<PAGE> 1
REGISTRATION NO. 333-
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NEENAH CORPORATION
NEENAH FOUNDRY COMPANY
HARTLEY CONTROLS CORPORATION
NEENAH TRANSPORT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
WISCONSIN 3321 39-1580331
WISCONSIN 3321 39-0496210
WISCONSIN 3321 39-0842568
WISCONSIN 3321 39-1378433
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
2121 BROOKS AVENUE, BOX 729,
NEENAH, WISCONSIN 54927
(414) 725-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
C/O GARY W. LACHEY
VICE PRESIDENT -- FINANCE, TREASURER AND SECRETARY
NEENAH CORPORATION
2121 BROOKS AVENUE, BOX 729,
NEENAH, WISCONSIN 54927
(414) 725-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this
Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Neenah Corporation's 11 1/8% Senior Subordinated Notes
due 2007, Series B.................................. $150,000,000 $1,000 $150,000,000 $51,724.14
Neenah Foundry Company's Guarantee of 11 1/8% Senior
Subordinated Notes due 2007, Series B............... * * * None
Hartley Controls Corporation's Guarantee of 11 1/8%
Senior Subordinated Notes due 2007, Series B........ * * * None
Neenah Transport, Inc.'s Guarantee of 11 1/8% Senior
Subordinated Notes due 2007, Series B............... * * * None
==========================================================================================================================
</TABLE>
* Not applicable
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF PART I OF FORM S-4
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus..... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus.............................. Inside Front Cover Page; Outside Back Cover
Page
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information.............. Prospectus Summary; The Company; Risk
Factors; Unaudited Pro Forma Consolidated
Financial Information; Selected
Consolidated Financial and Other Data
4. Terms of the Transaction................... Outside Front Cover Page; Prospectus
Summary; The Exchange Offer; Description of
Exchange Notes; Certain Federal Income Tax
Consequences
5. Pro Forma Financial Information............ Unaudited Pro Forma Consolidated Financial
Information
6. Material Contracts with the Company Being
Acquired................................... Inapplicable
7. Additional Information Required............ Inapplicable
8. Interests of Named Experts and Counsel..... Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Inapplicable
10. Information with Respect to S-3
Registrants................................ Inapplicable
11. Incorporation of Certain Information by
Reference.................................. Inapplicable
12. Information with Respect to S-3 or S-2
Registrants................................ Inapplicable
13. Incorporation of Certain Information by
Reference.................................. Inapplicable
14. Information with Respect to Registrants
other than S-3 or S-2 Registrants.......... Outside Front Cover Page; Prospectus
Summary; Risk Factors; Use of Proceeds; The
Transactions; Capitalization; Unaudited Pro
Forma Consolidated Financial Information;
Selected Consolidated Financial and Other
Data; Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Industry; Business; Management;
Security Ownership; Certain Relationships
and Related Transactions; Description of
Credit Agreement
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
------------------------------------------- -------------------------------------------
<C> <S> <C>
15. Information with Respect to S-3 Companies.. Inapplicable
16. Information with Respect to S-3 or S-2
Companies.................................. Inapplicable
17. Information with Respect to Companies Other
Than S-3 or S-2 Companies.................. Inapplicable
18. Information if Proxies, Consents or
Authorizations are to be Solicited......... Inapplicable
19. Information if Proxies, Consents or
Authorizations are not to be Solicited or
in an Exchange Offer....................... Management; Security Ownership; Certain
Relationships and Related Transactions
</TABLE>
<PAGE> 4
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
nor 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 securities
laws of any such State.
SUBJECT TO COMPLETION, DATED JUNE , 1997
PRELIMINARY PROSPECTUS
OFFER FOR ALL OUTSTANDING 11 1/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR 11 1/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2007 OF
NEENAH CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997 UNLESS EXTENDED
NEENAH CORPORATION, a Wisconsin corporation (the "Company"), hereby offers to
exchange an aggregate principal amount of up to $150,000,000 of its 11 1/8%
Senior Subordinated Notes due 2007 (the "New Notes") for a like principal amount
of its 11 1/8% Senior Subordinated Notes due 2007 (the "Old Notes") outstanding
on the date hereof upon the terms and subject to the conditions set forth in
this Prospectus and in the accompanying Letter of Transmittal (which together
constitute the "Exchange Offer"). The New Notes and the Old Notes are
collectively hereafter referred to as the "Notes." The terms of the New Notes
are identical in all material respects to those of the Old Notes, except for
certain transfer restrictions and registration rights relating to the Old Notes.
The New Notes will be issued pursuant to, and entitled to the benefits of, the
Indenture (as defined) governing the Old Notes. The New Notes will be unsecured
and will be subordinated to all existing and future Senior Indebtedness (as
defined) of the Company. The New Notes will rank pari passu with any future
Senior Subordinated Indebtedness (as defined) of the Company and will rank
senior to all subordinated indebtedness of the Company. The New Notes will be
fully guaranteed (the "Subsidiary Guaranties") by each of the Company's
principal operating subsidiaries, Neenah Foundry Company ("Neenah Foundry"),
Hartley Controls Corporation ("Hartley Controls"), and Neenah Transport, Inc.
("Neenah Transport") (collectively, the "Guarantor Subsidiaries"). The Company
is a holding company that will derive substantially all of its operating income
and cash flow from its subsidiaries. The Guarantor Subsidiaries guarantee the
Senior Bank Facilities (as defined) and are jointly and severally liable on a
senior basis with the Company for all obligations thereunder. Such obligations
are secured by pledges of all the capital stock of the Guarantor Subsidiaries
and security interests in, or liens on, substantially all other tangible and
intangible assets located in the United States of the Guarantor Subsidiaries.
See "Description of Senior Bank Facilities" and "Description of Notes."
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company and the Guarantor Subsidiaries contained in the
Exchange and Registration Rights Agreement dated April 30, 1997 (the
"Registration Rights Agreement"), among the Company, the Guarantor Subsidiaries
and Chase Securities Inc. and Morgan Stanley & Co. Incorporated (the "Initial
Purchasers"), with respect to the initial sale of the Old Notes.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes
pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date (as defined) for the Exchange Offer. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes
with respect to the Exchange Offer, the Company will promptly return such Old
Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New 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 New Notes. The Letter of Transmittal states that by so
acknowledging and by delivery of a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"). 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 New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. Each of the Company and the Guarantor
Subsidiaries has agreed that, for a period of 180 days after the Expiration
Date, it will make this Prospectus available to any broker-dealer for use in
connection with any such resale. See "Plan of Distribution."
- --------------------------------------------------------------------------------
Prior to the Exchange Offer, there has been no public market for the Old Notes.
If a market for the New Notes should develop, such New Notes could trade at a
discount from their principal amount. The Company currently does not intend to
list the New Notes on any securities exchange or to seek approval for quotation
through any automated quotation system and no active public market for the New
Notes is currently anticipated. There can be no assurance that any public market
for the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Notes being tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" COMMENCING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 5
AVAILABLE INFORMATION
The Company and the Guarantor Subsidiaries have filed with the Securities
and Exchange Commission (the "Commission") a Registration Statement on Form S-4
(the "Exchange Offer Registration Statement", which term shall encompass all
amendments, exhibits, annexes and schedules thereto) pursuant to the Securities
Act, and the rules and regulations promulgated thereunder, covering the New
Notes being offered hereby. This Prospectus does not contain all the information
set forth in the Exchange Offer Registration Statement. For further information
with respect to the Company, the Guarantor Subsidiaries and the Exchange Offer,
reference is made to the Exchange Offer Registration Statement. 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 Exchange Offer
Registration Statement, reference is made to the exhibit for a more complete
description of the document or matter involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Exchange Offer
Registration Statement, including the exhibits thereto, can 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 Regional
Offices of the Commission at Seven World Trade Center, Suite 1300, New York, New
York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials can be obtained from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of such Web site is:
http://www.sec.gov.
As a result of the Exchange Offer, the Company will become subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will be required to file
periodic reports and other information with the Commission. In the event the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company will be required under the Indenture to continue to file with
the Commission the annual and quarterly reports, information, documents or other
reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K,
which would be required pursuant to the informational requirements of the
Exchange Act. The Company will also furnish such other reports as may be
required by law.
Information contained in this Prospectus contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other similar terminology, or by discussions of strategy.
The Company's actual results could differ materially from those anticipated by
any such forward-looking statements as a result of certain factors, including
those set forth under the "Risk Factors" beginning on page 14 and elsewhere in
this Prospectus.
------------------------
2
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial statements and
related notes thereto included elsewhere in this Prospectus. Prospective
investors are urged to read this Prospectus in its entirety. Unless otherwise
indicated in this Prospectus, all market share percentages are based on industry
information compiled by Georgetown Economic Services, an independent market
research firm that compiles information on behalf of the foundry industry.
Unless otherwise stated in this Prospectus or unless the context otherwise
requires, references herein to the "Company" are to Neenah Corporation and its
currently active subsidiaries, Neenah Foundry Company, Hartley Controls
Corporation and Neenah Transport, Inc., for periods prior to the Merger and to
Neenah Corporation, as the surviving entity in the Merger, and its subsidiaries,
for periods thereafter. Neenah Corporation is a Wisconsin corporation organized
in 1987 as a holding company for its operating subsidiaries. The Company's
fiscal year ends on March 31, and unless otherwise indicated all annual
references herein refer to such fiscal year.
THE COMPANY
OVERVIEW
The Company, founded in 1872, is one of the largest manufacturers of a wide
range of high quality ductile and gray iron castings for the heavy municipal
market and selected segments of the industrial market. The Company believes it
is the largest manufacturer of heavy municipal iron castings in the United
States with approximately a 19% market share in calendar year 1996. The
Company's broad range of heavy municipal iron castings includes manhole covers
and frames, storm sewer frames and grates, heavy duty airport castings,
specialized trench drain castings, specialty flood control castings and
ornamental tree grates. These municipal castings are sold throughout the United
States to state and local government entities, utility companies, precast
concrete manhole structure producers and contractors for both new construction
and infrastructure replacement. The municipal market generated approximately 43%
of the Company's 1997 net sales. The Company believes it is also a leading
manufacturer of a wide range of complex industrial castings, including castings
for medium- and heavy-duty truck drive line components, a broad range of
castings for the farm equipment industry and specific components for compressors
used in heating, ventilation and air conditioning systems ("HVAC"). The
industrial market generated approximately 53% of the Company's 1997 net sales.
In addition, the Company engineers, manufactures and sells customized sand
control systems and related products, which are an essential part of the casting
process, to other iron foundries. Sales of these sand control systems and
related products represented approximately 4% of the Company's 1997 net sales.
The Company currently operates two modern foundries with an annual
aggregate rated capacity of approximately 187,000 tons at a single site in
Neenah, Wisconsin. Since 1985, the Company has invested approximately $100
million in its production facilities, with approximately $73 million invested in
a major plant modernization program from 1985 to 1990. This plant modernization
program was a critical part of a long-term strategy to produce higher volume,
value-added castings for its existing industrial customers and to penetrate
other selected segments of the industrial market, while preserving its position
as the leader in the heavy municipal market. This modernization program entailed
the closing of the Company's oldest foundry, Plant 1, and the updating of the
Company's other two foundries, Plants 2 and 3, which enabled the Company both to
produce higher volume, complex castings for selected industrial segments and to
improve the Company's cost position in the heavy municipal market. Following the
completion of the modernization program, the Company has steadily decreased its
production of lower margin products such as axle covers and brake drums and
increased the production of higher margin, more complex parts such as
transmission and axle housings. As a result of this strategy, the Company's
ongoing improvements in its manufacturing process and increased demand for
medium- and heavy-duty truck components,
3
<PAGE> 7
net sales and EBITDA (as defined) have increased substantially. From 1992 to
1997, net sales have grown from $116.5 million to $165.4 million, representing a
compound annual growth rate of 7.3%, and EBITDA has grown from $13.4 million to
$38.0 million during the same period, representing a compound annual growth rate
of 23.2%.
COMPETITIVE ADVANTAGES
The Company believes it benefits from the following competitive advantages,
which have enabled it to increase sales and operating profitability and to
maintain its position as one of the leaders in the iron casting industry.
Leading Market Position. The Company believes it is the largest
manufacturer of heavy municipal iron castings in the United States with
approximately a 19% market share in calendar year 1996. Furthermore, the
Company, which has produced municipal castings for over 70 years has, according
to its estimates, over a 50% market share in nine of the top ten states in which
the Company sells heavy municipal castings. Sales in those states represented
approximately 69% of the Company's municipal sales in 1997. The Company believes
it is also one of the largest manufacturers of iron castings for selected
segments of the industrial market, including the medium-and heavy-duty truck and
farm equipment segments. The Company is the sole sourced supplier for over 85%
of the industrial products it produces and has multi-year arrangements with
certain of its largest customers. The Company believes it can continue to
capitalize on its strong market position to generate additional revenues and
realize economies of scale, thereby increasing margins and earnings.
Low Cost Structure. As a result of its size, significant investment in
equipment and technology and focus on improving efficiency, the Company believes
it possesses a highly competitive cost structure. Since 1985, the Company has
invested approximately $100 million in its production facilities, with
approximately $73 million invested in plant modernization and new equipment from
1985 to 1990. These investments, combined with the Company's ongoing
improvements to its manufacturing process, have substantially increased
efficiency and manufacturing productivity. From 1992 to 1997, the Company
reduced its scrap rate from 3.5% to 2.0%, which the Company believes is one of
the lowest scrap rates in the industry. During the same period, the Company
reduced its employee hours per ton by approximately 40% from 14.8 to 9.0, while
improving product quality levels and producing higher margin, more complex
parts.
Broad Product Offering. The Company carries a broad range of products,
offering more than 4,400 patterns that can produce over 20,000 part combinations
for the heavy municipal market, and more than 350 patterns for the industrial
market. The Company believes its municipal catalog offers the largest castings
selection of any foundry serving the heavy municipal market. This extensive
product offering, which includes hundreds of one-of-a-kind specialty items,
enables the Company to compete throughout the United States and provide a
substantial number of the many types of municipal castings required for
individual projects. Heavy municipal castings are manufactured from
Company-owned patterns which have been appraised by independent appraisers to be
in excess of $22 million. Additionally, the Company's extensive and growing
offering of complex industrial castings enables it to more effectively service
its customers' increasing needs for highly engineered cast parts and often
positions the Company as the sole source of supply to original equipment
manufacturers ("OEMs") and their first tier suppliers. The Company's broad
industrial product offering and its recognized casting engineering expertise
have become increasingly important as large industrial customers seek to reduce
the number of suppliers with whom they conduct business.
Strong, Diverse Customer Relationships. The Company continually focuses on
establishing and maintaining strong relationships with its customers. In the
heavy municipal market, the Company currently sells to over 17,000 active
customers in all 50 states, with the majority of its sales concentrated in the
midwestern states. The Company believes it has the largest sales and marketing
4
<PAGE> 8
effort of any foundry serving the heavy municipal market, including 47 Company
employees and 26 commissioned representatives. The Company believes the size of
its marketing effort, the breadth of its product offering and the level of its
technical support provide it with a significant competitive advantage and will
allow it to further strengthen its leading position in the heavy municipal
market. With respect to the industrial market, the Company has established
strong relationships with leading manufacturers of medium- and heavy-duty truck
components, farm equipment and HVAC systems. The Company is the sole sourced
provider for over 85% of the products it currently supplies to its industrial
customer base and has multi-year arrangements with certain of its largest
customers. Furthermore, the average industrial casting typically takes between
12 and 18 months to go from the design phase to full production and has an
average life cycle of approximately 8 to 10 years. This lengthy development
process, in which the Company actively participates, provides the Company with
an inventory of products that cannot be quickly replicated by its competitors.
Historically, the foundry that has originally manufactured an industrial part
has continued to manufacture that part throughout its product life cycle. The
Company's participation in both the heavy municipal and industrial markets helps
to diversify the Company's business and to reduce the Company's reliance on
individual customers or end-use markets.
High Quality Products and Customer Service. The Company believes it enjoys
a reputation for providing a high level of customer service and is recognized
for its ability to consistently manufacture high-quality, complex products. The
Company believes its manufacturing capabilities and process controls allow it to
manufacture high quality castings which are dimensionally and metallurgically
consistent. In addition to providing high quality products, the Company
emphasizes customer service by providing tooling and engineering development
support to its customers, consistent on-time delivery utilizing its own fleet of
trucks for delivery of many of its municipal products and a small portion of the
Company's industrial products and follow-up through its sales and marketing
team. The Company believes its ability to provide such product quality and
responsive service has fostered customer loyalty and long-term relationships.
Experienced Management Team with Significant Equity Stake. The top seven
members of the Company's senior operating management have an average of
approximately 12 years with the Company and 23 years in the iron foundry
industry. Certain members of the Company's management (the "Management
Investors") beneficially own, on a fully diluted basis, approximately 10% of the
common stock of the Company.
BUSINESS STRATEGY
The Company's strategy for achieving continued growth in sales and
profitability includes: (i) increasing the sale of higher margin products, (ii)
selectively entering new markets, (iii) improving operating performance and (iv)
making selective acquisitions.
Increasing the Sale of Higher Margin Products. The Company continually
strives to improve the margins on the parts it produces. In the heavy municipal
market, the Company has historically maintained strong margins by periodically
implementing price increases and introducing new, higher value-added products.
For example, the Company is currently leading the market in the sale of
lightweighted municipal castings, which are less costly to handle and require
less raw material to produce. The Company believes incremental margin
improvements will be realized from the Company's increased production of these
lightweighted products. In the industrial market, the Company increased its
focus on manufacturing complex, highly engineered castings in the early 1990s
following substantial capital investment in the late 1980s. Since 1991, the
Company has steadily increased the volume, array and complexity of the parts it
produces for its industrial customers. The Company intends to continue to pursue
opportunities to produce more complex, higher value-added castings, thereby
continuing to improve product margins.
Selectively Entering New Markets. The Company intends to selectively
expand its presence in both the heavy municipal and industrial markets. In the
heavy municipal market, the Company is
5
<PAGE> 9
considering expanding its product offering in high volume markets such as New
York and Nevada where the Company already has sales representatives in place and
for which the Company has already invested in certain of the toolings necessary
to meet potential product demand. In addition, the Company is exploring further
opportunities in New Jersey, New Hampshire and Massachusetts. The Company's
strategy in its chosen industrial segments is to continue to increase its
penetration of existing customers and to develop similar relationships with
other selected industrial companies which would value the Company's technical
ability and high level of product quality and customer service. The Company also
intends to explore opportunities in austempering (heat-treating ductile iron)
and machining and assembling sub-components for specific industrial customers.
Improving Operating Performance. The Company operates two modern
foundries, and believes it possesses a highly competitive cost structure. The
Company intends to continue to seek ways to capitalize on and extend its
technological expertise and operating efficiencies, thereby reducing its
operating costs. In contrast to the major investments made from 1985 to 1990,
which significantly improved both manufacturing capacity and efficiency, the
Company's near term capital expenditures will be focused primarily on
incrementally improving efficiency and reducing costs through projects such as:
(i) sand system optimization, (ii) material handling improvements and (iii)
energy utilization improvements.
Making Selective Acquisitions. The United States iron foundry industry is
highly fragmented despite significant consolidation over the past decade. In
1986, there were approximately 880 foundries engaged in the casting of iron,
with an aggregate capacity of approximately 15 million tons according to
Stratecasts, Inc., a foundry industry research and consulting organization. By
1996, the number of iron foundries decreased to approximately 730, with an
aggregate capacity of approximately 13 million tons. Management believes the
consolidation that has occurred will continue, particularly in the industrial
market, as technical, environmental and quality standards continue to increase.
The Company intends to pursue selective acquisition opportunities that
complement its existing product offering or enable the Company to expand its
presence in selected geographic areas of the heavy municipal market. The Company
believes such acquisitions will provide opportunities for incremental revenue
and cash flow by leveraging the Company's current expertise in manufacturing,
sales and marketing, and product and process engineering.
THE MERGER
NFC Castings, Inc. ("Holdings") and its wholly-owned subsidiary, NC Merger
Company ("NC Merger"), were organized by Citicorp Venture Capital, Ltd. ("CVC")
and its affiliate, ACP Holding Company, to effect the acquisition of the
Company. On April 30, 1997, pursuant to an Agreement and Plan of Reorganization,
dated November 20, 1996, as amended (the "Merger Agreement"), among Holdings, NC
Merger and the Company, NC Merger merged with and into the Company, with the
Company as the surviving corporation (the "Merger"). Holdings is a wholly-owned
subsidiary of ACP Holding Company ("ACP Holdings"). ACP Holdings is wholly-owned
by ACP Products, L.L.C., which in turn is owned in part by CVC and certain other
investors (collectively, the "Investor Group"). The Management Investors also
own an interest in ACP Products, L.L.C.
The consideration for the Merger was $236.9 million in cash (the "Merger
Consideration"), subject to a closing date net worth adjustment. Upon
consummation of the Merger, the Company paid $11.3 million to certain former
stockholders of the Company (the "Former Stockholder Payment" and, together with
the Merger Consideration, the "Merger Price"). Pro forma for a March 31, 1997
closing, the closing date net worth adjustment would have been $9.1 million
which would result in a total pro forma Merger Price of $258.3 million
(including acquisition costs of $1.0 million). The Merger Price reflects the use
of approximately $25.3 million of cash on the Company's balance sheet pro forma
for a March 31, 1997 closing (resulting in a valuation of the Company's business
and other assets of approximately $233.0 million). In order to finance the
Merger Price, including the payment of related fees and expenses: (i) NC Merger
consummated the Offering;
6
<PAGE> 10
(ii) NC Merger entered into a credit agreement providing for (a) a term loan
(the "Tranche A Term Loan") in the amount of $20.0 million and a second term
loan (the "Tranche B Term Loan" and, together with the Tranche A Term Loan, the
"Term Loans") in the amount of $25.0 million, and (b) a revolving credit
facility (the "Revolving Credit Facility" and, together with the Term Loans, the
"Senior Bank Facilities") in the amount of $30.0 million, subject to a borrowing
base formula; (iii) Holdings made an equity contribution (the "Equity
Contribution") of $45.0 million to NC Merger; and (iv) $25.3 million of cash
(pro forma for a March 31, 1997 closing) was utilized. Concurrently with the
consummation of the Offering, the Company, as the surviving corporation in the
Merger, assumed, pursuant to the Merger, the obligations under the Notes and the
Senior Bank Facilities. The Offering, the establishment of the Senior Bank
Facilities, the Equity Contribution and the Merger are referred to collectively
herein as the "Transactions."
The sources and uses of funds for the Merger and related Transactions,
assuming that the Merger occurred on March 31, 1997, were as follows (dollars in
millions):
SOURCES OF FUNDS
<TABLE>
<S> <C>
Senior Bank Facilities:(1)(2)
Tranche A Term Loan............................................... $ 20.0
Tranche B Term Loan............................................... 25.0
Senior Subordinated Notes due 2007.................................. 150.0
Equity Contribution(3).............................................. 45.0
Excess Cash and Borrowings under Revolving Credit Facility(2)....... 26.2
------
Total..................................................... $266.2
======
</TABLE>
USES OF FUNDS
<TABLE>
<S> <C>
Merger Price(2)(4).................................................. $258.3
Financing Costs..................................................... 7.9
------
Total..................................................... $266.2
======
</TABLE>
- ---------------
(1) Total borrowings of up to $30.0 million under the Revolving Credit Facility
are available, subject to borrowing base limitations, for working capital
and general corporate purposes, including up to $15.0 million for letters of
credit. At March 31, 1997, on a pro forma basis after giving effect to the
Offering, the other Transactions, and the application of the proceeds
therefrom, as well as borrowing base limitations and $0.6 million of
outstanding letters of credit, the Company estimates that it would have had
the ability to borrow approximately $24.8 million under the Revolving Credit
Facility. See "Description of Senior Bank Facilities."
(2) Based on the Company's results of operations since March 31, 1997, the
Company estimates the closing net worth adjustment will be approximately
$12.6 million resulting in a total Merger Price of approximately $261.8
million, cash on hand of approximately $11.5 million, substantially all of
which will be applied to fund the Merger Price, and approximately $1.0
million will be drawn under the Revolving Credit Facility in order to
provide the remainder of the necessary financing.
(3) Holdings made an Equity Contribution of $45.0 million for which it received
all of the Company's common stock. See "Ownership of Securities."
(4) The Merger Price includes a net worth adjustment, which would have been $9.1
million based on a March 31, 1997 pro forma closing.
7
<PAGE> 11
THE EXCHANGE OFFER
Securities Offered......... Up to $150,000,000 aggregate principal amount of
11 1/8% Senior Subordinated Notes due 2007 (the
"New Notes"). The terms of the New Notes and Old
Notes are identical in all material respects,
except for certain transfer restrictions and
registration rights relating to the Old Notes.
The Exchange Offer......... The New Notes are being offered in exchange for a
like principal amount of Old Notes. Old Notes may
be exchanged only in integral multiples of $1,000.
The issuance of the New Notes is intended to
satisfy obligations of the Company and the
Guarantor Subsidiaries contained in the
Registration Rights Agreement.
Expiration Date; Withdrawal
of Tender................ The Exchange Offer will expire 5:00 p.m. New York
City time, on , 1997, or such later
date and time to which it is extended by the
Company. The tender of Old Notes pursuant to the
Exchange Offer may be withdrawn at any time prior
to the Expiration Date. Any Old 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
Exchange Offer........... The Company's obligation to accept for exchange, or
to issue New Notes in exchange for, any Old Notes
is subject to certain customary conditions relating
to compliance with any applicable law, or any
applicable interpretation by any staff of the
Commission, or any order of any governmental agency
or court of law, which may be waived by the Company
in its reasonable discretion. The Company currently
expects that each of the conditions will be
satisfied and that no waivers will be necessary.
See "The Exchange Offer -- Certain Conditions to
the Exchange Offer."
Procedures for Tendering
Old Notes................ Each holder of Old Notes wishing to accept 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 Old Notes and any other required
documentation, to the Exchange Agent (as defined)
at the address set forth herein. See "The Exchange
Offer -- Procedures for Tendering Old Notes."
Use of Proceeds............ There will be no proceeds to the Company from the
exchange of Notes pursuant to the Exchange Offer.
Exchange Agent............. United States Trust Company of New York is serving
as the Exchange Agent in connection with the
Exchange Offer.
Federal Income Tax
Consequences............. The exchange of Notes pursuant to the Exchange
Offer should not be a taxable event for federal
income tax purposes. See "Certain Federal Income
Tax Considerations."
9
<PAGE> 12
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company is of the view that
holders of Old Notes (other than any holder who is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act) who exchange their Old
Notes for New Notes pursuant to the Exchange Offer generally may offer such New
Notes for resale, resell such New Notes and otherwise transfer such New Notes
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided such New Notes are acquired in the ordinary course
of the holders' business and such holders have no intention, or any arrangement
with any person, to participate in a distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account in exchange for Old
Notes must acknowledge that it will deliver a prospectus in connection with any
resale of such New Notes. See "Plan of Distribution." In addition, to comply
with the securities laws of certain jurisdictions, if applicable, the New Notes
may not be offered for sale unless they have been registered or qualified for
sale in such jurisdiction or an exemption from registration or qualification is
available and is complied with. The Company has agreed, pursuant to the
Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the New Notes for offer or sale under the
securities or blue sky laws of such jurisdictions as any holder of the Notes
reasonably requests in writing. If a holder of Old Notes does not exchange such
Old Notes for New Notes pursuant to the Exchange Offer, such Old Notes will
continue to be subject to the restrictions on transfer contained in the legend
thereon. In general, the Old Notes may not be offered for sale, 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. Holders of Old Notes do not have any appraisal or dissenters' rights under
Delaware General Corporation Law in connection with the Exchange Offer. See "The
Exchange Offer -- Consequences of Failure to Exchange; Resales of New Notes."
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. Following consummation of the
Exchange Offer, the New Notes will not be eligible for PORTAL trading.
THE OFFERING
The terms of the New Notes are identical in all material respects to the
Old Notes, except for certain transfer restrictions on registration rights
relating to the Old Notes.
Issuer..................... Neenah Corporation.
Securities Offered......... $150,000,000 aggregate principal amount of 11 1/8%
Senior Subordinated Notes due 2007.
Maturity................... May 1, 2007.
Interest Payment Dates..... May 1 and November 1 of each year, commencing
November 1, 1997.
Optional Redemption........ Except as described below, the Company may not
redeem the New Notes (or the Old Notes) prior to
May 1, 2002. On or after such date, the Company may
redeem the New Notes (and any outstanding Old
Notes), in whole or in part, at any time at the
redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of
redemption. In addition, at any time and from time
to time on or prior to May 1, 2000, the Company
may, subject to certain requirements, redeem up to
40%
9
<PAGE> 13
of the original aggregate principal amount of the
Notes with the net cash proceeds of one or more
Public Equity Offerings (as defined) by the
Company, Holdings, or ACP Holdings, for which there
is a Public Market (as defined), at a redemption
price equal to 111.125% of the principal amount of
the Notes to be redeemed, together with accrued and
unpaid interest, if any, to the date of redemption,
provided that at least 60% of the original
aggregate principal amount of the Notes remains
outstanding immediately after each such redemption.
See "Description of Notes -- Optional Redemption."
Change of Control.......... Upon the occurrence of a Change of Control (as
defined), (i) the Company will have the option, at
any time prior to May 1, 2002, to redeem the New
Notes (and any outstanding Old Notes) at a
redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium (as
defined), together with accrued and unpaid
interest, if any, to the date of redemption; and
(ii) if the Company does not redeem the New Notes
(or such Old Notes) pursuant to the preceding
clause (i) or if such Change of Control occurs
after May 1, 2002, each holder will have the right
to require the Company to make an offer to
repurchase the New Notes (and such Old Notes) at a
price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest,
if any, to the date of purchase. See "Description
of Notes -- Change of Control."
Subsidiary Guaranties...... The New Notes will be (as are the Old Notes) fully
guaranteed on an unsecured, senior subordinated
basis by the Guarantor Subsidiaries. Neenah
Corporation is a holding company that derives
substantially all of its income from its principal
subsidiaries, Neenah Foundry Company, Hartley
Controls Corporation, and Neenah Transport, Inc.
The Guarantor Subsidiaries have guaranteed the
Senior Bank Facilities (as defined), and are
jointly and severally liable on a senior basis with
the Company for the obligations thereunder. Such
obligations are secured by pledges of all the
capital stock of the Company and the Guarantor
Subsidiaries and security interests in, or liens
on, substantially all other tangible and intangible
assets of the Company and the Guarantor
Subsidiaries. See "Description of Notes --
Subsidiary Guaranties" and "-- Certain Covenants
-- Future Note Guarantors."
Ranking.................... The New Notes will be (as are the Old Notes)
unsecured and will be subordinated to all existing
and future Senior Indebtedness (as defined) of the
Company. The New Notes will (as do the Old Notes)
rank pari passu with any future Senior Subordinated
Indebtedness of the Company and will rank senior to
all other subordinated indebtedness of the Company.
The Subsidiary Guaranties are unsecured, senior
subordinated obligations of the Guarantor
Subsidiaries, subordinated in right of payment to
existing and future Senior Indebtedness of the
Guarantor Subsidiaries. As of March 31, 1997, on a
pro forma basis, after giving effect to the Merger,
the Offering, the other Transactions, and the
application of the net proceeds therefrom, the
Company and the Guarantor Subsidiaries would have
had outstanding $46.0 mil-
10
<PAGE> 14
lion (excluding $0.6 million of outstanding letters
of credit) aggregate amount of Senior Indebtedness
(all of which is Secured Indebtedness), no Senior
Subordinated Indebtedness other than the
indebtedness represented by the Notes and no
indebtedness that is subordinate or junior in right
of repayment to the indebtedness represented by the
Notes.
Restrictive Covenants...... The indenture (the "Indenture") governing the New
Notes, which is the Indenture governing the Old
Notes, limits (i) the incurrence of additional
Indebtedness by the Company and its Restricted
Subsidiaries (as defined); (ii) the payment of
dividends on, and redemption of, capital stock of
the Company and its Restricted Subsidiaries and the
redemption of certain Subordinated Obligations of
the Company and its Restricted Subsidiaries; (iii)
certain other restricted payments, including
without limitation, investments; (iv) sales of
assets and Restricted Subsidiary stock; (v) certain
transactions with affiliates; (vi) the sale or
issuance of capital stock of its Restricted
Subsidiaries; (vii) the creation of liens; (viii)
the lines of business in which the Company and its
Restricted Subsidiaries may operate; (ix)
consolidations, mergers and transfers of all or
substantially all of the Company's assets; and (x)
sale and leaseback transactions. The Indenture also
prohibits certain restrictions on distributions
from Restricted Subsidiaries. However, all of these
limitations and prohibitions are subject to a
number of important qualifications and exemptions.
See "Description of Notes -- Certain Covenants" and
"-- Merger and Consolidation."
Transfer Restrictions;
Absence of a Public Market
for the Notes............ The New Notes are new securities and there is
currently no established market for the New Notes.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the New
Notes. The Initial Purchasers have advised the
Company that they currently intend to make a market
in the New Notes. However, they are not obligated
to do so, and any market making with respect to the
New Notes may be discontinued without notice. The
Company does not intend to apply for listing of the
New Notes on any national securities exchange or
for their quotation through the National
Association of Securities Dealers Automated
Quotation System.
The address for the Company and each of the Guarantor Subsidiaries is 2121
Brooks Avenue, Box 729, Neenah, Wisconsin 54927 and the telephone number is
(414) 725-7000.
RISK FACTORS
Holders of Old Notes should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors under "Risk Factors" beginning on page 14 for risks in connection with
the Exchange Offer.
11
<PAGE> 15
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth summary historical consolidated, financial
and other data of the Company for the five years ended March 31, 1997, and
certain financial and other data for the year ended March 31, 1997. The summary
historical consolidated financial and other data, (with the exception of tons
produced, employees, employee hours per ton and scrap rate) are derived from the
audited historical consolidated financial statements and the "Unaudited Pro
Forma Financial Information" of the Company, all of which are included elsewhere
in this Prospectus. The historical consolidated balance sheets for 1995, 1996
and 1997 and the historical consolidated statements of income for 1994, 1995,
1996 and 1997 were audited by Ernst & Young LLP, independent auditors. The
historical consolidated balance sheets for 1993 and 1994 and the historical
consolidated statement of income for 1993 were audited by other auditors. The
unaudited pro forma balance sheet data as of March 31, 1997 gives effect to the
Transactions as if such transactions had occurred on March 31, 1997. The
unaudited pro forma consolidated statement of income for the year ended March
31, 1997 gives effect to the Transactions as if such transactions were
consummated on April 1, 1996. The unaudited pro forma financial and other data
do not purport to represent what the Company's financial position or results of
operations would actually have been had the Transactions in fact occurred on the
assumed dates or to project the Company's financial position or results of
operations for any future date or future period. The information contained in
the following table should also be read in conjunction with "Capitalization,"
"Selected Consolidated Financial and Other Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma
Consolidated Financial Information," and the Company's historical consolidated
financial statements and related notes included elsewhere in this Prospectus.
12
<PAGE> 16
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
PRO
FISCAL YEAR ENDED MARCH 31, FORMA
-------------------------------------------------------- --------
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales(1).................... $133,422 $131,982 $160,621 $166,951 $165,426 $165,426
Gross profit.................... 25,143 25,451 39,640 45,320 48,690 48,747
Operating income................ 6,106 11,837 22,967 28,337 31,143 29,718
Interest expense (income),
net........................... 2,118 1,043 397 (481) (1,162) 20,365
Net income...................... 5,080 6,581 13,704 17,142 19,838 4,549
OTHER DATA:
EBITDA(2)....................... $ 13,399 $ 18,577 $ 29,809 $ 35,113 $ 38,024 $ 41,539
Depreciation and amortization... 7,293 6,740 6,842 6,776 6,881 12,979
Capital expenditures............ 3,967 4,583 3,665 7,275 4,546 4,546
Cash interest expense(3)........ 2,128 1,049 624 84 39 20,408
Tons produced................... 137,260 136,754 171,727 168,400 155,134 155,134
Employees....................... 1,169 931 952 922 910 910
Employee hours per ton(4)....... 13.3 10.7 8.7 8.6 9.0 9.0
Scrap rate(5)................... 3.3% 2.9% 2.2% 2.0% 2.0% 2.0%
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents....... $ 79 $ 118 $ 238 $ 10,126 $ 22,403 $ --
Working capital(6).............. 13,425 14,596 15,174 18,094 21,438 29,032
Total assets.................... 87,388 74,327 73,813 82,957 93,869 308,955
Total debt...................... 21,409 13,325 887 241 134 196,020
Total stockholders' equity...... 36,862 37,929 43,198 54,790 68,857 45,000
</TABLE>
- ---------------
(1) Net sales for the years ended March 31, 1993 and 1994 include sales of
products manufactured in Plant 1, which was closed in 1994 as part of the
Company's strategy to increase its focus on higher volume, complex parts for
its industrial customers. The majority of the parts produced in Plant 1 were
then discontinued. Plant 1 provided sales of $30.9 million and $4.4 million
for the fiscal years ended March 31, 1993 and 1994, respectively.
(2) EBITDA represents operating income plus depreciation and amortization. The
Company has included information concerning EBITDA because management
believes that EBITDA is generally accepted as providing useful information
regarding a company's ability to service and/or incur debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash flows
or other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity.
(3) Cash interest expense is defined as interest expense less amortization of
debt issuance cost.
(4) Employee hours per ton represents the number of hours worked by hourly
employees during this period (excluding supervisory employee hours) divided
by the number of tons produced.
(5) The scrap rate is the percentage of castings that are determined to be
unusable prior to delivery to customers.
(6) Working capital represents total current assets (excluding cash and cash
equivalents) less total current liabilities (excluding the revolving credit
facility and the current portion of long-term debt).
13
<PAGE> 17
RISK FACTORS
Holders of Old Notes should carefully consider the following factors in
addition to the other information set forth in this Prospectus in connection
with the Exchange Offer. The risk factors set forth below are generally
applicable to the Old Notes as well as the New Notes.
SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE INDEBTEDNESS
The Company is highly leveraged. As of March 31, 1997, on a pro forma
basis, after giving effect to the Merger, the Offering, the other Transactions,
and the application of the proceeds therefrom, the Company and the Guarantor
Subsidiaries would have had $46.0 million (excluding $0.6 million of outstanding
letters of credit) aggregate amount of Senior Indebtedness (all of which is
Secured Indebtedness), no Senior Subordinated Indebtedness other than that
represented by the Notes and no indebtedness that is junior in right of
repayment to the indebtedness represented by the Notes. As of March 31, 1997, on
a pro forma basis, after giving effect to the Merger, the Offering, the other
Transactions, and the application of the proceeds therefrom, as well as
borrowing base limitations and $0.6 million of outstanding letters of credit,
the Company estimates that it would have had the ability to borrow approximately
$24.8 million under the Revolving Credit Facility. Subject to the restrictions
in the Senior Bank Facilities and the Indenture, the Company may incur
additional indebtedness from time to time, including additional Senior
Indebtedness. The degree to which the Company is leveraged could have important
consequences to holders of the New Notes (and to holders of Old Notes),
including the following: (i) the Company's ability to obtain additional
financing for working capital, capital expenditures, acquisitions or general
corporate purposes may be limited; (ii) a substantial portion of the Company's
cash flow from operations must be dedicated to the payment of interest on the
New Notes (and any outstanding Old Notes), and interest and principal on the
Senior Bank Facilities and the Company's other existing indebtedness, thereby
reducing the funds available to the Company for other purposes; (iii) all of the
indebtedness under the Senior Bank Facilities will be at variable rates of
interest, which will cause the Company to be vulnerable to increases in interest
rates; (iv) all of the indebtedness outstanding under the Senior Bank Facilities
will be secured by pledges of all the capital stock of the Company and the
Guarantor Subsidiaries and security interests in, or liens on, substantially all
other assets of the Company and the Guarantor Subsidiaries, and will become due
prior to the time the principal on the Notes will become due; (v) the Company
may be hindered in its ability to adjust rapidly to changing market conditions;
and (vi) the Company's substantial degree of leverage could make it more
vulnerable in the event of a downturn in general economic conditions or in its
business.
The Company's ability to pay interest on the New Notes (and any outstanding
Old Notes) and to satisfy its other debt obligations will depend on its future
operating performance, which will be affected by prevailing economic conditions
and financial, business and other factors, certain of which are beyond the
Company's control. If the Company's cash flow from operations and capital
resources is insufficient to fund its debt service obligations, the Company may
be forced to reduce or delay capital expenditures, sell assets, obtain
additional equity capital or restructure its debt. There can be no assurance
that the Company's cash flow from operations and capital resources will be
sufficient for payment of its indebtedness in the future. In the absence of such
operating results and resources, the Company could face substantial liquidity
problems and might be required to dispose of material assets or operations to
meet its debt service and other obligations, and there can be no assurance as to
the timing of such sales or the proceeds that the Company could realize
therefrom. The financial covenants and other restrictions in the Senior Bank
Facilities and the Indenture will limit the Company's ability to borrow
additional funds and dispose of certain assets. See "Description of Senior Bank
Facilities" and "Description of Notes."
14
<PAGE> 18
SUBORDINATION; ASSET ENCUMBRANCE
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the New Notes will be (as is the case with the Old
Notes) subordinated to the prior payment in full of all existing and future
Senior Indebtedness of the Company, including all amounts owing or guaranteed
under the Senior Bank Facilities. Consequently, in the event of a bankruptcy,
liquidation, dissolution, reorganization or similar proceeding with respect to
the Company, assets of the Company will be available to pay obligations of the
New Notes (and any outstanding Old Notes) only after all Senior Indebtedness of
the Company has been paid in full, and there can be no assurance that there will
be sufficient assets to pay amounts due on all or any of the New Notes (and any
outstanding Old Notes).
Payments in respect of the respective Subsidiary Guaranties of the New
Notes will be (as is the case with the Old Notes) subordinated to the prior
payment in full of all existing and future Senior Indebtedness of the respective
Guarantor Subsidiaries, including all amounts guaranteed in respect of the
Senior Bank Facilities. As of March 31, 1997, on a pro forma basis after giving
effect to the Merger, the Offering, the other Transactions, and the application
of the proceeds therefrom, the aggregate principal amount of such Senior
Indebtedness would have been $46.0 million (excluding $0.6 million of
outstanding letters of credit) guaranteed under the Senior Bank Facilities.
Consequently, in the event of a bankruptcy, liquidation, dissolution,
reorganization or similar proceeding with respect to a Guarantor Subsidiary, its
assets will be available to pay obligations only after the Senior Indebtedness
of such Guarantor Subsidiary has been paid in full, and there can be no
assurance that there will be sufficient assets to pay amounts due in respect of
such Guarantor Subsidiary's guaranty of the New Notes (or any outstanding Old
Notes).
The Indenture permits the Company and the Guarantor Subsidiaries to incur
certain Secured Indebtedness, including indebtedness under the Senior Bank
Facilities, which will be secured by pledges of all the capital stock of the
Company and the Guarantor Subsidiaries, and security interests in, or liens on,
substantially all other assets of the Company and the Guarantor Subsidiaries.
The New Notes (and the Old Notes) and the Subsidiary Guaranties are unsecured
and therefore do not have the benefit of such collateral. Accordingly, if an
event of default occurs under the Senior Bank Facilities, the lenders will have
a prior right to the assets of the Company and the Guarantor Subsidiaries, and
may foreclose upon such collateral to the exclusion of the holders of the New
Notes (and of any of the Old Notes), notwithstanding the existence of an event
of default with respect thereto. In such event, such assets would first be used
to repay in full amounts outstanding under the Senior Bank Facilities, resulting
in all or a portion of the Company's and the Guarantor Subsidiaries' assets
being unavailable to satisfy the claims of the holders of the New Notes (and of
any of the Old Notes) and other unsecured indebtedness.
RESTRICTIVE LOAN COVENANTS
The Senior Bank Facilities will include certain covenants that, among other
things, will restrict the ability of the Company and its subsidiaries to: (i)
dispose of assets; (ii) incur additional indebtedness; (iii) incur guarantee
obligations; (iv) prepay other indebtedness or amend other debt instruments; (v)
pay dividends; (vi) create liens on assets; (vii) enter into sale and leaseback
transactions; (viii) make investments, loans or advances; (ix) make
acquisitions; (x) engage in mergers or consolidations; (xi) change the business
conducted by the Company; (xii) make capital expenditures; or (xiii) engage in
certain transactions with affiliates and otherwise restrict certain corporate
activities. In addition, under the Senior Bank Facilities the Company will be
required to comply with specified financial ratios and tests, including minimum
interest coverage ratios, maximum leverage ratios and minimum net worth tests.
There can be no assurance that these requirements will be met in the future. If
they are not, the holders of the indebtedness under the Senior Bank Facilities
would be entitled to declare such indebtedness immediately due and payable. See
"Description of Senior Bank Facilities."
15
<PAGE> 19
HOLDING COMPANY STRUCTURE; POSSIBLE UNENFORCEABILITY OF THE SUBSIDIARY
GUARANTIES
The Company is a holding company which derives substantially all of its
operating income from its subsidiaries. The holders of the New Notes (and of any
of the Old Notes) will have no direct claim against the Guarantor Subsidiaries
other than the claim created by the Subsidiary Guaranties, which may themselves
be subject to legal challenge in the event of the bankruptcy of a Guarantor
Subsidiary. See "-- Fraudulent Conveyance." If such a challenge were upheld, the
Subsidiary Guaranties would be unenforceable. To the extent that the Subsidiary
Guaranties are not enforceable, the rights of holders of the New Notes (and of
any of the Old Notes) to participate in any distribution of assets of any
Guarantor Subsidiary upon liquidation, bankruptcy, reorganization or otherwise
may, as is the case with other unsecured creditors of the Company, be subject to
prior claims of creditors of that Guarantor Subsidiary. The Company must rely
upon dividends and other payments from its subsidiaries to generate the funds
necessary to meet its obligations, including the payment of principal of and
interest on the New Notes (and any of the Old Notes). The Indenture contains
covenants that restrict the ability of the Company's Restricted Subsidiaries (as
defined) to enter into agreements limiting distributions and transfers,
including dividends. However, the ability of the Company's subsidiaries to pay
dividends and make other payments may be restricted by, among other things,
applicable state corporate laws and regulations or by terms of agreements to
which they may become party. See "Description of Notes."
DEPENDENCE ON KEY PERSONNEL
Three of the Company's senior executives, including the chief executive
officer, did not remain with the Company after the Closing. The Company retained
James K. Hildebrand to serve as Chairman and Chief Executive Officer following
the Merger, and the Company's current management assumed primary responsibility
for the other duties conducted by the departing senior executives. The ability
of the Company to maintain its competitive position will depend to a significant
degree upon its ability to continue to attract and retain highly qualified
managerial and manufacturing personnel. There can be no assurance that the
Company will be able to continue to recruit and retain such personnel. In
particular, the Company is dependent on certain key management personnel, and
there can be no assurance that the loss of key personnel would not have a
material adverse effect on the Company's results of operations. See
"Management."
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, unless the Company redeems the
Notes, each holder of the New Notes (and of any outstanding Old Notes) will have
the right to require the Company to repurchase all or any portion of such
holder's Notes at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of purchase. The occurrence of
a Change of Control would constitute a default under the Senior Bank Facilities.
In addition, the Senior Bank Facilities will prohibit the purchase of the New
Notes (and of any outstanding Old Notes) by the Company in the event of a Change
of Control, unless and until such time as all indebtedness under the Senior Bank
Facilities is repaid in full. The Company's failure to purchase the New Notes
(and any outstanding Old Notes) would result in a default under the Indenture.
The inability to repay the indebtedness under the Senior Bank Facilities, if
accelerated, would also constitute an event of default under the Indenture. In
the event of a Change of Control, there can be no assurance that the Company
would have sufficient assets to satisfy all of its obligations under the Senior
Bank Facilities and the New Notes (and any outstanding Old Notes). See
"Description of Senior Bank Facilities" and "Description of Notes -- Change of
Control."
CONCENTRATION OF CUSTOMERS
In 1997, sales to one of the Company's customers, Rockwell International,
accounted for 16.1% of the Company's total net sales, and the Company's top
three customers accounted for approximately 34.8% of the Company's net sales. A
significant reduction of purchases by one or more of the
16
<PAGE> 20
Company's key industrial customers could have a material adverse effect on the
Company's business, financial condition or results of operations. See
"Business -- Products, Customers and Markets."
DEPENDENCE ON INDUSTRY/CYCLICALITY
The Company has historically experienced moderate cyclicality in the heavy
municipal market. Sales of municipal castings are influenced by, among other
things, public spending. The Company's industrial sales are largely dependent on
orders from OEMs of medium- and heavy-duty trucks and truck components and their
first-tier suppliers and orders for farm equipment. The truck market has
historically been subject to fluctuations due to general economic conditions
and, in particular, the industrial sector of the economy. From 1993 to 1995, the
truck market experienced significant growth, while in 1996 the medium- and
heavy-duty truck market declined substantially from 1995 levels. In 1997, the
medium- and heavy-duty truck market increased over 1996 levels but remained
below 1995 levels. There can be no assurance that the truck market will not
decline. The farm equipment market has also experienced cyclicality. A downturn
in these markets could reduce demand for, and prices of, the Company's products.
A significant downturn in either of these markets could have a material adverse
effect on the Company's business, financial condition or results of operations.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
COMPETITION
The markets for the Company's products are highly competitive. Competition
is based not only on price, but also on quality of product, range of capability,
level of service and reliability of delivery. The Company competes with numerous
independent and captive domestic iron foundries, as well as with a number of
foreign iron foundries, including certain foundries located in India. The
Company also competes with several large domestic foundries and manufacturers
whose casting products are made with materials other than ductile and gray iron,
such as steel or aluminum. Industry consolidation over the past decade has
resulted in a significant reduction in the number of smaller foundries and a
rise in the share of production by larger foundries, some of which have
significantly greater financial resources than the Company. There can be no
assurance that the Company will be able to maintain or improve its competitive
position in the markets in which it competes. See "Business -- Competition."
FLUCTUATIONS IN PRICE AND SUPPLY OF RAW MATERIALS
The Company is dependent upon outside suppliers for all of its raw material
needs and, therefore, is subject to price increases and delays in receiving
supplies of such materials. Changes in the supply of or demand for raw materials
could affect delivery times and prices. Although historically the Company has
been able to increase prices in response to increased raw material costs, no
assurance can be given that the Company will continue to have available
necessary raw materials at reasonable prices or that any increases in raw
material costs would not have a material adverse effect on the Company's
business, financial condition, or results of operations. See "Business -- Raw
Materials."
CONTROLLING SHAREHOLDERS
The Investor Group beneficially owns approximately 90% of the Common Stock
of the Company and, together with the Management Investors, collectively, has
the ability to elect the entire Board of Directors and generally to control the
affairs and policies of the Company. Circumstances may occur
17
<PAGE> 21
in which the interests of the Investor Group, as shareholders of the Company,
could be in conflict with the interests of the holders of the New Notes (and of
any outstanding Old Notes). In addition, the Investor Group may have an interest
in pursuing acquisitions, divestitures or other transactions that, in their
judgment, could enhance their equity investment, even though such transactions
might involve disproportionate risks to the holders of the New Notes (and of any
outstanding Old Notes). See "Ownership of Securities" and "Certain Relationships
and Related Transactions" and "Business -- Business Strategy."
ENVIRONMENTAL MATTERS
The Company's facilities are subject to numerous federal, state and local
laws and regulations relating to the protection of the environment and worker
health and safety, including those relating to discharges to air, water and
land, the handling and disposal of solid and hazardous waste and the cleanup of
properties affected by hazardous substances. The Company does not currently
anticipate any material adverse effect on its operations or financial condition
as a result of its efforts to comply with, or its liabilities under, such
requirements. Risk of environmental liability is inherent in the manufacturing
of casting products, however, and there can be no assurance that material
environmental costs will not arise in the future. In particular, the Company
might incur capital and other costs to comply with increasingly stringent air
emission control laws and enforcement policies. See "Business -- Environmental
Matters."
FRAUDULENT CONVEYANCE
The incurrence by the Company of indebtedness such as the Old Notes (and
the New Notes exchanged therefor) to finance the Transactions may be subject to
review under relevant state and federal fraudulent conveyance and similar laws
if a bankruptcy or reorganization case or a lawsuit is commenced by or on behalf
of creditors of the Company. Under these laws, if a court were to find that,
after giving effect to the sale of the Old Notes and the exchange of the New
Notes therefor and the application of the net proceeds therefrom, either (a) the
Company incurred such indebtedness with the intent of hindering, delaying or
defrauding then-existing or future creditors or (b) the Company received less
than a reasonably equivalent value or fair consideration for incurring such
indebtedness and at the time of the incurrence of such indebtedness the Company
(i) was insolvent or was rendered insolvent by reason of such transactions; (ii)
was engaged in a business or transaction for which the assets remaining with the
Company constituted unreasonably small capital; or (iii) intended to incur, or
believed that it would incur, debts beyond its ability to pay as they matured,
such court may subordinate such indebtedness to presently existing and future
indebtedness of the Company, avoid the issuance of such indebtedness and direct
the repayment of any amounts paid thereunder to the creditors of the Company or
take other action detrimental to the holders of such indebtedness.
The measure of insolvency for purposes of determining whether a transfer is
avoidable as a fraudulent transfer varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, was greater than the value of all its assets at a fair valuation,
or if the present fair saleable value of the debtor's assets was less than the
amount required to repay its probable liabilities on its debts, including
contingent liabilities, as they become absolute and matured.
There can be no assurance as to what standard a court would apply in order
to determine solvency. To the extent that proceeds from the sale of the Old
Notes were used to finance the Transactions, a court may find that the Company
did not receive fair consideration or reasonably equivalent value for the
incurrence of the indebtedness represented thereby. In addition, if a court were
to find that any of the components of the Transactions constituted a fraudulent
transfer, to the extent that proceeds from the sale of the Old Notes were used
to finance such Transactions, a court may find that the Company did not receive
fair consideration or reasonably equivalent value for the incurrence of the
indebtedness represented by the Old Notes.
18
<PAGE> 22
The Company believes that it received equivalent value at the time the
indebtedness under the Old Notes was incurred. In addition, the Company does
not, after giving effect to the consummation of the Transactions: (i) believe
that it was insolvent or rendered insolvent; (ii) believe that it was engaged in
a business or transaction for which its remaining assets constitute unreasonably
small capital; or (iii) intended to incur, or believe that it incurred, debts
beyond its ability to pay as they mature. These beliefs are based on the
Company's analysis of internal cash flow projections and estimated values of
assets and liabilities of the Company and the Guarantor Subsidiaries at the time
of the offering of the Old Notes. There can be no assurance, however, that a
court passing on the issues would make the same determination.
In addition, the Subsidiary Guaranties may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
any of the Guarantor Subsidiaries. In such a case, the analysis set forth above
would generally apply, except that the Subsidiary Guaranties could also be
subject to the claim that, since the Subsidiary Guaranties were incurred for the
benefit of the Company (and only indirectly for the benefit of the Guarantor
Subsidiaries), the obligations of the Guarantor Subsidiaries thereunder were
incurred for less than reasonably equivalent value or fair consideration. A
court could void a Guarantor Subsidiary's obligation under the Subsidiary
Guaranties, subordinate the Subsidiary Guaranties to other indebtedness of a
Guarantor Subsidiary or take other action detrimental to the holders of the Old
Notes (and the New Notes exchanged therefor).
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
The New Notes are new securities for which there currently is no market.
Although the Initial Purchasers have informed the Company that they currently
intend to make a market in the New Notes, they are not obligated to do so and
any such market making may be discontinued at any time without notice in the
sole discretion of the Initial Purchasers. Accordingly, there can be no
assurance as to the development or liquidity of any market for the New Notes.
The Old Notes are eligible for trading by qualified buyers in the PORTAL market.
The Company does not intend to apply for listing of the Notes or, if issued, the
Exchange Notes, on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System.
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market for similar securities.
Such declines may adversely affect such liquidity and trading markets
independently of the financial performance of, and prospects for, the Company.
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition, including,
in particular, the likelihood of the Company's success in developing and
expanding its business. These statements are based upon a number of assumptions
and estimates which are inherently subject to significant uncertainties and
contingencies, many of which are beyond the control of the Company, and reflect
future business decisions which are subject to change. The foregoing description
of risk factors specifies the principal contingencies and uncertainties to which
the Company believes it is subject. Some of these assumptions inevitably will
not materialize, and unanticipated events will occur which will affect the
Company's results.
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes
pursuant to the Exchange Offer.
19
<PAGE> 23
CAPITALIZATION
The following table sets forth as of March 31, 1997 (i) the consolidated
historical capitalization of the Company, and (ii) the unaudited consolidated
pro forma capitalization of the Company after giving effect to the Transactions,
assuming the Transactions were consummated on such date. This table should be
read in conjunction with the "Selected Consolidated Financial and Other Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Consolidated Financial Information" and the
consolidated financial statements and related notes included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
---------------------
ACTUAL PRO FORMA
------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash and cash equivalents..................................... $22,403 $ --(1)(2)
======= ========
Debt:
Revolving Credit Facility(2)(3)............................. $ -- $ 886
Tranche A Term Loan......................................... -- 20,000
Tranche B Term Loan......................................... -- 25,000
Senior Subordinated Notes due 2007.......................... -- 150,000
Other....................................................... 134 134
------- --------
Total debt.......................................... 134 196,020
Stockholders' equity:
Common stock................................................ 444 100
Additional paid-in capital.................................. -- 44,900
Retained earnings........................................... 71,335 --
Notes receivable from owners to finance stock purchase...... (2,922) --
------- --------
Total stockholders' equity.......................... 68,857 45,000
------- --------
Total capitalization................................ $68,991 $ 241,020
======= ========
</TABLE>
- ---------------
(1) Pro Forma cash and cash equivalents include actual cash and cash equivalents
at March 31, 1997, plus $2.9 million in repayments of notes receivable from
certain stockholders of the Company prior to the Merger, less $25.3 million
to be paid as part of the Merger Price.
(2) Based on the Company's results of operations since March 31, 1997, the
Company estimates the closing net worth adjustment will be approximately
$12.6 million resulting in a total Merger Price of approximately $261.8
million, cash on hand of approximately $11.5 million, substantially all of
which will be applied to fund the Merger Price, and approximately $1.0
million will be drawn under the Revolving Credit Facility in order to
provide the remainder of the necessary financing.
(3) Total borrowings of up to $30.0 million under the Revolving Credit Facility
are available, subject to borrowing base limitations, for working capital
and general corporate purposes, including up to $15.0 million for letters of
credit. At March 31, 1997, on a pro forma basis after giving effect to the
Offering, the other Transactions, and the application of the proceeds
therefrom, as well as borrowing base limitations and $0.6 million of
outstanding letters of credit, the Company estimates that it would have had
the ability to borrow approximately $24.8 million under the Revolving Credit
Facility. See "Description of Senior Bank Facilities."
20
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth the selected historical consolidated
financial and other data of the Company for the five years ended March 31, 1997
and certain pro forma consolidated financial and other data for the year ended
March 31, 1997. The selected historical consolidated financial and other data,
with the exception of tons produced, employees, employee hours per ton and scrap
rate, for the five years ended March 31, 1997 are derived from the audited
consolidated financial statements of the Company. The historical consolidated
financial statements of the Company as of March 31, 1995, 1996 and 1997 and for
each of the four years in the period ended March 31, 1997, have been audited by
Ernst & Young LLP, independent auditors. The historical consolidated financial
statements of the Company as of March 31, 1993 and 1994 and for the year ended
March 31, 1993 have been audited by other auditors. The pro forma consolidated
financial and other data, with the exception of tons produced, employees,
employee hours per ton and scrap rate, as of and for the year ended March 31,
1997, were derived from the "Unaudited Pro Forma Consolidated Financial
Information" included elsewhere herein. The pro forma financial data does not
purport to represent what the Company's financial position or results of
operations would actually have been had the Transactions in fact occurred on the
assumed dates or to project the Company's financial position or results of
operations for any future date or period. The information contained in the
following table should also be read in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Consolidated Financial Information," and the
Company's historical consolidated financial statements and related notes
included elsewhere in this Prospectus.
21
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------------------
PRO
FORMA
1993 1994 1995 1996 1997 1997
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net sales(1)......................................... $133,422 $131,982 $160,621 $166,951 $165,426 $165,426
Cost of sales........................................ 108,279 106,531 120,981 121,631 116,736 116,679
-------- -------- -------- -------- -------- --------
Gross profit......................................... 25,143 25,451 39,640 45,320 48,690 48,747
Selling, general and administrative expenses......... 12,865 13,614 16,673 16,983 17,547 19,029
Restructuring charge................................. 6,172 -- -- -- -- --
-------- -------- -------- -------- -------- --------
Operating income..................................... 6,106 11,837 22,967 28,337 31,143 29,718
Interest expense (income), net....................... 2,118 1,043 397 (481) (1,162) 20,365
-------- -------- -------- -------- -------- --------
Income before income taxes and cumulative effect of
accounting changes................................. 3,988 10,794 22,570 28,818 32,305 9,353
Provision for income taxes........................... 1,544 4,213 8,866 11,676 12,467 4,804
-------- -------- -------- -------- -------- --------
Income before cumulative effect of accounting
changes............................................ 2,444 6,581 13,704 17,142 19,838 4,549
Cumulative effect of accounting changes:
Income taxes....................................... 5,200 -- -- -- -- --
Postretirement benefits other than pensions........ (2,564) -- -- -- -- --
-------- -------- -------- -------- -------- --------
Net income........................................... $ 5,080 $ 6,581 $ 13,704 $ 17,142 $ 19,838 $ 4,549
======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(2)............................................ $ 13,399 $ 18,577 $ 29,809 $ 35,113 $ 38,024 $ 41,539
Depreciation and amortization........................ 7,293 6,740 6,842 6,776 6,881 12,979
Capital expenditures................................. 3,967 4,583 3,665 7,275 4,546 4,546
Cash interest expense(3)............................. 2,128 1,049 624 84 39 20,408
Ratio of earnings to fixed charges(4)................ 2.7x 9.5x 25.9x 70.3x 81.4x 1.4x
Tons produced........................................ 137,260 136,754 171,727 168,400 155,134 155,134
Employees............................................ 1,169 931 952 922 910 910
Employee hours per ton(5)............................ 13.3 10.7 8.7 8.6 9.0 9.0
Scrap rate(6)........................................ 3.3% 2.9% 2.2% 2.0% 2.0% 2.0%
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents............................ $ 79 $ 118 $ 238 $ 10,126 $ 22,403 $ --
Working capital(7)................................... 13,425 14,596 15,174 18,094 21,438 29,032
Total assets......................................... 87,388 74,327 73,813 82,957 93,869 308,955
Total debt........................................... 21,409 13,325 887 241 134 196,020
Total stockholders' equity........................... 36,862 37,929 43,198 54,790 68,857 45,000
</TABLE>
See accompanying Notes to Selected Consolidated Financial and Other Data.
22
<PAGE> 26
NOTES TO SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(1) Net sales for the years ended March 31, 1993 and 1994 include sales of
products manufactured in Plant 1, which was closed in 1994 as part of the
Company's strategy to increase its focus on higher volume, complex parts for
its industrial customers. The majority of the parts produced in Plant 1 were
then discontinued. Plant 1 provided sales of $30.9 million and $4.4 million
for the fiscal years ended March 31, 1993 and 1994, respectively.
(2) EBITDA represents operating income plus depreciation and amortization. The
Company has included information concerning EBITDA because management
believes that EBITDA is generally accepted as providing useful information
regarding a company's ability to service and/or incur debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash flows
or other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity.
(3) Cash interest expense is defined as interest expense less amortization of
debt issuance costs.
(4) For purposes of the computation, the ratio of earnings to fixed charges has
been calculated by dividing (i) income before income taxes and cumulative
effect of accounting changes plus fixed charges by (ii) fixed charges. Fixed
charges are equal to interest expense plus the portion of the rent expense
estimated to represent interest.
(5) Employee hours per ton represents the number of hours worked by hourly
employees during this period (excluding supervisory employee hours) divided
by the number of tons produced.
(6) The scrap rate is the percentage of castings that are determined to be
unusable prior to delivery to customers.
(7) Working capital represents total current assets (excluding cash and cash
equivalents) less total current liabilities (excluding the revolving credit
facility and the current portion of long-term debt).
23
<PAGE> 27
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information (the
"Unaudited Pro Forma Financial Information") has been derived by the application
of pro forma adjustments, which give effect to the Transactions, to the
Company's historical consolidated financial statements included elsewhere in
this Prospectus. The unaudited pro forma consolidated balance sheet gives effect
to the Transactions as if such Transactions had occurred on March 31, 1997. The
unaudited pro forma consolidated statement of income for the year ended March
31, 1997 gives effect to the Transactions as if such Transactions were
consummated on April 1, 1996.
The Unaudited Pro Forma Financial Information is for comparative purposes
only and does not purport to represent what the Company's financial position or
results of operations would actually have been had the Transactions in fact
occurred on the assumed dates or to project the Company's financial position or
results of operations for any future date or future period. The Unaudited Pro
Forma Financial Information should be read in conjunction with the Company's
historical consolidated financial statements and related notes included
elsewhere in this Prospectus.
The pro forma adjustments, as described in the accompanying Notes to the
Unaudited Pro Forma Consolidated Balance Sheet and Statement of Income, are
based on available information and certain assumptions that management believes
are reasonable.
The acquisition of the Company is accounted for under the purchase method
of accounting. Assuming the Merger was consummated on March 31, 1997, the Merger
Price would have been $258.3 million, which would include (i) a net worth
adjustment of $9.1 million at the Closing based on a March 31, 1997 closing, and
(ii) an $11.3 million payment to certain former stockholders of the Company upon
consummation of the Merger. The Merger Price reflects the use of approximately
$25.3 million of cash on the Company's balance sheet and borrowings under the
Revolving Credit Facility of $0.9 million. In addition, there will be a
repayment of $2.9 million in notes receivable from certain stockholders of the
Company prior to the Merger, which reduces the net effect on cash to $22.4
million. The Merger Price has been allocated to the tangible and identifiable
intangible assets and to the liabilities based on preliminary estimates of their
fair values. The allocation of the Merger Price is subject to revision when
additional information concerning certain asset valuations is obtained. The
Merger Price is subject to a closing date net worth adjustment.
24
<PAGE> 28
NEENAH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
$ 2,922(a)
Cash and cash equivalents........................... $ 22,403 (25,325)(b) $ --
Accounts receivable................................. 21,423 21,423
Inventories......................................... 13,956 7,995(c) 21,951
Deferred income taxes and other..................... 2,726 (401)(c) 2,325
------- ------- -------
60,508 (14,809) 45,699
Property, plant and equipment......................... 31,379 69,821(c) 101,200
925(c)
Other assets.......................................... 1,982 7,925(d) 10,832
Identifiable intangible assets........................ -- 29,245(c) 29,245
Goodwill.............................................. -- 121,979(c) 121,979
------- ------- -------
Total assets................................ $ 93,869 $ 215,086 $ 308,955
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving credit facility........................... $ -- $ 886(b) $ 886
Accounts payable.................................... 8,497 8,497
Income taxes payable................................ 573 573
Other current liabilities........................... 7,597 7,597
Current portion of long-term debt................... 134 5,000(e) 5,134
------- ------- -------
16,801 5,886 22,687
Long-term debt........................................ -- 190,000(e) 190,000
Post-retirement benefit obligations................... 5,667 (243)(c) 5,424
Deferred income taxes................................. 2,544 43,300(c) 45,844
------- ------- -------
Total liabilities........................... 25,012 238,943 263,955
2,922(a)
(71,779)(c)
Stockholders' equity.................................. 68,857 45,000(f) 45,000
------- ------- -------
Total liabilities and stockholders'
equity.................................... $ 93,869 $ 215,086 $ 308,955
======= ======= =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
25
<PAGE> 29
NEENAH CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Adjustment to reflect repayment of $2,922 notes receivable from owners
(reported as a reduction from stockholders' equity in the historical
balance sheet) scheduled to occur prior to the closing of the Transactions.
(b) Adjustment to reflect the net effect on cash and borrowings under the
Revolving Credit Facility of the Transactions, as follows:
<TABLE>
<S> <C> <C>
Proceeds from Senior Bank Facilities and Senior Subordinated
Notes............................................................... $ 195,000
Proceeds from Equity Contribution................................... 45,000
Purchase price:
Merger Consideration................................ $(236,840)
Closing date net worth adjustment................... (9,103)
Former Stockholder Payment.......................... (11,336)
---------
(257,279)
Acquisition costs................................... (1,007)
Financing costs..................................................... (7,925)
---------
$ (26,211)
=========
</TABLE>
(c) Adjustment to reflect the push-down of the $258,286 Merger Price (which
includes the acquisition costs) to the assets and liabilities of the
Company, allocated as follows:
<TABLE>
<S> <C>
Book value of Company as of March 31, 1997
($68,857 + $2,922(1)).................................. $ 71,779
Fair value adjustments(2):
Write-up inventories(3)................................ 7,995
Eliminate other current assets repaid at closing....... (401)
Write-up property, plant and equipment(4).............. 69,821
Write-up net pension asset............................. 925
Record identifiable intangible assets(5)............... 29,245
Reduce post-retirement benefit obligations............. 243
Record deferred income taxes(6)........................ (43,300)
Residual -- goodwill(7)................................ 121,979
---------
$258,286
=========
</TABLE>
--------------------
(1) Add back notes receivable from owners (to be repaid prior to the
Closing), which is shown as a reduction from stockholders' equity in
the historical balance sheet.
(2) For all other recorded assets and liabilities of the Company, the
historical book values were estimated to approximate their fair values
at the balance sheet date.
(3) Net effect of changing inventory costing method from last in, first out
to fair value.
(4) The fair value of property, plant and equipment was based on outside
appraisals completed in connection with the Transactions. The write-up
has been allocated to the fixed asset categories as shown below. The
remaining economic useful lives used in depreciating the new basis of
the depreciable fixed assets are also indicated:
<TABLE>
<CAPTION>
REMAINING ECONOMIC
ALLOCATED EXCESS USEFUL LIFE
------------------ ---------------------
<S> <C> <C>
Land....................................... $ 53 N/A
Buildings and improvements................. 1,995 10 to 35 years
Machinery and equipment.................... 45,373 7 to 20 years
Municipal patterns......................... 22,400 15 years
--------
$ 69,821
===============
</TABLE>
26
<PAGE> 30
(5) The fair value of identifiable intangible assets was based on an
outside valuation. The estimated useful lives of the identifiable
intangible assets are 10 to 40 years.
(6) Deferred income taxes were calculated at 40% of all fair value
adjustments except for goodwill since there is no step-up in basis of
assets or liabilities for income tax purposes resulting from the
Transactions.
(7) An amortization period of 40 years will be used for goodwill because
the period expected to be benefited exceeds 40 years.
(d) Adjustment to record the estimated financing costs of $7,925. The amount is
being amortized using the interest method over the term of the related
debt.
(e) Adjustment to record the debt used to finance the acquisition of the
Company:
<TABLE>
<S> <C> <C>
Senior Bank Facilities
Tranche A Term Loan........................... $20,000
Tranche B Term Loan........................... 25,000
------
$ 45,000
Senior Subordinated Notes due 2007....................... 150,000
--------
$195,000
========
</TABLE>
(f) Adjustment to record the $45,000 Equity Contribution to the Company by
Holdings.
