to the Trustee or the Company received before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented (and not theretofore revoked
such consent) to the amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be at least 30 days prior to the
first solicitation of such consent. If a record date is fixed, then
notwithstanding the last sentence of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to revoke any consent previously
given, whether or not such Persons continue to be Holders after such record
date. No such consent shall be valid or effective for more than 90 days after
such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Holder, unless it makes a change described in any of clauses (1)
through (8) of Section 9.02, in which case, the amendment, supplement or waiver
shall bind only each Holder of a Note who has consented to it and every subse
quent Holder of a Note or portion of a Note that evidences the same debt as the
consenting Holder's Note; provided that any such waiver shall not impair or
--------
affect the right of any Holder to receive payment of principal of and interest
on a Note, on or after the respective due dates expressed in such Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates without the consent of such Holder.
SECTION 9.06. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement or waiver changes the terms of a Note,
the Trustee may require the Holder of such Note to deliver it to the Trustee.
The Trustee may place an
<PAGE>
90
appropriate notation on the Note about the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Note shall issue and the Trustee shall authenticate a new
Note that reflects the changed terms. Any such notation or exchange shall be
made at the sole cost and expense of the Company.
SECTION 9.07. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall execute any amendment, supplement or waiver authorized
pursuant to this Article Nine; provided that the Trustee may, but shall not be
--------
obligated to, execute any such amendment, supplement or waiver which affects the
Trustee's own rights, duties or immunities under this Inden ture. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel and an Officers' Certificate each stating that the execution
of any amendment, supplement or waiver authorized pursuant to this Article Nine
is authorized or permitted by this Indenture. Such Opinion of Counsel shall not
be an expense of the Trustee.
ARTICLE TEN
SUBORDINATION
SECTION 10.01 Notes Subordinated to Senior Debt.
---------------------------------
The Company covenants and agrees, and each Holder of the Notes, by
its acceptance thereof, likewise covenants and agrees, that all Notes shall be
issued subject to the provisions of this Article Ten; and each Person holding
any Note, whether upon original issue or upon transfer, assignment or exchange
thereof, accepts and agrees that the payment of all Obligations on the Notes by
the Company shall, to the extent and in the manner herein set forth, be
subordinated and junior in right of payment to the prior payment in full in cash
or Cash Equivalents of all Obligations on the Senior Debt; that the
subordination is for the benefit of, and shall be enforceable directly by, the
holders of Senior Debt, and that each holder of Senior Debt whether now
outstanding or hereafter created, incurred, assumed or guaranteed shall be
deemed to have acquired Senior Debt in reliance upon the covenants and
provisions contained in this Indenture and the Notes.
<PAGE>
91
SECTION 10.02. No Payment on Notes in
Certain Circumstances.
----------------------
(a) If any default occurs and is continuing in the payment when due,
whether at maturity, upon redemption, by declaration or otherwise, of any
principal of, interest on, unpaid drawings for letters of credit issued in
respect of, or regularly accruing fees with respect to, any Senior Debt, no
payment of any kind or character shall be made by, or on behalf of, the Company
or any other Person on its or their behalf with respect to any Obligations on
the Notes, or to acquire any of the Notes for cash or property or otherwise. In
addition, if any other event of default occurs and is continuing with respect to
any Designated Senior Debt, as such event of default is defined in the
instrument creating or evidencing such Designated Senior Debt, permitting the
holders of such Designated Senior Debt then outstanding to accelerate the
maturity thereof and if the Representative for the respective issue of
Designated Senior Debt gives notice of the event of default to the Trustee (a
"Default Notice"), then, unless and until all events of default have been cured
or waived or have ceased to exist or the Trustee receives notice thereof from
the Representative for the respective issue of Designated Senior Debt
terminating the Blockage Period (as defined below), during the 180 days after
the delivery of such Default Notice (the "Blockage Period"), neither the Company
nor any other Person on its behalf shall (x) make any payment of any kind or
character with respect to any Obligations on the Notes or (y) acquire any of the
Notes for cash or property or otherwise. Notwithstanding anything herein to the
contrary, in no event will a Blockage Period extend beyond 180 days from the
date the payment on the Notes was due and only one such Blockage Period may be
commenced within any 360 consecutive days. No event of default which existed or
was continuing on the date of the commencement of any Blockage Period with
respect to the Designated Senior Debt shall be, or be made, the basis for the
commencement of a second Blockage Period by the Representative of such
Designated Senior Debt whether or not within a period of 360 consecutive days,
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days (it being acknowledged that any subsequent action,
or any breach of any financial covenants for a period commencing after the date
of commencement of such Blockage Period that, in either case, would give rise to
an event of default pursuant to any provisions under which an event of default
previously existed or was continuing shall constitute a new event of default for
this purpose).
<PAGE>
92
(b) In the event that, notwithstanding the foregoing, any payment shall
be received by the Trustee or any Holder when such payment is prohibited by
Section 10.02(a), such payment shall be held in trust for the benefit of, and
shall be paid over or delivered to, the holders of Senior Debt (pro rata to such
holders on the basis of the respective amount of Senior Debt held by such
holders) or their respective Representatives, as their respective interests may
appear. The Trustee shall be entitled to rely on information regarding amounts
then due and owing on the Senior Debt, if any, received from the holders of
Senior Debt (or their Representatives) or, if such information is not received
from such holders or their Representatives, from the Company and only amounts
included in the information provided to the Trustee shall be paid to the holders
of Senior Debt.
Nothing contained in this Article Ten shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Section 6.02 or to pursue any rights or remedies
hereunder; provided that all Senior Debt thereafter due or declared to be due
--------
shall first be paid in full in cash or Cash Equivalents before the Holders are
entitled to receive any payment of any kind or character with respect to
Obligations on the Notes.
SECTION 10.03. Payment Over of Proceeds
upon Dissolution, Etc.
------------------------
(a) Upon any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to creditors upon
any total or partial liquidation, dissolution, windingup, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company
or in a bankruptcy, reorganization, insolvency, receivership or other similar
proceeding relating to the Company or its property, whether voluntary or
involuntary, all Obligations due or to become due upon all Senior Debt shall
first be paid in full in cash or Cash Equivalents, or such payment duly provided
for to the satisfaction of the holders of Senior Debt, before any payment or
distribution of any kind or character is made on account of any Obligations on
the Notes, or for the acquisition of any of the Notes for cash or property or
otherwise. Upon any such dissolution, windingup, liquidation, reorganization,
receivership or similar proceeding, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holders of the Notes or the Trustee under this Indenture would be
entitled, except
<PAGE>
93
for the provisions hereof, shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other Person making such
payment or distribution, or by the Holders or by the Trustee under this
Indenture if received by them, directly to the holders of Senior Debt (pro rata
to such holders on the basis of the respective amounts of Senior Debt held by
such holders) or their respective Representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Debt may have been
issued, as their respective interests may appear, for application to the payment
of Senior Debt remaining unpaid until all such Senior Debt has been paid in full
in cash or Cash Equivalents after giving effect to any concurrent payment,
distribution or provision therefor to or for the holders of Senior Debt.
(b) To the extent any payment of Senior Debt (whether by or on behalf of
the Company, as proceeds of security or enforcement of any right of setoff or
otherwise) is declared to be fraudulent or preferential, set aside or required
to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or
other similar Person under any bankruptcy, insolvency, receivership, fraudulent
conveyance or similar law, then, if such payment is recovered by, or paid over
to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar Person, the Senior Debt or part thereof originally intended to be
satisfied shall be deemed to be reinstated and outstanding as if such payment
had not occurred.
(c) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, shall be received by any Holder when such payment or
distribution is prohibited by this Section 10.03(c), such payment or
distribution shall be held in trust for the benefit of, and shall be paid over
or delivered to, the holders of Senior Debt (pro rata to such holders on the
basis of the respective amount of Senior Debt held by such holders) or their
respective Representatives, or to the trustee or trustees under any indenture
pursuant to which any of such Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of Senior Debt
remaining unpaid until all such Senior Debt has been paid in full in cash or
Cash Equivalents, after giving effect to any concurrent payment, distribution or
provision therefor to or for the holders of such Senior Debt.
<PAGE>
94
(d) The consolidation of the Company with, or the merger of the Company
with or into, another corporation or the liquidation or dissolution of the
Company following the conveyance or transfer of all or substantially all of its
assets, to another corporation upon the terms and conditions provided in Article
Five hereof and as long as permitted under the terms of the Senior Debt shall
not be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section if such other corporation shall, as a part of such
consolidation, merger, conveyance or transfer, assume the Company's obligations
hereunder in accordance with Article Five hereof.
SECTION 10.04. Payments May Be Paid Prior
to Dissolution.
--------------------------
Nothing contained in this Article Ten or elsewhere in this
Indenture shall prevent (i) the Company, except under the conditions described
in Sections 10.02 and 10.03, from making payments at any time for the purpose of
making payments of principal of and interest on the Notes, or from depositing
with the Trustee any moneys for such payments, or (ii) in the absence of actual
knowledge by the Trustee that a given payment would be prohibited by Section
10.02 or 10.03, the application by the Trustee of any moneys deposited with it
for the purpose of making such payments of principal of, and interest on, the
Notes to the Holders entitled thereto unless at least two Business Days prior
to the date upon which such payment would otherwise become due and payable a
Trust Officer shall have actually received the written notice provided for in
the second sentence of Section 10.02(a) or in Section 10.07 (provided that,
notwithstanding the foregoing, such application shall otherwise be subject to
the provisions of the first sentence of Section 10.02(a) and Section 10.03). The
Company shall give prompt written notice to the Trustee of any dissolution,
winding-up, liquidation or reorganization of the Company.
SECTION 10.05. Subrogation.
-----------
Subject to the payment in full in cash or Cash Equivalents of
all Senior Debt, the Holders of the Notes shall be subrogated to the rights of
the holders of Senior Debt to receive payments or distributions of cash,
property or securities of the Company applicable to the Senior Debt until the
Notes shall be paid in full; and, for the purposes of such subrogation, no such
payments or distributions to the holders of the Senior Debt by or on behalf of
the Company or by or on behalf of the Holders by virtue of this Article Ten
which
<PAGE>
95
otherwise would have been made to the Holders shall, as between
the Company and the Holders of the Notes, be deemed to be a payment by the
Company to or on account of the Senior Debt, it being understood that the
provisions of this Article Ten are and are intended solely for the purpose of
defining the relative rights of the Holders of the Notes, on the one hand, and
the holders of the Senior Debt, on the other hand.
SECTION 10.06. Obligations of the Company
Unconditional.
--------------------------
Nothing contained in this Article Ten or elsewhere in this
Indenture or in the Notes is intended to or shall impair, as among the Company,
its creditors other than the holders of Senior Debt, and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of and any interest on the Notes as and when the same
shall become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of the Holders and creditors of the Company
other than the holders of the Senior Debt, nor shall anything herein or therein
prevent the Holder of any Note or the Trustee on its behalf from exercising all
remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
SECTION 10.07. Notice to Trustee.
-----------------
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes pursuant to the provisions of this
Article Ten. Regardless of anything to the contrary contained in this Article
Ten or elsewhere in this Indenture, the Trustee shall not be charged with
knowledge of the existence of any default or event of default with respect to
any Senior Debt or of any other facts which would prohibit the making of any
payment to or by the Trustee unless and until the Trustee shall have received
notice in writing from the Company, or from a holder of Senior Debt or a
Representative therefor, together with proof satisfactory to the Trustee of such
holding of Senior Debt or of the authority of such Representative, and, prior to
the receipt of any such written notice, the Trustee shall be entitled to assume
(in the absence of actual knowledge to the contrary) that no such facts exist.
<PAGE>
96
In the event that the Trustee determines in good faith that any evidence
is required with respect to the right of any Person as a holder of Senior Debt
to participate in any payment or distribution pursuant to this Article Ten, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amounts of Senior Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article Ten, and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 10.08. Reliance on Judicial Order or
Certificate of Liquidating Agent.
---------------------------------
Upon any payment or distribution of assets of the Company referred to in
this Article Ten, the Trustee, subject to the provisions of Article Seven
hereof, and the Holders of the Notes shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which any insolvency,
bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization
or similar case or proceeding is pending, or upon a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit
of creditors, agent or other person making such payment or distribution,
delivered to the Trustee or the Holders of the Notes, for the purpose of
ascertaining the persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other Indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article
Ten.
SECTION 10.09. Trustee's Relation to Senior Debt.
---------------------------------
The Trustee and any agent of the Company or the Trustee shall
be entitled to all the rights set forth in this Article Ten with respect to any
Senior Debt which may at any time be held by it in its individual or any other
capacity to the same extent as any other holder of Senior Debt and nothing in
this Indenture shall deprive the Trustee or any such agent of any of its rights
as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this
<PAGE>
97
Article Ten, and no implied covenants or obligations with respect to the holders
of Senior Debt shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Debt.
Whenever a distribution is to be made or a notice given to
holders or owners of Senior Debt, the distribution may be made and the notice
may be given to their Representative, if any.
SECTION 10.10 Subordination Rights Not Impaired
by Acts or Omissions of the Company
or Holders of Senior Debt.
-----------------------------------
No right of any present or future holders of any Senior Debt to enforce
subordination as provided herein shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any noncompliance by
the Company with the terms of this Indenture, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee, without incurring
responsibility to the Trustee or the Holders of the Notes and without impairing
or releasing the subordination provided in this Article Ten or the obligations
hereunder of the Holders of the Notes to the holders of the Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt, or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the payment or collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 10.11. Noteholders Authorize Trustee To
Effectuate Subordination of Notes.
---------------------------------
Each Holder of Notes by its acceptance of them authorizes and
expressly directs the Trustee on its behalf to take
<PAGE>
98
such action as may be necessary or appropriate to effectuate, as between the
holders of Senior Debt and the Holders of Notes, the subordination provided in
this Article Ten, and appoints the Trustee its attorney-infact for such
purposes, including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency, receivership,
reorganization or similar proceedings or upon an assignment for the benefit of
creditors or otherwise) tending towards liquidation of the business and assets
of the Company, the filing of a claim for the unpaid balance of its Notes and
accrued interest in the form required in those proceedings.
If the Trustee does not file a proper claim or proof of debt in the form
required in such proceeding prior to 30 days before the expiration of the time
to file such claim or claims, then the holders of the Senior Debt or their
Representative are or is hereby authorized to have the right to file and are or
is hereby authorized to file an appropriate claim for and on behalf of the
Holders of said Notes. Nothing herein contained shall be deemed to authorize the
Trustee or the holders of Senior Debt or their Representative to authorize or
consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee or the holders of
Senior Debt or their Representative to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 10.12 This Article Ten Not To
Prevent Events of Default.
-------------------------
The failure to make a payment on account of principal of or interest on
the Notes by reason of any provision of this Article Ten will not be construed
as preventing the occurrence of an Event of Default.
SECTION 10.13 Trustee's Compensation
Not Prejudiced.
----------------------
Nothing in this Article Ten will apply to amounts due to the
Trustee pursuant to other sections in this Indenture.
<PAGE>
99
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or
conflicts with another provision which is required to be included in this
Indenture by the TIA, the required provision shall control.
SECTION 11.02. Notices.
-------
Any notices or other communications required or permitted
hereunder shall be in writing, and shall be sufficiently given if made by hand
delivery, by commercial courier service, by telex, by telecopier or registered
or certified mail, postage prepaid, return receipt requested, addressed as
follows:
if to the Company:
CAF Acquisition Corporation
311 Smith Industrial Boulevard
Dalton, GA 30722
Facsimile No.: (706) 2592610
Attn: President
with a copy to:
CAF Holdings, Inc.
230 East High Street
Charlottesville, VA 22902
Facsimile No.: (804) 9791145
Attn: Stephen M. Burns
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Facsimile No.: (212) 858-2952
Attention: Corporate Trust Department
Each of the Company and the Trustee by written notice to each
other such Person may designate additional or different addresses for notices to
such Person. Any notice or
<PAGE>
100
communication to the Company or the Trustee shall be deemed to have been given
or made as of the date so delivered if personally delivered; when receipt is
confirmed if delivered by commercial courier service; when answered back, if
telexed; when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing if sent by registered or certified mail, postage prepaid (except
that a notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Holder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
SECTION 11.03. Communications by Holders
with Other Holders.
-------------------------
Holders may communicate pursuant to TIA 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other Person shall have the
protection of TIA (S)312(c).
SECTION 11.04. Certificate and Opinion as
to Conditions Precedent.
--------------------------
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(1) an Officers' Certificate, in form and substance satisfactory to the
Trustee, stating that, in the opinion of the signers, all conditions
precedent to be performed by the Company, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent to be performed by the Company, if any,
provided for in this
<PAGE>
101
Indenture relating to the proposed action have been complied with.
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 the Officers'
Certificate required by Section 4.06, shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition and the definitions relating thereto;
(2) 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;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is reasonably necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with.
SECTION 11.06. Rules by Trustee, Paying
Agent, Registrar.
------------------------
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Holders. The
Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. Legal Holidays.
--------------
A "Legal Holiday" used with respect to a particular place of payment is
a Saturday, a Sunday or a day on which banking institutions in New York, New
York or at such place of payment are not required to be open. If a payment date
is a Legal Holiday at such place, payment may be made at such place on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
<PAGE>
102
SECTION 11.08 Governing Law.
---------------
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE.
SECTION 11.09. No Adverse Interpretation
of Other Agreements.
-------------------------
This Indenture may not be used to interpret another indenture,
loan or debt agreement of the Company or any of its Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 11.10. No Recourse Against Others.
--------------------------
A director, officer, employee, stockholder or incorporator, as
such, of the Company or of the Trustee shall not have any liability for any
obligations of the Company under the Notes 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. Such waiver
and release are part of the consideration for the issuance of the Notes.
SECTION 11.11 Successors.
----------
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.12 Duplicate Originals.
-------------------
All parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together shall represent
the same agreement.
SECTION 11.13. Severability.
------------
In case any one or more of the provisions in this Indenture or
in the Notes shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every
<PAGE>
103
other respect and of the remaining provisions shall not in any way be affected
or impaired thereby, it being intended that all of the provisions hereof shall
be enforceable to the full extent permitted by law.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
Issuer:
CAF ACQUISITION CORPORATION
By: /s/ Stephen M. Burns
Name:
Title: President
Trustee:
IBJ SCHRODER BANK & TRUST
COMPANY,
as Trustee
By: /s/ Barbara McCluskey
Name:
Title: Vice President
<PAGE>
EXHIBIT A
---------
CUSIP No.:
CAF ACQUISITION CORPORATION
10% SENIOR SUBORDINATED NOTE DUE 2007
No. $
CAF ACQUISITION CORPORATION, a Virginia corporation (the
"Company," which term includes any successor entity), for value
received promises to pay to or registered
assigns, the principal sum of Dollars, on January 15, 2007.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers and a facsimile
of its corporate seal to be affixed hereto or
<PAGE>
imprinted hereon.
CAF ACQUISITION CORPORATION
By:
Name:
Title:
By:
Name:
Dated: February 6, 1997 Title:
Certificate of Authentication
This is one of the 10% Senior Subordinated Notes due 2007
referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
Dated: February 6, 1997 By:
Authorized Signatory
<PAGE>
(REVERSE OF SECURITY)
% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. CAF ACQUISITION CORPORATION, a Virginia corporation (the
"Company"), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. Interest on the Notes will accrue from the most
recent date on which interest has been paid or, if no interest has been paid,
from February 6, 1997. The Company will pay interest semi-annually in arrears on
each Interest Payment Date, commencing July 15, 1997. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes plus 2% per annum and on overdue installments of interest (without
regard to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the Notes (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date
even if the Notes are cancelled on registration of transfer or registration of
exchange after such Record Date. Holders must surrender Notes to a Paying Agent
to collect principal payments. The Company shall pay
<PAGE>
principal and interest in money of the United States that at the time of payment
is legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by its check payable in such
U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank & Trust
Company, a New York banking corporation (the "Trustee"), will act as Paying
Agent and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture, dated as of
February 6, 1997 (the "Indenture"), between the Company and the Trustee. This
Note is one of a duly authorized issue of Initial Notes of the Company
designated as its 10% Senior Subordinated Notes due 2007 (the "Initial Notes").
The Notes are limited in aggregate principal amount to $100,000,000. The Notes
include the Initial Notes and the Exchange Notes, as defined below, issued in
exchange for the Initial Notes pursuant to the Indenture. The Initial Notes and
the Exchange Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture unless
otherwise defined herein. The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code 77aaa-77bbbb) (the "TIA"), as in effect on
the date of the Indenture. Notwithstanding anything to the contrary herein, the
Notes are subject to all such terms, and Holders of Notes are referred to the
Indenture and said Act for a statement of them. The Notes are general unsecured
obligations of the Company.
5. Subordination. The Notes are subordinated in right of payment, in the
manner and to the extent set forth in the Indenture, to the prior payment in
full in cash or Cash Equivalents of all Senior Debt of the Company, whether
outstanding on the date of the Indenture or thereafter created, incurred,
assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound
by such provisions and authorizes and expressly directs the Trustee, on his
behalf, to take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-infact for such purposes.
6. Redemption.
(a) Optional Redemption. The Notes will be redeemable, at the Company's
option, in whole at any time or in part from time to time, on and after January
15, 2002, upon not less than 30 nor more than 60 days' notice, at the following
redemption prices (expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on January 15 of the year set
forth below, plus, in each case, accrued and unpaid
<PAGE>
interest thereon, if any, to the date of redemption:
Year Percentage
2002 105.000%
2003 103.333%
2004 101.667%
2005 and thereafter 100.000%
(b) Optional Redemption Upon Public Equity Offerings. At any time, or from
time to time, on or prior to January 15, 2000, the Company may, at its option,
use the net cash proceeds of one or more Public Equity Offerings (as defined in
the Indenture) to redeem up to 35% of the aggregate principal amount of Notes
originally issued at a redemption price equal to 110% of the principal amount
thereof plus, in each case, accrued interest to the date of redemption; provided
that at least 65% of the principal amount of Notes originally issued remains
outstanding immediately after any such redemption.
In order to effect the foregoing redemption with the proceeds of
any Public Equity Offering, the Company shall make such redemption not more than
120 days after the consummation of any such Public Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at such Holder's registered address. Notes in denominations
larger than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with the
Paying Agent for redemption on such Redemption Date, then, unless the Company
defaults in the payment of such Redemption Price plus accrued and unpaid
interest, if any, the Notes called for redemption will cease to bear interest
from and after such Redemption Date and the only right of the Holders of such
Notes will be to receive payment of the Redemption Price plus accrued and unpaid
interest, if any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture provide
that, after certain Asset Sales (as defined in the Indenture) and upon the
occurrence of a Change of Control (as defined in the Indenture), and subject to
further limitations contained therein, the Company will make an offer to
purchase certain amounts of the Notes in accordance with the procedures set
forth in the Indenture.
9. Registration Rights. Pursuant to the Registration Rights Agreement (as
defined in the Indenture), the Company will be obligated to consummate an
exchange offer pursuant to which the Holder of this Note shall have the right
<PAGE>
to exchange this Note for the Company's Series B 10% Senior Subordinated Notes
due 2007 (the "Exchange Notes"), which have been registered under the Securities
Act, in like principal amount and having terms identical in all material
respects to the Initial Notes. The Holders of the Initial Notes shall be
entitled to receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
10. Denominations; Transfer; Exchange. The Notes are in registered form,
without coupons, in denominations of $1,000 and integral multiples of $1,000. A
Holder shall register the transfer of or exchange Notes in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange of any Notes or portions thereof selected for redemption.
11. Persons Deemed Owners. The registered Holder of a Note shall be treated
as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of principal or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. If the Company at any time
deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations
sufficient to pay the principal of and interest on the Notes to redemption or
maturity and complies with the other provisions of the Indenture relating
thereto, the Company will be discharged from certain provisions of the Indenture
and the Notes (including certain covenants, but excluding its obligation to pay
the principal of and interest on the Notes).
14. Amendment; Supplement; Waiver. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the written consent
of the Holders of at least a majority in aggregate principal amount of the Notes
then outstanding, and any existing Default or Event of Default or noncompliance
with any provision may be waived with the written consent of the Holders of a
majority in aggregate principal amount of the Notes then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency, provide for uncertificated Notes in addition to or in place of
certificated Notes, or comply with Article Five of the Indenture or make any
<PAGE>
other change that does not adversely affect in any material respect the rights
of any Holder of a Note.
15. Restrictive Covenants. The Indenture imposes certain limitations on the
ability of the Company and its Restricted Subsidiaries to, among other things,
incur additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, enter into transactions with Affiliates, create dividend
or other payment restrictions affecting Subsidiaries, merge or consolidate with
any other Person, sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its assets or adopt a plan of liquidation. Such
limitations are subject to a number of important qualifications and exceptions.
The Company must annually report to the Trustee on compliance with such
limitations.
16. Successors. When a successor assumes, in accordance with the Indenture,
all the obligations of its predecessor under the Notes and the Indenture, the
predecessor will be released from those obligations.
17. Defaults and Remedies. If an Event of Default occurs and is continuing,
the Trustee or the Holders of at least 25% in aggregate principal amount of
Notes then outstanding may declare all the Notes to be due and payable in the
manner, at the time and with the effect provided in the Indenture. Holders of
Notes may not enforce the Indenture or the Notes except as provided in the
Indenture. The Trustee is not obligated to enforce the Indenture or the Notes
unless it has received indemnity reasonably satisfactory to it. The Indenture
permits, subject to certain limitations therein provided, Holders of a majority
in aggregate principal amount of the Notes then outstanding to direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
18. Trustee Dealings with Company. The Trustee under the Indenture, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company, its Subsidiaries or their respective
Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No stockholder, director, officer, employee
or incorporator, as such, of the Company shall have any liability for any
obligation of the Company under the Notes or the Indenture or for any claim
based on, in respect of or by reason of, such obligations or their creation.
Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
<PAGE>
20. Authentication. This Note shall not be valid
until the Trustee or Authenticating Agent manually signs the
certificate of authentication on this Note.
21. Governing Law. The Laws of the State of New
York shall govern this Note and the Indenture, without regard
to principles of conflict of laws.
22. Abbreviations and Defined Terms. Customary
abbreviations may be used in the name of a Holder of a Note or
an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed
on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the
other identification numbers printed hereon.
24. Indenture. Each Holder, by accepting a Note,
agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
The Company will furnish to any Holder of a Note upon
written request and without charge a copy of the Indenture,
which has the text of this Note in larger type. Requests may
be made to: CAF Acquisition Corporation, 230 East High Street,
Charlottesville, Virginia 22902, Attn: President.
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in
the form below and have your signature guaranteed:
I or we assign and transfer this Note to:
_______________________________________________________________
_______________________________________________________________
_______________________________________________________________
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ,
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Date: ___________________ Signed: ____________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ____________________________
In connection with any transfer of this Note occur-
ring prior to the date which is the earlier of (i) the date of
the declaration by the SEC of the effectiveness of a registra-
tion statement under the Securities Act of 1933, as amended
(the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at
the date of the transfer) and (ii) February 6, 2000, the under-
signed confirms that it has not utilized any general solicita-
tion or general advertising in connection with the transfer and
that this Note is being transferred:
[Check One]
(1) __ to the Company or a subsidiary thereof; or
(2) __ pursuant to and in compliance with Rule 144A under
the Securities Act; or
(3) __ to an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the Securi-
ties Act) that has furnished to the Trustee a signed
letter containing certain representations and agree-
ments (the form of which letter can be obtained from
the Trustee); or
(4) __ outside the United states to a "foreign person" in
compliance with Rule 904 of Regulation S under the Securities
Act; or
(5) __ pursuant to the exemption from registration provided
by Rule 144 under the Securities Act; or
(6) __ pursuant to an effective registration statement under
the Securities Act; or
(7) __ pursuant to another available exemption from the reg-
istration requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Notes evidenced by this certificate in the
name of any person other than the registered Holder thereof;
provided that if box (3), (4), (5) or (7) is checked, the Com-
pany or the Trustee may require, prior to registering any such
<PAGE>
transfer of the Notes, in its sole discretion, such legal opin-
ions, certifications (including an investment letter in the
case of box (3) or (4)) and other information as the Trustee or
the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of
the Securities Act.
If none of the foregoing boxes is checked, the Trustee or Reg-
istrar shall not be obligated to register this Note in the name
of any person other than the Holder hereof unless and until the
conditions to any such transfer of registration set forth
herein and in Section 2.17 of the Indenture shall have been
satisfied.
Dated: __________________ Signed: ____________________________
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with
respect to which it exercises sole investment discretion and
that it and any such account is a "qualified institutional
buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such informa-
tion regarding the Company as the undersigned has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying
upon the undersigned's foregoing representations in order to
claim the exemption from registration provided by Rule 144A.
Dated: __________________ ____________________________
NOTICE: To be executed by
an executive officer
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the
Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note
purchased by the Company pursuant to Section 4.15 or Section
4.16 of the Indenture, state the amount you elect to have
purchased:
$___________________
Dated: __________________ ____________________________________
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee: ____________________________________
<PAGE>
EXHIBIT B
---------
CUSIP No.:
CAF ACQUISITION CORPORATION
SERIES B 10% SENIOR SUBORDINATED NOTE DUE 2007
No. $
CAF ACQUISITION CORPORATION, a Virginia corporation
(the "Company," which term includes any successor entity), for
value received promises to pay to or reg-
istered assigns, the principal sum of Dollars, on
January 15, 2007.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Reference is made to the further provisions of this
Note contained herein, which will for all purposes have the
same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note
to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed
hereto or imprinted hereon.
CAF ACQUISITION CORPORATION
By:
----------------------------
Name:
Title:
By:
----------------------------
Name:
Dated: Title:
Certificate of Authentication
This is one of the Series B 10% Senior Subordinated
Notes due 2007 referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
Dated: By:
------------------------------
Authorized Signatory
B-1
<PAGE>
(REVERSE OF SECURITY)
SERIES B 10% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. CAF ACQUISITION CORPORATION, a Vir-
--------
ginia corporation (the "Company"), promises to pay interest on
the principal amount of this Note at the rate per annum shown
above. Interest on the Notes will accrue from the most recent
date on which interest has been paid or, if no interest has
been paid, from February 6, 1997. The Company will pay inter-
est semi-annually in arrears on each Interest Payment Date,
commencing July 15, 1997. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal
and on overdue installments of interest from time to time on
demand at the rate borne by the Notes plus 2% per annum and on
overdue installments of interest (without regard to any appli-
cable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay inter-
-----------------
est on the Notes (except defaulted interest) to the Persons who
are the registered Holders at the close of business on the
Record Date immediately preceding the Interest Payment Date
even if the Notes are cancelled on registration of transfer or
registration of exchange after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal pay-
ments. The Company shall pay principal and interest in money
of the United States that at the time of payment is legal ten-
der for payment of public and private debts ("U.S. Legal Ten-
der"). However, the Company may pay principal and interest by
its check payable in such U.S. Legal Tender. The Company may
deliver any such interest payment to the Paying Agent or to a
Holder at the Holder's registered address.
3. Paying Agent and Registrar. Initially, IBJ
--------------------------
Schroder Bank & Trust Company, a New York banking corporation
(the "Trustee"), will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-Registrar
without notice to the Holders.
4. Indenture. The Company issued the Notes under
---------
an Indenture, dated as of February 6, 1997 (the "Indenture"),
between the Company and the Trustee. This Note is one of a
duly authorized issue of Exchange Notes of the Company desig-
nated as its Series B 10% Senior Subordinated Notes due 2007
(the "Exchange Notes"). The Notes are limited in aggregate
principal amount to $100,000,000. The Notes include the Ini-
tial Notes (the 10% Senior Subordinated Notes due 2007) and the
B-2
<PAGE>
Exchange Notes, issued in exchange for the Initial Notes
pursuant to the Indenture. The Initial Notes and the Exchange
Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the
Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S. Code (S)(S)77aaa-77bbbb) (the "TIA"), as in effect
on the date of the Indenture. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and
Holders of Notes are referred to the Indenture and said Act for
a statement of them. The Notes are general unsecured obliga-
tions of the Company.
5. Subordination. The Notes are subordinated in
-------------
right of payment, in the manner and to the extent set forth in
the Indenture, to the prior payment in full in cash or Cash
Equivalents of all Senior Debt of the Company, whether out-
standing on the date of the Indenture or thereafter created,
incurred, assumed or guaranteed. Each Holder by his acceptance
hereof agrees to be bound by such provisions and authorizes and
expressly directs the Trustee, on his behalf, to take such
action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purposes.
6. Redemption.
----------
(a) Optional Redemption. The Notes will be redeem-
-------------------
able, at the Company's option, in whole at any time or in part
from time to time, on and after January 15, 2002, upon not less
than 30 nor more than 60 days' notice, at the following redemp-
tion prices (expressed as percentages of the principal amount
thereof) if redeemed during the twelve-month period commencing
on January 15 of the year set forth below, plus, in each case,
accrued interest to the date of redemption:
Year Percentage
- ---- ----------
2002..................................................105.000%
2003..................................................103.333%
2004..................................................101.667%
2005 and thereafter...................................100.000%
(b) Optional Redemption Upon Public Equity Offer-
---------------------------------------------
ings. At any time, or from time to time, on or prior to
- ----
January 15, 2000, the Company may, at its option, use the net
cash proceeds of one or more Public Equity Offerings (as
defined in the Indenture) to redeem up to 35% of the aggregate
principal amount of Notes originally issued at a redemption
B-3
<PAGE>
price equal to 110% of the principal amount thereof plus, in
each case, accrued interest to the date of redemption; provided
--------
that at least 65% of the principal amount of Notes originally
issued remains outstanding immediately after any such
redemption.
In order to effect the foregoing redemption with the
proceeds of any Public Equity Offering, the Company shall make
such redemption not more than 120 days after the consummation
of any such Public Equity Offering.
7. Notice of Redemption. Notice of redemption will
--------------------
be mailed at least 30 days but not more than 60 days before the
Redemption Date to each Holder of Notes to be redeemed at such
Holder's registered address. Notes in denominations larger
than $1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for
the redemption of the Notes called for redemption shall have
been deposited with the Paying Agent for redemption on such
Redemption Date, then, unless the Company defaults in the pay-
ment of such Redemption Price plus accrued and unpaid interest,
if any, the Notes called for redemption will cease to bear
interest from and after such Redemption Date and the only right
of the Holders of such Notes will be to receive payment of the
Redemption Price plus accrued and unpaid interest, if any.
8. Offers to Purchase. Sections 4.15 and 4.16 of
------------------
the Indenture provide that, after certain Asset Sales (as
defined in the Indenture) and upon the occurrence of a Change
of Control (as defined in the Indenture), and subject to fur-
ther limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance
with the procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes
---------------------------------
are in registered form, without coupons, in denominations of
$1,000 and integral multiples of $1,000. A Holder shall regis-
ter the transfer of or exchange Notes in accordance with the
Indenture. The Registrar may require a Holder, among other
things, to furnish appropriate endorsements and transfer docu-
ments and to pay certain transfer taxes or similar governmental
charges payable in connection therewith as permitted by the
Indenture. The Registrar need not register the transfer of or
exchange of any Notes or portions thereof selected for
redemption.
10. Persons Deemed Owners. The registered Holder of
---------------------
a Note shall be treated as the owner of it for all purposes.
B-4
<PAGE>
11. Unclaimed Money. If money for the payment of
---------------
principal or interest remains unclaimed for two years, the
Trustee and the Paying Agent will pay the money back to the
Company. After that, all liability of the Trustee and such
Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If
-----------------------------------------
the Company at any time deposits with the Trustee U.S. Legal
Tender or U.S. Government Obligations sufficient to pay the
principal of and interest on the Notes to redemption or matur-
ity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain
provisions of the Indenture and the Notes (including certain
covenants, but excluding its obligation to pay the principal of
and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to cer-
-----------------------------
tain exceptions, the Indenture or the Notes may be amended or
supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Notes
then outstanding, and any existing Default or Event of Default
or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in aggregate prin-
cipal amount of the Notes then outstanding. Without notice to
or consent of any Holder, the parties thereto may amend or sup-
plement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated
Notes, or comply with Article Five of the Indenture or make any
other change that does not adversely affect in any material
respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes
---------------------
certain limitations on the ability of the Company and its
Restricted Subsidiaries to, among other things, incur addi-
tional Indebtedness, make payments in respect of its Capital
Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions
affecting Subsidiaries, merge or consolidate with any other
Person, sell, assign, transfer, lease, convey or otherwise dis-
pose of all or substantially all of its assets or adopt a plan
of liquidation. Such limitations are subject to a number of
important qualifications and exceptions. The Company must
annually report to the Trustee on compliance with such
limitations.
15. Successors. When a successor assumes, in accor-
----------
dance with the Indenture, all the obligations of its predeces-
sor under the Notes and the Indenture, the predecessor will be
released from those obligations.
B-5
<PAGE>
16. Defaults and Remedies. If an Event of Default
---------------------
occurs and is continuing, the Trustee or the Holders of at
least 25% in aggregate principal amount of Notes then outstand-
ing may declare all the Notes to be due and payable in the man-
ner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee is not obli-
gated to enforce the Indenture or the Notes unless it has
received indemnity reasonably satisfactory to it. The Inden-
ture permits, subject to certain limitations therein provided,
Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of
any trust or power. The Trustee may withhold from Holders of
Notes notice of any continuing Default or Event of Default
(except a Default in payment of principal or interest) if it
determines that withholding notice is in their interest.
17. Trustee Dealings with Company. The Trustee
-----------------------------
under the Indenture, in its individual or any other capacity,
may become the owner or pledgee of Notes and may otherwise deal
with the Company, its Subsidiaries or their respective Affili-
ates as if it were not the Trustee.
18. No Recourse Against Others. No stockholder,
--------------------------
director, officer, employee or incorporator, as such, of the
Company shall have any liability for any obligation of the Com-
pany under the Notes or the Indenture or for any claim based
on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives and
releases all such liability. The waiver and release are part
of the consideration for the issuance of the Notes.
19. Authentication. This Note shall not be valid
--------------
until the Trustee or Authenticating Agent manually signs the
certificate of authentication on this Note.
20. Governing Law. The Laws of the State of New
-------------
York shall govern this Note and the Indenture, without regard
to principles of conflict of laws.
21. Abbreviations and Defined Terms. Customary
-------------------------------
abbreviations may be used in the name of a Holder of a Note or
an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with
right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation
-------------
promulgated by the Committee on Uniform Security Identification
Procedures, the Company has caused CUSIP numbers to be printed
B-6
<PAGE>
on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the
other identification numbers printed hereon.
23. Indenture. Each Holder, by accepting a Note,
---------
agrees to be bound by all of the terms and provisions of the
Indenture, as the same may be amended from time to time.
The Company will furnish to any Holder of a Note upon
written request and without charge a copy of the Indenture,
which has the text of this Note in larger type. Requests may
be made to: CAF Acquisition Corporation, 230 East High Street,
Charlottesville, Virginia 22902, Attn: President.
B-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in
the form below and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint ,
----------------------------------------------------
agent to transfer this Note on the books of the Company. The
agent may substitute another to act for him.
Dated: Signed:
------------------- -------------------------------------
(Sign exactly as name
appears on the other side
of this Note)
Signature Guarantee:
--------------------------------------------------------
B-8
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by
the Company pursuant to Section 4.15 or Section 4.16 of the
Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note
purchased by the Company pursuant to Section 4.15 or Section
4.16 of the Indenture, state the amount you elect to have
purchased:
$
-------------------
Dated:
----------------- -------------------------------------
NOTICE: The signature on this
assignment must correspond with
the name as it appears upon the
face of the within Note in
every particular without alteration
or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee:
-------------------------------------------
B-9
<PAGE>
Exhibit C
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
___________, ____
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Securities Processing
Window Level SC1
Re: CAF Acquisition Corporation
10% Senior Subordinated Notes due 2007
--------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 10%
Senior Subordinated Notes due 2007 (the "Notes") of CAF Acqui-
sition Corporation (the "Company"), we confirm that:
1. We have received a copy of the Offering Memoran-
(the "Offering Memorandum"), dated January 29, 1997 relat-
ing to the Notes and such other information as we deem neces-
sary in order to make our investment decision. We acknowledge
that we have read and agreed to the matters stated on
pages (i)-(ii) of the Offering Memorandum and in the section
entitled "Transfer Restrictions" of the Offering Memorandum,
including the restrictions on duplication and circulation of
the Offering Memorandum.
2. We understand that any subsequent transfer of
the Notes is subject to certain restrictions and conditions set
forth in the Indenture relating to the Notes (as described in
the Offering Memorandum) and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and
the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the
Notes have not been registered under the Securities Act, and
that the Notes may not be offered or sold except as permitted
in the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes
prior to the date which is three years after the original issu-
ance of the Notes, we will do so only (i) to the Company or any
of its subsidiaries, (ii) inside the United States in
C-1
<PAGE>
accordance with Rule 144A under the Securities Act to a "quali-
fied institutional buyer" (as defined in Rule 144A under the
Securities Act), (iii) inside the United States to an institu-
tional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to the Trustee (as defined in the Indenture
relating to the Notes), a signed letter containing certain rep-
resentations and agreements relating to the restrictions on
transfer of the Notes, (iv) outside the United States in accor-
dance with Rule 904 of Regulation S under the Securities Act,
(v) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (vi) pur-
suant to an effective registration statement under the Securi-
ties Act, and we further agree to provide to any person pur-
chasing any of the Notes from us a notice advising such pur-
chaser that resales of the Notes are restricted as stated
herein.
4. We are not acquiring the Notes for or on behalf
of, and will not transfer the Notes to, any pension or welfare
plan (as defined in Section 3 of the Employee Retirement Income
Security Act of 1974), except as permitted in the section enti-
tled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of
any Notes, we will be required to furnish to the Trustee and
the Company such certification, legal opinions and other infor-
mation as the Trustee and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect.
6. We are an institutional "accredited investor"
(as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act) and have such knowledge and expe-
rience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes,
and we and any accounts for which we are acting are each able
to bear the economic risk of our or their investment, as the
case may be.
7. We are acquiring the Notes purchased by us for
our account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion.
C-2
<PAGE>
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or
a copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the mat-
ters covered hereby.
Very truly yours,
By:
-------------------------------
Name:
Title:
C-3
<PAGE>
Exhibit D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
______________, ____
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Processing
Window Level SC1
Re: CAF Acquisition Corporation (the "Company")
10% Senior Subordinated Notes due 2007
(the "Notes")
-------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $
------------
aggregate principal amount of the Notes, we confirm that such
sale has been effected pursuant to and in accordance with Regu-
lation S under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person
in the United States;
(2) either (a) at the time the buy offer was origi-
nated, the transferee was outside the United States or we
and any person acting on our behalf reasonably believed
that the transferee was outside the United States, or (b)
the transaction was executed in, on or through the facili-
ties of a designated off-shore securities market and nei-
ther we nor any person acting on our behalf knows that the
transaction has been pre-arranged with a buyer in the
United States;
(3) no directed selling efforts have been made in
the United States in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S, as applicable;
D-1
<PAGE>
(4) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities
Act; and
(5) we have advised the transferee of the transfer
restrictions applicable to the Notes.
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or
a copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the mat-
ters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------------------
Authorized Signature
<PAGE>
EXHIBIT 4.2
COLLINS & AIKMAN FLOORCOVERINGS, INC.,
as Issuer
and
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of February 6, 1997
to
INDENTURE
Dated as of February 6, 1997
between
CAF ACQUISITION CORPORATION, as Issuer
and
IBJ SCHRODER BANK & TRUST COMPANY, as Trustee
--------------------
$100,000,000
10% Senior Subordinated Notes due 2007
and
Series B 10% Senior Subordinated Notes due 2007
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of February 6, 1997,
between COLLINS & AIKMAN FLOORCOVERINGS, INC., a Delaware corporation (the
"Company"), and IBJ Schroder Bank & Trust Company, a New York banking
corporation, as Trustee (the "Trustee").
WHEREAS, CAF Acquisition Corporation, a Virginia corporation
("CAF Acquisition"), has heretofore executed and delivered to the Trustee an
Indenture dated as of February 6, 1997 (the "Indenture") providing for the
issuance of $100,000,000 aggregate principal amount of CAF Acquisition's 10%
Senior Subordinated Notes due 2007 (the "Initial Notes") and CAF Acquisition's
Series B 10% Senior Subordinated Notes due 2007 (the "Exchange Notes", and
together with the Initial Notes, the "Notes"); and
WHEREAS, CAF Acquisition has merged with and into the Company
and, in connection herewith, the Company has assumed by operation of law, all
of CAF Acquisition's debts, liabilities, duties and obligations, including CAF
Acquisition's obligations in respect of the Notes and under the Indenture; and
WHEREAS, the Company desires by this First Supplemental
Indenture, pursuant to and as contemplated by Section 5.01 and 9.01 of the
Indenture, to expressly assume covenants, agreements and undertakings of CAE
Acquisition in the Indenture and under the Notes; and
WHEREAS, the execution and delivery of this First Supplemental
Indenture and the note(s) evidencing the Initial Notes and the Exchange Notes
substantially in the form attached hereto as Exhibit A and Exhibit B,
respectively (the "Securities"), has been authorized by a resolution of the
Board of Directors of the Company; and
WHEREAS, all conditions and requirements necessary to make each
of this First Supplemental Indenture and the Securities a valid, binding and
legal instrument in accordance with its terms have been performed and
fulfilled by the parties hereto and the execution and delivery thereof have
been in all respects duly authorized by the parties hereto.
NOW, THEREFORE, in consideration of the above premises, each
party agrees, for the benefit of the other and for the equal and ratable
benefit of the Holders of the Notes, as follows:
<PAGE>
-2-
ARTICLE ONE
ASSUMPTION OF OBLIGATIONS OF CAF ACQUISITION
SECTION 1.01. Assumption.
----------
The Company hereby expressly and unconditionally assumes each
and every covenant, agreement and undertaking of CAF Acquisition in the
Indenture as if the Company had been the original issuer of the Notes, and
also hereby expressly and unconditionally assumes each and every covenant,
agreement and undertaking in each Note outstanding on the date of this First
Supplemental Indenture.
ARTICLE TWO
MISCELLANEOUS PROVISIONS
SECTION 2.01. Terms Defined.
-------------
For all purposes of this First Supplemental Indenture, except as
otherwise defined or unless the context otherwise requires, terms used in
capitalized form in this First Supplemental Indenture and defined in the
Indenture have the meanings specified in the Indenture.
SECTION 2.02. Indenture.
---------
Except as amended hereby, the Indenture and the Notes are in all
respects ratified and confirmed and all the terms shall remain in full force
and effect.
SECTION 2.03. Governing Law.
-------------
THIS FIRST SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS .
SECTION 2.04. Successors.
----------
All agreements of the Company in this First Supplemental
Indenture and the Notes shall bind its successors. All
<PAGE>
-3-
agreements of the Trustee in this First Supplemental Indenture shall bind its
successors.
SECTION 2.05. Duplicate Originals.
-------------------
The parties may sign any number of copies of this First
Supplemental Indenture. Each signed copy shall be an original, but all of them
together shall represent the same agreement.
SECTION 2.06. Trustee Disclaimer.
------------------
The Trustee accepts the amendment of the Indenture effected by
this First Supplemental Indenture and agrees to execute the trust created by
the Indenture as hereby amended, but only upon the terms and conditions set
forth in the Indenture, including the terms and provisions defining and
limiting the liabilities and responsibilities of the Trustee, which terms and
provisions shall in like manner define and limit its liabilities and
responsibilities in the performance of the trust created by the Indenture as
hereby amended, and without limiting the generality of the foregoing, the
Trustee shall not be responsible in any manner whatsoever for or with respect
to any of the recitals or statements contained herein, all of which recitals
or statements are made solely by the Company, or for or with respect to (i)
the validity of the terms of this First Supplemental Indenture or any of the
terms or provisions hereof, (ii) the proper authorization hereof by the
Company by corporate action or otherwise, (iii) the due execution hereof by
the Company or (iv) the consequences (direct or indirect and whether
deliberate or inadvertent) of any amendment herein provided for, and the
Trustee makes no representation with respect to any such matters.
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, all as of the date first written
above.
Issuer:
COLLINS & AIKMAN FLOORCOVERINGS, INC.
By: /s/ Stephen M. Burns
-----------------------------------
Name: Stephen M. Burns
Time: Vice President
Trustee:
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: /s/ Barbara McCluskey
-----------------------------------
Name: Barbara McCluskey
Time: Vice President
<PAGE>
-
EXHIBIT A
---------
CUSIP No.:
COLLINS & AIKMAN FLOORCOVERINGS, INC.
10% SENIOR SUBORDINATED NOTE DUE 2007
No. $
COLLINS & AIKMAN FLOORCOVERINGS, INC., a Delaware corporation
(the "Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal sum
of Dollars, on January 15, 2007.
Interest Payment Dates: January 15 and July 15
Record Dates: January 1 and July 1
Reference is made to the further provisions of this Note
contained herein, which will for a11 purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.
COLLINS & AIKMAN FLOORCOVERINGS,
INC.
By:
-----------------------------
Name:
Title:
By:
-----------------------------
Name:
Dated: February 6, 1997 Title:
Certificate of Authentication
This is one of the 10% Senior Subordinated Notes due 2007
referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
Dated: February 6, 1997 By:
-----------------------------
Authorized Signatory
A-1
<PAGE>
(REVERSE OF SECURITY)
% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. COLLINS & AIKMAN FLOORCOVERINGS, INC., a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at the rate per annum shown above. Interest on the Notes will
accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from February 6, 1997. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing July 15,
1997. Interest will be computed on the basis of a 360-day year of twelve
30-day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes plus 2% per annum and on overdue installments of interest
(without regard to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
-----------------
Notes (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Notes are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts ("U.S.
Legal Tender"). However, the Company may pay principal and interest by its
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Registrar. Initially, IBJ Schroder Bank &
--------------------------
Trust Company, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
---------
dated as of February 6, 1997 (as supplemented by the First Supplemental
Indenture thereto, dated as of February 6, 1997, the "Indenture"), between the
Company and the Trustee. This Note is one of a duly authorized issue of
Initial Notes of the Company designated as its 10% Senior Subordinated Notes
due 2007 (the "Initial Notes"). The Notes are limited in aggregate principal
amount to $100,000,000. The Notes
A-2
<PAGE>
include the Initial Notes and the Exchange Notes, as defined below, issued in
exchange for the Initial Notes pursuant to the Indenture. The Initial Notes
and the Exchange Notes are treated as a single class of securities under the
Indenture. Capitalized terms herein are used as defined in the Indenture
unless otherwise defined herein. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act of 1939 (15 U.S. Code SS 77aaa-77bbbb) (the "TIA"), as
in effect on the date of the Indenture. Notwithstanding anything to the
contrary herein, the Notes are subject to all such terms, and Holders of Notes
are referred to the Indenture and said Act for a statement of them. The Notes
are general unsecured obligations of the Company.
5. Subordination. The Notes are subordinated in right of
-------------
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purposes.
6. Redemption.
----------
(a) Optional Redemption. The Notes will be redeemable, at the
-------------------
Company's option, in whole at any time or in part from time to time, on and
after January 15, 2002, upon not less than 30 nor more than 60 days' notice,
at the following redemption prices (expressed as percentages of the principal
amount thereof) if redeemed during the twelve-month period commencing on
January 15 of the year set forth below, plus, in each case, accrued and unpaid
interest thereon, if any, to the date of redemption:
Year Percentage
---- ----------
2002................................................... 105.000%
2003................................................... 103.333%
2004................................................... 101.667%
2005 and thereafter.................................... 100.000%
(b) Optional Redemption Upon Public Equity Offerings. At any
------------------------------------------------
time, or from time to time, on or prior to January 15, 2000, the Company may,
at its option, use the net cash proceeds of one or more Public Equity-
Offerings (as
A-3
<PAGE>
defined in the Indenture) to redeem up to 35% of the aggregate principal
amount of Notes originally issued at a redemption price equal to 110% of the
principal amount thereof plus, in each case, accrued interest to the date of
redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Public Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than S1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with
the Paying Agent for redemption on such Redemption Date, then, unless the
Company defaults in the payment of such Redemption Price plus accrued and
unpaid interest, if any, the Notes called for redemption will cease to bear
interest from and after such Redemption Date and the only right of the Holders
of such Notes will be to receive payment of the Redemption Price plus accrued
and unpaid interest, if any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
------------------
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and
subject to further limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. Registration Rights. Pursuant to the Registration Rights
-------------------
Agreement (as defined in the Indenture), the Company will be obligated to
consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for the Company's Series B 10% Senior
Subordinated Notes due 2007 (the "Exchange Notes"), which have been registered
under the Securities Act, in like principal amount and having terms identical
in all material respects to the Initial Notes. The Holders of the Initial
Notes shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon certain other
conditions, all pursuant to and in accordance with the terms of the
Registration Rights Agreement.
A-4
<PAGE>
10. Denominations; Transfer; Exchange. The Notes are in
---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of S1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and
to pay certain transfer taxes or similar governmental charges payable in
connection therewith as permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Notes or portions thereof selected
for redemption.
11. Persons Deemed Owners. The registered Holder of
---------------------
a Note shall be treated as the owner of it for all purposes.
12. Unclaimed Money. If money for the payment of principal
---------------
or interest remains unclaimed for two years, the Trustee and the Paying Agent
will pay the money back to the Company. After that, all liability of the
Trustee and such Paying Agent with respect to such money shall cease.
13. Discharge Prior to Redemption or Maturity. If the Company
-----------------------------------------
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of
the Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
14. Amendment; Supplement; Waiver. Subject to certain
-----------------------------
exceptions, the Indenture or the Notes may be amended or supplemented with the
written consent of the Holders of at least a majority in aggregate principal
amount of the Notes then outstanding, and any existing Default or Event of
Default or noncompliance with any provision may be waived with the written
consent of the Holders of a majority in aggregate principal amount of the
Notes then outstanding. Without notice to or consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Notes to, among
other things, cure any ambiguity, defect or inconsistency, provide for
uncertificated Notes in addition to or in place of certificated Notes, or
comply with Article Five of the Indenture or make any other change that does
not adversely affect in any material respect the rights of any Holder of a
Note.
15. Restrictive Covenants. The Indenture imposes certain
---------------------
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur
A-5
<PAGE>
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, enter into transactions with Affiliates, create dividend
or other payment restrictions affecting Subsidiaries, merge or consolidate
with any other Person, sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets or adopt a plan of
liquidation. Such limitations are subject to a number of important
qualifications and exceptions. The Company must annually report to the Trustee
on compliance with such limitations.
16. Successors. When a successor assumes, in accordance with
----------
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
17. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and
payable in the manner, at the time and with the effect provided in the
Indenture. Holders of Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. The Trustee is not obligated to enforce the
Indenture or the Notes unless it has received indemnity reasonably
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Notes then outstanding to direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of Notes notice of any continuing
Default or Event of Default (except a Default in payment of principal or
interest) if it determines that withholding notice is in their interest.
18. Trustee Dealings with Company. The Trustee under the
-----------------------------
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
19. No Recourse Against Others. No stockholder, director,
--------------------------
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture
or for any claim based on, in respect of or by reason of, such obligations or
their creation. Each Holder of a Note by accepting a Note waives and releases
all such liability. The waiver and release are part of the consideration for
the issuance of the Notes.
A-6
<PAGE>
20. Authentication. This Note shall not be valid until the
--------------
Trustee or Authenticating Agent manually signs the certificate of
authentication on this Note.
21. Governing Law. The Laws of the State of New York shall
-------------
govern this Note and the Indenture, without regard to principles of conflict
of laws.
22. Abbreviations and Defined Terms. Customary abbreviations
-------------------------------
may be used in the name of a Holder of a Note or an assignee, such as: TEN COM
(= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with right of survivorship and not as tenants in common), CUST (=
Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
23. CUSIP Numbers. Pursuant to a recommendation promulgated by
-------------
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the
Holders of the Notes. No representation is made as to the accuracy of such
numbers as printed on the Notes and reliance may be placed only on the other
identification numbers printed hereon.
24. Indenture. Each Holder, by accepting a Note, agrees to be
---------
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indenture, which has the text of this
Note in larger type. Requests may be made to: Collins & Aikman Floorcoverings,
Inc., 311 Smith Industrial Boulevard, Dalton, Georgia 30722, Attn: President.
A-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint __________________, agent to transfer this Note on the
books of the Company. The agent may substitute another to act for him.
Date: Signed:
---------------------------- --------------------------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
---------------------------
In connection with any transfer of this Note occurring prior to
the date which is the earlier of (i) the date of the declaration by the SEC of
the effectiveness of a registration statement under the Securities Act of
1933, as amended (the "Securities Act") covering resales of this Note (which
effectiveness shall not have been suspended or terminated at the date of the
transfer) and (ii) February 6, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with
the transfer and that this Note is being transferred:
A-8
<PAGE>
[Check One]
---------
(1) _ to the Company or a subsidiary thereof; or
(2) _ pursuant to and in compliance with Rule 144A under the Securities Act;
or
(3) _ to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished
to the Trustee a signed letter containing certain representations and
agreements (the form of which letter can be obtained from the Trustee);
or
(4) _ outside the United states to a "foreign person" in compliance with Rule
904 of Regulation S under the Securities Act; or
(5) _ pursusnt to the exemption from registration provided by Rule 144 under
the Securities Act; or
(6) _ pursuant to an effective registration statement under the Securities
Act; or
(7) _ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Notes evidenced by this certificate in the name of any person other than the
registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked,
the Company or the Trustee may require, prior to registering any such transfer
of the Notes, in its sole discretion, such legal opinions, certifications
(including an investment letter in the case of box (3) or (4)) and other
information as the Trustee or the Company has reasonably requested to confirm
that such transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act.
A-9
<PAGE>
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.17 of the Indenture shall have been satisfied.
Dated: Signed:
---------------------------- --------------------------------
(Sign exactly as name
appears on the other side
of this Security)
Signature Guarantee:
----------------------------------------
TO BE COMPLETED BY PURCHASER IF ( 2 ) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such informa tion regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned s foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
----------------------- ----------------------------------------------
NOTICE: To be executed by an executive officer
A-10
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, check the
appropriate box:
Section 4.15 [ ]
Section 4-16 [ ]
If you want to elect to have only part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture,
state the amount you elect to have purchased:
$
------------------------------
Dated:
--------------------------- ---------------------------------------
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of the
within Note in every particular without
alteration or enlargement or any change
whatsoever and be guaranteed by the
endorser's bank or broker.
Signature Guarantee:
--------------------------------
A-ll
<PAGE>
EXHIBIT B
---------
CUSIP No.:
COLLINS & AIKMAN FLOORCOVERINGS, INC.
SERIES B 10% SENIOR SUBORDINATED NOTE DUE 2007
No. $
COLLINS & AIKMAN FLOORCOVERINGS, INC , a Delaware corporation
(the "Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal sum
of Dollars, on January 15,
2007.
Interest Payment Dates: January 15
and July 15
Record Dates: January 1
and July 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.
COLLINS & AIKMAN FLOORCOVERINGS, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Certificate of Authentication
This is one of the Series B 10% Senior Subordinated Notes due
2007 referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
Dated: By:
--------------------------- -----------------------------
Authorized Signatory
B-1
<PAGE>
(REVERSE OF SECURITY)
SERIES B 10% SENIOR SUBORDINATED
NOTE DUE 2007
1. Interest. COLLINS & AIKMAN FLOORCOVERINGS, INC., a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at the rate per annum shown above. Interest on the Notes will
accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from February 6, 1997. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing July 15,
1997. Interest will be computed on the basis of a 360-day year of twelve 30-
day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes plus 2% per annum and on overdue installments of interest
(without regard to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
-----------------
Notes (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Notes are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts ("U.S.
Legal Tender"). However, the Company may pay principal and interest by its
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Reqistrar. Initially, IBJ Schroder Bank &
--------------------------
Trust Company, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
---------
dated as of February 6, 1997 (as supplemented by the First Supplemental
Indenture thereto, dated as of February 6, 1997, the "Indenture"), between the
Company and the Trustee. This Note is one of a duly authorized issue of
Exchange Notes of the Company designated as its Series B 10% Senior
Subordinated Notes due 2007 (the "Exchange Notes"). The Notes are limited in
aggregate principal amount to
B-2
<PAGE>
$100,000,000. The Notes include the Initial Notes (the 10% Senior Subordinated
Notes due 2007) and the Exchange Notes, issued in exchange for the Initial
Notes pursuant to the Indenture. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are general unsecured
obligations of the Company.
5. Subordination. The Notes are subordinated in right of
-------------
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purposes.
6. Redemption.
----------
(a) Optional Redemption. The Notes will be redeemable, at the
-------------------
Company's option, in whole at any time or in part from time to time, on and
after January 15, 2002, upon not less than 30 nor more than 60 days notice, at
the following redemption prices (expressed as percentages of the principal
amount thereof) if redeemed during the twelve-month period commencing on
January 15 of the year set forth below, plus, in each case, accrued interest
to the date of redemption:
Year Percentage
2002.......................................... 105.000%
2003.......................................... 103.333%
2004.......................................... 101.667%
2005 and thereafter........................... 100.000%
(b) Optional Redemption Upon Public Equity Offerings. At any
------------------------------------------------
time, or from time to time, on or prior to January 15, 2000, the Company may,
at its option, use the net cash proceeds of one or more Public Equity
Offerings (as
B-3
<PAGE>
defined in the Indenture) to redeem up to 35% of the aggregate principal
amount of Notes originally issued at a redemption price equal to 110% of the
principal amount thereof plus, in each case, accrued interest to the date of
redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Public Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than S1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with
the Paying Agent for redemption on such Redemption Date, then, unless the
Company defaults in the payment of such Redemption Price plus accrued and
unpaid interest, if any, the Notes called for redemption will cease to bear
interest from and after such Redemption Date and the only right of the Holders
of such Notes will be to receive payment of the Redemption Price plus accrued
and unpaid interest, if any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
------------------
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and
subject to further limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes are in
---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, smong
other things, to furnish appropriate endorsements and transfer documents and
to pay certain transfer taxes or similar governmental charges payable in
connection therewith as permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Notes or portions thereof selected
for redemption.
B-4
<PAGE>
10. Persons Deemed Owners. The registered Holder of a Note
---------------------
shall be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company
-----------------------------------------
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain
-----------------------------
exceptions, the or the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes in addition
to or in place of certificated Notes, or comply with Article Five of the
Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain
---------------------
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
B-5
<PAGE>
15. Successors. When a successor assumes, in accordance with
----------
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the
-----------------------------
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No stockholder, director,
--------------------------
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. Authentication. This Note shall not be valid until the
--------------
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
20. Governinq Law. The Laws of the State of New York shall
-------------
govern this Note and the Indenture, without regard to principles of conflict of
laws.
21. Abbreviations and Defined Terms. Customary abbreviations may
-------------------------------
be used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with
B-6
<PAGE>
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by
-------------
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be
---------
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indehture, which has the text of this
Note in larger type. Requests may be made to: Collins & Aikman Floorcoverings,
Inc., 311 Smith Industrial Boulevard, Dalton, Georgia 30722, Attn: President.