27
<PAGE> 31
NEENAH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales........................................ $ 165,426 $ 165,426
Cost of sales.................................... (116,736) $ 57(a) (116,679)
--------- -------- ---------
Gross profit..................................... 48,690 57 48,747
22(a)
(5,019)(b)
Selling, general and administrative expenses..... (17,547) 3,515(c) (19,029)
--------- -------- ---------
Operating income................................. 31,143 (1,425) 29,718
Interest income (expense), net................... 1,162 (21,527)(d) (20,365)
--------- -------- ---------
Income before income taxes....................... 32,305 (22,952) 9,353
Provision for income taxes....................... (12,467) 7,663(e) (4,804)
--------- -------- ---------
Net income....................................... $ 19,838 $ (15,289) $ 4,549
========= ======== =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statement of Income.
28
<PAGE> 32
NEENAH CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(a) Adjustment to reflect depreciation expense based on the new basis and
remaining economic useful lives of the Company's property, plant and
equipment, as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1997
-----------------------
COST OF SALES SG&A
------------- -----
<S> <C> <C>
Historical depreciation (accelerated and straight line
methods).................................................. $(6,723) $(158)
New basis depreciation (straight line method)............... 6,666 136
------- -----
$ (57) $ (22)
======= =====
</TABLE>
(b) Adjustment to record in selling, general and administrative expenses, the
amortization of the identifiable intangible assets and residual goodwill,
calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1997
--------------
<S> <C>
Intangible assets................................................... $1,970
Goodwill............................................................ 3,049
------
$5,019
======
</TABLE>
(c) Adjustment to reduce selling, general and administrative expenses for the
compensation expense (salary, bonuses, and benefits) relating to the four
executives who will not continue with the Company after the Transactions.
Compensation expense relating to replacement executives, including
additional compensation to current employees who will assume new
responsibilities, is included based on planned employment arrangements.
(d) Adjustment to record interest expense and amortization of deferred
financing costs on the debt incurred to finance the Transactions,
calculated as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31, 1997
--------------
<S> <C>
Tranche A Term Loan ($20,000 @ 8.25%)............................. $ 1,526
Tranche B Term Loan ($25,000 @ 8.75%)............................. 2,155
Senior Subordinated Notes due 2007 ($150,000 @ 11.125%)........... 16,688
-------
20,369
Amortization of deferred financing costs.......................... 1,158
-------
$ 21,527
=======
</TABLE>
The interest expense amounts are based on quarterly principal payments of
$1,000 and $250 for the Tranche A and Tranche B Term Loans, respectively.
The effect on interest expense pertaining to the variable rate Term Loans
of an adjustment of a 1/8th of a percent variance in interest rates would
be $53 for the fiscal year ended March 31, 1997.
(e) Adjustment to record the tax effect on the above adjustments using the
marginal effective income tax rate of 38.5%. All adjustments were
tax-effected except for goodwill amortization.
29
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations covers periods before consummation of the Transactions. The following
information should be read in conjunction with "Selected Consolidated Financial
and Other Data," "Unaudited Pro Forma Consolidated Financial Information," and
the consolidated financial statements and the notes thereto included elsewhere
in this Prospectus.
GENERAL
Historically, the Company's net sales have been derived primarily from
sales of heavy municipal and industrial iron castings, which represented 43% and
53%, respectively, of the Company's net sales for the year ended March 31, 1997.
In addition, the Company sells sand control systems and other related products,
which represented 4% of net sales for the year ended March 31, 1997. Sales to
the heavy municipal market have produced, and continue to produce, significantly
higher gross profit margins than sales to the industrial market.
Since 1985, the Company has invested approximately $100 million in its
facilities, with approximately $73 million invested in a major plant
modernization program from 1985 to 1990. This plant modernization program was a
critical part of a long-term strategy to produce higher value-added castings for
its existing industrial customers and to penetrate other selected segments of
that market, while preserving its position as the leader in the heavy municipal
market. This modernization program entailed the closing of the Company's oldest
foundry, Plant 1, and the updating of the Company's other two foundries, Plants
2 and 3. Plant 1 was closed due to its age and the significant investment
required to keep it competitive with more modern mold technology. Plants 2 and 3
were updated with four new molding lines to enable the Company both to produce
higher volume, complex castings for selected industrial segments, and to improve
the Company's cost position in the heavy municipal market. Following the
completion of the modernization program, the Company has steadily decreased its
production of lower margin products such as axle covers and brake drums and
increased the production of more complex, higher value-added parts such as
transmission housings and axle housings. In 1996, the Company began to introduce
what it calls "lightweighted" castings to the municipal market. These
lightweighted castings have been reengineered in order to reduce both their
weight and the amount of raw materials necessary for their manufacture, while
maintaining the high quality performance characteristics of the heavier version
of the casting. This improvement in the design and manufacture of municipal
castings has resulted in lower material costs and improved margins for this
product line. The impact of lightweighted parts on operating results has
generally been lower tons produced, equal or higher unit volumes, higher prices
per ton, lower raw material costs and improved margins.
From 1992 to 1997, the Company's net sales increased from $116.5 million to
$165.4 million, representing a compound annual growth rate of 7.3%, and
operating income increased from $6.2 million to $31.1 million, representing a
compound annual growth rate of 38.1%. The Company's net sales during this period
have been driven primarily by the Company's increased market penetration in
selected products in the medium- and heavy-duty and farm equipment markets, by
increased market demand in the medium- and heavy-duty truck market and, to a
lesser extent, increased heavy municipal market sales. The Company's increase in
operating income during this period was largely the result of improvements in
industrial products and, to a lesser extent, municipal products. Operating
income attributable to industrial castings increased primarily due to higher
production volume, an improved product mix, improved pricing and increased
efficiency in operating its manufacturing equipment, while operating income
attributable to municipal castings increased primarily due to improved pricing
and the effects of the lightweighted casting program. In addition, the Company's
operating income increased due to increased operating leverage.
30
<PAGE> 34
RESULTS OF OPERATIONS
The following table sets forth for the periods shown certain statement of
income data expressed as a percentage of net sales:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH
31,
-------------------------
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
Net sales:
Municipal sales........................................ 43.9% 41.6% 43.1%
Industrial sales....................................... 53.2 55.2 53.4
Hartley Controls sales................................. 2.9 3.2 3.5
----- ----- -----
Total net sales.......................................... 100.0 100.0 100.0
Cost of sales............................................ 75.3 72.9 70.6
----- ----- -----
Gross profit........................................... 24.7 27.1 29.4
Selling, general and administrative...................... 10.4 10.1 10.6
----- ----- -----
Operating income....................................... 14.3% 17.0% 18.8%
===== ===== =====
</TABLE>
COMPARISON OF FISCAL YEAR ENDED MARCH 31, 1997 TO FISCAL YEAR ENDED MARCH 31,
1996
Net Sales. Net sales were $165.4 million for the year ended March 31,
1997, a decrease of $1.6 million, or 0.9%, from $167.0 million for the year
ended March 31, 1996. Net sales of industrial castings decreased $3.9 million,
or 4.2%, to $88.3 million. The decrease in industrial casting sales was
primarily the result of a decision by the Company to discontinue its production
of certain lower margin brake components, which resulted in a 9,600 ton decrease
in tons produced compared to the year earlier period, and, to a lesser extent,
reduced demand for casting products in the medium- and heavy-duty truck market.
Net sales of municipal castings increased $1.9 million, or 2.7%, to $71.3
million, primarily due to increased pricing. Hartley Controls net sales grew
$0.4 million, or 7.4%, to $5.8 million, principally due to increased volume of
equipment sales.
Gross Profit. Gross profit was $48.7 million for the year ended March 31,
1997, an increase of $3.4 million, or 7.5%, from $45.3 million for the year
ended March 31, 1996. Gross profit as a percentage of net sales increased to
29.4% for the year ended March 31, 1997, from 27.1% for the year ended March 31,
1996. The increase in gross profit as a percentage of net sales was due mainly
to improved product mix in the industrial product line and greater overall plant
efficiency. Gross profit percentage also improved due to the continued effect of
the lightweighted municipal casting program.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $17.5 million for the year ended March 31, 1997, an
increase of $0.5 million, or 2.9%, from $17.0 million for the year ended March
31, 1996. As a percentage of net sales, selling, general and administrative
expenses increased to 10.6% for the year ended March 31, 1997, from 10.1% for
the year ended March 31, 1996. Approximately $0.2 million of the increase in
selling, general and administrative expenses was due to a non-recurring
charitable contribution and approximately $0.9 million of the increase was due
to increased compensation and benefits to officers of the Company who resigned
at Closing. Excluding the effects of estimated nonrecurring officer compensation
and benefits and the charitable contribution, selling, general and
administrative expenses, as a percentage of net sales, decreased slightly to
8.3% for the year ended March 31, 1997, from 8.4% for the year ended March 31,
1996.
Operating Income. Operating income increased to $31.1 million for the year
ended March 31, 1997, an increase of $2.8 million or 9.9% from $28.3 million for
the year ended March 31, 1996. As a percentage of net sales, operating income
increased to 18.8% for the year ended March 31, 1997, from 17.0% for the year
ended March 31, 1996. The improvement in operating income was achieved primarily
for the reasons discussed above.
31
<PAGE> 35
COMPARISON OF FISCAL YEAR ENDED MARCH 31, 1996 TO FISCAL YEAR ENDED MARCH 31,
1995
Net sales. Net sales were $167.0 million for the year ended March 31,
1996, an increase of $6.4 million, or 4.0%, from $160.6 million for the year
ended March 31, 1995. Net sales of industrial castings grew $6.6 million, or
7.7%, to $92.2 million. The increase in industrial sales was primarily due to
improved pricing while sales volume remained stable. The improved pricing for
industrial castings was mainly the result of a better industrial product mix as
the Company increased its sales of more complex, value-added industrial
castings. Net sales of municipal castings decreased $1.0 million, or 1.4%, to
$69.4 million, due to a decrease in unit volume, which was partially offset by
improved pricing. The decrease in municipal castings volume was principally due
to artificially high sales in fiscal 1995 resulting from weather conditions.
Fiscal 1995 net sales were affected by poor winter weather in January to March
1994 which resulted in the postponement of certain sales from fiscal 1994 to
fiscal 1995, and mild weather from January to March 1995 which resulted in the
acceleration of sales from fiscal 1996 to fiscal 1995. Total production volume
in tons decreased more significantly than unit volume for municipal sales
because of the effect of the lightweighted casting program. See "-- General."
Hartley Controls net sales grew $0.8 million, or 17.4%, to $5.4 million,
principally due to increased volume of equipment sales.
Gross Profit. Gross profit was $45.3 million for the year ended March 31,
1996, an increase of $5.7 million, or 14.4%, from $39.6 million for the year
ended March 31, 1995. Gross profit as a percentage of net sales increased to
27.1% for the year ended March 31, 1996, from 24.7% for the year ended March 31,
1995. The continued improvement in gross profit, as a percentage of net sales,
was due to the combined effect of margin improvements in both the industrial and
municipal product lines. Industrial castings gross profit percentage improved
due to the shift to a more profitable product mix and improved efficiency in
plant operations. Municipal castings gross profit percentage improved largely
due to the effect of implementing the lightweighted casting program and an
increase in selling prices.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $17.0 million for the year ended March 31, 1996, an
increase of $0.3 million, or 1.8%, from $16.7 million for the year ended March
31, 1995. As a percentage of net sales, selling, general and administrative
expenses decreased slightly to 10.1% for the year ended March 31, 1996, from
10.4% for the year ended March 31, 1995. Approximately $0.1 million of the
increase in selling, general and administrative expense was due to increased
compensation and benefits to officers of the Company who resigned at Closing.
Excluding the effects of estimated nonrecurring executive compensation and
benefits, selling, general and administrative expenses, as a percentage of net
sales, decreased to 8.4% from 8.6% for the year ended March 31, 1995, primarily
due to the spreading of fixed expenses over a greater volume of sales.
Operating Income. Operating income increased to $28.3 million for the year
ended March 31, 1996, an increase of $5.3 million, or 23.0%, from $23.0 million
for the year ended March 31, 1995. As a percentage of net sales, operating
income increased to 17.0% for the year ended March 31, 1996, from 14.3% for the
year ended March 31, 1995. The improvement in operating income was achieved
primarily for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs will arise primarily from debt service on
indebtedness incurred in connection with the Transactions, working capital needs
and the funding of capital expenditures. At March 31, 1997, on a pro forma basis
after giving effect to the Transactions, the Company's consolidated indebtedness
would have been approximately $196.0 million (excluding $0.6 million of
outstanding letters of credit), consisting of $150.0 million of the Notes, $45.0
million in Term Loans, $0.1 million in capital lease obligations and $0.9
million drawn under the Revolving Credit Facility. The degree to which the
Company is leveraged could have a significant effect on its results of
operations.
32
<PAGE> 36
Principal and interest payments under the Senior Bank Facilities and the
Notes will represent significant liquidity requirements for the Company. Under
the terms of the Senior Bank Facilities, the Company will be required to make
principal payments totaling approximately $5.0 million in 1998, $5.0 million in
1999, $5.0 million in 2000, $5.0 million in 2001, $5.0 million in 2002, $10.0
million in 2003 and $10.0 million in 2004. Loans under the Senior Bank
Facilities will bear interest at floating rates based upon the interest rate
option selected by the Company. Borrowings under the Revolving Credit Facility
will be subject to a borrowing base. For a description of the Senior Bank
Facilities, see "Description of Senior Bank Facilities."
For the fiscal years ended March 31, 1995, 1996 and 1997, the Company's
capital expenditures were $3.7 million, $7.3 million and $4.5 million,
respectively. The $3.6 million increase in capital expenditures for the fiscal
year ended March 31, 1996 from the comparable period for 1995 was primarily the
result of the expansion of the cooling capabilities of two of the Company's
production lines. Of the $4.5 million of capital expenditures in 1997, an
estimated $4.0 million was attributable to maintenance of capital equipment. The
Company currently plans to make capital expenditures of approximately $6.0
million in the fiscal year ended March 31, 1998, exclusive of any acquisitions.
While a component of the Company's strategy is to make selective acquisitions in
the foundry industry, it currently has no agreements relating to any
acquisitions.
The Company's principal source of cash to fund its liquidity needs will be
net cash from operating activities and borrowings under the Revolving Credit
Facility. Net cash from operating activities for the year ended March 31, 1997
was $23.5 million, an increase of $1.2 million from $22.3 million for the year
ended March 31, 1996, primarily as a result of an increase in net income. Net
cash from operating activities for the year ended March 31, 1996 of $22.3
million represented a decrease of $1.3 million from $23.6 million in the
comparable period of 1995, primarily as a result of a net increase in working
capital (excluding cash and cash equivalents) during 1996 partially offset by
greater net income in 1996.
At March 31, 1997, on a pro forma basis after giving effect to the
Offering, the other Transactions and the application of the proceeds therefrom,
as well as borrowing base limitations and $0.6 million of outstanding letters of
credit, the Company estimates that it would have had the ability to borrow
approximately $24.8 million under the Revolving Credit Facility. Amounts under
the Revolving Credit Facility may be used for working capital and general
corporate purposes, subject to certain limitations under the Senior Bank
Facilities. The Company believes that cash generated from operations, together
with the amounts available under the Revolving Credit Facility, will be adequate
to meet its debt service requirements, anticipated capital expenditures and
working capital needs for the foreseeable future, although no assurance can be
given in this regard. The Company also believes that such resources, together
with the potential future use of debt or equity financing, will allow the
Company to pursue its strategic goal of making selective acquisitions. The
Company's future operating performance and ability to service or refinance the
Notes and to extend or refinance the Senior Bank Facilities will be subject to
future economic conditions and to financial, business and other factors, many of
which are beyond the Company's control.
RAW MATERIALS
Although the prices of all raw materials used by the Company vary, the
fluctuations in the price of steel scrap are the most significant to the
Company. The Company has arrangements with most of its industrial customers
which require the Company to adjust industrial casting prices to reflect scrap
price fluctuations. In periods of rapidly rising or falling scrap prices, these
adjustments will lag the current scrap price because they are generally based on
average market prices for prior periods, which periods vary by customer but are
generally no longer than six months. Castings are generally sold to the heavy
municipal market on a bid basis and, after a bid is won, the price for the
municipal casting subject to the bid generally cannot be adjusted for raw
material price increases. However, in most cases the Company has been successful
in obtaining higher municipal casting unit prices in subsequent bids to
compensate for rises in scrap prices in prior periods. Rapidly
33
<PAGE> 37
fluctuating scrap prices may have a temporary adverse or positive effect on the
Company's results of operations.
INFLATION
The Company does not believe that inflation has had a material impact on
its financial position or results of operations during the three years ended
March 31, 1997.
CYCLICALITY AND SEASONALITY
The Company has historically experienced moderate cyclicality in the heavy
municipal market. Sales of municipal products are influenced by, among other
things, public spending. In the industrial market, the Company has experienced
cyclicality in sales resulting from fluctuations in the medium-and heavy-duty
truck market and the farm equipment market, which are subject to general
economic trends.
The Company experiences seasonality in its municipal business where sales
tend to be higher during the construction season, which occurs during the warmer
months, generally the first and second quarters of the Company's fiscal year.
Seasonal weather can also impact the Company's net sales from year to year, as
warmer weather conditions in the months of January through March of any given
year can allow shipments during that time which would normally occur in the
subsequent fiscal year. The Company maintains level production throughout the
year in anticipation of such seasonality and does not experience production
volume fluctuations as a result. The Company builds inventory in anticipation of
the construction season with such inventories reaching a peak near the end of
its fiscal year in March. The Company has not historically experienced
seasonality in industrial casting sales.
34
<PAGE> 38
EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
Exchange Offer), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on ; provided, however, that if the Company has
extended the period of time for which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $150.0 million aggregate principal
amount of the Old Notes are outstanding. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , to all
holders of Old Notes known to the Company. The Company's obligation to accept
Old Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "-- Certain Conditions to the Exchange Offer"
below.
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 any exchange of any Old Notes, by giving notice of
such extension to the holders thereof. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old 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 Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." The Company
will give notice of any extension, amendment, non-acceptance or termination to
the holders of the Old 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.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to United States Trust Company of New
York (the "Exchange Agent") at one of the addresses set forth below under
"Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old 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 the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE
35
<PAGE> 39
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by registered holder of the Old Notes 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 (as defined below). 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 guarantees must be by a firm that is a member or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If Old
Notes are registered in the name of a person other than a signer of the Letter
of Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by, the registered holder with the signature thereon guaranteed by an
Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (including the Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
do so must be submitted.
By tendering, each broker-dealer holder will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the holder and any
beneficial holder, that neither the holder nor any such beneficial holder has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of the Company. If
the holder is not a broker-dealer, the holder must represent that it is not
engaged in nor does it intend to engage in a distribution of the New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. For purposes of the Exchange
36
<PAGE> 40
Offer, the Company shall be deemed to have accepted properly tendered Old Notes
for exchange when, as and if the Company has given oral and written notice
thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for such Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's accountant the
Book-Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
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 Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old 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 Old 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 one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile and transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Notes,
in proper form for transfer or a confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (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 (iii) the certificates for all physically tendered Old
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 five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time on the business day prior to 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
37
<PAGE> 41
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing holder. If
certificates for Old 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 number 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 Old 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 Old 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 Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder (or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the Book-Entry Transfer Facility pursuant to the book entry transfer
described above, such Old Notes will be credited to an account maintained with
such Book-Entry Transfer Facility for the Old Notes) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "-- Procedures for Tendering Old Notes" above at any
time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue New Notes in exchange
for, any Old Notes and may terminate or amend the Exchange Offer if at any time
before the Expiration Date, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
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 reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
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 Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
prior to the Expiration Date 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, as amended (the "TIA"). In any such event, the Company is required to use
every reasonable effort to obtain the withdrawal of any stop order at the
earliest possible time.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at the address set forth below. Questions and
requests for assistance, requests for additional copies of
38
<PAGE> 42
this Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
United States Trust
Company of New York
114 West 47th Street
New York, NY 10036
Via Facsimile: (212) 852-1626
Confirm by Telephone: (212) 852-1614
For Information: (212) 858-2103
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or other
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and Trustee, accounting and legal fees and printing costs among others.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount as reflected in the Company's accounting records
on the date of the exchange. Accordingly, no gain or loss for accounting
purposes will be recognized. The expenses of the Exchange Offer will be
capitalized for accounting purposes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
the Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of, the Securities
Act and applicable state securities law. Old Notes not exchanged pursuant to the
Exchange Offer will continue to accrue interest at 11 1/8% per annum and will
otherwise remain outstanding in accordance with their terms. Holders of Old
Notes do not have any appraisal or dissenters' rights under the Delaware General
Corporation Law in connection with the Exchange Offer. In general, the Old 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 Old Notes under the Securities
Act. However, (i) if the Initial Purchasers so request with respect to Old Notes
not eligible to be exchanged for New Notes in the Exchange Offer and held by
them following consummation of the Exchange Offer or (ii) if any holder of Old
Notes is not eligible to participate in the Exchange Offer, or, in the case of
any holder of Old Notes that participates in the Exchange
39
<PAGE> 43
Offer, does not receive freely tradable New Notes in exchange for Old Notes, the
Company is obligated to file a Registration Statement on the appropriate form
under the Securities Act relating to the Old Notes held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, it is the Company's view that New
Notes issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or (ii) any broker-dealer that purchases Notes form the Company
to resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such holders' business and such holders have no intention, or any arrangement
or understanding with any person, to participate in the distribution of such New
Notes. If any holder has any arrangement or understanding with respect to the
distribution of the New Notes to be acquired pursuant to the Exchange Offer,
such holder (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. A broker-dealer who holds Old Notes that were acquired for
its own account as a result of market-making or other trading activities may be
deemed to be an "underwriter" within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of New Notes. Each such broker-dealer that
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of such New Notes. See "Plan
of Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the New Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the new Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
40
<PAGE> 44
BUSINESS
OVERVIEW
The Company, founded in 1872, is one of the largest manufacturers of a wide
range of high quality ductile and gray iron castings for the heavy municipal
market and selected segments of the industrial market. The Company believes it
is the largest manufacturer of heavy municipal iron castings in the United
States with approximately a 19% market share in calendar year 1996. The
Company's broad range of heavy municipal iron castings includes manhole covers
and frames, storm sewer frames and grates, heavy duty airport castings,
specialized trench drain castings, specialty flood control castings and
ornamental tree grates. These municipal castings are sold throughout the United
States to state and local government entities, utility companies, precast
concrete manhole structure producers and contractors for both new construction
and infrastructure replacement. The municipal market generated approximately 43%
of the Company's 1997 net sales. The Company believes it is also a leading
manufacturer of a wide range of complex industrial castings, including castings
for medium- and heavy-duty truck drive line components, a broad range of
castings for the farm equipment industry and specific components for compressors
used in heating, ventilation and air conditioning systems ("HVAC"). The
industrial market generated approximately 53% of the Company's 1997 net sales.
In addition, the Company engineers, manufactures and sells customized sand
control systems and related products, which are an essential part of the casting
process, to other iron foundries. Sales of these sand control systems and
related products represented approximately 4% of the Company's 1997 net sales.
The Company currently operates two modern foundries with an annual
aggregate rated capacity of approximately 187,000 tons at a single site in
Neenah, Wisconsin. Since 1985, the Company has invested approximately $100
million in its production facilities, with approximately $73 million invested in
a major plant modernization program from 1985 to 1990. This plant modernization
program was a critical part of a long-term strategy to produce higher volume,
value-added castings for its existing industrial customers and to penetrate
other selected segments of the industrial market, while preserving its position
as the leader in the heavy municipal market. This modernization program entailed
the closing of the Company's oldest foundry, Plant 1, and the updating of the
Company's other two foundries, Plants 2 and 3, which enabled the Company both to
produce higher volume, complex castings for selected industrial segments and to
improve the Company's cost position in the heavy municipal market. Following the
completion of the modernization program, the Company has steadily decreased its
production of lower margin products such as axle covers and brake drums and
increased the production of higher margin, more complex parts such as
transmission and axle housings. As a result of this strategy, the Company's
ongoing improvements in its manufacturing process and increased demand for
medium- and heavy-duty truck components, net sales and EBITDA (as defined) have
increased substantially. From 1992 to 1997, net sales have grown from $116.5
million to $165.4 million, representing a compound annual growth rate of 7.3%,
and EBITDA has grown from $13.4 million to $38.0 million during the same period,
representing a compound annual growth rate of 23.2%.
INDUSTRY
The United States casting industry includes products made from gray,
malleable and ductile iron, aluminum, steel and various other metals, each with
different underlying structural and performance properties such as strength,
durability and weight. Gray iron, the oldest and most widely used cast iron, is
readily cast into intricate shapes that are easily machined and wear resistant.
Malleable iron, the least used form of iron, is stronger than gray iron and is
more costly than either gray or ductile iron. Ductile iron is also readily cast
into intricate shapes, and due to the addition of alloys during the casting
process, has greater strength and ductility than gray iron. As a result, ductile
iron is used as a higher-strength substitute for gray iron and a lower-cost
substitute
41
<PAGE> 45
for malleable iron and, in certain applications, steel. The Company manufactures
both gray and ductile iron which it sells into two broad end markets, the
municipal and industrial markets.
The municipal market consists of the heavy municipal market and the water
works market. The heavy municipal market is composed of "standard" castings
(consisting primarily of storm and sanitary sewer castings including manhole
covers and frames and storm sewer frames and grates), and "specialty" castings
(consisting primarily of heavy duty airport castings, trench drain castings,
flood control castings, special manhole and inlet castings and ornamental tree
grates). The water works market consists of certain pipe fittings, valves and
fire hydrants. The Company competes in the heavy municipal market and does not
participate in the water works market. The industrial market includes segments
such as car/light truck, medium- and heavy-duty truck, farm equipment and HVAC.
Of these, the Company primarily provides parts to the medium- and heavy-duty
truck, farm equipment and, to a lesser extent, HVAC segments. Since 1986, the
industrial market has steadily increased its demand for ductile iron due to its
superior performance properties such as strength, ductility and resistance to
stress and mechanical shock. The heavy municipal market utilizes gray iron for
the overwhelming majority of the parts it requires because gray iron continues
to be the most cost-effective material for most municipal applications.
The United States iron foundry industry is highly fragmented despite
significant consolidation over the past decade. In 1986, there were
approximately 880 foundries engaged in the casting of gray, ductile and
malleable irons, with an aggregate capacity of approximately 15 million tons
according to Stratecasts, Inc. a foundry industry research and consulting
organization. By 1996, the number of iron foundries had decreased to
approximately 730, with an aggregate capacity of approximately 13 million tons,
with further consolidation expected to take place. Many smaller foundries have
closed due to the increasing cost of complying with environmental and other
governmental regulations and their inability to satisfy the increasing demand
for higher quality, more complex castings. Due to capacity achieved through
consolidation and technological advancements, the output per remaining foundry
has risen.
In the heavy municipal market, a significant share of the market is served
by a few large foundries, including the Company. Foreign competition,
particularly from India, which had a strong presence in the heavy municipal
market in the past, has receded over the last 18 months as a result of both
antidumping and countervailing duty litigation and increasingly stringent
emission controls in such countries. Such foreign competition, which continues
to be a factor in the heavy municipal market, is primarily present in the
western and eastern coastal states due in part to the costs associated with
transportation. The industrial market has experienced substantial change over
the last 20 years due to two major initiatives by industrial original equipment
manufacturers and their first tier suppliers. The first, outsourcing, has meant
the closing of automotive and other captive foundries as OEMs and their first
tier suppliers focus on core businesses and take advantage of specialized skills
and lower manufacturing and labor costs of independent foundries. Second, OEMs
and their first tier suppliers are reducing the number of suppliers with whom
they work in an effort to eliminate duplicative overhead at multiple suppliers,
take advantage of economies of scale inherent in volume production and confine
suppliers to those with the resources necessary to satisfy stringent quality and
dependability criteria.
COMPETITIVE ADVANTAGES
The Company believes it benefits from the following competitive advantages,
which have enabled it to increase sales and operating profitability and to
maintain its position as one of the leaders in the iron casting industry.
Leading Market Position. The Company believes it is the largest
manufacturer of heavy municipal iron castings in the United States with
approximately a 19% market share in calendar year 1996. Furthermore, the
Company, which has produced municipal castings for over 70 years has, according
to its estimates, over a 50% market share in nine of the top ten states in which
the
42
<PAGE> 46
Company sells heavy municipal castings. Sales in those states represented
approximately 69% of the Company's municipal sales in 1997. The Company believes
it is also one of the largest manufacturers of iron castings for selected
segments of the industrial market, including the medium-and heavy-duty truck and
farm equipment segments. The Company is the sole sourced supplier for over 85%
of the industrial products it produces and has multi-year arrangements with
certain of its largest customers. The Company believes it can continue to
capitalize on its strong market position to generate additional revenues and
realize economies of scale, thereby increasing margins and earnings.
Low Cost Structure. As a result of its size, significant investment in
equipment and technology and focus on improving efficiency, the Company believes
it possesses a highly competitive cost structure. Since 1985, the Company has
invested approximately $100 million in its production facilities, with
approximately $73 million invested in plant modernization and new equipment from
1985 to 1990. These investments, combined with the Company's ongoing
improvements to its manufacturing process, have substantially increased
efficiency and manufacturing productivity. From 1992 to 1997, the Company
reduced its scrap rate from 3.5% to 2.0%, which the Company believes is one of
the lowest scrap rates in the industry. During the same period, the Company
reduced its employee hours per ton by approximately 40% from 14.8 to 9.0, while
improving product quality levels and producing higher margin, more complex
parts.
Broad Product Offering. The Company carries a broad range of products,
offering more than 4,400 patterns that can produce over 20,000 part combinations
for the heavy municipal market, and more than 350 patterns for the industrial
market. The Company believes its municipal catalog offers the largest castings
selection of any foundry serving the heavy municipal market. This extensive
product offering, which includes hundreds of one-of-a-kind specialty items,
enables the Company to compete throughout the United States and provide a
substantial number of the many types of municipal castings required for
individual projects. Heavy municipal castings are manufactured from
Company-owned patterns which have been appraised by independent appraisers to be
in excess of $22 million. Additionally, the Company's extensive and growing
offering of complex industrial castings enables it to more effectively service
its customers' increasing needs for highly engineered cast parts and often
positions the Company as the sole source of supply to original equipment
manufacturers ("OEMs") and their first tier suppliers. The Company's broad
industrial product offering and its recognized casting engineering expertise
have become increasingly important as large industrial customers seek to reduce
the number of suppliers with whom they conduct business.
Strong, Diverse Customer Relationships. The Company continually focuses on
establishing and maintaining strong relationships with its customers. In the
heavy municipal market, the Company currently sells to over 17,000 active
customers in all 50 states, with the majority of its sales concentrated in the
midwestern states. The Company believes it has the largest sales and marketing
effort of any foundry serving the heavy municipal market, including 47 Company
employees and 26 commissioned representatives. The Company believes the size of
its marketing effort, the breadth of its product offering and the level of its
technical support provide it with a significant competitive advantage and will
allow it to further strengthen its leading position in the heavy municipal
market. With respect to the industrial market, the Company has established
strong relationships with leading manufacturers of medium- and heavy-duty truck
components, farm equipment and HVAC systems. The Company is the sole sourced
provider for over 85% of the products it currently supplies to its industrial
customer base and has multi-year arrangements with certain of its largest
customers. Furthermore, the average industrial casting typically takes between
12 and 18 months to go from the design phase to full production and has an
average life cycle of approximately 8 to 10 years. This lengthy development
process, in which the Company actively participates, provides the Company with
an inventory of products that cannot be quickly replicated by its competitors.
Historically, the foundry that has originally manufactured an industrial part
has continued to manufacture that part throughout its product life cycle. The
Company's participation in both the heavy municipal and
43
<PAGE> 47
industrial markets helps to diversify the Company's business and to reduce the
Company's reliance on individual customers or end-use markets.
High Quality Products and Customer Service. The Company believes it enjoys
a reputation for providing a high level of customer service and is recognized
for its ability to consistently manufacture high-quality, complex products. The
Company believes its manufacturing capabilities and process controls allow it to
manufacture high quality castings which are dimensionally and metallurgically
consistent. In addition to providing high quality products, the Company
emphasizes customer service by providing tooling and engineering development
support to its customers, consistent on-time delivery utilizing its own fleet of
trucks for delivery of many of its municipal products and a small portion of the
Company's industrial products and follow-up through its sales and marketing
team. The Company believes its ability to provide such product quality and
responsive service has fostered customer loyalty and long-term relationships.
Experienced Management Team with Significant Equity Stake. The top seven
members of the Company's senior operating management have an average of
approximately 12 years with the Company and 23 years in the iron foundry
industry. Certain members of the Company's management (the "Management
Investors") beneficially own, on a fully diluted basis, approximately 10% of the
common stock of the Company.
BUSINESS STRATEGY
The Company's strategy for achieving continued growth in sales and
profitability includes: (i) increasing the sale of higher margin products, (ii)
selectively entering new markets, (iii) improving operating performance and (iv)
making selective acquisitions.
Increasing the Sale of Higher Margin Products. The Company continually
strives to improve the margins on the parts it produces. In the heavy municipal
market, the Company has historically maintained strong margins by periodically
implementing price increases and introducing new, higher value-added products.
For example, the Company is currently leading the market in the sale of
lightweighted municipal castings, which are less costly to handle and require
less raw material to produce. The Company believes incremental margin
improvements will be realized from the Company's increased production of these
lightweighted products. In the industrial market, the Company increased its
focus on manufacturing complex, highly engineered castings in the early 1990s
following substantial capital investment in the late 1980s. Since 1991, the
Company has steadily increased the volume, array and complexity of the parts it
produces for its industrial customers. The Company intends to continue to pursue
opportunities to produce more complex, higher value-added castings, thereby
continuing to improve product margins.
Selectively Entering New Markets. The Company intends to selectively
expand its presence in both the heavy municipal and industrial markets. In the
heavy municipal market, the Company is considering expanding its product
offering in high volume markets such as New York and Nevada where the Company
already has sales representatives in place and for which the Company has already
invested in certain of the toolings necessary to meet potential product demand.
In addition, the Company is exploring further opportunities in New Jersey, New
Hampshire and Massachusetts. The Company's strategy in its chosen industrial
segments is to continue to increase its penetration of existing customers and to
develop similar relationships with other selected industrial companies which
would value the Company's technical ability and high level of product quality
and customer service. The Company also intends to explore opportunities in
austempering (heat-treating ductile iron) and machining and assembling
sub-components for specific industrial customers.
Improving Operating Performance. The Company operates two modern
foundries, and believes it possesses a highly competitive cost structure. The
Company intends to continue to seek ways to capitalize on and extend its
technological expertise and operating efficiencies, thereby reducing its
operating costs. In contrast to the major investments made from 1985 to 1990,
which significantly improved both manufacturing capacity and efficiency, the
Company's near term capital
44
<PAGE> 48
expenditures will be focused primarily on incrementally improving efficiency and
reducing costs through projects such as: (i) sand system optimization, (ii)
material handling improvements and (iii) energy utilization improvements.
Making Selective Acquisitions. The United States iron foundry industry is
highly fragmented despite significant consolidation over the past decade. In
1986, there were approximately 880 foundries engaged in the casting of iron,
with an aggregate capacity of approximately 15 million tons according to
Stratecasts, Inc., a foundry industry research and consulting organization. By
1996, the number of iron foundries decreased to approximately 730, with an
aggregate capacity of approximately 13 million tons. Management believes the
consolidation that has occurred will continue, particularly in the industrial
market, as technical, environmental and quality standards continue to increase.
The Company intends to pursue selective acquisition opportunities that
complement its existing product offering or enable the Company to expand its
presence in selected geographic areas of the heavy municipal market. The Company
believes such acquisitions will provide opportunities for incremental revenue
and cash flow by leveraging the Company's current expertise in manufacturing,
sales and marketing, and product and process engineering.
PRODUCTS, CUSTOMERS AND MARKETS
The Company provides a variety of products to both the heavy municipal and
industrial markets. The following table sets forth certain information regarding
the end-user markets served by the Company, the products produced by the
Company, representative customers in each end-user market and the percentage of
net sales attributable to each of the Company's markets for the years ended
March 31, 1996 and 1997.
<TABLE>
<CAPTION>
PERCENTAGE OF NET SALES(1)
-------------------------------
FISCAL YEAR FISCAL YEAR
REPRESENTATIVE ENDED ENDED
MARKET END PRODUCT CUSTOMERS MARCH 31, 1996 MARCH 31, 1997
- ------------------ ------------------------ ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Heavy Municipal Standard castings State and local 42.9% %44.5
including storm and government
sanitary sewer castings, entities,
including manhole covers utility
and frames, storm sewer companies,
frames and grates; precast concrete
Specialty castings structure
including heavy duty producers and
airport castings, contractors(2)
specialized trench drain
castings, specialty
flood control castings
and ornamental tree
grates
Industrial
Medium- and % %(3)
Heavy-Duty Differential carriers Rockwell 42.3 34.3
Truck and cases, brackets, International
cages, calipers, caps, Eaton Corp.
carriers, hubs, Dana Corp.
knuckles, transmission
housings, yokes
Farm Equipment Various gear housings, John Deere 10.7% %16.0
planet carriers, axle New Holland
housings, planting and
harvesting equipment
parts, counterweights
Other Industrial Compressor components, Aisin 4.1% % 5.2
various housing and gear The Trane
cases Company
</TABLE>
45
<PAGE> 49
- ---------------
(1) Net sales include sales of Neenah Foundry only.
(2) No municipal customer represented more than 1.2% of Neenah Foundry's net
sales for the fiscal years ended March 31, 1996 or 1997.
(3) Commencing in the second quarter of calendar 1996, the Company decided to
discontinue the production of certain lower margin brake components as part
of its strategy to increase its focus on higher volume, complex parts for
its industrial customers. These brake components accounted for 8.3% of
medium- and heavy-duty truck net sales in fiscal 1996 and 1.0% in fiscal
1997.
Heavy Municipal. Based on industry reported data, the Company believes it
is the largest manufacturer of heavy municipal iron castings in the United
States with an estimated 19% market share in calendar year 1996. The Company's
broad heavy municipal product line consists of two general categories of
castings, "standard" and "specialty" castings. Standard castings principally
consist of storm and sanitary sewer castings which are consistent with
pre-existing dimension and strength specifications established by local
authorities. Standard castings are generally high volume items that are
routinely used in new construction and infrastructure replacement. Specialty
castings are generally lower volume, higher margin products which include
heavy-duty airport castings, trench drain castings, flood control castings,
special manhole and inlet castings and ornamental tree grates. These specialty
items are frequently selected and/or specified from the Company's municipal
product catalog and its tree grate catalog, which together encompass over 4,400
standard and specialty patterns. For many of these specialty products, the
Company believes it is the only manufacturer with existing patterns to produce
such a particular casting, although a competing manufacturer could elect to make
the investment in patterns or equipment necessary to produce such a casting.
The Company's municipal castings are sold to state and local government
entities, utility companies, pre-cast concrete manhole structure producers and
contractors for both new construction and infrastructure replacement. The
Company's 17,000 active municipal customers generally make purchase decisions
based on a number of criteria including acceptability of the product per local
specification, quality, service, price and the customer's relationship with the
foundry. Relative to customers in the industrial market, municipal market
customers are less technically demanding and rely on published product
specifications to ensure product performance.
A key aspect of winning orders in the heavy municipal market is the
specification process in which a local authority or design engineer sets
specific criteria for the casting or castings to be used in a particular
project. Those criteria then become part of the formal plans and specifications
that will govern the acceptability of castings for a particular project. The
Company seeks to be an active participant in the specification process. Its
sales staff makes frequent calls on design engineers as part of a continuous
effort to stay abreast of current specifications and upcoming projects. In these
sales calls, the Company seeks to create opportunities for the selection of
specifications which utilize an existing Company pattern. Although in many cases
the design engineer who sets the specification does not make the purchase
decision, when the Company's specialty product is specified it becomes more
difficult for another manufacturer to provide an alternate part which is
considered acceptable. The Company's professional sales staff and product
engineering department are highly regarded by design engineers and are
frequently consulted during the specification drafting process. The Company
believes its reputation for its product engineering support, consistent quality
and reliable service have made the Company's municipal and tree grate catalogs
two of the most frequently used specification design tools in the municipal
casting industry.
Over the past two years, the Company has begun to introduce what it calls
"lightweighted" parts to the heavy municipal market. These lightweighted parts
have been reengineered in order to reduce both their weight and the amount of
raw materials necessary for their manufacture, while maintaining the high
quality performance characteristics of the heavier version of the casting. This
improvement in the design and manufacture of municipal castings has resulted in
lower material costs and improved margins for this product line. The Company is
able to manufacture lightweighted castings because its manufacturing processes
enable it to refine castings walls down to very narrow
46
<PAGE> 50
tolerances, many of which are currently not achievable by the Company's
competitors. While only a portion of the municipal castings the Company sells
are candidates for lightweighting, the Company expects to continue to increase
the number of lightweighted castings which it offers for sale over the next
several years.
Industrial. The Company believes it is a leading manufacturer of a wide
range of complex industrial castings, including castings for medium- and
heavy-duty truck drive line components and farm equipment as well as castings
for specific components for compressors used in HVAC systems. The Company's
industrial castings have increased in complexity since the early 1990's and are
generally produced in higher volumes than municipal castings. Complexity in the
industrial market is determined by the intricacy of a casting's shape, the
thinness of its walls and the amount of processing by a customer required before
a part is suitable for use by it. OEMs and their first tier suppliers have been
demanding higher complexity parts principally to reduce labor costs in their own
production processes by using fewer parts to manufacture the same finished
product or assembly and by using parts which require less preparation before
entering the production process.
The Company's industrial castings are primarily sold to a limited number of
customers with whom the Company has established a close working relationship.
The Company has sold to certain industrial customers for over 20 years and
currently has multi-year arrangements with certain of those customers. These
customers make purchasing decisions based on, among other things, technical
ability, price, service, quality assurance systems, facility capabilities and
reputation. However, as in the municipal market, the Company's assistance in
product engineering plays an important role in winning the award of industrial
castings. The average industrial casting typically takes between 12 and 18
months to go from the design phase to full production and has an average product
life cycle of approximately 8 to 10 years. The patterns for industrial castings,
unlike the patterns for municipal castings, are owned by the Company's customers
rather than the Company, however, such industrial patterns are not readily
transferrable to other foundries without, in most cases, significant additional
investment. Although foundries, including the Company, do not design industrial
castings, a close working relationship between a foundry and the customer during
a product launch is critical to reduce potential production problems and
minimize the customer's risk of incurring lost sales or reputation damage due to
a delayed launch. Involvement by a foundry early in the design process generally
improves the likelihood that the customer will design a casting within the
manufacturing capabilities of such foundry and also improves the likelihood that
such foundry will be awarded the casting for full production.
The Company is the sole sourced supplier of over 85% of the industrial
castings it currently produces. Historically, the Company has retained
approximately 90% of the castings it has been awarded throughout the product
life cycle, which is typical for the industry. The Company believes industrial
customers will continue to seek out foundries with a strong reputation for
performance who are capable of providing a cost-effective combination of
manufacturing technology and quality. The Company's strategy is to further its
relationships with existing customers by participating in the design and
production of more complex industrial castings, while seeking out selected new
customers who would value the Company's performance reputation, technical
ability and high level of quality and service.
In addition to increasing its sales to existing customers and seeking out
new customers, the Company intends to explore opportunities in austempering and
machining and assembling sub-components for specific industrial customers.
Austempering is the process of heat treating a ductile iron casting to increase
its strength, thereby increasing the casting's ability to replace steel in
additional applications. Machining and sub-assembling are value-added processes
often performed by the OEM or third parties. Austempering, machining and
sub-assembly are both processes which generally provide higher margins and
increase a customer's reliance on the manufacturer.
47
<PAGE> 51
SALES AND MARKETING
Heavy Municipal. Over its 70 years of heavy municipal market
participation, the Company has emphasized sales and marketing and believes it
has built a strong reputation for customer service. The Company believes it is
one of the leaders in United States heavy municipal casting production and has
strong name recognition. The Company has the largest sales and marketing effort
of any foundry serving the heavy municipal market, including 47 Company
employees and 26 commissioned representatives. The dedicated sales force works
out of regional sales offices to market the Company's municipal castings to
contractors and state and local governmental entities throughout the United
States. The Company operates nine regional distribution and sales centers and
has two other sales offices in Oklahoma City, Oklahoma and Norwood,
Pennsylvania. The Company believes this regional approach enhances its knowledge
of local specifications and its position in the heavy municipal market.
Industrial. The Company employs a dedicated industrial casting sales force
of six people, five based in Neenah, Wisconsin and one based in Mansfield, Ohio.
These six people consist of three account coordinators, who support the ongoing
customer relationships and organize the scheduling and delivery of shipments,
and three major account managers who work with customers' engineers and
procurement representatives, Company engineers, manufacturing management and
quality assurance representatives throughout all stages of the production
process to ensure that the final product consistently meets or exceeds customer
specifications. This team approach between sales, manufacturing, marketing,
engineering and quality assurance is an integral part of the Company's marketing
strategy.
MANUFACTURING PROCESS
The Company operates two modern foundries with an annual rated capacity of
approximately 187,000 tons at a single location in Neenah, Wisconsin. The
Company's foundries manufacture gray and ductile iron and cast it into intricate
shapes according to customer metallurgical and dimensional specifications. Since
1985, the Company has invested approximately $100 million in its production
facilities, with approximately $73 million invested from 1985 to 1990 in plant
modernization and new equipment. The Company also continually invests in the
improvement of process controls and product performance and believes that these
investments and its significant experience in the industry have made it one of
the most efficient manufacturers of industrial and heavy municipal casting
products. During 1997, the Company had a combined scrap rate of 2.0%, which it
believes was one of the lowest in the industry.
The casting process involves using metal, wood or urethane patterns to make
an impression of a casting product in a mold made primarily of sand. Cores, also
made primarily of sand, are used to make the internal cavities and openings in a
casting product. Once the casting impression is made in the mold, the cores are
set into the mold and the mold is closed. Molten metal is then poured into the
mold, fills the mold cavity and takes on the shape of the desired casting
product. Once the iron has solidified and cooled, the mold is shaken from the
casting and the sand is recycled. The selection of the appropriate casting
method, pattern, core making equipment and sand and other raw materials depends
on the final product and its complexity, specifications, and function as well as
intended production volumes. Because the casting process involves many critical
variables, such as choice of raw materials, design and production of tooling,
iron chemistry and metallurgy, and core and molding sand properties, it is
important to monitor the process parameters closely to ensure dimensional
precision and metallurgical consistency. See "-- Quality Assurance."
The Company continually seeks to find ways to expand the capabilities of
existing technology to improve manufacturing processes. An example of this
expansion is the Company's integration of Disamatic molding machines into its
operations. Disamatic molding machines are considered to be among the most
efficient sand molding machines because of their ability to produce high quality
molds at high production rates. Disamatic molding machines are used by most of
the Company's
48
<PAGE> 52
direct competitors. Although the Company was not the first foundry to acquire
Disamatic molding machines, it has significantly enhanced the equipment's range
of production by combining it with core-setting capabilities which exceed those
of most foundries. To further improve upon the productivity of the Disamatic
molding machines, the Company has recently increased the length of two of its
cooling lines, making each line among the longest lines in the world for
comparable Disamatic equipment. This extension allows the Company to run its
machines at higher production rates while providing sufficient inmold cooling
time prior to mold shakeout to facilitate the production of high quality
castings. As a result of these and other similar efforts, the Company has been
able to increase productivity as measured in the number of molds per hour.
Additionally, from 1992 to 1997, the Company reduced employee hours per ton from
14.8 to 9.0.
The Company also achieves productivity gains by improving upon the
individual steps of the casting process such as reducing the amount of time
required to make a pattern change to produce a different casting product. The
reduced time permits it to profitably produce castings in medium volume
quantities on high volume, cost-effective equipment such as the Disamatic
molding machines. Additionally, extensive effort in real time process controls
permits the Company to produce a consistent, dimensionally accurate casting
product which requires less time and effort in the final processing stages of
production. This accuracy contributes significantly to the Company's
manufacturing efficiency.
Due to the Company's efforts to improve manufacturing productivity, as well
as increased operating leverage, improved pricing and a shift to higher
value-added industrial products, from fiscal 1992 to 1997 the Company's
operating margins have increased from 5.4% to 18.8%. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
HARTLEY CONTROLS
Hartley Controls, a wholly owned subsidiary of the Company, engineers,
manufactures and sells customized sand control systems, which are an essential
part of the casting process, to other iron foundries. The sand molding media
used in all high production iron foundries is a critical element in determining
the mold quality. Exacting and consistent control of this sand with respect to
moisture and chemical additives is an essential element for process control, and
relates directly to casting quality, scrap rate and the ability to produce
complex molds for highly engineered castings. Hartley Controls is a major United
States supplier of sand control systems, with over 300 installations since 1986.
Hartley Controls has made investments in process technology and has several
patented technologies related to sand systems, including the "Automatic Moisture
Controllers," the "Even-Flo Bin," the "Automatic Compactibility Tester," the
"Automatic Bond Determinator," the "Green Sand Reconditioner" and the "Sandman."
Sales of these sand systems and other products represented approximately 4% of
the Company's net sales for 1997.
In addition, Hartley Controls has recently expanded overseas and after only
three years has become a significant supplier of sand control systems in the
United Kingdom. Hartley Controls is the only manufacturer to supply control
systems in the United Kingdom for all brands of foundry sand mixers. Hartley
Controls also currently exports sand control systems to India, with further
expansion planned through a joint venture scheduled for the second quarter of
calendar 1997. Hartley Controls provides the Company access to the newest
technology in sand control as it becomes available.
QUALITY ASSURANCE
Constant testing and monitoring of the manufacturing process is important
to maintain product quality. The Company has adopted sophisticated quality
assurance techniques and policies for its manufacturing operations. During and
after the casting process, the Company performs numerous tests, including
tensile, proof-load, radiography, ultrasonic, magnetic particle and chemical
analysis. The Company utilizes statistical process controls to measure and
control significant process variables and casting dimensions. The results of
this testing are documented in metallurgical
49
<PAGE> 53
certifications which are provided with each shipment to most industrial
customers. The Company strives to maintain systems that provide for continuous
improvement of operations and personnel, emphasize defect prevention and reduce
variation and waste in all areas.
MANUFACTURING FACILITIES, EQUIPMENT AND PROPERTIES
The Company's headquarters and two foundries are located in Neenah,
Wisconsin. The first manufacturing foundry, Plant 2, produces gray and ductile
iron castings and is equipped with one BMD air impulse molding line, two Hydro
slinger cope and drag molding units, and one 2070 Type B Disamatic molding
machine. The annual rated capacity for Plant 2 is 116,000 gst (good salable
tons). The second manufacturing foundry, Plant 3, produces ductile iron castings
and is equipped with one 2013 Mark IV Disamatic molding machine and one 2070
Type B Disamatic molding machine. In July, 1995, the Company completed a program
in Plant 3 to gain efficiencies in material handling, labor utilization and
molding line productivity. The annual rated capacity for Plant 3 is
approximately 71,000 gst. Industrial and municipal castings are produced in both
plants. Rated capacity is based on an assumed product mix and, due to the
Company's current industrial product mix, which includes numerous complex
castings, practical capacity is currently approximately 5% to 6% less than rated
capacity. The Company owns seven and leases six distribution and sales centers.
In early 1994, the Company closed Plant 1, its oldest and lowest capacity plant,
which was primarily producing large castings for HVAC Systems. The Company
closed Plant 1 because of its decision to discontinue the low volume, highly
complex castings produced by Plant 1 and the significant capital expenditures
that would have been necessary to modernize its equipment and facilities.
DISTRIBUTION
The Company sells a substantial amount of its municipal castings through
its network of two warehouses, nine distribution and sales centers and two other
sales offices. Industrial castings are shipped direct to customers from the
Company. For many municipal and a small portion of its industrial customers,
castings are delivered by Neenah Transport, a wholly owned subsidiary of the
Company, which operates a fleet of 29 tractors and 101 trailers that deliver
products throughout the Midwest. For sales outside of the Midwest, increased
transportation costs impact the ability of the Company to compete on a cost
basis. Neenah Transport also backhauls raw materials for use by the Company on
return trips. Neenah Transport is staffed with professional drivers who are
trained in service standards and product knowledge as representatives of the
Company. To the Company's knowledge, none of the Company's major heavy municipal
competitors have a captive transportation subsidiary. The Company believes
Neenah Transport's service and drivers provide another differentiating factor in
favor of the Company.
RAW MATERIALS
The primary raw materials used by the Company to manufacture iron castings
are steel scrap, pig iron, metallurgical coke and silica sand. While there are
multiple suppliers for each of these commodities, the Company has single source
arrangements with its suppliers of each of these major raw materials, with the
exception of pig iron. Due to long standing relationships with each of its
suppliers, the Company believes that it will continue to be able to secure raw
materials from its suppliers at competitive prices. The primary energy sources
for the Company's operations, electricity and natural gas, are purchased through
utilities.
Although the prices of all raw materials used by the Company vary, the
fluctuations in the price of steel scrap are the most significant to the
Company. The Company has arrangements with most of its industrial customers
which require the Company to adjust industrial casting prices to reflect scrap
price fluctuations. In periods of rapidly rising or falling scrap prices, these
adjustments will lag the current scrap price because they are generally based on
average market prices for prior periods, which periods vary by customer but are
generally no longer than six months. Castings are
50
<PAGE> 54
generally sold to the heavy municipal market on a bid basis and, after a bid is
won, the price for the municipal casting subject to the bid generally cannot be
adjusted for raw material price increases. However, in most cases the Company
has been successful in obtaining higher municipal casting unit prices in
subsequent bids to compensate for rises in scrap prices in prior periods.
Rapidly fluctuating scrap prices may have a temporary adverse or positive effect
on the Company's results of operations. See "Risk Factors -- Raw Materials."
COMPETITION
The markets for the Company's products are highly competitive. Competition
is based not only on price, but also on quality of product, range of capability,
level of service and reliability of delivery. The Company competes with numerous
independent and captive foundries, as well as with a number of foreign iron
foundries, including certain foundries located in India. The Company also
competes with several large domestic manufacturers whose products are made with
materials other than ductile and gray iron, such as steel or aluminum. The
industry consolidation that has occurred over the past 20 years has resulted in
a significant reduction in the number of smaller foundries and a rise in the
share of production by larger foundries, some of which have significantly
greater financial resources than the Company. Competition from India has had a
strong presence in the heavy municipal market and continues to be a factor,
primarily in the western and eastern coastal states, due in part to costs
associated with transportation. Such competition has receded over the past 18
months, primarily as a result of increased enforcement of emission controls. As
a result, Indian import volume has decreased and the price of Indian casting
products has risen. Additionally, foreign companies have been, and continue to
be, subject to antidumping and countervailing duty enforcement litigation which
the Company believes has had a negative effect on foreign companies' ability to
compete in the United States markets. There can be no assurance that these
factors will continue to mitigate the impact of foreign competition, or that the
Company will be able to maintain or improve its competitive position in the
markets in which it competes.
BACKLOG
The Company's industrial business generally involves supplying all or a
portion of a customer's annual requirements for a particular casting. Industrial
customers generally order castings on a monthly basis. Orders for the heavy
municipal market are generally received for specific casting products and cover
a much larger range of castings. The Company's backlog at any given time
consists only of firm industrial and municipal orders. The Company's backlog was
26,750 tons at March 31, 1997 as compared to 25,500 tons at March 31, 1996. The
increase in backlog of approximately 5% was primarily the result of
strengthening in the medium- and heavy-duty truck market. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EMPLOYEES
As of March 31, 1997, the Company had 910 full time employees, of whom 710
were hourly employees and 200 were salaried employees. Of the 200 salaried
employees, 91 are in manufacturing and engineering, 61 are in sales and
marketing, 44 are in management and administration and four are in
transportation. The Local 121B of the Glass, Molders, Pottery, Plastics and
Allied Workers International Union AFL-CIO is the major bargaining agent for and
representative of 678 of the Company's hourly employees. The collective
bargaining agreement with Local 121B was reached on January 1, 1996 and expires
on December 31, 1998. The Independent Patternmakers Union of Neenah, Wisconsin
is the major bargaining agent for and representative of 32 of the Company's
hourly employees. The collective bargaining agreement with the Independent
Patternmakers Union was reached on January 1, 1995 and expires on December 31,
1997. The Company believes that it has a good relationship with its employees.
51
<PAGE> 55
LITIGATION
The Company is involved in routine litigation incidental to its business.
Such litigation is not, in the opinion of management, likely to have a material
adverse effect on the financial condition or results of operation of the
Company.
ENVIRONMENTAL MATTERS
The Company's facilities are subject to federal, state and local laws and
regulations relating to the protection of the environment and worker health and
safety, including those relating to discharges to air, water and land, the
handling and disposal of solid and hazardous waste and the cleanup of properties
affected by hazardous substances. Such laws include the Federal Clean Air Act,
the Clean Water Act, the Resource Conservation and Recovery Act and the
Occupational Health and Safety Act. The Company believes that its operations
have been and are currently in substantial compliance with applicable
environmental laws, and that it has no liabilities arising under such
environmental laws, except as would not be expected to have a material adverse
effect on the Company's operations, financial condition or competitive position.
However, some risk of environmental liability and other costs is inherent in the
nature of the iron foundry business. The Company might in the future incur
significant costs to meet current or more stringent compliance, cleanup or other
obligations pursuant to environmental requirements. Such costs may include
expenditures related to remediation of historical releases or clean-up of
structures prior to demolition.
Under the Federal Clean Air Act Amendments of 1990 ("CAA"), the
Environmental Protection Agency must establish maximum achievable control
technology ("MACT") standards for hazardous air pollutants emitted from iron
foundry operations by the year 2000. In addition, Wisconsin law imposes
requirements on emissions of air toxins from iron foundries and other
industries. Many of the regulations that will implement the CAA and Wisconsin
law have not yet been promulgated. Although it is not possible to estimate the
costs of complying with the regulations until they are issued, iron foundries,
including the Company, can be expected to incur significant costs over time to
comply with these federal and state regulations.
52
<PAGE> 56
MANAGEMENT
The following table identifies members of the Board of Directors, key
executive officers and certain other key employees of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- -------------------------------------------------
<S> <C> <C>
James K. Hildebrand................ 60 Chairman of the Board and Chief Executive Officer
William M. Barrett................. 50 Vice President and General Manager
Gary W. LaChey..................... 51 Vice President -- Finance, Treasurer and
Secretary
Charles M. Kurtti.................. 60 Vice President -- Manufacturing and Engineering
John Z. Rader...................... 48 Vice President -- Human Resources
William J. Martin.................. 49 Vice President and General Manager -- Hartley
Controls Corporation
Timothy J. Koller.................. 47 General Sales Manager -- Municipal Castings
Frank C. Headington................ 47 Director -- Product Reliability
David F. Thomas.................... 47 Director
John D. Weber...................... 33 Director
Brenton F. Halsey.................. 69 Director
</TABLE>
Mr. Hildebrand is Chairman of the Board and Chief Executive Officer of the
Company. Mr. Hildebrand has been President and Chief Executive Officer of
Advanced Cast Products, Inc. since 1988, and will continue in that position.
Previously, he served as President of the Cast Products Group of Amcast
Industrial Corp. Mr. Hildebrand is also employed by ACP Holding Company which,
upon the consummation of the Merger, became the beneficial owner of all the
common equity of both the Company and Advanced Cast Products, Inc. See "Certain
Relationships and Related Transactions." Mr. Hildebrand devotes substantial time
to, and be partially compensated by, Advanced Cast Products, Inc.
Mr. Barrett is Vice President and General Manager of the Company. Mr.
Barrett joined the Company in 1992 serving as General Sales
Manager -- Industrial Castings. From 1985 to 1992, Mr. Barrett was the Vice
President -- Sales for Harvard Industries Cast Products Group.
Mr. LaChey is Vice President -- Finance, Treasurer and Secretary of the
Company. Mr. LaChey joined the Company in 1971, serving in a variety of
positions of increasing responsibility in the finance department. Mr. LaChey is
currently Vice President -- Administration of the Company.
Mr. Kurtti is Vice President -- Manufacturing and Engineering, of the
Company, a position he has held since 1991. Mr. Kurtti joined the Company in
1976 as a salesman. Mr. Kurtti has served as Director of Marketing, Director of
Purchasing -- Engineering and Director -- Manufacturing and Engineering.
Mr. Rader is Vice President -- Human Resources, a position he has held
since 1990. Mr. Rader joined the Company in 1987, serving as
Director -- Personnel until 1989 and as Director -- Human Resources until 1990.
Mr. Martin is Vice President and General Manager -- Hartley Controls
Corporation, a wholly owned subsidiary of the Company, a position he has held
since 1996. Previously, Mr. Martin was Territory Sales Manager at Disamatic,
Inc., a molding machine manufacturer, from 1986 to 1996.
Mr. Koller is General Sales Manager -- Municipal Castings for the Company.
Mr. Koller joined the Company in 1978, serving in a variety of positions of
increasing responsibility in the sales and marketing departments.
Mr. Headington is Director -- Product Reliability, a position he has held
since 1991. Mr. Headington joined the Company in 1989 as Manager -- Technical
Services, a position he held until 1991.
53
<PAGE> 57
Mr. Thomas is a director of the Company. Mr. Thomas has been a Managing
Director of Citicorp Venture Capital, Ltd. for more than the past five years.
Mr. Thomas is a director of Lifestyles Furnishings International Ltd., Galey &
Lord, Inc., Anvil Knitwear, Inc. and a number of private companies.
Mr. Weber is a director of the Company. Since 1994, Mr. Weber has been a
Vice President at Citicorp Venture Capital, Ltd. Previously, Mr. Weber worked at
Putnam Investments from 1992 through 1994. Mr. Weber is a director of Anvil
Knitwear, Inc. and a number of private companies.
Mr. Halsey is a director of the Company. Mr. Halsey was the founding Chief
Executive Officer and Chairman of the James River Corporation from 1969 to 1990.
He continued as Chairman until 1992 when he became Chairman Emeritus.
COMPENSATION OF DIRECTORS
Directors of the Company who are officers or employees of the Company or
its affiliates are presently not expected to receive compensation for their
services as directors. No determination has yet been made with respect to
compensation for directors of the Company who are not officers or employees of
the Company or any of its affiliates. Directors of the Company will be entitled
to reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the board of directors or
committees thereof.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of executive officers of the Company will be determined by
the Board of Directors of the Company. None of the historical benefit or
compensation plans of the Company are described herein because each will be
terminated with respect to the named officers and replaced as a group by a
single compensation plan in connection with the Merger (with the exception of a
401(k) plan and a retirement plan for Mr. Kurtti). The following table sets
forth information concerning compensation received by the five most highly
compensated officers of the Company for services rendered in 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------------------------
-------------------- OTHER ANNUAL OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(1) SARS(#) PAYOUTS COMPENSATION
- ------------------------------ -------- ---------- --------------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Edmund W. Aylward, Jr.(2)..... $600,000 $1,157,793 $31,992 -- -- --
Chairman, President and
Chief Executive Officer
Andrew A. Aylward(2).......... 378,000 627,894 25,720 -- -- --
Vice President
Thomas R. Franklin(2)......... 209,750 164,840 49,424 -- -- --
Senior Vice President and
Chief Financial Officer
James P. Keating, Jr.(2)...... 204,000 99,096 32,780 -- -- --
Senior Vice President
Gary W. LaChey................ 138,000 40,000 26,122 -- -- --
Vice President
</TABLE>
54
<PAGE> 58
- ---------------
(1) The named officers have participated in the Company's profit sharing,
Company 401(k) contributions, and excess benefit programs. The aggregate
payments made by the Company pursuant to such programs are listed as Other
Annual Compensation.
(2) Messrs. E.W. Aylward and A.A. Aylward resigned from their current positions
in connection with the consummation of the Transactions. Mr. Keating's
employment listed above will terminate on June 30, 1997, after which he will
be available to serve as a consultant to the Company. Mr. Franklin retired
as an officer of the Company on February 28, 1997.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with James P. Keating,
Jr. that terminates on June 30, 1997. The Company has also entered into a
consulting agreement with Mr. Keating that provides that Mr. Keating will be
available to serve as a consultant to the Company from July 1, 1997 to June 30,
1999.
MANAGEMENT INCENTIVE PLAN
The Company intends to provide performance-based compensation awards to
executive officers and key employees for achievement during each year as part of
a bonus plan. Such compensation awards may be a function of individual
performance and consolidated corporate results. The qualitative and quantitative
criteria will be determined from time to time by the Board of Directors of the
Company.
MANAGEMENT EQUITY PARTICIPATION
In connection with the Merger, in order to provide financial incentives for
certain of the Company's employees, (a) the Management Investors will have the
opportunity to acquire units representing membership interests in ACP Products,
L.L.C., which will represent, in the aggregate, approximately a ten percent
beneficial interest in the Company (the "Purchased Interests") and (b) the
Management Investors and certain other employees of the Company are expected to
be granted, over a five year period, options (the "Options") to purchase
additional Purchased Interests representing, in the aggregate, approximately a
two percent beneficial interest in the Company. The Options are expected to be
granted periodically and to vest and become exercisable upon (i) certain
threshold dates and/or (ii) the satisfaction of certain financial performance
tests.
Upon the termination of employment with the Company, an employee's
Purchased Interests will be subject to certain repurchase provisions exercisable
by ACP Products, L.L.C. or its designees. The Purchased Interests obtainable
upon exercise of the Options are expected to be subject to rights and
restrictions similar to those of the Purchased Interests purchased at Closing.
The exercise price of the Options will be established by ACP Products, L.L.C. in
consultation with the Board of Directors of the Company or a compensation
committee thereof.
55
<PAGE> 59
OWNERSHIP OF SECURITIES
The Company's authorized capital stock consists of 11,000 shares of common
stock, par value $100 per share (the "Common Stock"), 1,000 shares of which are
issued and outstanding and owned by Holdings and are pledged to the Lenders
under the Senior Bank Facilities. Holdings is a wholly-owned subsidiary of ACP
Holdings which in turn is wholly-owned by ACP Products, L.L.C.
Set forth below is certain information regarding the beneficial ownership
of Common Stock by each person known by the Company to beneficially own 5.0% or
more of the outstanding shares of Common Stock, each director and named
executive officer and all directors and named executive officers as a group.
Except as indicated below, the address for each of the persons listed below is
c/o Neenah Corporation, 2121 Brooks Avenue, Box 729, Neenah, Wisconsin 54927.
<TABLE>
<CAPTION>
COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK
-------------------------------------------------------------- ----------
<S> <C> <C>
ACP Products, L.L.C.(1)....................................... 100.00%
399 Park Avenue
New York, New York
James K. Hildebrand(2)........................................ 0.00%
William M. Barrett(2)......................................... 1.30%
Gary W. LaChey(2)............................................. 1.30%
Charles W. Kurtti(2).......................................... 1.30%
John Z. Radar(2).............................................. 1.30%
David F. Thomas(3)............................................ 100.00%
John D. Weber(3).............................................. 0.00%
Brenton F. Halsey............................................. 0.00%
Directors and named executive officers as a group............. 87.18%
</TABLE>
- ---------------
(1) ACP Products, L.L.C. is an affiliate of Citicorp Venture Capital, Ltd.
(2) Such person has made an investment in ACP Products, L.L.C. Such person
disclaims beneficial ownership of the Company's Common Stock. See
"Management -- Management Equity Participation."
(3) Consists of shares held by ACP Products, L.L.C., which may be deemed to be
beneficially owned by Mr. Thomas. Mr. Thomas disclaims beneficial ownership
of shares held by ACP Products, L.L.C.
56
<PAGE> 60
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH ACP HOLDING COMPANY
ACP Products, L.L.C. holds all of the issued and outstanding shares of
capital stock of ACP Holding Company ("ACP Holdings"). ACP Holdings is the
parent company of Holdings, and thus indirectly owns 100% of the Common Stock of
the Company. James K. Hildebrand, who serves as the Chairman of the Board and
Chief Executive Officer of the Company, currently serves as President and Chief
Executive Officer of ACP Holdings and its principal operating subsidiary,
Advanced Cast Products, Inc. ("Advanced Cast"). After the Closing, Mr.
Hildebrand will devote substantial time to, and be partially compensated by,
Advanced Cast, in addition to his role with the Company. Advanced Cast also
produces iron castings for sale to the industrial medium- and heavy-duty truck
market, but it has not competed with the Company in the past in any significant
way and the Company does not anticipate that it will so compete with Advanced
Cast in the future.
SHAREHOLDER RELATIONSHIPS
In connection with the Merger, the Management Investors and certain
institutional investors, including Citicorp Venture Capital, Ltd., became
parties to the Second Amended and Restated Limited Liability Agreement of ACP
Products, L.L.C., as amended (the "L.L.C. Agreement"). The L.L.C. Agreement
contains certain provisions with respect to the beneficial equity interests and
corporate governance of the Company. The L.L.C. Agreement provides that the
Investor Group and the Management Investors, as the only members of ACP
Products, L.L.C. holding beneficial interests in the Company, have the right to
direct all actions taken in respect of Holdings and the Company, including,
without limitation, appointing members of the Board of Directors of the Company
and of Holdings.
REGISTRATION RIGHTS AGREEMENT
The Company entered into a registration rights agreement (the "Registration
Rights Agreement") with the Investor Group and the Management Investors.
Pursuant to the terms of the Registration Rights Agreement, certain holders of
the Company's Common Stock have the right to require the Company, at the
Company's sole cost and expense and subject to certain limitations, to register
under the Securities Act or list on any recognized stock exchange all or part of
the Common Stock beneficially owned by such holders (the "Registrable
Securities"). All such holders will be entitled to participate in all
registrations by the Company or other holders, subject to certain limitations.
In connection with all such registrations, the Company agreed to indemnify all
beneficial owners of Registrable Securities against certain liabilities,
including liabilities under the Securities Act and other applicable state or
foreign securities laws. Registrations pursuant to the Registration Rights
Agreement will be made, if applicable, on the appropriate registration form and
may be underwritten registrations.
DESCRIPTION OF SENIOR BANK FACILITIES
The Company entered into a credit agreement (the "Credit Agreement") with
The Chase Manhattan Bank, as administrative agent and collateral agent (the
"Agent") and the lenders named therein (the "Lenders") that provide term loans
of $45.0 million and a revolving credit facility of $30.0 million. Chase
Securities Inc. acted as advisor and arranger in connection with the Senior Bank
Facilities (the "Arranger"). The following is a summary description of the
principal terms of the Credit Agreement, which will be available upon request
from the Company.
Structure. Loans under the Credit Agreement consist of (i) a term loan
(the "Tranche A Term Loan") in the amount of $20.0 million; (ii) a second term
loan (the "Tranche B Term Loan," and together with the Tranche A Term Loan, the
"Term Loans") in the amount of $25.0 million and (iii) a
57
<PAGE> 61
revolving credit facility (the "Revolving Credit Facility," and together with
the Term Loans, the "Senior Bank Facilities") in the amount of $30.0 million
subject to a borrowing base formula (of which $15.0 million will be available
for letters of credit). The Company used the Term Loans to provide a portion of
the funding necessary to consummate the Transactions, with the Revolving Credit
Facility being used for general corporate purposes in the ordinary course of the
Company's business.