B-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to transfer
this Note on the books of the Company. The agent may substitute another to act
for him.
Dated: Signed:
-------------------------------- ------------------------------
(Sign exactly as name appears
on the other side of this Note)
Signature Guarantee:
--------------------------------------------
B-8
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you
elect to have purchased:
$
------------------------
Dated:
---------------------------- ------------------------------------
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular
without alteration or enlargement or
any change whatsoever and be
guaranteed by the endorser s bank or
broker.
Signature Guarantee:
---------------------------------
B-9
<PAGE>
Exhibit C
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
------------------, ----
IBJ Schroder Bank & Trust
Company
One State Street
New York, New York 10004
Attention: Securities Processing
Window Level SC1
Re: Collins & Aikman Floorcoverings, Inc.
10% Senior Subordinated Notes due 2007
--------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 10% Senior
Subordinated Notes due 2007 (the "Notes") of Collins & Aikman Floorcoverings,
Inc. (the "Company"), we confirm that:
1. We have received a copy of the Offering Memorandum (the
"Offering Memorandum"), dated January 29, 1997 relating to the Notes and such
other information as we deem necessary in order to make our investment decision.
we acknowledge that we have read and agreed to the matters stated on pages (i)-
(ii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum, including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Notes (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Notes
C-1
<PAGE>
prior to the date which is three years after the original issuance of the Notes,
we will do so only (i) to the Company or any of its subsidiaries, (ii) inside
the Vnited States in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined in Rule 144A under the Securities
Act), (iii) inside the United States to an institutional "accredited investor"
(as defined below) that, prior to such transfer, furnishes (or has furnished on
its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture
relating to the Notes), a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Notes, (iv) outside
the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (v) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, and we further agree to provide
to any person purchasing any of the Notes from us a notice advising such
purchaser that resales of the Notes are restricted as stated herein.
4. We are not acquiring the Notes for or on behalf of, and will
not transfer the Notes to, any pension or welfare plan (as defined in Section 3
of the Employee Retirement Income Security Act of 1974), except as permitted in
the section entitled "Transfer Restrictions" of the Offering Memorandum.
5. We understand that, on any proposed resale of any Notes, we
will be required to furnish to the Trustee and the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or their investment, as the case may be.
7. We are acquiring the Notes purchased by us for our account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
C-2
<PAGE>
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.
Very truly yours,
By:
----------------------------------
Name:
Title:
C-3
<PAGE>
Exhibit D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Securities Processing
Window Level SC1
Re: Collins & Aikman Floorcoverings, Inc.
(the "Company")
10% Senior Subordinated Notes due 2007
(the "Notes")
--------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $ _______________
aggregate principal amount of the Notes, we confirm that such sale has been
effected pursuant to and in accordance with Regulation S under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we
represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we
nor any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
D-1
<PAGE>
(4) the transaction is not part of 8 plan or scheme to evade
the registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in.Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------------
Authorized Signature
D-2
<PAGE>
EXHIBIT 4.3
-----------
CUSIP No.:
COLLINS & AIKMAN FLOORCOVERINGS, INC.
SERIES B 10% SENIOR SUBORDINATED NOTE DUE 2007
No. $
COLLINS & AIKMAN FLOORCOVERINGS, INC , a Delaware corporation
(the "Company," which term includes any successor entity), for value received
promises to pay to or registered assigns, the principal sum
of Dollars, on January 15,
2007.
Interest Payment Dates: January 15
and July 15
Record Dates: January 1
and July 1
Reference is made to the further provisions of this Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers and a
facsimile of its corporate seal to be affixed hereto or imprinted hereon.
COLLINS & AIKMAN FLOORCOVERINGS, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Certificate of Authentication
This is one of the Series B 10% Senior Subordinated Notes due
2007 referred to in the within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
Dated: By:
--------------------------- -----------------------------
Authorized Signatory
B-1
<PAGE>
(REVERSE OF SECURITY)
SERIES B 10% SENIOR SUBORDINATED
NOTE DUE 2007
1. Interest. COLLINS & AIKMAN FLOORCOVERINGS, INC., a Delaware
--------
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at the rate per annum shown above. Interest on the Notes will
accrue from the most recent date on which interest has been paid or, if no
interest has been paid, from February 6, 1997. The Company will pay interest
semi-annually in arrears on each Interest Payment Date, commencing July 15,
1997. Interest will be computed on the basis of a 360-day year of twelve 30-
day months.
The Company shall pay interest on overdue principal and on
overdue installments of interest from time to time on demand at the rate borne
by the Notes plus 2% per annum and on overdue installments of interest
(without regard to any applicable grace periods) to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
-----------------
Notes (except defaulted interest) to the Persons who are the registered
Holders at the close of business on the Record Date immediately preceding the
Interest Payment Date even if the Notes are cancelled on registration of
transfer or registration of exchange after such Record Date. Holders must
surrender Notes to a Paying Agent to collect principal payments. The Company
shall pay principal and interest in money of the United States that at the
time of payment is legal tender for payment of public and private debts ("U.S.
Legal Tender"). However, the Company may pay principal and interest by its
check payable in such U.S. Legal Tender. The Company may deliver any such
interest payment to the Paying Agent or to a Holder at the Holder's registered
address.
3. Paying Agent and Reqistrar. Initially, IBJ Schroder Bank &
--------------------------
Trust Company, a New York banking corporation (the "Trustee"), will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-Registrar without notice to the Holders.
4. Indenture. The Company issued the Notes under an Indenture,
---------
dated as of February 6, 1997 (as supplemented by the First Supplemental
Indenture thereto, dated as of February 6, 1997, the "Indenture"), between the
Company and the Trustee. This Note is one of a duly authorized issue of
Exchange Notes of the Company designated as its Series B 10% Senior
Subordinated Notes due 2007 (the "Exchange Notes"). The Notes are limited in
aggregate principal amount to
B-2
<PAGE>
$100,000,000. The Notes include the Initial Notes (the 10% Senior Subordinated
Notes due 2007) and the Exchange Notes, issued in exchange for the Initial
Notes pursuant to the Indenture. The Initial Notes and the Exchange Notes are
treated as a single class of securities under the Indenture. Capitalized terms
herein are used as defined in the Indenture unless otherwise defined herein.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.
Code (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of the
Indenture. Notwithstanding anything to the contrary herein, the Notes are
subject to all such terms, and Holders of Notes are referred to the Indenture
and said Act for a statement of them. The Notes are general unsecured
obligations of the Company.
5. Subordination. The Notes are subordinated in right of
-------------
payment, in the manner and to the extent set forth in the Indenture, to the
prior payment in full in cash or Cash Equivalents of all Senior Debt of the
Company, whether outstanding on the date of the Indenture or thereafter
created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof
agrees to be bound by such provisions and authorizes and expressly directs the
Trustee, on his behalf, to take such action as may be necessary or appropriate
to effectuate the subordination provided for in the Indenture and appoints the
Trustee his attorney-in-fact for such purposes.
6. Redemption.
----------
(a) Optional Redemption. The Notes will be redeemable, at the
-------------------
Company's option, in whole at any time or in part from time to time, on and
after January 15, 2002, upon not less than 30 nor more than 60 days notice, at
the following redemption prices (expressed as percentages of the principal
amount thereof) if redeemed during the twelve-month period commencing on
January 15 of the year set forth below, plus, in each case, accrued interest
to the date of redemption:
Year Percentage
2002.......................................... 105.000%
2003.......................................... 103.333%
2004.......................................... 101.667%
2005 and thereafter........................... 100.000%
(b) Optional Redemption Upon Public Equity Offerings. At any
------------------------------------------------
time, or from time to time, on or prior to January 15, 2000, the Company may,
at its option, use the net cash proceeds of one or more Public Equity
Offerings (as
B-3
<PAGE>
defined in the Indenture) to redeem up to 35% of the aggregate principal
amount of Notes originally issued at a redemption price equal to 110% of the
principal amount thereof plus, in each case, accrued interest to the date of
redemption; provided that at least 65% of the principal amount of Notes
originally issued remains outstanding immediately after any such redemption.
In order to effect the foregoing redemption with the proceeds
of any Public Equity Offering, the Company shall make such redemption not more
than 120 days after the consummation of any such Public Equity Offering.
7. Notice of Redemption. Notice of redemption will be mailed at
--------------------
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Notes to be redeemed at such Holder's registered address. Notes in
denominations larger than S1,000 may be redeemed in part.
Except as set forth in the Indenture, if monies for the
redemption of the Notes called for redemption shall have been deposited with
the Paying Agent for redemption on such Redemption Date, then, unless the
Company defaults in the payment of such Redemption Price plus accrued and
unpaid interest, if any, the Notes called for redemption will cease to bear
interest from and after such Redemption Date and the only right of the Holders
of such Notes will be to receive payment of the Redemption Price plus accrued
and unpaid interest, if any.
8. Offers to Purchase. Sections 4.15 and 4.16 of the Indenture
------------------
provide that, after certain Asset Sales (as defined in the Indenture) and upon
the occurrence of a Change of Control (as defined in the Indenture), and
subject to further limitations contained therein, the Company will make an
offer to purchase certain amounts of the Notes in accordance with the
procedures set forth in the Indenture.
9. Denominations; Transfer; Exchange. The Notes are in
---------------------------------
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. A Holder shall register the transfer of or exchange Notes
in accordance with the Indenture. The Registrar may require a Holder, smong
other things, to furnish appropriate endorsements and transfer documents and
to pay certain transfer taxes or similar governmental charges payable in
connection therewith as permitted by the Indenture. The Registrar need not
register the transfer of or exchange of any Notes or portions thereof selected
for redemption.
B-4
<PAGE>
10. Persons Deemed Owners. The registered Holder of a Note
---------------------
shall be treated as the owner of it for all purposes.
11. Unclaimed Money. If money for the payment of principal or
---------------
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
12. Discharge Prior to Redemption or Maturity. If the Company
-----------------------------------------
at any time deposits with the Trustee U.S. Legal Tender or U.S. Government
Obligations sufficient to pay the principal of and interest on the Notes to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Notes (including certain covenants, but excluding its
obligation to pay the principal of and interest on the Notes).
13. Amendment; Supplement; Waiver. Subject to certain
-----------------------------
exceptions, the or the Notes may be amended or supplemented with the written
consent of the Holders of at least a majority in aggregate principal amount of
the Notes then outstanding, and any existing Default or Event of Default or
noncompliance with any provision may be waived with the written consent of the
Holders of a majority in aggregate principal amount of the Notes then
outstanding. Without notice to or consent of any Holder, the parties thereto may
amend or supplement the Indenture or the Notes to, among other things, cure any
ambiguity, defect or inconsistency, provide for uncertificated Notes in addition
to or in place of certificated Notes, or comply with Article Five of the
Indenture or make any other change that does not adversely affect in any
material respect the rights of any Holder of a Note.
14. Restrictive Covenants. The Indenture imposes certain
---------------------
limitations on the ability of the Company and its Restricted Subsidiaries to,
among other things, incur additional Indebtedness, make payments in respect of
its Capital Stock or certain Indebtedness, enter into transactions with
Affiliates, create dividend or other payment restrictions affecting
Subsidiaries, merge or consolidate with any other Person, sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets or adopt a plan of liquidation. Such limitations are subject to a number
of important qualifications and exceptions. The Company must annually report to
the Trustee on compliance with such limitations.
B-5
<PAGE>
15. Successors. When a successor assumes, in accordance with
----------
the Indenture, all the obligations of its predecessor under the Notes and the
Indenture, the predecessor will be released from those obligations.
16. Defaults and Remedies. If an Event of Default occurs and is
---------------------
continuing, the Trustee or the Holders of at least 25% in aggregate principal
amount of Notes then outstanding may declare all the Notes to be due and payable
in the manner, at the time and with the effect provided in the Indenture.
Holders of Notes may not enforce the Indenture or the Notes except as provided
in the Indenture. The Trustee is not obligated to enforce the Indenture or the
Notes unless it has received indemnity reasonably satisfactory to it. The
Indenture permits, subject to certain limitations therein provided, Holders of a
majority in aggregate principal amount of the Notes then outstanding to direct
the Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of Notes notice of any continuing Default or Event of Default (except a
Default in payment of principal or interest) if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company. The Trustee under the
-----------------------------
Indenture, in its individual or any other capacity, may become the owner or
pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or
their respective Affiliates as if it were not the Trustee.
18. No Recourse Against Others. No stockholder, director,
--------------------------
officer, employee or incorporator, as such, of the Company shall have any
liability for any obligation of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
19. Authentication. This Note shall not be valid until the
--------------
Trustee or Authenticating Agent manually signs the certificate of authentication
on this Note.
20. Governinq Law. The Laws of the State of New York shall
-------------
govern this Note and the Indenture, without regard to principles of conflict of
laws.
21. Abbreviations and Defined Terms. Customary abbreviations may
-------------------------------
be used in the name of a Holder of a Note or an assignee, such as: TEN COM (=
tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint
tenants with
B-6
<PAGE>
right of survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
22. CUSIP Numbers. Pursuant to a recommendation promulgated by
-------------
the Committee on Uniform Security Identification Procedures, the Company has
caused CUSIP numbers to be printed on the Notes as a convenience to the Holders
of the Notes. No representation is made as to the accuracy of such numbers as
printed on the Notes and reliance may be placed only on the other identification
numbers printed hereon.
23. Indenture. Each Holder, by accepting a Note, agrees to be
---------
bound by all of the terms and provisions of the Indenture, as the same may be
amended from time to time.
The Company will furnish to any Holder of a Note upon written
request and without charge a copy of the Indehture, which has the text of this
Note in larger type. Requests may be made to: Collins & Aikman Floorcoverings,
Inc., 311 Smith Industrial Boulevard, Dalton, Georgia 30722, Attn: President.
B-7
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Note, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Note to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code and
social security or tax ID number of assignee)
and irrevocably appoint , agent to transfer
this Note on the books of the Company. The agent may substitute another to act
for him.
Dated: Signed:
-------------------------------- ------------------------------
(Sign exactly as name appears
on the other side of this Note)
Signature Guarantee:
--------------------------------------------
B-8
<PAGE>
[OPTION OF HOLDER TO ELECT PURCHASE]
If you want to elect to have this Note purchased by the Company pursuant to
Section 4.15 or Section 4.16 of the Indenture, check the appropriate box:
Section 4.15 [ ]
Section 4.16 [ ]
If you want to elect to have only part of this Note purchased by the Company
pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you
elect to have purchased:
$
------------------------
Dated:
---------------------------- ------------------------------------
NOTICE: The signature on this
assignment must correspond with the
name as it appears upon the face of
the within Note in every particular
without alteration or enlargement or
any change whatsoever and be
guaranteed by the endorser s bank or
broker.
Signature Guarantee:
---------------------------------
B-9
<PAGE>
EXHIBIT 4.4
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of February 6, 1997
By and Between
CAF ACQUISITION CORPORATION
and
BT SECURITIES CORPORATION,
as Initial Purchaser
10% Senior Subordinated Notes due 2007
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Definitions................................................ 2
2. Exchange Offer............................................. 6
3. Shelf Registration......................................... 10
4. Additional Interest........................................ 12
5. Registration Procedures.................................... 15
6. Registration Expenses...................................... 26
7. Indemnification............................................ 27
8. Rules 144 and 144A......................................... 32
9. Underwritten Registrations................................. 33
10. Miscellaneous.............................................. 33
(a) No Inconsistent Agreements........................... 33
(b) Adjustments Affecting Registrable
Notes.............................................. 33
(c) Amendments and Waivers............................... 33
(d) Notices.............................................. 34
(e) Successors and Assigns............................... 36
(f) Counterparts......................................... 36
(g) Headings............................................. 36
(h) Governing Law........................................ 36
(i) Severability......................................... 36
(j) Securities Held by CAF or Its
Affiliates......................................... 36
(k) Third Party Beneficiaries............................ 37
i
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is dated as of
-----------
February 6, 1997, by and between CAF ACQUISITION CORPORATION, a Virginia
corporation ("CAF"), and BT SECURITIES CORPORATION (the "Initial Purchaser").
-------------------
This Agreement is entered into in connection with the Purchase Agreement,
dated as of January 29, 1997, by and among CAF, CAF Holdings, Inc. and the
Initial Purchaser (the "Purchase Agreement"), which provides for the sale by
--------------------
CAF to the Initial Purchaser of $100,000,000 aggregate principal amount of its
10% Senior Subordinated Notes due 2007 (the "Notes"). In order to induce the
-------
Initial Purchaser to enter into the Purchase Agreement, CAF has agreed to
provide the registration rights set forth in this Agreement for the benefit of
the Initial Purchaser and any subsequent holder or holders of the Notes. The
execution and delivery of this Agreement is a condition to the Initial
Purchaser's obligation to purchase the Notes under the Purchase Agreement.
The Notes are being issued and sold in connection with the acquisition (the
"Acquisition") of Collins & Aikman Floor Coverings, Inc., a Delaware corporation
- -------------
(the "Company"), by CAF pursuant to an agreement dated as of December 9, 1996,
---------
entered into by and among Holdings, CAF, the Company, Collins & Aikman Products,
Co. and Collins & Aikman Floor Coverings Group, Inc. Simultaneously with the
closing of the sale of the Notes, CAF will acquire from the Seller all of the
outstanding capital stock of the Company.
Immediately after the consummation of the Acquisition, CAF will merge (the
"Merger") with and into the Company and the Company shall change its name to
- --------
Collins & Aikman Floorcoverings, Inc. The time of the consummation of the Merger
is referred to herein as the "Effective Time." At the Effective Time, (i) the
Company and the Trustee will enter into a first supplemental indenture to the
Indenture (the "Supplemental Indenture") providing for the express assumption
------------------------
by the Company (as survivor of the Merger) of the covenants, agreements and
undertakings of CAF in the Indenture and under the Notes, (ii) the Company will
execute an Assumption Agreement pursuant to which the Company (as survivor of
the Merger) shall expressly assume the obligations of CAF under this Agreement
and the Purchase Agreement and (iii) the obligations of CAF under this Agreement
will, by operation of law, become obligations of the Company. References to the
Indenture as of or after the Effective Time will refer to the Indenture as
supplemented by the Supplemental Indenture and references to the
<PAGE>
-2-
Purchase Agreement as of or after the Effective Time will refer to the Purchase
Agreement together with the Assumption Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall
have the following meanings:
Acquisition: See the introductory paragraphs hereto.
-----------
Additional Interest: See Section 4(a) hereof.
-------------------
Advice: See the last paragraph of Section 5 hereof.
------
Agreement: See the introductory paragraphs hereto.
---------
Applicable Period: See Section 2(b) hereof.
-----------------
CAF: See the introductory paragraphs hereto.
---
Company: See the introductory paragraphs hereto.
-------
Effectiveness Date: With respect to (i) the Exchange Offer
------------------
Registration Statement, the 120th day after the Issue Date and (ii) any Shelf
Registration Statement, the 60th day after the Filing Date with respect thereto.
Effectiveness Period: See Section 3(a) hereof.
--------------------
Effective Time: See the introductory paragraphs hereto.
--------------
Event Date: See Section 4(b) hereof.
----------
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a) hereof.
--------------
Exchange Offer: See Section 2(a) hereof.
--------------
Exchange Offer Registration Statement: See Section 2(a) hereof.
-------------------------------------
<PAGE>
-3-
Filing Date: (A) If no Registration Statement has been filed by
-----------
CAF pursuant to this Agreement, the 60th day after the Issue Date; and (B) in
any other case (which may be applicable notwithstanding the consummation of the
Exchange Offer), the 45th day after the delivery of a Shelf Notice.
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c) hereof.
------------------
Indemnifying Person: See Section 7(c) hereof.
-------------------
Indenture: See the introductory paragraphs hereto.
---------
Initial Purchaser: See the introductory paragraphs hereto.
-----------------
Initial Shelf Registration: See Section 3(a) hereof.
--------------------------
Inspectors: See Section 5(o) hereof.
----------
Issue Date: February 6, 1997, the date of original issuance of the
----------
Notes.
Merger: See the introductory paragraphs hereto.
------
NASD: See Section 5(s) hereof.
----
Notes: See the introductory paragraphs hereto.
-----
Participant: See Section 7(a) hereof.
-----------
Participating Broker-Dealer: See Section 2(b) hereof.
---------------------------
Person: An individual, trustee, corporation, partnership, joint
------
stock company, trust, unincorporated association, union, business association,
firm or other legal entity.
Private Exchange: See Section 2(b) hereof.
----------------
Private Exchange Notes: See Section 2(b) hereof.
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an
<PAGE>
-4-
effective registration statement in reliance upon Rule 430A under the Securities
Act and any term sheet filed pursuant to Rule 434 under the Securities Act), as
amended or supplemented by any prospectus supplement, and all other amendments
and supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
Purchase Agreement: See the introductory paragraphs hereof.
------------------
Records: See Section 5(o) hereof.
-------
Registrable Notes: Each Note upon its original issuance and at all
-----------------
times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof
is applicable upon original issuance and at all times subsequent thereto and
each Private Exchange Note upon original issuance thereof and at all times
subsequent thereto, until (i) a Registration Statement (other than, with respect
to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the
Exchange Offer Registration Statement) covering such Note, Exchange Note or
Private Exchange Note has been declared effective by the SEC and such Note,
Exchange Note or such Private Exchange Note, as the case may be, has been
disposed of in accordance with such effective Registration Statement, (ii) such
Note has been exchanged pursuant to the Exchange Offer for an Exchange Note or
Exchange Notes that may be resold without restriction under federal securities
laws, (iii) such Note, Exchange Note or Private Exchange Note, as the case may
be, ceases to be outstanding for purposes of the Indenture or (iv) such Note,
Exchange Note or Private Exchange Note, as the case may be, may be resold with-
out restriction pursuant to Rule 144 under the Securities Act.
Registration Statement: Any registration statement of CAF or, at
----------------------
and after the Effective Time, the Company that covers any of the Notes, the
Exchange Notes or the Private Exchange Notes filed with the SEC under the
Securities Act, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such
--------
Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities
<PAGE>
-5-
made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of CAF or the Company of such
securities being free of the registration and prospectus delivery requirements
of the Securities Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such
--------
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the
--------------
rules and regulations of the SEC promulgated thereunder.
Seller: See the introductory paragraphs hereto.
------
Shelf Notice: See Section 2(b) hereof.
------------
Shelf Registration: See Section 3(b) hereof.
------------------
Shelf Registration Statement: Any Registration Statement relating to
----------------------------
a Shelf Registration.
Subsequent Shelf Registration: See Section 3(b) hereof.
-----------------------------
Supplemental Indenture: See the introductory paragraphs hereto.
----------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture.
-------
Underwritten registration or underwritten offering: A registration
--------------------------------------------------
in which securities of CAF or, at and after the Effective Time, the Company are
sold to an underwriter for reoffering to the public.
2. Exchange Offer
--------------
(a) To the extent not prohibited by applicable law or applicable
interpretation of the staff of the Division of
<PAGE>
-6-
Corporation Finance of the SEC, CAF shall and, at and after the Effective Time,
the Company shall file with the SEC, no later than the Filing Date, a
Registration Statement (the "Exchange Offer Registration Statement") on an
appropriate registration form with respect to a registered offer (the "Exchange
Offer") to exchange any and all of the Registrable Notes for a like aggregate
principal amount of notes (the "Exchange Notes") of CAF or, at and after the
Effective Time, the Company that are identical in all material respects to the
Notes except that the Exchange Notes shall contain no restrictive legend
thereon. The Exchange Offer shall comply with all applicable tender offer rules
and regulations under the Exchange Act and other applicable laws. CAF shall or,
at and after the Effective Time, the Company shall use its best efforts to (x)
cause the Exchange Offer Registration Statement to be declared effective under
the Securities Act on or before the Effectiveness Date; (y) keep the Exchange
Offer open for at least 30 days (or longer if required by applicable law) after
the date that notice of the Exchange Offer is mailed to Holders; and (z) con-
summate the Exchange Offer on or prior to the 60th day follow-ing the date on
which the Exchange Offer Registration Statement is declared effective by the
SEC. If, after the Exchange Offer Registration Statement is initially declared
effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes
thereunder is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, the Exchange
Offer Registration Statement shall be deemed not to have become effective for
purposes of this Agreement.
Each Holder that participates in the Exchange Offer will be required
to represent that any Exchange Notes to be received by it will be acquired in
the ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes in violation of
the provisions of the Securities Act, and that such Holder is not an affiliate
of CAF or the Company within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement shall continue to apply, solely with
respect to Registrable Notes that are Private Exchange Notes, Exchange Notes as
to which Section 2(c)(iv) is applicable and Exchange Notes held by Par-
ticipating Broker-Dealers, and CAF shall or, at and after the Effective Time,
the Company shall have no further obligation to register Registrable Notes
(other than Private Exchange Notes
<PAGE>
-7-
and other than in respect of any Exchange Notes as to which clause 2(c)(iv)
hereof applies) pursuant to Section 3 hereof. No securities other than the
Exchange Notes shall be included in the Exchange Offer Registration Statement.
(b) CAF shall or, at and after the Effective Time, the Company shall
include within the Prospectus contained in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," reasonably acceptable to
the Holders, which shall contain a summary statement of the positions taken or
policies made by the staff of the SEC with respect to the potential
"underwriter" status of any broker-dealer that is the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such
broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"), whether
---------------------------
such positions or policies have been publicly disseminated by the staff of the
SEC or such positions or policies represent the prevailing views of the staff of
the SEC. Such "Plan of Distribution" section shall also expressly permit, to
the extent permitted by applicable policies and regulations of the SEC, the use
of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including, to the extent permitted by
applicable policies and regulations of the SEC, all Participating Broker-
Dealers, and include a statement describing the means by which Participating
Broker-Dealers may resell the Exchange Notes in compliance with the Securities
Act.
CAF shall or, at and after the Effective Time, the Company shall use
its reasonable best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement the Prospectus contained therein in order
to permit such Prospectus to be lawfully delivered by all Persons subject to the
prospectus delivery requirements of the Securities Act for such period of time
as is necessary to comply with applicable law in connection with any resale of
the Exchange Notes covered thereby; provided, however, that such period shall
-------- -------
not exceed 180 days after such Exchange Offer Registra-tion Statement is
declared effective (or such longer period if extended pursuant to the last
paragraph of Section 5 hereof) (the "Applicable Period").
---------- ------
If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Notes acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled to participate in the Exchange
Offer, CAF or, at and after the Effective Time, the Company upon the
<PAGE>
-8-
request of any such Holder shall simultaneously with the delivery of the
Exchange Notes in the Exchange Offer, issue and deliver to any such Holder, in
exchange (the "Private Exchange") for such Notes held by any such Holder, a like
------- --------
principal amount of notes (the "Private Exchange Notes") of CAF or, at and after
------- -------- -----
the Effective Time, the Company that are identical in all material respects to
the Exchange Notes (except that they may bear a customary legend with respect to
restrictions on transfer). The Private Exchange Notes shall be issued pursuant
to the same indenture as the Exchange Notes and bear the same CUSIP number as
the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from (A) the later of (i) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (ii) if the
Notes are surrendered for exchange on a date subsequent to the record date for
an interest payment date to occur on or after the date of such exchange and as
to which interest will be paid, the date of such interest payment or (B) if no
interest has been paid on the Notes, from the date of the original issuance of
the Notes.
In connection with the Exchange Offer, CAF shall or, at and after the
Effective Time, the Company shall:
(1) mail, or cause to be mailed, to each Holder entitled to
participate in the Exchange Offer a copy of the Prospectus forming part of
the Exchange Offer Registration Statement, together with an appropriate
letter of transmittal and related documents;
(2) keep the Exchange Offer open for not less than 30 days after the
date that notice of the Exchange Offer is mailed to Holders (or longer if
required by applicable law);
(3) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(4) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which
the Exchange Offer shall remain open; and
(5) otherwise comply in all material respects with all applicable
laws, rules and regulations.
<PAGE>
-9-
As soon as practicable after the close of the Exchange Offer and the
Private Exchange, if any, CAF shall or, at and after the Effective Time, the
Company shall:
(1) accept for exchange all Registrable Notes validly tendered and
not validly withdrawn pursuant to the Exchange Offer and the Private
Exchange, if any;
(2) deliver to the Trustee for cancellation all Registrable Notes so
accepted for exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may
be, equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Offer and the Private Exchange shall not be subject to
any conditions, other than that (i) the Exchange Offer or Private Exchange, as
the case may be, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) no action or proceeding shall have
been instituted or threatened in any court or by any governmental agency which
might materially impair the ability of the Company to proceed with the Exchange
Offer or the Private Exchange, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Company and
(iii) all governmental approvals shall have been obtained, which approvals the
Company deems necessary for the consummation of the Exchange Offer or Private
Exchange.
The Exchange Notes and the Private Exchange Notes shall be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture and which, in either case, has been qualified under the TIA or
is exempt from such qualification and shall provide that the Exchange Notes
shall not be subject to the transfer restrictions set forth in the Indenture.
The Indenture or such indenture shall provide that the Exchange Notes, the
Private Exchange Notes and the Notes shall vote and consent together on all
matters as one class and that none of the Exchange Notes, the Private Exchange
Notes or the Notes will have the right to vote or consent as a separate class on
any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the staff of the SEC, CAF is not and, at and after the
Effective Time, the Company is not permitted to effect the Exchange Offer, (ii)
the Exchange Offer
<PAGE>
-10-
is not consummated within 180 days of the Issue Date, (iii) the Initial
Purchaser or any holder of Private Exchange Notes so requests in writing to CAF
or, at and after the Effective Time, the Company at any time after the
consummation of the Exchange Offer, or (iv) in the case of any Holder that
participates in the Exchange Offer, such Holder does not receive Exchange Notes
on the date of the exchange that may be sold without restriction under federal
securities laws (other than due solely to the status of such Holder as an
affiliate of the Company within the meaning of the Securities Act) and so
notifies CAF or, at and after the Effective Time, the Company within 30 days
after such Holder first becomes aware of such restrictions, in the case of each
of clauses (i) to and including (iv) of this sentence, then CAF shall and, at
and after the Effective Time, the Company shall promptly deliver to the Holders
and the Trustee written notice thereof (the "Shelf Notice") and shall file a
------------
Shelf Registration pursuant to Section 3 hereof.
3. Shelf Registration
------------------
If at any time a Shelf Notice is delivered as contemplated by
Section 2(c) hereof, then:
(a) Shelf Registration. CAF shall or, at and after the Effective
------------------
Time, the Company shall file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all of
the Registrable Notes not permitted to be exchanged in the Exchange Offer in
accordance with the terms of this Agreement, Private Exchange Notes and Exchange
Notes as to which Section 2(c)(iv) is applicable (the "Initial Shelf
-------------
Registration"). CAF shall or, at and after the Effective Time, the Company shall
- ------------
use its best efforts to file with the SEC the Initial Shelf Registration on or
before the applicable Filing Date. The Initial Shelf Registration shall be on
Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by Holders in the manner or manners designated by
them (including, without limitation, one or more underwritten offerings). CAF
shall or, at and after the Effective Time, the Company shall not permit any
securities other than the Registrable Notes to be included in the Initial Shelf
Registration or any Subsequent Shelf Registration (as defined below).
CAF shall or, at and after the Effective Time, the Company shall use
its best efforts to cause the Initial Shelf Registration to be declared
effective under the Securities Act on or prior to the Effectiveness Date and to
keep the Initial Shelf Registration continuously effective under the Securities
<PAGE>
-11-
Act until the date which is three years from the Issue Date, subject to
extension pursuant to the last paragraph of Section 5 hereof (the "Effectiveness
-------------
Period"), or such shorter period ending when all Registrable Notes covered by
- ------
the Shelf Registration have been sold in the manner set forth and as contem-
plated in the Initial Shelf Registration or, if applicable, a Subsequent Shelf
Registration; provided, however, that the Effectiveness Period in respect of the
-------- -------
Initial Shelf Registration shall be extended to the extent required to permit
dealers to comply with the applicable prospectus delivery requirements of Rule
174 under the Securities Act and as otherwise provided herein and shall be
subject to reduction to the extent that the applicable provisions of Rule 144(k)
are amended or revised to reduce the three year holding period set forth
therein.
No holder of Registrable Notes may include any of its Registrable
Notes in any Shelf Registration Statement pursuant to this Agreement unless and
until such holder furnishes to CAF and, at and after the Effective Time the
Company in writing, within 15 business days after receipt of a request therefor,
such information as CAF and, at and after the Effective Time, the Company may
reasonably request for use in connection with any Shelf Registration Statement
or Prospectus or preliminary prospectus included therein. No holder of
Registrable Notes shall be entitled to Additional Interest pursuant to Section 4
hereof unless and until such holder shall have provided all such reasonably
requested information. Each holder of Registrable Notes as to which any Shelf
Registration Statement is being effected agrees to furnish promptly to CAF and,
at and after the Effective Time, the Company all information required to be
disclosed in order to make information previously furnished to CAF and, at and
after the Effective Time, the Company by such Holder not materially misleading.
(b) Subsequent Shelf Registrations. If the Initial Shelf
------------------------------
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale of all of the securities registered thereunder), CAF shall or, at and after
the Effective Time, the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within 30 days of such cessation of effectiveness amend the Initial Shelf
Registration in a manner to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration Statement
pursuant to Rule 415 covering all of the Registrable Notes covered by and not
sold under the Initial Shelf Registration or an earlier Subsequent Shelf
Registration (each,
<PAGE>
-12-
a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed,
-----------------------------
CAF shall or, at and after the Effective Time, the Company shall use its best
efforts to cause the Subsequent Shelf Registration to be declared effective
under the Securities Act as soon as practicable after such filing and to keep
such subsequent Shelf Registration continuously effective for a period equal to
the number of days in the Effectiveness Period less the aggregate number of days
during which the Initial Shelf Registration or any Subsequent Shelf
Registration was previously continuously effective. As used herein the term
"Shelf Registration" means the Initial Shelf Registration and any Subsequent
------------------
Shelf Registration.
(c) Supplements and Amendments. CAF shall or, at and after the
--------------------------
Effective Time, the Company shall promptly sup-plement and amend any Shelf
Registration if required by the rules, regulations or instructions applicable to
the registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested by the Holders of a majority in
aggregate principal amount of the Registrable Notes covered by such Registration
Statement or by any underwriter of such Registrable Notes.
(d) Withdrawal of Stop Orders. If the Shelf Registration ceases to
-------------------------
be effective for any reason at any time during the Effectiveness Period (other
than because of the sale of all of the securities registered thereunder), CAF
shall or, at and after the Effective Time, the Company shall use its best
efforts to obtain the prompt withdrawal of any order suspending the
effectiveness thereof.
4. Additional Interest
-------------------
(a) CAF and, at and after the Effective Time, the Company and the
Initial Purchaser agree that the Holders will suffer damages if CAF or, at and
after the Effective Time, the Company fails to fulfill its obligations under
Section 2 or Section 3 hereof and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, CAF and, at and after the
Effective Time, the Company agree to pay, as liquidated damages, additional
interest on the Notes ("Additional Interest") under the circumstances and to
-------------------
the extent set forth below (each of which shall be given independent effect):
(i) if (A) neither the Exchange Offer Registration Statement nor
the Initial Shelf Registration has been filed on or prior to the Filing
Date applicable thereto (i.e., 60 days after the Issue Date) or
---
<PAGE>
-13-
(B) notwithstanding that CAF or, at and after the Effective Time, the
Company has consummated or will consummate the Exchange Offer, CAF or, at
and after the Effective Time, the Company is required to file a Shelf
Registration and such Shelf Registration is not filed on or prior to the
Filing Date applicable thereto, then, commencing on the day after any such
Filing Date, Additional Interest shall accrue on the principal amount of
the Notes at a rate of 0.50% per annum for the first 90 days immediately
following such applicable Filing Date, and such Additional Interest rate
shall increase by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; or
(ii) if (A) neither the Exchange Offer Registration Statement nor the
Initial Shelf Registration is declared effective by the SEC on or prior to
the Effectiveness Date applicable thereto (i.e., 120 days after the Issue
Date) or (B) notwithstanding that CAF or, at and after the Effective Time,
the Company has consummated or will consummate the Exchange Offer, CAF or,
at and after the Effective Time, the Company is required to file a Shelf
Registration and such Shelf Registration is not declared effective by the
SEC on or prior to the Effectiveness Date applicable to such Shelf
Registration, then, commencing on the day after such Effectiveness Date,
Additional Interest shall accrue on the principal amount of the Notes at a
rate of 0.50% per annum for the first 90 days immediately following the day
after such Effectiveness Date, and such Additional Interest rate shall
increase by an additional 0.50% per annum at the beginning of each
subsequent 90-day period; or
(iii) if (A) CAF has not or, at and after the Effective Time, the
Company has not exchanged Exchange Notes for all Notes validly tendered in
accordance with the terms of the Exchange Offer on or prior to the 45th day
after the date on which the Exchange Offer Registration Statement relating
thereto was declared effective or (B) if applicable, a Shelf Registration
has been declared effective and such Shelf Registration ceases to be
effective at any time during the Effectiveness Period, then Additional
Interest shall accrue on the principal amount of the Notes at a rate of
0.50% per annum for the first 90 days commencing on the (x) 46th day after
such effective date, in the case of (A) above, or (y) the day such Shelf
Registration ceases to be effective in the case of (B) above, and such
Additional Interest rate shall increase by
<PAGE>
-14-
an additional 0.50% per annum at the beginning of each such subsequent 90-
day period;
provided, however, that the Additional Interest rate on the Notes may not exceed
- -------- -------
at any one time in the aggregate 1.0% per annum; provided, further, however,
-------- ------- -------
that (1) upon the filing of the applicable Exchange Offer Registration Statement
or the applicable Shelf Registration as required hereunder (in the case of
clause (i) above of this Section 4), (2) upon the effectiveness of the Exchange
Offer Registration Statement or the applicable Shelf Registration Statement as
required hereunder (in the case of clause (ii) of this Section 4), or (3) upon
the exchange of the Exchange Notes for all Notes tendered (in the case of clause
(iii)(A) of this Section 4), or upon the effectiveness of the applicable Shelf
Registration Statement which had ceased to remain effective (in the case of
(iii)(B) of this Section 4), Additional Interest on the Notes in respect of
which such events relate as a result of such clause (or the relevant subclause
thereof), as the case may be, shall cease to accrue.
(b) CAF shall and, at and after the Effective Time, the Company
shall notify the Trustee within one business day after each and every date on
which an event occurs in respect of which Additional Interest is required to be
paid (an "Event Date"). Any amounts of Additional Interest due pursuant to
----- ----
(a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable in cash semi-
annually on each February 15 and August 15 (to the holders of record on the
February 1 and August 1 immediately preceding such dates), commencing with the
first such date occurring after any such Additional Interest commences to
accrue. The amount of Additional Interest will be determined by multiplying the
applicable Additional Interest rate by the principal amount of the Registrable
Notes, multiplied by a fraction, the numerator of which is the number of days
such Additional Interest rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months and, in the case
of a partial month, the actual number of days elapsed), and the denominator of
which is 360.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant to
Sections 2 or 3 hereof, CAF shall and, at and after the Effective Time, the
Company shall effect such registrations to permit the sale of the securities
covered thereby in accordance with the intended method or methods of disposition
thereof, and pursuant thereto and in connection
<PAGE>
-15-
with any Registration Statement filed by CAF or, at and after the Effective
Time, the Company hereunder CAF shall and, at and after the Effective Time, the
Company shall:
(a) Prepare and file with the SEC prior to the applicable Filing
Date, a Registration Statement or Registration Statements as prescribed by
Sections 2 or 3 hereof, and use its best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein; provided, however, that, if (1) such filing is pursuant to Section
-------- -------
3 hereof or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period relating thereto, before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, CAF shall and, at and after the Effective Time, the
Company shall furnish to and afford the Holders of the Registrable Notes
covered by such Registration Statement or each such Participating Broker-
Dealer, as the case may be, their counsel and the managing underwriters, if
any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference therein
and all exhibits thereto) proposed to be filed (in each case at least five
business days prior to such filing, or such later date as is reasonable
under the circumstances). CAF shall and, at and after the Effective Time,
the Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, their counsel, or the managing underwriters, if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration Statement or Exchange Offer
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period or until consummation of the Exchange
Offer, as the case may be; cause the related Prospectus to be supplemented
by any Prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) promulgated under the Securities Act; and comply with the
provisions of the Securities Act and the Exchange
<PAGE>
-16-
Act applicable to it with respect to the disposition of all securities
covered by such Registration Statement as so amended or in such Prospectus
as so supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any such
Prospectus. CAF shall and, at and after the Effective Time, the Company
shall be deemed not to have used their diligent best efforts to keep a
Registration Statement effective during the Effective Period or the
Applicable Period, as the case may be, relating thereto if CAF or the
Company voluntarily takes any action that would result in selling Holders
of the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable
Notes or such Exchange Notes during that period unless (i) such action is
required by applicable law or (ii) CAF or the Company complies with this
Agreement, including without limitation, the provisions of Section 5(k) or
the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period relating thereto from whom
CAF or, at and after the Effective Time, the Company has received written
notice that it will be a Participating Broker-Dealer in the Exchange Offer,
notify the selling Holders of Registrable Notes, or each such Participating
Broker-Dealer, as the case may be, their counsel and the managing
underwriters, if any, promptly (but in any event within two business days),
and confirm such notice in writing, (i) when a Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to
a Registration Statement or any post-effective amendment, when the same has
become effective under the Securities Act (including in such notice a
written statement that any Holder may, upon request, obtain, at the sole
expense of CAF or, at and after the Effective Time, the Company, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated or
deemed to be incorporated by reference therein and exhibits), (ii) of the
issuance by the SEC of any stop order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus or the initiation of
<PAGE>
-17-
any proceedings for that purpose, (iii) if at any time when a prospectus is
required by the Securities Act to be delivered in connection with sales of
the Registrable Notes or resales of Exchange Notes by Participating Broker-
Dealers the representations and warranties of CAF or, at and after the
Effective Time, the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 5(m) hereof cease to be
true and correct in all material respects, (iv) of the receipt by CAF or,
at and after the Effective Time, the Company of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable Notes
or the Exchange Notes to be sold by any Participating Broker-Dealer for
offer or sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event, the
existence of any condition or any information becoming known that makes any
statement made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes
in or amendments or supplements to such Registration Statement, Prospectus
or documents so that, in the case of the Registration Statement, it will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of any of CAF's or, at and after the
Effective Time, the Company's determination that a post-effective amendment
to a Registration Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, use its best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing or suspending the use of
a Prospectus or suspending the qualification (or exemption from
qualification) of any of the Registrable Notes or the
<PAGE>
-18-
Exchange Notes to be sold by any Participating Broker-Dealer, for sale in
any jurisdiction, and, if any such order is issued, to use its best efforts
to obtain the withdrawal of any such order at the earliest possible date.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter or underwriters (if any), the Holders
of a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering or any Participating
Broker-Dealer, (i) promptly as practicable incorporate in a prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters (if any), such Holders, any Participating
Broker-Dealer or counsel for any of them reasonably request to be included
therein, (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as practicable after CAF has or, at
and after the Effective Time, the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such Registration
Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer
who so requests and to counsel and each managing underwriter, if any, at
the sole expense of CAF or, at and after the Effective Time, the Company,
one conformed copy of the Registration Statement or Registration Statements
and each post-effective amendment thereto, including financial statements
and schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period,
<PAGE>
-19-
deliver to each selling Holder of Registrable Notes, or each such
Participating Broker-Dealer, as the case may be, their respective counsel,
and the underwriters, if any, at the sole expense of CAF or, at and after
the Effective Time, the Company, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each
amendment or supplement thereto and any documents incorporated by reference
therein as such Persons may reasonably request; and, subject to the last
paragraph of this Section 5, CAF and, at and after the Effective Time, the
Company hereby consent to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, and the
underwriters or agents, if any, and dealers (if any), in connection with
the offering and sale of the Registrable Notes covered by, or the sale by
Participating Broker-Dealers of the Exchange Notes pursuant to, such
Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Offer Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, to use its best efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Notes for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters reasonably request in writing;
provided, however, that where Exchange Notes held by Participating Broker-
Dealers or Registrable Notes are offered other than through an underwritten
offering, CAF agrees and, at and after the Effective Time, the Company
agrees to cause its counsel to perform Blue Sky investigations and file
registrations and qualifications required to be filed pursuant to this
Section 5(h); keep each such registration or qualification (or exemption
therefrom) effective during the period such Registration Statement is
required to be kept effective and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Exchange Notes held by Participating Broker-Dealers or
the
<PAGE>
-20-
Registrable Notes covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to (A) qualify
-------- -------
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service of
process in any such jurisdiction where it is not then so subject or (C)
subject itself to taxation in excess of a nominal dollar amount in any such
jurisdiction where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be reasonably necessary to
enable the seller or sellers thereof or the underwriter or underwriters, if
any, to consummate the disposition of such Registrable Notes, except as may
be required solely as a consequence of the nature of such selling Holder's
business, in which case CAF will and, at and after the Effective Time, the
Company will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, upon the occurrence of
any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly
as practicable prepare and (subject to Section 5(a) hereof) file with the
SEC, at the sole expense of CAF and, at and after the Effective Time, the
Company, a supplement or post-effective amendment to the Registration
Statement or a supplement to the related Prospectus or any document
<PAGE>
-21-
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers
of the Registrable Notes being sold thereunder or to the purchasers of the
Exchange Notes to whom such Prospectus will be delivered by a Participating
Broker-Dealer, any such Prospectus will not contain an untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes or Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as
the case may be.
(m) In connection with any underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities
similar to the Notes in form and substance reasonably satisfactory to CAF
and, at and after the Effective Time, the Company and take all such other
actions as are reasonably requested by the managing underwriter or
underwriters in order to expedite or facilitate the registration or the
disposition of such Registrable Notes and, in such connection, (i) make
such representations and warranties to, and covenants with, the
underwriters with respect to the business of CAF and, at and after the
Effective Time, the Company and its subsidiaries and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily made by
issuers to underwriters in underwritten offerings of debt securities
similar to the Notes, and confirm the same in writing if and when requested
in form and substance reasonably satisfactory to CAF and, at and after the
Effective Time, the Company; (ii) obtain the written opinions of counsel to
CAF and the Company and written updates thereof in form, scope and
substance reasonably satisfactory to the managing underwriter or
underwriters, addressed to the underwriters covering the matters
customarily covered in opinions reasonably requested in underwritten
offerings and such other matters as may be reasonably requested by the
managing underwriter or
<PAGE>
-22-
underwriters; (iii) use its best efforts to obtain "cold comfort" letters
and updates thereof in form, scope and substance reasonably satisfactory to
the managing underwriter or underwriters from the independent certified
public accountants of CAF and the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of CAF or the
Company or of any business acquired by CAF the Company for which financial
statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to the
underwriter, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings of debt securities similar to the Notes and such
other matters as reasonably requested by the managing underwriter or
underwriters as permitted by the Statement on Auditing Standards No. 72;
and (iv) if an underwriting agreement is entered into, the same shall
contain indemnification provisions and procedures no less favorable to the
sellers and underwriters, if any, than those set forth in Section 7 hereof
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents, if any). The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in the Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or
each such Participating Broker-Dealer, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
----------
during reasonable business hours, all financial and other records,
pertinent corporate documents and instruments of CAF and, at and after the
Effective Time, the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
-------
applicable due diligence responsibilities,
<PAGE>
-23-
and cause the officers, directors and employees of CAF and, at and after
the Effective Time, the Company and their subsidiaries to supply all
information reasonably requested by any such Inspector in connection with
such Registration Statement and Prospectus. Each Inspector shall agree in
writing that it will keep the Records confidential and that it will not
disclose any of the Records unless (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in such
Registration Statement or Prospectus, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is necessary or
advisable, in the opinion of counsel for any Inspector, in connection with
any action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Inspector and arising out of, based upon,
relating to, or involving this Agreement or the Purchase Agreement, or any
transac-tions contemplated hereby or thereby or arising hereunder or
thereunder, or (iv) the information in such Records has been made generally
available to the public. Each selling Holder of such Registrable Notes and
each such Participating Broker-Dealer will be required to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of CAF and, at and after the Effective Time,
the Company unless and until such is made generally available to the
public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to further agree that it will,
upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give notice to CAF and, at and after the Effective
Time, the Company and allow CAF and, at and after the Effective Time, the
Company to undertake appropriate action to prevent disclosure of the
Records deemed confidential at CAF's or, at and after the Effective Time,
the Company's expense.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the first
Registration Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the
Holders of the Registrable Notes, to effect such changes to such
<PAGE>
-24-
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best efforts
to cause such trustee to execute, all documents as may be required to
effect such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely
manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to their respective securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month period
(or 90 days after the end of any 12-month period if such period is a fiscal
year) (i) commencing at the end of any fiscal quarter in which Registrable
Notes are sold to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of CAF
or, at and after the Effective Time, the Company after the effective date
of a Registration Statement, which statements shall cover said 12-month
periods.
(q) If the Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to CAF or, at and after
the Effective Time, the Company (or to such other Person as directed by CAF
or the Company) in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be, CAF shall and, at and after the Effective Time,
the Company shall mark, or cause to be marked, on such Registrable Notes
that such Registrable Notes are being cancelled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; in no
event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(r) Use its best efforts to cause the Registrable Notes covered by a
Registration Statement or the Exchange Notes, as the case may be, to be
rated with the appropriate rating agencies, if so requested by the Holders
of a majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement or the Exchange Notes, as the case may be, or
the managing underwriter or underwriters, if any.
<PAGE>
-25-
(s) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Notes and their respective counsel in
connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
----
(t) Use its best efforts to take all other steps reasonably
necessary to effect the registration of the Exchange Notes and/or
Registrable Notes covered by a Registration Statement contemplated hereby.
CAF may and, at and after the Effective Time, the Company may require
each seller of Registrable Notes as to which any registration is being effected
to furnish to CAF or, at and after the Effective Time, the Company such
information regarding such seller and the distribution of such Registrable Notes
as CAF may and, at and after the Effective Time, the Company may, from time to
time, reasonably request. CAF may and, at and after the Effective Time, the
Company may exclude from such registration the Registrable Notes of any seller
so long as such seller fails to furnish such information within a reasonable
time after receiving such request. Each seller as to which any Shelf
Registration is being effected agrees to furnish promptly to CAF or, at and
after the Effective Time, the Company all information required to be disclosed
in order to make the information previously furnished to CAF or the Company by
such seller not materially misleading.
Each Holder of Registrable Notes and each Partici-pating Broker-
Dealer agrees by its acquisition of such Registrable Notes or Exchange Notes to
be sold by such Participating Broker-Dealer, as the case may be, that, upon
actual receipt of any notice from CAF or, at and after the Effective Time, the
Company of the happening of any event of the kind described in Section 5(c)(ii),
5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith discontinue
disposition of such Registrable Notes covered by such Registration Statement or
Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-
Dealer, as the case may be, until such Holder's or Participating Broker-
Dealer's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof, or until it is advised in writing (the
"Advice") by CAF or, at and after the Effective Time, the Company that the use
------
of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event that CAF or, at and after the
Effective Time, the Company shall
<PAGE>
-26-
give any such notice, each of the Effectiveness Period and the Applicable Period
shall be extended by the number of days during such periods from and including
the date of the giving of such notice to and including the date when each seller
of Registrable Notes covered by such Registration Statement or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, shall have
received (x) the copies of the supplemented or amended Prospectus contemplated
by Section 5(k) hereof or (y) the Advice.
6. Registration Expenses
---------------------
All fees and expenses incident to the performance of or compliance
with this Agreement by CAF shall and, at and after the Effective Time, the
Company shall be borne by CAF and, at and after the Effective Time, the Company
whether or not the Exchange Offer Registration Statement or any Shelf Reg-
istration Statement is filed or becomes effective or the Exchange Offer is
consummated, including, without limitation, (i) all registration and filing fees
(including, without limitation, (A) fees with respect to filings required to be
made with the NASD in connection with an underwritten offering and (B) fees and
expenses of compliance with state securities or Blue Sky laws (including,
without limitation, reasonable fees and disbursements of counsel in connection
with Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes for
investment under the laws of such jurisdictions (x) where the holders of
Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing prospectuses if
the printing of prospectuses is requested by the managing underwriter or
underwriters, if any, by the Holders of a majority in aggregate principal amount
of the Registrable Notes included in any Registration Statement or in respect of
Exchange Notes to be sold by any Participating Broker-Dealer during the Appli-
cable Period, as the case may be, (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for CAF and the Company and, in
the case of a Shelf Registration, reasonable fees and disbursements of one
special counsel for all of the sellers of Registrable Notes (exclusive of any
counsel retained pursuant to Section 7 hereof), (v) fees and disbursements of
all independent certified public accountants
<PAGE>
-27-
referred to in Section 5(m)(iii) hereof (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or
incident to such performance), (vi) Securities Act liability insurance, if CAF
desires and, at and after the Effective Time, the Company desires such insur-
ance, (vii) fees and expenses of all other Persons retained by CAF and, at and
after the Effective Time, the Company, (viii) internal expenses of CAF and, at
and after the Effective Time, the Company (including, without limitation, all
salaries and expenses of officers and employees of CAF and, at and after the
Effective Time, the Company performing legal or accounting duties), (ix) the
expense of any annual audit, (x) the fees and expenses incurred in connection
with the listing of the securities to be registered on any securities exchange,
and the obtaining of a rating of the securities, in each case, if applicable,
and (xi) the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, indentures and any other
documents necessary in order to comply with this Agreement.
7. Indemnification
---------------
(a) CAF agrees and, at and after the Effective Time, the Company
agrees to indemnify and hold harmless each Holder of Registrable Notes and each
Participating Broker-Dealer selling Exchange Notes during the Applicable Period,
the officers, directors, employees and agents of each such Person, and each
Person, if any, who controls any such Person within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a
"Participant"), from and against any and all losses, claims, damages, judgments,
-----------
liabilities and expenses (including, without limitation, the reasonable legal
fees and other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) or Prospectus (as amended or
supplemented if CAF shall and, at and after the Effective Time, the Company
shall have furnished any amendments or supplements thereto) or any preliminary
prospectus, or caused by, arising out of or based upon any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the case of the Prospectus in the
light of the circumstances under which they were made, not misleading, except
------
insofar as such losses, claims, damages or liabilities are caused by, arise out
of or are based upon any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and
<PAGE>
-28-
in conformity with information relating to any Participant furnished to CAF or
the Company in writing by such Participant expressly for use therein; provided,
however, that CAF and, at and after the Effective Time, the Company will not be
liable if such untrue statement or omission or alleged untrue statement or
omission was contained or made in any preliminary prospectus and corrected in
the final Prospectus or any amendment or supplement thereto and any such loss,
liability, claim, or damage or expense suffered or incurred by the Participants
resulted from any action, claim or suit by any Person who purchased Registrable
Notes or Exchange Notes which are the subject thereof from such Participant and
it is established in the related proceeding that such Participant failed to
deliver or provide a copy of the final Prospectus (as amended or supplemented)
to such Person with or prior to the confirmation of the sale of such Registrable
Notes or Exchange Notes sold to such Person if required by applicable law,
unless such failure to deliver or provide a copy of the Prospectus (as amended
or supplemented) was a result of noncompliance by CAF or, at and after the
Effective Time, the Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless CAF and, at and after the Effective Time, the Company, their
respective directors, their respective officers who sign the Registration
Statement and each Person who controls CAF or the Company within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from CAF and, at and after the Effective Time,
the Company to each Participant, but only with reference to information relating
to such Participant furnished to CAF or the Company in writing by such
Participant expressly for use in any Registration Statement or Prospectus, any
amendment or supplement thereto, or any preliminary prospectus. The liability of
any Participant under this paragraph shall in no event exceed the proceeds
received by such Participant from sales of Registrable Notes or Exchange Notes
giving rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
------------------
notify the Persons against whom such indemnity may be sought (the "Indemnifying
------------
Persons") in writing, and the Indemnifying Persons, upon request of the
- -------
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others
<PAGE>
-29-
the Indemnifying Persons may reasonably designate in such proceeding and shall
pay the reasonable fees and expenses actually incurred by such counsel related
to such proceeding; provided, however, that the failure to so notify the
-------- -------
Indemnifying Persons shall not relieve any of them of any obligation or
liability which any of them may have hereunder or otherwise except to the extent
it is materially prejudiced by such failure. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Persons and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Persons shall have failed
within a reasonable period of time to retain counsel reasonably satisfactory to
the Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both any Indemnifying Person and the
Indemnified Person or any affiliate thereof and representation of both parties
by the same counsel would be inappropriate due to actual or potential
conflicting interests between them. It is understood that, unless there exists a
conflict among Indemnified Persons, the Indemnifying Persons shall not, in
connection with such proceeding or separate but substantially similar related
proceeding in the same jurisdiction arising out of the same general allegations,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all Indemnified Persons, and that all such fees and
expenses shall be reimbursed promptly as they are incurred. Any such separate
firm for the Participants and such control Persons of Participants shall be
designated in writing by Participants who sold a majority in interest of
Registrable Notes and Exchange Notes sold by all such Participants and any such
separate firm for CAF or the Company, their respective directors, their
respective officers and such control Persons of CAF and the Company shall be
designated in writing by CAF and the Company and shall be reasonably acceptable
to the Holders. The Indemnifying Persons shall not be liable for any settlement
of any proceeding effected without its prior written consent (which consent
shall not be unreasonably withheld or delayed), but if settled with such consent
or if there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
each of the Indemnifying Persons agrees to indemnify and hold harmless each
Indemnified Person from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an Indemnified Person shall have requested an Indemnifying Person to reimburse
the Indemnified Person for reasonable fees and expenses actually incurred by
counsel as contemplated by
<PAGE>
-30-
the third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such Indemnifying Person of the aforesaid request and (ii) such
Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement; provided,
--------
however, that the Indemnifying Person shall not be liable for any settlement
- -------
effected without its consent pursuant to this sentence if the Indemnifying
Person is contesting, in good faith, the request for reimbursement. No
Indemnifying Person shall, without the prior written consent of the Indemnified
Persons (which consent shall not be unreasonably withheld or delayed), effect
any settlement or compromise of any pending or threatened proceeding in respect
of which any Indemnified Person is or could have been a party, or indemnity
could have been sought hereunder by such Indemnified Person, unless such
settlement (A) includes an unconditional written release of such Indemnified
Person, in form and substance reasonably satisfactory to such Indemnified
Person, from all liability on claims that are the subject matter of such
proceeding and (B) does not include any statement as to an admission of fault,
culpability or failure to act by or on behalf of such Indemnified Person.
(d) If the indemnification provided for in clauses (a) and (b) of
this Section 7 is for any reason unavailable to, or insufficient to hold
harmless, an Indemnified Person in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such
paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in
order to provide for just and equitable contribution, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
(i) the relative benefits received by the Indemnifying Person or Persons on the
one hand and the Indemnified Person or Persons on the other from the offering of
the Notes or (ii) if the allocation provided by the foregoing clause (i) is not
permitted by applicable law, not only such relative benefits but also the
relative fault of the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof) as well as any
other relevant equitable considerations. The relative benefits received by CAF
and, at and after the Effective Time, the Company on the one hand and the
Participants on the other shall
<PAGE>
-31-
be deemed to be in the same proportion as the total proceeds from the offering
(net of discounts and commissions but before deducting expenses) of the Notes
received by CAF and, at and after the Effective Time, the Company bears to the
total proceeds received by such Participant from the sale of Registrable Notes
or Exchange Notes, as the case may be, in each case as set forth in the table on
the cover page of the Offering Memorandum dated January 29, 1997 in respect of
the sale of the Notes. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by CAF and, at and after the Effective Time, the
Company on the one hand or such Participant or such other Indemnified Person, as
the case may be, on the other, the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission,
and any other equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purpose) or by any
other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages, judgments, liabilities and expenses referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes, as the case may be, exceeds the amount of any damages that such
Participant has otherwise been required to pay or has paid by reason of such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
(f) Any losses, claims, damages, liabilities or expenses for which
an indemnified party is entitled to indemnification or contribution under this
Section 7 shall be paid by
<PAGE>
-32-
the Indemnifying Party to the Indemnified Party as such losses, claims, damages,
liabilities or expenses are incurred. The indemnity and contribution agreements
contained in this Section 7 and the representations and warranties of CAF and
the Company set forth in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf of any
Holder or any person who controls a Holder, CAF or the Company and their
respective directors, officers, employees or agents or any person controlling
CAF or the Company, and (ii) any termination of this Agreement.
(g) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
------------------
CAF covenants and agrees and, at and after the Effective Time, the
Company covenants and agrees that, so long as Registrable Notes remain
outstanding, it will file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
SEC thereunder in a timely manner in accordance with the requirements of the
Securities Act and the Exchange Act and, if at any time CAF is not or, at and
after the Effective Time, the Company is not permitted to file such reports, CAF
will and, at and after the Effective Time, the Company will, upon the request of
any Holder or beneficial owner of Registrable Notes, make publicly available
annual reports and such information, documents and other reports of the type
specified in Sections 13 and 15(d) of the Exchange Act. CAF further covenants
and, at and after the Effective Time, the Company further covenants for so long
as any Registrable Notes remain outstanding, to make available to any Holder or
beneficial owner of Registrable Notes in connection with any sale thereof and
any prospective purchaser of such Registrable Notes from such Holder or
beneficial owner the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Notes pursuant to
Rule 144A.
9. Underwritten Registrations
--------------------------
If any of the Registrable Notes covered by any Shelf Registration
are to be sold in an underwritten offering, the investment banker or investment
bankers and manager or managers that will manage the offering will be selected
by the Holders of a majority in aggregate principal amount of such Registrable
<PAGE>
-33-
Notes included in such offering and shall be reasonably acceptable to CAF and,
at and after the Effective Time, to the Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous
-------------
(a) No Inconsistent Agreements. As of the date hereof, CAF has not
--------------------------
entered and, at and after the Effective Time, the Company will not enter into
any agreement with respect to any of its securities that is inconsistent with
the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of any of CAF's or, at and after the Effective
Time, the Company's other issued and outstanding securities. As of the date
hereof, CAF has not entered at and after the Effective Time, the Company will
not enter into any agreement with respect to any of its securities which will
grant to any Person piggy-back registration rights with respect to any
Registration Statement required to be filed by CAF or, at and after the
Effective Time, the Company pursuant to this Agreement.
(b) Adjustments Affecting Registrable Notes. CAF shall not and, at
---------------------------------------
and after the Effective Time, the Company shall not, directly or indirectly,
take any action with respect to the Registrable Notes as a class that would
adversely affect the ability of the Holders of Registrable Notes to include such
Registrable Notes in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may
----------------------
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, otherwise than with the prior
written consent of (I) CAF or, at and after the Effective Time, the Company and
(II)(A) the Holders of not less than a majority in aggregate principal amount of
the then outstanding Registrable Notes and
<PAGE>
-34-
(B) in circumstances that would adversely affect the Participating Broker-
Dealers, the Participating Broker-Dealers holding not less than a majority in
aggregate principal amount of the Exchange Notes held by all Participating
Broker-Dealers; provided, however, that Section 7 and this Section 10(c) may not
-------- --------
be amended, modified or supplemented without the prior written consent of each
Holder and each Participating Broker-Dealer (including any person who was a
Holder or Participating Broker-Dealer of Registrable Notes or Exchange Notes, as
the case may be, disposed of pursuant to any Registration Statement) affected by
any such amendment, modification or supplement. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold pursuant to such
Registration Statement.
(d) Notices. All notices and other communications (including,
-------
without limitation, any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or facsimile:
(i) if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or
Participating Broker-Dealer, as the case may be, set forth on the records
of the registrar under the Indenture, with a copy in like manner to the
Initial Purchaser as follows:
BT Securities Corporation,
One Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Facsimile No: (212) 250-7200
Attention: Corporate Finance
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Facsimile No: (212) 269-5420
Attention: William M. Hartnett, Esq.
<PAGE>
-35-
(ii) if to the Initial Purchasers, at the address specified in
Section 10(d)(1);
(iii) if to CAF, at the address as follows:
CAF Acquisition Corporation
230 East High Street
Charlottesville, Virginia 22902
Facsimile No.: (804) 979-1145
Attention: Stephen M. Burns
with a copy to:
McGuire, Woods, Battle & Boothe, L.L.P.
901 E. Cary Street
1 James Center
Richmond, Virginia 23219
Facsimile No.: (804) 775-1061
Attention: Leslie A. Grandis, Esq.
(iv) if to the Company, at the address as follows:
Collins & Aikman Floorcoverings, Inc.
311 Smith Industrial Boulevard
Dalton, Georgia 30722
Facsimile No.: (706) 259-2610
Attention: President
with a copy to:
McGuire, Woods, Battle & Boothe, L.L.P.
901 E. Cary Street
1 James Center
Richmond, Virginia 23219
Facsimile No.: (804) 775-1061
Attention: Leslie A. Grandis, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and upon receiving
confirmation receipt by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving
<PAGE>
-36-
the same to the Trustee at the address and in the manner specified in such
Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors and assigns of each of the parties
hereto, the Holders and the Participating Broker-Dealers, provided that nothing
--------
herein shall be deemed to permit any assignment, transfer or other disposition
of Registrable Notes in violation of the terms of the Purchase Agreement or the
Indenture.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED ENTIRELY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Securities Held by CAF or its Affiliates. Whenever the consent
----------------------------------------
or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by CAF and, at and after the
Effective Time, the Company or any of their affiliates (as such term is defined
in Rule 405 under the Securities Act) shall not be counted in
<PAGE>
-37-
determining whether such consent or approval was given by the Holders of such
required percentage.
(k) Third Party Beneficiaries. Holders of Registrable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement, and this Agreement may be enforced by such Persons.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
CAF ACQUISITION CORPORATION
By: /s/ Stephen M. Burns
-----------------------
Name: Stephen M. Burns
Title: President
BT SECURITIES CORPORATION,
as Initial Purchaser
By: /s/ Julie Persily
-----------------------
Name: Julie Persily
Title: Vice President
<PAGE>
Exhibit 10.1
------------
- --------------------------------------------------------------------------------
CREDIT AGREEMENT
among
CAF HOLDINGS, INC.,
CAF ACQUISITION CORPORATION,
VARIOUS LENDING INSTITUTIONS,
and
BANKERS TRUST COMPANY,
AS AGENT
--------------------------------
Dated as of February 6, 1997
--------------------------------
$85,000,000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
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SECTION 1. Amount and Terms of Credit.................................... 1
1.01 Commitments................................................... 1
1.02 Minimum Borrowing Amounts, etc................................ 4
1.03 Notice of Borrowing........................................... 4
1.04 Disbursement of Funds......................................... 5
1.05 Notes......................................................... 6
1.06 Conversions................................................... 7
1.07 Pro Rata Borrowings........................................... 8
1.08 Interest...................................................... 8
1.09 Interest Periods.............................................. 9
1.10 Increased Costs; Illegality; etc.............................. 10
1.11 Compensation.................................................. 13
1.12 Change of Lending Office...................................... 13
1.13 Replacement of Banks.......................................... 13
SECTION 2. Letters of Credit............................................. 15
2.01 Letters of Credit............................................. 15
2.02 Letter of Credit Requests; Notices; etc....................... 17
2.03 Agreement to Repay Letter of Credit Drawings.................. 18
2.04 Letter of Credit Participations............................... 18
2.05 Increased Costs............................................... 21
SECTION 3. Fees; Commitments............................................. 21
3.01 Fees.......................................................... 21
3.02 Voluntary Termination or Reduction of Total Unutilized
Revolving Loan Commitment................................... 23
3.03 Mandatory Reduction of Commitments............................ 23
SECTION 4. Payments...................................................... 24
4.01 Voluntary Prepayments......................................... 24
4.02 Mandatory Prepayments......................................... 26
4.03 Method and Place of Payment................................... 30
4.04 Net Payments.................................................. 31
SECTION 5. Conditions Precedent.......................................... 33
5.01 Execution of Agreement; Notes................................. 33
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5.02 No Default;Representations and Warranties..................... 33
5.03 Officer's Certificate......................................... 33
5.04 Opinions of Counsel........................................... 33
5.05 Corporate Proceedings......................................... 34
5.06 Adverse Change, etc........................................... 34
5.07 Litigation.................................................... 34
5.08 Approvals..................................................... 35
5.09 Consummation of the Transaction............................... 35
5.10 Pledge Agreement.............................................. 36
5.11 Security Agreement............................................ 37
5.12 Mortgages; Title Insurance; Surveys, etc...................... 38
5.13 Employee Benefit Plans; Collective Bargaining Agreements;
Existing Indebtedness Agreements; Shareholders' Agreements;
Management Agreements; Employment Agreements;
Non-Compete Agreements; Tax Sharing Agreements;
Material Contracts.......................................... 39
5.14 Solvency Opinion; Environmental Analyses; Evidence of
Insurance; Financial Statements............................. 40
5.15 Pro Forma Balance Sheets...................................... 41
5.16 Projections................................................... 41
5.17 Indebtedness to Remain Outstanding............................ 41
5.18 Payment of Fees............................................... 41
5.19 Notice of Borrowing; Letter of Credit Request................. 41
SECTION 6. Representations, Warranties and Agreements.................... 42
6.01 Corporate Status.............................................. 42
6.02 Corporate Power and Authority................................. 42
6.03 No Violation.................................................. 43
6.04 Litigation.................................................... 43
6.05 Use of Proceeds; Margin Regulations........................... 43
6.06 Governmental Approvals........................................ 44
6.07 Investment Company Act........................................ 44
6.08 Public Utility Holding Company Act............................ 44
6.09 True and Complete Disclosure.................................. 44
6.10 Financial Condition; Financial Statements..................... 44
6.11 Security Interests............................................ 46
6.12 Representations and Warranties in Other Documents............. 46
6.13 Transaction................................................... 46
6.14 Special Purpose Corporation................................... 47
6.15 Compliance with ERISA......................................... 47
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6.16 Capitalization................................................ 48
6.17 Subsidiaries.................................................. 49
6.18 Intellectual Property......................................... 49
6.19 Compliance with Statutes, etc. ............................... 49
6.20 Environmental Matters......................................... 50
6.21 Properties.................................................... 50
6.22 Labor Relations............................................... 51
6.23 Tax Returns and Payments...................................... 51
6.24 Indebtedness to Remain Outstanding............................ 51
6.25 Subordination................................................. 51
6.26 Insurance..................................................... 52
SECTION 7. Affirmative Covenants......................................... 52
7.01 Information Covenants......................................... 52
7.02 Books, Records and Inspections................................ 55
7.03 Insurance..................................................... 56
7.04 Payment of Taxes.............................................. 56
7.05 Corporate Franchises.......................................... 57
7.06 Compliance with Statutes, etc................................. 57
7.07 Compliance with Environmental Laws............................ 57
7.08 ERISA......................................................... 58
7.09 Good Repair................................................... 59
7.10 End of Fiscal Years; Fiscal Quarters.......................... 59
7.11 Additional Security; Further Assurances....................... 59
7.12 Contributions; Payments....................................... 60
7.13 Foreign Subsidiaries Security................................. 61
7.14 338(h)(10) Election........................................... 61
7.15 Merger; Name Change........................................... 62
7.16 Performance of Obligations.................................... 62
7.17 Use of Proceeds............................................... 63
7.18 Qualified Preferred Stock..................................... 63
SECTION 8. Negative Covenants............................................ 63
8.01 Changes in Business........................................... 63
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc........ 63
8.03 Liens......................................................... 68
8.04 Indebtedness.................................................. 71
8.05 Advances, Investments and Loans............................... 72
8.06 Dividends, etc................................................ 75
8.07 Transactions with Affiliates.................................. 76
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8.08 Capital Expenditures.......................................... 77
8.09 Minimum Consolidated EBITDA................................... 78
8.10 Interest Coverage Ratio....................................... 79
8.11 Leverage Ratio................................................ 80
8.12 Designated Senior Debt........................................ 81
8.13 Limitation on Voluntary Payments and Modifications of
Indebtedness; Modifications of Certificate of Incorporation,
By-Laws and Certain Other Agreements; etc................... 81
8.14 Limitation on Certain Restrictions on Subsidiaries............ 82
8.15 Limitation on the Creation of Subsidiaries and Joint Ventures. 82
SECTION 9. Events of Default............................................. 83
9.01 Payments...................................................... 83
9.02 Representations, etc.......................................... 83
9.03 Covenants..................................................... 83
9.04 Default Under Other Agreements................................ 83
9.05 Bankruptcy, etc............................................... 84
9.06 ERISA......................................................... 84
9.07 Security Documents............................................ 85
9.08 Guaranties.................................................... 85
9.09 Judgments..................................................... 85
9.10 Ownership..................................................... 85
9.11 338(h)(10) Election........................................... 85
SECTION 10. Definitions................................................... 86
SECTION 11. The Agent..................................................... 113
11.01 Appointment................................................... 113
11.02 Delegation of Duties.......................................... 114
11.03 Exculpatory Provisions........................................ 114
11.04 Reliance by Agent............................................. 115
11.05 Notice of Default............................................. 115
11.06 Nonreliance on Agent and Other Banks.......................... 115
11.07 Indemnification............................................... 116
11.08 Agent in its Individual Capacity.............................. 116
11.09 Holders....................................................... 117
11.10 Resignation of the Agent...................................... 117
SECTION 12. Miscellaneous................................................. 117
12.01 Payment of Expenses, etc...................................... 117
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12.02 Right of Setoff............................................... 118
12.03 Notices....................................................... 119
12.04 Benefit of Agreement.......................................... 119
12.05 No Waiver; Remedies Cumulative................................ 121
12.06 Payments Pro Rata............................................. 121
12.07 Calculations; Computations.................................... 122
12.08 Governing Law; Submission to Jurisdiction; Venue.............. 122
12.09 Counterparts.................................................. 123
12.10 Effectiveness................................................. 123
12.11 Headings Descriptive.......................................... 123
12.12 Amendment or Waiver, etc...................................... 123
12.13 Survival...................................................... 125
12.14 Domicile of Loans and Commitments............................. 125
12.15 Confidentiality............................................... 125
12.16 Waiver of Jury Trial.......................................... 126
12.17 Registry...................................................... 126
12.18 Limited Recourse.............................................. 126
SECTION 13. Holdings Guaranty............................................. 126
13.01 The Guaranty.................................................. 126
13.02 Bankruptcy.................................................... 127
13.03 Nature of Liability........................................... 127
13.04 Independent Obligation........................................ 128
13.05 Authorization................................................. 128
13.06 Reliance...................................................... 129
13.07 Subordination................................................. 129
13.08 Waiver........................................................ 129
13.09 Nature of Liability........................................... 130
</TABLE>
ANNEX I List of Banks and Commitments
ANNEX II Bank Addresses
ANNEX III Real Properties
ANNEX IV Projections
ANNEX V Subsidiaries
ANNEX VI Plans
ANNEX VII Insurance
ANNEX VIII Indebtedness to Remain Outstanding
ANNEX IX Existing Liens
ANNEX X Capitalization
(v)
<PAGE>
EXHIBIT A-1 - Form of Notice of Borrowing
EXHIBIT A-2 - Form of Letter of Credit Request
EXHIBIT B-1 - Form of Term Note
EXHIBIT B-2 - Form of Revolving Note
EXHIBIT B-3 - Form of Swingline Note
EXHIBIT C - Form of Section 4.04(b)(ii) Certificate
EXHIBIT D-1 - Form of Opinion of McGuire Woods, Battle & Boothe L.L.P.
special counsel to the Credit Parties
EXHIBIT D-2 - Form of Opinion of White & Case, special United Kingdom
counsel to the Agent and the Banks
EXHIBIT E - Form of Officers' Certificate
EXHIBIT F - Form of Pledge Agreement
EXHIBIT G - Form of Security Agreement
EXHIBIT H - Form of Subsidiary Guaranty
EXHIBIT I - Form of Subordination Provisions
EXHIBIT J - Form of Assignment and Assumption Agreement
EXHIBIT K - Form of Intercompany Note
EXHIBIT L - Form of Shareholder Subordinated Note
EXHIBIT M - Form of Acknowledgement Agreement
(vi)
<PAGE>
CREDIT AGREEMENT, dated as of February 6, 1997, among CAF HOLDINGS,
INC., a Virginia corporation ("Holdings"), CAF ACQUISITION CORPORATION, a
Virginia corporation ("Acquisition Corp."), the lenders from time to time party
hereto (each, a "Bank" and, collectively, the "Banks"), and BANKERS TRUST
COMPANY, as Agent (in such capacity, the "Agent"). Unless otherwise defined
herein, all capitalized terms used herein and defined in Section 10 are used
herein as so defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Banks are willing to make available to the Borrower the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
--------------------------
1.011 Commitments. (a) Subject to and upon the terms and conditions
-----------
set forth herein, each Bank with a Term Loan Commitment severally agrees to make
a term loan or term loans (each, a "Term Loan" and, collectively, the "Term
Loans") to the Borrower, which Term Loans (i) shall be incurred by the Borrower
pursuant to a single drawing on the Initial Borrowing Date, (ii) shall be
denominated in U.S. Dollars, (iii) except as hereafter provided, shall, at the
option of the Borrower, be incurred and maintained as, and/or converted into,
Base Rate Loans or Eurodollar Loans, provided, that (x) all Term Loans made as
--------
part of the same Borrowing shall, unless otherwise specifically provided herein,
consist of Term Loans of the same Type and (y) unless the Agent has determined
that the Syndication Date has occurred (at which time this clause (y) shall no
longer be applicable), no more than three Borrowings of Term Loans to be
maintained as Eurodollar Loans may be incurred prior to the 90th day after the
Initial Borrowing Date (each of which Borrowings of Eurodollar Loans may only
have an Interest Period of one month, and the first of which Borrowings may only
be made on or within five Business Days following the Initial Borrowing Date,
the second of which Borrowings may only be made on the last day of the Interest
Period of the first such Borrowing and the third of which Borrowings may only be
made on the last day of the Interest Period of the second such Borrowing) and
(iv) shall not exceed for any Bank at the time of incurrence thereof on the
Initial Borrowing Date that aggregate principal amount as is equal to the Term
Loan Commitment of such Bank as in effect on the Initial Borrowing Date (before
giving effect to any reductions thereto on such
<PAGE>
date pursuant to Section 3.03(b)). Once repaid, Term Loans incurred hereunder
may not be reborrowed.
(b) Subject to and upon the terms and conditions herein set forth,
each RL Bank severally agrees, at any time and from time to time on and after
the Initial Borrowing Date and prior to the Final Maturity Date, to make a
revolving loan or revolving loans (each, a "Revolving Loan" and, collectively,
the "Revolving Loans") to the Borrower, which Revolving Loans (i) shall be
denominated in U.S. Dollars, (ii) except as hereinafter provided, shall, at the
option of the Borrower, be incurred and maintained as and/or converted into Base
Rate Loans or Eurodollar Loans, provided, that (x) all Revolving Loans made as
--------
part of the same Borrowing shall, unless otherwise specifically provided herein,
consist of Revolving Loans of the same Type and (y) unless the Agent has
determined that the Syndication Date has occurred (at which time this clause (y)
shall no longer be applicable), no more than three Borrowings of Revolving Loans
to be maintained as Eurodollar Loans may be incurred prior to the 90th day after
the Initial Borrowing Date (each of which Borrowings of Eurodollar Loans may
only have an Interest Period of one month, and the first of which Borrowings may
only be made on the same date as the initial Borrowing of Term Loans that are
maintained as Eurodollar Loans, the second of which Borrowings may only be made
on the last day of the Interest Period of the first such Borrowing and the third
of which Borrowings may only be made on the last day of the Interest Period of
the second such Borrowing), (iii) may be repaid and reborrowed in accordance
with the provisions hereof and (iv) shall not exceed for any Bank at any time
outstanding that aggregate principal amount which, when combined with (I) the
aggregate principal amount of all other then outstanding Revolving Loans made by
such Bank and (II) such Bank's Percentage, if any, of the Swingline Loans then
outstanding and the Letter of Credit Outstandings (exclusive of Unpaid Drawings
relating to Letters of Credit which are repaid with the proceeds of, and
simultaneously with the incurrence of, Revolving Loans or Swingline Loans) at
such time, equals the Revolving Loan Commitment of such Bank at such time.
Notwithstanding anything to the contrary contained herein, the aggregate amount
of Revolving Loans incurred on the Initial Borrowing Date shall not exceed
$3,000,000.
(c) Subject to and upon the terms and conditions herein set forth,
BTCo in its individual capacity agrees to make at any time and from time to time
on and after the Initial Borrowing Date and prior to the Swingline Expiry Date,
a loan or loans to the Borrower (each, a "Swingline Loan" and, collectively, the
"Swingline Loans"), which Swingline Loans (i) shall be made and maintained as
Base Rate Loans, (ii) shall be denominated in U.S. Dollars, (iii) may be repaid
and reborrowed in accordance with the provisions hereof, (iv) shall not exceed
in aggregate principal amount at any time outstanding, when combined with the
aggregate principal amount of all Revolving Loans then outstanding and the
Letter of Credit Outstandings (exclusive of Unpaid Drawings relating to Letters
of Credit which are repaid with the proceeds of, and simultaneously with the
incurrence of, Revolving Loans or Swingline Loans) at such time, an amount equal
to the Total Revolving Loan Commitment
-2-
<PAGE>
then in effect and (v) shall not exceed in aggregate principal amount at any
time outstanding the Maximum Swingline Amount. BTCo shall not be obligated to
make any Swingline Loans at a time when a Bank Default exists unless BTCo has
entered into arrangements satisfactory to it and the Borrower to eliminate
BTCo's risk with respect to the Defaulting Bank's or Banks' participation in
such Swingline Loans, including by cash collateralizing such Defaulting Bank's
or Banks' Percentage of the outstanding Swingline Loans. BTCo will not make a
Swingline Loan after it has received written notice from the Borrower or the
Required Banks stating that a Default or an Event of Default exists until such
time as BTCo shall have received a written notice of (i) rescission of such
notice from the party or parties originally delivering the same or (ii) a waiver
of such Default or Event of Default from the Required Banks (or all the Banks to
the extent required by Section 12.12).
(d) On any Business Day, BTCo may, in its sole discretion, give
notice to the RL Banks that its outstanding Swingline Loans shall be funded with
a Borrowing of Revolving Loans (provided that each such notice shall be deemed
--------
to have been automatically given upon the occurrence of a Default or an Event of
Default under Section 9.05 or upon the exercise of any of the remedies provided
in the last paragraph of Section 9), in which case a Borrowing of Revolving
Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory
Borrowing") shall be made on the immediately succeeding Business Day by all RL
Banks pro rata based on each RL Bank's Percentage, and the proceeds thereof
--- ----
shall be applied directly to repay BTCo for such outstanding Swingline Loans.
Each RL Bank hereby irrevocably agrees to make Base Rate Loans upon one Business
Day's notice pursuant to each Mandatory Borrowing in the amount and in the
manner specified in the preceding sentence and on the date specified in writing
by BTCo notwithstanding (i) that the amount of the Mandatory Borrowing may not
comply with the Minimum Borrowing Amount otherwise required hereunder, (ii)
whether any conditions specified in Section 5 are then satisfied, (iii) whether
a Default or an Event of Default has occurred and is continuing, (iv) the date
of such Mandatory Borrowing and (v) any reduction in the Total Revolving Loan
Commitment after the making of any such Swingline Loans. 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 in respect of the Borrower), each RL Bank
(other than BTCo) hereby agrees that it shall forthwith purchase from BTCo
(without recourse or warranty) such assignment of the outstanding Swingline
Loans as shall be necessary to cause the RL Banks to share in such Swingline
Loans ratably based upon their respective Percentages, provided that (x) all
--------
interest payable on the Swingline Loans shall be for the account of BTCo until
the date the respective assignment is purchased and, to the extent attributable
to the purchased assignment, shall be payable to the RL Bank purchasing same
from and after such date of purchase and (y) at the time any purchase of
assignments pursuant to this sentence is actually made, the purchasing RL Bank
shall be required to pay BTCo interest on the principal amount of the assignment
purchased for each day from and including the day upon which the Mandatory
Borrowing would otherwise have occurred to but excluding the date of payment for
such assignment, at
-3-
<PAGE>
the rate otherwise applicable to Revolving Loans maintained as Base Rate Loans
hereunder for each day thereafter.
1.012 Minimum Borrowing Amounts, etc. The aggregate principal amount
-------------------------------
of each Borrowing of Loans shall not be less than the Minimum Borrowing Amount
applicable to such Loans, provided that Mandatory Borrowings shall be made in
--------
the amounts required by Section 1.01(d). More than one Borrowing may be
incurred on any day; provided, that at no time shall there be outstanding more
--------
than six Borrowings of Eurodollar Loans.
1.013 Notice of Borrowing. (a) Whenever the Borrower desires to
-------------------
make a Borrowing hereunder (excluding Borrowings of Swingline Loans and
Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to
11:00 A.M. (New York time), at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) of each Borrowing of
Eurodollar Loans and at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate
Loans to be made hereunder. Each such notice (each, a "Notice of Borrowing")
shall, except as otherwise expressly provided in Section 1.10, be irrevocable,
and, in the case of each written notice and each confirmation of telephonic
notice, shall be in the form of Exhibit A-1, appropriately completed to specify:
(i) the aggregate principal amount of the Loans to be made pursuant to such
Borrowing, (ii) the date of such Borrowing (which shall be a Business Day),
(iii) whether the respective Borrowing shall consist of Term Loans or Revolving
Loans, and (iv) whether the respective Borrowing shall consist of Base Rate
Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar
Loans, the Interest Period to be initially applicable thereto. The Agent shall
promptly give each Bank which is required to make the Loans specified in the
respective Notice of Borrowing, written notice (or telephonic notice promptly
confirmed in writing) of each proposed Borrowing, of such Bank's proportionate
share thereof and of the other matters required to be specified in the Notice of
Borrowing.
(b) (i) Whenever the Borrower desires to incur Swingline Loans
hereunder, it shall give BTCo not later than 12:00 Noon (New York time) on the
day such Swingline Loan is to be made, written notice (or telephonic notice
promptly confirmed in writing) of each Swingline Loan to be made hereunder.
Each such notice shall be irrevocable and shall specify in each case (x) the
date of such Borrowing (which shall be a Business Day) and (y) the aggregate
principal amount of the Swingline Loan to be made pursuant to such Borrowing.
(ii) Mandatory Borrowings shall be made upon the notice specified in
Section 1.01(d), with the Borrower irrevocably agreeing, by its incurrence of
any Swingline Loan, to the making of Mandatory Borrowings as set forth in such
Section 1.01(d).
-4-
<PAGE>
(c) Without in any way limiting the obligation of the Borrower to
confirm in writing any telephonic notice permitted to be given hereunder, the
Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the respective
Letter of Credit Issuer (in the case of the issuance of Letters of Credit), as
the case may be, may prior to receipt of written confirmation act without
liability upon the basis of such telephonic notice, believed by the Agent, BTCo
or the respective Letter of Credit Issuer, as the case may be, in good faith to
be from an Authorized Officer of the Borrower. In each such case, the Borrower
hereby waives the right to dispute the Agent's, BTCo's or such Letter of Credit
Issuer's record of the terms of such telephonic notice.
1.014 Disbursement of Funds. (a) Not later than 1:00 P.M. (New York
---------------------
time) on the date specified in each Notice of Borrowing (or (x) in the case of
Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified
in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than
12:00 Noon (New York time) on the date specified in Section 1.01(d)), each Bank
with a Commitment under the respective Facility will make available its pro rata
--- ----
share, if any, of each Borrowing requested to be made on such date (or in the
case of Swingline Loans, BTCo shall make available the full amount thereof) in
the manner provided below. All amounts shall be made available to the Agent in
U.S. Dollars and in immediately available funds at the Payment Office and the
Agent promptly will make available to the Borrower by depositing to its account
at the Payment Office the aggregate of the amounts so made available in the type
of funds received. Unless the Agent shall have been notified by any Bank prior
to the date of Borrowing that such Bank does not intend to make available to the
Agent its portion of the Borrowing or Borrowings to be made on such date, the
Agent may assume that such Bank has made such amount available to the Agent on
such date of Borrowing, and the Agent, in reliance upon such assumption, may (in
its sole discretion and 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 by such Bank and the Agent has made available same
to the Borrower, the Agent shall be entitled to recover such corresponding
amount on demand from such Bank. If such Bank does not pay such corresponding
amount forthwith upon the Agent's demand therefor, the Agent shall promptly
notify the Borrower, and the Borrower shall promptly pay such corresponding
amount to the Agent. The Agent shall also be entitled to recover on demand from
such Bank 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 rate per annum equal to (x) if paid by such Bank,
the overnight Federal Funds Rate or (y) if paid by the Borrower, the then
applicable rate of interest, calculated in accordance with Section 1.08.
(b) Nothing in this Agreement shall be deemed to relieve any Bank
from its obligation to fulfill its commitments hereunder or to prejudice any
rights which the Borrower may have against any Bank as a result of any default
by such Bank hereunder.
-5-
<PAGE>
1.015 Notes. (a) The Borrower's obligation to pay the principal of,
-----
and interest on, all the Loans made to it by each Bank shall be evidenced (i) if
Term Loans, by a promissory note substantially in the form of Exhibit B-1 with
blanks appropriately completed in conformity herewith (each, a "Term Note" and,
collectively, the "Term Notes"), (ii) if Revolving Loans, by a promissory note
substantially in the form of Exhibit B-2 with blanks appropriately completed in
conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving
Notes") and (iii) if Swingline Loans, by a promissory note substantially in the
form of Exhibit B-3 with blanks appropriately completed in conformity herewith
(the "Swingline Note").
(b) The Term Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank or its registered assigns
and be dated the Initial Borrowing Date, (iii) be in a stated principal amount
equal to the Term Loans made by such Bank and be payable in the principal amount
of Term Loans evidenced thereby, (iv) mature on the Final Maturity Date, (v)
bear interest as provided in the appropriate clause of Section 1.08 in respect
of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced
thereby, (vi) be subject to voluntary repayment as provided in Section 4.01 and
mandatory repayment as provided in Section 4.02 and (vii) be entitled to the
benefits of this Agreement and the other Credit Documents.
(c) The Revolving Note issued to each Bank shall (i) be executed by
the Borrower, (ii) be payable to the order of such Bank or its registered
assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal
amount equal to the Revolving Loan Commitment of such Bank and be payable in the
principal amount of the Revolving Loans evidenced thereby, (iv) mature on the
Final Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(d) The Swingline Note issued to BTCo shall (i) be executed by the
Borrower, (ii) be payable to the order of BTCo or its registered assigns and be
dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to
the Maximum Swingline Amount and be payable in the principal amount of the
Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v)
bear interest as provided in Section 1.08 in respect of the Base Rate Loans
evidenced thereby, (vi) be subject to voluntary prepayment as provided in
Section 4.01 and mandatory repayment as provided in Section 4.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(e) Each Bank will note on its internal records the amount of each
Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced
-6-
<PAGE>
thereby. Failure to make any such notation or any error in such notation shall
not affect the Borrower's obligations in respect of such Loans.
1.016 Conversions. The Borrower shall have the option to convert on
-----------
any Business Day occurring after the Initial Borrowing Date, all or a portion at
least equal to the applicable Minimum Borrowing Amount of the outstanding
principal amount of Loans (other than Swingline Loans which shall at all times
be maintained as Base Rate Loans) made pursuant to one or more Borrowings of one
or more Types of Loans under a single Facility into a Borrowing or Borrowings of
another Type of Loan under such Facility; provided, that (i) except as otherwise
--------
provided in Section 1.10(b) and subject to the provisions of clause (iii) below,
Eurodollar Loans may be converted into Base Rate Loans only on the last day of
an Interest Period applicable to the Loans being converted and no partial
conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding
principal amount of the Eurodollar Loans made pursuant to such Borrowing to less
than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may
only be converted into Eurodollar Loans if no Default or Event of Default is in
existence on the date of the conversion, (iii) unless the Agent has determined
that the Syndication Date has occurred (at which time this clause (iii) shall no
longer be applicable), prior to the 90th day after the Initial Borrowing Date,
conversions of Base Rate Loans into Eurodollar Loans may only be made if any
such conversion is effective on the first, second or third Interest Period
referred to in clause (y) of each of Sections 1.01(a)(iii) and 1.01(b)(ii) and
so long as such conversion does not result in a greater number of Borrowings of
Eurodollar Loans prior to the 90th day after the Initial Borrowing Date as are
permitted under such Sections and (iv) Borrowings of Eurodollar Loans resulting
from this Section 1.06 shall be limited in number as provided in Section 1.02.
Each such conversion shall be effected by the Borrower by giving the Agent at
its Notice Office, prior to 11:00 A.M. (New York time), at least three Business
Days' (or one Business Day's in the case of a conversion into Base Rate Loans)
prior written notice (or telephonic notice promptly confirmed in writing) (each,
a "Notice of Conversion") specifying the Loans to be so converted, the
Borrowing(s) pursuant to which the Loans were made and, if to be converted into
a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Agent shall give each Bank prompt notice of any such proposed
conversion affecting any of its Loans. Upon any such conversion, the proceeds
thereof will be deemed to be applied directly on the day of such conversion to
prepay the outstanding principal amount of the Loans being converted.
1.017 Pro Rata Borrowings. All Borrowings of Term Loans and
-------------------
Revolving Loans under this Agreement shall be incurred by the Borrower from the
Banks pro rata on the basis of their Term Loan Commitments or Revolving Loan
--- ----
Commitments, as the case may be; provided that all Borrowings of Revolving Loans
--------
made pursuant to a Mandatory Borrowing shall be incurred from the Banks pro rata
--- ----
on the basis on their Percentages. It is understood that no Bank shall be
responsible for any default by any other Bank of its obligation to make Loans
hereunder and that each Bank shall be obligated to make the Loans to be
-7-
<PAGE>
made by it hereunder, regardless of the failure of any other Bank to fulfill its
commitments hereunder.
1.018 Interest. (a) The unpaid principal amount of each Base Rate
--------
Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be the
relevant Applicable Margin plus the Base Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan and (ii)
the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section
1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at all
times be the relevant Applicable Margin plus the Eurodollar Rate for such
Interest Period.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan shall bear interest at a rate per annum equal
to the greater of (i) the rate which is 2% in excess of the rate otherwise
applicable to Base Rate Loans from time to time and (ii) the rate which is 2% in
excess of the rate borne by such Loan immediately prior to the respective
payment default. Interest which accrues under this Section 1.08(c) shall be
payable on demand.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on each
Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date
of any prepayment or repayment thereof (on the amount prepaid or repaid), (y)
the date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09
or 1.10(b), as applicable (on the amount converted) and (z) the last day of each
Interest Period applicable thereto and, in the case of an Interest Period in
excess of three months, on each date occurring at three month intervals after
the first day of such Interest Period and (iii) in respect of each Loan, at
maturity (whether by acceleration or otherwise) and, after such maturity, on
demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 12.07(b).
(f) Upon each Interest Determination Date, the Agent shall determine
the Eurodollar Rate for the respective Interest Period or Interest Periods and
shall promptly notify the Borrower and the Banks thereof. Each such
determination shall, absent manifest error, be final and conclusive and binding
on all parties hereto.
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<PAGE>
1.019 Interest Periods. At the time the Borrower gives a Notice of
----------------
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 11:00 A.M. (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans (in the case of any subsequent Interest Period),
the Borrower shall have the right to elect by giving the Agent written notice
(or telephonic notice promptly confirmed in writing) of the Interest Period
applicable to such Borrowing, which Interest Period shall, at the option of the
Borrower (but otherwise subject to clause (y) of the proviso to Sections
1.01(a)(iii) and 1.01(b)(ii) and to Section 1.06), be a one, two, three or six
month period or, to the extent approved by all Banks with a Commitment and/or
outstanding Loans, as the case may be, under the respective Facility, a nine or
twelve month period. Notwithstanding anything to the contrary contained above:
(i) all Eurodollar Loans comprising a Borrowing shall at all
times have the same Interest Period;
(ii) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period applicable thereto
expires;
(iii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of
such calendar month;
(iv) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided, that if any Interest Period would
--------
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(v) no Interest Period for any Borrowing of Loans shall be
elected which would extend beyond the Final Maturity Date;
(vi) no Interest Period may be elected at any time when a Default
or an Event of Default is then in existence; and
(vii) no Interest Period in respect of any Borrowing of Term Loans
shall be elected which extends beyond any date upon which a Scheduled
Repayment will
-9-
<PAGE>
be required to be made under Section 4.02(A)(b) if, after giving effect to
the election of such Interest Period, the aggregate principal amount of
such Term Loans which have Interest Periods which will expire after such
date will be in excess of the aggregate principal amount of such Term Loans
then outstanding less the aggregate amount of such required Scheduled
Repayment.
If upon the expiration of any Interest Period, the Borrower has failed to elect,
or is not permitted to elect, a new Interest Period to be applicable to the
respective Borrowing of Eurodollar Loans as provided above, the Borrower shall
be deemed to have elected to convert such Borrowing into a Borrowing of Base
Rate Loans effective as of the expiration date of such current Interest Period.
1.10 Increased Costs; Illegality; etc. (a) In the event that (x) in
---------------------------------
the case of clause (i) below, the Agent or (y) in the case of clauses (ii) and
(iii) below, any Bank, shall have determined (which determination shall, absent
manifest error, be final and conclusive and binding upon all parties hereto):
(i) on any Interest Determination Date, that, by reason of any
changes arising after the date of this Agreement affecting the interbank
Eurodollar market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of
Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans because of (x) any change since the date of this
Agreement in any applicable law, governmental rule, regulation, guideline,
order or request (whether or not having the force of law), or in the
interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, guideline, order or request
(such as, for example, but not limited to, (A) a change in the basis of
taxation or payment to any Bank of the principal of or interest on such
Eurodollar Loans or any other amounts payable hereunder (except for changes
with respect to any tax imposed on, or determined by reference to, the net
income or net profits of such Bank pursuant to the laws of the jurisdiction
in which such Bank is organized, or in which such Bank's principal office
or applicable lending office is located or any subdivision thereof or
therein or Taxes for which the Borrower is responsible under Section 4.04),
or (B) a change in official reserve requirements, but, in all events,
excluding reserves required under Regulation D to the extent included in
the computation of the Eurodollar Rate) and/or (y) other circumstances
affecting such Bank, the interbank Eurodollar market or the position of
such Bank in such market; or
(iii) at any time since the date of this Agreement, that the making
or continuance of any Eurodollar Loan has become unlawful by compliance by
such Bank
-10-
<PAGE>
with any law, governmental rule, regulation, guideline or order (or would
conflict with any governmental rule, regulation, guideline, request or
order not having the force of law but with which such Bank customarily
complies even though the failure to comply therewith would not be
unlawful), or has become impracticable as a result of a contingency
occurring after the date of this Agreement which materially and adversely
affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Agent in the case of clause (i)
above) shall promptly give notice (by telephone confirmed in writing) to the
Borrower and (except in the case of clause (i)) to the Agent of such
determination (which notice the Agent shall promptly transmit to each of the
other Banks). Thereafter, (x) in the case of clause (i) above, Eurodollar Loans
shall no longer be available until such time as the Agent notifies the Borrower
and the Banks that the circumstances giving rise to such notice by the Agent no
longer exist, and any Notice of Borrowing or Notice of Conversion given by the
Borrower with respect to Eurodollar Loans which have not yet been incurred
(including by way of conversion) shall be deemed rescinded by the Borrower, (y)
in the case of clause (ii) above, the Borrower agrees to pay to such Bank, upon
written demand therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Bank in its sole discretion shall determine) as shall be required to compensate
such Bank for such increased costs or reductions in amounts received or
receivable hereunder (a written notice as to the additional amounts owed to such
Bank, showing the basis for the calculation thereof, submitted to the Borrower
by such Bank shall, absent manifest error, be final and conclusive and binding
upon all parties hereto, although the failure to give any such notice shall not
release or diminish any of the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(a) upon the subsequent receipt of such notice) and
(z) in the case of clause (iii) above, the Borrower shall take one of the
actions specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and,
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii), the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic
notice (confirmed promptly in writing) thereof on the same date that the
Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or
(ii) if the affected Eurodollar Loan is then outstanding, upon at least three
Business Days' notice to the Agent, require the affected Bank to convert each
such Eurodollar Loan into a Base Rate Loan; provided, that if more than one Bank
--------
is affected at any time, then all affected Banks must be treated the same
pursuant to this Section 1.10(b).
(c) If any Bank shall have determined that after the date hereof, the
adoption or effectiveness of any applicable law, rule or regulation regarding
capital adequacy, or any
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<PAGE>
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Bank or any
corporation controlling such Bank 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 Bank's or such other corporation's capital or assets as a
consequence of such Bank's Commitment or Commitments hereunder or its
obligations hereunder to a level below that which such Bank or such other
corporation could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Bank's or such other corporation's
policies with respect to capital adequacy), then from time to time, upon written
demand by such Bank (with a copy to the Agent), accompanied by the notice
referred to in the last sentence of this clause (c), the Borrower shall pay to
such Bank such additional amount or amounts as will compensate such Bank or such
other corporation for such reduction. In determining such additional amounts,
each Bank will act reasonably and in good faith and will use reasonable
averaging and attribution methods. Each Bank, upon determining that any
additional amounts will be payable pursuant to this Section 1.10(c), will give
prompt written notice thereof to the Borrower (a copy of which shall be sent by
such Bank to the Agent), which notice shall set forth the basis of the
calculation of such additional amounts, although the failure to give any such
notice shall not release or diminish the Borrower's obligations to pay
additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt
of such notice. A Bank's reasonable good faith determination of compensation
owing under this Section 1.10(c) shall, absent manifest error, be final and
conclusive and binding on all the parties hereto.
(d) Promptly after any Bank has determined, in its judgment, that it
will make a request for increased compensation pursuant to this Section 1.10,
such Bank will notify the Borrower thereof. Failure on the part of any Bank so
to notify the Borrower or to demand compensation for any increased costs or
reduction in amounts received or receivable or reduction in return on capital
with respect to any period shall not constitute a waiver of such Bank's right to
demand compensation with respect to such period or any other period; provided
--------
that the Borrower shall not be under any obligation to compensate any Bank under
Section 1.10(a)(ii) or (c) with respect to increased costs or reductions with
respect to any period prior to the date that is 90 days prior to such request if
such Bank knew or could reasonably have been expected to be aware of the
circumstances giving rise to such increased costs or reductions and of the fact
that such circumstances would in fact result in such increased costs or
reduction; provided further, that the foregoing limitation shall not apply to
----------------
any increased costs or reduction arising out of the retroactive application of
any law, regulation, rule, guideline or directive as aforesaid within such 90-
day period.
1.11 Compensation. The Borrower shall compensate each Bank, promptly
------------
upon its written request (which request shall set forth the basis for requesting
such compensation), for all losses, expenses and liabilities (including, without
limitation, any loss, expense
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<PAGE>
or liability incurred by reason of the liquidation or reemployment of deposits
or other funds required by such Bank to fund its Eurodollar Loans) which such
Bank may sustain: (i) if for any reason (other than a default by such Bank or
the Agent) a Borrowing of, or conversion from or into, Eurodollar Loans does not
occur on a date specified therefor in a Notice of Borrowing or Notice of
Conversion (whether or not withdrawn by the Borrower or deemed withdrawn
pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment
made pursuant to Section 4.01 or 4.02 or as a result of an acceleration of the
Loans pursuant to Section 9 or as a result of the replacement of a Bank pursuant
to Section 1.13 or 12.12(b)) or conversion of any Eurodollar Loans occurs on a
date which is not the last day of an Interest Period applicable thereto; (iii)
if any prepayment of any Eurodollar Loans is not made on any date specified in a
notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any
other default by the Borrower to repay its Eurodollar Loans when required by the
terms of this Agreement or (y) an election made pursuant to Section 1.10(b). A
Bank's basis for requesting compensation pursuant to this Section 1.11 and a
Bank's calculation of the amount thereof, shall, absent manifest error, be final
and conclusive and binding on all parties hereto.
1.12 Change of Lending Office. Each Bank agrees that, upon the
------------------------
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by
the Borrower, use reasonable efforts (subject to overall policy considerations
of such Bank) to designate another lending office for any Loans or Letters of
Credit affected by such event; provided, that such designation is made on such
--------
terms that, in the sole judgment of such Bank, such Bank and its lending office
suffer no economic, legal or regulatory disadvantage, with the object of
avoiding the consequences of the event giving rise to the operation of any such
Section. Nothing in this Section 1.12 shall affect or postpone any of the
obligations of the Borrower or the right of any Bank provided in Section 1.10,
2.05 or 4.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting
--------------------
Bank, (y) upon the occurrence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with
respect to any Bank which results in such Bank charging to the Borrower
increased costs in a material amount or (z) in the case of a refusal by a Bank
to consent to a proposed change, waiver, discharge or termination with respect
to this Agreement which has been approved by the Required Banks as provided in
Section 12.12(b), the Borrower shall have the right, in accordance with Section
12.04(b), if no Default or Event of Default then exists or would exist after
giving effect to such replacement, to replace such Bank (the "Replaced Bank")
with one or more other Eligible Transferee or Transferees, none of whom shall
constitute a Defaulting Bank at the time of such replacement (collectively, the
"Replacement Bank") and each of whom shall be reasonably acceptable to the Agent
or, at the option of the Borrower, to replace only (a) the Revolving Loan
Commitment (and outstandings pursuant thereto) of the Replaced Bank with an
identical Revolving Loan Commitment provided by the Replacement Bank or (b) in
the case of a re-
-13-
<PAGE>
placement as provided in Section 12.12(b) where the consent of the respective
Bank is required with respect to less than all Facilities, the Commitments
and/or outstanding Loans of such Bank in respect of each Facility where the
consent of such Bank would otherwise be individually required, with identical
Commitments and/or Loans of the respective Facility provided by the Replacement
Bank; provided that:
--------
(i) at the time of any replacement pursuant to this Section 1.13,
the Replacement Bank shall enter into one or more Assignment and Assumption
Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant
to said Section 12.04(b) to be paid by the Replacement Bank) pursuant to
which the Replacement Bank shall acquire all of the Commitments and
outstanding Loans (or, in the case of the replacement of only (a) the
Revolving Loan Commitment, the Revolving Loan Commitment and outstanding
Revolving Loans and participations in Letter of Credit Outstandings and/or
(b) Term Loans, the outstanding Term Loans) of, and in each case (except
for the replacement of only the outstanding Term Loans of the respective
Bank) participations in Letters of Credit by, the Replaced Bank and, in
connection therewith, shall pay to (x) the Replaced Bank in respect thereof
an amount equal to the sum of (A) an amount equal to the principal of, and
all accrued interest on, all outstanding Loans (or, in the case of the
replacement of only (I) the Revolving Loan Commitment, the outstanding
Revolving Loans or (II) the Term Loans, the outstanding Term Loans) of the
Replaced Bank, (B) except in the case of the replacement of only the
outstanding Term Loans of a Replaced Bank, an amount equal to all Unpaid
Drawings that have been funded by (and not reimbursed to) such Replaced
Bank, together with all then unpaid interest with respect thereto at such
time and (C) an amount equal to all accrued, but theretofore unpaid, Fees
owing to the Replaced Bank (but only with respect to the relevant
Facilities, in the case of the replacement of less than all Facilities of
the respective Replaced Bank) pursuant to Section 3.01, (y) except in the
case of the replacement of only the outstanding Term Loans of a Replaced
Bank, the relevant Letter of Credit Issuer an amount equal to such Replaced
Bank's Percentage of any Unpaid Drawing relating to Letters of Credit
issued by such Letter of Credit Issuer (which at such time remains an
Unpaid Drawing) to the extent such amount was not theretofore funded by
such Replaced Bank and (z) in the case of any replacement of Revolving Loan
Commitments, BTCo an amount equal to such Replaced Bank's Percentage of any
Mandatory Borrowing to the extent such amount was not theretofore funded by
such Replaced Bank; and
(ii) all obligations of the Borrower then owing to the Replaced Bank
(other than those (a) specifically described in clause (i) above in respect
of which the assignment purchase price has been, or is concurrently being,
paid, but including all amounts, if any, owing under Section 1.11 or (b)
relating to any Facility of Loans and/or Commitments of the respective
Replaced Bank which will remain outstanding
-14-
<PAGE>
after giving effect to the respective replacement) shall be paid in full to
such Replaced Bank concurrently with such replacement.
Upon the execution of the respective Assignment and Assumption Agreements, the
payment of amounts referred to in clauses (i) and (ii) above, recordation of the
assignment on the Register by the Agent pursuant to Section 12.17 and, if so
requested by the Replacement Bank, delivery to the Replacement Bank of the
appropriate Note or Notes executed by the Borrower, (x) the Replacement Bank
shall become a Bank hereunder and, unless the respective Replaced Bank continues
to have outstanding Term Loans or a Revolving Loan Commitment hereunder, the
Replaced Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement (including, without limitation,
Sections 1.10, 1.11, 2.05, 4.04, 12.01 and 12.06), which shall survive as to
such Replaced Bank and (y) in the case of the replacement of a Defaulting Bank
with a Non-Defaulting Bank, the Percentages of the Banks shall be automatically
adjusted at such time to give effect to such replacement.
SECTION 2. Letters of Credit.
-----------------
1.021 Letters of Credit. (a) Subject to and upon the terms and
-----------------
conditions herein set forth, the Borrower may request a Letter of Credit Issuer
at any time and from time to time on or after the Initial Borrowing Date and
prior to the tenth Business Day (or the 30th day in the case of trade Letters of
Credit) preceding the Final Maturity Date to issue, for the account of the
Borrower and in support of (x) trade obligations of the Borrower or any of its
Subsidiaries that arise in the ordinary course of business and/or (y) on a
standby basis, L/C Supportable Indebtedness, irrevocable sight letters of credit
in such form as may be approved by such Letter of Credit Issuer (each such
letter of credit, a "Letter of Credit" and, collectively, the "Letters of
Credit"). Notwithstanding the foregoing, no Letter of Credit Issuer shall be
under any obligation to issue any Letter of Credit if at the time of such
issuance:
(i) any order, judgment or decree of any governmental authority or
arbitrator shall purport by its terms to enjoin or restrain such Letter of
Credit Issuer from issuing such Letter of Credit or any requirement of law
applicable to such Letter of Credit Issuer or any request or directive
(whether or not having the force of law) from any governmental authority
with jurisdiction over such Letter of Credit Issuer shall prohibit, or
request that such Letter of Credit Issuer refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon such Letter of Credit Issuer with respect to such Letter of
Credit any restriction or reserve or capital requirement (for which such
Letter of Credit Issuer is not otherwise compensated) not in effect on the
date hereof, or any unreimbursed loss, cost or expense which was not
applicable, in effect or known to such Letter of Credit
-15-
<PAGE>
Issuer as of the date hereof and which such Letter of Credit Issuer in good
faith deems material to it; or
(ii) such Letter of Credit Issuer shall have received notice from
the Borrower or the Required Banks prior to the issuance of such Letter of
Credit of the type described in clause (vi) of Section 2.01(b).
(b) Notwithstanding the foregoing, (i) no Letter of Credit shall be
issued the Stated Amount of which, when added to the Letter of Credit
Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and
prior to the issuance of, the respective Letter of Credit) at such time, would
exceed either (x) $8,000,000 or (y) when added to the aggregate principal amount
of all Revolving Loans and Swingline Loans then outstanding, the Total Revolving
Loan Commitment at such time; (ii) (x) each standby Letter of Credit shall have
an expiry date occurring not later than one year after such standby Letter of
Credit's date of issuance, provided, that any such Letter of Credit may be
--------
extendable for successive periods of up to one year, but not beyond the tenth
Business Day preceding the Final Maturity Date, on terms acceptable to the
Letter of Credit Issuer and (y) each trade Letter of Credit shall have an expiry
date occurring not later than 180 days after such Letter of Credit's date of
issuance; (iii) (x) no standby Letter of Credit shall have an expiry date
occurring later than the tenth Business Day preceding the Final Maturity Date
and (y) no trade Letter of Credit shall have an expiry date occurring later than
30 days prior to the Final Maturity Date; (iv) each Letter of Credit shall be
denominated in U.S. Dollars; (v) the Stated Amount of each Letter of Credit
shall not be less than $100,000 or such lesser amount as is acceptable to the
respective Letter of Credit Issuer; and (vi) no Letter of Credit Issuer will
issue any Letter of Credit after it has received written notice from the
Borrower, the Agent or the Required Banks stating that a Default or an Event of
Default exists until such time as such Letter of Credit Issuer shall have
received a written notice of (x) rescission of such notice from the party or
parties originally delivering the same or (y) a waiver of such Default or Event
of Default by the Required Banks (or all Banks to the extent required by Section
12.12).
(c) Notwithstanding the foregoing, in the event a Bank Default
exists, no Letter of Credit Issuer shall be required to issue any Letter of
Credit unless the respective Letter of Credit Issuer has entered into
arrangements satisfactory to it and the Borrower to eliminate such Letter of
Credit Issuer's risk with respect to the participation in Letters of Credit of
the Defaulting Bank or Banks, including by cash collateralizing such Defaulting
Bank's or Banks' Percentage of the Letter of Credit Outstandings, as the case
may be.
1.022 Letter of Credit Requests; Notices; etc. (a) Whenever it
----------------------------------------
desires that a Letter of Credit be issued, the Borrower shall give the Agent and
the respective Letter of Credit Issuer written notice (or telephonic notice
confirmed in writing) thereof prior to 12:00 Noon (New York time) at least five
Business Days (or such shorter period as may be
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<PAGE>
acceptable to the respective Letter of Credit Issuer) prior to the proposed date
of issuance (which shall be a Business Day) which written notice shall be in the
form of Exhibit A-2 (each, a "Letter of Credit Request"). Each Letter of Credit
Request shall include any other documents as such Letter of Credit Issuer
customarily requires in connection therewith.
(b) Each Letter of Credit Issuer shall, promptly after each issuance
of, or amendment or modification to, a standby Letter of Credit issued by it,
give the Agent, each Participant and the Borrower written notice of the issuance
of, or amendment or modification to, such Letter of Credit, which notice shall
be accompanied by a copy of the standby Letter of Credit or standby Letters of
Credit issued by it and each such amendment or modification thereto.
(c) Each Letter of Credit Issuer (other than BTCo) shall deliver to
the Agent, promptly on the first Business Day of each week, by facsimile
transmission, the aggregate daily Stated Amount available to be drawn under the
outstanding trade Letters of Credit issued by such Letter of Credit Issuer for
the previous week. The Agent shall, within 10 days after the last Business Day
of each calendar month, deliver to each Participant a report setting forth for
such preceding calendar month the aggregate daily Stated Amount available to be
drawn under all outstanding trade Letters of Credit during such calendar month.
(d) The making of each Letter of Credit Request shall be deemed to be
a representation and warranty by the Borrower that such Letter of Credit may be
issued in accordance with, and it will not violate the requirements of, Section
2.01(a). Unless the respective Letter of Credit Issuer has received notice from
the Required Banks before it issues a Letter of Credit that one or more of the
applicable conditions specified in Section 5 are not then satisfied, or that the
issuance of such Letter of Credit would violate Section 2.01(a), then such
Letter of Credit Issuer may issue the requested Letter of Credit for the account
of the Borrower in accordance with such Letter of Credit Issuer's usual and
customary practice.
1.023 Agreement to Repay Letter of Credit Drawings. (a) The
--------------------------------------------
Borrower hereby agrees to reimburse each Letter of Credit Issuer, by making
payment to the Agent in immediately available funds at the Payment Office, for
any payment or disbursement made by such Letter of Credit Issuer under any
Letter of Credit issued by it (each such amount so paid or disbursed until
reimbursed, an "Unpaid Drawing") no later than one Business Day following the
date of such payment or disbursement, with interest on the amount so paid or
disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to
1:00 P.M. (New York time) on the date of such payment or disbursement, from and
including the date paid or disbursed to but not including the date such Letter
of Credit Issuer is reimbursed therefor at a rate per annum which shall be the
Base Rate as in effect from time to time plus the Applicable Margin for Base
Rate Loans (plus an additional 2% per annum if not reimbursed by the third
Business Day after the date of such payment or disbursement), such interest also
to be payable on demand; provided, that it is understood and agreed, however,
--------
-17-
<PAGE>
that the notices referred to above in this clause (a) shall not be required to
be given if a Default or an Event of Default under Section 9.05 shall have
occurred and be continuing (in which case the Unpaid Drawings shall be due and
payable promptly without presentment, demand, protest or notice of any kind (all
of which are hereby waived by each Credit Party) and shall bear interest at a
rate per annum which shall be the Base Rate as in effect from time to time plus
the Applicable Margin for Base Rate Loans plus 2% on and after the third
Business Day following the respective Drawing). Each Letter of Credit Issuer
shall provide the Borrower prompt notice of any payment or disbursement made by
it under any Letter of Credit issued by it, although the failure of, or delay
in, giving any such notice shall not release or diminish the obligations of the
Borrower under this Section 2.03(a) or under any other Section of this
Agreement.
(b) The Borrower's obligation under this Section 2.03 to reimburse
the respective Letter of Credit Issuer with respect to Unpaid Drawings
(including, in each case, interest thereon) shall be absolute and unconditional
under any and all circumstances and irrespective of any setoff, counterclaim or
defense to payment which the Borrower or any of its Subsidiaries may have or
have had against such Letter of Credit Issuer, the Agent or any Bank, including,
without limitation, any defense based upon the failure of any drawing under a
Letter of Credit issued by it to conform to the terms of the Letter of Credit or
any nonapplication or misapplication by the beneficiary of the proceeds of such
drawing; provided, however, that the Borrower shall not be obligated to
-------- -------
reimburse such Letter of Credit Issuer for any wrongful payment made by such
Letter of Credit Issuer under a Letter of Credit issued by it as a result of
acts or omissions constituting willful misconduct or gross negligence on the
part of such Letter of Credit Issuer.
1.024 Letter of Credit Participations. (a) Immediately upon the
-------------------------------
issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of
Credit Issuer shall be deemed to have sold and transferred to each other RL
Bank, and each such RL Bank (each, a "Participant") shall be deemed irrevocably
and unconditionally to have purchased and received from such Letter of Credit
Issuer, without recourse or warranty, an undivided interest and participation,
to the extent of such Participant's Percentage, in such Letter of Credit, each
substitute Letter of Credit, each drawing made thereunder and the obligations of
the Borrower under this Agreement with respect thereto (although Letter of
Credit Fees shall be payable directly to the Agent for the account of the RL
Banks as provided in Section 3.01(b) and the Participants shall have no right to
receive any portion of any Facing Fees with respect to such Letters of Credit)
and any security therefor or guaranty pertaining thereto. Upon any change in the
Revolving Loan Commitments of the RL Banks pursuant to Section 1.13 or 12.04(b),
it is hereby agreed that, with respect to all outstanding Letters of Credit and
Unpaid Drawings with respect thereto, there shall be an automatic adjustment to
the participations pursuant to this Section 2.04 to reflect the new Percentages
of the assigning and assignee Bank.
-18-
<PAGE>
(b) In determining whether to pay under any Letter of Credit, no
Letter of Credit Issuer shall have any obligation relative to the Participants
other than to determine that any documents required to be delivered under such
Letter of Credit have been delivered and that they appear to substantially
comply on their face with the requirements of such Letter of Credit. Any action
taken or omitted to be taken by any Letter of Credit Issuer under or in
connection with any Letter of Credit issued by it if taken or omitted in the
absence of gross negligence or willful misconduct, shall not create for such
Letter of Credit Issuer any resulting liability.
(c) In the event that any Letter of Credit Issuer makes any payment
under any Letter of Credit issued by it and the Borrower shall not have
reimbursed such amount in full to such Letter of Credit Issuer pursuant to
Section 2.03(a), such Letter of Credit Issuer shall promptly notify the Agent,
and the Agent shall promptly notify each Participant of such failure, and each
such Participant shall promptly and unconditionally pay to the Agent for the
account of such Letter of Credit Issuer, the amount of such Participant's
Percentage of such payment in U.S. Dollars and in same day funds. If the Agent
so notifies any Participant required to fund a payment under a Letter of Credit
prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall
make available to the Agent at the Payment Office for the account of the
respective Letter of Credit Issuer such Participant's Percentage of the amount
of such payment on such Business Day in same day funds (and, to the extent such
notice is given after 11:00 A.M. (New York time) on any Business Day, such
Participant shall make such payment on the immediately following Business Day).
If and to the extent such Participant shall not have so made its Percentage of
the amount of such payment available to the Agent for the account of the
respective Letter of Credit Issuer, such Participant agrees to pay to the Agent
for the account of such Letter of Credit Issuer, forthwith on demand such
amount, together with interest thereon, for each day from such date until the
date such amount is paid to the Agent for the account of such Letter of Credit
Issuer at the overnight Federal Funds Rate. The failure of any Participant to
make available to the Agent for the account of the respective Letter of Credit
Issuer its Percentage of any payment under any Letter of Credit issued by it
shall not relieve any other Participant of its obligation hereunder to make
available to the Agent for the account of such Letter of Credit Issuer its
applicable Percentage of any payment under any such Letter of Credit on the date
required, as specified above, but no Participant shall be responsible for the
failure of any other Participant to make available to the Agent for the account
of such Letter of Credit Issuer such other Participant's Percentage of any such
payment.
(d) Whenever any Letter of Credit Issuer receives a payment of a
reimbursement obligation as to which the Agent has received for the account of
such Letter of Credit Issuer any payments from the Participants pursuant to
clause (c) above, such Letter of Credit Issuer shall pay to the Agent and the
Agent shall promptly pay to each Participant which has paid its Percentage
thereof, in U.S. Dollars and in same day funds, an amount
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<PAGE>
equal to such Participant's Percentage of the principal amount thereof and
interest thereon accruing after the purchase of the respective participations.
(e) The obligations of the Participants to make payments to the Agent
for the account of the respective Letter of Credit Issuer with respect to
Letters of Credit issued by it shall be irrevocable and not subject to
counterclaim, set-off or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Credit Documents;
(ii) the existence of any claim, set-off, defense or other right
which the Borrower or any of its Subsidiaries may have at any time against
a beneficiary named in a Letter of Credit, any transferee of any Letter of
Credit (or any Person for whom any such transferee may be acting), the
Agent, any Letter of Credit Issuer, any Bank or other Person, whether in
connection with this Agreement, any Letter of Credit, the transactions
contemplated herein (including the Transaction) or any unrelated
transactions (including any underlying transaction between the Borrower or
any of its Subsidiaries and the beneficiary named in any such Letter of
Credit);
(iii) any draft, certificate or other document presented under the
Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Credit
Documents; or
(v) the occurrence of any Default or Event of Default.
1.025 Increased Costs. If after the date hereof, the adoption or
---------------
effectiveness of any applicable law, rule or regulation, order, guideline or
request or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Letter of Credit Issuer or any Participant with any request or directive
(whether or not having the force of law) by any such authority, central bank or
comparable agency shall either (i) impose, modify or make applicable any
reserve, deposit, capital adequacy or similar requirement against Letters of
Credit issued by such Letter of Credit Issuer or such Participant's
participation therein, or (ii) impose on any Letter of Credit Issuer or any
Participant any other conditions directly or indirectly affecting this
Agreement, any Letter of Credit or such Participant's participation therein; and
the result of any of the foregoing is to
-20-
<PAGE>
increase the cost to such Letter of Credit Issuer or such Participant of
issuing, maintaining or participating in any Letter of Credit, or to reduce the
amount of any sum received or receivable by such Letter of Credit Issuer or such
Participant hereunder or reduce the rate of return on its capital with respect
to Letters of Credit, then, upon written demand to the Borrower by such Letter
of Credit Issuer or such Participant (a copy of which notice shall be sent by
such Letter of Credit Issuer or such Participant to the Agent), accompanied by
the certificate described in the last sentence of this Section 2.05, the
Borrower shall pay to such Letter of Credit Issuer or such Participant such
additional amount or amounts as will compensate such Letter of Credit Issuer or
such Participant for such increased cost or reduction. A certificate submitted
to the Borrower by such Letter of Credit Issuer or such Participant, as the case
may be (a copy of which certificate shall be sent by such Letter of Credit
Issuer or such Participant to the Agent), setting forth the basis for the
determination of such additional amount or amounts necessary to compensate such
Letter of Credit Issuer or such Participant as aforesaid shall be final and
conclusive and binding on the Borrower absent manifest error, although the
failure to deliver any such certificate shall not release or diminish the
Borrower's obligations to pay additional amounts pursuant to this Section 2.05
upon subsequent receipt of such certificate.
SECTION 3. Fees; Commitments.
-----------------
1.031 Fees. (a) The Borrower shall pay to the Agent for
----
distribution to each Non-Defaulting Bank a commitment fee (the "Commitment Fee")
for the period from the Effective Date to and including the Final Maturity Date
(or such earlier date as the Total Commitment shall have been terminated),
computed at a rate of 1/2 of 1% per annum on the daily Aggregate Unutilized
Commitment of such Non-Defaulting Bank. Accrued Commitment Fees shall be due and
payable quarterly in arrears on each Quarterly Payment Date and on the Final
Maturity Date (or such earlier date upon which the Total Commitment is
terminated).
(b) The Borrower shall pay to the Agent for pro rata distribution to
--- ----
each Non-Defaulting Bank with a Revolving Loan Commitment (based on their
respective Percentages), a fee in respect of each Letter of Credit (the "Letter
of Credit Fee") computed at a rate per annum equal to the Applicable Margin for
Eurodollar Loans then in effect on the daily Stated Amount of such Letter of
Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in
arrears on each Quarterly Payment Date and upon the first day after the
termination of the Total Revolving Loan Commitment upon which no Letters of
Credit remain outstanding.