Security, Guaranty. The obligations of the Company under the Senior Bank
Facilities will be unconditionally and irrevocably guaranteed, jointly and
severally, by Holdings and by each existing and subsequently acquired or
organized subsidiary of the Company. In addition, the Senior Bank Facilities and
the guarantees thereunder are secured by substantially all of the assets of the
Company and the guarantors (collectively, the "Collateral"), including but not
limited to (i) a first priority pledge of all the capital stock of the Company
and of each existing and subsequently acquired or organized subsidiary of the
Company and (ii) perfected first priority security interests in, and mortgages
on, substantially all tangible and intangible assets of the Company and the
guarantors (including but not limited to accounts receivable, documents,
inventory, equipment, intellectual property, general intangibles, real property,
cash and cash accounts and proceeds of the foregoing) in each case subject to
certain limited exceptions.
Availability. The availability of the Senior Bank Facilities are subject
to various conditions precedent typical of bank loans including, among other
things, the absence of any material adverse change on the part of the Company.
The full amount of the Term Loans must be drawn in a single drawing at the
Closing of the Transactions and amounts repaid or prepaid under the Term Loans
may not be reborrowed. Amounts under the Revolving Credit Facility are available
on a revolving basis, subject to a borrowing base comprised of percentages of
the Company's eligible accounts receivable and eligible inventory. As of March
31, 1997, on a pro forma basis after giving effect to the Offering, the other
Transactions, and the application of the proceeds therefrom as well as such
borrowing base limitations and $0.6 million of outstanding letters of credit,
the Company estimates it would have had the ability to borrow approximately
$24.8 million under the Revolving Credit Facility.
Amortization, Interest. The Tranche A Term Loan is repayable in quarterly
principal payments over five years totalling $4.0 million per year and will bear
interest at a rate per annum equal (at the Company's option) to: (i) an adjusted
London inter-bank offered rate ("Adjusted LIBOR") plus 2.5% or (ii) an Alternate
Base Rate (equal to the highest of the Agent's prime rate, a certificate of
deposit rate plus 1% and the Federal Funds effective rate plus 1/2 of 1%) plus
1.5%, in each case subject to certain reductions based on the Company's
financial performance. The Tranche B Term Loan is repayable in quarterly
principal payments over seven years, totalling $1.0 million per year for the
first five years and $10.0 million per year for the last two years, and will
bear interest at a rate per annum equal (at the Company's option) to: (i)
Adjusted LIBOR plus 3.0% or (ii) the Alternate Base Rate plus 2.0%. The
Revolving Credit Facility will be a five year facility and will bear interest at
a rate per annum equal (at the Company's option) to: (i) Adjusted LIBOR plus
2.5% or (ii) the Alternate Base Rate plus 1.5%, in each case subject to certain
reductions based on the Company's financial performance. Amounts under the
Senior Bank Facilities not paid when due bear interest at a default rate equal
to 2.0% above the otherwise applicable rate.
Prepayments. The Senior Bank Facilities permit the Company to prepay loans
and to permanently reduce revolving credit commitments, in whole or in part, at
any time. In addition, the Company is required to make mandatory prepayments of
Term Loans, subject to certain exceptions, in amounts equal to (i) 50% of
consolidated excess cash flow of Holdings, the Company and its subsidiaries; and
(ii) 100% of the net cash proceeds of certain dispositions of assets or
issuances of debt or equity of the Company or any of its subsidiaries. Mandatory
and optional prepayments of the Term Loans will be allocated pro rata between
the Tranche A Term Loan and the Tranche B Term Loan and applied pro rata against
the remaining scheduled amortization payments of such Term Loans, except that,
so long as the Tranche A Term Loan is outstanding, the Lenders
58
<PAGE> 62
participating in the Tranche B Term Loan will have the right to refuse mandatory
prepayments, in which case such prepayments will be applied to the Tranche A
Term Loan. Any prepayment of Adjusted LIBOR loans other than at the end of an
interest period will be subject to reimbursement of breakage costs.
Fees. The Company is required to pay the lenders, on a quarterly basis, a
commitment fee equal to 1/2 of 1% per annum on the undrawn portion of the
commitments, subject to reductions based upon the Company's financial
performance. The Company is also required to pay (i) a per annum letter of
credit fee equal to the applicable margin from time to time for Adjusted LIBOR
loans under the Revolving Credit Facility on the aggregate face amount of
outstanding letters of credit under the Revolving Credit Facility, (ii) a
fronting bank fee for the letter of credit issuing bank, (iii) annual
administration fees, and (iv) agent, arrangement and other similar fees.
Covenants. The Senior Bank Facilities contain a number of covenants that,
among other things, restrict the ability of the Company and its subsidiaries to
dispose of assets, incur additional indebtedness, incur guarantee obligations,
prepay other indebtedness or amend other debt instruments, pay dividends, create
liens on assets, enter into sale and leaseback transactions, make investments,
loans or advances, make acquisitions, engage in mergers or consolidations,
change the business conducted by the Company or its subsidiaries, make capital
expenditures, or engage in certain transactions with affiliates and otherwise
restrict certain corporate activities. In addition, under the Senior Bank
Facilities, the Company is required to comply with specified financial ratios
and tests, including minimum interest coverage ratios, maximum leverage ratios
and minimum net worth tests.
The Senior Bank Facilities also contain provisions that prohibit any
modification of the Indenture in any manner adverse to the Lenders and that will
limit the Company's ability to refinance or otherwise prepay the Notes without
the consent of such Lenders.
Events of Default. The Senior Bank Facilities contain customary events of
default, including payment defaults, breach of representations and warranties,
covenant defaults, cross-defaults and cross-acceleration to certain other
indebtedness, certain events of bankruptcy and insolvency, ERISA events,
judgment defaults, actual or asserted invalidity of any security interest and
change of control.
DESCRIPTION OF NOTES
GENERAL
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes will have been registered under the
Securities Act and thus will not bear restrictive legends restricting their
transfer pursuant to the Securities Act and (ii) holders of New Notes will not
be entitled to certain rights of holders of the Old Notes under the Registration
Rights Agreement which will terminate upon the consummation of the Exchange
Offer. The Old Notes have been, and the New Notes are to be, issued under an
Indenture, dated as of (the "Indenture"), among the Company, the
Guarantor Subsidiaries and United States Trust Company of New York, as Trustee
(the "Trustee").
The following summary of certain provisions of the Indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended ("TIA"). Capitalized terms used herein
and not otherwise defined have the meanings set forth in the section "-- Certain
Definitions" below.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York (which initially shall
be the corporate trust office of the Trustee at 114 West 47th
59
<PAGE> 63
Street, New York, N.Y. 10036, Attn: Gerard Ganey), except that, at the option of
the Company, payment of interest may be made by check mailed to the registered
holders of the Notes at their registered addresses.
The Notes may be issued only in fully registered form, without coupons, in
denominations of $1,000 and any integral multiple of $1,000. No service charge
will be made for any registration of transfer or exchange of Notes, but the
Company may require payment of a sum sufficient to cover any transfer tax or
other similar governmental charge payable in connection therewith.
TERMS OF THE NOTES
The Notes are unsecured senior subordinated obligations of the Company,
limited to $150.0 million aggregate principal amount, and will mature on May 1,
2007. Each Note will bear interest at a rate per annum shown on the front cover
of this Prospectus from the Issue Date or from the most recent date to which
interest has been paid or provided for, payable semiannually to Holders of
record at the close of business on the April 15 or October 15 immediately
preceding the interest payment date on May 1 and November 1 of each year,
commencing November 1, 1997.
OPTIONAL REDEMPTION
Except as set forth below, the Notes are not redeemable at the option of
the Company prior to May 1, 2002. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's registered address, at the following redemption prices (expressed
in percentages of principal amount), plus accrued and unpaid interest, if any,
to the redemption date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant interest payment
date that is on or prior to the date of redemption), if redeemed during the
12-month period commencing on May 1 of the years set forth below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
----------------------------------------------------------------- ----------
<S> <C>
2002............................................................. 105.5625%
2003............................................................. 103.7083%
2004............................................................. 101.8542%
2005 and thereafter.............................................. 100.0000%
</TABLE>
In addition, at any time and from time to time on or prior to May 1, 2000,
the Company may redeem in the aggregate up to 40% of the original aggregate
principal amount of the Notes with the cash proceeds to it of one or more Public
Equity Offerings following which there is a Public Market, at a redemption price
(expressed as a percentage of principal amount thereof) of 111.125% plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date that is on or prior to the date of redemption);
provided, however, that at least 60% of the original aggregate principal amount
of the Notes must remain outstanding after each such redemption.
The Notes will be subject to redemption at the option of the Company, prior
to May 1, 2002, at any time within 180 days after a Change of Control on not
less than 30 nor more than 60 days' prior notice to each Holder of Notes to be
redeemed, in amounts of $1,000 or an integral multiple thereof, at a redemption
price equal to the sum of (i) the principal amount thereof plus (ii) accrued and
unpaid interest, if any, to the redemption date (subject to the right of holders
of record on the relevant record date to receive interest due on the relevant
interest payment date that is on or prior to the date of redemption) plus (iii)
the Applicable Premium. Each Holder of Notes will also have certain rights to
require the Company to purchase such Notes upon the occurrence of a Change of
Control. See "-- Change of Control" below.
60
<PAGE> 64
SELECTION
In the case of any partial redemption, selection of the Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Note of $1,000 in original principal amount or less
will be redeemed in part. If any Note is to be redeemed in part only, the notice
of redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The indebtedness evidenced by the Notes is unsecured Senior Subordinated
Indebtedness of the Company. The payment of the principal of, premium (if any)
and interest on the Notes is subordinate in right of payment, as set forth in
the Indenture, to all existing and future Senior Indebtedness of the Company,
ranks pari passu in right of payment with all existing and future Senior
Subordinated Indebtedness of the Company and is senior in right of payment to
all existing and future Subordinated Obligations of the Company. The Notes will
also be effectively subordinated to any Secured Indebtedness of the Company to
the extent of the value of the assets securing such indebtedness. However,
payment from the money or the proceeds of U.S. Government Obligations held in
any defeasance trust described under "Defeasance" below is not subordinated to
any Senior Indebtedness or subject to the restrictions described herein.
The indebtedness evidenced by a Subsidiary Guaranty is unsecured Senior
Subordinated Indebtedness of the Guarantor Subsidiary issuing such Subsidiary
Guaranty. The payment of a Subsidiary Guaranty is subordinate in right of
payment, as set forth in the Indenture, to all existing and future Senior
indebtedness of such Guarantor Subsidiary, ranks pari passu in right of payment
with the existing and future Senior Subordinated Indebtedness of such Guarantor
Subsidiary and will be senior in right of payment to all existing and future
Subordinated Obligations of such Guarantor Subsidiary. Each Subsidiary Guaranty
is also effectively subordinated to any Secured Indebtedness of the Guarantor
Subsidiary to the extent of the value of the assets securing such indebtedness.
As of March 31, 1997, after giving pro forma effect to the Transactions,
the Offering and the application of the proceeds therefrom, the Company would
have had outstanding $46.0 million of Senior Indebtedness, excluding $0.6
million of outstanding letters of credit, no Senior Subordinated Indebtedness
other than the Indebtedness represented by the Notes, and no Indebtedness that
is subordinate and junior in right of repayment to the Indebtedness represented
by the Notes. As of March 31, 1997, and after giving effect to the Transactions,
the Offering and the application of the proceeds therefrom, as well as borrowing
base limitations and $0.6 million of outstanding letters of credit, the Company
estimates it would have had the ability to borrow approximately $24.8 million
under the Revolving Credit Facility. Although the Indenture contains limitations
on the amount of additional Indebtedness that the Company and its Guarantor
Subsidiaries may incur, under certain circumstances the amount of such
Indebtedness could be substantial and, in any case, such Indebtedness may be
Senior Indebtedness of the Company or a Guarantor Subsidiary, as the case may
be. See "Certain Covenants -- Limitation on Indebtedness" below.
"Senior Indebtedness" of the Company means all principal of, premium (if
any), accrued interest (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and other amounts owing
with respect to all Indebtedness of the Company, and including all Bank
Indebtedness, whether outstanding on the Issue Date or thereafter incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is expressly provided that such obligations are not
superior in right of payment to the Notes; provided, however, that Senior
61
<PAGE> 65
Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary, (2) any liability for federal, foreign, state, local or other taxes
owed or owing by the Company, (3) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness or
obligation of the Company which is subordinate or junior in any respect (other
than as a result of the Indebtedness being unsecured) to any other Indebtedness
or obligation of the Company, including any Senior Subordinated Indebtedness and
any Subordinated Obligations, (5) any obligations with respect to any Capital
Stock or (6) any Indebtedness Incurred in violation of the Indenture. "Senior
Indebtedness" of any Guarantor Subsidiary has a correlative meaning.
Only Indebtedness of the Company or a Guarantor Subsidiary that is Senior
Indebtedness will rank senior to the Notes and the relevant Subsidiary Guaranty
in accordance with the provisions of the Indenture. The Notes and each
Subsidiary Guaranty in all respects ranks pari passu with all other Senior
Subordinated Indebtedness of the Company and the relevant Guarantor Subsidiary,
respectively. The Company and each Guarantor Subsidiary has agreed in the
Indenture that it will not incur, directly or indirectly, any Indebtedness which
is subordinate or junior in ranking in any respect to Senior Indebtedness unless
such Indebtedness is Senior Subordinated Indebtedness, or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness. Unsecured
Indebtedness of the Company or a Guarantor Subsidiary is not deemed to be
subordinated or junior to Secured Indebtedness, as the case may be, merely
because it is unsecured.
The Company may not pay principal of, or premium (if any) or interest on,
the Notes or make any deposit pursuant to the provisions described under
"-- Defeasance" below, and may not otherwise purchase, redeem or otherwise
retire any Notes other than from funds held in a defeasance trust pursuant to
the provisions described under "-- Defeasance" below (collectively, "pay the
Notes"), if (i) any Senior Indebtedness of the Company is not paid when due or
(ii) any other default on Senior Indebtedness of the Company occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Senior Indebtedness has been paid in
full. However, the Company may pay the Notes without regard to the foregoing if
the Company and the Trustee receive written notice approving such payment from
the Representative of the holders of the Senior Indebtedness with respect to
which either of the events set forth in clause (i) or (ii) of the immediately
preceding sentence has occurred and is continuing. During the continuance of any
default (other than a default described in clause (i) or (ii) of the second
preceding sentence) with respect to any Designated Senior Indebtedness pursuant
to which the maturity thereof may be accelerated immediately without further
notice (except such notice as may be required to effect such acceleration) or
the expiration of any applicable grace periods, the Company may not pay the
Notes for a period (a "Payment Blockage Period") commencing upon the receipt by
the Trustee (with a copy to the Company) of written notice (a "Blockage Notice")
of such default from the Representative of the holders of the Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee and the Company from the Person
or Persons who gave such Blockage Notice, (ii) because the default giving rise
to such Blockage Notice is no longer continuing or (iii) because such Designated
Senior Indebtedness has been repaid in full). Notwithstanding the provisions
described in the immediately preceding sentence, unless the holders of such
Designated Senior Indebtedness have, or the Representative of such holders has,
accelerated the maturity of such Designated Senior Indebtedness, the Company may
resume payments on the Notes after the end of such Payment Blockage Period,
including any missed payments. Not more than one Blockage Notice may be given in
any consecutive 360-day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness during such period. However, if any
Blockage Notice within such 360-day period is given by or on behalf of any
holders of Designated Senior Indebtedness other than the Bank Indebtedness, the
Representative of the Bank Indebtedness may give another Blockage Notice within
such period. In no event, however, may the total number of days during which any
62
<PAGE> 66
Payment Blockage Period or Periods is in effect exceed 179 days in the aggregate
during any 360 consecutive day period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness of
the Company will be entitled to receive payment in full of the Senior
Indebtedness of the Company before the Noteholders are entitled to receive any
payment and until the Senior Indebtedness of the Company is paid in full, any
payment or distribution to which Noteholders would be entitled but for the
subordination provisions of the Indenture will be made to holders of the Senior
Indebtedness of the Company as their respective interests may appear. If a
payment or distribution is made to Noteholders that due to the subordination
provisions should not have been made to them, such Noteholders are required to
hold such payment or distribution in trust for the holders of Senior
Indebtedness and pay it over to them as their respective interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the holders of the Designated Senior Indebtedness receive
notice of such acceleration and, thereafter, may pay the Notes only if the
subordination provisions of the Indenture otherwise permit payment at that time.
The terms of the subordination provisions described above with respect to
the Company's obligations under the Notes apply equally to a Guarantor
Subsidiary and the obligations of such Guarantor Subsidiary under its Subsidiary
Guaranty.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company or a Guarantor Subsidiary who
are holders of Senior Indebtedness of the Company or a Guarantor Subsidiary, as
the case may be, may recover more, ratably, than the Noteholders, and creditors
of the Company who are not holders of Senior Indebtedness of the Company or of
Senior Subordinated Indebtedness (including the Notes) may recover less,
ratably, than holders of Senior Indebtedness of the Company.
SUBSIDIARY GUARANTIES
Each of Neenah Foundry Company, Hartley Controls Corporation and Neenah
Transport, Inc. (the "Initial Guarantors," and together with all future issuers
of Subsidiary Guaranties, the "Guarantor Subsidiaries") jointly and severally as
primary obligors and not merely as sureties, irrevocably Guarantee on an
unsecured senior subordinated basis the performance and punctual payment when
due, whether at Stated Maturity, by acceleration or otherwise, of all
obligations of the Company under the Indenture and the Notes, whether for
payment of principal of or interest on the Notes, expenses, indemnification or
otherwise (all such obligations guaranteed by the Guarantor Subsidiaries being
herein called the "Guaranteed Obligations"). The Guarantor Subsidiaries have
agreed to pay, in addition to the amount stated above, any and all expenses
(including reasonable counsel fees and expenses) incurred by the Trustee or the
Holders in enforcing any rights under the Subsidiary Guaranties. Each Subsidiary
Guaranty is limited in amount to an amount not to exceed the maximum amount that
can be Guaranteed by the applicable Guarantor Subsidiary without rendering such
Subsidiary Guaranty voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. On or after the Issue Date, the Company will cause each
Restricted Subsidiary which Incurs Indebtedness to execute and deliver to the
Trustee a supplemental indenture pursuant to which such Restricted Subsidiary
will Guarantee payment of the Notes. See "Certain Covenants -- Future Guarantor
Subsidiaries" below.
Each Subsidiary Guaranty is a continuing guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon each Guarantor
63
<PAGE> 67
Subsidiary and (c) enure to the benefit of and be enforceable by the Trustee,
the Holders and their successors, transferees and assigns.
A Subsidiary Guaranty will be released upon the sale of the capital stock,
or all or substantially all of the assets, of the applicable Guarantor
Subsidiary if such sale is made in compliance with the Indenture.
Each of the Company's Guarantor Subsidiaries also Guarantee Indebtedness of
the Company Incurred under the terms of the Senior Bank Facilities. Because the
operations of the Company are conducted through its Subsidiaries, and the
Guaranties issued by the Guarantor Subsidiaries are secured by pledges of
substantially all the assets of the Guarantor Subsidiaries, the Notes
effectively subordinated to creditors of the Company under the Senior Bank
Facilities. See "Risk Factors -- Holding Company Structure."
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of purchase (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date),
pursuant to the offer described below and the other procedures set forth in the
Indenture; provided, however, that notwithstanding the occurrence of a Change of
Control, the Company shall not be obligated to purchase the Notes pursuant to
this covenant in the event that it has exercised its rights to redeem all of the
Notes as described under "-- Optional Redemption":
(a) prior to the earlier to occur of the first public offering of
Voting Stock of ACP Holdings, Holdings or the Company, the Permitted
Holders cease to be entitled (by "beneficial ownership" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act) of Voting Stock, contract or
otherwise) to elect or cause the election of directors of the Company
having a majority of the total voting power of the Board of Directors of
the Company, whether as a result of issuance of securities of the Company,
any merger, consolidation, liquidation or dissolution of the Company, any
direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (a), the Permitted Holders shall be
deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as one or more of the Permitted Holders beneficially
own (as so defined), directly or indirectly, in the aggregate a majority of
the voting power of the Voting Stock of the parent corporation);
(b) after the first public offering of Voting Stock of ACP Holdings,
Holdings or the Company, any person or group (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more of
the Permitted Holders, is or becomes the beneficial owner (as defined in
clause (a) above), directly or indirectly, of Voting Stock that represents
more than 40% of the aggregate ordinary voting power of all classes of the
Voting Stock of ACP Holdings, Holdings or the Company voting together as a
single class, and either (x) the Permitted Holders beneficially own (as
defined in clause (a) above), directly or indirectly, in the aggregate
Voting Stock that represents a lesser percentage of the aggregate ordinary
voting power of all classes of the Voting Stock of ACP Holdings, Holdings,
or the Company as the case may be, voting together as a single class, than
such other person or group and are not entitled (by voting power, contract
or otherwise) to elect directors of ACP Holdings, Holdings or the Company
having a majority of the total voting power of the board of directors of
ACP Holdings, Holdings or the Company, as the case may be, or (y) such
other person or group is entitled to elect directors of ACP Holdings,
Holdings or the Company having a majority of the total voting power of the
board of directors of ACP Holdings, Holdings or the Company;
64
<PAGE> 68
(c) after the first public offering of Voting Stock of ACP Holdings,
Holdings or the Company, during any period of not greater than two
consecutive years beginning after the Issue Date, individuals who at the
beginning of such period constituted the board of directors of ACP
Holdings, Holdings or the Company, as the case may be (together with any
new directors whose election by such board of directors, or whose
nomination for election by shareholders was approved by the Permitted
Holders or by such board of directors, in each case by a vote of a majority
of the directors of ACP Holdings, Holdings or the Company, as the case may
be, then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved), cease for any reason to have a majority of the total voting
power of the board of directors of ACP Holdings, Holdings or the Company,
as the case may be; or
(d) any sale, lease, or other transfer (in one transaction or in a
series of related transactions) is made by the Company or its Restricted
Subsidiaries of all or substantially all of the consolidated assets of the
Company and its Restricted Subsidiaries to any Person.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating, among other things:
(1) that a Change of Control has occurred and that such Holder has the right to
require the Company to purchase all or any portion of such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of repurchase (subject to the
right of Holders of record on a record date to receive interest on the relevant
interest payment date); (2) the circumstances and relevant facts and financial
information regarding such Change of Control; (3) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed); and (4) the instructions determined by the Company,
consistent with this covenant, that a Holder must follow in order to have its
Notes or any portion thereof purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations described above by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company or Holdings would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions, including acquisitions or other recapitalizations, that
would not constitute a Change of Control under the Indenture, but that could
increase the amount of indebtedness outstanding at such time or otherwise affect
the Company's capital structure or credit ratings.
The occurrence of a Change of Control would constitute a default under the
Senior Bank Facilities. Future Senior Indebtedness of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their right to require the Company to
repurchase the Notes could cause a default under such Senior Indebtedness, even
if the Change of Control itself does not, due to the financial effect of such
repurchase on the Company. Finally, the Company's ability to pay cash to the
Holders upon a repurchase may be limited by the Company's then existing
financial resources. There can be no assurance that sufficient funds will be
available when necessary to make any repurchases required in connection with a
Change of Control. The Company's failure to purchase the Notes in connection
with a Change of Control would result in a default under the Indenture.
65
<PAGE> 69
CERTAIN COVENANTS
The Indenture will contain covenants including, among others, the
following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness (other than pursuant to the
following paragraph (b)) unless on the date of such Incurrence the Consolidated
Coverage Ratio exceeds 2.00 to 1.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness consisting of the Term Loans in an aggregate
principal amount outstanding of up to $45.0 million less (A) the amount of
any scheduled principal payments thereon and (B) the aggregate amount of
all repayments of principal actually made thereunder since the Issue Date
with Net Available Cash from Asset Dispositions pursuant to clause
(a)(iii)(A) of the covenant described under "-- Limitation on Sales of
Assets and Subsidiary Stock");
(ii) Indebtedness consisting of revolving credit, working capital or
letters of credit financing in an aggregate principal amount at any time
outstanding not in excess of the greater of $35.0 million and the Borrowing
Base in effect from time to time (in each case less the aggregate amount of
all repayments of principal actually made thereunder since the Issue Date
with Net Available Cash from Asset Dispositions pursuant to clause
(a)(iii)(A) of the covenant described under "-- Limitation on Sales of
Assets and Subsidiary Stock");
(iii) Indebtedness of the Company owing to and held by any Wholly
Owned Subsidiary or Indebtedness of a Restricted Subsidiary owing to and
held by the Company or any Wholly Owned Subsidiary; provided, however, that
any subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Wholly Owned Subsidiary) will be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(iv) Indebtedness of the Company represented by the Notes;
(v) any Indebtedness of the Company and its Restricted Subsidiaries
(other than the Indebtedness described in clauses (i), (ii) or (iii) above)
outstanding on the Issue Date;
(vi) Indebtedness of the Company and its Restricted Subsidiaries (A)
in respect of judgment, appeal, surety, performance and other like bonds,
bankers' acceptances and letters of credit provided by the Company and its
Restricted Subsidiaries in the ordinary course of their business and which
do not secure other Indebtedness and (B) under Commodity Agreements,
Currency Agreements and Interest Rate Agreements that are designed to
protect the Company and its Restricted Subsidiaries against fluctuations in
commodity prices (for raw materials used by them), interest rates or
currency exchange rates and not for the purposes of speculation;
(vii) Indebtedness represented by Guarantees by the Company of
Indebtedness of a Restricted Subsidiary, or in respect of letters of credit
provided by the Company to support such Indebtedness, or Guarantees by a
Restricted Subsidiary of Indebtedness of the Company or a Restricted
Subsidiary, or in respect of letters of credit provided by a Restricted
Subsidiary to support such Indebtedness; provided, however, that only
Indebtedness that is Incurred in compliance with this covenant may be
guaranteed pursuant to this clause (vii);
(viii) Purchase Money Indebtedness, industrial revenue bonds or
similar Indebtedness and Capitalized Lease Obligations of the Company and
its Restricted Subsidiaries in an aggregate principal amount at any time
outstanding not in excess of 10% of Total Assets;
(ix) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments, in connection with the
66
<PAGE> 70
acquisition or disposition of any business, assets or Subsidiary of the
Company permitted under the Indenture;
(x) Indebtedness of the Company and its Restricted Subsidiaries, to
the extent the proceeds thereof are immediately used after the Incurrence
thereof to purchase Notes tendered in an offer to purchase made as a result
of a Change of Control;
(xi) Indebtedness of the Company or a Restricted Subsidiary owed to
(including obligations in respect of letters of credit for the benefit of)
any Person in connection with liability insurance provided by such Person
to the Company or such Restricted Subsidiary, pursuant to reimbursement or
indemnification obligations to such Person, in each case Incurred in the
ordinary course of business;
(xii) Indebtedness of the Company consisting of guarantees of up to an
aggregate principal amount of $2.0 million of borrowings by Management
Investors in connection with purchases of Voting Stock of Holdings on or
after the Issue Date and in accordance with "-- Certain
Covenants -- Limitation on Restricted Payments;"
(xiii) Indebtedness of the Company or any Restricted Subsidiary in an
aggregate principal amount at any time outstanding not in excess of $15.0
million which Indebtedness may be incurred pursuant to clause (ii) above;
and
(xiv) any Refinancing Indebtedness incurred in respect of any
Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (i),
(ii), (v), (viii), (x) or (xiv) of this paragraph (b).
(c) Notwithstanding the foregoing, the Company may not Incur any
Indebtedness if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior Indebtedness of the Company unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness of the Company. In addition, the
Company may not Incur any Secured Indebtedness which is not Senior Indebtedness
of the Company unless contemporaneously therewith effective provision is made to
secure the Notes equally and ratably with (or on a senior basis to, in the case
of Indebtedness subordinated in right of payment to the Notes) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien. A
Guarantor Subsidiary may not Incur any Indebtedness if such Indebtedness is
subordinate or junior in ranking in any respect to any Senior Indebtedness of
the Guarantor Subsidiary unless such Indebtedness is Senior Subordinated
Indebtedness of such Guarantor Subsidiary or is expressly subordinated in right
of payment to Senior Subordinated Indebtedness of such Guarantor Subsidiary. In
addition, a Guarantor Subsidiary may not incur any Secured Indebtedness which is
not Senior Indebtedness of such Guarantor Subsidiary unless contemporaneously
therewith effective provision is made to secure the Subsidiary Guaranty equally
and ratably with (or on a senior basis to, in the case of Indebtedness
subordinated in right of payment to such Subsidiary Guaranty) such Secured
Indebtedness for so long as such Secured Indebtedness is secured by a Lien.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to:
(i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) except dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and except dividends or distributions payable to the Company or
another Restricted Subsidiary (and, if such Restricted Subsidiary has
shareholders other than the Company or other Restricted Subsidiaries, to
its other shareholders on a pro rata basis or on a basis that results in
the receipt by the Company or a Restricted Subsidiary of dividends or
distributions of equal or greater value);
67
<PAGE> 71
(ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company or any Restricted Subsidiary held by Persons
other than the Company or another Restricted Subsidiary;
(iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of acquisition); or
(iv) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement, Investment or payment being
herein referred to as a "Restricted Payment") if at the time the Company or
such Restricted Subsidiary makes such Restricted Payment: (1) a Default
will have occurred and be continuing (or would result therefrom); (2) the
Company could not Incur at least $1.00 of additional Indebtedness under
paragraph (a) of the covenant described under "-- Limitation on
Indebtedness"; or (3) the aggregate amount of such Restricted Payment and
all other Restricted Payments (the amount so expended, if other than in
cash, to be determined in good faith by the Board of Directors, whose
determination will be conclusive and evidenced by a resolution of the Board
of Directors) declared or made subsequent to the Issue Date would exceed
the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the Issue Date to the end of the
most recent fiscal quarter ending at least 45 days prior to the date of
such Restricted Payment (or, in case such Consolidated Net Income will
be a deficit, minus 100% of such deficit);
(B) 100% of the aggregate net proceeds received by the Company
(including the fair market value (as determined in good faith by the
Board of Directors, whose determination will be conclusive and evidenced
by a resolution of the Board of Directors) of property received by the
Company; provided, however, that such property is related, ancillary or
complementary to any business of the Company and the Restricted
Subsidiaries conducted on the Issue Date) as a capital contribution or
from the issue or sale of Capital Stock (other than Disqualified Stock)
of the Company or Holdings subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company or an employee stock
ownership plan or other trust established by the Company or any of its
Subsidiaries to the extent the purchase by such plan or trust is
financed by Indebtedness of such plan or trust and for which the Company
or a Subsidiary is liable, directly or indirectly, as a guarantor or
otherwise (including by the making of cash contributions to such plan or
trust which are used to pay interest or principal on such
Indebtedness));
(C) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary) of any
Indebtedness of the Company or its Restricted Subsidiaries issued
subsequent to the Issue Date and convertible or exchangeable for Capital
Stock (other than Disqualified Stock) of the Company (less the amount of
any cash or other property (other than such Capital Stock) distributed
by the Company or any Restricted Subsidiary upon such conversion or
exchange) (including any such exchange pursuant to the exercise of a
conversion right or privilege in connection with which cash is paid in
lieu of the issuance of fractional shares or scrip);
(D) the aggregate Net Cash Proceeds received subsequent to the
Issue Date by the Company or Holdings (other than from any Restricted
Subsidiary) upon the exercise of any options or warrants to purchase
Capital Stock (other than Disqualified Stock) of the Company or
Holdings; and
68
<PAGE> 72
(E) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal of loans, return of capital or advances or
other transfers of assets to the Company or any Restricted Subsidiary
from Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided
in the definition of "Investment") or the receipt of proceeds from the
sale or other disposition of any portion of any Investment in an
Unrestricted Subsidiary not to exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made by the Company or
any Restricted Subsidiary in such Unrestricted Subsidiary, which amount
was included in the calculation of the amount of Restricted Payments.
(b) The provisions of the foregoing paragraph (a) will not prohibit:
(i) any purchase, redemption, retirement or other acquisition of
Capital Stock or Subordinated Obligations of the Company made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership
plan or other trust established by the Company or any of its Subsidiaries
to the extent the purchase by such plan or trust is financed by
Indebtedness of such plan or trust and for which the Company or a
Subsidiary is liable, directly or indirectly, as a guarantor or otherwise
(including by the making of cash contributions to such plan or trust which
are used to pay interest or principal on such Indebtedness)); provided,
however, that (A) such purchase, redemption, retirement or other
acquisition will be excluded in the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale to the extent so used
will be excluded from clause (iv)(B) of paragraph (a) above;
(ii) any purchase, defeasance, retirement, redemption or other
acquisition of (A) Subordinated Obligations of the Company made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
paragraph (b) of the covenant described under "-- Limitation on
Indebtedness" or (B) Subordinated Obligations of a Restricted Subsidiary
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of any Restricted Subsidiary or the
Company which is permitted to be Incurred pursuant to paragraph (b) of the
covenant described under "-- Limitation of Indebtedness"; provided,
however, that such purchase, defeasance, retirement, redemption or other
acquisition will be excluded in the calculation of the amount of Restricted
Payments;
(iii) any purchase, redemption, retirement or other acquisition of
Disqualified Stock made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Disqualified Stock; provided, however,
that such purchase, redemption, retirement or other acquisition will be
excluded in the calculation of the amount of Restricted Payments;
(iv) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under
"-- Limitation on Sales of Assets and Subsidiary Stock"; provided, however,
that such purchase or redemption will be excluded in the calculation of the
amount of Restricted Payments;
(v) upon the occurrence of a Change of Control and within 60 days
after the completion of the offer to repurchase the Notes pursuant to the
covenant described under "-- Change of Control" above (including the
purchase of all Notes tendered), any purchase, defeasance, retirement,
redemption or other acquisition of Subordinated Obligations required
pursuant to the terms thereof as a result of such Change of Control;
provided, however, that such purchase, defeasance, retirement, redemption
or other acquisition will be included in the calculation of the amount of
Restricted Payments;
69
<PAGE> 73
(vi) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that such dividend will be included
in the calculation of the amount of Restricted Payments;
(vii) the repurchase, for cash or notes, of shares of, or options or
warrants to purchase shares of, or payments to Holdings to enable Holdings
to repurchase shares of, or options or warrants to purchase shares of,
Capital Stock of Holdings, the Company or any of the Subsidiaries of the
Company from present or former Management Investors in an amount not in
excess of $2.0 million in any one year and $5.0 million in the aggregate;
provided, however, that the amount of such repurchase will be included in
the calculation of the amount of Restricted Payments;
(viii) payments in lieu of fractional shares in amount not in excess
of $250,000 in the aggregate;
(ix) payments by the Company to Holdings to pay Federal, state and
local taxes to the extent such taxes are attributable to the Company and
its Restricted Subsidiaries; provided, however, that such payments will be
excluded from the calculation of the amount of Restricted Payments;
(x) loans, advances, dividends or distributions by the Company to
Holdings to pay dividends on the common stock of Holdings following a
Public Equity Offering of such stock; but only to the extent that such
loans, advances, dividends or distributions do not exceed 6% per annum of
the net proceeds received by the Company in such Public Equity Offering;
provided, however, that the amount of such loans, advances, dividends or
distributions will be included in the amount of Restricted Payments; or
(xi) in each case to the extent such payments by Holdings are
attributable to the Company and its Restricted Subsidiaries, payments by
the Company to Holdings not to exceed an amount necessary to permit
Holdings to (A) make payments in respect to its indemnification obligations
owing to directors, officers or other Persons under Holding's charter or
by-laws or pursuant to written agreements with any such Person, (B) make
payments in respect of its other operational expenses (other than taxes)
incurred in the ordinary course of business, or (C) make payments in
respect of indemnification obligations and costs and expenses incurred by
Holdings in connection with any offering of common stock of Holdings;
provided, however, that all such payments will be included in the
calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Issue Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness entered
into prior to the date on which such Restricted Subsidiary was acquired or
designated as a Restricted Subsidiary by the Company (other than as
consideration in, in contemplation of, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was otherwise acquired by the Company);
(3) any encumbrance or restriction pursuant to (x) an agreement
constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to
an agreement referred to in clause (1) or
70
<PAGE> 74
(2) of this covenant or this clause (3) or contained in any amendment to an
agreement referred to in clause (1) or (2) of this covenant or this clause
(3) or (y) Indebtedness Incurred pursuant to clause (i) or (ii) of
paragraph (b) of the covenant described above under "-- Limitation on
Indebtedness;" provided, however, that the encumbrances and restrictions
contained in (A) any such refinancing agreement or amendment referred to in
clause (x) above are, collectively, no more restrictive in any material
respect than the encumbrances and restrictions contained in such agreements
(as determined in good faith by the Company) and (B) any instrument
relating to any Indebtedness referred to in clause (y) above, are,
collectively, no more restrictive in any material respect than the
encumbrances and restrictions contained in the Senior Bank Facilities as in
effect on the Issue Date (as determined in good faith by the Company);
(4) in the case of clause (iii) above, any encumbrance or restriction
contained in security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary which are not prohibited by the covenant described
under "-- Limitation on Liens" to the extent such encumbrances or
restrictions restrict the transfer of the property or assets subject to
such security agreements or mortgages;
(5) any encumbrance or restriction existing under or by reason of
applicable law;
(6) customary non-assignment provisions of any licensing agreement or
of any lease;
(7) any encumbrance or restriction contained in contracts for sales of
assets otherwise permitted by the Indenture;
(8) with respect to a Restricted Subsidiary, any encumbrance or
restriction imposed pursuant to an agreement that has been entered into for
the sale of all or substantially all of the Capital Stock of such
Restricted Subsidiary; and
(9) Purchase Money Obligations for property acquired in the ordinary
course of business that impose restrictions of the type referred to in
clause (iii) of this covenant.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless:
(i) the Company or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value, as may
be determined (and shall be determined, to the extent an Asset Disposition
(or a series of related Asset Dispositions) involves a fair market value
greater than $1.0 million) in good faith by the Board of Directors, whose
determination will be conclusive and evidenced by a resolution of the Board
of Directors (including as to the value of all non-cash consideration), of
the shares and assets subject to such Asset Disposition;
(ii) in the case of an Asset Disposition (or a series of related Asset
Dispositions) having a fair market value of $1.0 million or more, at least
80% (or 100% in the case of lease payments) of the consideration thereof
received by the Company or such Restricted Subsidiary is in the form of
cash or cash equivalents; and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be) (A) first, to the extent the Company or such Restricted
Subsidiary elects (or is required by the terms of any Senior Indebtedness),
to prepay, repay or purchase Senior Indebtedness of the Company or a Wholly
Owned Subsidiary or, in the case of a sale by a Restricted Subsidiary which
is not a Wholly Owned Subsidiary, to prepay, repay or purchase Senior
Indebtedness of such Restricted Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within 365
days after the later of the date of such Asset Disposition or the receipt
of such Net Available Cash; (B) second, to the extent of the balance of Net
Available Cash after
71
<PAGE> 75
application in accordance with clause (A), to the extent the Company or
such Restricted Subsidiary elects, to reinvest (or enter into a binding
contract to do so) in Additional Assets (including by means of an
Investment in Additional Assets by a Restricted Subsidiary with Net
Available Cash received by the Company or another Restricted Subsidiary),
within 365 days from the later of such Asset Disposition or the receipt of
such Net Available Cash; (C) third, to the extent of the balance of such
Net Available Cash after application in accordance with clauses (A) and
(B), to make an Offer (as defined below) to purchase Notes pursuant to and
subject to the conditions set forth in section (b) of this covenant and (D)
fourth, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B) and (C), to fund (to the
extent consistent with any other applicable provision of the Indenture) any
corporate purpose; provided, however, that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to clause (A)
above, the Company or such Restricted Subsidiary will retire such
Indebtedness and will cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this
covenant, the Company and its Restricted Subsidiaries will not be required
to apply any Net Available Cash in accordance with this covenant except to
the extent that the aggregate Net Available Cash from all Asset
Dispositions in any year which are not applied in accordance with this
covenant exceed $5.0 million in such year.
For the purposes of clause (ii) of this covenant, the following are deemed
to be cash: (w) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition, (x) securities received
by the Company or any Restricted Subsidiary from the transferee that are
promptly converted by the Company or such Restricted Subsidiary into cash, (y)
Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Disposition, to the extent that the Company
and each other Restricted Subsidiary is released from any Guarantee of such
Indebtedness in connection with such Asset Disposition, and (z) consideration
consisting of Indebtedness of the Company or any Restricted Subsidiary.
(b) In the event of an Asset Disposition that requires the purchase of
Notes pursuant to clause (a)(iii)(C) of this covenant, the Company will be
required to purchase Notes tendered pursuant to an offer, commenced within 30
days following the expiration of the 365 day period referred to in clause
(a)(iii)(B) of this covenant (or, if the Company so elects, at any time within
such 365 day period), by the Company for the Notes (the "Offer") at a purchase
price of 100% of their principal amount plus accrued and unpaid interest, if
any, to the date of purchase in accordance with the procedures (including
prorationing in the event of oversubscription) set forth in the Indenture. If
the aggregate purchase price of Notes tendered pursuant to the Offer is less
than the Net Available Cash allotted to the purchase of the Notes, the Company
will apply the remaining Net Available Cash in accordance with clause
(a)(iii)(D) of this covenant and upon completion of the purchase of the Notes
tendered pursuant to the Offer, the remaining amount of Net Available Cash, if
any, will be reset at zero. The Company will not be required to make an Offer
for Notes pursuant to this covenant if the Net Available Cash available therefor
(after application of the proceeds as provided in clauses (A) and (B) of section
(a)(iii) of this covenant) is less than $5.0 million (which lesser amount will
be carried forward for purposes of determining whether an Offer is required with
respect to the Net Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
72
<PAGE> 76
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
or conduct any transaction (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with any Affiliate of the Company
(an "Affiliate Transaction") on terms (i) that are less favorable to the Company
or such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealings with a Person
who is not such an Affiliate and (ii) that , in the event such Affiliate
Transaction involves an aggregate amount in excess of $1.0 million, are not in
writing and have not been approved by a majority of the members of the Board of
Directors having no material direct or indirect financial interest in or with
respect to such Affiliate Transaction. In addition, if such Affiliate
Transaction involves an amount in excess of $5.0 million, a fairness opinion
must be obtained from a nationally recognized appraisal or investment banking
firm.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment or Permitted Investment permitted to be made pursuant to the
covenant described under "-- Limitation on Restricted Payments," (ii) fees,
compensation or employee benefit arrangements paid to, and any indemnity
provided for the benefit of, directors, officers or employees of the Company,
Holdings or any Subsidiary of the Company in the ordinary course of business or
any Indebtedness permitted to be Incurred pursuant to clause (xiii) of paragraph
(b) of the covenant described under "-- Limitation on Indebtedness," or any
payments in respect thereof, (iii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors, (iv) transactions pursuant to agreements
entered into or in effect on the Issue Date, including amendments thereto
entered into after the Issue Date, provided that the terms of any such amendment
are not, in the aggregate, less favorable to the Company or such Restricted
Subsidiary than the terms of such agreement prior to such amendment, (v) loans
or advances to employees that are Affiliates of the Company in the ordinary
course of business, but in any event not to exceed $2.0 million in the aggregate
outstanding at any one time, (vi) any transaction between the Company and a
Restricted Subsidiary or between Restricted Subsidiaries (so long as the other
stockholders of any participating Restricted Subsidiaries which are not Wholly
Owned Subsidiaries are not themselves Affiliates of the Company) or (vii)
payments with respect to Indebtedness Incurred pursuant to clause (ix) of
paragraph (b) of the covenant described under "-- Limitation on Indebtedness."
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company will not sell any shares of Capital Stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell any shares of its Capital Stock, except (i) to
the Company or a Wholly Owned Subsidiary, (ii) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary, (iii) directors' qualifying shares or (iv)
in a Public Equity Offering as a result of or after which a Public Market
exists. The proceeds of any sale of such Capital Stock permitted by clause (ii)
must be treated as Net Available Cash from an Asset Disposition and must be
applied in accordance with the terms of the covenant described under
"-- Limitation on Sales of Assets and Subsidiary Stock."
Limitation on Liens. (a) The Company will not, and will not permit any
Guarantor Subsidiary to, directly or indirectly, create or permit to exist any
Lien (the "Initial Lien") on any of its property or assets (including Capital
Stock), whether owned on the Issue Date or thereafter acquired, securing any
Indebtedness other than Senior Indebtedness of the Company, in the case of the
Company, or Senior Indebtedness of a Guarantor Subsidiary, in the case of a
Guarantor Subsidiary, unless contemporaneously therewith effective provision is
made to secure the Notes and, in respect of Liens on any Guarantor Subsidiary's
property or assets, the Subsidiary Guaranty of such Guarantor Subsidiary equally
and ratably with (or on a senior basis to, in the case of Indebtedness expressly
subordinated in right of payment to the Notes and such Subsidiary Guaranty) such
obligation for so long as such obligation is so secured. The preceding sentence
will not require the
73
<PAGE> 77
Company or any Restricted Subsidiary to equally and ratably secure the Notes if
the Initial Lien consists of Permitted Liens.
(b) Any Lien created for the benefit of the Holders of the Notes pursuant
to the foregoing paragraph (a) shall provide by its terms that such Lien shall
be automatically and unconditionally released and discharged upon the release
and discharge of the Initial Lien.
SEC Reports. Notwithstanding that the Company may not be required to be or
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file with the Commission (after the date the
Exchange Offer or Shelf Registration Statement described under "-- Exchange and
Registration Rights Agreement" below becomes effective), and provide (both prior
to and after such effective date) the Trustee and Noteholders and prospective
Noteholders (upon request) with the annual reports and the information,
documents and other reports which are specified in Sections 13 and 15(d) of the
Exchange Act. The Company also will comply with the other provisions of TIA Sec.
314(a).
Future Guarantor Subsidiaries. The Company will cause (a) each Restricted
Subsidiary that is a Domestic Subsidiary which Incurs Indebtedness and (b) each
Restricted Subsidiary that is not a Domestic Subsidiary and that after the Issue
Date enters into a Guarantee of any of the obligations of the Company, Holdings
or any of the Company's Subsidiaries pursuant to the Senior Bank Facilities to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Subsidiary will Guarantee payment of the Notes; provided, however, that
such Subsidiary shall not be required to execute and deliver a supplemental
indenture pursuant to this section in the event that such Subsidiary is a party
to the Indenture or the Supplemental Indenture at the time of such Incurrence of
Indebtedness. Each Subsidiary Guaranty will be limited to an amount not to
exceed the maximum amount that can be Guaranteed by that Subsidiary without
rendering the Subsidiary Guaranty, as it relates to such Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
Limitation on Lines of Business. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any business other than (i) a Related
Business and (ii) the making of Permitted Investments and the operations of any
business that is part of a Permitted Investment. Holdings will not engage in any
business other than managing its investment in the Company.
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless (i) the Company or such
Restricted Subsidiary would be entitled to Incur Indebtedness in an amount equal
to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to the covenant described under "-- Limitation on Indebtedness" and
(ii) the net cash proceeds received by the Company or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to the
fair market value (in the case of Sale/Leaseback Transactions involving amounts
in excess of $1.0 million, as determined by the Board of Directors, whose
determination will be conclusive and evidenced by a resolution of the Board of
Directors) of such property and (iii) the transfer of such property is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
the covenant described under "-- Limitation on Sale of Assets and Subsidiary
Stock."
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company") will
be a corporation, limited liability company, limited partnership or business
trust organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor Company (if not the
Company) will expressly assume, by an indenture supplemental hereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Notes and the Indenture;
74
<PAGE> 78
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred by
the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing; (iii) except in
the case of a merger the sole purpose of which is to change the Company's
jurisdiction of incorporation, immediately after giving effect to such
transaction, the Successor Company would be able to Incur an additional $1.00 of
Indebtedness under paragraph (a) of the covenant described under "-- Limitation
on Indebtedness"; (iv) immediately after giving effect to such transaction, the
Successor Company will have Consolidated Net Worth in an amount which is not
less than the Consolidated Net Worth of the Company immediately prior to such
transaction and (v) the Company will have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such consolidation,
merger or transfer and such supplemental indenture (if any) comply with the
Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets will not be released from the obligation to pay the
principal of and interest on the Notes.
DEFAULTS
An Event of Default is defined in the Indenture as:
(i) a default in any payment of interest on any Note when due (whether
or not such payment is prohibited by the provisions described under
"Ranking" above), continued for 30 days;
(ii) a default in the payment of principal of any Note when due at its
Stated Maturity, upon optional redemption, upon required repurchase, upon
declaration or otherwise (whether or not such payment is prohibited by the
provisions described under "Ranking" above);
(iii) the failure by the Company to comply with its obligations under
the covenant described under "Merger and Consolidation" above;
(iv) the failure by the Company to comply for 30 days after notice
with any of its obligations under the covenants described under "Change of
Control" or "Certain Covenants" above (in each case, other than a failure
to purchase Notes);
(v) the failure by the Company or any Guarantor Subsidiary to comply
for 60 days after notice with its other agreements contained in the Notes
or the Indenture;
(vi) the failure by the Company or any Significant Subsidiary to pay
any Indebtedness within any applicable grace period after final maturity or
the acceleration of any such Indebtedness by the holders thereof because of
a default, if the total amount of such Indebtedness unpaid or accelerated
exceeds $5.0 million or its foreign currency equivalent (the "cross
acceleration provision");
(vii) certain events of bankruptcy, insolvency or reorganization of
the Company or a Restricted Subsidiary (the "bankruptcy provisions");
(viii) the rendering of any judgment or decree in excess of $5.0
million or its foreign currency equivalent (net of amounts paid within 30
days of any such judgment or decree under any insurance, indemnity, bond,
surety or similar instrument) against the Company or a Restricted
Subsidiary by a court or other adjudicatory authority of competent
jurisdiction for which the Company or the Restricted Subsidiary, as
applicable, is not fully insured by a third
75
<PAGE> 79
Person and (A) an enforcement proceeding is commenced with respect to such
judgment or decree or (B) such judgment or decree remains outstanding the
later of (i) the day which is the sixtieth day after the judgment is
rendered and (ii) the day on which any right to appeal expires (the
"judgment default provision"); or
(ix) any Subsidiary Guaranty ceases to be in full force and effect
(except as contemplated by the terms thereof) or any Guarantor Subsidiary
denies or disaffirms its obligations under the Indenture or any Subsidiary
Guaranty and such Default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a default under clauses (iv) or (v) will not constitute an Event
of Default until the Trustee or the Holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued but unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and
interest will be due and payable immediately. If an Event of Default relating to
certain events of bankruptcy, insolvency or reorganization of the Company occurs
and is continuing, the principal of and interest on all the Notes will become
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holders. Under certain circumstances, the Holders of a
majority in principal amount of the outstanding Notes may rescind any such
acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Notes unless (i) such Holder has
previously given the Trustee notice that an Event of Default is continuing, (ii)
Holders of at least 25% in principal amount of the outstanding Notes have
requested the Trustee to pursue the remedy, (iii) such Holders have offered the
Trustee reasonable security or indemnity against any loss, liability or expense,
(iv) the Trustee has not complied with such request within 60 days after the
receipt of the request and the offer of security or indemnity and (v) the
Holders of a majority in principal amount of the outstanding Notes have not
given the Trustee a direction inconsistent with such request within such 60-day
period. Subject to certain restrictions, the Holders of a majority in principal
amount of the outstanding Notes are given the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or of exercising any trust or power conferred on the Trustee. The Trustee,
however, may refuse to follow any direction that conflicts with law or the
Indenture or that the Trustee determines is unduly prejudicial to the rights of
any other Holder or that would involve the Trustee in personal liability. Prior
to taking any action under the Indenture, the Trustee will be entitled to
indemnification satisfactory to it in its sole discretion against all losses and
expenses caused by taking or not taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within the earlier of 90 days after it occurs or 30 days after it is known to a
Trust Officer or written notice of it is received by the Trustee. Except in the
case of a Default in the payment of principal of, premium (if any) or interest
on any Note, the Trustee may withhold notice if and so long as a committee of
its Trust Officers in good faith
76
<PAGE> 80
determines that withholding notice is in the interests of the Noteholders. In
addition, the Company is required to deliver to the Trustee, within 120 days
after the end of each fiscal year, a certificate indicating whether the signers
thereof know of any Default that occurred during the previous year. The Company
also is required to deliver to the Trustee, within 30 days after the occurrence
thereof, written notice of any event which would constitute certain Defaults,
their status and what action the Company is taking or proposes to take in
respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding and any past default and its consequences or compliance with any
provisions may be waived with the consent of the Holders of a majority in
principal amount of the Notes then outstanding. However, without the consent of
each Holder of an outstanding Note affected, no amendment may (i) reduce the
amount of Notes whose Holders must consent to an amendment or waiver, (ii)
reduce the rate of or extend the time for payment of interest on any Note, (iii)
reduce the principal of or extend the Stated Maturity of any Note, (iv) reduce
the premium payable upon the redemption of any Note or change the time at which
any Note may be redeemed as described under "Optional Redemption" above, (v)
make any Note payable in money other than that stated in the Note, (vi) impair
the right of any Holder to receive payment of principal of and interest on such
Holder's Notes on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such Holder's Notes, (vii) make
any change in the amendment provisions which require each Holder's consent or in
the waiver provisions or (viii) make any change in any Subsidiary Guaranty that
would adversely affect the Noteholders.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Notes in addition to or in
place of certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(B) of the
Code), to add further Guaranties with respect to the Notes, to release Guarantor
Subsidiaries when permitted by the Indenture, to secure the Notes, to add to the
covenants of the Company for the benefit of the Noteholders or to surrender any
right or power conferred upon the Company, to make any change that does not
adversely affect the rights of any Holder or to comply with any requirement of
the Commission in connection with the qualification of the Indenture under the
TIA.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Noteholders a notice briefly describing such amendment.
However, the failure to give such notice to all Noteholders, or any defect
therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Noteholder to pay any taxes
required by law or permitted by the Indenture. The Company is not required to
transfer or exchange any Note selected for redemption or to transfer or exchange
any Note for a period of 15 days prior to a selection of Notes to be redeemed.
The Notes will be issued in registered form and the registered holder of a Note
will be treated as the owner of such Note for all purposes.
77
<PAGE> 81
DEFEASANCE
The Company at any time may terminate all its obligations under the Notes
and the Indenture ("legal defeasance"), except for certain obligations,
including those respecting the defeasance trust and obligations to register the
transfer or exchange of the Notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in respect of the
Notes. The Company at any time may terminate its obligations under the covenants
described under "Certain Covenants," the operation of the cross acceleration
provision, the bankruptcy default provisions with respect to Subsidiaries and
the judgment default provision described under "Defaults" above and the
limitations contained in clauses (iii) and (iv) under "Merger and Consolidation"
above ("covenant defeasance"). If the Company exercises its legal defeasance
option or its covenant defeasance option, each Guarantor Subsidiary will be
released from all of its obligations with respect to its Subsidiary Guaranty.
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default specified in clause (iv), (vi), (vii) (with respect to
Restricted Subsidiaries only), (viii) (with respect to Significant Subsidiaries
only), (ix) or (x) under "Defaults" above or because of the failure of the
Company to comply with clause (iii) or (iv) under "Merger and Consolidation"
above.
Defeasance options with respect to the Notes may be exercised to any
redemption date or the applicable maturity date. In order to exercise either
defeasance option, the Company must irrevocably deposit in trust (the
"defeasance trust") with the Trustee money or U.S. Government Obligations for
the payment of principal, premium (if any) and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Notes will not recognize income, gain or loss for
Federal income tax purposes as a result of such deposit and defeasance and will
be subject to Federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
CONCERNING THE TRUSTEE
United States Trust Company of New York is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"ACP Holdings" means ACP Holding Company, a Delaware corporation.
"ACP Products, L.L.C." means ACP Products, L.L.C., a Delaware limited
liability company.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock), including improvements to existing assets, to
be used by the Company or a Restricted Subsidiary in a Related Business; (ii)
the Capital Stock of a Person that becomes a Restricted Subsidiary as a result
of the acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a
78
<PAGE> 82
Restricted Subsidiary; provided, however, that, in the case of clauses (ii) and
(iii), such Restricted Subsidiary is primarily engaged in a Related Business.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "-- Certain Covenants -- Limitation
on Transactions with Affiliates" only, "Affiliate" shall also mean any
beneficial owner of shares representing 5% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Applicable Premium" means, with respect to a Note, the greater of (i) 1.0%
of the then outstanding principal amount of such Note and (ii) the excess of (A)
the present value of all remaining required interest and principal payments due
on such Note, computed using a discount rate equal to the Treasury Rate plus 75
basis points, over (B) the then outstanding principal amount of such Note.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or assets (each referred to for the purposes of
this definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Restricted
Subsidiary; (ii) a disposition of inventory, in the ordinary course of business
consistent with past practices of the Company and its Subsidiaries; (iii)
dispositions with a fair market value of less than $500,000 in the aggregate in
any fiscal year; (iv) a disposition of properties and assets that is governed by
the provisions under the first paragraph of "-- Merger and Consolidation" above;
and (v) for purposes of the provisions described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition subject to the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
assumed in making calculations in accordance with FAS 13) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale/Leaseback Transaction (including any period for
which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
scheduled redemption or similar payment with respect to such Preferred Stock
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the Senior Bank Facilities or any refinancing or replacements thereof
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for post-filing interest is allowed in
such proceeding), fees, charges, expenses, reimbursement obligations, guarantees
and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
79
<PAGE> 83
"Borrowing Base" means, as of the date of determination, an amount equal to
the sum, without duplication, of (i) 80% of the net book value of the Company's
accounts receivable at such date and (ii) 50% of the net book value of the
Company's inventories at such date. Net book value shall be determined in
accordance with GAAP and shall be that reflected on the most recent available
balance sheet (it being understood that the accounts receivable and inventories
of an acquired business may be included if such acquisition has been completed
on or prior to the date of determination).
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York State are authorized or required by law
to close.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The amount of Indebtedness represented by a
Capitalized Lease Obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP, and the Stated Maturity thereof shall be the
date of the last scheduled payment of rent or any other amount due under the
relevant lease.
"Citicorp" means Citicorp, a Delaware corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Agreement" means one or more of the following agreements entered
into by a Person and one or more financial institutions: commodity future
contracts, forward contracts, options or other similar arrangements or
agreements designed to protect against fluctuations in the price of, or the
shortage of supply of, commodities from time to time.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending at least 45 days prior to the date of
such determination (determined, for the four fiscal quarters ending prior to the
Issue Date, or any thereof, on a pro forma basis to give effect to the Neenah
Merger as if it had occurred at the beginning of such period) to (ii)
Consolidated Interest Expense for such four fiscal quarters (determined, for the
four fiscal quarters ending prior to the Issue Date, or any thereof, on a pro
forma basis to give effect to the Neenah Merger as if it had occurred at the
beginning of such period); provided, however, that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness and the application of the
proceeds thereof as if such Indebtedness had been Incurred on the first day of
such period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period (except that in
the case of Indebtedness to finance seasonal fluctuations in working capital
needs Incurred under a revolving credit or similar arrangement, the amount
thereof shall be deemed to be the average daily balance of such Indebtedness
during such four quarter period);
(2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have disposed of any assets constituting all or substantially
all of the assets of an operating unit of a business (a "Disposal"), (x) the
EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Disposal for
80
<PAGE> 84
such period or increased by an amount equal to the EBITDA (if negative) directly
attributable thereto for such period and (y) Consolidated Interest Expense for
such period shall be reduced by an amount equal to the Consolidated Interest
Expense directly attributable to any Indebtedness of the Company or any
Restricted Subsidiary repaid, repurchased, defeased or otherwise discharged with
respect to the Company and its continuing Restricted Subsidiaries in connection
with such Disposal for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale);
(3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of the assets of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness in connection therewith) as if such Investment or acquisition
occurred on the first day of such period; and
(4) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Disposal or any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Disposal, Investment or acquisition of assets occurred on the
first day of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma effect, then (i)
if any interest had accrued on such Indebtedness prior to the date of
determination, the interest expense on such Indebtedness shall be computed by
applying a fixed or floating rate of interest as selected by the Company or such
Restricted Subsidiary for the interest period immediately preceding such
determination or (ii) if no interest accrued on such Indebtedness prior to the
date of determination, the interest expense on such Indebtedness shall be
computed by applying, at the option of the Company or such Restricted
Subsidiary, either a fixed or floating rate. If any Indebtedness which is being
given pro forma effect was Incurred under a revolving credit facility that was
in effect throughout the applicable period, the interest expense on such
Indebtedness shall be computed based upon the average daily balance of such
Indebtedness during the applicable period.
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries for
such period, plus, to the extent Incurred by the Company and its Restricted
Subsidiaries in such period but not included in such interest expense, (i)
interest expense attributable to Capitalized Lease Obligations and Attributable
Debt, (ii) amortization of debt discount, (iii) capitalized interest, (iv)
noncash interest expense, (v) commissions, discounts and other fees and charges
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Interest Rate Agreements, (vii) the
81
<PAGE> 85
interest portion of any deferred payment obligation for goods or services,
(viii) interest actually paid by the Company or any Restricted Subsidiary on any
Indebtedness of any other Person that is Guaranteed by the Company or any
Restricted Subsidiary, (ix) the cash contributions to any employee stock
ownership plan or similar trust to the extent such contributions are used by
such plan or trust to pay interest or fees to any Person (other than the Company
or a Wholly Owned Subsidiary) in connection with Indebtedness Incurred by such
plan or trust and (x) the earned discount or yield with respect to the sale of
receivables (without duplication of amounts included in Consolidated Net
Income); but in no event shall include (i) amortization of debt issuance costs,
(ii) Preferred Stock dividends in respect of all Preferred Stock of Subsidiaries
of the Company and Disqualified Stock of the Company held by Persons other than
the Company or a Wholly Owned Subsidiary, or (iii) interest Incurred in
connection with Investments in discontinued operations.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its Subsidiaries for such period; provided,
however, that there shall not be included in such Consolidated Net Income: (i)
any net income (loss) of any Person if such Person is not a Restricted
Subsidiary, except that (A) subject to the limitations contained in clause (iv)
below, the Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net Income, (ii) for
purposes of subclause (a)(3)(A) of the covenant described under "Limitation on
Restricted Payments" only, any net income (loss) of any person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition, (iii) any net income (loss) of any
Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the limitations contained in (iv) below, the Company's equity in the
net income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in the case of
a dividend that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the Company's equity in a net loss
of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income, (iv) any gain (or loss) realized upon
the sale or other disposition of any asset of the Company or its Consolidated
Subsidiaries (including pursuant to any Sale/Leaseback Transaction) which is not
sold or otherwise disposed of in the ordinary course of business and any gain
(or loss) realized upon the sale or other disposition of any Capital Stock of
any Person, (v) any extraordinary gain or loss, and (vi) the cumulative effect
of a change in accounting principles after the Issue Date. Notwithstanding the
foregoing, for the purpose of the covenant described under "Certain
Covenants -- Limitation on Restricted Payments" only, there shall be excluded
from Consolidated Net Income any dividends, repayments of loans or advances or
other transfers of assets from Unrestricted Subsidiaries to the Company or a
Restricted Subsidiary to the extent such dividends, repayments or transfers
increase the amount of Restricted Payments permitted under such covenant
pursuant to clause (a)(3)(D) thereof. Notwithstanding anything to the contrary
in the covenant described under "Certain Covenants -- Limitations on Restricted
Payments," all amounts paid to Holdings pursuant to clause (b)(xi)(B) of such
covenant shall be deducted in computing Consolidated Net Income.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such
82
<PAGE> 86
Capital Stock plus (iii) any retained earnings or earned surplus less (A) any
accumulated deficit and (B) any amounts attributable to Disqualified Stock.
"Consolidated Non-Cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Consolidated Subsidiaries for such period, on a Consolidated basis, as
determined in accordance with GAAP (excluding any such other non-cash charge
which consists of an accrual or reserve for cash charges for any future period).
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Currency Agreement" means with respect to any Person any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement as
to which such Person is a party or a beneficiary.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend at least
$25.0 million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to ninety-one days after the
Stated Maturity of the Notes. Disqualified Stock shall not include any Capital
Stock that is not otherwise Disqualified Stock if by its terms the holders have
the right to require the issuer to repurchase such stock upon a Change of
Control (or upon events substantially similar to a Change of Control).
"Domestic Subsidiary" means a Subsidiary that is incorporated or organized
under the laws of the United States of America, any State thereof or the
District of Columbia.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense, (ii) Consolidated Interest Expense and (iii)
Consolidated Non-Cash Charges, in each case for such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income (loss) of such Subsidiary was included in
calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, in statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by
83
<PAGE> 87
such other entity as approved by a significant segment of the accounting
profession. All ratios and computations based on GAAP contained in the Indenture
shall be computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person through
an agreement enforceable by or for the benefit of the holder of such
Indebtedness and any such obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Guarantor Subsidiary" means any Person that has issued a Subsidiary
Guaranty. Upon consummation of the Neenah Merger and execution and delivery of
the Supplemental Indenture, the term "Guarantor Subsidiary" shall include each
of the Initial Guarantors.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Commodity Agreement, Interest Rate Agreement or Currency
Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Registrar's books.
"Holdings" means NFC Castings, Inc., a Delaware corporation, any Person
succeeding to its ownership, and successors thereto.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such person at the time it becomes a Restricted Subsidiary; provided further,
however, that in the case of a discount security, the accretion of original
issue discount on such security shall not be considered an Incurrence of
Indebtedness if (but only if) at the time of issuance of such security, the
Company elects to treat the whole face amount of such security as Incurred at
such time (and such Incurrence is then permitted in accordance with the terms of
the Indenture).
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of indebtedness of such
Person for borrowed money; (ii) the principal of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) other
than letters of credit or similar instruments supporting Trade Payables entered
into in the ordinary course of business of such Person to the extent that such
letters of credit are not drawn upon or, if and to the extent drawn upon, such
drawing is reimbursed not later than the third business day following such
drawing; (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which purchase
price is due more than twelve months after the date of placing such property in
service or taking delivery and title thereto or the completion of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of such Person;
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in
each case, any accrued dividends); (vii) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person; provided, however, that the amount of Indebtedness of
such Person shall
84
<PAGE> 88
be the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other Persons;
(viii) all Indebtedness of other Persons to the extent Guaranteed by such
Person; and (ix) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
"Initial Guarantors" means Neenah Foundry Company, Hartley Controls
Corporation and Neenah Transport, Inc., each a Wisconsin corporation.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance or loan
(other than advances or loans to customers or suppliers in the ordinary course
of business that are recorded as accounts receivable on the balance sheet of the
Person making such loan or advance) or other extension of credit (including by
way of Guarantee or similar arrangement) 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 of
Capital Stock, Indebtedness or other similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary" and the covenant
described under "-- Certain Covenants -- Limitation on Restricted Payments,"
only (i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors.
"Issue Date" means the date on which the Notes were originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Investors" means the officers and employees of ACP Holdings,
ACP Products, L.L.C., Holdings, the Company or a Subsidiary of the Company who
acquire Voting Stock of ACP Holdings, ACP Products, L.L.C., Holdings or the
Company on or after the Issue Date.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"NC Merger" means NC Merger Company, a Wisconsin corporation.
"Neenah Merger" means the merger of NC Merger Company with and into the
Company under the terms of the Agreement and Plan of Reorganization (as amended)
by and among Holdings, the Company and NC Merger Company and dated November 20,
1996.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or from an escrow account or
otherwise, in each case only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such
85
<PAGE> 89
Asset Disposition or received in any other non-cash form) therefrom, in each
case net of (i) all legal, title and recording expenses, commissions and other
expenses (including fees and expenses of counsel and investment bankers)
incurred, and all Federal, state, provincial, foreign and local taxes required
to be paid or accrued as a liability under GAAP, as a consequence of such Asset
Disposition, (ii) all payments made on any Indebtedness which is secured by any
assets subject to such Asset Disposition, in accordance with the terms of any
Lien upon such assets, or which must by its terms, or in order to obtain a
necessary consent to such asset disposition, or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) all distributions and other
payments required to be made to minority interest holders in Subsidiaries or
joint ventures as a result of such Asset Disposition and (iv) appropriate
amounts to be provided by the party or parties making such Asset Disposition as
a reserve, in accordance with GAAP, against any liabilities associated with the
assets disposed of in such Asset Disposition and retained by the Company or any
Restricted Subsidiary after such Asset Disposition, 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 Disposition.
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
means the proceeds of such issuance or sale in the form of cash, including
payments in respect of deferred payment obligations when received in form of, or
stock or other assets when disposed for, cash, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, filing and registration fees, trustee's fees,
consultant and other fees actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means (i) CVC and its Affiliates and Permitted
Transferees and (ii) the Management Investors and their Permitted Transferees.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, (ii) a Restricted Subsidiary or a Person which
will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (iii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iv) Temporary Cash Investments; (v) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (vi) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vii) loans or advances to employees made in the ordinary course of business and
not exceeding $1.0 million in the aggregate outstanding at any one time; (viii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (ix) securities received as
consideration in sales of assets made in compliance with the covenant described
under "-- Limitation on Sales of Assets and Subsidiary Stock"; (x) other
Investments, of any type, provided that the amount of such Investments made
after the Issue Date in reliance on this clause (x) and outstanding at any time
does not exceed 7.5% of Total Assets; or (xi) Guarantees relating to
86
<PAGE> 90
Indebtedness which is permitted to be Incurred under the covenant described
under "-- Limitation on Indebtedness."
"Permitted Liens" means with respect to any Person:
(a) Liens to secure Indebtedness permitted under the provisions
described under clause (b)(i) or (ii) under "Certain
Covenants -- Limitation on Indebtedness";
(b) pledges or deposits made or other Liens granted by (1) such Person
under workmen's compensation laws, unemployment insurance laws or similar
legislation, (2) in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such Person is a party,
or (3) to secure public or statutory obligations of such Person or deposits
of cash or United States government bonds to secure surety or appeal bonds
to which such Person is a party, or deposits as security for contested
taxes or import duties or for the payment of rent, in each case Incurred in
the ordinary course of business;
(c) Liens imposed by law, such as carriers', warehousemen's,
mechanics', employees' and other like Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings or other
Liens arising out of judgments, awards, decrees or orders of any court or
other governmental authority against such Person with respect to which such
Person shall then be proceeding with an appeal or other proceedings for
review;
(d) Liens for property taxes not yet due or payable or subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings;
(e) Liens in favor of issuers of surety, performance, judgment, appeal
and other like bonds or letters of credit issued pursuant to the request of
and for the account of such Person in the ordinary course of its business;
(f) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes,
or zoning provisions, carveouts, conditional waivers or other restrictions
as to the use of real properties or minor irregularities of title (and with
respect to leasehold interests, mortgages, obligations, Liens and other
encumbrances incurred, created, assumed or permitted to exist and arising
by, through or under a landlord or owner of the leased property, with or
without consent of the lessee) or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties which were
not Incurred in connection with Indebtedness and which do not in the
aggregate materially impair the use of such properties in the operation of
the business of such Person;
(g) Liens existing or provided for under written arrangements existing
on the Issue Date;
(h) Liens securing Indebtedness or other obligations of a Subsidiary
of such Person owing to such Person or a wholly owned Subsidiary of such
Person;
(i) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under the Indenture, secured by a
Lien on the same property securing such Hedging Obligations;
(j) Liens to secure any refinancing, refunding, replacement, renewal,
repayment or extension (or successive refinancings, refundings,
replacements, renewals, repayments or extensions) as a whole, or in part,
of any Indebtedness secured by any Lien referred to in clause (g), (i),
(l), (m) or (n); provided, however, that (x) such new Lien shall be limited
to all or part of the same property that secured the original Lien (plus
improvements on such property) and (y) the Indebtedness secured by such
Lien at such time is not increased to any amount greater than the sum of
(A) the outstanding principal amount or, if greater, committed amount of
the Indebtedness described under clauses (g), (i), (l), (m) and (n) at the
time the original Lien became a Permitted Lien and (B) an amount necessary
to pay any fees and expenses,
87
<PAGE> 91
including premiums, related to such refinancing, refunding, replacement,
renewal, repayment or extension;
(k)(i) mortgages, liens, security interests, restrictions or
encumbrances that have been placed by any developer, landlord or other
third party on property over which the Company or any Restricted Subsidiary
or the Company has easement rights or on any real property leased by the
Company and subordination or similar agreements relating thereto and (ii)
any condemnation or eminent domain proceedings affecting any real property;
(l) Liens on property, assets or shares of stock of a Person at the
time such Person becomes a Subsidiary; provided, however, such Liens are
not created, Incurred or assumed by such Person in connection with, or in
contemplation of, such other Person becoming such a Subsidiary; provided
further, however, that such Liens may not extend to any other property
owned by the Company or any Restricted Subsidiary;
(m) Liens on property or assets at the time the Company or a
Restricted Subsidiary acquired the property or assets, including any
acquisition by means of a merger or consolidation with or into the Company
or a Restricted Subsidiary; provided, however, that such Liens are not
created in connection with, or in contemplation of, such acquisition;
provided further, however, that the Liens may not extend to any other
property owned by the Company or any Restricted Subsidiary; and
(n) any Lien on stock or other securities of an Unrestricted
Subsidiary that secures Indebtedness of such Unrestricted Subsidiary.
"Permitted Transferee" means (a) with respect to CVC (i) Citicorp, any
direct or indirect wholly owned subsidiary of Citicorp, and any officer,
director or employee of CVC, Citicorp or any wholly owned subsidiary of
Citicorp, (ii) any spouse or lineal descendant (including by adoption and
stepchildren) of the officers, directors and employees to in clause (a)(i) above
or (iii) any trust, corporation or partnership 100% in interest of the
beneficiaries, stockholders or partners of which consists of one or more of the
persons described in clause (a)(i) or (ii) above and (b) with respect to any
officer or employee of ACP Products, L.L.C., ACP Holdings, Holdings, the Company
or a Subsidiary of the Company (i) any spouse or lineal descendant (including by
adoption and stepchildren) of such officer or employee and (ii) any trust,
corporation or partnership 100% in interest of the beneficiaries, stockholders
or partners of which consists of such officer or employee, any of the persons
described in clause (b)(i) above or any combination thereof.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Equity Offering" means an underwritten public offering of common
stock of ACP Holdings, the Company or Holdings (or, for purposes of the covenant
described under "-- Limitation on the Sale or Issuance of Capital Stock of
Restricted Subsidiaries," any Restricted Subsidiary) pursuant to an effective
registration statement (other than a registration statement on Form S-4, S-8 or
any successor or similar forms) under the Securities Act (whether alone or in
conjunction with any secondary public offering); provided, however, that if any
such offering is an offering of the common stock of ACP Holdings, only the net
proceeds thereof that are contributed to the Company shall be taken into
consideration for the purposes of this definition.
"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of ACP Holdings, the Company
88
<PAGE> 92
or Holdings (or, for purposes of the covenant described under "-- Limitation on
the Sale or Issuance of Capital Stock of Restricted Subsidiaries," any
Restricted Subsidiary) has been distributed by means of an effective
registration statement under the Securities Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of an asset or assets (including Capital Stock and the
assets of an ongoing business) including additions and improvements, any
conditional sale obligation, any obligation under any title retention agreement
or any other purchase money obligation, or (ii) incurred to finance the
acquisition by the Company or a Restricted Subsidiary of an asset or assets
(including Capital Stock and the assets of a Related Business) including
additions and improvements; provided in the case of clause (i) that the Average
Life of such Indebtedness is less than the anticipated useful life of assets
having an aggregate fair market value representing more than 50% of the
aggregate fair market value of all assets so acquired and that in the case of
clauses (i) and (ii) such Indebtedness is incurred within 180 days after the
acquisition by the Company or Restricted Subsidiary of such asset or assets, or
is in existence with respect to any asset or other property at the time such
asset or property is acquired.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances" and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the Issue Date or Incurred
in compliance with the Indenture (including Indebtedness of the Company that
refinances Indebtedness of any Restricted Subsidiary (to the extent permitted in
the Indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of that or another Restricted Subsidiary of the Company), including
Indebtedness that refinances Refinancing Indebtedness; provided, however, that
(i) the Refinancing Indebtedness has a Stated Maturity no earlier than the
Stated Maturity of the Indebtedness being refinanced, (ii) the Refinancing
Indebtedness has an Average Life at the time such Refinancing Indebtedness is
Incurred that is equal to or greater than the Average Life of the Indebtedness
being refinanced, (iii) such Refinancing Indebtedness is Incurred in an
aggregate principal amount (or, if issued with original issue discount, an
aggregate issue price) that is equal to or less than the aggregate principal
amount (or, if issued with original issue discount, the aggregate accreted
value) then outstanding of the Indebtedness being refinanced plus the amount of
any premium reasonably determined by the Company or such Restricted Subsidiary,
as applicable, as necessary at the time of such refinancing to accomplish such
refinancing or required pursuant to the terms thereof, plus the amount of
expenses of the Company or such Restricted Subsidiary, as applicable, Incurred
in connection with such refinancing and (iv) if the Indebtedness being
refinanced is subordinated in right of payment to the Notes, such Refinancing
Indebtedness is subordinated in right of payment to the Notes to the extent of
the Indebtedness being refinanced provided further, however, that Refinancing
Indebtedness shall not include Indebtedness of the Company or a Restricted
Subsidiary that refinances Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business of the Company and the Restricted
Subsidiaries as conducted on the Issue Date and any business related, ancillary
or complementary thereto.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc. and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or such Restricted Subsidiary transfers such property to a Person
and the Company or such Restricted Subsidiary leases it from such Person, other
than leases between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries.
89
<PAGE> 93
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Guarantor Subsidiary has a correlative
meaning.
"Senior Bank Facilities" means the credit agreement dated as of the Issue
Date, as amended, waived or otherwise modified from time to time, among
Holdings, the Company, the lenders party thereto from time to time and The Chase
Manhattan Bank, a New York banking corporation, as agent (except to the extent
that any such amendment, waiver or other modification thereto would be
prohibited by the terms of the Indenture).
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Notes and is not subordinated by its terms to any
Indebtedness or other obligation of the Company which is not Senior
Indebtedness. "Senior Subordinated Indebtedness" of any Guarantor Subsidiary has
a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of clause (w)(1) or
(2) of Rule 1-02 under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the purchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Issue Date or thereafter Incurred) which is expressly
subordinate in right of payment to the Notes pursuant to a written agreement.
"Subordinated Obligation" of any Guarantor Subsidiary shall have a correlative
meaning.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, trustees or members of any other governing body
thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person or (ii) one or more Subsidiaries of such Person.
"Subsidiary Guaranty" means any Guarantee of the Notes which may from time
to time be executed and delivered pursuant to the terms of the Indenture. Each
such Subsidiary Guaranty shall be in the form prescribed in the Indenture.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations (x) of the United States of America or any agency thereof
or obligations Guaranteed by the United States of America or any agency thereof
or (y) of any foreign country recognized by the United States of America rated
at least "A" by S&P or "A-1" by Moody's, (ii) investments in time deposit
accounts, certificates of deposit and money market deposits maturing within 365
days of the date of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having capital
and surplus in excess of $250.0 million (or the foreign currency equivalent
thereof) and whose long-term debt is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act), (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 365 days after the date of acquisition, issued by
a corporation (other than an Affiliate of
90
<PAGE> 94
the Company) organized and in existence under the laws of the United States of
America or any foreign country recognized by the United States of America with a
rating at the time as of which any investment therein is made of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to S&P, (v)
investments in securities with maturities of six months or less from the date of
acquisition issued or fully guaranteed by any state, commonwealth or territory
of the United States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by S&P or "A" by Moody's, (vi) any
money market deposit accounts issued or offered by a domestic commercial bank or
a commercial bank organized and located in a country recognized by the United
States of America, in each case, having capital and surplus in excess of $250.0
million (or the foreign currency equivalent thereof), or investments in money
market funds complying with the risk limiting conditions of Rule 2a-7 (or any
successor rule) of the Commission under the Investment Company Act of 1940, as
amended, and (vii) similar investments approved by the Board of Directors in the
ordinary course of business.
"Term Loans" means the Tranche A Term Loans and the Tranche B Term Loans
made pursuant to the Senior Bank Facilities.
"Total Assets" means, at any date of determination, the total consolidated
assets of the Company and its Restricted Subsidiaries, as set forth on the
Company's then most recent consolidated balance sheet.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two Business Days prior to the date
fixed for redemption of the Notes following a Change of Control (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Average Life to
Stated Maturity of the Notes; provided, however, that if the Average Life to
Stated Maturity of the Notes is not equal to the constant maturity of a United
States Treasury security for which a weekly average yield is given, the Treasury
Rate shall be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the Average Life to
Stated Maturity of the Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Restricted Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the Subsidiary to be so designated has total
Consolidated assets of $1,000 or less or (B) if such Subsidiary has Consolidated
assets greater than $1,000, then such designation would be permitted under the
covenant entitled "Limitation on Restricted Payments." The Board of Directors
may designate any
91
<PAGE> 95
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under paragraph (a) of the covenant described
under "Limitation on Indebtedness" and (y) no Default shall have occurred and be
continuing. Any such designation by the Board of Directors shall be evidenced to
the Trustee by promptly filing with the Trustee a copy of the resolution of the
Board of Directors giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and, to the extent
required by local ownership laws in foreign countries, shares owned by foreign
shareholders) is owned by the Company or another Wholly Owned Subsidiary
(including shares held of record by a nominee for the benefit of the Company or
another Wholly Owned Subsidiary).
92
<PAGE> 96
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Kirkland & Ellis, counsel to the Company, the following
are the material United States federal income tax consequences of the Exchange
Offer to a holder of Old Notes that is an individual citizen or resident of the
United States or a United States corporation that purchased the Old Notes
pursuant to their original issue (a "U.S. Holder"). The following discussion is
based on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), existing and proposed Treasury regulations, and judicial and
administrative determinations, all of which are subject to change at any time,
possibly on a retroactive basis. The following relates only to the Old Notes,
and the New Notes received therefor, that are held as "capital assets" within
the meaning of Section 1221 of the Code by U.S. Holders. It does not discuss
state, local or foreign tax consequences, nor does it discuss tax consequences
to categories of holders that are subject to special rules, such as foreign
persons, tax-exempt organizations, insurance companies, banks and dealers in
stocks and securities. Tax consequences may vary depending on the particular
status of an investor. No rulings will be sought from the Internal Revenue
Service with respect to the federal income tax consequences of the Exchange
Offer.
PROSPECTIVE PURCHASERS OF THE NOTES ARE URGED TO CONSULT THEIR TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO THEM OF
ACQUIRING, OWNING AND DISPOSING OF THE NOTES, AS WELL AS THE APPLICATION OF
STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
DEBT CHARACTERIZATION AND INTEREST INCOME
The Company and each Holder will agree to treat the Notes as indebtedness
for federal income tax purposes, and the following discussion assumes that such
treatment is correct. If the Notes were not respected as debt, they likely would
be treated as equity ownership interests in the Company. In such event, the
Company would not be entitled to claim a deduction for interest payable on the
Notes. As a result, the Company's after-tax cash flow and, consequently, its
ability to make payments with respect to the Notes could be reduced.
A Holder will recognize ordinary income when it receives or accrues
interest on the Notes in accordance with such Holder's method of tax accounting.
A Holder may be entitled to treat interest income on the Notes as "investment
income" for purposes of computing certain limitations concerning the
deductibility of investment interest expense.
The Notes are not expected to be issued with "original issue discount"
within the meaning of Section 1273 of the Code ("OID"). A Holder who purchases a
Note after the initial distribution thereof at a discount that exceeds a
statutorily defined de minimis amount will be subject to the "market discount"
rules of the Code, and a Holder who purchases a Note at a premium will be
subject to the bond premium amortization rules of the Code.
DISPOSITION OF NOTES
If a Holder sells a Note between interest payment dates, the Holder will
recognize gain or loss equal to the difference between the amount realized on
the sale and the Holder's adjusted tax basis in the Note. A Holder's adjusted
tax basis in a Note will be equal to the Holder's cost for the Note, (i)
increased by any interest that has accrued on the Note since the last interest
payment date, as well as any OID, market discount and gain previously included
by such Holder in income with respect to the Note, and (ii) decreased by any
bond premium previously amortized and any principal payments previously received
by such Holder with respect to such Note. Subject to the market discount rules,
any such gain or loss will be capital gain or loss, long- or short-term
depending upon whether the Holder has held the Note for more than one year.
Subject to certain limited exceptions, capital losses cannot be used to offset
ordinary income.
93
<PAGE> 97
A cash basis holder that sells a Note between interest payment dates will
be required to treat an amount equal to accrued but unpaid interest through the
date of sale as ordinary interest income, and to add such amount to its basis in
the Note.
TAX CONSEQUENCES TO FOREIGN HOLDERS
For purposes of this discussion, a "Foreign Holder" is any corporation,
individual, partnership, estate or trust that is, as to the United States, a
foreign corporation, a non-resident alien individual, a foreign partnership, or
a non-resident fiduciary or foreign estate or trust.
A Foreign Holder generally will not be subject to United States federal
withholding tax on interest paid on the Notes so long as the Foreign Holder (i)
is not actually or constructively a "10 percent shareholder" of the Company or a
"controlled foreign corporation" with respect to which the Company is a "related
person" within the meaning of the Code, and (ii) provides an appropriate
statement, signed under penalties of perjury, certifying that the beneficial
owner of the Note is a foreign person and providing that foreign person's name
and address. If the information provided in this statement changes, the foreign
person must so inform the Company within 30 days of such change. The statement
generally must be provided in the year a payment occurs or in either of the two
preceding years. If the foregoing conditions are not satisfied, then interest
paid on the Notes will be subject to United States withholding tax at a rate of
30 percent, unless such rate is reduced or eliminated pursuant to an applicable
tax treaty.
Any capital gain a Foreign Holder realizes on the sale, redemption,
retirement or other taxable disposition of a Note will be exempt from United
States federal income and withholding tax, provided that (i) the gain is not
effectively connected with the Foreign Holder's conduct of a trade or business
in the United States, and (ii) in the case of a Foreign Holder that is an
individual, the Foreign Holder is not present in the United States for 183 days
or more in the taxable year.
If the interest, gain or other income a Foreign Holder recognizes on a Note
is effectively connected with the Foreign Holder's conduct of a trade or
business in the United States, the Foreign Holder (although exempt from the
withholding tax previously discussed if an appropriate statement is furnished)
generally will be subject to United States federal income tax on the interest,
gain or other income at regular federal income tax rates. In addition, if the
Foreign Holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30 percent of its "effectively connected earnings and profits," as
adjusted for certain items, unless it qualifies for a lower rate under an
applicable tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Company will be required to report annually to the IRS, and to each
Holder of record, the amount of interest paid on the Notes (and the amount of
interest withheld for federal income taxes, if any) for each calender year,
except as to exempt Holders (generally, corporations, tax-exempt organizations,
qualified pension and profit-sharing trusts, individual retirement accounts, or
nonresident aliens who provide certification as to their status). Each Holder
(other than Holders who are not subject to the reporting requirements) will be
required to provide to the Company, under penalties of perjury, a certificate
containing the Holder's name, address, correct federal taxpayer identification
number and a statement that the Holder is not subject to backup withholding.
Should a nonexempt Holder fail to provide the required certificate, the Company
will be required to withhold 31% of the interest otherwise payable to the Holder
and to remit the withheld amount to the IRS as a credit against the Holder's
federal income tax liability.
94
<PAGE> 98
PLAN OF DISTRIBUTION
Each broker-dealer that receives New 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 New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. Each of the Company and the Guarantor Subsidiaries has
agreed that, for a period of 180 days after the Expiration Date, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer to
use in connection with any such resale. In addition, until , 1997
(90 days after the date of this Prospectus), all dealers effecting transactions
in the New Notes may be required to deliver a prospectus.
Neither the Company nor the Guarantor Subsidiaries will receive any
proceeds from any sale of New Notes by broker-dealers. New 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 New Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer or the purchasers of any such New Notes.
Any broker-dealer that resells New 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 New Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of New Notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company and each of the Guarantor Subsidiaries
has jointly and severally agreed to pay all expenses incident to the Exchange
Offer (including the expenses of one counsel for the holders of the Old Notes)
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the Old Notes (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereunder will be passed upon for the
Company and the Guarantor Subsidiaries by Kirkland & Ellis, New York, New York.
Cravath, Swaine & Moore, New York, New York has acted as counsel for the Initial
Purchasers.
EXPERTS
The consolidated financial statements of the Company at March 31, 1996 and
1997, and for each of the three years in the period ended March 31, 1997,
appearing in this Prospectus and in the Registration Statement, and the
financial statement schedule included in the Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein and in the Registration Statement,
and are included herein in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.
95
<PAGE> 99
CHANGE IN INDEPENDENT AUDITORS
The Company's consolidated financial statements at March 31, 1995, 1996 and
1997 and for the years ended March 31, 1994, 1995, 1996 and 1997 were audited by
Ernst & Young LLP. The consolidated financial statements at March 31, 1993 and
1994 and for the year ended March 31, 1993 were audited by Schenck & Associates
SC. During the two most recent years preceding the change in independent
auditors, there were no disagreements with Schenck & Associates SC on any matter
of accounting principles or practices, financial statement disclosures or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of Schenck & Associates SC would have caused them to make reference
thereto in their report on the consolidated financial statements for such years.
96
<PAGE> 100
NEENAH CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Consolidated Balance Sheets as of March 31, 1996 and 1997............................. F-3
Consolidated Statements of Income for the years ended March 31, 1995, 1996 and 1997... F-4
Consolidated Statements of Changes in Stockholders Equity for the years ended March
31, 1995, 1996 and 1997............................................................. F-5
Consolidated Statements of Cash Flows for the years ended March 31, 1995, 1996 and
1997................................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 101
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Board of Directors
Neenah Corporation
We have audited the accompanying consolidated balance sheets of Neenah
Corporation (the Company) as of March 31, 1996 and 1997, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended March 31, 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of March 31, 1996 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
March 31, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
April 29, 1997
F-2
<PAGE> 102
NEENAH CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
---------------------
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 10,126 $ 22,403
Accounts receivable, less allowance for doubtful accounts of $386
at March 31, 1996 and 1997...................................... 20,831 21,423
Inventories........................................................ 13,324 13,956
Other current assets............................................... -- 401
Deferred income taxes.............................................. 2,253 2,325
-------- --------
Total current assets....................................... 46,534 60,508
Property, plant and equipment:
Land............................................................... 847 847
Buildings and improvements......................................... 14,972 15,063
Machinery and equipment............................................ 97,749 101,655
-------- --------
113,568 117,565
Less accumulated depreciation...................................... 79,840 86,186
-------- --------
33,728 31,379
Other assets....................................................... 2,695 1,982
-------- --------
$ 82,957 $ 93,869
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 8,124 $ 8,497
Dividends payable.................................................. 2,220 --
Income taxes payable............................................... 517 573
Accrued wages and employee benefits................................ 5,516 5,545
Other accrued liabilities.......................................... 1,937 2,052
Current portion of long-term debt.................................. 107 134
-------- --------
Total current liabilities.................................. 18,421 16,801
Long-term debt....................................................... 134 --
Pension obligations.................................................. 1,737 --
Postretirement benefit obligations................................... 5,300 5,667
Deferred income taxes................................................ 2,575 2,544
-------- --------
Total liabilities.......................................... 28,167 25,012
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock, par value $100 per share:
Authorized 3,000 shares; no shares issued and outstanding....... -- --
Common stock, par value $100 per share:
Class A (voting):
Authorized 1,000 shares; issued and outstanding, 620 shares... 62 62
Class B (nonvoting):
Authorized 10,000 shares; issued and outstanding, 3,820
shares....................................................... 382 382
Retained earnings.................................................. 57,268 71,335
Notes receivable from owners to finance stock purchase............. (2,922) (2,922)
-------- --------
Total stockholders' equity................................. 54,790 68,857
-------- --------
$ 82,957 $ 93,869
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 103
NEENAH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Net sales............................................... $160,621 $166,951 $165,426
Cost of sales........................................... 120,981 121,631 116,736
-------- -------- --------
Gross profit............................................ 39,640 45,320 48,690
Selling, general and administrative expenses............ 16,673 16,983 17,547
-------- -------- --------
Operating income........................................ 22,967 28,337 31,143
Net interest income (expense)........................... (397) 481 1,162
-------- -------- --------
Income before income taxes.............................. 22,570 28,818 32,305
Provision for income taxes.............................. 8,866 11,676 12,467
-------- -------- --------
Net income.............................................. $ 13,704 $ 17,142 $ 19,838
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 104
NEENAH CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------
NOTES RECEIVABLE
PREFERRED STOCK CLASS A CLASS B FROM OWNERS
--------------- --------------- --------------- RETAINED TO FINANCE STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT EARNINGS PURCHASE TOTAL
------ ------ ------ ------ ------ ------ -------- ---------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at April
1, 1994........ 1,468 $ 147 719 $ 72 4,920 $ 492 $40,140 $ (2,922) $37,929
Redemption and
retirement of
stock........ (1,468) (147) (99) (10) (1,100) (110) (5,932) -- (6,199)
Dividends
declared:
Preferred --
$4.50 per
share...... -- -- -- -- -- -- (5) -- (5)
Common --
$475 per
share...... -- -- -- -- -- -- (2,231) -- (2,231)
Net income..... -- -- -- -- -- -- 13,704 -- 13,704
---- --- --- ------ ---- ------- ------- ------- -------
Balance at March
31, 1995....... -- -- 620 62 3,820 382 45,676 (2,922) 43,198
Common
dividends
declared --
$1,250 per
share........ -- -- -- -- -- -- (5,550) -- (5,550)
Net income..... -- -- -- -- -- -- 17,142 -- 17,142
---- --- --- ------ ---- ------- ------- ------- -------
Balance at March
31, 1996....... -- -- 620 62 3,820 382 57,268 (2,922) 54,790
Common
dividends
declared
-- $1,300 per
share........ -- -- -- -- -- -- (5,771) -- (5,771)
Net income..... -- -- -- -- -- -- 19,838 -- 19,838
---- --- --- ------ ---- ------- ------- ------- -------
Balance at March
31, 1997....... -- $ -- 620 $ 62 3,820 $ 382 $71,335 $ (2,922) $68,857
==== === === ====== ==== ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 105
NEENAH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.............................................. $ 13,704 $ 17,142 $ 19,838
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation....................................... 6,842 6,776 6,881
Deferred income taxes.............................. 2,862 1,863 (103)
Other.............................................. (274) 48 (103)
Changes in operating assets and liabilities:
Accounts receivable.............................. (3,384) 439 (592)
Inventories...................................... (142) (603) (632)
Other current assets............................. 186 27 (401)
Accounts payable................................. 684 (2,653) 373
Income taxes payable............................. 526 (585) 56
Accrued liabilities.............................. 1,388 (1,261) 144
Pension obligations.............................. 900 859 (2,349)
Postretirement benefit obligations............... 289 221 367
-------- -------- --------
Net cash provided by operating activities..... 23,581 22,273 23,479
INVESTING ACTIVITIES
Purchase of property, plant and equipment............. (3,665) (7,275) (4,546)
Proceeds from life insurance policy................... -- -- 1,439
Other................................................. 253 (24) 3
-------- -------- --------
Net cash used in investing activities......... (3,412) (7,299) (3,104)
FINANCING ACTIVITIES
Dividends paid........................................ (1,411) (4,440) (7,991)
Redemption of stock................................... (6,199) -- --
Proceeds from long-term debt.......................... 70,529 16,370 --
Payments on long-term debt............................ (82,968) (17,016) (107)
-------- -------- --------
Net cash used in financing activities......... (20,049) (5,086) (8,098)
-------- -------- --------
Increase in cash and cash equivalents................... 120 9,888 12,277
Cash and cash equivalents at beginning of year.......... 118 238 10,126
-------- -------- --------
Cash and cash equivalents at end of year................ $ 238 $ 10,126 $ 22,403
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest........................................... $ 624 $ 84 $ 39
Income taxes....................................... 5,478 10,398 12,515
</TABLE>
See accompanying notes.
F-6
<PAGE> 106
NEENAH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1995, 1996 AND 1997
(IN THOUSANDS)
1. NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Neenah Corporation (the Company) operates in one business segment for
financial reporting purposes: the manufacture of gray and ductile iron castings.
The Company's principal operating subsidiary, Neenah Foundry Company (Foundry),
manufactures castings sold directly to industrial customers throughout the
United States, and to heavy municipal customers throughout the United States and
several foreign countries either directly or through representatives. Industrial
castings are custom-engineered and are produced for customers in several
industries, with a concentration in the medium and heavy-duty truck components,
farm equipment, and heating, ventilation, and air-conditioning industries. Heavy
municipal castings include manhole covers and frames, storm sewer frames and
grates, trench drain systems, tree grates and specialty castings for a variety
of applications.
Industrial castings are generally sold to large, well-established
companies, with two customers accounting for 18% and 15% of net sales in fiscal
1995, 17% and 9% of net sales in fiscal 1996, and 16% and 10% of net sales in
fiscal 1997. Combined receivables from these two customers totaled $4,974 and
$6,651 at March 31, 1996 and 1997, respectively. Municipal castings are sold to
a large number of customers. The Company's accounts receivable generally are
unsecured.
The Company's other operating subsidiaries include Neenah Transport, Inc.
(Transport) and Hartley Controls Corporation (Hartley). Transport is a common
and contract carrier licensed to operate in the continental United States. The
majority of Transport's revenues are derived from transport services provided to
Foundry. Hartley designs and manufactures customized sand control systems for
the foundry industry, which are sold and serviced throughout the United States
and several foreign countries. Hartley and Transport each account for less than
10% of the Company's net sales, net income and total assets.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Foundry, Transport and Hartley. All
significant intercompany accounts and transactions 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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid investments with a maturity of three months or less
when purchased to be cash equivalents. Cash equivalents, consisting principally
of investments in commercial paper, totaled $11,598 and $23,028 at March 31,
1996 and 1997, respectively. The cost of these debt securities, which are
considered as "available for sale" for financial reporting purposes,
approximates fair value at both March 31, 1996 and 1997. There were no realized
gains or losses recognized on these securities during any of the three years in
the period ended March 31, 1997.
F-7
<PAGE> 107
NEENAH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
on the last-in, first-out (LIFO) method for substantially all inventories except
for supplies, for which cost is determined on the first-in, first-out (FIFO)
method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Expenditures for
additions and improvements are capitalized while replacements, maintenance and
repairs which do not improve or extend the lives of the respective assets are
expensed as incurred.
Depreciation for financial reporting purposes is provided over the
estimated useful lives of the respective assets, using accelerated and
straight-line methods. Depreciation expense includes amortization of machinery
and equipment recorded under capitalized leases.
REVENUE RECOGNITION
Revenue from the sale of castings and sand control systems is recognized
upon shipment to the customer.
ADVERTISING COSTS
Advertising costs are expensed as incurred, and amounted to $467, $527 and
$524 for the years ended March 31, 1995, 1996 and 1997, respectively.
INCOME TAXES
Deferred income taxes are provided for temporary differences between the
financial reporting and income tax basis of the Company's assets and liabilities
and are measured using currently enacted tax rates and laws.
FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The Company estimates that the fair value of all financial
instruments at March 31, 1996 and 1997 does not differ materially from the
carrying value of such instruments recorded in the accompanying consolidated
balance sheets, as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
------- -------
<S> <C> <C>
Cash and cash equivalents...................................... $10,126 $22,403
Accounts receivable............................................ 20,831 21,423
Accounts payable............................................... (8,124) (8,497)
Long-term debt................................................. (241) (134)
</TABLE>
NEW ACCOUNTING STANDARDS
The Company adopted FASB Statement of Financial Accounting Standards (SFAS)
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Assets to
Be Disposed Of," and SFAS No. 123, "Accounting for Stock-Based Compensation," on
April 1, 1996 and SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," on January 1, 1997. The
adoption of these standards did not have any effect on the Company's
F-8
<PAGE> 108
NEENAH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
consolidated financial statements. The Company is required to adopt AICPA
Statement of Position 96-1, "Environmental Remediation Liabilities," on April 1,
1997. The pending adoption of this standard is not expected to have a material
impact on the Company's consolidated financial statements.
2. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
------- -------
<S> <C> <C>
Raw materials.................................................. $ 2,214 $ 2,017
Work in process and finished goods............................. 13,957 14,324
Supplies....................................................... 4,886 4,860
------- -------
Inventories at FIFO cost....................................... 21,057 21,201
Excess of FIFO cost over LIFO cost............................. (7,733) (7,245)
------- -------
$13,324 $13,956
======= =======
</TABLE>
3. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
-------------
1996 1997
---- ----
<S> <C> <C>
Capital lease obligations............................................ $241 $134
Less current portion................................................. 107 134
---- ----
$134 $ --
==== ====
</TABLE>
The Company has a revolving credit agreement (the Agreement) with a bank
that provides for borrowings up to $25,000 through July 31, 1998. Interest is
payable monthly on outstanding borrowings at the bank's Reference Rate (8.25% at
March 31, 1997). The Agreement contains an option that allows the Company to
designate a portion (minimum of $2,000) of the borrowings to bear a fixed rate
of interest for a specified period of time. Borrowings under the Agreement are
unsecured and a quarterly fee is charged by the bank on the unused portion of
the facility.
The capital lease obligations consist of leases for a propane system and
semi-tractors and trailers. Included in machinery and equipment is $567 and $397
and included in accumulated depreciation is $272 and $179 at March 31, 1996 and
1997, respectively, related to these capital leases.
4. NOTES RECEIVABLE FROM OWNERS
The notes receivable from owners of $2,922 are due April 1, 1999, with
interest adjusted annually to the Company's borrowing rate plus .1%. The
proceeds of the notes receivable were used to purchase 1,461 shares of Company
Class B common stock from other shareholders, and are secured by such common
stock. These notes are scheduled to be repaid by the owners prior to the
consummation of the plan of reorganization described in Note 9.
F-9
<PAGE> 109
NEENAH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. COMMITMENTS AND CONTINGENCIES
The Company leases warehouse space, machinery and equipment, office
equipment and vehicles under operating leases. Rent expense under these
operating leases for the years ended March 31, 1995, 1996 and 1997 amounted to
$850, $996 and $1,088, respectively. Minimum rental payments due under these
operating leases for subsequent fiscal years are as follows:
<TABLE>
<S> <C>
1998........................................................................ $ 736
1999........................................................................ 586
2000........................................................................ 287
2001........................................................................ 115
------
$1,724
======
</TABLE>
The Company is involved in a number of product liability claims, none of
which, in the opinion of management, is expected to have a material adverse
effect on the consolidated financial statements.
The Company is partially self-insured for workers compensation claims. An
accrued liability is recorded for claims incurred but not yet paid or reported,
with such accrual based on current and historical claim information. The accrual
may ultimately be settled for an amount greater or lesser than the recorded
amount. Adjustments of the accrual are recorded in the period in which they are
determined.
As of March 31, 1997, the Company had outstanding letters of credit in the
aggregate amount of $595, which secure certain workers compensation and other
obligations.
6. INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------
1995 1996 1997
------ ------- -------
<S> <C> <C> <C>
Current:
Federal............................................ $5,556 $ 9,147 $11,554
State.............................................. 448 666 1,016
------ ------- -------
6,004 9,813 12,570
Deferred............................................. 2,862 1,863 (103)
------ ------- -------
$8,866 $11,676 $12,467
====== ======= =======
</TABLE>
The difference between the provision for income taxes and income taxes
computed using the statutory U.S. federal income tax rate of 35% is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------
1995 1996 1997
------ ------- -------
<S> <C> <C> <C>
Provision at statutory rate.......................... $7,900 $10,086 $11,307
State income taxes, net of federal tax benefit....... 801 1,126 1,318
Other................................................ 165 464 (158)
------ ------- -------
Provision for income taxes........................... $8,866 $11,676 $12,467
====== ======= =======
</TABLE>
F-10
<PAGE> 110
NEENAH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of the Company's deferred income tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
MARCH 31,
-------------------
1996 1997
------- -------
<S> <C> <C>
Deferred income tax liabilities:
Tax depreciation in excess of book depreciation.............. $(5,621) $(5,156)
Employee benefit plans....................................... (602) (441)
Other........................................................ (437) (127)
------- -------
(6,660) (5,724)
Deferred income tax assets:
Inventories.................................................. 560 560
Employee benefit plans....................................... 3,316 3,128
Accrued vacation............................................. 825 855
Other accrued liabilities.................................... 672 790
State tax credit carryforwards............................... 676 --
Other........................................................ 289 172
------- -------
6,338 5,505
------- -------
Net deferred income tax liability.............................. $ (322) $ (219)
======= =======
Included in the consolidated balance sheets as:
Current deferred income tax asset............................ $ 2,253 $ 2,325
Noncurrent deferred income tax liability..................... (2,575) (2,544)
------- -------
$ (322) $ (219)
======= =======
</TABLE>
The Company has not recorded a valuation allowance with respect to any
deferred tax assets at March 31, 1996 or 1997.
7. EMPLOYEE BENEFIT PLANS
DEFINED BENEFIT PENSION PLANS
The Company sponsors two defined benefit pension plans covering
substantially all hourly employees and previously sponsored a defined benefit
supplemental executive retirement plan (SERP) which covered certain salaried
employees. During the year ended March 31, 1997, the Company purchased
nonparticipating annuity contracts to settle the vested benefit obligations
under the SERP. Retirement benefits for the pension plans are based on years of
credited service and defined benefit rates while retirement benefits for the
SERP were based on compensation levels. The Company funds the pension plans
based on an actuarially determined cost method allowable under Internal Revenue
Service regulations. The SERP was unfunded.
F-11
<PAGE> 111
NEENAH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the funded status of the plans, as of
December 31, 1995 and 1996 (the Company uses a measurement date as of December
31), to the amounts included in the consolidated balance sheets at March 31,
1996 and 1997:
<TABLE>
<CAPTION>
1996 1997
------------------------- -------------------------
UNDERFUNDED OVERFUNDED UNDERFUNDED OVERFUNDED
PLANS PLAN PLAN PLAN
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Accumulated benefit obligations............ $(3,944) $(19,805) $(845) $(20,150)
Effect of assumed increases in compensation
on SERP.................................. (2,593) -- -- --
------- -------- ----- --------
Projected benefit obligations.............. (6,537) (19,805) (845) (20,150)
Plan assets at fair value (consisting
principally of pooled investment funds
and an investment contract with an
insurance company)....................... 697 21,110 735 22,169
------- -------- ----- --------
Projected benefit obligations less than (in
excess of) plan assets................... (5,840) 1,305 (110) 2,019
Unrecognized net loss (gain)............... 2,055 (1,940) (8) (2,966)
Unrecognized prior service cost............ 259 4,833 160 4,452
Unrecognized net transition obligation
(asset).................................. 782 (2,695) (21) (2,411)
Adjustment to recognize additional minimum
liability................................ (503) -- (131) --
------- -------- ----- --------
Prepaid (accrued) pension obligation, at
December 31, 1995 and December 31, 1996,
respectively............................. (3,247) 1,503 (110) 1,094
Contributions between January 1 and March
31, 1996 and 1997, respectively.......... 7 -- -- --
------- -------- ----- --------
Prepaid (accrued) pension obligations...... $(3,240) 1,503 $(110) $ 1,094
======= ======== ===== ========
Net pension asset (obligation) included in
the consolidated balance sheets.......... $(1,737) $ 984
======= =====
</TABLE>
Components of net periodic pension cost are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Service cost -- benefits earned during the year..... $ 822 $ 880 $ 820
Interest cost on projected benefit obligations...... 1,437 1,545 1,742
Actual return on plan assets........................ (1,412) (1,450) (1,531)
Net amortization and deferral....................... 217 203 220
------- ------- -------
$ 1,064 $ 1,178 $ 1,251
======= ======= =======
</TABLE>
As a result of the settlement of the SERP, the Company recognized a
curtailment gain of $1,317 and a settlement loss of $878 during the year ended
March 31, 1997. The discount rate used in estimating the projected benefit
obligations and in determining the interest component of pension expense for the
following year for all plans was 7.5% for all years. The annual rate of
compensation increase assumed for the SERP in estimating the projected benefit
obligations was 6.5% for all years. The assumed long-term rate of return on plan
assets used in determining pension expense was 7.5% for all years.
F-12
<PAGE> 112
NEENAH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PROFIT-SHARING AND SAVINGS RETIREMENT PLAN
The Company has a Profit-Sharing and Savings Retirement Plan which covers
eligible salaried employees of Foundry and Transport and all eligible employees
of Hartley. The plan allows participants to make 401(k) contributions in an
amount from 1% to 5% of their compensation. The Company matches 50% of the
participants contributions. The Company may make additional voluntary
contributions to the plan as determined annually by the Board of Directors.
Total Company contributions amounted to $859, $891 and $915 for the years ended
March 31, 1995, 1996 and 1997, respectively.
POSTRETIREMENT BENEFITS
The Company sponsors defined benefit postretirement health care plans which
cover eligible salaried employees and their dependents of Foundry and Hartley.
Benefits are provided from the date of retirement for the duration of the
employee's life up to a maximum of $1 million per individual. Retirees'
contributions to the plans are based on years of service and age at retirement.
The Company funds benefits as incurred.
The following table reconciles the funded status of the postretirement
benefit plans to the amounts included in the consolidated balance sheets at
March 31:
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Accumulated postretirement benefit obligations:
Retirees....................................................... $2,047 $1,830
Fully eligible active participants............................. 654 810
Other active participants...................................... 2,534 2,784
------ ------
5,235 5,424
Plan assets...................................................... -- --
------ ------
5,235 5,424
Unrecognized net gain............................................ 65 243
------ ------
Accrued postretirement benefit obligations....................... $5,300 $5,667
====== ======
</TABLE>
Components of net periodic postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Service cost................................................ $164 $176 $193
Interest cost on accumulated postretirement benefit
obligations............................................... 340 361 370
Net amortization and deferral............................... (4) (4) (5)
---- ---- ----
$500 $533 $558
==== ==== ====
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligations for both plans was 7.5% for all years, and
the healthcare cost trend rate was projected to have annual increases of 8.5%.
The healthcare cost trend rate assumption has a significant effect on the
amounts reported. Increasing the healthcare cost trend rate by one percentage
point would increase the accumulated postretirement benefit obligations as of
March 31, 1997 by $1,014 and would increase postretirement benefit expense for
the year ended March 31, 1997 by $131.
F-13
<PAGE> 113
NEENAH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. STOCKHOLDERS' EQUITY
The Company has a Restrictive Stock Transfer Agreement with certain of its
stockholders which permits the transfer of its stock held by such stockholders
to permitted transferees, as defined. In the event a stockholder wishes to sell
stock to a third party who is not a permitted transferee, the stock must first
be offered for sale to the Company. If the Company accepts the offer of sale,
the purchase price is based on a formula, as defined. The purchase price will be
financed by a promissory note payable in ten equal annual installments with
interest at the prime rate less 1%. The Restrictive Stock Transfer Agreement
will be terminated concurrently with the consummation of the plan of
reorganization described in Note 9.
9. SUBSEQUENT EVENT
The Company has entered into an Agreement and Plan of Reorganization with
NC Merger Company and NFC Castings, Inc. pursuant to which the Company will be
acquired by NFC Castings, Inc. using (i) $45,000 of cash equity contributed by
NFC Castings, Inc., (ii) $45,000 of term loans borrowed under Senior Bank
Facilities, (iii) proceeds from the issuance of $150,000 of Senior Subordinated
Notes in a Rule 144A private placement and (iv) Company cash. The consideration
for the acquisition is subject to a closing date net worth adjustment.
10. UNAUDITED QUARTERLY RESULTS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
------------------------------------------------------
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales............................ $ 46,277 $ 44,454 $ 39,015 $ 37,205
Gross profit......................... 12,976 12,243 10,199 9,902
Net income........................... 5,325 5,024 3,839 2,954
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1997
------------------------------------------------------
QUARTER 1 QUARTER 2 QUARTER 3 QUARTER 4
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales............................ $ 44,309 $ 45,430 $ 37,815 $ 37,872
Gross profit......................... 13,140 13,613 10,825 11,112
Net income........................... 5,178 5,558 4,635 4,467
</TABLE>
F-14
<PAGE> 114
ANNEX A TO OFFERING MEMORANDUM
TRANSFEREE LETTER OF REPRESENTATION
THE COMPANY
United States Trust Company of New York
114 West 47th Street
New York, N.Y. 10036
Ladies and Gentlemen:
This certificate is delivered to request a transfer of $ principal
amount of the 11 1/8% Senior Subordinated Notes due 2007 (the "Notes") of Neenah
Corporation (the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: ------------------------------------------------------------------
Address:
-----------------------------------------------------------------
Taxpayer ID Number:-----------------------------------------------------
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risk of our investment in the Notes and invest in
or purchase securities similar to the Notes in the normal course of our
business. We and any accounts for which we are acting are each able to bear the
economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Notes to offer, sell or otherwise transfer
such Notes prior to the date which is two years after the later of the date of
original issue and the last date on which the Company or any affiliate of the
Company was the owner of such Notes (or any predecessor thereto) (the "Resale
Restriction Termination Date") only (a) to the Company, (b) pursuant to a
registration statement which has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") that purchases for its own account or for the
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) pursuant to offers and sales that occur outside the
United States within the meaning of Regulation S under the Securities Act, (e)
to an institutional "accredited investor" within the meaning of Rule 501(a)(1),
(2), (3) or (7) under the Securities Act that is purchasing for its own account
or for the account of such an institutional "accredited investor," in each case
in a minimum principal amount of Notes of $250,000 or (f) pursuant to any other
available exemption from the registration requirements of the Securities Act,
subject in each of the foregoing cases to any requirement of law that the
disposition of our property or the property of such investor account or accounts
be at all times within our or their control and in compliance with any
applicable state securities laws. The foregoing restrictions on resale will not
apply subsequent to the Resale Restriction Termination Date. If any resale or
other transfer of the Notes is proposed to be made pursuant to clause (e) above
prior to the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in
A-1
<PAGE> 115
the form of this letter to the Company and the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act and that it is acquiring such Notes for investment purposes and
not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Company and the Trustee reserve the right prior to the
offer, sale or other transfer prior to the Resale Restriction Termination Date
of the Notes pursuant to clause (d), (e) or (f) above to require the delivery of
an opinion of counsel, certifications and/or other information satisfactory to
the Company and the Trustee.
TRANSFEREE:
--------------------------
BY:
----------------------------------
A-2
<PAGE> 116
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL.
- ------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................ 2
Prospectus Summary................... 3
Risk Factors......................... 14
Use of Proceeds...................... 19
Capitalization....................... 20
Selected Consolidated Financial and
Other Data......................... 21
Unaudited Pro Forma Consolidated
Financial Information.............. 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 30
Exchange Offer....................... 35
Business............................. 41
Management........................... 53
Ownership of Securities.............. 56
Certain Relationships and Related
Transactions....................... 57
Description of Senior Bank
Facilities......................... 57
Description of Notes................. 59
Certain United States Federal Income
Tax Considerations................. 93
Plan of Distribution................. 95
Legal Matters........................ 95
Experts.............................. 95
Change in Independent Auditors....... 95
Index to Consolidated Financial
Statements......................... F-1
Annex A--Form of Transferee Letter of
Representation..................... A-1
</TABLE>
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
LOGO
--------------------
PROSPECTUS
--------------------
OFFER TO EXCHANGE ITS
11 1/8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2007 FOR
11 1/8% SERIES A SENIOR SUBORDINATED
NOTES DUE 2007
, 1997
<PAGE> 117
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION+.
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $51,724
Blue Sky Fees and Expenses................................................ *
Printing Expenses......................................................... *
Accounting Fees and Expenses.............................................. *
Legal Fees and Expenses................................................... *
Trustee's Fees and Expenses............................................... *
Miscellaneous............................................................. *
--------
Total........................................................... $ --
========
</TABLE>
- ---------------
+ Estimated
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 180.0850 to 180.0859 of the Wisconsin Statutes require a
corporation to indemnify any director or officer who is a party to any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit, arbitration or other proceeding, whether formal or
informal, which involves foreign, federal, state or local law and which is
brought by or in the right of the corporation or by any other person. A
corporation's obligation to indemnify any such person includes the obligation to
pay any judgment, settlement, penalty, assessment, forfeiture or fine, including
any excise tax assessed with respect to an employee benefit plan, and all
reasonable expenses including fees, costs, charges, disbursements, attorney's
and other expenses except in those cases in which liability was incurred as a
result of the breach or failure to perform a duty which the director or officer
owes to the corporation and the breach or failure to perform constitutes: (i) a
willful failure to deal fairly with the corporation or its shareholders in
connection with a matter in which the director or officer has a material
conflict of interest; (ii) a violation of criminal law, unless the person has
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful; (iii) a transaction from which the person
derived an improper personal profit; or (iv) willful misconduct.
Unless otherwise provided in a corporation's articles of incorporation or
by-laws or by written agreement, an officer or director seeking indemnification
is entitled to indemnification if approved in any of the following manners: (i)
by majority vote of a disinterested quorum of the board of directors, or if such
quorum of disinterested directors cannot be obtained, by a majority vote of a
committee or two or more disinterested directors; (ii) by independent legal
counsel; (iii) by a panel of three arbitrators; (iv) by affirmative vote of
shareholders; (v) by a court; or (vi) with respect to any additional right to
indemnification granted by any other method permitted in Section 180.0859 of the
Wisconsin Statutes.
Reasonable expenses incurred by a director or officer who is a party to a
proceeding may be reimbursed by a corporation at such time as the director or
officer furnishes to the corporation written affirmation of his good faith
belief that he has not breached or failed to perform his duties and a written
undertaking to repay any amounts advanced if it is determined that
indemnification by the corporation is not required.
The indemnification provisions of Sections 180.0850 to 180.0859 are not
exclusive. A corporation may expand an officer's or director's right to
indemnification (i) in its articles of incorporation or
II-1
<PAGE> 118
by-laws; (ii) by written agreement, (iii) by resolution of its board of
directors; or (iv) by resolution of a majority of all of the corporation's
voting shares then issued and outstanding.
As permitted by Section 180.0859, the Registrant has adopted
indemnification provisions in its By-Laws which closely track the statutory
indemnification provisions with certain exceptions. In particular, Article VIII
of the Registrant's By-Laws provides that payment or reimbursement of expenses,
subject to certain limitations, will be mandatory rather than permissive.
The Registrant maintains and has in effect insurance policies covering all
of their respective directors and officers against certain liabilities for
actions taken in such capacities, including liabilities under the Securities Act
of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
See Exhibit Index
(b) Financial Statement Schedules.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(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 the 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; and
(4) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
II-2
<PAGE> 119
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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(6) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(8) The undersigned registrant hereby undertakes 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.
(9) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-3
<PAGE> 120
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on June 6, 1997.
NEENAH CORPORATION
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------- ------------------------------------- ---------------
<C> <S> <C>
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief June 6, 1997
- ------------------------------------- Executive Officer
James K. Hildebrand
/s/ WILLIAM M. BARRETT Vice President and General Manager June 6, 1997
- -------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Director and Vice President -- June 6, 1997
- ------------------------------------- Finance, Treasurer and Secretary
Gary W. LaChey
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and June 6, 1997
- ------------------------------------- Engineering
Charles M. Kurtti
/s/ DAVID F. THOMAS Director June 6, 1997
- -------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director June 6, 1997
- -------------------------------------
John D. Weber
/s/ BRENTON F. HALSEY Director June 6, 1997
- -------------------------------------
Brenton F. Halsey
</TABLE>
II-4
<PAGE> 121
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on June 6, 1997.
NEENAH FOUNDRY COMPANY
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and President
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------- ------------------------------------- -------------
<C> <S> <C>
/s/ JAMES K. HILDEBRAND Chairman and President June 6, 1997
- -------------------------------------
James K. Hildebrand
/s/ WILLIAM M. BARRETT Vice President and General Manager June 6, 1997
- -------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Director and Vice President -- June 6, 1997
- ------------------------------------- Finance, Treasurer and Secretary
Gary W. LaChey
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and June 6, 1997
- ------------------------------------- Engineering
Charles M. Kurtti
/s/ DAVID F. THOMAS Director June 6, 1997
- -------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director June 6, 1997
- -------------------------------------
John D. Weber
/s/ BRENTON F. HALSEY Director June 6, 1997
- -------------------------------------
Brenton F. Halsey
</TABLE>
II-5
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neeneh,
State of Wisconsin, on June 6, 1997.
Hartley Controls Corporation
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and President
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------- ---------------------------------------- -------------
<S> <C> <C>
/s/ JAMES K. HILDEBRAND Chairman and President June 6, 1997
- -------------------------------------
James K. Hildebrand
/s/ WILLIAM J. MARTIN Vice President and General Manager June 6, 1997
- -------------------------------------
William J. Martin
/s/ GARY W. LACHEY Director and Vice President -- Finance, June 6, 1997
- ------------------------------------- Treasurer and Secretary
Gary W. LaChey
/s/ JOHN Z. RADER Vice President -- Human Resources June 6, 1997
- -------------------------------------
John Z. Rader
/s/ JOHN D. WEBER Director and Vice President and June 6, 1997
- ------------------------------------- Assistant Secretary
John D. Weber
/s/ DAVID F. THOMAS Director June 6, 1997
- -------------------------------------
David F. Thomas
/s/ BRENTON F. HALSEY Director June 6, 1997
- -------------------------------------
Brenton F. Halsey
</TABLE>
II-6
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on June 6, 1997.
NEENAH TRANSPORT, INC.
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and President
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-4 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
- ------------------------------------------ ----------------------------------- -------------
<C> <S> <C>
/s/ JAMES K. HILDEBRAND Chairman and President June 6, 1997
- ------------------------------------------
James K. Hildebrand
/s/ GARY W. LACHEY Director and Vice President -- June 6, 1997
- ------------------------------------------ Finance, Treasurer and Secretary
Gary W. LaChey
/s/ JOHN Z. RADER Vice President -- Human Resources June 6, 1997
- ------------------------------------------
John Z. Rader
/s/ JOHN D. WEBER Director and Vice President and June 6, 1997
- ------------------------------------------ Assistant Secretary
John D. Weber
/s/ DAVID F. THOMAS Director June 6, 1997
- ------------------------------------------
David F. Thomas
/s/ BRENTON F. HALSEY Director June 6, 1997
- ------------------------------------------
Brenton F. Halsey
</TABLE>
II-7
<PAGE> 124
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated financial statements of Neenah Corporation
as of March 31, 1996 and 1997, and for each of the three years in the period
ended March 31, 1997, and have issued our report thereon dated April 29, 1997
(included elsewhere in this Registration Statement). Our audits also included
the financial statement schedule listed in Item 15(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
April 29, 1997
<PAGE> 125
SCHEDULE II
NEENAH CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
---------------------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT END
DESCRIPTION YEAR EXPENSES ACCOUNTS DEDUCTIONS(1) OF YEAR
- -------------------------------- ------------ ---------- ---------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1995:
Deduction from asset accounts
Allowance for doubtful
accounts................. $386 $214 $ -- $ 214 $386
==== ==== ==== ==== ====
Year ended March 31, 1996:
Deduction from asset accounts
Allowance for doubtful
accounts................. $386 $234 $ -- $ 234 $386
==== ==== ==== ==== ====
Year ended March 31, 1997:
Deduction from asset accounts
Allowance for doubtful
accounts................. $386 $175 $ -- $ 175 $386
==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) Represents uncollectible accounts written off, net of recoveries of $22, $19
and $22, respectively.
<PAGE> 126
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated November 20, 1996, by and among NFC
Castings, Inc., NC Merger Company and Neenah Corporation.
3.1 Restated Article of Incorporation of Neenah Corporation.
3.2 By-laws of Neenah Corporation.
3.3 Articles of Incorporation of Neenah Foundry Company.
3.4 By-laws of Neenah Foundry Company.+
3.5 Restated Articles of Incorporation of Hartley Controls Corporation.
3.6 By-laws of Hartley Controls Corporation.+
3.7 Restated Articles of Incorporation of Neenah Transport, Inc.
3.8 By-laws of Neenah Transport, Inc.+
4.1 Indenture dated as of April 30, 1997 among NC Merger Company and United States Trust
Company of New York.+
4.2 Purchase Agreement dated as of April 23, 1997 among NC Merger Company, Chase
Securities Inc. and Morgan Stanley & Co. Incorporated.+
4.3 Exchange and Registration Rights Agreement dated as of April 30, 1994 among Neenah
Corporation, Neenah Foundry Company, Hartley Controls Corporation and Neenah
Transport, Inc.+
4.4 First Supplemental Indenture, dated as of April 30, 1997 among Neenah Corporation,
Neenah Foundry Company, Neenah Transport, Inc. and Hartley Controls Corporation and
United States Trust Company of New York.+
4.5 Letter Agreement, dated as of April 30, 1997 among Neenah Corporation, Neenah
Foundry Company, Hartley Controls Corporation and Neenah Transport, Inc. and Chase
Securities Inc. and Morgan Stanley & Co. Incorporated.+
4.6 [intentionally omitted]
5.1 Opinion of Kirkland & Ellis.+
9.1 [intentionally omitted]
10.1 Master Lease Agreement between Neenah Foundry Company and Bank One Leasing
Corporation dated December 14, 1992.+
10.2 Agreement between Neenah Foundry Company and Rockwell International Corporation
effective April 1, 1995.+
10.3 Letter Agreement between Neenah Foundry Company and Eaton Corporation dated April 4,
1996.+
10.4 [Intentionally omitted].
10.5 1996-1998 Collective Bargaining Agreement between Neenah Foundry Company and Local
121B Glass, Molders, Pottery, Plastics and Allied Workers International Union
AFL-CIO-CLC.+
10.6 1995-1997 Collective Bargaining Agreement between Neenah Foundry Company and The
Independent Patternmakers Union of Neenah, Wisconsin.+
10.7 Credit Agreement, dated as of April 30, 1997 among Chase Manhattan Bank, N.A., NFC
Castings, Inc. and NC Merger Company.+
10.8 Employment Agreement dated September 9, 1994 between the Neenah Corporation and the
subsidiaries and James P. Keating, Jr., as amended.
</TABLE>
<PAGE> 127
<TABLE>
<CAPTION>
EXHIBITS
- --------
<C> <S>
10.9 Consulting Agreement dated September 9, 1994 between the Neenah Foundry Company and
the Guarantors and James P. Keating, Jr.
10.10 Natural Gas Service Contract dated March 1, 1997 between Neenah Foundry and
Wisconsin Electric-Gas Operations.+
12.1 Statement Regarding Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries of the Registrant.+
23.1 Consent of Ernst & Young LLP.
23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1)
24.1 Powers of Attorney (included in signature page).
25.1 Statement of Eligibility of Trustee on Form T-1.+
27.1 Financial Data Schedule.+
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
99.3 Form of Tender Instructions.+
</TABLE>
- ---------------
+ To be filed by amendment
<PAGE> 1
Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NFC CASTINGS, INC.,
NC MERGER COMPANY
AND
NEENAH CORPORATION
NOVEMBER 20, 1996
<PAGE> 2
AGREEMENT AND PLAN OF REORGANIZATION
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINITIONS................................................................ 1
1.1. Defined Terms............................................ 1
ARTICLE II
THE MERGER................................................................. 9
2.1. The Merger............................................... 9
2.2. The Closing.............................................. 10
2.3. Actions at Closing....................................... 10
2.4. Effect of Merger......................................... 10
2.5. Procedure for Payment.................................... 11
2.6. Post-Closing Adjustment.................................. 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY.................................. 14
3.1. Organization and Authority............................... 15
3.2. Authority; Validity...................................... 16
3.3. No Violation............................................. 16
3.4. Third Party Consents..................................... 17
3.5. Financial Statements..................................... 17
3.6. Tax Matters.............................................. 17
3.7. Absence of Certain Changes............................... 19
3.8. Assets................................................... 21
3.9. Bank Accounts............................................ 24
3.10. Litigation............................................... 24
3.11. Compliance With Laws..................................... 24
3.12. Insurance................................................ 25
3.13. Material Contracts and Commitments....................... 25
3.14. Labor Matters............................................ 26
3.15. Employee Benefit Plans................................... 27
3.16. Environmental Matters.................................... 28
3.17. Proprietary Rights....................................... 29
3.18. Accounts Receivable...................................... 30
3.19. Product Warranty......................................... 30
3.20. Sufficiency of Assets.................................... 30
3.21. Accuracy of Representations.............................. 30
3.22. Opinion of Financial Advisor............................. 30
3.23. Transactions with Affiliates............................. 30
3.24. Funded Debt.............................................. 31
3.25. Closing Date............................................. 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO......................... 31
4.1. Organization............................................. 31
4.2. No Violation............................................. 31
4.3. Authority................................................ 31
4.4. Third Party Consents..................................... 32
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
4.5. Investment/Operational Intent............................. 32
4.6. Closing Date.............................................. 33
ARTICLE V
COVENANTS.................................................................. 33
5.1. Access to Information and Records........................ 33
5.2. Conduct of Business Pending the Closing.................. 33
5.3. HSR Act Filings........................................... 35
5.4. Consents................................................. 36
5.5. Publicity................................................ 36
5.6. Merger Payment Statements................................ 36
5.7. Disclosure Schedule...................................... 36
5.8. Company Shareholders Approval............................ 37
5.9. Newco Shareholder Approval............................... 37
5.10. Indemnification of Directors and Officers................ 37
5.11. Company Representative................................... 38
5.12. Third Party Proposals.................................... 38
5.13. Non-Competition; Non-Interference; Non-
Solicitation................................................... 38
ARTICLE VI
CONDITIONS PRECEDENT TO PARENT'S AND NEWCO'S OBLIGATIONS................... 40
6.1. Representations and Warranties True on the Closing
Date........................................................... 40
6.2. Compliance With Agreement................................ 40
6.3. Absence of Litigation.................................... 40
6.4. Consents and Approvals................................... 40
6.5. HSR Act Waiting Period................................... 41
6.6. No Material Adverse Effect............................... 41
6.7. Shareholders Approval.................................... 41
6.8. Articles of Merger....................................... 41
6.9. Documents to be Delivered by Company..................... 41
6.10. Merger Payment Statements................................ 42
6.11. Amendment of Restated Articles........................... 42
6.12. Termination of Restrictive Stock Transfer
Agreement...................................................... 42
6.13. Note Repayment and Release of Stock Pledge............... 42
6.14. Real Property............................................ 43
6.15. Financing................................................ 43
6.16. Due Diligence............................................ 43
6.17. Minimum Cash on Hand..................................... 43
ARTICLE VII
CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS.............................. 43
7.1. Representations and Warranties True on the Closing
Date........................................................... 44
7.2. Compliance With Agreement................................ 44
7.3. Absence of Litigation.................................... 44
7.4. HSR Act Waiting Period................................... 44
7.5. Documents to be Delivered by Parent and Newco............ 44
7.6. Articles of Merger....................................... 45
7.7. Shareholders Approval.................................... 45
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
7.8. Merger Price............................................. 45
7.9. Reliance Letter.......................................... 45
ARTICLE VIII
SURVIVAL; INDEMNIFICATION.................................................. 45
8.1. Survival; Remedies for Breach............................ 45
8.2. Indemnification on Behalf of Company Shareholders;
Escrow of Funds................................................ 47
8.3. Indemnification by Parent................................ 50
8.4. Procedures for Indemnification........................... 50
8.5. Procedures for Third-Party Claims........................ 51
ARTICLE IX
TERMINATION OF AGREEMENT................................................... 52
9.1. Causes................................................... 52
9.2. Effect of Termination..................................... 53
9.3. Right to Proceed......................................... 53
ARTICLE X
DISPUTE RESOLUTION......................................................... 53
10.1. Dispute.................................................. 53
10.2. Process.................................................. 54
10.3. Negotiations............................................. 54
10.4. Mediation................................................ 54
10.5. Submission to Adjudication............................... 55
10.6. General.................................................. 55
ARTICLE XI
MISCELLANEOUS.............................................................. 56
11.1. Further Assurance........................................ 56
11.2. Assignment............................................... 56
11.3. Law Governing Agreement.................................. 56
11.4. Amendment and Modification............................... 57
11.5. Notice................................................... 57
11.6. Expenses................................................. 58
11.7. Entire Agreement; Binding Effect......................... 58
11.8. Counterparts............................................. 59
11.9. Headings................................................. 59
11.10. Construction............................................ 59
11.11. Specific Performance.................................... 59
11.12. Waiver of Jury Trial.................................... 59
11.13. No Strict Construction.................................. 59
11.14. Time of the Essence; Computation of Time................ 59
</TABLE>
iii
<PAGE> 5
Schedules
Disclosure Schedule
Schedule 9.1(c)(iv) Termination Events
Exhibits
--------
<TABLE>
<S> <C>
Exhibit A Articles of Merger
Exhibit B Merger Agreement
Exhibit C Escrow Agreement
Exhibit D Merger Payment Statement
Exhibit E Opinion of Company's Counsel
Exhibit F Opinion of Parent's and Newco's Counsel
Exhibit G Paying Agent Agreement
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made as of November 20,
1996, by and among NFC CASTINGS, INC., a Delaware corporation ("Parent"), NC
MERGER COMPANY, a Wisconsin corporation ("Newco") and NEENAH CORPORATION, a
Wisconsin corporation (the "Company"). The Company and Newco sometimes are
referred to collectively herein as the "Constituent Corporations".
RECITALS
A. The Company and the Subsidiaries are engaged in the businesses of
(i) manufacturing and selling gray iron and ductile iron castings to the
transportation and construction industries; (ii) manufacturing and selling
customized machinery and control systems for the foundry industry and (iii)
operating a common and contract carrier (collectively, the "Business").
B. Newco is a wholly owned subsidiary of Parent.
C. Parent desires to acquire the Company.
D. This Agreement contemplates a transaction in which Parent will
acquire the Company for cash in an aggregate amount equal to the Merger Price,
plus the Positive Closing Date Adjustment Amount or minus the Negative Closing
Date Adjustment Amount, as the case may be, through a reverse subsidiary merger
of Newco with and into the Company, whereby all of the outstanding shares of
capital stock of the Company will be converted into the right to receive cash on
the terms and conditions specified herein.
NOW, THEREFORE, in consideration of the Recitals and the respective
representations, warranties, covenants, agreements and conditions hereinafter
set forth, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound hereby, do hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. As used in this Agreement, the terms
below shall have the following meanings. Any of such terms, unless
the context otherwise requires, may be used in the singular or
plural, depending on the reference.
"Accounting Principles" shall mean the following: (i)
each accounting term used herein shall have the meaning that is
applied thereto in accordance with generally accepted accounting
-1-
<PAGE> 7
principles unless a different meaning is set forth herein for such term, and
each account included in the Closing Date Balance Sheet shall be calculated in
accordance with generally accepted accounting principles and shall be consistent
with the books and records of the Company, provided that all known arithmetic
errors shall be corrected in the calculation of each account set forth above,
regardless of materiality; (ii) with respect to the calculation of the levels of
the accounts set forth above, no change in accounting principles shall be made
from those utilized in preparing the Financial Statements, including, without
limitation, with respect to the nature or classification of accounts, closing
proceedings, levels of reserves or levels of accruals other than as a result of
objective changes in the underlying business; and (iii) for purposes of the
preceding clauses, "changes in accounting principles" includes all changes in
accounting principles, policies, practices, procedures or methodologies with
respect to financial statements, their classification or their display, as well
as all changes in practices, methods, conventions or assumptions utilized in
making accounting estimates.
"Acquisition Proposal" shall have the meaning specified in Section
5.12 of this Agreement.
"Adjusted Final Closing Date Net Worth" shall mean the amount
determined by adding (i) the Final Closing Date Net Worth plus (ii) the Base
Date Vehicle Value plus (iii) the Base Date Cash Surrender Value.
"Agreement" shall mean this Agreement and Plan of Reorganization,
together with the exhibits and schedules attached hereto, as the same may be
amended from time to time in accordance with the terms hereof.
"Arbitrating Accountant" shall have the meaning specified in Section
2.6(b) of this Agreement.
"Articles of Merger" shall mean the Articles of Merger in the form
attached hereto as Exhibit A.
"Base Date Cash Surrender Value" shall mean the aggregate cash
surrender value as of the date of the Most Recent Balance Sheet of the life
insurance policies owned by the Company and/or Subsidiaries on the lives of E.W.
Aylward, Andrew A. Aylward, Richard J. Aylward and Thomas R. Franklin and listed
in Section 3.12 of the Disclosure Schedule. (For illustrative purposes only, the
cash surrender value of these policies as of March 31, 1996 was $594,800.)
"Base Date Vehicle Value" shall mean the aggregate net book value as
of the date of the Most Recent Balance Sheet of the four vehicles listed as
items 1, 2, 3 and 4 on the list of
-2-
<PAGE> 8
"Excluded Assets" set forth in Section 3.8(e) of the Disclosure Schedule (or, in
the case of a vehicle so listed that was acquired as a replacement after the
date of the Most Recent Balance Sheet, the predecessor of such vehicle), as
determined from the books and records of the Company and/or the Subsidiaries.
"Base Net Worth" shall mean the amount of $62,675,790.00, which is
the consolidated net worth (total stockholders' equity) of the Company and the
Subsidiaries shown on the Most Recent Balance Sheet.
"Business" shall have the meaning specified in the Recitals of this
Agreement.
"Buying Group" shall mean, collectively, Parent and Newco and their
respective permitted successors and permitted assigns.
"CERCLA" shall mean the federal Comprehensive Environmental
Response, Compensation, and Liability Act.
"Class A Common Stock" shall mean the 1,000 authorized shares of the
Company's Class A Common Stock, $100 par value.
"Class B Common Stock" shall mean the 10,000 authorized shares of
the Company's Class B Common Stock, $100 par value.
"Closing" shall mean the conference to be held at 10:00 A.M. Central
Time, on the Closing Date at the offices of Cravath, Swaine & Moore, 825 Eighth
Avenue, New York, New York, 10019, counsel for Parent's Lenders, or such other
time and place as the parties may mutually agree to in writing, at which the
transactions contemplated by this Agreement shall be consummated.
"Closing Date" shall have the meaning specified in Section 2.2 of
this Agreement.
"Closing Date Balance Sheet" shall have the meaning specified in
Section 2.6(a) of this Agreement.
"Closing Date Net Worth" shall have the meaning specified in Section
2.6(a) of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Neenah Corporation, a Wisconsin corporation.
"Company Capital Stock" shall mean, collectively, the
Class A Common Stock, the Class B Common Stock and the Preferred
Stock.
-3-
<PAGE> 9
"Company Common Stock" shall mean, collectively, the Class A Common
Stock and the Class B Common Stock.
"Company Employees" shall mean any persons employed by Company or
any Subsidiary.
"Company Representative" shall mean the person appointed to that
position as provided in Section 5.11 of this Agreement.
"Company Shareholder" shall mean any Person who holds any Company
Capital Stock.
"Constituent Corporations" shall have the meaning specified in the
preamble of this Agreement.
"Covered Activities" shall have the meaning specified in Section
5.13(a) of this Agreement.
"Covered Individuals" shall mean E.W. Aylward and Andrew A. Aylward.
"CPR" shall have the meaning specified in Section 10.4 of this
Agreement.
"Cut-off Date" shall have the meaning specified in Section 8.1(a) of
this Agreement.
"De Minimis Claim" shall mean any individual claim for
indemnification if the amount of the Loss attributable to such claim does not
exceed $10,000.00.
"Disclosure Schedule" shall mean the Disclosure Schedule, dated the
date of this Agreement, delivered by the Company to the Parent and Newco
contemporaneously with the execution and delivery of this Agreement and as the
same may be updated from time to time after the date of this Agreement and prior
to the Closing Date in accordance with the terms of this Agreement.
"Dispute" shall have the meaning specified in Section
10.1 of this Agreement.
"Dissenting Share" shall mean a share of Company Capital Stock that
any Company Shareholder who has exercised his or its dissenters' rights under
the Wisconsin Business Corporation Law holds of record.
"Effective Time" shall mean the time and date when the Company and
Newco file the Articles of Merger with the Wisconsin Department of Financial
Institutions.
"Employee Benefit Plan" shall have the meaning specified in Section
3.15(a) of this Agreement.
-4-
<PAGE> 10
"Environmental Laws" shall mean all Laws relating to pollution or
protection of the environment, including, without limitation, Laws relating to
emissions, discharges, treatment, disposal, handling, generation, storage,
Release or threatened Release of Hazardous Substances into the environment,
including, without limitation, the Clean Water Act, the Clean Air Act, RCRA, the
Toxic Substances Control Act and CERCLA, all as in force and effect as of the
Closing.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Escrow Agent" shall mean Bank One, Milwaukee, N.A.
"Escrow Agreement" shall mean the Escrow Agreement in the form of
Exhibit C attached to this Agreement.
"Escrow Deposit" shall have the meaning specified in Section 2.5(a)
of this Agreement.
"Excluded Assets" shall have the meaning specified in Section 3.8(e)
of this Agreement.
"Final Closing Date Balance Sheet" shall have the meaning specified
in Section 2.6(b) of this Agreement.
"Final Closing Date Net Worth" shall have the meaning specified in
Section 2.6(b) of this Agreement.
"Financial Statements" shall mean the consolidated financial
statements of the Company and its Subsidiaries consisting of (i) the
consolidated balance sheets of the Company as of March 31, 1996, 1995 and 1994,
and the related consolidated statements of income, retained earnings and cash
flows for the years then ended, together with the auditor's report thereon, and
(ii) an unaudited consolidated balance sheet of the Company and its Subsidiaries
as of September 30, 1996 and the related unaudited statements of income for the
interim period then ended and the corresponding period of the preceding year.
"Funded Debt", of the Company or any Subsidiary, shall mean, without
duplication: all obligations under indebtedness for borrowed money (including,
without limitation, principal, interest, overdrafts, penalties, premiums, fees,
expenses, indemnities and breakage costs), all obligations under capital leases,
notes payable, guaranties and drafts accepted representing extensions of credit.
"Hazardous Substance" shall mean any substance that is a "hazardous
substance" under CERCLA, any substance that is a "hazardous waste" under RCRA,
or any pesticide, pollutant,
-5-
<PAGE> 11
contaminant, toxic chemical, petroleum product or byproduct, asbestos or
polychlorinated biphenyl.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" shall mean any Party seeking indemnification
under Article VIII of this Agreement.
"Indemnifying Party" shall mean the Party from whom the
indemnification is sought under Article VIII of this Agreement.