(c) The Borrower shall pay to each Letter of Credit Issuer a fee in
respect of each Letter of Credit issued by such Letter of Credit Issuer (the
"Facing Fee") computed at the rate of 1/4 of 1% per annum on the daily Stated
Amount of such Letter of Credit;
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<PAGE>
provided, that in no event shall the annual Facing Fee with respect to each
- --------
Letter of Credit be less than $500; it being agreed that (x) on the date of
issuance of any Letter of Credit and on each anniversary thereof prior to the
termination of such Letter of Credit, if $500 will exceed the amount of Facing
Fees that will accrue with respect to such Letter of Credit for the immediately
succeeding 12-month period, the full $500 shall be payable on the date of
issuance of such Letter of Credit and on each such anniversary thereof prior to
the termination of such Letter of Credit and (y) if on the date of the
termination of any Letter of Credit, $500 actually exceeds the amount of Facing
Fees paid or payable with respect to such Letter of Credit for the period
beginning on the date of the issuance thereof (or if the respective Letter of
Credit has been outstanding for more than one year, the date of the last
anniversary of the issuance thereof occurring prior to the termination of such
Letter of Credit) and ending on the date of the termination thereof, an amount
equal to such excess shall be paid as additional Facing Fees with respect to
such Letter of Credit on the next date upon which Facing Fees are payable in
accordance with the immediately succeeding sentence. Except as provided in the
immediately preceding sentence, accrued Facing Fees shall be due and payable
quarterly in arrears on each Quarterly Payment Date and upon the first day on or
after the termination of the Total Revolving Loan Commitment upon which no
Letters of Credit remain outstanding.
(d) The Borrower hereby agrees to pay directly to each Letter of
Credit Issuer upon each issuance of, payment under, and/or amendment of, a
Letter of Credit issued by such Letter of Credit Issuer such amount as shall at
the time of such issuance, payment or amendment be the administrative charge
which such Letter of Credit Issuer is customarily charging for issuances of,
payments under or amendments of, letters of credit issued by it.
(e) The Borrower shall pay to the Agent, for its own account, such
fees as may be agreed to in writing from time to time between the Borrower and
the Agent, when and as due.
(f) All computations of Fees shall be made in accordance with
Section 12.07(b).
1.032 Voluntary Termination or Reduction of Total Unutilized
------------------------------------------------------
Revolving Loan Commitment. (a) Upon at least three Business Days' prior
- -------------------------
written notice (or telephone notice promptly confirmed in writing) to the Agent
at its Notice Office (which notice the Agent shall promptly transmit to each of
the Banks), the Borrower shall have the right, without premium or penalty, to
terminate or partially reduce the Total Unutilized Revolving Loan Commitment,
provided that (w) any such termination or partial reduction shall apply to
- --------
proportionately and permanently reduce the Revolving Loan Commitment of each of
the RL Banks, (x) any reduction to the Total Unutilized Revolving Loan
Commitment prior to the Initial Borrowing Date may only be made in connection
with a termination in full of the Total Revolving Loan Commitment, (y) any
partial reduction pursuant to this Section 3.02(a)
-22-
<PAGE>
shall be in integral multiples of $1,000,000 and (z) the reduction to the Total
Unutilized Revolving Loan Commitment shall in no case be in an amount which
would cause the Revolving Loan Commitment of any RL Bank to be reduced (as
required by the preceding clause (w)) by an amount which exceeds the remainder
of (A) the Unutilized Revolving Loan Commitment of such RL Bank as in effect
immediately before giving effect to such reduction minus (B) such RL Bank's
Percentage of the aggregate principal amount of Swingline Loans then
outstanding.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, subject to obtaining the consents
required by Section 12.12(b), upon five Business Days' prior written notice to
the Agent at its Notice Office (which notice the Agent shall promptly transmit
to each of the Banks), to terminate the entire Revolving Loan Commitment of such
Bank, so long as all Loans, together with accrued and unpaid interest, Fees and
all other amounts, owing to such Bank (including all amounts, if any, owing
pursuant to Section 1.11 but excluding amounts owing in respect of Term Loans
maintained by such Bank, if such Term Loans are not being repaid pursuant to
Section 12.12(b)) are repaid concurrently with the effectiveness of such
termination (at which time Annex I shall be deemed modified to reflect such
changed amounts) and at such time, unless the respective Bank continues to have
outstanding Term Loans hereunder, such Bank shall no longer constitute a "Bank"
for purposes of this Agreement, except with respect to indemnifications under
this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04,
12.01 and 12.06), which shall survive as to such repaid Bank.
1.033 Mandatory Reduction of Commitments. (a) The Total Commitment
----------------------------------
(and the Term Loan Commitment and the Revolving Loan Commitment of each Bank)
shall terminate in its entirety on March 15, 1997 unless the Initial Borrowing
Date has occurred on or before such date.
(b) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Term Loan Commitment (and the Term Loan
Commitment of each Bank) shall terminate in its entirety on the Initial
Borrowing Date (after giving effect to the incurrence of Term Loans on such
date).
(c) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Revolving Loan Commitment (and the Revolving
Loan Commitment of each RL Bank) shall terminate in its entirety on the earlier
of (i) the date on which a Change of Control Event occurs and (ii) the Final
Maturity Date.
(d) In addition to any other mandatory commitment reductions pursuant
to this Section 3.03 on each date upon which a mandatory repayment of Term Loans
pursuant
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<PAGE>
to Section 4.02(A)(c), (d), (e), (f), (g) and (h) is required (and exceeds in
amount the aggregate principal amount of Term Loans then outstanding) or would
be required if Term Loans were then outstanding, the Total Revolving Loan
Commitment shall be permanently reduced by the amount, if any, by which the
amount required to be applied pursuant to said Sections (determined as if an
unlimited amount of Term Loans were actually outstanding) exceeds the aggregate
principal amount of Term Loans then outstanding.
(e) Each reduction to the Total Term Loan Commitment or Total
Revolving Loan Commitment pursuant to this Section 3.03 shall be applied
proportionately to reduce the Term Loan Commitment or the Revolving Loan
Commitment, as the case may be, of each Bank with such a Commitment.
SECTION 4. Payments.
--------
1.041 Voluntary Prepayments. (a) The Borrower shall have the right
---------------------
to prepay the Loans, and the right to allocate such prepayments to Revolving
Loans, Swingline Loans and/or Term Loans as the Borrower elects, in whole or in
part, without premium or penalty except as otherwise provided in this Agreement,
from time to time on the following terms and conditions:
(i) the Borrower shall give the Agent at its Notice Office written
notice (or telephonic notice promptly confirmed in writing) of its intent
to prepay such Loans, whether such Loans are Term Loans, Revolving Loans or
Swingline Loans, the amount of such prepayment, the Type of Loans to be
repaid and (in the case of Eurodollar Loans) the specific Borrowing(s)
pursuant to which made, which notice shall be given by the Borrower prior
to 12:00 Noon (New York time) (x) at least one Business Day prior to the
date of such prepayment in the case of Base Rate Loans, (y) on the date of
such prepayment in the case of Swingline Loans and (z) at least three
Business Days prior to the date of such prepayment in the case of
Eurodollar Loans, which notice shall, except in the case of Swingline
Loans, promptly be transmitted by the Agent to each of the Banks;
(ii) each prepayment (other than prepayments in full of (x) all
outstanding Base Rate Loans or (y) any outstanding Borrowing of Eurodollar
Loans) shall be in an aggregate principal amount of at least (I) $500,000,
in the case of Base Rate Loans (other than Swingline Loans), (II)
$1,000,000, in the case of Eurodollar Loans and (III) $250,000, in the case
of Swingline Loans, and, if greater, in integral multiples of $100,000,
provided, that no partial prepayment of Eurodollar Loans made pursuant to a
--------
Borrowing shall reduce the aggregate principal amount of the Eurodollar
Loans outstanding pursuant to such Borrowing to an amount less than the
Minimum Borrowing Amount applicable thereto;
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<PAGE>
(iii) at the time of any prepayment of Eurodollar Loans pursuant to
this Section 4.01 on any date other than the last day of the Interest
Period applicable thereto, the Borrower shall pay the amounts required
pursuant to Section 1.11;
(iv) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans, provided, that at the
--- ---- --------
Borrower's election in connection with any prepayment of Revolving Loans
pursuant to this Section 4.01(a), such prepayment shall not be applied to
any Revolving Loans of a Defaulting Bank; and
(v) each prepayment of principal of Term Loans pursuant to this
Section 4.01(a) shall be applied to reduce the then remaining Scheduled
Repayments in direct order of maturity.
(b) In the event of certain refusals by a Bank to consent to certain
proposed changes, waivers, discharges or terminations with respect to this
Agreement which have been approved by the Required Banks as provided in Section
12.12(b), the Borrower shall have the right, upon five Business Days' prior
written notice to the Agent at its Notice Office (which notice the Agent shall
promptly transmit to each of the Banks), to repay all Loans of such Bank
(including all amounts, if any, owing pursuant to Section 1.11), together with
accrued and unpaid interest, Fees and all other amounts then owing to such Bank
(or owing to such Bank with respect to the Facility which gave rise to the need
to obtain such Bank's individual consent) in accordance with said Section
12.12(b), so long as (A) in the case of the repayment of Revolving Loans of any
Bank pursuant to this clause (b), the Revolving Loan Commitment of such Bank is
terminated concurrently with such repayment (at which time Annex I shall be
deemed modified to reflect the changed Revolving Loan Commitments) and (B) the
consents required by Section 12.12(b) in connection with the repayment pursuant
to this clause (b) shall have been obtained.
4.02 Mandatory Prepayments.
---------------------
(A) Requirements:
------------
(a) If on any date the sum of (i) the aggregate outstanding
principal amount of Revolving Loans and Swingline Loans (after giving effect to
all other repayments thereof on such date) plus (ii) the Letter of Credit
Outstandings on such date exceeds the Total Revolving Loan Commitment as then in
effect, the Borrower shall repay on such date the principal of Swingline Loans,
and if no Swingline Loans are or remain outstanding, Revolving Loans, in an
aggregate amount equal to such excess. If, after giving effect to the prepayment
of all outstanding Swingline Loans and Revolving Loans, the aggregate amount of
Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as
then in effect, the Borrower agrees to pay to the Agent on such date an amount
in cash and/or Cash
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<PAGE>
Equivalents equal to such excess (up to the aggregate amount of Letter of Credit
Outstandings at such time) and the Agent shall hold such payment as security for
the obligations of the Borrower hereunder pursuant to a cash collateral
agreement to be entered into in form and substance satisfactory to the Agent
(which shall permit certain investments in Cash Equivalents satisfactory to the
Agent until the proceeds are applied to the secured obligations).
(b) In addition to any other mandatory repayments pursuant to this
Section 4.02, on each date set forth below, the Borrower shall be required to
repay that principal amount of Term Loans as is set forth opposite such date
(each such repayment, as the same may be reduced as provided in Sections 4.01
and 4.02(B), a "Scheduled Repayment"):
<TABLE>
<CAPTION>
Scheduled Repayment Date Amount
------------------------ ------
<S> <C>
June 30, 1997 $1,000,000
September 30, 1997 $1,000,000
December 31, 1997 $1,000,000
March 31, 1998 $1,250,000
June 30, 1998 $1,250,000
September 30, 1998 $1,250,000
December 31, 1998 $1,250,000
March 31, 1999 $2,250,000
June 30, 1999 $2,250,000
September 30, 1999 $2,250,000
December 31, 1999 $2,250,000
March 31, 2000 $3,750,000
June 30, 2000 $3,750,000
September 30, 2000 $3,750,000
December 31, 2000 $3,750,000
March 31, 2001 $3,750,000
June 30, 2001 $3,750,000
September 30, 2001 $3,750,000
December 31, 2001 $3,750,000
March 31, 2002 $4,000,000
June 30, 2002 $4,000,000
</TABLE>
(c) In addition to any other mandatory repayments pursuant to this
Section 4.02, on the third Business Day after the date of receipt thereof by
Holdings and/or any of its Subsidiaries of Proceeds from any Asset Sale, an
amount equal to 100% of the Net Proceeds from such Asset Sale shall be applied
as a mandatory repayment of principal of the Term Loans, provided, that with
--------
respect to no more than $750,000 in the aggregate of such Net Proceeds in any
fiscal year of the Borrower, such Net Proceeds shall not be required to be so
applied on such date to the extent that no Default or Event of Default then
exists and
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<PAGE>
the Borrower delivers a certificate to the Agent on or prior to such date
stating that such Net Proceeds shall be used to purchase assets used or to be
used (or contractually committed to be used) in the businesses referred to in
Section 8.01(a) (including, without limitation (but only to the extent permitted
by Section 8.02), capital stock of a corporation engaged in any such business)
within 180 days following the date of such Asset Sale (which certificate shall
set forth the estimates of the proceeds to be so expended), provided, that (1)
--------
if all or any portion of such Net Proceeds not so applied to the repayment of
Term Loans are not so used (or contractually committed to be used) within such
180 day period, such remaining portion shall be applied on the last day of such
period as a mandatory repayment of principal of outstanding Term Loans as
provided above in this Section 4.02(A)(c) and (2) if all or any portion of such
Net Proceeds are not required to be applied on the 180th day referred to in
clause (1) above because such amount is contractually committed to be used and
subsequent to such date such contract is terminated or expires without such
portion being so used, then such remaining portion shall be applied on the date
of such termination or expiration as a mandatory repayment of principal of
outstanding Term Loans as provided above in this Section 4.02(A)(c).
(d) In addition to any other mandatory repayments pursuant to this
Section 4.02, on the date of the receipt thereof by Holdings and/or any of its
Subsidiaries, an amount equal to 100% of the cash proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith) of
the sale or issuance of preferred or common equity of (or cash capital
contributions to) Holdings or any of its Subsidiaries (other than (w) equity
contributions received by Holdings on or prior to the Initial Borrowing Date as
part of the Equity Financing, (x) proceeds from issuances of Holdings Common
Stock and Qualified Preferred Stock of up to $2,500,000 in the aggregate to the
extent that such proceeds are used to consummate one or more Permitted
Acquisitions, (y) issuances of Holdings Common Stock or Qualified Preferred
Stock (including as a result of the exercise of any options with regard thereto)
to management of Holdings and its Subsidiaries and (z) equity contributions to
the Borrower or any of its Subsidiaries made by Holdings or any of its
Subsidiaries) shall be applied as a mandatory repayment of principal of the Term
Loans.
(e) In addition to any other mandatory repayments pursuant to this
Section 4.02, on the date of the receipt thereof by Holdings and/or any of its
Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting
discounts and commissions and other reasonable costs associated therewith) of
the incurrence of Indebtedness by Holdings and/or any of its Subsidiaries (other
than Indebtedness permitted to be incurred by Section 8.04 as in effect on the
Effective Date) shall be applied as a mandatory repayment of principal of the
Term Loans.
(f) In addition to any other mandatory repayments pursuant to this
Section 4.02, on each Excess Cash Payment Date, an amount equal to 75% of Excess
Cash Flow of the Borrower and its Subsidiaries for the most recent Excess Cash
Flow Period ending prior
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<PAGE>
to such Excess Cash Payment Date shall be applied as a mandatory repayment of
principal of the Term Loans.
(g) In addition to any other mandatory repayments pursuant to this
Section 4.02, within 10 days following each date on which Holdings or any of its
Subsidiaries receives any proceeds from any Recovery Event, an amount equal to
100% of the proceeds of such Recovery Event (net of reasonable costs and taxes
incurred in connection with such Recovery Event) shall be applied as a mandatory
repayment of principal of the Term Loans, provided that so long as no Default or
--------
Event of Default then exists and such proceeds do not exceed $1,000,000, such
proceeds shall not be required to be so applied on such date to the extent that
the Borrower has delivered a certificate to the Agent on or prior to such date
stating that such proceeds shall be used (or contractually committed to be used)
to replace or restore any properties or assets in respect of which such proceeds
were paid within 180 days following the date of the receipt of such proceeds
(which certificate shall set forth the estimates of the proceeds to be so
expended), and provided further, that (i) if the amount of such proceeds exceeds
----------------
$1,000,000, then the entire amount and not just the portion in excess of
$1,000,000 shall be applied as a mandatory repayment of Term Loans as provided
above in this Section 4.02(A)(g), (ii) if all or any portion of such proceeds
not required to be applied to the repayment of Term Loans pursuant to the
preceding proviso are not so used (or contractually committed to be used) within
180 days after the date of the receipt of such proceeds, such remaining portion
shall be applied on the last day of such period as a mandatory repayment of
principal of the Term Loans as provided in this Section 4.02(A)(g) and (iii) if
all or any portion of such proceeds are not required to be applied on the 180th
day referred to in clause (ii) above because such amount is contractually
committed to be used and subsequent to such date such contract is terminated or
expires without such portion being so used, then such remaining portion shall be
applied on the date of such termination or expiration as a mandatory repayment
of principal of outstanding Term Loans as provided in this Section 4.02(A)(g).
(h) On the date of the receipt thereof by Holdings and/or any of its
Subsidiaries of a Pension Plan Refund, an amount equal to 100% of such Pension
Plan Refund shall be applied as a mandatory repayment of principal of the Term
Loans.
(i) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full
on the Swingline Expiry Date and (ii) all other then outstanding Loans shall be
repaid in full on the Final Maturity Date.
(j) On the date upon which any Change of Control Event occurs, the
outstanding amount of all Term Loans shall become due and payable in full.
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(B) Application:
-----------
(a) All repayments of Term Loans shall be applied in the following
manner:
(i) if required pursuant to Section 4.02(A)(c), (d), (e), (g) or
(h), to reduce the then remaining Scheduled Repayments on a pro rata basis
--- ----
(based upon the then remaining amount of each such Scheduled Repayment
after giving effect to all prior reductions thereto); and
(ii) if required pursuant to Section 4.02(A)(f), (x) first to reduce
-----
the next two then remaining Scheduled Repayments in direct order of
maturity and (y) second, thereafter (or to the extent in excess thereof),
to reduce the then remaining Scheduled Repayments on a pro rata basis
--- ----
(based upon the then remaining amount of each such Scheduled Repayment
after giving effect to all prior reductions thereto, including reductions
pursuant to clause (x) above).
(b) With respect to each repayment of Loans required by this Section
4.02, the Borrower may designate the Types of Loans which are to be repaid and
the specific Borrowing(s) under the affected Facility pursuant to which made;
provided, that (i) Eurodollar Loans made pursuant to a specific Facility may be
- --------
designated for repayment pursuant to this Section 4.02 only on the last day of
an Interest Period applicable thereto unless all Eurodollar Loans made pursuant
to such Facility with Interest Periods ending on such date of required
prepayment and all Base Rate Loans made pursuant to such Facility have been paid
in full; (ii) if any repayment of Eurodollar Loans made pursuant to a single
Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to
an amount less than the Minimum Borrowing Amount applicable thereto, such
Borrowing shall be immediately converted into Base Rate Loans; and (iii) each
repayment of any Loans made pursuant to a Borrowing shall be applied pro rata
--- ----
among such Loans; provided, that no repayment pursuant to Section 4.02(A)(a)
--------
shall be applied to any Revolving Loans of a Defaulting Bank at any time when
the aggregate amount of the Revolving Loans of any Non-Defaulting Bank exceeds
such Non-Defaulting Bank's Percentage of Revolving Loans then outstanding. In
the absence of a designation by the Borrower as described in the preceding
sentence, the Agent shall, subject to the above, make such designation in its
sole discretion with a view, but no obligation, to minimize breakage costs owing
under Section 1.11. Notwithstanding the foregoing provisions of this Section
4.02(B), if at any time the mandatory prepayment of Loans pursuant to Section
4.02(A) above would result, after giving effect to the procedures set forth
above, in the Borrower incurring breakage costs under Section 1.11 as a result
of Eurodollar Loans being prepaid other than on the last day of an Interest
Period applicable thereto (the "Affected Eurodollar Loans"), then the Borrower
may in its sole discretion initially deposit a portion (up to 100%) of the
amounts that otherwise would have been paid in respect of the Affected
Eurodollar Loans with the Agent (which deposit must be equal in amount to the
amount of Affected Eurodollar Loans not immediately prepaid) to be held as
security for the obligations of the Borrower hereunder pursuant to a cash
collateral arrangement satisfactory
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<PAGE>
to the Agent and the Borrower and shall provide for investments satisfactory to
the Agent and the Borrower, with such cash collateral to be directly applied
upon the first occurrence (or occurrences) thereafter of the last day of an
Interest Period applicable to the relevant Loans that are Eurodollar Loans (or
such earlier date or dates as shall be requested by the Borrower), to repay an
aggregate principal amount of such Loans equal to the Affected Eurodollar Loans
not initially prepaid pursuant to this sentence. Notwithstanding anything to the
contrary contained in the immediately preceding sentence, all amounts deposited
as cash collateral pursuant to the immediately preceding sentence shall be held
for the sole benefit of the Banks whose Loans would otherwise have been
immediately prepaid with the amounts deposited and upon the taking of any action
by the Agent or the Banks pursuant to the remedial provisions of Section 9, any
amounts held as cash collateral pursuant to this Section 4.02(B) shall, subject
to the requirements of applicable law, be immediately applied to the Loans.
4.03 Method and Place of Payment. Except as otherwise specifically
---------------------------
provided herein, all payments under this Agreement or any Note shall be made to
the Agent for the ratable account of the Banks entitled thereto, not later than
12:00 Noon (New York time) on the date when due and shall be made in immediately
available funds and in U.S. Dollars at the Payment Office, it being understood
that written, telex or facsimile transmission notice by the Borrower to the
Agent to make a payment from the funds in the Borrower's account at the Payment
Office shall constitute the making of such payment to the extent of such funds
held in such account. Any payments under this Agreement or any Note which are
made later than 12:00 Noon (New York time) shall be deemed to have been made on
the next succeeding Business Day. Whenever any payment to be made hereunder or
under any Note shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest shall be payable during such
extension at the applicable rate in effect immediately prior to such extension.
4.04 Net Payments. (a) All payments made by the Borrower hereunder
------------
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 4.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured by the net income or net profits of a Bank pursuant to the laws
of the jurisdiction in which it is organized or the jurisdiction in which the
principal office or applicable lending office of such Bank is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect to such non-excluded taxes, levies, imposts, duties,
fees, assessments or other charges (all such non-excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes").
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<PAGE>
If any Taxes are so levied or imposed, the Borrower agrees to pay the full
amount of such Taxes, and such additional amounts as may be necessary so that
every payment of all amounts due under this Agreement or under any Note, after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein or in such Note. If any amounts are payable in
respect of Taxes pursuant to the preceding sentence, the Borrower agrees to
reimburse each Bank, upon the written request of such Bank, for taxes imposed on
or measured by the net income or net profits of such Bank pursuant to the laws
of the jurisdiction in which such Bank is organized or in which the principal
office or applicable lending office of such Bank is located or under the laws of
any political subdivision or taxing authority of any such jurisdiction in which
such Bank is organized or in which the principal office or applicable lending
office of such Bank is located and for any withholding of taxes as such Bank
shall determine are payable by, or withheld from, such Bank in respect of such
amounts so paid to or on behalf of such Bank pursuant to the preceding sentence
and in respect of any amounts paid to or on behalf of such Bank pursuant to this
sentence. The Borrower will furnish to the Agent within 45 days after the date
the payment of any Taxes is due pursuant to applicable law certified copies of
tax receipts evidencing such payment by the Borrower. The Borrower agrees to
indemnify and hold harmless each Bank, and reimburse such Bank upon its written
request, for the amount of any Taxes so levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes
agrees to deliver to the Borrower and the Agent on or prior to the Effective
Date, or in the case of a Bank that is an assignee or transferee of an interest
under this Agreement pursuant to Section 1.13 or 12.04(b) (unless the respective
Bank was already a Bank hereunder immediately prior to such assignment or
transfer), on the date of such assignment or transfer to such Bank, (i) two
accurate and complete original signed copies of Internal Revenue Service Form
4224 or 1001 (or successor forms) certifying to such Bank's entitlement to a
complete exemption from United States withholding tax with respect to payments
to be made under this Agreement and under any Note, or (ii) if the Bank is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver
either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above,
(x) a certificate substantially in the form of Exhibit C (any such certificate,
a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original
signed copies of Internal Revenue Service Form W-8 (or successor form)
certifying to such Bank's entitlement to a complete exemption from United States
withholding tax with respect to payments of interest to be made under this
Agreement and under any Note. In addition, each Bank agrees that from time to
time after the Effective Date, when a lapse in time or change in circumstances
renders the previous certification obsolete or inaccurate in any material
respect, it will deliver to the Borrower and the Agent two new accurate and
complete original signed copies of Internal Revenue Service Form 4224 or 1001,
or Form W-8 and a Section 4.04(b)(ii) Certificate, as the case may be, and such
other forms as may be required in order to confirm or establish the entitlement
of such Bank to a continued exemption from
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<PAGE>
or reduction in United States withholding tax with respect to payments under
this Agreement and any Note, or it shall immediately notify the Borrower and the
Agent of its inability to deliver any such Form or Certificate. Notwithstanding
anything to the contrary contained in Section 4.04(a), but subject to Section
12.04(b) and the immediately succeeding sentence, (x) the Borrower shall be
entitled, to the extent it is required to do so by law, to deduct or withhold
income or similar taxes imposed by the United States (or any political
subdivision or taxing authority thereof or therein) from interest, Fees or other
amounts payable hereunder for the account of any Bank which is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. Federal income tax purposes to the extent that such Bank has not provided
to the Borrower U.S. Internal Revenue Service Forms that establish a complete
exemption from such deduction or withholding and (y) the Borrower shall not be
obligated pursuant to Section 4.04(a) hereof to gross-up payments to be made to
a Bank in respect of income or similar taxes imposed by the United States if (I)
such Bank has not provided to the Borrower the Internal Revenue Service Forms
required to be provided to the Borrower pursuant to this Section 4.04(b) or (II)
in the case of a payment, other than interest, to a Bank described in clause
(ii) above, to the extent that such Forms do not establish a complete exemption
from withholding of such taxes. Notwithstanding anything to the contrary
contained in the preceding sentence or elsewhere in this Section 4.04 and except
as set forth in Section 12.04(b), the Borrower agrees to pay any additional
amounts and to indemnify each Bank in the manner set forth in Section 4.04(a)
(without regard to the identity of the jurisdiction requiring the deduction or
withholding) in respect of any Taxes deducted or withheld by it as described in
the immediately preceding sentence as a result of any changes after the
Effective Date in any applicable law, treaty, governmental rule, regulation,
guideline or order, or in the interpretation thereof, relating to the deducting
or withholding of such Taxes (or, if later, the date such Bank became party to
this Agreement).
SECTION 5. Conditions Precedent. The obligation of each Bank to make
--------------------
each Loan to the Borrower hereunder, and the obligation of any Letter of Credit
Issuer to issue each Letter of Credit hereunder, is subject, at the time of each
such Credit Event (except as otherwise hereinafter indicated), to the
satisfaction of the following conditions:
5.01 Execution of Agreement; Notes. On or prior to the Initial
-----------------------------
Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall
have been delivered to the Agent for the account of each Bank the appropriate
Term Note and Revolving Note, if any, and to BTCo the Swingline Note, in each
case executed by the Borrower and in the amount, maturity and as otherwise
provided herein.
5.02 No Default; Representations and Warranties. At the time of each
------------------------------------------
Credit Event and also after giving effect thereto (i) there shall exist no
Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents in effect at such time shall
be true and correct in all material respects with the same effect as
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<PAGE>
though such representations and warranties had been made on and as of the date
of such Credit Event, unless stated to relate to a specific earlier date, in
which case such representations and warranties shall be true and correct in all
material respects as of such earlier date.
5.03 Officer's Certificate. On the Initial Borrowing Date, the Agent
---------------------
shall have received a certificate dated such date signed by an appropriate
officer of the Borrower stating that all of the applicable conditions set forth
in Sections 5.02, 5.06, 5.07, 5.08 and 5.09 exist as of such date.
5.04 Opinions of Counsel. On the Initial Borrowing Date, the Agent
-------------------
shall have received opinions, addressed to the Agent, the Collateral Agent and
each of the Banks and dated the Initial Borrowing Date, from (i) McGuire, Woods,
Battle & Boothe L.L.P., counsel to the Credit Parties, which opinion shall cover
the matters contained in Exhibit D-1 and such other matters incident to the
transactions contemplated herein as the Agent or the Required Banks may
reasonably request, (ii) White & Case, United Kingdom counsel to the Agent,
which opinion shall cover the matters contained in Exhibit D-2 and such other
matters incident to the transactions contemplated herein as the Agent or the
Required Banks may reasonably request and (iii) local counsel to the Credit
Parties reasonably satisfactory to the Agent, which opinions shall cover such
matters incident to the transactions contemplated herein and in the other Credit
Documents as the Agent or the Required Banks may request and shall be in form
and substance satisfactory to the Agent or the Required Banks.
5.05 Corporate Proceedings. (a) On the Initial Borrowing Date, the
---------------------
Agent shall have received from each Credit Party a certificate, dated the
Initial Borrowing Date, signed by the chairman, a vice-chairman, the president
or any vice-president of such Credit Party, and attested to by the secretary or
any assistant secretary of such Credit Party, in the form of Exhibit E with
appropriate insertions, together with copies of the Certificate of Incorporation
and By-Laws (or their foreign equivalents) of such Credit Party and the
resolutions of such Credit Party referred to in such certificate and all of the
foregoing (including each such Certificate of Incorporation and By-Laws or their
foreign equivalent) shall be satisfactory to the Agent.
(b) On the Initial Borrowing Date, all corporate and legal
proceedings and all instruments and agreements in connection with the
transactions contemplated by this Agreement and the other Documents shall be
reasonably satisfactory in form and substance to the Agent, and the Agent shall
have received all information and copies of all certificates, documents and
papers, including good standing certificates, bring-down certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Agent reasonably may have requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities.
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<PAGE>
(c) On the Initial Borrowing Date and after giving effect to the
Transaction, the ownership and capital structure (including, without limitation,
the terms of any capital stock, options, warrants or other securities issued by
Holdings or any of its Subsidiaries) and management of Holdings and its
Subsidiaries and the Borrower and its Subsidiaries shall be in form and
substance reasonably satisfactory to the Agent and the Required Banks.
5.06 Adverse Change, etc. On or prior to the Initial Borrowing Date,
--------------------
nothing shall have occurred since January 27, 1996 (and neither the Banks nor
the Agent shall have become aware of any facts or conditions not previously
known) which the Agent or the Required Banks shall determine has, or could
reasonably be expected to have (i) a material adverse effect on the rights or
remedies of the Banks or the Agent and Required Banks, or on the ability of any
Credit Party to perform its obligations to them hereunder or under any other
Credit Document or (ii) a Material Adverse Effect.
5.07 Litigation. On the Initial Borrowing Date, there shall be no
----------
actions, suits, proceedings or investigations pending or threatened (a) with
respect to the Transaction, this Agreement or any other Document or (b) which
the Agent or the Required Banks shall determine could reasonably be expected to
(i) have a Material Adverse Effect or (ii) have a material adverse effect on the
Transaction, the rights or remedies of the Banks or the Agent hereunder or under
any other Credit Document or on the ability of any Credit Party to perform its
respective obligations to the Banks or the Agent hereunder or under any other
Credit Document.
5.08 Approvals. On or prior to the Initial Borrowing Date, all
---------
necessary governmental (domestic and foreign), regulatory and third party
approvals in connection with the Transaction, the transactions contemplated by
the Documents and otherwise referred to herein or therein shall have been
obtained and remain in full force and effect, and all applicable waiting periods
shall have expired without any action being taken by any competent authority
which restrains, prevents or imposes materially adverse conditions upon the
consummation of the Transaction, the transactions contemplated by the Documents
and otherwise referred to herein or therein. Additionally, there shall not
exist any judgment, order, injunction or other restraint issued or filed or a
hearing seeking injunctive relief or other restraint pending or notified
prohibiting or imposing materially adverse conditions upon the consummation of
the Transaction or the making of Loans or the issuance of Letters of Credit.
5.09 Consummation of the Transaction. (a) On the Initial Borrowing
-------------------------------
Date and concurrently with the incurrence of Loans on such date, the Acquisition
shall have been consummated in accordance with the Acquisition Documents and all
applicable laws, and each of the conditions precedent to the consummation of the
Acquisition (including, without limitation, the accuracy in all material
respects of the representations and warranties contained in the Acquisition
Agreement) shall have been satisfied and not waived except with the
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<PAGE>
consent of the Agent and the Required Banks to the satisfaction of the Agent and
the Required Banks.
(b) On the Initial Borrowing Date and concurrently with the
incurrence of Loans on such date, (i) Holdings shall have received proceeds of
at least $51,000,000 from the Equity Financing, consisting of (x) $5,100,000 in
cash in connection with the issuance of Holdings Common Stock and (y)
$45,900,000 in cash in connection with the issuance of Holdings Preferred Stock,
(ii) Holdings shall have contributed the full amount of such cash proceeds
received in respect of the Equity Financing to the capital of the Borrower in
exchange for common stock of, or as an additional common capital contribution
to, the Borrower and (iii) the Borrower shall have utilized the full amount of
such cash proceeds to make payments owing in connection with the Transaction
prior to or concurrently with the utilization of any proceeds of the Loans for
such purpose.
(c) On or prior to the Initial Borrowing Date, (i) the Borrower shall
have received gross cash proceeds of at least $100,000,000 from the issuance of
the Senior Subordinated Notes (it being understood that such cash proceeds shall
include all amounts directly applied to pay underwriting and placement
commissions and discounts and related fees) and (ii) the Borrower shall have
utilized the full amount of such cash proceeds to make payments owing in
connection with the Transaction prior to or concurrently with the utilization of
any proceeds of the Loans for such purpose.
(d) On the Initial Borrowing Date, the creditors under the C&A
Products Debt Documents shall have terminated and released all security
interests and Liens on the assets owned by the Acquired Business and C&A
Products shall have taken all actions under Section 9.15 of the C&A Products
Receivables Sale Agreement as may be required to ensure that Floor Coverings is
terminated as a seller thereunder. The Agent shall have received such releases
of security interests in and Liens on the assets owned by the Acquired Business
as may have been requested by the Agent, which releases shall be in form and
substance reasonably satisfactory to the Agent and Required Banks. Without
limiting the foregoing, there shall have been delivered (i) proper termination
statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC
of each jurisdiction where a financing statement (Form UCC-1 or the appropriate
equivalent) was filed with respect to the Acquired Business in connection with
the security interests created with respect to the Indebtedness under the C&A
Products Debt Documents and the documentation related thereto, (ii) termination
or reassignment of any security interest in, or Lien on, any patents,
trademarks, copyrights, or similar interests of the Acquired Business on which
filings have been made, (iii) terminations of all mortgages, leasehold
mortgages, deeds of trust and leasehold deeds of trust created with respect to
property of the Acquired Business, in each case, to secure the obligations in
respect of the Indebtedness under the C&A Products Debt Documents, all of which
shall be in form and substance reasonably satisfactory to the Agent and Required
Banks, and (iv) all collateral owned by the Acquired Business in the possession
of any of the
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<PAGE>
creditors in respect of the Indebtedness under the C&A Products Debt Documents
or any collateral agent or trustee under any related security document shall
have been returned to the Acquired Business. On the Initial Borrowing Date, all
guarantees of the Acquired Business with respect to the Indebtedness under the
C&A Products Debt Documents shall have been terminated and be of no further
force and effect.
(e) On or prior to the Initial Borrowing Date, there shall have been
delivered to the Banks true and correct copies of all Documents entered into in
connection with the Transaction (including, without limitation, Acquisition
Documents, the Termination Documents, the Senior Subordinated Notes Documents,
the Merger Documents and the Equity Financing Documents), and all of the terms
and conditions of such Documents (including, without limitation, with respect to
the Senior Subordinated Notes Documents, amortization, maturities, interest
rates, covenants, defaults, remedies, sinking fund provisions, and subordination
provisions), as well as the structure of the Transaction, shall be in form and
substance satisfactory to the Agent and the Required Banks.
(f) All conditions precedent to the consummation of the Transaction
as set forth in the documentation related thereto shall have been satisfied.
5.10 Pledge Agreement. On the Initial Borrowing Date, each Credit
----------------
Party shall have duly authorized, executed and delivered a Pledge Agreement in
the form of Exhibit F, together with such changes (or with such other documents)
as may be requested by the Collateral Agent in connection with local or foreign
law (as amended, modified or supplemented from time to time in accordance with
the terms thereof and hereof, the "Pledge Agreement") and shall have delivered
to the Collateral Agent, as pledgee thereunder, all of the Pledged Securities
referred to therein, endorsed in blank in the case of promissory notes or
accompanied by executed and undated stock powers in the case of capital stock,
and the Pledge Agreement and such other documents shall be in full force and
effect.
5.11 Security Agreement. On the Initial Borrowing Date, each Credit
------------------
Party shall have duly authorized, executed and delivered a Security Agreement in
the form of Exhibit G, together with such changes (or with such other documents)
as may be requested by the Collateral Agent in connection with local law (as
amended, modified or supplemented from time to time in accordance with the terms
thereof and hereof, the "Security Agreement") covering all of the Security
Agreement Collateral, together with:
(A) executed copies of Financing Statements (Form UCC-1 and/or UCC-3)
or appropriate local equivalent in appropriate form for filing under the
UCC or appropriate local equivalent of each jurisdiction as may be
necessary or, in the opinion of the Collateral Agent, desirable to perfect
the security interests purported to be created by the Security Agreement;
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<PAGE>
(B) certified copies of Requests for Information or Copies (Form UCC-
11), or equivalent reports, each of a recent date listing all effective
financing statements that name Holdings, the Borrower, any of their
respective Subsidiaries or a division or operating unit of any such Person,
as debtor, or otherwise relate to the Acquired Business and that are filed
in the jurisdictions referred to in clause (A) above, together with copies
of such financing statements (none of which shall cover the Collateral
except (x) those with respect to which appropriate termination statements
executed by the secured lender thereunder have been delivered to the Agent
and (y) to the extent evidencing Permitted Liens);
(C) evidence of the completion of all other recordings and filings
of, or with respect to, the Security Agreement as may be necessary or, in
the opinion of the Collateral Agent, desirable to perfect the security
interests intended to be created by the Security Agreement; and
(D) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect the security
interests purported to be created by the Security Agreement have been
taken;
and the Security Agreement and such other documents shall be in full force and
effect.
5.12 Mortgages; Title Insurance; Surveys, etc. (a) On the Initial
-----------------------------------------
Borrowing Date, the Collateral Agent shall have received fully executed
counterparts of deeds of trust, mortgages and similar documents in each case in
form and substance satisfactory to the Collateral Agent (as amended, modified or
supplemented from time to time in accordance with the terms hereof and thereof,
each a "Mortgage" and, collectively, the "Mortgages") with respect to each of
the Mortgaged Properties located in the United States, and arrangements
reasonably satisfactory to the Collateral Agent shall be in place to provide
that counterparts of such Mortgages shall be recorded on the Initial Borrowing
Date in all places to the extent necessary or desirable, in the judgment of the
Collateral Agent, effectively to create a valid and enforceable first priority
Lien, subject only to Permitted Encumbrances, on each such Mortgaged Property in
favor of the Collateral Agent (or such other trustee as may be required or
desired under local law) for the benefit of the Secured Creditors.
(b) On the Initial Borrowing Date, the Collateral Agent shall have
received mortgagee title insurance policies (or binding commitments to issue
such title insurance policies) issued by title insurers reasonably satisfactory
to the Collateral Agent (the "Mortgage Policies") in amounts reasonably
satisfactory to the Collateral Agent and assuring the Collateral Agent that the
Mortgages are valid and enforceable first priority mortgage Liens on the
respective Mortgaged Properties, free and clear of all defects and encumbrances
except Permitted Encumbrances. Such Mortgage Policies shall be in form and
substance reasonably satisfactory to the Collateral Agent and (i) shall include
an endorsement for future advances
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under this Agreement, the Notes and the Mortgages and for any other matter that
the Collateral Agent in its discretion may reasonably request (to the extent
available in the respective jurisdiction of each Mortgaged Property), (ii) shall
not include an exception for mechanics' liens, and (iii) shall provide for
affirmative insurance and such reinsurance (including direct access agreements)
as the Collateral Agent in its discretion may reasonably request.
(c) On the Initial Borrowing Date, the Collateral Agent shall have
also received surveys in form and substance reasonably satisfactory to the
Collateral Agent of each Mortgaged Property designated as "Owned" on Annex III
hereto, dated a recent date reasonably acceptable to the Collateral Agent and
certified in a manner reasonably satisfactory to the Collateral Agent by a
licensed professional surveyor satisfactory to the Collateral Agent.
(d) On the Initial Borrowing Date, the Collateral Agent shall have
received duly authorized, fully executed, acknowledged and delivered access
agreements, landlord consents and waivers and such other documents relating to
the Leased Properties that the Collateral Agent may request, and all the
foregoing shall be in form and substance reasonably satisfactory to the
Collateral Agent.
5.13 Employee Benefit Plans; Collective Bargaining Agreements;
---------------------------------------------------------
Existing Indebtedness Agreements; Shareholders' Agreements; Management
- ----------------------------------------------------------------------
Agreements; Employment Agreements; Non-Compete Agreements; Tax Sharing
- ----------------------------------------------------------------------
Agreements; Material Contracts. On or prior to the Initial Borrowing Date,
- ------------------------------
there shall have been delivered to the Banks copies, certified as true and
correct by an appropriate officer of the Borrower, of:
(a) all Plans (and for each Plan that is required to file an annual
report on Internal Revenue Service Form 5500-series, a copy of the most
recent such report (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information), and for each Plan
that is a "single-employer plan," as defined in Section 4001(a)(15) of
ERISA, the most recently prepared actuarial valuation therefor), and any
other material agreements, plans or arrangements, with or for the benefit
of current or former employees of Holdings or any of its Subsidiaries or
any ERISA Affiliate (collectively, the "Employee Benefit Plans");
(b) all collective bargaining agreements or any other similar
agreement or arrangement covering the employees of Holdings or any of its
Subsidiaries (collectively, the "Collective Bargaining Agreements");
(c) all agreements evidencing or relating to the Indebtedness to
Remain Outstanding that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Existing Indebtedness
Agreements");
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<PAGE>
(d) (A) the Stockholders' Agreement and (B) all other agreements
(including, without limitation, shareholders' agreements, subscription
agreements and registration rights agreements) entered into by Holdings or
any of its Subsidiaries governing the terms and relative rights of its
capital stock, and any agreements entered into by shareholders relating to
any such entity with respect to their capital stock, in each case that are
to remain in effect after giving effect to the consummation of the
Transaction (collectively, the "Shareholders' Agreements");
(e) all material agreements (or the forms thereof) with members of,
or with respect to, the management of Holdings or any of its Subsidiaries
that are to remain in effect after giving effect to the consummation of the
Transaction (including, without limitation, the Management Services
Agreement and the Quad-C Consulting Agreement) (collectively, the
"Management Agreements");
(f) all employment agreements entered into by Holdings or any of its
Subsidiaries (collectively, the "Employment Agreements");
(g) all non-compete agreement entered into by Holdings or any of its
Subsidiaries (collectively, the "Non-Compete Agreements");
(h) all tax sharing, tax allocation agreements or similar agreements
entered into by Holdings or any of its Subsidiaries (collectively, the "Tax
Sharing Agreements"); and
(i) all other material contracts and licenses of Holdings or any of
its Subsidiaries (to the extent not described in clauses (a) through (h),
inclusive, above) that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Material Contracts");
all of which Employee Benefit Plans, Collective Bargaining Agreements, Existing
Indebtedness Agreements, Shareholders' Agreements, Management Agreements,
Employment Agreements, Non-Compete Agreements, Tax Sharing Agreements and
Material Contracts shall be in form and substance reasonably satisfactory to the
Agent and Required Banks and shall be in full force and effect on the Initial
Borrowing Date.
5.14 Solvency Opinion; Environmental Analyses; Evidence of Insurance;
----------------------------------------------------------------
Financial Statements. On the Initial Borrowing Date, the Banks shall have
- --------------------
received:
(a) a solvency opinion from Valuation Research Corporation, addressed
to the Agent and each of the Banks and dated the Initial Borrowing Date and
supporting the conclusions, that, after giving effect to the Transaction
and the incurrence of all financings contemplated herein, each of Holdings
and its Subsidiaries (including,
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<PAGE>
without limitation, the Acquired Business) (on a consolidated basis), the
Borrower and its Subsidiaries (on a consolidated basis) and the Borrower
(on a stand-alone-basis) are not insolvent and will not be rendered
insolvent by the indebtedness incurred in connection herewith, will not be
left with unreasonably small capital with which to engage in their
respective businesses and will not have incurred debts beyond their ability
to pay such debts as they mature and become due;
(b) environmental assessments from O'Brien & Gere, the results of
which shall be in form and substance reasonably satisfactory to the Agent,
together with a reliance letter with respect thereto;
(c) evidence of insurance complying with the requirements of Section
7.03 for the business and properties of Holdings and its Subsidiaries, in
scope, form and substance reasonably satisfactory to the Agent and the
Required Banks and naming the Collateral Agent as an additional insured,
mortgagee and/or loss payee, and stating that such insurance shall not be
cancelled or revised without 30 days' prior written notice by the insurer
to the Collateral Agent; and
(d) on or prior to the Initial Borrowing Date, the Agent shall have
received the financial statements referred to in Section 6.10(b), which
shall be in form and substance satisfactory to the Agent.
5.15 Pro Forma Balance Sheets. On or prior to the Initial Borrowing
------------------------
Date, there shall have been delivered to the Agent and the Required Banks, an
unaudited pro forma consolidated balance sheet of each of Holdings and its
--- -----
Subsidiaries and the Borrower and its Subsidiaries as of December 28, 1996 after
giving effect to the Transaction, prepared in accordance with Regulation S-X,
together with a related funds flow memorandum, which pro forma balance sheets
--- -----
and funds flow memorandum shall be reasonably satisfactory in form and substance
to the Agent and the Required Banks.
5.16 Projections. On or prior to the Initial Borrowing Date, the
-----------
Banks shall have received the financial projections (the "Projections") set
forth on Annex IV hereto for the six fiscal years ended after the Initial
Borrowing Date, which Projections shall be in form and substance satisfactory to
the Agent and the Required Banks.
5.17 Indebtedness to Remain Outstanding. On the Initial Borrowing
----------------------------------
Date and after giving effect to the Transaction and the Loans incurred on the
Initial Borrowing Date, neither Holdings nor any of its Subsidiaries shall have
any preferred stock or Indebtedness outstanding except for (i) the Loans, (ii)
the Senior Subordinated Notes, (iii) the Indebtedness to Remain Outstanding and
(iv) Holdings Preferred Stock issued in connection with the Equity Financing.
On and as of the Initial Borrowing Date, all of the Indebtedness to Remain
Outstanding shall remain outstanding after giving effect to the Transaction and
the other trans-
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<PAGE>
actions contemplated hereby without any default or events of default existing
thereunder or arising as a result of the Transaction and the other transactions
contemplated hereby (except to the extent amended or waived by the parties
thereto on terms and conditions satisfactory to the Agent and the Required
Banks), and there shall not be any amendments or modifications to the Existing
Indebtedness Agreements other than as requested or approved by the Agent or the
Required Banks. On and as of the Initial Borrowing Date, the Agent and the
Required Banks shall be satisfied with the amount of and the terms and
conditions of all Indebtedness to Remain Outstanding.
5.18 Payment of Fees. On the Initial Borrowing Date, all costs, fees
---------------
and expenses, and all other compensation due to the Agent or the Banks
(including, without limitation, reasonable legal fees and expenses) shall have
been paid to the extent due.
5.19 Notice of Borrowing; Letter of Credit Request. (a) Prior to
---------------------------------------------
the making of each Loan (excluding Swingline Loans and Mandatory Borrowings),
the Agent shall have received a Notice of Borrowing meeting the requirements of
Section 1.03(a). Prior to the making of any Swingline Loan, BTCo shall have
received the notice required by Section 1.03(b)(i).
(b) Prior to the issuance of each Letter of Credit, the Agent and the
respective Letter of Credit Issuer shall have received a Letter of Credit
Request meeting the requirements of Section 2.02(a).
The occurrence of the Initial Borrowing Date and the acceptance of the
benefits of each Credit Event shall constitute a representation and warranty by
each Credit Party to the Agent and each of the Banks that all of the applicable
conditions specified above exist as of the date of such Credit Event. All of the
Notes, certificates, legal opinions and other documents and papers referred to
in this Section 5, unless otherwise specified, shall be delivered to the Agent
at its Notice Office for the account of each of the Banks and, except for the
Notes, in sufficient counterparts for each of the Banks and shall be
satisfactory in form and substance to the Agent and the Required Banks.
SECTION 6. Representations, Warranties and Agreements. In order to
------------------------------------------
induce the Banks to enter into this Agreement and to make the Loans and issue
and/or participate in the Letters of Credit provided for herein, each of
Holdings and the Borrower makes the following representations, warranties and
agreements with the Banks, in each case after giving effect to the Transaction,
all of which shall survive the execution and delivery of this Agreement, the
making of the Loans and the issuance of the Letters of Credit (with the
occurrence of each Credit Event being deemed to constitute a representation and
warranty that the matters specified in this Section 6 are true and correct in
all material respects on and as of the date of each such Credit Event, unless
stated to relate to a specific earlier date in which case
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<PAGE>
such representations and warranties shall be true and correct in all material
respects as of such earlier date):
6.01 Corporate Status. Each of Holdings and each of its Subsidiaries
----------------
(i) is a duly organized and validly existing corporation in good standing under
the laws of the jurisdiction of its organization, (ii) has the corporate power
and authority to own its property and assets and to transact the business in
which it is engaged and presently proposes to engage and (iii) is duly qualified
and is authorized to do business and is in good standing in all jurisdictions
where it is required to be so qualified and where the failure to be so qualified
would have a Material Adverse Effect.
6.02 Corporate Power and Authority. Each Credit Party has the
-----------------------------
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Documents to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which it is a party. Each Credit Party has duly executed and
delivered each Document to which it is a party and each such Document
constitutes the legal, valid and binding obligation of such Credit Party
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
6.03 No Violation. Neither the execution, delivery or performance by
------------
any Credit Party of the Documents to which it is a party nor compliance by any
Credit Party with the terms and provisions thereof, nor the consummation of the
transactions contemplated herein or therein, (i) will contravene any applicable
provision of any law, statute, rule or regulation, or any order, writ,
injunction or decree of any court or governmental instrumentality, (ii) will
conflict or be inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under, or (other
than pursuant to the Security Documents) result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of Holdings or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, credit agreement or any
other material agreement or instrument to which Holdings or any of its
Subsidiaries is a party or by which it or any of its property or assets are
bound or to which it may be subject (including, without limitation, the
Indebtedness to Remain Outstanding) or (iii) will violate any provision of the
Certificate of Incorporation or By-Laws (or their foreign equivalents) of
Holdings or any of its Subsidiaries.
6.04 Litigation. There are no actions, suits, proceedings or
----------
investigations pending or threatened, with respect to Holdings or any of its
Subsidiaries (i) that are likely to have a Material Adverse Effect or (ii) that
could reasonably be expected to have a material adverse effect on the rights or
remedies of the Agent or the Banks or on the ability of any
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<PAGE>
Credit Party to perform its respective obligations to the Agent or the Banks
hereunder and under the other Credit Documents to which it is, or will be, a
party. Additionally, there does not exist any judgment, order or injunction
prohibiting or imposing material adverse conditions upon the occurrence of any
Credit Event.
6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all
-----------------------------------
Term Loans shall be utilized (i) to finance the Transaction and (ii) to pay fees
and expenses incurred in connection therewith.
(b) The proceeds of all Revolving Loans and Swingline Loans shall be
utilized for the general corporate and working capital purposes of the Borrower
and its Subsidiaries (including to effect Permitted Acquisitions and make
Capital Expenditures, in each case to the extent permitted by this Agreement),
provided that proceeds of Revolving Loans incurred on the Initial Borrowing Date
- --------
in an amount not to exceed $3,000,000 may be used to finance the Transaction and
to pay the fees and expenses incurred in connection therewith.
(c) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate the provisions of Regulation G, T, U or X of the
Board of Governors of the Federal Reserve System and no part of the proceeds of
any Loan will be used to purchase or carry any Margin Stock or to extend credit
for the purpose of purchasing or carrying any Margin Stock.
6.06 Governmental Approvals. Except for filings and recordings in
----------------------
connection with the Security Documents (which filings and recordings shall have
been made prior to the Initial Borrowing Date or arrangements satisfactory to
the Agent for the making of such filings and recordings shall have been made
prior to the Initial Borrowing Date), no order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required in
connection with (i) the execution, delivery and performance of any Document or
(ii) the legality, validity, binding effect or enforceability of any Document.
6.07 Investment Company Act. Neither Holdings nor any of its
----------------------
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
6.08 Public Utility Holding Company Act. Neither Holdings nor any of
----------------------------------
its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
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<PAGE>
6.09 True and Complete Disclosure. All factual information (taken as
----------------------------
a whole) heretofore or contemporaneously furnished by or on behalf of Holdings
or any of its Subsidiaries in writing to the Agent or any Bank (including,
without limitation, all information contained in the Documents) for purposes of
or in connection with this Agreement or any transaction contemplated herein is,
and all other such factual information (taken as a whole) hereafter furnished by
or on behalf of any such Persons in writing to the Agent or any Bank will be,
true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information (taken as a whole) not
misleading at such time in light of the circumstances under which such
information was provided.
6.10 Financial Condition; Financial Statements. (a) On and as of
-----------------------------------------
the Initial Borrowing Date, on a pro forma basis after giving effect to the
--- -----
Transaction and to all Indebtedness incurred, and to be incurred (including,
without limitation, the Loans and the Senior Subordinated Notes), and Liens
created, and to be created, by each Credit Party in connection therewith, with
respect to the Borrower (on a stand-alone basis) and each of Holdings and its
Subsidiaries and the Borrower and its Subsidiaries (each on a consolidated
basis), (x) the sum of the assets, at a fair valuation, of the Borrower (on a
stand-alone basis) and each of Holdings and its Subsidiaries and the Borrower
and its Subsidiaries (each on a consolidated basis), will exceed its debts, (y)
it has not incurred nor intended to, nor believes that it will, incur debts
beyond its ability to pay such debts as such debts mature and (z) it will have
sufficient capital with which to conduct its business. For purposes of this
Section 6.10(a), "debt" means any liability on a claim, and "claim" means (i)
right to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a payment, whether or not
such right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured or unsecured.
(b) The audited consolidated balance sheet of the Acquired Business
for the fiscal years ended January 28, 1995 and January 27, 1996, and the
unaudited consolidated balance sheet of the Acquired Business at November 23,
1996, and the related consolidated statements of operations and cash flows of
the Acquired Business for the fiscal years or ten-month period, as the case may
be, ended as of said dates, which annual financial statements have been examined
by Arthur Andersen LLP, certified public accountants, who delivered an
unqualified opinion with respect thereto and copies of which have heretofore
been delivered to each Bank, present fairly in all material respects the
financial position of the Acquired Business on a consolidated basis at the date
of said statements and the results for the periods covered thereby. All such
financial statements have been prepared in accordance with GAAP consistently
applied except to the extent provided in the notes to said financial statements
and subject, in the case of the November 23, 1996 statements, to normal year-end
audit adjustments and the absence of footnotes.
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<PAGE>
(c) Since January 27, 1996, nothing has occurred that has had or
would reasonably be expected to have a Material Adverse Effect.
(d) Except as fully reflected in the financial statements described
in Section 6.10(b) and the Indebtedness incurred under this Agreement and the
Senior Subordinated Notes, (i) there were as of the Initial Borrowing Date (and
after giving effect to any Loans made on such date), no liabilities or
obligations (excluding current obligations incurred in the ordinary course of
business) with respect to Holdings or any of its Subsidiaries of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether or
not due), and (ii) neither Holdings nor the Borrower knows of any basis for the
assertion against Holdings or any of its Subsidiaries of any such liability or
obligation which, either individually or in the aggregate, are or would
reasonably be expected to have, a Material Adverse Effect.
(e) Except with respect to taxes, depreciation and amortization of
intangible assets, which have been determined in connection with the preparation
of the Projections in accordance with tax-based accounting conventions, the
Projections have been prepared on a basis consistent with the financial
statements referred to in Section 6.10(b) and are based on good faith estimates
and assumptions made by the management of the Borrower. On the Initial
Borrowing Date such management believed that the Projections were reasonable and
attainable, it being recognized by the Banks, however, that projections as to
future events are not to be viewed as facts and that the actual results during
the period or periods covered by the Projections may differ from the projected
results and that the differences may be material. There is no fact known to
Holdings or any of its Subsidiaries which would reasonably be expected to have a
Material Adverse Effect, which has not been disclosed herein or in such other
documents, certificates and statements furnished to the Banks for use in
connection with the transactions contemplated hereby.
6.11 Security Interests. On and after the Initial Borrowing Date,
------------------
each of the Security Documents creates (or after the execution and delivery
thereof will create), as security for the Obligations, a valid and enforceable
perfected security interest in and Lien on all of the Collateral subject
thereto, superior to and prior to the rights of all third Persons and subject to
no other Liens (except that the Security Agreement Collateral, the Mortgaged
Properties and the collateral covered by the Additional Security Documents may
be subject to Permitted Liens relating thereto), in favor of the Collateral
Agent. No filings or recordings are required in order to perfect the security
interests created under any Security Document except for filings or recordings
required in connection with any such Security Document which shall have been
made on or prior to the Initial Borrowing Date as contemplated by Section 5.11
or on or prior to the execution and delivery thereof as contemplated by Sections
7.11, 7.13 and 8.15.
6.12 Representations and Warranties in Other Documents. All
-------------------------------------------------
representations and warranties set forth in the other Documents were true and
correct in all material
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<PAGE>
respects as of the time such representations and warranties were made (or deemed
made) and shall be true and correct in all material respects as of the Initial
Borrowing Date as if such representations and warranties were made on and as of
such date, unless stated to relate to a specific earlier date, in which case
such representations and warranties shall be true and correct in all material
respects as of such earlier date.
6.13 Transaction. At the time of consummation thereof, the
-----------
Transaction shall have been consummated in accordance with the terms of the
respective Documents and all applicable laws. At the time of consummation
thereof, all consents and approvals of, and filings and registrations with, and
all other actions in respect of, all governmental agencies, authorities or
instrumentalities required in order to make or consummate the Transaction have
been obtained, given, filed or taken or waived and are or will be in full force
and effect (or effective judicial relief with respect thereto has been
obtained). All applicable waiting periods with respect thereto have or, prior to
the time when required, will have, expired without, in all such cases, any
action being taken by any competent authority which restrains, prevents, or
imposes material adverse conditions upon the Transaction. Additionally, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the Transaction, the occurrence of any Credit
Event or the performance by Holdings and its Subsidiaries of their obligations
under the Documents and all applicable laws.
6.14 Special Purpose Corporation. (a) Holdings and Acquisition
---------------------------
Corp. were formed to effect the Transaction. Prior to the consummation of the
Transaction, (i) Holdings had no significant assets (other than $2,100,000 in
cash and the capital stock of the Borrower) or liabilities (other than those
liabilities under the Acquisition Documents) and (ii) Acquisition Corp. had no
significant assets or liabilities (other than those liabilities under the
Acquisition Documents and the Merger Documents).
(b) After the consummation of the Transaction, Holdings has no
significant assets (other than the capital stock of the Borrower and immaterial
assets used for the performance of those activities permitted to be performed by
Holdings pursuant to Section 8.01(b)) or liabilities (other than under this
Agreement and the other Documents to which it is a party and those liabilities
permitted to be incurred by Holdings pursuant to Section 8.01(b)).
6.15 Compliance with ERISA. (a) Annex VI sets forth each Plan; each
---------------------
Plan (and each related trust, insurance contract or fund) is in material
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan is a multiemployer plan (as defined in Section
4001(a) (3) of ERISA); except as disclosed on Annex VI, no Plan has an Unfunded
Current Liability; no Plan which
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<PAGE>
is subject to Section 412 of the Code or Section 302 of ERISA has an accumulated
funding deficiency, within the meaning of such sections of the Code or ERISA, or
has applied for or received a waiver of an accumulated funding deficiency or an
extension of any amortization period, within the meaning of Section 412 of the
Code or Section 303 or 304 of ERISA; all contributions required to be made with
respect to a Plan have been timely made or, as applicable, will be timely made
or paid in full on or prior to the Initial Borrowing Date; neither Holdings nor
any Subsidiary of Holdings nor any ERISA Affiliate has incurred any material
liability (including any indirect, contingent or secondary liability) to or on
account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a) (29), 4971 or 4975 of
the Code or expects to incur any such liability under any of the foregoing
sections with respect to any Plan; no condition exists which presents a material
risk to Holdings or any Subsidiary of Holdings or any ERISA Affiliate of
incurring a liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; no proceedings have been instituted to
terminate or appoint a trustee to administer any Plan which is subject to Title
IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with
respect to the administration, operation or the investment of assets of any Plan
(other than routine claims for benefits) is pending, expected or threatened;
each Plan that is a group health plan (as defined in Section 607(1) of ERISA or
Section 4980B(g)(2) of the Code) which covers or has covered employees or former
employees of Holdings, any Subsidiary of Holdings, or any ERISA Affiliate has at
all times been operated in compliance with the provisions of Part 6 of subtitle
B of Title I of ERISA and Section 4980B of the Code; no lien imposed under the
Code or ERISA on the assets of Holdings or any Subsidiary of Holdings or any
ERISA Affiliate exists or is likely to arise on account of any Plan; and
Holdings and its Subsidiaries may cease contributions to or terminate any
employee benefit plan maintained by any of them without incurring any material
liability.
(b) Each Foreign Pension Plan has been maintained in material
compliance with its terms and with the requirements of any and all applicable
laws, statutes, rules, regulations and orders and has been maintained, where
required, in good standing with applicable regulatory authorities. All
contributions required to be made with respect to a Foreign Pension Plan have
been timely made. Neither Holdings nor any of its Subsidiaries has incurred any
obligation in connection with the termination of or withdrawal from any Foreign
Pension Plan. The present value of the accrued benefit liabilities (whether or
not vested) under each Foreign Pension Plan, determined as of the end of the
Borrower's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities.
6.16 Capitalization. (a) On the Initial Borrowing Date and after
--------------
giving effect to the Transaction and the other transactions contemplated hereby,
the authorized capital stock of Holdings shall consist of (i) 50,000,000 shares
of common stock, no par value per share
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<PAGE>
(such authorized shares of common stock, together with any subsequently
authorized shares of common stock of Holdings, the "Holdings Common Stock"), of
which 5,100,000 shares shall be issued and outstanding and owned by the Equity
Investors and (ii) 5,000,000 shares of preferred stock, $100 liquidation
preference per share ("Holdings Preferred Stock"), of which 459,000 shares shall
be issued and outstanding and owned by the Equity Investors. All such
outstanding shares have been duly and validly issued and are fully paid and
nonassessable. Except as set forth on Annex X, Holdings does not have
outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreement providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.
(b) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of the Borrower shall consist of 1,000 shares of common stock,
$.01 par value per share, all of which shares shall be issued and outstanding
and owned by Holdings. All such outstanding shares have been duly and validly
issued and are fully paid and nonassessable. The Borrower does not have
outstanding any securities convertible into or exchangeable for its capital
stock or 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.
6.17 Subsidiaries. (a) Prior to the consummation of the
------------
Transaction, (i) Holdings has no Subsidiaries other than Acquisition Corp. and
(ii) Acquisition Corp. has no Subsidiaries.