"Knowledge of Company" or "Company's Knowledge" shall mean the
actual knowledge of the individuals listed below:
<TABLE>
<S> <C>
E.W. Aylward Charles M. Kurtii
Andrew A. Aylward William J. Martin
Thomas R. Franklin John Z. Rader
Gary W. LaChey James P. Keating, Jr.
</TABLE>
"Law" shall mean any federal, state, local or other governmental
law, rule or regulation of any kind, and the rules and regulations promulgated
thereunder.
"Leased Real Property" shall mean, collectively, all of the parcels
of real estate leased by the Company or any Subsidiary pursuant to the Leases.
"Leases" shall mean the real estate lease, sublease and other
occupancy agreements to which the Company or any Subsidiary is a party listed in
Section 3.8(f) of the Disclosure Schedule.
"Losses" shall mean damages, liabilities, deficiencies, claims,
actions, charges, demands, judgments, interest, losses, or costs or expenses of
whatever kind (including, without limitation, reasonable attorneys' fees but
exclusive of loss of profits or consequential damages).
"Material Adverse Effect" shall mean a material adverse effect on
the Business, assets, condition (financial or otherwise), results of operations
or prospects of the Company and its Subsidiaries taken as a whole.
"Material Contracts" shall have the meaning specified in Section
3.13 of this Agreement.
"Merger" shall mean the merger of Newco with and into the Company
described in Article II of this Agreement.
"Merger Agreement" shall mean the Merger Agreement in the form
attached hereto as Exhibit B.
-6-
<PAGE> 12
"Merger Payee" shall mean a Company Shareholder who has not
exercised dissenters' rights under the Wisconsin Business Corporation Law with
respect to the Merger.
"Merger Payment Statement" shall mean a Merger Payment Statement in
the form of Exhibit D attached to this Agreement
"Merger Price" shall mean the sum of $240,000,000.00, to be
delivered by Newco pursuant to Article II of this Agreement, subject to later
adjustment as provided in Section 2.6(e) of this Agreement.
"Merger Price Per Share" shall mean the quotient determined by
dividing the Merger Price of $240,000,000 to be delivered by Newco at Closing by
the total number of shares of the Company Common Stock issued and outstanding
immediately prior to the Effective Time. (For illustration purposes only, based
on the total issued and outstanding shares of Company Common Stock set forth in
Section 3.1(c) of this Agreement, the Merger Price Per Share would equal
$54,060.14.)
"Most Recent Balance Sheet" shall mean the unaudited consolidated
balance sheet of the Company and its Subsidiaries as of September 30, 1996.
"Negative Closing Date Adjustment Amount" shall have the meaning
specified in Section 2.6(e) of this Agreement.
"Newco" shall mean NC Merger Company, a Wisconsin corporation.
"Newco Capital Stock" shall mean the 1,000 authorized shares of
Newco's Common Stock, without par value.
"Non-Competition Period" shall have the meaning specified in Section
5.13(a) of this Agreement.
"Ordinary Course" shall mean the ordinary course of business of the
Company and its Subsidiaries, consistent with their custom and practice as in
effect as of September 30, 1996 and the date of this Agreement.
"Parent" shall mean NFC Castings, Inc., a Delaware
corporation.
"Parent's Lenders" shall mean The Chase Manhattan Bank and Chase
Securities Inc., or such other lenders providing the financing to Parent
necessary to effect the Merger and provide Newco with funds sufficient to
deliver the Merger Price and provide for the ongoing working capital needs of
the Company during the term of the senior bank financing.
-7-
<PAGE> 13
"Parties" shall mean, collectively, the Company, Parent and Newco.
"Paying Agent" shall mean Bank One, Milwaukee, N.A.
"Paying Agent Agreement" shall mean the Paying Agent Agreement in
the form of Exhibit G attached to this Agreement.
"Person" shall mean a natural person, corporation, limited liability
company, trust, partnership, government entity, agency or branch or department
thereof, or any other legal entity.
"Positive Closing Date Adjustment Amount" shall have the meaning
specified in Section 2.6(e) of this Agreement.
"Preferred Stock" shall mean the 3,000 authorized shares of
Preferred Stock of the Company, $100 par value.
"Proprietary Rights" shall mean all of the following items owned,
used or held for use by the Company or any Subsidiary: (i) all patents, patent
applications, inventions, trade names and corporate names, trademarks, service
marks, trademark registrations, service mark registrations, trade mark
applications, service mark applications, registered copyrights, copyright
applications, together with all goodwill associated therewith; and (ii) trade
secrets and confidential information.
"Pro Rata Percentage" shall mean, as to each Company Shareholder,
the ownership percentage set forth opposite such Person's name under the heading
"Pro Rata Ownership Percentage" in the applicable portion of Section 3.1(c) of
the Disclosure Schedule.
"Pro Rata Portion" of an obligation or benefit shall mean, as to any
Company Shareholder, the product of (i) the total amount of the obligation or
benefit, times (ii) the Pro Rata Percentage of such Company Shareholder.
"RCRA" shall mean the federal Resource Conservation and Recovery
Act.
"Real Property" shall mean all real property owned in whole or in
part by the Company or any Subsidiary.
"Release" shall have the meaning set forth in CERCLA.
"Replacement" shall have the meaning specified in Section 10.6(g) of
this Agreement.
"Request" shall have the meaning specified in Section 10.4 of this
Agreement.
-8-
<PAGE> 14
"Subsidiaries" shall mean Neenah Foundry Company, a Wisconsin
corporation, Neenah Transport, Inc., a Wisconsin corporation, and Hartley
Controls Corporation, a Wisconsin corporation, all of which are wholly owned by
the Company.
"Surviving Corporation" shall mean the Company as the survivor of
the Merger.
"Taxes" shall mean any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not.
"Tax Returns" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Third Party Acquisition" shall have the meaning specified in
Section 5.12 of this Agreement.
"Third-Party Claim" shall mean a legal proceeding, action, claim or
demand instituted by any third person or governmental entity.
"Title Company" shall have the meaning specified in Section 6.14(a)
of this Agreement.
ARTICLE II
THE MERGER
2.1. The Merger. This Agreement provides for the merger of Newco with and
into the Company, whereby it is contemplated that each outstanding share of the
Newco Capital Stock will be converted into one share of the Class A Common
Stock, and each outstanding share of the Company Capital Stock will be converted
into cash as provided in this Agreement. On and subject to the terms and
conditions of this Agreement, as of the Effective Time, Newco will be merged
with and into the Company, which shall continue to be governed by the Laws of
the State of Wisconsin, and the separate existence of Newco shall thereupon
cease. The Merger shall be pursuant to the provisions of, and shall be with the
effect provided in, the Wisconsin Business Corporation Law.
-9-
<PAGE> 15
2.2. The Closing. The Closing shall take place on the third business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the Parties will take at the Closing itself)
but in no event later than January 31, 1997, or such other time and date as the
Parties may mutually determine (the "Closing Date").
2.3. Actions at Closing. At the Closing, (i) the Company will deliver to
Parent and Newco the various certificates, instruments and documents referred to
in Article VI of this Agreement, (ii) Parent and Newco will deliver to the
Company the various certificates, instruments and documents referred to in
Article VII of this Agreement, (iii) the Merger Agreement and the Articles of
Merger shall be executed and acknowledged by each of Newco and the Company and
filed with the Wisconsin Department of Financial Institutions, and (iv) Parent
will cause Newco to deliver the Merger Price to the Paying Agent by wire
transfer of immediately available funds to an account designated by the Paying
Agent in writing not less than three days prior to the Closing Date.
2.4. Effect of Merger.
(a) General. The Merger shall become effective at the Effective
Time. The Merger shall have the effect set forth in the Wisconsin Business
Corporation Law. At the Effective Time, the identity, existence, rights,
privileges, powers, franchises, properties and assets of the Company shall
continue unaffected and unimpaired by the Merger. The separate corporate
existence of Newco shall cease and the Surviving Corporation shall become the
owner, without transfer, of all rights and property of the Constituent
Corporations (except the Excluded Assets), and the Surviving Corporation shall
be subject to all of the debts and liabilities of the Constituent Corporations
as if the Surviving Corporation had itself incurred them. The Surviving
Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf of
either the Company or Newco in order to carry out and effectuate the
transactions contemplated by this Agreement.
(b) Articles of Incorporation; Bylaws. The Restated Articles of
Incorporation as amended as contemplated by Section 6.11 of this Agreement and
the Bylaws of the Company as in effect immediately prior to the Effective Time
shall be the Restated Articles of Incorporation and the Bylaws of the Surviving
Corporation until amended in accordance with their respective terms and as
provided by applicable law.
(c) Directors and Officers. The directors and officers of Newco
shall become the directors and officers of the Surviving Corporation at and as
of the Effective Time (retaining their respective positions and terms of
office).
-10-
<PAGE> 16
(d) Conversion of Company Capital Stock. At and as of the Effective
Time, subject to Section 2.5 of this Agreement and subject to later adjustment
as provided in Section 2.6(e) of this Agreement, (i) each outstanding share of
Company Capital Stock that is Class A Common Stock (other than a Dissenting
Share or shares held by Newco or Parent) shall be converted into the right to
receive an amount in cash equal to the Merger Price Per Share, (ii) each
outstanding share of Company Capital Stock that is Class B Common Stock (other
than a Dissenting Share or shares held by Newco or Parent) shall be converted
into the right to receive an amount in cash equal to the Merger Price Per Share,
and (iii) each Dissenting Share, if any, shall be converted into the right to
receive payment from the Surviving Corporation with respect thereto in
accordance with the provisions of the Wisconsin Business Corporation Law. As
provided in Section 2.5 of this Agreement, the amount to be received by each
Merger Payee immediately after the Effective Time shall be reduced by that
Merger Payee's Pro Rata Portion of the Escrow Deposit and by that Merger Payee's
Pro Rata Portion of brokerage fees and expenses and professional fees and
expenses incurred on behalf of the Company Shareholders, as indicated on the
Merger Payment Statement for that Merger Payee.
(e) Conversion of Newco Capital Stock. At and as of the Effective
Time, each share of Newco Capital Stock shall be converted into one share of
Class A Common Stock of the Surviving Corporation.
2.5. Procedure for Payment.
(a) Immediately after the Effective Time, the Paying Agent shall
deposit or shall cause to be deposited with the Escrow Agent by wire transfer of
immediately available funds, $12,000,000.00 of the Merger Price (the "Escrow
Deposit"), to be held by the Escrow Agent in accordance with Section 8.2 of this
Agreement and in accordance with the Escrow Agreement.
(b) Immediately after the Effective Time, the Paying Agent shall pay
or cause to be paid (i) to each Merger Payee for whom the Paying Agent has
received a Merger Payment Statement duly signed by that Merger Payee, an amount
equal to the "Net Merger Payment" shown on that Merger Payment Statement less
such Merger Payee's proportionate share of professional fees and expenses as set
forth in a schedule to be delivered by Company Representative to the Paying
Agent, and (ii) such professional fees and expenses as directed by Company
Representative in such schedule. Each such payment to a Merger Payee shall be by
wire transfer of immediately available funds or otherwise as instructed on the
Merger Payment Statement by the Merger Payee receiving payment.
(c) Parent may cause the Paying Agent to pay over to the Surviving
Corporation any portion of the Merger Price (including any earnings thereon)
remaining unpaid by the Paying Agent in
-11-
<PAGE> 17
accordance with paragraphs (a) and (b) above (through no fault of the Paying
Agent) 180 days after the Effective Time, and thereafter all former Company
Shareholders shall be entitled to look to the Surviving Corporation as general
creditors thereof with respect to the cash payable upon surrender of their
certificates.
(d) Parent shall cause the Surviving Corporation to pay all charges
and expenses of the Paying Agent.
(e) After the Effective Time, no Person who was a Company
Shareholder immediately prior to the Effective Time shall transfer any shares of
Company Capital Stock other than to the Surviving Corporation as contemplated by
Section 2.5(c) of this Agreement.
2.6. Post-Closing Adjustment.
(a) As promptly as practicable after the Closing Date (but in no
event later than 60 days after the Closing Date), the Company Representative
will cause the accounting firm of Schenck & Associates SC to prepare and deliver
concurrently to Parent and the Company Representative an audited consolidated
balance sheet of the Company and its Subsidiaries (the "Closing Date Balance
Sheet"), setting forth the consolidated net worth of the Company and the
Subsidiaries immediately prior to the Effective Time on the Closing Date (the
"Closing Date Net Worth"). The Closing Date Balance Sheet shall be prepared in
accordance with generally accepted accounting principles (including the
Accounting Principles) on a basis consistent with the Company's past practices
and with the preparation of the Most Recent Balance Sheet, subject, however, to
the following requirements, which requirements shall be adhered to irrespective
of whether such requirements are in accordance with generally accepted
accounting principles (including the Accounting Principles):
(i) no reserves for product warranty claims or product liability
claims shall be established with respect to the Company or any
Subsidiary or the products sold by them, and the Closing Date
Balance Sheet and the Final Closing Date Balance Sheet shall
contain no such reserves; and
(ii) the amount of the reserve for worker's compensation claims
contained in the Closing Date Balance Sheet and the Final
Closing Date Balance Sheet shall not exceed the amount of the
reserve for worker's compensation claims contained in the Most
Recent Balance Sheet.
One-half (1/2) of the fees and expenses of Schenck & Associates SC will be paid
or accrued by the Company prior to Closing, and the balance shall be paid by the
Parent or the Company after Closing
-12-
<PAGE> 18
and not accrued by the Company at or prior to Closing. The lesser of $50,000.00
or one-half (1/2) of the total fees and expenses charged by the title insurance
company and the surveying company or companies to obtain the title insurance and
surveys described in Section 6.14 of this Agreement will be paid or accrued by
the Company prior to Closing, and the balance shall be paid by the Parent or the
Company after Closing and not accrued by the Company at or prior to Closing.
(b) If either Parent or the Company Representative claims that the
Closing Date Balance Sheet has not been prepared in accordance with the
requirements of Section 2.6(a), it will deliver to the other party a detailed
statement describing the basis for any such claim within 15 days after receiving
the Closing Date Balance Sheet. Parent and the Company Representative will use
reasonable efforts to resolve any such claims themselves. If they do not obtain
a final resolution within 90 days after the Closing Date, however, Parent and
the Company Representative will select another accounting firm from among the
"Big Six" accounting firms mutually acceptable to them to resolve any remaining
such claims. If Parent and the Company Representative are unable to agree on the
choice of an accounting firm, they will select a nationally-recognized
accounting firm by lot (after excluding any such firm affiliated with Parent or
the Company Shareholders) (the "Arbitrating Accountant"). Upon submission to the
Arbitrating Accountant for resolution, Parent shall indicate in writing its
position on each disputed matter and the Company Representative shall do
likewise. The Arbitrating Accountant shall choose one of the two positions on
each disputed matter no later than 120 days after the Closing Date and such
position will be conclusive and binding upon Parent and the Company
Representative with respect to that disputed matter if delivered in writing. The
proposed Closing Date Balance Sheet will be revised as appropriate to reflect
the resolution of any such claims pursuant to this Section 2.6(b). The term
"Final Closing Date Balance Sheet" means the Closing Date Balance Sheet,
together with any revisions thereto pursuant to this Section 2.6(b), and the
term "Final Closing Date Net Worth" means the consolidated net worth of the
Company and the Subsidiaries immediately prior to the Effective Time on the
Closing Date as set forth on the Final Closing Date Balance Sheet. The Surviving
Corporation and the Company Representative (on behalf of the Company
Shareholders) each shall be responsible for and shall pay one-half (1/2) of the
fees and expenses of the Arbitrating Accountant.
(c) The Company Representative will make the work papers and back-up
materials used in preparing the Closing Date Balance Sheet, and any books,
records and financial staff of the Company Shareholders, and representatives of
Schenck & Associates SC, available to Parent and its accountants and other
representatives and to the Arbitrating Accountant resolving any claim concerning
the Closing Date Balance Sheet at reasonable times and upon
-13-
<PAGE> 19
reasonable notice at any time during (a) the preparation of the Closing Date
Balance Sheet, (b) the review by Parent and the Company Representative of the
Closing Date Balance Sheet, and (c) the resolution by Parent and the Company
Representative of any objections thereto.
(d) Parent will make the work papers and back-up materials used in
(or necessary for) the Closing Date Balance Sheet, and any books, records and
financial staff of Parent and the Company and their accountants and other
representatives, available to the Company Representative and its accountants and
other representatives and to the Arbitrating Accountant resolving any claim
concerning the Closing Date Balance Sheet at reasonable times and upon
reasonable notice at any time during (a) the preparation of the Closing Date
Balance Sheet, (b) the review by Parent and the Company Representative of the
Closing Date Balance Sheet, and (c) the resolution by Parent and the Company
Representative of any objections thereto.
(e) The Merger Price will be adjusted if the Adjusted Final Closing
Date Net Worth is greater or less than the Base Net Worth. If the Adjusted Final
Closing Date Net Worth is greater than the Base Net Worth, then the Merger Price
will be increased on a dollar-for-dollar basis by the amount of such excess (the
"Positive Closing Date Adjustment Amount"). In such event, each Merger Payee's
Pro Rata Portion of the Positive Closing Date Adjustment Amount will be paid by
Parent to the Company Representative on behalf of such Merger Payee, by wire
transfer of immediately available funds to an account or accounts designated by
the Company Representative in writing, no later than three business days after
the completion of the Final Closing Date Balance Sheet, and the Company
Representative shall distribute that amount to such Merger Payee. If the
Adjusted Final Closing Date Net Worth is less than the Base Net Worth, then the
Merger Price will be decreased on a dollar-for-dollar basis by the amount of
such deficiency (the "Negative Closing Date Adjustment Amount"). In such event,
the Company Representative will cause each of the Merger Payees to pay its Pro
Rata Portion of the Negative Closing Date Adjustment Amount to Parent by wire
transfer of immediately available funds to an account or accounts designated by
Parent in writing, no later than three business days after the completion of the
Final Closing Date Balance Sheet.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COMPANY
All representations and warranties of the Company are made subject to the
exceptions which are set forth in the Disclosure Schedule and in any other
schedules attached to this Agreement, as supplemented from time to time by the
Company hereafter and prior to the Closing Date in accordance with the terms
hereof to the
-14-
<PAGE> 20
extent specifically referenced therein. Except as specifically set forth in this
Agreement, the Company makes no representations or warranties to Parent or Newco
of any kind whatsoever, express or implied. Subject to the foregoing, the
Company hereby represents and warrants to Parent and Newco as follows:
3.1. Organization and Authority.
(a) Company is a corporation duly organized, validly existing and is
of active status under the Laws of the State of Wisconsin. Except as set forth
in Section 3.1(a) of the Disclosure Schedule, Company is duly qualified to
conduct business as a foreign corporation in each jurisdiction wherein the
character of the properties owned or leased by it, or the nature of its
business, makes such licensing or qualification necessary except where the
failure to do so would not have a Material Adverse Effect. Any states in which
Company is licensed or qualified to do business are listed in Section 3.1(a) of
the Disclosure Schedule.
(b) Company has all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as and where such
is now being conducted.
(c) The authorized capital stock of the Company consists of the
Class A Common Stock, of which 619.5 shares are issued and outstanding, the
Class B Common Stock, of which 3,820 shares are issued and outstanding and the
Preferred Stock, none of which shares are issued and outstanding. Section 3.1(c)
of the Disclosure Schedule sets forth the names and number of shares of the
Company Capital Stock owned by each of the Company Shareholders. All of the
outstanding shares of the Company Capital Stock have been duly authorized and
validly issued, are fully paid and nonassessable, except as set forth in Section
180.0622(2)(b) of the Wisconsin Statutes, as judicially interpreted, and are
owned by the Company Shareholders free and clear of all liens, claims,
encumbrances and restrictions whatsoever except as set forth in Section 3.1(c)
of the Disclosure Schedule. No shares of Company Capital Stock or other
ownership interest in the Company are reserved for issuance or are held as
treasury shares, and, except for this Agreement, there are no outstanding
options, convertible securities, warrants, rights, subscriptions, claims of any
character, agreements or understandings relating to the Company Capital Stock
pursuant to which the Company is or may become obligated to issue or redeem or
exchange any shares of Company Capital Stock.
(d) Section 3.1(d) of the Disclosure Schedule sets forth the
jurisdiction of incorporation, capitalization and ownership of each of the
Subsidiaries. Each of the Subsidiaries is a corporation duly organized, validly
existing and of active status under the Laws of the State of Wisconsin. Except
as set forth in Section 3.1(d) of the Disclosure Schedule, each of the
Subsidiaries
-15-
<PAGE> 21
has all respective corporate power and authority to carry on its respective
business as presently conducted and each Subsidiary is duly qualified to conduct
business as a foreign corporation in each jurisdiction wherein the character of
the properties owned or leased by it, or the nature of its business, makes such
licensing or qualification necessary except where the failure to do so would not
have a Material Adverse Effect. Except for the Subsidiaries, Neenah Enterprises,
Inc., an inactive Wisconsin corporation, and Neenah Foundry Export, Inc., an
inactive Wisconsin corporation, and except as set forth in Section 3.1(d) of the
Disclosure Schedule the Company does not own, directly or indirectly, any
capital stock or other equity securities of any other corporation or have any
direct or indirect equity or other ownership interest in any entity or business.
(e) The officers and directors of the Company and each of the
Subsidiaries are set forth in Section 3.1(e) of the Disclosure Schedule.
(f) True and complete copies of the Restated Articles of
Incorporation and Bylaws of the Company and each of the Subsidiaries have been
delivered to Parent. The minute books of the Company and the Subsidiaries which
have been provided to Parent for examination contain complete and accurate
records of all material corporate action taken by the boards of directors and
stockholders of the Company and the Subsidiaries.
3.2. Authority; Validity. The execution and delivery of this Agreement and
the other documents and instruments to be executed and delivered by Company
pursuant hereto and the consummation by Company of the transactions contemplated
hereby and thereby have been duly authorized by the board of directors of the
Company. Except for obtaining requisite stockholder approval, no corporate act
or proceeding on the part of Company is necessary to authorize this Agreement or
the other documents and instruments to be executed and delivered by Company
pursuant hereto or the consummation by Company of the transactions contemplated
hereby and thereby. This Agreement constitutes, and when executed and delivered,
the other documents and instruments to be executed and delivered by Company
pursuant hereto will constitute, valid and binding agreements of Company,
enforceable against Company in accordance with their respective terms, except as
such may be limited by bankruptcy, insolvency, reorganization or other Laws
affecting creditors' rights generally, and by general equitable principles.
3.3. No Violation. Except as set forth in Section 3.3 of the Disclosure
Schedule, the execution and delivery of this Agreement and the consummation by
Company of the transactions contemplated hereby will not cause a breach or
violation of or default under any provision of (a) the articles of incorporation
or bylaws of the Company or any of the Subsidiaries; (b) any Material Contract
to
-16-
<PAGE> 22
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or its assets may be bound; or (c) any statute, law, rule,
regulation, judgment, decree, order, injunction or other decision of any court,
arbitrator or governmental authority to which the Company or any Subsidiary may
be subject.
3.4. Third Party Consents. Except for the filing of appropriate notices
under the HSR Act and for the third party consents listed in Section 3.4 of the
Disclosure Schedule, no approval, authorization, notice, consent or other action
by or filing with any Person is required for the Company's execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby.
3.5. Financial Statements. Section 3.5 of the Disclosure Schedule contains
complete and accurate copies of the Financial Statements. Except as set forth in
Section 3.5 of the Disclosure Schedule, all of such Financial Statements (a)
have been prepared in accordance with the books and records regularly maintained
by the Company, (b) fairly present the assets, liabilities, financial condition
and results of operations of the Company and the Subsidiaries and (c) were
prepared in accordance with generally accepted accounting principles
consistently applied throughout all periods, subject, in the case of the interim
statements, to normal year-end and audit adjustments and any other adjustments
described in such statements and subject to the absence of footnotes thereto.
3.6. Tax Matters.
(a) Except as set forth in Section 3.6(a) of the Disclosure
Schedule, the Company and the Subsidiaries have filed all Tax Returns required
to be filed. The Company and the Subsidiaries have paid all Taxes that are due
(whether or not shown on such returns) and have made adequate provisions on
their books and records for all Taxes payable by the Company and the
Subsidiaries that have accrued but are not yet due.
(b) None of the Company and the Subsidiaries (i) has been a member
of an affiliated group (within the meaning of Section 1504(a) of the Code or any
similar group defined under a similar provision of applicable state, local or
foreign Law) filing a consolidated, combined or unitary income Tax Return,
except for a group the common parent of which is the Company or (ii) has any
liability for the Taxes of any Person (other than the Company and the
Subsidiaries) under Treas. Reg. section 1.1502-6 (or any similar provision of
state, local or foreign Law) as a transferee or successor, by contract or
otherwise.
(c) Except as set forth in Section 3.6(c) of the Disclosure
Schedule, none of the Company and the Subsidiaries is a party to any Tax
allocation or Tax sharing agreement.
-17-
<PAGE> 23
(d) The federal and state income Tax Returns of Company have been
audited by the Internal Revenue Service and appropriate state taxing authorities
for the periods and to the extent set forth in Section 3.6(d) of the Disclosure
Schedule, and except as set forth in Section 3.6(d) of the Disclosure Schedule
Company has not received from the Internal Revenue Service or from the tax
authorities of any state, county, local or other jurisdiction any notice of
underpayment of Taxes or other deficiency which has not been paid nor any
objection to any return or report filed by Company. There are outstanding no
agreements or waivers extending the statutory period of limitations applicable
to any Tax Return.
(e) All Tax Returns filed by the Company and the Subsidiaries were
correct and complete in all material respects.
(f) Except as set forth in Section 3.6(f) of the Disclosure
Schedule, no dispute or claim concerning any Tax liability of any of the Company
and the Subsidiaries has been proposed, asserted or assessed (and is currently
pending).
(g) None of the Company or the Subsidiaries will be required as a
result of (i) a change in accounting method for a Tax period beginning on or
before the Closing, to include any adjustment under Code section 481(c) of the
Code (or any similar provision of state, local or foreign Law) in taxable income
for any Tax period beginning on or after the Closing Date or (ii) any "closing
agreement" as described in Code section 7121 (or any similar provision of state,
local or foreign Law), to include any item of income in or exclude any item of
deduction from any Tax period beginning on or after the Closing.
(h) There are no liens on any of the assets of any of the Company
and the Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax.
(i) Each of the Company and the Subsidiaries has withheld and paid
all Taxes required to have been withheld and paid in connection with any amount
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party.
(j) None of the Company and the Subsidiaries has filed a consent
under Code section 341(f) concerning collapsible corporations.
(k) None of the Company and the Subsidiaries has made any payments,
is obligated to make any payments, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code section 280G.
(l) None of the Company Shareholders is a foreign person subject to
withholding under Code section 1445.
-18-
<PAGE> 24
(m) Except as set forth in Section 3.6(m) of the Disclosure
Schedule, the unpaid Taxes of the Company and the Subsidiaries (i) did not, as
of September 30, 1996, exceed the reserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth in the Most Recent Balance Sheet and (ii) do not
exceed that reserve as adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Company and the
Subsidiaries in filing their Tax Returns.
(n) Except as set forth in Section 3.6(n) of the Disclosure
Schedule, none of the property owned or used by any of the Company and the
Subsidiaries is subject to a tax benefit transfer lease executed in accordance
with section 168(f)(8) of the Internal Revenue Code of 1954, as amended by the
Economic Recovery Tax Act of 1981.
(o) None of the property owned by any of the Company and the
Subsidiaries is "tax-exempt use property" within the meaning of Code section
168(h).
(p) Section 3.6(p) of the Disclosure Schedule lists all federal,
state, local and foreign income Tax Returns filed with respect to any of the
Company and the Subsidiaries for taxable periods ending on or after March 31,
1992, indicates those Tax Returns that have been audited and indicates those Tax
Returns that currently are the subject of an audit or examination.
(q) The Company has made available to Parent correct and complete
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by any of the Company and the
Subsidiaries since March 31, 1992.
(r) Each of the Company and the Subsidiaries has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
section 6662.
3.7. Absence of Certain Changes. Since the date of the Most Recent Balance
Sheet and except as disclosed in Section 3.7 of the Disclosure Schedule, the
Company and the Subsidiaries have been operated in the Ordinary Course. Without
limiting the generality of the foregoing, since the date of the Most Recent
Balance Sheet and except as disclosed in Section 3.7 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries has:
(ia) experienced any change in its business, condition (financial or
otherwise) or results of operations that would constitute, or insofar as
reasonably can be foreseen, result in a Material Adverse Effect;
-19-
<PAGE> 25
(ib) declared, set aside, or paid any dividend or made any distribution in
respect of the capital stock of the Company or any Subsidiary or redeemed,
purchased or otherwise acquired any such stock;
(i) experienced any adverse change in any relationship with its suppliers,
customers, distributors, brokers, lessors or others, other than changes in the
Ordinary Course;
(ii) sold, leased, transferred, or assigned any of assets, tangible or
intangible (including, without limitation, the Proprietary Rights) other than
for consideration in the Ordinary Course;
(iii) entered into any agreement, contract, lease, or license (or series
of related agreements, contracts, leases or licenses) involving receipt or
expenditure of more than $100,000 individually or modified the terms of any such
existing contract or agreement, other than in the Ordinary Course;
(iv) engaged in any activity which has resulted in any acceleration or
delay of the collection of its accounts or notes receivables or any delay in the
payment of its accounts payables, in each case other than in the Ordinary
Course;
(v) (nor has any other party) accelerated, terminated, modified or
canceled any permit or agreement, contract, lease or license involving receipt
or expenditure of more than $100,000 individually to which it is a party or by
which it is bound, other than in the Ordinary Course;
(vi) suffered any damage, destruction or loss, whether or not covered by
insurance, affecting any material property or assets owned or used by it;
(vii) adopted, modified, amended or terminated any bonus, profit-sharing,
incentive, severance, or other similar plan (including any Employee Benefit
Plan), contract, or commitment for the benefit of any of its directors,
officers, or employees, or otherwise made any change in the employment terms
(including any increase in the base compensation) for any of its officers and
employees whose annual base compensation is in excess of $50,000, other than in
the Ordinary Course;
(viii) made any capital expenditure or any other investment (or series of
related investments) in excess of $100,000 other than in the Ordinary Course;
(ix) issued any note, bond, or other debt security or created, incurred,
assumed, or guaranteed any indebtedness involving receipt or expenditure of more
than $50,000 individually, other than in the Ordinary Course;
-20-
<PAGE> 26
(x) canceled, compromised, waived, or released any right or claim (or
series of related rights and claims) involving receipt or expenditure of more
than $50,000 outside the Ordinary Course;
(xi) made or authorized any change in its articles of incorporation or
bylaws except as contemplated by Section 6.11 of this Agreement;
(xii) issued, sold, or otherwise disposed of any of its capital stock, or
granted, modified or amended any options, warrants, stock appreciation rights,
or other rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock or participate in any change in the value
thereof;
(xiii) made or been subject to change in its accounting practices,
procedures or methods or in its cash management practices;
(xiv) entered into or become party to any agreement, arrangement or
transaction with any of its respective directors, officers, employees,
stockholders or their relatives (other than in the Ordinary Course and other
than as contemplated by Sections 6.12 and 6.13 of this Agreement), including,
without limitation, any (i) loan or advance of funds, or made any other
payments, to any of its directors, officers, employees or stockholders, or (ii)
creation or discharge of any intercompany account, other than in the Ordinary
Course;
(xv) granted any license or sublicense of any rights under, allowed to
lapse, disposed of, or otherwise experienced any adverse changes with respect to
the Proprietary Rights, other than in the ordinary course of business consistent
with past custom and practice;
(xvi) experienced any material changes in the amount or scope of coverage
of insurance now carried by them; or
(xvii) committed to do any of the foregoing.
3.8. Assets.
(a) Company and each Subsidiary have good and marketable title to
all of its respective assets and properties free and clear of all mortgages,
liens, claims, encumbrances and restrictions except (i) those listed in Section
3.8(a) of the Disclosure Schedule, and (ii) in the case of real property, liens
for taxes not yet due or which are being contested in good faith by appropriate
proceedings (and which have been sufficiently accrued or reserved against in the
Most Recent Balance Sheet), municipal and zoning ordinances and easements for
public utilities, none of which interfere with the use of the property as
currently utilized.
-21-
<PAGE> 27
(b) Except as set forth in Section 3.8(b) of the Disclosure
Schedule, all of the property and assets currently being used in the operation
of the Company and the Subsidiaries are in all material respects in good
operating condition and repair, subject to normal wear and tear, and are free
from material structural or mechanical defects or deficiencies.
(c) The inventories of the Company reflected on the Most Recent
Balance Sheet valued in accordance with lower of cost (determined on a LIFO or
FIFO basis as described in the notes to the Financial Statements) or market are
usable and merchantable, on an aggregate basis, in the ordinary course of
business such that no additional reserves are required under generally accepted
accounting principles.
(d) Section 3.8(d) of the Disclosure Schedule contains a complete
and accurate list of all the Real Property including a legal description
thereof. All of the Real Property has rights of access to public roads. Except
as set forth in Section 3.8(d) of the Disclosure Schedule, there is not (i) any
claim of adverse possession or prescriptive rights involving any of the Real
Property, (ii) any structure located on any Real Property which encroaches on or
over the boundaries of neighboring or adjacent properties or (iii) any structure
of any other party which encroaches on or over the boundaries of any of such
Real Property. Except as set forth in Section 3.8(d) of the Disclosure Schedule,
none of the Real Property is located in a flood plain, flood hazard area,
wetland or lakeshore erosion area within the meaning of any Law. No public
improvements have been commenced and to Company's Knowledge none are planned
which in either case may result in special assessments against or otherwise
materially adversely affect any Real Property. The Company does not have any
notice or Knowledge of any (i) planned or proposed increase in assessed
valuations of any Real Property, (ii) order requiring repair, alteration, or
correction of any existing condition affecting any Real Property or the systems
or improvements thereat, or (iii) any structural, mechanical, or other defects
of material significance affecting any Real Property or the systems or
improvements thereat (including, but not limited to, inadequacy for normal use
of mechanical systems or disposal or water systems at or serving the Real
Property).
(e) Section 3.8(e) of the Disclosure Schedule contains (i) a list of
certain assets currently owned by the Company or the Subsidiaries that will be
transferred to one or more of the Company Shareholders or executives of the
Company at or prior to the Closing without additional consideration and (ii) a
list of certain assets currently being used by the Company that are owned and
will be retained by one or more of the Company Shareholders (collectively, the
"Excluded Assets").
-22-
<PAGE> 28
(f) Section 3.8(f) of the Disclosure Schedule contains a complete
and accurate list of all real estate lease, sublease and other occupancy
agreements, including all amendments, extensions and other modifications
thereto, to which the Company or any Subsidiary is a party. The Company or its
applicable Subsidiary has a good and valid leasehold interest in and to all of
the Leased Real Property. Each Lease is in full force and effect and is
enforceable in accordance with its terms, except as such may be limited by
bankruptcy, insolvency, reorganization or other Laws affecting creditors' rights
generally, and by general equitable principles. There exists no default by the
Company or any Subsidiary or condition which, with the giving of notice, the
passage of time or both, could become a default by the Company or any Subsidiary
under any Lease. To the Knowledge of the Company, no party to a Lease other than
the Company or any Subsidiary is in default thereunder nor does any condition
exist which, with the giving of notice, the passage of time or both, could
become a default by any party to a Lease other than the Company or any
Subsidiary. The Company has previously made available to Parent true and
complete copies of all the Leases. Except as described in Section 3.8(f) of the
Disclosure Schedule, no consent, waiver, approval or authorization is required
from the landlord under any Lease as a result of the execution of this Agreement
or the consummation of the transactions contemplated hereby.
(g) The Real Property and the Leased Real Property constitute all of
the real property owned, leased, occupied or otherwise utilized in connection
with the business of the Company and its Subsidiaries. Except as set forth in
Section 3.8(g) of the Disclosure Schedule, other than the Company and the
Subsidiaries, there are no parties in possession or parties having any current
or future right to occupy any of the Real Property. Except as set forth in
Section 3.8(g) of the Disclosure Schedule, the Real Property is in good
condition and repair and is sufficient and appropriate for the conduct of the
Company's business. Except as set forth in Section 3.8(g) of the Disclosure
Schedule, the Real Property and all plants, buildings and improvements located
thereon conform in all material respects to all applicable building, zoning and
other Laws. Except as set forth in Section 3.8(g) of the Disclosure Schedule,
all permits, licenses and other approvals necessary to the current occupancy and
use of the Real Property have been obtained, are in full force and effect and
have not been violated. Except as set forth in Section 3.8(g) of the Disclosure
Schedule, there exists no violation of any covenant, condition, restriction,
easement, agreement or order affecting any portion of the Real Property. There
is no pending or, to the Knowledge of the Company, any threatened condemnation
proceeding affecting any portion of the Real Property. No Lease requires rental
payments by the Company or any Subsidiary in excess of $45,000 per year. In the
event it became necessary for the Company or any Subsidiary to obtain a
functionally equivalent replacement parcel of real property for any parcel of
Leased Real Property in the same
-23-
<PAGE> 29
geographic area, such replacement could be obtained within thirty (30) days of
the date of the event requiring such replacement (without regard to whether the
Lease covering the parcel of Leased Real Property being replaced had expired or
been terminated).
3.9. Bank Accounts. Section 3.9 of the Disclosure Schedule sets forth the
names and locations of all banks, trust companies, savings and loan associations
and other financial institutions at which the Company or any Subsidiary
maintains a safe deposit box, lock box or checking, savings, custodial or other
account of any nature, and the type and number of each such account, and the
name of the Company's primary contact person at such institution.
3.10. Litigation. Except as set forth in Section 3.10 of the Disclosure
Schedule, there is no action, suit, arbitration, proceeding, investigation,
claim or inquiry, whether civil, criminal or administrative, pending or, to the
Company's Knowledge, threatened against the Company or any Subsidiary which,
insofar as reasonably can be foreseen, would have or result in a Material
Adverse Effect.
3.11. Compliance With Laws.
(a) Compliance. Except as set forth in Section 3.11(a) of the
Disclosure Schedule, the Company and the Subsidiaries are in compliance with all
applicable Laws (except where non-compliance, insofar as reasonably can be
foreseen, would not have or result in a Material Adverse Effect), including,
without limitation, those applicable to occupational safety and health, trade
practices, competition and pricing, product warranties, zoning, building and
sanitation, retirement and product advertising. Except as set forth in Section
3.11(a) of the Disclosure Schedule, Company has not received notice of any
violation or alleged violation of, any Laws.
(b) Licenses and Permits. The Company and the Subsidiaries have all
governmental licenses, permits, approvals, authorizations and consents and all
certifications required for the conduct of the Business (as presently conducted)
and operation of the facilities used in the Business (other than licenses,
permits, approvals, authorizations, consents or certifications which if not
obtained, insofar as reasonably can be foreseen, would not have a Material
Adverse Effect). All such licenses, permits, approvals, authorizations, consents
and certifications are described in Section 3.11(b) of the Disclosure Schedule
and are in full force and effect. Except as set forth in Section 3.11(b) of the
Disclosure Schedule, the Company (including its operations, properties and
assets) are and have been in material compliance with all such permits,
licenses, approvals, authorizations, consents and certifications.
-24-
<PAGE> 30
3.12. Insurance. Section 3.12 of the Disclosure Schedule contains a
complete list and description of all insurance policies owned or maintained by
the Company and the Subsidiaries. Such insurance policies are in full force and
effect and Company and the Subsidiaries have not received any notice of any
cancellation of such insurance. All premiums with respect to such policies
covering all periods up to and including the Effective Time will have been paid.
Such policies will not be materially affected by, or terminate or lapse by
reason of, the transactions contemplated by this Agreement. All of such policies
have been issued by insurance companies actively engaged in the insurance
business. Except as set forth in Section 3.12 of the Disclosure Schedule, all
known claims, if any, made against the Company or any of the Subsidiaries that
are covered by insurance have been disclosed to and accepted by the appropriate
insurance companies and are being defended by such appropriate insurance
companies and no such claims have been denied coverage during the last three
years.
3.13. Material Contracts and Commitments.
(a) Section 3.13(a) of the Disclosure Schedule sets forth a complete
list of each executory contract and lease to which the Company or a Subsidiary
is a party (the "Material Contracts") which constitutes:
(i) a lease of real or personal property involving
consideration or other expenditure or revenue in excess of $100,000 in the
aggregate or involving performance over a period of more than 12 months;
(ii) an agreement involving payment or receipt or other
obligations of more than $100,000 in the aggregate;
(iii) a labor union contract;
(iv) a loan agreement, promissory note, letter of credit, or
other evidence of indebtedness as a signatory, guarantor or otherwise;
(v) an agreement not to compete in any business or geographic
area;
(vi) an agreement involving payment or other obligations of
more than $25,000 in the aggregate and that is not cancelable on less than
twelve month's notice; or
(vii) a material agreement with a shareholder, officer,
director or employee of the Company or any Subsidiary.
(b) Company has made available to Parent true, correct and complete
copies of the Material Contracts.
-25-
<PAGE> 31
(c) Except as disclosed in Section 3.13(c) of the Disclosure
Schedule, neither the Company nor any Subsidiary, nor to the Company's
Knowledge, any other party, is in material breach or material violation of, or
default under, any provision of any Material Contract, and to the Company's
Knowledge there exist no facts that, with notice or lapse of time, or both,
would constitute a default (or give rise to a termination right) on the part of
any party in the performance of any obligation to be performed under any of the
Material Contracts.
(d) None of the other parties to any Material Contract has given
written notice to the Company or a Subsidiary that it intends to terminate or
materially alter the provisions of such Material Contract either as a result of
transactions contemplated by this Agreement or otherwise, and neither the
Company nor any Subsidiary has given notice to any other party to any such
Material Contract that it intends to terminate or materially alter the
provisions of any such Material Contract.
(e) Except as set forth in Section 3.13(e) of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to any contract,
agreement or understanding which contains a "change in control," "potential
change in control" or similar provision which could be triggered by the
transactions contemplated by this Agreement.
3.14. Labor Matters. Except as set forth in Section 3.14 of the Disclosure
Schedule, the Company and the Subsidiaries are not a party to any written labor
agreement with respect to their respective employees with any labor union.
Except as set forth in Section 3.14 of the Disclosure Schedule, in the last five
years, the Company and the Subsidiaries have not experienced any labor disputes
or any work stoppage due to labor disagreements in connection with the Business.
Except to the extent set forth in Section 3.14 of the Disclosure Schedule, (a)
Company is in compliance in all material respects with all applicable Laws
respecting employment practices, terms and conditions of employment and wages
and hours, and is not engaged in any unfair labor practice; (b) there is no
unfair labor practice charge or complaint against Company pending before the
National Labor Relations Board or any similar state agency; and (c) there are no
administrative charges or court complaints against Company concerning alleged
employment discrimination or other employment related matters pending or
threatened before the U.S. Equal Employment Opportunity Commission or any other
government entity. To the Company's Knowledge, no union organization campaign is
in progress with respect to any of the Company's or any Subsidiary's employees
who are not presently members of a union. Except as set forth in Section 3.14 of
the Disclosure Schedule, since April 1, 1992, neither the Company nor any
Subsidiary has engaged in any plant closing or employee layoff activities that
would violate, or require notification pursuant to, the Worker Adjustment
Retraining
-26-
<PAGE> 32
and Notification Act of 1988, as amended, or any similar state or local plant
closing or mass layoff statute, rule or regulation.
3.15. Employee Benefit Plans.
(a) Section 3.15(a) of the Disclosure Schedule sets forth all
pension, medical, dental, life, accident insurance, employee welfare,
disability, group insurance, and other similar fringe or employee benefit plans,
programs and arrangements, and any severance or employment agreements or plans,
sick leave plans, programs, arrangements and policies, including, without
limitation, all "employee benefit plans" (as defined in Section 3(3) of ERISA),
which are provided to, for the benefit of, or relate to, any current or former
Company Employees. The items described in the foregoing sentence are hereinafter
sometimes referred to collectively as "Employee Benefit Plans," and each
individually as an "Employee Benefit Plan." True and correct copies of all the
Employee Benefit Plans, including all amendments thereto, have heretofore been
made available to Parent. Each of the Employee Benefit Plans is identified in
Section 3.15(a) of the Disclosure Schedule, to the extent applicable, as one or
more of the following: an "employee pension benefit plan" (as defined in Section
3(2) of ERISA), an "employee welfare benefit plan" (as defined in Section 3(1)
of ERISA), and/or as a plan intended to be qualified under Section 401 of the
Code. Except as set forth in Section 3.15(a) of the Disclosure Schedule, no
Employee Benefit Plan is a "multiemployer plan" (as defined in Section 4001 of
ERISA) or a defined benefit plan as defined in Section 414 of the Code, and
neither the Company nor any Subsidiary has ever contributed or been obligated to
contribute to any multiemployer plan or defined benefit plan.
(b) There have been no "prohibited transactions" within the meaning
of Section 406 or 407 of ERISA or Section 4975 of the Code for which a statutory
or administrative exemption does not exist with respect to any Employee Benefit
Plan. No event or omission has occurred in connection with which the Company or
any Subsidiary or any of their respective assets or any Employee Benefit Plan,
directly or indirectly, could be subject to any liability under ERISA, the Code
or any other Law applicable to any Employee Benefit Plan, or under any
agreement, instrument or Law pursuant to or under which Company or any
Subsidiary has agreed to indemnify or is required to indemnify any person
against liability incurred under any such Law.
(c) With respect to each Employee Benefit Plan, (i) all payments due
from Company or any Subsidiary to date have been made and all amounts properly
accrued to date as liabilities of Company and any Subsidiary which have not been
paid have been properly recorded on the books of Company or any Subsidiary and
are reflected in the Financial Statements; (ii) Company and each Subsidiary has
complied with, and each such Employee Benefit Plan
-27-
<PAGE> 33
complies in form and has been administered in accordance with all applicable
Laws and regulations, including but not limited to ERISA and the Code, except
where failure to do so, insofar as reasonably can be foreseen, would not result
in a Material Adverse Effect; (iii) each such Employee Benefit Plan which is
intended to qualify under Section 401 of the Code has received a favorable
determination letter from the Internal Revenue Service with respect to such
qualification, its related trust has been determined to be exempt from taxation
under Section 501(a) of the Code, and nothing has occurred since the date of
such letter that has or is likely to adversely affect such qualification or
exemption; (iv) there are no actions, suits or claims pending (other than
routine claims for benefits) or threatened with respect to such Employee Benefit
Plan or against the assets of such Employee Benefit Plan; and (v) no accumulated
funding deficiency, as defined in ERISA or the Code, or reportable event, as
defined in ERISA, has occurred.
(d) Except as set forth in Section 3.15(d) of the Disclosure
Schedule, no Employee Benefit Plan provides benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
current or former Company Employees beyond their retirement or other termination
of service other than (i) coverage mandated by applicable law, (ii) death or
retirement benefits under any Employee Benefit Plan that is an employee pension
benefit plan, (iii) deferred compensation benefits accrued as liabilities on the
books of Company, (iv) disability benefits under any Employee Benefit Plan that
is an employee welfare benefit plan and which have been fully provided for by
insurance or otherwise or (v) benefits in the nature of severance pay.
(e) Except as set forth in Section 3.15(e) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former Company Employee to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due to any such employee or former employee or (iii)
result in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available.
3.16. Environmental Matters.
(a) The Company is in compliance with applicable Environmental Laws,
except as set forth in Section 3.16(a) of the Disclosure Schedule. Without
limiting the generality of the foregoing, the Company has obtained and is in
compliance with, all permits, licenses and other authorizations that are
required pursuant to Environmental Laws for the occupation of its facilities and
the operation of its business; a list of all such permits, licenses and other
authorizations is set forth in Section 3.16(a) of the Disclosure Schedule.
-28-
<PAGE> 34
(b) Except as set forth in Section 3.16(b) of the Disclosure
Schedule, there is no litigation nor any demand, claim, hearing or notice of
violation pending or to the best of the Company's Knowledge threatened against
the Company relating in any way to the Environmental Laws.
(c) Except as set forth in Section 3.16(c) of the Disclosure
Schedule, there has been no release, spill or discharge of Hazardous Substance
on, in, under or from the Real Property in an amount or condition which would
require investigative or remedial action under Environmental Laws.
(d) The Company has not received notice from any governmental agency
of any claim that it is or may be liable for the Release of a Hazardous
Substance under CERCLA or any similar state law in relation to any site or
facility.
3.17. Proprietary Rights. Section 3.17 of the Disclosure Schedule lists
all patents, patent applications, trade names, trademarks, service marks,
trademarks registrations, service mark registrations, trade mark applications,
service mark applications, registered copyrights, and copyright applications
included among the Proprietary Rights. There is no pending claim against the
Company or any Subsidiary alleging that the Company or any Subsidiary infringes
on or misappropriates the intellectual property rights of others. Except as set
forth in Section 3.17 of the Disclosure Schedule, the Company and the
Subsidiaries own and possess all right, title and interest in, free and clear of
all Liens or have a valid, enforceable and effective written license to use, all
Proprietary Rights. Section 3.17 of the Disclosure Schedule also lists all
computer software (other than mass-marketed software having a license fee of
less than $1,000.00) owned or used by the Company or any Subsidiary and all
written licenses or other agreements to or from third parties regarding any of
the Proprietary Rights. Except as set forth in Section 3.17 of the Disclosure
Schedule there is not pending, or to the Company's Knowledge threatened, against
the Company or any Subsidiary any claim by any third party contesting the
validity, enforceability, use or ownership of any Proprietary Right, and, to the
Knowledge of the Company, there are no grounds for any such claim. The Company
and Subsidiaries have not infringed, misappropriated or otherwise conflicted
with any proprietary rights of any Person, nor to the Company's Knowledge, as
far as reasonably can be foreseen, will any such infringement, misappropriation
or conflict occur as a result of continued operation of the business of the
Company and the Subsidiaries as currently conducted (including, without
limitation, the "modernized casting designs" program of the Company and the
Subsidiaries involving the reduction of weight of certain of the products of the
Company and the Subsidiaries). All Proprietary Rights owned or used by the
Company and the Subsidiaries prior to the Closing Date will be owned or
available for use on identical terms and conditions immediately after the
Closing Date.
-29-
<PAGE> 35
3.18. Accounts Receivable. All accounts and notes receivable of the
Company and the Subsidiaries reflected on the Most Recent Balance Sheet (other
than those described in Section 6.13 of this Agreement), and all accounts and
notes receivable arising subsequent to the date of the Most Recent Balance
Sheet, in each case, have arisen in the ordinary course of business, consistent
with past custom and practice, and will be collected in accordance with their
terms at their recorded amounts, subject only to the reserves for doubtful
accounts set forth on the Most Recent Balance Sheet which have been established
in accordance with past custom and practice and are substantially adequate in
light of the previous collectibility experience with respect to accounts
receivables generated by the Company and the Subsidiaries.
3.19. Product Warranty. All of the products manufactured, sold, leased,
and delivered by the Company and the Subsidiaries have conformed in all material
respects with all applicable contractual commitments and all express and implied
warranties, and none of the Company and the Subsidiaries has any material
liability (whether known or unknown, absolute, accrued, contingent or otherwise,
or whether due or to become due) for replacement or repair thereof or other
damages in connection therewith.
3.20. Sufficiency of Assets. The assets currently owned by the Company or
any Subsidiary, or leased by the Company or any Subsidiary pursuant to any lease
agreement entered into in the ordinary course of business or otherwise disclosed
to Parent, constitute all of the assets necessary to conduct the businesses of
the Company and the Subsidiaries in accordance with past practices as of March
31, 1996 and as of the date hereof.
3.21. Accuracy of Representations. To the Company's Knowledge, no
representation or warranty made by the Company in this Agreement contains or, as
of the Closing Date, will contain, any untrue statement of a material fact or
omits or, as of the Closing Date will omit, to state a material fact necessary
to make the statements contained herein not misleading, subject in each case to
any exception to such representations and warranties set forth in the Disclosure
Schedule, as the same may be updated from time to time prior to and as of the
Closing Date by delivery to Parent and Newco in accordance with the terms of
this Agreement.
3.22. Opinion of Financial Advisor. As of the date of this Agreement, the
Company has received the opinion of Brown, Gibbons, Lang & Company, L.P. to the
effect that the consideration to be received in the Merger by the Company
Shareholders is fair to such shareholders from a financial point of view, a
signed copy of which opinion has been delivered to Parent.
3.23. Transactions with Affiliates. Except as set forth in
Section 3.23 of the Disclosure Schedule and except in their
capacities as officers, directors and/or employees of the Company
-30-
<PAGE> 36
and the Subsidiaries, none of the Company Shareholders nor their relatives is
involved in any business arrangement or relationship with Company or the
Subsidiaries (whether written or oral), and none of the Company Shareholders nor
their relatives owns any property or right, tangible or intangible, which is
used by the Company or the Subsidiaries.
3.24. Funded Debt. Except as set forth in Section 3.24 of the Disclosure
Schedule, neither the Company or any Subsidiary has outstanding any Funded Debt.
3.25. Closing Date. All of the representations and warranties of the
Company contained in this Article III are restated on and as of the Closing Date
and shall be true and correct in all respects with the same effect as though
made as of the Closing Date, subject in each case to any exception to such
representations and warranties set forth in the Disclosure Schedule, as the same
may be updated from time to time prior to and as of the Closing Date by delivery
to Parent and Newco in accordance with the terms of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO
Parent and Newco each represent and warrant to the Company and the Company
Shareholders as follows:
4.1. Organization. Parent is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Parent
has all requisite corporate power to enter into this Agreement and the other
documents and instruments to be executed and delivered by Parent and to carry
out the transactions contemplated hereby and thereby. Newco is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Wisconsin. Newco has all requisite corporate power to enter into this
Agreement and the other documents and instruments to be executed and delivered
by Newco and to carry out the transactions contemplated hereby and thereby.
4.2. No Violation. The execution and delivery of this Agreement and the
consummation by Parent and Newco of the transactions contemplated hereby will
not cause a breach or violation of or default under any provision of (a) the
articles of incorporation or bylaws of Parent or Newco; (b) any contract to
which Parent or Newco is a party or by which Parent or Newco may be bound; or
(c) any decree, order, injunction or other decision of any court, arbitrator or
governmental authority to which Parent or Newco may be subject.
4.3. Authority; Validity. The execution and delivery of this Agreement and
the other documents and instruments to be executed
-31-
<PAGE> 37
and delivered by Parent and Newco pursuant hereto and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
boards of directors of Parent and Newco. Except for obtaining any requisite
stockholder approval, no other corporate act or proceeding on the part of Parent
or Newco is necessary to authorize this Agreement or the other documents and
instruments to be executed and delivered by Parent or Newco pursuant hereto or
the consummation by Parent or Newco of the transactions contemplated hereby and
thereby. This Agreement constitutes, and when executed and delivered, the other
documents and instruments to be executed and delivered by Parent and Newco
pursuant hereto will constitute, valid and binding agreements of Parent or
Newco, enforceable against Parent and Newco in accordance with their respective
terms.
4.4. Third Party Consents. Except for the filing of appropriate notices
under the HSR Act, no approval, authorization, notice, consent or other action
by or filing with any Person is required for Parent's or Newco's execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
4.5. Investment/Operational Intent.
(a) Parent and Newco each has sufficient knowledge and experience in
financial and business matters to enable it to evaluate the merits and risks of
the transactions contemplated by this Agreement.
(b) Parent and Newco have been given access to information requested
regarding the Company and the Subsidiaries, including the opportunity to ask
questions of and receive answers from the officers of the Company and the
Subsidiaries concerning the present and proposed activities of the Company and
the Subsidiaries and to obtain the information which Parent or Newco deems
necessary or advisable in order to evaluate the merits and risks of the
transactions contemplated by this Agreement, and Parent and Newco have made
their own independent investigation of the Company and the Subsidiaries and the
merits and risks of the transactions contemplated by this Agreement.
Notwithstanding the foregoing sentence, no such investigation shall limit the
rights of Parent and Newco under Article VI hereof and, subject to Section 5.7
hereof and except to the extent the matters subject to such investigation have
been disclosed in this Agreement or in the Disclosure Schedule, Article VIII
hereof.
(c) Parent is acquiring the Company for its own account, for
investment/operational purposes, and not with a present view to resale or for
distribution of all or any portion of the Company Capital Stock.
-32-
<PAGE> 38
4.6. Closing Date. All of the representations and warranties of Parent and
Newco contained in this Article IV are restated on and as of the Closing Date
and shall be true and correct in all respects with the same effect as though
made as of the Closing Date.
ARTICLE V
COVENANTS
From and after the date of this Agreement, the parties shall comply with
the following covenants:
5.1. Access to Information and Records. The Company shall give Parent,
Newco, their counsel, accountants and other representatives and the Parent's
Lenders (i) reasonable access during normal business hours to all of the
properties, books, records, contracts and documents of Company and the
Subsidiaries for the purpose of such inspection, investigation and testing as
Parent or Newco deems appropriate (and Company shall furnish or cause to be
furnished to Parent, Newco and their representatives all information with
respect to the business and affairs of Company and the Subsidiaries as Parent or
Newco may reasonably request), provided, however, that neither Parent nor Newco,
nor their counsel, accountants or other representatives, shall have any
environmental test or assessment performed on or in connection with any of the
Real Property or Leased Real Property prior to the Effective Time other than a
routine "Phase I" assessment or report, without the prior written consent of the
Company Representative; (ii) with the prior consent of the Company
Representative in each instance, access to employees, agents and representatives
for the purposes of such meetings and communications as Parent or Newco
reasonably desires; and (iii) with the prior consent of Company Representative
in each instance, access to vendors, customers and others having business
dealings with Company.
5.2. Conduct of Business Pending the Closing. From the date hereof until
the Closing, except as otherwise approved in writing by Parent (which approval
shall not be unreasonably withheld), the Company shall comply with the following
covenants:
(a) No Material Changes. Company will carry on the Business
diligently and in substantially the same manner as heretofore and will not make
or institute any material changes in its methods of purchase, sale, management,
accounting or operation.
(b) Maintain Organization. Company will take such action as may be
commercially reasonable to maintain, preserve, renew and keep in favor and
effect the existence, rights and franchises of Company and the Subsidiaries and
will use commercially reasonable efforts to preserve the business organization
of Company and the Subsidiaries intact, to keep
-33-
<PAGE> 39
available to Company the present employees of the Company and the Subsidiaries,
and to preserve for Company and the Subsidiaries its present relationships with
suppliers and customers and others having business relationships with Company
and the Subsidiaries.
(c) No Corporate Changes. Company shall not amend its Restated
Articles of Incorporation or Bylaws or make any changes in authorized or issued
capital stock, except as contemplated by Section 6.11 of this Agreement.
(d) Maintenance of Insurance. Company shall maintain
all of the insurance in effect as of the date hereof.
(e) Maintain Assets. The Company will maintain the Proprietary
Rights so as not to affect adversely any registration or application for
registration thereof or the validity or enforcement thereof, and maintain its
other assets in customary repair, order and condition; and in the event of any
casualty, loss or damage to any of such assets repair or replace such assets
with assets of comparable quality and value in accordance with past custom and
practice.
(f) Perform Obligations. The Company will and will cause the
Subsidiaries to perform in all material respects all of its obligations under
all notes, bonds, mortgages, indentures, licenses, contracts, agreements or
other instruments or obligations to which the Company or any Subsidiary is a
party or by which any of them or any of their respective properties or assets
may be bound and not enter into, assume or amend any such contract or commitment
other than in the ordinary course of business in accordance with past custom and
practice.
(g) Taxes. The Company will pay all Taxes and estimated Taxes and
prepare and file all Tax Returns and other Tax reports, filings and amendments
thereto required to be filed by it, on a timely basis.
(h) Notice of Breach. The Company will promptly inform Parent in
writing of any material breach of or change in the representations and
warranties contained in Article III hereof.
(i) Representations and Warranties. Neither the Company nor any
Subsidiary shall enter into any contract, agreement or commitment or take any
other action (other than in the ordinary course of business) which, if entered
into or taken prior to the date of this Agreement, would cause any
representation or warranty of the Company to be untrue in any material respect
or be required to be disclosed on the Disclosure Schedule (including, without
limitation, with respect to Section 3.7 hereof).
(j) Affiliate Transactions. Except as contemplated by
Section 6.12 and 6.13 of this Agreement and except as set forth in
-34-
<PAGE> 40
Section 5.2(j) of the Disclosure Schedule, neither the Company nor any
Subsidiary will enter into or become party to any agreement, arrangement or
transaction with any of its respective directors, officers, employees,
stockholders or their relatives except in the Ordinary Course, including,
without limitation, any (i) loan or advance of funds, or make any other payments
except in the Ordinary Course, to any of its directors, officers, employees or
stockholders, (ii) creation or discharge of any intercompany account, other than
in the Ordinary Course, or (iii) payment or declaration of any dividend,
redemption or other distribution with respect to their respective capital stock.
(k) No Indebtedness. Neither the Company nor any Subsidiary will
incur any Funded Debt.
(l) Capital Expenditures. Except as set forth in Section 5.2(l) of
the Disclosure Schedule, neither the Company nor any Subsidiary will make any
capital expenditure or any other investment (or series of related investments)
in excess of $100,000, except in the Ordinary Course.
(m) Employees. Except as set forth in Section 5.2(m) of the
Disclosure Schedule, neither the Company nor any Subsidiary will adopt, modify,
amend or terminate any bonus, profit-sharing, incentive, severance, or other
similar plan (including any Employee Benefit Plan), contract, or commitment for
the benefit of any of its directors, officers, or employees, or otherwise make
any change in the employment terms (including any increase in the base
compensation) for any of its officers and employees whose annual base
compensation is in excess of $50,000, except in the Ordinary Course.
(n) No Stock Issuances. Neither the Company nor any Subsidiary will
issue, sell or otherwise dispose of any of its capital stock, or grant, modify
or amend any options, warrants, stock appreciation rights, or other rights to
purchase or obtain (including upon conversion, exchange or exercise) any of its
capital stock.
(o) Working Capital. The Company and the Subsidiaries
will maintain a level of working capital in the Ordinary Course.
(p) Material Adverse Effect. The Company will not take or omit to be
taken any action, or permit its Subsidiaries to take or to omit to take any
action, which would result in a Material Adverse Effect.
5.3. HSR Act Filings. Each Party shall, in cooperation with the other
Parties, file or cause to be filed any reports or notifications that may be
required to be filed by it under the HSR Act, with the Federal Trade Commission
and the Antitrust Division of the Department of Justice, and shall furnish to
the others all
-35-
<PAGE> 41
such information in its possession as may be necessary for the completion of the
reports or notifications to be filed by the others. Prior to making any
communication, written or oral, with the Federal Trade Commission, the Antitrust
Division of the federal Department of Justice or any other governmental agency
or authority or members of their respective staffs with respect to this
Agreement or the transactions contemplated hereby, each Party shall consult with
the other Parties with respect thereto.
5.4. Consents. The Company will use reasonable best efforts prior to
Closing to obtain all governmental and third party consents necessary for the
consummation by the Company of the transactions contemplated hereby.
5.5. Publicity. All general notices, releases, statements and
communications to employees, suppliers, customers and the general public and the
press relating to the transactions contemplated by or consummated pursuant to
this Agreement shall be made only at such times and in such manner as may be
mutually agreed upon by the Company Representative and the Parent; provided,
however, that any party may make a public announcement of the proposed
transaction, if, in the opinion of counsel, such announcement is required to
comply with any Law or any rule or regulation of any securities exchange or
securities quotation system and such party shall, to the extent practicable,
consult with the other party with respect to such announcements and give
reasonable prior written notice of its intent to issue such announcement.
5.6. Merger Payment Statements. Copies of Merger Payment Statements for
each Company Shareholder shall be delivered by the Company to Parent prior to
the mailing of the proxy statement or information statement used by Company in
connection with its special shareholder's meeting relating to the Merger. The
Company shall deliver the Merger Payment Statements to the Company Shareholders
with the proxy statement or information statement, together with directions to
all Company Shareholders to sign their Merger Payment Statement confirming their
agreement to the amounts stated therein and return the Merger Payment Statement
to the Company on or prior to five (5) business days prior to the Closing Date.
5.7. Disclosure Schedule.
(a) Disclosure Schedule. Contemporaneously with the execution and
delivery of this Agreement, the Company is delivering to Parent the Disclosure
Schedule, which is accompanied by a certificate signed by the chief executive
officer of the Company stating that the Disclosure Schedule is being delivered
pursuant to this Agreement and is the Disclosure Schedule referred to in this
Agreement. The Disclosure Schedule is deemed to constitute an integral part of
this Agreement and to modify the representations, warranties, covenants or
agreements of the Company contained in
-36-
<PAGE> 42
this Agreement to the extent specified therein by reference to corresponding
sections of this Agreement. Subject to the next sentence, the inclusion of any
item in the Disclosure Schedule shall constitute disclosure solely for purposes
of the section hereof specifically referenced therein, but shall not be
construed as an indication of the materiality or lack of materiality of such
item. The Company shall use its best efforts to number all exceptions noted in
the Disclosure Schedule to correspond to the applicable section of this
Agreement to which such exception refers, but it is understood that the failure
to do so shall not constitute a breach of any representation or warranty made in
this Agreement so long as such exception is disclosed with reasonable
specificity elsewhere in the Disclosure Schedule or elsewhere in this Agreement
and the Company Representative can establish that Parent reasonably should have
known that an exception noted in the Disclosure Schedule or elsewhere in this
Agreement as corresponding to a particular section or sections of this Agreement
also would correspond to another section or sections of this Agreement.
(b) Updates. Subject to Section 6.1, prior to the Closing Date, the
Company may update and supplement the Disclosure Schedule from time to time by
written notice to Parent. If requested by Parent, the Company shall meet and
discuss with Parent any change in the Disclosure Schedule made by the Company.
5.8. Company Shareholders Approval. The Company agrees, as soon as
reasonably practicable after the date of this Agreement, to take all steps
necessary to duly call, give notice of, convene and hold a special meeting of
the Company Shareholders no later than thirty (30) calendar days after the date
of this Agreement, as provided by Law and its bylaws, for the purpose of
securing their approval of this Agreement and the Merger Agreement or otherwise
to obtain such approval by written consent of the Company Shareholders dated no
later than thirty (30) days after the date of this Agreement. The Board of
Directors of the Company has recommended and will recommend that the Company
Shareholders vote to adopt and approve the Merger.
5.9. Newco Shareholder Approval. Parent's execution of this Agreement
evidences Parent's consent to and approval of the Merger as sole shareholder of
Newco and, if separately required to further evidence such consent and approval,
Parent agrees to cause the shares of Newco owned by it to be voted in favor of
the Merger subject to the terms and conditions of this Agreement.
5.10. Indemnification of Directors and Officers. Until the fifth
anniversary of the Closing Date, Parent shall not take, nor permit the Company
or Newco to take, any action so as to amend the provisions of the Restated
Articles of Incorporation or Bylaws of Company or any of the Subsidiaries with
respect to the indemnification of directors and officers, if such amendment
would adversely affect the rights of any person who shall have served as
-37-
<PAGE> 43
a director or officer of Company or any of the Subsidiaries prior to the
Closing. This covenant of Parent may be enforced after the Closing Date by the
Company Representative on behalf of any then current or former officer or
director whose rights are adversely affected by any such amendment.
5.11. Company Representative. By approving this Agreement, the Company
Shareholders hereby irrevocably make, constitute and appoint E.W. Aylward as
their true and lawful attorney-in-fact to take all actions required under this
Agreement on behalf of the Company Shareholders (including, without limitation,
the resolution or dispute of any claims) in their name and stead and further
ratify and approve all such actions as their own. In the event of the death,
inability to act or declination to act of E.W. Aylward, then a successor Company
Representative shall be selected by a majority vote of the Company Shareholders.
5.12. Third Party Proposals. From the date hereof until the earlier of the
Effective Time or the termination of this Agreement by the Company in accordance
with Article IX of this Agreement, neither the Company, any Subsidiary or any
Company Shareholder shall initiate, solicit, negotiate, accept or encourage,
directly or indirectly, inquiries or proposals (each, an "Acquisition Proposal")
with respect to, or furnish any information relating to, or enter into any
agreement with respect to, any acquisition or purchase of all or a substantial
portion of the assets (other than inventory and equipment in the Ordinary
Course) of, or the capital stock of, the Company or any Subsidiary or any
business combination with the Company other than as contemplated by this
Agreement (a "Third Party Acquisition"), or authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it to take any such
action. The Company shall notify Parent promptly if any Acquisition Proposal is
received by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated with, the Company, any Subsidiary or, to
the Knowledge of the Company, any Company Shareholder, or any of their
respective officers, directors, stockholders, employees, agents or
representatives. The Company shall immediately cease and cause to be terminated
any existing discussions or negotiations with any parties conducted prior to the
date hereof with respect to any Acquisition Proposal. The Company represents
that neither it nor any Subsidiary or their respective stockholders is party to
or bound by any agreement with respect to an Acquisition Proposal other than
under this Agreement. The Company shall cause its Subsidiaries, officers,
directors, stockholders, agents and advisors to comply with the provisions of
this Section 5.12.
5.13. Non-Competition; Non-Interference; Non-Solicitation. As a
significant inducement to Parent to enter into and perform its obligations under
this Agreement, on the Closing Date the Company
-38-
<PAGE> 44
shall cause the Covered Individuals to enter into restrictive covenant
agreements with the Parent, dated the Closing Date and in form and substance
reasonably satisfactory to Parent and such Covered Individuals, providing
substantially as follows:
(a) For a period of three (3) years after the Closing Date
("Non-Competition Period"), they shall not, directly or indirectly, own,
operate, lease, manage, control, engage in, invest in, permit their names to be
used by, act as consultants or advisors to, render services for (alone or in
association with any person, firm, corporate or other business organization) or
otherwise assist in any manner any person or entity that manufactures any
products or provides any services that may be used as substitutes for or are
otherwise in competition with any products or services in the business of the
Company anywhere in the United States as it exists or is proposed as of the
Closing Date or the date of this Agreement ("Covered Activities"). Nothing
herein shall prohibit any Covered Individual from being a passive owner of not
more than four percent (4%) of the outstanding stock of any class of securities
of a publicly traded corporation engaged in Covered Activities, so long as such
Covered Individual does not actively participate in the management of such
corporation;
(b) During the Non-Competition Period, they shall not, (i) induce or
attempt to induce any employee of the Company or any of its Subsidiaries to
leave its employ, or (ii) induce or attempt to induce any supplier, licensee,
franchisee, customer or other business relation of the Company to cease doing
business with it;
(c) That (i) the covenants set forth in Sections 5.13(a) and (b) are
reasonable in geographical and temporal scope and in all other respects, (ii)
Parent would not have entered into this Agreement but for the covenants of the
Covered Individuals contained therein, and (iii) the covenants contained therein
have been made in order to induce Parent to enter into this Agreement; and
(d) That if, at the time of enforcement of the covenants contained
in Sections 5.13(a) and (b), a court shall hold that the duration, scope, or
area restrictions stated therein are unreasonable under circumstances then
existing, the parties agree that the maximum duration, scope, or area reasonable
under such circumstances shall be substituted for the stated duration, scope or
area.
(e) That the Covered Individuals recognize and affirm that in the
event of their breach of any of the foregoing restrictive covenants, money
damages would be inadequate and the damaged party would have no adequate remedy
at law. Accordingly, each Covered Individual agrees that Parent and Newco shall
have the right, in addition to any other rights and remedies existing in its
favor, to enforce its rights and the Covered Individuals'
-39-
<PAGE> 45
obligations therein not only by an action or actions for damages, but also by an
action or actions for specific performance, injunction and/or other equitable
relief in order to enforce or prevent any violations (whether anticipatory,
continuing or future) of the provisions thereof (including, without limitation
but without duplication, the extension of the Non-Competition Period by a period
equal to (i) the length of the violation of any of the provisions thereof plus
(ii) the length of any court proceedings necessary to stop such violation). In
the event of a breach or violation of any of the provisions thereof, the running
of the Non-Competition Period (but not of the Covered Individuals' obligations
thereunder) shall be tolled during the continuance of any actual breach or
violation.
ARTICLE VI
CONDITIONS PRECEDENT TO PARENT'S AND NEWCO'S OBLIGATIONS
Each and every obligation of Parent and Newco to be performed on the
Closing Date shall be subject to the satisfaction prior to or at the Closing of
each of the following conditions:
6.1. Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Company in this Agreement shall be true
and correct in all material respects (i) when made and (ii) at and as of the
Closing Date as though such representations and warranties were made or given on
and as of the Closing Date; provided, however, that for purposes of this Section
6.1 only, any updates and supplements to the Disclosure Schedule delivered by
the Company to Parent after the date of this Agreement and prior to the Closing
shall not be taken into account, except in each of cases (i) and (ii) for any
changes consented to in writing by Parent or Newco; and for purposes of this
Section 6.1 only no effect shall be given to any materiality qualifier contained
in any such representation or warranty.
6.2. Compliance With Agreement. The Company shall have in all material
respects performed and complied with all of its agreements and obligations under
this Agreement which are to be performed or complied with by it prior to or on
the Closing Date.
6.3. Absence of Litigation. No action, suit, investigation or proceeding
shall have been commenced or threatened by a governmental agency or third party
against Parent, Newco, Company, Subsidiaries, or any of the affiliates, officers
or directors of any of them, with respect to the transactions contemplated
hereby, challenging the rights of the parties hereto to consummate such
transactions or which reasonably could be expected to have a Material Adverse
Effect.
6.4. Consents and Approvals. All material approvals, consents and waivers
that are necessary for the Company to effect the
-40-
<PAGE> 46
transactions contemplated hereby shall have been received, and executed
counterparts thereof shall have been delivered to Parent or Newco at or prior to
the Closing.
6.5. HSR Act Waiting Period. All applicable waiting periods related to the
HSR Act shall have expired.
6.6. No Material Adverse Effect. During the period from the date hereof to
the Closing Date, no event which has had or could reasonably be expected to have
a Material Adverse Effect shall have occurred.
6.7. Shareholders Approval. This Agreement, including specifically the
Merger Agreement, the Merger and the transactions contemplated thereby shall
have been approved by at least a majority of all the votes entitled to be cast
with respect thereto by the holders of the outstanding Class A Common Stock and
the holders of the outstanding Class B Common Stock, voting as separate voting
groups; and dissenters' rights shall not have been asserted with respect to more
than 1% of the number of issued and outstanding shares of Class A Common Stock
and Class B Common Stock, taken together as a single class for this purpose.
6.8. Articles of Merger. The Articles of Merger shall have been filed with
the Wisconsin Department of Financial Institutions.
6.9. Documents to be Delivered by Company. At the Closing, Company shall
have delivered to Parent and Newco the following documents, in each case duly
executed or otherwise in proper form:
(a) Stock Certificate(s). Stock certificates representing all of the
outstanding shares of the Class A Common Stock and Class B Common Stock, except
for stock certificates held by a Company Shareholder who has asserted
dissenters' rights.
(b) Compliance Certificate. A certificate signed by the chief
executive officer of the Company that each of the representations and warranties
made by the Company in this Agreement is true and correct in all material
respects on and as of the Closing Date with the same effect as though such
representations and warranties had been made or given on and as of the Closing
Date (except for any changes permitted by the terms of this Agreement or
consented to in writing by Parent), and that the Company has performed and
complied in all material respects with all of its obligations under this
Agreement which are to be performed or complied with on or prior to the Closing
Date.
(c) Opinion of Counsel. A written opinion of Quarles & Brady,
counsel to Company, dated as of the Closing Date, addressed to Parent and Newco,
substantially in the form of Exhibit E hereto.
-41-
<PAGE> 47
(d) Certified Resolutions. Certified copies of the resolutions of
the Board of Directors and the shareholders of Company, authorizing and
approving this Agreement and the consummation of the transactions contemplated
by this Agreement.
(e) Escrow Agreement and Paying Agent Agreement. The Escrow
Agreement and Paying Agent Agreement.
(f) Articles; Bylaws. A copy of the articles of incorporation of
Company and each Subsidiary certified as of a recent date by the Wisconsin
Department of Financial Institutions and a copy of the bylaws of Company and
each Subsidiary certified by the secretary of Company and each Subsidiary,
respectively.
(g) Incumbency Certificate. Incumbency certificates relating to each
person executing (as a corporate officer or otherwise on behalf of another
person) any document executed and delivered to Parent or Newco pursuant to the
terms hereof.
(h) Non-Competition, Non-Interference, Non-Solicitation Agreement.
Parent shall have received the non-competition, noninterference and
non-solicitation agreement referred to in Section 5.13 of this Agreement
executed by each Covered Individual.
(i) Other Documents. All other documents, instruments or writings
required to be delivered to Parent or Newco at or prior to the Closing pursuant
to this Agreement and such other certificates of authority and documents as
Parent or Newco may reasonably request.
6.10. Merger Payment Statements. Parent shall have received signed copies
of Merger Payment Statements from all of the Company Shareholders except any
Company Shareholder who has asserted dissenters' rights.
6.11. Amendment of Restated Articles. The Company shall have amended its
Restated Articles of Incorporation to remove therefrom any restrictions on the
transfer of Company Capital Stock.
6.12. Termination of Restrictive Stock Transfer Agreement. The Company and
the Company Shareholders party thereto shall have terminated that certain
Restrictive Stock Transfer Agreement dated July 14, 1995.
6.13. Note Repayment and Release of Stock Pledge. The three (3) promissory
notes dated March 24, 1994 issued to the Company by E.W. Aylward, Andrew A.
Aylward and Richard J. Aylward, respectively, each in the original principal
amount of $974,000, shall have been repaid to the Company, and the shares of
Class B Common Stock pledged to the Company to secure payment of such loans
shall have been released by the Company from such pledges.
-42-
<PAGE> 48
6.14. Real Property.
(a) A title insurance company selected by Parent (the "Title
Company") shall be willing to insure at standard rates the Company's or the
applicable Subsidiary's marketable title in and to the Real Property in fee
simple and the mortgage lien on the Real Property of Parent's Lenders, free and
clear of all liens, defects, claims, leases, rights of possession or other
encumbrances (other than the matters disclosed in Section 3.8(d) of the
Disclosure Schedule) including such endorsements and affirmative coverages as
Parent and Parent's Lenders shall reasonably require including without
limitation non-imputation endorsements. Company shall provide all such
affidavits as the Title Company reasonably shall require in order to afford such
coverages.
(b) Parent shall have received a survey of each Real Property
conforming to the Minimum Standard Detail Requirements jointly established and
approved in 1992 by ALTA and ACSM certified to the Company, Parent's Lenders and
the Title Company and showing no encroachments or encumbrances other than the
matters disclosed in Section 3.8(d) of the Disclosure Schedule.
(c) Parent shall have received from the Company and each Subsidiary
that owns any of the Real Property an affidavit stating that such Person is not
a "foreign person", as defined in Section 1445(f)(3) of the Code.
6.15. Financing. Parent shall have received the cash proceeds of
financings from the Parent's Lenders in an amount necessary to consummate the
Merger and the other transactions contemplated hereby and to pay all fees and
expenses in connection therewith and to provide for the ongoing working capital
needs of the Company for the term of the senior financing provided by Parent's
Lenders, all on terms and conditions satisfactory to Parent.
6.16. Due Diligence. Parent shall have completed its due diligence review
of the Company and the Subsidiaries, and Parent shall, in good faith, be
satisfied with the results of such due diligence review.
6.17. Minimum Cash on Hand. The Company and its Subsidiaries on a
consolidated basis shall have at least $18,000,000 cash and cash equivalents on
hand at Closing (net of checks issued but not yet presented).
ARTICLE VII
CONDITIONS PRECEDENT TO COMPANY'S OBLIGATIONS
Each and every obligation of Company to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
conditions:
-43-
<PAGE> 49
7.1. Representations and Warranties True on the Closing Date. Each of the
representations and warranties made by Parent and Newco in this Agreement shall
be true and correct in all material respects when made and shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made or given on and as of the Closing Date.
7.2. Compliance With Agreement. Parent and Newco shall have in all
material respects performed and complied with all of their agreements and
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date.
7.3. Absence of Litigation. No litigation shall have been commenced or
threatened against Parent, Newco, Company, Subsidiaries or any of the
affiliates, officers or directors of any of them, with respect to the
transactions contemplated hereby which would prevent the Closing.
7.4. HSR Act Waiting Period. All applicable waiting periods related to the
HSR Act shall have expired.
7.5. Documents to be Delivered by Parent and Newco. At the Closing, Parent
and Newco shall deliver to Company the following documents, in each case duly
executed or otherwise in proper form:
(a) Compliance Certificates. A certificate signed by the chief
executive officer of Parent and a certificate signed by the chief executive
officer of Newco that each of the representations and warranties made by Parent
and Newco in this Agreement are true and correct in all material respects on and
as of the Closing Date with the same effect as though such representations and
warranties had been made or given on and as of the Closing Date (except for any
changes permitted by the terms of this Agreement or consented to in writing by
Company), and that Parent and Newco have each performed and complied with all of
their obligations under this Agreement which are to be performed or complied
with on or prior to the Closing Date.
(b) Opinion of Counsel. A written opinion of Kirkland & Ellis,
counsel to Parent and Newco, and, if determined necessary by Parent, of local
counsel as to applicable laws other than federal, New York and Delaware laws,
dated as of the Closing Date, addressed to Company and the Company
Representative, in substantially the form of Exhibit F hereto.
(c) Certified Resolutions. A certified copy of the resolutions of
the boards of directors of Parent and Newco, and of the sole shareholder of
Newco, authorizing and approving this Agreement and the consummation of the
transactions contemplated by this Agreement.
-44-
<PAGE> 50
(d) Incumbency Certificates. Incumbency certificates relating to
each person executing any document executed and delivered to Company by Parent
or Newco pursuant to the terms hereof.
(e) Escrow Agreement and Paying Agent Agreement. The Escrow
Agreement and Paying Agent Agreement.
(f) Other Documents. All other documents, instruments or writings
required to be delivered to Company at or prior to the Closing pursuant to this
Agreement and such other certificates of authority and documents as Company may
reasonably request.
7.6. Articles of Merger. The Articles of Merger shall have been filed with
the Wisconsin Department of Financial Institutions.
7.7. Shareholders Approval. This Agreement, including specifically the
Merger Agreement, the Merger and the transactions contemplated thereby shall
have been approved by at least a majority of all the votes entitled to be cast
with respect thereto by the holders of the outstanding Class A Common Stock and
the holders of the outstanding Class B Common Stock, voting as separate voting
groups.
7.8. Merger Price. Parent or Newco shall have paid the Merger Price in
accordance with the provisions of Article II of this Agreement and of the Merger
Agreement.
7.9. Reliance Letter. The Company Representative shall have received a
letter dated as of the Closing Date, addressed to the Board of Directors of the
Company and the Company Shareholders and in form and substance reasonably
satisfactory to the Company Representative, from the independent evaluation firm
that is providing a solvency letter to Parent's Lenders as to the solvency of
Parent and its subsidiaries on a consolidated basis after giving effect to the
transactions contemplated by this Agreement and the related agreements between
Parent and Parent's Lenders, stating that the Board of Directors of the Company
and the Company Shareholders may rely on such solvency letter with the same
effect as if such solvency letter had been issued to the Board of Directors of
the Company and the Company Shareholders directly.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1. Survival; Remedies for Breach.
(a) Each and every representation, warranty, agreement and covenant
made by Company, Parent or Newco in this Agreement or in any exhibits,
schedules, instruments of transfer or other documents delivered pursuant thereto
or in connection therewith
-45-
<PAGE> 51
shall be effective regardless of any investigation that may have been or may be
made at any time by or on behalf of the party to whom such representation,
warranty, agreement or covenant is made and shall survive the Closing, but
except as otherwise provided in this subsection 8.1, shall terminate on the date
that is eighteen (18) months after the Closing Date and thereafter be of no
further force or effect (the date on which any covenant, agreement,
representation or warranty terminates in accordance with this Article VIII being
referred to herein as the "Cut-off Date" for such covenant, agreement,
representation or warranty).
(b) Any covenant, agreement, representation or warranty of the
Company relating to Taxes or Tax Returns contained in Sections 3.6 or 5.2(g) of
this Agreement shall extend for a period of thirty-six (36) months after the
Closing Date.
(c) Any covenant, agreement, representation or warranty of the
Company relating to Environmental Laws or Hazardous Substances contained in
Sections 3.11 or 3.16 of this Agreement shall extend for a period of forty-eight
(48) months after the Closing Date.
(d) Any covenant or agreement contained herein that by its terms is
to be performed after the Closing Date shall survive for (i) a period of
eighteen (18) months from the last date on which performance is due under such
covenant or agreement, or (ii) in the absence of a specified due date for
performance, a period of two (2) years after the Closing Date.
(e) Any covenant, agreement, representation or warranty that would
otherwise terminate at the Cut-off Date with respect thereto shall survive as to
a claim for indemnification if the notice referred to in Section 8.2(b)(vi) or
Section 8.3(b), as the case may be, of the breach, inaccuracy or nonperformance
thereof shall have been given on or prior to the Cut-off Date with respect
thereto to the party against whom indemnification may be sought.
(f) The covenants and agreements contained in this Article VIII
shall survive until such time as any claim for indemnification is finally
settled in accordance with the terms hereof.
(g) After the Closing, the indemnities set forth in this Article
VIII shall be the exclusive remedies of the Company, Parent and Newco for the
breach of any covenant, agreement, representation or warranty in this Agreement
by the Company, Parent and Newco, as the case may be, and the parties shall not
be entitled to a rescission of this Agreement or to any further indemnification
rights or claims of any nature whatsoever in respect thereof, all of which the
Parties waive; provided, however, that any Dispute related to the post-closing
adjustment described in Section 2.6 of
-46-
<PAGE> 52
this Agreement shall be resolved pursuant to the procedures set forth in that
Section 2.6.
8.2. Indemnification on Behalf of Company Shareholders; Escrow of Funds.
(a) General. To induce Parent and Newco to enter into this Agreement
and to consummate the Merger, the Company has agreed, and by approving this
Agreement the Company Shareholders shall have agreed, that, subject to the
provisions of this Section and the other Sections of this Article VIII, the
Escrow Deposit shall be withheld and placed in escrow at Closing for the purpose
of indemnifying the Buying Group and their respective directors, officers,
employees and Shareholders and holding them harmless from and against, and as
the Buying Group's sole source of indemnification for, any and all Losses
incurred or sustained or suffered by, or imposed upon, Parent or Newco and their
respective directors, officers, employees and Shareholders, with respect to or
by reason of any failure, breach, default, inaccuracy or lack of performance on
the part of the Company of any of its representations, warranties, agreements or
covenants under this Agreement or contained in any certificate, document or
instrument delivered by the Company hereunder. The Escrow Deposit shall be
withheld and placed in escrow at the Closing with the Escrow Agent who shall
hold and administer the Escrow Deposit in accordance with the terms of the
Escrow Agreement. ALL INDEMNITY PAYMENTS TO THE BUYING GROUP UNDER THIS
AGREEMENT SHALL BE PAID FROM AND LIMITED TO, AND SHALL IN NO CIRCUMSTANCES
EXCEED, THE PRINCIPAL OF THE ESCROW DEPOSIT. SUCH INDEMNITY PAYMENTS FROM THE
ESCROW DEPOSIT SHALL BE THE SOLE SOURCE OF PAYMENT FROM, AND THE SOLE REMEDY
AGAINST, THE COMPANY AND THE COMPANY SHAREHOLDERS SHALL HAVE NO RESPONSIBILITY
FOR AMOUNTS THAT MAY BECOME PAYABLE HEREUNDER, OR OTHERWISE, EXCEPT TO THE
EXTENT OF THEIR PRO RATA PORTION OF THE PRINCIPAL OF THE ESCROW DEPOSIT.
(b) Notwithstanding anything to the contrary in this Agreement, the
Buying Group shall not be entitled to indemnification under Section 8.2(a):
(i) with respect to a claim for indemnification hereunder
related to the title of any real estate with respect to which there is a title
insurance policy in effect, except to the extent that the Buying Group has first
unsuccessfully attempted to recover upon such title insurance, provided that the
Cut-off Date with respect to any such claim shall be tolled for any period
during which the Company or any Subsidiary is in good faith trying to recover
under such title insurance if the Company Representative has been given written
notice of such claim by Parent prior to the applicable Cut-off Date in the
manner required hereunder; and
(ii) in connection with any claim for indemnification
hereunder with respect to which the Company or any
-47-
<PAGE> 53
Subsidiary has an enforceable contractual right of indemnification or right of
set-off against any third party, except to the extent that the Company or such
Subsidiary has first unsuccessfully attempted to recover upon such contractual
right of indemnification or set-off or unless the Company or such Subsidiary is
enjoined by a court of competent jurisdiction or otherwise legally prevented
from receiving the benefit of any such contractual right of indemnification or
set-off, provided that the Cut-off Date with respect to any such claim shall be
tolled for any period during which the Company or any Subsidiary is in good
faith trying to recover from any such third party if the Company Representative
has been given written notice of such claim by Parent prior to the applicable
Cut-off Date in the manner required hereunder; and
(iii) with respect to any Loss resulting from a breach of a
representation, warranty, covenant or agreement that is disclosed in a written
notice, setting forth in reasonable detail the specific facts and circumstances
pertaining thereto, delivered by the Company to Parent after the date of this
Agreement and not less than ten (10) days prior to the Closing if the Buying
Group nevertheless elects to close (regardless of whether the Buying Group
waives such breach in writing or otherwise); and
(iv) in connection with any claim for indemnification based
upon a claim, assessment or deficiency for any Tax which arises from adjustments
having the effect only of shifting income, credits and/or deductions from one
fiscal period to another to the extent of any offsetting reduction in Tax for
another period; and
(v) to the extent of the value of any net Tax benefit realized
(by reason of a Tax deduction, basis reductions, shifting of income, credits
and/or deductions or otherwise) by the Buying Group or the Company in connection
with the Loss that forms the basis of the Buying Group's claim for
indemnification hereunder net of any Tax due from the Buying Group with respect
to the indemnification payment itself; and
(vi) with respect to any claim for indemnification hereunder,
unless Parent has given the Company Representative written notice of such claim,
setting forth what Parent in good faith reasonably believes is sufficient detail
as to the facts and circumstances pertaining thereto to inform the Company
Representative of the nature of the claim, prior to the applicable Cut-off Date;
and
(vii) to the extent of any insurance proceeds actually
received by the Buying Group in connection with the facts giving rise to such
indemnification, net of any Tax due with respect to the receipt of such
insurance proceeds and net of the present value of any future insurance premium
increases directly
-48-
<PAGE> 54
attributable to the insurance claim filed by the Buying Group that gave rise to
the insurance proceeds received; and
(viii) for any De Minimis Claim, it also being understood and
agreed by the parties to this Agreement that for purposes of clauses (ix), (x),
(xi) and (xii) of this Section 8.2(b), the amount of the Buying Group's Losses
shall not include the amount of any De Minimis Claim; and
(ix) for the first $500,000.00 of Losses as to which the
Buying Group otherwise may be entitled to indemnity hereunder (without giving
effect to this clause (ix) or clauses (x), (xi) or (xii) of this Section
8.2(b)), all of such $500,000.00 of Losses being the responsibility of the
Buying Group, it being understood and agreed, however, by the parties to this
Agreement that the limitations on indemnification set forth in this clause (ix)
and in clauses (x), (xi) and (xii) of this Section 8.2(b) shall not apply with
respect to Losses of the Buying Group arising from (i) failure of the Company or
the Company Representative to perform their respective obligations under
Sections 2.3, 2.6, 5.2(j), 5.2(k), 5.2(m), 5.2(n) and 10.6(f) of this Agreement
and this Article VIII or (ii) any breach by the Company of its representations
and warranties contained in Sections 3.1(c), 3.2, 3.23, 3.24 and 11.6(a) of this
Agreement; and
(x) for two-thirds of each dollar of Losses of the second
$500,000.00 of Losses (over and above the $500,000.00 of Losses specified in
clause (ix) of this Section 8.2(b)) as to which the Buying Group otherwise may
be entitled to indemnity hereunder (without giving effect to this clause (x) or
clauses (ix), (xi) or (xii) of this Section 8.2(b)), all of such two-thirds of
each dollar of Losses of the second $500,000.00 of Losses being the
responsibility of the Buying Group; and
(xi) for one-half of each dollar of Losses of the third
$500,000.00 of Losses (over and above the $500,000.00 of Losses specified in
clauses (ix) and (x) of this Section 8.2(b)) as to which the Buying Group
otherwise may be entitled to indemnity hereunder (without giving effect to this
clause (xi) or clauses (ix), (x) or (xii) of this Section 8.2(b)), all of such
one-half of each dollar of Losses of the third $500,000.00 of Losses being the
responsibility of the Buying Group; and
(xii) for one-third of each dollar of Losses of the fourth
$500,000.00 of Losses (over and above the $500,000.00 of Losses specified in
clauses (ix), (x) and (xi) of this Section 8.2(b)) as to which the Buying Group
otherwise may be entitled to indemnity hereunder (without giving effect to this
clause (xii) or clauses (ix), (x) or (xi) of this Section 8.2(b)), all of such
one-third of each dollar of Losses of the fourth $500,000.00 of Losses being the
responsibility of the Buying Group; and
-49-
<PAGE> 55
(xiii) for any Losses in excess of the amount in the Escrow
Deposit, all of such Losses in excess of the Escrow Deposit being the
responsibility of the Buying Group.
The following examples are for illustration purposes only with
respect to clauses (ix), (x), (xi) and (xii) of this Section 8.2(b): Example A:
in the event that Losses in aggregate total $750,000, Buying Group shall not be
entitled to any indemnification with respect to the first $500,000 thereof, but
shall be entitled to indemnification for one-third of every dollar of Losses in
excess of $500,000 (i.e. 1/3 x $250,000 = $83,333.33); Example B: if Losses in
aggregate total $1,250,000, Buying Group shall be entitled to one-third of every
dollar of Losses in excess of $500,000 up to $1,000,000 and one-half of every
dollar of Losses in excess of $1,000,000 (i.e. (1/3 x $500,000) + (1/2 x
$250,000) = $291,666.67).
8.3. Indemnification by Parent.
(a) Subject to the provisions of this Section and the other Sections
of this Article VIII, Parent agrees to indemnify the Company and hold it
harmless (and agrees to indemnify and hold harmless any persons adversely
affected by Parent's failure to comply with Section 5.10 of this Agreement) from
and against any and all Losses incurred or sustained by or imposed upon the
Company (or such persons) with respect to or by reason of any failure, breach,
default, inaccuracy or lack of performance on the part of Parent or Newco of any
of their respective representations, warranties, agreements or covenants under
this Agreement or contained in any certificate, document or instrument delivered
by Parent or Newco hereunder.
(b) Notwithstanding anything to the contrary in this Agreement, the
Company (and such persons) shall not be entitled to indemnification under
Section 8.3(a) with respect to any claim for indemnification hereunder unless
the Company Representative has given Parent written notice of such claim,
setting forth what the Company Representative in good faith reasonably believes
is sufficient detail as to the facts and circumstances pertaining thereto to
inform the Parent of the nature of the claim prior to the applicable Cut-off
Date.
8.4. Procedures for Indemnification.
(a) If an Indemnified Party shall claim to have suffered a Loss for
which indemnification is available under Section 8.2 or 8.3, as the case may be
(for purposes of this Section 8.4, regardless of whether such Indemnified Party
is entitled to receive a payment in respect of such claim by virtue of
paragraphs (b)(ix), (x), (xi) or (xii) of Section 8.2), the Indemnified Party
shall notify the Indemnifying Party in writing of such claim within the time
periods provided in paragraph (b)(vi) of Section 8.2 or
-50-
<PAGE> 56
paragraph (b) of Section 8.3, as the case may be. Such written notice shall
describe what the Indemnified Party in good faith reasonably believes to be the
nature of such claim, the facts and circumstances that give rise to such claim
and the amount of such claim if reasonably ascertainable at the time such claim
is made (or if not then reasonably ascertainable, the maximum amount of such
claim reasonably estimated by the Indemnified Party). In the case of a claim by
the Buying Group, a copy of such written notice shall also be provided by the
Indemnified Party to the Escrow Agent. In the event that within forty-five (45)
days after the receipt by the Indemnifying Party of such a written notice from
the Indemnified Party, the Indemnified Party shall not have received from the
Indemnifying Party a written objection to such claim, such claim shall be
conclusively presumed and considered to have been assented to and approved by
the Indemnifying Party.
(b) If within the forty-five (45) day period described in paragraph
(a) above the Indemnified Party (and, in the case of claim by the Buying Group,
the Escrow Agent) shall have received from the Indemnifying Party a notice
setting forth the Indemnifying Party's objections to such claim and the
Indemnifying Party's reasons for such objection, then the Parties shall follow
the procedures set forth in Article X below with respect to the resolution of
such matter.
8.5. Procedures for Third-Party Claims.
(a) Any Indemnified Party seeking indemnification pursuant to this
Article VIII in respect of any Third-Party Claim shall give the Indemnifying
Party from whom indemnification with respect to such claim is sought (i) prompt
written notice (but in no event more than twenty (20) days after the Indemnified
Party acquires knowledge thereof) of such Third-Party Claim and (ii) copies of
all documents and information relating to any such Third-Party Claim within
twenty (20) days of their being obtained by the Indemnified Party; provided,
that the failure by the Indemnified Party to so notify or provide copies to the
Indemnifying Party shall not relieve the Indemnifying Party from any liability
to the Indemnified Party for any liability hereunder except to the extent that
such failure shall have materially prejudiced the defense of such Third-Party
Claim.
(b) The Indemnifying Party shall have the right, at its option, and
expense, to defend against, negotiate, settle or otherwise deal with any
Third-Party Claim with respect to which it is the Indemnifying Party and to be
represented by counsel of its own choice, and the Indemnified Party will not
admit any liability with respect thereto or settle, compromise, pay or discharge
the same without the consent of the Indemnifying Party, which consent shall not
be unreasonably withheld, so long as such claim is primarily for money damages
and the Indemnifying Party is contesting or defending the same with reasonable
diligence and in
-51-
<PAGE> 57
good faith; provided, that the Indemnified Party may participate in any
proceeding with counsel of its choice and at its expense and shall be entitled
to control any such proceeding as to which the counsel for the Indemnifying
Party has an ethical conflict of interest in representing both the Indemnifying
Party and the Indemnified Party which conflict the Indemnified Party is not
willing to waive; provided further, that the Indemnifying Party may not enter
into a settlement of any such Third-Party Claim without the consent of the
Indemnified Party, which consent shall be not unreasonably withheld, unless such
settlement requires no more than a monetary payment for which the Indemnified
Party is fully indemnified by the Indemnifying Party or involves other matters
not binding upon the Indemnified Party and as to which the Indemnified Party has
been fully released; and provided further that, in the event the Indemnifying
Party does not, within fifteen (15) days after it receives written notice of the
Third-Party Claim from the Indemnified Party, agree in writing to accept the
defense of, and assume all responsibility for, such Third-Party Claim as
provided above in this Section 8.5(b), then the Indemnified Party shall have the
right to defend against, negotiate, settle or otherwise deal with the
Third-Party Claim in such manner as the Indemnified Party deems appropriate, in
its sole discretion, and the Indemnified Party shall be entitled to
indemnification therefor from the Indemnifying Party to the extent provided
under this Article VIII.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1. Causes. This Agreement and the transactions contemplated hereby may
be terminated at any time prior to the completion of the Closing as follows, and
in no other manner:
(a) By mutual consent of the Parties;
(b) By written notice from Parent to the Company if:
(i) there have been material misrepresentations or breaches by
the Company in the representations, warranties, agreements or covenants of the
Company set forth herein which misrepresentations or breaches, individually or
in the aggregate, would or would be reasonably likely to result in a Material
Adverse Effect, and such misrepresentations or breaches have not been cured
within a reasonable time after notice thereof to the Company from Parent; or
(ii) any of the conditions provided for in Article VI of this
Agreement have not been satisfied, or waived by Parent or Newco in writing, and
the Closing has not occurred by January 31, 1997 or the date of such notice,
whichever is later; or
-52-
<PAGE> 58
(iii) the Closing has not occurred by February 15, 1997, for
reasons other than the failure of the Parent or Newco to perform their
respective obligations hereunder; or
(c) By written notice from the Company to Parent and Newco if:
(i) there has been a material misrepresentation or breach by
Parent or Newco in the respective representations, warranties, agreements or
covenants of Parent and Newco set forth herein and such misrepresentation or
breach has not been cured within a reasonable time after notice thereof to
Parent and Newco from the Company; or
(ii) any of the conditions provided for in Article VII of this
Agreement have not been satisfied, or waived by the Company in writing, and the
Closing has not occurred by January 31, 1997 or the date of such notice,
whichever is later; or
(iii) the Closing has not occurred by February 15, 1997, for
reasons other than the failure of the Company to perform its obligations
hereunder; or
(iv) any of the events identified as "termination events" on
Schedule 9.1(c)(iv) attached to this Agreement has not occurred, or been waived
by the Company in writing, by the date indicated for such event.
9.2. Effect of Termination. In the event of a termination of this
Agreement by Parent or the Company under subparagraphs 9.1(b)(i) or 9.1(c)(i),
the terminating party shall have such rights and remedies in law or in equity as
the law may provide.
9.3. Right to Proceed. If any of the conditions specified in Article VI
hereof have not been satisfied, Parent and Newco, in lieu of any other rights
that may be available to them, may waive their rights to have such conditions
satisfied prior to Closing and may proceed with the transactions contemplated
hereby, and if any of the conditions specified in Article VII hereof have not
been satisfied prior to Closing, the Company, in lieu of any other rights that
may be available to it, may waive its rights to have such conditions satisfied
and may proceed with the transactions contemplated hereby.
ARTICLE X
DISPUTE RESOLUTION
10.1. Dispute. As used in this Agreement, "Dispute" shall mean any dispute
or disagreement between Parent (for itself or on behalf of Newco) and Company or
the Company Representative concerning the interpretation of this Agreement, the
validity of
-53-
<PAGE> 59
this Agreement, any breach or alleged breach by any party under this Agreement
or any other matter relating in any way to this Agreement.
10.2. Process. Other than with respect to claims or disputes arising in
connection with a breach or asserted breach of Section 5.12 of this Agreement or
the wrongful failure by the Company or Parent to consummate the Merger, if a
Dispute arises, the parties to the Dispute shall follow the procedures specified
in Sections 10.3, 10.4 and 10.5 of this Agreement; provided, however, that any
Dispute related to the post-closing adjustment described in Section 2.6 of this
Agreement shall be resolved pursuant to the procedures set forth in that Section
2.6.
10.3. Negotiations. The parties shall promptly attempt to resolve any
Dispute by negotiations between the Parent and the Company Representative.
Either the Parent or Company Representative may give the other party written
notice of any Dispute not resolved in the normal course of business. The Parent
and the Company Representative shall meet at a mutually acceptable time and
place within ten (10) calendar days after delivery of such notice, and
thereafter as often as they reasonably deem necessary, to exchange relevant
information and to attempt to resolve the Dispute. If the Dispute has not been
resolved by these Persons within thirty (30) calendar days of the disputing
party's notice, or if the parties fail to meet within such ten (10) calendar
days, either the Parent or the Company Representative may initiate mediation as
provided in Section 10.4 of this Agreement. If a negotiator intends to be
accompanied at a meeting by legal counsel, the other negotiator shall be given
at least three (3) business days' notice of such intention and may also be
accompanied by legal counsel.
10.4. Mediation. If the Dispute is not resolved by negotiations pursuant
to Section 10.3 of this Agreement, the Parent and the Company Representative
shall attempt in good faith to resolve any such Dispute by mediation. Either the
Parent or the Company Representative may initiate a mediation proceeding by a
request in writing to the other party (the "Request"), and both parties will
then be obligated to engage in a mediation. The proceeding will be conducted in
accordance with the then current Center for Public Resources ("CPR") Model
Procedure for Mediation of Business Disputes, with the following exceptions:
(a) if the parties have not agreed within thirty (30) calendar days
of the Request on the selection of a mediator willing to serve, CPR, upon the
request of either the Parent or the Company Representative, shall appoint a
member of the CPR Panels of Neutrals as the mediator; and
(b) efforts to reach a settlement will continue until the conclusion
of the proceedings, which shall be deemed to occur
-54-
<PAGE> 60
upon the earliest of the date that: (i) a written settlement is reached; or (ii)
the mediator concludes and informs the parties in writing that further efforts
would not be useful; or (iii) the Parent and the Company Representative agree in
writing that an impasse has been reached; or (iv) is sixty (60) calendar days
after the Request and none of the events specified in Sections 10.4(b)(i), (ii)
or (iii) have occurred. No party may withdraw before the conclusion of the
proceeding.
10.5. Submission to Adjudication. If a Dispute is not resolved by
negotiation pursuant to Section 10.3 of this Agreement or by mediation pursuant
to Section 10.4 of this Agreement within 100 calendar days after initiation of
the negotiation process pursuant to Section 10.3 of this Agreement, such Dispute
and any other claims arising out of or relating to this Agreement may be heard,
adjudicated and determined in an action or proceeding filed in any state or
federal court sitting in Milwaukee County, Wisconsin.
10.6. General.
(a) Provisional Remedies. At any time during the procedures
specified in Sections 10.3 and 10.4 of this Agreement, a party may seek a
preliminary injunction or other provisional judicial relief if in its judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo. Despite such action, the parties will continue to participate in good faith
in the procedures specified in this Article X of this Agreement.
(b) Tolling Statue of Limitations. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled while the
procedures specified in this Article X of this Agreement are pending. The
parties will take such action, if any, as is required to effectuate such
tolling.
(c) Performance to Continue. Each party is required to continue to
perform its obligations under this Agreement pending final resolution of any
Dispute.
(d) Extension of Deadlines. All deadlines specified in this Article
X of this Agreement may be extended by mutual agreement between the Parent and
the Company Representative.
(e) Enforcement. The parties regard the obligations in this Article
X of this Agreement to constitute an essential provision of this Agreement and
one that is legally binding on them. In case of a violation of the obligations
in this Article X of this Agreement by either the Parent or the Company
Representative, the other party may bring an action to seek enforcement of such
obligations in any court of Law having jurisdiction thereof.
-55-
<PAGE> 61
(f) Costs. The parties to the dispute shall pay: (i) their own
costs, fees, and expenses incurred in connection with the application of the
provisions of this Article X of this Agreement; and (ii) fifty percent (50%) of
the fees and expenses of CPR and the mediator in connection with the application
of the provisions of Section 10.4 of this Agreement; provided that, prior to the
Closing, the Company Representative's costs, fees and expenses shall be paid by
the Company, and after the Closing, the Company Representative's costs, fees and
expenses shall be paid pro rata by the Company Shareholders.
(g) Replacement. If CPR is no longer in business or is unable or
refuses or declines to act or to continue to act under this Article X of this
Agreement for any reason, then the functions specified in this Article X of this
Agreement to be performed by CPR shall be performed by another Person engaged in
a business equivalent to that conducted by CPR as is agreed to by the Parent and
the Company Representative (the "Replacement"). If the Parent and the Company
Representative cannot agree on the identity of the Replacement within ten (10)
calendar days after a Request, the Replacement shall be selected by the Chief
Judge of the United States District Court for the Eastern District of Wisconsin
upon application by any party hereto. If a Replacement is selected by either
means, this Article X shall be deemed appropriately amended to refer to such
Replacement.
ARTICLE XI
MISCELLANEOUS
11.1. Further Assurance. From time to time, at a Party's request and
without further consideration, the other Parties will execute and deliver to the
requesting Party such documents and take such other action as the requesting
Party may reasonably request in order to consummate more effectively the
transactions contemplated hereby.
11.2. Assignment. The rights and obligations of a Party hereunder may not
be assigned, transferred or encumbered without the prior written consent of the
other parties. Notwithstanding the foregoing, Parent may, without such written
consent assign, directly or indirectly, any or all of its rights and obligations
hereunder to any of its corporate affiliates under common ownership with Parent,
or for collateral purposes to any of Parent's Lenders or successor lenders
providing refinancing of the financing provided by Parent's Lenders.
11.3. Law Governing Agreement. This Agreement shall be
construed and interpreted according to the internal Laws of the
State of Wisconsin, excluding any choice of law rules that may
direct the application of the Laws of another jurisdiction.
-56-
<PAGE> 62
11.4. Amendment and Modification. Parent, Newco and Company may amend,
modify and supplement this Agreement, and any of the terms, covenants,
representations, warranties or conditions hereof may be waived, only by a
written instrument executed on behalf of all of the Parties hereto or, in the
case of a waiver, by the Party waiving compliance.
11.5. Notice. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, demands or requests are as
follows:
(a) If to Parent or Newco, to:
NFC Castings, Inc.
c/o Citicorp Venture Capital, Ltd.
399 Park Avenue, 14th Floor, Zone 4
New York, New York 10043
Attention: David F. Thomas
Facsimile: (212) 888-2940
(with a copy to)
Kirkland & Ellis
Citicorp Center
153 East 53rd Street
New York NY 10022-4675
Attention: Kirk A. Radke
Facsimile: (212) 446-4900
(b) If to Company:
Neenah Corporation
2121 Brooks Avenue
P.O. Box 729
Neenah, WI 54956
Attention: E.W. Aylward
Facsimile: (414) 729-3633
(with a copy to)
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Bruce C. Davidson
Facsimile: (414) 271-3552
-57-
<PAGE> 63
(c) If to Company Representative:
E.W. Aylward
241 Lake Road
Menasha, WI 54952
(with a copy to)
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Bruce C. Davidson
Facsimile: (414) 271-3552
If personally delivered, such communication shall be deemed delivered upon
actual receipt; if electronically transmitted pursuant to this paragraph, such
communication shall be deemed delivered the next business day after transmission
(and sender shall bear the burden of proof of delivery); if sent by overnight
courier pursuant to this paragraph, such communication shall be deemed delivered
upon receipt; and if sent by U.S. mail pursuant to this paragraph, such
communication shall be deemed delivered as of the date of delivery indicated on
the receipt issued by the relevant postal service, or, if the addressee fails or
refuses to accept delivery, as of the date of such failure or refusal. Delivery
to the Company Representative shall constitute delivery to all Company
Shareholders. Any Person may change its address for the purposes of this
Agreement by giving notice thereof in accordance with this Section.
11.6. Expenses. Regardless of whether or not the transactions contemplated
hereby are consummated:
(a) Brokerage. Except as to Brown, Gibbons, Lang & Company, L.P.,
who shall be compensated by the Company Shareholders, Company, Newco and Parent
each represent and warrant to each other that there is no broker involved or in
any way connected with the transfer provided for herein on their behalf
respectively and each agrees to hold the other harmless from and against all
other claims for brokerage commissions or finder's fees in connection with the
execution of this Agreement or the transactions provided for herein.
(b) Other. Except as otherwise provided herein, each of the Parties
shall bear its own expenses and the expenses of its counsel and other agents in
connection with the transactions contemplated hereby.
11.7. Entire Agreement; Binding Effect. This Agreement embodies the entire
agreement between the Parties hereto with respect to the transactions
contemplated herein, and there have been and are no agreements, representations
or warranties between
-58-
<PAGE> 64
the parties other than those set forth or provided for herein or executed
contemporaneously or in connection herewith. This Agreement shall be binding
upon and shall inure to the benefit of the Parties hereto and their respective
legal representatives, successors and permitted assigns.
11.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
11.10. Construction. Where any group or category of items or matters is
defined collectively in the plural number, any item or matter within such
definition may be referred to using such defined term in the singular number.
11.11. Specific Performance. Each of Company and Parent acknowledges that
the rights of each party to consummate the transactions contemplated hereby are
unique and recognizes and affirms that in the event of a breach of this
Agreement by any party, money damages may be inadequate and the non-breaching
party may have no adequate remedy at law. Accordingly, the parties agree that
such non-breaching party shall have the right, in addition to any other rights
and remedies existing in their favor at law or in equity, to enforce their
rights and the other party's obligations hereunder not only by an action or
actions for damages but also by an action or actions for specific performance,
injunctive and/or other equitable relief (without posting of bond or other
security).
11.12. Waiver of Jury Trial. Each of the parties hereto waives any right
it may have to trial by jury in respect of any litigation based on, or arising
out of, under or in connection with this Agreement or any course of conduct,
course of dealing, verbal or written statement or action of any party hereto.
11.13. No Strict Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
11.14. Time of the Essence; Computation of Time. Time is of the essence
for each and every provision of this Agreement. Whenever the last day for the
exercise of any privilege or the discharge of any duty hereunder shall fall upon
any day which is not a business day, the party having such privilege or duty may
exercise such privilege or discharge such duty on the next succeeding business
day.
-59-
<PAGE> 65
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date and year first above written.
NFC CASTINGS, INC.
/s/ John Weber
-----------------------------------
By: John Weber
--------------------------------
Title: Vice President
----------------------------
NC MERGER COMPANY
/s/ John Weber
-----------------------------------
By: John Weber
--------------------------------
Title: Vice President
----------------------------
NEENAH CORPORATION
By: /s/ E. W. Aylward
---------------------------------
Title: Chairman, President, & CEO
------------------------------
-60-
<PAGE> 66
EXHIBIT A
ARTICLES OF MERGER
OF
NC MERGER COMPANY
INTO
NEENAH CORPORATION
The undersigned, NC MERGER COMPANY, a Wisconsin corporation, and NEENAH
CORPORATION, a Wisconsin Corporation, each desire to give notice of corporate
action effecting the merger of NC MERGER COMPANY into NEENAH CORPORATION, and
acting by their respective officers and pursuant to Section 180.1105 of the
Wisconsin Business Corporation Law, hereby certify, each with respect to the
facts and acts relating to it, the following:
1. Plan of Merger.
(a) The surviving corporation shall be NEENAH CORPORATION and it shall
be governed by the laws of the State of Wisconsin.
(b) The terms and conditions of the merger, the manner and basis of
exchanging shares of each corporation into shares and cash, and other provisions
relating to the merger are set forth in the Merger Agreement which is attached
as Addendum A hereto and which is incorporated herein by reference.
2. Approval of Merger Agreement. The Merger Agreement has been adopted
and approved by the respective boards of directors and approved by the
respective shareholders of NC MERGER COMPANY and NEENAH CORPORATION in
accordance with Section 180.1103 of the Wisconsin Business Corporation Law.
3. Effective Time. The merger shall be effective upon the filing of
these Articles of Merger with the State of Wisconsin Department of Financial
Institutions.
<PAGE> 67
IN WITNESS WHEREOF, each of the parties hereto has caused these
Articles of Merger to be executed on its behalf by its respective duly
authorized officers, this _____ day of ____________, 1997.
NC MERGER COMPANY
By: ___________________________
_____________, President
Attest:
By: _____________________________
__________________, Secretary
NEENAH CORPORATION
By: ___________________________
E. W. Aylward, Chairman of
the Board, President and Chief
Executive Officer
Attest:
By: ___________________________
___________________, Secretary
This document was drafted by:
Patrick J. Goebel
Quarles & Brady
411 E. Wisconsin Avenue
Milwaukee, WI 53202
-2-
<PAGE> 68
EXHIBIT B
MERGER AGREEMENT
THIS MERGER AGREEMENT (this "Merger Agreement") is made as of
_____________ __, 1997, by and between NC MERGER COMPANY, a Wisconsin
corporation ("Newco"), and NEENAH CORPORATION, a Wisconsin corporation
("Company").
RECITALS
A. Newco, the Company, and NFC Castings, Inc., a Delaware corporation
("Parent"), are parties to an Agreement and Plan of Reorganization, dated as of
____________, 1996 (the "Reorganization Agreement"), providing for, among other
things, the merger of Newco with and into the Company (the "Merger").
B. The respective boards of directors of Newco and the Company have
determined that the Merger is advisable and generally to the advantage and
welfare of Newco and the Company and the respective shareholders of Newco and
the Company, and, by resolutions duly adopted, have approved the Merger, the
Reorganization Agreement, including this Merger Agreement, and the transactions
contemplated thereby.
C. The respective shareholders of Newco and the Company, by resolutions
duly adopted, have approved the Merger, the Reorganization Agreement, including
this Merger Agreement, and the transactions contemplated thereby.
NOW THEREFORE, in consideration of the Recitals and of the
mutual provisions, agreements and covenants herein contained, Newco and Neenah
hereby agree as follows:
1. The Merger. At the Effective Time, Newco shall be merged with and
into the Company which shall be the surviving corporation pursuant to the
provisions of the Wisconsin Business Corporation Law (the "Surviving
Corporation").
2. Effective Time. Upon the filing of the Articles of Merger with the
Wisconsin Department of Financial Institutions, the Merger shall be effective
and the date and time of the filing of the Articles of Merger shall be the
"Effective Time" as that term is used herein.
3. Effect of Merger. At the Effective Time, the corporate identity,
existence, purposes, powers, franchises, rights and immunities of the Company
shall continue in the Surviving Corporation unaffected and unimpaired by the
Merger and the corporate identity, existence, purposes, powers, franchises,
rights and immunities of Newco shall be merged into the Surviving
<PAGE> 69
Corporation and the Surviving Corporation shall be fully vested therewith. The
separate existence of Newco, except insofar as otherwise specifically provided
by law, shall cease at the Effective Time whereupon Newco and the Surviving
Corporation shall be and become one single corporation.
4. Directors and Officers. The officers and directors of Newco in
office immediately prior to the Effective Time shall be the officers and
directors of the Surviving Corporation and shall hold their respective positions
from and after the Effective Time until their successors have been appointed or
elected and qualified.
5. Articles of Incorporation; Bylaws. The Restated Articles of
Incorporation and Bylaws of the Company in effect immediately prior to the
Effective Time shall be the Restated Articles of Incorporation and Bylaws of the
Surviving Corporation. After the Effective Time, the Restated Articles of
Incorporation and Bylaws of the Surviving Corporation may be amended in
accordance with their terms and as provided by applicable law.
6. Effect on Shares. The manner of exchanging shares of capital stock
of the Company issued and outstanding immediately prior to the Effective Time
for cash to be distributed to the holders of capital stock of the Company and
converting shares of common stock of Newco issued and outstanding immediately
prior to the Effective Time into shares of common stock of the Company shall be
as follows:
(a) As of the Effective Time, by virtue of the Merger and
without any action of either Newco or the Company or any of the shareholders
thereof, each outstanding share of Common Stock of Newco, without par value,
shall be converted into one share of Class A Common Stock, $100 par value, of
the Surviving Corporation.
(b) As of the Effective Time, by virtue of the Merger and
without any action of either Newco or the Company or any of the shareholders
thereof:
(i) each share of Class A Common Stock of the
Company, $100 par value, issued and outstanding immediately prior to the
Effective Time (other than shares as to which dissenter's rights are perfected
under the Wisconsin Business Corporation Law and other than shares held by Newco
or Parent) shall be converted into the right to receive an amount in cash equal
to the Merger Price Per Share, subject to later adjustment as provided in
Section 2.6(e) of the Reorganization Agreement; and
(ii) each share of Class B Common Stock of the
Company, $100 par value, issued and outstanding immediately prior to the
Effective Time (other than shares as to which dissenter's rights are perfected
under the Wisconsin Business Corporation Law
-2-
<PAGE> 70
and other than shares held by Newco or Parent) shall be converted into the right
to receive an amount in cash equal to the Merger Price Per Share, subject to
later adjustment as provided in Section 2.6(e) of the Reorganization Agreement.
For purposes hereof, "Merger Price Per Share" shall mean the quotient determined
by dividing the Merger Price of $240,000,000 by the total number of shares of
Class A Common Stock and Class B Common Stock of the Company issued and
outstanding immediately prior to the Effective Time.
(c) There are no shares of the authorized Preferred Stock,
$100 par value, of the Company issued and outstanding and there will be no
shares of Preferred Stock of the Company issued and outstanding as of the
Effective Time.
7. Abandonment. The Merger may be abandoned as provided in Article IX
of the Reorganization Agreement at any time prior to the Effective Time in which
case this Merger Agreement shall be void and of no further force and effect.
8. Miscellaneous. This Merger Agreement shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin. This
Merger Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which counterparts together
constitute a single instrument.
IN WITNESS WHEREOF, this Merger Agreement has been executed by duly
authorized officers of the parties hereto on the date first above written.
NC MERGER COMPANY
By:________________________________
Title:_____________________________
Attest:____________________________
Title:_____________________________
NEENAH CORPORATION
By:________________________________
Title:_____________________________
Attest:____________________________
Title:_____________________________
-3-
<PAGE> 71
This document was drafted by:
Patrick J. Goebel
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202-4497
-4-
<PAGE> 72
EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement") is made as of
______________, 1996, by and among NC Merger Company, a Wisconsin corporation
("Newco"), Neenah Corporation, a Wisconsin corporation (the "Company"), NFC
Castings, Inc., a Delaware corporation ("Parent"), E. W. Aylward, on behalf of
the Company Shareholders ("Company Representative") and Bank One, Milwaukee,
N.A. (herein sometimes referred to as the "Escrow Agent").
RECITALS
Parent, Newco and the Company have made, executed and delivered a
certain Agreement and Plan of Reorganization among them dated as of
_____________ ___, 1996 (the "Agreement"), a copy of which has been delivered to
the Escrow Agent for reference purposes. (Any word, term or phrase which is
defined in the Agreement and not otherwise defined herein shall, when used in
this Escrow Agreement, have the same meaning which each respectively has when
used in the Agreement.) The terms of the Agreement provide that on the Closing
Date, among other things, Paying Agent shall deliver to the Escrow Agent the sum
of $12,000,000.00, subject to the terms and provisions of this Escrow Agreement
and the Agreement, representing a portion of the Merger Price. This Escrow
Agreement is made, executed and delivered by the Company and Company
Representative to provide the Escrow Fund (as hereinafter defined in this Escrow
Agreement) from which the Company Shareholders may be paid or Parent or Newco
may be repaid as provided in this Escrow Agreement and in Section 8.2 of the
Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein and in the Agreement, the parties hereto agree as
follows:
1. Appointment of the Escrow Agent. Parent, Newco, the Company and
Company Representative hereby constitute and appoint the Escrow Agent as, and
the Escrow Agent hereby agrees to assume and perform the duties of, the Escrow
Agent under and pursuant to this Escrow Agreement. The Escrow Agent also
acknowledges receipt of an executed copy of the Agreement.
2. Establishment of Escrow Fund. The parties acknowledge that Paying
Agent has delivered to the Escrow Agent the amount of $12,000,000.00 as the
Escrow Deposit to establish the Escrow Fund in accordance with Sections 2.5(a)
and 8.2 of the Agreement. From and after the date hereof, the term "Escrow Fund"
means the amount delivered to the Escrow Agent pursuant to this Section 2, less
distributions therefrom in accordance with this Escrow Agreement, but shall not
include interest or other income received from the investment or reinvestment
thereof.
<PAGE> 73
3. Disposition of Escrow Fund. Parent, Newco, the Company and Company
Representative hereby instruct the Escrow Agent and the Escrow Agent hereby
agrees to hold, invest and dispose of the Escrow Fund in accordance with and
subject to the terms, conditions, limitations and restrictions contained in this
Escrow Agreement.
4. Receipt, Segregation and Release of Income. The Escrow Agent shall
receive and collect any and all interest and other income of a kindred nature
arising with respect to the Escrow Fund, and shall set aside such interest and
other income, and all interest and other income earned on such interest and
other income, in a separate account maintained for the benefit of the Company
Shareholders (the "Interest Account"). Any taxes payable with respect to
interest and other income accruing on the Escrow Fund or the Interest Account
shall be the responsibility of the Company Shareholders to whom such interest or
other income is distributed hereunder. All amounts held in the Interest Account
shall be the property of the Company Shareholders to the extent of their
respective Pro Rata Portions thereof, and shall be distributed from time to time
by the Escrow Agent to the Company Shareholders as directed by the Company
Representative. No amount held in the Interest Account shall be subject to any
claim by Newco, Parent or the Company.
5. Investment. (a) The Escrow Agent shall invest and reinvest all cash
funds from time to time comprising part of the Escrow Fund in (i) bonds or other
obligations of the government of the United States of America and not having
maturities of greater than thirty (30) days; or (ii) demand or time deposits in,
certificates of deposit of, or money market accounts/funds of a depository
institution or trust company incorporated under the laws of the United States of
America, any state thereof or the District of Columbia if the commercial paper,
if any, and the long-term unsecured debt obligations (other than such
obligations whose rating is based on the credit of a person or entity other than
such institution or trust company) of such depository institution or trust
company, at the time of the Escrow Agent's investment therein or contractual
commitment providing for such investment, have credit ratings from Moody's and
S&P of at least P-l and A-l+, respectively, in the case of the commercial paper,
and a credit rating from Moody's and S&P of at least A3 and A-, respectively, in
the case of long-term unsecured debt obligations, and not having maturities
greater than thirty (30) days; or (iii) such other investments as Parent and
Company Representative shall approve in writing.
(b) All cash funds held from time to time in the Interest
Account shall be invested by the Escrow Agent in accordance with the directions
of the Company Representative or distributed in accordance with Section 4 of
this Escrow Agreement.
6. Authority for Payments. The Escrow Fund has been established to
provide an exclusive source of payment to Parent and Newco for recovery of
claims for indemnification Parent and Newco
-2-
<PAGE> 74
may have as provided in Section 8.2 of the Agreement, with the balance payable
to the Company Shareholders. Accordingly, the Escrow Agent shall disburse funds
from the Escrow Fund only pursuant to or in accordance with the following
procedure:
(a) Parent may at any time and from time to time prior to the
Cut-off Date give written notice to Company Representative and Escrow Agent in
accordance with Section 8.4 of the Agreement that Parent is asserting one or
more claims for indemnification (a "Notice of Claim").
(b) If the Escrow Agent and Parent shall not have received
from Company Representative prior to the forty-fifth calendar day following the
date of delivery of such Notice of Claim, a written notice from Company
Representative of the type contemplated by clause (c) below, on such forty-fifth
(45th) day or, if not a business day, on the next succeeding business day, the
Escrow Agent shall withdraw from the Escrow Fund and pay to Parent by certified
check or wire transfer of immediately available funds to an account designated
by Parent an amount equal to the lesser of (i) the aggregate of the claims
asserted in the Notice of Claim or (ii) the balance in the Escrow Fund on the
date of payment. Any claim set forth in a Notice of Claim that is not
specifically disputed in a written notice from Company Representative of the
type contemplated by clause (c) below shall be paid by the Escrow Agent in
accordance with the preceding sentences even though a notice of dispute might
otherwise have been received by the Escrow Agent with respect to other claims
set forth in Parent's Notice of Claim.
(c) Company Representative may deliver to the Escrow Agent and
Parent, prior to the forty-fifth calendar day following the date of delivery of
the above Notice of Claim, a written notice to the effect that Company
Representative disputes the fact or amount of any one or more of the claims
asserted in Parent's Notice of Claim. If such notice of dispute from Company
Representative is delivered to the Escrow Agent and Parent within such time
period, then the Escrow Agent shall refrain from making any disbursement from
the Escrow Fund of the amount or amounts specifically disputed in the notice of
dispute from Company Representative unless pursuant to or in accordance with:
(i) a written authorization signed by Company Representative and Parent to the
effect that it incorporates the resolution of the matter by such parties, which
authorization shall set forth the amount of the Escrow Fund to be distributed to
Parent, or (ii) a certified copy of a final judgment of a court of competent
jurisdiction, provided, however, that a certified copy of a final judgment shall
serve as a valid determination only if the time for appeal has expired and no
appeal has been perfected or all appeals have been exhausted or no right of
appeal exists. Any distribution from the Escrow Fund to Parent in accordance
with this paragraph (c) shall be paid by certified check or wire transfer of
immediately available funds to an account designated by Parent.
-3-
<PAGE> 75
(d) On the date (the "Termination Date") that is forty-nine
(49) months after the date first above written, any and all funds and property
then held in the Escrow Fund in excess of that which the Escrow Agent is or may
be required to pay in respect of claims asserted in any Notice of Claim prior to
the Cut-off Date which have not theretofore been paid, shall be distributed to
Company Representative on behalf of the Company Shareholders. Any funds then
included in the Escrow Fund which are not distributed in accordance with the
preceding sentence shall be retained by the Escrow Agent until such time as any
and all such claims of Parent which have not been paid or otherwise resolved on
or prior to the Termination Date shall have been paid or otherwise resolved in
accordance with clause (c) above, at which time all of the remaining funds then
held by the Escrow Agent in the Escrow Fund shall be distributed to Company
Representative on behalf of the Company Shareholders.
7. Fees and Expenses. The Escrow Agent shall be entitled to a
reasonable fee for its services under this Escrow Agreement in accordance with
the fee schedule attached hereto as Schedule A and to reimbursement for all
reasonable out-of-pocket costs, charges and expenses incurred by it in
connection therewith. Company Representative shall be responsible for, and shall
discharge, one-half (1/2) of such fee, costs, charges and expenses, and Parent
shall be responsible for and shall discharge one-half (1/2) of such fee, costs,
charges and expenses.
8. Limitations on Duties and Liabilities of the Escrow
Agent. Unless otherwise expressly provided in this Escrow
Agreement, the Escrow Agent shall:
(a) not be held liable for any action taken or omitted under
this Escrow Agreement so long as it shall have acted in good faith and without
negligence;
(b) have no responsibility to inquire into or determine the
genuineness, authenticity, or sufficiency of any securities, checks, or other
documents or instruments submitted to it in connection with its duties under and
pursuant to this Escrow Agreement;
(c) be entitled to deem (unless it has actual knowledge to the
contrary) the signatories of any documents or instruments submitted to it
pursuant to this Escrow Agreement as being those purported to be authorized to
sign such documents or instruments on behalf of the parties to this Escrow
Agreement and shall be entitled to rely (unless it has actual knowledge to the
contrary) upon the genuineness of the signatures of such signatories without
inquiry and without requiring substantiating evidence of any kind; and
(d) have no responsibility or liability for any diminution
which may result from any investments or reinvestments made in accordance with
any provisions contained in this Escrow Agreement.
-4-
<PAGE> 76
9. Resignation and Removal of the Escrow Agent.
(a) The Escrow Agent may resign as such thirty (30) days
following the giving of prior written notice thereof to Company Representative
and Parent. Similarly, the Escrow Agent may be removed and replaced following
the giving of thirty (30) days' prior written notice to the Escrow Agent by
Company Representative and Parent. Notwithstanding the foregoing, no such
resignation or removal shall be effective until a successor Escrow Agent has
acknowledged its appointment as such as provided in paragraph (c) below. In
either event, upon the effective date of such resignation or removal, the Escrow
Agent shall deliver the property comprising the Escrow Fund and the Interest
Account to a successor Escrow Agent appointed by Company Representative and
Parent as evidenced by a written notice executed by Company Representative and
Parent and filed with the Escrow Agent.
(b) If Company Representative and Parent are unable to agree
upon a successor Escrow Agent, or shall have failed to appoint a successor
Escrow Agent prior to the expiration of thirty (30) days following the date of
the notice of such resignation or removal, the then acting Escrow Agent may
petition any court of competent jurisdiction for the appointment of a successor
Escrow Agent, or other appropriate relief, and any such resulting appointment
shall be binding upon all of the parties to this Escrow Agreement.
(c) Upon acknowledgment by any successor Escrow Agent
appointed in accordance with the foregoing provisions of this Section 9 of the
receipt of the property then comprising the Escrow Fund and the Interest
Account, the then acting Escrow Agent shall be fully released and relieved of
all duties, responsibilities, and obligations under this Escrow Agreement.
10. Indemnification of the Escrow Agent. Company Representative and
Parent or their respective successors and assigns, each agree to indemnify and
save and hold harmless the Escrow Agent and its successors and assigns of, from
and against all losses, costs and expenses which the Escrow Agent shall sustain
or incur as a result of the Escrow Agent's involvement as a party thereto in any
litigation commenced prior to the termination of this Escrow Agreement, arising
from the performance by the Escrow Agent of its duties and responsibilities
under and pursuant to this Escrow Agreement which is not attributable in any
manner, or to any extent, to any action taken, or omitted, by the Escrow Agent
in connection with this Escrow Agreement in respect of which the Escrow Agent
shall have been adjudged to have been negligent, but in, and only in, the
following manner and to, and only to, the following extent, and subject to the
following limitations and restrictions:
(a) Company Representative and its successors and assigns,
shall indemnify and save and hold harmless the Escrow Agent to the extent, but
only to the extent, of one-half (1/2) of any such losses, costs and expenses;
and
-5-
<PAGE> 77
(b) Parent and its successors and assigns, shall indemnify and
save and hold harmless the Escrow Agent to the extent, but only to the extent,
of one-half (1/2) of any such losses, costs and expenses.
11. Termination of Escrow Fund. This Escrow Agreement (other than
Sections 7 and 10) shall automatically terminate when all of the funds held by
the Escrow Agent as part of the Escrow Fund at any time while this Escrow
Agreement remains in effect shall have been distributed, or otherwise disposed
of, by the Escrow Agent in accordance with the terms of this Escrow Agreement.
At such time, any amounts remaining in the Interest Account shall be distributed
to the Company Shareholders to the extent of their respective Pro Rata Portions
thereof as directed by the Company Representative.
12. Notices. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, demands or requests are as
follows:
TO COMPANY REPRESENTATIVE: E. W. Aylward
241 Lake Road
Menasha, WI 54952
With a copy to: Quarles & Brady
Attn: Bruce C. Davidson
411 East Wisconsin Avenue
Milwaukee, WI 53202
TO PARENT, NEWCO OR THE COMPANY: NFC Castings, Inc.
c/o Citicorp Venture
Capital, Ltd.
Attn: David F. Thomas
399 Park Avenue
14th Floor, Zone 4
New York, NY 10043
With copies to: Kirkland & Ellis
Attn: Kirk A. Radke
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
and
-6-
<PAGE> 78
Citicorp Venture Capital, Ltd.
Attn: David F. Thomas
399 Park Avenue
14th Floor, Zone 4
New York NY 10043
TO THE ESCROW AGENT: Bank One, Milwaukee, N.A.
Attn:_____________________
__________________________
Milwaukee WI _____________
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent by
overnight courier pursuant to this paragraph, such communication shall be deemed
delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph,
such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Delivery to the Company Representative shall constitute delivery to all
Company Shareholders. Any Person may change its address for the purposes of this
Escrow Agreement by giving notice thereof in accordance with this Section.
13. Continuance of Agreement. This Escrow Agreement shall be
binding upon the parties hereto and their respective successors and
assigns.
14. Applicable Law. This Escrow Agreement shall be governed by
and construed under and in accordance with the laws of the State of
Wisconsin.
15. Counterparts. This Escrow Agreement may be executed in
any number of counterparts, any one of which shall be considered an
original but all of which together shall constitute one agreement.
-7-
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have executed this Escrow
Agreement as of the date and year first above written.
NEWCO:
NC MERGER COMPANY
Attest: By:___________________________
______________________ Its:__________________________
(Assistant) Secretary
PARENT:
NFC CASTINGS, INC.
Attest: By:___________________________
_____________________________ Its:__________________________
(Assistant) Secretary
THE COMPANY:
NEENAH CORPORATION
Attest: By:___________________________
_____________________________ Its:__________________________
(Assistant) Secretary
COMPANY REPRESENTATIVE:
______________________________
E. W. Aylward
ESCROW AGENT:
BANK ONE, MILWAUKEE, N.A.
Attest: By:___________________________
______________________________ Its:__________________________
Title:________________________
-8-
<PAGE> 80
EXHIBIT D
MERGER PAYMENT STATEMENT
Neenah Corporation Shareholder: Date _______________, 199_
Address:
Number
1. Shares You Hold of Shares
1.1 Class A Common Stock
1.2 Class B Common Stock
1.3 Share Payment Class A Common Stock -
$_____ (Merger Price Per Share)
times total Class A shares
(item 1.1) = $
1.4 Share Payment Class B Common Stock -
$_____ (Merger Price Per Share)
times total Class B shares
(item 1.2) = $
1.5 Total Gross Share Payment (Class A
& Class B) (items 1.3 & 1.4) = $
2. Deductions for pro rata portion
of brokerage fees and expenses = $
3. Pro rata portion of $12,000,000.00
Escrow Deposit = $
4. Net Merger Payment (item 1.5 less items
2 and 3), to be reduced by proportionate
share of professional fees and expenses. = $
=======
5. After reduction for proportionate share of professional
fees and expenses, net payment to be made upon receipt of
signed Merger Payment Statement and after Closing.
<PAGE> 81
"Merger Price Per Share" means the quotient determined by dividing the Merger
Price of $240,000,000 to be delivered by Newco at Closing by the total number of
shares of Class A Common Stock and Class B Common Stock issued and outstanding
immediately prior to the Effective Time. (For illustration purposes only, based
on 619.5 and 3,820 issued and outstanding shares of Class A Common Stock and
Class B Common Stock, respectively, the Merger Price Per Share would equal
$54,060.14.)
Please check, and complete where appropriate, one of the following:
_____ Please mail my check _____ Please have my check
to the following held for my pickup at
address: the offices of the
Paying Agent:
______________________________ ______________________________
______________________________ ______________________________
______________________________ ________________, WI_________*
_____ Please wire payment to me
using the following wire
transfer instructions:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
*If the shareholder elects to pick up his check at the offices of the Paying
Agent set forth above, the shareholder understands that the Paying Agent will
require appropriate identification from the shareholder prior to delivery of the
check.
Important Tax Information
Under the federal income tax law, a Neenah Corporation shareholder who
receives payment in connection with the Merger is required to provide the Paying
Agent with such shareholder's correct taxpayer identification number by
completing the IRS Form W-9 attached hereto certifying that the taxpayer
identification number provided on the IRS Form W-9 is correct (or that such
shareholder is awaiting a taxpayer identification number). If the Paying Agent
is not provided with the correct taxpayer identification number, payments that
are made to such shareholder pursuant to the Merger may be subject to backup
withholding.
- 2 -
<PAGE> 82
If backup withholding applies, the Paying Agent is required to withhold
20% of any gross payments due to the Neenah Corporation shareholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service. If backup withholding does not apply to you, the
box in Part II of the W-9 Form must be checked.
Agreed and accepted this ____ day of ____________, 199_.
______________________________
Signature of Neenah
Corporation Shareholder**
(IF MORE THAN ONE PERSON IS LISTED AS THE NEENAH CORPORATION SHAREHOLDER, EACH
PERSON MUST SIGN HIS NAME EXACTLY AS IT APPEARS ON PAGE ONE OF THE MERGER
PAYMENT STATEMENT IN ORDER FOR THE PAYING AGENT TO ACCEPT THE MERGER PAYMENT
STATEMENT.)
**If the Neenah Corporation shareholder is a partnership or corporation, the
person signing on behalf of the shareholder must also print the name of the
shareholder and the title of the person signing. If the Merger Payment Statement
or the IRS Form W-9 are executed by attorneys, executors, administrators,
trustees, guardians, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
proper evidence, satisfactory to Neenah Corporation, which may include a
signature guaranty guaranteed by a commercial bank, a trust company or by a
member firm of any securities exchange of the National Association of Securities
Dealers, Inc., of their authority so to act must be submitted to Neenah
Corporation.
- 3 -
<PAGE> 83
EXHIBIT E
____________, 1997
NFC Castings, Inc. NC Merger Company
c/o Citicorp Venture c/o Citicorp Venture
Capital, Ltd. Capital, Ltd.
399 Park Avenue 399 Park Avenue
14th Floor, Zone 4 14th Floor, Zone 4
New York, NY 10043 New York, NY 10043
Gentlemen:
We have acted as counsel to Neenah Corporation, a Wisconsin corporation
(the "Company"), in connection with the negotiation, preparation, execution and
delivery of an Agreement and Plan of Reorganization dated as of ____________,
1996 (the "Agreement") by and among the Company, NC Merger Company, a Wisconsin
corporation ("Newco") and NFC Castings, Inc., a Delaware corporation ("Parent").
Pursuant to the Agreement, the Company has this day executed and delivered to
Parent and Newco the following documents, all dated the date hereof: (a) the
Articles of Merger; (b) the Merger Agreement; (c) the Escrow Agreement; and (d)
the Paying Agent Agreement (the foregoing documents together with the Agreement
are collectively referred to herein as the "Transaction Documents").
This opinion is delivered to you at the request of the Company pursuant
to Section 6.9(c) of the Agreement. Any capitalized term used herein without
definition shall have the meaning assigned to such term in the Agreement.
Pursuant to the Agreement, Parent is this day acquiring all of the
issued and outstanding shares of capital stock of the Company through the merger
of Newco, a wholly owned subsidiary of Parent, with and into the Company.
In rendering this opinion, we have examined or considered such of the
following as we deemed relevant and necessary as a basis for the opinions
hereinafter set forth: (a) corporate records, certificates, agreements,
instruments and other documents (collectively referred to as the "Ancillary
Documents"); (b) questions and matters of law; and (c) certificates or
comparable documents of public officials and of officers and representatives of
the Company. We have also made such inquiries of such officers and
representatives of the Company as we have deemed relevant and necessary as a
basis for the opinions hereinafter set forth.
<PAGE> 84
NFC Castings, Inc.
NC Merger Company
_____________, 1996
Page 2
In giving the various opinions set forth below, we have, with respect
to factual matters, relied on: (a) the representations and warranties of the
Company contained in the Agreement; and (b) representations and warranties of
officers and representatives of the Company contained in certificates delivered
to us.
We have assumed that: (a) all certificates or comparable documents of
public officials examined by us are accurate; (b) each Ancillary Document
submitted to us as an original is authentic and complete; (c) each Ancillary
Document submitted to us as a certified or photostatic copy conforms to an
authentic original; (d) each of the parties (other than the Company) to the
Transaction Documents has duly and validly executed and delivered the
Transaction Documents to which it is a signatory; (e) all signatures (other than
the signatures of the Company) on Ancillary Documents reviewed by us are
genuine; (f) each person executing any Transaction Documents (other than the
Company) on behalf of such party is authorized to do so; (g) the obligations of
each party (other than the Company) under the Transaction Documents are such
party's legal, valid and binding obligations, enforceable and effective in
accordance with the terms of the Transaction Documents; (h) the Transaction
Documents accurately describe and contain the mutual understanding of the
parties; (i) there are no oral or written statements or agreements that purport
to modify, amend or vary any of the terms of the Transaction Documents; (j) all
individuals executing and delivering the Transaction Documents have the legal
capacity to so execute and deliver such document; and (k) Parent and Newco have
the corporate power and authority to enter into the Transaction Documents.
Based upon the foregoing and subject to the qualifications, assumptions
and limitations set forth herein, it is our opinion that:
1. The Company is a corporation validly existing under the laws of the
State of Wisconsin. As of January 1, 1991, Wisconsin no longer recognizes the
concept of "good standing" for corporations. We have received a certificate of
status from the Wisconsin Department of Financial Institutions for the Company
which is conclusive evidence of its existence. Wis. Stat. Section 180.0128.