(b) On and as of the Initial Borrowing Date and after giving effect
to the consummation of the Transaction, Holdings has no Subsidiaries other than
the Borrower and its Subsidiaries and the Borrower has no Subsidiaries other
than those Subsidiaries listed on Annex V. Annex V correctly sets forth, as of
the Initial Borrowing Date and after giving effect to the Transaction, the
percentage ownership (direct and indirect) of the Borrower in each class of
capital stock of each of its Subsidiaries and also identifies the direct owner
thereof. All outstanding shares of capital stock of each Subsidiary of the
Borrower have been duly and validly issued, are fully paid and non-assessable
and have been issued free of preemptive rights. No Subsidiary of the Borrower
has outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any right to subscribe for or to purchase, or any options
or warrants for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of or any calls, commitments or claims of any
character relating to, its capital stock or any stock appreciation or similar
rights.
6.18 Intellectual Property. Each of Holdings and each of its
---------------------
Subsidiaries owns or holds a valid license to use all the patents, trademarks,
permits, service marks, trade
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names, technology, know-how, copyrights, franchises and formulas or other rights
with respect to the foregoing, free from restrictions that are materially
adverse to the use thereof, that are used in the operation of the business of
Holdings and each of its Subsidiaries as presently conducted.
6.19 Compliance with Statutes, etc. Holdings and each of its
------------------------------
Subsidiaries is in compliance with all applicable statutes, regulations, rules
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of
the conduct of its business and the ownership of its property (including
compliance with all applicable Environmental Laws with respect to any Real
Property or governing its business and the requirements of any permits issued
under such Environmental Laws with respect to any such Real Property or the
operations of Holdings or any of its Subsidiaries), except such non-compliance
as would not reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.
6.20 Environmental Matters. (a) Each of Holdings and each of its
---------------------
Subsidiaries has complied with, and on the date of each Credit Event is in
compliance with, all applicable Environmental Laws and the requirements of any
permits issued under such Environmental Laws. There are no pending, past or
threatened Environmental Claims against Holdings or any of its Subsidiaries or
any Real Property owned or operated by Holdings or any of its Subsidiaries.
There are no facts, circumstances, conditions or occurrences regarding Holdings
or its Subsidiaries, their operations or any Real Property at any time owned or
operated by Holdings or any of its Subsidiaries or on any property adjoining or
in the vicinity of any such Real Property that would reasonably be expected (i)
to form the basis of an Environmental Claim against Holdings or any of its
Subsidiaries or any such Real Property or (ii) to cause any such Real Property
to be subject to any restrictions on the ownership, occupancy, use or
transferability of such Real Property by Holdings or any of its Subsidiaries
under any applicable Environmental Law.
(b) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Real Property owned or
operated by Holdings or any of its Subsidiaries. Hazardous Materials have not
at any time been Released on or from any Real Property owned or operated by
Holdings or any of its Subsidiaries. There are not now any underground storage
tanks located on any Real Property owned or operated by Holdings or any of its
Subsidiaries.
(c) Notwithstanding anything to the contrary in this Section 6.20,
the representations made in this Section 6.20 shall be untrue only if the
aggregate effect of all conditions, failures, noncompliances, Environmental
Claims, Releases and presence of underground storage tanks, in each case of the
types described above, would reasonably be expected to have a Material Adverse
Effect.
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<PAGE>
6.21 Properties. All Real Property owned by Holdings or any of its
----------
Subsidiaries and all material Leaseholds leased by Holdings or any of its
Subsidiaries, in each case as of the Initial Borrowing Date and after giving
effect to the Transaction, and the nature of the interest therein, is correctly
set forth in Annex III. Holdings and each of its Subsidiaries has good and
marketable title to, or a validly subsisting leasehold interest in, all material
properties owned or leased by it, including all Real Property reflected in Annex
III or in the financial statements referred to in Section 6.10(b), free and
clear of all Liens, other than Permitted Liens.
6.22 Labor Relations. Neither Holdings nor any of its Subsidiaries
---------------
is engaged in any unfair labor practice that would reasonably be expected to
have a Material Adverse Effect. There is (i) no unfair labor practice complaint
pending or threatened against Holdings or any of its Subsidiaries or before the
National Labor Relations Board, and no grievance or arbitration proceeding
arising out of or under any collective bargaining agreement is so pending or
threatened against Holdings or any of its Subsidiaries, (ii) no strike, labor
dispute, slowdown or stoppage pending or threatened against Holdings or any of
its Subsidiaries and (iii) no union representation question existing with
respect to the employees of Holdings or any of its Subsidiaries and no union
organizing activities are taking place, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, either individually or in the
aggregate) such as would not reasonably be expected to have a Material Adverse
Effect.
6.23 Tax Returns and Payments. Each of Holdings and each of its
------------------------
Subsidiaries has filed all federal income tax returns and all other material tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, except for
those contested in good faith and adequately disclosed and fully provided for on
the financial statements of Holdings and its Subsidiaries in accordance with
generally accepted accounting principles. Each of Holdings and each of its
Subsidiaries has at all times paid, or have provided adequate reserves (in the
good faith judgment of the management of Holdings) for the payment of, all
federal, state and foreign income taxes applicable for all prior fiscal years
and for the current fiscal year to date. There is no material action, suit,
proceeding, investigation, audit, or claim now pending or, to the knowledge of
Holdings or any of its Subsidiaries, threatened by any authority regarding any
taxes relating to Holdings or any of its Subsidiaries. Neither Holdings nor any
of its Subsidiaries has entered into an agreement or waiver or been requested to
enter into an agreement or waiver extending any statute of limitations relating
to the payment or collection of taxes of Holdings or any of its Subsidiaries, or
is aware of any circumstances that would cause the taxable years or other
taxable periods of Holdings or any of its Subsidiaries not to be subject to the
normally applicable statute of limitations.
6.24 Indebtedness to Remain Outstanding. Annex VIII sets forth a
----------------------------------
true and complete list of all Indebtedness of Holdings and its Subsidiaries as
of the Initial Borrowing
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<PAGE>
Date and which is to remain outstanding after giving effect to the Transaction
and the incurrence of Loans on such date (excluding the Loans, the Letters of
Credit and the Senior Subordinated Notes, the "Indebtedness to Remain
Outstanding"), in each case showing the aggregate principal amount thereof and
the name of the respective borrower and any other entity which directly or
indirectly guaranteed such debt.
6.25 Subordination. The subordination provisions contained in the
-------------
Senior Subordinated Notes Documents are enforceable against the Borrower and the
holders thereof, and all Obligations are within the definition of "Senior Debt"
included in such subordination provisions.
6.26 Insurance. Set forth on Annex VII hereto is a true, correct and
---------
complete summary of all insurance carried by each Credit Party on and as of the
Initial Borrowing Date, with the amounts insured set forth therein.
SECTION 7. Affirmative Covenants. Holdings and the Borrower hereby
---------------------
covenant and agree that on the Effective Date and thereafter for so long as this
Agreement is in effect and until the Total Commitment has terminated, no Letters
of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together
with interest, Fees and all other Obligations (other than any indemnities
described in Section 12.13 hereof which are not then due and payable) incurred
hereunder, are paid in full:
7.01 Information Covenants. Holdings will furnish to each Bank:
---------------------
(a) Monthly Reports. Within 30 days after the end of each fiscal
---------------
month of the Borrower (or 45 days in the case of the fiscal months ending
February 28, 1997 and March 31, 1997), the consolidated balance sheet of
the Borrower and its Subsidiaries as at the end of such month and the
related consolidated statements of income and retained earnings and of cash
flows for such month and for the elapsed portion of the fiscal year ended
with the last day of such month, in each case (commencing with the fiscal
month ending February 28, 1998) setting forth comparative figures for the
corresponding month in the prior fiscal year, all of which shall be
certified by the chief financial officer or other Authorized Officer of the
Borrower, subject to normal year-end audit adjustments and the absence of
footnotes.
(b) Quarterly Financial Statements. Within 45 days after the close
------------------------------
of each quarterly accounting period in each fiscal year of each of Holdings
and the Borrower, (i) the consolidated and consolidating balance sheets of
each of Holdings and its Subsidiaries and the Borrower and its Subsidiaries
as at the end of such quarterly accounting period and the related
consolidated and consolidating statements of income and retained earnings
and of cash flows for such quarterly accounting period and for
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the elapsed portion of the fiscal year ended with the last day of such
quarterly accounting period and (ii) management's discussion and analysis
of the most important operational and financial developments during such
quarterly period, all of which shall be in reasonable detail and certified
by the chief financial officer or other Authorized Officer of Holdings or
the Borrower, as the case may be, that they fairly present the financial
condition of Holdings and its Subsidiaries or the Borrower and its
Subsidiaries, as the case may be, as of the dates indicated and the results
of their operations and changes in their cash flows for the periods
indicated, subject to normal year-end audit adjustments and the absence of
footnotes.
(c) Annual Financial Statements. Within 90 days after the close of
---------------------------
each fiscal year of each of Holdings and the Borrower, the consolidated and
consolidating balance sheets of each of Holdings and its Subsidiaries and
the Borrower and its Subsidiaries as at the end of such fiscal year and the
related consolidated and consolidating statements of income and retained
earnings and of cash flows for such fiscal year and, in the case of such
consolidated financial statements, setting forth comparative figures for
the preceding fiscal year and comparable budgeted figures for such fiscal
year and certified by Arthur Andersen LLP or such other independent
certified public accountants of recognized national standing as shall be
reasonably acceptable to the Agent, in each case to the effect that such
statements fairly present in all material respects the financial condition
of Holdings and its Subsidiaries and the Borrower and its Subsidiaries, as
the case may be, as of the dates indicated and the results of their
operations and changes in its financial position for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years, if
any, together with a certificate of such accounting firm stating that in
the course of its regular audit of the business of Holdings and its
Subsidiaries and the Borrower and its Subsidiaries, which audit was
conducted in accordance with generally accepted auditing standards, no
Default or Event of Default which has occurred and is continuing has come
to their attention or, if such a Default or Event of Default has come to
their attention a statement as to the nature thereof.
(d) Budgets, etc. Not more than 30 days after the commencement of
-------------
each fiscal year of Holdings, budgets of the Borrower and its Subsidiaries
in reasonable detail for each of the four fiscal quarters of such fiscal
year and (commencing with the fiscal year beginning on or about February 1,
1998) for each of the four fiscal quarters of the immediately succeeding
fiscal year, in each case as customarily prepared by management for its
internal use setting forth, with appropriate discussion, the principal
assumptions upon which such budgets are based. Together with each delivery
of financial statements pursuant to Section 7.01(b) and (c), a comparison
of the current year to date financial results (other than in respect of the
balance sheets included therein) against the budgets required to be
submitted pursuant to this clause (d) shall be presented.
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<PAGE>
(e) Officer's Certificates. At the time of the delivery of the
----------------------
financial statements provided for in Section 7.01(b) and (c), a certificate
of the chief financial officer or other Authorized Officer of Holdings to
the effect that no Default or Event of Default exists or, if any Default or
Event of Default does exist, specifying the nature and extent thereof,
which certificate shall set forth the calculations required to establish
whether Holdings and its Subsidiaries were in compliance with the
provisions of Sections 8.04, 8.05 and 8.08 through and including 8.11, as
at the end of such fiscal quarter or year, as the case may be. In addition,
at the time of the delivery of the financial statements provided for in
Section 7.01(c), a certificate of the chief financial officer or other
Authorized Officer of Holdings setting forth in reasonable detail the
amount of, and calculations required to establish the amount of, Excess
Cash Flow for the Excess Cash Flow Period ending on the last day of the
respective fiscal year.
(f) Notice of Default or Litigation. Promptly, and in any event
-------------------------------
within three Business Days after any officer of Holdings or any of its
Subsidiaries obtains knowledge thereof, notice of (i) the occurrence of any
event which constitutes a Default or an Event of Default, which notice
shall specify the nature thereof, the period of existence thereof and what
action Holdings or the Borrower proposes to take with respect thereto and
(ii) the commencement of, or threat of, or any significant development in,
any litigation or governmental proceeding or investigation pending against
Holdings or any of its Subsidiaries with respect to any Document or which
could reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the ability of any Credit Party to perform its
respective obligations hereunder or under any other Credit Document.
(g) Auditors' Reports. Promptly upon receipt thereof, a copy of each
-----------------
report or "management letter" submitted to Holdings or any of its
Subsidiaries by its independent accountants in connection with any annual,
interim or special audit made by them of the books of Holdings or any of
its Subsidiaries and management's responses thereto.
(h) Environmental Matters. Promptly after obtaining knowledge of any
---------------------
of the following, written notice of any of the following environmental
matters which, individually or in the aggregate, could reasonably be
expected to result in a cost to Holdings or any of its Subsidiaries in
excess of $250,000:
(i) any pending or threatened Environmental Claim against
Holdings or any of its Subsidiaries or any Real Property owned or
operated by Holdings or any of its Subsidiaries;
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<PAGE>
(ii) any condition or occurrence on any Real Property at any
time owned or operated by Holdings or any of its Subsidiaries that (x)
results in a material noncompliance by Holdings or any of its
Subsidiaries with any applicable Environmental Law or (y) could
reasonably be anticipated to form the basis of a material
Environmental Claim against Holdings or any of its Subsidiaries or any
such Real Property;
(iii) any condition or occurrence on any Real Property owned
or operated by Holdings or any of its Subsidiaries that could
reasonably be anticipated to cause such Real Property to be subject to
any restrictions on the ownership, occupancy, use or transferability
by Holdings or its Subsidiary, as the case may be, of its interest in
such Real Property under any Environmental Law; and
(iv) the taking of any removal or remedial action in response
to the actual or alleged presence of any Hazardous Material on any
Real Property owned or operated by Holdings or any of its
Subsidiaries.
All such notices shall describe in reasonable detail the nature of the
claim, investigation, condition, occurrence or removal or remedial action
and Holdings' or the Borrower's response or proposed response thereto. In
addition, Holdings agrees to provide the Banks with copies of all material
written communications by Holdings or any of its Subsidiaries with any
Person, government or governmental agency relating to any of the matters
set forth in clauses (i)-(iv) above, and such detailed reports relating to
any of the matters set forth in clauses (i)-(iv) above (other than such
communications or reports between Holdings or any of its Subsidiaries and
their respective counsel to the extent the same are subject to attorney-
client privilege) as may reasonably be requested by the Agent or the
Required Banks.
(i) Other Information. Promptly upon transmission thereof, copies of
-----------------
any filings and registrations with, and reports to, the SEC by Holdings or
any of its Subsidiaries and copies of all financial statements, proxy
statements, notices and reports as Holdings or any of its Subsidiaries
shall generally send to analysts or the holders of their capital stock or
of the Senior Subordinated Notes in their capacity as such holders (in each
case to the extent not theretofore delivered to the Banks pursuant to this
Agreement) and, with reasonable promptness, such other information or
documents (financial or otherwise) as the Agent on its own behalf or on
behalf of any Bank may reasonably request from time to time.
7.02 Books, Records and Inspections. Holdings will, and will cause
------------------------------
each of its Subsidiaries to, keep proper books of record and account in which
full, true and correct entries in conformity with GAAP and all requirements of
law shall be made of all dealings
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<PAGE>
and transactions in relation to its business and activities. Holdings will, and
will cause each of its Subsidiaries to, permit, upon notice to the chief
financial officer or other Authorized Officer of Holdings or the Borrower, (x)
officers and designated representatives of the Agent or any Bank to visit and
inspect any of the properties or assets of Holdings and any of its Subsidiaries
in whomsoever's possession, and to examine the books of account of Holdings and
any of its Subsidiaries and discuss the affairs, finances and accounts of
Holdings and of any of its Subsidiaries with, and be advised as to the same by,
their officers and independent accountants, all at such reasonable times and
intervals and to such reasonable extent as the Agent or any Bank may desire and
(y) the Agent, at the request of the Required Banks, to conduct, at Holdings'
and the Borrower's expense, an audit of the accounts receivable and/or
inventories of Holdings and its Subsidiaries at such times (but no more
frequently than once a year unless an Event of Default has occurred and is
continuing) as the Required Banks shall reasonably require.
7.03 Insurance. Holdings will, and will cause each of its
---------
Subsidiaries to, at all times from and after the Effective Date maintain in full
force and effect insurance with reputable and solvent insurance carriers in such
amounts, covering such risks and liabilities and with such deductibles or self-
insured retentions as are in accordance with normal industry practice. At any
time that insurance at the levels described in Annex VII is not being maintained
by Holdings and its Subsidiaries, Holdings will notify the Banks in writing
thereof and, if thereafter notified by the Agent to do so, Holdings will obtain
insurance at such levels to the extent then generally available (but in any
event within the deductible or self-insured retention limitations set forth in
the preceding sentence) or otherwise as are reasonably acceptable to the Agent.
At the request of the Agent or the Required Banks, Holdings will furnish to the
Agent and the Banks on an annual basis a summary of the insurance carried in
respect of Holdings and its Subsidiaries and the assets of Holdings and its
Subsidiaries together with certificates of insurance and other evidence of such
insurance, if any, naming the Collateral Agent as mortgagee with respect to real
property, lenders loss payee with respect to personal property, additional
insured with respect to general liability and umbrella liability coverage and
certificate holder with respect to workers' compensation insurance. All
policies (including Mortgage Policies) or certificates with respect to such
insurance shall state that such insurance policies shall not be cancelled or
materially changed without at least 30 days' prior written notice thereof by the
respective insurer to the Collateral Agent. If Holdings or any of its
Subsidiaries shall fail to maintain all insurance in accordance with this
Section 7.03, or if Holdings or any of its Subsidiaries shall fail to so name
the Collateral Agent as an additional insured, mortgagee, loss payee or
certificate holder, as the case may be, the Agent and/or the Collateral Agent
shall have the right (but shall be under no obligation) to procure such
insurance, and the Credit Parties agree to jointly and severally reimburse the
Agent or the Collateral Agent, as the case may be, for all costs and expenses of
procuring such insurance.
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<PAGE>
7.04 Payment of Taxes. Holdings will pay and discharge, and will
----------------
cause each of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or profits, or
upon any properties belonging to it, prior to the date on which penalties attach
thereto, and all lawful claims for sums that have become due and payable which,
if unpaid, might become a Lien not otherwise permitted under Section 8.03(a);
provided, that neither Holdings nor any of its Subsidiaries shall be required to
- --------
pay any such tax, assessment, charge, levy or claim which is being contested in
good faith and by proper proceedings if it has maintained adequate reserves with
respect thereto in accordance with GAAP.
7.05 Corporate Franchises. Holdings will do, and will cause each of
--------------------
its Subsidiaries to do, or cause to be done, all things necessary to preserve
and keep in full force and effect its existence and its material rights,
franchises and authority to do business; provided, however, that any transaction
-------- -------
permitted by Section 8.02 will not constitute a breach of this Section 7.05.
7.06 Compliance with Statutes, etc. Holdings will, and will cause
------------------------------
each of its Subsidiaries to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property (including applicable statutes, regulations, orders
and restrictions relating to environmental standards and controls) except for
such non-compliance as would not reasonably be expected to have a Material
Adverse Effect or a material adverse effect on the ability of any Credit Party
to perform its obligations under any Credit Document to which it is a party.
7.07 Compliance with Environmental Laws. (a)(i) Holdings will, and
----------------------------------
will cause each of its Subsidiaries to, comply in all material respects with all
Environmental Laws applicable to the operation of its business and the ownership
or use of all Real Property now or hereafter owned or operated by Holdings or
any of its Subsidiaries, and Holdings will promptly pay, and will cause each of
its Subsidiaries to pay promptly, all costs and expenses incurred in keeping in
such compliance with all Environmental Laws and will keep or cause to be kept
all Real Properties owned or operated by Holdings or any of its Subsidiaries
free and clear of any Liens imposed pursuant to such Environmental Laws and (ii)
neither Holdings nor any of its Subsidiaries will generate, use, treat, store,
release or dispose of, or permit the generation, use, treatment, storage,
Release or disposal of, Hazardous Materials on any Real Property owned or
operated by Holdings or any of its Subsidiaries, or transport or permit the
transportation of Hazardous Materials to or from any such Real Property, except
in amounts necessary for the operation of the business, in compliance with all
applicable Environmental Laws and so as not to give rise to an Environmental
Claim.
(b) If Holdings or any of its Subsidiaries, or any tenant or occupant
of any Real Property owned or operated by Holdings or any of its Subsidiaries,
cause or permit any
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<PAGE>
intentional or unintentional act or omission resulting in the presence or
Release of any Hazardous Material, each of Holdings and the Borrower agrees to
undertake, and/or to cause any of its Subsidiaries, tenants or occupants to
undertake, at their sole expense, any clean up, removal, remedial or other
action required pursuant to Environmental Laws to remove and clean up any
Hazardous Materials from any Real Property; provided, that neither Holdings nor
--------
any of its Subsidiaries shall be required to comply with any such order or
directive which is being contested in good faith and by proper proceedings so
long as it has maintained adequate reserves with respect to such compliance to
the extent required in accordance with GAAP.
(c) At the request of the Agent or the Required Banks at any time and
from time to time during the existence of this Agreement: (i) if a Default or
an Event of Default exists under this Agreement, (ii) upon the reasonable belief
by the Agent that Holdings or any of its Subsidiaries has breached any
representation or covenant herein with respect to any environmental matters and
such breach is continuing or (iii) in the event notice is provided under Section
7.01(h) hereof, Holdings or its Subsidiaries will provide, at its sole cost and
expense, an environmental site assessment report concerning any Real Property
now or hereafter owned or operated by Holdings or any of its Subsidiaries,
prepared by an environmental consulting firm approved by the Agent, indicating
the presence or Release, if any, of Hazardous Materials on or from any of the
Real Property and the potential cost of any removal or remedial action required
by any Environmental Laws in connection with any Hazardous Materials on such
Real Property. If Holdings or its Subsidiaries shall fail to provide the same
after 30 days' notice or as soon thereafter as is reasonably possible, the Agent
may order the same, and Holdings or its Subsidiaries shall grant and hereby
grant to the Agent and the Banks and their agents access to such Real Property
and specifically grant the Agent and the Banks and their agents an irrevocable
non-exclusive license to undertake such an assessment, all at the Borrower's
expense.
7.08 ERISA. As soon as possible and, in any event, within 10 days
-----
after Holdings, any Subsidiary of Holdings or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following, Holdings will deliver
to each of the Banks a certificate of the chief financial officer of Holdings
setting forth the full details as to such occurrence and the action, if any,
that Holdings, such Subsidiary or such ERISA Affiliate is required or proposes
to take, together with any notices required or proposed to be given to or filed
with or by Holdings, such Subsidiary, such ERISA Affiliate, the PBGC, a Plan
participant or the Plan administrator with respect thereto: that a Reportable
Event has occurred; that an accumulated funding deficiency, within the meaning
of Section 412 of the Code or Section 302 of ERISA, has been incurred or an
application may be or has been made for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code or Section 303 or 304
of ERISA with respect to a Plan; that any contribution required to be made with
respect to a Plan or Foreign Pension Plan has not been timely made; that a
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<PAGE>
Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current
Liability; that proceedings may be or have been instituted to terminate or
appoint a trustee to administer a Plan which is subject to Title IV of ERISA;
that a proceeding has been instituted pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Plan; that Holdings, any Subsidiary of
Holdings or any ERISA Affiliate will or may incur any material liability
(including any indirect, contingent, or secondary liability) to or on account of
the termination of or withdrawal from a Plan under Section 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section
401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(l) of
ERISA or with respect to a Plan that is a group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B
of the Code; or that Holdings or any Subsidiary of Holdings may incur any
material liability pursuant to any employee welfare benefit plan (as defined in
Section 3(1) of ERISA) that provides benefits to retired employees or other
former employees (other than as required by Section 601 of ERISA) or any Plan or
any Foreign Pension Plan. At the request of any Bank, Holdings will deliver to
such Bank a complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service. In addition to any certificates or notices delivered
to the Banks pursuant to the first sentence hereof, copies of any material
notices received by Holdings, any Subsidiary of Holdings or any ERISA Affiliate
from a governmental agency with respect to any Plan or Foreign Pension Plan
shall be delivered to the Banks no later than 10 days after the date such notice
has been received by Holdings, such Subsidiary or such ERISA Affiliate, as
applicable.
7.09 Good Repair. Holdings will, and will cause each of its
-----------
Subsidiaries to, ensure that its material properties and equipment used in its
business are kept in good repair, working order and condition, normal wear and
tear excepted, and, subject to Section 8.08, that from time to time there are
made in such properties and equipment all needful and proper repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto, to
the extent and in the manner useful or customary for companies in similar
businesses.
7.10 End of Fiscal Years; Fiscal Quarters. Holdings will, for
------------------------------------
financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on the last Saturday of January of each year
and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on
dates consistent with such fiscal year ends.
7.11 Additional Security; Further Assurances. (a) Holdings will,
---------------------------------------
and will cause each of its Domestic Subsidiaries (and subject to Section 7.13,
each of its Foreign Subsidiaries) to, grant to the Collateral Agent security
interests and mortgages in such assets and properties of Holdings and its
Subsidiaries as are not covered by the original Security Documents, and as may
be requested from time to time by the Agent or the Required Banks
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(collectively, the "Additional Security Documents"). All such security interests
and mortgages shall be granted pursuant to documentation reasonably satisfactory
in form and substance to the Agent and shall constitute valid and enforceable
perfected security interests and mortgages superior to and prior to the rights
of all third Persons and subject to no other Liens except for Permitted Liens.
The Additional Security Documents or instruments related thereto shall have been
duly recorded or filed in such manner and in such places as are required by law
to establish, perfect, preserve and protect the Liens in favor of the Collateral
Agent required to be granted pursuant to the Additional Security Documents and
all taxes, fees and other charges payable in connection therewith shall have
been paid in full.
(b) Holdings will, and will cause each of its Subsidiaries to, at the
expense of Holdings and the Borrower, make, execute, endorse, acknowledge, file
and/or deliver to the Collateral Agent from time to time such vouchers,
invoices, schedules, confirmatory assignments, conveyances, financing
statements, transfer endorsements, powers of attorney, certificates, real
property surveys, reports and other assurances or instruments and take such
further steps relating to the Collateral covered by any of the Security
Documents as the Collateral Agent may reasonably require. Furthermore, Holdings
shall cause to be delivered to the Collateral Agent such opinions of counsel,
title insurance and other related documents as may be reasonably requested by
the Agent to assure themselves that this Section 7.11 has been complied with.
(c) If the Collateral Agent or the Required Banks determine that they
are required by law or regulation to have appraisals prepared in respect of the
Real Property of Holdings and its Subsidiaries constituting Collateral, the
Borrower shall provide to the Agent appraisals which satisfy the applicable
requirements of the Real Estate Appraisal Reform Amendments of the Financial
Institution Reform, Recovery and Enforcement Act of 1989, as amended, and which
shall be in form and substance reasonably satisfactory to the Agent.
(d) Holdings and the Borrower agree that each action required above
by this Section 7.11 shall be completed as soon as possible, but in no event
later than 90 days after such action is either requested to be taken by the
Agent or the Required Banks or required to be taken by Holdings and its
Subsidiaries pursuant to the terms of this Section 7.11.
7.12 Contributions; Payments. (a) Holdings will contribute as a
-----------------------
common equity contribution to the capital of the Borrower upon its receipt
thereof, any cash proceeds received by Holdings after the Initial Borrowing Date
from any asset sale, any incurrence of Indebtedness, any Recovery Event, any
sale or issuance of its preferred or common equity or any cash capital
contributions received by Holdings after the Initial Borrowing Date.
(b) The Borrower will use the proceeds of all equity contributions
received by it from Holdings as provided in clause (a) above toward the
repayment of Term Loans to the extent required by Section 4.02.
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7.13 Foreign Subsidiaries Security. If following a change in the
-----------------------------
relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower acceptable to the Agent and the Required Banks does not within 30 days
after a request from the Agent or the Required Banks deliver evidence, in form
and substance mutually satisfactory to the Agent and the Borrower, with respect
to any Foreign Subsidiary which has not already had all of its stock pledged
pursuant to the Pledge Agreement that (i) a pledge (x) of 66-2/3% or more of the
total combined voting power of all classes of capital stock of such Foreign
Subsidiary entitled to vote, and (y) of any promissory note issued by such
Foreign Subsidiary to Holdings or any of its Domestic Subsidiaries, (ii) the
entering into by such Foreign Subsidiary of a security agreement in
substantially the form of the Security Agreement and (iii) the entering into by
such Foreign Subsidiary of a guaranty in substantially the form of the
Subsidiary Guaranty, in any such case would cause the undistributed earnings of
such Foreign Subsidiary as determined for Federal income tax purposes to be
treated as a deemed dividend to such Foreign Subsidiary's United States parent
for Federal income tax purposes, then in the case of a failure to deliver the
evidence described in clause (i) above, that portion of such Foreign
Subsidiary's outstanding capital stock or any promissory notes so issued by such
Foreign Subsidiary, in each case not theretofore pledged pursuant to the Pledge
Agreement shall be pledged to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement
in substantially similar form, if needed), and in the case of a failure to
deliver the evidence described in clause (ii) above, such Foreign Subsidiary
shall execute and deliver the Security Agreement (or another security agreement
in substantially similar form, if needed), granting the Secured Creditors a
security interest in all of such Foreign Subsidiary's assets and securing the
Obligations of the Borrower under the Credit Documents and under any Interest
Rate Protection Agreement or Other Hedging Agreement and, in the event the
Subsidiary Guaranty shall have been executed by such Foreign Subsidiary, the
obligations of such Foreign Subsidiary thereunder, and in the case of a failure
to deliver the evidence described in clause (iii) above, such Foreign Subsidiary
shall execute and deliver the Subsidiary Guaranty (or another guaranty in
substantially similar form, if needed), guaranteeing the Obligations of the
Borrower under the Credit Documents and under any Interest Rate Protection
Agreement or Other Hedging Agreement, in each case to the extent that the
entering into such Security Agreement or Subsidiary Guaranty is permitted by the
laws of the respective foreign jurisdiction and with all documents delivered
pursuant to this Section 7.13 to be in form and substance reasonably
satisfactory to the Agent and the Required Banks.
7.14 338(h)(10) Election. The Borrower will timely file or shall
-------------------
cause to be timely filed all forms required to be filed to effect a valid
election under Section 338(h)(10) of the Code with respect to the Acquisition,
and the Borrower will timely satisfy or will cause to be timely satisfied any
requirements imposed by any state or local government to give effect to an
election analogous to the foregoing Section 338(h)(10) election for all
applicable state or local tax purposes. Within five Business Days after forms
required to be filed to
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effect a valid election under Section 338(h)(10) of the Code are filed, the
Borrower will deliver to the Agent a certificate, signed and attested by any
Authorized Officer of the Borrower, that all such Internal Revenue forms have
been timely filed to effect the foregoing election, and within five Business
Days after requirements imposed by any state or local government to give effect
to an election analogous to the foregoing Section 338(h)(10) election for state
or local tax purposes have been satisfied, the Borrower will deliver to the
Agent a certificate, signed and attested by any Authorized Officer of the
Borrower, that all such requirements to give effect to the foregoing election
under state and local law have been timely satisfied.
7.15 Merger; Name Change. (a) Promptly following the consummation
-------------------
of the Acquisition, but in any event on the Initial Borrowing Date, (i) Holdings
and Acquisition Corp. shall cause the Merger to be consummated, and all aspects
thereof (including, without limitation, regulatory, financial, accounting and
tax aspects) shall be satisfactory to the Required Banks and in compliance with
the terms of the Merger Documents, this Agreement and all applicable laws, (ii)
Floor Coverings, as the surviving corporation of the Merger, shall execute and
deliver an Acknowledgment Agreement in the form of Exhibit M and new Notes in
replacement of the Notes delivered pursuant to Section 5.01 and (iii) the
Articles of Merger with respect to the Merger shall have been filed to the
satisfaction of the Agent with the Secretary of State of the State of Delaware
and the Clerk of the State Corporation Commission of the Commonwealth of
Virginia. After giving effect to the Merger, Floor Coverings shall succeed to
all rights and obligations of Acquisition Corp. as were existing immediately
prior to the Merger (including, without limitation, all obligations under this
Agreement and the other Credit Documents to which Acquisition Corp. is a party).
Simultaneously with the Merger, all capital stock of Floor Coverings, as the
surviving corporation of the Merger, shall be pledged pursuant to the Pledge
Agreement, and all stock certificates evidencing such shares of capital stock of
Floor Coverings after giving effect to the Merger shall be delivered to the
Collateral Agent.
(b) Immediately after giving effect to the Merger, the Borrower shall
cause an amendment to its Certificate of Incorporation to be filed with the
Secretary of State of the State of Delaware, which amendment shall change the
name of the Borrower to "Collins & Aikman Floorcoverings, Inc."
7.16 Performance of Obligations. Holdings will, and will cause each
--------------------------
of its Subsidiaries to, perform all of its obligations under the terms of each
mortgage, deed of trust, indenture, loan agreement or credit agreement and each
other material agreement, contract or instrument by which it is bound, except
such non-performances as are not, individually or in the aggregate, reasonably
expected to have a Material Adverse Effect.
7.17 Use of Proceeds. All proceeds of the Loans shall be used as
---------------
provided in Section 6.05.
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7.18 Qualified Preferred Stock. Holdings shall pay all dividends on
-------------------------
Qualified Preferred Stock through the issuance of additional shares of Qualified
Preferred Stock, rather than in cash.
SECTION 8. Negative Covenants. Holdings and the Borrower hereby
------------------
covenant and agree that as of the Effective Date and thereafter for so long as
this Agreement is in effect and until the Total Commitment has terminated, no
Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings,
together with interest, Fees and all other Obligations (other than any
indemnities described in Section 12.13 hereof which are not then due and
payable) incurred hereunder, are paid in full:
8.01 Changes in Business. (a) Holdings and its Subsidiaries will
-------------------
not engage in any business other than the business in which the Acquired
Business is engaged as of the Effective Date and activities directly related
thereto, and similar or related businesses.
(b) Notwithstanding the foregoing, Holdings will engage in no
business other than (i) its ownership of the capital stock of the Borrower and
those obligations of officers and employees of Holdings and its Subsidiaries to
the extent permitted by Section 8.05(e) and having those liabilities which it is
responsible for under this Agreement and the other Documents to which it is a
party, (ii) the issuance of shares of Holdings Common Stock, Holding Preferred
Stock and Qualified Preferred Stock to the extent permitted by Section 8.13(v),
(iii) activities associated with expenses paid with dividends made by the
Borrower pursuant to Section 8.06(iv) and (iv) indemnity obligations pursuant to
indemnity agreements entered into in the ordinary course of business in support
of the operations of the Borrower and its Subsidiaries, provided that Holdings
--------
may engage in those activities that are incidental to (a) the maintenance of its
corporate existence in compliance with applicable law, (b) legal, tax and
accounting matters in connection with any of the foregoing activities and (c)
the entering into, and performing its obligations under, this Agreement and the
other Documents to which it is a party.
8.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
-------------------------------------------------------
Holdings will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs or enter into any transaction of merger or
consolidation, or convey, sell, lease or otherwise dispose of all or any part of
its property or assets (other than inventory in the ordinary course of
business), or enter into any partnerships, joint ventures or sale-leaseback
transactions, or purchase or otherwise acquire (in one or a series of related
transactions) any part of the property or assets (other than purchases or other
acquisitions of inventory, materials and equipment in the ordinary course of
business) of any Person or agree to do any of the foregoing at any future time,
except that the following shall be permitted:
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(a) the Transaction;
(b) the Borrower and its Subsidiaries may lease, as lessee, or
license, as licensee, real or personal property (including, without
limitation, intellectual property) in the ordinary course of business and
otherwise not in violation of this Agreement;
(c) Capital Expenditures by the Borrower and its Subsidiaries to the
extent not in violation of Section 8.08;
(d) the advances, investments and loans permitted pursuant to Section
8.05;
(e) each of the Borrower and its Subsidiaries may sell or otherwise
dispose of assets, provided, that (w) each such sale or disposition shall
--------
be for an amount at least equal to the fair market value thereof (as
determined in good faith by senior management of the Borrower), (x) each
such sale results in consideration at least 90% of which shall be in the
form of cash (for such purpose, taking into account the amount of cash, the
principal amount of any promissory notes and the fair market value, as
determined in good faith by senior management of the Borrower, of any other
consideration), (y) the aggregate sale proceeds from all assets subject to
such sales or dispositions pursuant to this clause (e) shall not exceed
$1,000,000 in any fiscal year of the Borrower and (z) the Net Proceeds
therefrom are either applied to repay Term Loans as provided in Section
4.02(A)(c) or reinvested in replacement assets to the extent permitted by
Section 4.02(A)(c);
(f) each of the Borrower and its Subsidiaries may sell or otherwise
dispose of assets, provided, that (w) each such sale or disposition shall
--------
be for an amount at least equal to the fair market value thereof (as
determined in good faith by senior management of the Borrower), (x) each
such sale results in consideration at least 90% of which shall be in the
form of cash (for such purpose, taking into account the amount of cash, the
principal amount of any promissory notes and the fair market value, as
determined in good faith by senior management of the Borrower, of any other
consideration) and (y) the aggregate sale proceeds from all assets subject
to such sales or dispositions pursuant to this clause (f) shall not exceed
$100,000 in any fiscal year of the Borrower;
(g) the Borrower and its Subsidiaries may sell or discount, in each
case without recourse and in the ordinary course of business, accounts
receivables arising in the ordinary course of business, but only in
connection with the compromise or collection thereof;
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(h) the Borrower and its Subsidiaries may sell for cash or exchange
specific items of equipment, so long as the purpose of each such sale or
exchange is to acquire (and results within 90 days of such sale or exchange
in the acquisition of) replacement items of equipment which are the
functional equivalent of the item of equipment so sold or exchanged;
(i) the Borrower and its Subsidiaries may, in the ordinary course of
business, license patents, trademarks, copyrights and know-how to third
Persons and to one another, so long as each such license is permitted to be
assigned pursuant to the Security Agreement (to the extent that a security
interest in such patents, trademarks, copyrights and know-how is granted
thereunder) and does not otherwise prohibit the granting of a Lien by the
Borrower or any of its Subsidiaries pursuant to the Security Agreement in
the intellectual property covered by such license;
(j) the assets of any Foreign Subsidiary of the Borrower may be
transferred to the Borrower or any Wholly-Owned Subsidiary of the Borrower,
and any Foreign Subsidiary of the Borrower may be merged with and into, or
be voluntarily dissolved or liquidated into, the Borrower or any Wholly-
Owned Subsidiary of the Borrower, so long as the Borrower or such Wholly-
Owned Subsidiary, as the case may be, is the surviving corporation of any
such merger, dissolution or liquidation;
(k) the Borrower and its Wholly-Owned Domestic Subsidiaries may sell
or otherwise transfer inventory between or among themselves in the ordinary
course of business for resale by the Borrower or such Wholly-Owned Domestic
Subsidiaries, as the case may be, so long as the security interest granted
to the Collateral Agent for the benefit of the Secured Creditors pursuant
to the Security Agreement in the inventory so transferred shall remain in
full force and effect and perfected (to at least the same extent as in
effect immediately prior to such transfer);
(l) the Borrower may lease, as lessor, equipment, machinery or its
Real Property to one or more Wholly-Owned Domestic Subsidiaries of the
Borrower, so long as (x) such lease is for fair market value (determined in
good faith by the Board of Directors or senior management of the Borrower)
and (y) the security interests granted to the Collateral Agent for the
benefit of the Secured Creditors pursuant to the Security Documents in the
assets so leased shall remain in full force and effect and perfected (to at
least the same extent as in effect immediately prior to such transfer);
(m) any Domestic Subsidiary of the Borrower may transfer assets
(other than inventory and accounts receivable) to the Borrower or to any
Wholly-Owned Domestic Subsidiary of the Borrower, so long as the security
interests granted to the Collateral Agent for the benefit of the Secured
Creditors pursuant to the Security
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Documents in the assets so transferred shall remain in full force and
effect and perfected (to at least the same extent as in effect immediately
prior to such transfer);
(n) any Wholly-Owned Domestic Subsidiary of the Borrower may merge
with and into, or be voluntarily dissolved or liquidated into, the
Borrower, so long as (i) the Borrower is the surviving corporation of such
merger, dissolution or liquidation and (ii) the security interests granted
to the Collateral Agent for the benefit of the Secured Creditors pursuant
to the Security Documents in the assets of such Wholly-Owned Domestic
Subsidiary so merged, dissolved or liquidated shall remain in full force
and effect and perfected (to at least the same extent as in effect
immediately prior to such merger, dissolution or liquidation);
(o) any Wholly-Owned Domestic Subsidiary of the Borrower may merge
with and into, or be voluntarily dissolved or liquidated into, any other
Wholly-Owned Domestic Subsidiary of the Borrower, so long as the security
interests granted to the Collateral Agent for the benefit of the Secured
Creditors pursuant to the Security Documents in the assets of such Wholly-
Owned Domestic Subsidiary so merged, dissolved or liquidated shall remain
in full force and effect and perfected (to at least the same extent as in
effect immediately prior to such merger, dissolution or liquidation);
(p) so long as no Default or Event of Default then exists or would
result therefrom, the Borrower may acquire assets constituting all or
substantially all of a business, business unit, division or product line of
any Person not already a Subsidiary of the Borrower or the capital stock of
any such Person (any such acquisition permitted by this clause (p), a
"Permitted Acquisition"), provided, that (i) such Person (or the assets so
--------
acquired) was, immediately prior to such acquisition, engaged (or used)
primarily in the business permitted pursuant to Section 8.01(a), (ii) if
such acquisition is structured as a stock acquisition, then either (A) the
Person so acquired becomes a Wholly-Owned Domestic Subsidiary of the
Borrower or (B) such Person is merged with and into a Wholly-Owned Domestic
Subsidiary of the Borrower (with such Wholly-Owned Domestic Subsidiary
being the surviving corporation of such merger), and in any case, all of
the provisions of Section 8.15 have been complied with in respect of such
Person, (iii) any Liens or Indebtedness assumed or issued in connection
with such acquisition are otherwise permitted under Section 8.03 or 8.04,
as the case may be, (iv) the only consideration paid by the Borrower in
respect of any such Permitted Acquisition consists of cash, Holdings
Common Stock, Qualified Preferred Stock and/or Indebtedness to the extent
permitted by Section 8.04(j), (v) all representations and warranties
contained herein or in the other Credit Documents shall be true and correct
in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of such
Permitted Acquisition (both before and after giving effect thereto), unless
stated to relate to a
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specific earlier date, in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date,
(vi) after giving effect to any such Permitted Acquisition, the Permitted
Acquisition Cost of such Permitted Acquisition shall not exceed an amount
equal to the sum of (x) $10,000,000 (less the portion, if any, of such
$10,000,000 previously used to consummate a Permitted Acquisition) plus (y)
the Excess Proceeds Amount at the time of such Permitted Acquisition, and
(vii) with respect to each Permitted Acquisition, (A) the Borrower shall
have given the Agent at least 10 Business Days prior written notice of such
Permitted Acquisition, (B) the Borrower in good faith shall believe, based
on calculations made by the Borrower on a pro forma basis (the pro forma
--- ----- --- -----
adjustments made by the Borrower in making the calculations pursuant to
this clause (vii)(B) and clauses (vii)(C) and (vii)(D) shall be subject to
the reasonable satisfaction of the Agent) after giving effect to the
respective Permitted Acquisition as if such Permitted Acquisition had been
consummated on the date occurring twelve months prior to the last day of
the most recently ended fiscal quarter of the Borrower, that (x) in the
case of any Permitted Acquisition consummated prior to October 31, 1998, a
Leverage Ratio of 5.50:1.0 or less would have been achieved for the 12-
month period ended on the last day of such fiscal quarter and (y)
thereafter, the covenant contained in Section 8.11 would have been
satisfied for the 12-month period ended on the last day of such fiscal
quarter, (C) the Borrower in good faith shall believe, based on
calculations made by the Borrower, on a pro forma basis after giving effect
--- -----
to the respective Permitted Acquisition, that the covenants contained in
Sections 8.09 through 8.11, inclusive, will continue to be met for the 12-
month period following the date of the consummation of the respective
Permitted Acquisition, (D) the Borrower in good faith shall believe, based
on calculations made by the Borrower on a pro forma basis after giving
--- -----
effect to the consummation of the respective Permitted Acquisition and all
other Permitted Acquisitions theretofore effected as if all such Permitted
Acquisitions had been consummated on the date occurring twelve months prior
to the last day of the most recently ended fiscal quarter of the Borrower,
that the covenants contained in Sections 8.09 through 8.11, inclusive,
would have been satisfied for the 12-month period ended on the last day of
such fiscal quarter and (E) the Borrower shall have delivered to the Agent
an officer's certificate executed by an Authorized Officer of the Borrower,
certifying, to the best of his knowledge, compliance with the requirements
of preceding clauses (i) through (vii) and containing the pro forma
--- -----
calculations required by the preceding clauses (vii)(B),(vii)(C) and
(vii)(D);
(q) the Borrower and its Wholly-Owned Domestic Subsidiaries may sell
or transfer inventory to the Borrower's Wholly-Owned Foreign Subsidiaries
in the ordinary course of business for resale by such Wholly-Owned Foreign
Subsidiary; and
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(r) the Borrower and any of its Subsidiaries may sell, lease (as
lessor) or otherwise dispose of assets which, in the reasonable opinion of
such Person, are obsolete, uneconomic or no longer useful in the conduct of
such Person's business, provided that (w) each such sale or disposition
--------
shall be for an amount at least equal to the fair market value thereof (as
determined in good faith by senior management of the Borrower), (x) each
such sale results in consideration at least 75% of which (taking the amount
of cash, the principal amount of any promissory notes and the fair market
value, as determined by the Borrower in good faith, of any other
consideration) shall be in the form of cash and (y) the Net Proceeds
therefrom are either applied to repay Term Loans as provided in Section
4.02(A)(c) or reinvested in replacement assets to the extent permitted by
Section 4.02(A)(c).
To the extent the Required Banks waive the provisions of this Section 8.02 with
respect to the sale or other disposition of any Collateral, or any Collateral is
sold or otherwise disposed of as permitted by this Section 8.02, such Collateral
(unless transferred to the Borrower or a Subsidiary thereof) shall in each case
be sold or otherwise disposed of free and clear of the Liens created by the
Security Documents and the Agent shall take such actions (including, without
limitation, directing the Collateral Agent to take such actions) as are
appropriate in connection therewith.
8.03 Liens. Holdings will not, and will not permit any of its
-----
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with
respect to any property or assets of any kind (real or personal, tangible or
intangible) of Holdings or any of its Subsidiaries, whether now owned or
hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to
Holdings or any of its Subsidiaries) or assign any right to receive income,
except for the following (collectively, the "Permitted Liens"):
(a) inchoate Liens for taxes, assessments or governmental charges or
levies not yet due or Liens for taxes, assessments or governmental charges
or levies being contested in good faith by appropriate proceedings and for
which adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Borrower or any of
its Subsidiaries imposed by law which were incurred in the ordinary course
of business and which have not arisen to secure Indebtedness for borrowed
money, such as carriers', warehousemen's and mechanics' Liens, statutory
landlord's Liens, and other similar Liens arising in the ordinary course of
business, and which either (x) do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any of its
Subsidiaries or (y) are being contested in good faith by appropriate
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proceedings, which proceedings have the effect of preventing the forfeiture
or sale of the property or asset subject to such Lien;
(c) Liens created by or pursuant to this Agreement and the Security
Documents;
(d) Liens in existence on the Initial Borrowing Date which are
listed, and the property subject thereto described, in Annex IX, without
giving effect to any extensions or renewals thereof;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 9.09,
provided that cash or other property (other than proceeds of insurance
--------
payable by reason of such judgments, decrees or attachments) may only be
pledged by Holdings or any of its Subsidiaries as security therefor to the
extent the amount of such cash plus the fair market value of such other
property does not exceed $250,000 in the aggregate;
(f) Liens incurred or deposits made (x) in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security, (y) to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids, government
contracts, performance and return-of-money bonds and other similar
obligations incurred in the ordinary course of business (exclusive of
obligations in respect of the payment for borrowed money) and (z) to secure
the performance of leases of Real Property, to the extent incurred or made
in the ordinary course of business consistent with past practices;
(g) licenses, leases or subleases granted to third Persons in the
ordinary course of business not interfering in any material respect with
the business of the Borrower or any of its Subsidiaries;
(h) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances, in each
case not securing Indebtedness and not interfering in any material respect
with the ordinary conduct of the business of the Borrower or any of its
Subsidiaries;
(i) Liens arising from precautionary UCC financing statements
regarding operating leases permitted by this Agreement;
(j) any interest or title of a licensor, lessor or sublessor under any
lease permitted by this Agreement;
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(k) Liens created pursuant to Capital Leases permitted pursuant to
Section 8.04(d), provided that (x) such Liens only serve to secure the
--------
payment of Indebtedness arising under such Capitalized Lease Obligation and
(y) the Lien encumbering the asset giving rise to the Capitalized Lease
Obligation does not encumber any other asset of the Borrower or any of its
Subsidiaries;
(l) Permitted Encumbrances;
(m) Liens arising pursuant to purchase money mortgages or security
interests securing Indebtedness representing the purchase price (or
financing of the purchase price within 60 days after the respective
purchase) of assets acquired after the Initial Borrowing Date, provided,
--------
that (i) any such Liens attach only to the assets so purchased, (ii) the
Indebtedness secured by any such Lien does not exceed 100%, nor is less
than 75%, of the lesser of the fair market value or the purchase price of
the property being purchased at the time of the incurrence of such
Indebtedness and (iii) the Indebtedness secured thereby is permitted to be
incurred pursuant to Section 8.04(d);
(n) Liens on property or assets acquired pursuant to a Permitted
Acquisition, or on property or assets of a Subsidiary of the Borrower in
existence at the time such Subsidiary is acquired pursuant to a Permitted
Acquisition, provided, that (i) any Indebtedness that is secured by such
--------
Liens is permitted to exist under Section 8.04(j) and (ii) such Liens are
not incurred in connection with, or in contemplation or anticipation of,
such Permitted Acquisition and do not attach to any other asset of the
Borrower or any of its Subsidiaries; and
(o) additional Liens incurred by the Borrower and its Subsidiaries so
long as the value of the property subject to such Liens, and the
Indebtedness and other obligations secured thereby, do not exceed
$1,000,000.
In connection with the granting of Liens of the type described in clauses (k)
and (m) of this Section 8.03 by the Borrower or any of its Subsidiaries, at the
reasonable request of the Borrower, and at the Borrower's expense, the Agent and
the Collateral Agent shall take (and are hereby authorized to take) any actions
reasonably requested by the Borrower in connection therewith (including, without
limitation, by executing appropriate lien releases in favor of the holder or
holders of such Liens, in either case solely with respect to the item or items
of equipment or other assets subject to such Liens).
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8.04 Indebtedness. Holdings will not, and will not permit any of its
------------
Subsidiaries to, contract, create, incur, assume or suffer to exist any
Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the other
Credit Documents;
(b) Indebtedness to Remain Outstanding on the Initial Borrowing Date
and listed on Annex VIII, without giving effect to any subsequent
extension, renewal or refinancing thereof;
(c) Indebtedness under Interest Rate Protection Agreements entered
into to protect the Borrower against fluctuations in interest rates in
respect of the Obligations;
(d) Capitalized Lease Obligations and Indebtedness of the Borrower
and its Subsidiaries representing purchase money Indebtedness secured by
Liens permitted under Section 8.03(m); provided, that (x) all such
--------
Capitalized Lease Obligations are permitted under Section 8.08 and (y) the
sum of (i) the aggregate outstanding Capitalized Lease Obligations plus
----
(ii) the aggregate outstanding principal amount of such purchase money
Indebtedness at any time shall not exceed $1,500,000;
(e) Indebtedness of the Borrower incurred under the Senior
Subordinated Notes in an aggregate principal amount not to exceed
$100,000,000 (as reduced by any repayments of principal thereof);
(f) Indebtedness constituting Intercompany Loans to the extent
permitted by Section 8.05(g);
(g) Indebtedness under Other Hedging Agreements providing protection
against fluctuations in currency values in connection with the Borrower's
or any of its Subsidiaries' operations so long as management of the
Borrower or such Subsidiary, as the case may be, has determined that the
entering into of such Other Hedging Agreements are bona fide hedging
---- ----
activities;
(h) Indebtedness of Foreign Subsidiaries to the Borrower or any of
its Domestic Subsidiaries as a result of any investment made pursuant to
Section 8.05(m);
(i) Indebtedness consisting of guaranties (x) by the Borrower of
Indebtedness and leases permitted to be incurred by Wholly-Owned Domestic
Subsidiaries of the Borrower, (y) by Domestic Subsidiaries of the Borrower
of Indebtedness (other than the Senior Subordinated Notes) and leases
permitted to be incurred by the Borrower or other Wholly-Owned Domestic
Subsidiaries of the Borrower and (z) by Foreign
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<PAGE>
Subsidiaries of Indebtedness and leases permitted to be incurred by other
Wholly-Owned Foreign Subsidiaries of the Borrower;
(j) Indebtedness of a Subsidiary acquired pursuant to a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition
of an asset securing such Indebtedness), provided that (i) such
--------
Indebtedness was not incurred in connection with, or in anticipation or
contemplation of, such Permitted Acquisition, (ii) such Indebtedness does
not constitute debt for borrowed money, it being understood and agreed that
Capitalized Lease Obligations and purchase money Indebtedness shall not
constitute debt for borrowed money for purposes of this clause (j) and
(iii) at the time of such Permitted Acquisition, such Indebtedness does not
exceed 20% of the total value of the assets of the Subsidiary so acquired,
or of the assets so acquired, as the case may be;
(k) Indebtedness of Holdings under the Shareholder Subordinated Notes
issued by Holdings as consideration in connection with redemptions or
repurchases of shares of capital stock of Holdings or options to purchase
capital stock of Holdings held by former employees of Holdings or any of
its Subsidiaries following the termination of their employment;
(l) additional Indebtedness of the Borrower and its Subsidiaries not
otherwise permitted hereunder not exceeding $1,000,000 in aggregate
principal amount at any time outstanding.
8.05 Advances, Investments and Loans. Holdings will not, and will
-------------------------------
not permit any of its Subsidiaries to, lend money or extend credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, or purchase or own a futures contract or otherwise become liable for
the purchase or sale of currency or other commodities at a future date in the
nature of a futures contract, or hold any cash, Cash Equivalents or Foreign Cash
Equivalents, except:
(a) Holdings and its Subsidiaries may invest in cash and Cash
Equivalents, provided that during any time that Revolving Loans or
--------
Swingline Loans are outstanding the aggregate amount of cash and Cash
Equivalents held by the Borrower and its Subsidiaries shall not exceed
$5,000,000 for any period of five consecutive Business Days (other than
cash deposited with the Agent pursuant to any cash collateral arrangement
entered into pursuant to this Agreement);
(b) the Borrower and its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dis-
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<PAGE>
chargeable in accordance with customary trade terms of the Borrower or such
Subsidiary;
(c) the Borrower and its Subsidiaries may acquire and own investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of suppliers and customers and in good faith settlement of
delinquent obligations of, and other disputes with, customers and suppliers
arising in the ordinary course of business;
(d) Interest Rate Protection Agreements entered into in compliance
with Section 8.04(c) shall be permitted;
(e) Holdings may acquire and hold obligations of one or more officers
or other employees of Holdings or its Subsidiaries in connection with such
officers' or employees' acquisition of shares of Holdings Common Stock, so
long as no cash is paid by Holdings or any of its Subsidiaries to such
officers or employees in connection with the acquisition of any such
obligations;
(f) deposits made in the ordinary course of business consistent with
past practices to secure the performance of leases shall be permitted;
(g) the Borrower may make intercompany loans and advances to any of
its Subsidiaries, any Subsidiary of the Borrower may make intercompany
loans and advances to the Borrower, and any Subsidiary of the Borrower may
make intercompany loans and advances to any other Subsidiary of the
Borrower (collectively, "Intercompany Loans"), provided, that (w) at no
--------
time shall the aggregate outstanding principal amount of all Intercompany
Loans made pursuant to this clause (g) by the Borrower and its Wholly-Owned
Domestic Subsidiaries to non-Wholly-Owned Domestic Subsidiaries and Foreign
Subsidiaries, when added to the amount of contributions, capitalizations
and forgiveness theretofore made pursuant to Section 8.05(l) after the
Initial Borrowing Date, exceed $1,000,000 (determined without regard to any
write-downs or write-offs of such loans and advances), (x) each
Intercompany Loan shall be evidenced by an Intercompany Note, (y) each
Intercompany Note evidencing an Intercompany Loan made by a Foreign
Subsidiary or a non-Wholly-Owned Domestic Subsidiary to the Borrower or a
Wholly-Owned Domestic Subsidiary of the Borrower shall contain the
subordination provisions set forth on Exhibit I and (z) each Intercompany
Note (other than (1) Intercompany Notes issued by Foreign Subsidiaries of
the Borrower to the Borrower or any of its Domestic Subsidiaries and (2)
Intercompany Notes held by Foreign Subsidiaries of the Borrower, in each
case except to the extent provided in Section 7.13) shall be pledged to the
Collateral Agent pursuant to the Pledge Agreement;
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<PAGE>
(h) loans and advances by the Borrower and its Subsidiaries to
employees of Holdings and its Subsidiaries for moving and travel expenses
and other similar expenses, in each case incurred in the ordinary course of
business, in an aggregate outstanding principal amount not to exceed
$500,000 at any time (determined without regard to any write-downs or
write-offs of such loans and advances), shall be permitted;
(i) Holdings may make equity contributions to the capital of the
Borrower;
(j) Foreign Subsidiaries of the Borrower may invest in Foreign Cash
Equivalents;
(k) Other Hedging Agreements may be entered into in compliance with
Section 8.04(g);
(l) the Borrower and its Wholly-Owned Domestic Subsidiaries may make
cash capital contributions to non-Wholly-Owned Domestic Subsidiaries and
Foreign Subsidiaries of the Borrower, and may capitalize or forgive any
Indebtedness owed to them by a non-Wholly-Owned Domestic Subsidiary or
Foreign Subsidiary of the Borrower and outstanding under clause (g) of this
Section 8.05, provided that the aggregate amount of such contributions,
capitalizations and forgiveness after the Initial Borrowing Date, when
added to the aggregate outstanding principal amount of Intercompany Loans
made to non-Wholly-Owned Domestic Subsidiaries and Foreign Subsidiaries
under such clause (g) (determined without regard to any write-downs or
write-offs thereof) after the Initial Borrowing Date, shall not exceed at
any one time outstanding an amount equal to $1,000,000;
(m) the Borrower and its Domestic Subsidiaries may make and hold
investments in their respective Foreign Subsidiaries to the extent that
such investments arise from the sale of inventory in the ordinary course of
business by the Borrower or such Domestic Subsidiary to such Foreign
Subsidiaries for resale by such Foreign Subsidiaries (including any such
investments resulting from the extension of the payment terms with respect
to such sales);
(n) the Borrower and its Subsidiaries may make transfers of assets to
their respective Subsidiaries in accordance with Sections 8.02(k), (m) and
(q);
(o) the Borrower may contribute cash to one or more of its Wholly-
Owned Domestic Subsidiaries formed after the Initial Borrowing Date in
accordance with Section 8.15 so long as the aggregate amount of
contributions at any one time outstanding (without giving effect to any
write-downs or write-offs) to all such Wholly-Owned Domestic Subsidiaries
does not exceed $500,000;
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<PAGE>
(p) Permitted Acquisitions shall be permitted in accordance with
Section 8.02(p);
(q) the Borrower and its Subsidiaries may acquire and hold debt
securities as partial consideration for a sale of assets pursuant to
Section 8.02(e) or (f) to the extent permitted by any such Section; and
(r) in addition to investments permitted by clauses (a) through (q)
above, the Borrower and its Subsidiaries may make additional loans,
advances and investments to or in a Person, so long as the amount of any
such loan, advance or investment (at the time of the making thereof) does
not exceed an amount which, when added to the aggregate amount used to make
loans, advances and investments pursuant to this clause (r) following the
Initial Borrowing Date to the extent same are then still outstanding
(determined without regard to any write-downs or write-offs thereof and net
of cash repayments of principal in the case of loans and cash equity
returns (whether as a dividend or redemption) in the case of equity
investments), equals $2,500,000, provided, that neither the Borrower nor
--------
any of its Subsidiaries may make or own any investment in Margin Stock.
8.06 Dividends, etc. Holdings will not, and will not permit any of
---------------
its Subsidiaries to, declare or pay any dividends (other than dividends payable
solely in common stock of Holdings or any such Subsidiary, as the case may be)
or return any capital to, its stockholders or authorize or make any other
distribution, payment or delivery of property or cash to its stockholders as
such, or redeem, retire, purchase or otherwise acquire, directly or indirectly,
for a consideration, any shares of any class of its capital stock, now or
hereafter outstanding (or any warrants for or options or stock appreciation
rights in respect of any of such shares), or make any payment pursuant to a tax
sharing agreement, or set aside any funds for any of the foregoing purposes, and
Holdings will not permit any of its Subsidiaries to purchase or otherwise
acquire for consideration any shares of any class of the capital stock of
Holdings or any other Subsidiary, as the case may be, now or hereafter
outstanding (or any options or warrants or stock appreciation rights issued by
such Person with respect to its capital stock) (all of the foregoing
"Dividends"), except that:
(i) any Subsidiary of the Borrower may pay Dividends to the
Borrower or any Wholly-Owned Subsidiary of the Borrower;
(ii) Holdings may redeem or purchase shares of capital stock of
Holdings or options to purchase capital stock of Holdings held by former
employees of Holdings or any of its Subsidiaries following the termination
of their employment, provided that (w) the only consideration paid by
--------
Holdings in respect of such redemptions and/or purchases shall be cash and
Shareholder Subordinated Notes, (x) the sum of (A) the aggregate amount
paid by Holdings in cash in respect of all such
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<PAGE>
redemptions and/or purchases plus (B) the aggregate amount of all
principal and interest payments made on Shareholder Subordinated Notes,
shall not exceed $300,000 in any fiscal year of Holdings, provided that
--------
such amount shall be increased by an amount equal to the net cash proceeds
received by Holdings in such year from the sale or issuance of Holdings
Common Stock to management of Holdings or any of its Subsidiaries, and (y)
at the time of any cash payment permitted to be made pursuant to this
Section 8.06(ii), including any cash payment under a Shareholder
Subordinated Note, no Default or Event of Default shall then exist or
result therefrom;
(iii) so long as no Default or Event of Default then exists or
would result therefrom, the Borrower may pay cash Dividends to Holdings, so
long as Holdings promptly uses such proceeds for the purposes described in
clause (ii) of this Section 8.06;
(iv) the Borrower may pay cash Dividends to Holdings, so long as
the proceeds thereof are promptly used by Holdings to pay operating
expenses in the ordinary course of business (including, without limitation,
professional fees and expenses) and other similar corporate overhead costs
and expenses, or to pay salaries or other compensation of employees who
perform services for Holdings and the Borrower, provided that the aggregate
--------
amount of cash Dividends paid pursuant to this clause (iv) during any
fiscal year of the Borrower shall not exceed $150,000;
(v) the Borrower may pay cash Dividends to Holdings in the
amounts and at the times of any payment by Holdings in respect of taxes,
provided that (x) the amount of cash Dividends paid pursuant to this clause
--------
(v) to enable Holdings to pay federal and state income taxes at any time
shall not exceed the lesser of (A) the amount of such federal and state
income taxes owing by Holdings at such time for the respective period and
(B) the amount of such federal and state income taxes that would be owing
by the Borrower and its Subsidiaries on a consolidated basis for such
period if determined without regard to Holdings' ownership of the Borrower
and (y) any refunds received by Holdings shall promptly be returned by
Holdings to the Borrower; and
(vi) Holdings may pay Dividends on Qualified Preferred Stock
solely through the issuance of additional shares of Qualified Preferred
Stock.
8.07 Transactions with Affiliates. Holdings will not, and will not
----------------------------
permit any of its Subsidiaries to, enter into any transaction or series of
transactions with any Affiliate other than in the ordinary course of business
and on terms and conditions substantially as favorable to Holdings or such
Subsidiary as would be obtainable by Holdings or such Subsidi-
-75-
<PAGE>
ary at the time in a comparable arm's-length transaction with a Person other
than an Affiliate; provided, that the following shall in any event be permitted:
--------
(i) the Transaction, (ii) Dividends may be paid to the extent provided in
Section 8.06, (iii) Holdings and the Borrower and its Domestic Subsidiaries may
enter into the Holdings Tax Allocation Agreement and may make any payments
required thereunder, (iv) so long as no Default or Event of Default exists, the
Borrower may pay consulting fees to Quad-C and/or its Affiliates in amounts not
to exceed $350,000 in any year in accordance with the terms of the Quad-C
Consulting Agreement, (v) the reimbursement of Quad-C and/or its Affiliates for
their reasonable out-of-pocket expenses incurred by them in connection with
performing consulting services to the Borrower and its Subsidiaries under the
Quad-C Consulting Agreement, (vi) the payment of indemnities owing to Quad-C
and/or its Affiliates under the terms of the Quad-C Consulting Agreement and
(vii) the reimbursement of directors of Holdings and its Subsidiaries for their
reasonable out-of-pocket expenses incurred in performing their directorial
duties and the payment of indemnities owing to them as directors.
8.08 Capital Expenditures. (a) Holdings will not, and will not
--------------------
permit any of its Subsidiaries to, make any Capital Expenditures, except that
during any fiscal year set forth below, the Borrower and its Subsidiaries may
make Capital Expenditures, so long as the aggregate amount of such Capital
Expenditures does not exceed in any fiscal year set forth below the amount set
forth opposite such fiscal year below:
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------
<S> <C>
January, 1998 5,200,000
January, 1999 4,900,000
January, 2000 3,900,000
January, 2001 2,800,000
January, 2002 4,500,000
January, 2003 4,500,000
</TABLE>
(b) Notwithstanding the foregoing, in the event that the amount of
Capital Expenditures permitted to be made by the Borrower and its Subsidiaries
pursuant to clause (a) above in any fiscal year (before giving effect to any
increase in such permitted expenditure amount pursuant to this clause (b)) is
greater than the amount of such Capital Expenditures made by the Borrower and
its Subsidiaries during such fiscal year, such excess (the "Rollover Amount")
may be carried forward and utilized to make Capital Expenditures in succeeding
fiscal years, provided that in no event shall the aggregate amount of Capital
Expenditures made by the Borrower and its Subsidiaries during any fiscal year
pursuant to Section 8.08(a) exceed 125% of the amount set forth in such Section
8.08(a).
(c) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determin-
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<PAGE>
ation under the foregoing clause (a)) with the insurance proceeds received by
the Borrower or any of its Subsidiaries from any Recovery Event so long as such
Capital Expenditures are to replace or restore any properties or assets in
respect of which such proceeds were paid or committed to be paid within 180 days
following the date of the receipt of such insurance proceeds to the extent such
insurance proceeds are not required to be applied to repay Term Loans pursuant
to Section 4.02(A)(g).
(d) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures (which Capital Expenditures will not be included
in any determination under the foregoing clause (a)) with the Net Proceeds of
Asset Sales, to the extent such Net Proceeds are not required to be applied to
repay Term Loans pursuant to Section 4.02(A)(c) and such proceeds are reinvested
as required by said Section.
(e) Notwithstanding the foregoing, the Borrower may make Capital
Expenditures (which Capital Expenditures will not be included in any
determination under the foregoing clause (a)) constituting Permitted
Acquisitions effected in accordance with the requirements of Section 8.02(p).
(f) Notwithstanding the foregoing, the Borrower and its Subsidiaries
may make Capital Expenditures at any time in an aggregate amount equal to the
Excess Proceeds Amount at such time (which Capital Expenditures will not be
included in any determination under the foregoing clause (a)).
8.09 Minimum Consolidated EBITDA. Neither Holdings nor the Borrower
---------------------------
will permit Consolidated EBITDA for any Test Period ending on or about a date
set forth below to be less than the amount set forth opposite such date:
<TABLE>
<CAPTION>
Minimum Consolidated
Date EBITDA
---- --------------------
<S> <C>
April 30, 1997 $ 4,700,000
July 31, 1997 $13,000,000
October 31, 1997 $19,500,000
January 31, 1998 $25,500,000
April 30, 1998 $26,250,000
July 31, 1998 $27,500,000
October 31, 1998 $28,400,000
January 31, 1999 $29,250,000
April 30, 1999 $29,750,000
July 31, 1999 $30,250,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Minimum Consolidated
Date EBITDA
---- --------------------
<S> <C>
October 31, 1999 $30,750,000
January 31, 2000 $31,500,000
April 30, 2000 $32,000,000
July 31, 2000 $32,500,000
October 31, 2000 $33,000,000
January 31, 2001 $34,000,000
April 30, 2001 $34,500,000
July 31, 2001 $35,000,000
October 31, 2001 $35,500,000
January 31, 2002 $36,000,000
April 30, 2002 $36,000,000
</TABLE>
8.10 Interest Coverage Ratio. Neither Holdings nor the Borrower will
-----------------------
permit the Interest Coverage Ratio for any Test Period ending on or about a date
set forth below to be less than the ratio set forth opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
April 30, 1997 1.15:1.0
July 31, 1997 1.50:1.0
October 31, 1997 1.50:1.0
January 31, 1998 1.50:1.0
April 30, 1998 1.58:1.0
July 31, 1998 1.65:1.0
October 31, 1998 1.70:1.0
January 31, 1999 1.75:1.0
April 30, 1999 1.80:1.0
July 31, 1999 1.85:1.0
October 31, 1999 1.90:1.0
January 31, 2000 1.95:1.0
April 30, 2000 2.05:1.0
July 31, 2000 2.10:1.0
October 31, 2000 2.15:1.0
January 31, 2001 2.20:1.0
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
April 30, 2001 2.25:1.0
July 31, 2001 2.35:1.0
October 31, 2001 2.40:1.0
January 31, 2002 2.50:1.0
April 30, 2002 2.75:1.0
</TABLE>
8.11 Leverage Ratio. Neither Holdings nor the Borrower will permit
--------------
the Leverage Ratio at any time during a fiscal quarter set forth below to exceed
the ratio set forth opposite such fiscal quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Ending on or about Ratio
--------------------------------- -----
<S> <C>
April 30, 1997 6.00:1.0
July 31, 1997 6.00:1.0
October 31, 1997 6.00:1.0
January 31, 1998 6.00:1.0
April 30, 1998 5.90:1.0
July 31, 1998 5.70:1.0
October 31, 1998 5.50:1.0
January 31, 1999 5.25:1.0
April 30, 1999 5.00:1.0
July 31, 1999 4.75:1.0
October 31, 1999 4.75:1.0
January 31, 2000 4.60:1.0
April 30, 2000 4.40:1.0
July 31, 2000 4.20:1.0
October 31, 2000 4.00:1.0
January 31, 2001 3.80:1.0
April 30, 2001 3.65:1.0
July 31, 2001 3.50:1.0
October 31, 2001 3.35:1.0
January 31, 2002 3.20:1.0
April 30, 2002 3.20:1.0
</TABLE>
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<PAGE>
8.12 Designated Senior Debt. Holdings will not, and will not permit
----------------------
any of its Subsidiaries to (i) designate any Indebtedness (other than the
Obligations) as "Designated Senior Debt" for purposes of, and as defined in, the
Senior Subordinated Notes Documents or (ii) designate any documents with respect
to any Indebtedness (other than this Agreement) as the "Credit Agreement" as
defined in the Senior Subordinated Notes Documents for purposes of the receipt
of notices by the Agent, and delivery of blockage notices pursuant to the
subordination provisions of the Senior Subordinated Notes Documents.
8.13 Limitation on Voluntary Payments and Modifications of
-----------------------------------------------------
Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain
- --------------------------------------------------------------------------------
Other Agreements; etc. Holdings will not, and will not permit any of its
- ----------------------
Subsidiaries to:
(i) make (or give any notice in respect of) any voluntary or
optional payment or prepayment on or redemption or acquisition for value of
(including, without limitation, by way of depositing with the trustee with
respect thereto or any other Person money or securities before due for the
purpose of paying when due) any Indebtedness to Remain Outstanding or
Senior Subordinated Notes; provided, that the Series B Senior Subordinated
--------
Notes may be issued in exchange for the Series A Senior Subordinated Notes
in accordance with the terms of the Senior Subordinated Note Indenture;
(ii) amend or modify, or permit the amendment or modification of,
any provision of any Indebtedness to Remain Outstanding, any Existing
Indebtedness Agreement, any Qualified Preferred Stock, any Shareholder
Subordinated Note or any Senior Subordinated Notes Document;
(iii) amend, modify or change in any way adverse to the interests
of the Banks, the Holdings Tax Allocation Agreement, any Management
Agreement, any Equity Financing Document, any Acquisition Document, any
Merger Document, its Certificate of Incorporation (including, without
limitation, by the filing or modification of any certificate of
designation) or By-Laws, or any agreement entered into by it, with respect
to its capital stock (including any Shareholders' Agreement), or enter into
any new Tax Sharing Agreement, Management Agreement or agreement with
respect to its capital stock which could in any way be adverse to the
interests of the Banks;
(iv) make (or give any notice in respect of) any principal or
interest payment on, or any redemption or acquisition for value of, any
Shareholder Subordinated Note, except to the extent permitted by Section
8.06(ii); or
(v) issue any class of capital stock other than (x) in the case
of the Borrower and its Subsidiaries, non-redeemable common stock and (y)
in the case of
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<PAGE>
Holdings, issuances of Holdings Common Stock and Qualified Preferred Stock,
in each case, so long as, after giving effect to such issuance, no Event of
Default will exist under Section 9.10 and the proceeds thereof are applied
in accordance with Sections 4.02(A)(d) and 7.12.
8.14 Limitation on Certain Restrictions on Subsidiaries. Holdings
--------------------------------------------------
will not, and will not permit any of its 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 such Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by Holdings or any Subsidiary of
Holdings, or pay any Indebtedness owed to Holdings or a Subsidiary of Holdings,
(b) make loans or advances to Holdings or any of Holdings' Subsidiaries or (c)
transfer any of its properties or assets to Holdings or any of Holdings'
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of (i) applicable law, (ii) this Agreement and the other Credit
Documents, (iii) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Borrower or a Subsidiary of the
Borrower, (iv) customary provisions restricting assignment of any licensing
agreement entered into by the Borrower or a Subsidiary of the Borrower in the
ordinary course of business, (v) customary provisions restricting the transfer
of assets subject to Liens permitted under Sections 8.03(k) and (m) and (vi) the
Senior Subordinated Notes Documents.
8.15 Limitation on the Creation of Subsidiaries and Joint Ventures.
-------------------------------------------------------------
(a) Notwithstanding anything to the contrary contained in this Agreement,
Holdings will not, and will not permit any of its Subsidiaries to, establish,
create or acquire after the Initial Borrowing Date any Subsidiary; provided
--------
that, the Borrower and its Wholly-Owned Subsidiaries shall be permitted to
establish, create or acquire Wholly-Owned Subsidiaries, so long as (i) at least
30 days' prior written notice thereof is given to the Agent, (ii) the capital
stock of such new Subsidiary is pledged pursuant to, and to the extent required
by, the Pledge Agreement and the certificates representing such stock, together
with stock powers duly executed in blank, are delivered to the Collateral Agent,
(iii) such new Subsidiary (other than a Foreign Subsidiary, except to the extent
otherwise required pursuant to Section 7.13) executes a counterpart of the
Subsidiary Guaranty, the Pledge Agreement and the Security Agreement and (iv) to
the extent requested by the Agent or the Required Banks, takes all actions
required pursuant to Section 7.11. In addition, each new Wholly-Owned
Subsidiary shall execute and deliver, or cause to be executed and delivered, all
other relevant documentation of the type described in Section 5 as such new
Subsidiary would have had to deliver if such new Subsidiary were a Credit Party
on the Initial Borrowing Date.
(b) Except as provided in Section 8.05(r), Holdings will not, and
will not permit any of its Subsidiaries to, enter into any partnerships or joint
ventures.
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<PAGE>
SECTION 9. Events of Default. Upon the occurrence of any of the
-----------------
following specified events (each, an "Event of Default"):
9.01 Payments. The Borrower shall (i) default in the payment when
--------
due of any principal of the Loans or (ii) default, and such default shall
continue for three or more Business Days, in the payment when due of any Unpaid
Drawing, any interest on the Loans or any Fees or any other amounts owing
hereunder or under any other Credit Document; or
9.02 Representations, etc. Any representation, warranty or statement
---------------------
made by Holdings, the Borrower or any other Credit Party herein or in any other
Credit Document or in any statement or certificate delivered pursuant hereto or
thereto shall prove to be untrue in any material respect on the date as of which
made or deemed made; or
9.03 Covenants. Any Credit Party shall (a) default in the due
---------
performance or observance by it of any term, covenant or agreement contained in
Sections 7.10, 7.11, 7.12, 7.13, 7.15 or 8, or (b) default in the due
performance or observance by it of any term, covenant or agreement (other than
those referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03)
contained in this Agreement and such default shall continue unremedied for a
period of at least 30 days after notice to the defaulting party by the Agent or
the Required Banks; or
9.04 Default Under Other Agreements. (a) Holdings or any of its
------------------------------
Subsidiaries shall (i) default in any payment with respect to any Indebtedness
(other than the Obligations) beyond the period of grace, if any, provided in the
instrument or agreement under which Indebtedness was created or (ii) default in
the observance or performance of any agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of such
holder or holders) to cause any such Indebtedness to become due prior to its
stated maturity; or (b) any Indebtedness (other than the Obligations) of
Holdings or any of its Subsidiaries shall be declared to be due and payable, or
shall be required to be prepaid other than by a regularly scheduled required
prepayment or as a mandatory prepayment (unless such required prepayment or
mandatory prepayment results from a default thereunder or an event of the type
that constitutes an Event of Default), prior to the stated maturity thereof;
provided, that it shall not constitute an Event of Default pursuant to clause
- --------
(a) or (b) of this Section 9.04 unless the principal amount of any one issue of
such Indebtedness, or the aggregate amount of all such Indebtedness referred to
in clauses (a) and (b) above, exceeds $1,500,000 at any one time; or
9.05 Bankruptcy, etc. Holdings or any of its Subsidiaries shall
----------------
commence a voluntary case concerning itself under Title 11 of the United States
Code entitled "Bank-
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ruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against Holdings or any
of its Subsidiaries and the petition is not controverted within 10 days, or is
not dismissed within 60 days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Holdings or any of its Subsidiaries; or
Holdings or any of its Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of debtors, dissolution,
insolvency or liquidation or similar law of any jurisdiction whether now or
hereafter in effect relating to Holdings or any of its Subsidiaries; or there is
commenced against Holdings or any of its Subsidiaries any such proceeding which
remains undismissed for a period of 60 days; or Holdings or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or Holdings or any
of its Subsidiaries suffers any appointment of any custodian or the like for it
or any substantial part of its property to continue undischarged or unstayed for
a period of 60 days; or Holdings or any of its Subsidiaries makes a general
assignment for the benefit of creditors; or any corporate action is taken by
Holdings or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
9.06 ERISA. (a) A Plan established, maintained or to which there is
-----
an obligation to contribute by the Borrower, and of its Subsidiaries or any
ERISA Affiliate shall fail to satisfy the minimum funding standard required by
Section 412 of the Code for any plan year or a waiver of such standard or
extension of any amortization period is sought or granted under Section 412 of
the Code or shall provide security to induce the issuance of such waiver or
extension, (b) any Plan is or shall have been or is likely to be terminated
(other than pursuant to a "standard termination" within the meaning of Section
4041(b) of ERISA) or the subject of termination proceedings under ERISA or an
event has occurred entitling the PBGC to terminate a Plan under Section 4042(a)
of ERISA, (c) any Plan shall have an Unfunded Current Liability, (d) the
Borrower or a Subsidiary or any ERISA Affiliate has incurred or is likely to
incur a material liability on account of a Plan under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section
401(a)(29), 4971 or 4975 of the Code or on account of a group health plan (as
defined in Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under
Section 4980B of the Code, (e) the Borrower or any Subsidiary of the Borrower
has incurred or is likely to incur liabilities pursuant to one or more employee
welfare benefit plans (as defined in Section 3(1) of ERISA) that provide
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or Plans or Foreign Pension Plans, (f) any Plan which
is subject to Title IV of ERISA shall have had or shall be likely to have a
trustee appointed to administer such Plan, (g) a Reportable Event shall have
occurred, and (h) a contribution required to be made with respect to a Plan or
Foreign Pension Plan has not been timely made; and there shall result from any
such event or events described in the preceding clauses of this Section 9.06 the
imposition of a Lien upon the assets of the Borrower or any Subsidiary, the
granting of a security interest, or a liability or a material risk of incurring
a liability, in each
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case which has had or would reasonably be expected to have, in the opinion of
the Required Banks a Material Adverse Effect; or
9.07 Security Documents. (a) Any Security Document shall cease to
------------------
be in full force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges purported to be created thereby in favor of
the Collateral Agent, or (b) any Credit Party shall default in any material
respect in the due performance or observance of any term, covenant or agreement
on its part to be performed or observed pursuant to any such Security Document
and such default shall continue beyond any cure or grace period specifically
applicable thereto pursuant to the terms of such Security Document; or
9.08 Guaranties. The Guaranties or any provision thereof shall cease
----------
to be in full force and effect, or any Guarantor or any Person acting by or on
behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations
under any Guaranty or any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed or
observed pursuant to any Guaranty; or
9.09 Judgments. One or more judgments or decrees shall be entered
---------
against Holdings or any of its Subsidiaries involving a liability (to the extent
not paid or not fully covered by insurance) in excess of $1,500,000 for all such
judgments and decrees and all such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 60 days from the
entry thereof;
9.10 Ownership. A Change of Control Event shall have occurred; or
---------
9.11 338(h)(10) Election. The Seller shall have failed to effect a
-------------------
valid election under Section 338(h)(10) of the Code with respect to the
Acquisition or shall have failed to satisfy any requirements imposed by any
state or local government to give effect to an election analogous to the Section
338(h)(10) election for purposes of all applicable state or local tax laws, in
each case within the time period provided under applicable law for such election
to be valid or for any such requirements to be satisfied;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Agent shall, upon the written request of the
Required Banks, by written notice to the Borrower, take any or all of the
following actions, without prejudice to the rights of the Agent or any Bank to
enforce its claims against any Guarantor or the
Borrower, except as otherwise specifically provided for in this Agreement
(provided, that if an Event of Default specified in Section 9.05 shall occur
- ---------
with respect to the Borrower, the result which would occur upon the giving of
written notice by the Agent as specified in clauses (i) and (ii) below shall
occur automatically without the giving of any such notice): (i) declare the
Total Commitment (or the unutilized portion thereof) terminated, whereupon the
Commitment of each Bank (or the unutilized portion thereof) shall forthwith
terminate immediately and any
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Commitment Fees shall forthwith become due and payable without any other notice
of any kind; (ii) declare the principal of and any accrued interest in respect
of all Loans and all Obligations owing hereunder (including Unpaid Drawings) to
be, whereupon the same shall become, forthwith due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the
Collateral Agent to enforce), any or all of the Liens and security interests
created pursuant to the Security Documents; (iv) terminate any Letter of Credit
which may be terminated in accordance with its terms; (v) direct the Borrower to
pay (and the Borrower hereby agrees upon receipt of such notice, or upon the
occurrence of any Event of Default specified in Section 9.05, to pay) to the
Collateral Agent at the Payment Office such additional amounts of cash, to be
held as security for the Borrower's reimbursement obligations in respect of
Letters of Credit then outstanding, equal to the aggregate Stated Amount of all
Letters of Credit then outstanding; and (vi) apply any cash collateral as
provided in Section 4.02.
SECTION 10. Definitions. As used herein, the following terms shall
-----------
have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Acknowledgment Agreement" shall mean the Acknowledgment Agreement,
dated as of February 6, 1997, executed by Floor Coverings immediately after the
Merger, in the form of Exhibit M.
"Acquired Business" shall mean the businesses acquired by Acquisition
Corp. from the Seller pursuant to the Acquisition Documents.
"Acquisition" shall mean the acquisition by Acquisition Corp. of 100%
of the outstanding capital stock of Floor Coverings pursuant to, and in
accordance with the terms of, the Acquisition Agreement.
"Acquisition Agreement" shall mean the Acquisition Agreement, dated as
of December 9, 1996, by and among Holdings, Acquisition Corp., Seller, Floor
Coverings and C&A Products, as the same may be amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof.
"Acquisition Corp." shall have the meaning provided in the first
paragraph of this Agreement.
"Acquisition Documents" shall mean the Acquisition Agreement and all
other agreements and documents relating to the Acquisition, as the same may be
amended, modified or supplemented from time to time in accordance with the terms
hereof and thereof.
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"Additional Security Documents" shall have the meaning provided in
Section 7.11.
"Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum
(rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x)
the most recent weekly average dealer offering rate for negotiable certificates
of deposit with a three-month maturity in the secondary market as published in
the most recent Federal Reserve System publication entitled "Select Interest
Rates," published weekly on Form H.15 as of the date hereof, or if such
publication or a substitute containing the foregoing rate information shall not
be published by the Federal Reserve System for any week, the weekly average
offering rate determined by the Agent on the basis of quotations for such
certificates received by it from three certificate of deposit dealers in New
York of recognized standing or, if such quotations are unavailable, then on the
basis of other sources reasonably selected by the Agent, by (y) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements as
specified in Regulation D applicable on such day to a three-month certificate of
deposit of a member bank of the Federal Reserve System in excess of $100,000
(including, without limitation, any marginal, emergency, supplemental, special
or other reserves), plus (2) the then daily net annual assessment rate as
estimated by the Agent for determining the current annual assessment payable by
BTCo to the Federal Deposit Insurance Corporation for insuring three month
certificates of deposit.
"Affected Eurodollar Loans" shall have the meaning provided in Section
4.02(B)(b).
"Affiliate" shall mean, 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
such corporation or (ii) to direct or cause the direction of the management and
policies of such corporation, whether through the ownership of voting
securities, by contract or otherwise.
"Agent" shall have the meaning provided in the first paragraph of this
Agreement and shall include any successor to the Agent appointed pursuant to
Section 11.10.
"Aggregate Unutilized Commitment" with respect to any Bank at any time
shall mean the sum of (i) such Bank's Term Loan Commitment at such time, if any
and (ii) such Bank's Revolving Loan Commitment at such time less the sum of (x)
----
the aggregate outstanding principal amount of all Revolving Loans made by such
Bank, (y) such Bank's Percentage of the Letter of Credit Outstandings at such
time and (z) in the case of any determination with respect to BTCo in its
individual capacity as a Bank hereunder (and only
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<PAGE>
in such case), the aggregate outstanding principal amount of all Swingline Loans
made by BTCo at such time.
"Agreement" shall mean this Credit Agreement, as the same may be from
time to time modified, amended and/or supplemented.
"Applicable Margin" shall mean a percentage per annum equal to (i) in
the case of Base Rate Loans, 1.50% and (ii) in the case of Eurodollar Loans,
2.50%.
"Asset Sale" shall mean any sale, transfer or other disposition by
Holdings or any of its Subsidiaries to any Person other than the Borrower or any
Wholly-Owned Subsidiary of the Borrower of any asset (including, without
limitation, any capital stock or other securities of another Person) of Holdings
or such Subsidiary other than (i) sales, transfers or other dispositions of
inventory made in the ordinary course of business and (ii) sales of assets
pursuant to Sections 8.02(f), (g), (h), (i) and (q).
"Assignment and Assumption Agreement" shall mean the Assignment and
Assumption Agreement substantially in the form of Exhibit J (appropriately
completed).
"Authorized Officer" shall mean any senior officer of Holdings or the
Borrower designated as such in writing to the Agent by Holdings or the Borrower,
in each case to the extent reasonably acceptable to the Agent.
"Bank" shall have the meaning provided in the first paragraph of this
Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing (including
any Mandatory Borrowing) or to fund its portion of any unreimbursed payment
under Section 2.03(b) or (ii) a Bank having notified the Agent and/or the
Borrower that it does not intend to comply with the obligations under Section
1.01(a), (b) or (d) or 2.03(b), in the case of either clause (i) or (ii) above
as a result of the appointment of a receiver or conservator with respect to such
Bank at the direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section 9.05.
"Base Rate" at any time shall mean the higher of (x) the rate which is
1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate and (y) the
Prime Lending Rate.
"Base Rate Loan" shall mean each Loan bearing interest at the rates
provided in Section 1.08(a).
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"Borrower" shall mean (i) at any time prior to the consummation of the
Merger, Acquisition Corp. and (ii) upon the consummation of the Merger, Floor
Coverings as the surviving corporation of said Merger (which shall be renamed
"Collins & Aikman Floorcoverings, Inc." in accordance with the terms of Section
7.15(b)).
"Borrowing" shall mean and include (i) the borrowing of Swingline
Loans from BTCo on a given date and (ii) the incurrence of one Type of Loan
pursuant to a single Facility by the Borrower from all of the Banks having
Commitments with respect to such Facility on a pro rata basis on a given date
--- ----
(or resulting from conversions on a given date), having in the case of
Eurodollar Loans the same Interest Period; provided, that Base Rate Loans
--------
incurred pursuant to Section 1.10(b) shall be considered part of any related
Borrowing of Eurodollar Loans.
"BTCo" shall mean Bankers Trust Company, in its individual capacity,
and any successor corporation thereto by merger, consolidation or otherwise.
"Business Day" shall mean (i) for all purposes other than as covered
by clause (ii) below, any day excluding Saturday, Sunday and any day which shall
be in the City of New York a legal holiday or a day on which banking
institutions are authorized by law or other governmental actions to close and
(ii) with respect to all notices and determinations in connection with, and
payments of principal and interest on, Eurodollar Loans, any day which is a
Business Day described in clause (i) and which is also a day for trading by and
between banks in U.S. dollar deposits in the interbank Eurodollar market.
"C&A Products" shall mean Collins & Aikman Products Co., a Delaware
corporation.
"C&A Products Debt Documents" shall mean the (i) Amended and Restated
Credit Agreement, dated as of June 3, 1995, among C&A Products, Collins & Aikman
Canada Inc., Collins & Aikman Corporation, various financial institutions from
time to time party thereto and The Chase Manhattan Bank, as Administrative
Agent, (ii) the C&A Products Receivables Sale Agreement and (iii) the Servicing
Agreement, dated as of March 30, 1995, among Carcorp, Inc., C&A Products, as
Master Servicer, certain subsidiaries of C&A Products, as Servicers, and The
Chase Manhattan Bank, as Trustee.
"C&A Products Receivables Sale Agreement" shall mean the Amended and
Restated Receivables Sale Agreement, dated as of March 30, 1995, among Carcorp.,
Inc., C&A Products, as Master Servicer, C&A Products and its Wholly-Owned
Subsidiaries, as Sellers.
"Capital Expenditures" shall mean, with respect to any Person, all
expenditures by such Person which should be capitalized in accordance with GAAP,
including, with-
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out duplication, all such expenditures with respect to fixed or capital assets
(including, without limitation, expenditures for maintenance and repairs which
should be capitalized in accordance with GAAP), and the amount of all
Capitalized Lease Obligations incurred by such Person.
"Capital Lease," as applied to any Person, shall mean any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
"Capitalized Lease Obligations" shall mean all obligations under
Capital Leases of the Borrower or any of its Subsidiaries in each case taken at
the amount thereof accounted for as liabilities in accordance with GAAP.
"Cash Equivalents" shall mean (i) 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 six months from the date of acquisition, (ii) U.S. dollar denominated time
deposits, certificates of deposit and bankers' acceptances of (x) any Bank or
(y) 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 or Bank, an "Approved Bank"), in each case with
maturities of not more than six months from the date of acquisition, (iii)
commercial paper issued by any Approved Bank or by the parent company of any
Approved Bank and commercial paper issued by, or guaranteed by, any industrial
or financial company with a short-term commercial paper rating of at least A-1
or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's, or guaranteed by any industrial company with a long term unsecured debt
rating of at least A or A2, or the equivalent of each thereof, from S&P or
Moody's, as the case may be, and in each case maturing within six months after
the date of acquisition, (iv) marketable direct obligations issued by any state
of the United States of America or any political subdivision of any such state
or any public instrumentality thereof maturing within six months from the date
of acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's and (v) investments in
money market funds substantially all the assets of which are comprised of
securities of the types described in clauses (i) through (iv) above.
"Change of Control Event" shall mean (a) Holdings shall cease to own
directly 100% on a fully diluted basis of the economic and voting interest in
the Borrower's capital stock, (b) any Person or "group" (within the meaning of
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, as in effect on
the Effective Date), other than the Sponsors, shall (i) have acquired beneficial
ownership of 20% or more on a fully diluted basis of the voting and/or economic
interest in Holdings' capital stock or (ii) obtained the power (whether or not
exercised) to elect a majority of Holdings' directors, (c) the Board of
Directors of
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Holdings shall cease to consist of a majority of Continuing Directors, (d) the
Sponsors cease to hold beneficial ownership of at least a majority on a fully
diluted basis of the voting and/or economic interest in Holdings' capital stock
or (e) any "Change of Control" as such term is defined in any Existing
Indebtedness Agreement or the Senior Subordinated Note Indenture, or any
successor or similar provision, shall occur.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in each of
the Security Documents.
"Collateral Agent" shall mean the Agent acting as collateral agent for
the Secured Creditors.
"Collective Bargaining Agreements" shall have the meaning provided in
Section 5.13.
"Commitment" shall mean, with respect to each Bank, such Bank's Term
Loan Commitment and Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section 3.01(a).
"Consolidated Current Assets" shall mean, at any time, the current
assets (other than cash, Cash Equivalents and deferred income taxes to the
extent included in current assets) of Holdings and its Subsidiaries at such time
determined on a consolidated basis.
"Consolidated Current Liabilities" shall mean, at any time, the
current liabilities of Holdings and its Subsidiaries determined on a
consolidated basis, but excluding deferred income taxes, any Indebtedness
included in current liabilities and any accrued but unpaid interest on any such
Indebtedness.
"Consolidated Debt" shall mean, at any time, all Indebtedness of
Holdings and its Subsidiaries for borrowed money determined on a consolidated
basis.
"Consolidated EBIT" shall mean, for any period, Consolidated Net
Income, before total interest expense (inclusive of amortization of deferred
financing fees and as original issue discount) and interest income of Holdings
and its Subsidiaries determined on a consolidated basis, and provisions for
taxes based on income and foreign withholding taxes,
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and determined without giving effect to any extraordinary gains or losses but
with giving effect to gains or losses from sales of assets sold in the ordinary
course of business.
"Consolidated EBITDA" shall mean, for any period, Consolidated EBIT,
adjusted by adding, without duplication, thereto (i) the amount of all
depreciation expense and amortization expense and other non-cash charges that
were deducted in determining Consolidated EBIT for such period and (ii) the
write-up of inventory in connection with the Acquisition to the extent deducted
in determining Consolidated EBIT for such period; provided that (x) in the case
--------
of any determination of Consolidated EBITDA for purposes of Section 8.11 and the
definition of Leverage Ratio for any Test Period ending on or prior to the
fiscal quarter ending on or about October 31, 1997, Consolidated EBITDA shall be
determined as provided in the definition of Test Period and (y) Consolidated
EBITDA shall include, in addition, the pro forma EBITDA of any Person
--- -----
(calculated as aforesaid but with respect to such Person and its Subsidiaries on
a consolidated basis and after giving effect to pro forma adjustments
satisfactory to the Agent) prior to the date it becomes a Subsidiary of Holdings
or is merged into or consolidated with Holdings or any Subsidiary or that
Person's assets are acquired by Holdings or any of its Subsidiaries.
"Consolidated Interest Expense" shall mean, for any period, total
interest expense (including that attributable to Capital Leases in accordance
with GAAP) of Holdings and its Subsidiaries determined on a consolidated basis
with respect to all outstanding Indebtedness of Holdings and its Subsidiaries,
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs or benefits under Interest Rate Protection Agreements, but
excluding, however, amortization of deferred financing costs and any interest
expense on deferred compensation arrangements to the extent included in total
interest expense.
"Consolidated Net Income" shall mean, for any period, the net income
(or loss), after provision for taxes, of Holdings and its Subsidiaries on a
consolidated basis for such period taken as a single accounting period;
provided, however, that (A) there shall be excluded (without duplication) (i)
- -------- -------
income (or loss) of any Person (other than a consolidated Subsidiary of such
Person) in which any other Person (other than such Person or any of its
consolidated Subsidiaries) has a joint interest, except to the extent of the
amount of dividends or other distributions actually paid to such Person or
(subject to subclause (iii) below) any of its consolidated Subsidiaries by such
other Person during such period, (ii) the income (or loss) of any Person during
such period accrued prior to the date it becomes a consolidated Subsidiary of
such Person or is merged into or consolidated with such Person or any of its
consolidated Subsidiaries, (iii) the income of any consolidated Subsidiary of
Holdings to the extent attributable to minority interests held therein by
Persons other than Holdings and its Wholly-Owned Subsidiaries, and (iv) the
income of any consolidated Subsidiary of Holdings during such period to the
extent that the declaration or payment of dividends or similar distributions by
that consolidated Subsidiary of such income is not at the time permitted by
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operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or Holdings or any of its other Subsidiaries.
"Contingent Obligations" shall mean as to any Person any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting direct
or indirect security therefor, (b) to advance or supply funds (x) for the
purchase or payment of any such primary obligation or (y) to maintain working
capital or equity capital of the primary obligor or otherwise to maintain the
net worth or solvency of the primary obligor, (c) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation or (d) otherwise to assure or hold harmless the owner of
such primary obligation against loss in respect thereof; provided, however, that
-------- -------
the term Contingent Obligation shall not include endorsements of instruments for
deposit or collection or standard contractual indemnities entered into, in each
case in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of Holdings on the
Effective Date and each other director if such director's nomination for the
election to the Board of Directors of Holdings is recommended by a majority of
the then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, the Holdings
Guaranty, each Security Document, the Acknowledgment Agreement and, after the
execution and delivery thereof, the Subsidiary Guaranty.
"Credit Event" shall mean the making of a Loan (other than a Revolving
Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of
Credit.
"Credit Party" shall mean Holdings, the Borrower and, upon the
execution and delivery of the Subsidiary Guaranty in accordance with the terms
hereof, each Subsidiary Guarantor.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
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"Defaulting Bank" shall mean any Bank with respect to which a Bank
Default is in effect.
"Dividends" shall have the meaning provided in Section 8.06.
"Documents" shall mean the Credit Documents, the Acquisition
Documents, the Equity Financing Documents, the Senior Subordinated Notes
Documents, the Merger Documents and the Termination Documents.
"Domestic Subsidiary" shall mean each Subsidiary of Holdings which
is not a Foreign Subsidiary.
"Effective Date" shall have the meaning provided in Section 12.10.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation D
of the Securities Act).
"Employee Benefit Plans" shall have the meaning provided in Section
5.13.
"Employment Agreements" shall have the meaning provided in Section
5.13.
"Environmental Claims" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of non-compliance or violation, investigations or proceedings relating
in any way to any Environmental Law or any permit issued to Holdings or any of
its Subsidiaries under any such law (hereafter "Claims"), including, without
limitation, (a) any and all Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any applicable international, United
Kingdom or U.S federal, state or local statute, law, treaty, rule, regulation,
ordinance, code, policy or rule of common law now or hereafter in effect and in
each case as amended, and any written and binding judicial or administrative
interpretation thereof, including any judicial or administrative order, consent,
decree or judgment (for purposes of this definition (collectively, "Laws")),
relating to the environment or Hazardous Materials or health and safety
including without limitation the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), 42 U.S.C. (S)
9601 et seq.; the Hazardous Materials Transportation Act, as amended, 49 U.S.C.
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(S) 1801 et seq.; the Resource Conservation and Recovery Act, as amended, 42
-- ----
U.S.C. (S) 6901 et seq.;
-- ---
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the Federal Water Pollution Control Act, as amended, 33 U.S.C. (S) 1251 et seq.;
-- ---
the Toxic Substances Control Act, as amended, 15 U.S.C. (S) 2601 et seq.; the
-- ---
Oil Pollution Act of 1990, as amended, 33 U.S.C. (S) 2701- 2761; the Clean Air
Act, as amended, 42 U.S.C. (S) 7401 et seq.; the Safe Drinking Water Act, as
-- ---
amended, 42 U.S.C. (S) 3808 et seq.; the Occupational Safety and Health Act of
-- ---
1970, as amended, 29 U.S.C. 651 et seq.; and their counterparts or equivalents
-- ---
under state or local law and under the laws of the United kingdom.
"Equity Financing" shall mean the issuance by Holdings of Holdings
Common Stock and Holdings Preferred Stock to the Equity Investors on the Initial
Borrowing Date.
"Equity Financing Documents" shall mean each of the documents related
to the consummation of the Equity Financing.
"Equity Investors" shall mean and include (i) Quad-C, its Affiliates
and such other Persons as may be designated by it acceptable to the Agent, (ii)
PPI and (iii) the Management Participants.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at
the date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section 3(9)
of ERISA) which together with Holdings or a Subsidiary of Holdings would be
deemed to be a "single employer" (i) within the meaning of Section 414(b), (c),
(m) or (o) of the Code or (ii) as a result of Holdings or a Subsidiary of
Holdings being or having been a general partner of such person.
"Eurodollar Loans" shall mean each Loan bearing interest at the rates
provided in Section 1.08(b).
"Eurodollar Rate" shall mean with respect to each Interest Period for
a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of
1%) of the offered quotation to first-class banks in the interbank Eurodollar
market by the Agent for U.S. dollar deposits of amounts in same day funds
comparable to the outstanding principal amount of the Eurodollar Loan of the
Agent for which an interest rate is then being determined with maturities
comparable to the Interest Period to be applicable to such Eurodollar Loan,
determined as of 10:00 A.M. (New York time) on the date which is two Business
Days prior to the commencement of such Interest Period divided (and rounded
upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to
100% minus the then stated
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maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) applicable to any
member bank of the Federal Reserve System in respect of Eurocurrency liabilities
as defined in Regulation D (or any successor category of liabilities under
Regulation D).
"Event of Default" shall have the meaning provided in Section 9.
"Excess Cash Flow" shall mean, for any period, the remainder (if
positive) of (I) (i) the sum of (A) Consolidated Net Income for such period,
plus (B) the amount of all non-cash charges (including, without limitation or
duplication, depreciation, amortization and non-cash interest expense) included
in determining Consolidated Net Income for such period plus (C) the decrease, if
any, in Working Capital from the first day to the last day of such period, minus
(ii) the sum (without duplication) of (A) any non-cash credits (including from
sales of assets) included in determining Consolidated Net Income for such
period, (B) gains from sales of assets (other than sales of inventory in the
ordinary course of business) included in determining Consolidated Net Income for
such period, (C) an amount equal to all Capital Expenditures (excluding Capital
Expenditures made pursuant to Section 8.08(c), (d) or (e)) made during such
period that are not financed by Indebtedness (including Capitalized Lease
Obligations but excluding Loans hereunder), (D) the amount of cash expended in
respect of Permitted Acquisitions during such period, except to the extent
constituting Capital Expenditures or financed with Indebtedness, (E) the
aggregate principal amount of permanent principal payments of Indebtedness for
borrowed money of Holdings and its Subsidiaries (other than (1) repayments of
Indebtedness with proceeds of the incurrence or issuance, as the case may be, of
other Indebtedness or equity or equity contributions or with proceeds of asset
sales, Recovery Events or Pension Plan Refunds and (2) repayments of Loans or
other Obligations, provided that repayments of Loans shall be deducted in
determining Excess Cash Flow if such repayments were (x) required as a result of
a Scheduled Repayment under Section 4.02(A)(b) or (y) made as a voluntary
prepayment with internally generated funds (but in the case of a voluntary
prepayment of Revolving Loans or Swingline Loans, only to the extent accompanied
by a voluntary reduction to the Total Revolving Loan Commitment)) during such
period, (F) non-cash charges added back in a previous period pursuant to clause
(i)(B) above to the extent any such charge has become a cash item in the current
period, (G) the increase, if any, in Working Capital from the first day to the
last day of such period and (H) costs incurred by Holdings during such period
and paid for with the proceeds of dividends paid to Holdings pursuant to Section
8.06(iv) to the extent not deducted in determining Consolidated Net Income for
such period, less (II) $2,000,000.
"Excess Cash Flow Period" shall mean, with respect to the repayment
required on each Excess Cash Payment Date, the immediately preceding fiscal year
of Holdings.
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"Excess Cash Payment Date" shall mean the date occurring 100 days
after the last day of a fiscal year of Holdings (beginning with its fiscal year
ending on or about January 31, 1998).
"Excess Proceeds" shall mean the portion of Excess Cash Flow of the
Borrower and its Subsidiaries which is permitted to be retained by the Borrower
pursuant to Section 4.02(A)(f).
"Excess Proceeds Amount" shall initially be $0, which amount shall be
(A) increased on each Excess Cash Payment Date so long as any repayment required
---------
pursuant to Section 4.02(A)(f) has been made, by an amount equal to 25% of
Excess Cash Flow for the immediately preceding Excess Cash Flow Period, and (B)
reduced (i) on each Excess Cash Payment Date where Excess Cash Flow for the
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immediately preceding Excess Cash Flow Period is a negative number, by such
amount, (ii) at the time any Capital Expenditure is made pursuant to Section
8.08(f), by the amount thereof, and (iii) at the time any Permitted Acquisition
is made, by the amount of Excess Proceeds expended in connection therewith (it
being understood that the Excess Proceeds Amount may be reduced to an amount
below zero after giving effect to the reductions enumerated in clause (B)
above).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Existing Indebtedness Agreements" shall have the meaning provided in
Section 5.13.
"Facility" shall mean any of the credit facilities established under
this Agreement, i.e., the Term Loan Facility or the Revolving Loan Facility.
----
"Facing Fee" shall have the meaning provided in Section 3.01(c).
"Federal Funds Rate" shall mean, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three Federal Funds brokers of
recognized standing selected by the Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 3.01.
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"Final Maturity Date" shall mean June 30, 2002.
"Floor Coverings" shall mean Collins & Aikman Floor Coverings, Inc.,
a Delaware corporation and (x) prior to the consummation of the Transaction, a
Wholly-Owned Subsidiary of the Seller and (y) after giving effect to the
consummation of the Transaction, a Wholly-Owned Subsidiary of Holdings (it being
understood that immediately after the consummation of the Merger, Floor
Coverings shall change its name to "Collins & Aikman Floorcoverings, Inc.").
"Foreign Cash Equivalents" shall mean certificates of deposit or
bankers acceptances of any bank organized under the laws of Canada, Japan or any
country that is a member of the European Economic Community 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, in each case with
maturities of not more than six months from the date of acquisition.
"Foreign Pension Plan" shall mean any plan, fund (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States of America by Holdings or any one or more
of its Subsidiaries primarily for the benefit of employees of Holdings or such
Subsidiaries residing outside the United States of America, which plan, fund or
other similar program provides, or results in, retirement income, a deferral of
income in contemplation of retirement or payments to be made upon termination of
employment, and which plan is not subject to ERISA or the Code.
"Foreign Subsidiary" shall mean each Subsidiary of Holdings that is
incorporated under the laws of any jurisdiction other than the United States of
America, any State thereof, or any territory thereof.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time; it being understood and
agreed that determinations in accordance with GAAP for purposes of Section 8,
including defined terms as used therein, are subject (to the extent provided
therein) to Section 12.07(a).
"Guaranteed Creditors" shall mean and include the Agent, the
Collateral Agent, the Banks and each party (other than any Credit Party) party
to an Interest Rate Protection Agreement or Other Hedging Agreement to the
extent such party constitutes a Secured Creditor under the Security Documents.
"Guaranteed Obligations" shall mean (i) the full and prompt payment
when due (whether at the stated maturity, by acceleration or otherwise) of the
principal and interest (whether such interest is allowed as a claim in a
bankruptcy proceeding with respect to the Borrower or otherwise) on each Note
issued by the Borrower to each Bank, and Loans made,
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under this Agreement and all reimbursement obligations and Unpaid Drawings with
respect to Letters of Credit, together with all the other obligations (including
obligations which, but for the automatic stay under Section 362(a) of the
Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of the Borrower to such
Bank, the Agent and the Collateral Agent now existing or hereafter incurred
under, arising out of or in connection with this Agreement or any other Credit
Document and the due performance and compliance with all the terms, conditions
and agreements contained in the Credit Documents by the Borrower and (ii) the
full and prompt payment when due (whether by acceleration or otherwise) of all
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities of the
Borrower or any of its Subsidiaries owing under any such Interest Rate
Protection Agreement or Other Hedging Agreement entered into by the Borrower or
any of its Subsidiaries with any Bank or any affiliate thereof (even if such
Bank subsequently ceases to be a Bank under this Agreement for any reason) so
long as such Bank or affiliate participates in such Interest Rate Protection
Agreement or Other Hedging Agreement, and their subsequent assigns, if any,
whether now in existence or hereafter arising, and the due performance and
compliance with all terms, conditions and agreements contained therein.
"Guarantor" shall mean Holdings and, upon and after the execution
and delivery of the Subsidiary Guaranty, each Subsidiary Guarantor.
"Guaranty" shall mean and include each of the Holdings Guaranty and,
after the execution and delivery thereof, the Subsidiary Guaranty.
"Hazardous Materials" shall mean (a) any petrochemical or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated biphenyls, and
radon gas; (b) any chemicals, materials or substances defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "restricted hazardous materials," "extremely hazardous wastes,"
"restrictive hazardous wastes," "toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar meaning and regulatory
effect; and (c) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority under and within
the context used in applicable Environmental Laws.
"Holdings" shall have the meaning provided in the first paragraph of
this Agreement.
"Holdings Common Stock" shall have the meaning provided in Section
6.16.
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"Holdings Guaranty" shall mean the guaranty of Holdings pursuant to
Section 13.
"Holdings Preferred Stock" shall have the meaning provided in
Section 6.16.
"Holdings Tax Allocation Agreement" shall mean the Tax Sharing
Agreement, dated as of the Effective Date, among Holdings and the Borrower.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services payable to the sellers thereof or any of such seller's
assignees which in accordance with GAAP would be shown on the liability side of
the balance sheet of such Person but excluding deferred rent as determined in
accordance with GAAP, (iii) the face amount of all letters of credit issued for
the account of such Person and, without duplication, all drafts drawn
thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any
property owned by such first Person, whether or not such Indebtedness has been
assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services whether or not delivered or accepted, i.e., take-or-pay and similar
----
obligations, (vii) all obligations under Interest Rate Protection Agreements and
Other Hedging Agreements and (viii) all Contingent Obligations of such Person,
provided, that Indebtedness shall not include trade payables and accrued
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expenses, in each case arising in the ordinary course of business.
"Indebtedness to Remain Outstanding" shall have the meaning provided
in Section 6.24.
"Initial Borrowing Date" shall mean the date upon which the Term
Loans are incurred hereunder.
"Intercompany Loan" shall have the meaning provided in Section
8.05(g).
"Intercompany Notes" shall mean promissory notes, in the form of
Exhibit K, evidencing Intercompany Loans.
"Interest Coverage Ratio" shall mean, for any period, the ratio of
Consolidated EBITDA to Consolidated Interest Expense for such period.
"Interest Determination Date" shall mean, with respect to any
Eurodollar Loan, the second Business Day prior to the commencement of any
Interest Period relating to such Eurodollar Loan.
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"Interest Period," with respect to any Eurodollar Loan, shall mean the
interest period applicable thereto, as determined pursuant to Section 1.09.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedging agreement or other similar agreement or arrangement.
"L/C Supportable Indebtedness" shall mean (i) obligations of the
Borrower or its Wholly-Owned Subsidiaries incurred in the ordinary course of
business with respect to insurance obligations and workers' compensation, surety
bonds and other similar statutory obligations and (ii) such other obligations of
the Borrower or any of its Wholly-Owned Subsidiaries as are reasonably
acceptable to the Agent and the respective Letter of Credit Issuer and otherwise
permitted to exist pursuant to the terms of this Agreement.
"Leased Properties" shall mean the property located in Whitfield
County, Georgia and subject to that certain Real Property Master Lease
Agreement, dated as of August 10, 1996, between the Borrower and Carpet Capital
Partnership No. 2.
"Leasehold" of any Person shall mean all of the right, title and
interest of such Person as lessee or licensee in, to and under leases or
licenses of land, improvements and/or fixtures.
"Letter of Credit" shall have the meaning provided in Section
2.01(a).
"Letter of Credit Fee" shall have the meaning provided in Section
3.01(b).
"Letter of Credit Issuer" shall mean BTCo, Wachovia Bank of Georgia,
N.A. and any Bank which, at the request of the Borrower and with the consent of
the Agent agrees, in such Bank's sole discretion, to become a Letter of Credit
Issuer for the purpose of issuing Letters of Credit pursuant to Section 2. The
sole Letter of Credit Issuer on the Initial Borrowing Date is BTCo.
"Letter of Credit Outstandings" shall mean, at any time, the sum of,
without duplication, (i) the aggregate Stated Amount of all outstanding Letters
of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all
Letters of Credit.
"Letter of Credit Request" shall have the meaning provided in
Section 2.02(a).
"Leverage Ratio" shall mean, at any time, the ratio of Consolidated
Debt at such time to Consolidated EBITDA for the Test Period then last ended.
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"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including 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 UCC or any similar
recording or notice statute, and any lease having substantially the same effect
as the foregoing).
"Loan" shall mean each Term Loan, Revolving Loan and Swingline Loan
made by any Bank hereunder.
"Management Agreements" shall have the meaning provided in Section
5.13.
"Management Participants" shall mean certain members of the
management of Floor Coverings acceptable to the Agent.
"Management Services Agreement" shall mean the Management Services
Agreement, dated as of February 6, 1997, among C&A Products, the Seller and the
Borrower, as the same may be amended, modified or supplemented from time to time
in accordance with the terms hereof and thereof.
"Mandatory Borrowing" shall have the meaning provided in Section
1.01(d).
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean a material adverse effect on
the business, properties, assets, liabilities, condition (financial or
otherwise) or prospects of the Acquired Business, the Borrower or Holdings and
its Subsidiaries taken as a whole.
"Material Contracts" shall have the meaning provided in Section
5.13(i).
"Maximum Swingline Amount" shall mean $5,000,000.
"Merger" shall mean the merger of Acquisition Corp. with and into
Floor Coverings pursuant to, and in accordance with the terms of, the Merger
Documents, with Floor Coverings as the surviving corporation of said merger and,
in connection therewith, immediately after the consummation of said merger,
Floor Coverings shall change its name to "Collins & Aikman Floorcoverings, Inc."
"Merger Agreement" shall mean the Plan of Merger, dated as of
February 6, 1997, between Floor Coverings and Acquisition Corp., as the same may
be modified, amended or supplemented from time to time in accordance with the
terms hereof.
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"Merger Documents" shall mean the Merger Agreement, the certificate
of merger and all other agreements and documents related to the Merger.
"Minimum Borrowing Amount" shall mean (i) for Base Rate Loans (other
than Swingline Loans), $500,000, (ii) for Eurodollar Loans, $1,000,000 and (iii)
for Swingline Loans, $250,000.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage" shall have the meaning provided in Section 5.12(a).
"Mortgage Policies" shall have the meaning provided in Section
5.12(b).
"Mortgaged Properties" shall mean and include (i) all Real
Properties owned or leased by Holdings and its Domestic Subsidiaries to the
extent designated as such on Annex III and (ii) each Real Property subjected to
a mortgage in favor of the Collateral Agent for the benefit of the Secured
Creditors pursuant to Section 7.11.
"Net Proceeds" shall mean, with respect to any Asset Sale, the
Proceeds resulting therefrom net of (a) reasonable cash expenses of sale
(including, as applicable, any brokerage or underwriting fees, reasonable legal,
advisory and other fees, transfer taxes and payment of principal, premium and
interest of Indebtedness other than the Loans required to be repaid as a result
of such Asset Sale) and (b) incremental income taxes paid or payable as a result
thereof.
"Non-Compete Agreements" shall have the meaning provided in Section
5.13.
"Non-Defaulting Bank" shall mean each Bank other than a Defaulting
Bank.
"Note" shall mean each Term Note, each Revolving Note and the
Swingline Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to Holdings, the Borrower and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect, contingent
or absolute, of every type or description, and at any time existing, owing to
the Agent, the
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Collateral Agent or any Bank pursuant to the terms of this Agreement or any
other Credit Document.
"Other Hedging Agreements" shall mean any foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements
designed to protect against fluctuations in currency values.
"Participant" shall have the meaning provided in Section 2.04(a).
"Payment Office" shall mean the office of the Agent located at One
Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent
may designate to Holdings, the Borrower and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Pension Plan Refund" shall mean any cash payments (net of
reasonable costs associated therewith, including income, excise and other taxes
payable thereon) received by Holdings and/or of its Subsidiaries from any return
of any surplus assets from any single Plan or Foreign Pension Plan.
"Percentage" shall mean, at any time for each Bank, the percentage
obtained by dividing such Bank's Revolving Loan Commitment at such time by the
Total Revolving Loan Commitment then in effect; provided, that if the Total
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Revolving Loan Commitment has been terminated, the Percentage of each Bank shall
be determined by dividing such Bank's Revolving Loan Commitment as in effect
immediately prior to such termination by the Total Revolving Loan Commitment as
in effect immediately prior to such termination.
"Permitted Acquisition" shall have the meaning provided in Section
8.02(p).
"Permitted Acquisition Cost" shall mean, with respect to any
Permitted Acquisition, the aggregate amount paid in connection with such
Permitted Acquisition (including for this purpose all cash consideration paid,
the face amount of all Indebtedness incurred in connection with such Permitted
Acquisition and the fair market value (determined as of the date of consummation
of such Permitted Acquisition in good faith by senior management of the
Borrower) of any Holdings Common Stock or Qualified Preferred Stock, if any,
issued as consideration in connection with such Permitted Acquisition).
"Permitted Encumbrances" shall mean (i) those liens, encumbrances
and other matters affecting title to any Mortgaged Property listed in the
Mortgage Policies in respect thereof and found, on the date of delivery of such
Mortgage Policies to the Collateral Agent in accordance with the terms hereof,
reasonably acceptable by the Collateral Agent, (ii) as
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to any particular Mortgaged Property at any time, such easements, encroachments,
covenants, rights of way, minor defects, irregularities or encumbrances on title
which do not, in the reasonable opinion of the Collateral Agent, materially
impair such Mortgaged Property for the purpose for which it is held by the
mortgagor thereof, or the lien held by the Collateral Agent, (iii) zoning and
other municipal ordinances, which are not violated in any material respect by
the existing improvements and the present use made by the mortgagor thereof of
the Premises (as defined in the respective Mortgage), (iv) general real estate
taxes and assessments not yet delinquent, and (v) such other items as the
Collateral Agent may consent to (such consent not to be unreasonably withheld).
"Permitted Liens" shall have the meaning provided in Section 8.03.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, limited liability company, association, trust or other
enterprise or any government or political subdivision or any agency, department
or instrumentality thereof.
"Plan" shall mean any employee benefit plan as defined in Section
3(3) of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) Holdings or a Subsidiary of Holdings or an ERISA
Affiliate, and each such plan for the five year period immediately following the
latest date on which Holdings, or a Subsidiary of Holdings or an ERISA Affiliate
maintained, contributed to or had an obligation to contribute to such plan.
"Pledge Agreement" shall have the meaning provided in Section 5.10.
"Pledged Securities" shall mean all the Pledged Securities as
defined in the Pledge Agreement.
"PPI" shall mean Paribas Principal Inc., a New York corporation.
"Prime Lending Rate" shall mean the rate which the Agent announces
from time to time as its prime lending rate, the Prime Lending Rate to change
when and as such prime lending rate changes. The Prime Lending Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. The Agent may make commercial loans or other
loans at rates of interest at, above or below the Prime Lending Rate.
"Proceeds" shall mean with respect to any Asset Sale, the aggregate
cash payments (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with such Asset Sale, other than the
portion of such deferred payment constituting interest, but only as and when so
received) received by Holdings and/or any of its Subsidiaries from such Asset
Sale.
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"Projections" shall have the meaning provided in Section 5.16.
"Quad-C" shall mean Quad-C, Inc., a Virginia corporation.
"Quad-C Consulting Agreement" shall mean the Consulting Agreement,
dated as of February 6, 1997, between Quad-C, Holdings and the Borrower, as same
may be amended, modified or supplemented from time to time pursuant to the terms
hereof and thereof.
"Qualified Preferred Stock" shall mean Holdings Preferred Stock and
such other preferred stock of Holdings having substantially the same terms as
the Holdings Preferred Stock (including, without limitation, perpetual pay-in-
kind dividend provisions, redemption provisions and the absence of covenants) or
otherwise having terms acceptable to the Agent and the Required Banks.
"Quarterly Payment Date" shall mean the last Business Day of each
March, June, September and December.
"Real Property" of any Person shall mean all of the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Recovery Event" shall mean the receipt by Holdings or any of its
Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of
any theft, physical destruction or damage or any other similar event with
respect to any properties or assets of Holdings or any of its Subsidiaries, (ii)
by reason of any condemnation, taking, seizing or similar event with respect to
any properties or assets of Holdings or any of its Subsidiaries and (iii) under
any policy of insurance required to be maintained under Section 7.03; provided
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that notwithstanding the foregoing, the term Recovery Event shall not include
the receipt by Holdings or any of its Subsidiaries of any proceeds payable under
business interruption insurance.
"Register" shall have the meaning provided in Section 12.17.
"Regulation D" shall mean Regulation D 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 establishing reserve requirements.
"Regulation G" shall mean Regulation G 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 establishing margin requirements.
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"Regulation S-X" shall mean Regulation S-X promulgated pursuant to the
Securities Act, as such Regulation is in effect on the date hereof.
"Regulation T" shall mean Regulation T of the Board of Governors of
the Federal Reserve System as from to time in effect and any successor to all or
any portion thereof.
"Regulation U" shall mean Regulation U 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.
"Regulation X" shall mean Regulation X of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or any portion thereof.
"Release" shall mean active or passive disposing, discharging,
injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping,
migrating, emptying, seeping, placing, pouring and the like, into or upon any
land or water or air, or otherwise entering into the environment.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section 1.13.
"Reportable Event" shall mean an event described in Section 4043(c)
of ERISA with respect to a Plan that is subject to Title IV of ERISA other than
those events as to which the 30-day notice period is waived under subsection
.13, .14, .16, .18, .19 or .20 of PBGC Regulation Section 4043.
"Required Banks" shall mean Non-Defaulting Banks the sum of whose
outstanding Term Loans and Revolving Loan Commitments (or, if after the Total
Revolving Loan Commitment has been terminated, outstanding Revolving Loans and
Percentages of outstanding Swingline Loans and Letter of Credit Outstandings)
constitute greater than 50% of the sum of (i) the total outstanding Term Loans
of Non-Defaulting Banks and (ii) the Total Revolving Loan Commitment less the
aggregate Revolving Loan Commitments of Defaulting Banks (or, if after the Total
Revolving Loan Commitment has been terminated, the total outstanding Revolving
Loans of Non-Defaulting Banks and the aggregate Percentages of all Non-
Defaulting Banks of the total outstanding Swingline Loans and Letter of Credit
Outstandings at such time).
"Revolving Loan" shall have the meaning provided in Section 1.01(b).
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"Revolving Loan Commitment" shall mean, with respect to each RL
Bank, the amount set forth opposite such Bank's name in Annex I directly below
the column entitled "Revolving Loan Commitment," as the same may be reduced from
time to time pursuant to Sections 3.02, 3.03 and/or 9.
"Revolving Loan Facility" shall mean the Facility evidenced by the
Total Revolving Loan Commitment.
"Revolving Note" shall have the meaning provided in Section 1.05(a).
"RL Bank" shall mean at any time each Bank with a Revolving Loan
Commitment or with outstanding Revolving Loans.
"Rollover Amount" shall have the meaning provided in Section
8.08(b).
"S&P" shall mean Standard & Poor's Ratings Services, a division of
McGraw Hill, Inc.
"Scheduled Repayment" shall have the meaning provided in Section
4.02(A)(b).
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"Section 4.04(b)(ii) Certificate" shall have the meaning provided in
Section 4.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the Security
Documents.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Agreement" shall have the meaning provided in Section
5.11.
"Security Agreement Collateral" shall mean all "Collateral" as
defined in the Security Agreement.
"Security Documents" shall mean and include the Security Agreement,
the Pledge Agreement, each Mortgage, each Additional Security Document, if any
and each other document or instrument entered into pursuant to Sections 5.10,
5.11, 7.11 and 7.13, if any, in each case as and when executed and delivered in
accordance with the terms of this Agreement.
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"Seller" shall mean Collins & Aikman Floor Coverings Group, Inc., a
Delaware corporation.
"Senior Subordinated Notes Documents" shall mean and include each of
the documents and other agreements entered into (including, without limitation,
the Senior Subordinated Note Indenture) relating to the issuance by the Borrower
of the Senior Subordinated Notes, as in effect on the Initial Borrowing Date (to
the extent thereof) and as the same may be entered into, modified, supplemented
or amended from time to time pursuant to the terms hereof and thereof.
"Senior Subordinated Note Indenture" shall mean the Indenture
entered into by and between the Borrower and IBJ Schroder Bank & Trust Company,
as trustee thereunder, as in effect on the Initial Borrowing Date and as the
same may be modified, amended or supplemented from time to time in accordance
with the terms hereof and thereof.
"Senior Subordinated Notes" shall mean the Series A Senior
Subordinated Notes and any Series B Senior Subordinated Notes issued in exchange
therefor in accordance with the terms of the Senior Subordinated Note Indenture.
"Series A Senior Subordinated Notes" shall mean the Borrower's 10%
Senior Subordinated Notes due January 15, 2007, as in effect on the Initial
Borrowing Date and as the same may be modified, supplemented or amended from
time to time pursuant to the terms hereof and thereof.