2. The Company has the requisite corporate power and authority to carry
on its business as now being conducted and to own its assets and properties.
3. To our knowledge, the entire authorized capital stock of the Company
consists of: (i) 1,000 shares of Class A Common Stock,
<PAGE> 85
NFC Castings, Inc.
NC Merger Company
_____________, 1996
Page 3
with a par value of $100.00 per share, of which 619.5 shares are issued and
outstanding; (ii) 10,000 shares of Class B Common Stock, with a par value of
$100.00 per share, of which 3,820 shares are issued and outstanding and (iii)
3,000 shares of Preferred Stock, with a par value of $100.00 per share, of which
no shares are issued and outstanding.
4. To our knowledge, there are no options, warrants, conversion rights,
agreements or other rights to subscribe for or purchase the capital stock of the
Company, other than the Agreement and as disclosed in the Disclosure Schedule.
5. The execution, delivery and performance by the Company of the
Transaction Documents are within the corporate power and authority of the
Company and have been duly authorized by all necessary corporate action by the
Company.
6. The Transaction Documents have been duly executed and delivered by
the Company and constitute legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, receivership, moratorium or similar laws generally
affecting the rights of creditors, and subject to general equity principles.
7. To our knowledge, the execution, delivery and performance by the
Company of the Transaction Documents do not result in a material breach of, or
constitute a default under, or result in a violation of: (a) any applicable
provision of laws or regulations of the State of Wisconsin or laws or
regulations of the United States of America; or (b) any judgment, injunction,
order or decree binding upon the Company; or (c) the Restated Articles of
Incorporation, as amended and restated effective as of the date hereof, or
Bylaws of the Company.
8. To our knowledge, except for consents that have been obtained, no
consent, order, authorization or approval of any governmental authority is
required in connection with the execution, delivery and performance of the
Transaction Documents by or the consummation by the Company of the transactions
contemplated thereby.
9. To our knowledge, no suit, action, investigation, inquiry or other
proceeding by any person or governmental agency or body has been instituted and
is pending against the Company which questions the validity or legality of the
Agreement or any of the transactions contemplated thereby.
<PAGE> 86
NFC Castings, Inc.
NC Merger Company
_____________, 1996
Page 4
Each of the opinions as to the enforceability of any agreement or
instrument is: (a) subject to the limitations set forth in the General
Qualifications stated in the Legal Opinion Accord of the ABA Section of Business
Law (1991), which General Qualifications are attached hereto as Schedule 1; and
(b) subject to the qualification that certain provisions of such documents may
be unenforceable in whole or in part, but the inclusion of such provisions does
not affect the validity of any such documents as a whole and each of such
documents contains legally adequate provisions for the realization of the
principal legal rights and benefits afforded by it.
We are attorneys licensed to practice law in the State of Wisconsin.
The opinions expressed herein are specifically limited to the present internal
law of the State of Wisconsin and the federal law of the United States of
America, are given as of the date of this letter, are intended to apply only to
the facts and circumstances that exist as of the date hereof, and we assume no
obligation or responsibility to update or supplement this opinion to reflect any
facts or circumstances occurring after the date hereof that would alter the
opinions contained herein.
Whenever this opinion refers to matters within our "knowledge" or
"known to us," such reference is limited to facts within our actual knowledge
after inquiry of the attorneys in our firm who have given substantive legal
attention to the representation of the Company, and after a review of our files
related to the Company, and facts represented to us by officers and
representatives of the Company. Each of the opinions set forth above is subject
to the matters disclosed by the Company in the Agreement and the Disclosure
Schedule.
The opinions set forth above are delivered to you in connection with
the transactions described in the Agreement. This opinion letter is rendered
solely for your information and assistance in connection with the transactions
described in the Agreement and may not be provided to, or used or relied upon
by, any other person or for any other purpose without our prior written consent.
Very truly yours,
QUARLES & BRADY
<PAGE> 87
EXHIBIT F
______________, 1997
E.W. Aylward Neenah Corporation
241 Lake Road Attention: E.W. Aylward
Menasha, WI 54952 2121 Brooks Avenue
P.O. Box 729
Neenah WI 54957
Gentlemen:
We have acted as counsel to NC Merger Company, a Wisconsin corporation
("Newco") and NFC Castings, Inc., a Delaware corporation ("Parent"), in
connection with the negotiation, preparation, execution and delivery of an
Agreement and Plan or Reorganization dated as of _____________, 1996 (the
"Agreement") by and among Newco, Parent and Neenah Corporation, a Wisconsin
corporation (the "Company"). Pursuant to the Agreement, Parent and Newco have
this day executed and delivered to the Company the following documents, all
dated the date hereof: (a) the Articles of Merger; (b) the Merger Agreement; (c)
the Escrow Agreement; and (d) the Paying Agent Agreement (the foregoing
documents together with the Agreement are collectively referred to herein as the
"Transaction Documents").
This opinion is delivered to you at the request of Parent pursuant to
Section 7.5(b) of the Agreement. Any capitalized term used herein without
definition shall have the meaning assigned to such term in the Agreement.
Pursuant to the Agreement, Parent is this day acquiring all of the
issued and outstanding shares of capital stock of the Company through the merger
of Newco, a wholly owned subsidiary of Parent, with and into the Company.
In rendering this opinion, we have examined or considered such of the
following as we deemed relevant and necessary as a basis for the opinions
hereinafter set forth: (a) corporate records, certificates, agreements,
instruments and other documents (collectively referred to as the "Ancillary
Documents"); (b) questions and matters of law; and (c) certificates or
comparable documents of public officials and of officers and representatives of
Parent and Newco. We have also made such inquiries of such officers and
representatives of Parent and Newco as we have deemed
<PAGE> 88
Neenah Corporation
_________________, 1997
Page 2
relevant and necessary as a basis for the opinions hereinafter set
forth.
In giving the various opinions set forth below, we have, with respect
to factual matters, relied on: (a) the representations and warranties of Parent
and Newco contained in the Agreement; and (b) representations and warranties of
officers and representatives of Parent and Newco contained in certificates
delivered to us.
We have assumed that: (a) all certificates or comparable documents of
public officials examined by us are accurate; (b) each Ancillary Document
submitted to us as an original is authentic and complete; (c) each Ancillary
Document submitted to us as a certified or photostatic copy conforms to an
authentic original; (d) each of the parties (other than Parent or Newco) to the
Transaction Documents has duly and validly executed and delivered the
Transaction Documents to which it is a signatory; (e) all signatures (other than
the signatures of Parent or Newco) on Ancillary Documents reviewed by us are
genuine; (f) each person executing the Transaction Documents (other than Parent
or Newco) on behalf of such party is authorized to do so; (g) the obligations of
each party (other than Parent or Newco) under the Transaction Documents are such
party's legal, valid and binding obligations, enforceable in accordance with the
terms of the Transaction Documents; (h) the Transaction Documents accurately
describe and contain the mutual understanding of the parties; (i) there are no
oral or written statements or agreements that purport to modify, amend or vary
any of the terms of the Transaction Documents; (j) all individuals executing and
delivering the Transaction Documents have the legal capacity to so execute and
deliver such document; and (k) the Company has the corporate power and authority
to enter into the Transaction Documents.
Based upon the foregoing and subject to the qualifications, assumptions
and limitations set forth herein, it is our opinion that:
1. Parent is a corporation validly existing and in good standing under
the laws of the State of Delaware. Newco is a corporation duly incorporated and
validly existing under the laws of the State of Wisconsin. As of January 1,
1991, Wisconsin no longer recognizes the concept of "good standing" for
corporations. We have received a certificate of status from the Wisconsin
Department of Financial Institutions for Newco which is conclusive evidence of
its existence. Wis. Stat. Section 180.0128.
<PAGE> 89
Neenah Corporation
_________________, 1997
Page 3
2. Parent and Newco each have the requisite corporate power and
authority to carry on its business as now being conducted and to own its assets
and properties.
3. The execution, delivery and performance by Parent and Newco of the
Transaction Documents are within the corporate power and authority of Parent and
Newco and have been duly authorized by all necessary corporate action by Parent
and Newco.
4. The Transaction Documents have been duly executed and delivered by
Parent and Newco and constitute legal, valid and binding obligations of Parent
and Newco, enforceable against Parent and Newco in accordance with their
respective terms, except as the enforcement thereof may be limited by applicable
bankruptcy, insolvency, reorganization, receivership, moratorium or similar laws
generally affecting the rights of creditors and subject to general equity
principles.
5. To our knowledge, the execution, delivery and performance by Parent
and Newco of the Transaction Documents do not result in a material breach of, or
constitute a default under, or result in a violation of: (a) any applicable
provision of laws or regulations of the State of _______________ or laws or
regulations of the United States of America; or (b) any judgment, injunction,
order or decree binding upon Parent or Newco or both; or (c) the Articles of
Incorporation or Bylaws of Parent or Newco.
6. To our knowledge, except for consents that have been obtained, no
consent, order, authorization or approval of any governmental authority is
required in connection with the execution, delivery and performance of the
Transaction Documents by Parent and Newco or the consummation by Parent and
Newco of the transactions contemplated thereby.
7. To our knowledge, no suit, action, investigation, inquiry or other
proceeding by any person or governmental agency or body has been instituted and
is pending against Parent or Newco which questions the validity or legality of
the Agreement or any of the transactions contemplated thereby.
Each of the opinions as to the enforceability of any agreement or
instrument is: (a) subject to the limitations set forth in the General
Qualifications stated in the Legal Opinion Accord of the ABA Section of Business
Law (1991), which General Qualifications are attached hereto as Schedule 1; and
(b) subject to the qualification that certain provisions of such documents may
be
<PAGE> 90
Neenah Corporation
_________________, 1997
Page 4
unenforceable in whole or in part, but the inclusion of such provisions does not
affect the validity of any such documents as a whole and each of such documents
contains legally adequate provisions for the realization of the principal legal
rights and benefits afforded by it.
We are attorneys licensed to practice law in the State of
______________. The opinions expressed herein are specifically limited to the
present internal law of the State of _____________ and federal law of the United
States of America, are given as of the date of this letter, are intended to
apply only to those facts and circumstances that exist as of the date hereof,
and we assume no obligation or responsibility to update or supplement this
opinion to reflect any facts or circumstances occurring after the date hereof
that would alter the opinions contained herein.
Whenever this opinion refers to matters within our "knowledge" or
"known to us," such reference is limited to facts within our actual knowledge
after inquiry of the attorneys in our firm who have given substantive legal
attention to the representation of Parent and Newco, and after a review of our
files related to Parent and Newco, and facts represented to us by officers and
representatives of Parent and Newco.
The opinions set forth above are delivered to you in connection with
the transactions described in the Agreement. This opinion letter is rendered
solely for your information and assistance in connection with the transactions
described in the Agreement and may not be provided to, or used or relied upon
by, any other person or for any other purpose without our prior written consent.
Very truly yours,
---------------------------
<PAGE> 91
EXHIBIT G
PAYING AGENT AGREEMENT
THIS PAYING AGENT AGREEMENT is made as of ____________, 199_, by and
among NFC CASTINGS, INC., a Delaware corporation ("Parent"), NC MERGER COMPANY,
a Wisconsin corporation ("Newco"), NEENAH CORPORATION, a Wisconsin corporation
("the Company"), E.W. AYLWARD, in his capacity as Company Representative
("Company Representative") and BANK ONE, MILWAUKEE, N.A., in its capacity as
paying agent hereunder (in such capacity, the "Paying Agent").
RECITALS
A. Parent, Newco and the Company are parties to an Agreement and Plan
of Reorganization (the "Agreement") dated as of _______________, 1996, a copy of
which has been furnished to the Paying Agent. (Any word, term or phrase which is
defined in the Agreement and not otherwise defined herein shall, when used
herein, have the meaning which each respectively has when used in the
Agreement.)
B. The Agreement contemplates and provides for the merger of Newco with
and into the Company pursuant to which all of the outstanding shares of the
Company's Class A and Class B Common Stock will be converted into the right to
receive cash and all of the issued and outstanding shares of Newco Common Stock
will be converted into shares of the Company's Class A Common Stock.
C. The Agreement further contemplates and provides for the distribution
of the Merger Price by the Paying Agent to the Escrow Agent and the Company
Shareholders. The parties wish to establish by means of this Paying Agent
Agreement a procedure to provide for the orderly payment of the Merger Price to
the Escrow Agent and to the Company Shareholders.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and intending to be legally bound, the parties
hereto agree as follows:
1. Delivery of Merger Price. Parent herewith deposits with the Paying
Agent the Merger Price and the Paying Agent hereby acknowledges the receipt and
the payment of such sum (the "Merger Fund"). The Paying Agent accepts the Merger
Fund and agrees to hold the same in a separate and segregated account (the
"Merger Account"), to invest and reinvest the Merger Fund, and to disburse the
same in accordance with the terms of this Paying Agent Agreement.
2. Investment of Merger Fund. The Paying Agent shall invest and
reinvest all cash funds from time to time comprising part of the Merger Fund in
(i) bonds or other obligations of the government of the United States of America
and not having maturities of greater than thirty (30) days; or (ii) demand or
time deposits in, certificates of deposit of, or money market accounts/funds of
a
<PAGE> 92
depository institution or trust company incorporated under the laws of the
United States of America, any state thereof or the District of Columbia if the
commercial paper, if any, and the long-term unsecured debt obligations (other
than such obligations whose rating is based on the credit of a person or entity
other than such institution or trust company) of such depository institution or
trust company, at the time of the Paying Agent's investment therein or
contractual commitment providing for such investment, have credit ratings from
Moody's and S&P of at least P-l and A-l+, respectively, in the case of the
commercial paper, and a credit rating from Moody's and S&P of at least A3 and
A-, respectively, in the case of long-term unsecured debt obligations, and not
having maturities greater than thirty (30) days; or (iii) such other investments
as Parent and Company Representative shall approve in writing. Interest and
other income earned on the Merger Fund shall be paid to a Merger Payee pro rata
in accordance with such Merger Payee's respective interest in the Merger Fund at
the time a disbursement is made to such Merger Payee in accordance with
paragraph 4 below.
3. Merger Payment Statements. The Company has heretofore delivered to
the Paying Agent unsigned copies of Merger Payment Statements for all of the
Company Shareholders, which statements show the net merger payment for each of
the Company Shareholders (after deductions for each Company Shareholder's
proportionate share of brokerage fees and expenses and each Company
Shareholder's pro rata share of the Escrow Deposit). The Company shall deliver
to the Paying Agent a copy of each signed Merger Payment Statement it receives
promptly after the receipt thereof.
4. Release and Disbursement of Amounts in Merger Account. The amounts
in the Merger Account from time to time shall be released and disbursed by the
Paying Agent in the manner and under the circumstances hereinafter specified:
(a) Immediately after the Effective Time, the Paying Agent
shall deposit or shall cause to be deposited the Escrow Deposit with the Escrow
Agent.
(b) Immediately after the Effective Time, the Paying Agent
shall pay or cause to be paid (i) to each Merger Payee for whom Paying Agent has
received a Merger Payment Statement duly signed by such Merger Payee, an amount
equal to the "Net Merger Payment" shown on such Merger Payment Statement less
such Merger Payee's proportionate share of professional fees and expenses as set
forth in a schedule to be delivered by Company Representative to the Paying
Agent, and (ii) such professional fees and expenses as directed by Company
Representative in such schedule.
(c) In the event the Paying Agent does not receive a Merger
Payment Statement with respect to any Merger Payee, the Paying Agent shall
notify Parent, the Company and Company Representative of that fact and shall not
disburse any amount allocable to that Merger Payee until Paying Agent receives a
Merger Payment Statement duly signed by such Merger Payee.
-2-
<PAGE> 93
(d) Any payment to be made by the Paying Agent out of the
Merger Fund shall be made in immediately available funds in the amount of the
payment to be made and transmitted to the payee in the manner specified in the
Merger Payment Statement.
(e) At any time after 180 days after the date hereof, Parent,
by notice to Paying Agent, may require Paying Agent to pay the remaining portion
of the Merger Fund (including interest and other income earned thereon) to the
Company as provided in Section 2.5(c) of the Agreement.
(f) Paying Agent shall not disburse any amount allocable to a
Company Shareholder who is not a Merger Payee until Paying Agent receives a
notice from the Company authorizing the release and disbursement of amounts to
such Company Shareholder, which notice shall not be unreasonably withheld by the
Company.
5. Accounting. Within a reasonable time after the delivery of the
remainder of the funds in the Merger Account in accordance with paragraph 4
hereof, the Paying Agent shall deliver to Parent and Company Representative an
accounting which shall consist of a statement of all receipts of and
disbursements made from the Merger Account. Unless Parent or Company
Representative shall object to such accounting within thirty (30) days after the
date of the delivery of such accounting to it, the Paying Agent shall be
discharged forever and absolutely from any and all liabilities and obligations
whatsoever to Parent or to Company Representative arising by virtue of this
Agreement or the Merger Fund, and in no event whatsoever shall the Paying Agent
be required otherwise to account for, or give evidence of the fact, amount or
propriety of, any disbursements made by it, except as provided in this paragraph
5, unless the Paying Agent shall have acted in gross negligence or with willful
misconduct. Any such objection to such accounting must be in writing and must be
delivered or sent to the Paying Agent by registered or certified mail.
6. Tax Information. The Paying Agent shall be responsible for the
preparation of any required tax reports related to the Merger Account, and shall
provide any necessary tax information to the Company Shareholders.
7. Conditions to Responsibilities of Paying Agent. Acceptance by the
Paying Agent of its duties under this Paying Agent Agreement is subject to the
following terms and conditions, which all parties to this Paying Agent Agreement
hereby agree shall define the rights, duties and immunities of the Paying Agent:
(a) The duties and obligations of the Paying Agent shall be
determined solely by the express provisions of this Paying Agent Agreement, and
the Paying Agent shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Paying Agent Agreement.
Except for the services it will render as Escrow Agent, the Paying Agent shall
not have any duty or responsibility for or with respect to the Agreement or any
-3-
<PAGE> 94
related undertaking and shall in no way be bound or obligated by the terms
thereof.
(b) The Paying Agent shall not be responsible for any failure
or inability of Parent or the Company to comply with any of the provisions of
any other agreement to which they may be parties.
(c) The Company shall reimburse and indemnify the Paying Agent
for, and hold it harmless against, any loss, liability or expense, including but
not limited to attorneys' fees and disbursements, incurred without gross
negligence or willful misconduct on the part of the Paying Agent, arising out of
or in connection with its acceptance of, or the performance of its duties and
obligations under, this Paying Agent Agreement or its defending against any
claim or liability arising out of or relating to this Paying Agent Agreement,
other than claims or liabilities established to have arisen out of the gross
negligence or willful misconduct of the Paying Agent.
(d) The Paying Agent shall be fully protected in acting on and
relying upon any written notice, direction, request, waiver, consent, receipt or
other paper or document which the Paying Agent in good faith believes to be
genuine and to have been signed or presented by the proper party or parties.
(e) The Paying Agent shall not be liable for any error of
judgment, or for any act done or step taken or omitted by it in good faith or
for any mistake, in fact or law, or for anything else which it may do or refrain
from doing in connection herewith, except for its own gross negligence or
willful misconduct.
(f) The Paying Agent may seek the advice of legal counsel in
the event of any dispute or question as to the construction of any of the
provisions of this Paying Agent Agreement or its duties hereunder, and it shall
incur no liability and shall be fully protected in respect of any action taken,
omitted or suffered by it in good faith in accordance with the advice of such
counsel.
(g) In the event of any dispute hereunder, the Paying Agent
shall have the right (but shall not be obligated) to pay into court the entire
Merger Account and thereafter be absolved of any further duty or obligation
hereunder with respect to the Merger Account.
8. Compensation. The Paying Agent shall be paid the sum of $_______ for
its services to be rendered hereunder, which amount shall be paid by the
Company.
9. Resignation of Paying Agent; Appointment of Successor. The Paying
Agent acting at any time hereunder may resign at any time by giving ten days'
prior written notice of resignation to Parent and Company Representative, such
resignation to be effective on the date specified in such notice. In addition,
Parent and Company Representative may jointly cause the removal of the Paying
-4-
<PAGE> 95
Agent at any time upon the giving of ten days' written notice. In either event
Parent and Company Representative shall appoint as successor Paying Agent a bank
or trust company mutually satisfactory to them by a written instrument delivered
to each of the retiring Paying Agent and the successor Paying Agent, and upon
such appointment and its acceptance thereof, the successor Paying Agent shall
succeed to all the rights and obligations of the retiring Paying Agent as of the
effective date of resignation or removal as though it had been originally named
herein, the retiring Paying Agent shall be discharged from all duties and
obligations thereafter arising or accruing hereunder, and the retiring Paying
Agent shall duly transfer and deliver to the successor Paying Agent the Merger
Account and any other property then held by the retiring Paying Agent hereunder.
After any retiring Paying Agent's resignation or removal hereunder, the
provisions of this Paying Agent Agreement shall inure to its benefit as to any
actions taken, omitted or suffered by it while it was the Paying Agent
hereunder.
10. Amendment and Termination. This Paying Agent Agreement may be
amended or terminated only by a written agreement signed by each of the Paying
Agent, Parent, the Company and Company Representative.
11. Notices. All notices, requests, demands and other communications
hereunder shall be given in writing and shall be: (a) personally delivered; (b)
sent by telecopier, facsimile transmission or other electronic means of
transmitting written documents; or (c) sent to the parties at their respective
addresses indicated herein by registered or certified U.S. mail, return receipt
requested and postage prepaid, or by private overnight mail courier service. The
respective addresses to be used for all such notices, demands or requests are as
follows:
<TABLE>
<S> <C>
If to Parent, Newco NFC Castings, Inc.
or the Company: c/o Citicorp Venture Capital, Ltd.
Attn: David F. Thomas
399 Park Avenue, 14th Floor, Zone 4
New York, NY 10043
With a copy to: Kirkland & Ellis
Attn: Kirk A. Radke
Citicorp Center
153 East 53rd Street
New York, NY 10022-4675
If to Company E.W. Aylward
Representative: 241 Lake Road
Menasha, WI 54952
With a copy to: Quarles & Brady
Attn: Bruce C. Davidson
411 East Wisconsin Avenue
Milwaukee, WI 53202
Facsimile: (414) 271-3552
</TABLE>
-5-
<PAGE> 96
If to the Paying Agent: Bank One, Milwaukee, N.A.
Attn:_____________________
__________________________
__________________________
Milwaukee WI _____________
If personally delivered, such communication shall be deemed delivered
upon actual receipt; if electronically transmitted pursuant to this paragraph,
such communication shall be deemed delivered the next business day after
transmission (and sender shall bear the burden of proof of delivery); if sent by
overnight courier pursuant to this paragraph, such communication shall be deemed
delivered upon receipt; and if sent by U.S. mail pursuant to this paragraph,
such communication shall be deemed delivered as of the date of delivery
indicated on the receipt issued by the relevant postal service, or, if the
addressee fails or refuses to accept delivery, as of the date of such failure or
refusal. Delivery to the Company Representative shall constitute delivery to all
Company Shareholders. Any Person may change its address for the purposes of this
agreement by giving notice thereof in accordance with this Section.
12. Governing Law. This Paying Agent Agreement is being delivered and
is intended to be performed in the State of Wisconsin and shall be construed and
enforced in accordance with, and the rights of the parties shall be governed by,
the laws of the State of Wisconsin.
13. Entire Agreement. This Paying Agent Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof, and supersedes all prior agreements and understandings, written and
oral. This Paying Agent Agreement shall be binding upon the parties hereto and
their successors and assigns.
14. Headings. The headings in this Paying Agent Agreement are inserted
for convenience only and shall not constitute a part hereof.
15. Counterparts. This Paying Agent Agreement may be executed in any
one or more counterparts, each of which shall constitute one and the same
agreement.
-6-
<PAGE> 97
IN WITNESS WHEREOF, the parties have caused this Paying Agent Agreement
to be executed on the date first above written.
NFC CASTINGS, INC.
By: _______________________________
Title:
NC MERGER COMPANY
By: _______________________________
Title:
NEENAH CORPORATION
By: _______________________________
Title:
________________________________________
E.W. Aylward, Company Representative
BANK ONE, MILWAUKEE, N.A.
as Paying Agent
By: _______________________________
Title:
-7-
<PAGE> 98
FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
This First Amendment to Agreement and Plan of Reorganization is dated
as of January 13, 1997 by and among NFC Castings, Inc., a Delaware corporation
("Parent"), NC Merger Company, a Wisconsin corporation ("Newco"), and Neenah
Corporation, a Wisconsin corporation (the "Company").
RECITALS
Parent, Newco and the Company entered into an Agreement and Plan of
Reorganization dated as of November 20, 1996 ("Agreement") pursuant to which
they agreed to consummate a transaction in which Parent would acquire the
Company for cash through a reverse triangular merger of Newco with and into the
Company, whereby all of the outstanding shares of the capital stock of the
Company would be converted into the right to receive cash and all of the
outstanding shares of the capital stock of Newco would be converted into shares
of the capital stock of the Company, upon the terms and subject to the
conditions set forth in the Agreement. The parties desire to amend certain
provisions of the Agreement in the manner and to the extent set forth herein, to
extend the closing date and the outside date for such transaction.
Accordingly, in consideration of the premises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto hereby
agree as follows:
1. AMENDMENT OF THE AGREEMENT.
1.1 Closing Date. Sections 2.2, 9.1(b)(ii) and 9.1(c)(ii) of the
Agreement are amended by substituting the date "February 20, 1997" for the date
"January 31, 1997" each place it appears.
1.2 Outside Date. Sections 9.1(b)(iii) and 9.1(c)(iii) of the Agreement
are amended by substituting the date "February 21, 1997" for the date "February
15, 1997" each place it appears.
2. RATIFICATION.
Except as expressly amended by this Amendment, all of the terms and
conditions of the Agreement shall remain in full force and effect. The
Agreement, as amended hereby, and all rights and powers created thereby and
thereunder are in all respects ratified and confirmed.
3. COUNTERPARTS.
This Amendment may be signed in any number of counterparts, all of
which taken together shall constitute one fully-executed agreement.
<PAGE> 99
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
NFC CASTINGS, INC.
By: /s/ John Weber
________________________________
Title: Vice President
_____________________________
NC MERGER COMPANY
By: /s/ John Weber
________________________________
Title: Vice President
____________________________
NEENAH CORPORATION
By: /s/ E. W. Aylward
________________________________
Title: Chairman
_____________________________
-2-
<PAGE> 100
SECOND AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
This Second Amendment to Agreement and Plan of Reorganization (the
"Second Amendment") is dated as of February 21, 1997 by and among NFC Castings,
Inc., a Delaware corporation ("Parent"), NC Merger Company, a Wisconsin
corporation ("Newco"), and Neenah Corporation, a Wisconsin corporation (the
"Company").
RECITALS
Parent, Newco and the Company entered into an Agreement and Plan of
Reorganization dated as of November 20, 1996 ("Agreement and Plan of
Reorganization") pursuant to which they agreed to consummate a transaction in
which Parent would acquire the Company for cash through a reverse triangular
merger of Newco with and into the Company, whereby all of the outstanding shares
of the capital stock of the Company would be converted into the right to receive
cash and all of the outstanding shares of the capital stock of Newco would be
converted into shares of the capital stock of the Company, upon the terms and
subject to the conditions set forth in the Agreement and Plan of Reorganization.
Parent, Newco and the Company entered into a First Amendment to Agreement and
Plan of Reorganization dated as of January 13, 1997 ("First Amendment") pursuant
to which they agreed to amend certain provisions of the Agreement and Plan of
Reorganization. (The Agreement and Plan of Reorganization, as amended by the
First Amendment, is referred to herein as the "Agreement".) The parties desire
to further amend certain provisions of the Agreement in the manner and to the
extent set forth herein.
Accordingly, in consideration of the premises and of the mutual
agreements, provisions and covenants herein contained, the parties hereto hereby
agree as follows:
1. AMENDMENT OF THE AGREEMENT.
1.1 Closing Date. Sections 2.2, 9.1(b)(ii) and 9.1(c)(ii)
of the Agreement are amended by substituting the date "April 11,
1997" for the date "February 20, 1997" each place it appears.
1.2 Outside Date. Sections 9.1(b)(iii) and 9.1(c)(iii) of
the Agreement are amended by substituting the date "April 11,
1997" for the date "February 21, 1997" each place it appears.
1.3 Definitions. Section 1.1 of the Agreement is amended
by amending the definitions of "Merger Price" and "Merger Price
Per Share" to read in their entirety as follows:
"Merger Price" shall mean the sum of $240,000,000.00
less an amount equal to the Settlement Adjustment Amount, to
be delivered by Newco pursuant to Article II of this
Agreement, subject to later
<PAGE> 101
adjustment as provided in Section 2.6(e) of this
Agreement.
"Merger Price Per Share" shall mean the quotient
determined by dividing the Merger Price to be delivered by
Newco at Closing by the total number of shares of the Company
Common Stock issued and outstanding immediately prior to the
Effective Time. (For illustration purposes only, based on the
total issued and outstanding shares of Company Common Stock
set forth in Section 3.1(c) of this Agreement, the Merger
Price Per Share would equal $54,060.14 less the amount
determined by dividing the Settlement Adjustment Amount by the
number 4439.50.)
1.4 Definitions. Section 1.1 of the Agreement is amended
by adding thereto the following additional defined terms:
"Former Shareholder" shall mean any former holder of
any shares of capital stock of the Company, whose shares of
capital stock were repurchased by the Company at any time
prior to the date of this Agreement.
"Former Shareholder Claim" shall mean any claim,
demand, cause of action, suit, obligation or liability
whatsoever, in law or equity, known or unknown, whether or not
asserted or assertable, and whether or not paid or settled,
that any Former Shareholder (and such Former Shareholder's
directors, officers, employees, stockholders, heirs,
successors, assigns and agents) had, has or may have against,
or that has been, might have been or may be asserted against,
the Company, any of the Subsidiaries or any of the Company
Shareholders, or any of the respective directors, officers,
employees, stockholders, heirs, successors, assigns or agents
of the Company, any of the Subsidiaries or any of the Company
Shareholders, including without limitation any claim, demand,
cause of action, suit, obligation or liability arising from or
in connection with any sale or conveyance of any of such
Former Shareholder's or any other Person's shares of the
capital stock of the Company, including any claim, demand,
cause of action, suit, obligation or liability based upon an
allegation that such Former Shareholder did not receive fair
value for his or her shares of the capital stock of the
Company at the time such shares were repurchased by the
Company or any other allegation in connection with such
repurchase or in connection with the transactions contemplated
by this Agreement.
"Former Shareholder Release" shall mean a
Confidential Settlement Agreement and Release substantially in
the form of Exhibit H attached to this Agreement and otherwise
in substance and amount reasonably acceptable to Parent and
the Company.
-2-
<PAGE> 102
"Recent Former Shareholder" shall mean any of the
following Former Shareholders: James P. Keating, Jr.,
Mary K. and James H. Russell, Jr., Katherine K. Wilson,
Dan E. Johnson and the Neenah Foundry Foundation, Inc.
"Recent Former Shareholder Claim" shall mean any
claim, demand, cause of action, suit, obligation or liability
whatsoever, in law or equity, known or unknown, whether or not
asserted or assertable, and whether or not paid or settled,
that any Recent Former Shareholder (and such Recent Former
Shareholder's directors, officers, employees, stockholders,
heirs, successors, assigns and agents) had, has or may have
against, or that has been, might have been or may be asserted
against, the Company, any of the Subsidiaries or any of the
Company Shareholders, or any of the respective directors,
officers, employees, stockholders, heirs, successors, assigns
or agents of the Company, any of the Subsidiaries or any of
the Company Shareholders, arising from or in connection with
any sale or conveyance of any of such Recent Former
Shareholder's or any other Person's shares of the capital
stock of the Company, including any claim, demand, cause of
action, suit, obligation or liability based upon an allegation
that such Recent Former Shareholder did not receive fair value
for his or her shares of the capital stock of the Company at
the time such shares were repurchased by the Company or any
other allegation in connection with such repurchase or in
connection with the transactions contemplated by this
Agreement.
"Settlement Adjustment Amount" shall mean one-half
(1/2) of the aggregate amount actually paid by Parent or Newco
to the Recent Former Shareholders in exchange for obtaining
Former Shareholder Releases from them, provided, however, that
in no event shall the Settlement Adjustment Amount exceed
$2,000,000.00.
1.5 Payments to Recent Former Shareholders. Article II of
the Agreement is amended by adding thereto, after Section 2.3
thereof, the following additional Section 2.3A:
2.3A Payments by Parent or Newco to Recent Former
Shareholders. At the Closing, Parent or Newco shall pay to
each of the Recent Former Shareholders the settlement amount
recited in the Former Shareholder Release applicable to such
Recent Former Shareholder.
1.6 Escrow Deposit. Section 2.5(a) of the Agreement is
amended to read in its entirety as follows:
(a) Immediately after the Effective Time, the
Paying Agent shall deposit or shall cause to be
deposited with the Escrow Agent by wire transfer of
-3-
<PAGE> 103
immediately available funds, a portion of the Merger Price
equal to $12,000,000.00 less an amount equal to the Settlement
Adjustment Amount (the "Escrow Deposit"), to be held by the
Escrow Agent in accordance with Section 8.2 of this Agreement
and in accordance
with the Escrow Agreement.
1.7 Post-Closing Adjustment. Section 2.6(a) of the
Agreement is amended by replacing the period at the end of clause
(ii) thereof with a semi-colon and adding thereto the following
additional clauses (iii), (iv) and (v):
(iii) no reserves, accruals or other liabilities for any
Former Shareholder Claims shall be established with
respect to the Company or any Subsidiary, and the
Closing Date Balance Sheet and the Final Closing Date
Balance Sheet shall contain no such reserves,
accruals or liabilities; and
(iv) no expense for any accrual or payment of any portion
of any Former Shareholder Claims, whether in
settlement thereof or otherwise, shall be allowed or
taken into account in computing the net income of the
Company for the interim period ending immediately
prior to the Effective Time on the Closing Date; and
(v) no reduction or decrease shall be made in any asset
account of the Company or any Subsidiary for any
payments made to the Recent Former Shareholders
pursuant to Section 2.3A of this Agreement to the
extent any such payments are considered or deemed to
have been made by the Company or any Subsidiary.
1.8 Approval of Supplemental Disclosures. Section 5.7(b)
of the Agreement is amended by adding the following sentence to
the end thereof:
Notwithstanding the immediately preceding sentence, for
purposes of this Agreement, including without limitation
Section 6.1 of this Agreement, Parent hereby consents to all
of the updates and supplements to the Disclosure Schedule set
forth in the First Addendum to Disclosure Schedule to
Agreement and Plan of Reorganization dated as of January 28,
1997 (except for the matter regarding the Recent Former
Shareholders disclosed as new Item 7 under Section 3.10) and
in the Second Addendum to Disclosure Schedule to Agreement and
Plan of Reorganization dated as of February 7, 1997, and
accordingly such updates and supplements (except for such
matter regarding the Recent Former Shareholders disclosed as
new Item 7 under Section 3.10) shall be taken into account for
purposes of Section 6.1 of this Agreement.
-4-
<PAGE> 104
1.9 Minimum Cash on Hand. Section 6.17 of the Agreement is amended to
read in its entirety as follows:
6.17 Minimum Cash on Hand. The Company and its
Subsidiaries on a consolidated basis shall have at least
$18,000,000 cash and cash equivalents on hand at Closing (net
of checks issued but not yet presented), less the amount of
any payments made to the Recent Former Shareholders pursuant
to Section 2.3A of this Agreement to the extent any such
payments are considered or deemed to have been made by the
Company or any Subsidiary.
1.10 Conditions Precedent to Parent's and Newco's Obligations. Article
VI of the Agreement is amended by adding thereto the following additional
Section 6.18:
6.18 Former Shareholder Releases. Parent shall have
received an irrevocable, duly executed Former Shareholder
Release from each of the Recent Former Shareholders, the
continued effectiveness of each of which as to the applicable
Recent Former Shareholder is conditioned only upon payment to
such Recent Former Shareholder at or before the Closing of the
settlement amount recited in the Former Shareholder Release
applicable to such Recent Former Shareholder.
1.11 Conditions Precedent to Company's Obligations. Article VII of the
Agreement is amended by adding thereto the following additional Section 7.10:
7.10 Former Shareholder Releases. Parent shall have
received, and Parent shall have delivered to the Company
Representative a true and correct copy of, an irrevocable,
duly executed Former Shareholder Release from each of the
Recent Former Shareholders, the continued effectiveness of
each of which as to the applicable Recent Former Shareholder
is conditioned only upon payment to such Recent Former
Shareholder at or before the Closing of the settlement amount
recited in the Former Shareholder Release applicable to such
Recent Former Shareholder.
1.12 Indemnification on Behalf of Company Shareholders --Limitations.
Section 8.2(b) of the Agreement is amended by replacing the period at the end of
clause (xiii) thereof with "; and" and adding thereto the following additional
clause (xiv):
(xiv) for any Recent Former Shareholder Claims or
Losses attributable thereto.
1.13 Termination of Agreement. Section 9.1(b) of the Agreement is
amended by adding thereto the following additional clause (iv):
-5-
<PAGE> 105
(iv) the condition provided for in Section
6.18 of this Agreement has not been satisfied, or
waived by Parent or Newco in writing, by March 14,
1997; or
1.14 Termination of Agreement. Section 9.1(c) of the Agreement is
amended by replacing the period at the end of clause (iv) thereof with "; or"
and adding thereto the following additional clause (v):
(v) the condition provided for in Section
7.10 of this Agreement has not been satisfied, or
waived by the Company in writing, by March 14, 1997.
1.15 Exhibits. The Agreement is amended by adding thereto as Exhibit H
the form of Confidential Settlement Agreement and Release attached hereto as
Exhibit H, and the schedule of Exhibits is modified accordingly.
1.16 Exhibits and Schedules. Prior to Closing, the exhibits and
schedules to the Agreement shall be amended to the extent necessary to reflect
the amendments to the Agreement set forth in this Second Amendment.
2. RATIFICATION.
Except as expressly amended by this Second Amendment, all of the terms
and conditions of the Agreement shall remain in full force and effect. The
Agreement, as amended hereby, and all rights and powers created thereby and
thereunder are in all respects ratified and confirmed.
3. COUNTERPARTS.
This Second Amendment may be signed in any number of counterparts, all
of which taken together shall constitute one fully-executed agreement.
-6-
<PAGE> 106
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the day and year first above written.
NFC CASTINGS, INC.
By: /s/ John Weber
________________________________
Title:_____________________________
NC MERGER COMPANY
By: /s/ John Weber
________________________________
Title:_____________________________
NEENAH CORPORATION
By: /s/ E. W. Aylward
________________________________
Title: Chairman, President & CEO
_____________________________
-7-
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
NEENAH CORPORATION
The following Restated Articles of Incorporation duly adopted pursuant
to the authority and provisions of the Wisconsin Business Corporation Law,
Chapter 180 of the Wisconsin Statute (the "WBCL"), supersede and take the place
of the existing articles of incorporation and any amendments thereto:
ARTICLE I
Name
The name of the corporation is Neenah Corporation.
ARTICLE II
Purposes
The purposes for which the corporation is organized are to engage in
any lawful activity within the purposes for which a corporation may be organized
under the WBCL.
ARTICLE III
Existence
The corporation shall have perpetual existence.
ARTICLE IV
Capital Stock
The total number of shares of all classes of capital stock which the
corporation shall have the authority to issue is 14,000 shares, consisting of
1,000 shares of a class designated as "Class A Common Stock" having a par value
of $100.00 per share, 10,000 shares of a class designated as "Class B Common
Stock" having a par value of $100.00 per share, and 3,000 shares of a class
designated as "Preferred Stock" having a par value of $100.00 per share.
Common Stock. Except as otherwise provided in the WBCL, each
outstanding share of Class A Common stock is entitled to one vote on each matter
voted on at a shareholders' meeting. The Class B Common Stock shall have no
voting rights except as may be provided
<PAGE> 2
by the WBCL. Except with regard to voting rights, the shares of Class A Common
Stock and Class B Common Stock shall be identical as to preferences, limitations
and relative rights. Subject to the prior rights and preferences of any issued
and outstanding shares of Preferred Stock, such dividends as May be determined
by the Board of Directors of the corporation. may be declared and paid on the
Class A Common Stock and Class B Common Stock from time to time out of any funds
legally available therefor. After payment shall have been made in full to the
holders of any issued and outstanding shares of Preferred Stock (in accordance
with the terms thereof) in the event of any liquidation, dissolution or winding
up of the affairs of the corporation the remaining assets and funds of the
Corporation shall be distributed among the holders of the Class A Common Stock
and Class B Common Stock according to their respective shares.
Preferred Stock. The Board of Directors may, within the limits under
Section 180.0601 of the WBCL (or any successor provision), do any of the
following with respect to the Preferred Stock:
(1) Determine with respect to the class of Preferred
Stock the preferences, limitations and relative
rights, in whole or in part, before the issuance of
any shares of that class.
(b) Create one or more series within the class of
Preferred Stock, and, with respect to any series,
determine the number of shares of the series, the
distinguishing designations and the preferences,
limitations and relative rights, in whole or in
part, before the issuance of any shares of that
series.
Preemptive Rights. The corporation elects not to have preemptive
rights. Shareholders or holders of other securities of the corporation,
including "shares of a pre-existing class" (meaning shares of a class for which
shares were authorized before January 1, 1991, whether the shares were issued
before, on or after January 1, 1991, as defined in Section 180.1701 of the
WBCL), shall not have a preemptive right to acquire unissued shares or
securities convertible into unissued shares or carrying a right to subscribe to
or acquire shares of the corporation.
ARTICLE V
Board of Directors
The number of directors constituting the Board of Directors of the
corporation shall be fixed by or in the manner provided in the Bylaws of the
corporation.
2
<PAGE> 3
ARTICLE VI
Registered office and Agent
The address of the registration office of the corporation is 2121
Brooks Avenue, P.O. Box 729, Neenah, Wisconsin 54956, and the name of its
registered agent at such office is Gary W. LaChey.
* * * * *
3
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
NEENAH CORPORATION
AS AMENDED AND RESTATED
JULY 14, 1995
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I. OFFICES; RECORDS ............................................. 1
1.01 Principal and Business Offices ................................ 1
1.02 Registered Office and Registered Agent ........................ 1
1.03 Corporate Records ............................................. 1
ARTICLE II. SHAREHOLDERS ................................................ 2
2.01 Annual Meeting ................................................ 2
2.02 Special Meetings .............................................. 2
2.03 Place of Meeting .............................................. 2
2.04 Notices to Shareholders ....................................... 2
2.05 Fixing of Record Date ......................................... 3
2.06 Shareholder List .............................................. 4
2.07 Quorum and Voting Requirements ................................ 4
2.08 Conduct of Meetings ........................................... 4
2.09 Proxies ....................................................... 5
2.10 Voting of Shares .............................................. 5
ARTICLE III. BOARD OF DIRECTORS ......................................... 5
3.01 General Powers and Number ..................................... 5
3.02 Election, Removal, Tenure and Qualifications .................. 5
3.03 Regular Meetings .............................................. 6
3.04 Special Meetings .............................................. 6
3.05 Meetings By Telephone or Other Communication Technology ....... 6
3.06 Notice of Meetings ............................................ 6
3.07 Quorum ........................................................ 7
3.08 Manner of Acting .............................................. 7
3.09 Conduct of Meetings ........................................... 7
3.10 Vacancies ..................................................... 7
3.11 Compensation .................................................. 7
3.12 Presumption of Assent ......................................... 7
3.13 Committees .................................................... 8
ARTICLE IV. OFFICERS .................................................... 8
4.01 Appointment ................................................... 8
4.02 Resignation and Removal ....................................... 8
4.03 Vacancies ..................................................... 9
4.04 Chairman of the Board ......................................... 9
4.05 President ..................................................... 9
4.06 Shared Functions .............................................. 9
4.07 Vice Presidents ............................................... 10
4.08 Secretary ..................................................... 10
4.09 Treasurer ..................................................... 10
4.10 Assistants and Acting Officers ................................ 10
-i-
<PAGE> 3
4.11 Salaries ........................................................ 11
ARTICLE V. CERTIFICATES FOR SHARES AND THEIR TRANSFER .................... 11
5.01 Certificates for Shares ......................................... 11
5.02 Signature by Former Officers .................................... 11
5.03 Transfer of Shares .............................................. 11
5.04 Restrictions on Transfer ........................................ 12
5.05 Lost, Destroyed or Stolen Certificates .......................... 12
5.06 Consideration for Shares ........................................ 12
5.07 Stock Regulations ............................................... 12
ARTICLE VI. WAIVER OF NOTICE ............................................. 12
6.01 Shareholder Written Waiver ...................................... 12
6.02 Shareholder Waiver by Attendance ................................ 12
6.03 Director Written Waiver ......................................... 13
6.04 Director Waiver by Attendance ................................... 13
ARTICLE VII. ACTION WITHOUT MEETINGS ..................................... 13
7.01 Shareholder Action Without Meeting .............................. 13
7.02 Director Action Without Meeting ................................. 13
ARTICLE VIII. INDEMNIFICATION ............................................ 14
8.01 Indemnification for Successful Defense .......................... 14
8.02 Other Indemnification ........................................... 14
8.03 Written Request ................................................. 14
8.04 Nonduplication .................................................. 14
8.05 Determination of Right to Indemnification ....................... 15
8.06 Advance of Expenses ............................................. 16
8.07 Nonexclusivity .................................................. 16
8.08 Court-Ordered Indemnification ................................... 17
8.09 Indemnification and Allowance of Expenses of Employees and Agents 17
8.10 Insurance ....................................................... 18
8.11 Securities Law Claims ........................................... 18
8.12 Liberal Construction ............................................ 18
8.13 Definitions Applicable to this Article .......................... 18
ARTICLE IX. CONTRACTS, LOANS, CHECKS AND DEPOSITS ......................... 19
9.01 Contracts; Director Conflict of Interest ........................ 19
9.02 Loans ........................................................... 20
9.03 Checks, Drafts, etc ............................................. 20
9.04 Deposits ........................................................ 20
-ii-
<PAGE> 4
ARTICLE X. MISCELLANEOUS ................................................ 20
10.01 Corporate Seal ............................................... 20
10.02 Fiscal Year .................................................. 20
ARTICLE XI. AMENDMENTS .................................................. 21
11.01 By Shareholders .............................................. 21
11.02 By Directors ................................................. 21
11.03 Implied Amendments ........................................... 21
-iii-
<PAGE> 5
ARTICLE I. OFFICES; RECORDS
1.01 Principal and Business Offices. The corporation may have such
principal and other business offices, either within or without the State of
Wisconsin, as the Board of Directors may designate or as the business of the
corporation may require from time to time.
1.02 Registered Office and Registered Agent. The registered office of
the corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical with the
principal office in the State of Wisconsin. The address of the registered office
may be changed from time to time by any officer or by the registered agent. The
office of the registered agent of the corporation shall be identical to such
registered office.
1.03 Corporate Records. The following documents and records shall be
kept at the corporation's principal office or at such other reasonable location
as may be specified by the corporation:
(a) Minutes of shareholders, and Board of Directors' meetings and
any written notices thereof.
(b) Records of actions taken by the shareholders or directors
without a meeting.
(c) Records of actions taken by committees of the Board of
Directors.
(d) Accounting records.
(e) Records of its shareholders.
(f) Current Bylaws.
(g) Written waivers of notice by shareholders or directors (if
any).
(h) Written consents by shareholders or directors for actions
without a meeting (if any).
(i) Voting trust agreements (if any).
(j) Stock transfer agreements to which the corporation is a party
or of which it has notice (if any).
-1-
<PAGE> 6
ARTICLE II. SHAREHOLDERS
2.01 Annual Meeting. The annual meeting of the shareholders shall be
held not earlier than the second Tuesday in April nor later than the third
Tuesday in June, as determined each year by the Chairman of the Board or the
President, and the time and place of meeting shall be such as shall be fixed by
the Secretary and specified in the notice or waiver of notice of the meeting.
The annual meeting shall be held for the purpose of electing directors and for
the transaction of such other business as may come before the meeting. If the
election of directors is not held on the day fixed as herein provided, for any
annual meeting of the shareholders, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a meeting of the shareholders
as soon thereafter as may be convenient.
2.02 Special Meetings. Special meetings of the shareholders, for any
purpose or purposes, unless otherwise prescribed by statute, may be called by
the Chairperson of the Board, if there is one, the President or the Board of
Directors. If and as required by the Wisconsin Business Corporation Law, a
special meeting shall be called upon written demand describing one or more
purposes for which it is to be held by holders of shares with at least 10% of
the votes entitled to be cast on any issue proposed to be considered at the
meeting. The purpose or purposes of any special meeting shall be described in
the notice required by Section 2.04 of these Bylaws.
2.03 Place of Meeting. The Board of Directors may designate any place,
either within or without the State of Wisconsin, as the place of meeting for any
annual meeting or any special meeting. If no designation is made, the place of
meeting shall be the principal office of the corporation but any meeting may be
adjourned to reconvene at any place designated by vote of a majority of the
shares represented thereat and entitled to vote thereon.
2.04 Notices to Shareholders. (a) Required Notice. Written notice
stating the place, day and hour of the meeting. and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days nor more than sixty (60) days before the date
of the meeting (unless a different time is provided by law or the Articles of
Incorporation), by or at the direction of the Chairman of the Board, the
President or the Secretary, to each shareholder entitled to vote at such meeting
or, for the fundamental transactions described in subsections (e)(1) to (4)
below (for which the Wisconsin Business Corporation Law requires that notice be
given to shareholders not entitled to vote), to all shareholders. If mailed,
such notice is effective when deposited in the United States mail, and shall be
addressed to the shareholder's address shown in the current record of
shareholders of the corporation, with postage thereon prepaid. At least twenty
(20) days' notice shall be provided if the purpose, or one of the purposes, of
the meeting is to consider a plan of merger or share exchange for which
shareholder approval is required by law, or the sale, lease, exchange or other
disposition of all or substantially all of the corporation's property, with or
without good will, otherwise than in the usual and regular course of business.
(b) Adjourned Meeting. Except as provided in the next sentence,
if any shareholder meeting is adjourned to a different date, time, or place,
notice need not be given of
-2-
<PAGE> 7
the new date, time, and place, if the new date, time and place is announced at
the meeting before adjournment. If a new record date for the adjourned meeting
is or must be fixed, then notice must be given pursuant to the requirements of
paragraph (a) of this Section 2.04, to those persons who are shareholders as of
the new record date.
(c) Waiver of Notice. A shareholder may waive notice in
accordance with Article VI of these Bylaws.
(d) Contents of Notice. The notice of each special shareholder
meeting shall include a description of the purpose or purposes for which the
meeting is called, and only business within the purpose described in the meeting
notice may be conducted at a special shareholder meeting. Except as otherwise
provided in subsection (e) of this Section 2.04, in the Articles of
Incorporation, or in the Wisconsin Business Corporation Law, the notice of an
annual shareholder meeting need not include a description of the purpose or
purposes for which the meeting is called.
(e) Fundamental Transactions. If a purpose of any shareholder
meeting is to consider either: (1) a proposed amendment to the Articles of
Incorporation (including any restated articles); (2) a plan of merger or share
exchange for which shareholder approval is required by law; (3) the sale, lease,
exchange or other disposition of all or substantially all of the corporation's
property, with or without good will, otherwise than in the usual and regular
course of business; (4) the dissolution of the corporation; or (5) the removal
of a director, the notice must so state and in cases (1), (2) and (3) above must
be accompanied by, respectively, a copy or summary of the: (1) proposed articles
of amendment or a copy of the restated articles that identifies any amendment or
other change; (2) proposed plan of merger or share exchange; or (3) proposed
transaction for disposition of all or substantially all of the corporation's
property. If the proposed corporate action creates dissenters, rights, the
notice must state that shareholders and beneficial shareholders are or may be
entitled to assert dissenters' rights, and must be accompanied by a copy of
Sections 180.1301 to 180.1331 of the Wisconsin Business Corporation Law, or the
corresponding provisions of any successor statute.
2.05 Fixing of Record Date. The Board of Directors may fix in advance
a date as the record date for one or more voting groups for any determination of
shareholders entitled to notice of a shareholders, meeting, to demand a special
meeting, to vote, or to take any other action, such date in any case to be not
more than seventy (70) days prior to the meeting or action requiring such
determination of shareholders, and may fix the record date for determining
shareholders entitled to a share dividend or distribution. If no record date is
fixed for the determination of shareholders entitled to demand a shareholder
meeting, to notice of or to vote at a meeting of shareholders, or to consent to
action without a meeting, (a) the close of business on the day before the
corporation receives the first written demand for a shareholder meeting, (b) the
close of business on the day before the first notice of the meeting is mailed or
otherwise delivered to shareholders, or (c) the close of business on the day
before the first written consent to shareholder action without a meeting is
received by the corporation, as the case may be, shall be the record date for
the determination of shareholders. If no record date is fixed for the
determination of shareholders entitled to receive a share dividend or
distribution (other than a distribution involving a purchase, redemption or
other acquisition of the corporation's shares),
-3-
<PAGE> 8
the close of business on the day on which the resolution of the Board of
Directors is adopted declaring the dividend or distribution shall be the record
date. When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
be applied to any adjournment thereof unless the Board of Directors fixes a new
record date and except as otherwise required by law. A new record date must be
set if a meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
2.06 Shareholder List. The officer or agent having charge of the stock
transfer books for shares of the corporation shall, before each meeting of
shareholders, make a complete record of the shareholders entitled to notice of
such meeting, arranged by class or series of shares and showing the address of
and the number of shares held by each shareholder. The shareholder list shall be
available at the meeting and may be inspected by any shareholder or his or her
agent or attorney at any time during the meeting or any adjournment. Any
shareholder or his or her agent or attorney may inspect the shareholder list
beginning two (2) business days after the notice of the meeting is given and
continuing to the date of the meeting, at the corporation's principal office or
at a place identified in the meeting notice in the city where the meeting will
be held and, subject to Section 180-1602(2)(b) 3 to 5 of the Wisconsin Business
Corporation Law, may copy the list, during regular business hours and at his or
her expense, during the period that it is available for inspection hereunder.
The original stock transfer books and nominee certificates on file with the
corporation (if any) shall be prima facie evidence as to who are the
shareholders entitled to inspect the shareholder list or to vote at any meeting
of shareholders. Failure to comply with the requirements of this section shall
not affect the validity of any action taken at such meeting.
2.07 Quorum and Voting Requirements. Except as otherwise provided in
the Articles of Incorporation or in the Wisconsin Business Corporation Law, a
majority of the votes entitled to be cast by shares entitled to vote as a
separate voting group on a matter, represented in person or by proxy, shall
constitute a quorum of that voting group for action on that matter at a meeting
of shareholders. If a quorum exists, action on a matter, other than the election
of directors, by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action unless a
greater number of affirmative votes is required by the Wisconsin Business
Corporation Law or the Articles of Incorporation. If the Articles of
Incorporation or Wisconsin Business Corporation Law provide for voting by two
(2) or more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately. Action may be
taken by one (1) voting group on a matter even though no action is taken by
another voting group entitled to vote on the matter. Once a share is represented
for any purpose at a meeting, other than for the purpose of objecting to holding
the meeting or transacting business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or must he
set for that meeting.
2.08 Conduct of Meetings. The Chairman of the Board, or in his or her
absence, the President, and in the President's absence, a Vice President in the
order provided under Section 4.07 of these Bylaws, and in their absence, any
person chosen by the shareholders present shall call the meeting of the
shareholders to order and shall act as chairperson of the meeting, and the
-4-
<PAGE> 9
Secretary shall act as secretary of all meetings of the shareholders, but, in
the absence of the Secretary, the presiding officer may appoint any other person
to act as secretary of the meeting.
2.09 Proxies. At all meetings of shareholders, a shareholder entitled
to vote may vote in person or by proxy appointed in writing by the shareholder
or by his or her duly authorized attorney-in-fact. All proxy appointment forms
shall be filed with the Secretary or other officer or agent of the corporation
authorized to tabulate votes before or at the time of the meeting. Unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest, a proxy appointment may be revoked at any time. The
presence of a shareholder who has filed a proxy appointment shall not of itself
constitute a revocation. No proxy appointment shall be valid after eleven months
from the date of its execution, unless otherwise expressly provided in the
appointment form. The Board of Directors shall have the power and authority to
make rules that are not inconsistent with the Wisconsin Business Corporation Law
as to the validity and sufficiency of proxy appointments.
2.10 Voting of Shares. Each outstanding share of Class A common stock
shall be entitled to one (1) vote on each matter submitted to a vote at a
meeting of shareholders. The holders of preferred stock and of Class B common
stock shall have no voting rights whatsoever, except as required by law. Shares
owned directly or indirectly by another corporation are not entitled to vote if
this corporation owns, directly or indirectly, sufficient shares to elect a
majority of the directors of such other corporation. However the prior sentence
shall not limit the power of the corporation to vote any shares, including its
own shares, held by it in a fiduciary capacity. Redeemable shares are not
entitled to vote after notice of redemption is mailed to the holders and a sum
sufficient to redeem the shares has been deposited with a bank, trust company,
or other financial institution under an irrevocable obligation to pay the
holders the redemption price on surrender of the shares.
ARTICLE III. BOARD OF DIRECTORS
3.01 General Powers and Number. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of, its Board of Directors. The number of
directors of the corporation shall be three (3). The number of directors may be
increased or decreased from time to time by amendment to this Section adopted by
the shareholders or the Board of Directors, but no decrease shall have the
effect of shortening the term of an incumbent director.
3.02 Election, Removal, Tenure and Qualifications. Unless action is
taken without a meeting under Section 7.01 of these Bylaws, directors shall be
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a shareholders meeting at which a quorum is present; i.e., the
individuals with the largest number of votes in favor of their election are
elected as directors up to the maximum number of directors to be chosen in the
election. Votes against a candidate are not given legal effect and are not
counted as votes cast in an election of directors. In the event two (2) or more
persons tie for the last vacancy to be filled, a run-off vote shall be taken
from among the candidates receiving the tie vote. Each director shall hold
office until the next annual meeting of shareholders and until the director's
successor shall have been elected
-5-
<PAGE> 10
and qualified or there is a decrease in the number of directors, or until his or
her prior death, resignation or removal. If cumulative voting for directors is
not authorized by the Articles of Incorporation, any director or directors may
be removed from office by the shareholders if the number of votes cast to remove
the director exceeds the number cast not to remove him or her, taken at a
meeting of shareholders called for that purpose (unless action is taken without
a meeting under Section 7.01 of these Bylaws), provided that the meeting notice
states that the purpose, or one of the purposes, of the meeting is removal of
the director. The removal may be made with or without cause unless the Articles
of Incorporation or these Bylaws provide that directors may be removed only for
cause. A director may resign at any time by delivering a written resignation to
the Board of Directors, to the Chairman of the Board, or to the corporation
through the Secretary or otherwise. Directors need not be residents of the State
of Wisconsin or shareholders of the corporation.
3.03 Regular Meetings. A regular meeting of the Board of Directors
shall be held, without other notice than this Bylaw, immediately after the
annual meeting of shareholders, and each adjourned session thereof. The place of
such regular meeting shall be the same as the place of the meeting of
shareholders which precedes it, or such other suitable place as may be announced
at such meeting of shareholders. The Board of Directors and any committee may
provide, by resolution, the time and place, either within or without the State
of Wisconsin, for the holding of additional regular meetings without other
notice than such resolution.
3.04 Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the Chairman of the Board, the President or
any two (2) directors. Special meetings of any committee may be called by or at
the request of the foregoing persons or the chairperson of the committee. The
persons calling any special meeting of the Board of Directors or committee may
fix any place, either within or without the State of Wisconsin, as the place for
holding any special meeting called by them, and if no other place is fixed the
place of meeting shall be the principal office of the corporation in the State
of Wisconsin.
3.05 Meetings By Telephone or Other Communication Technology. (a) Any
or all directors may participate in a regular or special meeting or in a
committee meeting of the Board of Directors by, or conduct the meeting through
the use of, telephone or any other means of communication by which either: (i)
all participating directors may simultaneously hear each other during the
meeting or (ii) all communication during the meeting is immediately transmitted
to each participating director, and each participating director is able to
immediately send messages to all other participating directors.
(b) If a meeting will be conducted through the use of any means
described in paragraph (a), all participating directors shall be informed that a
meeting is taking place at which official business may be transacted. A director
participating in a meeting by any means described in paragraph (a) is deemed to
be present in person at the meeting.
3.06 Notice of Meetings. Except as otherwise provided in the Articles
of Incorporation or the Wisconsin Business Corporation Law, notice of the date,
time and place of any special meeting of the Board of Directors and of any
special meeting of a committee of the Board shall be given orally or in writing
to each director or committee member at least 48 hours
-6-
<PAGE> 11
prior to the meeting, except that notice by mail shall be given at least 72
hours prior to the meeting. The notice need not describe the purpose of the
meeting. Notice may be communicated in person, by telephone, telegraph or
facsimile or by mail or private carrier. Oral notice is effective when
communicated. Written notice is effective as follows: If delivered in person,
when received; if given by mail, when deposited, postage prepaid, in the United
States mail addressed to the director at his or her business or home address (or
such other address as the director may have designated in writing filed with the
Secretary); if given by facsimile, at the time transmitted to a facsimile number
at any address designated above; and if given by telegraph, when delivered to
the telegraph company.
3.07 Quorum. Except as otherwise provided by the Wisconsin Business
Corporation Law, a majority of the number of directors as provided in Section
3.01 shall constitute a quorum of the Board of Directors. Except as otherwise
provided by the Wisconsin Business Corporation Law, a majority of the number of
directors appointed to serve on a committee shall constitute a quorum of the
committee.
3.08 Manner of Acting. Except as otherwise provided by the Wisconsin
Business Corporation Law, the affirmative vote of a majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors or any committee thereof.
3.09 Conduct of Meetings. The Chairman of the Board, or in his or her
absence, the President, and in the President's absence, a Vice President in the
order provided under Section 4.07 of these Bylaws, and in their absence, any
director chosen by the directors present, shall call meetings of the Board of
Directors to order and shall chair the meeting. The Secretary of the corporation
shall act as secretary of all meetings of the Board of Directors, but in the
absence of the Secretary, the presiding officer may appoint any assistant
secretary or any director or other person present to act as secretary of the
meeting.
3.10 Vacancies. Any vacancy occurring in the Board of Directors,
including a vacancy created by an increase in the number of directors, may be
filled by the shareholders or the Board of Directors. If the directors remaining
in office constitute fewer than a quorum of the Board, the directors may fill a
vacancy by the affirmative vote of a majority of all directors remaining in
office. A vacancy that will occur at a specific later date (because of a
resignation effective at a later date or otherwise) may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
3.11 Compensation. The Board of Directors, irrespective of any personal
interest of any of its members, may fix the compensation of directors.
3.12 Presumption of Assent. A director who is present and is announced
as present at a meeting of the Board of Directors or a committee thereof at
which action on any corporate matter is taken shall be presumed to have assented
to the action taken unless (i) the director objects at the beginning of the
meeting or promptly upon his or her arrival to ho1ding the meeting or
transacting business at the meeting, or (ii) the director's dissent or
abstention from the action taken is entered in the minutes of the meeting, or
(iii) the director delivers his or her written dissent or abstention to the
presiding officer of the meeting before the adjournment
-7-
<PAGE> 12
thereof or to the corporation immediately after the adjournment of the meeting.
Such right to dissent or abstain shall not apply to a director who voted in
favor of such action.
3.13 Committees. The Board of Directors, by resolution adopted by the
affirmative vote of a majority of all the directors then in office, may create
one (1) or more committees, each committee to consist of two (2) or more
directors as members, which to the extent provided in the resolution as
initially adopted, and as thereafter supplemented or amended by further
resolution adopted by a like vote, may exercise the authority of the Board of
Directors, except that no committee may: (a) authorize distributions; (b)
approve or propose to shareholders action that the Wisconsin Business
Corporation Law requires be approved by shareholders; (c) fill vacancies on the
Board of Directors or any of its committees, except that the Board of Directors
may provide by resolution that any vacancies on a committee shall be filled by
the affirmative vote of a majority of the remaining committee members; (d) amend
the Articles of Incorporation; (e) adopt, amend or repeal Bylaws; (f) approve a
plan of merger not requiring shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method prescribed by
the Board of Directors or (h) authorize or approve the issuance or sale or
contract for sale of shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except within limits
prescribed by the Board of Directors. All members of the Board of Directors who
are not members of a given committee shall be alternate members of such
committee and may take the place of any absent member or members at any meeting
of such committee, upon request by the Chairman of the Board, the President or
upon request by the chairperson of such meeting. Each such committee shall fix
its own rules (consistent with the Wisconsin Business Corporation Law, the
Articles of Incorporation and these Bylaws) governing the conduct of its
activities and shall make such reports to the Board of Directors of its
activities as the Board of Directors may request. Unless otherwise provided by
the Board of Directors in creating a committee, a committee may employ counsel,
accountants and other consultants to assist it in the exercise of authority. The
creation of a committee, delegation of authority to a committee or action by a
committee does not relieve the Board of Directors or any of its members of any
responsibility imposed on the Board of Directors or its members by law.
ARTICLE IV. OFFICERS
4.01 Appointment. The principal officers shall include a Chairman of
the Board, a President, one or more Vice Presidents (the number and designations
to be determined by the Board of Directors), a Secretary and a Treasurer, each
of whom shall be appointed by the Board of Directors. The Board of Directors may
designate one or more of the Vice Presidents as Executive Vice Presidents or
Senior Vice Presidents. Such other officers and assistant officers as may be
deemed necessary may be appointed by the Board of Directors, the Chairman of the
Board or the President. Any two or more offices may be held by the same person.
4.02 Resignation and Removal. An officer shall hold office until he or
she resigns, dies, is removed hereunder, or a different person is appointed to
the office. An officer may resign at any time by delivering an appropriate
written notice to the corporation. The resignation
-8-
<PAGE> 13
is effective when the notice is delivered, unless the notice specifies a later
effective date and the corporation accepts the later effective date. Any officer
may be removed by the Board of Directors with or without cause and
notwithstanding the contract rights, if any, of the person removed. Except as
provided in the preceding sentence, the resignation or removal is subject to any
remedies provided by any contract between the officer and the corporation or
otherwise provided by law. Appointment shall not of itself create contract
rights.
4.03 Vacancies. A vacancy in any principal office because of death,
resignation, removal or otherwise, shall be filled by the Board of Directors and
a vacancy in any other office shall be filled by the Board of Directors, the
Chairman of the Board or the President. If a resignation is effective at a later
date, the vacancy may be filled before the effective date if the appointment
provides that the successor may not take office until the effective date.
4.04 Chairman of the Board. The Chairman of the Board shall be the
chief executive officer of the corporation and, subject to the control of the
Board of Directors, shall in general supervise and control all of the business
and affairs of the corporation. He or she shall, when present, preside at all
meetings of the shareholders and of the Board of Directors. He or she shall have
authority, subject to such rules as may be prescribed by the Board of Directors,
to appoint such agents and employees of the corporation as he or she shall deem
necessary, to prescribe their powers, duties and compensation, and to delegate
authority to them. Such agents and employees shall hold office at the discretion
of the Chairman of the Board. In general, he or she shall perform all duties
incident to the office of the Chairman of the Board and such other duties as may
be prescribed by the Board of Directors from time to time. In the absence of the
President, or in the event that such office is for any reason vacant, the
Chairman of the Board shall perform the functions of the President.
4.05 President. The President shall be the chief operating officer of
the corporation, carrying out his or her functions subject to the directions of
the Chairman of the Board and the Board of Directors. In the absence of the
Chairman of the Board, or in the event that such office is for any reason
vacant, the President shall perform the functions of the Chairman of the Board.
However, if the offices of Chairman of the Board and President are held by the
same person, the Board of Directors may designate an Executive Vice President as
the chief operating officer of the corporation, in which event references in the
Bylaws to the President shall be regarded as references to such Executive Vice
President, as chief operating officer, except where a contrary meaning is
clearly required.
4.06 Shared Functions. Except in cases where the signing and execution
thereof is expressly delegated by the Board of Directors or these Bylaws to some
other officer or agent of the corporation, or is required by law to be otherwise
signed or executed, the Chairman of the Board and the President shall each have
authority to sign, execute and acknowledge, on behalf of the corporation, all
deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all
other documents or instruments necessary or proper to be executed in the course
of a corporation's regular business, or which shall be authorized by resolution
of the Board of Directors (provided that in no case shall the Chairman be
empowered in place of the President to sign the certificates for shares of stock
of the corporation); and, except as otherwise provided by law or the Board of
Directors, they may authorize any Vice President or other officer or agent of
-9-
<PAGE> 14
the corporation to sign, execute and acknowledge such documents or instruments
in their place and stead.
4.07 Vice Presidents. In the absence of both the Chairman of the Board
and the President, or in the event of the death, inability or refusal to act of
both the Chairman of the Board and the President, or in the event for any reason
it shall be impracticable for either of them to act personally, the Vice
President (or in the event there be more than one Vice President, the Vice
Presidents in the order designated by the Board of Directors, or in the absence
of any designation, then in the order of their election) shall perform the
duties of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may sign,
with the Secretary or Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties and have such authority as from
time to time may be delegated or assigned to him or her by the Chairman of the
Board, the President or the Board of Directors. The execution of any instrument
of the corporation by any Vice President shall be conclusive evidence, as to
third parties, of the Vice President's authority to act in the stead of the
President. Vice Presidents may, by their election, have charge and supervision
of designated divisions, departments or units of the corporation's business.
4.08 Secretary. The Secretary shall: (a) keep (or cause to be kept)
regular minutes of all meetings of the shareholders, the Board of Directors and
any committees of the Board of Directors in one or more books provided for that
purpose; (b) see that all notices are duly given in accordance with the
provisions of these Bylaws or as required by law; (c) be custodian of the
corporate records and of the seal of the corporation, if any, and see that the
seal of the corporation, if any, is affixed to all documents which are
authorized to be executed on behalf of the corporation under its seal; (d) keep
or arrange for the keeping of a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or a Vice President, certificates for shares of the
corporation, the issuance of which shall have been authorized by resolution of
the Board of Directors; (f) have general charge of the stock transfer books of
the corporation; and (g) in general perform all duties incident to the office of
Secretary and have such other duties and exercise such authority as from time to
time may be delegated-or assigned to him or her by the Chairman of the Board or
the President or by the Board of Directors.
4.09 Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; (b) receive
and give receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
banks, trust companies or other depositories as shall be selected by the
corporation; and (c) in general perform all of the duties incident to the office
of Treasurer and have such other duties and exercise such other authority as
from time to time may be delegated or assigned to him or her by the Chairman of
the Board or the President or by the Board of Directors.
4.10 Assistants and Acting Officers. The Board of Directors, the
Chairman of the Board and the President shall have the power to appoint any
person to act as assistant to any officer, or as agent for the corporation in
the officer's stead, or to perform the duties of such officer whenever for any
reason it is impracticable for such officer to act personally, and such
-10-
<PAGE> 15
assistant or acting officer or other agent so appointed by the Board of
Directors, the Chairman of the Board or President shall have the power to
perform all the duties of the office to which that person is so appointed to be
assistant, or as to which he or she is so appointed to act, except as such power
may be otherwise defined or restricted by the Board of Directors, the Chairman
of the Board or the President.