"Series B Senior Subordinated Notes" shall mean the Borrower's 10%
Series B Senior Subordinated Notes due January 15, 2007, issued in exchange for
Series A Senior Subordinated Notes, in the form set forth in the Senior
Subordinated Note Indenture as in effect on the Initial Borrowing Date, and as
such Series B Senior Subordinated Notes may be modified, supplemented or amended
from time to time, pursuant to the terms hereof and thereof.
"Shareholder Subordinated Note" shall mean an unsecured junior
subordinated note issued by Holdings (and not guaranteed or supported in any way
by the Borrower or any of its Subsidiaries) in the form of Exhibit L.
"Shareholders' Agreements" shall have the meaning provided in
Section 5.13(d).
"Sponsors" shall mean Quad-C, PPI and their respective Affiliates.
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"Stated Amount" of each Letter of Credit shall mean at any time the
maximum amount available to be drawn thereunder (regardless of whether any
conditions for drawing could then be met).
"Stockholders' Agreement" shall mean the Shareholders' Agreement,
dated as of February 6, 1997, among Holdings, Quad-C Partners II, L.P., Quad-C
Partners III, L.P., Quad-C Partners IV, L.P., PPI and certain other parties
signatory thereto, as amended, modified or supplemented from time to time, in
accordance with the terms hereof and thereof.
"Subsidiary" of any Person shall mean and include (i) 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 stock of 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 (ii) any partnership, association, joint
venture, limited liability company or other entity in which such Person directly
or indirectly through Subsidiaries, has more than a 50% equity interest at the
time.
"Subsidiary Guarantor" shall mean each Subsidiary of Holdings (other
than (i) the Borrower and (ii) a Foreign Subsidiary except to the extent
otherwise provided in Section 7.13) that becomes a party to the Subsidiary
Guaranty.
"Subsidiary Guaranty" shall mean, after the execution and delivery
thereof, the Subsidiary Guaranty, entered into by each Wholly-Owned Subsidiary
of the Borrower pursuant to Section 8.15, in the form of Exhibit H, as the same
may be amended, modified or supplemented from time to time.
"Swingline Expiry Date" shall mean the date which is five Business
Days prior to the Final Maturity Date.
"Swingline Loan" shall have the meaning provided in Section 1.01(c).
"Swingline Note" shall have the meaning provided in Section 1.05(a).
"Syndication Date" shall mean that date upon which the Agent
determines (and notifies the Borrower and the Banks) that the primary
syndication (and resultant addition of Persons as Banks pursuant to Section
12.04(b)) has been completed.
"Tax Sharing Agreements" shall have the meaning provided in Section
5.13(h).
"Taxes" shall have the meaning provided in Section 4.04(a).
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"Term Loan" shall have the meaning provided in Section 1.01(a).
"Term Loan Commitment" shall mean, with respect to each Bank, the
amount set forth opposite such Bank's name in Annex I directly below the column
entitled "Term Loan Commitment," as the same may be reduced or terminated
pursuant to Sections 3.02, 3.03 and/or 9.
"Term Loan Facility" shall mean the Facility evidenced by the Total
Term Loan Commitment.
"Term Note" shall have the meaning provided in Section 1.05(a).
"Termination Documents" shall mean each of the agreements, documents
and instruments entered into in accordance with the requirements of Section
5.09(d).
"Test Period" shall mean (a) for purposes of Sections 8.09 and 8.10,
(i) for any determination made on and prior to the last day of the fiscal
quarter ending on or about October 31, 1997, the period from the first day of
the fiscal quarter ending on or about April 30, 1997 to the last day of the
fiscal quarter of Holdings then last ended, provided that the first Test Period
--------
shall end on the last day of the fiscal quarter ending on or about April 30,
1997, and (ii) for any determination made thereafter, the four consecutive
fiscal quarters of Holdings then last ended and (b) for purposes of Section
8.11, each period of four consecutive fiscal quarters of Holdings then last
ended, in each case taken as one accounting period. Notwithstanding anything to
the contrary contained above or otherwise required by GAAP, for purposes of
Section 8.11 in the case of any Test Period ending on or prior to the fiscal
quarter ending on or about October 31, 1997, such period shall be a one year
period ending on the last day of a fiscal quarter, with calculations of
Consolidated EBITDA for such period to be made as follows: (i) for the three-
month period ending on or about April 30, 1997, Consolidated EBITDA shall be
actual Consolidated EBITDA for such period plus $24,300,000, (ii) for the six-
month period ending on or about July 31, 1997, Consolidated EBITDA shall be
actual Consolidated EBITDA for such period plus $13,900,000 and (iii) for the
nine-month period ending on or about October 31, 1997, Consolidated EBITDA shall
be actual Consolidated EBITDA for such period plus $6,500,000.
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Loan Commitment.
"Total Revolving Loan Commitment" shall mean the sum of the
Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean the sum of the Term Loan
Commitments of each of the Banks.
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"Total Unutilized Revolving Loan Commitment" shall mean, at any
time, (i) the Total Revolving Loan Commitment at such time less (ii) the sum of
the aggregate principal amount of all Revolving Loans and Swingline Loans
outstanding at such time plus the Letter of Credit Outstandings at such time.
"Transaction" shall mean, collectively, (i) the Acquisition, (ii)
the issuance by the Borrower of the Senior Subordinated Notes on the Initial
Borrowing Date, (iii) the incurrence of the Loans and issuance of Letters of
Credit hereunder on the Initial Borrowing Date, (iv) the terminations and
releases contemplated by Section 5.09(d), (v) the Merger and (vi) the payment of
fees and expenses in connection with the foregoing.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan.
----
"UCC" shall mean the Uniform Commercial Code as in effect from time
to time in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the actuarial present value of the accumulated plan benefits under
the Plan as of the close of its most recent plan year exceeds the fair market
value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unpaid Drawing" shall have the meaning provided in Section 2.03(a).
"Unutilized Revolving Loan Commitment" with respect to any RL Bank
at any time shall mean such RL Bank's Revolving Loan Commitment at such time
less the sum of (i) the aggregate outstanding principal amount of all Revolving
Loans made by such RL Bank and (ii) such RL Bank's Percentage of the Letter of
Credit Outstandings at such time.
"U.S. Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States of America.
"Wholly-Owned Domestic Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Domestic Subsidiary.
"Wholly-Owned Foreign Subsidiary" shall mean, as to any Person, any
Wholly-Owned Subsidiary of such Person which is a Foreign Subsidiary.
"Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any
corporation 100% of whose capital stock (other than director's qualifying shares
and/or other nominal
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amounts of shares required to be held other than by such Person under applicable
law) is at the time owned by such Person and/or one or more Wholly-Owned
Subsidiaries of such Person and (ii) any partnership, association, joint venture
or other entity in which such Person and/or one or more Wholly-Owned
Subsidiaries of such Person has a 100% equity interest at such time.
"Working Capital" shall mean the excess of Consolidated Current
Assets over Consolidated Current Liabilities.
"Written," "written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile device, telegraph
or cable.
SECTION 11. The Agent.
---------
11.01 Appointment. Each Bank hereby irrevocably designates and
-----------
appoints BTCo as Agent of such Bank (such term to include for purposes of this
Section 11, BTCo acting as Collateral Agent) to act as specified herein and in
the other Credit Documents, and each such Bank hereby irrevocably authorizes
BTCo as the Agent to take such action on its behalf under the provisions of this
Agreement and the other Credit Documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of this
Agreement and the other Credit Documents, together with such other powers as are
reasonably incidental thereto. The Agent agrees to act as such upon the
express conditions contained in this Section 11. Notwithstanding any provision
to the contrary elsewhere in this Agreement or in any other Credit Document, the
Agent shall not have any duties or responsibilities, except those expressly set
forth herein or in the other Credit Documents, or any fiduciary relationship
with any Bank, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against the Agent. The provisions of this Section 11 are solely for the benefit
of the Agent and the Banks, and neither Holdings nor any of its Subsidiaries
shall have any rights as a third party beneficiary of any of the provisions
hereof. In performing its functions and duties under this Agreement, the Agent
shall act solely as agent of the Banks and the Agent does not assume and shall
not be deemed to have assumed any obligation or relationship of agency or trust
with or for Holdings or any of its Subsidiaries.
11.02 Delegation of Duties. The Agent may execute any of its duties
--------------------
under this Agreement or any other Credit Document by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
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.
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11.03 Exculpatory Provisions. Neither the Agent nor any of its
----------------------
officers, directors, employees, agents, attorneys-in-fact or affiliates shall be
(i) liable for any action lawfully taken or omitted to be taken by it or such
Person in its capacity as Agent under or in connection with this Agreement or
the other Credit Documents (except for its or such Person's own gross negligence
or willful misconduct) or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by Holdings, any of
its Subsidiaries or any of their respective officers contained in this Agreement
or the other Credit Documents, any other Document or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Document or for
any failure of Holdings or any of its Subsidiaries or any of their respective
officers to perform its obligations hereunder or thereunder. The Agent shall
not be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or the other Documents, or to inspect the properties, books
or records of Holdings or any of its Subsidiaries. The Agent shall not be
responsible to any Bank for the effectiveness, genuineness, validity,
enforceability, collectability or sufficiency of this Agreement or any other
Document or for any representations, warranties, recitals or statements made
herein or therein or made 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 Banks
or by or on behalf of Holdings or any of its Subsidiaries to the Agent or any
Bank 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 of the
existence or possible existence of any Default or Event of Default.
11.04 Reliance by Agent. 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, facsimile, telex
or teletype message, statement, order or other document or conversation
reasonably 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 Holdings or any of its
Subsidiaries), independent accountants and other experts selected by the Agent.
The Agent shall be fully justified in failing or refusing to take any action
under this Agreement or any other Credit Document unless it shall first receive
such advice or concurrence of the Required Banks as it deems appropriate or it
shall first be indemnified to its satisfaction by the Banks 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, under this Agreement and the
other Credit Documents in accordance with a request of the Required Banks, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all the Banks.
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11.05 Notice of Default. The Agent shall not be deemed to have
-----------------
knowledge or notice of the occurrence of any Default or Event of Default unless
the Agent has actually received notice from a Bank, Holdings or the Borrower
referring to this Agreement, 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 Banks.
The Agent shall take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Required Banks; provided, that,
--------
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
11.06 Nonreliance on Agent and Other Banks. Each Bank expressly
------------------------------------
acknowledges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Borrower or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the Agent that it has,
independently and without reliance upon the Agent or any other Bank, 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 condition, prospects and creditworthiness of the Acquired
Business, Holdings, the Borrower or their respective Subsidiaries and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Bank also represents that it will, independently and without reliance upon the
Agent or any other Bank, 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 Agreement,
and to make such investigation as it deems necessary to inform itself as to the
business, assets, operations, property, financial and other condition, prospects
and creditworthiness of the Acquired Business, Holdings, the Borrower or their
respective Subsidiaries. The Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other condition, prospects or
creditworthiness of the Acquired Business, Holdings, the Borrower or their
respective Subsidiaries which may come into the possession of the Agent or any
of its officers, directors, employees, agents, attorneys-in-fact or affiliates.
11.07 Indemnification. The Banks agree to indemnify the Agent in its
---------------
capacity as such ratably according to their respective "percentages" as used in
determining the Required Banks at such time or, if the Commitments have
terminated and all Loans have been repaid in full, as determined immediately
prior to such termination and repayment (with such "percentages" to be
determined as if there are no Defaulting Banks), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Obligations) be im-
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posed on, incurred by or asserted against the Agent in its capacity as such in
any way relating to or arising out of this Agreement or any other Credit
Document, or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted to be taken by
the Agent under or in connection with any of the foregoing, but only to the
extent that any of the foregoing is not paid by Holdings or any of its
Subsidiaries; provided, that no Bank shall be liable to the Agent for the
--------
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely 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. The agreements in this Section 11.07
shall survive the payment of all Obligations.
11.08 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 Holdings and its Subsidiaries as though the Agent were not the
Agent hereunder. With respect to the Loans made by it and all Obligations owing
to it, the Agent shall have the same rights and powers under this Agreement as
any Bank and may exercise the same as though it were not the Agent and the terms
"Bank" and "Banks" shall include the Agent in its individual capacity.
11.09 Holders. The Agent may deem and treat the payee of any Note as
-------
the owner thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request, authority or consent of any Person or
entity who, at the time of making such request or giving such authority or
consent, is the holder of any Note shall be conclusive and binding on any
subsequent holder, transferee, assignee or indorsee, as the case may be, of such
Note or of any Note or Notes issued in exchange therefor.
11.10 Resignation of the Agent. (a) The Agent may resign from the
------------------------
performance of all its functions and duties hereunder and/or under the other
Credit Documents at any time by giving 30 Business Days' prior written notice to
the Borrower and the Banks. Such resignation shall take effect upon the
appointment of a successor Agent pursuant to clauses (b) and (c) below or as
otherwise provided below.
(b) Upon any such notice of resignation, the Required Banks shall
appoint a successor Agent hereunder or thereunder who shall be a commercial bank
or trust company reasonably acceptable to the Borrower.
(c) If a successor Agent shall not have been so appointed within such
30 Business Day period, the Agent, with the consent of the Borrower (which
consent shall not
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be unreasonably withheld or delayed), shall then appoint a successor Agent who
shall serve as Agent hereunder or thereunder until such time, if any, as the
Required Banks appoint a successor Agent as provided above.
(d) If no successor Agent has been appointed pursuant to clause (b)
or (c) above by the 30th Business Day after the date such notice of resignation
was given by the Agent, the Agent's resignation shall become effective and the
Required Banks shall thereafter perform all the duties of the Agent hereunder
and/or under any other Credit Document until such time, if any, as the Banks
appoint a successor Agent as provided above.
SECTION 12. Miscellaneous.
-------------
12.01 Payment of Expenses, etc. The Borrower hereby agrees to: (i)
-------------------------
whether or not the transactions herein contemplated are consummated, pay all
reasonable out-of-pocket costs and expenses of the Agent (including, without
limitation, the reasonable fees and disbursements of White & Case and local
counsel) in connection with the negotiation, preparation, execution and delivery
of the Credit Documents and the documents and instruments referred to therein
and any amendment, waiver or consent relating thereto and in connection with the
Agent's syndication efforts with respect to this Agreement; (ii) pay all
reasonable out-of-pocket costs and expenses of the Agent and each of the Banks
in connection with the enforcement of the Credit Documents and the documents and
instruments referred to therein and, after an Event of Default shall have
occurred and be continuing, the protection of the rights of the Agent and each
of the Banks thereunder (including, without limitation, the reasonable fees and
disbursements of counsel (including in-house counsel) for the Agent and for each
of the Banks); (iii) pay and hold each of the Banks harmless from and against
any and all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission (other
than to the extent attributable to such Bank) to pay such taxes; and (iv)
indemnify the Agent, the Collateral Agent and each Bank, 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, (a) any investigation, litigation or other proceeding
(whether or not any Agent, the Collateral Agent or any Bank is a party thereto
and whether or not any such investigation, litigation or other proceeding is
between or among the Agent, the Collateral Agent, any Letter of Credit Issuer,
any Bank, any Credit Party or any third Person or otherwise) related to the
entering into and/or performance of this Agreement or any other Document or the
use of the proceeds of any Loans hereunder or the Transaction or the
consummation of any other transactions contemplated in any Document (but
excluding any such losses, liabilities, claims, damages or expenses to the
extent incurred by reason of the gross negligence or willful misconduct of the
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Person to be indemnified), or (b) the actual or alleged generation, presence or
Release of Hazardous Materials occurring before the repayment of the Loans,
foreclosure or conveyance of the Real Property by a deed in lieu of foreclosure
(i) on or from, or the transportation of Hazardous Materials to or from, any
such Real Property at any time owned or operated by Holdings or any of its
Subsidiaries, or (ii) in the air, surface water or groundwater or on the surface
or subsurface of any Real Property or (c) any Environmental Claim relating to
Holdings or its Subsidiaries or any Real Property at any time owned or operated
by Holdings or any of its Subsidiaries, in each case, including, without
limitation, the reasonable fees and disbursements of counsel and independent
consultants incurred in connection with any such investigation, litigation or
other proceeding.
12.02 Right of Setoff. 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 and continuance of an Event of Default, the
Agent and each Bank is hereby authorized at any time or from time to time,
without presentment, demand, protest or other notice of any kind to any Credit
Party or to any other Person, any such notice 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 the Agent or such Bank
(including, without limitation, by branches and agencies of such Bank wherever
located) to or for the credit or the account of such Credit Party against and on
account of the Obligations and liabilities of such Credit Party to the Agent,
such Bank or any other Bank under this Agreement or under any of the other
Credit Documents, including, without limitation, all interests in Obligations of
such Credit Party purchased by such Bank or any other Bank pursuant to Section
12.06(b), and all other claims of any nature or description arising out of or
connected with this Agreement or any other Credit Document, irrespective of
whether or not the Agent or such Bank shall have made any demand hereunder and
although said Obligations, liabilities or claims, or any of them, shall be
contingent or unmatured. Each Bank is hereby designated the agent of all other
Banks for purposes of effecting set off pursuant to this Section 12.02, and each
Credit Party hereby grants to each Bank for such Bank's own benefit and as agent
for all other Banks a continuing security interest in any and all deposits,
accounts or moneys of such Credit Party maintained from time to time with such
Bank.
12.03 Notices. Except as otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below or in the other relevant
Credit Documents, as the case may be; if to any Bank, at its address specified
for such Bank on Annex II; or, at such other address as shall be designated by
any party in a written notice to the other parties hereto. All such notices and
communications shall be mailed, telegraphed, telexed, telecopied or cabled or
sent by overnight courier, and shall be effective when received.
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12.04 Benefit of Agreement. (a) This 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, however, no Credit Party may assign
-------- -------
or transfer any of its rights, obligations or interest hereunder or under any
other Credit Document without the prior written consent of all of the Banks and,
provided further, that, although any Bank may transfer, assign or grant
- ----------------
participations in its rights hereunder, such Bank shall remain a "Bank" for all
purposes hereunder (and may not transfer or assign all or any portion of its
Commitments hereunder except as provided in Section 12.04(b)) and the
transferee, assignee or participant, as the case may be, shall not constitute a
"Bank" hereunder and, provided further, that no Bank shall transfer or grant any
----------------
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Credit Document except to
the extent such amendment or waiver would (i) extend the final scheduled
maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is
not extended beyond the Final Maturity Date) in which such participant is
participating, or reduce the rate or extend the time of payment of interest or
Fees thereon (except in connection with a waiver of applicability of any post-
default increase in interest rates) or reduce the principal amount thereof, or
increase the amount of the participant's participation over the amount thereof
then in effect (it being understood that a waiver of any Default or Event of
Default or of a mandatory reduction in the Total Commitment shall not constitute
a change in the terms of such participation, and that an increase in any
Commitment or Loan shall be permitted without the consent of any participant if
the participant's participation is not increased as a result thereof), (ii)
consent to the assignment or transfer by Holdings or the Borrower of any of its
rights and obligations under this Agreement or (iii) release all or
substantially all of the Collateral under all of the Security Documents (except
as expressly provided in the Credit Documents) supporting the Loans hereunder in
which such participant is participating. In the case of any such participation,
the participant shall not have any rights under this Agreement or any of the
other Credit Documents (the participant's rights against such Bank in respect of
such participation to be those set forth in the agreement executed by such Bank
in favor of the participant relating thereto) and all amounts payable by the
Borrower hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, any Bank (or any Bank together
with one or more other Banks) may (x) assign all or a portion of its Revolving
Loan Commitment (and related outstanding Obligations hereunder) and/or its
outstanding Term Loans to its parent company and/or any affiliate of such Bank
which is at least 50% owned by such Bank or its parent company or to one or more
Banks or (y) assign all, or if less than all, a portion equal to at least
$5,000,000 in the aggregate for the assigning Bank or assigning Banks, of such
Revolving Loan Commitments (and related outstanding Obligations hereunder)
and/or outstanding principal amount of Term Loans hereunder to one or more
Eligible Transferees, each of which assignees shall become a party to this
Agreement as a Bank by execution of an Assignment and Assumption Agreement,
provided that (i) at such time Annex I shall be deemed modified to reflect the
- --------
Commitments (and/or outstanding Term Loans, as the case
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may be) of such new Bank and of the existing Banks, (ii) upon surrender of the
old Notes, new Notes will be issued, at the Borrower's expense, to such new Bank
and to the assigning Bank, such new Notes to be in conformity with the
requirements of Section 1.05 (with appropriate modifications) to the extent
needed to reflect the revised Commitments (and/or outstanding Term Loans, as the
case may be), (iii) the consent of the Agent shall be required in connection
with any such assignment pursuant to clause (y) of this Section 12.04(b) (which
consent shall not be unreasonably withheld), (iv) the consent of each Letter of
Credit Issuer shall be required in connection with any such assignment of
Revolving Loan Commitments pursuant to clause (y) of this Section 12.04(b)
(which consent shall not be unreasonably withheld) and (v) the Agent shall
receive at the time of each such assignment, from the assigning or assignee
Bank, the payment of a non-refundable assignment fee of $3,500 and, provided
--------
further, that such transfer or assignment will not be effective until recorded
- -------
by the Agent on the Register pursuant to Section 12.17 hereof. To the extent of
any assignment pursuant to this Section 12.04(b), the assigning Bank shall be
relieved of its obligations hereunder with respect to its assigned Commitments.
At the time of each assignment pursuant to this Section 12.04(b) to a Person
which is not already a Bank hereunder and which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Code) for Federal income
tax purposes, the respective assignee Bank shall provide to the Borrower and the
Agent the appropriate Internal Revenue Service Forms (and, if applicable, a
Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent
that an assignment of all or any portion of a Bank's Commitment and related
outstanding Obligations pursuant to Section 1.13 or this Section 12.04(b) would,
at the time of such assignment, result in increased costs under Section 1.10,
1.11, 2.05 or 4.04 from those being charged by the respective assigning Bank
prior to such assignment, then the Borrower shall not be obligated to pay such
increased costs (although the Borrower shall be obligated to pay any other
increased costs of the type described above resulting from changes after the
date of the respective assignment).
(c) Nothing in this Agreement shall prevent or prohibit any Bank from
pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of
borrowings made by such Bank from such Federal Reserve Bank.
12.05 No Waiver; Remedies Cumulative. No failure or delay on the
------------------------------
part of the Agent or any Bank in exercising any right, power or privilege
hereunder or under any other Credit Document and no course of dealing between
any Credit Party and the Agent or any Bank 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 herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Agent or any
Bank 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
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rights of the Agent or the Banks to any other or further action in any
circumstances without notice or demand.
12.06 Payments Pro Rata. (a) The Agent agrees that promptly after
-----------------
its receipt of each payment from or on behalf of any Credit Party in respect of
any Obligations of such Credit Party, it shall, except as otherwise provided in
this Agreement, distribute such payment to the Banks (other than any Bank that
has consented in writing to waive its pro rata share of such payment) pro rata
--- ---- --- ----
based upon their respective shares, if any, of the Obligations with respect to
which such payment was received.
(b) Each of the Banks agrees that, if it should receive any amount
hereunder (whether by voluntary payment, by realization upon security, by the
exercise of the right of setoff or banker's lien, by counterclaim or cross
action, by the enforcement of any right under the Credit Documents, or
otherwise, but excluding by operation of Section 4.01(b)) which is applicable to
the payment of the principal of, or interest on, the Loans, Unpaid Drawings or
Fees, of a sum which with respect to the related sum or sums received by other
Banks is in a greater proportion than the total of such Obligation then owed and
due to such Bank bears to the total of such Obligation then owed and due to all
of the Banks immediately prior to such receipt, then such Bank receiving such
excess payment shall purchase for cash without recourse or warranty from the
other Banks an interest in the Obligations of the respective Credit Party to
such Banks in such amount as shall result in a proportional participation by all
of the Banks in such amount; provided, that if all or any portion of such excess
--------
amount is thereafter recovered from such Bank, such purchase shall be rescinded
and the purchase price restored to the extent of such recovery, but without
interest.
12.07 Calculations; Computations. (a) The financial statements to
--------------------------
be furnished to the Banks pursuant hereto shall be made and prepared in
accordance with GAAP consistently applied throughout the periods involved
(except as set forth in the notes thereto or as otherwise disclosed in writing
by Holdings or the Borrower to the Banks); provided, that except as otherwise
--------
specifically provided herein, all computations determining compliance with
Sections 4.02 and 8, including definitions used therein, shall utilize
accounting principles and policies in effect at the time of the preparation of,
and in conformity with those used to prepare, the January 27, 1996 financial
statements delivered to the Banks pursuant to Section 6.10(b).
(b) All computations of interest and Fees hereunder shall be made on
the actual number of days elapsed over a year of 360 days.
12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS
------------------------------------------------
AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF
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THE STATE OF NEW YORK. Any legal action or proceeding with respect to this
Agreement or any other Credit Document may be brought in the courts of the State
of New York or of the United States for the Southern District of New York, and,
by execution and delivery of this Agreement, each Credit Party hereby
irrevocably accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Credit Party
hereby further irrevocably waives any claim that any such courts lack
jurisdiction over such Credit Party, and agrees not to plead or claim, in any
legal action or proceeding with respect to this Agreement or any other Credit
Document brought in any of the aforesaid courts, that any such court lacks
jurisdiction over such Credit Party. Each Credit Party irrevocably consents to
the service of process in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such Credit Party,
at its address for notices pursuant to Section 12.03, such service to become
effective 30 days after such mailing. Each Credit Party hereby irrevocably
waives any objection to such service of process and further irrevocably waives
and agrees not to plead or claim in any action or proceeding commenced hereunder
or under any other Credit Document that service of process was in any way
invalid or ineffective. Nothing herein shall affect the right of the Agent, any
Bank or the holder of any Note to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against any 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 Agreement or
any other Credit Document brought in the courts referred to in clause (a) above
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.
12.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts executed by all the parties hereto shall be lodged with Holdings,
the Borrower and the Agent.
12.10 Effectiveness. This Agreement shall become effective on the
-------------
date (the "Effective Date") on which Holdings, the Borrower, the Agent and each
of the Banks shall have signed a counterpart hereof (whether the same or
different counterparts) and shall have delivered the same to the Agent at the
Notice Office or, in the case of the Banks, shall have given to the Agent
telephonic (confirmed in writing), written, telex or facsimile notice (actually
received) at such office that the same has been signed and mailed to it. The
Agent will give Holdings, the Borrower and each Bank prompt written notice of
the occurrence of the Effective Date.
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12.11 Headings Descriptive. The headings of the several sections and
--------------------
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
12.12 Amendment or Waiver, etc. (a) Neither this Agreement nor any
-------------------------
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the respective Credit Parties party thereto and the
Required Banks, provided that no such change, waiver, discharge or termination
--------
shall, without the consent of each Bank (other than a Defaulting Bank) (with
Obligations being directly affected thereby in the case of following clause
(i)), (i) extend the final scheduled maturity of any Loan or Note or extend the
stated maturity of any Letter of Credit beyond the Final Maturity Date, or
reduce the rate or extend the time of payment of interest or Fees thereon, or
reduce the principal amount thereof, (ii) release all or substantially all of
the Collateral (except as expressly provided in the Security Documents) under
all the Security Documents, (iii) amend, modify or waive any provision of this
Section 12.12, (iv) reduce the percentage specified in the definition of
Required Banks (it being understood that, with the consent of the Required
Banks, additional extensions of credit pursuant to this Agreement may be
included in the determination of the Required Banks on substantially the same
basis as the extensions of Term Loans and Revolving Loan Commitments are
included on the Effective Date) or (v) consent to the assignment or transfer by
Holdings or the Borrower of any of its rights and obligations under this
Agreement; provided further, that no such change, waiver, discharge or
----------------
termination shall (1) increase the Commitments of any Bank over the amount
thereof then in effect without the consent of such Bank (it being understood
that waivers or modifications of conditions precedent, covenants, Defaults or
Events of Default or of a mandatory reduction in the Total Commitment shall not
constitute an increase of the Commitment of any Bank, and that an increase in
the available portion of any Commitment of any Bank shall not constitute an
increase in the Commitment of such Bank), (2) without the consent of each Letter
of Credit Issuer, amend, modify or waive any provision of Section 2 or alter its
rights or obligations with respect to Letters of Credit, (3) without the consent
of the Agent, amend, modify or waive any provision of Section 11 as same applies
to such Agent or any other provision as same relates to the rights or
obligations of the Agent, (4) without the consent of the Collateral Agent,
amend, modify or waive any provision relating to the rights or obligations of
the Collateral Agent or (5) without the consent of BTCo, alter its rights or
obligations with respect to Swingline Loans.
(b) If, in connection with any proposed change, waiver, discharge or
termination to any of the provisions of this Agreement as contemplated by
clauses (a)(i) through (v), inclusive, of the first proviso to Section 12.12(a),
the consent of the Required Banks is obtained but the consent of one or more of
such other Banks whose consent is required is not obtained, then the Borrower
shall have the right, so long as all non-consenting Banks whose individual
consent is required are treated as described in either clause (A) or (B) below,
to either (A) replace each such non-consenting Bank or Banks (or, at the option
of the
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Borrower if the respective Bank's consent is required with respect to less than
all Facilities of Loans (or related Commitments), to replace only the
Commitments and/or Loans under the respective Facility of the respective non-
consenting Bank which gave rise to the need to obtain such Bank's individual
consent) with one or more Replacement Banks pursuant to Section 1.13 so long as
at the time of such replacement, each such Replacement Bank consents to the
proposed change, waiver, discharge or termination or (B) terminate such non-
consenting Bank's Revolving Loan Commitment (if such Bank's consent is required
as a result of its Revolving Loan Commitment) and/or repay outstanding Loans of
such Bank under each Facility which gave rise to the need to obtain such Bank's
consent and/or cash collateralize its applicable Percentage of the Letter of
Credit of Outstandings, in accordance with Sections 3.02(b) and/or 4.01(b),
provided that, unless the Commitments which are terminated and Loans which are
- --------
repaid pursuant to preceding clause (B) are immediately replaced in full at such
time through the addition of new Banks or the increase of the Commitments and/or
outstanding Loans of existing Banks (who in each case must specifically consent
thereto), then in the case of any action pursuant to preceding clause (B) the
Required Banks (determined before giving effect to the proposed action) shall
specifically consent thereto, provided further, that the Borrower shall not have
----------------
the right to replace a Bank, terminate its Commitments or repay its Loans solely
as a result of the exercise of such Bank's rights (and the withholding of any
required consent by such Bank) pursuant to the second proviso to Section
12.12(a).
12.13 Survival. All indemnities set forth herein including, without
--------
limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall survive the
execution and delivery of this Agreement and the making and repayment of the
Loans.
12.14 Domicile of Loans and Commitments. Each Bank may transfer and
---------------------------------
carry its Loans and/or Commitments at, to or for the account of any branch
office, subsidiary or affiliate of such Bank; provided, that the Borrower shall
--------
not be responsible for costs arising under Section 1.10, 1.11, 2.05 or 4.04
resulting from any such transfer (other than a transfer pursuant to Section
1.12) to the extent such costs would not otherwise be applicable to such Bank in
the absence of such transfer.
12.15 Confidentiality. (a) Each of the Banks agrees that it will
---------------
use reasonable efforts not to disclose without the prior consent of the Borrower
(other than to its directors, employees, auditors, counsel or other professional
advisors, to affiliates or to another Bank if the Bank or such Bank's holding or
parent company in its sole discretion determines that any such party should have
access to such information) any information with respect to Holdings, the
Borrower or any of its Subsidiaries which is furnished pursuant to this
Agreement; provided, that any Bank may disclose any such information (a) as has
--------
become generally available to the public or has become available to such Bank on
a non-confidential basis, (b) as may be required or appropriate in any report,
statement or testimony submitted to any municipal, state or Federal regulatory
body having or claiming to have juris-
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diction over such Bank or to the Federal Reserve Board or the Federal Deposit
Insurance Corporation or similar organizations (whether in the United States or
elsewhere) or their successors, (c) as may be required or appropriate in
response to any summons or subpoena or in connection with any litigation, (d) in
order to comply with any law, order, regulation or ruling applicable to such
Bank, and (e) to any prospective transferee in connection with any contemplated
transfer of any of the Notes or any interest therein by such Bank; provided,
--------
that such prospective transferee agrees, for the benefit of such Bank and the
Borrower, to be bound by this Section 12.15 to the same extent as such Bank.
(b) Each of Holdings and the Borrower hereby acknowledges and agrees
that each Bank may share with any of its affiliates any information related to
Holdings or any of its Subsidiaries (including, without limitation, any
nonpublic customer information regarding the creditworthiness of Holdings and
its Subsidiaries, provided that such Persons shall be subject to the provisions
of this Section 12.15 to the same extent as such Bank).
12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT
--------------------
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
12.17 Registry. The Borrower hereby designates the Agent to serve as
--------
the Borrower's agent, solely for purposes of this Section 12.17, to maintain a
register (the "Register") on which it will record the Commitments from time to
time of each of the Banks, the Loans made by each of the Banks and each
repayment in respect of the principal amount of the Loans of each Bank. Failure
to make any such recordation, or any error in such recordation shall not affect
the Borrower's obligations in respect of such Loans. With respect to any Bank,
the transfer of the Commitments of such Bank and the rights to the principal of,
and interest on, any Loan made pursuant to such Commitments shall not be
effective until such transfer is recorded on the Register maintained by the
Agent with respect to ownership of such Commitments and Loans and prior to such
recordation all amounts owing to the transferor with respect to such Commitments
and Loans shall remain owing to the transferor. The registration of assignment
or transfer of all or part of any Commitments and Loans shall be recorded by the
Agent on the Register only upon the acceptance by the Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
12.04(b). Coincident with the delivery of such an Assignment and Assumption
Agreement to the Agent for acceptance and registration of assignment or transfer
of all or part of a Loan, or as soon thereafter as practicable, the assigning or
transferor Bank shall surrender the Note evidencing such Loan, and thereupon one
or more new Notes in the same aggregate principal amount shall be issued to the
assigning or transferor Bank and/or the new Bank. The Borrower agrees to
indemnify the Agent from and against any and all losses,
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claims, damages and liabilities of whatsoever nature which may be imposed on,
asserted against or incurred by the Agent in performing its duties under this
Section 12.17.
12.18 Limited Recourse. The Banks agree that notwithstanding
----------------
anything to the contrary contained herein or in the other Credit Documents, no
director, officer, employee, stockholder or incorporator of the Borrower, in
each case in such capacity, shall have any liability to the Banks for any
Obligations or for any claim based on, in respect of or by reason of such
Obligations or their creation, and the Banks shall have no recourse against any
such person in such capacity in respect of the Obligations.
SECTION 13. Holdings Guaranty.
-----------------
13.01 The Guaranty. In order to induce the Banks to enter into this
------------
Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by Holdings from the proceeds of the Loans and the
issuance of the Letters of Credit, Holdings hereby agrees with the Banks as
follows: Holdings hereby unconditionally and irrevocably guarantees as primary
obligor and not merely as surety the full and prompt payment when due, whether
upon maturity, acceleration or otherwise, of any and all of the Guaranteed
Obligations of the Borrower to the Guaranteed Creditors. If any or all of the
Guaranteed Obligations of the Borrower to the Guaranteed Creditors becomes due
and payable hereunder, Holdings unconditionally promises to pay such
indebtedness to the Guaranteed Creditors, or order, on demand, together with any
and all expenses which may be incurred by the Guaranteed Creditors in collecting
any of the Guaranteed Obligations. If claim is ever made upon any Guaranteed
Creditor for repayment or recovery of any amount or amounts received in payment
or on account of any of the Guaranteed Obligations and any of the aforesaid
payees repays all or part of said amount by reason of (i) any judgment, decree
or order of any court or administrative body having jurisdiction over such payee
or any of its property or (ii) any settlement or compromise of any such claim
effected by such payee with any such claimant (including the Borrower), then and
in such event Holdings agrees that any such judgment, decree, order, settlement
or compromise shall be binding upon Holdings, notwithstanding any revocation of
this Guaranty or other instrument evidencing any liability of the Borrower, and
Holdings shall be and remain liable to the aforesaid payees hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
13.02 Bankruptcy. Additionally, Holdings unconditionally and
----------
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
of the Borrower to the Guaranteed Creditors whether or not due or payable by the
Borrower upon the occurrence of any of the events specified in Section 9.05, and
unconditionally, promises to pay such indebtedness to the Guaranteed Creditors,
or order, on demand, in lawful money of the United States.
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13.03 Nature of Liability. The liability of Holdings hereunder is
-------------------
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by Holdings, any other
guarantor or by any other party, and the liability of Holdings hereunder is not
affected or impaired by (a) any direction as to application of payment by the
Borrower or by any other party, or (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of
any such other guaranty or undertaking, or (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower, or (e) any payment
made to any Guaranteed Creditor on the Guaranteed Obligations which any such
Guaranteed Creditor repays to the Borrower pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and Holdings waives any right to the deferral or modification of its
obligations hereunder by reason of any such proceeding.
13.04 Independent Obligation. The obligations of Holdings hereunder
----------------------
are independent of the obligations of any other guarantor, any other party or
the Borrower, and a separate action or actions may be brought and prosecuted
against Holdings whether or not action is brought against any other guarantor,
any other party or the Borrower and whether or not any other guarantor, any
other party or the Borrower be joined in any such action or actions. Holdings
waives, to the full extent permitted by law, the benefit of any statute of
limitations affecting its liability hereunder or the enforcement thereof. Any
payment by the Borrower or other circumstance which operates to toll any statute
of limitations as to the Borrower shall operate to toll the statute of
limitations as to Holdings.
13.05 Authorization. Holdings authorizes the Guaranteed Creditors
-------------
without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder,
from time to time to:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of
the Guaranteed Obligations (including any increase or decrease in the rate
of interest thereon), any security therefor, or any liability incurred
directly or indirectly in respect thereof, and the Guaranty herein made
shall apply to the Guaranteed Obligations as so changed, extended, renewed
or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any of
those hereunder) incurred directly or indirectly in respect thereof or
hereof, and/or any offset thereagainst;
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(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers, guarantors, the
Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations, any
security therefor or any liability (including any of those hereunder)
incurred directly or indirectly in respect thereof or hereof, and may
subordinate the payment of all or any part thereof to the payment of any
liability (whether due or not) of the Borrower to its creditors other than
the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Guaranteed Creditors
regardless of what liability or liabilities of the Borrower remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement, any other Credit Document or any of the
instruments or agreements referred to herein or therein, or otherwise
amend, modify or supplement this Agreement, any other Credit Document or
any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise applicable
principles of common law, give rise to a legal or equitable discharge of
Holdings from its liabilities under this Guaranty.
13.06 Reliance. It is not necessary for any Guaranteed Creditor to
--------
inquire into the capacity or powers of the Borrower or the officers, directors,
partners or agents acting or purporting to act on their behalf, and any
Guaranteed Obligations made or created in reliance upon the professed exercise
of such powers shall be guaranteed hereunder.
13.07 Subordination. Any of the indebtedness of the Borrower
-------------
relating to the Guaranteed Obligations now or hereafter owing to Holdings is
hereby subordinated to the Guaranteed Obligations of the Borrower owing to the
Guaranteed Creditors; and if the Agent so requests at a time when an Event of
Default exists, all such indebtedness relating to the Guaranteed Obligations of
the Borrower to Holdings shall be collected, enforced and received by Holdings
for the benefit of the Guaranteed Creditors and be paid over to the Agent on
behalf of the Guaranteed Creditors on account of the Guaranteed Obligations of
the Borrower to the Guaranteed Creditors, but without affecting or impairing in
any manner the liability of Holdings under the other provisions of this
Guaranty. Prior to the transfer by Holdings of any note or negotiable
instrument evidencing any of the indebtedness relating to the Guaranteed
Obligations of the Borrower to Holdings, Holdings shall mark such note or
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negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, Holdings
hereby agrees with the Guaranteed Creditors that it will not exercise any right
of subrogation which it may at any time otherwise have as a result of this
Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or
otherwise) until all Guaranteed Obligations have been irrevocably paid in full
in cash.
13.08 Waiver. (a) Holdings waives any right (except as shall be
------
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party or (iii) pursue any other remedy in any
Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based on or
arising out of the disability of the Borrower, any other guarantor or any other
party, or the validity, legality or unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower other than payment in full of the Guaranteed
Obligations. The Guaranteed Creditors may, at their election, foreclose on any
security held by the Agent, the Collateral Agent or any other Guaranteed
Creditor by one or more judicial or nonjudicial sales, whether or not every
aspect of any such sale is commercially reasonable (to the extent such sale is
permitted by applicable law), or exercise any other right or remedy the
Guaranteed Creditors may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of Holdings
hereunder except to the extent the Guaranteed Obligations have been paid.
Holdings waives any defense arising out of any such election by the Guaranteed
Creditors, even though such election operates to impair or extinguish any right
of reimbursement or subrogation or other right or remedy of Holdings against the
Borrower or any other party or any security.
(b) Holdings waives all presentments, demands for performance,
protests and notices, including, without limitation, notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations. Holdings assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which Holdings assumes
and incurs hereunder, and agrees that the Guaranteed Creditors shall have no
duty to advise Holdings of information known to them regarding such
circumstances or risks.
13.09 Nature of Liability. It is the desire and intent of Holdings
-------------------
and the Guaranteed Creditors that this Guaranty shall be enforced against
Holdings to the fullest extent permissible under the laws and public policies
applied in each jurisdiction in which
-128-
<PAGE>
enforcement is sought. If, however, and to the extent that, the obligations of
Holdings under this Guaranty 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 amount
of the Guaranteed Obligations of Holdings shall be deemed to be reduced and
Holdings shall pay the maximum amount of the Guaranteed Obligations which would
be permissible under applicable law.
* * *
-129-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers to execute and deliver this Agreement as of the date first above
written.
Address:
- -------
CAF HOLDINGS, INC.
311 Smith Industrial Blvd.
P.O. Box 1447
Dalton, GA 30722-1447 By /s/ Stephen M. Burns
Attention: President --------------------------
Title: President
311 Smith Industrial Blvd. CAF ACQUISITION CORPORATION
P.O. Box 1447
Dalton, GA 30722-1447
Attention: President By /s/ Stephen M. Burns
--------------------------
Title: President
130 Liberty Street BANKERS TRUST COMPANY,
New York, NY 10006 Individually and as Agent
By /s/ Mary Kay Coyle
-------------------------
Title: Managing Director
<PAGE>
2850 West Golf FIRST SOURCE FINANCIAL LLP
5th Floor
Rolling Meadows, IL 60008
By /s/ Robert M. Coseo
-----------------------------
Title: Senior Vice President
<PAGE>
900 Circle 75 Parkway HELLER FINANCIAL, INC.
Suite 90
Atlanta, GA 30339
By /s/ Daniel O'Donnell
-----------------------------
Title: Senior Vice President
<PAGE>
135 South LaSalle Street LASALLE NATIONAL BANK
Chicago, IL 60603
By /s/ Steven M. Cohen
----------------------------
Title: First Vice President
<PAGE>
100 Federal Street THE FIRST NATIONAL BANK OF BOSTON
Boston, MA 02106
By /s/ Timothy M. Barns
----------------------------
Title: Division Executive
<PAGE>
1339 Chestnut Street CORESTATES BANK, N.A.
4th Floor
Philadelphia, PA 19101
By /s/ Marcus F. Brown
----------------------------
Title: Vice President
<PAGE>
165 Broadway LTCB TRUST COMPANY
New York, NY 10006
By /s/ John J. Sullivan
--------------------------------
Title: Executive Vice President
<PAGE>
One South Wacker Drive SANWA BUSINESS CREDIT CORPORATION
Chicago, IL 60606
By /s/ John P. Thacker
---------------------------
Title: Vice President
<PAGE>
191 Peachtree Street, N.E. WACHOVIA BANK OF GEORGIA, N.A.
30th Floor
Atlanta, GA 30303-1757
By /s/ Richard E.S. Bowen
------------------------------
Title: Commercial Officer
<PAGE>
ANNEX I
-------
LIST OF BANKS AND COMMITMENTS
-----------------------------
<TABLE>
<CAPTION>
Term Loan Revolving Loan
Bank Commitment Commitment
- ---- ---------- --------------
<S> <C> <C>
Bankers Trust Company $12,294,117.64 $ 6,705,882.36
First Source Financial LLP $ 6,147,058.82 $ 3,352,941.18
Heller Financial, Inc. $ 6,147,058.82 $ 3,352,941.18
LaSalle National Bank $ 6,147,058.82 $ 3,352,941.18
The First National Bank $ 4,852,941.18 $ 2,647,058.82
of Boston
Corestates Bank, N.A. $ 4,852,941.18 $ 2,647,058.82
LTCB Trust Company $ 4,852,941.18 $ 2,647,058.82
Sanwa Business Credit
Corporation $ 4,852,941.18 $ 2,647,058.82
Wachovia Bank of Georgia, N.A.
$ 4,852,941.18 $ 2,647,058.82
Total $55,000,000.00 $30,000,000.00
</TABLE>
<PAGE>
ANNEX II
--------
BANK ADDRESSES
--------------
Bank Address
- ---- -------
BANKERS TRUST COMPANY One Bankers Trust Plaza
New York, New York 10006
Attention: Mary Kay Coyle
Telephone No.: (212) 250-9094
Facsimile No.: (212) 250-7218
THE FIRST NATIONAL 100 Federal Street
BANK OF BOSTON Boston, MA 02106
Attention: Jeannie Inn Shanahan
Telephone No.: (617) 434-3037
Facsimile No.: (617) 434-4929
CORESTATES BANK, N.A. 1339 Chestnut Street
4th Floor
Philadelphia, PA 19101
Attention: Mark Supple
Telephone No.: (215) 973-2562
Facsimile No.: (215) 973-6680
FIRST SOURCE FINANCIAL 2850 West Golf - 5th floor
Rolling Meadows, IL 60008
Attention: Bob Coseo
Telephone No.: (847) 734-2071
Facsimile No.: (847) 734-7910
HELLER FINANCIAL, INC. 900 Circle 75 Parkway
Suite 90
Atlanta, GA 30339
<PAGE>
ANNEX II
Page 2
Attention: Tim Eichenland
Telephone No.: (770) 980-6128
Facsimile No.: (770) 980-6061
<PAGE>
ANNEX II
Page 3
LASALLE NATIONAL BANK 135 South LaSalle Street
Chicago, IL 60603
Attention: Steve Cohen
Telephone No.: (312) 904-7039
Facsimile No.: (312) 904-6242
LTCB TRUST COMPANY 165 Broadway
49th Floor
New York, NY 10006
Attention: Edna Astuto
Telephone No.: (212) 335-4900
Facsimile No.: (212) 608-9349
SANWA BUSINESS CREDIT One South Wacker Drive
CORPORATION Chicago, IL 60606
Attention: Greg Cooper
Telephone No.: (312) 853-1401
Facsimile No.: (312) 782-6035
WACHOVIA BANK OF GEORGIA 191 Peachtree Street, N.E.
30th Floor
Atlanta, GA 30303-1757
Attention: Richard E.S. Bowen
Telephone No.: (404) 332-1383
Facsimile No.: (404) 332-6920
<PAGE>
Exhibit 10.2
------------
TRADENAME LICENSE AGREEMENT
---------------------------
THIS TRADENAME LICENSE AGREEMENT (this "Agreement") is made and entered
into as of February 6, 1997, by and between Collins & Aikman Floor Coverings
Group, Inc., a Delaware corporation ("Licensor"), CAF Holdings, Inc., a Virginia
corporation, and Collins & Aikman Floor Coverings, Inc., a Delaware corporation
(collectively, "Licensee"). Capitalized terms used herein but not defined have
the meaning given them in the Acquisition Agreement, dated as of December 9,
1996 (the "Acquisition Agreement") between Licensor and certain other Persons
relating to the purchase and sale of stock of Licensee.
RECITALS:
--------
A. Licensor has certain rights to use the name "Collins & Aikman" (the
"Name") and the logo depicted on Annex A attached hereto (the "Logo");
B. Licensee believes that various commercial advantages could result from
its continued use of the Name and Logo in the operation of its Business;
C. The parties desire to set forth the terms and conditions under which
Licensee would be permitted so to use the Name and Logo; and
D. The execution and delivery of this Agreement is a condition to the
obligations of the parties to the Acquisition Agreement to consummate the
transactions contemplated thereby.
NOW, THEREFORE, in consideration of the premises and the agreements
contained herein and in the Acquisition Agreement, Licensor and Licensee agree
as follows:
1. Grant of License.
----------------
1.1. On the terms and subject to the conditions hereof including without
limitation Section 9, Licensor grants to Licensee a perpetual, exclusive, fully
paid, royalty-free License to use the Name and Logo (but only to the extent the
Licensor has the right to use the Name and Logo) in connection with the conduct
of the business of designing, manufacturing and marketing carpets or floor
coverings for installation in buildings or other structures (such as stadiums)
and other products currently manufactured and distributed by the Company (the
"Floorcoverings Business"), provided that the Name and Logo will not be used
other than in close proximity to the words "Floorcoverings" or "Floor
Coverings." Licensor represents and warrants to Licensee that, as of the date
hereof, Licensor has all of the right, title and interest in and to the Name and
Logo when used in connection with the Floorcoverings Business and in close
proximity to the words "Floorcoverings" or "Floor Coverings" that Collins &
Aikman
1
<PAGE>
Products Co., a Delaware corporation ("C&A"), had prior to the date hereof.
1.2. Nothing contained herein will in any manner limit or affect the right
of Licensor or C&A to use, or permit another Person to use, the Name and Logo
for any purpose other than (i) in the Floorcoverings Business or (ii) in close
proximity to the words "Floorcoverings" or "Floor Coverings", including without
limitation in connection with the manufacture and sale of Licensor's or C&A's
products or services.
2. Term. This Agreement will commence on the date of this Agreement and
----
will continue until terminated as provided in Section 9.
3. Quality Control. Licensee recognizes the quality of Licensor's and
---------------
C&A's products and services and Licensor's and C&A's position and goodwill in
the businesses in which Licensor and C&A operate and that it is essential that
such quality be maintained at all times. Licensee will display the Name and
Logo only in such form or manner as (i) displayed by Licensee prior to the date
hereof or (ii) has been previously approved by Licensor (which approval, if not
previously given, (x) may not unreasonably be withheld or delayed and (y) will
be deemed given if Licensor does not object in writing within 15 calendar days
of Licensor's receipt of a Licensee's written request for Licensor's approval)
and will take such actions as are reasonably requested by Licensor from time to
time with respect to the form or manner of Licensee's use of the Name and Logo
and to distinguish Licensor and C&A from Licensee. Licensee will also cause to
appear on all materials in connection with which the Name and Logo are used such
legends, markings or notices as Licensor may request in order to give
appropriate notice of any trademark, trade name or other rights or such
distinction, including the use of the Name and Logo in close proximity to
"Floorcoverings" or "Floor Coverings."
4. Infringement. Licensee agrees to notify Licensor promptly of any
------------
infringement or of any use by any Person of a name or mark confusingly similar
to the Name or Logo which actually comes to the attention of a senior officer of
Licensee. Licensor will take, or cause to be taken, such action as it deems
advisable for the protection of its rights in and to the Name and Logo and
Licensee will cooperate with Licensor, if requested to do so. In no event,
however, will Licensor be required to take, or cause to be taken, any action if
it deems it inadvisable to do so and Licensee will have no right to take any
action with respect to the Name or Logo without Licensor's prior written
approval (which may be given or withheld in Licensor's reasonable discretion).
Licensor agrees to notify Licensee promptly of any infringement of or any use by
any Person of a name or mark confusingly similar to the Name, the Logo or
"Collins & Aikman Floorcoverings" which comes to the attention of Licensor.
2
<PAGE>
5. Indemnity. Licensee will jointly and severally indemnify, defend and
---------
hold harmless Licensor, its Affiliates and its or their respective directors,
officers, employees, agents and representatives (including without limitation
any predecessor or successor to any of the foregoing) from and against any and
all Indemnifiable Losses relating to, resulting from or arising out of (a)
infringement or an act of unfair competition in connection with the use of the
Name or Logo by Licensee or any of its Affiliates outside of the United States;
(b) the breach by Licensee of any covenant or agreement contained in this
Agreement; and (c) any Third Party Claim the subject matter of which relates to
use of the Name or Logo by Licensee after the Closing Date.
6. Recognition of Ownership.
------------------------
6.1. Based on the representation of Licensor in Section 1.1, Licensee
recognizes Licensor's and C&A's title to the Name and Logo and will not do or
cause to be done any act which will in any way impair the rights of Licensor or
C&A in and to the Name and Logo. Licensee will not acquire and will not claim
title to the Name or Logo adverse to Licensor or C&A by virtue of the license
granted hereunder or use of the Name or Logo or otherwise.
6.2. Nothing herein will require Licensor or any of its Affiliates to
obtain, maintain or renew any registration of the Name or Logo.
7. Covenant-Not-to-Sue. Licensee for itself and its Affiliates,
-------------------
successors and assigns, hereby covenants from and after the date hereof, not to
sue or to otherwise assert any claims with respect to the use or ownership of
the Name or Logo (other than for any breach by Licensor of this Agreement or the
Acquisition Agreement or any of the agreements contemplated thereby) against
Licensor or any of its Affiliates.
8. Assignment. Neither this Agreement nor any of the rights or
----------
obligations of Licensee hereunder may be directly or indirectly assigned or
transferred by Licensee, in whole or in part, nor may Licensee grant any
sublicense hereunder to any Person (a) except with the prior written consent of
Licensor, which may be given or withheld in Licensor's sole discretion, (b)
except that Licensee may sublicense its rights hereunder to any wholly owned
Subsidiary of Licensee pursuant to a sublicense pursuant to which such
sublicensee agrees to be bound by all of the terms and conditions hereof, and
(c) except that Licensee may assign its rights hereunder to an entity purchasing
all or substantially all of Licensee's assets, provided neither such entity nor
any of its Affiliates, competes, directly or indirectly, with C&A, Licensor or
any of their respective Subsidiaries (the "C&A Group") in any material current
or future product line of the C&A Group other than (i) carpets or floorcoverings
for installation in buildings or other structures
3
<PAGE>
(such as stadiums) ("Floorcoverings Products") or (ii) a product line that is a
product line of any entity that purchases all or substantially all of the
Licensor's, C&A's or C&A's parent's equity or assets at the time of such
acquisition and thereafter becomes a product line of C&A (a "Parent Product
Line"). Any attempted assignment by Licensee of this Agreement or of any rights
or obligations of Licensee hereunder or sublicense not expressly permitted by
the immediately preceding sentence of this section will be null and void.
Nothing herein or done pursuant to this Agreement shall be construed as making
either party an agent of the other.
9. Termination.
-----------
9.1. If Licensee violates or fails to perform in any material respect any
of its material obligations hereunder, Licensor will have the right to give
written notice of default (the "Default Notice") setting forth in reasonable
detail the facts and circumstances constituting the alleged default and stating
that Licensor intends to terminate this Agreement on or after the date set forth
therein (which shall be at least 30 calendar days after the giving of such
notice) (the "Cure Date") unless the Licensee has remedied the default to
Licensor's reasonable satisfaction. In the event the alleged default set forth
in the Default Notice is not rendered to Licensor's reasonable satisfaction by
the Cure Date, Licensor will have the right to terminate this Agreement by
giving written notice of termination. In addition, this Agreement will
terminate automatically, without any notice or action being required by Licensor
or any other Person, if Licensee is acquired by a Person that competes, directly
or indirectly, with the C&A Group in any material current or future product line
of the C&A Group other than the Floorcoverings Products Line or a Parent Product
Line (a "Competing Successor"), provided, however, that for purposes of this
sentence, the term "Person" does not include a merchant bank, leveraged capital
or buy-out firm or similar financial investment firm unless such Person or a
Subsidiary or Affiliate of such Person is a major competitor of C&A in a
material product line of the C&A Group in the automotive interior and
convertible top components and systems business.
9.2. Upon termination of this Agreement, Licensee's rights to use of the
Name and Logo will, without further action, cease. Licensee will, and will use
its reasonable efforts to cause any Competing Successor to, promptly thereafter
(a) destroy any and all signage, stationery, business cards, billhead and other
items bearing the Name or Logo, (b) refrain from using the Name or Logo as part
of its or their corporate name, and (c) refrain from using the Name or Logo on
packaging, advertising, commercial registers and directories, telephone
directories and other listings.
9.3. Licensee acknowledges that a breach of any of the covenants and
agreements contained herein may result in material
4
<PAGE>
irreparable injury to Licensor and its Affiliates for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of such a breach or threat thereof, Licensee
shall be entitled in addition to any other remedies it may have under this
Agreement or otherwise, to seek to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining Licensee and its Affiliates from
engaging in activities prohibited hereby or such other relief as may be required
to specifically enforce any of the covenants contained herein; provided, that no
---------
specification in this Agreement of a specific legal or equitable remedy shall be
construed as a waiver or prohibition against the pursuit of other legal or
equitable remedies in the event of such breach.
10. Notices. All notices and other communications required or permitted
-------
hereunder will be in writing and, unless otherwise provided in this Agreement,
will be deemed to have been duly given when delivered in person or by a
nationally recognized overnight courier service or when dispatched during normal
business hours by electronic facsimile transfer (confirmed in writing by mail
promptly dispatched) to the appropriate party at the address specified below:
If to Licensor, to:
Collins & Aikman Floor Coverings Group, Inc.
701 McCullough Drive
Charlotte, NC 28262
Facsimile No.: (704) 548-2085
Attention: Ronald T. Lindsay, Esq.
With a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Facsimile No.: (212) 755-7306
Attention: Robert A. Profusek, Esq.
If to Licensee:
Collins & Aikman Floorcoverings, Inc.
311 Smith Industrial Blvd.
Dalton, Georgia 30722-1447
Facsimile No.: (706) 259-9711
Attention: Edgar M. Bridger
5
<PAGE>
With a copy to:
CAF Holdings, Inc.
230 East High Street
Charlottesville, Virginia 22902
Facsimile No.: (804) 979-1145
Attention: Stephen M. Burns
And:
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
Richmond, Virginia 23219
Facsimile No.: (804) 775-1061
Attention: Leslie A. Grandis, Esq.
or to such other address or addresses as Licensor or Licensee may from time to
time designate by like notice.
11. Governing Law. This Agreement and the legal relations among the
-------------
parties hereto will be governed by and construed in accordance with the
substantive laws of the State of New York, without giving effect to the
principles of conflict of laws thereof.
12. Severability. If in any judicial proceeding a court refuses to
------------
enforce all provisions of this Agreement, any unenforceable provisions will be
deemed eliminated from the Agreement as is necessary to permit the remainder of
the Agreement to be enforced in such proceeding.
13. Entire Agreement; Amendment.
---------------------------
13.1. This Agreement and the Acquisition Agreement set forth the
entire agreement and understanding of the parties in respect of the matters
contemplated hereby and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof.
13.2. This Agreement may be modified or amended only in a writing
signed by both Licensor and Licensee.
14. Successors. This Agreement shall be binding on and inure to the
----------
benefit of the parties hereto and their respective successors and permitted
assigns.
6
<PAGE>
IN WITNESS WHEREOF, this Tradename License Agreement has been executed
and entered into by the parties as of the date first written above.
COLLINS & AIKMAN FLOOR COVERINGS
GROUP, INC.
By: /s/ Leonard F. Ferro
------------------------
Name:_______________________
Title: _______________________
COLLINS & AIKMAN FLOOR COVERINGS,
INC.
By: /s/ J. Michael Stepp
------------------------
Name:_______________________
Title: _______________________
CAF HOLDINGS INC.
By: /s/ Stephen M. Burns
------------------------
Name:_______________________
Title: _______________________
7
<PAGE>
GUARANTEE
---------
Collins & Aikman Products Co. hereby guarantees the performance by
Collins & Aikman Floor Coverings Group, Inc. ("Licensor") of Licensor's
obligations under the Tradename License Agreement dated as of the date hereof
between Licensor, Collins & Aikman Floor Coverings, Inc. and CAF Holdings, Inc.
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ Elizabeth Philipp
--------------------------
Name: Elizabeth Philipp
-----------------------
Title: Executive Vice President
-------------------------
8
<PAGE>
EXHIBIT 10.3
------------
CONSULTING SERVICES AGREEMENT
This Agreement is made as of February _, 1997, among CAF HOLDINGS,
INC., a Virginia corporation ("Holdings") and COLLINS & AIKMAN FLOORCOVERINGS,
INC., a Delaware corporation ("Floorcoverings") and QUAD-C, INC., a Delaware
corporation (the "Consultant").
RECITALS:
A. Floorcoverings is engaged in the business of designing,
manufacturing and distributing carpet and other floorcoverings for installation
in buildings and other structures (the "Business"). Holdings owns all of the
outstanding common stock of Floorcoverings.
B. Consultant has expertise in the management and operation of
businesses and Holdings desires that they provide consulting services to the
Business.
NOW, THEREFORE, the parties agree as follows:
1. Retention as Consultant. Holdings and Floorcoverings hereby retain
-----------------------
Consultant to render certain consulting and advisory services to Holdings and
Floorcoverings and Consultant hereby agrees to perform the services described
herein.
2. Term. The initial term of this Agreement shall be the period
----
commencing on the date hereof and ending January 31, 1999. This Agreement shall
automatically renew for additional one-year periods unless it is terminated by
either party by giving written notice of termination to the other party at least
90 days before the end of the initial term or 90 days before the end of each
one-year renewal period, as the case may be.
3. Duties. During the term hereof, Consultant shall consult with and
------
advise each of Holdings and Floorcoverings on matters relating to the Business,
including, without limitation, matters relating to the financing, taxation,
operations and development of the Business and such other advice as may be
requested by any of them. If elected, representatives of the Consultant will
serve, without additional compensation, as directors and/or officers of Holdings
and/or Floorcoverings, and will perform the functions of corporate secretary.
4. Compensation. During the term of this Agreement, subject to the
------------
provisions of the Company's senior credit facility, Holdings and Floorcoverings
shall pay Consultant an aggregate of $350,000 per year, payable in equal
quarterly installments in arrears on the last business day of each quarter.
Holdings and Floorcoverings shall also reimburse Consultant for all
reasonable out-of-pocket expenses as incurred by Consultant in the performance
of services hereunder. Such expenses shall be reimbursed promptly upon receipt
by Holdings or Floorcoverings, as the case may be, of expense statements or
other supporting documentation.
<PAGE>
5. Independent Contractor. Consultant is an independent contractor and
----------------------
nothing in this Agreement shall be construed or inferred to imply that
Consultant or any affiliate of Consultant is a partner or joint venturer with,
or an agent or employee of, Holdings or Floorcoverings. All employees, agents or
representatives employed by or used by Consultant in its performance of this
Agreement shall be the employees, agents and representatives of Consultant and
not Holdings or Floorcoverings, except if Holdings or Floorcoverings expressly
hires such persons as its employees, agents or representatives.
6. Notices. Any notice required or permitted hereunder shall be deemed
-------
to have been given or made only if in writing and either delivered or sent by
hand delivery, express delivery, or courier service, or prepaid registered or
certified mail, return receipt requested, addressed as follows:
If to Holdings:
CAF Holdings, Inc.
c/o Quad-C, Inc.
230 East High Street
Charlottesville, Virginia 22902
Attention: Stephen M. Burns
If to Floorcoverings:
Collins & Aikman Floorcoverings, Inc.
311 Smith Industrial Boulevard
Dalton, Georgia 30722
Attention: President
If to Consultant:
Quad-C, Inc.
230 East High Street
Charlottesville, Virginia 22902
Attention: Stephen M. Burns
The date of delivery, or the date of mailing of any such notice shall
be deemed to be the date on which the same was given. Any of the parties may
change its address for the purpose of notice by giving like notice in accordance
with the provisions of this Section.
7. Entire Agreement, Etc. This Agreement contains the entire agreement
---------------------
between the parties hereto and supersedes any and all prior agreements,
arrangements or understandings relating to the subject matter hereof.
2
<PAGE>
8. Governing Law. This Agreement shall be governed, construed by and
-------------
enforced in accordance with the laws of the Commonwealth of Virginia.
CAF HOLDINGS, INC.
By:
---------------------------
Title:
-------------------------
COLLINS & AIKMAN FLOORCOVERINGS, INC
By:
---------------------------
Title:
-------------------------
QUAD-C, INC.
By:
---------------------------
Title:
-------------------------
3
<PAGE>
EXHIBIT 10.4
CAF HOLDINGS, INC.
1997 STOCK OPTION PLAN
1. Purpose. The purpose of this CAF Holdings, Inc. 1997 Stock Option
Plan (the "Plan") is to further the long term stability and financial success of
CAF Holdings, Inc. (the "Company") by attracting and retaining key employees of
the Company and its Subsidiaries through the use of stock incentives. It is
believed that ownership of Company Stock will stimulate the efforts of those
employees of the Company upon whose judgment and interest the Company is and
will be largely dependent for the successful conduct of its business. It is also
believed that Option Awards granted to such employees of the Company under this
Plan will strengthen their desire to remain with the Company and will further
the identification of those employees' interests with those of the Company's
shareholders.
2. Definitions. As used in the Plan, the following terms have the
meanings indicated:
(a) "Applicable Withholding Taxes" means the aggregate amount of
federal, state and local income and payroll taxes that the Company is
required to withhold in connection with any exercise of a Nonstatutory
Stock Option.
(b) "Board" means the board of directors of the Company.
(c) "Change of Control" means the closing date of any sale or other
disposition of substantially all the Company Stock or assets of the
Company other than in the ordinary course of business.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means the Board or the committee appointed by the
Board as described under Section 12.
(f) "Company" means CAF Holdings, Inc., a Virginia corporation.
(g) "Company Stock" means Common Shares, no par value, of the
Company. If the par value of the Company Stock is changed, or in the
event of a change in the capital structure of the Company (as provided
in Section 11), the shares resulting from such a change shall be deemed
to be Company Stock within the meaning of the Plan.
(h) "Control Transfer" means one or a series of related transactions
as a result of which (i) any Third Party, or group of Third Parties
acting in concert, acquires, directly or indirectly, a majority of the
Company's voting shares (on a Fully-Diluted Basis), (ii) the Company
consolidates with or merges into or with, or effects any plan of share
exchange with, any Person and after giving effect to such consolidation
or merger or plan of share exchange any Third Party or group of Third
Parties acting in concert owns, directly or indirectly, a majority of
the voting shares of the Person (on a Fully-Diluted Basis) surviving
such consolidation or merger or (iii) in one transaction or a series of
related transactions, all or substantially all of the assets of the
Company are sold, leased, exchanged or otherwise
<PAGE>
transferred as an entirety to any Third Party or group of Third Parties
acting in concert (the "Acquiring Persons") and after giving effect to
such transaction any Third Party or group of Third Parties acting in
concert owns, directly or indirectly, a majority of the voting shares
of the Acquiring Persons (on a Fully-Diluted Basis).
(i) "Date of Grant" means the date on which an Option Award is
granted by the Committee.
(j) "Disability" or "Disabled" means a condition determined in good
faith by the Committee to be a Disability, with such determination to
be conclusive.
(k) "Fair Market Value" means as of the Date of Grant (or, if there
were no trades on the Date of Grant, the last preceding day on which
Company Stock is traded) (i) if the Company Stock is traded on an
exchange the average of the highest and lowest registered sales prices
of the Company Stock at which it is traded on such day on the exchange
on which it generally has the greatest trading volume, (ii) if the
Company Stock is traded on the over-the-counter market, the average
between the closing high bid and low asked prices as reported by
NASDAQ, or (iii) if shares of Common Stock are not traded on any
exchange or over-the-counter market, the fair market value shall be
determined by the Committee using any reasonable method in good faith.
(l) "Nonstatutory Stock Option" means an Option that does not meet
the requirements of Code section 422, or, even if meeting the
requirements of Code section 422, is not intended to be an incentive
stock option and is so designated.
(m) "Option" means a right to purchase Company Stock granted under
the Plan, at a price determined in accordance with the Plan.
(n) "Option Award" means the award of an Option under the Plan.
(o) "Parent" means, with respect to any corporation, a parent of
that corporation within the meaning of Code section 424(e).
(p) "Participant" means any employee who receives an Option Award
under the Plan.
(q) "Shareholders Agreement" the shareholders agreement among the
Company and its shareholders dated February 6, 1997, as amended.
(r) "Subsidiary" means, with respect to any corporation, a
subsidiary of that corporation within the meaning of Code section
424(f).
(s) "Third Party" means a Person who was not (i) a shareholder of
the Company on February 7, 1997, (ii) a Permitted Transferee (as
defined in the Shareholders Agreement) of a transferor who was, or
whose predecessor in interest was, a shareholder of the Company
-2-
<PAGE>
on February 7, 1997 or (iii) an Affiliate of the Company or any
shareholder or (iv) an employee of the Company on the date such person
became a shareholder.
3. General. Only Nonstatutory Stock Options may be granted under Option
Awards pursuant to the Plan.
4. Stock. Subject to Section 11 of the Plan, there shall be reserved
for issuance under the Plan an aggregate of 800,000 shares of Company Stock;
which shall be authorized, but unissued shares. Shares allocable to Options or
portions thereof granted under the Plan that expire or otherwise terminate
unexercised may again be subjected to an Option Award under the Plan. The
Committee is expressly authorized to make an Option Award to a Participant
conditioned upon the surrender for cancellation of an Option granted under an
existing Option Award. For purposes of determining the number of shares that are
available for Option Awards under the Plan, such number shall include the number
of shares surrendered by an optionee or retained by the Company in payment of
Applicable Withholding Taxes.
5. Eligibility.
(a) All present and future employees of the Company (or any Parent
or Subsidiary of the Company, whether now existing or hereafter created or
acquired) whom the Committee determines to be key employees shall be eligible to
receive Option Awards under the Plan. The Committee shall have the power and
complete discretion, as provided in Section 12, to select eligible employees to
receive Option Awards and to determine for each employee the terms and
conditions and the number of shares to be allocated to each employee as part of
each Option Award.
(b) The grant of an Option Award shall not obligate the Company or
any Parent or Subsidiary of the Company to pay an employee any particular amount
of remuneration, to continue the employment of the employee after the grant or
to make further grants to the employee at any time thereafter.
6. Stock Options.
(a) Whenever the Committee deems it appropriate to grant Options,
notice shall be given to the Participant stating the number of shares for which
Options are granted, the Option price per share, and the conditions to which the
grant and exercise of the Options are subject. This notice, when duly accepted
in writing by the Participant, shall become a stock option agreement between the
Company and the Participant.
(b) The exercise price of shares covered by an Option may be less
than the Fair Market Value of such shares on the Date of Grant, as determined by
the Committee.
(c) Options may be exercised in whole or in part at such times as
may be specified by the Committee in the Participant's stock option agreement.
-3-
<PAGE>
(d) The Committee may, in its discretion, grant Options that by
their terms become fully exercisable upon a Change of Control, notwithstanding
other conditions on exercisability in the stock option agreement.
7. Method of Exercise of Options.
(a) Options may be exercised by the Participant giving written
notice of the exercise to the Company, stating the number of shares the
Participant has elected to purchase under the Option. Such notice shall be
effective only if accompanied by the exercise price in full in cash; provided,
--------
that if the terms of an Option so permit, or if so determined by the Committee,
the Participant may deliver shares of Company Stock (valued at their Fair Market
Value on the date of exercise) that have been held by the Participant for more
than six months in satisfaction of all or any part of the exercise price.
(b) The Company may place on any certificate representing Company
Stock issued upon the exercise of an Option any legend deemed desirable by the
Company's counsel to comply with federal or state securities laws, and the
Company may require a customary written indication of the Participant's
investment intent. Until the Participant has made any required payment,
including any Applicable Withholding Taxes, and has had issued a certificate for
the shares of Company Stock acquired, he or she shall possess no shareholder
rights with respect to the shares.
(c) Each Participant shall agree as a condition of the exercise of
an Option to pay to the Company, or make arrangements satisfactory to the
Company regarding the payment to the Company of, Applicable Withholding Taxes.
Until such amount has been paid or arrangements satisfactory to the Company have
been made, no stock certificate shall be issued upon the exercise of an Option.
(d) As an alternative to making a cash payment to the Company to
satisfy Applicable Withholding Taxes, the Committee may establish procedures
permitting the Participant to elect to deliver shares of Company Stock (valued
at Fair Market Value on the date of delivery) that have been held by the
Participant for more than six months that would satisfy all or a specified
portion of the Federal, state and local tax liabilities of the Participant
arising in the year the Option Award becomes subject to tax. Any such election
shall be made only in accordance with procedures established by the Committee.
8. Nontransferability of Options. Options by their terms, shall not be
transferable except by will or by the laws of descent and distribution or to the
Participant's spouse or children or a family limited partnership, trust or other
similar entity solely for the benefit of the Participant's spouse or children (a
"Permitted Transferee"), and shall be exercisable, during the Participant's
lifetime, only by the Participant or by his or her guardian, duly authorized
attorney-in-fact or other legal representative or by the Permitted Transferee to
whom they have been transferred.
9. Effective Date of the Plan. The effective date of the Plan is
February 6, 1997.
-4-
<PAGE>
10. Termination, Modification, Change. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on February 5, 2008.
No Option Awards shall be granted under the Plan after its termination. The
Board may terminate the Plan or may amend the Plan in such respects as it shall
deem advisable. A termination or amendment of the Plan shall not, without the
consent of the Participant, adversely affect a Participant's rights under an
Option Award previously granted to him.
11. Change in Capital Structure.
(a) In the event of a stock dividend, stock split or combination of
shares, recapitalization or merger in which the Company is the surviving
corporation or other change in the Company's capital stock (including, but not
limited to, the creation or issuance to shareholders generally of rights,
options or warrants for the purchase of common stock or preferred stock of the
Company), the number and kind of shares of stock or securities of the Company to
be subject to the Plan and to Options then outstanding or to be granted
thereunder, the maximum number of shares or securities which may be delivered
under the Plan, the exercise price and other relevant provisions shall be
appropriately adjusted by the Committee, whose determination shall be binding on
all persons. If the adjustment would produce fractional shares with respect to
any unexercised Option, the Committee may adjust appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.
(b) In the event of a Control Transfer, each outstanding Option
that either has theretofore vested or becomes vested by reason of such Control
Transfer and is not exercised prior to the consummation of the Control Transfer,
shall, as determined by the Committee, either (i) be honored or assumed or new
rights substituted therefor, or (ii) be canceled in exchange for a payment in
cash of an amount equal to the excess, if any, of the net proceeds to be
received per Common Share in the Control Transfer over the exercise price for
the Option.
(c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes.
12. Administration of the Plan. The Plan shall be administered by the
Committee, which shall consist of not less than two members of the Board, who
shall be appointed by the Board. In the absence of appointment of the Committee,
the entire Board shall constitute the Committee. The Committee shall have
general authority to impose any limitation or condition upon an Option Award the
Committee deems appropriate to achieve the objectives of the Option Award and
the Plan and, without limitation and in addition to powers set forth elsewhere
in the Plan, shall have the following specific authority:
(a) The Committee shall have the power and complete discretion to
determine (i) which eligible employees shall receive Option Awards,
(ii) the number of shares of Company Stock to be covered by each Option
Award, (iii) the exercise price of Nonstatutory Stock Options; (iv) the
Fair Market Value of Company Stock, (v) the time or times when an
Option Award shall be granted, (vi) whether an Option Award shall
become vested over a period of
-5-
<PAGE>
time and when it shall be fully vested, (vii) when Options may be
exercised, (viii) whether a Disability exists, (ix) the manner in which
payment will be made upon the exercise of Options, (x) conditions
relating to the length of time before disposition of Company Stock
received upon the exercise of Options is permitted, (xi) whether to
approve a Participant's election to deliver shares of already owned
Company Stock to satisfy Applicable Withholding Taxes, (xii) notice
provisions relating to the sale of Company Stock acquired under the
Plan, and (xiii) any additional requirements relating to Option Awards
that the Committee deems appropriate. The Committee shall have the
power to amend the terms of previously granted Option Awards so long as
the terms as amended are consistent with the terms of the Plan and
provided that the consent of the Participant is obtained with respect
to any amendment that would be detrimental to him or her.
(b) The Committee may adopt rules and regulations for carrying out
the Plan. The interpretation and construction of any provision of the
Plan by the Committee shall be final and conclusive. The Committee may
consult with counsel, who may be counsel to the Company, and shall not
incur any liability for any action taken in good faith in reliance upon
the advice of counsel.
(c) A majority of the members of the Committee shall constitute a
quorum, and all actions of the Committee shall be taken by a majority
of the members present. Any action may be taken by a written instrument
signed by all of the members, and any action so taken shall be fully
effective as if it had been taken at a meeting.
(d) The Board from time to time may appoint members previously
appointed and may fill vacancies, however caused, in the Committee.
13. Notice. All notices and other communications required or permitted
to be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered personally or mailed first class, postage prepaid, as
follows (a) if to the Company - at its principal business address to the
attention of the Chief Executive Officer; (b) if to any Participant - at the
last address of the Participant known to the sender at the time the notice or
other communication is sent.
14. Interpretation. The terms of this Plan shall be governed by the
laws of the Commonwealth of Virginia.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Plan to be executed
this 6th day of February, 1997.
CAF HOLDINGS, INC.
By
------------------------
-7-
<PAGE>
CAF HOLDINGS, INC.
230 East High Street
Charlottesville, Virginia 22902
February 24, 1997
- -------------------
- -------------------
Dear Mr. :
------
CAF Holdings, Inc. (the "Company") has designated you to be a recipient
of an option (the "Option") to purchase Common Shares, no par value, of the
Company ("Common Shares") on the terms set forth in this letter and in the CAF
Holdings, Inc. 1997 Stock Option Plan (the "Plan").
The Option is awarded pursuant to the Plan, which was effective as of
February 6, 1997. The Plan is administered by the Board of Directors of the
Company.
Please refer to the Plan for certain conditions not set forth in this
letter. All provisions of this Option are subject to the terms of the Plan, and
the terms of the Plan are hereby incorporated into this letter by this
reference. Capitalized terms which are not defined herein shall have the
meanings given those terms in the Plan.
A. Option. In consideration of your agreements contained in this letter
------
and subject to the vesting requirements set forth below, the Company hereby
grants you an Option to purchase from the Company ____ Common Shares, at $1.00
per share. The Option is a Nonstatutory Stock Option as defined in the Plan. The
award of the Option is subject to the terms and conditions set forth below.
B. Terms of Option.
---------------
(1) The Option will become exercisable when the vesting provisions
described below are met. Except as provided in subparagraph (2)(f) below, you
must continue to be an employee of the Company or a Parent or Subsidiary at all
times through the appropriate vesting date in order for the Option to become
vested.
(2) The Option will become vested, without duplication, as to the
number of shares indicated below, if and when the following conditions are
satisfied:
(a) EBITDA Test: (i) In the event cumulative earnings of the
-----------
Company before interest, taxes, depreciation and amortization ("EBITDA") from
January 26, 1997 through the end of any fiscal year of the Company ending on or
before January 26, 2002 equals at least $______ million (representing
approximately 95% of the forecasted EBITDA as reflected in the projections
attached hereto as Exhibit A), the Option, to the extent not theretofore
expired, will, on the last day of the fiscal year of the Company in which such
<PAGE>
February 24, 1997
Page 2
event occurs or such earlier date within such fiscal year as the Board of
Directors shall determine, become vested as to _______ shares.
(ii) The determination of EBITDA shall be made
in accordance with generally accepted accounting principles in effect
in the United States and shall exclude gains on disposal of assets and
other non-operating income items, but shall include losses on disposal
of assets and other non-operating expense items; provided that reported
--------
EBITDA shall be adjusted by adding thereto (x) the amount of the
non-cash charges, if any, for the accretion of the value of the options
issued pursuant to the Plan that were deducted in calculating EBITDA
for such period and (y) management fees paid to Quad-C, Inc. that were
deducted in calculating EBITDA for each period, and subtracting
therefrom an annual amount determined in good faith by the Board of
Directors to account for the cost of additional capital for
acquisitions and capital expenditures in excess of the capital
expenditures provided for in Exhibit A based on the following formula:
(A) 25% per annum of the aggregate additional equity capital
contributions to the Company to fund such capital expenditures or
acquisitions plus (B) an amount per annum representing annual principal
and interest payments under additional indebtedness for borrowed money
or capitalized lease obligations to fund such capital expenditures or
acquisitions (or assumed in connection with such acquisitions), such
annual charges to be calculated assuming (1) straight line amortization
from the date of incurrence or assumption of such additional
indebtedness to February 15, 2007 and (2) interest at a spread of 338
basis points over like period U.S. treasury obligations at the time of
such capital expenditure or acquisition (representing the spread
reflected in the Company's Senior Subordinated Debt).
(b) IRR test: (i) In the event that on or before
--------
January 31, 2005, as a result of (x) a sale of all the capital stock or
assets of the Company ("Company Transfer") or (y) a public offering of
Common Shares by the Company in which the Company receives net proceeds
of at least $30 million (an "Initial Public Offering"), the pretax
internal rate of return (calculated on a cash-in, cash-out basis)
("IRR") realized by Quad-C Partners II, L.P., Quad-C Partners III, L.P.
and Quad-C Partners IV, L.P. (collectively, the "Quad-C Investors")
over the term of the investment through the date of closing of the sale
or the Initial Public Offering, and after giving effect to the dilution
that would be caused by the exercise of all Options vested (either
theretofore or by operation of this provision) under the Plan and the
issuance of all capital stock issuable upon conversion or exchange of
securities issued by the Company or its Subsidiaries and, in the event
of the Initial Public Offering, valuing the Common Shares held by the
Quad-C Investors immediately before the Initial Public Offering at the
higher of (A) the Initial Public Offering price and (B) the highest
average of the closing price of the Common Shares during any ten
consecutive trading days during the 60 calender days immediately
following the effective date of the Initial Public Offering, is at
least __%, the Option, to the extent not theretofore vested or expired,
will, as of the date of closing of such sale or Initial Public Offering
become vested as to _______ shares.
<PAGE>
February 24, 1997
Page 3
(ii) In the event that on or before January 31,
2005, as a result of a Control Transfer (as defined in the Shareholders
Agreement among the Company, its Shareholders and holders of Options),
the IRR realized by the Quad-C Investors over the term of the
investment through the date of closing of the Control Transfer, is at
least 30%, the Option, to the extent not theretofore vested or expired,
will, as of the date of closing of such sale, become vested as to the
number of shares set forth in clause (i) of this paragraph (b)
multiplied by the percentage of the stock or assets of the Company
transferred in such Control Transfer.
(c) In the event of a transaction or series of
transactions resulting in the sale of all of the capital stock or
assets of the Company that does not result in vesting of all of the
shares covered by the Option pursuant to paragraph (a) or (b) of this
Section B(2), the unvested portion of the Option shall expire as of the
date of closing of the sale.
(d) The Board of Directors shall have complete
discretion to determine whether the provisions of paragraphs (a), (b)
or (c) of this Section B(2) have been satisfied.
(e) On January 31, 2006, to the extent not
theretofore vested or expired, the Option will vest as to ______
shares.
(f) If your employment with the Company and its
subsidiaries is terminated for any reason prior to the earlier of (i)
the vesting of the Option pursuant to paragraph (a) or (b) and (ii)
January 31, 1999, the unvested portion of the Option will expire as of
the date of your termination of employment. If your employment with the
Company and its subsidiaries is terminated by reason of retirement at
age 65, voluntary termination by you or involuntary termination by the
Company or its subsidiaries for Cause (as defined in your Executive
Subscription Agreement with the Company) on or after January 31, 1999
and prior to the earlier of (i) the vesting of the Option pursuant to
paragraph (a) or (b) and (ii) January 31, 2006, the unvested portion of
the Option will expire as of the date of your termination of
employment. If your employment with the Company and its subsidiaries is
terminated by reason of your death or permanent disability or
involuntarily by the Company other than for Cause, on or after January
31, 1999, and prior to the vesting of the Option pursuant to paragraph
(a) or (b), the Option will be deemed to have "conditionally vested"
depending on the date of termination of your employment as follows:
<PAGE>
February 24, 1997
Page 4
<TABLE>
<CAPTION>
Percentage of Option
Termination of Employment Conditionally
------------------------- -------------
Vested
- ------
<S> <C> <C>
On or after January 31, 1999 and before January 31, 2000 25%
On or after January 31, 2000 and before January 31, 2001 50%
On or after January 31, 2001 and before January 31, 2002 75%
On or after January 31, 2002 100%
</TABLE>
The remaining portion of the Option will expire as of the date of
termination of employment. Final vesting of the "conditionally vested"
Option will be dependent upon satisfaction of the provisions of
paragraph (a) or (b) of this Section B(2), so that the "conditionally
vested" Option may not be exercised unless the provisions of paragraph
(a) or (b), as the case may be, of this Section B(2) are satisfied, and
if such conditions are not satisfied the "conditionally vested" Option
will expire on January 31, 2005.
(3) Subject to the limitations set forth in this letter and in
the Plan, after the Option becomes vested, you may exercise the vested portion
of the Option, in whole or in part, at any time until the earlier of (i) the
effective time of termination of your employment with the Company and its
subsidiaries for Cause, (ii) one year after termination of your employment with
the Company and its subsidiaries by you or by the Company other than for Cause
(and other than by reason of death, permanent disability or retirement at age
65); provided that in the event that the shares to be issued upon exercise of
--------
the Option will be immediately tradeable, the date by which the vested portion
of the Option must be exercised shall be 30 days after the later of (x) the
effective time of termination of employment and (y) the expiration of any
restriction imposed on disposition of such shares, but in no event later than
one year after termination of employment, (iii) a Control Transfer and (iv)
January 31, 2008.
(4) You may exercise all or any portion of the Option by
giving written notice of the exercise to the Company, stating the number of
shares that you are purchasing and transmitting cash in the amount of the full
purchase price. Attached is a Notice of Exercise form to be used to give the
Company written notice of the exercise.
(5) This Option is not transferable by you except by will or
by the laws of descent and distribution or to your spouse or children or a
family limited partnership, trust or other similar entity solely for the benefit
of your spouse or children ("Permitted Transferees"), and the Option may be
exercised during your lifetime only by you or your Permitted Transferees to whom
the Option has been transferred. All agreements made by you in this letter shall
be binding on your heirs and descendants.
<PAGE>
February 24, 1997
Page 5
C. Other Conditions.
----------------
(1) As provided in the Plan, appropriate adjustments shall be
made in the number and kind of shares for which the Option may be exercised and
the Option price should there be a change in the capital structure of the
Company, and the Board of Directors may take appropriate actions in good faith
with respect to the Option in the event of a significant corporate transaction.
(2) By signing this letter, you agree to make arrangements
satisfactory to the Company to comply with any income and payroll tax
withholding requirements that may apply upon the exercise of the Option.
(3) All shares received upon the exercise of the Option shall
be held subject to the terms of the Shareholders Agreement and the Custody
Agreement and Power of Attorney in such form as shall be required by the Board
of Directors at the time. By signing this letter, you agree to execute the
Shareholders Agreement and the Custody Agreement and Power of Attorney as a
condition to the award of the Option.
(4) By signing this letter, you agree to hold all of the
Common Shares acquired pursuant to the exercise of the Option for investment
purposes and not with a view to resale or distribution to the public, unless and
until such time as the Common Shares so acquired shall have been registered
under applicable state and federal securities laws or an exemption from such
registration is available. By signing this letter, you hereby agree to execute
such documents as the Company may require with respect to applicable state and
federal securities laws, and you agree to any restrictions on the resale of the
Common Shares that may pertain.
D. Notice. Written notice is deemed to have been given to the
------
Company and the Board of Directors if delivered personally or mailed first
class, postage prepaid, to the President of the Company at the principal
business address of the Company, with copies to Quad-C, Inc. 230 East High
Street, Charlottesville, Virginia 22902, Attention: Stephen M. Burns, or at such
other address or to the attention of such other person as the recipient shall
have specified by prior written notice to you.
E. Agreement. In consideration of the grant of the Option, you
---------
hereby agree that you will comply with such other conditions as the Board of
Directors may impose on the exercise of the Option and will perform such duties
as may be assigned to you from time to time by the Board of Directors or by the
executive officers of the Company; provided that the provisions of this sentence
--------
shall not be interpreted as affecting any right that the Company or a subsidiary
may have to terminate your employment at any time.
This Agreement shall be governed by the laws of the Commonwealth of
Virginia.
<PAGE>
February 24, 1997
Page 6
If you agree to the foregoing terms and conditions, please execute the
attached copy of this letter and return it to the Chief Executive Officer of the
Company.
Sincerely,
CAF Holdings, Inc.
By:
-------------------------
I hereby accept the foregoing Option according to the terms set forth
in this letter and in the CAF Holdings, Inc. 1997 Stock Option Plan.
----------------------------------
[Type Name of Optionee]
<PAGE>
EXHIBIT B
---------
CAF HOLDINGS, INC.
1997 STOCK OPTION PLAN
NOTICE OF EXERCISE OF OPTION
----------------------------
Pursuant to the terms of the Option Agreement, dated _______________,
1997, between CAF Holdings, Inc. and the undersigned Optionee, the Optionee
hereby exercises the Option to purchase ________________ Common Shares. The
Optionee hereby delivers the full Option price with respect to the exercised
Option, which is comprised of cash in the amount of $_________.
Executed this _____ day of _________, 19__.
OPTIONEE
------------------------------
Signature
------------------------------
Print or Type Name
CAF Holdings, Inc. hereby acknowledges receipt of the foregoing notice
of exercise and payment of the Option price this ____ day of __________, 19__.
CAF Holdings, Inc.
By:
---------------------------
<PAGE>
CAF HOLDINGS, INC.
230 East High Street
Charlottesville, Virginia 22902
February 24, 1997
- --------------------
- --------------------
Dear Mr. ______:
CAF Holdings, Inc. (the "Company") has designated you to be a recipient
of an option (the "Option") to purchase Common Shares, no par value, of the
Company ("Common Shares") on the terms set forth in this letter and in the CAF
Holdings, Inc. 1997 Stock Option Plan (the "Plan").
The Option is awarded pursuant to the Plan, which was effective as of
February 6, 1997. The Plan is administered by the Board of Directors of the
Company.
Please refer to the Plan for certain conditions not set forth in this
letter. All provisions of this Option are subject to the terms of the Plan, and
the terms of the Plan are hereby incorporated into this letter by this
reference. Capitalized terms which are not defined herein shall have the
meanings given those terms in the Plan.
A. Option. In consideration of your agreements contained in this letter
------
and subject to the vesting requirements set forth below, the Company hereby
grants you an Option to purchase from the Company ____ Common Shares, at $1.00
per share. The Option is a Nonstatutory Stock Option as defined in the Plan. The
award of the Option is subject to the terms and conditions set forth below.
B. Terms of Option.
---------------
(1) The Option will become exercisable when the vesting provisions
described below are met. Except as provided in subparagraph (2)(e) below, you
must continue to be an employee of the Company or a Parent or Subsidiary at all
times through the appropriate vesting date in order for the Option to become
vested.
(2) The Option will become vested, without duplication, as to
the number of shares indicated below, if and when the following conditions are
satisfied:
(a) EBITDA Test: (i) In the event cumulative earnings of the
-----------
Company before interest, taxes, depreciation and amortization
("EBITDA") from January 26, 1997 through the end of any fiscal year of
the Company ending on or before January 26, 2002 equals more than
$______ million, but is less than $______ million, the Option, to the
extent not theretofore vested or expired, will, on the last day of the
fiscal year of the Company in which such event occurs or such earlier
date within such fiscal year as the Board of Directors shall determine,
become vested as to the number of shares determined by multiplying ___
<PAGE>
February 24, 1997
Page 2
shares by the fraction, the numerator of which is the amount by which
EBITDA for such period exceeds $______ million and the denominator of
which is $______ million.
(ii) In the event cumulative EBITDA from
January 26, 1997 through the end of any fiscal year of the Company
ending on or before January 26, 2002 equals at least $_______ million
(representing 100% of the forecasted EBITDA as reflected in the
projections attached hereto as Exhibit A) but is less than $_______
million, the Option, to the extent not theretofore vested or expired,
will, on the last day of the fiscal year of the Company in which such
event occurs or such earlier date within such fiscal year as the Board
of Directors shall determine, become vested as to _______ shares plus
such additional number of shares, if any, determined by multiplying
_____ shares by the fraction, the numerator of which is the amount by
which EBITDA for such period exceeds $_______ million and the
denominator of which is $______ million.
(iii) In the event cumulative EBITDA from
January 26, 1997 through the end of any fiscal year of the Company
ending on or before January 26, 2002 equals at least $_______ million
(representing approximately 113% of the forecasted EBITDA as reflected
in the projections attached hereto as Exhibit A), the Option, to the
extent not theretofore vested or expired, will, on the last day of the
fiscal year of the Company in which such event occurs or such earlier
date within such fiscal year as the Board of Directors shall determine,
become vested as to _____ shares.
(iv) The determination of EBITDA shall be made
in accordance with generally accepted accounting principles in effect
in the United States and shall exclude gains on disposal of assets and
other non-operating income items, but shall include losses on disposal
of assets and other non-operating expense items; provided that reported
--------
EBITDA shall be adjusted by adding thereto (x) the amount of the
non-cash charges, if any, for the accretion of the value of the options
issued pursuant to the Plan that were deducted in calculating EBITDA
for such period and (y) management fees paid to Quad-C, Inc. that were
deducted in calculating EBITDA for each period, and subtracting
therefrom an annual amount determined in good faith by the Board of
Directors to account for the cost of additional capital for
acquisitions and capital expenditures in excess of the capital
expenditures provided for in Exhibit A based on the following formula:
(A) 25% per annum of the aggregate additional equity capital
contributions to the Company to fund such capital expenditures or
acquisitions plus (B) an amount per annum representing annual principal
and interest payments under additional indebtedness for borrowed money
or capitalized lease obligations to fund such capital expenditures or
acquisitions (or assumed in connection with such acquisitions), such
annual charges to be calculated assuming (1) straight line amortization
from the date of incurrence or assumption of such additional
indebtedness to February 15, 2007 and (2) interest at a spread of 338
basis points over like period U.S. treasury obligations at the time of
such capital expenditure or acquisition (representing the spread
reflected in the Company's Senior Subordinated Debt).
<PAGE>
February 24, 1997
Page 3
(b) IRR test: (i) In the event that on or before January 31,
--------
2005, as a result of (x) a sale of all the capital stock or assets of
the Company ("Company Transfer") or (y) a public offering of Common
Shares by the Company in which the Company receives net proceeds of at
least $30 million (an "Initial Public Offering"), the pretax internal
rate of return (calculated on a cash-in, cash-out basis) ("IRR")
realized by Quad-C Partners II, L.P., Quad-C Partners III, L.P. and
Quad-C Partners, IV L.P. (collectively, the "Quad-C Investors") over
the term of the investment through the date of closing of the sale or
the Initial Public Offering, and after giving effect to the dilution
that would be caused by the exercise of all Options vested (either
theretofore or by operation of the provisions of this paragraph (b))
under the Plan and the issuance of all capital stock issuable upon
conversion or exchange of securities issued by the Company or its
Subsidiaries and, in the event of the Initial Public Offering. valuing
the Common Shares held by the Quad-C Investors immediately before the
Initial Public Offering at the higher of (A) the Initial Public
Offering price and (B) the highest average of the closing price of the
Common Shares during any ten consecutive trading days during the 60
calender days immediately following the effective date of the Initial
Public Offering, is more than 30%, but is less than 35%, the Option, to
the extent not theretofore vested or expired, will, as of the date of
closing of such sale or Initial Public Offering, become vested as to
the number of shares determined by multiplying _____ shares by the
fraction, the numerator of which is the amount by which the IRR for
such period exceeds __% and the denominator of which is 5.
(ii) In the event that on or before January 31,
2005, as a result of (x) a Company Transfer or (y) an Initial Public
Offering, the IRR realized by the Quad-C Investors over the term of the
investment through the date of closing of the sale or the Initial
Public Offering, and after giving effect to the dilution that would be
caused by the exercise of all Options vested (either theretofore or by
operation of the provisions of this paragraph (b)) under the Plan and
the issuance of all capital stock issuable upon conversion or exchange
of securities issued by the Company or its Subsidiaries and, in the
event of the Initial Public Offering. valuing the Common Shares held by
the Quad-C Investors immediately before the Initial Public Offering at
the higher of (A) the Initial Public Offering price and (B) the highest
average of the closing price of the Common Shares during any ten
consecutive trading days during the 60 calender days immediately
following the effective date of the Initial Public Offering, is at
least 35%, but less than 40%, the Option, to the extent not theretofore
vested or expired, will, as of the date of closing of such sale or
Initial Public Offering, become vested as to _______ shares plus such
additional number of shares, if any, determined by multiplying _____
shares by the fraction, the numerator of which is the amount by which
the IRR for such period exceeds __% and the denominator of which is 5.
(iii) In the event that on or before January
31, 2005, as a result of (x) a Company Transfer or (y) an Initial
Public Offering, the IRR realized by the Quad-C Investors over the term
of the investment through the date of closing of the sale or the
Initial Public Offering, and after giving effect to the dilution that
would be caused by the exercise of all Options vested (either
theretofore or by operation of the provisions of this paragraph
<PAGE>
February 24, 1997
Page 4
(b)) under the Plan and the issuance of all capital stock issuable upon
conversion or exchange of securities issued by the Company or its
Subsidiaries and, in the event of the Initial Public Offering. valuing
the Common Shares held by the Quad-C Investors immediately before the
Initial Public Offering at the higher of (A) the Initial Public
Offering price and (B) the highest average of the closing price of the
Common Shares during any ten consecutive trading days during the 60
calender days immediately following the effective date of the Initial
Public Offering, is at least __%, the Option, to the extent not
theretofore vested or expired, will, as of the date of closing of such
sale or Initial Public Offering, become vested as to _______ shares.
(iv) In the event that on or before January 31, 2005,
as a result of a Control Transfer (as defined in the Shareholders
Agreement among the Company, its Shareholders and holders of Options),
the IRR realized by the Quad-C Investors over the term of the
investment through the date of closing of the Control Transfer, is
greater than 30%, the Option, to the extent not theretofore vested or
expired, will, as of the date of closing of such sale, become vested as
to the number of shares set forth in clauses (i), (ii) or (iii), as the
case may be (based upon the IRR realized) of this paragraph (b)
multiplied by the percentage of the stock or assets of the Company
transferred in such Control Transfer.
(c) In the event of a transaction or series of
transactions resulting in the sale of all of the capital stock or
assets of the Company that does not result in vesting of all of the
shares covered by the Option pursuant to paragraph (a) or (b) of this
Section B(2), the unvested portion of the Option shall expire as of the
date of closing of the sale.
(d) The Board of Directors shall have complete discretion
to determine whether the provisions of paragraphs (a), (b) or (c) of
this Section B(2) have been satisfied.
(e) If your employment with the Company and its
subsidiaries is terminated for any reason prior to the earlier of (i)
the vesting of the Option pursuant to paragraph (a) or (b) and (ii)
January 31, 1999, the unvested portion of the Option will expire as of
the date of your termination of employment. If your employment with the
Company and its subsidiaries is terminated by reason of retirement at
age 65, voluntary termination by you or involuntary termination by the
Company or its subsidiaries for Cause (as defined in your Executive
Subscription Agreement with the Company) on or after January 31, 1999
and prior to the earlier of (i) the vesting of the Option pursuant to
paragraph (a) or (b) and (ii) January 31, 2005, the unvested portion of
the Option will expire as of the date of your termination of
employment. If your employment with the Company and its subsidiaries is
terminated by reason of your death or permanent disability or
involuntarily by the Company other than for Cause, on or after January
31, 1999, and prior to the vesting of the Option pursuant to paragraph
(a) or (b), the Option will be deemed to have "conditionally vested"
depending on the date of termination of your employment as follows:
<PAGE>
February 24, 1997
Page 5
<TABLE>
<CAPTION>
Termination of Employment Percentage of Option
Conditionally
------------------------- -------------
Vested
- ------
<S> <C> <C>
On or after January 31, 1999 and before January 31, 2000 25%
On or after January 31, 2000 and before January 31, 2001 50%
On or after January 31, 2001 and before January 31, 2002 75%
On or after January 31, 2002 100%
</TABLE>
The remaining portion of the Option will expire as of the date of
termination of employment. Final vesting of the "conditionally vested"
Option will be dependent upon satisfaction of the applicable provisions
of paragraph (a) or (b) of this Section B(2), so that applicable
portion of the "conditionally vested" Option may not be exercised
unless the provisions of paragraph (a) or (b), as the case may be, of
this Section B(2) are satisfied, and if such conditions are not
satisfied the "conditionally vested" Option will expire on January 31,
2005.
(f) On January 31, 2005, all Options, including conditionally
vested Options, that have not vested pursuant to paragraphs (a) or (b)
of this Section B(2), or expired, on or before such date, shall expire.
(3) Subject to the limitations set forth in this letter and in the
Plan, after the Option becomes vested, you may exercise the vested portion of
the Option, in whole or in part, at any time until the earlier of (i) the
effective time of termination of your employment with the Company and its
subsidiaries for Cause, (ii) one year after termination of your employment with
the Company and its subsidiaries by you or by the Company other than for Cause
(and other than by reason of death, permanent disability or retirement at age
65); provided that in the event that the shares to be issued upon exercise of
the Option will be immediately tradeable, the date by which the vested portion
of the Option must be exercised shall be 30 days after the later of (x) the
effective time of termination of employment and (y) the expiration of any
restriction imposed on disposition of such shares, but in no event later than
one year after termination of employment, (iii) a Control Transfer and (iv)
January 31, 2008.
(4) You may exercise all or any portion of the Option by giving
written notice of the exercise to the Company, stating the number of shares that
you are purchasing and transmitting cash in the amount of the full purchase
price. Attached is a Notice of Exercise form to be used to give the Company
written notice of the exercise.
(5) This Option is not transferable by you except by will or by the
laws of descent and distribution or to your spouse or children or a family
limited partnership, trust or other similar entity solely for the benefit of
your spouse or children ("Permitted Transferees"), and the Option may be
exercised during your lifetime only by you or your Permitted Transferees to whom
the
<PAGE>
February 24, 1997
Page 6
Option has been transferred. All agreements made by you in this letter shall be
binding on your heirs and descendants.
C. Other Conditions.
----------------
(1) As provided in the Plan, appropriate adjustments shall be made
in the number and kind of shares for which the Option may be exercised and the
Option price should there be a change in the capital structure of the Company,
and the Board of Directors may take appropriate actions in good faith with
respect to the Option in the event of a significant corporate transaction.
(2) By signing this letter, you agree to make arrangements
satisfactory to the Company to comply with any income and payroll tax
withholding requirements that may apply upon the exercise of the Option.
(3) All shares received upon the exercise of the Option shall be
held subject to the terms of the Shareholders Agreement and the Deposit and
Escrow Agreement in such form as shall be required by the Board of Directors at
the time. By signing this letter, you agree to execute the Shareholders
Agreement and the Deposit and Escrow Agreement as a condition to the award of
the Option.
(4) By signing this letter, you agree to hold all of the Common
Shares acquired pursuant to the exercise of the Option for investment purposes
and not with a view to resale or distribution to the public, unless and until
such time as the Common Shares so acquired shall have been registered under
applicable state and federal securities laws or an exemption from such
registration is available. By signing this letter, you hereby agree to execute
such documents as the Company may require with respect to applicable state and
federal securities laws, and you agree to any restrictions on the resale of the
Common Shares that may pertain.
D. Notice. Written notice is deemed to have been given to the Company
------
and the Board of Directors if delivered personally or mailed first class,
postage prepaid, to the President of the Company at the principal business
address of the Company, with copies to Quad-C, Inc. 230 East High Street,
Charlottesville, Virginia 22902, Attention: Terrence D. Daniels, or at such
other address or to the attention of such other person as the recipient shall
have specified by prior written notice to you.
E. Agreement. In consideration of the grant of the Option, you hereby
---------
agree that you will comply with such other conditions as the Board of Directors
may impose on the exercise of the Option and will perform such duties as may be
assigned to you from time to time by the Board of Directors or by the executive
officers of the Company; provided that the provisions of this sentence shall not
be interpreted as affecting any right that the Company or a subsidiary may have
to terminate your employment at any time.
<PAGE>
February 24, 1997
Page 7
This Agreement shall be governed by the laws of the Commonwealth of
Virginia.
If you agree to the foregoing terms and conditions, please execute the
attached copy of this letter and return it to the Chief Executive Officer of the
Company.
Sincerely,
CAF Holdings, Inc.
By:
--------------------------------
I hereby accept the foregoing Option according to the terms set forth
in this letter and in the CAF Holdings, Inc. 1997 Stock Option Plan.
----------------------------------
[Type Name of Optionee]
<PAGE>
EXHIBIT B
---------
CAF HOLDINGS, INC.
1997 STOCK OPTION PLAN
NOTICE OF EXERCISE OF OPTION
----------------------------
Pursuant to the terms of the Option Agreement, dated _______________,
1997, between CAF Holdings, Inc. and the undersigned Optionee, the Optionee
hereby exercises the Option to purchase ________________ Common Shares. The
Optionee hereby delivers the full Option price with respect to the exercised
Option, which is comprised of cash in the amount of $_________.
Executed this _____ day of _________, 19__.
OPTIONEE
------------------------------
Signature
------------------------------
Print or Type Name
CAF Holdings, Inc. hereby acknowledges receipt of the foregoing notice
of exercise and payment of the Option price this ____ day of __________, 19__.
CAF Holdings, Inc.
By:
--------------------------
<PAGE>
Exhibit 10.5
------------
================================================================================
NON-COMPETITION AGREEMENT
AMONG
CAF HOLDINGS, INC.,
COLLINS & AIKMAN FLOOR COVERINGS, INC.
COLLINS & AIKMAN CORPORATION
AND
COLLINS & AIKMAN PRODUCTS CO.
--------------------------------------
Dated as of February 6, 1997
--------------------------------------
================================================================================
<PAGE>
Table of Contents
-----------------
<TABLE>
<S> <C>
1. Confidentiality and Non-competition. .................................... 1
(a) Covenant Not to Compete. ...................................... 1
(b) Covenant Not to Use Name. ..................................... 2
(c) Nondisclosure of Confidential Information. .................... 2
(d) No Interference. .............................................. 2
(e) Relief. ....................................................... 3
(f) Indemnity. ..................................................... 3
(g) Extension of Restricted Periods. .............................. 3
2. Successors; Binding Agreement. .......................................... 3
3. Waiver and Modification. ................................................ 4
4. Reasonableness of Covenants; Severability. .............................. 4
5. Governing Law. .......................................................... 4
6. Blue Pencilling. ........................................................ 4
7. Notices. ................................................................ 4
8. Captions and Section Headings; Certain Definitions. ..................... 5
9. Entire Agreement. ....................................................... 6
10. Counterparts. .......................................................... 6
</TABLE>
<PAGE>
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT (this "Agreement") is made and
entered into this 6th day of February, 1997, among CAF HOLDINGS, INC., a
Virginia corporation ("Parent"), COLLINS & AIKMAN FLOOR COVERINGS, INC., a
Delaware corporation (the "Company"), COLLINS & AIKMAN CORPORATION, a Delaware
corporation and COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation
(collectively, "C&A").
Parent has, through its wholly-owned subsidiary, CAF
Acquisition Corporation, a Virginia corporation ("Purchaser"), agreed to acquire
(the "Acquisition") the entire issued and outstanding share capital of the
Company pursuant to a certain Acquisition Agreement dated as of December 9,
1996, among Parent, Purchaser, C&A and C&A's wholly-owned subsidiary, Collins &
Aikman Floor Coverings Group, Inc., a Delaware corporation ("Seller"), (the
"Acquisition Agreement"). The execution and delivery of this Non-Competition
Agreement is a condition to the closing of the Acquisition, and C&A and Seller
acknowledge that the Company, Parent and their investors and lenders are relying
on the covenants of C&A contained herein in proceeding with the Acquisition.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
1. Confidentiality and Non-competition. C&A acknowledges that
(i) the agreements and covenants contained herein are essential to protect the
value of the Company's business and assets and (ii) by virtue of its association
with the Company, it has obtained (and will obtain) such knowledge, know-how,
training and experience which could be used to the substantial advantage of a
competitor of the Company and to the Company's substantial detriment. C&A also
acknowledges that Parent and Purchaser have consummated the purchase
contemplated by the Acquisition Agreement, and have entered into related
agreements effective as of the Closing Date (as defined therein) in reliance, in
part, on the covenants made by C&A herein.
(a) Covenant Not to Compete. C&A covenants and agrees that,
for the period commencing on the date hereof and ending on the seventh
anniversary after the date hereof (the "Restrictive Period"), C&A shall not, and
shall cause its direct and indirect Subsidiaries not to, in the Territory
(hereinafter defined), directly or indirectly, own, manage, operate, control,
participate in, give advice to, loan money to, be connected in any manner with
or allow its name to be used in connection with any business which designs,
manufactures or sells in the Territory any products which are in direct
competition with carpeting or other floor coverings for installation in
buildings or other structures (such as stadiums) or parking blocks, but
excluding mats whether or not used in buildings (a "Competitive Activity");
provided that (i) nothing in this Section 1(a) shall restrict or prevent in any
- --------
manner C&A or its Subsidiaries from engaging in any business or related activity
in which it is engaged on the date hereof (C&A acknowledging that neither it nor
any of its Subsidiaries is so engaged in a Competitive Activity), (ii) nothing
in this Section 1(a) shall restrict C&A or its Subsidiaries from acquiring after
the second anniversary after the date hereof an entity which prior to and after
such acquisition is engaged in a Competitive Activity so long as C&A is in
compliance in all material respects with the provisions of paragraphs (b),
(c)(i) and (d) of this Section 1, and (iii) C&A and its Subsidiaries may
maintain and/or undertake purely passive investments in companies engaged in a
Competitive Activity so long as the aggregate interest represented by such
investments does not exceed (A) 3% of any class of the outstanding debt or
equity securities of any such
<PAGE>
company, in the case of a company whose shares are listed on a national
securities exchange or the NASDAQ National Market System, or (B) 1% of any class
of the outstanding debt or equity securities in the case of any other company.
Territory means:
(i) the United States
(ii) the United States and Canada
(iii) the United States, Canada and the United Kingdom
(iv) North America and the United Kingdom
(v) North America, South America and the United Kingdom
(vi) North America, South America and Europe
(vii) North America, South America, Europe and Asia
(viii) North America, South America, Europe, Asia and Africa
(ix) Worldwide
(b) Covenant Not to Use Name. C&A covenants and agrees that at
any time after the date hereof, C&A shall not use or allow the use of, and shall
cause its direct and indirect Subsidiaries not to use or allow the use of, in
the Territory, in connection with a Competitive Activity, any of (i) the name
"Collins & Aikman," (ii) the trademark "CA" (Registration No. 988,978), (iii)
the initials "CA" or (iv) the initials "C&A."
(c) Nondisclosure of Confidential Information. (i) C&A
covenants and agrees not to, and to cause its direct and indirect Subsidiaries
not to, disclose to any person or entity, other than as and to the extent
required by law or court order, or use, any information relating primarily to
the business of the Company and not primarily to other business of C&A and its
Subsidiaries (other than the Company) not in the public domain (the "Company
Non-Public Information"), in any form, acquired by C&A while it or its officers,
directors, employees or Subsidiaries were associated with the Company. C&A
agrees and acknowledges that all of such Company Non-Public Information, in any
form, and copies and extracts thereof are and shall remain the sole and
exclusive property of the Company (except to the extent it relates to
liabilities and obligations retained by C&A and Seller under the Acquisition
Agreement), and C&A shall on request return to the Company the originals and all
copies of any such information provided to or acquired by C&A in connection with
its or its officers', directors', employees' or Subsidiaries' association with
the Company, and shall return to the Company all files, correspondence and/or
other communications received, maintained and/or originated by C&A during the
course of such association except to the extent necessary to discharge its
liabilities and obligations or as permitted under the Acquisition Agreement.
(ii) In the event that C&A or any of its Subsidiaries is requested or
required in any proceeding (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand, or similar
process) to disclose any Company Non-Public Information, C&A agrees to provide
the Company with prompt notice of such request(s) in order that the Company may
seek an appropriate protective order or waive compliance with the provisions of
this Agreement (or both). It is further agreed that if, in the absence of a
protective order or the receipt of a waiver hereunder, C&A or any of its
Subsidiaries, agents or representatives are nonetheless required to disclose
such information in connection with any such proceeding, then such information
may be disclosed in such connection without liability hereunder.
(d) No Interference. C&A covenants and agrees not to, and to
cause its direct and indirect Subsidiaries not to, directly or indirectly, (i)
during the Restrictive Period, solicit or attempt
2
<PAGE>
to solicit in connection with a Competitive Activity any existing customer of
the Company or (ii) during the period commencing on the date hereof and ending
on the fifth anniversary after the date hereof solicit or take away or attempt
to hire, solicit or take away (whether or not in connection with a Competitive
Activity) any employee of the Company as of the date hereof whose current annual
compensation exceeds $75,000 or employees whose aggregate compensation exceeds
$300,000. C&A covenants and agrees not to, and to cause its direct and indirect
Subsidiaries not to, disparage or demean the Company or any person affiliated
with the Company, or otherwise make any statement, to any person or entity which
is a former, actual or prospective customer of the Company which casts aspersion
or doubt on, or which disparages or demeans, the financial or operational
ability of, or any products or services provided or sold by, the Company or any
person affiliated with the Company.
(e) Relief. C&A acknowledges that a breach of any of the
covenants and agreements contained herein may result in material irreparable
injury to the Company or its affiliates for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of such a breach or threat thereof, Parent and the
Company shall be entitled, in addition to any other remedies it may have under
this Agreement or otherwise, to seek to obtain a temporary restraining order
and/or a preliminary or permanent injunction restraining C&A and its
Subsidiaries from engaging in activities prohibited hereby or such other relief
as may be required to specifically enforce any of the covenants contained
herein; provided, that no specification in this Agreement of a specific legal or
--------
equitable remedy shall be construed as a waiver or prohibition against the
pursuing of other legal or equitable remedies in the event of such breach.
(f) Indemnity. C&A will indemnify, defend and hold harmless
Parent and the Company, their affiliates and their respective directors,
officers, employees, agents and representatives (including, without limitation,
any predecessor or successor of any of the foregoing) from and against any and
all losses, liabilities, costs and expenses, including reasonable attorneys'
fees and expenses in connection therewith or in enforcing C&A's obligations
hereunder, relating to, resulting from or arising out of the breach by C&A of
any of its covenants or agreements contained in this Agreement.
(g) Extension of Restricted Periods. In addition to the
remedies the Company may seek and obtain pursuant to this Agreement, the
restricted periods set forth therein shall be extended by any and all periods
during which C&A or its Subsidiaries shall be found by a court to have been in
violation of the covenants contained herein.
2. Successors; Binding Agreement. Neither this Agreement, nor
any rights or benefits hereunder, may be assigned, delegated, transferred,
pledged or hypothecated without the written consent of all parties hereto, and
any such assignment, delegation, transfer, pledge or hypothecation shall be null
and void and shall be disregarded by the other parties hereto, provided, that
--------
Parent and/or the Company may assign this Agreement, without the consent of any
other party, to a subsidiary or parent corporation of Parent or the Company, or
to an acquiror (by purchase, merger or otherwise), directly or indirectly, of
substantially all of the capital stock or assets of the Company; provided that
--------
such assignment shall not affect the scope of the covenants in this Agreement.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respect successors and permitted assigns, including, without
limitation, any person or entity that acquires all or substantially all of the
assets or capital stock of Collins & Aikman Corporation or Collins & Aikman
Products Co., except that the provisions of paragraph (a) and clause (i) of
paragraph (d) of Section 1 shall not apply to the operations of any person or
entity that acquires all or substantially all of the assets or capital stock of
such corporations, with respect to operations
3
<PAGE>
conducted by such person or entity otherwise than by or through Collins & Aikman
Corporation or its Subsidiaries.
3. Waiver and Modification. Any waiver, alteration or
modification of any of the terms of this Agreement shall be valid only if made
in writing and signed by the parties hereto; provided, that any such waiver,
--------
alteration or modification on behalf of the Company must be consented to by its
Board of Directors. No waiver by any of the parties hereto of their rights
hereunder shall be deemed to constitute a waiver with respect to any subsequent
occurrences or transactions hereunder unless such waiver specifically states
that it is to be construed as a continuing waiver.
4. Reasonableness of Covenants; Severability. C&A acknowledges
and agrees that the covenants set forth in paragraphs (a) and (d) of Section 1
hereof are reasonable and valid in duration and geographical scope and in all
other respects. If any of such covenants or such other provisions of this
Agreement is found to be invalid or unenforceable by a final determination of a
court of competent jurisdiction (a) the remaining terms and provisions hereof
shall be unimpaired and (b) the invalid or unenforceable term or provision shall
be deemed replaced by a term or provision that is valid and enforceable and that
comes closest to expressing the intention of the invalid or unenforceable term
or provision.
5. Governing Law. This Agreement and the legal relations among
the parties hereto will be governed by and construed in accordance with the laws
of the State of New York, without giving effect to principles of conflict of
laws thereof.
6. Blue Pencilling. In the event that, notwithstanding the
first sentence of Section 4 hereof, any of the provisions of paragraphs (a) and
(d) of Section 1 relating to the geographic or temporal scope of the covenants
contained therein or the nature of the business restricted thereby shall be
declared by a court of competent jurisdiction to exceed the maximum
restrictiveness such court deems enforceable, such provision shall be deemed to
be replaced herein by the maximum restriction deemed enforceable by such court.
7. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or by
a nationally recognized overnight courier service or when dispatched during
normal business hours by electronic facsimile transfer (confirmed in writing by
mail promptly dispatched) to the appropriate party at the address specified
below:
In the case of Parent:
CAF Holdings, Inc.
c/o Quad-C, Inc.
230 East High Street
Charlottesville, Virginia 22902
Facsimile No.: (804) 979-1145
Attention: Stephen M. Burns
4
<PAGE>
with a copy to:
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
Richmond, Virginia 23219
Facsimile No.: (804) 775-1061
Attention: Leslie A. Grandis
In the case of the Company:
Collins & Aikman Floor Coverings, Inc.
311 Smith Industrial Boulevard
Dalton, Georgia 30722-1447
Facsimile No.: (706) 259-9711
Attention: Edgar M. Bridger
with a copy to:
McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
Richmond, Virginia 23219
Facsimile No.: (804) 775-1061
Attention: Leslie A. Grandis
In the case of C&A:
Collins & Aikman Products Co.
701 McCullogh Drive
Charlotte, North Carolina 28262
Facsimile No.: (704) 548-2085
Attention: Ronald T. Lindsay
with copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Facsimile No.: (212) 755-7306
Attention: Robert A. Profusek
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
8. Captions and Section Headings; Certain Definitions.
Captions and section headings herein are for convenience only, are not a part
hereof and shall not be used in construing this Agreement. Subsidiary means,
with respect to any person (in this Section 8 referred to as "parent"), any
corporation, partnership, association or other business entity (i) of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power or more than 50% of the general
partnership interests are, at the time any determination is being made, owned,
controlled or held, or (ii) which is, at the time any determination is made,
5
<PAGE>
otherwise controlled, by the parent or one or more subsidiaries of parent or by
parent and one or more subsidiaries of parent.
9. Entire Agreement. This Agreement and the Acquisition
Agreement set forth the entire agreement and understanding of the parties in
respect of the matters contemplated hereby and supersede all prior agreements,
arrangements and understandings relating to the subject matter hereof.
10. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CAF HOLDINGS, INC.
By: /s/ Stephen M. Burns
-------------------------------
Name:
Title: President
COLLINS & AIKMAN FLOOR COVERINGS, INC.
By: /s/ J. Michael Stepp
-------------------------------
Name:
Title: Executive Vice President and
Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By: /s/ J. Michael Stepp
-------------------------------
Name:
Title: Executive Vice President and
Chief Financial Officer
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
-------------------------------
Name:
Title: Executive Vice President and
Chief Financial Officer
6
<PAGE>
Exhibit 10.6
------------
TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT is dated as of February 6, 1997 between CAF
HOLDINGS, INC., a Virginia corporation ("Parent") and COLLINS & AIKMAN
FLOORCOVERINGS, INC., a Delaware corporation (the "Subsidiary").
A. Parent and the Subsidiary are members of an affiliated group as
defined in Section 1504(a) of the Internal Revenue Code of 1986, as amended (the
"Affiliated Group").
B. The Affiliated Group expects to file a consolidated federal income
tax return.
C. Parent and Subsidiary desire to establish a method for (i)
allocating the consolidated federal income tax liability of the Affiliated Group
between the Parent and the Subsidiary and (ii) reimbursing Parent for payment of
such tax liability.
NOW THEREFORE, the parties agree as follows:
1. Payment of Federal Income Taxes of Affiliated Group. If an election
---------------------------------------------------
is made to file a consolidated federal income tax return for the Affiliated
Group, Parent shall file all federal income tax returns on behalf of the
Affiliated Group and pay to the Internal Revenue Service all income taxes of the
Affiliated Group.
2. Contribution by Member for Tax Liability. If a consolidated federal
----------------------------------------
income tax return for the Affiliated Group is filed, the Subsidiary shall
compute and pay to the Parent, an amount equal to the lesser of (a) the federal
income taxes that the Borrower would be required to pay with respect to such
taxable year if the Borrower had filed a separate federal income tax return for
the current year and all prior taxable years (collectively, the "Separate
Federal Income Tax Liability"), and (b) the product of (i) the federal income
tax liability of the Affiliated Group for such year and all prior taxable years
commencing on or after the date of this Agreement and (ii) a fraction, (x) the
numerator of which is an amount equal to the Separate Federal Income Tax
Liability of the Borrower for such year and (y) the denominator of which is the
aggregate total of the separate federal income tax liability that each member of
the Affiliated Group would have incurred for such year if such corporations had
filed separate federal income tax returns for such year.
3. Estimated Tax Payments. If a consolidated federal income tax return
----------------------
for the Affiliated Group is filed, the Subsidiary shall compute on the same
basis as set forth in Section 2 its contribution to the estimated federal income
tax installments due for each taxable period, and it shall pay such amount to
Parent on a timely basis. Any amounts paid under this Section 3 shall be
credited against the amounts payable by the Subsidiary to Parent under
Section 2.
4. State and Local Taxes. If, under the laws of any state or
---------------------
subdivision thereof in which the Affiliated Group is subject to income tax,
Parent and the Subsidiary are required or permitted to file their income tax
returns on a combined or consolidated basis,
<PAGE>
then the Subsidiary shall compute and pay to Parent the Subsidiary's tax
liability and estimated tax installment liability in the manner set forth in
Sections 2 and 3.
5. Deficiencies and Refunds. If there should be any factual
------------------------
circumstance (including any tax audit) or any application or amendment of any
tax laws, either retroactively or prospectively, that would affect the income
tax liability of the Subsidiary for any year, or portion thereof, and that if
applied to the tax computed under Section 2 for such period would have resulted
in a determination that the amount of tax computed and paid to Parent by the
Subsidiary under Section 2 was greater than the amount of the correct tax
liability of the Subsidiary for such period, Parent will refund to the
Subsidiary the amount of the excess payment. Likewise, if any such circumstance
or any application or amendment of the tax laws would have resulted in a
determination that the amount of the tax computed under Section 2 was
understated and that, therefore, the amount of correct tax liability of the
Subsidiary for such period was in excess of the amount paid to Parent under
Section 2, then the Subsidiary shall pay Parent such excess amount.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representative as of the date first above
written.
CAF HOLDINGS, INC.
By: /s/ Stephen M. Burns
--------------------------------------
Title: President
-----------------------------------
COLLINS & AIKMAN FLOORCOVERINGS,
INC.
By: /s/ Edgar M. Bridger
--------------------------------------
Title: President
-----------------------------------
-2-
<PAGE>
EXHIBIT 12.1
<TABLE>
<CAPTION>
C&A Floorcoverings, Inc.
Calulation of Ratio of Earnings to Fixed Charges
------------------------------------------------
Jan-93 Jan-94 Jan-95 Jan-96 Jan-97
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Pre-Tax Income 12,219 10,347 19,449 16,330 20,418
Fixed charges:
Interest:
Net Interest Expense 35 0 0 0 0
Interest Income 0 0 0 0 0
Loss on Sale of Receivables 0 0 1,261 3,269 3,489
Interest Component of rental expense 117 130 160 218 269
--- --- ----- ----- -----
Total fixed charges 152 130 1,421 3,487 3,758
====== ====== ====== ====== ======
Total Earnings 12,371 10,477 20,870 19,817 24,176
====== ====== ====== ====== ======
Ratio of Earning to Fixed Charges 81.1 80.4 14.7 5.7 6.4
====== ====== ====== ====== ======
</TABLE>
For purposes of determining the ratio of earnings to fixed charges, earnings are
defined as income (loss) before income taxes, plus fixed charges. Fixed charges
consist of interest expense on all indebtedness, loss on sale of receivables and
the portion of operating lease rental expense that is representative of the
interest factor.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
Registration Statement.
Arthur Andersen LLP
Atlanta, Georgia
April 1, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SUMMARY CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS FOR THE PERIOD ENDED JANUARY 25, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> JAN-25-1997
<CASH> 144
<SECURITIES> 0<F1>
<RECEIVABLES> 1,592
<ALLOWANCES> 15
<INVENTORY> 16,172
<CURRENT-ASSETS> 19,814
<PP&E> 47,743
<DEPRECIATION> 28,222
<TOTAL-ASSETS> 39,614
<CURRENT-LIABILITIES> 13,329
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 21,620
<TOTAL-LIABILITY-AND-EQUITY> 39,614
<SALES> 136,124
<TOTAL-REVENUES> 140,013<F2>
<CGS> 81,715
<TOTAL-COSTS> 112,217
<OTHER-EXPENSES> 3,489
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 20,905
<INCOME-TAX> 7,905
<INCOME-CONTINUING> 12,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,513
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Amounts inapplicable or not disclosed as a separate line on the
Statement of Financial Position or Results of Operations are reported
as 0 herein.
<F2>Revenues are reported net of credits in the Statement of Financial
Position
</FN>
</TABLE>