4.11 Salaries. The salaries of the principal officers may be fixed from
time to time by the Board of Directors, and no officer shall be prevented from
receiving such salary by reason of the fact that such officer is also a director
of the corporation.
ARTICLE V. CERTIFICATES FOR SHARES AND THEIR TRANSFER
5.01 Certificates for Shares. All shares of this corporation shall be
represented by certificates. Certificates representing shares of the corporation
shall be in such form, consistent with law, as shall be determined by the Board
of Directors. At a minimum, a share certificate shall state on its face the name
of the corporation and that it is organized under the laws of the State of
Wisconsin, the name of the person to whom issued, and the number and class of
shares and the designation of the series, if any, that the certificate
represents. The front or back of the certificate also must contain either (a) a
summary of the designations, relative rights, preferences and limitations
applicable to each class, and the variations in the rights, preferences and
limitations determined for each series and the authority of the Board of
Directors to determine variations for future series, or (b) a conspicuous
statement that the corporation will furnish the shareholder the information
described in clause (a) on request, in writing and without charge. Such
certificates shall be signed, either manually or in facsimile, by the President
or a Vice President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the corporation. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except as provided in Section 5.05.
5.02 Signature by Former Officers. If an officer or assistant officer,
who has signed or whose facsimile signature has been placed upon any certificate
for shares, has ceased to be such officer or assistant officer before such
certificate is issued, the certificate may be issued by the corporation with the
same effect as if that person were still an officer or assistant officer at the
date of its issue.
5.03 Transfer of Shares. Prior to due presentment of a certificate for
shares for registration of transfer, and unless the corporation has established
a procedure by which a beneficial owner of shares held by a nominee is to be
recognized by the corporation as the shareholder, the corporation may treat the
registered owner of such shares as the person exclusively entitled to vote, to
receive notifications and otherwise to have and exercise all the rights and
power of an owner. The corporation may require reasonable assurance that all
transfer
-11-
<PAGE> 16
endorsements are genuine and effective and in compliance with all regulations
prescribed by or under the authority of the Board of Directors.
5.04 Restrictions on Transfer. The face or reverse side of each
certificate representing shares shall bear a conspicuous notation of the
restrictions upon the transfer of such shares imposed by the Articles of
Incorporation of the corporation and any other restrictions imposed by any
agreement of which the corporation has written notice.
5.05 Lost, Destroyed or Stolen Certificates. Where the owner claims
that his or her certificate for shares has been lost, destroyed or wrongfully
taken, a new certificate shall be issued in place thereof if the owner (a) so
requests before the corporation has notice that such shares have been acquired
by a bona fide purchaser, and (b) if required by the corporation, files with the
corporation a sufficient indemnity bond or affidavit and indemnity agreement,
and (c) satisfies such other reasonable requirements as may be prescribed by or
under the authority of the Board of Directors.
5.06 Consideration for Shares. The shares of the corporation may be
issued for such consideration as shall be fixed from time to time and determined
to be adequate by the Board of Directors, but not less than the par value
thereof. The consideration may consist of any tangible or intangible property or
benefit to the corporation, including cash, promissory notes, services
performed, contracts for services to be performed, or other securities of the
corporation. When the corporation receives the consideration for which the Board
of Directors authorized the issuance of shares, such shares shall be deemed to
be fully paid and nonassessable by the corporation.
5.07 Stock Regulations. The Board of Directors shall have the power and
authority to make all such rules and regulations not inconsistent with the
statutes of the State of Wisconsin as it may deem expedient concerning the
issue, transfer and registration of certificates representing shares of the
corporation, including the appointment or designation of one or more stock
transfer agents and one or more registrars.
ARTICLE VI. WAIVER OF NOTICE
6.01 Shareholder Written Waiver. A shareholder may waive any notice
required by the Wisconsin Business Corporation Law, the Articles of
Incorporation or these Bylaws before or after the date and time stated in the
notice. The waiver shall be in writing and signed by the shareholder entitled to
the notice, shall contain the same information that would have been required in
the notice under the Wisconsin Business Corporation Law except that the time and
place of meeting need not be stated, and shall be delivered to the corporation
for inclusion in the corporate records.
6.02 Shareholder Waiver by Attendance. A shareholder's attendance at a
meeting, in person or by proxy, waives objection to both of the following:
-12-
<PAGE> 17
(a) Lack of notice or defective notice of the meeting, unless
the shareholder at the beginning of the meeting or promptly
upon arrival objects to holding the meeting or transacting
business at the meeting.
(b) Consideration of a particular matter at the meeting that
is not within the purpose described in the meeting notice,
unless the shareholder objects to considering the matter when
it is presented.
6.03 Director Written Waiver. A director may waive any notice required
by the Wisconsin Business Corporation Law, the Articles of Incorporation or the
Bylaws before or after the date and time stated in the notice. The waiver shall
be in writing, signed by the director entitled to the notice and retained by the
corporation.
6.04 Director Waiver by Attendance. A director's attendance at or
participation in a meeting of the Board of Directors or any committee thereof
waives any required notice to him or her of the meeting unless the director at
the beginning of the meeting or promptly upon his or her arrival objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
ARTICLE VII. ACTION WITHOUT MEETINGS
7.01 Shareholder Action Without Meeting. Action required or permitted
by the Wisconsin Business Corporation Law to be taken at a shareholders, meeting
may be taken without a meeting by all shareholders entitled to vote on the
action. The action must be evidenced by one or more written consents describing
the action taken, signed by the shareholders consenting thereto and delivered to
the corporation for inclusion in its corporate records. A consent hereunder has
the effect of a meeting vote and may be described as such in any document. The
Wisconsin Business Corporation Law requires that notice of the action be given
to certain shareholders and specifies the effective date thereof and the record
date in respect thereto.
7.02 Director Action Without Meeting. Unless the Articles of
Incorporation provide otherwise, action required or permitted by the Wisconsin
Business Corporation Law to be taken at a Board of Directors meeting or
committee meeting may be taken without a meeting if the action is taken by all
members of the Board or committee. The action shall be evidenced by one or more
written consents describing the action taken, signed by each director and
retained by the corporation ion taken hereunder is effective when the last
director signs the consent, unless the consent specifies a different effective
date. A consent signed hereunder has the effect of a unanimous vote taken at a
meeting at which all directors or committee members were present, and may be
described as such in any document.
-13-
<PAGE> 18
ARTICLE VIII. INDEMNIFICATION
8.01 Indemnification for Successful Defense. Within twenty (20) days
after receipt of a written request pursuant to Section 8.03, the corporation
shall indemnify a director or officer, to the extent he or she has been
successful on the merits or otherwise in the defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the director or officer was a
party because he or she is a director or officer of the corporation.
8.02 Other Indemnification.
(a) In cases not included under Section 8.01, the corporation
shall indemnify a director or officer against all liabilities and
expenses incurred by the director or officer in a proceeding to which
the director or officer was a party because he or she is a director or
officer of the corporation, unless liability was incurred because the
director or officer breached or failed to perform a duty he or she owes
to the corporation and the breach or failure to perform constitutes any
of the following:
(1) A willful failure to deal fairly with the
corporation or its shareholders in connection with a matter in
which the director or officer has a material conflict of
interest.
(2) A violation of criminal law, unless the director
or officer had reasonable cause to believe that his or her
conduct was lawful or no reasonable cause to believe that his
or her conduct was unlawful.
(3) A transaction from which the director or officer
derived an improper personal profit.
(4) Willful misconduct.
(b) Determination of whether indemnification is required under
this Section shall be made pursuant to Section 8.05.
(c) The termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an equivalent
plea does not, by itself, create a presumption that indemnification of
the director or officer is not required under this Section.
8.03 Written Request. A director or officer who seeks indemnification
under Sections 8.01 or 8.02 shall make a written request to the corporation.
8.04 Nonduplication. The corporation shall not indemnify a director or
officer under Sections 8.01 or 8.02 if the director or officer has previously
received indemnification or allowance of expenses from any person, including the
corporation, in connection with the same
-14-
<PAGE> 19
proceeding. However, the director or officer has no duty to look to any other
person for indemnification.
8.05 Determination of Right to Indemnification.
(a) Unless otherwise provided by the Articles of Incorporation
or by written agreement between the director or officer and the
corporation, the director or officer seeking indemnification under
Section 8.02 shall select one of the following means for determining
his or her right to indemnification:
(1) By a majority vote of a quorum of the Board of
Directors consisting of directors not at the time parties to
the same or related proceedings. If a quorum of disinterested
directors cannot be obtained, by majority vote of a committee
duly appointed by the Board of Directors and consisting solely
of two (2) or more directors who are not at the time parties
to the same or related proceedings. Directors who are parties
to the same or related proceedings may participate in the
designation of members of the committee.
(2) By independent legal counsel selected by a quorum
of the Board of Directors or its committee in the manner
prescribed in sub. (1) or, if unable to obtain such a quorum
or committee, by a majority vote of the full Board of
Directors, including directors who are parties to the same or
related proceedings.
(3) By a panel of three (3) arbitrators consisting of
one arbitrator selected by those directors entitled under sub.
(2) to select independent legal counsel, one arbitrator
selected by the director or officer seeking indemnification
and one arbitrator selected by the two (2) arbitrators
previously selected.
(4) By an affirmative vote of shares represented at a
meeting of shareholders at which a quorum of the voting group
entitled to vote thereon is present. Shares owned by, or voted
under the control of, persons who are at the time parties to
the same or related proceedings, whether as plaintiffs or
defendants or in any other capacity, may not be voted in
making the determination.
(5) By a court under Section 8.08.
(6) By any other method provided for in any
additional right to indemnification permitted under Section
8.07.
(b) In any determination under (a), the burden of proof is on
the corporation to prove by clear and convincing evidence that
indemnification under Section 8.02 should not be allowed.
-15-
<PAGE> 20
(c) A written determination as to a director's or officer's
indemnification under Section 8.02 shall be submitted to both the
corporation and the director or officer within 60 days of the selection
made under (a).
(d) If it is determined that indemnification is required under
Section 8.02, the corporation shall pay all liabilities and expenses
not prohibited by Section 8.04 within ten (10) days after receipt of
the written determination under (c). The corporation shall also pay all
expenses incurred by the director or officer in the determination
process under (a).
8.06 Advance of Expenses. Within ten (10) days after receipt of a
written request by a director or officer who is a party to a proceeding, the
corporation shall pay or reimburse his or her reasonable expenses as incurred if
the director or officer provides the corporation with all of the following:
(1) A written affirmation of his or her good faith
belief that he or she has not breached or failed to perform
his or her duties to the corporation.
(2) A written undertaking, executed personally or on
his or her behalf, to repay the allowance to the extent that
it is ultimately determined under Section 8.05 that
indemnification under Section 8.02 is not required and that
indemnification is not ordered by a court under Section
8.08(b)(2). The undertaking under this subsection shall be an
unlimited general obligation of the director or officer and
may be accepted without reference to his or her ability to
repay the allowance. The undertaking may be secured or
unsecured.
8.07 Nonexclusivity.
(a) Except as provided in (b), Sections 8.01, 8.02 and 8.06 do
not preclude any additional right to indemnification or allowance of
expenses that a director or officer may have under any of the
following:
(1) The Articles of Incorporation.
(2) A written agreement between the director or
officer and the corporation.
(3) A resolution of the Board of Directors.
(4) A resolution, after notice, adopted by a majority
vote of all of the corporation's voting shares then issued and
outstanding.
(b) Regardless of the existence of an additional right under
(a), the corporation shall not indemnify a director or officer, or
permit a director or officer to retain any allowance of expenses unless
it is determined by or on behalf of the corporation that the director
or officer did not breach or fail to perform a duty he or she owes to
the corporation which constitutes conduct under Section 8.02(a)(1).
(2), (3) or
-16-
<PAGE> 21
(4). A director or officer who is a party to the same or related
proceeding for which indemnification or an allowance of expenses is
sought may not participate in a determination under this subsection.
(c) Sections 8.01 to 8.13 do not affect the corporation's
power to pay or reimburse expenses incurred by a director or officer in
any of the following circumstances.
(1) As a witness in a proceeding to which he or she
is not a party.
(2) As a plaintiff or petitioner in a proceeding
because he or she is or was an employee, agent, director or
officer of the corporation.
8.08 Court-Ordered Indemnification.
(a) Except as provided otherwise by written agreement between
the director or officer and the corporation, a director or officer who
is a party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent
jurisdiction. Application shall be made for an initial determination by
the court under Section 8.05(a)(5) or for review by the court of an
adverse determination under Section 8.05(a)(1), (2), (3), (4) or (6).
After receipt of an application, the court shall give any notice it
considers necessary.
(b) The court shall order indemnification if it determines any
of the following:
(1) That the director or officer is entitled to
indemnification under Sections 8.01 or 8.02.
(2) That the director or officer is fairly and
reasonably entitled to indemnification in view of all the
relevant circumstances, regardless of whether indemnification
is required under Section 8.02.
(3) If the court determines under (b) that the director or
officer is entitled to indemnification, the corporation shall pay the
director's or officer's expenses incurred to obtain the court-ordered
indemnification.
8.09 Indemnification and Allowance of Expenses of Employees and Agents.
The corporation shall indemnify an employee of the corporation who is not a
director or officer of the corporation, to the extent that he or she has been
successful on the merits or otherwise in defense of a proceeding, for all
reasonable expenses incurred in the proceeding if the employee was a party
because he or she was an employee of the corporation. In addition, the
corporation may indemnify and allow reasonable expenses of an employee or agent
who is not a director or officer of the corporation to the extent provided by
the Articles of Incorporation or these Bylaws, by general or specific action of
the Board of Directors or by contract.
-17-
<PAGE> 22
8.10 Insurance. The corporation may purchase and maintain insurance on
behalf of an individual who is an employee, agent, director or officer of the
corporation against liability asserted against or incurred by the individual in
his or her capacity as an employee, agent, director or officer, regardless of
whether the corporation is required or authorized to indemnify or allow expenses
to the individual against the same liability under Sections 8.01, 8.02, 8.06,
8.07 and 8.09.
8.11 Securities Law Claims.
(a) Pursuant to the public policy of the State of Wisconsin,
the corporation shall provide indemnification and allowance of expenses
and may insure for any liability incurred in connection with a
proceeding involving securities regulation described under (b) to the
extent required or permitted under Sections 8.01 to 8.10.
(b) Sections 8.01 to 8.10 apply, to the extent applicable to
any other proceeding, to any proceeding involving a federal or state
statute, rule or regulation regulating the offer, sale or purchase of
securities, securities brokers or dealers, or investment companies or
investment advisers.
8.12 Liberal Construction. In order for the corporation to obtain and
retain qualified directors, officers and employees, the foregoing provisions
shall be liberally administered in order to afford maximum indemnification of
directors, officers and, where Section 8.09 of these Bylaws applies, employees.
The indemnification above provided for shall be granted in all applicable cases
unless to do so would clearly contravene law, controlling precedent or public
policy.
8.13 Definitions Applicable to this Article. For purposes of this
article:
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit plan, trust
or other enterprise that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, the corporation.
(b) "Corporation" means this corporation and any domestic or
foreign predecessor of this corporation where the predecessor
corporation's existence ceased upon the consummation of a merger or
other transaction.
(c) "Director or officer" means any of the following:
(1) An individual who is or was a director or officer
of this corporation.
(2) An individual who, while a director or officer of
this corporation, is or was serving at the corporation's
request as a director, officer, partner, trustee, member of
any governing or decision-making committee, employee or agent
of
-18-
<PAGE> 23
another corporation or foreign corporation, partnership, joint
venture, trust or other enterprise.
(3) An individual who, while a director or officer of
this corporation, is or was serving an employee benefit plan
because his or her duties to the corporation also impose
duties on, or otherwise involve services by, the person to the
plan or to participants in or beneficiaries of the plan.
(4) Unless the context requires otherwise, the estate
or personal representative of a director or officer.
For purposes of this Article, it shall be conclusively presumed that
any director or officer serving as a director, officer, partner,
trustee, member of any governing or decision-making committee, employee
or agent of an affiliate shall be so serving at the request of the
corporation.
(d) "Expenses" include fees, costs, charges, disbursements,
attorney fees and other expenses incurred in connection with a
proceeding.
(e) "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine, including an
excise tax assessed with respect to an employee benefit plan, and
reasonable expenses.
(f) "Party" includes an individual who was or is, or who is
threatened to be made, a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or completed
civil, criminal, administrative or investigative action, suit,
arbitration or other proceeding, whether formal or informal, which
involves foreign, federal, state or local law and which is brought by
or in the right of the corporation or by any other person.
ARTICLE IX. CONTRACTS, LOANS, CHECKS AND DEPOSITS
9.01 Contracts; Director Conflict of Interest. The Board of Directors
may authorize any officer or officers, agent or agents, to enter into any
contract or execute or deliver any instrument in the name of and on behalf of
the corporation, and such authorization may be general or confined to specific
instances.
Any contract or other transaction between the corporation and one or
more of its directors, or between the corporation and any entity of which one or
more of its directors are members or employees or in which one or more of its
directors are interested, or between the corporation and any corporation or
association of which one or more of its directors are shareholders, members,
directors, officers or employees or-in which one or more of its directors are
interested, shall not be voidable by the corporation solely because of the
director's interest, whether direct or indirect, in the transaction if:
-19-
<PAGE> 24
(a) The material facts of the transaction and the director's
interest were disclosed or known to the Board of Directors or a
committee of the Board of Directors, and a majority of disinterested
members of the Board of Directors or committee authorized, approved, or
specifically ratified the transaction; or
(b) The material facts of the transaction and the director's
interest were disclosed or known to the shareholders entitled to vote,
and a majority of the shares held by disinterested shareholders
authorized, approved, or specifically ratified the transaction; or
(c) The transaction was fair to the corporation.
For purposes of this Section 9.01, a majority of directors having no direct or
indirect interest in the transaction shall constitute a quorum of the Board or a
committee of the Board acting on the matter, and a majority of the shares
entitled to vote on the matter, whether or not present, and other than those
owned by or under the control of a director having a direct or indirect interest
in the transaction, shall constitute a quorum of the shareholders for the
purpose of acting on the matter.
9.02 Loans. No indebtedness for borrowed money shall be contracted on
behalf of the corporation and no evidences of such indebtedness shall be issued
in its name unless authorized by or under the authority of a resolution of the
Board of Directors. Such authorization may be general or confined to specific
instances.
9.03 Checks, Drafts, etc. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the corporation, shall be signed by such officer(s), employees or agents of the
corporation and in such manner as shall from time to time be determined by or
under the authority of a resolution of the Board of Directors.
9.04 Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies or other depositaries as may be selected by or under the
authority of a resolution of the Board of Directors.
ARTICLE X. MISCELLANEOUS
10.01 Corporate Seal. The Board of Directors may provide a corporate
seal which may be circular in form and have inscribed thereon the name of the
corporation and the state of incorporation and the words "Corporate Seal."
10.02 Fiscal Year. The fiscal year of the corporation shall begin on
the first day of April and end on the last day of March in each year.
-20-
<PAGE> 25
ARTICLE XI. AMENDMENTS
11.01 By Shareholders. These Bylaws may be amended or repealed and new
Bylaws may be adopted by the shareholders by the vote provided in Section 2.07
of these Bylaws or as specifically provided below. The shareholders may adopt or
amend a Bylaw that fixes a greater or lower quorum requirement or a greater
voting requirement for shareholders or voting groups of shareholders than
otherwise is provided in the Wisconsin Business Corporation Law. The adoption or
amendment of a Bylaw that adds, changes or deletes a greater or lower quorum
requirement or a greater voting requirement for shareholders must meet the same
quorum requirement and be adopted by the same vote and voting groups required to
take action under the quorum and voting requirement then in effect.
11.02 By Directors. Except as the Articles of Incorporation may
otherwise provide, these Bylaws may also be amended or repealed and new Bylaws
may be adopted by the Board of Directors by the vote provided in Section 3.08,
but (a) no Bylaw adopted by the shareholders shall be amended, repealed or
readopted by the Board of Directors if the Bylaw so adopted so provides and (b)
a Bylaw adopted or amended by the shareholders that fixes a greater or lower
quorum requirement or a greater voting requirement for the Board of Directors
than otherwise is provided in the Wisconsin Business Corporation Law may not be
amended or repealed by the Board of Directors unless the Bylaw expressly
provides that it may be amended or repealed by a specified vote of the Board of
Directors. Action by the Board of Directors to adopt or amend a Bylaw that
changes the quorum or voting requirement for the Board of Directors must meet
the same quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then in effect, unless a
different voting requirement is specified as provided by the preceding sentence.
A Bylaw that fixes a greater or lower quorum requirement or a greater voting
requirement for shareholders or voting groups of shareholders than otherwise is
provided in the Wisconsin Business Corporation Law may not be adopted, amended
or repealed by the Board of Directors.
11.03 Implied Amendments. Any action taken or authorized by the
shareholders or by the Board of Directors, which would be inconsistent with the
Bylaws then in effect but is taken or authorized by a vote that would be
sufficient to amend the Bylaws so that the Bylaws would be consistent with such
action, shall be given the same effect as though the Bylaws had been temporarily
amended or suspended so far, but only so far, as is necessary to permit the
specific action so taken or authorized.
-21-
<PAGE> 1
EXHIBIT 3.3
RESTATED ARTICLES OF INCORPORATION
OF
NEENAH FOUNDRY COMPANY
The following Restated Articles of Incorporation, duly adopted pursuant
to the authority and provisions of Chapter 180 of the Wisconsin Statutes,
supersede and take the place of the existing articles of incorporation and all
amendments thereto:
ARTICLE I
NAME
The name of the corporation is NEENAH FOUNDRY COMPANY
ARTICLE II
PURPOSES
The purposes for which the corporation is organized are to engage in
any lawful activity within the purposes for which a corporation may be organized
under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin
Statutes.
ARTICLE III
AUTHORIZED SHARES
The aggregate number of shares which the corporation shall have
authority to issue is 14,000 shares, consisting of one class only, designated as
Common Stock of the par value of $1OO.00 per share.
Upon the effectiveness of these Restated Articles of Incorporation, the
shares of the corporation's Class A Common Stock, $100.00 par value, then issued
and outstanding shall, without any further action required on the part of the
corporation or its sole shareholder, be converted into an aggregate of 100
shares of the corporation's Common Stock of the par value of $100.00 per share,
and the issued and outstanding shares of the corporation's Class B Common Stock,
$100.00 par value, and Preferred Stock, $100.00 par value, all of which are
owned by the corporation's sole shareholder, shall be canceled.
ARTICLE IV
BOARD OF DIRECTORS
The number of directors shall be fixed by or in the manner provided in
the Bylaws.
ARTICLE V
REGISTERED OFFICE AND AGENT
The registered office of the corporation is located in Winnebago
County, Wisconsin, and the address of such registered office is 2121 Brooks
Avenue, P.O. Box 729, Neenah, Wisconsin 54957. The name of the registered agent
at such address is E.W. Aylward, Sr.
<PAGE> 2
The undersigned officers of NEENAH FOUNDRY COMPANY, a Wisconsin
corporation with its registered office in Winnebago County, Wisconsin, hereby
certify that the foregoing Restated Articles of Incorporation, and the amendment
of the heretofore existing articles of incorporation of the corporation
reflected therein, were consented to in writing by the sole shareholder of the
corporation, duly signed by such sole shareholder.
The reclassification and conversion of the outstanding shares, without
par value, of the corporation effected by the amendment reflected in the
foregoing Restated Articles of Incorporation will change the stated capital of
the corporation to the aggregate par value of the 100 shares of Common Stock,
par value S100.00 per share, outstanding immediately after such
reclassification. The amount of stated capital, as so changed, will be $10,000.
The effective time of the foregoing Restated Articles of Incorporation
shall be 12:01 a.m. on October 1, 1988.
* * * * *
2
<PAGE> 1
EXHIBIT 3.5
RESTATED ARTICLES OF INCORPORATION
OF
HARTLEY CONTROLS CORPORATION
The following Restated Articles of Incorporation, duly adopted pursuant
to the authority and provisions of Chapter 180 of the Wisconsin Statutes,
supersede and take the place of the existing articles of incorporation and all
amendments thereto:
ARTICLE I
NAME
The name of the corporation is HARTLEY CONTROLS CORPORATION.
ARTICLE II
PURPOSES
The purposes for which the corporation is organized are to engage in
any lawful activity within the purposes for which a corporation may be organized
under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin
Statutes.
ARTICLE III
AUTHORIZED SHARES
The aggregate number of shares which the corporation shall have
authority to issue is 1,000 shares, consisting of one class only, designated as
Common Stock of the par value of $100.00 per share.
Upon the effectiveness of these Restated Articles of Incorporation, the
shares, without par va1ue, then issued and outstanding shall, without any
further action required on the part of the corporation or its sole shareholder,
be converted into an aggregate of 100 shares of the corporation's Common Stock
of the par value of $100.00 per share.
ARTICLE IV
BOARD OF DIRECTORS
The number of directors sha11 be fixed by or in the manner provided in
the Bylaws.
ARTICLE V
REGISTERED OFFICE AND AGENT
The registered office of the corporation is located in Winnebago
County, Wisconsin, and the address of such registered off ice is 2121 Brooks
Avenue, P.O. Box 729, Neenah, Wisconsin 54957. The name of the registered agent
at such address is E.W. Aylward, Sr.
<PAGE> 2
The undersigned officers of HARTLEY CONTROLS CORPORATION, a Wisconsin
corporation with its registered office in Winnebago County, Wisconsin, hereby
certify that the foregoing Restated Articles of Incorporation, and the amendment
of the heretofore existing articles of incorporation of the corporation
reflected therein, were consented to in writing by the sole shareholder of the
corporation, duly signed by such sole shareholder.
The reclassification and conversion of the outstanding shares, without
par value, of the corporation effected by the amendment reflected in the
foregoing Restated Articles of Incorporation will change the stated capital of
the corporation to the aggregate par value of the 100 shares of Common Stock,
par value $100.00 per share, outstanding immediately after such
reclassification. The amount of stated capital, as so changed, will be $10,000.
The effective time of the foregoing Restated Articles of Incorporation
shall be 12:01 a.m. on October 1, 1988.
* * * * *
2
<PAGE> 1
EXHIBIT 3.7
RESTATED ARTICLES OF INCORPORATION
OF
NEENAH TRANSPORT, INC.
The following Restated Articles of Incorporation, duly adopted pursuant
to the authority and provisions of Chapter 180 of the Wisconsin Statutes,
supersede and take the place of the existing articles of incorporation and all
amendments thereto:
ARTICLE I
NAME
The name of the corporation is NEENAH TRANSPORT, INC.
ARTICLE II
PURPOSES
The purposes for which the corporation is organized are to engage in
any lawful activity within the purposes for which a corporation may be organized
under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin
Statutes.
ARTICLE III
AUTHORIZED SHARES
The aggregate number of shares which the corporation shall have
authority to issue is 560 shares, consisting of one class only, designated as
Common Stock of the par value of $1OO.00 per share.
Upon the effectiveness of these Restated Articles of Incorporation, the
shares, without par value, then issued and outstanding shall, without any
further action required on the part of the corporation or its sole shareholder,
be converted into an aggregate of 100 shares of the corporation's Common Stock
of the par value of $100.00 per share.
ARTICLE IV
BOARD OF DIRECTORS
The number of directors shall be fixed by or in the manner Provided in
the Bylaws.
ARTICLE V
REGISTERED OFFICE AND AGENT
The registered office of the corporation is located in Winnebago
County, Wisconsin, and the address of such registered office is 2121 Brooks
Avenue, P.O. Box 729, Neenah, Wisconsin 54957. The name of the registered agent
at such address is E.W. Aylward, Sr.
The undersigned officers of NEENAH TRANSPORT, INC., a Wisconsin
corporation with its registered office in Winnebago County, Wisconsin, hereby
certify that the foregoing
<PAGE> 2
Restated Articles of Incorporation, and the amendment of the heretofore existing
articles of incorporation of the corporation reflected therein, were consented
to in writing by the sole shareholder of the corporation, duly signed by such
sole shareholder.
The reclassification and conversion of the outstanding shares, without
par value, of the corporation effected by the amendment reflected in the
foregoing Restated Articles of Incorporation will change the stated capital of
the corporation to the aggregate par value of the 100 shares of Common Stock,
par value S100.00 per share, outstanding immediately after such
reclassification. The amount of stated capital, as so changed, will be $10,000.
The effective time of the foregoing Restated Articles of Incorporation
shall be 12:01 a.m. on October 1, 1988.
* * * * *
2
<PAGE> 1
Exhibit 10.8
EMPLOYMENT AGREEMENT
AGREEMENT dated the 9th day of September, 1994, effective September
9th, 1994, between NEENAH FOUNDRY COMPANY, a Wisconsin corporation, and its
affiliated companies, to-wit, NEENAH CORPORATION, HARTLEY CONTROLS CORPORATION
and NEENAH TRANSPORT, INC., hereinafter called the Employer, and JAMES P.
KEATING, JR., of Neenah, Wisconsin, hereinafter called the Employee.
1. Employment. The Employer hereby employs the Employee and the
Employee hereby accepts employment upon the terms and conditions hereinafter set
forth.
2. Term. The term of this Agreement shall be for the period from the
effective date through June 30, 1997.
3. Compensation. For all services rendered by the Employee under this
Agreement, Employee shall receive the following:
a. A minimum annual salary of $180,000, payable in periodic
installments as shall be in accordance with Employer's regular payroll policies.
This minimum salary shall be subject to annual increases in accordance with
Employer's policies of reviewing all executive salaries.
b. Employee shall be eligible to receive incentive
compensation in each year of employment hereunder, plus bonuses, including
Christmas bonuses, said payments to be made in the sole discretion of Employer's
Chief Executive officer in accordance with his current policies.
4. Duties. Employee is being hired on a full-time basis by Employer to
perform various management duties. The precise duties of the Employee shall be
as determined from time to time by the President and/or Board of Directors of
Employer, with Employee's initial management duty to be President and Chief
Executive Officer of Employer's affiliated company, Hartley Controls
Corporation. If Employee is elected to be an officer and/or director of the
Employer during the term of this Agreement, the Employee will serve in such
capacity without further compensation; but nothing herein shall be construed as
requiring the Employer, or anybody else, to cause the election of the Employee
as an officer and/or director.
5. Extent of Services. The Employee shall devote his best efforts and
abilities to the business of the Employer, which shall consist of at least forty
(40) hours per week, and shall not during the term of this Agreement engage in
outside business activities except as may be authorized from time to time
specifically by Employer. Nothing in this section 5. shall preclude Employee
from outside investments in enterprises not in competition with the Employer as
long as the time spent by Employee thereon is substantially outside normal
business hours and does not interfere with Employee's duties hereunder.
<PAGE> 2
6. Expenses. The Employee shall be reimbursed such business related
expenses as may be approved by Employer and as are consistent with expense
reimbursement policies as may be established from time to time by Employer.
7. Vacations. The Employee shall be entitled to annual paid vacations
in the amount of six (6) weeks during the term of this Agreement, in accordance
with the vacation policies established from time to time by the Employer.
8. Disability/Sick Leave. If Employee becomes sick or disabled during
the term of this contract, then he shall be entitled to receive compensation at
the then current minimum annual salary while he is sick or disabled until the
end of the term of this Agreement, but not beyond the end of the contract term,
to-wit, June 30, 1997.
9. Employment Benefits. Employee shall also receive the standard fringe
benefits that Employer provides to its full-time executive employees.
10. Death During Employment. If the Employee dies during the term of
this employment, the Employer shall continue to pay the then current minimum
annual salary to Employee's widow, Sally Ann Keating, if she survives, or if she
is predeceased, to Employee's estate, with said payments to continue until the
end of the contract period, to-wit, June 30, 1997.
11. Supplemental Employee Retirement Payments (SERP). As additional
consideration for entering into this Employment Agreement, which Employment
Agreement ends prior to Employee reaching age sixty-five, Employer agrees that
at the end of this Employment Agreement period, Employee shall be considered
eligible for full benefits under Employer's SERP plan as if he retired at age
sixty-five, which SERP payments will commence on July 1, 1997.
12. Covenant Not To Compete. As additional consideration for Employer
entering into this Employment Agreement, Employee covenants and agrees that for
the period that this Employment Agreement is in effect and for a one year period
after its termination, he will not, without the prior written consent of the
Employer, directly or indirectly, whether as principal or as agent, officer,
director, employee, Employee or otherwise, alone or in association with any
other person, firm, corporation or other business organization, carry on, or be
engaged, concerned or take part in, or render services to, or own any interest
or share in the earnings of or invest in the stock, bonds or other securities of
any person, firm, corporation or other business organization (except for
publicly traded securities) which is located in the continental United States in
a business which is in competition with the Employer.
Employee also covenants and agrees that for such period that this
Employment Agreement is in effect and for one year after its termination, he
will not without the prior written consent of Employer, whether for his own
account or for the account of any other person, firm, corporation or other
business organization, intentionally interfere with the Employer's relationship
with, or endeavor to entice away from the Employer, any person who is employed
by or associated with the Employer in an executive, managerial or sales capacity
or who is a customer of the Employer.
-2-
<PAGE> 3
13. Covenant Not To Disclose. Employee covenants and agrees that he
will not, to the detriment of Employer, at any time during the term of this
Agreement, and for a one year period thereafter, reveal, divulge or make known
to any person (other than Employer) or use for his own account any confidential
or proprietary records, data, trade secrets or any other confidential or
proprietary information whatever (the Confidential Information) previously used
by the Employer to date or during the term of this Agreement and made known to
Employee by reason of his association with the Employer pursuant to this
Agreement, unless the disclosure of this Confidential Information is made with
the permission of Employer when same is necessary during the course of any
customer contact or for any other legitimate business reason.
Employee and Employer agree that this Section 13. shall not change any
duties Employee may have under common law not to disclose the aforementioned
confidential information.
14. Specific Performance. Without intending to limit the remedies
available to the Employer, Employee further agrees that damages at law will be
an insufficient remedy to the Employer in the event that he violates the terms
of Sections 12. and 13. of this Agreement, and that the Employer may apply for
and obtain injunctive relief in any court of competent jurisdiction to restrain
the breach or threatened breach of, or otherwise to specifically enforce, any of
the covenants of such Sections. The parties hereto understand that each of the
covenants contained in Sections 12. and 13. of this Agreement is an essential
element of this Agreement.
15. Purchase of Life Insurance Policies on Termination of Employment.
Upon Employee's termination of employment, Employee shall have the right within
thirty (30) days after the effective date of termination to purchase from
Employer the policies of life insurance then owned by it on the life of Employee
at a price equal to the cash surrender value. Upon receipt of the purchase
price, the Employer shall deliver the life insurance policies to the Employee
and shall execute any necessary instruments of transfer. Employee shall have no
further rights in any such policies not purchased within the above thirty (30)
day period.
16. Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing, and if delivered personally or sent
by registered or certified mail to his residence in the case of the Employee, or
to its principal office in the case of the Employer.
17. Waiver of Breach. The waiver by the Employer of a breach of any
provision of this Agreement by the Employee shall not operate or be construed as
a waiver of any subsequent breach by the Employee.
18. Binding Effect; Benefits. This Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their respective
successors, assigns, heirs and legal representatives.
19. Severability. If any provision of this Agreement shall be held
invalid or unenforceable, the remainder shall nevertheless remain in full force
and effect. If any provision is held invalid or unenforceable with respect to
particular circumstances, it shall nevertheless remain in full force and effect
in all other circumstances.
-3-
<PAGE> 4
20. Entire Agreement. This instrument contains the entire agreement of
the parties. It may not be changed orally but only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification, extension, or discharge is sought.
21. Governing Law. This Agreement shall be construed under the laws of
the State of Wisconsin, and all matters pertaining to this Agreement which
cannot be resolved by reference to its provisions shall be governed by the laws
of Wisconsin.
22. Headings. The headings of sections in this Agreement are for
convenience only, and shall not affect its interpretation.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in five counterparts as of the date first above written.
In the Presence of:
- ------------------------------------------
EMPLOYER:
NEENAH FOUNDRY COMPANY
By:
-------------------------------
Name:
Title:
NEENAH CORPORATION
By:
-------------------------------
Name:
Title:
HARTLEY CONTROLS CORPORATION
By:
-------------------------------
Name:
Title:
NEENAH TRANSPORT, INC.
By:
-------------------------------
Name:
Title:
CONSULTANT:
-----------------------------------
James P. Keating, Jr.
-5-
<PAGE> 6
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
This is a First Amendment to the Employment Agreement entered into the
9th day of September, 1994, by and between NEENAH FOUNDRY COMPANY, a Wisconsin
corporation, and its affiliated companies, to-wit, NEENAH CORPORATION, HARTLEY
CONTROLS CORPORATION and NEENAH TRANSPORT, INC., hereinafter called the
Employer, and JAMES P. KEATING, JR., of Neenah, Wisconsin, hereinafter called
the Employee.
WITNESSETH:
WHEREAS, the parties desire to amend the aforesaid employment
agreement.
NOW, THEREFORE, it is agreed between the parties that the employment
agreement be as amended as follows:
1. That Section 11 be deleted in its entirety and replaced
with the following Section 11.
"11. Supplemental Employee Retirement Payments (SERP).
As additional consideration for entering into this
Employment Agreement, which Employment Agreement ends
prior to Employee reaching age sixty-five, Employer
agrees that at the end of this Employment Agreement
period, Employee shall be paid full benefits under
Employer's SERP plan as if he retired at age
sixty-five without regard to Employer's right to
amend, modify or revoke the SERP Plan. The SERP
payments will commence on July 1, 1997. Employer and
Employee agree that Employee's benefits under the
SERP plan shall be fully vested and irrevocable as of
the date of this Agreement."
2. All other terms and conditions of the employment agreement,
except as modified by this first amendment, are agreed by both parties to be in
full force and effect and binding on their heirs, personal representatives,
successors and assigns.
<PAGE> 7
IN WITNESS WHEREOF, the parties have set their hands and seals
this 23rd day of July, 1996.
In the Presence of:
- -------------------------------------
EMPLOYER:
NEENAH FOUNDRY COMPANY
By:
----------------------------------
Name:
Title:
NEENAH CORPORATION
By:
----------------------------------
Name:
Title:
HARTLEY CONTROLS CORPORATION
By:
----------------------------------
Name:
Title:
NEENAH TRANSPORT, INC.
By:
----------------------------------
Name:
Title:
EMPLOYEE:
----------------------------------------
James P. Keating, Jr.
-2-
<PAGE> 1
Exhibit 10.9
CONSULTING AGREEMENT
AGREEMENT, entered into this 9th day of September, 1994, effective July
1, 1997, by and between NEENAH FOUNDRY COMPANY, a Wisconsin corporation, and its
affiliated companies, to-wit, NEENAH CORPORATION, HARTLEY CONTROLS CORPORATION
and NEENAH TRANSPORT, INC., hereinafter referred to as Company, and JAMES P.
KEATING, JR., of Neenah, Wisconsin, hereinafter referred to as Consultant.
WHEREAS, the Consultant has considerable knowledge and experience
relating to the business of the Company as a result of his affiliation with the
Company as a director, officer and key employee; and
WHEREAS, the Consultant desires to aid and assist the Company as a
consultant by providing consulting services to the Company; and
WHEREAS, the Company desires to recognize the valuable and meritorious
services performed on behalf of the Company by the Consultant throughout the
many years in which he served the Company as a director, officer and key
employee, and further desires to engage the Consultant as a consultant to render
certain advisory services to the Company on a standby basis, and to reflect
herein his agreement not to compete with it.
NOW THEREFORE, in consideration of the premises and of the covenants
and agreements herein provided, the parties hereto agree as follows:
1. TERM. The Company hereby agrees to retain Consultant, and Consultant
hereby agrees to be retained by the Company, all in accordance with the terms
and conditions hereof, for a two-year term beginning July 1, 1997 and ending
June 30, 1999, unless sooner terminated as hereinafter provided (the Consulting
Period).
2. DUTIES. Consultant shall be retained by the Company and shall,
subject to paragraph 7. below, devote such time as may be reasonably required by
the Company so that Company shall have the benefit of Consultant's experience
and knowledge of the affairs of the business that Company is engaged in, but not
in excess of 960 hours per year of this Agreement as mutually agreed upon by
Consultant and Company. Consultant agrees to make himself available to give such
advice and counsel to the officers and employees of Company at all reasonable
times by telephone, letter or in person. The Consultant's failure to render the
services or to give advice and counsel required by this Agreement as a result of
Consultant's illness or other incapacities, including death, shall not affect
his rights to receive the compensation provided herein.
3. COMPENSATION.
a. The Company agrees to pay Consultant a monthly compensation for his
services hereunder in the amount of $16,500. Also, if Consultant provides
services to Company in excess of 960 hours per contract year as set forth in
section 7. hereof, then Consultant shall
<PAGE> 2
receive additional compensation for his services as mutually agreed upon between
Consultant and Company.
b. Upon advance approval thereof and submission of appropriate
invoices or vouchers, the Company shall pay or reimburse Consultant for all
reasonable expenses incurred by Consultant in the performance of his duties
hereunder in furtherance of the business, and in keeping with the policies of
the Company.
4. DEATH. If Consultant dies during the term of the Agreement, the
Company's obligations under this Agreement shall not terminate, but shall
continue, with the remaining payments during the term of this Agreement to be
made to Consultant's widow, Sally Ann Keating. If she has not survived or dies
prior to date of the last payment due in June, 1999, then the payments shall be
made to the estate of the last to die of Consultant or his spouse, Sally Ann
Keating.
5. TERMINATION. This Agreement may be terminated by the Company for
cause at any time upon thirty (30) days' advance notice from the Company to
Consultant, which notice shall set forth the specific facts on which such
termination is based. Upon any such termination, Consultant shall be entitled to
all arrearages of amounts to be paid pursuant to this Agreement but shall not be
entitled to any further compensation. For the purposes of this Agreement, and
without limitation, "cause" shall mean: Consultant's having been convicted of
any crime involving fraud, embezzlement or moral turpitude.
6. COVENANT NOT TO DISCLOSE. Consultant covenants and agrees that he
will not, to the detriment of the Company, at any time during the term of this
Agreement, and for a one year period thereafter, reveal, divulge or make known
to any person (other than the Company) or use for his own account any
confidential or proprietary records, data, trade secrets or any other
confidential or proprietary information whatever (the Confidential Information)
previously used by the Company to date or during the term of this Agreement and
made known to Consultant by reason of his association with the Company pursuant
to this Agreement, unless the disclosure of this Confidential Information is
made with the permission of company when same is necessary during the course of
any customer contact or for any other legitimate business reason.
Consultant and Company agree that this Section 6. shall not change any
duties Consultant may have under common law not to disclose the aforementioned
confidential information.
7. LIMITATION ON SERVICES REQUIRED OF CONSULTANT. Unless the parties
otherwise agree, assignments of responsibility to Consultant shall be limited to
those which can be reasonably expected to require not more than 960 hours of
services per contract year.
8. COVENANT NOT TO COMPETE. As additional consideration for Company
entering into this Consulting Agreement, Consultant covenants and agrees that
for the period that this Consulting Agreement is in effect and for a one year
period after its termination, he will not, without the prior written consent of
the Company, directly or indirectly, whether as principal or
-2-
<PAGE> 3
as agent, officer, director, employee, consultant or otherwise, alone or in
association with any other person, firm, corporation or other business
organization, carry on, or be engaged, concerned or take part in, or render
services to, or own any interest or share in the earnings of or invest in the
stock, bonds or other securities of any person, firm, corporation or other
business organization (except for publicly traded securities) which is located
in the continental United States in a business which is in competition with the
Company.
Consultant also covenants and agrees that for such period that this
Consulting Agreement is in effect and for one year after its termination, he
will not without the prior written consent of Company, whether for his own
account or for the account of any other person, firm, corporation or other
business organization, intentionally interfere with the Company's relationship
with, or endeavor to entice away from the Company, any person who is employed by
or associated with the Company in an executive managerial or sales capacity or
who is a customer of the Company.
9. BUSINESS MATERIALS, COVENANT TO REPORT. All written materials,
records and documents made by Consultant or coming into his possession, after
becoming Consultant, concerning the business or affairs of the Company shall be
the sole property of the Company and, upon the termination of his association
with the Company pursuant to this Agreement or upon the request of the Company
at any time, Consultant shall promptly deliver the same to the Company and shall
retain no copies thereof. Consultant agrees to render to the Company such
reports of the activities undertaken by him or conducted under its direction
pursuant hereto during the term of this Agreement as the Company may request.
Consultant and Company agree that this section 9. does not change
Consultant's duty as a former employee of Company to return to Company whatever
materials, records and documents that Consultant has as required by common law.
10. SPECIFIC PERFORMANCE. Without intending to limit the remedies
available to the Company, Consultant further agrees that damages at law will be
an insufficient remedy to the Company in the event that he violates the terms of
Section 6., 8. and 9. of this Agreement, and that the Company may apply for and
obtain injunctive relief in any court of competent jurisdiction to restrain the
breach or threatened breach of, or otherwise to specifically enforce, any of the
covenants of such Sections. The parties hereto understand that each of the
covenants contained in Sections 6., 8. and 9. of this Agreement is an essential
element of this Agreement.
11. INDEPENDENT CONTRACTOR. Nothing contained herein shall constitute
Consultant an employee or agent of the Company and the relationship of
Consultant to the Company shall, during such period, be one of an independent
contractor.
12. BINDING EFFECT; BENEFITS. This Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their respective
successors, assigns, heirs and legal representatives. Insofar as Consultant is
concerned, this contract, being personal, cannot be assigned. No assignment of
this Agreement shall relieve the assigning party of its obligations under this
Agreement.
-3-
<PAGE> 4
13. NOTICES. All notices and other communications which are required or
permitted hereunder shall be in writing and shall be sufficient if mailed by
registered or certified mail, with return receipt, postage prepaid, shall be
effective on receipt, to the following addresses or such other address as any
party hereto shall have specified by notice in writing to the other party
hereto:
a. If to Consultant: James P. Keating, Jr., 232 Limekiln Drive, Neenah,
WI 54956.
b. If to Company: Neenah Foundry Company, Attention Mr. E. W. Aylward,
Jr., President, 2121 Brooks Avenue, Neenah, WI 54956.
14. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto and supersedes all prior agreements and
understandings, oral or written, between the parties hereto with respect to the
subject matter hereof.
15. AMENDMENTS AND WAIVERS. This Agreement may not be modified or
amended except by an instrument or instruments in writing signed by the party
against whom enforcement of any such modification or amendment is sought. Either
party hereto may, by an instrument in writing, waive compliance by the other
party with any term or provision of this Agreement on the part of such other
party hereto to be performed or complied with. The waiver by any party hereto of
a breach of any term or provision of this Agreement shall not be construed as a
waiver of any subsequent breach.
16. SEVERABILITY. If any term or provision of this Agreement is held or
deemed to be invalid or unenforceable, in whole or in part, by a court of
competent jurisdiction, this Agreement shall be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Wisconsin.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement in five counterparts as of the date first above written.
In the Presence of:
- -----------------------------------
COMPANY:
NEENAH FOUNDRY COMPANY
By:
----------------------------------
Name:
Title:
NEENAH CORPORATION
By:
----------------------------------
Name:
Title:
HARTLEY CONTROLS CORPORATION
By:
----------------------------------
Name:
Title:
NEENAH TRANSPORT, INC.
By:
----------------------------------
Name:
Title:
CONSULTANT:
--------------------------------------
James P. Keating, Jr.
-5-
<PAGE> 1
EXHIBIT 12.1
NEENAH CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
----------
YEAR ENDED
YEAR ENDED MARCH 31, MARCH 31,
------------------------------------------------------ ----------
1993 1994 1995 1996 1997 1997
------ ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income before income
taxes................... $3,988 $10,794 $22,570 $28,818 $32,305 $ 9,353
Fixed charges............. 2,348 1,278 907 416 402 21,929
------ ------- ------- ------- ------- ----------
Earnings.................. $6,336 $12,072 $23,477 $29,234 $32,707 $ 31,282
====== ======== ======== ======== ======== =========
Interest expense.......... 2,128 1,049 624 84 39 $ 20,408
Amortization of deferred
financing costs......... -- -- -- -- -- 1,158
Interest portion of rent
expense................. 220 229 283 332 363 363
------ ------- ------- ------- ------- ----------
Fixed charges............. $2,348 $ 1,278 $ 907 $ 416 $ 402 $ 21,929
====== ======== ======== ======== ======== =========
Ratio of earnings to fixed
charges................. 2.70 9.45 25.88 70.27 81.36 1.43
====== ======== ======== ======== ======== =========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Experts,"
"Summary Consolidated Financial and Other Data" and "Selected Consolidated
Financial and Other Data" and to the use of our reports dated April 29, 1997, in
the Registration Statement (Form S-4) and related Prospectus of Neenah
Corporation for the registration of $150,000,000 11 1/8% Senior Subordinated
Notes.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
June 4, 1997
<PAGE> 1
Exhibit 99.1
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ,
1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF OLD NOTES MAY BE
WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE.
NEENAH CORPORATION
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
11 1/8% SENIOR SUBORDINATED NOTES DUE 2006
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
FOR INFORMATION BY TELEPHONE: (800) 548-6565
<TABLE>
<CAPTION>
By Overnight Courier: By Hand: By Registered Or Certified Mail:
<S> <C> <C>
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Attn: Corporate Trust Services
Attn: Corporate Trust Services Attn: Corporate Trust Services Cooper Station
New York, New York 10006 New York, New York
10276-0844
</TABLE>
(Originals of all documents sent by facsimile should be sent
promptly by registered or certified mail, by hand or by overnight courier)
Delivery of this instrument to an address other than as set forth above
or transmission of instructions via a facsimile number other than the one
listed above will not constitute a valid delivery. The instructions
accompanying this Letter of Transmittal should be read carefully before this
Letter of Transmittal is completed.
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR OLD
NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW)
THEIR OLD NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
The undersigned acknowledges receipt of the Prospectus dated ,
1997 (the "Prospectus") of Neenah Corporation, (the "Company") and this Letter
of Transmittal (the "Letter of Transmittal"), which together constitute the
Company's offer (the "Exchange Offer") to exchange $1,000 principal amount of
its 11 1/8% Series B Senior Subordinated Notes due 2007 (the "New Notes"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which the Prospectus
is a part, for each $1,000 principal amount of its outstanding 11 1/8% Series A
Senior Subordinated Notes due 2007 (the "Old Notes"), of which $150,000,000
principal amount is outstanding, upon the terms and conditions set forth in the
Prospectus. Other capitalized terms used but not defined herein have the meaning
given to them in the Prospectus.
<PAGE> 2
For each Old Note accepted for exchange, the holder of such Old Note
will receive a New Note having a principal amount equal to that of the
surrendered Old Note. Interest on the New Notes will accrue from the last
interest payment date on which interest was paid on the Old Notes surrendered in
exchange therefor or, if no interest has been paid on the Old Notes, from the
date of original issue of the Old Notes. Holders of Old Notes accepted for
exchange will be deemed to have waived the right to receive any other payments
or accrued interest on the Old Notes. The Company reserves the right, at any
time or from time to time, to extend the Exchange Offer at its discretion, in
which event the term "Expiration Date" shall mean the latest time and date to
which the Exchange Offer is extended. The Company shall notify holders of the
Old Notes of any extension by means of a press release or other public
announcement prior to 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter of Transmittal is to be used by Holders if: (i)
certificates representing Old Notes are to be physically delivered to the
Exchange Agent herewith by Holders; (ii) tender of Old Notes is to be made by
book-entry transfer to the Exchange Agent's account at The Depository Trust
Company ("DTC"), pursuant to the procedures set forth in the Prospectus under
"The Exchange Offer -- Procedures for Tendering" by any financial institution
that is a participant in DTC and whose name appears on a security position
listing as the owner of Old Notes; or (iii) tender of Old Notes is to be made
according to the guaranteed delivery procedures set forth in the Prospectus
under "The Exchange Offer -- Guaranteed Delivery." DELIVERY OF DOCUMENTS TO DTC
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The term "Holder" with respect to the Exchange Offer means any person:
(i) in whose name Old Notes are registered on the books of the Company or any
other person who has obtained a properly completed bond power from the
registered Holder; or (ii) whose Old Notes are held of record by DTC who
desires to deliver such old Notes by book-entry transfer at DTC. The
undersigned has completed, executed and delivered this Letter of Transmittal to
indicate the action the undersigned desires to take with respect to the
Exchange Offer.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery
may be directed to the Exchange Agent. See Instruction 11 herein.
HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR OLD
NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY.
<PAGE> 3
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE CHECKING ANY BOX BELOW
DESCRIPTION OF 11-1/8% SENIOR SUBORDINATED NOTES DUE 2007 (OLD NOTES)
<TABLE>
<CAPTION>
AGGREGATE
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT
NAME(S) AND ADDRESS(ES) OF REPRESENTED TENDERED (IF
REGISTERED HOLDER(S) CERTIFICATE BY LESS
(PLEASE FILL IN, IF BLANK) NUMBER(S)* CERTIFICATE(S) THAN ALL)**
<S> <C> <C> <C>
Total
</TABLE>
* Need not be completed by Holders tendering by book-entry transfer.
** Unless indicated in the column labeled "Principal Amount Tendered," any
tendering Holder of Old Notes will be deemed to have tendered the entire
aggregate principal amount represented by the column labeled "Aggregate
Principal Amount Represented by Certificate(s)." If the space provided above
is inadequate, list the certificate numbers and principal amounts on a
separate signed schedule and affix the list to this Letter of Transmittal.
The minimum permitted tender is $1,000 in principal amount of Old Notes. All
other tenders must be integral multiples of $1,000.
<PAGE> 4
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for exchange, or New Notes issued in exchange for Old
Notes accepted for exchange, are to be issued in the name of someone other than
the undersigned, or if the Old Notes tendered by book-entry transfer that are
not accepted for exchange are to be credited to an account maintained by DTC.
Issue certificate(s) to:
Name............................................................................
(PLEASE PRINT)
Address.........................................................................
................................................................................
(INCLUDE ZIP CODE)
................................................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 4, 5 AND 6)
To be completed ONLY if certificates for Old Notes in a principal amount not
tendered or not accepted for exchange, or New Notes issued in exchange for Old
Notes accepted for exchange, are to be sent to someone other than the
undersigned, or to the undersigned at an address other than that shown above.
Mail to:
Name............................................................................
(PLEASE PRINT)
Address.........................................................................
................................................................................
(INCLUDE ZIP CODE)
................................................................................
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.)
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:..............................................
DTC Book-Entry Account No.:.................................................
Transaction Code No.:.......................................................
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s):............................................
Window Ticket Number (if any):..............................................
Date of Execution of Notice of Guaranteed Delivery:.........................
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
Account Number:...................... Transaction Code Number:..............
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:.......................................................................
Address:....................................................................
............................................................................
<PAGE> 5
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of Old Notes
indicated above. Subject to and effective upon the acceptance for exchange of
the principal amount of Old Notes tendered in accordance with this Letter of
Transmittal, the undersigned sells, assigns and transfers to, or upon the order
of, the Company all right, title and interest in and to the Old Notes tendered
hereby. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent its agent and attorney-in-fact (with full knowledge that the
Exchange Agent also acts as the agent of the Company and as Trustee under the
Indenture for the Old Notes and New Notes) with respect to the tendered Old
Notes with full power of substitution to (i) deliver certificates for such Old
Notes to the Company, or transfer ownership of such Old Notes on the account
books maintained by DTC and deliver all accompanying evidence of transfer and
authenticity to, or upon the order of, the Company and (ii) present such Old
Notes for transfer on the books of the Company and receive all benefits and
otherwise exercise all rights of beneficial ownership of such Old Notes, all in
accordance with the terms and subject to the conditions of the Exchange Offer.
The power of attorney granted in this paragraph shall be deemed irrevocable and
coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances
and not subject to any adverse claim, when the same are acquired by the
Company. The undersigned hereby further represents that any New Notes acquired
in exchange for Old Notes tendered hereby will have been acquired in the
ordinary course of business of the Holder receiving such New Notes, whether or
not such person is the Holder, that neither the Holder nor any such other
person has an arrangement or understanding with any person to participate in
the distribution of such New Notes and that neither the Holder nor any such
other person is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company or any of its subsidiaries.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on an interpretation by the staff of the Securities and
Exchange Commission (the "SEC") that the New Notes issued in exchange for the
Old Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder that 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 New Notes are acquired in
the ordinary course of such holders' business and such holders have no intent,
or oral arrangements with any person, to participate in the distribution of
such New Notes. If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage in, a
distribution of New Notes. If the undersigned is a broker-dealer that will
receive New Notes for its own account in exchange for Old Notes that were
acquired as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the assignment, transfer and purchase of the Old Notes
tendered hereby. All authority conferred or agreed to be conferred by this
Letter of Transmittal shall survive the death, incapacity or dissolution of the
undersigned and every obligation of the undersigned under this Letter of
Transmittal shall be binding upon the undersigned's heirs, personal
representatives, successors and assigns, trustees in bankruptcy or other legal
representatives of the undersigned. This tender may be withdrawn only in
<PAGE> 6
accordance with the procedures set forth in "The Exchange Offer -- Withdrawal
Rights" section of the Prospectus.
For purposes of the Exchange Offer, the Company shall be deemed to have
accepted validly tendered Old Notes when, as and if the Company has given oral
or written notice thereof to the Exchange Agent.
If any tendered Old Notes are not accepted for exchange pursuant to the
Exchange Offer for any reason, certificates for any such unaccepted Old Notes
will be returned (except as noted below with respect to tenders through DTC),
without expense, to the undersigned at the address shown below or at a
different address as may be indicated under "Special Delivery Instructions" as
promptly as practicable after the Expiration Date.
<PAGE> 7
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer -- Procedures for
Tendering Old Notes" in the Prospectus and in the instructions hereto will
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.
Unless otherwise indicated under "Special Payment Instructions," please
issue the certificates representing the New Notes issued in exchange for the
Old Notes accepted for exchange and return any Old Notes not tendered or not
exchanged in the name(s) of the undersigned (or in either such event in the
case of the Old Notes tendered by DTC, by credit to the undersigned's account,
at DTC). Similarly, unless otherwise indicated under "Special Delivery
Instructions," please send the certificates representing the New Notes issued
in exchange for the Old Notes accepted for exchange and any certificates for
Old Notes not tendered or not exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s), unless, in either event, tender is being made through DTC. In the
event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the certificates representing the New
Notes issued in exchange for the Old Notes accepted for exchange and return any
Old Notes not tendered or not exchanged in the name(s) of, and send said
certificates to, the person(s) so indicated. The undersigned recognizes that
the Company has no obligation pursuant to the "Special Payment Instructions"
and "Special Delivery Instructions" to transfer any Old Notes from the name of
the registered Holder(s) thereof if the Company does not accept for exchange
any of the Old Notes so tendered.
Holders of Old Notes who wish to tender their Old Notes and (i) whose
Old Notes are not immediately available or (ii) who cannot deliver their Old
Notes, this Letter of Transmittal or any other documents required hereby to the
Exchange Agent, or cannot complete the procedure for book-entry transfer, prior
to the Expiration Date, may tender their Old Notes according to the guaranteed
delivery procedures set forth in the Prospectus under the caption "The Exchange
Offer -- Guaranteed Delivery Procedures." See Instruction 1 regarding the
completion of the Letter of Transmittal printed below.
<PAGE> 8
PLEASE SIGN HERE WHETHER OR NOT
OLD NOTES ARE BEING PHYSICALLY TENDERED HEREBY
X
.................................................... .........................
DATE
X
.................................................... .........................
SIGNATURE(S) OF REGISTERED HOLDER(S) DATE
OR AUTHORIZED SIGNATORY
Area Code and Telephone Number:................................................
The above lines must be signed by the registered Holder(s) of
Old Notes as their name(s) appear(s) on the Old Notes or, if the Old
Notes are tendered by a participant in DTC, as such participant's
name appears on a security position listing as the owner of Old
Notes, or by person(s) authorized to become registered Holder(s) by
a properly completed bond power from the registered Holder(s), a
copy of which must be transmitted with this Letter of Transmittal.
If Old Notes to which this Letter of Transmittal relates are held of
record by two or more joint Holders, then all such Holders must sign
this Letter of Transmittal. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation
or other person acting in a fiduciary or representative capacity,
such person must (i) set forth his or her full title below and (ii)
unless waived by the Company, submit evidence satisfactory to the
Company of such person's authority as to act. See Instruction 4
regarding the completion of this Letter of Transmittal printed
below.
Name(s): ...................................................................
(PLEASE PRINT)
Capacity: ...................................................................
Address: ...................................................................
(INCLUDE ZIP CODE)
Signature(s) Guaranteed by an Eligible Institution:
(If required by Instruction 4)
...................................................................
(AUTHORIZED SIGNATURE)
...................................................................
(TITLE)
...................................................................
(NAME OF FIRM)
...................................................................
(ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE
NUMBER (INCLUDING AREA CODE) OF FIRM)
Dated: .............................................................., 1996
<PAGE> 9
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter of Transmittal is to be completed by noteholders, either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The
Exchange Offer -- Book-Entry Transfer" section of the Prospectus. Certificates
for all physically tendered Old Notes, or Book-Entry Confirmation, as the case
may be, as well as a properly completed and duly executed Letter of Transmittal
(or manually signed facsimile hereof) and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent at the address
set forth herein on or prior to the Expiration Date, or the tendering holder
must comply with the guaranteed delivery procedures set forth below. Old Notes
tendered hereby must be in denominations of principal amount that are integral
multiples of $1,000.
Noteholders whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer -- Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through
an Eligible Institution (as defined in Instruction 4 below), (ii) prior to the
Expiration Date, the Exchange Agent must receive from such Eligible Institution
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and Notice of Guaranteed Delivery, substantially in the form provided
by the Company (by facsimile transmission, mail or hand delivery), setting
forth the name and address of the holder of Old Notes and the amount of Old
Notes tendered, stating that the tender is being made thereby and guaranteeing
that within five New York Stock Exchange ("NYSE") trading days after the date
of execution of the Notice of Guaranteed Delivery, the certificates for all
physically tendered Old Notes, or a Book-Entry Confirmation, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, and all other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within five NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter of Transmittal, the Old Notes and
all other required documents is at the election and risk of the tendering
holders, but the delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If Old Notes are sent by mail, it is suggested
that the mailing be made sufficiently in advance of the Expiration Date to
permit the delivery to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date.
See "The Exchange Offer" section in the Prospectus.
2. TENDER BY HOLDER. Only a holder of Old Notes may tender such Old
Notes in the Exchange Offer. Any beneficial holder of Old Notes who is not the
registered holder and who wishes to tender should arrange with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
or must, prior to completing and executing this Letter of Transmittal and
delivering his or her Old Notes, either make appropriate arrangements to
register ownership of the Old Notes in such holder's name or obtain a properly
completed bond power from the registered holder.
<PAGE> 10
3. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000. If less than the entire principal amount of any
Old Notes is tendered, the tendering holder should fill in the principal amount
tendered in the fourth column of the box entitled "Description of 11 1/8%
Senior Subordinated Notes due 2007 (Old Notes)" above. The entire principal
amount of Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. If the entire principal amount of all Old
Notes is not tendered, then Old Notes for the principal amount of Old Notes not
tendered and a certificate or certificates representing New Notes issued in
exchange for any Old Notes accepted will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal of Transmittal, promptly after the Old Notes
are accepted for exchange.
4. SIGNATURES ON THIS LETTER OF TRANSMITTAL; POWERS OF ATTORNEY AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered holder of the Old Notes tendered hereby, the signature must
correspond exactly with the name as written on the face of the certificates
without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate copies of this Letter of Transmittal as there are different
registrations of certificates.
When this Letter of Transmittal is signed by the registered holder or
holders of the Old Notes specified herein and tendered hereby, no endorsements
of certificates or separate powers of attorney are required. If, however, the
New Notes are to be issued, or any untendered Old Notes are to be reissued, to
a person other than the registered holder, then endorsements of any
certificates transmitted hereby or separate powers of attorney are required.
Signatures on such certificate(s) must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder or holders of any certificate(s) specified herein, such
certificate(s) must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names on the registered
holder or holders appear(s) on the certificate(s) and signatures on such
certificate(s) must be guaranteed by an Eligible Institution.
If this letter of Transmittal or any certificates or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
Endorsements on certificates for Old Notes or signatures on powers of
attorney required by this Instruction 4 must be guaranteed by an eligible
guarantor institution that is a member or participant in the Securities
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Program, the Stock Exchange Medallion Program, or by an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (collectively "Eligible Institutions").
Signatures on this Letter of Transmittal must be guaranteed by an
Eligible Institution unless the Old Notes are tendered (i) by a registered
holder of Old Notes (which term, for purposes of the Exchange Offer, includes
any participant in the Book-Entry Transfer Facility system whose name appears
on a security position listing as the holder of such Old Notes) who has not
completed the box entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on this Letter of Transmittal, or (ii) for the account of an
Eligible Institution.
<PAGE> 11
5. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in the applicable box or boxes, the name and address to which New
Notes or substitute Old Notes for principal amounts not tendered or not
accepted for exchange are to be issued or sent, if different from the name and
address of the person signing this Letter of Transmittal of Transmittal (or in
the case of tender of Old Notes through DTC, if different from DTC). In the case
of issuance in a different name, the taxpayer identification or social security
number of the person named must also be indicated. Noteholders tendering Old
Notes by book-entry transfer may request that Old Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as such
noteholder may designate hereon. If no such instructions are given, such Old
Notes not exchanged will be returned to the name and address of the person
signing this Letter of Transmittal.
6. TAX IDENTIFICATION NUMBER. United States federal income tax law may
require that a holder whose offered Old Notes are accepted for exchange provide
the Company (as payer) with his, her or its correct Taxpayer Identification
Number ("TIN"), which, in the case of an exchanging holder who is an individual,
is his or her social security number. If the Company is not provided with the
correct TIN or an adequate basis for exemption, such holder may be subject to a
$50 penalty imposed by the Internal Revenue Service (the "IRS"), and payments
made with respect to the Notes may be subject to backup withholding at a 31%
rate. If withholding results in an overpayment of taxes, a refund may be
obtained. Exempt holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding requirements.
See the enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9."
To prevent backup withholding, each exchanging holder should provide
his, her or its correct TIN by completing the Substitute Form W-9 enclosed
herewith, certifying that the TIN provided is correct and as to certain other
matters. If a foreign individual qualifies as an exempt recipient, such holder
should submit a Form W-8 signed under penalty of perjury attesting to such
exempt status. Such forms may be obtained from the Exchange Agent. If the Old
Notes are in more than one name or are not in the name of the actual owner,
consult the Substitute Form W-9 for information on which TIN to report.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes or Old Notes for principal amounts
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered hereby, or if tendered Old Notes are
registered in the name of any person other than the person signing this Letter
of Transmittal of Transmittal, or if a transfer tax is imposed for any reason
other than the exchange of Old Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered holder or
on any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering holder.
8. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify specified conditions in the Exchange Offer in the case
of any Old Notes tendered.
9. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter of Transmittal, shall waive any right to receive
notice of the acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Old Notes nor shall any of them incur any liability for failure to
give any such notice.
<PAGE> 12
10. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any tendering
holder whose Old Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address indicated herein for further
instructions.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance for additional copies of the Prospectus, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to the
Exchange Agent at the address specified in the Prospectus.
<PAGE> 13
(DO NOT WRITE IN THE SPACE BELOW)
CERTIFICATE OLD NOTES OLD NOTES
SURRENDERED TENDERED ACCEPTED
Delivery Prepared by
- -----------------------Checked By---------------------Date---------------------
<PAGE> 14
PAYER'S NAME: NEENAH CORPORATION
SUBSTITUTE Name (if joint names, list first and circle the name of
FORM W-9 the person or entity whose number you enter in Part 1
below. See instructions if your name has changed.)
DEPARTMENT OF
THE TREASURY Address
INTERNAL REVENUE
SERVICE
City, state and ZIP code
List account number(s) here (optional)
PART 1 -- PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION
NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING
AND DATING BELOW.
Social security number
or TIN
PART 2 -- Check the box if you are NOT subject to backup
withholding because (1) you have not been notified that
you are subject to backup withholding as a result of
failure to report all interest or dividends, (2) the
Internal Revenue Service has notified you that you are no
longer subject to backup withholding or (3) you are exempt
from backup withholding. [ ]
PART 2 --
AWAITING TIN [ ]
Payer's Request
for TIN CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY
THAT THE INFORMATION PROVIDED ON THIS FORM IS TRUE,
CORRECT AND COMPLETE.
Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE NOTES. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OR SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
11 1/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
NEENAH CORPORATION
Pursuant to the Prospectus Dated _______________, 1997
This form must be used by a holder of 11 1/8% Senior Subordinated Notes
due 2007 (the "Notes") of Neenah Corporation, a Wisconsin corporation (the
"Company"), who wishes to tender Notes to the Exchange Agent pursuant to the
guaranteed delivery procedures described in "The Exchange Offer - Guaranteed
Delivery Procedures" of the Company's Prospectus, dated ____________, 1997 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON ________________, 1997 UNLESS EXTENDED (THE "EXPIRATION DATE").
United States Trust Company of New York
(the "Exchange Agent")
<TABLE>
<S> <C> <C>
By Overnight Courier: By Hand: By Registered or Certified Mail:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
770 Broadway, 13th Floor 111 Broadway P.O. Box 844
New York, New York 10003 Lower Level Attn: Corporate Trust Services
Attn: Corporate Trust Services Attn: Corporate Trust Services Cooper Station
New York, New York 10006 New York, New York 10276-0844
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
This form is not to be used to guarantee signatures. If a signature on
a Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
subject to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
<S> <C> <C>
- ---------------------------------------------------- ----------------- ------------------
- ---------------------------------------------------- ----------------- ------------------
- ---------------------------------------------------- ----------------- ------------------
- ---------------------------------------------------- ----------------- ------------------
</TABLE>
2
<PAGE> 3
PLEASE SIGN AND COMPLETE
Signatures of Registered Holder(s) or
Authorized Signatory:______________________ Date: ___________________, 1996
___________________________________________ Address:________________________
Name(s) of Registered Holder(s):___________ Area Code and Telephone No._____
___________________________________________
___________________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s)
exactly as their name(s) appear on certificates for Notes or on a security
position listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): _______________________________________________________________________
________________________________________________________________________________
Capacity: ______________________________________________________________________
Address(es):____________________________________________________________________
________________________________________________________________________________
3
<PAGE> 4
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Notes tendered hereby in proper form
for transfer (or confirmation of the book-entry transfer of such Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility described in the
prospectus under the caption "The Exchange Offer -- Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange
trading day following the Expiration Date.
Name of firm________________________ ____________________________________
(Authorized Signature)
Address_____________________________ Name________________________________
(Please Print)
____________________________________ Title_______________________________
(Include Zip Code)
Area Code and Tel. No. _____________ Dated_________________________, 1996
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF
TRANSMITTAL.
4
<PAGE> 5
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes referred
to herein, the signature must correspond with the name(s) written on the face of
the Notes without alteration, enlargement, or any change whatsoever. If this
Notice of Guaranteed Delivery is signed by a participant of the Book-Entry
Transfer Facility whose name appears on a security position listing as the owner
of the Notes, the signature must correspond with the name shown on the security
position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than
the registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Notes or signed as the name of the participant shown on the Book-Entry
Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
5
